Correspondence 0001437749-23-026505 from Innovator ETFs Trust (CIK 0001415726)
Innovator ETFs Trust (CIK 0001415726)
Date: Sept. 21, 2023 · CIK: 0001415726 · Accession: 0001437749-23-026505
AI Filing Summary & Sentiment
File numbers found in text: 333-146827, 811-22135
Letter
VIA EDGAR CORRESPONDENCE United States Securities and Exchange Commission 100 F Street, N.E. Washington, D.C. 20549 Re: Innovator ETFs Trust File Nos. 333-146827; 811-22135
Dear Ms. Browning
This letter responds to your comments, provided by telephone, regarding the registration statements filed on Form N‑1A for Innovator ETFs Trust (the “Trust”) with the Securities and Exchange Commission (the “Commission”) on July 14, 2023 (each, a “Registration Statement” and collectively, the “Registration Statements”). The Registration Statements relate to the Innovator Premium Income 15 Barrier ETF – Quarterly, Innovator Premium Income 9 Buffer ETF – October, Innovator Premium Income 15 Buffer ETF – October, Innovator U.S. Equity 5 to 15 Buffer ETF – Quarterly and Innovator U.S. Equity 10 Buffer ETF – Quarterly (each, a “Fund” and collectively, the “Funds”), each a series of the Trust. Capitalized terms used herein, but not otherwise defined, have the meanings ascribed to them in the Registration Statements.
Comment 1 – General
As previously discussed with the Staff in a telephone conversation on August 16, 2023, the Trust amended the precedent Fund for each Fund’s selective review request (each, a “Precedent Fund”). Please supplementally provide the accession number, date of filing, date of effectiveness for each Fund and its Precedent Fund.
Response to Comment 1
The Trust confirms that the Precedent Fund identified in the Trust’s amended selective review request, as filed with the Staff on August 16, 2023, is materially identical to each respective Fund, except for each Fund’s Outcome Period and applicable Cap, Defined Distribution Rate, Buffer or Barrier. The Trust considers each Registration Statement to be substantially similar to each respective Precedent Fund with regard to the description of the Fund, the investment objective, strategy and policies, the risks associated with investment in the Fund and the management of the Fund. Please see below for a summary of the filing information for each Fund and its applicable Precedent Fund.
Fund Information
Precedent Fund Information
Innovator Premium Income 15 Barrier ETF – Quarterly
Filing date: July 14, 2023
Post-Effective Amendment No. under 1933 Act: 985
Accession No.: 0001437749-23-019954
Innovator Premium Income 10 Barrier ETF – July
Filing date: July 3, 2023
Post-Effective Amendment No. under 1933 Act: 981
Accession No.: 0001437749-23-019070
Innovator Premium Income 9 Buffer ETF – October
Filing date: July 14, 2023
Post-Effective Amendment No. under 1933 Act: 986
Accession No.: 0001437749-23-019955
Innovator Premium Income 10 Barrier ETF – July
Filing date: July 3, 2023
Post-Effective Amendment No. under 1933 Act: 981
Accession No.: 0001437749-23-019070
Innovator Premium Income 15 Buffer ETF – October
Filing date: July 14, 2023
Post-Effective Amendment No. under 1933 Act: 987
Accession No.: 0001437749-23-019956
Innovator Premium Income 10 Barrier ETF – July
Filing date: July 3, 2023
Post-Effective Amendment No. under 1933 Act: 981
Accession No.: 0001437749-23-019070
Innovator U.S. Equity 5 to 15 Buffer ETF – Quarterly
Filing date: July 14, 2023
Post-Effective Amendment No. under 1933 Act: 988
Accession No.: 0001437749-23-019957
Innovator U.S. Equity Buffer ETF – August
Filing date: March 1, 2023
Post-Effective Amendment No. under 1933 Act: 920
Accession No.: 0001437749-23-004980
Innovator U.S. Equity 10 Buffer ETF – Quarterly
Filing date: July 14, 2023
Post-Effective Amendment No. under 1933 Act: 989
Accession No.: 0001437749-23-019958
Innovator U.S. Equity Buffer ETF – August
Filing date: March 1, 2023
Post-Effective Amendment No. under 1933 Act: 920
Accession No.: 0001437749-23-004980
For the Innovator Premium Income 15 Barrier ETF – Quarterly, the disclosure in each Registration Statement has been revised only as necessary to set forth the change in the start of the outcome period from July to October (and to change the annual reset to a quarterly reset) and to update the applicable defined distribution rate and barrier level.
For the Innovator Premium Income 9 Buffer ETF – October and Innovator Premium Income 15 Buffer ETF – October, the disclosure in each Registration Statement has been revised only as necessary to set forth the change in the start of the outcome period from July to October, to modify the protection from a barrier to a buffer, and update the applicable defined distribution rate.
For the Innovator U.S. Equity 5 to 15 Buffer ETF – Quarterly and Innovator U.S. Equity 10 Buffer ETF – Quarterly, the disclosure in each Registration Statement has been revised only as necessary to set forth the change in the outcome period from an annual reset to a quarterly reset and to update the applicable cap and buffer.
- 2 -
Comment 2 – Fee Table
Please supplementally explain to the Staff why the management fee is blank. The Staff notes the Funds have the same unitary fee structure as existing versions of the Funds. The existing versions of the Funds currently disclose a unitary management fee of 0.79%. Please confirm the unitary management fee will be disclosed and that if the Funds should adopt a Rule 12b-1 Plan, the Registration Statements will be revised accordingly.
Response to Comment 2
The Trust confirms that each Fund will have a unitary management fee of 0.79%. The fee table for each Fund will be completed in each Fund’s next post-effective amendment filing to its Registration Statement and has been replicated in Exhibit A this comment response letter. The Trust confirms the Funds currently have no plan to adopt a Rule 12b-1 Plan.
Comment 3 – Principal Investment Strategies
The Staff notes the disclosure states, “If at the conclusion of the Outcome Period the market value of the U.S. Equity Index has decreased in comparison to the market value of the U.S. Equity Index at the beginning of the Outcome Period in an amount that is greater than the Barrier but less than or equal to 16%, the Fund will be subject to U.S. Equity Index losses ranging from 0% to 16% proportionate to U.S. Equity Index losses from 15% to 16% (the “Initial Breach Losses”).” Please consider revising the term “proportionate,” as the Staff believes it is misleading. Please provide a more accurate way to explain actual losses in plain English so a reasonable investor may understand.
Response to Comment 3
In accordance with the Staff’s comment, the “Initial Breach Losses” concept has been revised throughout the prospectus. In particular, the above-referenced disclosure has been revised as follows:
●
If at the conclusion of the Outcome Period the market value of the U.S. Equity Index has decreased in comparison to the market value of the U.S. Equity Index at the beginning of the Outcome Period in an amount that is greater than the Barrier (15%) but less than or equal to 16%, the Fund will be subject to U.S. Equity Index losses on an initial accelerated basis from 0% to 16%, which will correspond to the U.S. Equity Index losses from 15% to 16% (the “Initial Breach Losses”).
●
If at the conclusion of the Outcome Period the market value of the U.S. Equity Index decreases in comparison to the market value of the U.S. Equity Index at the beginning of the Outcome Period in an amount that is greater than 16%, the Fund will be subject to the full extent of U.S. Equity Index losses on a one-to-one basis (the “Full Breach Losses”). See “Principal Investment Strategies — The Barrier — Full Breach Losses.”
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Comment 4 – Principal Investment Strategies
In the “Fund Holdings” chart, with respect to the “Put Spread FLEX Option Contracts on U.S. Equity Index” row and “Investment Function” column, please provide the range of notional for these spreads versus the investor’s investment to indicate the degree of gearing for these put spreads over market movements from 85% to 84%. This should be in contrast to the “one-to-one downside exposure” language for the sold put options.
Response to Comment 4
The Trust believes adding disclosure related to “gearing” will add a level of unnecessary complication to the “Fund Holdings” chart when it is meant to be a summary for investor comprehension. The Trust notes that the bullet points below the “Fund Holdings” chart accurately describes the details of the put spread FLEX Option contracts on the U.S. Equity Index. Nevertheless, the Trust has revised the disclosure to clarify that the Initial Breach Losses are those losses ranging from 0% to 16% on an initial accelerated basis which will correspond to the U.S. Equity Index losses from 15% to 16%. The disclosure immediately following the “Fund Holdings” chart has been revised as follows:
The Sub-Adviser seeks to specifically select the strike price for each FLEX Option contract held by the Fund such that if the FLEX Options were exercised on the expiration date (the final day of the Outcome Period), the Fund’s portfolio would provide a 15% Barrier with losses experienced by the Fund beginning at 15% of losses on an initial accelerated basis and experienced to the full extent of the U.S. Equity Index losses on a one-to-one basis starting at 16% of losses. The Fund’s portfolio holdings are as detailed below:
●
A sold put FLEX Option with a strike price at 85% of the value of the U.S. Equity Index at the commencement of the Outcome Period. The sold put FLEX Option provides one-to-one downside for all losses that exceed the strike price. In exchange for selling the put FLEX Option, the Fund will receive a premium that will be invested in the U.S. Treasuries and be part of the Defined Distribution Rate.
●
A “put option spread” strategy which uses a package of 15 purchased and sold put FLEX Options that reference the U.S. Equity Index. The Fund will sell put FLEX Options with a strike price of approximately 85% of the price of the U.S. Equity Index at the commencement of each Outcome Period. The Fund will simultaneously purchase the same number of put FLEX Options with a strike price of approximately 84% of the price of the U.S. Equity Index at the commencement of each Outcome Period. The 15 purchased put options with a 1% spread results in the Barrier, Initial Breach Losses and Full Breach Losses, as applicable. Specifically, the 1% spread for each of the 15 put options subjects the Fund to U.S. Equity Index losses at the conclusion of the Outcome Period on an initial accelerated basis from 0% to 16% which will correspond to the U.S. Equity Index losses from 15% to 16% at the conclusion of the Outcome Period. The 15 sold put options expose the Fund to the extent of U.S. Equity Index Losses exceed 16% on a one-to-one basis at the conclusion of the Outcome Period. The Fund invests the net premiums generated from the purchased and sold put FLEX Options in U.S. Treasuries to be included as part of the Defined Distribution Rate.
- 4 -
●
The Fund uses proceeds from the sale of Shares to purchase U.S. Treasuries that mature at the end of the Outcome Period. The Fund receives premiums from its FLEX Options positions and invests the proceeds in U.S. Treasuries with maturities that align with the Distribution Dates. The U.S. Treasuries are entitled to an interest rate, which when added to the premiums received for selling FLEX Options, produce the Defined Distribution Rate. The Defined Distribution Rate is distributed to shareholders in Defined Distributions.
Comment 5 – Principal Risks
The Staff notes the “Barrier Risk” states, “Further, while the Fund seeks to provide Initial Breach Losses at a graduated rate if the U.S. Equity Index experiences losses of between 15-16% and Full Breach Losses thereafter, such returns are not guaranteed, and if the FLEX Options fail to perform as expected, an investor could experience additional losses.” Please better clarify what “graduated” means in plain English.
Response to Comment 5
In accordance with the Staff’s comment, the disclosure has been revised as follows:
Further, while the Fund subjects shareholders to Initial Breach Losses on an accelerated basis from 0% to 16% if the U.S. Equity Index experiences losses of between 15 to 16% and Full Breach Losses thereafter, such returns are not guaranteed, and if the FLEX Options fail to perform as expected, an investor could experience additional losses.
Comment 6 – Principal Risks
The Staff notes each Fund discusses Rule 18f-4 in a generalized manner in the Option Contracts Risk. Please revise the disclosure throughout the prospectus and statement of additional information to indicate what each Fund has done to comply with Rule 18f-4.
- 5 -
Response to Comment 6
The Trust refers the Staff to the “Option Contracts Risk” disclosure, which describes the requirements for complying with Rule 18f-4. In accordance with the Staff’s comment, the Trust has revised the Option Contracts Risk as follows:
Option Contracts Risk. The use of option contracts involves investment strategies and risks different from those associated with ordinary portfolio securities transactions. The prices of option contracts are volatile and are influenced by, among other things, actual and anticipated changes in the value of the underlying instrument, changes in interest or currency exchange rates, including the anticipated volatility, which are affected by fiscal and monetary policies and by national and international political, changes in the actual or implied volatility or the reference asset, the time remaining until the expiration of the option contract and economic events. There may at times be an imperfect correlation between the movement in values option contracts and the reference asset, and there may at times not be a liquid secondary market for certain option contracts. The Fund has taken the necessary steps to comply with the requirements of Rule 18f-4 under the 1940 Act (“Rule 18f-4”) in its usage of FLEX Options. The Fund has adopted and implements a derivatives risk management program that contains policies and procedures reasonably designed to manage the Fund’s derivatives risks, has appointed a derivatives risk manager who is responsible for administrating the derivatives risk management program, complies with outer limitations on risks relating to its derivatives transactions and carries out enhanced reporting to the Board, the SEC and the public regarding its derivatives activities. To the extent the Fund is noncompliant with Rule 18f-4, the Fund may be required to adjust its investment portfolio which may, in turn, negatively impact the Fund’s ability to deliver the sought-after Outcomes.
Additionally, the Trust believes the disclosure in each Fund’s statement of additional information adequately describes the requirements to comply with Rule 18f-4 and each Fund states it will comply with the requirements of Rule 18f-4.
- 6 -
Comment 7 – Principal Risks
For the Funds with a quarterly Outcome Period, please add a concept that annualized losses could exceed losses from the respective U.S. Equity Index if net assets are reinvested on a quarterly basis.
Response to Comment 7
In accordance with the Staff’s comment, the “Outcome Period Risk” has been revised as follows:
Outcome Period Risk. The Fund’s investment strategy is designed to deliver the Outcomes if Shares are held for the entirety of the Outcome Period. In the event an investor purchases Shares after the FLEX Options were entered into or sells Shares prior to the expiration of the FLEX Options, the returns realized by the investor will not match those that the Fund seeks to provide. In addition, because the Fund is designed to achieve Outcomes that change for each three-month Outcome Period,
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CORRESP 1 filename1.htm inetfs20230921_corresp.htm [Chapman and Cutler LLP Letterhead] September 21, 2023 VIA EDGAR CORRESPONDENCE Kimberly Browning United States Securities and Exchange Commission 100 F Street, N.E. Washington, D.C. 20549 Re: Innovator ETFs Trust File Nos. 333-146827; 811-22135 Dear Ms. Browning This letter responds to your comments, provided by telephone, regarding the registration statements filed on Form N‑1A for Innovator ETFs Trust (the “Trust”) with the Securities and Exchange Commission (the “Commission”) on July 14, 2023 (each, a “Registration Statement” and collectively, the “Registration Statements”). The Registration Statements relate to the Innovator Premium Income 15 Barrier ETF – Quarterly, Innovator Premium Income 9 Buffer ETF – October, Innovator Premium Income 15 Buffer ETF – October, Innovator U.S. Equity 5 to 15 Buffer ETF – Quarterly and Innovator U.S. Equity 10 Buffer ETF – Quarterly (each, a “Fund” and collectively, the “Funds”), each a series of the Trust. Capitalized terms used herein, but not otherwise defined, have the meanings ascribed to them in the Registration Statements. Comment 1 – General As previously discussed with the Staff in a telephone conversation on August 16, 2023, the Trust amended the precedent Fund for each Fund’s selective review request (each, a “Precedent Fund”). Please supplementally provide the accession number, date of filing, date of effectiveness for each Fund and its Precedent Fund. Response to Comment 1 The Trust confirms that the Precedent Fund identified in the Trust’s amended selective review request, as filed with the Staff on August 16, 2023, is materially identical to each respective Fund, except for each Fund’s Outcome Period and applicable Cap, Defined Distribution Rate, Buffer or Barrier. The Trust considers each Registration Statement to be substantially similar to each respective Precedent Fund with regard to the description of the Fund, the investment objective, strategy and policies, the risks associated with investment in the Fund and the management of the Fund. Please see below for a summary of the filing information for each Fund and its applicable Precedent Fund. Fund Information Precedent Fund Information Innovator Premium Income 15 Barrier ETF – Quarterly Filing date: July 14, 2023 Post-Effective Amendment No. under 1933 Act: 985 Accession No.: 0001437749-23-019954 Innovator Premium Income 10 Barrier ETF – July Filing date: July 3, 2023 Post-Effective Amendment No. under 1933 Act: 981 Accession No.: 0001437749-23-019070 Innovator Premium Income 9 Buffer ETF – October Filing date: July 14, 2023 Post-Effective Amendment No. under 1933 Act: 986 Accession No.: 0001437749-23-019955 Innovator Premium Income 10 Barrier ETF – July Filing date: July 3, 2023 Post-Effective Amendment No. under 1933 Act: 981 Accession No.: 0001437749-23-019070 Innovator Premium Income 15 Buffer ETF – October Filing date: July 14, 2023 Post-Effective Amendment No. under 1933 Act: 987 Accession No.: 0001437749-23-019956 Innovator Premium Income 10 Barrier ETF – July Filing date: July 3, 2023 Post-Effective Amendment No. under 1933 Act: 981 Accession No.: 0001437749-23-019070 Innovator U.S. Equity 5 to 15 Buffer ETF – Quarterly Filing date: July 14, 2023 Post-Effective Amendment No. under 1933 Act: 988 Accession No.: 0001437749-23-019957 Innovator U.S. Equity Buffer ETF – August Filing date: March 1, 2023 Post-Effective Amendment No. under 1933 Act: 920 Accession No.: 0001437749-23-004980 Innovator U.S. Equity 10 Buffer ETF – Quarterly Filing date: July 14, 2023 Post-Effective Amendment No. under 1933 Act: 989 Accession No.: 0001437749-23-019958 Innovator U.S. Equity Buffer ETF – August Filing date: March 1, 2023 Post-Effective Amendment No. under 1933 Act: 920 Accession No.: 0001437749-23-004980 For the Innovator Premium Income 15 Barrier ETF – Quarterly, the disclosure in each Registration Statement has been revised only as necessary to set forth the change in the start of the outcome period from July to October (and to change the annual reset to a quarterly reset) and to update the applicable defined distribution rate and barrier level. For the Innovator Premium Income 9 Buffer ETF – October and Innovator Premium Income 15 Buffer ETF – October, the disclosure in each Registration Statement has been revised only as necessary to set forth the change in the start of the outcome period from July to October, to modify the protection from a barrier to a buffer, and update the applicable defined distribution rate. For the Innovator U.S. Equity 5 to 15 Buffer ETF – Quarterly and Innovator U.S. Equity 10 Buffer ETF – Quarterly, the disclosure in each Registration Statement has been revised only as necessary to set forth the change in the outcome period from an annual reset to a quarterly reset and to update the applicable cap and buffer. - 2 - Comment 2 – Fee Table Please supplementally explain to the Staff why the management fee is blank. The Staff notes the Funds have the same unitary fee structure as existing versions of the Funds. The existing versions of the Funds currently disclose a unitary management fee of 0.79%. Please confirm the unitary management fee will be disclosed and that if the Funds should adopt a Rule 12b-1 Plan, the Registration Statements will be revised accordingly. Response to Comment 2 The Trust confirms that each Fund will have a unitary management fee of 0.79%. The fee table for each Fund will be completed in each Fund’s next post-effective amendment filing to its Registration Statement and has been replicated in Exhibit A this comment response letter. The Trust confirms the Funds currently have no plan to adopt a Rule 12b-1 Plan. Comment 3 – Principal Investment Strategies The Staff notes the disclosure states, “If at the conclusion of the Outcome Period the market value of the U.S. Equity Index has decreased in comparison to the market value of the U.S. Equity Index at the beginning of the Outcome Period in an amount that is greater than the Barrier but less than or equal to 16%, the Fund will be subject to U.S. Equity Index losses ranging from 0% to 16% proportionate to U.S. Equity Index losses from 15% to 16% (the “Initial Breach Losses”).” Please consider revising the term “proportionate,” as the Staff believes it is misleading. Please provide a more accurate way to explain actual losses in plain English so a reasonable investor may understand. Response to Comment 3 In accordance with the Staff’s comment, the “Initial Breach Losses” concept has been revised throughout the prospectus. In particular, the above-referenced disclosure has been revised as follows: ● If at the conclusion of the Outcome Period the market value of the U.S. Equity Index has decreased in comparison to the market value of the U.S. Equity Index at the beginning of the Outcome Period in an amount that is greater than the Barrier (15%) but less than or equal to 16%, the Fund will be subject to U.S. Equity Index losses on an initial accelerated basis from 0% to 16%, which will correspond to the U.S. Equity Index losses from 15% to 16% (the “Initial Breach Losses”). ● If at the conclusion of the Outcome Period the market value of the U.S. Equity Index decreases in comparison to the market value of the U.S. Equity Index at the beginning of the Outcome Period in an amount that is greater than 16%, the Fund will be subject to the full extent of U.S. Equity Index losses on a one-to-one basis (the “Full Breach Losses”). See “Principal Investment Strategies — The Barrier — Full Breach Losses.” - 3 - Comment 4 – Principal Investment Strategies In the “Fund Holdings” chart, with respect to the “Put Spread FLEX Option Contracts on U.S. Equity Index” row and “Investment Function” column, please provide the range of notional for these spreads versus the investor’s investment to indicate the degree of gearing for these put spreads over market movements from 85% to 84%. This should be in contrast to the “one-to-one downside exposure” language for the sold put options. Response to Comment 4 The Trust believes adding disclosure related to “gearing” will add a level of unnecessary complication to the “Fund Holdings” chart when it is meant to be a summary for investor comprehension. The Trust notes that the bullet points below the “Fund Holdings” chart accurately describes the details of the put spread FLEX Option contracts on the U.S. Equity Index. Nevertheless, the Trust has revised the disclosure to clarify that the Initial Breach Losses are those losses ranging from 0% to 16% on an initial accelerated basis which will correspond to the U.S. Equity Index losses from 15% to 16%. The disclosure immediately following the “Fund Holdings” chart has been revised as follows: The Sub-Adviser seeks to specifically select the strike price for each FLEX Option contract held by the Fund such that if the FLEX Options were exercised on the expiration date (the final day of the Outcome Period), the Fund’s portfolio would provide a 15% Barrier with losses experienced by the Fund beginning at 15% of losses on an initial accelerated basis and experienced to the full extent of the U.S. Equity Index losses on a one-to-one basis starting at 16% of losses. The Fund’s portfolio holdings are as detailed below: ● A sold put FLEX Option with a strike price at 85% of the value of the U.S. Equity Index at the commencement of the Outcome Period. The sold put FLEX Option provides one-to-one downside for all losses that exceed the strike price. In exchange for selling the put FLEX Option, the Fund will receive a premium that will be invested in the U.S. Treasuries and be part of the Defined Distribution Rate. ● A “put option spread” strategy which uses a package of 15 purchased and sold put FLEX Options that reference the U.S. Equity Index. The Fund will sell put FLEX Options with a strike price of approximately 85% of the price of the U.S. Equity Index at the commencement of each Outcome Period. The Fund will simultaneously purchase the same number of put FLEX Options with a strike price of approximately 84% of the price of the U.S. Equity Index at the commencement of each Outcome Period. The 15 purchased put options with a 1% spread results in the Barrier, Initial Breach Losses and Full Breach Losses, as applicable. Specifically, the 1% spread for each of the 15 put options subjects the Fund to U.S. Equity Index losses at the conclusion of the Outcome Period on an initial accelerated basis from 0% to 16% which will correspond to the U.S. Equity Index losses from 15% to 16% at the conclusion of the Outcome Period. The 15 sold put options expose the Fund to the extent of U.S. Equity Index Losses exceed 16% on a one-to-one basis at the conclusion of the Outcome Period. The Fund invests the net premiums generated from the purchased and sold put FLEX Options in U.S. Treasuries to be included as part of the Defined Distribution Rate. - 4 - ● The Fund uses proceeds from the sale of Shares to purchase U.S. Treasuries that mature at the end of the Outcome Period. The Fund receives premiums from its FLEX Options positions and invests the proceeds in U.S. Treasuries with maturities that align with the Distribution Dates. The U.S. Treasuries are entitled to an interest rate, which when added to the premiums received for selling FLEX Options, produce the Defined Distribution Rate. The Defined Distribution Rate is distributed to shareholders in Defined Distributions. Comment 5 – Principal Risks The Staff notes the “Barrier Risk” states, “Further, while the Fund seeks to provide Initial Breach Losses at a graduated rate if the U.S. Equity Index experiences losses of between 15-16% and Full Breach Losses thereafter, such returns are not guaranteed, and if the FLEX Options fail to perform as expected, an investor could experience additional losses.” Please better clarify what “graduated” means in plain English. Response to Comment 5 In accordance with the Staff’s comment, the disclosure has been revised as follows: Further, while the Fund subjects shareholders to Initial Breach Losses on an accelerated basis from 0% to 16% if the U.S. Equity Index experiences losses of between 15 to 16% and Full Breach Losses thereafter, such returns are not guaranteed, and if the FLEX Options fail to perform as expected, an investor could experience additional losses. Comment 6 – Principal Risks The Staff notes each Fund discusses Rule 18f-4 in a generalized manner in the Option Contracts Risk. Please revise the disclosure throughout the prospectus and statement of additional information to indicate what each Fund has done to comply with Rule 18f-4. - 5 - Response to Comment 6 The Trust refers the Staff to the “Option Contracts Risk” disclosure, which describes the requirements for complying with Rule 18f-4. In accordance with the Staff’s comment, the Trust has revised the Option Contracts Risk as follows: Option Contracts Risk. The use of option contracts involves investment strategies and risks different from those associated with ordinary portfolio securities transactions. The prices of option contracts are volatile and are influenced by, among other things, actual and anticipated changes in the value of the underlying instrument, changes in interest or currency exchange rates, including the anticipated volatility, which are affected by fiscal and monetary policies and by national and international political, changes in the actual or implied volatility or the reference asset, the time remaining until the expiration of the option contract and economic events. There may at times be an imperfect correlation between the movement in values option contracts and the reference asset, and there may at times not be a liquid secondary market for certain option contracts. The Fund has taken the necessary steps to comply with the requirements of Rule 18f-4 under the 1940 Act (“Rule 18f-4”) in its usage of FLEX Options. The Fund has adopted and implements a derivatives risk management program that contains policies and procedures reasonably designed to manage the Fund’s derivatives risks, has appointed a derivatives risk manager who is responsible for administrating the derivatives risk management program, complies with outer limitations on risks relating to its derivatives transactions and carries out enhanced reporting to the Board, the SEC and the public regarding its derivatives activities. To the extent the Fund is noncompliant with Rule 18f-4, the Fund may be required to adjust its investment portfolio which may, in turn, negatively impact the Fund’s ability to deliver the sought-after Outcomes. Additionally, the Trust believes the disclosure in each Fund’s statement of additional information adequately describes the requirements to comply with Rule 18f-4 and each Fund states it will comply with the requirements of Rule 18f-4. - 6 - Comment 7 – Principal Risks For the Funds with a quarterly Outcome Period, please add a concept that annualized losses could exceed losses from the respective U.S. Equity Index if net assets are reinvested on a quarterly basis. Response to Comment 7 In accordance with the Staff’s comment, the “Outcome Period Risk” has been revised as follows: Outcome Period Risk. The Fund’s investment strategy is designed to deliver the Outcomes if Shares are held for the entirety of the Outcome Period. In the event an investor purchases Shares after the FLEX Options were entered into or sells Shares prior to the expiration of the FLEX Options, the returns realized by the investor will not match those that the Fund seeks to provide. In addition, because the Fund is designed to achieve Outcomes that change for each three-month Outcome Period,