correspond to the price and yield of the S&P 500 Financial Select Sector Stock Covered Call Index. They did not specify a trading symbol or expense ratio in the initial filing.
Principal Investment Strategies
The Fund is an index fund that employs a “passive management” investment strategy in seeking to achieve its objective of providing investment results that generally correspond to the price performance and yield of the S&P 500 Financial Select Sector Stock Covered Call Index (the “Underlying Index”). The Underlying Index is comprised of all the securities in the S&P Financial Select Sector Index (the “Reference Index”) and short (written) call options on each of the option eligible securities in the Reference Index. The Fund generally invests at least 80% of its total assets in the equity securities of companies in the Reference Index. It also writes (sells) call options on the equity securities of the option eligible companies in the Reference Index to the same extent as such short call options are included in the Underlying Index. The Reference Index, the S&P Financial Select Sector Index, is a rules based, modified float market capitalization weighted index that is designed to track the movements of public companies that are components of the S&P 500 Index and are classified in the GICS® sector, Financials. A wide array of diversified financial service firms are featured in this sector with business lines ranging from investment management to commercial and investment banking.
The Underlying Index measures the performance of a hypothetical portfolio that employs a covered call strategy. It consists of long positions in companies in the Reference Index and out-of-the-money call options that are written (sold) systematically on each of the option eligible companies in the Reference Index. An “out-of-the-money” call option is one in which the exercise (or “strike”) price of the option is above the market price of the security. A covered call strategy is generally considered to be an investment strategy in which an investor buys a security, and sells a call option that corresponds to the security. In return for a premium, the Fund gives the purchaser of the option written by the Fund the right to receive a cash payment equal to the difference between the value of the security and the exercise (or “strike”) price, if the value is above the exercise price on or before the expiration date of the option. In addition, the covered call options hedge against a decline in the price of the securities on which they are written to the extent of the premium the Fund receives. A covered call strategy is generally used in a neutral-to-bullish market environment, where a slow and steady rise in market prices is anticipated. Because a covered call strategy generates income in the form of premiums on the written options, the Underlying Index is expected to provide higher returns with lower volatility than the Reference Index in most market environments, with the exception of when the equity market is rallying rapidly. There can be no assurance, however, that the Underlying Index will perform as expected. The options in the Underlying Index will be traded on national securities exchanges. As of March 30, 2012, the S&P Financial Select Sector Index included common stocks of 81 companies with a market capitalization range of between approximately $2 billion and $180 billion.
The Fund generally uses a replication methodology, meaning it will invest in all of the securities comprising the Underlying Index in proportion to the weightings in the Underlying Index. However, the Fund may from time-to-time utilize a sampling methodology under various circumstances where it may not be possible or practicable to purchase all of the equity securities and write (sell) all of the call options comprising the Underlying Index.
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