price and yield of the RAFI Investment Grade Bond Index.
Total Annual Fund Operating Expenses: 0.22%
Principal Investment Strategies
The Fund will invest at least 80% of its total assets in the component securities that comprise the Underlying Index. The Underlying Index represents the performance of a theoretical portfolio of investment grade corporate bonds that must be rated BBB/Baa or higher by both Moody’s Investors Service, Inc. (“Moody’s”) and Standard & Poor’s, a division of The McGraw-Hill Companies, Inc. (“S&P”). The Underlying Index is comprised of U.S. dollar-denominated bonds registered for sale in the United States whose issuers are public companies listed on a major U.S. stock exchange. The Underlying Index is comprised of bonds with weighted average maturities of 5.8 years and weighted average credit ratings of A3/A, as of June 30, 2011. Only securities with greater than one year to maturity qualify for inclusion in the Underlying Index. In determining each individual security’s relative weight within the Underlying Index, Research Affiliates, LLC (“Research Affiliates®“ or the “Index Provider”) utilizes four fundamental corporate accounting variables: book value of assets, gross sales, gross dividends and cash flow. A composite fundamental weight is calculated for each security by comparing its four fundamental variables against those of the other issuers in the Underlying Index universe.
The Fund does not purchase all of the securities in the Underlying Index. Instead, the Fund utilizes a “sampling” methodology in seeking to achieve its investment objective.
As of the date of this Prospectus, a significant percentage (i.e., approximately 35%) of the Underlying Index is comprised of companies in the manufacturing sector. The manufacturing sector includes companies that principally are engaged in the production of goods or products for commercial or consumer use. Sector allocation is not a factor in the construction of the Underlying Index and, accordingly, the Underlying Index’s allocations to any particular sector may increase or decrease over time.
For the complete prospectus click: HERE