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As
filed with the Securities and Exchange Commission on January 12, 2022
Securities
Act File No. 333-238475
Investment
Company Act File No. 811-23570
U.S.
SECURITIES AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
N-1A
REGISTRATION
STATEMENT
UNDER
☑ THE SECURITIES ACT OF 1933 |
☐ Pre-Effective Amendment No. __ |
☑ Post-Effective Amendment No. 31 |
AND/OR |
☑ THE INVESTMENT COMPANY ACT OF 1940 |
☑ Amendment No. 32 |
Simplify
Exchange Traded Funds
(Exact
Name of Registrant as Specified in its Charter)
54 W 40th Street
New
York NY 10018
(Address
of Principal Executive Offices)
Registrant’s
Telephone Number, including Area Code: 646-741-2438
The
Corporation Trust Company
Corporation
Trust Center
1209
Orange Street
Wilmington,
Delaware 19801
(Name
and address of agent for service)
Copy
to:
JoAnn
M. Strasser
Thompson
Hine LLP
41
South High Street, Suite 1700
Columbus,
Ohio 43215
☐ | Approximate Date of Proposed Public Offering: |
It
is proposed that this filing will become effective:
☐ | Immediately upon filing pursuant to paragraph (b) |
☐ | On (date) pursuant to paragraph (b) |
☐ | 60 days after filing pursuant to paragraph (a)(1) |
☐ | On (date) pursuant to paragraph (a)(1) |
þ | 75 days after filing pursuant to paragraph (a)(2) |
☐ | On (date) pursuant to paragraph (a)(2) of Rule 485. |
If
appropriate, check the following box:
☐ | This post-effective amendment designates a new effective date for a previously filed post-effective amendment |
The information in this prospectus is not complete
and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission
is effective. This prospectus is not an offer to sell these securities and is not soliciting an offer to buy these securities in any state
where the offer or sale is not permitted.
Simplify Volt Web3 ETF
WIII
a series of Simplify Exchange Traded Funds
PROSPECTUS
[____], 2022
Advised by: | |
Simplify Asset Management Inc. | |
54 W 40th Street, | |
New York, NY 10018 | |
Sub-Advised by: | |
Volt Equity LLC | |
2193 Fillmore Street | |
San Francisco, CA 94115 |
www.simplify.us/etfs | phone: 1 (855) 772-8488 |
This Prospectus provides important information
about the Fund that you should know before investing. Please read it carefully and keep it for future reference.
These securities have not been approved or disapproved
by the Securities and Exchange Commission nor has the Securities and Exchange Commission passed upon the accuracy or adequacy of this
Prospectus. Any representation to the contrary is a criminal offense.
Shares of the Fund are listed and traded on the
NYSE Arca, Inc.
TABLE OF CONTENTS
FUND SUMMARY – SIMPLIFY VOLT WEB3 ETF
Investment Objective: The Simplify Volt
Web3 ETF (the “Fund”) seeks to provide capital appreciation.
Fees and Expenses of the Fund: This table
describes the fees and expenses that you may pay if you buy, hold, and sell shares of the Fund. Investors purchasing or selling shares
of the Fund in the secondary market may be subject to costs (including customary brokerage commissions) charged by their broker. These
costs are not included in the expense example below.
Annual Fund Operating Expenses (expenses that you pay each year as a percentage of the value of your investment) |
|
Management Fees | [0.95%] |
Distribution and Service (12b-1) Fees | 0.00% |
Total Annual Fund Operating Expenses | [0.95%] |
Example: This Example is intended
to help you compare the cost of investing in the Fund with the cost of investing in mutual funds and other exchange traded funds.
The Example assumes that you invest $10,000 in
the Fund for the time periods indicated and then redeem all of your shares at the end of those periods. The Example also assumes that
your investment has a 5% return each year and that the Fund’s operating expenses remain the same. The Example further assumes that
the Fund’s operating expense limitation agreement will only be in place for the term specified above. Although your actual costs
may be higher or lower, based upon these assumptions your costs would be:
Portfolio Turnover: The Fund pays
transaction costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio). A higher portfolio
turnover rate may indicate higher transaction costs and may result in higher taxes when Fund shares are held in a taxable account. These
costs, which are not reflected in annual fund operating expenses or in the Example, affect the Fund’s performance. Since the Fund
is not yet operational, it does not have a portfolio turnover rate.
Principal Investment Strategies: The adviser
and sub-adviser seek to achieve the Fund’s investment objective by investing primarily in equity securities of U.S. and foreign
Web3 companies (as defined below). The adviser applies an option overlay strategy to the Fund’s equity investments.
Equity Strategy
Under normal circumstances, the Fund invests primarily in
equity securities of U.S. and foreign Web3 companies. Web3 companies are companies that the sub-adviser believes are expected to focus
on and benefit from the development of new products or services, technological improvements and innovative approaches related to innovation
in the operation of the internet, which is referred to as the “Web3” internet and may include metaverse companies (“Web3
Companies”).
Web3 companies are companies that the sub-adviser believes
are focused on and expected to benefit from shifting the bases of technology infrastructure from a centralized self-hosted hardware infrastructure
to a decentralized cloud infrastructure. The companies will use, help others use, or significantly be reliant upon Web3 technology, which
is generally verifiable, trustless, self governing and distributed and may include metaverse companies. Metaverse companies are companies
that the sub-adviser believes help bring the ‘metaverse’, a computerized virtual environment, to the masses. The ‘metaverse’
may play a large part in internet innovation, as it may allow users to own pieces of digital property through non-fungible tokens or digital
tokens.
In selecting Web3 companies, the sub-adviser
seeks to identify, using its own internal research and analysis, companies capitalizing or enabling the further development of Web3 technologies.
The sub-adviser’s internal research and analysis leverages insights from diverse sources, including internal and external research,
to develop and refine its investment themes and identify and take advantage of trends that have ramifications for individual companies
or entire industries.
Under normal circumstances, primarily all of the
Fund’s assets will be invested in equity securities, including common stocks, partnership interests, business trust shares and other
equity investments or ownership interests in business enterprises. The Fund’s investments may include small-, medium- and large-capitalization
companies. The Fund’s investments in foreign equity securities may be in both developed and emerging markets. The Fund may invest
in foreign securities (including investments in American Depositary Receipts (“ADRs”) and securities listed on local foreign
exchanges.
The Fund invests up to
10% of its total assets in the Grayscale Bitcoin Trust. The Grayscale Bitcoin Trust is a private fund that is not registered as an investment
company under the Investment Company Act of 1940, as amended. The Grayscale Bitcoin Trust seeks for its shares to track the price of Bitcoin.
The Fund will not invest in cryptocurrencies directly or through the use of derivatives. The Fund also will not invest in initial coin
offerings. The Fund may, however, have indirect exposure to cryptocurrencies by virtue of its investments in operating companies that
use one or more cryptocurrencies as part of their business activities or that hold cryptocurrencies. Because the Fund will not invest
directly in any cryptocurrency, it will not track price movements of any cryptocurrency.
The Fund is classified as a “non-diversified”
investment company under the Investment Company Act of 1940, as amended, which means that the Fund may invest a high percentage of its
assets in a fewer number of issuers.
Option Overlay Strategy
Up to twenty percent of the Fund’s net assets will be
subject to the Fund’s option overlay. The option overlay consists of purchasing exchange-traded and over the counter (“OTC”)
put and call options on the NASDAQ® 100 Index, S&P 500® Index, a NASDAQ® 100 Index ETF,
a S&P 500 Index ETF or individual securities and call options on individual securities. When the Fund purchases a call option, the
Fund has the right, but not the obligation, to buy a stock or other asset at a specified price (strike price) within a specific time period.
When the Fund purchases a put option, the Fund has the right, but not the obligation, to sell a stock or other asset at a specified price
(strike price) within a specific time period.
The option overlay is a strategic, persistent
exposure meant to partially hedge against market declines. If the market goes up, the Fund’s returns may outperform the market because
the adviser will sell or exercise the call options. If the market goes down, the Fund’s returns may fall less than the market because
the adviser will sell or exercise the put options. The adviser selects options based upon its evaluation of relative value based on cost,
strike price (price that the option can be bought or sold by the option holder) and maturity (the last date the option contract is valid)
and will exercise or close the options based on maturity or portfolio rebalancing requirements. The Fund anticipates purchasing and selling
options on a monthly, quarterly, and annual basis, depending upon the Fund’s rebalancing requirements and the individual option
expiration dates. However, the Fund may rebalance its option portfolio on a more frequent basis for a number of reasons such as market
volatility renders the protection provided by the option strategy ineffective or an option position has appreciated to the point that
it is prudent to decrease the Fund’s exposure and realize gains for the Fund’s shareholders. While the option overlay is intended
to improve the Fund’s performance, there is no guarantee that it will do so.
The value of the Fund’s call options is
expected to rise in proportion to the rise in value of the underlying assets, but the amount by which the Fund’s options increase
or decrease in value depends on how far the market has moved from the time the options position was initiated. The value of the Fund’s
call options may rise faster than the market if the adviser successfully selects options that appreciate in value.
Principal Investment Risks: As with
all funds, there is the risk that you could lose money through your investment in the Fund. Many factors affect the Fund’s net asset
value and price of shares and performance.
The following describes the risks the Fund bears
with respect to its investments. As with any fund, there is no guarantee that the Fund will achieve its goal.
Next Generation Internet Companies. Companies that
the sub-adviser believes are focused on and expected to benefit from shifting the bases of technology infrastructure from hardware and
software to the cloud, enabling mobile and local services, such as companies that rely on or benefit from the increased use of shared
technology, infrastructure and services. These companies may include mail order houses which generate the entirety of their business through
websites and which offer internet-based products and services, such as streaming media or cloud storage in addition to traditional physical
goods. These companies may also include ones that develop, use or rely on innovative payment methodologies, big data, the “internet
of things,” machine learning, and social distribution and media.
Active Management Risk. The Fund is subject
to the risk that the investment management strategy may not produce the intended results and may negatively impact Fund performance. The
adviser’s overlay strategy will not fully protect the Fund from declines in the market.
Bitcoin Risk. The value of the Fund’s
investment in the Grayscale Bitcoin Trust is subject to fluctuations in the value of bitcoins. The value of bitcoins is determined by
the supply of and demand for bitcoins in the global market for the trading of bitcoins, which consists of transactions on electronic bitcoin
exchanges (“Bitcoin Exchanges”). Pricing on Bitcoin Exchanges and other venues can be volatile and can adversely affect the
value of the Grayscale Bitcoin Trust. Currently, there is relatively small use of bitcoins in the retail and commercial marketplace in
comparison to the relatively large use of bitcoins by speculators, thus contributing to price volatility that could adversely affect the
Fund’s investment in the Grayscale Bitcoin Trust. Bitcoin transactions are irrevocable and stolen or incorrectly transferred bitcoins
may be irretrievable. As a result, any incorrectly executed bitcoin transactions could adversely affect the value of the Fund’s
investment in the Grayscale Bitcoin Trust. Shares of the Grayscale Bitcoin Trust may trade at a premium or discount to the net asset value
of the Grayscale Bitcoin Trust.
Blockchain Investments Risk. An investment
in companies actively engaged in blockchain technology may be subject to the following risks:
● | The technology is new and many of its uses may be untested. The mechanics of using distributed ledger technology to transact in other types of assets, such as securities or derivatives, is less clear. There is no assurance that widespread adoption will occur. A lack of expansion in the usage of blockchain technology could adversely affect an investment in the Fund. |
● | Theft, loss or destruction. Transacting on a blockchain depends in part specifically on the use of cryptographic keys that are required to access a user’s account (or “wallet”). The theft, loss or destruction of these keys impairs the value of ownership claims users have over the relevant assets being represented by the ledger (whether “smart contracts,” securities, currency or other digital assets). The theft, loss or destruction of private or public keys needed to transact on a blockchain could also adversely affect a company’s business or operations if it were dependent on the ledger. |
● | Competing platforms and technologies. The development and acceptance of competing platforms or technologies may cause consumers or investors to use an alternative to blockchains. |
● | Cyber security incidents. Cyber security incidents may compromise an issuer, its operations or its business. Cyber security incidents may also specifically target a user’s transaction history, digital assets, or identity, thereby leading to privacy concerns. In addition, certain features of blockchain technology, such as decentralization, open source protocol, and reliance on peer-to-peer connectivity, may increase the risk of fraud or cyber-attack by potentially reducing the likelihood of a coordinated response. |
● | Developmental risk. Blockchain technology may never develop optimized transactional processes that lead to realized economic returns for any company in which the Fund invests. Companies that are developing applications of blockchain technology applications may not in fact do so or may not be able to capitalize on those blockchain technologies. The development of new or competing platforms may cause consumers and investors to use alternatives to blockchains. |
● | Intellectual property claims. A proliferation of recent startups attempting to apply blockchain technology in different contexts means the possibility of conflicting intellectual property claims could be a risk to an issuer, its operations or its business. This could also pose a risk to blockchain platforms that permit transactions in digital securities. Regardless of the merit of any intellectual property or other legal action, any threatened action that reduces confidence in the viability of blockchain may adversely affect an investment in the Fund. |
● | Lack of liquid markets, and possible manipulation of blockchain-based assets. Digital assets that are represented and trade on a blockchain may not necessarily benefit from viable trading markets. Stock exchanges have listing requirements and vet issuers, and perhaps users. These conditions may not necessarily be replicated on a blockchain, depending on the platform’s controls and other policies. The more lenient a blockchain is about vetting issuers of digital assets or users that transact on the platform, the higher the potential risk for fraud or the manipulation of digital assets. These factors may decrease liquidity or volume, or increase volatility of digital securities or other assets trading on a blockchain. |
● | Lack of regulation. Digital commodities and their associated platforms are largely unregulated, and the regulatory environment is rapidly evolving. Because blockchain works by having every transaction build on every other transaction, participants can self-police any corruption, which can mitigate the need to depend on the current level of legal or government safeguards to monitor and control the flow of business transactions. As a result, companies engaged in such blockchain activities may be exposed to adverse regulatory action, fraudulent activity or even failure. |
● | Third party product defects or vulnerabilities. Where blockchain systems are built using third party products, those products may contain technical defects or vulnerabilities beyond a company’s control. Open-source technologies that are used to build a blockchain application may also introduce defects and vulnerabilities. |
● | Reliance on the Internet. Blockchain functionality relies on the Internet. A significant disruption of Internet connectivity affecting large numbers of users or geographic areas could impede the functionality of blockchain technologies and adversely affect the Fund. In addition, certain features of blockchain technology, such as decentralization, open source protocol, and reliance on peer-to-peer connectivity, may increase the risk of fraud or cyber-attack by potentially reducing the likelihood of a coordinated response. |
● | Line of business risk. Some of the companies in which the Fund may invest are engaged in other lines of business unrelated to blockchain and these lines of business could adversely affect their operating results. The operating results of these companies may fluctuate as a result of these additional risks and events in the other lines of business. In addition, a company’s ability to engage in new activities may expose it to business risks with which it has less experience than it has with the business risks associated with its traditional businesses. Despite a company’s possible success in activities linked to its use of blockchain, there can be no assurance that the other lines of business in which these companies are engaged will not have an adverse effect on a company’s business or financial condition. |
Cryptocurrency Risk. Cryptocurrency (notably,
Bitcoin), often referred to as “virtual currency” or “digital currency,” operates as a decentralized, peer-to-peer
financial exchange and value storage that is used like money. The Fund will have exposure to Bitcoin, a cryptocurrency, indirectly through
investment in the Grayscale Bitcoin Trust. Cryptocurrencies operate without central authority or banks and are not backed by any government.
Cryptocurrencies may experience very high volatility, and related investment vehicles that invest in cryptocurrencies may be affected
by such volatility. Cryptocurrency is not legal tender. Federal, state or foreign governments may restrict the use and exchange of cryptocurrency,
and regulation in the U.S. is still developing. Cryptocurrency exchanges have stopped operating and have permanently shut down due to
fraud, technical glitches, hackers or malware. Cryptocurrencies exchanges are new, largely unregulated, and may be more exposed to fraud.
Derivatives Risk. Options are a derivative
investment. The use of derivative instruments involves risks different from, or possibly greater than, the risks associated with investing
directly in securities and other traditional investments. These risks include (i) the risk that the counterparty to a derivative transaction
may not fulfill its contractual obligations; (ii) risk of mispricing or improper valuation; and (iii) the risk that changes in the value
of the derivative may not correlate perfectly with the underlying asset, rate or index.
Disruptive Innovation Risk. Companies that
the adviser and sub-adviser believe create or capitalize on disruptive innovation and developing technologies to displace older technologies
or create new markets may not in fact do so. Companies that initially develop a novel technology may not be able to capitalize on the
technology. The Fund may invest in a company that does not currently derive any revenue from disruptive innovations or technologies, and
there is no assurance that a company will derive any revenue from disruptive innovations or technologies in the future. A disruptive innovation
or technology may constitute a small portion of a company’s overall business. As a result, the success of a disruptive innovation
or technology may not affect the value of the equity securities issued by the company.
Early Close/Trading Halt Risk. An exchange
or market may close or issue trading halts on specific securities, or the ability to buy or sell certain securities or financial instruments
may be restricted, which may prevent the Fund from buying or selling certain securities or financial instruments. In these circumstances,
the Fund may be unable to rebalance its portfolio, may be unable to accurately price its investments and may incur substantial trading
losses.
Equity Risk. The net asset value of the
Fund will fluctuate based on changes in the value of the equity securities held by the Fund. Equity prices can fall rapidly in response
to developments affecting a specific company or industry, or to changing economic, political or market conditions.
ETF Structure Risks: The Fund is structured
as an ETF and will invest in underlying ETFs. As a result, the Fund is subject to special risks, including:
● | Not Individually Redeemable. The Fund’s shares (“Shares”) are not redeemable by retail investors and may be redeemed only by authorized participants (“Authorized Participants”) at net asset value (“NAV”) and only in Creation Units. A retail investor generally incurs brokerage costs when selling shares. |
● | Trading Issues. Trading in Shares on the NYSE Arca, Inc. (the “Exchange”) may be halted due to market conditions or for reasons that, in the view of the Exchange, make trading in Shares inadvisable, such as extraordinary market volatility. There can be no assurance that Shares will continue to meet the listing requirements of the Exchange which may result in the Shares being delisted. An active trading market for the Shares may not be developed or maintained. If the Shares are traded outside a collateralized settlement system, the number of financial institutions that can act as Authorized Participants that can post collateral on an agency basis is limited, which may limit the market for the Shares. |
● | Market Price Variance Risk. The market prices of Shares will fluctuate in response to changes in NAV and supply and demand for Shares and will include a “bid-ask spread” charged by the exchange specialists, market makers or other participants that trade the Shares. There may be times when the market price and the NAV vary significantly. This means that Shares may trade at a discount to NAV. |
○ | In times of market stress, market makers may step away from their role market making in the Shares and in executing trades, which can lead to differences between the market value of the Shares and the Fund’s NAV. |
○ | The market price of the Shares may deviate from the Fund’s NAV, particularly during times of market stress, with the result that investors may pay significantly more or significantly less the Shares than the Fund’s NAV, which is reflected in the bid and ask price for the Shares or in the closing price. |
○ | In stressed market conditions, the market for the Shares may become less liquid in response to the deteriorating liquidity of the Fund’s portfolio. This adverse effect on the liquidity of the Shares may, in turn, lead to differences between the market value of the Shares and the Fund’s NAV. |
● | Authorized Participant Risk. Only an Authorized Participant may engage in creation or redemption transactions directly with the Fund. The Fund has a limited number of institutions that may act as an Authorized Participant on an agency basis (i.e., on behalf of other market participants). To the extent that Authorized Participants exit the business or are unable to proceed with creation or redemption orders with respect to the Fund and no other Authorized Participant is able to step forward to create or redeem Creation Units, Fund shares may be more likely to trade at a premium or discount to net asset value and possibly face trading halts or delisting. Authorized Participant concentration risk may be heightened for securities or instruments that have lower trading volumes. |
Foreign Securities Risk. The Fund’s
investments in foreign securities can be riskier than U.S. securities investments. Investments in the securities of foreign issuers (including
investments in ADRs) are subject to the risks associated with investing in those foreign markets, such as heightened risks of inflation
or nationalization. The prices of foreign securities and the prices of U.S. securities have, at times, moved in opposite directions. In
addition, securities of foreign issuers may lose value due to political, economic and geographic events affecting a foreign issuer or
market.
Grayscale
Bitcoin Trust Risk. The Fund will invest indirectly in bitcoin through the Grayscale Bitcoin Trust. The Grayscale Bitcoin Trust
is a private investment fund that is not regulated under the 1940 Act. The shares of the Grayscale Bitcoin Trust may trade at a premium
or discount, may not directly correspond to the price of Bitcoin, and are highly volatile.
Industry Concentration Risk. A fund
that concentrates its investments in an industry or group of industries is more vulnerable to adverse market, economic, regulatory, political
or other developments affecting such industry or group of industries than a fund that invests its assets more broadly.
Large Capitalization Risk. Large-capitalization
companies may be less able than smaller capitalization companies to adapt to changing market conditions. Large-capitalization companies
may be more mature and subject to more limited growth potential compared with smaller capitalization companies. During different market
cycles, the performance of large capitalization companies has trailed the overall performance of the broader securities markets.
Limited History Risk. The Fund is a new
ETF and has a limited history of operations for investors to evaluate.
Market and Geopolitical Risk. The increasing
interconnectivity between global economies and financial markets increases the likelihood that events or conditions in one region or financial
market may adversely impact issuers in a different country, region or financial market. Securities in the Fund’s portfolio may underperform
due to inflation (or expectations for inflation), interest rates, global demand for particular products or resources, natural disasters,
pandemics, epidemics, terrorism, regulatory events and governmental or quasi-governmental actions. The occurrence of global events similar
to those in recent years may result in market volatility and may have long term effects on both the U.S. and global financial markets.
The current novel coronavirus (COVID-19) global pandemic and the aggressive responses taken by many governments, including closing borders,
restricting international and domestic travel, and the imposition of prolonged quarantines or similar restrictions, as well as the forced
or voluntary closure of, or operational changes to, many retail and other businesses, has had negative impacts, and in many cases severe
negative impacts, on markets worldwide. It is not known how long such impacts, or any future impacts of other significant events described
above, will or would last, but there could be a prolonged period of global economic slowdown, which may impact your Fund investment.
Non-Diversification Risk. The Fund’s
portfolio may focus on a limited number of investments and will be subject to potential for volatility than a diversified fund.
Option Risk. As the buyer of a put or call
option, the Fund risks losing the entire premium invested in the option if the Fund does not exercise the option.
Over-the-Counter Market Risk. Securities
and options traded in over-the-counter markets may trade less frequently and in limited volumes and thus exhibit more volatility and liquidity
risk, and the prices paid by the Fund in over-the-counter transactions may include an undisclosed dealer markup. The Fund is also exposed
to default by the over-the-counter option writer who may be unwilling or unable to perform its contractual obligations to the Fund.
Small and Medium Capitalization Risk. The
earnings and prospects of small and medium sized companies are more volatile than larger companies and may experience higher failure rates
than larger companies. Small and medium sized companies normally have a lower trading volume than larger companies, which may tend to
make their market price fall more disproportionately than larger companies in response to selling pressures and may have limited markets,
product lines, or financial resources and lack management experience.
Valuation
Risk. The sales price the Fund could receive for any particular portfolio investment may differ from the Fund’s valuation
of the investment, particularly for securities or other investments, such as Bitcoin, that trade in thin or volatile markets or that are
valued using a fair value methodology. Valuation may be more difficult in times of market turmoil since many investors and market makers
may be reluctant to purchase complex instruments or quote prices for them. The Fund’s ability to value its investments may be impacted
by technological issues and/or errors by pricing services or other third party service providers. Shares of Grayscale Bitcoin Trust are
intended to reflect the price of bitcoin assets, less fees and expenses, and the shares currently trade at a substantial premium to the
net asset value of such assets. As such, the price of Grayscale Bitcoin Trust may go down even if the price of the underlying asset, bitcoin,
remains unchanged. Additionally, shares that trade at a premium mean that an investor who purchases $1 of a portfolio will actually own
less than $1 in assets.
Performance: The
Fund does not have performance history for a full calendar year. Once the Fund has completed a full calendar year of investment operations,
this section will provide some indication of the risks of investing in the Fund by showing how the Fund’s average annual returns
compare with a broad measure of market performance. Past performance does not necessarily indicate how the Fund will perform in the
future. Also, shareholder reports containing financial and performance information are mailed to shareholders semi-annually. Updated
performance information is available at no cost by visiting www.simplify.us/etfs or by calling 1 (855) 772-8488.
Investment Adviser: Simplify Asset Management
Inc. (the “Adviser”)
Investment Sub-Adviser: Volt Equity LLC
(the “Sub-Adviser”)
Portfolio Managers: Paul Kim, Chief Executive
Officer of the Adviser, David Berns, Chief Investment Officer of the Adviser, Tad Park, Chief Executive Officer of the Sub-Adviser, have
each served the Fund as a portfolio manager since it commenced operations in December 2020. Mr. Kim, Mr. Berns, Mr. Park are jointly and
primarily responsible for the management of the Fund.
Purchase and Sale of Fund Shares: The Fund
will issue and redeem Shares at NAV only in large blocks of 25,000 Shares (each block of Shares is called a “Creation Unit”).
Creation Units are issued and redeemed primarily in-kind for securities but may include cash. Individual Shares may only be purchased
and sold in secondary market transactions through brokers. Except when aggregated in Creation Units in transactions with Authorized Participants,
the Shares are not redeemable securities of the Fund.
Shares of the Fund are listed for trading on the
Exchange and trade at market prices rather than NAV. Shares of the Fund may trade at a price that is greater than, at, or less than NAV.
Tax Information: The Fund’s distributions
generally will be taxable as ordinary income or long-term capital gains. A sale of Shares may result in capital gain or loss.
Payments to Broker-Dealers and Other Financial
Intermediaries: If you purchase the Fund through a broker-dealer or other financial intermediary (such as a bank), the Fund and its
related companies may pay the intermediary for the sale of Fund shares and related services. These payments may create a conflict of interest
by influencing the broker-dealer or other intermediary and your salesperson to recommend the Fund over another investment. Ask your salesperson
or visit your financial intermediary’s website for more information.
ADDITIONAL INFORMATION ABOUT PRINCIPAL INVESTMENT
STRATEGIES AND RELATED RISKS
The Fund seeks to provide capital appreciation.
The Fund’s investment objective may be changed by the Board of Trustees (“Board”) upon 60 days’ written notice
to shareholders.
Principal
Investment Strategies:
Under normal circumstances, the Fund invests primarily in
equity securities of U.S. and foreign Web3 companies. Web3 companies are companies that the sub-adviser believes are expected to focus
on and benefit from the development of new products or services, technological improvements and innovative approaches related to innovation
in the operation of the internet, which is referred to as the “Web3” internet and may include metaverse companies (“Web3
Companies”).
Web3 companies are companies that the sub-adviser believes
are focused on and expected to benefit from shifting the bases of technology infrastructure from a centralized self-hosted hardware infrastructure
to a decentralized cloud infrastructure. The companies will use, help others use, or significantly be reliant upon Web3 technology, which
is generally verifiable, trustless, self governing and distributed and may include metaverse companies. Metaverse companies are companies
that the sub-adviser believes help bring the ‘metaverse’, a computerized virtual environment, to the masses. Metaverse companies
may develop augmented reality or virtual reality technology in the form of hardware or software applications, gaming applications that
involve digital worlds, or provide immersive social experiences that combine the digital and physical worlds. The ‘metaverse’
may play a large part in internet innovation, as it may allow users to own pieces of digital property through non-fungible tokens or digital
tokens.
In selecting Web3 companies, the sub-adviser seeks
to identify, using its own internal research and analysis, companies capitalizing or enabling the further development of Web3 technologies.
The sub-adviser’s internal research and analysis leverages insights from diverse sources, including internal and external research,
to develop and refine its investment themes and identify and take advantage of trends that have ramifications for individual companies
or entire industries.
Option Overlay Strategy
The option overlay consists of purchasing exchange-traded
and over the counter (“OTC”) put and call options on the NASDAQ® 100 Index, S&P 500® Index,
a NASDAQ® 100 Index ETF, a S&P 500 Index ETF or individual securities and call options on individual securities. When
the Fund purchases a call option, the Fund has the right, but not the obligation, to buy a stock or other asset at a specified price (strike
price) within a specific time period. When the Fund purchases a put option, the Fund has the right, but not the obligation, to sell a
stock or other asset at a specified price (strike price) within a specific time period.
Up to twenty percent of the Fund’s net assets
will be subject to the Fund’s convexity option overlay. The option overlay is intended to add convexity to the Fund and is intended
as a strategic, persistent exposure meant to partially hedge against market moves and add convexity to the Fund. If the market goes up,
the Fund’s returns may outperform the market because the adviser will sell or exercise the call options. If the market goes down,
the Fund’s returns may fall less than the market because the adviser will sell or exercise the put options. The adviser generally
selects options with strike prices at least 5% out of the money at purchase. A call option is out of the money if the strike price is
higher at the time of purchase than the market price of the underlying asset. A put option is out of the money if the strike price is
lower than the market price of the underlying asset. The adviser selects options based upon its evaluation of relative value based on
cost, strike price (price that the option can be bought or sold by the option holder) and maturity (the last date the option contract
is valid) and will exercise or close the options based on maturity or portfolio rebalancing requirements. The Fund anticipates purchasing
and selling options on a monthly, quarterly, and annual basis, depending upon the Fund’s rebalancing requirements and the individual
option expiration dates. However, the Fund may rebalance its option portfolio on a more frequent basis for a number of reasons such as
market volatility renders the protection provided by the option strategy ineffective or an option position has appreciated to the point
that it is prudent to decrease the Fund’s exposure and realize gains for the Fund’s shareholders. The adviser actively trades
options using a systematic proprietary approach that rebalances at least monthly. The adviser manages the use of options so that the annualized
cost of the option overlay does not normally exceed 3% of the net assets of the Fund. While the option overlay is intended to improve
the Fund’s performance, there is no guarantee that it will improve performance.
If the adviser determines that purchasing options
is not a cost-effective way to implement the overlay strategy, it may employ options spreads. In a call option spread, the Fund purchases
a call option while selling (writing) a call option that is further out of the money to partially offset the cost of the purchased option.
In a put option spread, the Fund purchases a put option while selling (writing) a put option that is further out of the money to partially
offset the cost of the purchased option.
Temporary Defensive Positions
From time to time, the Fund may take temporary
defensive positions, which are inconsistent with the Fund’s principal investment strategies, in attempting to respond to adverse
market, economic, political, or other conditions. For example, the Fund may hold all or a portion of their respective assets in money
market instruments, including cash, cash equivalents, U.S. government securities, other investment grade fixed income securities, certificates
of deposit, bankers acceptances, commercial paper, money market funds and repurchase agreements. While the Fund is in a defensive position,
the opportunity to achieve its investment objective will be limited. If the Fund invests in a money market fund, the shareholders of the
Fund generally will be subject to duplicative management fees. Although the Fund would do this only in seeking to avoid losses, the Fund
will be unable to pursue its investment objective during that time, and it could reduce the benefit from any upswing in the market.
Manager-of-Managers Order
The Trust and the Adviser have received an exemptive
order from the SEC that permits the Adviser, with the Board approval, to enter into sub-advisory agreements with one or more sub-advisers
without obtaining shareholder approval. The exemptive order permits the adviser, subject to the approval of the Board, to replace sub-advisers
or amend sub-advisory agreements, including fees, without shareholder approval if the Adviser and the Board believe such action will benefit
the Fund and its shareholders.
The following describes the risks born by the
Fund with respect to its investments.
Active Management Risk. The Fund is subject
to the risk that its investment management strategy may not produce the intended results. There can be no assurance that the securities
selected by the adviser will produce positive returns.
Bitcoin
Risk. The value of the Fund’s investment in the Grayscale Bitcoin Trust is subject to fluctuations in the value of bitcoins.
The value of bitcoins is determined by the supply of and demand for bitcoins in the global market for the trading of bitcoins, which consists
of transactions on electronic bitcoin exchanges (“Bitcoin Exchanges”). Pricing on Bitcoin Exchanges and other venues can be
volatile and can adversely affect the value of the Grayscale Bitcoin Trust. Currently, there is relatively small use of bitcoins in the
retail and commercial marketplace in comparison to the relatively large use of bitcoins by speculators, thus contributing to price volatility
that could adversely affect the Fund’s investment in the Grayscale Bitcoin Trust. Bitcoin transactions are irrevocable and stolen
or incorrectly transferred bitcoins may be irretrievable. As a result, any incorrectly executed bitcoin transactions could adversely affect
the value of the Fund’s investment in the Grayscale Bitcoin Trust. Shares of the Grayscale Bitcoin Trust may trade at a premium
or discount to the net asset value of the Grayscale Bitcoin Trust.
Blockchain Investments Risk. An investment in companies
actively engaged in blockchain technology may be subject to the following risks:
● | The technology is new and many of its uses may be untested. The mechanics of using distributed ledger technology to transact in other types of assets, such as securities or derivatives, is less clear. There is no assurance that widespread adoption will occur. A lack of expansion in the usage of blockchain technology could adversely affect an investment in the Fund. |
● | Theft, loss or destruction. Transacting on a blockchain depends in part specifically on the use of cryptographic keys that are required to access a user’s account (or “wallet”). The theft, loss or destruction of these keys impairs the value of ownership claims users have over the relevant assets being represented by the ledger (whether “smart contracts,” securities, currency or other digital assets). The theft, loss or destruction of private or public keys needed to transact on a blockchain could also adversely affect a company’s business or operations if it were dependent on the ledger. |
● | Competing platforms and technologies. The development and acceptance of competing platforms or technologies may cause consumers or investors to use an alternative to blockchains. |
● | Cyber security incidents. Cyber security incidents may compromise an issuer, its operations or its business. Cyber security incidents may also specifically target a user’s transaction history, digital assets, or identity, thereby leading to privacy concerns. In addition, certain features of blockchain technology, such as decentralization, open source protocol, and reliance on peer-to-peer connectivity, may increase the risk of fraud or cyber-attack by potentially reducing the likelihood of a coordinated response. |
● | Developmental risk. Blockchain technology may never develop optimized transactional processes that lead to realized economic returns for any company in which the Fund invests. Companies that are developing applications of blockchain technology applications may not in fact do so or may not be able to capitalize on those blockchain technologies. The development of new or competing platforms may cause consumers and investors to use alternatives to blockchains. |
● | Intellectual property claims. A proliferation of recent startups attempting to apply blockchain technology in different contexts means the possibility of conflicting intellectual property claims could be a risk to an issuer, its operations or its business. This could also pose a risk to blockchain platforms that permit transactions in digital securities. Regardless of the merit of any intellectual property or other legal action, any threatened action that reduces confidence in the viability of blockchain may adversely affect an investment in the Fund. |
● | Lack of liquid markets, and possible manipulation of blockchain-based assets. Digital assets that are represented and trade on a blockchain may not necessarily benefit from viable trading markets. Stock exchanges have listing requirements and vet issuers, and perhaps users. These conditions may not necessarily be replicated on a blockchain, depending on the platform’s controls and other policies. The more lenient a blockchain is about vetting issuers of digital assets or users that transact on the platform, the higher the potential risk for fraud or the manipulation of digital assets. These factors may decrease liquidity or volume, or increase volatility of digital securities or other assets trading on a blockchain. |
● | Lack of regulation. Digital commodities and their associated platforms are largely unregulated, and the regulatory environment is rapidly evolving. Because blockchain works by having every transaction build on every other transaction, participants can self-police any corruption, which can mitigate the need to depend on the current level of legal or government safeguards to monitor and control the flow of business transactions. As a result, companies engaged in such blockchain activities may be exposed to adverse regulatory action, fraudulent activity or even failure. |
● | Third party product defects or vulnerabilities. Where blockchain systems are built using third party products, those products may contain technical defects or vulnerabilities beyond a company’s control. Open-source technologies that are used to build a blockchain application may also introduce defects and vulnerabilities. |
● | Reliance on the Internet. Blockchain functionality relies on the Internet. A significant disruption of Internet connectivity affecting large numbers of users or geographic areas could impede the functionality of blockchain technologies and adversely affect the Fund. In addition, certain features of blockchain technology, such as decentralization, open source protocol, and reliance on peer-to-peer connectivity, may increase the risk of fraud or cyber-attack by potentially reducing the likelihood of a coordinated response. |
● | Line of business risk. Some of the companies in which the Fund may invest are engaged in other lines of business unrelated to blockchain and these lines of business could adversely affect their operating results. The operating results of these companies may fluctuate as a result of these additional risks and events in the other lines of business. In addition, a company’s ability to engage in new activities may expose it to business risks with which it has less experience than it has with the business risks associated with its traditional businesses. Despite a company’s possible success in activities linked to its use of blockchain, there can be no assurance that the other lines of business in which these companies are engaged will not have an adverse effect on a company’s business or financial condition. |
Cryptocurrency
Risk. Cryptocurrency (notably, Bitcoin), often referred to as “virtual currency” or “digital currency,”
operates as a decentralized, peer-to-peer financial exchange and value storage that is used like money. The Fund will have exposure to
Bitcoin, a cryptocurrency, indirectly through investment in the Grayscale Bitcoin Trust. Cryptocurrencies operate without central authority
or banks and are not backed by any government. Cryptocurrencies may experience very high volatility, and related investment vehicles that
invest in cryptocurrencies may be affected by such volatility. Cryptocurrency is not legal tender. Federal, state or foreign governments
may restrict the use and exchange of cryptocurrency, and regulation in the U.S. is still developing. Cryptocurrency exchanges have stopped
operating and have permanently shut down due to fraud, technical glitches, hackers or malware. Cryptocurrencies exchanges are new, largely
unregulated, and may be more exposed to fraud.
Derivatives Risk. The Fund’s
use of derivative instruments involves risks different from, or possibly greater than, the risks associated with investing directly in
securities and other traditional investments. These risks include (i) the risk that the counterparty to a derivative transaction may not
fulfill its contractual obligations; (ii) risk of mispricing or improper valuation; and (iii) the risk that changes in the value of the
derivative may not correlate perfectly with the underlying asset, rate or index. Derivative prices are highly volatile and may fluctuate
substantially during a short period of time. Such prices are influenced by numerous factors that affect the markets, including, but not
limited to: changing supply and demand relationships; government programs and policies; national and international political and economic
events, changes in interest rates, inflation and deflation and changes in supply and demand relationships. Trading derivative instruments
involves risks different from, or possibly greater than, the risks associated with investing directly in securities.
Disruptive Innovation Risk. Companies that
the adviser and sub-adviser believe are capitalizing on disruptive innovation and developing technologies to displace older technologies
or create new markets may not in fact do so. Companies that initially develop a novel technology may not be able to capitalize on the
technology. Companies that develop disruptive technologies may face political or legal attacks from competitors, industry groups or local
and national governments. These companies may also be exposed to risks applicable to sectors other than the disruptive innovation theme
for which they are chosen, and the securities issued by these companies may underperform the securities of other companies that are primarily
focused on a particular theme. The Fund may invest in a company that does not currently derive any revenue from disruptive innovations
or technologies, and there is no assurance that a company will derive any revenue from disruptive innovations or technologies in the future.
A disruptive innovation or technology may constitute a small portion of a company’s overall business. As a result, the success of
a disruptive innovation or technology may not affect the value of the equity securities issued by the company.
Early Close/Trading Halt Risk. An exchange
or market may close or issue trading halts on specific securities, or the ability to buy or sell certain securities or financial instruments
may be restricted, which may prevent the Fund from buying or selling certain securities or financial instruments. In these circumstances,
the Fund may be unable to rebalance its portfolio, may be unable to accurately price its investments and may incur substantial trading
losses.
Equity Risk. Equity securities are susceptible
to general stock market fluctuations and to volatile increases and decreases in value. The equity securities held by the Fund may experience
sudden, unpredictable drops in value or long periods of decline in value. This may occur because of factors affecting securities markets
generally, the equity securities of a particular sector, or a particular company.
ETF Structure Risk: The Fund is structured as an ETF. As a result,
the Fund is subject to special risks, including:
● | Not Individually Redeemable. The Fund’s Shares (“Shares”) are not redeemable by retail investors and may be redeemed only by the authorized participant (“Authorized Participant”) at net asset value (“NAV”) and only in Creation Units. A retail investor generally incurs brokerage costs when selling shares. |
● | Trading Issues. Trading in Shares on the Exchange may be halted due to market conditions or for reasons that, in the view of the Exchange, make trading in Shares inadvisable, such as extraordinary market volatility. There can be no assurance that Shares will continue to meet the listing requirements of the Exchange, which may result in the Fund’s shares being delisted. An active trading market for the Shares may not be developed or maintained. If the Shares are traded outside a collateralized settlement system, the number of financial institutions that can act as Authorized Participants that can post collateral on an agency basis is limited, which may limit the market for the Shares. |
● | Market Price Variance Risk. Individual Shares of the Fund that are listed for trading on the Exchange can be bought and sold in the secondary market at market prices. The market prices of Shares will fluctuate in response to changes in NAV and supply and demand for Shares. There may be times when the market price and the NAV vary significantly and you may pay more than NAV when buying Shares on the secondary market, and you may receive less than NAV when you sell those Shares. The market price of Shares, like the price of any exchange-traded security, includes a “bid-ask spread” charged by the exchange specialists, market makers or other participants that trade the particular security. In times of severe market disruption, the bid-ask spread often increases significantly. This means that Shares may trade at a discount to NAV and the discount is likely to be greatest when the price of Shares is falling fastest, which may be the time that you most want to sell your Shares. The Fund’s investment results are measured based upon the daily NAV of the Fund over a period of time. Investors purchasing and selling Shares in the secondary market may not experience investment results consistent with those experienced by those Authorized Participants creating and redeeming directly with the Fund. |
○ | In times of market stress, market makers may step away from their role market making in shares of ETFs and in executing trades, which can lead to differences between the market value of Shares and the Fund’s NAV. |
○ | The market price for the Shares may deviate from the Fund’s NAV, particularly during times of market stress, with the result that investors may pay significantly more or significantly less for Shares than the Fund’s NAV, which is reflected in the bid and ask price for Fund shares or in the closing price. |
○ | In stressed market conditions, the market for the Shares may become less liquid in response to the deteriorating liquidity of the Fund’s portfolio. This adverse effect on the liquidity of the Shares may, in turn, lead to differences between the market value of the Shares and the Fund’s NAV. |
● | Authorized Participant Risk. Only an Authorized Participant may engage in creation or redemption transactions directly with the Fund. The Fund has a limited number of institutions that may act as an Authorized Participant on an agency basis (i.e., on behalf of other market participants). To the extent that Authorized Participants exit the business or are unable to proceed with creation or redemption orders with respect to the Fund and no other Authorized Participant is able to step forward to create or redeem Creation Units, the Fund’s shares may be more likely to trade at a premium or discount to NAV and possibly face trading halts or delisting. Authorized Participant concentration risk may be heightened for securities or instruments that have lower trading volumes. |
Foreign Securities Risk. Investment in
the securities of foreign issuers involves risks beyond those associated with investments in U.S. securities. These additional risks
include greater market volatility, the availability of less reliable financial information, higher transactional and custody costs, taxation
by foreign governments, decreased market liquidity and political instability. Because many foreign securities markets may be limited
in size, the prices of securities that trade in such markets may be influenced by large traders. Certain foreign markets that have historically
been considered relatively stable may become volatile in response to changed conditions or new developments. Increased interconnectivity
of world economies and financial markets increases the possibility that adverse developments and conditions in one country or region
will affect the stability of economies and financial markets in other countries or regions. Foreign issuers are often subject to less
stringent requirements regarding accounting, auditing, financial reporting and record keeping than are U.S. issuers, and therefore, not
all material information may be available or reliable. Securities exchanges or foreign governments may adopt rules or regulations that
may negatively impact the Fund’s ability to invest in foreign securities or may prevent the Fund from repatriating its investments.
In addition, the Fund may not receive shareholder communications or be permitted to vote the securities that it holds, as the issuers
may be under no legal obligation to distribute shareholder communications.
Grayscale
Bitcoin Trust Risk. The Fund will invest indirectly in bitcoin through the Grayscale Bitcoin Trust. The Grayscale Bitcoin Trust
is a private investment fund that is not regulated under the 1940 Act. The shares of the Grayscale Bitcoin Trust may trade at a premium
or discount, may not directly correspond to the price of Bitcoin, and are highly volatile.
Industry Concentration Risk. A
fund that concentrates its investments in an industry or group of industries is more vulnerable to adverse market, economic,
regulatory, political or other developments affecting such industry or group of industries than a fund that invests its assets more
broadly.
Large Capitalization Risk. Large-capitalization
companies may be less able than smaller capitalization companies to adapt to changing market conditions. Large-capitalization companies
may be more mature and subject to more limited growth potential compared with smaller capitalization companies. During different market
cycles, the performance of large capitalization companies has trailed the overall performance of the broader securities markets.
Limited History of Operations. The Fund
is a new ETFs and have limited history of operations for investors to evaluate. Investors in the Fund bear the risk that the Fund may
not be successful in implementing its investment strategies, may be unable to implement certain of its investment strategies or may fail
to attract sufficient assets, any of which could result in the Fund being liquidated and terminated at any time without shareholder approval
and at a time that may not be favorable for all shareholders. Such a liquidation could have negative tax consequences for shareholders
and will cause shareholders to incur expenses of liquidation. The adviser may not achieve its intended result in managing the Fund.
Market and Geopolitical Risk. The increasing
interconnectivity between global economies and financial markets increases the likelihood that events or conditions in one region or financial
market may adversely impact issuers in a different country, region or financial market. Securities in the Fund’s portfolio may underperform
due to inflation (or expectations for inflation), interest rates, global demand for particular products or resources, natural disasters,
pandemics, epidemics, terrorism, regulatory events and governmental or quasi-governmental actions. The occurrence of global events similar
to those in recent years may result in market volatility and may have long term effects on both the U.S. and global financial markets.
The current novel coronavirus (COVID-19) global pandemic and the aggressive responses taken by many governments, including closing borders,
restricting international and domestic travel, and the imposition of prolonged quarantines or similar restrictions, as well as the forced
or voluntary closure of, or operational changes to, many retail and other businesses, has had negative impacts, and in many cases severe
negative impacts, on markets worldwide. It is not known how long such impacts, or any future impacts of other significant events described
above, will or would last, but there could be a prolonged period of global economic slowdown, which may impact your investment.
Next Generation Internet Companies. Companies
that the sub-adviser believes are focused on and expected to benefit from shifting the bases of technology infrastructure from hardware
and software to the cloud, enabling mobile and local services, such as companies that rely on or benefit from the increased use of shared
technology, infrastructure and services. These companies may include mail order houses which generate the entirety of their business through
websites and which offer internet-based products and services, such as streaming media or cloud storage in addition to traditional physical
goods. These companies may also include ones that develop, use or rely on innovative payment methodologies, big data, the “internet
of things,” machine learning, and social distribution and media.
Non-Diversification Risk. The Fund is non-diversified.
This means that it may invest a larger portion of its assets in a limited number of companies than a diversified fund. Because a relatively
high percentage of the Fund’s assets may be invested in the securities of a limited number of companies that could be in the same
or related economic sectors, the Fund’s portfolio may be more susceptible to any single economic, technological or regulatory occurrence
than the portfolio of a diversified fund.
Options Risk. The Fund may purchase call
and put options on securities in which they invest. The Fund may engage in these transactions to hedge against a decline in the value
of securities owned or an increase in the price of securities which the Fund plans to purchase.
○ | Put Options. When the Fund purchases a put option, it receives, in return for the premium it pays, the right to sell to the writer of the option the underlying security at a specified price at any time before the option expires. The Fund purchases put options in anticipation of a decline in the market value of the underlying security. During the life of the put option, the Fund is able to sell the underlying security at the exercise price regardless of any decline in the market price of the underlying security. In order for a put option to result in a gain, the market price of the underlying security must decline, during the option period, below the exercise price enough to cover the premium and transaction costs |
○ | Call Options. When the Fund purchases a call option, it receives, in return for the premium it pays, the right to buy from the writer of the option the underlying security at a specified price at any time before the option expires. The Fund purchases call options in anticipation of an increase in the market value of securities that it intends ultimately to buy. During the life of the call option, the Fund is able to buy the underlying security at the exercise price regardless of any increase in the market price of the underlying security. In order for a call option to result in a gain, the market price of the underlying security must exceed the sum of the exercise price, the premium paid, and transaction costs. |
Over-the-Counter Market Risk. Securities
and options traded in over-the-counter markets may trade less frequently and in limited volumes and thus exhibit more volatility and liquidity
risk, and the prices paid by the Fund in over-the-counter transactions may include an undisclosed dealer markup. The Fund is also exposed
to default by the over-the-counter option writer who may be unwilling or unable to perform its contractual obligations to the Fund.
Small and Medium Capitalization Risk. The
stocks of small and medium capitalization companies involve substantial risk. These companies may have limited product lines, markets
or financial resources, and they may be dependent on a limited management group. Stocks of these companies may be subject to more abrupt
or erratic market movements than those of larger, more established companies or the market averages in general.
Valuation
Risk. The sales price the
Fund could receive for any particular portfolio investment may differ from the Fund’s valuation of the investment, particularly
for securities or other investments, such as Bitcoin, that trade in thin or volatile markets or that are valued using a fair value methodology.
Valuation may be more difficult in times of market turmoil since many investors and market makers may be reluctant to purchase complex
instruments or quote prices for them. The Fund’s ability to value its investments may be impacted by technological issues and/or
errors by pricing services or other third party service providers. Shares of Grayscale Bitcoin Trust are intended to reflect the price
of bitcoin assets, less fees and expenses, and the shares currently trade at a substantial premium to the net asset value of such assets.
As such, the price of Grayscale Bitcoin Trust may go down even if the price of the underlying asset, bitcoin, remains unchanged. Additionally,
shares that trade at a premium mean that an investor who purchases $1 of a portfolio will actually own less than $1 in assets.
Portfolio
Holdings Disclosure: A description of the Fund’s policies and procedures regarding the release of portfolio holdings
information is available in the Fund’s Statement of Additional Information (“SAI”).
Cybersecurity:
The computer systems, networks and devices used by the Fund and its service providers to carry out routine business operations employ
a variety of protections designed to prevent damage or interruption from computer viruses, network failures, computer and telecommunication
failures, infiltration by unauthorized persons and security breaches. Despite the various protections utilized by the Fund and its service
providers, systems, networks, or devices potentially can be breached. The Fund and its shareholders could be negatively impacted as a
result of a cybersecurity breach.
Cybersecurity breaches can include unauthorized
access to systems, networks, or devices; infection from computer viruses or other malicious software code; and attacks that shut down,
disable, slow, or otherwise disrupt operations, business processes, or website access or functionality. Cybersecurity breaches may cause
disruptions and impact the Fund’s business operations, potentially resulting in financial losses; interference with the Fund’s
ability to calculate its NAV; impediments to trading; the inability of the Fund, the adviser, and other service providers to transact
business; violations of applicable privacy and other laws; regulatory fines, penalties, reputational damage, reimbursement or other compensation
costs, or additional compliance costs; as well as the inadvertent release of confidential information.
Similar adverse consequences could result from
cybersecurity breaches affecting issuers of securities in which the Fund invests; counterparties with which the Fund engages in transactions;
governmental and other regulatory authorities; exchange and other financial market operators, banks, brokers, dealers, insurance companies,
and other financial institutions (including financial intermediaries and service providers for the Fund’s shareholders); and other
parties. In addition, substantial costs may be incurred by these entities in order to prevent any cybersecurity breaches in the future.
Investment
Adviser: Simplify Asset Management Inc., located at 54 W 40th St, New York NY 10018, serves as the Fund’s investment
adviser (the “Adviser”). The Adviser is registered with the SEC as an investment adviser under the Investment Advisers Act
of 1940, as amended and manages only investment companies.
Subject to the oversight of the Board of Trustees,
the Adviser is responsible for managing the Fund’s investments, placing trade orders and providing related administrative services
and facilities under an advisory agreement between the Fund and the Adviser. The Fund was formed in December 2020.
The Adviser is paid a monthly management fee at
an annual rate (stated as a percentage of the average daily net assets of the Fund) of [0.95%]. The management agreement between the Fund
and the Adviser provides that the Adviser will pay all operating expenses of the Fund, except for any interest expenses, taxes, brokerage
expenses, future Rule 12b-1 fees (if any), acquired fund fees and expenses, expenses incidental to a meeting of the Fund’s
shareholders.
A discussion regarding the Board’s approval
of the Adviser’s and Sub-Adviser’s management agreement will be available in the Fund’s annual report to shareholders
dated June 30, 2022.
Investment
SUB-Adviser: Volt Equity LLC (the “Sub-Adviser”), located at 2193 Fillmore Street, San Francisco, CA 94115, serves
as sub-adviser to the Fund. Subject to the oversight of the Board, the Sub-Adviser is responsible for management of the Fund’s equity
portfolio. The Sub-Adviser was established in 2020 for the purpose of managing investment companies. The Sub-Adviser is paid by the Adviser,
not the Fund.
Paul Kim is the chief executive officer and co-founder
of the Adviser. Prior to co-founding the Adviser in 2020, he was a portfolio manager and managing director at Principal Global Investors
from 2015 to 2020, where he founded and led Principal’s ETF business segment. Mr. Kim has a Bachelors degree from Dartmouth and
a Masters in Business Administration in Finance from the Wharton School at the University of Pennsylvania.
David Berns, PhD, is the chief investment officer
and co-founder of the Adviser. Prior to co-founding the Adviser in 2020, he founded Portfolio Designer, LLC, a company that specializes
in portfolio design and from 2018 to 2019 was a managing director at Nasdaq Dorsey Wright. Prior to joining Nasdaq Dorsey Wright, Inc.,
he founded and developed a company that specializes in proprietary trading. He has specialized in developing asset allocation, portfolio
management, and risk management systems for managing private and institutional wealth. Mr. Berns has a PhD in Physics from the Massachusetts
Institute of Technology in the field of Quantum Computation.
Tad Park is the chief executive officer and the
founder of the Sub-Adviser. Prior to founding the Sub-Adviser in 2020, from 2017 to 2020, he was the first Senior Software Engineer of
the Series B round for Sonder Corp. which went on to become a successful Silicon Valley disruptor worth over one billion dollars. Prior
to 2017, he worked as a senior developer and team leader for an information technology and services company. Mr. Park has a Bachelor’s
degree in Environmental Economics and Policy Management from the University of California, Berkeley.
Mr. Kim, Mr. Berns, and Mr. Park are jointly and
primarily responsible for the management of the Fund.
The SAI provides additional information about
the Portfolio Managers’ compensation, other accounts managed and ownership of Fund shares.
The NAV of the Fund is determined at the close
of regular trading (normally 4:00 p.m. Eastern Time) on each day the Exchange is open for business. NAV is computed by determining, the
aggregate market value of all assets of the Fund, less its liabilities, divided by the total number of shares outstanding ((assets-liabilities)/number
of shares = NAV). The Exchange is closed on weekends and New Year’s Day, Martin Luther King, Jr. Day, Presidents’ Day, Good
Friday, Memorial Day, Juneteenth, Independence Day, Labor Day, Thanksgiving Day and Christmas Day (“Exchange Close”). The
NAV takes into account, the expenses and fees of the Fund, including management, administration, and distribution fees, which are accrued
daily. The determination of NAV for the Fund for a particular day is applicable to all applications for the purchase of shares, as well
as all requests for the redemption of Creation Units, received by the Fund (or an authorized broker or agent, or its authorized designee)
before the close of trading on the Exchange on that day.
Generally, the Fund’s portfolio securities,
including securities issued by ETFs, are valued each day at the last quoted sales price on each security’s primary exchange. Securities
traded or dealt in upon one or more securities exchanges (whether domestic or foreign) for which market quotations are readily available
and not subject to restrictions against resale shall be valued at the last quoted sales price on the primary exchange or, in the absence
of a sale on the primary exchange, at the mean between the current bid and ask prices on such exchange. Securities primarily traded in
the National Association of Securities Dealers’ Automated Quotation System (“NASDAQ”) National Market System for which
market quotations are readily available shall be valued using the NASDAQ Official Closing Price. Securities that are not traded on any
securities exchange (whether domestic or foreign) and for which over-the-counter market quotations are readily available generally shall
be valued at the last sale price or, in the absence of a sale, at the mean between the current bid and ask price on such over-the-counter
market. Debt securities not traded on an exchange may be valued at prices supplied by a pricing agent(s) based on broker or dealer supplied
valuations or matrix pricing, a method of valuing securities by reference to the value of other securities with similar characteristics,
such as rating, interest rate and maturity.
If market quotations are not readily available,
securities will be valued at their fair market value as determined using the “fair value” procedures approved by the Board.
Fair value pricing involves subjective judgments and it is possible that the fair value determined for a security may be materially different
than the value that could be realized upon the sale of that security. The fair value prices can differ from market prices when they become
available or when a price becomes available. The Board has delegated execution of these procedures to a fair value committee composed
of one or more representatives from each of the (i) Trust, (ii) administrator, and (iii) Adviser and/or Sub-Adviser. The committee may
also enlist third party consultants such as an audit firm or financial officer of a security issuer on an as-needed basis to assist in
determining a security-specific fair value. The Board reviews and ratifies the execution of this process and the resultant fair value
prices at least quarterly to assure the process produces reliable results.
The Fund may use independent pricing services
to assist in calculating the value of the Fund’s portfolio securities. In addition, market prices for foreign securities are not
determined at the same time of day as the NAV for the Fund.
In computing the NAV, the Fund values foreign
securities held by the Fund at the latest closing price on the exchange in which they are traded immediately prior to closing of the Exchange.
Prices of foreign securities quoted in foreign currencies are translated into U.S. dollars at current rates. If events materially affecting
the value of a security in the Fund’s portfolio, particularly foreign securities, occur after the close of trading on a foreign
market but before the Fund prices its shares, the security will be valued at fair value. For example, if trading in a portfolio security
is halted and does not resume before the Fund calculates its NAV, the Adviser may need to price the security using the Funds’ fair
value pricing guidelines. Without a fair value price, short-term traders could take advantage of the arbitrage opportunity and dilute
the NAV of long-term investors. Fair valuation of the Fund’s portfolio securities can serve to reduce arbitrage opportunities available
to short-term traders, but there is no assurance that fair value pricing policies will prevent dilution of the Fund’s NAV by short
term traders. The determination of fair value involves subjective judgments. As a result, using fair value to price a security may result
in a price materially different from the prices used by other mutual funds to determine NAV, or from the price that may be realized upon
the actual sale of the security.
Shares of the Fund are listed for trading on the
Exchange under the symbol WIII. Share prices are reported in dollars and cents per Share. Shares can be bought and sold on the secondary
market throughout the trading day like other publicly traded shares, and Shares typically trade in blocks of less than a Creation Unit.
There is no minimum investment required. Shares may only be purchased and sold on the secondary market when the Exchange is open for trading.
The Exchange is open for trading Monday through Friday and is closed on weekends and the following holidays, as observed: New Year’s
Day, Martin Luther King, Jr. Day, Presidents’ Day, Good Friday, Memorial Day, Juneteenth, Independence Day, Labor Day, Thanksgiving
Day and Christmas Day.
When buying or selling Shares through a broker,
you will incur customary brokerage commissions and charges, and you may pay some or all of the spread between the bid and the offered
price in the secondary market on each leg of a round trip (purchase and sale) transaction.
Authorized Participants that have entered into
a contract with the Fund’s distributor may acquire Shares from the Funds, and Authorized Participants may tender their Shares for
redemption directly to the Fund, at NAV per Share only in large blocks, or Creation Units, of 25,000 Shares. Purchases and redemptions
directly with the Fund must follow the Fund’s procedures, which are described in the SAI.
The Fund may liquidate and terminate at any time
without shareholder approval.
Share Trading Prices
The approximate value of Shares, an amount representing
on a per share basis the sum of the current market price of the securities accepted by the Fund in exchange for Shares and an estimated
cash component will be disseminated every 15 seconds throughout the trading day through the facilities of the Consolidated Tape Association.
This approximate value should not be viewed as a “real-time” update of the NAV per Share because the approximate value may
not be calculated in the same manner as the NAV, which is computed once a day, generally at the end of the business day. The Fund is not
involved in, or responsible for, the calculation or dissemination of the approximate value of the Shares, and the Fund does not make any
warranty as to the accuracy of these values.
Book Entry
Shares are held in book entry form, which means
that no stock certificates are issued. The Depository Trust Company (“DTC”) or its nominee is the record owner of all outstanding
Shares and is recognized as the owner of all Shares for all purposes.
Investors owning Shares are beneficial owners
as shown on the records of DTC or its participants. DTC serves as the securities depository for all Shares. Participants in DTC include
securities brokers and dealers, banks, trust companies, clearing corporations and other institutions that directly or indirectly maintain
a custodial relationship with DTC. As a beneficial owner of Shares, you are not entitled to receive physical delivery of stock certificates
or to have Shares registered in your name, and you are not considered a registered owner of Shares. Therefore, to exercise any right as
an owner of Shares, you must rely upon the procedures of DTC and its participants. These procedures are the same as those that apply to
any other securities that you hold in book entry or “street name” form.
FREQUENT PURCHASES AND REDEMPTIONS OF FUND
SHARES
Shares can only be purchased and redeemed directly
from the Fund in Creation Units by Authorized Participants that have entered into a contract with the Fund’s distributor. The vast
majority of trading in Shares occurs on the secondary market. Because the secondary market trades do not directly involve the Fund, it
is unlikely those trades would cause the harmful effects of market timing, including dilution, disruption of portfolio management, increases
in the Fund’s trading costs and the realization of capital gains. With regard to the purchase or redemption of Creation Units directly
with the Fund, to the extent effected in-kind (i.e., for securities), those trades do not cause the harmful effects that may result
from frequent cash trades. To the extent trades are effected in whole or in part in cash, those trades could result in dilution to the
Fund and increased transaction costs, which could negatively impact the Fund’s ability to achieve its investment objective. However,
direct trading by Authorized Participants is critical to ensuring that Shares trade at or close to NAV. The Fund also employs fair valuation
pricing to minimize potential dilution from market timing. In addition, the Fund imposes transaction fees on purchases and redemptions
of Shares to cover the custodial and other costs incurred by the Fund in effecting trades. These fees increase if an investor substitutes
cash in part or in whole for securities, reflecting the fact that the Fund’s trading costs increase in those circumstances. Given
this structure, the Trust has determined that it is not necessary to adopt policies and procedures to detect and deter market timing of
the Shares.
The Fund has adopted a distribution and service
plan (“Plan”) pursuant to Rule 12b-1 under the 1940 Act. Under the Plan, the Fund is authorized to pay distribution fees to
the distributor and other firms that provide distribution and shareholder services (“Service Providers”). If a Service Provider
provides these services, the Fund may pay fees at an annual rate not to exceed 0.25% of average daily net assets, pursuant to Rule 12b-1
under the1940 Act.
No distribution or service fees are currently
paid by the Fund and will not be paid by the Fund unless authorized by the Board. There are no current plans to impose these fees. In
the event Rule 12b-1 fees were charged, over time they would increase the cost of an investment in the Fund.
DIVIDENDS, OTHER DISTRIBUTIONS AND TAXES
Shares are traded throughout the day in the secondary
market on a national securities exchange on an intra-day basis and are created and redeemed in-kind and/or for cash in Creation Units
at each day’s next calculated NAV. In-kind arrangements are designed to protect ongoing shareholders from the adverse effects on
the Fund’s portfolio that could arise from frequent cash redemption transactions. In a conventional mutual fund, redemptions can
have an adverse tax impact on taxable shareholders if the mutual fund needs to sell portfolio securities to obtain cash to meet net fund
redemptions. These sales may generate taxable gains for the ongoing shareholders of the mutual fund, whereas the Shares’ in-kind
redemption mechanism generally will not lead to a tax event for the Fund or its ongoing shareholders.
Ordinarily, dividends from net investment income,
if any, are declared and paid quarterly by the Fund. The Fund distributes its net realized capital gains, if any, to shareholders annually.
The Fund may also pay a special distribution at the end of a calendar year to comply with federal tax requirements.
No dividend reinvestment service is provided by
the Fund. Broker-dealers may make available the DTC book-entry Dividend Reinvestment Service for use by beneficial owners of the Fund
for reinvestment of their dividend distributions. Beneficial owners should contact their broker to determine the availability and costs
of the service and the details of participation therein. Brokers may require beneficial owners to adhere to specific procedures and timetables.
If this service is available and used, dividend distributions of both income and realized gains will be automatically reinvested in additional
whole shares of the Fund purchased in the secondary market.
Distributions in cash may be reinvested automatically
in additional whole Shares only if the broker through whom you purchased Shares makes such option available.
Taxes
As with any investment, you should consider how
your investment in Shares will be taxed. The tax information in this Prospectus is provided as general information. You should consult
your own tax professional about the tax consequences of an investment in Shares.
Unless your investment in Shares is made through
a tax-exempt entity or tax-deferred retirement account, such as an individual retirement account, you need to be aware of the possible
tax consequences when:
○ | The Fund makes distributions, |
○ | You sell your Shares listed on the Exchange, and |
○ | You purchase or redeem Creation Units. |
Taxes on Distributions
Distributions from the Fund’s net investment
income, including net short-term capital gains, if any, are taxable to you as ordinary income, except that the Fund’s dividends
attributable to its “qualified dividend income” (i.e., dividends received on stock of most domestic and certain foreign
corporations with respect to which the Fund satisfies certain holding period and other restrictions), if any, generally are subject to
federal income tax for non-corporate shareholders who satisfy those restrictions with respect to their Shares at the rate for net capital
gain. A part of the Fund’s dividends also may be eligible for the dividends-received deduction allowed to corporations — the eligible
portion may not exceed the aggregate dividends the Fund receives from domestic corporations subject to federal income tax (excluding Real
Estate Investment Trusts) and excludes dividends from foreign corporations — subject to similar restrictions. However, dividends a corporate
shareholder deducts pursuant to that deduction are subject indirectly to the federal alternative minimum tax.
In general, your distributions are subject to
federal income tax when they are paid, whether you take them in cash or reinvest them in the Fund (if that option is available). Distributions
reinvested in additional Shares through the means of a dividend reinvestment service, if available, will be taxable to shareholders acquiring
the additional Shares to the same extent as if such distributions had been received in cash. Distributions of net long-term capital gains,
if any, in excess of net short-term capital losses are taxable as long-term capital gains, regardless of how long you have held the Shares.
Distributions in excess of the Fund’s current
and accumulated earnings and profits are treated as a tax-free return of capital to the extent of your basis in the Shares and as capital
gain thereafter. A distribution will reduce the Fund’s NAV per Share and may be taxable to you as ordinary income or capital gain
(as described above) even though, from an investment standpoint, the distribution may constitute a return of capital.
By law, the Fund is required to withhold 28% of
your distributions and redemption proceeds if you have not provided the Fund with a correct Social Security number or other taxpayer identification
number and in certain other situations.
Taxes on Exchange-Listed Share Sales
Any capital gain or loss realized upon a sale
of Shares is generally treated as long-term capital gain or loss if the Shares have been held for more than one year and as short-term
capital gain or loss if the Shares have been held for one year or less. The ability to deduct capital losses from sales of Shares may
be limited.
Taxes on Purchase and Redemption of Creation
Units
An Authorized Participant that exchanges securities
for Creation Units generally will recognize a gain or a loss equal to the difference between the market value of the Creation Units at
the time of the exchange and the sum of the exchanger’s aggregate basis in the securities surrendered plus any Cash Component it
pays. An Authorized Participant that exchanges Creation Units for securities will generally recognize a gain or loss equal to the difference
between the exchanger’s basis in the Creation Units and the sum of the aggregate market value of the securities received plus any
cash equal to the difference between the NAV of the Shares being redeemed and the value of the securities. The Internal Revenue Service
(“Service”), however, may assert that a loss realized upon an exchange of securities for Creation Units cannot be deducted
currently under the rules governing “wash sales” or for other reasons. Persons exchanging securities should consult their
own tax advisor with respect to whether wash sale rules apply and when a loss might be deductible.
Any capital gain or loss realized upon redemption
of Creation Units is generally treated as long-term capital gain or loss if the Shares have been held for more than one year and as short-term
capital gain or loss if the Shares have been held for one year or less.
If you purchase or redeem Creation Units, you
will be sent a confirmation statement showing how many Shares you purchased or sold and at what price. See “Tax Status” in
the SAI for a description of the newly effective requirement regarding basis determination methods applicable to Share redemptions and
the Fund’s obligation to report basis information to the Service.
The foregoing discussion summarizes some of the
possible consequences under current federal tax law of an investment in the Fund. It is not a substitute for personal tax advice. Consult
your personal tax advisor about the potential tax consequences of an investment in the Shares under all applicable tax laws. See “Tax
Status” in the SAI for more information.
Bank of New York Mellon is the Fund’s administrator,
transfer agent, custodian and fund accountant. It has its principal office at 240 Greenwich St., New York, NY 10286, and is primarily
in the business of providing administrative, fund accounting and transfer agent services to retail and institutional mutual funds.
Foreside Financial Services, LLC (the “Distributor”),
located at Three Canal Plaza, Suite 100, Portland, ME 04101, is the distributor for the shares of the Fund. The Distributor is a registered
broker-dealer and member of the Financial Industry Regulatory Authority, Inc. (“FINRA”).
Thompson Hine LLP, 41 South High Street, 17th
Floor, Columbus, Ohio 43215, serves as legal counsel to the Trust.
[___], located at [____], serves as the Fund’s
independent registered public accounting firm. The independent registered public accounting firm is responsible for auditing the annual
financial statements of the Fund.
Continuous Offering
The method by which Creation Units of Shares are
created and traded may raise certain issues under applicable securities laws. Because new Creation Units of Shares are issued and sold
by the Funds on an ongoing basis, a “distribution,” as such term is used in the Securities Act of 1933, as amended (the “Securities
Act”), may occur at any point. Broker-dealers and other persons are cautioned that some activities on their part may, depending
on the circumstances, result in their being deemed participants in a distribution in a manner which could render them statutory underwriters
and subject them to the prospectus delivery requirement and liability provisions of the Securities Act.
For example, a broker-dealer firm or its client
may be deemed a statutory underwriter if it takes Creation Units after placing an order with the Distributor, breaks them down into constituent
Shares and sells the Shares directly to customers or if it chooses to couple the creation of a supply of new Shares with an active selling
effort involving solicitation of secondary market demand for Shares. A determination of whether one is an underwriter for purposes of
the Securities Act must take into account all the facts and circumstances pertaining to the activities of the broker-dealer or its client
in the particular case, and the examples mentioned above should not be considered a complete description of all the activities that could
lead to a characterization as an underwriter.
Broker dealers who are not “underwriters”
but are participating in a distribution (as contrasted to ordinary secondary trading transactions), and thus dealing with Shares that
are part of an “unsold allotment” within the meaning of Section 4(3)(C) of the Securities Act of 1933 (the “Securities
Act”), would be unable to take advantage of the prospectus delivery exemption provided by Section 4(3) of the Securities
Act. This is because the prospectus delivery exemption in Section 4(3) of the Securities Act is not available in respect of
such transactions as a result of Section 24(d) of the 1940 Act. As a result, broker dealer firms should note that dealers who
are not underwriters but are participating in a distribution (as contrasted with ordinary secondary market transactions) and thus dealing
with Shares that are part of an overallotment within the meaning of Section 4(3)(A) of the Securities Act would be unable to
take advantage of the prospectus delivery exemption provided by Section 4(3) of the Securities Act. Firms that incur a prospectus
delivery obligation with respect to Shares are reminded that, under Rule 153 of the Securities Act, a prospectus delivery obligation
under Section 5(b)(2) of the Securities Act owed to an exchange member in connection with a sale on the Exchange is satisfied
by the fact that the prospectus is available at the Exchange upon request. The prospectus delivery mechanism provided in Rule 153
is only available with respect to transactions on an exchange.
Dealers effecting transactions in the Shares,
whether or not participating in this distribution, are generally required to deliver a Prospectus. This is in addition to any obligation
of dealers to deliver a Prospectus when acting as underwriters.
Because the Fund has only recently commenced investment
operations, no financial highlights are available for the Fund at this time. In the future, financial highlights will be presented in
this section of the Prospectus.
Adviser |
Simplify Asset Management Inc. 54 W 40th St, New York, NY 10018 |
Sub-Adviser |
Volt Equity LLC 2193 Fillmore St, San Francisco, CA 94115 |
Custodian, Administrator & Transfer Agent |
Bank of New York Mellon 240 Greenwich St. New York, NY 10286 |
Legal Counsel |
Thompson Hine LLP 41 South High Street, Suite 1700 Columbus, OH 43215 |
Independent Registered Public Accounting Firm | Distributor |
Foreside Financial Services, LLC Three Canal Plaza, Suite 100, Portland, ME 04101 |
Additional information about the Fund is included
in the Fund’s SAI. The SAI is incorporated into this Prospectus by reference (i.e., legally made a part of this Prospectus). The
SAI provides more details about the Fund’s policies and management. Additional information about the Fund’s investments is
also available in the Fund’s Annual and Semi-Annual Reports to Shareholders. In the Fund’s Annual Report, you will find a
discussion of the market conditions and investment strategies that significantly affected the Fund’s performance during the last
fiscal year.
To obtain a free copy of the SAI and the Annual
and Semi-Annual Reports to Shareholders, or other information about the Fund, or to make shareholder inquiries about the Fund, please
call 1 (855) 772-8488. You may also write to:
Simplify Exchange Traded Funds
54 W 40th Street
NY, NY 10018
Reports and other information about the Fund is
available on the EDGAR Database on the SEC’s Internet site at http://www.sec.gov.
Investment Company Act File # 811-23570
The information in this SAI is not complete
and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission
is effective. This SAI is not an offer to sell these securities and is not soliciting an offer to buy these securities in any state where
the offer or sale is not permitted.
Simplify Volt Web3 ETF
WIII
a series of Simplify Exchange Traded Funds
STATEMENT OF ADDITIONAL INFORMATION
[____], 2022
Listed and traded on:
the NYSE Arca, Inc.
This Statement of Additional Information (“SAI”)
is not a prospectus and should be read in conjunction with the combined Prospectus of the Simplify Volt Pop Web3 ETF, (the “Fund”)
dated [___], 2022. The Fund’s Prospectus is hereby incorporated by reference, which means it is legally part of this document. You
can obtain copies of the Fund’s Prospectus, annual or semi-annual reports without charge by contacting the Fund’s Distributor,
Foreside Financial Services, LLC or by calling 1 (855) 772-8488. You may also obtain a Prospectus by visiting the website at www.simplify.us/etfs.
TABLE OF CONTENTS
The Fund is a non-diversified
series of Simplify Exchange Traded Funds, a Delaware statutory trust organized on February 28, 2020 (the “Trust”). The Trust
is registered as an open-end management investment company. The Trust is governed by its Board of Trustees (the “Board” or
“Trustees”).
The Fund may issue an unlimited
number of shares of beneficial interest (“Shares”). All Shares have equal rights and privileges. Each Share is entitled to
one vote on all matters as to which Shares are entitled to vote. In addition, each Share is entitled to participate equally with other
Shares (i) in dividends and distributions declared by the Fund and (ii) on liquidation to its proportionate share of the assets remaining
after satisfaction of outstanding liabilities. Shares are fully paid, non-assessable and fully transferable when issued and have no pre-emptive,
conversion or exchange rights.
The Fund’s investment
objective is to seek to provide capital appreciation and the Fund is managed by Simplify Asset Management Inc. (the “Adviser”).
The Fund is sub-advised by Volt Equity LLC (the “Sub-Adviser”). The Board may form other series and offer shares of a new
fund under the Trust at any time.
The Fund is an exchange traded
funds (“ETFs”), which are registered open-end management companies that issue (and redeem) creation units (“Creation
Units”) to (and from) authorized participants (“Authorized Participants”) in exchange for a basket and a cash balancing
amount (if any) and the shares of which are listed on a national securities exchange and traded at market-determined prices. An Authorized
Participant is a financial institution that is a member or participant of a clearing agency registered with the Securities and Exchange
Commission (“SEC”) which has a written agreement with the Fund or one of its service providers that allows the financial institution
to place orders for the purchase and redemption of Creation Units. The Fund issues and redeem shares on a continuous basis at net asset
value per share (“NAV”) in aggregations of a specified number of shares called “Creation Units.” Creation Units
are a specified number of the Fund’s shares (e.g., 25,000) that the Fund will issue to (or redeem from) an Authorized Participant
in exchange for the deposit (or delivery) of a basket and a cash balancing amount if any. Shares trade in the secondary market at market
prices that may differ from the shares’ NAV. Shares are not individually redeemable, but are redeemable only in Creation Unit aggregations,
and generally in exchange for portfolio securities and a specified cash payment. A Creation Unit of the Fund consists of a block of 25,000
shares. Shareholders who are not Authorized Participants will not be able to purchase or redeem shares directly with or from the Fund.
The Fund reserves the right
to offer creations and redemptions of Shares for cash. In addition, Shares may be issued in advance of receipt of deposit securities subject
to various conditions, including a requirement to maintain on deposit with the Trust cash equal to up to 115% of the market value of the
missing deposit securities. In each instance of such cash creations or redemptions, transaction fees, may be imposed and may be higher
than the transaction fees associated with in-kind creations or redemptions. See PURCHASE, REDEMPTION AND PRICING OF SHARES below.
Exchange Listing and Trading
There can be no assurance that
the requirements of the NYSE Arca, Inc. (the “Exchange”) necessary to maintain the listing of shares of the Fund will continue
to be met. The Exchange may, but is not required to, remove the shares of the Fund from listing if, among other things: (i) following
the initial 12-month period beginning upon the commencement of trading of Fund shares, there are fewer than 50 record and/or beneficial
owners of shares of the Fund for 30 or more consecutive trading days, or (ii) any other event shall occur or condition shall exist that,
in the opinion of the Exchange, makes further dealings on the Exchange inadvisable. The Exchange will also remove shares of the Fund from
listing and trading upon termination of the Fund.
A discussion of the risks associated
with an investment in the Fund is contained in the Prospectus under the headings “Fund Summary—Principal Investment Strategies”,
and “Additional Information About the Principal Investment Strategies and Risks.” The discussion below supplements, and should
be read in conjunction with, such sections of the Prospectus.
General Risks and Considerations
An investment in the Fund should
be made with an understanding of the risks inherent in an investment in securities, including the risk that the general condition of the
securities market may deteriorate. Securities are susceptible to general securities market fluctuations and to volatile increases and
decreases in value as market confidence change. These investor perceptions are based on various and unpredictable factors, including expectations
regarding government, economic, monetary and fiscal policies, inflation and interest rates, economic expansion or contraction, and global
or regional political, economic or banking crises.
The existence of a liquid trading
market for certain securities may depend on whether dealers will make a market in such securities. There can be no assurance that a market
will be made or maintained or that any such market will be or remain liquid. The price at which securities may be sold and the value of
the Shares will be adversely affected if trading markets for the Fund’s portfolio securities are limited or absent, or if bid/ask
spreads are wide.
Securities of Other Investment Companies
Investments in ETFs and mutual
funds involve certain additional expenses and certain tax results, which would not be present in a direct investment in such funds. Due
to legal limitations, the Fund will be prevented from: 1) purchasing more than 3% of an investment company’s (including ETFs)
outstanding shares; 2) investing more than 5% of the Fund’s assets in any single such investment company, and 3) investing more
than 10% of the Fund’s assets in investment companies overall; unless: (i) the underlying investment company and/or the Fund has
received an order for exemptive relief from such limitations from the SEC; and (ii) the underlying investment company and the Fund take
appropriate steps to comply with any conditions in such order. In the alternative, the Fund may rely on Section 12(d)(1)(F) and Rule 12d1-3,
which allows unaffiliated mutual funds to exceed the 5% limitation and the 10% limitation, provided the aggregate sales loads any investor
pays (i.e., the combined distribution expenses of both the acquiring fund and the acquired fund) does not exceed the limits on sales loads
established by Financial Industry Regulatory Authority (“FINRA”) for funds of funds. In addition to ETFs, the Fund may invest
in other investment companies such as open-end mutual funds or exchange-traded funds, within the limitations described above. The investment
company is subject to specific risks, depending on the nature of the Fund. ETFs and mutual funds may employ leverage, which magnifies
the changes in the underlying stock or other index upon which they are based. The Fund may also rely upon Rule 12d(1)-4 which under certain
circumstances allows the Fund to exceed the 3%, 5%, and 10% limitations described above.
Open-End Investment Companies
The Fund and any “affiliated
persons,” as defined by the Investment Company Act of 1940, as amended (the “1940 Act”) may purchase in the aggregate
only up to 3% of the total outstanding securities of any underlying fund. Accordingly, when affiliated persons hold shares of any of the
underlying fund, the Fund’s ability to invest fully in shares of those funds is restricted, and the Adviser must then, in some instances,
select alternative investments that would not have been its first preference. The 1940 Act also provides that an underlying fund whose
shares are purchased by the Fund will be obligated to redeem shares held by the Fund only in an amount up to 1% of the underlying fund’s
outstanding securities during any period of less than 30 days. Shares in excess of 1% of an underlying fund’s outstanding securities
therefore, will be considered not readily marketable securities, which, together with other such securities, may not exceed 15% of the
Fund’s total assets.
Under certain circumstances
an underlying fund may determine to make payment of a redemption by the Fund wholly or partly by a distribution in kind of securities
from its portfolio, in lieu of cash, in conformity with the rules of the SEC. In such cases, the Fund may hold securities distributed
by an underlying fund until the Adviser determines that it is appropriate to dispose of such securities.
Investment decisions by the
investment advisers of the underlying fund(s) are made independently of the Fund and the Adviser. Therefore, the investment adviser of
one underlying fund may be purchasing shares of the same issuer whose shares are being sold by the investment adviser of another such
fund. The result would be an indirect expense to the Fund without accomplishing any investment purpose.
Exchange Traded Funds
ETFs are often passive funds
that track their related index and have the flexibility of trading like a security. They are managed by professionals and typically provide
the investor with diversification, cost and tax efficiency, liquidity, marginability, are useful for hedging, have the ability to go long
and short, and some provide quarterly dividends. Additionally, some ETFs are unit investment trusts. Under certain circumstances, the
adviser may invest in ETFs, known as “inverse funds,” which are designed to produce results opposite to market trends. Inverse
ETFs are funds designed to rise in price when stock prices are falling.
ETFs have two markets. The
primary market is where institutions swap “creation units” in block-multiples of, for example, 25,000 shares for in-kind securities
and cash in the form of dividends. The secondary market is where individual investors can trade as little as a single share during trading
hours on the exchange. This is different from open-ended mutual funds that are traded after hours once the NAV is calculated. ETFs share
many similar risks with open-end and closed-end funds.
Foreign Securities
Investing in securities of
foreign companies and countries involves certain considerations and risks that are not typically associated with investing in U.S. government
securities and securities of domestic companies. There may be less publicly available information about a foreign issuer than a domestic
one, and foreign companies are not generally subject to uniform accounting, auditing and financial standards and requirements comparable
to those applicable to U.S. companies. There may also be less government supervision and regulation of foreign securities exchanges, brokers
and listed companies than exists in the United States. Interest and dividends paid by foreign issuers may be subject to withholding and
other foreign taxes, which may decrease the net return on such investments as compared to dividends and interest paid to the Fund by domestic
companies or the U.S. government. There may be the possibility of expropriations, seizure or nationalization of foreign deposits, confiscatory
taxation, political, economic or social instability or diplomatic developments that could affect assets of the Fund held in foreign countries.
Finally, the establishment of exchange controls or other foreign governmental laws or restrictions could adversely affect the payment
of obligations.
To the extent currency exchange
transactions do not fully protect the Fund against adverse changes in currency exchange rates, decreases in the value of currencies of
the foreign countries in which the Fund will invest relative to the U.S. dollar will result in a corresponding decrease in the U.S. dollar
value of the Fund’s assets denominated in those currencies (and possibly a corresponding increase in the amount of securities required
to be liquidated to meet distribution requirements). Conversely, increases in the value of currencies of the foreign countries in which
the Fund invests relative to the U.S. dollar will result in a corresponding increase in the U.S. dollar value of the Fund’s assets
(and possibly a corresponding decrease in the amount of securities to be liquidated).
Short Sales
The Fund may sell securities
short as an outright investment strategy and to offset potential declines in long positions in similar securities. A short sale is a transaction
in which the Fund sells a security it does not own or have the right to acquire (or that it owns but does not wish to deliver) in anticipation
that the market price of that security will decline.
When the Fund makes a short
sale, the broker-dealer through which the short sale is made must borrow the security sold short and deliver it to the party purchasing
the security. The Fund is required to make a margin deposit in connection with such short sales; the Fund may have to pay a fee to borrow
particular securities and will often be obligated to pay over any dividends and accrued interest on borrowed securities.
If the price of the security
sold short increases between the time of the short sale and the time the Fund covers its short position, the Fund will incur a loss; conversely,
if the price declines, the Fund will realize a capital gain. Any gain will be decreased, and any loss increased, by the transaction costs
described above. The successful use of short selling may be adversely affected by imperfect correlation between movements in the price
of the security sold short and the securities being hedged.
To the extent the Fund sells
securities short, it will provide collateral to the broker-dealer and (except in the case of short sales “against the box”)
will maintain additional asset coverage in the form of cash, U.S. government securities or other liquid securities with its custodian
in a segregated account in an amount at least equal to the difference between the current market value of the securities sold short and
any amounts required to be deposited as collateral with the selling broker. A short sale is “against the box” to the extent
the Fund contemporaneously owns, or has the right to obtain at no added cost, securities identical to those sold short.
Common Stock
Common stock represents an
equity (ownership) interest in a company, and usually possesses voting rights and earns dividends. Dividends on common stock are not fixed
but are declared at the discretion of the issuer. Common stock generally represents the riskiest investment in a company. In addition,
common stock generally has the greatest appreciation and depreciation potential because increases and decreases in earnings are usually
reflected in a company’s stock price.
Preferred Stock
Preferred stock is a class
of stock having a preference over common stock as to the payment of dividends and the recovery of investment should a company be liquidated,
although preferred stock is usually junior to the debt securities of the issuer. Preferred stock typically does not possess voting rights
and its market value may change based on changes in interest rates.
A fundamental risk of investing
in common and preferred stock is the risk that the value of the stock might decrease. Stock values fluctuate in response to the activities
of an individual company or in response to general market and/or economic conditions. Historically, common stocks have provided greater
long-term returns and have entailed greater short-term risks than preferred stocks, fixed-income securities and money market investments.
The market value of all securities, including common and preferred stocks, is based upon the market’s perception of value and not
necessarily the book value of an issuer or other objective measures of a company’s worth.
Convertible Securities
Convertible securities include
fixed income securities that may be exchanged or converted into a predetermined number of shares of the issuer’s underlying common
stock at the option of the holder during a specified period. Convertible securities may take the form of convertible preferred stock,
convertible bonds or debentures, units consisting of “usable” bonds and warrants or a combination of the features of several
of these securities. Convertible securities are senior to common stocks in an issuer’s capital structure, but are usually subordinated
to similar non-convertible securities. While providing a fixed-income stream (generally higher in yield than the income derivable from
common stock but lower than that afforded by a similar nonconvertible security), a convertible security also gives an investor the opportunity,
through its conversion feature, to participate in the capital appreciation of the issuing company depending upon a market price advance
in the convertible security’s underlying common stock.
Bonds
A bond is an interest-bearing
security issued by a U.S. or non-U.S. company, or U.S. or non-U.S. governmental unit. The issuer of a bond has a contractual obligation
to pay interest at a stated rate on specific dates and to repay principal (the bond’s face value) periodically or on a specified
maturity date. Bonds generally are used by corporations and governments to borrow money from investors.
An issuer may have the right
to redeem or “call” a bond before maturity, in which case a fund may have to reinvest the proceeds at lower market rates.
Similarly, a fund may have to reinvest interest income or payments received when bonds mature, sometimes at lower market rates. Most bonds
bear interest income at a “coupon” rate that is fixed for the life of the bond. The value of a fixed-rate bond usually rises
when market interest rates fall, and falls when market interest rates rise. Accordingly, a fixed-rate bond’s yield (income as a
percent of the bond’s current value) may differ from its coupon rate as its value rises or falls. When an investor purchases a fixed-rate
bond at a price that is greater than its face value, the investor is purchasing the bond at a premium. Conversely, when an investor purchases
a fixed-rate bond at a price that is less than its face value, the investor is purchasing the bond at a discount. Fixed-rate bonds that
are purchased at a discount pay less current income than securities with comparable yields that are purchased at face value, with the
result that prices for such fixed-rate securities can be more volatile than prices for such securities that are purchased at face value.
Other types of bonds bear interest at an interest rate that is adjusted periodically. Interest rates on “floating rate” or
“variable rate” bonds may be higher or lower than current market rates for fixed-rate bonds of comparable quality with similar
final maturities.
Because of their adjustable
interest rates, the value of “floating rate” or “variable rate” bonds fluctuates much less in response to market
interest rate movements than the value of fixed-rate bonds, but their value may decline if their interest rates do not rise as much, or
as quickly, as interest rates in general. The Fund may treat some of these bonds as having a shorter maturity for purposes of calculating
the weighted average maturity of its investment portfolio. Generally, prices of higher quality issues tend to fluctuate less with changes
in market interest rates than prices of lower quality issues and prices of longer maturity issues tend to fluctuate more than prices of
shorter maturity issues. Bonds may be senior or subordinated obligations. Senior obligations generally have the first claim on a corporation’s
earnings and assets and, in the event of liquidation, are paid before subordinated obligations. Bonds may be unsecured (backed only by
the issuer’s general creditworthiness) or secured (backed by specified collateral).
Corporate Bonds
The investment return of corporate
bonds reflects interest earned on the security and changes in the market value of the security. The market value of a corporate bond may
be affected by changes in the market rate of interest, the credit rating of the corporation, the corporation’s performance and perceptions
of the corporation in the marketplace. There is a risk that the issuers of the securities may not be able to meet their obligations on
interest or principal payments at the time called for by an instrument.
Real Estate Investment Trusts
The Fund may invest in securities
of real estate investment trusts (“REITs”). REITs are publicly traded corporations or trusts that specialize in acquiring,
holding and managing residential, commercial or industrial real estate. A REIT is not taxed at the entity level on income distributed
to its shareholders or unitholders if it distributes to shareholders or unitholders at least 95% of its taxable income for each taxable
year and complies with regulatory requirements relating to its organization, ownership, assets and income.
REITs generally can be classified
as “Equity REITs”, “Mortgage REITs” and “Hybrid REITs.” An Equity REIT invests the majority of its
assets directly in real property and derives its income primarily from rents and from capital gains on real estate appreciation, which
are realized through property sales. A Mortgage REIT invests the majority of its assets in real estate mortgage loans and services its
income primarily from interest payments. A Hybrid REIT combines the characteristics of an Equity REIT and a Mortgage REIT. Although the
Fund can invest in all three kinds of REITs, its emphasis is expected to be on investments in Equity REITs.
Investments in the real estate
industry involve particular risks. The real estate industry has been subject to substantial fluctuations and declines on a local, regional
and national basis in the past and may continue to be in the future. Real property values and income from real property continue to be
in the future. Real property values and income from real property may decline due to general and local economic conditions, overbuilding
and increased competition, increases in property taxes and operating expenses, changes in zoning laws, casualty or condemnation losses,
regulatory limitations on rents, changes in neighborhoods and in demographics, increases in market interest rates, or other factors. Factors
such as these may adversely affect companies that own and operate real estate directly, companies that lend to such companies, and companies
that service the real estate industry.
Investments in REITs also involve
risks. Equity REITs will be affected by changes in the values of and income from the properties they own, while Mortgage REITs may be
affected by the credit quality of the mortgage loans they hold. In addition, REITs are dependent on specialized management skills and
on their ability to generate cash flow for operating purposes and to make distributions to shareholders or unitholders REITs may have
limited diversification and are subject to risks associated with obtaining financing for real property, as well as to the risk of self-liquidation.
REITs also can be adversely affected by their failure to qualify for tax-free pass-through treatment of their income under the Internal
Revenue Code of 1986, as amended, or their failure to maintain an exemption from registration under the 1940 Act. By investing in REITs
indirectly through the Fund, a shareholder bears not only a proportionate share of the expenses of the Fund, but also may indirectly bear
similar expenses of some of the REITs in which it invests.
Warrants
Warrants are options to purchase
common stock at a specific price (usually at a premium above the market value of the optioned common stock at issuance) valid for a specific
period of time. Warrants may have a life ranging from less than one year to twenty years, or they may be perpetual. However, most warrants
have expiration dates after which they are worthless. In addition, a warrant is worthless if the market price of the common stock does
not exceed the warrant’s exercise price during the life of the warrant. Warrants have no voting rights, pay no dividends, and have
no rights with respect to the assets of the corporation issuing them. The percentage increase or decrease in the market price of the warrant
may tend to be greater than the percentage increase or decrease in the market price of the optioned common stock.
Depositary Receipts
Sponsored and unsponsored American
Depositary Receipts (“ADRs”) are receipts issued by an American bank or trust company evidencing ownership of underlying securities
issued by a foreign issuer. ADRs, in registered form, are designed for use in U.S. securities markets. Unsponsored ADRs may be created
without the participation of the foreign issuer. Holders of these ADRs generally bear all the costs of the ADR facility, whereas foreign
issuers typically bear certain costs in a sponsored ADR. The bank or trust company depositary of an unsponsored ADR may be under no obligation
to distribute shareholder communications received from the foreign issuer or to pass through voting rights. Many of the risks described
below regarding foreign securities apply to investments in ADRs.
Emerging Markets Securities
Investing in emerging market
securities imposes risks different from, or greater than, risks of investing in foreign developed countries. These risks include: smaller
market capitalization of securities markets, which may suffer periods of relative illiquidity; significant price volatility; restrictions
on foreign investment; possible repatriation of investment income and capital. In addition, foreign investors may be required to register
the proceeds of sales; future economic or political crises could lead to price controls, forced mergers, expropriation or confiscatory
taxation, seizure, nationalization, or creation of government monopolies. The currencies of emerging market countries may experience significant
declines against the U.S. dollar, and devaluation may occur subsequent to investments in these currencies by the Fund. Inflation and rapid
fluctuations in inflation rates have had, and may continue to have, negative effects on the economies and securities markets of certain
emerging market countries.
Additional risks of emerging
markets securities may include: greater social, economic and political uncertainty and instability; more substantial governmental involvement
in the economy; less governmental supervision and regulation; unavailability of currency hedging techniques; companies that are newly
organized and small; differences in auditing and financial reporting standards, which may result in unavailability of material information
about issuers; and less developed legal systems. In addition, emerging securities markets may have different clearance and settlement
procedures, which may be unable to keep pace with the volume of securities transactions or otherwise make it difficult to engage in such
transactions. Settlement problems may cause the Fund to miss attractive investment opportunities, hold a portion of its assets in cash
pending investment, or be delayed in disposing of a portfolio security. Such a delay could result in possible liability to a purchaser
of the security.
Certificates of Deposit and Bankers’
Acceptances
Certificates of deposit are
receipts issued by a depository institution in exchange for the deposit of funds. The issuer agrees to pay the amount deposited plus interest
to the bearer of the receipt on the date specified on the certificate. The certificate usually can be traded in the secondary market prior
to maturity. Bankers’ acceptances typically arise from short-term credit arrangements designed to enable businesses to obtain funds
to finance commercial transactions. Generally, an acceptance is a time draft drawn on a bank by an exporter or an importer to obtain a
stated amount of funds to pay for specific merchandise. The draft is then “accepted” by a bank that, in effect, unconditionally
guarantees to pay the face value of the instrument on its maturity date. The acceptance may then be held by the accepting bank as an earning
asset or it may be sold in the secondary market at the going rate of discount for a specific maturity. Although maturities for acceptances
can be as long as 270 days, most acceptances have maturities of six months or less.
Commercial Paper
Commercial paper consists of
short-term (usually from 1 to 270 days) unsecured promissory notes issued by corporations in order to finance their current operations.
It may be secured by letters of credit, a surety bond or other forms of collateral. Commercial paper is usually repaid at maturity by
the issuer from the proceeds of the issuance of new commercial paper. As a result, investment in commercial paper is subject to the risk
the issuer cannot issue enough new commercial paper to satisfy its outstanding commercial paper, also known as rollover risk. Commercial
paper may become illiquid or may suffer from reduced liquidity in certain circumstances. Like all fixed income securities, commercial
paper prices are susceptible to fluctuations in interest rates. If interest rates rise, commercial paper prices will decline. The short-term
nature of a commercial paper investment makes it less susceptible to interest rate risk than many other fixed income securities because
interest rate risk typically increases as maturity lengths increase. Commercial paper tends to yield smaller returns than longer-term
corporate debt because securities with shorter maturities typically have lower effective yields than those with longer maturities. As
with all fixed income securities, there is a chance that the issuer will default on its commercial paper obligation.
Information on Time Deposits and Variable Rate
Notes
Time deposits are issued by
a depository institution in exchange for the deposit of funds. The issuer agrees to pay the amount deposited plus interest to the depositor
on the date specified with respect to the deposit. Time deposits do not trade in the secondary market prior to maturity. However, some
time deposits may be redeemable prior to maturity and may be subject to withdrawal penalties.
The commercial paper obligations
are typically unsecured and may include variable rate notes. The nature and terms of a variable rate note (i.e., a “Master Note”)
permit the Fund to invest fluctuating amounts at varying rates of interest pursuant to a direct arrangement between the Fund and the issuer.
It permits daily changes in the amounts invested. The Fund, typically, has the right at any time to increase, up to the full amount stated
in the note agreement, or to decrease the amount outstanding under the note. The issuer may prepay at any time and without penalty any
part of or the full amount of the note. The note may or may not be backed by one or more bank letters of credit. Because these notes are
direct investment arrangements between the Fund and the issuer, it is not generally contemplated that they will be traded; moreover, there
is currently no secondary market for them. Except as specifically provided in the Prospectus, there is no limitation on the type of issuer
from whom these notes may be purchased; however, in connection with such purchase and on an ongoing basis, the Adviser will consider the
earning power, cash flow and other liquidity ratios of the issuer, and its ability to pay principal and interest on demand, including
a situation in which all holders of such notes made demand simultaneously. Variable rate notes are subject to the Fund’s investment
restriction on illiquid securities unless such notes can be put back to the issuer (redeemed) on demand within seven days.
Insured Bank Obligations
The Federal Deposit Insurance
Corporation (“FDIC”) insures the deposits of federally insured banks and savings and loan associations (collectively referred
to as “banks”) up to $250,000. The Fund may elect to purchase bank obligations in small amounts so as to be fully insured
as to principal by the FDIC. Currently, to remain fully insured as to principal, these investments must be limited to $250,000 per bank;
if the principal amount and accrued interest together exceed $250,000, the excess principal and accrued interest will not be insured.
Insured bank obligations may have limited marketability.
Closed-End Investment Companies
The Fund may invest its assets
in closed-end investment companies (or “closed-end funds”), subject to the investment restrictions set forth above. Shares
of closed-end funds are typically offered to the public in a one-time initial public offering by a group of underwriters who retain a
spread or underwriting commission of between 4% or 6% of the initial public offering price. Such securities are then listed for trading
on the NYSE Arca, Inc. the National Association of Securities Dealers Automated Quotation System (commonly known as “NASDAQ”)
or, in some cases, may be traded in other over-the-counter markets. Because the shares of closed-end funds cannot be redeemed upon demand
to the issuer like the shares of an open-end investment company (such as the Fund), investors seek to buy and sell shares of closed-end
funds in the secondary market.
The Fund generally will purchase
shares of closed-end funds only in the secondary market. The Fund will incur normal brokerage costs on such purchases similar to the expenses
the Fund would incur for the purchase of securities of any other type of issuer in the secondary market. The Fund may, however, also purchase
securities of a closed-end fund in an initial public offering when, in the opinion of the Adviser, based on a consideration of the nature
of the closed-end fund’s proposed investments, the prevailing market conditions and the level of demand for such securities, they
represent an attractive opportunity for growth of capital. The initial offering price typically will include a dealer spread, which may
be higher than the applicable brokerage cost if the Fund purchased such securities in the secondary market.
The shares of many closed-end
funds, after their initial public offering, frequently trade at a price per share, which is less than the net asset value per share, the
difference representing the “market discount” of such shares. This market discount may be due in part to the investment objective
of long-term appreciation, which is sought by many closed-end funds, as well as to the fact that the shares of closed-end funds are not
redeemable by the holder upon demand to the issuer at the next determined net asset value but rather are subject to the principles of
supply and demand in the secondary market. A relative lack of secondary market purchasers of closed-end fund shares also may contribute
to such shares trading at a discount to their net asset value.
The Fund may invest in shares
of closed-end funds that are trading at a discount to net asset value or at a premium to NAV. There can be no assurance that the market
discount on shares of any closed-end fund purchased by the Fund will ever decrease. In fact, it is possible that this market discount
may increase and the Fund may suffer realized or unrealized capital losses due to further decline in the market price of the securities
of such closed-end funds, thereby adversely affecting the net asset value of the Fund’s shares. Similarly, there can be no assurance
that any shares of a closed-end fund purchased by the Fund at a premium will continue to trade at a premium or that the premium will not
decrease subsequent to a purchase of such shares by the Fund.
Closed-end funds may issue
senior securities (including preferred stock and debt obligations) for the purpose of leveraging the closed-end fund’s common shares
in an attempt to enhance the current return to such closed-end fund’s common shareholders. The Fund’s investment in the common
shares of closed-end funds that are financially leveraged may create an opportunity for greater total return on its investment, but at
the same time may be expected to exhibit more volatility in market price and net asset value than an investment in shares of investment
companies without a leveraged capital structure.
United States Government Obligations
These consist of various types
of marketable securities issued by the United States Treasury, i.e., bills, notes and bonds. Such securities are direct obligations of
the United States government and differ mainly in the length of their maturity. Treasury bills, the most frequently issued marketable
government security, have a maturity of up to one year and are issued on a discount basis.
Debt Issued by United States Government Agencies
These consist of debt securities
issued by agencies and instrumentalities of the United States government, including the various types of instruments currently outstanding
or which may be offered in the future. Agencies include, among others, the Federal Housing Administration, Government National Mortgage
Association (“Ginnie Mae”), Farmer’s Home Administration, Export-Import Bank of the United States, Maritime Administration,
and General Services Administration. Instrumentalities include, for example, each of the Federal Home Loan Banks, the National Bank for
Cooperatives, the Federal Home Loan Mortgage Corporation (“Freddie Mac”), the Farm Credit Banks, the Federal National Mortgage
Association (“Fannie Mae”), and the United States Postal Service. These securities are either: (i) backed by the full faith
and credit of the United States government (e.g., United States Treasury Bills); (ii) guaranteed by the United States Treasury (e.g.,
Ginnie Mae mortgage-backed securities); (iii) supported by the issuing agency’s or instrumentality’s right to borrow from
the United States Treasury (e.g., Fannie Mae Discount Notes); or (iv) supported only by the issuing agency’s or instrumentality’s
own credit (e.g., Tennessee Valley Association).
Government-related guarantors
(i.e. not backed by the full faith and credit of the United States Government) include Fannie Mae and Freddie Mac. Fannie Mae is a government-sponsored
corporation owned entirely by private stockholders. It is subject to general regulation by the Secretary of Housing and Urban Development.
Fannie Mae purchases conventional (i.e., not insured or guaranteed by any government agency) residential mortgages from a list of approved
seller/servicers which include state and federally chartered savings and loan associations, mutual savings banks, commercial banks and
credit unions and mortgage bankers. Pass-through securities issued by Fannie Mae are guaranteed as to timely payment of principal and
interest by Fannie Mae but are not backed by the full faith and credit of the United States Government.
Freddie Mac was created by
Congress in 1970 for the purpose of increasing the availability of mortgage credit for residential housing. It is a government-sponsored
corporation formerly owned by the twelve Federal Home Loan Banks and now owned entirely by private stockholders. Freddie Mac issues participation
certificates (“PCs”), which represent interests in conventional mortgages from Freddie Mac’s national portfolio. Freddie
Mac guarantees the timely payment of interest and ultimate collection of principal, but PCs are not backed by the full faith and credit
of the United States Government. Commercial banks, savings and loan institutions, private mortgage insurance companies, mortgage bankers
and other secondary market issuers also create pass-through pools of conventional residential mortgage loans. Such issuers may, in addition,
be the originators and/or servicers of the underlying mortgage loans as well as the guarantors of the mortgage-related securities. Pools
created by such nongovernmental issuers generally offer a higher rate of interest than government and government-related pools because
there are no direct or indirect government or agency guarantees of payments in the former pools. However, timely payment of interest and
principal of these pools may be supported by various forms of insurance or guarantees, including individual loan, title, pool and hazard
insurance and letters of credit. The insurance and guarantees are issued by governmental entities, private insurers and the mortgage poolers.
Securities Options
The Fund may purchase and write
(i.e., sell) put and call options. Such options may relate to particular securities or stock indices, and may or may not be listed
on a domestic or foreign securities exchange and may or may not be issued by the Options Clearing Corporation. Options trading is a highly
specialized activity that entails greater than ordinary investment risk. Options may be more volatile than the underlying instruments,
and therefore, on a percentage basis, an investment in options may be subject to greater fluctuation than an investment in the underlying
instruments themselves.
A call option for a particular
security gives the purchaser of the option the right to buy, and the writer (seller) the obligation to sell, the underlying security at
the stated exercise price at any time prior to the expiration of the option, regardless of the market price of the security. The premium
paid to the writer is in consideration for undertaking the obligation under the option contract. A put option for a particular security
gives the purchaser the right to sell the security at the stated exercise price at any time prior to the expiration date of the option,
regardless of the market price of the security.
Stock index options are put
options and call options on various stock indices. In most respects, they are identical to listed options on common stocks. The primary
difference between stock options and index options occurs when index options are exercised. In the case of stock options, the underlying
security, common stock, is delivered. However, upon the exercise of an index option, settlement does not occur by delivery of the securities
comprising the index. The option holder who exercises the index option receives an amount of cash if the closing level of the stock index
upon which the option is based is greater than, in the case of a call, or less than, in the case of a put, the exercise price of the option.
This amount of cash is equal to the difference between the closing price of the stock index and the exercise price of the option expressed
in dollars times a specified multiple. A stock index fluctuates with changes in the market value of the stocks included in the index.
For example, some stock index options are based on a broad market index, such as the Standard & Poor’s 500® Index or the
Value Line Composite Index or a narrower market index, such as the Standard & Poor’s 100®. Indices may also be based on
an industry or market segment, such as the NYSE Arca Oil and Gas Index or the Computer and Business Equipment Index. Options on stock
indices are currently traded on the Chicago Board Options Exchange, the New York Stock Exchange and the NASDAQ PHLX.
The Fund’s obligation
to sell an instrument subject to a call option written by it, or to purchase an instrument subject to a put option written by it, may
be terminated prior to the expiration date of the option by the Fund’s execution of a closing purchase transaction, which is effected
by purchasing on an exchange an option of the same series (i.e., same underlying instrument, exercise price and expiration date)
as the option previously written. A closing purchase transaction will ordinarily be effected to realize a profit on an outstanding option,
to prevent an underlying instrument from being called, to permit the sale of the underlying instrument or to permit the writing of a new
option containing different terms on such underlying instrument. The cost of such a liquidation purchase plus transactions costs may be
greater than the premium received upon the original option, in which event the Fund will have paid a loss in the transaction. There is
no assurance that a liquid secondary market will exist for any particular option. An option writer unable to effect a closing purchase
transaction will not be able to sell the underlying instrument or liquidate the assets held in a segregated account, as described below,
until the option expires or the optioned instrument is delivered upon exercise. In such circumstances, the writer will be subject to the
risk of market decline or appreciation in the instrument during such period.
If an option purchased by the
Fund expires unexercised, the Fund realizes a loss equal to the premium paid. If the Fund enters into a closing sale transaction on an
option purchased by it, the Fund will realize a gain if the premium received by the Fund on the closing transaction is more than the premium
paid to purchase the option, or a loss if it is less. If an option written by the Fund expires on the stipulated expiration date or if
the Fund enters into a closing purchase transaction, it will realize a gain (or loss if the cost of a closing purchase transaction exceeds
the net premium received when the option is sold). If an option written by the Fund is exercised, the proceeds of the sale will be increased
by the net premium originally received and the Fund will realize a gain or loss.
Certain Risks Regarding Options
There are several risks associated
with transactions in options. For example, there are significant differences between the securities and options markets that could result
in an imperfect correlation between these markets, causing a given transaction not to achieve its objectives. In addition, a liquid secondary
market for particular options, whether traded over-the-counter or on an exchange, may be absent for reasons which include the following:
there may be insufficient trading interest in certain options; restrictions may be imposed by an exchange on opening transactions or closing
transactions or both; trading halts, suspensions or other restrictions may be imposed with respect to particular classes or series of
options or underlying securities or currencies; unusual or unforeseen circumstances may interrupt normal operations on an exchange; the
facilities of an exchange or the Options Clearing Corporation may not at all times be adequate to handle current trading value; or one
or more exchanges could, for economic or other reasons, decide or be compelled at some future date to discontinue the trading of options
(or a particular class or series of options), in which event the secondary market on that exchange (or in that class or series of options)
would cease to exist, although outstanding options that had been issued by the Options Clearing Corporation as a result of trades on that
exchange would continue to be exercisable in accordance with their terms.
Successful use by the Fund
of options on stock indices will be subject to the ability of the Adviser to correctly predict movements in the directions of the stock
market. This requires different skills and techniques than predicting changes in the prices of individual securities. In addition, the
Fund’s ability to effectively hedge all or a portion of the securities in its portfolio, in anticipation of or during a market decline,
through transactions in put options on stock indices, depends on the degree to which price movements in the underlying index correlate
with the price movements of the securities held by the Fund. In as much as the Fund’s securities will not duplicate the components
of an index, the correlation will not be perfect. Consequently, the Fund bears the risk that the prices of its securities being hedged
will not move in the same amount as the prices of its put options on the stock indices. It is also possible that there may be a negative
correlation between the index and the Fund’s securities that would result in a loss on both such securities and the options on stock
indices acquired by the Fund.
The hours of trading for options
may not conform to the hours during which the underlying securities are traded. To the extent that the options markets close before the
markets for the underlying securities, significant price and rate movements can take place in the underlying markets that cannot be reflected
in the options markets. The purchase of options is a highly specialized activity that involves investment techniques and risks different
from those associated with ordinary portfolio securities transactions. The purchase of stock index options involves the risk that the
premium and transaction costs paid by the Fund in purchasing an option will be lost as a result of unanticipated movements in prices of
the securities comprising the stock index on which the option is based.
There is no assurance that
a liquid secondary market on an options exchange will exist for any particular option, or at any particular time, and for some options
no secondary market on an exchange or elsewhere may exist. If the Fund is unable to close out a call option on securities that it has
written before the option is exercised, the Fund may be required to purchase the optioned securities in order to satisfy its obligation
under the option to deliver such securities. If the Fund is unable to effect a closing sale transaction with respect to options on securities
that it has purchased, it would have to exercise the option in order to realize any profit and would incur transaction costs upon the
purchase and sale of the underlying securities.
Cover for Options Positions
Transactions using options
(other than options that the Fund has purchased) expose the Fund to an obligation to another party. The Fund will not enter into any such
transactions unless it owns either (i) an offsetting (“covered”) position in securities or other options or (ii) cash or liquid
securities with a value sufficient at all times to cover its potential obligations not covered as provided in (i) above. The Fund will
comply with SEC guidelines regarding cover for these instruments and, if the guidelines so require, set aside cash or liquid securities
in a segregated account with the Fund’s custodian in the prescribed amount. Under current SEC guidelines, the Fund will segregate
assets to cover transactions in which the Fund writes or sells options.
Assets used as cover or held
in a segregated account cannot be sold while the position in the corresponding option is open, unless they are replaced with similar assets.
As a result, the commitment of a large portion of the Fund’s assets to cover or segregated accounts could impede portfolio management
or the Fund’s ability to meet redemption requests or other current obligations.
Options on Futures Contracts
The Fund may purchase and sell
options on the same types of futures in which it may invest. Options on futures are similar to options on underlying instruments except
that options on futures give the purchaser the right, in return for the premium paid, to assume a position in a futures contract (a long
position if the option is a call and a short position if the option is a put), rather than to purchase or sell the futures contract, at
a specified exercise price at any time during the period of the option. Upon exercise of the option, the delivery of the futures position
by the writer of the option to the holder of the option will be accompanied by the delivery of the accumulated balance in the writer’s
futures margin account which represents the amount by which the market price of the futures contract, at exercise, exceeds (in the case
of a call) or is less than (in the case of a put) the exercise price of the option on the futures contract. Purchasers of options who
fail to exercise their options prior to the exercise date suffer a loss of the premium paid.
Dealer Options
The Fund may engage in transactions
involving dealer options as well as exchange-traded options. Certain additional risks are specific to dealer options. While the Fund might
look to a clearing corporation to exercise exchange-traded options, if the Fund were to purchase a dealer option it would need to rely
on the dealer from which it purchased the option to perform if the option were exercised. Failure by the dealer to do so would result
in the loss of the premium paid by the Fund as well as loss of the expected benefit of the transaction.
Exchange traded options generally
have a continuous liquid market while dealer options may not. Consequently, the Fund may generally be able to realize the value of a dealer
option it has purchased only by exercising or reselling the option to the dealer who issued it. Similarly, when the Fund writes a dealer
option, it may generally be able to close out the option prior to its expiration only by entering into a closing purchase transaction
with the dealer to whom the Fund originally wrote the option. While the Fund will seek to enter into dealer options only with dealers
who will agree to and which are expected to be capable of entering into closing transactions with the Fund, there can be no assurance
that the Fund will at any time be able to liquidate a dealer option at a favorable price at any time prior to expiration. Unless the Fund,
as a covered dealer call option writer, is able to effect a closing purchase transaction, it will not be able to liquidate securities
(or other assets) used as cover until the option expires or is exercised. In the event of insolvency of the other party, the Fund may
be unable to liquidate a dealer option. With respect to options written by the Fund, the inability to enter into a closing transaction
may result in material losses to the Fund. For example, because the Fund must maintain a secured position with respect to any call option
on a security it writes, the Fund may not sell the assets, which it has segregated to secure the position while it is obligated under
the option. This requirement may impair the Fund’s ability to sell portfolio securities at a time when such sale might be advantageous.
The Staff of the SEC has taken
the position that purchased dealer options are illiquid securities. The Fund may treat the cover used for written dealer options as liquid
if the dealer agrees that the Fund may repurchase the dealer option it has written for a maximum price to be calculated by a predetermined
formula. In such cases, the dealer option would be considered illiquid only to the extent the maximum purchase price under the formula
exceeds the intrinsic value of the option. Accordingly, the Fund will treat dealer options as subject to the Fund’s limitation on
illiquid securities. If the SEC changes its position on the liquidity of dealer options, the Fund will change its treatment of such instruments
accordingly.
Spread Transactions
The Fund may purchase covered
spread options from securities dealers. These covered spread options are not presently exchange-listed or exchange-traded. The purchase
of a spread option gives the Fund the right to put securities that it owns at a fixed dollar spread or fixed yield spread in relationship
to another security that the Fund does not own, but which is used as a benchmark. The risk to the Fund, in addition to the risks of dealer
options described above, is the cost of the premium paid as well as any transaction costs. The purchase of spread options will be used
to protect the Fund against adverse changes in prevailing credit quality spreads, i.e., the yield spread between high quality and
lower quality securities. This protection is provided only during the life of the spread options.
Repurchase Agreements
The Fund may enter into repurchase
agreements. In a repurchase agreement, an investor (such as the Fund) purchases a security (known as the “underlying security”)
from a securities dealer or bank. Any such dealer or bank must be deemed creditworthy by the Adviser. At that time, the bank or securities
dealer agrees to repurchase the underlying security at a mutually agreed upon price on a designated future date. The repurchase price
may be higher than the purchase price, the difference being income to the Fund, or the purchase and repurchase prices may be the same,
with interest at an agreed upon rate due to the Fund on repurchase. In either case, the income to the Fund generally will be unrelated
to the interest rate on the underlying securities. Repurchase agreements must be “fully collateralized,” in that the market
value of the underlying securities (including accrued interest) must at all times be equal to or greater than the repurchase price. Therefore,
a repurchase agreement can be considered a loan collateralized by the underlying securities.
Repurchase agreements are generally
for a short period of time, often less than a week, and will generally be used by the Fund to invest excess cash or as part of a temporary
defensive strategy. Repurchase agreements that do not provide for payment within seven days will be treated as illiquid securities. In
the event of a bankruptcy or other default by the seller of a repurchase agreement, the Fund could experience both delays in liquidating
the underlying security and losses. These losses could result from: (a) possible decline in the value of the underlying security while
the Fund is seeking to enforce its rights under the repurchase agreement; (b) possible reduced levels of income or lack of access to income
during this period; and (c) expenses of enforcing its rights.
Trading in Futures Contracts
A futures contract provides
for the future sale by one party and purchase by another party of a specified amount of a specific financial instrument (e.g., units of
a stock index) for a specified price, date, time and place designated at the time the contract is made. Brokerage fees are paid when a
futures contract is bought or sold and margin deposits must be maintained. Entering into a contract to buy is commonly referred to as
buying or purchasing a contract or holding a long position. Entering into a contract to sell is commonly referred to as selling a contract
or holding a short position.
Unlike when the Fund purchases
or sells a security, no price would be paid or received by the Fund upon the purchase or sale of a futures contract. Upon entering into
a futures contract, and to maintain the Fund’s open positions in futures contracts, the Fund would be required to deposit with its
custodian or futures broker in a segregated account in the name of the futures broker an amount of cash, U.S. government securities, suitable
money market instruments, or other liquid securities, known as “initial margin.” The margin required for a particular futures
contract is set by the exchange on which the contract is traded, and may be significantly modified from time to time by the exchange during
the term of the contract. Futures contracts are customarily purchased and sold on margins that may range upward from less than 5% of the
value of the contract being traded.
If the price of an open futures
contract changes (by increase in underlying instrument or index in the case of a sale or by decrease in the case of a purchase) so that
the loss on the futures contract reaches a point at which the margin on deposit does not satisfy margin requirements, the broker will
require an increase in the margin. However, if the value of a position increases because of favorable price changes in the futures contract
so that the margin deposit exceeds the required margin, the broker will pay the excess to the Fund.
These subsequent payments,
called “variation margin,” to and from the futures broker, are made on a daily basis as the price of the underlying assets fluctuate
making the long and short positions in the futures contract more or less valuable, a process known as “marking to the market.”
The Fund expects to earn interest income on margin deposits.
Although certain futures contracts,
by their terms, require actual future delivery of and payment for the underlying instruments, in practice most futures contracts are usually
closed out before the delivery date. Closing out an open futures contract purchase or sale is effected by entering into an offsetting
futures contract sale or purchase, respectively, for the same aggregate amount of the identical underlying instrument or index and the
same delivery date. If the offsetting purchase price is less than the original sale price, the Fund realizes a gain; if it is more, the
Fund realizes a loss. Conversely, if the offsetting sale price is more than the original purchase price, the Fund realizes a gain; if
it is less, the Fund realizes a loss. The transaction costs must also be included in these calculations. There can be no assurance, however,
that the Fund will be able to enter into an offsetting transaction with respect to a particular futures contract at a particular time.
If the Fund is not able to enter into an offsetting transaction, the Fund will continue to be required to maintain the margin deposits
on the futures contract.
For example, one contract in
the Financial Times Stock Exchange 100 Index future is a contract to buy 25 pounds sterling multiplied by the level of the UK Financial
Times 100 Share Index on a given future date. Settlement of a stock index futures contract may or may not be in the underlying instrument
or index. If not in the underlying instrument or index, then settlement will be made in cash, equivalent over time to the difference between
the contract price and the actual price of the underlying asset at the time the stock index futures contract expires.
Regulation as a Commodity Pool Operator
The Adviser is registered with
the National Futures Association as a commodity pool operator under the Commodity Exchange Act, as amended, and the rules of the Commodity
Futures Trading Commission promulgated thereunder. The Adviser, on behalf of the Fund, has filed with the National Futures Association,
a notice claiming an exemption from the definition of the term “commodity pool operator” in accordance with Rule 4.5 under
the Commodity Exchange Act (“CEA”), as amended, and the rules of the Commodity Futures Trading Commission promulgated thereunder,
with respect to the Fund’s operations. Accordingly, the Fund is not subject, nor will they be subject, to registration or regulation
as a commodity pool operator under the CEA.
When-Issued, Forward Commitments and Delayed Settlements
The Fund may purchase and sell
securities on a when-issued, forward commitment or delayed settlement basis. In this event, the Custodian (as defined under the section
entitled “Custodian”) will segregate liquid assets equal to the amount of the commitment in a separate account. Normally, the
Custodian will set aside portfolio securities to satisfy a purchase commitment. In such a case, the Fund may be required subsequently
to segregate additional assets in order to assure that the value of the account remains equal to the amount of the Fund’s commitment.
It may be expected that the Fund’s net assets will fluctuate to a greater degree when it sets aside portfolio securities to cover
such purchase commitments than when it sets aside cash.
The Fund does not intend to
engage in these transactions for speculative purposes but only in furtherance of their investment objectives. Because the Fund will segregate
liquid assets to satisfy purchase commitments in the manner described, the Fund’s liquidity and the ability of the Adviser to manage
them may be affected in the event the Fund’s forward commitments, commitments to purchase when-issued securities and delayed settlements
ever exceeded 15% of the value of its net assets.
The Fund will purchase securities
on a when-issued, forward commitment or delayed settlement basis only with the intention of completing the transaction. If deemed advisable
as a matter of investment strategy, however, the Fund may dispose of or renegotiate a commitment after it is entered into, and may sell
securities it has committed to purchase before those securities are delivered to the Fund on the settlement date. In these cases the Fund
may realize a taxable capital gain or loss. When the Fund engages in when-issued, forward commitment and delayed settlement transactions,
it relies on the other party to consummate the trade. Failure of such party to do so may result in the Fund incurring a loss or missing
an opportunity to obtain a price credited to be advantageous.
The market value of the securities
underlying a when-issued purchase, forward commitment to purchase securities, or a delayed settlement and any subsequent fluctuations
in their market value is taken into account when determining the market value of the Fund starting on the day the Fund agrees to purchase
the securities. The Fund does not earn interest on the securities it has committed to purchase until it has paid for and delivered on
the settlement date.
Illiquid and Restricted Securities
The Fund may invest up to 15%
of its net assets in illiquid securities. Illiquid securities include securities subject to contractual or legal restrictions on resale
(e.g., because they have not been registered under the Securities Act of 1933, as amended (the “Securities Act”)) and securities
that are otherwise not readily marketable (e.g., because trading in the security is suspended or because market makers do not exist or
will not entertain bids or offers). Securities that have not been registered under the Securities Act are referred to as private placements
or restricted securities and are purchased directly from the issuer or in the secondary market. Foreign securities that are freely tradable
in their principal markets are not considered to be illiquid.
Restricted and other illiquid
securities may be subject to the potential for delays on resale and uncertainty in valuation. The Fund might be unable to dispose of illiquid
securities promptly or at reasonable prices and might thereby experience difficulty in satisfying redemption requests from shareholders.
The Fund might have to register restricted securities in order to dispose of them, resulting in additional expense and delay. Adverse
market conditions could impede such a public offering of securities.
A large institutional market
exists for certain securities that are not registered under the Securities Act, including foreign securities. The fact that there are
contractual or legal restrictions on resale to the general public or to certain institutions may not be indicative of the liquidity of
such investments. Rule 144A under the Securities Act allows such a broader institutional trading market for securities otherwise subject
to restrictions on resale to the general public. Rule 144A establishes a “safe harbor” from the registration requirements of
the Securities Act for resale of certain securities to qualified institutional buyers. Rule 144A has produced enhanced liquidity for many
restricted securities, and market liquidity for such securities may continue to expand as a result of this regulation and the consequent
existence of the PORTAL system, which is an automated system for the trading, clearance and settlement of unregistered securities of domestic
and foreign issuers sponsored by NASDAQ.
Under guidelines adopted by
the Board, the Adviser may determine that particular Rule 144A securities, and commercial paper issued in reliance on the private placement
exemption from registration afforded by Section 4(a)(2) of the Securities Act, are liquid even though they are not registered. A determination
of whether such a security is liquid or not is a question of fact. In making this determination, the Adviser will consider, as it deems
appropriate under the circumstances and among other factors: (1) the frequency of trades and quotes for the security; (2) the number of
dealers willing to purchase or sell the security; (3) the number of other potential purchasers of the security; (4) dealer undertakings
to make a market in the security; (5) the nature of the security (e.g., debt or equity, date of maturity, terms of dividend or interest
payments, and other material terms) and the nature of the marketplace trades (e.g., the time needed to dispose of the security, the method
of soliciting offers, and the mechanics of transfer); and (6) the rating of the security and the financial condition and prospects of
the issuer. In the case of commercial paper, the Adviser will also determine that the paper (1) is not traded flat or in default as to
principal and interest, and (2) is rated in one of the two highest rating categories by at least two Nationally Recognized Statistical
Rating Organizations (“NRSROs”) or, if only one NRSRO rates the security, by that NRSRO, or, if the security is unrated, the
Adviser determines that it is of equivalent quality.
Rule 144A securities and Section
4(a)(2) commercial paper that have been deemed liquid as described above will continue to be monitored by the Adviser to determine if
the security is no longer liquid as the result of changed conditions. Investing in Rule 144A securities or Section 4(a)(2) commercial
paper could have the effect of increasing the amount of the Fund’s assets invested in illiquid securities if institutional buyers
are unwilling to purchase such securities.
Lending Portfolio Securities
For the purpose of achieving
income, the Fund may lend its portfolio securities, provided (1) the loan is secured continuously by collateral consisting of U.S. Government
securities or cash or cash equivalents (cash, U.S. Government securities, negotiable certificates of deposit, bankers’ acceptances
or letters of credit) maintained on a daily mark-to-market basis in an amount at least equal to the current market value of the securities
loaned, (2) the Fund may at any time call the loan and obtain the return of securities loaned, (3) the Fund will receive any interest
or dividends received on the loaned securities, and (4) the aggregate value of the securities loaned will not at any time exceed one-third
of the total assets of the Fund.
INVESTMENT RESTRICTIONS
The Fund has adopted the following
investment restrictions that may not be changed without approval by a “majority of the outstanding shares” of the Fund, which,
as used in this SAI, means the vote of the lesser of (a) 67% or more of the shares of the Fund represented at a meeting, if the holders
of more than 50% of the outstanding shares of the Fund are present or represented by proxy, or (b) more than 50% of the outstanding shares
of the Fund. The Fund may not:
1. | Issue senior securities, except as otherwise permitted under the 1940 Act, and the rules and regulations promulgated thereunder; |
2. | Borrow money, except (a) from a bank, provided that immediately after such borrowing there is an asset coverage of 300% for all borrowings of the Fund; or (b) from a bank or other persons for temporary purposes only, provided that such temporary borrowings are in an amount not exceeding 5% of the Fund’s total assets at the time when the borrowing is made. This limitation does not preclude the Fund from entering into reverse repurchase transactions, provided that the Fund has an asset coverage of 300% for all borrowings and repurchase commitments of the Fund pursuant to reverse repurchase transactions; |
3. | The Fund may not engage in the business of underwriting securities issued by others, except to the extent that the Fund may be considered an underwriter within the meaning of the Securities Act, in the disposition of restricted securities or in connection with its investments in other investment companies; |
4. | Purchase or sell real estate or interests in real estate. This limitation is not applicable to investments in marketable securities that are secured by or represent interests in real estate. This limitation does not preclude the Fund from investing in mortgage-related securities or investing in companies engaged in the real estate business or that have a significant portion of their assets in real estate (including REITs); |
5. | Simplify Volt Web3 ETF: The Fund will invest 25% or more of the value of its total assets in the securities of issuers in a group of industries including: software, IT services, capital markets, semiconductors & semiconductor equipment, technology hardware, storage & peripherals, textiles, apparel & luxury goods, entertainment, and interactive media and services industries. For purposes of determining industry concentration, if the Fund invests in unaffiliated underlying investment companies, the Fund will consider the concentration of the underlying investment companies for purposes of determining compliance with its own concentration policy. |
6. | Purchase or sell commodities (unless acquired as a result of ownership of securities or other investments) or commodity futures contracts, except that the Fund may purchase and sell futures contracts and options to the full extent permitted under the 1940 Act, sell foreign currency contracts in accordance with any rules of the Commodity Futures Trading Commission, invest in securities or other instruments backed by commodities, and invest in companies that are engaged in a commodities business or have a significant portion of their assets in commodities; or |
7. | Make loans to others, except that the Fund may, in accordance with its investment objective and policies, (i) lend portfolio securities, (ii) purchase and hold debt securities or other debt instruments, including but not limited to loan participations and sub-participations, assignments, and structured securities, (iii) make loans secured by mortgages on real property, (iv) enter into repurchase agreements, (v) enter into transactions where each loan is represented by a note executed by the borrower, and (vi) make time deposits with financial institutions and invest in instruments issued by financial institutions. For purposes of this limitation, the term “loans” shall not include the purchase of a portion of an issue of publicly distributed bonds, debentures or other securities. |
If a restriction on the Fund’s
investments is adhered to at the time an investment is made, a subsequent change in the percentage of Fund assets invested in certain
securities or other instruments of the Fund’s investment portfolio, resulting from changes in the value of the Fund’s total
assets, will not be considered a violation of the restriction; provided, however, that the asset coverage requirement applicable to borrowings
shall be maintained in the manner contemplated by applicable law.
With respect to fundamental
investment restriction #2 above, if the Fund’s asset coverage falls below 300%, the Fund will reduce borrowing within 3 days in
order to ensure that the Fund has 300% asset coverage.
POLICIES AND PROCEDURES FOR DISCLOSURE OF PORTFOLIO HOLDINGS
The Trust has adopted a policy
regarding the disclosure of information about the Fund’s portfolio holdings. The Fund and its service providers may not receive
compensation or any other consideration (which includes any agreement to maintain assets in the Fund or in other investment companies
or accounts managed by the Adviser or any affiliated person of the Adviser) in connection with the disclosure of portfolio holdings information
of the Fund. The Trust’s policy is implemented and overseen by the Chief Compliance Officer of the Trust, subject to the oversight
of the Board. Periodic reports regarding these procedures will be provided to the Board. The Trust, the Adviser and the Distributor (as
defined below) will not disseminate non-public information concerning the Trust. The Board must approve all material amendments to this
policy.
Each business day, the Fund’s
portfolio holdings information will generally be provided for dissemination through the facilities of the National Securities Clearing
Corporation (“NSCC”) and/or other fee-based subscription services to NSCC members and/or subscribers to those other fee-based
subscription services, including Authorized Participants (as defined below), and to entities that publish and/or analyze such information
in connection with the process of purchasing or redeeming Creation Units or trading shares of the Fund in the secondary market. This information
typically reflects the Fund’s anticipated holdings as of the next Business Day (as defined below).
Access to information concerning
the Fund’s portfolio holdings may be permitted to personnel of third party service providers, including the Fund’s custodian,
transfer agent, auditors and counsel, as may be necessary to conduct business in the ordinary course in a manner consistent with such
service providers’ agreements with the Trust on behalf of the Fund.
Portfolio holdings information
made available in connection with the creation/redemption process may be provided to other entities that provide services to the Fund
in the ordinary course of business after it has been disseminated to the NSCC. From time to time, information concerning portfolio holdings
other than portfolio holdings information made available in connection with the creation/redemption process, as discussed above, may be
provided to other entities that provide services to the Fund, including rating or ranking organizations, in the ordinary course of business,
no earlier than one business day following the date of the information.
The Fund discloses on the Adviser’s
website at www.simplify.us/etfs at the start of each Business Day the identities and quantities of the securities and other assets held
by the Fund that will form the basis of the Fund’s calculation of its NAV on that Business Day. The portfolio holdings so disclosed
will be based on information as of the close of business on the prior Business Day and/or trades that have been completed prior to the
opening of business on that Business Day and that are expected to settle on that Business Day. The Fund may also concurrently disclose
this portfolio holdings information directly to ratings agencies on a daily basis.
Quarterly Portfolio Schedule.
The Trust is required to disclose the complete schedule of the Fund’s portfolio holdings with the SEC on Form N-PORT. The Trust
will also disclose a complete schedule of the Fund’s portfolio holdings with the SEC on Form N-CSR after its second and fourth quarters.
Form N-PORT and Form N-CSR
for the Fund is available on the SEC’s website at www.sec.gov. The Fund’s Form N-PORT and Form N-CSR are available
without charge, upon request, by calling 1 (855) 772-8488 or by writing to: Simplify Exchange Traded Funds, 54 W. 40th Street, New York,
NY 10018.
Other Service Providers
The Adviser. Personnel of the Adviser,
including personnel responsible for managing the Fund’s portfolio, may have full daily access to Fund portfolio holdings since that
information is necessary in order for the Adviser to provide its management, administrative, and investment services to the Fund. As required
for purposes of analyzing the impact of existing and future market changes on the prices, availability, as demand and liquidity of such
securities, as well as for the assistance of portfolio managers in the trading of such securities, Adviser personnel may also release
and discuss certain portfolio holdings with various broker-dealers.
Bank of New York Mellon. Bank of New York
Mellon is the fund accountant, administrator, transfer agent and custodian for the Funds; therefore, its personnel have full daily access
to the Fund’s portfolio holdings since that information is necessary in order for them to provide the agreed-upon services for the
Trust.
[___]. [___]. is the Fund’s independent
registered public accounting firm; therefore, its personnel have access to the Fund’s portfolio holdings in connection with auditing
of the Fund’s annual financial statements and providing assistance and consultation in connection with SEC filings.
Thompson Hine LLP. Thompson Hine LLP is
counsel to the Fund; therefore, its personnel have access to the Fund’s portfolio holdings in connection with review of the Fund’s
annual and semi-annual shareholder reports and SEC filings.
Additions to List of Approved Recipients
The Trust’s Chief Compliance
Officer is the person responsible, and whose prior approval is required, for any disclosure of the Fund’s portfolio securities at
any time or to any persons other than those described above. In such cases, the recipient must have a legitimate business need for the
information and must be subject to a duty to keep the information confidential. There are no ongoing arrangements in place with respect
to the disclosure of portfolio holdings. In no event shall the Fund, the Adviser, or any other party receive any direct or indirect compensation
in connection with the disclosure of information about the Fund’s portfolio holdings.
Compliance with Portfolio Holdings Disclosure
Procedures
The Trust’s Chief Compliance
Officer will report periodically to the Board with respect to compliance with the Fund’s portfolio holdings disclosure procedures,
and from time to time will provide the Board any updates to the portfolio holdings disclosure policies and procedures.
There is no assurance that
the Trust’s policies on disclosure of portfolio holdings will protect the Fund from the potential misuse of holdings information
by individuals or firms in possession of that information.
The business of the Trust is
managed under the direction of the Board in accordance with the Agreement and Declaration of Trust and the Trust’s By-laws (the
“Governing Documents”), which have been filed with the SEC and are available upon request. The Board consists of four (4)
individuals, each of whom are not “interested persons” (as defined under the 1940 Act) of the Trust or any investment adviser
to any series of the Trust (“Independent Trustees”). Pursuant to the Governing Documents, the Trustees shall elect officers
including a President, a Secretary, a Treasurer, a Principal Executive Officer and a Principal Accounting Officer. The Board retains the
power to conduct, operate and carry on the business of the Trust and has the power to incur and pay any expenses, which, in the opinion
of the Board, are necessary or incidental to carry out any of the Trust’s purposes. The Trustees, officers, employees and agents
of the Trust, when acting in such capacities, shall not be subject to any personal liability except for his or her own bad faith, willful
misfeasance, gross negligence or reckless disregard of his or her duties.
Board Leadership Structure
The Trust is led by Paul Kim,
who has served as the Chairman of the Board since June 2020. The Board of Trustees is comprised of 3 independent Trustees. Additionally,
under certain 1940 Act governance guidelines that apply to the Trust, the Independent Trustees will meet in executive session, at least
quarterly. Under the Governing Documents, the Chairman of the Board is responsible for (a) presiding at board meetings, (b) calling special
meetings on an as-needed basis, (c) executing and administering of Trust policies including (i) setting the agendas for board meetings
and (ii) providing information to board members in advance of each board meeting and between board meetings. The Trust believes that its
Chairman, the independent chair of the Audit Committee, and, as an entity, the full Board, provide effective leadership that
is in the best interests of the Trust, its funds and each shareholder.
Board Risk Oversight
The Board has a
standing independent Audit Committee. The Board is responsible for overseeing risk management, and the full Board regularly engages in
discussions of risk management and receives compliance reports that inform its oversight of risk management from its Chief Compliance
Officer at quarterly meetings and on an ad hoc basis, when and if necessary. The Audit Committee considers financial and reporting risk
within its area of responsibilities. Generally, the Board believes that its oversight of material risks is adequately maintained through
the compliance-reporting chain where the Chief Compliance Officer is the primary recipient and communicator of such risk-related information.
Trustee Qualifications
Generally, the Trust believes
that each Trustee is competent to serve because of their individual overall merits including: (i) experience, (ii) qualifications, (iii)
attributes and (iv) skills.
Christopher Caltagirone
worked for a major service provider to investment managers and mutual funds for more than 9 years, including as a portfolio manager
for fixed income securities. His expertise in fixed income securities and portfolio trading enables Mr. Caltagirone to bring a unique
perspective to service provider oversight for the Trust.
Craig Enders has over
20 years of experience as a professor at two major universities. Mr. Enders study of multiple imputation and maximum likelihood and Bayesian
estimation with incomplete data enables him to provide oversight for the Trust.
Paul Kim has worked
as a senior director and vice president in ETF strategy and product management for over ten-years. His expertise in developing ETF strategies
and actively managed ETFs provides him unique insight on the formation and regulatory oversight of ETFs.
Zung Nguyen has more
than 20 years’ experience in the investment management industry and has extensive investment adviser experience. During the course
of his career, Mr. Zung has served as a senior managing director and executive wealth advisor for large advisory firm. Mr. Zung has excellent
communications skills, as well as an ability to work effectively with others. Mr. Zung brings a diversity of viewpoint, background and
experience to the Board.
The Trust does not believe
any one factor is determinative in assessing a Trustee’s qualifications, but that the collective experience of each Trustee makes
them each highly qualified.
The following is a list of
the Trustees and executive officers of the Trust and each person’s principal occupation over the last five years. The business address
of each Trustee and Officer is Simplify Exchange Traded Funds 54 W. 40th Street, New York, NY 10018. All correspondence to the Trustees
and Officers should be directed to c/o Simplify Exchange Traded Funds 54 W. 40th Street, New York, NY 10018.
Independent Trustees
Name and Year of Birth | Position/Term of Office* | Principal Occupation During the Past Five Years | Number of Funds in Fund Complex** Overseen by Trustee |
Other Directorships held by Trustee during the Past Five Years |
Christopher Caltagirone Year of Birth: 1971 |
Independent Trustee | Deputy Sheriff, Ravalli County Sheriff’s Department (2019 to Present); Unemployed (2015 to 2019); Portfolio Manager, PIMCO (2006 to 2015). | [___] | None |
Craig Enders Year of Birth: 1968 |
Independent Trustee | Professor, University of California Los Angeles (2015 to Present). | [___] | None |
Zung Nguyen Year of Birth: 1955 |
Independent Trustee | Founder, ZTN Capital Consulting, LLC (2015 to Present). | [___] | None |
Interested Trustee and Officers
Name and Year of Birth |
Position/Term of Office* | Principal Occupation During the Past Five Years | Number of Funds in Fund Complex** Overseen by Trustee | Other Directorships held by Trustee during the Past Five Years |
Paul Kim Year of Birth: 1977 |
Trustee, President and Treasurer since 2020 | Co-Founder, Simplify Asset Management, Inc. (February 2020 to Present); Managing Director, Principal Global Advisors (2015 to 2020). | [___] | None |
David Berns Year of Birth: 1978 |
Secretary since 2020 | Co-Founder, Simplify Asset Management, Inc. (February 2020 to Present); CEO, Portfolio Designer, LLC (2019 to Present); Managing Director, Nasdaq (2018 to 2019); CEO, DMB Trading, LLC (2015 to 2018). | N/A | N/A |
James Nash Year of Birth: 1981 |
Chief Compliance Officer since 2020 | Director, Foreside Financial Group, LLC (2016 to Present); Regulatory Administration Advisor, JP Morgan Chase & Co. (2014 to 2016). | N/A | N/A |
* | The term of office for each Trustee and officer listed above will continue indefinitely until the individual resigns or is removed. |
** | The term “Fund Complex” refers to the operational series of the Trust. |
Board Committees
Audit Committee
The Board has an Audit Committee
that consists of all the Trustees who are not “interested persons” of the Trust within the meaning of the 1940 Act. The Audit
Committee’s responsibilities include: (i) recommending to the Board the selection, retention or termination of the Trust’s
independent auditors; (ii) reviewing with the independent auditors the scope, performance and anticipated cost of their audit; (iii) discussing
with the independent auditors certain matters relating to the Trust’s financial statements, including any adjustment to such financial
statements recommended by such independent auditors, or any other results of any audit; (iv) reviewing on a periodic basis a formal written
statement from the independent auditors with respect to their independence, discussing with the independent auditors any relationships
or services disclosed in the statement that may impact the objectivity and independence of the Trust’s independent auditors and
recommending that the Board take appropriate action in response thereto to satisfy itself of the auditor’s independence; and (v)
considering the comments of the independent auditors and management’s responses thereto with respect to the quality and adequacy
of the Trust’s accounting and financial reporting policies and practices and internal controls. The Audit Committee operates pursuant
to an Audit Committee Charter. The Audit Committee is responsible for seeking and reviewing nominee candidates for consideration as Independent
Trustees as is from time to time considered necessary or appropriate. The Audit Committee generally will not consider shareholder nominees.
The Audit Committee is also responsible for reviewing and setting Independent Trustee compensation from time to time when considered necessary
or appropriate. During the period December 29, 2020 (commencement of operations) through June 30, 2021, the Audit Committee met two times.
Nominating and Corporate Governance Committee
The Board has a Nominating
and Governance Corporate Committee that consists of all the Trustees who are not “interested persons” of the Trust within
the meaning of the 1940 Act. The Committee’s responsibilities (which may also be conducted by the Board) include: (i) recommend
persons to be nominated or re-nominated as Trustees in accordance with the Independent Trustee’s Statement of Policy on Criteria
for Selecting Independent Trustees; (ii) review the Fund’s officers, and conduct Chief Compliance Officer searches, as needed, and
provide consultation regarding other CCO matters, as requested; (iii) reviewing trustee qualifications, performance, and compensation;
(iv) review periodically with the Board the size and composition of the Board as a whole; (v) annually evaluate the operations of the
Board and its Committees and assist the Board in conducting its annual self-evaluation; (vi) make recommendations on the requirements
for, and means of, Board orientation and training; (vii) periodically review the Board’s corporate Governance policies and practices
and recommend, as it deems appropriate, any changes to the Board; (ix) considering any corporate governance issues that arise from time
to time, and to develop appropriate recommendations for the Board; and (x) supervising counsel for the independent Trustees. The Nominating
and Corporate Governance Committee generally will not consider shareholder nominees. Zung Nguyen serves as the Chairman of the Committee.
The Nominating and Governance Corporate Committee operates pursuant to a Nominating and Governance Committee Charter. For the period ended
June 30, 2021, the Nominating and Corporate Governance Committee met once.
Compensation
Each Trustee who is not affiliated
with the Trust or an investment adviser to any series of the Trust (each an “Independent Trustee”) receives a yearly fee of
$100,000 paid by the Trust for his service as a Trustee of the Board. as well as reimbursement for any reasonable expenses incurred for
attending regularly scheduled Board and Committee meetings.
None of the executive officers
or interested Trustees receive compensation from the Trust.
The table below details the
amount of compensation the Trustees received from the Fund for the Fund’s initial fiscal period. Each Independent Trustee is expected
to attend all quarterly meetings during the period. The Trust does not have a bonus, profit sharing, pension or retirement plan.
Name and Position | Simplify Volt Web3 ETF | Pension or Retirement Benefits Accrued as Part of Funds Expenses | Annual Benefits Upon Retirement | Total Compensation From Trust and Fund Complex* Paid to Trustees |
Craig Enders | [___] | $0 | $0 | [___] |
Christopher Caltagirone | [___] | $0 | $0 | [___] |
Zung Nguyen | [___] | $0 | $0 | [___] |
* | There are currently numerous series comprising the Trust. The term “Fund Complex” refers to the operational series of the Trust. |
Management and Trustee Ownership
As of the date of the SAI,
the Trustees and officers, as a group, owned no shares of a Fund or any of the Fund Complex’s outstanding shares.
The following information supplements
and should be read in conjunction with the section in the Prospectus entitled “Dividends, Other Distributions, and Taxes.”
General Policies
The Fund expects to declare
and distribute all of its net investment income, if any, to shareholders as dividends at least semi-annually. The Fund may distribute
such income dividends and capital gains more frequently, if necessary, in order to reduce or eliminate federal excise or income taxes
on the Fund.
Dividend Distributions
Dividends and other distributions
on Shares are distributed, as described below, on a pro rata basis to Beneficial Owners of such Shares. Dividend payments are made through
DTC Participants and Indirect Participants to Beneficial Owners then of record with proceeds received from the Trust.
Dividend Reinvestment Service
The Trust will not make the
DTC book-entry dividend reinvestment service available for use by Beneficial Owners for reinvestment of their cash proceeds, but certain
individual broker-dealers may make available the DTC book-entry Dividend Reinvestment Service for use by Beneficial Owners of the Fund
through DTC Participants for reinvestment of their dividend distributions. Investors should contact their brokers to ascertain the availability
and description of these services. Beneficial Owners should be aware that each broker may require investors to adhere to specific procedures
and timetables in order to participate in the dividend reinvestment service and investors should ascertain from their brokers such necessary
details. If this service is available and used, dividend distributions of both income and realized gains will be automatically reinvested
in additional whole Shares issued by the Trust of the same Fund at NAV per Share. Distributions reinvested in additional Shares of the
Fund will nevertheless be taxable to Beneficial Owners acquiring such additional Shares to the same extent as if such distributions had
been received in cash.
CONTROL PERSONS AND PRINCIPAL HOLDERS
A principal shareholder is
any person who owns (either of record or beneficially) 5% or more of the outstanding shares of a fund. A control person is one who owns,
either directly or indirectly more than 25% of the voting securities of a company or acknowledges the existence of control. A control
person is one who owns beneficially or through controlled companies more than 25% of the voting securities of a company or acknowledged
the existence of control. As of the date of this SAI, no person owns of record or beneficially 5% or more of the outstanding shares of
the Fund.
The Depository Trust Company
(“DTC”) or its nominee is the record owner of all outstanding shares and is recognized as the owner of all shares for all
purposes. Investors owning shares are beneficial owners as shown on the records of DTC or its participants.
Investment Adviser and Advisory Agreement
Simplify Asset Management Inc.,
located at 54 W. 40th Street, New York, NY 10018, serves as the Fund’s investment adviser pursuant to an investment advisory agreement
between the Trust and the Adviser (the “Management Agreement”). The Adviser is registered with the SEC as an investment adviser
under the Investment Advisers Act of 1940, as amended.
Subject to the oversight of
the Board, the Adviser provides or causes to be furnished all supervisory and other services reasonably necessary for the operation of
the Fund, including overseeing audit, portfolio accounting, legal, transfer agency, custody, printing costs, certain administrative services
(provided pursuant to a separate administration agreement), certain distribution services (provided pursuant to a separate distribution
agreement), certain shareholder and distribution-related services (provided pursuant to a separate Rule 12b-1 Plan and related agreements)
and investment management and investment advisory services (provided pursuant to the Management Agreement) under what is essentially an
all-in fee structure. The Fund bears other expenses which are not covered under the Management Agreement that may vary and will affect
the total level of expenses paid by the Fund, such as taxes and governmental fees, brokerage fees, commissions and other transaction expenses,
costs of borrowing money, including interest expenses, certain custody expenses and extraordinary expenses (such as litigation and indemnification
expenses).
The Fund pays the Adviser a
unitary fee (“Management Fee”) under the Management Agreement in return for providing investment management, investment advisory
and supervisory services and for being obligated to pay certain Fund expenses discussed above. The Adviser is paid a monthly Management
Fee at an annual rate of [0.95]% of the average daily net assets of the Fund. Under a unitary fee structure, the Adviser is responsible
for paying substantially all the expenses of the Fund, excluding payments under the Fund’s 12b-1 plan (if any), interest expenses,
taxes, acquired fund fees and expenses, brokerage fees, costs of holding shareholder meetings, litigation, indemnification and extraordinary
expenses.
The Management Agreement is
in effect for two (2) years initially and shall continue from year to year provided such continuance is approved at least annually by
(a) a vote of the majority of the Independent Trustees, cast in person at a meeting specifically called for the purpose of voting on such
approval and by (b) the majority vote of either all of the Trustees or the vote of a majority of the outstanding shares of the Fund. The
Management Agreement may be terminated without penalty on 60 days written notice by a vote of a majority of the Trustees or by the Adviser,
or by holders of a majority of the Fund’s outstanding shares. The Management Agreement shall terminate automatically in the event
of its assignment.
A discussion regarding the
basis for the Board’s approval of the Management Agreement with respect to the Fund, will be available in the Fund’s annual
report to shareholders dated June 30, 2022.
Sub-Adviser and Sub-Advisory Agreement
The Adviser has engaged Volt
Equity LLC to serve as sub-adviser to the Fund pursuant to Investment Sub-Advisory Agreement (the “Sub-Advisory Agreement”).
The Sub-Adviser is responsible for the management of the Fund’s portfolio subject to the Adviser’s oversight and instructions.
Mr. Tad Park holds a majority ownership of the Sub-Adviser and serves as the Sub-Adviser’s President.
The Sub-Advisory Agreement
will continue in effect for two (2) years initially and then from year to year, provided it is approved at least annually by a vote of
the majority of the Trustees who are not parties to the agreement or interested persons of any such party, cast in person at a meeting
specifically called for the purpose of voting on such approval. The Sub-Advisory Agreement may be terminated without penalty at any time
by the Adviser or the Sub-Adviser on 60 days’ written notice, and will automatically terminate in the event of its “assignment”
(as that term is defined in the 1940 Act).
The Adviser not the Fund pays
the Sub-Adviser [0.50]% of the average net assets of the Fund. The Sub-Adviser is required to furnish, at its own expense, all investment
facilities necessary to perform its obligations under the Sub-Advisory Agreement. Pursuant to the Sub-Advisory Agreement between the Adviser
and Sub-Adviser, the Sub-Adviser is entitled to receive an annual sub-advisory fee, which is paid by the Adviser, not the Fund. The Sub-Advisory
Agreement was approved by the Board including by a majority of the Independent Trustees, at a Meeting held on [___], 2022. A discussion
regarding the basis for the Board’s approval of the Sub-Advisory Agreement with respect to the Fund, will be available in the Fund’s
annual report to shareholders dated June 30, 2022.
Codes of Ethics
The Trust, the Adviser and
the Distributor have each adopted codes of ethics (each a “Code”) under Rule 17j-1 under the 1940 Act that governs the personal
securities transactions of their board members, officers and employees who may have access to current trading information of the Trust.
Under the Codes, the Trustees are permitted to invest in securities that may also be purchased by the Fund.
In addition, the Trust has
adopted a code of ethics (the “Trust Code”), which applies only to the Trust’s executive officers to ensure that these
officers promote professional conduct in the practice of corporate governance and management. The purpose behind these guidelines is to
promote (i) honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and
professional relationships; (ii) full, fair, accurate, timely, and understandable disclosure in reports and documents that the Trust files
with, or submits to, the SEC and in other public communications made by the Fund; (iii) compliance with applicable governmental laws,
rule and regulations; (iv) the prompt internal reporting of violations of the Trust Code to an appropriate person or persons identified
in the Trust Code; and (v) accountability for adherence to the Trust Code.
Proxy Voting Policies
The Board has adopted Proxy
Voting Policies and Procedures (“Policies”) on behalf of the Trust, which delegate the responsibility for voting proxies to
the Adviser or its designee, subject to the Board’s continuing oversight. The Policies require that the Adviser or its designee
vote proxies received in a manner consistent with the best interests of the Fund and its shareholders. The Policies also require the Adviser
or its designee to present to the Board, at least annually, the Adviser’s Proxy Policies, or the proxy policies of the Adviser’s
designee, and a record of each proxy voted by the Adviser or its designee on behalf of the Fund, including a report on the resolution
of all proxies identified by the Adviser as involving a conflict of interest.
Where a proxy proposal raises
a material conflict between the Adviser’s interests and the Fund’s interests, the Adviser will resolve the conflict by voting
in accordance with the policy guidelines or at the client’s directive using the recommendation of an independent third party. If
the third party’s recommendations are not received in a timely fashion, the Adviser will abstain from voting the securities held
by that client’s account. A copy of the Adviser’s proxy voting policies is attached hereto as Appendix A.
More information. Information
regarding how the Fund voted proxies relating to portfolio securities held by the Funds during the most recent 12-month period ending
June 30 is available (1) without charge, upon request, by calling the Fund at 1 (855) 772-8488; and (2) on the SEC’s website at
http://www.sec.gov. In addition, a copy of the Fund’s proxy voting policies and procedures are also available by calling
(877) 658-9473 and will be sent within three business days of receipt of a request.
Foreside Financial Services,
LLC (the “Distributor”), serves as the principal underwriter and national distributor for the shares of the Fund pursuant
to an ETF Distribution Agreement with the Trust (the “Distribution Agreement”). The Distributor is registered as a broker-dealer
under the Securities Exchange Act of 1934 and each state’s securities laws and is a member of FINRA. The offerings of the Shares
are continuous and the Distributor acts as an agent for the Trust. The Distributor will deliver a Prospectus to persons purchasing Shares
in Creation Units and will maintain records of both orders placed with it and confirmations of acceptance furnished by it. The Distributor
has no role in determining the investments or investment policies of the Fund.
The Distribution Agreement
provides that, unless sooner terminated, it will continue in effect for two years initially and thereafter shall continue from year to
year, subject to annual approval by (a) the Board or a vote of a majority of the outstanding shares, and (b) by a majority of the Trustees
who are not parties to the Distribution Agreement or the Trust’s distribution plan or interested persons of the Trust or of the
Distributor (“Qualified Trustees”) by vote cast in person at a meeting called for the purpose of voting on such approval.
The Distribution Agreement
may at any time be terminated, without penalty by the Trust, by vote of a majority of the Qualified Trustees or by vote of a majority
of the outstanding shares of the Trust on 60 days’ written notice to the other party. The Distribution Agreement will automatically
terminate in the event of its assignment.
The Fund does not pay the Distributor
any fees under the Distribution Agreement. However, the Adviser pays an annual fee to the Distributor plus reasonable out-of-pocket expenses
incurred by Distributor in connection with activities performed for the Fund, including, without limitation, printing and distribution
of prospectuses and shareholder reports, out of its own resources.
Rule 12b-1 Plans
The Trust, with respect to
the Fund, has adopted the Trust’s Master Distribution and Shareholder Servicing Plans pursuant to Rule 12b-1 under the 1940 Act
(the “Plan”) for Shares pursuant to which the Fund is authorized to pay the Distributor, as compensation for Distributor’s
account maintenance services under the Plans. The Board has approved a distribution and shareholder servicing fee at the rate of up to
0.25% of the Fund’s average daily net assets. Such fees are to be paid by the Fund monthly, or at such other intervals as the Board
shall determine. Such fees shall be based upon the Fund’s average daily net assets during the preceding month, and shall be calculated
and accrued daily. The Fund may pay fees to the Distributor at a lesser rate, as agreed upon by the Board of Trustees and the Distributor.
The Plan authorizes payments to the Distributor as compensation for providing account maintenance services to Fund shareholders, including
arranging for certain securities dealers or brokers, administrators and others (“Recipients”) to provide these services and
paying compensation for these services. The Fund will bear their own costs of distribution with respect to its shares. The Plan was adopted
in order to permit the implementation of the Fund’s method of distribution. No fees are currently paid by the Fund under the Plan,
and there are no current plans to impose such fees. In the event such fees were to be charged, over time they would increase the cost
of an investment in the Fund.
The services to be provided
by Recipients may include, but are not limited to, the following: assistance in the offering and sale of Fund shares and in other aspects
of the marketing of the shares to clients or prospective clients of the respective recipients; answering routine inquiries concerning
the Fund; assisting in the establishment and maintenance of accounts or sub-accounts in the Funds and in processing purchase and redemption
transactions; making the Funds’ investment plan and shareholder services available; and providing such other information and services
to investors in shares of the Fund as the Distributor or the Trust, on behalf of the Fund, may reasonably request. The distribution services
shall also include any advertising and marketing services provided by or arranged by the Distributor with respect to the Fund.
The Distributor is required
to provide a written report, at least quarterly to the Board of Trustees, specifying in reasonable detail the amounts expended pursuant
to the Plan and the purposes for which such expenditures were made. Further, the Distributor will inform the Board of any Rule 12b-1 fees
to be paid by the Distributor to Recipients.
The Plan may not be amended
to increase materially the amount of the Distributor’s compensation to be paid by the Fund, unless such amendment is approved by
the vote of a majority of the outstanding voting securities of the Fund (as defined in the 1940 Act). All material amendments must be
approved by a majority of the Board of Trustees and a majority of the Rule 12b-1 Trustees by votes cast in person at a meeting called
for the purpose of voting on the Plans. During the term of the Plans, the selection and nomination of non-interested Trustees of the Trust
will be committed to the discretion of current non-interested Trustees. The Distributor will preserve copies of the Plans, any related
agreements, and all reports, for a period of not less than six years from the date of such document and for at least the first two years
in an easily accessible place.
Any agreement related to a
Plan will be in writing and provide that: (a) it may be terminated by the Trust or the Fund at any time upon sixty days written notice,
without the payment of any penalty, by vote of a majority of the respective Rule 12b-1 Trustees, or by vote of a majority of the outstanding
voting securities of the Trust or the Funds; (b) it will automatically terminate in the event of its assignment (as defined in the 1940
Act); and (c) it will continue in effect for a period of more than one year from the date of its execution or adoption only so long as
such continuance is specifically approved at least annually by a majority of the Board and a majority of the Rule 12b-1 Trustees by votes
cast in person at a meeting called for the purpose of voting on such agreement.
Securities Lending
For the purpose of achieving
income, the Fund may lend its portfolio securities, provided (1) the loan is secured continuously by collateral consisting of U.S. Government
securities or cash or cash equivalents (cash, U.S. Government securities, negotiable certificates of deposit, bankers’ acceptances
or letters of credit) maintained on a daily mark-to-market basis in an amount at least equal to the current market value of the securities
loaned, (2) the Fund may at any time call the loan and obtain the return of securities loaned, (3) the Fund will receive any interest
or dividends received on the loaned securities, and (4) the aggregate value of the securities loaned will not at any time exceed one-third
of the total assets of the Fund.
Paul Kim, David Berns and Tad
Park serve as the portfolio managers of the Fund.
As of [___], the portfolio
managers are responsible for the portfolio management of the following types of accounts in addition to the Fund:
Paul Kim
Total Other Accounts By Type |
Total Number of Accounts by Account Type |
Total Assets By Account Type (in millions) |
Number of Accounts by Type Subject to a Performance Fee |
Total Assets By Account Type Subject to a Performance (in millions) |
Registered Investment Companies | 0 | $0 | ||
Other Pooled Investment Vehicles | 0 | $0 | ||
Other Accounts | 0 | $0 |
David Berns
Total Other Accounts By Type |
Total Number of Accounts by Account Type |
Total Assets By Account Type (in millions) |
Number of Accounts by Type Subject to a Performance Fee | Total Assets By Account Type Subject to a Performance Fee |
Registered Investment Companies | 0 | $0 | ||
Other Pooled Investment Vehicles | 0 | $0 | ||
Other Accounts | 0 | $0 |
Tad Park
Total Other Accounts By Type |
Total Number of Accounts by Account Type |
Total Assets By Account Type (in millions) |
Number of Accounts by Type Subject to a Performance Fee | Total Assets By Account Type Subject to a Performance Fee |
Registered Investment Companies | 0 | $0 | ||
Other Pooled Investment Vehicles | 0 | $0 | ||
Other Accounts | 0 | $0 |
Conflicts of Interest
As a general matter, certain
conflicts of interest may arise in connection with a portfolio manager’s management of the Fund’s investments, on the one
hand, and the investments of other accounts for which the portfolio manager is responsible, on the other. For example, it is possible
that the various accounts managed could have different investment strategies that, at times, might conflict with one another to the possible
detriment of the Fund. Alternatively, to the extent that the same investment opportunities might be desirable for more than one account,
possible conflicts could arise in determining how to allocate them. Other potential conflicts might include conflicts created by specific
portfolio manager compensation arrangements, and conflicts relating to selection of brokers or dealers to execute the Fund’s portfolio
trades and/or specific uses of commissions from the Fund’s portfolio trades (for example, research, or “soft dollars”,
if any). The Adviser has adopted policies and procedures and has structured the portfolio managers’ compensation in a manner reasonably
designed to safeguard the Fund from being negatively affected as a result of any such potential conflicts.
Compensation
Mr. Kim and Mr. Berns are compensated
through a salary and equity participation in the Adviser. Mr. Park is compensated through a salary and equity participation in the Sub-Adviser.
Ownership of Securities
The following table shows
the dollar range of equity securities beneficially owned by the portfolio managers in the Fund as the date of this SAI.
Name of Portfolio Manager |
Dollar Range of Equity Securities in the Simplify Volt Web3 ETF |
Paul Kim | None |
David Berns | None |
Tad Park | None |
ALLOCATION OF PORTFOLIO BROKERAGE
Specific decisions to purchase
or sell securities for the Fund are made by the portfolio managers who are employees of the Adviser. The Adviser are authorized by the
Trustees to allocate the orders placed by them on behalf of the Fund to brokers or dealers who may, but need not, provide research or
statistical material or other services to the Fund or the Adviser for the Fund’s use. Such allocation is to be in such amounts and
proportions as the Adviser may determine.
In selecting a broker or dealer
to execute each particular transaction, the Adviser will take the following into consideration:
● | the best net price available; |
● | the reliability, integrity and financial condition of the broker or dealer; |
● | the size of and difficulty in executing the order; and |
● | the value of the expected contribution of the broker or dealer to the investment performance of the Funds on a continuing basis. |
Brokers or dealers executing
a portfolio transaction on behalf of the Funds may receive a commission in excess of the amount of commission another broker or dealer
would have charged for executing the transaction if the Adviser determines in good faith that such commission is reasonable in relation
to the value of brokerage and research services provided to the Fund. In allocating portfolio brokerage, the Adviser may select brokers
or dealers who also provide brokerage, research and other services to other accounts over which the Adviser exercises investment discretion.
Some of the services received as the result of Fund transactions may primarily benefit accounts other than the Fund, while services received
as the result of portfolio transactions effected on behalf of those other accounts may primarily benefit the Fund.
The Fund’s portfolio
turnover rate is calculated by dividing the lesser of purchases or sales of portfolio securities for the fiscal year by the monthly average
of the value of the portfolio securities owned by the Fund during the fiscal year. The calculation excludes from both the numerator and
the denominator securities with maturities at the time of acquisition of one year or less. High portfolio turnover involves correspondingly
greater brokerage commissions and other transaction costs, which will be borne directly by the Fund. A 100% turnover rate would occur
if all of the Fund’s portfolio securities were replaced once within a one-year period.
Fund Administration
Bank of New York Mellon, (the
“Administrator”), which has its principal office at 240 Greenwich St., New York, NY 10286, and is primarily in the business
of providing administrative, fund accounting and transfer agent services to retail and institutional mutual funds.
Pursuant to a Fund Services
Agreement with the Trust on behalf of the Fund, the Administrator provides administrative services to the Fund, subject to the supervision
of the Board. The Administrator may provide persons to serve as officers of the Fund. Such officers may be directors, officers or employees
of the Administrator or its affiliates.
The Fund Services Agreement
is dated July 14, 2020. The agreement remains in effect for two years from the effective date of the agreement, and will remain in effect
subject to annual approval of the Board for one-year periods thereafter. The agreement is terminable by the Board or the Administrator
on ninety days’ written notice and may be assigned provided the non-assigning party provides prior written consent. This agreement
provides that in the absence of willful misfeasance, bad faith or gross negligence on the part of the Administrator or reckless disregard
of its obligations thereunder, the Administrator shall not be liable for any action or failure to act in accordance with its duties thereunder.
Under the Fund Services Agreement,
the Administrator provides facilitating administrative services, including: (i) providing services of persons competent to perform such
administrative and clerical functions as are necessary to provide effective administration of the Fund; (ii) facilitating the performance
of administrative and professional services to the Fund by others, including the Custodian; (iii) preparing, but not paying for, the periodic
updating of the Fund’s Registration Statement, Prospectuses and Statements of Additional Information in conjunction with Fund counsel,
including the printing of such documents for the purpose of filings with the SEC and state securities administrators, and preparing reports
to the Fund’s shareholders and the SEC; (iv) preparing in conjunction with Fund counsel, but not paying for, all filings under the
securities or “Blue Sky” laws of such states or countries as are designated by the Distributor, which may be required to register
or qualify, or continue the registration or qualification, of the Fund and/or its shares under such laws; (v) preparing notices and agendas
for meetings of the Board and minutes of such meetings in all matters required by the 1940 Act to be acted upon by the Board; and (vi)
monitoring daily and periodic compliance with respect to all requirements and restrictions of the 1940 Act, the Internal Revenue Code
and the Prospectus.
The Administrator also provides
the Fund with accounting services, including: (i) daily computation of net asset value; (ii) maintenance of security ledgers and books
and records as required by the 1940 Act; (iii) production of the Fund’s listing of portfolio securities and general ledger reports;
(iv) reconciliation of accounting records; (v) calculation of yield and total return for the Fund; (vi) maintenance of certain books and
records described in Rule 31a-1 under the 1940 Act, and reconciliation of account information and balances among the Custodian and Adviser;
and (vii) monitoring and evaluation of daily income and expense accruals, and sales and redemptions of shares of the Fund.
For administrative services
rendered to the Fund under the agreement, the Fund pays the Administrator the greater of an annual minimum fee or an asset-based fee,
which scales downward based upon net assets. For the fund accounting services rendered to the Fund under the Agreement, the Fund pays
the Administrator the greater of an annual minimum fee or an asset-based fee, which scales downward based upon net assets. The Fund also
pays the Administrator for any out-of-pocket expenses.
Transfer Agent
Bank of New York Mellon, located
at 240 Greenwich St., New York, NY 10286, acts as transfer, dividend disbursing, and shareholder servicing agent for the Fund pursuant
to written agreement with Fund (the “Transfer Agent”). Under the agreement, the Transfer Agent is responsible for administering
and performing transfer agent functions, dividend distribution, shareholder administration, and maintaining necessary records in accordance
with applicable rules and regulations.
Custodian
Bank of New York Mellon, located
at 240 Greenwich St., New York, NY 10286 (the “Custodian”), serves as the custodian of the Fund’s assets pursuant to
a Custodian and Transfer Agent Agreement by and between the Custodian and the Trust on behalf of the Fund. The Custodian’s responsibilities
include safeguarding and controlling the Fund’s cash and securities, handling the receipt and delivery of securities, and collecting
interest and dividends on the Fund’s investments. Pursuant to the Custodian and Transfer Agent Agreement, the Custodian also maintains
original entry documents and books of record and general ledgers; posts cash receipts and disbursements; and records purchases and sales
based upon communications from the Adviser. The Fund may employ foreign sub-custodians that are approved by the Board to hold foreign
assets.
Compliance Officer
Foreside Fund Officer Services,
LLC (“Foreside”), Three Canal Plaza, Suite 100, Portland, ME 04101, provides a Chief Compliance Officer to the Trust as well
as related compliance services pursuant to a consulting agreement between Foreside and the Trust. Foreside’s compliance services
consist primarily of reviewing and assessing the policies and procedures of the Trust and its service providers pertaining to compliance
with applicable federal securities laws, including Rule 38a-1 under the 1940 Act. For the compliance services rendered to the Funds, the
Trust pays Foreside a reoccurring fund fee and a fee per each fund. The Fund also pays Foreside for any out-of-pocket expenses.
Each share of beneficial interest
of the Trust has one vote in the election of Trustees. Cumulative voting is not authorized for the Trust. This means that the holders
of more than 50% of the shares voting for the election of Trustees can elect 100% of the Trustees if they choose to do so, and, in that
event, the holders of the remaining shares will be unable to elect any Trustees.
Shareholders of the current
series of the Trust and any other future series of the Trust will vote in the aggregate and not by series except as otherwise required
by law or when the Board determines that the matter to be voted upon affects only the interest of the shareholders of a particular series
or classes. Matters such as election of Trustees are not subject to separate voting requirements and may be acted upon by shareholders
of the Trust voting without regard to series.
The Trust is authorized to
issue an unlimited number of shares of beneficial interest. Each share has equal, dividend, distribution and liquidation rights. There
are no conversion or preemptive rights applicable to any shares of the Fund. All shares issued are fully paid and non-assessable.
The Trust has established an
Anti-Money Laundering Compliance Program (the “Program”) as required by the Uniting and Strengthening America by Providing
Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (“USA PATRIOT Act”). To ensure compliance with
this law, the Trust’s Program provides for the development of internal practices, procedures and controls, designation of anti-money
laundering compliance officers, an ongoing training program and an independent audit function to determine the effectiveness of the Program.
The Trust’s secretary serves as its Anti-Money Laundering Compliance Officer.
Procedures to implement the
Program include, but are not limited to, determining that the Fund’s Distributor and Transfer Agent have established proper anti-money
laundering procedures, reporting suspicious and/or fraudulent activity and a providing a complete and thorough review of all new opening
account applications. The Trust will not transact business with any person or entity whose identity cannot be adequately verified under
the provisions of the USA PATRIOT Act.
As a result of the Program,
the Trust may be required to “freeze” the account of a shareholder if the shareholder appears to be involved in suspicious activity
or if certain account information matches information on government lists of known terrorists or other suspicious persons, or the Trust
may be required to transfer the account or proceeds of the account to a governmental agency.
PURCHASE, REDEMPTION AND PRICING OF SHARES
Calculation of Share Price
As indicated in the Prospectus
under the heading “How Shares are Priced,” NAV of the Fund’s shares is determined by dividing the total value of the Fund’s
portfolio investments and other assets, less any liabilities, by the total number of shares outstanding of the Fund.
Generally, the Fund’s
domestic securities (including underlying ETFs which hold portfolio securities primarily listed on foreign (non-U.S.) exchanges) are valued
each day at the last quoted sales price on each security’s primary exchange. Securities traded or dealt in upon one or more securities
exchanges for which market quotations are readily available and not subject to restrictions against resale shall be valued at the last
quoted sales price on the primary exchange or, in the absence of a sale on the primary exchange, at the mean between the current bid and
ask prices on such exchange. Securities primarily traded in the NASDAQ National Market System for which market quotations are readily
available shall be valued using the NASDAQ Official Closing Price. If market quotations are not readily available, securities will be
valued at their fair market value as determined in good faith by the Fund’s fair value committee in accordance with procedures approved
by the Board and as further described below. Securities that are not traded or dealt in any securities exchange (whether domestic or foreign)
and for which over-the-counter market quotations are readily available generally shall be valued at the last sale price or, in the absence
of a sale, at the mean between the current bid and ask price on such over-the- counter market.
Certain securities or investments
for which daily market quotes are not readily available may be valued, pursuant to guidelines established by the Board, with reference
to other securities or indices. Debt securities not traded on an exchange may be valued at prices supplied by a pricing agent(s) based
on broker or dealer supplied valuations or matrix pricing, a method of valuing securities by reference to the value of other securities
with similar characteristics, such as rating, interest rate and maturity. Short-term investments having a maturity of 60 days or less
may be generally valued at amortized cost when it approximated fair value.
Exchange traded options are
valued at the last quoted sales price or, in the absence of a sale, at the mean between the current bid and ask prices on the exchange
on which such options are traded. Futures and options on futures are valued at the settlement price determined by the exchange, or, if
no settlement price is available, at the last sale price as of the close of business prior to when the Fund calculates NAV. Other securities
for which market quotes are not readily available are valued at fair value as determined in good faith by the Board or persons acting
at their direction. Swap agreements and other derivatives are generally valued daily depending on the type of instrument and reference
assets based upon market prices, the mean between bid and asked prices quotations from market makers or by a pricing service or other
parties in accordance with the valuation procedures approved by the Board.
Under certain circumstances,
the Fund may use an independent pricing service to calculate the fair market value of foreign equity securities on a daily basis by applying
valuation factors to the last sale price or the mean price as noted above. The fair market values supplied by the independent pricing
service will generally reflect market trading that occurs after the close of the applicable foreign markets of comparable securities or
the value of other instruments that have a strong correlation to the fair-valued securities. The independent pricing service will also
take into account the current relevant currency exchange rate. A security that is fair valued may be valued at a price higher or lower
than actual market quotations or the value determined by other funds using their own fair valuation procedures. Because foreign securities
may trade on days when Shares are not priced, the value of securities held by the Fund can change on days when Shares cannot be redeemed
or purchased. In the event that a foreign security’s market quotations are not readily available or are deemed unreliable (for reasons
other than because the foreign exchange on which it trades closed before the Fund’s calculation of NAV), the security will be valued
at its fair market value as determined in good faith by the Fund’s fair value committee in accordance with procedures approved by
the Board as discussed below. Without fair valuation, it is possible that short-term traders could take advantage of the arbitrage opportunity
and dilute the NAV of long-term investors. Fair valuation of the Fund’s portfolio securities can serve to reduce arbitrage opportunities
available to short-term traders, but there is no assurance that it will prevent dilution of the Fund’s NAV by short-term traders.
In addition, because the Fund may invest in underlying ETFs which hold portfolio securities primarily listed on foreign (non-U.S.) exchanges,
and these exchanges may trade on weekends or other days when the underlying ETFs do not price their shares, the value of these portfolio
securities may change on days when you may not be able to buy or sell Shares.
Investments initially valued
in currencies other than the U.S. dollar are converted to U.S. dollars using exchange rates obtained from pricing services or other parties
in accordance with the valuation procedures approved by the Board. As a result, the NAV of the Shares may be affected by changes in the
value of currencies in relation to the U.S. dollar. The value of securities traded in markets outside the United States or denominated
in currencies other than the U.S. dollar may be affected significantly on a day that the Exchange is closed and an investor is not able
to purchase, redeem or exchange Shares.
Shares are valued at the close
of regular trading on the Exchange (normally 4:00 p.m., Eastern time) (the “Exchange Close”) on each day that the Exchange is
open. For purposes of calculating the NAV, the Fund normally use pricing data for domestic equity securities received shortly after the
Exchange Close and does not normally take into account trading, clearances or settlements that take place after the Exchange Close. Domestic
fixed income and foreign securities are normally priced using data reflecting the earlier closing of the principal markets for those securities.
Information that becomes known to the Fund or its agents after the NAV has been calculated on a particular day will not generally be used
to retroactively adjust the price of the security or the NAV determined earlier that day.
When market quotations are
insufficient or not readily available, the Fund may value securities at fair value or estimate their value as determined in good faith
by the Board or its designees, pursuant to procedures approved by the Board. Fair valuation may also be used by the Board if extraordinary
events occur after the close of the relevant market but prior to the Exchange Close.
Creation Units
The Fund sells and redeems
Shares in Creation Units on a continuous basis through the Distributor, without a sales load, at the NAV next determined after receipt
of an order in proper form on any Business Day. A “Business Day” is any day on which the Exchange is open for business. As
of the date of this SAI, the Exchange observes the following holidays: New Year’s Day, Martin Luther King, Jr. Day, Presidents’
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
A Creation Unit is an aggregation
of 25,000 Shares. The Board may declare a split or a consolidation in the number of Shares outstanding of the Fund or Trust and make a
corresponding change in the number of Shares in a Creation Unit.
Authorized Participants
Only Authorized Participants
that have entered into agreements with the Trust or the Distributor may purchase or redeem Creation Units. In order to be an Authorized
Participant, a firm must be either a broker-dealer or other participant (“Participating Party”) in the Continuous Net Settlement
System (“Clearing Process”) of the National Securities Clearing Corporation (“NSCC”) or a participant in DTC with
access to the DTC system (“DTC Participant”), and you must execute an agreement (“Participant Agreement”) with
the Distributor that governs transactions in the Fund’s Creation Units.
Investors who are not Authorized
Participants but want to transact in Creation Units may contact the Distributor for the names of Authorized Participants. An Authorized
Participant may require investors to enter into a separate agreement to transact through it for Creation Units and may require orders
for purchases of shares placed with it to be in a particular form. Investors transacting through a broker that is not itself an Authorized
Participant and therefore must still transact through an Authorized Participant may incur additional charges. There are expected to be
a limited number of Authorized Participants at any one time.
Orders must be transmitted
by an Authorized Participant by telephone or other transmission method acceptable to the Distributor. Market disruptions and telephone
or other communication failures may impede the transmission of orders.
Transaction Fees
A fixed fee payable to the
Custodian is imposed on each creation and redemption transaction regardless of the number of Creation Units involved in the transaction
(“Fixed Fee”). Purchases and redemptions of Creation Units for cash or involving cash-in-lieu (as defined below) are required
to pay an additional variable charge to compensate the Fund and its ongoing shareholders for brokerage and market impact expenses relating
to Creation Unit transactions (“Variable Charge,” and together with the Fixed Fee, the “Transaction Fees”). With
the approval of the Board, the Adviser may waive or adjust the Transaction Fees, including the Fixed Fee and/or Variable Charge (shown
in the table below), from time to time. In such cases, the Authorized Participant will reimburse the Fund for, among other things, any
difference between the market value at which the securities and/or financial instruments were purchased by the Fund and the cash-in-lieu
amount, applicable registration fees, brokerage commissions and certain taxes. In addition, purchasers of Creation Units are responsible
for the costs of transferring the deposit securities to the account of the Fund.
Investors who use the services
of a broker, or other such intermediary may be charged a fee for such services. The Transaction Fees for the Fund are listed in the table
below.
ETFs | Fee for In-Kind and Cash Purchases | Maximum Additional Variable Charge for Cash Purchases* |
Simplify Volt Web3 ETF | $500 | 3% |
* | As a percentage of the amount invested. |
The Clearing Process
Transactions by an Authorized
Participant that is a Participating Party using the NSCC system are referred to as transactions “through the Clearing Process.”
Transactions by an Authorized Participant that is a DTC Participant using the DTC system are referred to as transactions “outside
the Clearing Process.” The Clearing Process is an enhanced clearing process that is available only for certain securities and only
to DTC participants that are also participants in the Continuous Net Settlement System of the NSCC. In-kind (portions of) purchase orders
not subject to the Clearing Process will go through a manual clearing process run by DTC. Portfolio Deposits that include government securities
must be delivered through the Federal Reserve Bank wire transfer system (“Federal Reserve System”). Fund Deposits that include
cash may be delivered through the Clearing Process or the Federal Reserve System. In-kind deposits of securities for orders outside the
Clearing Process must be delivered through the Federal Reserve System (for government securities) or through DTC (for corporate securities).
Foreign Securities
Because the portfolio securities
of the Fund may trade on days that the Exchange is closed or are otherwise not Business Days for the Fund, shareholders may not be able
to redeem their shares of the Fund, or to purchase or sell shares of the Fund on the Exchange, on days when the NAV of the Fund could
be significantly affected by events in the relevant foreign markets.
Purchasing Creation Units
Portfolio Deposit
The consideration for a Creation
Unit generally consists of the deposit securities and a Cash Component. Together, the deposit securities and the Cash Component constitute
the “Portfolio Deposit.” The Cash Component serves the function of compensating for any differences between the net asset
value per Creation Unit and the deposit securities. Thus, the Cash Component is equal to the difference between (x) the net asset value
per Creation Unit of the Fund and (y) the market value of the deposit securities. If (x) is more than (y), the Authorized Participant
will pay the Cash Component to the Fund. If (x) is less than (y), the Authorized Participant will receive the Cash Component from the
Fund.
On each Business Day, prior
to the opening of business on the Exchange (currently 9:30 a.m., Eastern Time), the Adviser through the Custodian makes available through
NSCC the name and amount of each deposit security in the current Portfolio Deposit (based on information at the end of the previous Business
Day) for the Fund and the (estimated) Cash Component, effective through and including the previous Business Day, per Creation Unit. The
deposit securities announced are applicable to purchases of Creation Units until the next announcement of deposit securities.
The deposit securities may
change and as rebalancing adjustments and corporate action events are reflected from time to time by the Adviser in the Fund’s portfolio.
These adjustments will reflect changes known to the Adviser on the date of announcement to be in effect by the time of delivery of the
Portfolio Deposit.
Payment of any stamp duty or
the like shall be the sole responsibility of the Authorized Participant purchasing a Creation Unit. The Authorized Participant must ensure
that all deposit securities properly denote change in beneficial ownership.
Custom Orders and Cash-in-Lieu
The Fund may, in its sole discretion,
permit or require the substitution of an amount of cash (“cash-in-lieu”) to be added to the Cash Component to replace any
deposit security. The Fund may permit or require cash-in-lieu when, for example, a deposit security may not be available in sufficient
quantity for delivery or may not be eligible for transfer through the systems of DTC or the Clearing Process. Similarly, the Fund may
permit or require cash in lieu of deposit securities when, for example, the Authorized Participant or its underlying investor is restricted
under U.S. or local securities laws or policies from transacting in one or more deposit securities. The Fund will comply with the federal
securities laws in accepting deposit securities including that the deposit securities are sold in transactions that would be exempt from
registration under the Securities Act. All orders involving cash-in-lieu, as well as certain other types of orders, are considered to
be “Custom Orders.”
Purchase Orders
To order a Creation Unit, an
Authorized Participant must submit an irrevocable purchase order to the Distributor.
Timing of Submission of Purchase Orders
An Authorized Participant must
submit an irrevocable purchase order no later than the earlier of (i) 4:00 p.m. Eastern Time or (ii) the closing time of the bond markets
and/or the trading session on the Exchange, on any Business Day in order to receive that Business Day’s NAV (“Cut-off Time”).
The Cut-off Time for Custom Orders is generally two hours earlier. The Business Day the order is deemed received by the Distributor is
referred to as the “Transmittal Date.” An order to create Creation Units is deemed received on a Business Day if (i) such
order is received by the Distributor by the Cut-off Time on such day and (ii) all other procedures set forth in the Participant Agreement
are properly followed. Persons placing or effectuating custom orders and/or orders involving cash should be mindful of time deadlines
imposed by intermediaries, such as DTC and/or the Federal Reserve Bank wire system, which may impact the successful processing of such
orders to ensure that cash and securities are transferred by the “Settlement Date,” which is generally the Business Day immediately
following the Transmittal Date (“T+1”) for cash and the third Business Day following the Transmittal Date for securities (“T+3”).
Orders Using the Clearing Process
If available, (portions of)
orders may be settled through the Clearing Process. In connection with such orders, the Distributor transmits, on behalf of the Authorized
Participant, such trade instructions as are necessary to effect the creation order. Pursuant to such trade instructions, the Authorized
Participant agrees to deliver the requisite Portfolio Deposit to the Fund, together with such additional information as may be required
by the Distributor. Cash Components will be delivered using either the Clearing Process or the Federal Reserve System.
Orders Outside the Clearing Process
If the Clearing Process is
not available for (portions of) an order, Portfolio Deposits will be made outside the Clearing Process. Orders outside the Clearing Process
must state that the DTC Participant is not using the Clearing Process and that the creation of Creation Units will be effected through
DTC. The Portfolio Deposit transfer must be ordered by the DTC Participant on the Transmittal Date in a timely fashion so as to ensure
the delivery of deposit securities (whether standard or custom) through DTC to the Fund account by 11:00 a.m., Eastern time, on T+1. The
Cash Component, along with any cash-in-lieu and Transaction Fee, must be transferred directly to the Custodian through the Federal Reserve
System in a timely manner so as to be received by the Custodian no later than 12:00 p.m., Eastern Time, on T+1. If the Custodian does
not receive both the deposit securities and the cash by the appointed time, the order may be canceled. A canceled order may be resubmitted
the following Business Day but must conform to that Business Day’s Portfolio Deposit. Authorized Participants that submit a canceled
order will be liable to the Fund for any losses incurred by the Fund in connection therewith.
Orders involving foreign deposit
securities are expected to be settled outside the Clearing Process. Thus, upon receipt of an irrevocable purchase order, the Distributor
will notify the Adviser and the Custodian of such order. The Custodian, who will have caused the appropriate local sub-custodian(s) of
the Fund to maintain an account into which an Authorized Participant may deliver deposit securities (or cash-in-lieu), with adjustments
determined by the Fund, will then provide information of the order to such local sub-custodian(s). The ordering Authorized Participant
will then deliver the deposit securities (and any cash-in-lieu) to the Fund’s account at the applicable local sub-custodian. The
Authorized Participant must also make available on or before the contractual settlement date, by means satisfactory to the Fund, immediately
available or same day funds in U.S. dollars estimated by the Fund to be sufficient to pay the Cash Component and Transaction Fee. When
a relevant local market is closed due to local market holidays, the local market settlement process will not commence until the end of
the local holiday period. Settlement must occur by 2:00 p.m., Eastern Time, on the contractual settlement date.
Acceptance of Purchase Order
All questions as to the number
of shares of each security in the deposit securities and the validity, form, eligibility and acceptance for deposit of any securities
to be delivered shall be determined by the Fund. The Fund’s determination shall be final and binding.
The Fund reserves the right
to reject or revoke acceptance of a purchase order transmitted to it by the Distributor under certain circumstances including but not
limited to (a) the order is not in proper form; (b) the investor(s), upon obtaining the shares ordered, would own 80% or more of the currently
outstanding shares of the Fund; (c) the deposit securities delivered do not conform to the deposit securities for the applicable date;
(d) the acceptance of the Portfolio Deposit would, in the opinion of counsel, be unlawful; or (e) in the event that circumstances outside
the control of the Trust, the Distributor and the Adviser make it for all practical purposes impossible to process purchase orders. Examples
of such circumstances include acts of God; public service or utility problems resulting in telephone, telecopy or computer failures; fires,
floods or extreme weather conditions; market conditions or activities causing trading halts; systems failures involving computer or other
informational systems affecting the Trust, the Distributor, DTC, NSCC, the Adviser, the Custodian, a sub-custodian or any other participant
in the creation process; and similar extraordinary events. The Distributor shall notify an Authorized Participant of its rejection of
the order. The Fund, the Custodian, any sub-custodian and the Distributor are under no duty, however, to give notification of any defects
or irregularities in the delivery of Portfolio Deposits, and they shall not incur any liability for the failure to give any such notification.
Issuance of a Creation Unit
Once the Fund has accepted
an order, upon next determination of the Fund’s NAV, the Fund will confirm the issuance of a Creation Unit, against receipt of payment,
at such NAV. The Distributor will transmit a confirmation of acceptance to the Authorized Participant that placed the order.
Except as provided below, a
Creation Unit will not be issued until the Fund obtains good title to the deposit securities and the Cash Component, along with any cash-in-lieu
and Transaction Fee. The delivery of Creation Units will generally occur no later than T+3.
In certain cases, Authorized
Participants will create and redeem Creation Units on the same trade date. In these instances, the Trust reserves the right to settle
these transactions on a net basis.
With respect to orders involving
foreign deposit securities, when the applicable local sub-custodian(s) have confirmed to the Custodian that the deposit securities (or
cash-in-lieu) have been delivered to the Fund’s account at the applicable local sub-custodian(s), the Distributor and the Adviser
shall be notified of such delivery, and the Fund will issue and cause the delivery of the Creation Unit. While, as stated above, Creation
Units are generally delivered on T+3, the Fund may settle Creation Unit transactions on a basis other than T+3 in order to accommodate
foreign market holiday schedules, to account for different treatment among foreign and U.S. markets of dividend record dates and ex-dividend
dates (that is the last day the holder of a security can sell the security and still receive dividends payable on the security), and in
certain other circumstances.
The Fund may issue a Creation
Unit prior to receiving good title to the deposit securities, under the following circumstances. Pursuant to the applicable Participant
Agreement, the Fund may issue a Creation Unit notwithstanding that (certain) deposit securities have not been delivered, in reliance on
an undertaking by the relevant Authorized Participant to deliver the missing deposit securities as soon as possible, which undertaking
is secured by such Authorized Participant’s delivery to and maintenance with the Custodian of collateral having a value equal to
at least 115% of the value of the missing deposit securities (“Collateral”), as adjusted by time to time by the Adviser. Such
Collateral will have a value greater than the NAV of the Creation Unit on the date the order is placed. Such Collateral must be delivered
no later than 2:00 p.m., Eastern Time, on T+1. The only Collateral that is acceptable to the Fund is cash in U.S. Dollars.
While (certain) deposit securities
remain undelivered, the Collateral shall at all times have a value equal to at least 115% (as adjusted by the Adviser) of the daily marked-to-market
value of the missing deposit securities. At any time, the Fund may use the Collateral to purchase the missing securities, and the Authorized
Participant will be liable to the Fund for any costs incurred thereby or losses resulting therefrom, whether or not they exceed the amount
of the Collateral, including any Transaction Fee, any amount by which the purchase price of the missing deposit securities exceeds the
market value of such securities on the Transmittal Date, brokerage and other transaction costs. The Trust will return any unused Collateral
once all of the missing securities have been received by the Fund. More information regarding the Fund’s current procedures for
collateralization is available from the Distributor.
Cash Purchase Method
When cash purchases of Creation
Units are available or specified for the Fund, they will be effected in essentially the same manner as in-kind purchases. In the case
of a cash purchase, the investor must pay the cash equivalent of the Portfolio Deposit. In addition, cash purchases will be subject to
Transaction Fees, as described above.
Redeeming a Creation Unit
Redemption Basket
The consideration received
in connection with the redemption of a Creation Unit generally consists of an in-kind basket of designated securities (“Redemption
Securities”) and a Cash Component. Together, the Redemption Securities and the Cash Component constitute the “Redemption Basket.”
There can be no assurance that
there will be sufficient liquidity in Shares in the secondary market to permit assembly of a Creation Unit. In addition, investors may
incur brokerage and other costs in connection with assembling a Creation Unit.
The Cash Component serves the
function of compensating for any differences between the net asset value per Creation Unit and the Redemption Securities. Thus, the Cash
Component is equal to the difference between (x) the net asset value per Creation Unit of the Fund and (y) the market value of the Redemption
Securities. If (x) is more than (y), the Authorized Participant will receive the Cash Component from the Fund. If (x) is less than (y),
the Authorized Participant will pay the Cash Component to the Fund.
If the Redemption Securities
on a Business Day are different from the deposit securities, prior to the opening of business on the Exchange (currently 9:30 a.m., Eastern
Time), the Adviser through the Custodian makes available through NSCC the name and amount of each Redemption Security in the current Redemption
Basket (based on information at the end of the previous Business Day) for the Fund and the (estimated) Cash Component, effective through
and including the previous Business Day, per Creation Unit. If the Redemption Securities on a Business Day are different from the deposit
securities, all redemption requests that day will be processed outside the Clearing Process.
The Redemption Securities may
change as rebalancing adjustments and corporate action events are reflected from time to time by the Adviser in the Fund’s portfolio.
These adjustments will reflect changes known to the Adviser on the date of announcement to be in effect by the time of delivery of the
Redemption Basket.
The right of redemption may
be suspended or the date of payment postponed: (i) for any period during which the NYSE is closed (other than customary weekend and holiday
closings); (ii) for any period during which trading on the NYSE is suspended or restricted; (iii) for any period during which an emergency
exists as a result of which disposal of the Shares or determination of the ETF’s NAV is not reasonably practicable; or (iv) in such
other circumstances as permitted by the SEC, including as described below.
Custom Redemptions and Cash-in-Lieu
The Fund may, in its sole discretion,
permit or require the substitution of cash-in-lieu to be added to the Cash Component to replace any Redemption Security. The Fund may
permit or require cash-in-lieu when, for example, a Redemption Security may not be available in sufficient quantity for delivery or may
not be eligible for transfer through the systems of DTC or the Clearing Process. Similarly, the Fund may permit or require cash-in-lieu
of Redemption Securities when, for example, the Authorized Participant or its underlying investor is restricted under U.S. or local securities
law or policies from transacting in one or more Redemption Securities. The Fund will comply with the federal securities laws in satisfying
redemptions with Redemption Securities, including that the Redemption Securities are sold in transactions that would be exempt from registration
under the Securities Act. All redemption requests involving cash-in-lieu are considered to be “Custom Redemptions.”
Redemption Requests
To redeem a Creation Unit,
an Authorized Participant must submit an irrevocable redemption request to the Distributor.
An Authorized Participant submitting
a redemption request is deemed to represent to the Fund that it or, if applicable, the investor on whose behalf it is acting, (i) owns
outright or has full legal authority and legal beneficial right to tender for redemption the Creation Unit to be redeemed and can receive
the entire proceeds of the redemption, and (ii) all of the Shares that are in the Creation Unit to be redeemed have not been borrowed,
loaned or pledged to another party nor are they the subject of a repurchase agreement, securities lending agreement or such other arrangement
that would preclude the delivery of such Shares to the Fund. The Fund reserves the absolute right, in its sole discretion, to verify these
representations, but will typically require verification in connection with higher levels of redemption activity and/or short interest
in the Fund. If the Authorized Participant, upon receipt of a verification request, does not provide sufficient verification of the requested
representations, the redemption request will not be considered to be in proper form and may be rejected by the Fund.
Timing of Submission of Redemption Requests
An Authorized Participant must
submit an irrevocable redemption order no later than the Cut-off Time. The Cut-off Time for Custom Orders is generally two hours earlier.
The Business Day the order is deemed received by the Distributor is referred to as the “Transmittal Date.” A redemption request
is deemed received if (i) such order is received by the Distributor by the Cut-off Time on such day and (ii) all other procedures set
forth in the Participant Agreement are properly followed. Persons placing or effectuating Custom Redemptions and/or orders involving cash
should be mindful of time deadlines imposed by intermediaries, such as DTC and/or the Federal Reserve System, which may impact the successful
processing of such orders to ensure that cash and securities are transferred by the Settlement Date, as defined above.
Requests Using the Clearing Process
If available, (portions of)
redemption requests may be settled through the Clearing Process. In connection with such orders, the Distributor transmits on behalf of
the Authorized Participant, such trade instructions as are necessary to effect the redemption. Pursuant to such trade instructions, the
Authorized Participant agrees to deliver the requisite Creation Unit(s) to the Fund, together with such additional information as may
be required by the Distributor. Cash Components will be delivered using either the Clearing Process or the Federal Reserve System, as
described above.
Requests Outside the Clearing Process
If the Clearing Process is
not available for (portions of) an order, Redemption Baskets will be delivered outside the Clearing Process. Orders outside the Clearing
Process must state that the DTC Participant is not using the Clearing Process and that the redemption will be effected through DTC. The
Authorized Participant must transfer or cause to be transferred the Creation Unit(s) of shares being redeemed through the book-entry system
of DTC so as to be delivered through DTC to the Custodian by 10:00 a.m., Eastern Time, on received T+1. In addition, the Cash Component
must be received by the Custodian by 12:00 p.m., Eastern Time, on T+1. If the Custodian does not receive the Creation Unit(s) and Cash
Component by the appointed times on T+1, the redemption will be rejected, except in the circumstances described below. A rejected redemption
request may be resubmitted the following Business Day.
Orders involving foreign Redemption
Securities are expected to be settled outside the Clearing Process. Thus, upon receipt of an irrevocable redemption request, the Distributor
will notify the Adviser and the Custodian. The Custodian will then provide information of the redemption to the Fund’s local sub-custodian(s).
The redeeming Authorized Participant, or the investor on whose behalf is acting, will have established appropriate arrangements with a
broker-dealer, bank or other custody provider in each jurisdiction in which the Redemption Securities are customarily traded and to which
such Redemption Securities (and any cash-in-lieu) can be delivered from the Fund’s accounts at the applicable local sub-custodian(s).
Acceptance of Redemption Requests
All questions as to the number
of shares of each security in the deposit securities and the validity, form, eligibility and acceptance for deposit of any securities
to be delivered shall be determined by the Trust. The Trust’s determination shall be final and binding.
Delivery of Redemption Basket
Once the Fund has accepted
a redemption request, upon next determination of the Fund’s NAV, the Fund will confirm the issuance of a Redemption Basket, against
receipt of the Creation Unit(s) at such NAV, any cash-in-lieu and Transaction Fee. A Creation Unit tendered for redemption and the payment
of the Cash Component, any cash-in-lieu and Transaction Fee will be effected through DTC. The Authorized Participant, or the investor
on whose behalf it is acting, will be recorded on the book-entry system of DTC.
The Redemption Basket will
generally be delivered to the redeeming Authorized Participant within T+3. Except under the circumstances described below, however, a
Redemption Basket generally will not be issued until the Creation Unit(s) are delivered to the Fund, along with the Cash Component, any
cash-in-lieu and Transaction Fee.
In certain cases, Authorized
Participants will create and redeem Creation Units on the same trade date. In these instances, the Trust reserves the right to settle
these transactions on a net basis.
With respect to orders involving
foreign Redemption Securities, the Fund may settle Creation Unit transactions on a basis other than T+3 in order to accommodate foreign
market holiday schedules, to account for different treatment among foreign and U.S. markets of dividend record dates and ex-dividend dates
(that is the last day the holder of a security can sell the security and still receive dividends payable on the security), and in certain
other circumstances. When a relevant local market is closed due to local market holidays, the local market settlement process will not
commence until the end of the local holiday period.
Cash Redemption Method
When cash redemptions of Creation
Units are available or specified for the Fund, they will be effected in essentially the same manner as in-kind redemptions. In the case
of a cash redemption, the investor will receive the cash equivalent of the Redemption Basket minus any Transaction Fees, as described
above.
The following discussion is
general in nature and should not be regarded as an exhaustive presentation of all possible tax ramifications. All shareholders should
consult a qualified tax advisor regarding their investment in the Fund.
The Fund intends to qualify
and has elected to be treated as a regulated investment company under Subchapter M of the Internal Revenue Code of 1986, as amended (the
“Tax Code”), and intends to continue to so qualify, which requires compliance with certain requirements concerning the sources
of its income, diversification of its assets, and the amount and timing of its distributions to shareholders. Such qualification does
not involve supervision of management or investment practices or policies by any government agency or bureau. By so qualifying, the Fund
should not be subject to federal income or excise tax on its net investment income or net capital gain, which are distributed to shareholders
in accordance with the applicable timing requirements. Net investment income and net capital gain of the Fund will be computed in accordance
with Section 852 of the Tax Code.
Net investment income is made
up of dividends and interest less expenses. Net capital gain for a fiscal year is computed by taking into account any capital loss carryforward
of the Fund. Capital losses incurred after January 31, 2011 may now be carried forward indefinitely and retain the character of the original
loss. Under pre-enacted laws, capital losses could be carried forward to offset any capital gains for eight years, and carried forward
as short-term capital, irrespective of the character of the original loss. Capital loss carry forwards are available to offset future
realized capital gains. To the extent that these carry forwards are used to offset future capital gains it is probable that the amount
offset will not be distributed to shareholders.
The Fund intends to distribute
all of its net investment income, any excess of net short-term capital gains over net long-term capital losses, and any excess of net
long-term capital gains over net short-term capital losses in accordance with the timing requirements imposed by the Tax Code and therefore
should not be required to pay any federal income or excise taxes. Distributions of net capital gain, if any, will be made annually no
later than December 31 of each year. Both types of distributions will be in shares of the Fund unless a shareholder elects to receive
cash.
To be treated as a regulated
investment company under Subchapter M of the Tax Code, the Fund must also (a) derive at least 90% of its gross income from dividends,
interest, payments with respect to securities loans, net income from certain publicly traded partnerships and gains from the sale or other
disposition of securities or foreign currencies, or other income (including, but not limited to, gains from options, futures or forward
contracts) derived with respect to the business of investing in such securities or currencies, and (b) diversify its holding so that,
at the end of each fiscal quarter, (i) at least 50% of the market value of the Fund’s assets is represented by cash, U.S. government
securities and securities of other regulated investment companies, and other securities (for purposes of this calculation, generally limited
in respect of any one issuer, to an amount not greater than 5% of the market value of the Fund’s assets and 10% of the outstanding
voting securities of such issuer) and (ii) not more than 25% of the value of its assets is invested in the securities of (other than U.S.
government securities or the securities of other regulated investment companies) any one issuer, two or more issuers that the Fund controls
and that are determined to be engaged in the same or similar trades or businesses, or the securities of certain publicly traded partnerships.
If the Fund fails to qualify
as a regulated investment company under Subchapter M in any fiscal year, it will be treated as a corporation for federal income tax purposes.
As such the Fund would be required to pay income taxes on its net investment income and net realized capital gains, if any, at the rates
generally applicable to corporations. Shareholders of the Fund generally would not be liable for income tax on the Fund’s net investment
income or net realized capital gains in their individual capacities. Distributions to shareholders, whether from the Fund’s net
investment income or net realized capital gains, would be treated as taxable dividends to the extent of current or accumulated earnings
and profits of the Fund.
The Fund is subject to a 4%
nondeductible excise tax on certain undistributed amounts of ordinary income and capital gain under a prescribed formula contained in
Section 4982 of the Tax Code. The formula requires payment to shareholders during a calendar year of distributions representing at least
98% of the Fund’s ordinary income for the calendar year and at least 98.2% of its capital gain net income (i.e., the excess of its
capital gains over capital losses) realized during the one-year period ending October 31 during such year plus 100% of any income that
was neither distributed nor taxed to the Fund during the preceding calendar year. Under ordinary circumstances, the Fund expects to time
its distributions so as to avoid liability for this tax.
The following discussion of
tax consequences is for the general information of shareholders that are subject to tax. Shareholders that are IRAs or other qualified
retirement plans are exempt from income taxation under the Tax Code.
Distributions of taxable net
investment income and the excess of net short-term capital gain over net long-term capital loss are taxable to shareholders as ordinary
income.
Distributions of net capital
gain (“capital gain dividends”) generally are taxable to shareholders as long-term capital gain; regardless of the length of
time the shares of the Trust have been held by such shareholders.
Certain U.S. shareholders,
including individuals and estates and trusts, are subject to an additional 3.8% Medicare tax on all or a portion of their “net investment
income,” which should include dividends from the Fund and net gains from the disposition of shares of the Fund. U.S. shareholders
are urged to consult their own tax advisors regarding the implications of the additional Medicare tax resulting from an investment in
the Fund.
Redemption of Fund shares by
a shareholder will result in the recognition of taxable gain or loss in an amount equal to the difference between the amount realized
and the shareholder’s tax basis in his or her Fund shares. Such gain or loss is treated as a capital gain or loss if the shares
are held as capital assets. However, any loss realized upon the redemption of shares within six months from the date of their purchase
will be treated as a long-term capital loss to the extent of any amounts treated as capital gain dividends during such six-month period.
All or a portion of any loss realized upon the redemption of shares may be disallowed to the extent shares are purchased (including shares
acquired by means of reinvested dividends) within 30 days before or after such redemption.
Distributions of taxable net
investment income and net capital gain will be taxable as described above, whether received in additional cash or shares. Shareholders
electing to receive distributions in the form of additional shares will have a cost basis for federal income tax purposes in each share
so received equal to the net asset value of a share on the reinvestment date.
All distributions of taxable
net investment income and net capital gain, whether received in shares or in cash, must be reported by each taxable shareholder on his
or her federal income tax return. Dividends or distributions declared in October, November or December as of a record date in such a month,
if any, will be deemed to have been received by shareholders on December 31, if paid during January of the following year. Redemptions
of shares may result in tax consequences (gain or loss) to the shareholder and are also subject to these reporting requirements.
Under the Tax Code, the Fund
will be required to report to the Internal Revenue Service all distributions of taxable income and capital gains as well as gross proceeds
from the redemption or exchange of Fund shares, except in the case of certain exempt shareholders. Under the backup withholding provisions
of Section 3406 of the Tax Code, distributions of taxable net investment income and net capital gain and proceeds from the redemption
or exchange of the shares of a regulated investment company may be subject to withholding of federal income tax in the case of non-exempt
shareholders who fail to furnish the investment company with their taxpayer identification numbers and with required certifications regarding
their status under the federal income tax law, or if the Fund is notified by the IRS or a broker that withholding is required due to an
incorrect TIN or a previous failure to report taxable interest or dividends. If the withholding provisions are applicable, any such distributions
and proceeds, whether taken in cash or reinvested in additional shares, will be reduced by the amounts required to be withheld.
Options, Futures, Forward Contracts and Swap Agreements
To the extent such investments
are permissible for the Fund, the Fund’s transactions in options, futures contracts, hedging transactions, forward contracts, straddles
and foreign currencies will be subject to special tax rules (including mark-to-market, constructive sale, straddle, wash sale and short
sale rules), the effect of which may be to accelerate income to the Fund, defer losses to the Fund, cause adjustments in the holding periods
of the Fund’s securities, convert long-term capital gains into short-term capital gains and convert short-term capital losses into
long-term capital losses. These rules could therefore affect the amount, timing and character of distributions to shareholders.
To the extent such investments
are permissible, certain of the Fund’s hedging activities (including its transactions, if any, in foreign currencies or foreign
currency-denominated instruments) are likely to produce a difference between its book income and its taxable income. If the Fund’s
book income exceeds its taxable income, the distribution (if any) of such excess book income will be treated as (i) a dividend to the
extent of the Fund’s remaining earnings and profits (including earnings and profits arising from tax-exempt income), (ii) thereafter,
as a return of capital to the extent of the recipient’s basis in the shares, and (iii) thereafter, as gain from the sale or exchange
of a capital asset. If the Fund’s book income is less than taxable income, the Fund could be required to make distributions exceeding
book income to qualify as a regulated investment company that is accorded special tax treatment.
Passive Foreign Investment Companies
Investment by the Fund in certain
passive foreign investment companies (“PFICs”) could subject the Fund to a U.S. federal income tax (including interest charges)
on distributions received from the company or on proceeds received from the disposition of shares in the company, which tax cannot be
eliminated by making distributions to Fund shareholders. However, the Fund may elect to treat a PFIC as a qualified electing fund (“QEF”),
in which case the Fund will be required to include its share of the company’s income and net capital gains annually, regardless
of whether it receives any distribution from the company.
The Fund also may make an election
to mark the gains (and to a limited extent losses) in such holdings “to the market” as though it had sold and repurchased its
holdings in those PFICs on the last day of the Fund’s taxable year. Such gains and losses are treated as ordinary income and loss.
The QEF and mark-to-market elections may accelerate the recognition of income (without the receipt of cash) and increase the amount required
to be distributed for the Fund to avoid taxation. Making either of these elections, therefore, may require the Fund to liquidate other
investments (including when it is not advantageous to do so) to meet its distribution requirement, which also may accelerate the recognition
of gain and affect the Fund’s total return.
Foreign Currency Transactions
The Fund’s transactions
in foreign currencies, foreign currency-denominated debt securities and certain foreign currency options, futures contracts and forward
contracts (and similar instruments) may give rise to ordinary income or loss to the extent such income or loss results from fluctuations
in the value of the foreign currency concerned.
Foreign Taxation
Income received by the Fund
from sources within foreign countries may be subject to withholding and other taxes imposed by such countries. Tax treaties and conventions
between certain countries and the U.S. may reduce or eliminate such taxes. If more than 50% of the value of the Fund’s total assets
at the close of its taxable year consists of securities of foreign corporations, the Fund may be able to elect to “pass through”
to the Fund’s shareholders the amount of eligible foreign income and similar taxes paid by the Fund. If this election is made, a
shareholder generally subject to tax will be required to include in gross income (in addition to taxable dividends actually received)
his or her pro rata share of the foreign taxes paid by the Fund, and may be entitled either to deduct (as an itemized deduction) his or
her pro rata share of foreign taxes in computing his or her taxable income or to use it as a foreign tax credit against his or her U.S.
federal income tax liability, subject to certain limitations. In particular, a shareholder must hold his or her shares (without protection
from risk of loss) on the ex-dividend date and for at least 15 more days during the 30-day period surrounding the ex-dividend date to
be eligible to claim a foreign tax credit with respect to a gain dividend. No deduction for foreign taxes may be claimed by a shareholder
who does not itemize deductions. Each shareholder will be notified within 60 days after the close of the Fund’s taxable year whether
the foreign taxes paid by the Fund will “pass through” for that year.
Generally, a credit for foreign
taxes is subject to the limitation that it may not exceed the shareholder’s U.S. tax attributable to his or her total foreign source
taxable income. For this purpose, if the pass-through election is made, the source of the Fund’s income will flow through to shareholders
of the Fund. With respect to the Fund, gains from the sale of securities will be treated as derived from U.S. sources and certain currency
fluctuation gains, including fluctuation gains from foreign currency-denominated debt securities, receivables and payables will be treated
as ordinary income derived from U.S. sources. The limitation on the foreign tax credit is applied separately to foreign source passive
income, and to certain other types of income. A shareholder may be unable to claim a credit for the full amount of his or her proportionate
share of the foreign taxes paid by the Fund. The foreign tax credit can be used to offset only 90% of the revised alternative minimum
tax imposed on corporations and individuals and foreign taxes generally are not deductible in computing alternative minimum taxable income.
Original Issue Discount and Pay-In-Kind Securities
Current federal tax law requires
the holder of a U.S. Treasury or other fixed income zero coupon security to accrue as income each year a portion of the discount at which
the security was purchased, even though the holder receives no interest payment in cash on the security during the year. In addition,
pay-in-kind securities will give rise to income, which is required to be distributed and is taxable even though the Fund holding the security
receives no interest payment in cash on the security during the year.
Some of the debt securities
(with a fixed maturity date of more than one year from the date of issuance) that may be acquired by the Fund may be treated as debt securities
that are issued originally at a discount. Generally, the amount of the original issue discount (“OID”) is treated as interest
income and is included in income over the term of the debt security, even though payment of that amount is not received until a later
time, usually when the debt security matures. A portion of the OID includable in income with respect to certain high-yield corporate debt
securities (including certain pay-in-kind securities) may be treated as a dividend for U.S. federal income tax purposes.
Some of the debt securities
(with a fixed maturity date of more than one year from the date of issuance) that may be acquired by the Fund in the secondary market
may be treated as having market discount. Generally, any gain recognized on the disposition of, and any partial payment of principal on,
a debt security having market discount is treated as ordinary income to the extent the gain, or principal payment, does not exceed the
“accrued market discount” on such debt security. Market discount generally accrues in equal daily installments. The Fund may
make one or more of the elections applicable to debt securities having market discount, which could affect the character and timing of
recognition of income.
Some debt securities (with
a fixed maturity date of one year or less from the date of issuance) that may be acquired by the Fund may be treated as having acquisition
discount, or OID in the case of certain types of debt securities. Generally, the Fund will be required to include the acquisition discount,
or OID, in income over the term of the debt security, even though payment of that amount is not received until a later time, usually when
the debt security matures. The Fund may make one or more of the elections applicable to debt securities having acquisition discount, or
OID, which could affect the character and timing of recognition of income.
The Fund that holds the foregoing
kinds of securities may be required to pay out as an income distribution each year an amount that is greater than the total amount of
cash interest the Fund actually received. Such distributions may be made from the cash assets of the Fund or by liquidation of portfolio
securities, if necessary (including when it is not advantageous to do so). The Fund may realize gains or losses from such liquidations.
In the event the Fund realizes net capital gains from such transactions, its shareholders may receive a larger capital gain distribution,
if any, than they would in the absence of such transactions.
Shareholders of the Fund may
be subject to state and local taxes on distributions received from the Fund and on redemptions of the Shares.
A brief explanation of the
form and character of the distribution accompany each distribution. In January of each year, the Fund issues to each shareholder a statement
of the federal income tax status of all distributions.
Shareholders should consult
their tax advisors about the application of federal, state and local and foreign tax law in light of their particular situation.
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
[_____], located at [_____],
serves as the Fund’s independent registered public accounting firm for the current fiscal year. The firm provides services including
(i) audit of the Fund’s annual financial statements, (ii) tax services for the Fund, and (iii) assistance and consultation in connection
with SEC filings.
Thompson Hine LLP, 41 South
High Street, Suite 1700, Columbus, Ohio 43215, serves as the Trust’s legal counsel.
The audited financial statements
and related report of [____], independent registered public accounting firm, contained in the Trust’s Annual Report, are hereby
incorporated by reference. A copy of the Trust’s Annual Report may be obtained upon request and without charge by calling 1 (855)
772-8488 during normal business hours. No other portions of the Fund’s Annual Report are incorporated herein by reference.
Policies and Procedures
Simplify Asset Management, Inc. (“SAMI”
or the “Company”) has the authority to vote proxies with respect of securities in client accounts (“Client Securities”)
over which the Company has voting discretion. In such cases, the Company will cast proxy votes in a manner that is consistent with the
best interests of the Company’s clients. Where the Company undertakes proxy voting responsibilities on behalf of multiple clients,
it shall consider whether it should have different voting policies for some or all of these different clients, depending on the investment
strategy and objectives of each client. These proxy voting policies and procedures are designed to deal with the complexities which may
arise in cases where the Company’s interests conflict or appear to conflict with the interests of its clients and to provide a copy
of proxy voting and these procedures upon client request. SAMI will also make available the record of the Company’s votes promptly
upon request.
Unless contractually obligated to vote in a certain
manner, the Company will reach its voting decisions independently, after appropriate investigation. It does not generally intend to delegate
its decision-making or to rely on the recommendations of any third party, although it may take such recommendations into consideration.
Where the Company deviates from the guidelines listed below, or depends upon a third party to make the decision, the reasons shall be
documented. SAMI may consult with such other experts, such as CPA’s, investment bankers, attorneys, etc., as it deems necessary
to help reach informed decisions.
The CCO is responsible for monitoring the effectiveness of this policy.
SAMI generally will monitor proposed corporate
actions and proxy issues regarding client securities and may take any of the following actions based on the best interests of its clients:
(i) determine how to vote the proxies; (ii) abstain; or (iii) follow the recommendations of an independent proxy voting service in voting
the proxies.
In general, the Company will determine how to
vote proxies based on reasonable judgment of the vote most likely to produce favorable financial results for its clients. Proxy votes
generally will be cast in favor of proposals that maintain or strengthen the shared interests of shareholders. Proxy votes generally will
be cast against proposals having the opposite effect. The Company will always consider each side of each proxy issue.
Non-Voting of Proxies
SAMI will generally not vote proxies in the following
situations:
● | Where the Company and client have agreed in advance to limit the conditions under which the Company would exercise voting authority; |
● | Proxies are received for equity securities where, at the time of receipt, the Company’s position, across all clients that it advises, is less than, or equal to, 1% of the total outstanding voting equity (an “immaterial position”); or |
● | Where the Company has determined that refraining is in the best interest of the client, such as when the cost to the client of voting the proxy is greater than the expected benefit of voting (e.g. voting a foreign security that is required to be made in person). |
● | Proxies are received for equity securities where, at the time of receipt, the Company’s clients no longer hold that position. |
Management Proposals
Absent good reason to the contrary, the Company
will generally give substantial weight to management recommendations regarding voting. This is based on the view that management is usually
in the best position to know which corporate actions are in the best interests of common shareholders as a whole.
SAMI will generally vote for routine matters proposed
by issuer management, such as setting a time or place for an annual meeting, changing the name or fiscal year of the company, or voting
for directors in favor of the management proposed slate. Other routine matters in which the Company will generally vote along with company
management include: appointment of auditors; fees paid to board members; and change in the board structure. The Company will generally
vote along with management as long as the proposal does not: i) measurably change the structure, management, control or operations of
the company; ii) measurably change the terms of, or fees or expenses associated with, an investment in the company; and (iii) the proposal
is consistent with customary industry standards and practices, as well as the laws of the state of incorporation applicable to the company.
Routine matters may not necessitate the same level of analysis than non-routine matters.
Non-Routine Matters
Non-routine matters include such things as:
● | Amendments to management incentive plans; |
● | The authorization of additional common or preferred stock; |
● | Initiation or termination of barriers to takeover or acquisition; |
● | Mergers or acquisitions; |
● | Changes in the state of incorporation; |
● | Corporate reorganizations; |
● | Term limits for board members; and |
● | “Contested” director slates. |
In non-routine matters, the Company will attempt to be generally
familiar with the questions at issue. Non-routine matters will be voted on a case-by-case basis given the complexity of many of these
issues. When determining how to vote non-routine matters the Company shall conduct an issue-specific analysis, giving consideration
to the potential effect on the value of a client’s investments, documentation of the analysis shall be maintained in the Company’s
proxy voting files.
Processing Proxy Votes
The CCO will be responsible for determining
whether each proxy is for a “routine” matter, as described above, and whether the policy and procedures set forth herein actually
address the specific issue. For proxies that are not clearly “routine”, the Company, in conjunction with the CCO, will determine
how to vote each such proxy by applying these policies and procedures. Upon making a decision, the proxy will be executed and returned
for submission to the issuer. SAMI’s proxy voting record will be updated at the time the proxy is submitted.
An independent proxy voting advisory and research
firm may be appointed as a “Proxy Service” for voting the Company’s proxies after approval by the CCO.
Periodic Testing
The Company shall evaluate compliance by periodically
sampling the proxy votes it casts on behalf of its clients by sampling proxy votes that relate to proposals that are non-routine matters
and require more issue-specific analysis (e.g., mergers and acquisition transactions, dissolutions, conversions, or consolidations).
Conflicts of Interest
Conflicts of interest between the Company or a
principal of the Company and the Company’s clients with respect to a proxy issue conceivably may arise, for example, from
personal or professional relationships with an issuer or with the directors, candidates for director, or senior executives of an issuer.
Potential conflicts of interest between the Company
and its clients may arise when the Company’s relationships with an issuer or with a related third party actually conflict, or appear
to conflict, with the best interests of the Company’s clients.
If the issue is specifically addressed in these
policies and procedures, the Company will vote in accordance with these policies. In a situation where the issue is not specifically addressed
in these policies and procedures and an apparent or actual conflict exists, the Company shall either: i) delegate the voting decision
to an independent third party; ii) inform clients of the conflict of interest and obtain advance consent of a majority of such clients
for a particular voting decision; or iii) obtain approval of a voting decision from the Company’s CCO, who will be responsible for
documenting the rationale for the decision made and voted.
In all such cases, the Company will make disclosures
to clients of all material conflicts and will keep documentation supporting its voting decisions.
If the CCO determines that a material conflict
of interest exists, the following procedures shall be followed:
1. | SAMI may disclose the existence and nature of the conflict to the client(s) owning the securities, and seek directions on how to vote the proxies; |
2. | SAMI may abstain from voting, particularly if there are conflicting client interests (for example, where client accounts hold different client securities in a competitive merger situation); or |
3. | SAMI may follow the recommendations of an independent proxy voting service in voting the proxies. |
Disclosure to Clients
A summary of the Company’s proxy voting
policy will be included in the Company’s Disclosure Brochure. The full text of the Company’s proxy voting policy will be provided
to clients upon request.
Proxy Advisory Firm
When the Company retains a proxy advisory firm
to provide research, voting recommendations or voting execution services, the Company shall conduct reasonable oversight to ensure the
proxy advisor’s recommendations are consistent with the Company’s proxy voting policies and in the best interest of the Company’s
clients and investors. The level of oversight may vary depending on (1) the scope of the investment adviser’s voting authority,
and (2) the type of functions and services that the investment adviser has retained the proxy advisory firm to perform.
Periodic Advisory Firm Testing
The Company shall periodically evaluate the proxy
services provided by third party providers which should consider the services, recommendations made by the provider and how the provider
voted, as applicable, and consider the steps enumerated below.
When conducting oversight of a proxy advisory
firm, the Company should consider taking the following steps:
● | whether the proxy advisory firm has the capacity and competency to adequately analyze the matters for which the investment adviser is responsible for voting including the adequacy and quality of the proxy advisory firm’s staffing, personnel, and/or technology; |
● | the adequacy of disclosures the proxy advisory firm has provided regarding its methodologies in formulating voting recommendations, such that the Company can understand the factors underlying the proxy advisory firm’s voting recommendations |
● | the effectiveness of the proxy advisory firm’s policies and procedures for obtaining current and accurate information relevant to matters included in its research and on which it makes voting recommendations; |
● | the Company’s access to the proxy advisory firm’s sources of information and methodologies used in formulating voting recommendations or executing voting instructions; |
● | the nature of any third-party information sources that the proxy advisory firm uses as a basis for its voting recommendations; |
● | whether the proxy advisory firm has adequate policies and procedures to identify, disclose, and address actual and potential conflicts of interest. |
Class Action Lawsuits
From time to time, securities held in the accounts
of clients will be the subject of class action lawsuits. SAMI has no obligation to determine if securities held by the client are subject
to a pending or resolved class action lawsuit. It also has no duty to evaluate a client’s eligibility or to submit a claim to participate
in the proceeds of a securities class action settlement or verdict. Furthermore, the Company has no obligation or responsibility to initiate
litigation to recover damages on behalf of clients who may have been injured because of actions, misconduct, or negligence by corporate
management of issuers whose securities are held by clients.
Where the Company receives written or electronic
notice of a class action lawsuit, settlement, or verdict directly relating to a client account, it will forward all notices, proof of
claim forms, and other materials, to the client. Electronic mail is acceptable where appropriate if the client has authorized contact
in this manner.
PART
C: OTHER INFORMATION
Item
28. Exhibits
1 | To be filed by subsequent amendment |
2 |
Filed |
3 | Filed as an exhibit to the Registrant’s Registration Statement on August 19, 2020. (File Nos. 333-238475 and 811-23570) |
4 | Filed as an exhibit to the Registrant’s Registration Statement on November 24, 2020. (File Nos. 333-238475 and 811-23570) |
5 | Filed as an exhibit to the Registrant’s Registration Statement on December 5, 2020 (File Nos. 333-238475 and 811-23570) |
6 | Filed as an exhibit to the Registrant’s Registration Statement on December 9, 2020. (File Nos. 333-238475 and 811-23570) |
7 | Filed as an exhibit to the Registrant’s Registration Statement on May 7, 2021. (File Nos. 333-238475 and 811-23570) |
8 | Filed as an exhibit to the Registrant’s Registration Statement on May 21, 2021 (File Nos. 333-238475 and 811-23570) |
9 | Filed as an exhibit to the Registrant’s Registration Statement on September 9, 2021 (File Nos. 333-238475 and 811-23570) |
10 | Filed as an exhibit to the Registrant’s Registration Statement on October 12, 2021 (File Nos. 333-238475 and 811-23570) |
11 | Filed as an exhibit to the Registrant’s Registration Statement on October 18, 2021 (File Nos. 333-238475 and 811-23570) |
12 |
Filed |
Item
29. Persons Controlled by or Under Common Control with the Funds
The table below depicts the persons controlled
or under common control with the Funds:
Fund | Controlled Foreign Corporation |
Simplify U.S. Equity PLUS Bitcoin ETF | Simplify U.S. Equity PLUS Bitcoin Cayman Fund |
Simplify Volatility Premium ETF | Simplify Volatility Premium Cayman Fund |
Simplify Gold Strategy ETF | Simplify Gold Strategy Cayman Fund |
Simplify Commodity Strategy ETF | Simplify Commodity Strategy Cayman Fund |
Each a Controlled Foreign Corporation was formed under and is subject
to the laws of the Cayman Islands. The financial statements of each Cayman Controlled Foreign Corporation are consolidated with the financial
statements of its respective fund.
Item
30. Indemnification
Pursuant
to the Agreement and Declaration of Trust (the “Declaration”), every person who is, or has been, a Trustee, officer, or employee
of the Trust, including persons who serve at the request of the Trust as directors, trustees, officers, employees or agents of another
organization in which the Trust has an interest as a shareholder, creditor or otherwise (“Covered Person”), shall be indemnified
by the Trust to the fullest extent permitted by law against liability and against all expenses reasonably incurred or paid by him in
connection with any claim, action, suit or proceeding in which he becomes involved as a party or otherwise by virtue of his being or
having been such a Trustee, director, officer, employee or agent and against amounts paid or incurred by him in settlement thereof.
No
indemnification shall be provided under the Declaration to a Covered Person to the extent such indemnification is prohibited by applicable
federal law.
The Underwriting Agreement provides that the Registrant agrees to indemnify and
hold harmless Foreside Financial Services, LLC (the “Distributor”), its affiliates and each of their respective directors,
officers and employees and agents and any person who controls the Distributor within the meaning of Section 15 of the Securities Act of
1933 against any loss, liability, claim, damages or expense (including the reasonable cost of investigating or defending any alleged loss,
liability, claim, damages or expense and reasonable counsel fees incurred in connection therewith) that the Distributor may incur arising
out of or based upon: (i) Distributor serving as distributor for the Trust in compliance with this Agreement and applicable law; (ii)
the allegation of any wrongful act of the Trust or any of its directors, officers, employees or affiliates in connection with its duties
and responsibilities in this Agreement; (iii) any claim that the Registration Statement, Prospectus, Statement of Additional Information,
product description, shareholder reports, Marketing Materials and advertisements specifically approved by the Registrant and the Adviser/Sub-Adviser
or other information filed or made public by the Registrant (as from time to time amended) included an untrue statement of a material
fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein (and in the
case of the Prospectus, Statement of Additional Information and product description, in light of the circumstances under which they were
made) not misleading under the Securities Act, or any other statute or the common law; (iv) the breach by the Registrant of any obligation,
representation or warranty contained in this Agreement; or (v) the Registrant’s failure to comply in any material respect with applicable
securities laws.
Item
31. Business and Other Connections of the Investment Adviser
A description of any other business, profession, vocation,
or employment of a substantial nature in which the Adviser or each Sub-Adviser is set forth in the applicable Fund’s Prospectus
in the section entitled “Management” and Statement of Additional Information in the section titled “Investment Adviser”.
The information required
by this Item 31 with respect to each director, officer or partner of the Adviser is incorporated by reference to the Adviser’s Form
ADV (File No. 801-119255). The Adviser’s Form ADV may be obtained, free of charge,
at the SEC’s website at www.adviserinfo.sec.gov. The information required by this Item 31 with respect to each director, officer or partner
of the Sub-Adviser is incorporated by reference to the Sub-Adviser’s Form ADV (File No. 801-119673).
The Sub-Adviser’s Form ADV may be obtained, free of charge, at the SEC’s website at www.adviserinfo.sec.gov. The information
required by this Item 31 with respect to each director, officer or partner of Altis Partners
(Jersey) Limited is incorporated by reference to its NFA Registration (NFA ID: 0358093). Information
regarding Altis Partners (Jersey) Limited NFA Registration is available, free of charge,
at the NFA’s website at www.nfa.futures.org.
Item
32. Principal Underwriters
(a)
Foreside Financial Services, LLC (f/k/a/ BHIL Distributors, LLC) (the “Distributor”) serves as principal underwriter for
the following investment companies registered under the Investment Company Act of 1940, as amended:
1. | 13D Activist Fund, Series of Northern Lights Fund Trust |
3. | A3 Alternative Credit Fund |
4. | AAMA Equity Fund, Series of Asset Management Fund |
5. | AAMA Income Fund, Series of Asset Management Fund |
6. | Advisers Investment Trust |
9. | BMO LGM Frontier Markets Equity Fund |
10. | Boston Trust Walden Funds (f/k/a The Boston Trust & Walden Funds) |
11. | Bow River Capital Evergreen Fund |
12. | Conversus StepStone Private Markets |
13. | Cook & Bynum Funds Trust |
14. | Datum One Series Trust |
18. | Engine No. 1 ETF Trust |
19. | FlowStone Opportunity Fund |
20. | Inspire 100 ETF, Series of Northern Lights Fund Trust IV |
21. | Inspire Corporate Bond Impact ETF, Series of Northern Lights Fund Trust IV |
22. | Inspire Faithward Large Cap Momentum ESG ETF, Series of Northern Lights Fund Trust IV |
23. | Inspire Faithward Mid Cap Momentum ESG ETF, Series of Northern Lights Fund Trust IV |
24. | Inspire Global Hope ETF, Series of Northern Lights Fund Trust IV |
25. | Inspire International ESG ETF, Series of Northern Lights Fund Trust IV |
26. | Inspire Small Mid Cap Impact ETF, Series of Northern Lights Fund Trust IV |
27. | Inspire Tactical Balanced ESG ETF, Series of the Northern Lights Fund Trust IV |
28. | Pax World Funds Series Trust |
29. | Pax World Funds Series Trust III |
31. | Primark Private Equity Investments Fund |
33. | SA Funds – Investment Trust |
35. | Simplify Exchange Traded Funds |
(b)
The following are the Officers and Manager of the Distributor, the Registrant’s underwriter. The Distributor’s main business
address is Three Canal Plaza, Suite 100, Portland, ME 04101.
Name |
Address | Position with Underwriter |
Position |
|||
Richard J. Berthy |
Three Canal Plaza, Suite 100, Portland, ME 04101 |
President, |
None | |||
Mark A. Fairbanks |
Three |
Vice President |
None | |||
Teresa Cowan |
111 |
Vice President |
None | |||
Jennifer K. DiValerio |
899 |
Vice President |
None | |||
Susan K. Moscaritolo |
899 |
Vice President and Chief Compliance Officer |
None | |||
Kelly Whetstone |
Three Canal Plaza, Suite 100, Portland, ME 04101 |
Secretary | None |
(c)
Not applicable.
Item
33. Location of Accounts and Records
The
books, accounts and other documents required by Section 31(a) under the Investment Company Act of 1940, as amended, and the rules promulgated
thereunder are maintained in the physical possession of Simplify Asset Management, Inc., 154 W 14th Street, Floor 2 New York NY 10011
and Bank of New York Mellon 240 Greenwich St. New York, NY 10286. Foreside maintains all records relating to its services as Distributor
of the Registrant at Three Canal Plaza, Suite 100, Portland, ME 04101.
Item
34. Management Services
Not
applicable.
Item
35. Undertakings
Not
applicable
SIGNATURES
Pursuant
to the requirements of the Securities Act of 1933 and the Investment Company Act of 1940, the Registrant has duly caused this Registration
Statement to be signed on its behalf by the undersigned, duly authorized, in the city of Columbus, and State of Ohio, on the 12th
day of January 2022.
Simplify Exchange Traded Funds Trust | ||
By: | /s/ JoAnn M. Strasser |
|
Name: | JoAnn M. Strasser | |
* Pursuant to Powers of Attorney |
Pursuant
to the requirements of the Securities Act of 1933, this registration statement has been signed below by the following person in the capacities
and on the date indicated.
Signature | Title | |
Paul Kim* | President, Trustee, Treasurer and Principal Executive and Financial Officer |
|
Zung Nguyen* | Trustee | |
Craig Enders* | Trustee | |
Christopher Caltagirone* | Trustee |
* | Pursuant to Powers of Attorney |
/s/ JoAnn M. Strasser |
||
Name: | JoAnn M. Strasser |
|
Title: | Attorney-in-Fact | |
Date: | January 12, 2022 |