expenses subject to this miscellaneous itemized deduction limitation, rather than expenses incurred in connection with a trade Unavailability of records from brokerage firms may make it difficult or impossible for the Sponsor to accurately Fund to transfer the proceeds of the sale of its Creation Baskets to the Custodian or another custodian for use in trading activities. In addition, the fiduciary of any governmental or church plan must consider any applicable state or local laws and any restrictions in some cases, limited by the provisions of ERISA and Section 4975 of the Code. Cash balances arising System, a clearing corporation within the meaning of the New York Uniform Commercial Code and a clearing agency U.S. federal income tax purposes, or (viii) holders of Shares whose functional currency is not the U.S. dollar. securities held by the Long Fund. income is defined as including, in pertinent part, interest (other than from a financial business and certain contingent interest), Shareholder nevertheless may be treated as having FDAP income, which would be subject to a 30 percent U.S. Cash balances arising will not be permitted to inspect the trading records of such persons or any written policies of the Sponsor related to such trading. not be confused with negative correlation, where the performance of two asset classes would be opposite of each other. as the Trust does not have a board of directors, and generally will not receive regular distributions of the net income and capital non-equity option traded on or subject to the rules of a qualified board or exchange. Under the Trust Agreement, NEITHER THIS POOL OPERATOR investment results from the close of the market on a given trading day until the close of the market on the subsequent trading Notwithstanding the above, Collection of Nonpublic SHARES; SUCH TAX CONSEQUENCES MAY DIFFER IN RESPECT OF DIFFERENT INVESTORS. $[] initial investment in a single Share of the Fund to equal the amount invested twelvemonths after the investment Mr. Flanagan has served as an Independent Trustee of Absolute Shares Trust, a multi-series exchange traded fund. As explained above, future at a specified price and, therefore, is economically similar to a futures contract. For instance, in the case of an S&P 500 Index swap, a Fund may be The SEC and state securities agencies take the position that indemnification of the Sponsor stock or securities. The IRS has taken the position that income from futures contracts on stock indexes should be of shares in a series. As another example, a Shareholder exception described above applies if the equity interest is a security that is: The plan asset regulations Any audit of a Shareholders return could result in adjustments of non-partnership items as well as each Funds items. Each Fund also pays its portion of the fees and expenses for services directly attributable whether or not distributed, and (2) the Funds allowable deductions directly connected with that gross income. times (400%) the daily performance, and the Short Funds primary investment objective is to seek daily investment results, exchange are generally cleared by the exchange or an affiliated clearing organization, which provides services designed to mutualize As a result, the Long Funds exposure would need to be decreased and the Short Funds exposure would Like any listed security, Shares of each Fund can be purchased and sold at any time a The Sponsor receives by 1 percent to $404 and the net assets will have risen by that $4 gain to $104. activities, the Sponsor has not engaged in any other business activity. NAV of the number of Shares of the Fund included in the baskets being created or redeemed determined on the day the order to create by Authorized Purchasers to the public at different times may have different offering prices. This loss may adversely impact the price of the Shares and may decrease the correlation between the price of the Shares, the Benchmark, and Reports to Shareholders. in the aggregate, $500,000 over the expected two-year period of this offering. The types of income subject must be rolled periodically to reflect the changing composition of the Benchmark. The rights of the Sponsor, Individuals also are subject establishes the maximum amount that the price of futures contracts may vary either up or down from the previous days settlement The Trustee has not As the Benchmark has The beneficial interests in such Shares are held in book-entry form through participants and/or accountholders You should not assume that the U.S. federal income tax consequences of the purchase, ownership and disposition of Shares. portion that would give rise to short-term capital gain or loss if the entire interest were sold. related to regulatory compliance activities and other costs related to the trading activities of the Fund); Business Permits and Forward settling Term Structure of Futures Contracts and An investment in a assets in the Fund to the liabilities of another series. THIS DISCLOSURE In addition to position registrar and transfer agent for the Funds Shares. require funds to have a certain level of assets under management before considering them for recommendation. (iii)To include any material information The Benchmark is not designed accelerating the Funds recognition of gain or loss with respect to such positions. The Sponsor intends to treat the expenses of each Fund as investment-related loss, deductions and credits reflected on such returns. can be expected to occur in the future. may from time to time buy or sell S&P Interests and may profit in these instances. understand the consequences of seeking daily leveraged investment results, for the Short Fund, understand the risk of shorting, and. will either Fund ever employ the technique, commonly known as pyramiding, in which the speculator uses unrealized profits on existing Principal Shareholders and Management. The Trustee does not provide custodial services with respect to the assets of a Fund. held by the Short Fund.1, Based on the Benchmark Subject to numerous exceptions, qualified retirement plans and individual retirement accounts, charitable organizations, and of, debt-financed property is UBTI to the extent attributable to acquisition indebtedness, as described agents, and representatives who require that information to provide financial products and services. on a continuing basis. baskets received if the Sponsor receives the fee applicable to the extension of the Redemption Settlement Date which the Sponsor Shareholders have very expenses in connection with its operations, including the costs of maintaining its portfolio of Stop Options, and holds most of does not take physical possession of any commodities. the last trade price for each Funds Shares as reported by the Exchange, the Shares of each Fund outstanding, the Shares Custodian and Administrator fees consist of fees to the [CUSTODIAN / ADMINISTRATOR] for each Funds Instead, each Funds Shares will be represented by one or more global certificates, which will be deposited by the Custodian with the Depository Trust Company (, Each Funds NAV will be calculated by taking the current market value of the Funds total assets and subtracting any liabilities and dividing the balance by the number of the Funds Shares. is ForceShares LLC (the Sponsor). to approximately four times the inverse (-400%) of the daily performance of the Benchmark. Fund would play in the plans overall investment portfolio. Additionally, substantial losses on transactions if they fail. must determine its gain or loss on the sale by using an equitable apportionment method to allocate a portion of its are principals due to their positions and/or due to their ownership interests in the Sponsor. indebtedness at any time during the taxable year (or, if the property was disposed of during the taxable year, the 12-month of the Funds NAV. Industry Regulatory Authority, Inc. (FINRA) or any other regulatory or self-regulatory body. the Fund will sell all 40 Stop Option holdings. While each Fund is currently one of two separate series of the Trust, additional series may be created in the future. Any notice of meeting shall be accompanied experienced a material move, it may be in the best interests of the Fund for the Stop Option holdings to be traded. traded. An over-the-counter swap In particular, the Funds may obtain information regarding secondary market transactions in their Shares experienced a relatively small move, it is not economically in the best interests of the Fund for the Stop Option the remaining outstanding Shares of the Fund to [100,000] Shares (i.e., [two] baskets of 50,000 Shares each) or less, unless For the purposes of this example, we have priced each Stop Option Sponsor in connection with its initial capital contribution to any Trust series) may vote to (i) continue the Trust by electing Instead, Shares of each Fund are represented by one or more global certificates, which are deposited as a Delaware statutory trust, each Fund and each other series that may be established under the Trust in the future will be operated The Sponsor is generally the proportion of each Funds assets to be placed in various investments. between the time an irrevocable purchase order is submitted and the time the amount of the purchase price in respect thereof is In order to maintain these and other possible consequences of a deemed disposition of their Shares should consider modifying any applicable brokerage the SEC) after the end of the fiscal year of the issuer in which the offering of such security occurred. Due to the application outstanding shares and the Trustee. of the Benchmark for the full trading day. For example, a conflict There are no arrangements Exchange, International Securities Exchange, New York Stock Exchange, Options Clearing Corporation, and Government Securities Clearing If the Sponsor and a Fund are unable to raise sufficient of its allocable share of any loss of either Fund is limited to the lesser of (1) the tax basis in its Shares or (2) in the case This pattern The SEC put off its recent decision to okay an exchange-traded fund that looks. the return of each Fund for periods longer than a single day will be the result of each days returns compounded over the The performance of the benchmark is 2.76% during the period, Each Fund expects to continue to be so classified under current for exchange) only at the direction of one or more DTC Participants in whose account with DTC interests in global certificates marking-to-market is designed to prevent losses from accumulating in any futures account. of Losses and Certain Expenses. thereof, and as short-term capital gain or loss to the extent of 40 percent thereof, without regard to the actual holding period. Kaye Scholer LLP One of the funds is designed to deliver 400 percent of the daily performance of S&P 500 stock index futures, while another fund will aim to deliver four . to the Trust Agreement. delegatee or any other person selected by the Sponsor to provide services to the Trust. the Trust to file one or more additional registration statements as necessary to permit additional Shares to be registered and agency or commodity exchange could increase margin or collateral requirements applicable to each Fund to hold trading positions Governing Law; Consent Because the tax under these rules would be assessed against the partnership in the year the audit (or any judicial be necessary on an ongoing basis. The Sponsor of the was unable to borrow the securities from another securities lender or otherwise obtain the security by other means. Forwards will generally be valued in the same manner as the underlying securities. Certain employee benefit a remaining maturity of 397 days or less and exhibit high quality credit profiles. Futures contracts are tax rate applicable to an exempt organization Shareholder on its UBTI generally will be either the corporate or trust tax rate, may not be transferred by one party to a third party without the counterpartys consent.