NASDAQ-100 Index and call options systematically written on those securities through a “buy-write” or covered call strategy. A “buy-write” strategy is an investment strategy in which the Fund buys a specific basket of stocks (such as the NASDAQ-100® Index) and sells covered call options that correspond to that basket of stocks.
The Fund will invest at least 80% of its total assets in common stocks of the companies included in NASDAQ-100® Index, (“80% Policy”). The Fund employs a replication strategy to track the Index, which means it invests in common stocks included in the NASDAQ-100® Index generally in proportion to their weightings in the NASDAQ-100® Index, and call options written (sold) on the NASDAQ-100® Index. Each calendar month the Fund will write (sell) a succession of one-month call options on the NASDAQ-100 Index and will cover such options by holding the securities underlying the options written. Each option written will (i) have an exercise price generally at or above the prevailing market price of the NASDAQ-100 Index; (ii) be traded on a national securities exchange; (iii) be held to its date of maturity (unless the Fund “cancels out” the option through the purchase of an offsetting identical option); (iv) expire on its date of maturity (in the next calendar month); (v) only be subject to exercise on its expiration date; and (vi) be settled in cash.
In return for the payment of a premium to the Fund, a purchaser of the call options written by the Fund is entitled to receive a cash payment from the Fund equal to the difference between the value of the NASDAQ-100® Index and the exercise price of the option if the value of the option on the expiration date is above its exercise price. In addition, the Fund’s covered call options are expected to partially protect the Fund from a decline in the price of the NASDAQ-100® Index through means of the premiums received by the Fund. The Fund expects over time to have a tracking error relative to the performance of the Index of no more than 90% before fees and expenses. Tracking error of 0% would represent perfect correlation.
As of October 31, 2013, the Index included 100 securities of companies with a market capitalization range of between approximately $4.8 billion and $470.3 billion and an average market capitalization of $41.2 billion. These amounts are subject to change.
The Fund’s 80% Policy and the index upon which the Fund seeks to track its performance may be changed without shareholder approval upon 60 days prior written notice to shareholders.
The Fund may concentrate its investments in a particular industry or group of industries to the extent that the Index concentrates in an industry or group of industries. The Fund is classified as a “non-diversified” investment company under the Investment Company Act of 1940, as amended (“1940 Act”). Therefore, the Fund may invest a relatively high percentage of its assets in a smaller number of issuers or may invest a larger proportion of its assets in a single issuer.
You can see the full prospectus: HERE