Thomson Reuters/Jefferies CRB Wildcatters Energy & Equity Index (the “Underlying Index”). The Fund’s investment objective is not fundamental and may be changed by the Board of Trustees without shareholder approval.
Primary Investment Strategies
The Fund, using a low cost “passive” or “indexing” investment approach, seeks to replicate, before fees and expenses, the performance of the Underlying Index. The Fund will normally invest at least 80% of its total assets in the equity securities that comprise the Underlying Index and depositary receipts based on the securities in the Underlying Index. The Fund has adopted a policy that requires the Fund to provide shareholders with at least 60 days notice prior to any material change in this policy. The Board of Trustees of the Trust may change the Fund’s investment strategy and other policies without shareholder approval, except as otherwise indicated.
The Sub-Adviser seeks a correlation over time of 0.95 or better between the Fund’s performance, before fees and expenses, and the performance of the Underlying Index. A figure of 1.00 would represent perfect correlation.
The Fund generally will invest in all of the securities that comprise the Underlying Index in proportion to their weightings in the Underlying Index. However, under various circumstances, it may not be possible or practicable to purchase all of the securities in the Underlying Index in those weightings. In those circumstances, the Fund may purchase a sample of the securities in the Underlying Index in proportions expected by the Sub-Adviser to replicate generally the performance of the Underlying Index as a whole. There may also be instances in which the Sub-Adviser may choose to overweight another security in the Underlying Index, purchase (or sell) securities not in the Underlying Index which the Sub-Adviser believes are appropriate to substitute for one or more Underlying Index components or utilize various combinations of other available investment techniques, in seeking to replicate, before fees and expenses, the performance of the Underlying Index. In addition, from time to time securities are added to or removed from the Underlying Index. The Fund may sell securities that are represented in the Underlying Index or purchase securities that are not yet represented in the Underlying Index in anticipation of their removal from or addition to the Underlying Index.
Index Description and Methodology
The Underlying Index is a modified capitalization-weighted, float-adjusted, rules-based index designed to track the overall performance of a universe of listed U.S. and Canadian small- and mid-capitalization companies engaged in the exploration and production (i.e., extraction) of oil and natural gas.
Each Underlying Index component derives more than 75% of its annual revenues from the exploration and production of oil and natural gas and is selected from a universe of approximately 300 U.S. and Canadian companies based on the following criteria:
1. The security is listed on a regulated exchange that provides a “last closing price” (e.g., National Stock Market stocks must be “reported securities” under Rule 11Aa3-1 under the Securities Exchange Act of 1934, as amended).
2. Each company must have a minimum market capitalization of $200 million and a minimum free float (i.e., shares of a public company that are not held by corporate insiders that are freely tradable in the public market or markets on which a company’s securities are listed) of $150 million on the last business day of the month prior to the rebalancing month to be admitted to the Underlying Index. Companies representing at least 95% of the total weight of the Underlying Index must have an average daily turnover for the previous ninety days of more than $1 million. A company is deleted from the Underlying Index if its market capitalization falls below $150 million and/or its free float falls below $100 million and/or its average daily turnover for the previous ninety days falls below $800,000 on last business day of the second month of the calendar quarter.
3. Each company must have a market capitalization of less than $2 billion and minimum free float of less than $2 billion on the last business day of the month prior to the rebalancing month to be admitted to the Underlying Index. A company is deleted from the Underlying Index if its market capitalization exceeds $2.5 billion on the last business day of the second month of the calendar quarter.
Individual companies are weighted based on a capitalization weighting methodology, adjusted for free float. The weights of individual stocks are capped at 25% and the excess weight is redistributed proportionately to the remaining Underlying Index constituents. In addition, the aggregate weight of companies with weights greater than 5% is capped at 45%. Company weights may be further modified, if required, to ensure compliance with the diversification requirements of Subchapter M of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”), and to account for other considerations set forth in the official rule book.
As of December 9, 2009, the Underlying Index included 55 securities of companies with a market capitalization range of between approximately $200 million and $2.4 billion. As of that date, approximately 68% of the weight of the Underlying Index reflected companies domiciled in the United States. These values can change over time within the constraints of the existing rulebook for the Underlying Index, and the rulebook can be modified by the Index Committee for the Underlying Index.
The Underlying Index is rebalanced quarterly on the third Friday of the last month of each calendar quarter. Share weights of the constituents remain constant between quarters, except in the event of certain types of corporate actions, including but not limited to stock splits and reverse stock splits. Share weights of the Underlying Index are not adjusted between rebalancing dates for shares issued or shares repurchased.
The Underlying Index was developed by S-Network Global Indexes LLC (the “Index Provider”) and was launched on December 9, 2009. Reuters America LLC will serve as calculation agent. Underlying Index values are distributed throughout the day, between the hours of 9:30 a.m. and 4:15 p.m. Eastern time at 15 second intervals under the symbol “WCATX.”
The information contained herein regarding the Underlying Index was provided by the Index Provider.
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