The prices of forwards on a Large Cap Securities Index are influenced by the aggregate trading prices of the Large Cap Securities, exposure to interest rate changes, and expected dividend values, among other factors. The Fund may use combinations of forwards to gain exposure to the expected dividend value of Large Cap Securities reflected in those portfolio holdings’ prices.
Money Market Instruments
The Fund may also invest in money market mutual funds, short term fixed income securities, commercial paper and other money market instruments, including short-term bank obligations and cash sweep programs, to serve as collateral for its derivatives positions. Subject to the provisions of the Investment Company Act of 1940, as amended (the “1940 Act”), the Fund may invest up to 80% of its assets in swaps, futures and forwards, and any one type of such portfolio holdings or any combination of such portfolio holdings may represent a substantial portion of the Fund’s portfolio at any time.
Before making an investment in the Fund you should know:
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The Fund generally will have a positive rate of return if the actual future growth in dividends exceeds the expected growth in dividends as reflected in the market prices at which the Fund buys and sells the instruments that are used to implement the Fund’s investment strategy.
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The Fund generally will have a zero rate of return, excluding fees and transaction costs, if the actual future growth in dividends equals the expected growth in dividends as reflected in the market prices at which the Fund buys and sells the instruments that are used to implement the Fund’s investment strategy, even though actual dividends may have grown during the holding period of this investment.
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The Fund generally will have a negative rate of return if the actual future growth in dividends is below the expected growth in dividends as reflected in the market prices at which the Fund buys and sells the instruments that are used to implement the Fund’s investment strategy, even though actual dividends may have grown during the holding period of this investment.
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Unlike more traditional products, the Fund does not seek returns based on appreciation in the stock market price of equity securities. This means that the returns on your Fund investment are not intended to correlate to the returns of the overall stock market (for example, the value of your Fund investment may go down when overall equity markets go up, or vice versa).
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The Fund does not produce qualified dividend income and is not an appropriate investment if you are seeking dividend income.
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The investment returns of the Fund are treated for tax purposes as ordinary income or capital gains or losses, as applicable. See the section of this Prospectus entitled “Taxes” for more information.
Correlation of Actual and Expected Dividend Values
The Adviser’s research indicates there historically has been a high correlation between the value of actual dividend payments and expected dividend values. While actual dividend value and expected dividend value may at times differ significantly, the following diagrams present three scenarios illustrating the potential impact of changes in the value of actual dividend payments on the expected dividend values reflected in the prices of the Fund’s portfolio holdings and how this may change the value of the Fund. The following diagrams do not represent all market scenarios, but are presented to show the potential relationship between actual dividend values and expected dividend values in accordance with the Adviser’s research. The diagrams do not represent the actual performance of the Fund.
The Black Dot in each diagram represents the starting (or purchased) expected dividend value reflected in the prices of the Fund’s portfolio holdings. The Gray Dot represents the actual dividend value on the same day. The Square reflects the point in time when the actual dividend value and expected dividend value converge.