The Fund, using an “indexing” investment approach, seeks to replicate as closely as possible, before fees and expenses, the total return of the Wells Fargo Hybrid and Preferred Securities Aggregate Index (“Index”). For more information regarding the Index, please refer to the “Additional Index Information” section of this Prospectus. SSgA Funds Management, Inc. (the “Adviser”) serves as investment adviser to the Fund.
The shares of the Fund (the “Shares”) are listed on a national securities exchange (the “Exchange”). The Shares trade on the Exchange at market prices that may differ to some degree from the Shares’ net asset values. The Fund issues and redeems its Shares on a continuous basis, at net asset value, only in a large specified number of Shares called a “Creation Unit,” principally in-kind for securities included in the Index; provided, however, the Trust reserves the right to permit or require the substitutions of cash for in-kind securities. EXCEPT WHEN AGGREGATED IN CREATION UNITS, THE SHARES ARE NOT REDEEMABLE SECURITIES OF THE FUND.
PRINCIPAL STRATEGIES OF THE FUND
The Adviser seeks to track the performance of the Fund’s Index as closely as possible (i.e., obtain a high level correlation with the Index). A number of factors may affect the Fund’s ability to achieve a high correlation with its Index, including the degree to which the Fund utilizes a sampling methodology (as described below). There can be no guarantee that the Fund will achieve a high degree of correlation.
The Fund generally will invest in all of the securities comprising its Index in proportion to the weightings in its Index. The Adviser, under various circumstances where it may not be possible or practicable to purchase all of the securities in the benchmark Index for the Fund, will utilize a sampling methodology. Sampling means that the Adviser uses quantitative analysis to select securities that represent a sample of securities in the Index that have a similar investment profile as the Index in terms of key risk factors, performance attributes and other characteristics. These include industry weightings, market capitalization, and other financial characteristics of securities. The quantity of holdings in the Fund will be based on a number of
factors, including asset size of the Fund.
In addition, from time to time, securities are added to or removed from the Index. The Adviser may sell securities that are represented in the Index, or purchase securities that are not yet represented in the Index, in anticipation of their removal from or addition to the Index. Further, the Adviser may choose to overweight securities in the Index, purchase or sell securities not in the Index, or utilize various combinations of other available investment techniques, in seeking to track the Index.
The Adviser will normally invest at least 80% of the Fund’s total assets in securities that comprise its benchmark Index. The Fund will provide shareholders with at least 60 days notice prior to any change in this policy or changing its benchmark Index. For purposes of this policy, the term “assets” means net assets plus the amount of borrowings for investment purposes. This percentage limitation applies at the time of investment.
The Fund may also invest its other assets in securities not included in its Index, but which the Adviser believes will help the Fund track its Index, as well as in certain futures, options, swap contracts and other derivatives, cash and cash equivalents or money market instruments, such as repurchase agreements and money market funds (including affiliated money market funds). The Fund will generally concentrate its investments (i.e., hold 25% or more of its total assets) in a particular industry or sector to approximately the same extent that its benchmark Index is so concentrated. For purposes of this limitation, securities of the U.S. government (including its agencies and instrumentalities), repurchase agreements collateralized by U.S. government securities and securities of U.S. states or U.S. municipal governments and their political subdivisions are not considered to be issued by members of any industry. The Fund is non-diversified and, as a result, may invest a larger percentage of its assets in securities of a single issuer than that of a diversified fund.
The Fund has adopted a non-fundamental investment policy, as described in the Statement of Additional Information (“SAI”), to invest at least 80% of its assets in investments suggested by its name, measured at the time of investment. For purposes of this policy, the term “assets” means net assets plus the amount of borrowings for investment purposes. The Fund will provide shareholders with at least 60 days notice prior to any material change in this policy. The Board of Trustees of the Trust (the “Board”) may change the Fund’s investment strategy, Index and other policies without shareholder approval, except as otherwise indicated. The investment objective of the Fund may also be changed without shareholder approval.
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