The Fund invests at least 80% of its total assets in component securities of the P&C Insurance Index. The Fund will generally use a “replication” strategy to achieve its investment objective, meaning it generally will invest in all of the component securities of the P&C Insurance Index in approximately the same proportions as in the P&C Insurance Index.
However, the Fund may use a “representative sampling” strategy, meaning it may invest in a sample of the securities in the Index whose risk, return and other characteristics closely resemble the risk, return and other characteristics of the P&C Insurance Index as a whole when the Fund’s Adviser, believes it is in the best interests of the Fund (e.g., when replicating the P&C Insurance Index involves practical difficulties or substantial costs, an Index constituent becomes temporarily illiquid, unavailable, or less liquid, or as a result of legal restrictions or limitations that apply to the Fund but not to the P&C Insurance Index).
The Fund may also invest in other exchange-traded funds for cash management purposes. Such exchange-traded funds may include The Laddered T-Bill ETF, which the Board of Trustees of the Fund has determined to be within the same group of investment companies as the Fund.
The Fund may hedge its sensitivity to diversification risk by investing in derivatives including swaps, swaptions, futures contracts and credit derivatives.
The Fund is classified as “non-diversified” under the Investment Company Act of 1940 (the “1940 Act”), which means that it may invest more of its assets in a smaller number of issuers than “diversified” funds.
Information About the Porter & Co. P&C Insurance Index
The P&C Insurance Index is a rules-based, equity index designed to provide exposure to leading publicly traded property and casualty (“P&C”) insurance companies. Construction of the P&C Insurance Index starts with an initial universe of the publicly traded property and casualty insurance companies included in the VettaFi Full World Ex US ADR Index which provides coverage of US listed companies in the VettaFi Full World Ex US index which includes the country/sector exposures of its corresponding equity market index. Constituents are selected annually from the Porter & Co. Leading Underwriters Property and Casualty list, with the top 20 ranked companies included in the P&C Insurance Index, subject to the following eligibility requirements:
1.The company must have readily available market capitalization data.
2.The company must have publicly reported combined ratio data based on its most recent financial disclosures.
3.The company must have a market capitalization of at least $1.5 billion.
4.The company must be primarily engaged in property & casualty insurance underwriting or reinsurance. Companies primarily engaged in title insurance, financial guaranty, insurance brokerage, managing general agency/fronting operations, or conglomerate holding companies are excluded.
5.Health and Life insurance cannot generate more than 15% of the company’s total revenues.
6.Three-year average return on equity (“ROE”) ≥ 5%.
The P&C Insurance Index limits any single Constituent (or issuer) to a maximum 10% weight. Excess weight from capped Constituents is proportionally redistributed to all remaining uncapped constituents.
The P&C Insurance Index employs a weighting methodology that incorporates underwriting performance, as measured by each company’s combined ratio, with companies exhibiting lower combined ratios receiving higher weight adjustments and companies with higher combined ratios receiving lower adjustments. Final weights are normalized to 100%. The P&C Insurance Index is reconstituted and rebalanced annually after publication of the updated Porter & Co. Leading Underwriters Property and Casualty list and is otherwise maintained in accordance with standard index procedures for corporate actions.
The P&C Insurance Index is reconstituted and rebalanced annually following the publication of the updated Porter & Co. Leading Underwriters Property and Casualty list (the “Underlying List”).
At each annual reconstitution:
•The Top 20 eligible companies are selected.
•Market capitalizations are updated.
•Combined ratios are reviewed.
•Constituent weights are reset accordingly.
The P&C Insurance Index is sponsored by Porter & Company, LLC (the "Index Provider"), which is an organization that is independent of, and unaffiliated with, the Fund and Tuttle Capital Management, LLC, the investment adviser for the Fund (the "Adviser"). The Index Provider maintains and publishes or designates a third-party index calculation agent to publish information regarding the market value of the P&C Insurance Index. Neither the Adviser nor its affiliates have any ability to select P&C Insurance Index components or change the P&C Insurance Index methodology.
