The Fund generally will invest at least 90% of its total assets in the securities that comprise the Underlying Index.
Strictly in accordance with its guidelines and mandated procedures, S&P Dow Jones Indices LLC (the “Index Provider”) compiles, maintains and calculates the Underlying Index, which is designed to measure the performance of approximately 120 securities in the S&P SmallCap 600®Index that are of the highest quality, as determined by the Index Provider. The Underlying Index selects constituents from the S&P SmallCap 600®Index, which is comprised of common stocks of approximately 600 small-capitalization companies that generally represent the small-cap segment of the U.S. equity market.
Each security in the S&P SmallCap 600® Index receives a “quality score,” which is based on an average of the following three fundamental measures of a company: (1) return on equity (calculated as the company’s trailing 12-month earnings per share divided by the company’s latest book value per share); (2) accruals ratio (computed using the change of the company’s net operating assets over the last fiscal year divided by the company’s average total assets over the last two fiscal years); and (3) financial leverage ratio (calculated as the company’s latest total debt divided by the company’s book value). The Index Provider assesses the quality score of securities of companies in the financials or real estate sectors (according to the Global Industry Classification Standard (“GICS®”)) based only on the
return on equity and financial leverage ratio measures. The Index Provider selects approximately 120 securities with the highest average quality scores for inclusion in the Underlying Index. The Underlying Index weights each component security by the product of its quality score and its market capitalization, subject to security and sector constraints and optimization procedures. Stocks with higher scores receive relatively greater weights.
As of October 31, 2025, the Underlying Index was comprised of 120constituents with market capitalizations ranging from $384.4 million to $11.5 billion.
The Fund employs a “full replication” methodology in seeking to track the Underlying Index, meaning that the Fund generally invests in all of the securities comprising the Underlying Index in proportion to their weightings in the Underlying Index.
The Fund intends to be “diversified,” as defined in the Investment Company Act of 1940, as amended (the “1940 Act”), to the extent that the Underlying Index is diversified. The Fund may become “non-diversified” as defined in the 1940 Act solely as a result of a change in relative market capitalization or index weighting of one or more constituents of the Underlying Index. Should the Fund become “non-diversified,” it will no longer be required to meet certain diversification requirements under the 1940 Act and may invest a greater portion of its assets in securities of a small group of issuers or in any one individual issuer than can a diversified fund. Shareholder approval will not be sought when the Fund crosses from diversified to non-diversified status solely due to a change in relative market capitalization or index weighting of one or more constituents of the Underlying Index. In seeking to track the Underlying Index, the Fund was managed as diversified as of August 31, 2025.
Concentration Policy. The Fund will concentrate its investments (i.e., invest more than 25% of the value of its net assets) in securities of issuers in any one industry or group of industries only to the extent that the Underlying Index reflects a concentration in that industry or group of industries. The Fund will not otherwise concentrate its investments in securities of issuers in any one industry or group of industries.
