Exchange Traded Funds (“ETFs”) are one of the fastest growing categories of investment products in the world, with over US$2 trillion of assets managed in ETF products globally.

An ETF is a managed fund or unit trust that is quoted and traded on a stock exchange such as the ASX. ETFs are built like managed funds, but trade like shares, meaning that pricing is transparent and that the products can be bought and sold throughout any trading day just like ordinary shares. ETFs generally aim to track as closely as possible the performance of a given index or asset class. They are transparent, liquid, cost-efficient and flexible investment tools – designed to be attractive to both individuals and institutional investors.

BetaShares ETFs are a family of exchange traded funds (ETFs). They are Australian domiciled funds that trade on the ASX just like shares.

BetaShares ETFs are designed to expand the universe of investment possibilities open to Australian investors by delivering transparent exposure to a broad range of market indices and asset classes. These can be products based on equity indices (e.g., providing exposure to a particular segment of the equity market), or they can be products that offer exposure to alternative asset classes (e.g., providing exposure to a foreign currency).

Simplicity

BetaShares ETFs help investors gain exposure to a range of investment strategies that can be executed as simply as buying any share.

Liquidity

BetaShares ETFs are open-ended funds, meaning the number of units on issue can be increased or decreased in response to daily demand. Units can be bought and sold at any time throughout the trading day. Dedicated market makers and Authorised Participants enhance this daily liquidity and provide robust bid-offer spreads. BetaShares ETFs have similar liquidity characteristics to the underlying shares that comprise the relevant index, or the underlying asset class.

Transparency

BetaShares ETFs aim to closely track the performance of a specified index or asset class. They have a transparent fund and cost structure. Portfolio information is published on the BetaShares website.

Cost-effectiveness

Because ETFs aim simply to track the performance of an index or asset class, there are no in-built “active management” fees and ETFs therefore have significantly lower fees than actively managed funds.

BetaShares ETFs are built like managed funds but they can be traded on the ASX like any share, providing significantly more flexibility to investors.

Because BetaShares ETFs aim simply to track the performance of a specified index or asset class, they also have lower costs than most managed funds.

BetaShares ETFs can be used by investors to implement a wide range of investment strategies:

Portfolio Construction & Asset Allocation

BetaShares ETFs can be used as core holdings in a portfolio and as building blocks for portfolio construction. For example, sector ETFs offer diversified exposure to a particular industry sector that could otherwise only be achieved by buying all the stocks in the relevant index.

Core/Satellite Strategy

ETFs are often used in active investment strategy to improve the risk/return of a portfolio. ETFs can be used to build a core portfolio of broadly diversified indices. Single individual stocks can then be added as alpha generating ‘satellites’.

Cash Equitisation

ETFs can be used as a substitute for cash pending individual stock selection. This is used to avoid ‘cash drag’ and as an efficient place to ‘park’ cash while investment decisions are being made

Pairs Trading

BetaShares ETFs offer a number of opportunities for pairs trading e.g. going long an index and shorting some of the constituents.

Alternative to Sector Swaps

BetaShares Sector ETFs can be used as an efficient alternative to a sector swap for institutional investors. Using Sector ETFs means that investors are not tied to one counterparty for exits and entries and have limited counterparty risk and they are easier to trade and administer than swaps.

Hedging

Since ETFs are traded on the ASX, investors can short ETFs as they would any stock, subject to availability of stock lending.

BetaShares ETFs are traded on the Australian Securities Exchange. As such, they can bought or sold like any share through a stockbroker, financial adviser or online broker. There is no need to open a separate trading account. BetaShares ETFs can be traded at any time during normal market hours, using all the trading techniques applicable to shares (e.g., market orders, limit orders, stop orders).

For investors buying in larger volumes, they can also be bought and sold through our Authorised Participants and Market Makers. For more information please contact BetaShares or refer to How to Invest.

As an individual investor, you can only buy and sell BetaShares ETFs through trading on the ASX through stockbrokers, financial advisers and online brokers. BetaShares ETFs may only be purchased or redeemed directly through BetaShares in large blocks by institutions known as Authorised Participants.

Similar to open ended funds, ETFs do not have restrictions on the number of units the fund may issue. This means that if there is higher demand in the market than the current number of units outstanding, the fund can ‘create' more units in line with market demand and if there is less demand, the fund can buy back or ‘redeem' the units. This is known as the “creation / redemption process”. The creation/redemption process is facilitated by large institutions, known as Authorised Participants, who create and redeem units to ensure that the number of units on issue matches supply and demand. This helps to ensure that the price of the ETF does not trade at a material premium or discount to the net asset value (NAV) of the assets in the fund.

Authorised Participants can create ETF units in one of two ways. The Authorised Participant may:

1. Deposit a basket of shares with BetaShares in exchange for an institutional-sized block of ETF units, known as a “creation unit”. This is commonly known as an “in kind” or "in specie” creation.

2. Deliver cash to BetaShares in exchange for a creation unit. This process is referred to as "cash creation".

Conversely, to redeem ETF units, an Authorised Participant delivers the ETF units to BetaShares and receives cash or (where agreed with BetaShares) the underlying shares.

An Authorised Participant is an ASX trading participant that has signed an authorised participant agreement with BetaShares and has the ability to create and redeem ETF units in large blocks (known as “creation units”) directly with BetaShares.

The role of a market maker is to satisfy supply and demand for units. They do this by providing liquidity to the market by acting as the buyer and seller of units on the ASX throughout the day, and by creating and redeeming units off-market. This helps to ensure the number of units on issue matches supply and demand, which in turn helps to ensure that the price of the ETF does not trade at a material premium or discount to its net asset value (NAV).

BetaShares ETFs maintain liquidity in three ways:

• They are traded on the Australian Securities Exchange and so can be bought and sold freely among investors

• Market makers provide a minimum amount of liquidity by providing onscreen bids and offers for units throughout the ASX trading day

• ASX trading participants known as Authorised Participants can create and redeem units on a daily basis in response to market demand.

No. As the officlal market makers for ETFs have agreed to provide bid and offer prices and have agreed levels of volume on the market throughout the trading day, even though an ETF might have zero turnover, investors will be able to buy and sell units in the ETFs to the market maker

While BetaShares cannot control or influence the execution of your trade, keep the following points in mind:

Yes. Any investor with access to trading on the Australian Securities Exchange can buy BetaShares ETFs.

Each BetaShares ETF has a management cost associated with it, which can be found on the “Product” page. In addition, because they are bought and sold just like shares, customary brokerage fees will apply when trading ETFs, just as they do when investors trade shares on the ASX.

In order to complete a short sale, an investor needs to borrow shares in order to cover their short position. Please contact your broker directly for further information.

Yes – all BetaShares ETFs can be purchased in a SMSF.

BetaShares does not set the bid and offer price for its ETF units. However, BetaShares does publish an Indicative Net Asset Value (iNAV) throughout the trading day, which helps brokers and market makers to set the bid/offer price accurately. The actual Net Asset Value (NAV) is calculated at the close of the trading day. The current bid and offer price, and the iNAV, are available on this website and through Bloomberg. The NAV of each ETF is published daily on the BetaShares website on the individual Product pages of this website

NAV means “net asset value” – the dollar value of the assets of the ETF. The NAV is calculated daily and published for each product on individual product pages of this website.

To encourage maximum transparency and comparability, BetaShares publishes an “iNAV” in real-time for most of its Funds. iNAV stands for Indicative Net Asset Value.

The iNAV is calculated on a minute-by-minute basis by a third-party vendor (Markit) and is based on the market prices of the individual holdings included in the relevant index or asset class being tracked. Most managed funds calculate NAV once per day, or less. By contrast, BetaShares’ iNAVs enable investors to receive an up-to-the-minute indication of what a Fund is worth that can be used to check their own calculations or, by comparing the iNAV with bid-ask spreads, to see whether an ETF is being priced fairly in the market. BetaShares iNAVs are updated every 60 seconds.

iNAVs are available on the relevant Fund product pages. They are also available on Bloomberg. For details of specific Bloomberg iNAV codes, please refer to the product pages or the Fund fact sheets.

The calculation of the Net Asset Value of a BetaShares ETF is based on the assets held by the ETF. The closing market price is not the NAV, but rather the final price of the trading day, as determined by buyers and sellers in the market. As with any ETF, it is possible that the trading price of units may differ from the NAV per unit. However the creation and redemption facility is designed to reduce the likelihood of units trading at a significant discount or premium to the NAV per unit.

The distribution objective varies depending on the specific Fund. Please check the PDS for the relevant Fund that you are interested in, or the individual product page for the relevant Fund. Generally speaking, dividends and franking credits received due to assets held by the relevant BetaShares Fund are passed through to the investor.

As with shares, unitholders on the register of an ETF at the end of a distribution period will be entitled to a share of the distributable income of the ETF for that period, based on the number of units held in the ETF.

A DRP is available for certain ETFs (such as the Sector ETFs). Please check the PDS for the relevant ETF that you are interested in.

Not necessarily. If the fund is growing during the month, there will be additional units created. The inflows associated with this new money will not earn a full month’s worth of interest but they are of course entitled to the same per unit distribution at month end. These new units will have the effect of reducing the cash distribution per unit, as the amount of interest earned will be divided amongst more unit holders. Critically, however, this should have no impact on the total return generated by any individual unit holder. A lower distribution per unit means a higher post distribution unit price.

This issue arises in all managed fund structures (ETFs, unlisted managed funds, etc) where there is growth in assets during a distribution period. Again, there is no impact on a total return basis.

Individuals, businesses and institutional investors seek exposure to foreign currencies for many reasons – to profit from an expected move in exchange rates, to provide diversification to investment portfolios and to hedge against currency risk (e.g., the risk that a fixed USD expense in the future becomes more expensive in AUD if the AUD falls in value).

Currencies have historically exhibited low correlation to other asset classes and so can be used to reduce volatility in an investment portfolio.

For more information about currency investing and about BetaShares Currency ETFs, please see the BetaShares Currency ETF Product Brochure.

Until the launch of BetaShares Currency ETFs, investors who wanted exposure to the performance of a foreign currency had a limited range of choices – they could use complicated foreign currency trading platforms, trade CFDs or open a foreign currency bank account

Foreign exchange trading platforms and CFDs are often difficult to set up, complex to use and typically involve the use of significant leverage, exposing investors to financing charges and the prospect of margin calls and potentially unlimited losses.

Purchasing currency directly from a financial institution typically requires investors to open foreign currency bank accounts, many of which have minimum balance thresholds. More importantly, the “spread” between the rate at which a bank will buy and sell currencies is often very wide, especially for smaller transaction sizes – this often adds significantly to the overall cost of the investment.

By comparison, BetaShares Currency ETFs give investors a simple, low-cost, liquid and efficient way to access the performance of selected foreign currencies – as simply as buying any share on the ASX.

No. The assets of each ETF consist of the relevant foreign currency (as specified in the name of the ETF), held in a bank account with JPMorgan Chase Bank. As a result, each ETF tracks the price of the underlying currency based on the WM/Reuters Closing Spot Rate.

Each business day, the fund administrator will calculate (and BetaShares will publish) the ETF’s Net Asset Value. This will be the aggregate value, expressed in Australian dollars, of the ETF’s assets. The NAV will be expressed in Australian dollars based on the WM/Reuters Closing Spot Rate. The WM/Reuters Closing Spot Rate is the exchange rate of the Australian dollar and the applicable foreign currency as determined by WM/Reuters as of 4:00 pm London time.

One of the major benefits of BetaShares Currency ETFs is that they provide investors with access to wholesale foreign exchange rates.

The assets of each BetaShares Currency ETF consist of the relevant foreign currency held in a bank account with JPMorgan Chase Bank. Each trading day, these assets are valued based on the WM/Reuters Closing Spot Rate, which represents the mid-point between wholesale bid and offer rates for the relevant currency. Accordingly, there is no buy/sell “spread” built into the value of the ETF.

To encourage maximum transparency, BetaShares publishes an “iNAV” in real-time for the Currency ETFs. iNAV stands for Indicative Net Asset Value. The iNAV is calculated on a minute-by-minute basis by a third-party vendor (Markit) and is based on the mid-point between the wholesale bid and offer price for the relevant currency. The iNAV can be viewed on the relevant product page, and it enables investors to receive an up-to-the-minute indication of what the ETF is worth. The FX rate underlying the iNAV is also displayed on the product page for the ETF. By comparing the iNAV with bid-ask spreads on ASX, investors can see whether the ETF is being priced fairly in the market.

BetaShares Currency ETFs provide investors with one of the most cost efficient ways to access the performance of foreign currencies. For most investors, costs are expected to be significantly lower than buying foreign currency directly from a bank or other financial institution.

For an example comparing BetaShares Currency ETFs with a foreign currency bank account, see the BetaShares Currency ETFs Product Brochure. Depending on holding period and other factors, BetaShares Currency ETFs can be around 10 times cheaper than the cost of operating a foreign currency bank account with a major Australian bank.

Yes, like any other exchange traded fund, the units of BetaShares Currency ETFs trade like traditional shares, and they can be bought and sold like any share throughout the trading day on the ASX.

Gold is a physical asset that is accumulated, rather than consumed. As a result, virtually all the gold that has ever been mined still exists today. Gold is virtually indestructible and viewed by many around the world as a store of value, which differentiates it from other commodities.

Gold has traditionally been demanded by investors as a “safe haven” asset, particularly during times of uncertainty. Investors have also used gold to hedge against the risk of inflation. In addition, the performance of gold has shown very low correlation with the performance of other asset classes and so an allocation to gold can be a good way to increase diversification as part of a broader investment portfolio. For more information – see our document entitled BetaShares Gold Bullion ETFs – Gold, Pure & Simple.

Traditionally, the only way to gain direct exposure to the gold price was through direct gold ownership or the use of gold futures.

Direct gold ownership involves a number of complications and costs, including high minimum investment levels and the costs of buying, physically storing and insuring the gold. In addition, liquidity levels (i.e., the ability to realise cash for the investment) may be low relative to exchange-traded alternatives.

Gold futures can be complicated to purchase, requiring an understanding of derivatives, tolerance for margin calls, experience in futures trading as well as potentially high minimum investments.

Gold exposure can also be obtained by buying shares in gold mining companies. This involves company-specific risk, as well as broader sharemarket risk, and it is therefore a more indirect way to access the performance of gold.

By comparison, the BetaShares Gold Bullion ETF offers investors a simple, low-cost, liquid and efficient way to access the performance of gold – as simply as buying any share.

Because gold is priced in U.S. dollars, the return on an investment in gold for Australian investors will be affected by two variables: (i) the price return of gold in U.S. dollars; and (ii) the variation in the AUD/USD exchange rate.

This means an investor with an “unhedged” gold exposure (e.g., a physical gold holding or an investment in a gold product that does not “hedge” its currency risk) may actually lose money even if the gold price rises (because, for example, the Australian dollar has strengthened against the U.S. dollar.) (Of course, currency fluctuations may also move in an investor’s favour.)

To reduce currency risk for Australian investors, the BetaShares Gold Bullion ETF will hedge substantially all of its U.S. dollar exposure back to the Australian dollar. This provides investors with a “purer” exposure to the gold price, irrespective of the fluctuations of the currency markets.

Yes – like any other exchange traded fund, units of the BetaShares Gold Bullion ETF trade on the ASX and can be bought and sold like any share.

The gold bullion underlying the BetaShares Gold Bullion ETF is valued each London business day at the “London AM fixing price”. Members of the London Bullion Market Association (LBMA) conduct twice-daily auctions during London trading hours to set reference gold prices. The London AM fix for gold occurs at 10:30AM London time. The London fix is the most widely used benchmark for daily gold prices and is quoted by various financial information sources.

The Fund invests its assets into the purchase of physical gold bullion (i.e., bars of gold) from the National Bank of Canada (“NBC”), one of Canada’s oldest and largest prudentially regulated banks. All of the physical gold bullion purchased from NBC is held in an allocated and segregated account maintained by NBC with JPMorgan Chase Bank N.A., in JPMorgan’s London vault premises (or, on a temporary basis, by an authorised sub-custodian). All the gold bullion will be certified “London Good Delivery”. The gold will be subject to a registered charge in favour of the Fund.

On any London business day, the Fund may require NBC to deliver the gold to the Fund, or alternatively pay to the Fund the equivalent value of the gold in cash (based on the spot price of gold on that day). Accordingly, the value of the units in the Fund is expected to vary based on the day to day movements in the spot price of gold.

The gold bullion underlying the BetaShares Gold Bullion ETF is held in the London vault premises of JP Morgan Chase Bank NA. An independent bullion audit will also be conducted at least annually to confirm the number, purity and weight of the gold bars held in the vault.

In addition, the BetaShares Gold Bullion ETF Gold Holdings list indicates the details of the actual allocated gold bullion bars held in the vault. This list, provided daily by the vault custodian, JPMorgan Chase Bank, includes specific details of each gold bar held in the vault including: serial number, refinery, purity, weight and year of casting.

All the gold bars that underlie the BetaShares Gold Bullion ETF are required to meet the standards for certification as “London Good Delivery Bars”, as specified by the London Bullion Market Association (“LBMA). A London Good Delivery Bar must contain between 350 and 430 fine troy ounces of gold, with a minimum fineness (or purity) of 995 parts per 1,000 (99.5%), must be of good appearance and must be easy to handle and stack. It must also bear the stamp of one of the melters and assayers that are on the LBMA approved list.

An “allocated” gold account is an account where the account holder has full title to the gold in the account, with the dealer holding as custodian on behalf of the account holder. The gold is stored in a vault which is owned and managed by a bullion dealer or depository. Specific bars, numbered and identified by weight, hallmark and purity, are allocated to the account holder. These bars are segregated from other gold or metals held in the vault of the dealer. Gold held in allocated accounts cannot be traded, leased or loaned except on the specific instructions of the account holder.

An “unallocated” gold account is an account where specific bars are not set aside and the account holder has a general entitlement to the gold. Credit balances on the account do not entitle the account holder to specific bars of gold, but are backed by the general stock of the bullion dealer with whom the account is held. The account holder is an unsecured creditor and is exposed to the creditworthiness of the bank or dealer providing the service in the same way as with any other kind of account.

The gold that underlies the BetaShares Gold Bullion ETF will be held by JPMorgan Chase Bank in the form of specifically allocated and identifiable “London Good Delivery” gold bars (other than an amount held in unallocated form which is too small to make up a whole gold bar or which is held temporarily to effect a creation or redemption of Units).

No. JPMorgan Chase Bank (which acts as custodian of the gold) is not permitted to lend, pledge or otherwise deal with the gold in any way.

Because it is possible to store physical gold bullion, BetaShares Gold Bullion ETF is backed by physical gold bullion. Most commodities, however involve significant storage and handling costs. As storage and handling can be impractical and costly for many commodities, investing in such commodities typically occurs via investment in commodities futures.

BetaShares Commodity ETFs (other than BetaShares Gold Bullion ETF), like most commodities ETFs globally track the performance of indices based on commodities futures. To do this, each ETF invests its assets in cash and is paid the performance on the underlying index by a counterparty via swap agreements with one or more financial institutions. Because the ETF obtains exposure to the performance of commodities in the way described above, the ETF is referred to as a “synthetic” ETF. However, BetaShares ETFs structured in this fashion are fully backed by cash, which is held in a segregated account by a third party custodian, RBC Investor Services.

ETC stands for “exchange traded commodity”. Like a Commodity ETF, an ETC trades on ASX and tracks the price of an underlying commodity.

Commodity ETFs are conventional managed investment funds (i.e. “unit trusts”), and are subject to the highest form of investor protection regulation in Australia. ETCs, by contrast, are classified as “structured products” and may use a variety of structures to deliver their investment return. They are generally subject to less onerous regulation than ETFs and may have different tax outcomes for investors.

BetaShares Gold Bullion ETF is backed by physical gold bullion.

The other BetaShares Commodity ETFs are fully backed by cash. These assets are held in a segregated account with a third party custodian, being RBC Investor Services.

BetaShares Commodity ETFs (other than BetaShares Gold Bullion ETF), like most commodities ETFs globally track the performance of indices based on commodities futures (hedged into Australian dollars). Indices based on commodities futures may perform differently to the underlying commodity itself.

BetaShares Gold Bullion ETF tracks the price of gold bullion, with a currency hedge against movements in AUD/USD exchange rate, before fees and expenses. BetaShares Gold Bullion ETF is backed by physical gold bullion.

It depends on the underlying commodity.

Where it is possible to access and store the relevant commodity, an ETF can directly track the underlying spot price. For example, the BetaShares Gold Bullion ETF tracks the spot price of gold (with a hedge against movements in the AUD/USD exchange rate).

Many commodity ETFs, however, are priced off futures contracts. This is because, for many commodities (e.g., oil, agricultural products), it is not possible to physically access and store the underlying commodity for long periods. In addition, futures pricing can be more efficient for some commodities, especially where the futures contracts helps to standardise the pricing (e.g, agricultural commodities where quality varies between crops, seasons and regions).

An investment in an ETF that tracks commodities futures is not the same as investing in the spot price of the commodity itself.

A futures contract is a contract which sets the price for delivery of a particular commodity at an agreed point of time in the future. Commodity futures are traded on futures exchanges around the world - they are liquid and standardised and utilised by commodities investors throughout the world.

Most often, investors in commodities futures do not wish to take delivery of the commodity itself. As such, investors usually trade their future contracts before expiry and replace them with contracts with a later expiry instead. This process is known as “rolling”. Understanding rolling is important for commodities investors as it impacts investment returns.

As an example, the new futures contract that investors "roll" into may refer to a higher future price, which would mean that the investor receives fewer new contracts for the same investment amount. Assuming the commodity price does not rise, the rolling will result in a loss. This phenomenon is known as “contago”. The opposite scenario can also occur, where the new futures contract an investor ‘rolls’ into may refer to a lower price. Assuming then that the commodity price does not change at the time of the expiry, the investor will profit. This is known as “backwardation”.

This process of rolling, and whether the futures contracts are affected by contango or backwardation will be the primary source of performance differential between the indices tracked by BetaShares Commodity ETFs and the spot commodities prices.

For certain commodities, and to access diversified baskets of commodities, the only way for investors to get investment exposure is via futures contracts (and via indices based on these contracts). Rolling futures are a necessary part of investing in these commodities and cannot be avoided.

Yes, it is. When the futures contracts are in ‘backwardation’, the “roll return” will be positive which would lead to outperformance compared to the commodity 'spot price'. For example, indices based on oil futures contracts outperformed the spot price of oil from 1999-2006 as the oil futures contracts were in backwardation for extended periods during that period.

No – the Fund is a conventional managed fund that is available for trading on the ASX.

Investors in the Bear Fund may buy and sell units in the Fund throughout the trading day, and benefit from high levels of portfolio transparency. In addition, market makers assist in keeping the market price and NAV of the Fund close together.

No. The Fund’s objective is to produce positive returns when the market declines (and negative returns when the market rises) and the Fund aims to return as much of the relevant market upside or downside as possible (without the use of leverage). However, the Fund should not be expected to provide the exact opposite of the market return over any time period.

The Fund invests substantially all of its assets in cash and cash equivalents, and obtains its exposure by selling ASX SPI 200 futures contracts. Selling ASX SPI 200 futures can be expected to generate a positive return when the S&P/ASX 200 index falls.

Investors can hold the Bear Fund for as long as it continues to meet their investment objectives. Investors should check the suitability of their holdings regularly, just as they should with any short position in the market.

This product may be suitable for anyone who wants to profit from, or protect against, a declining equities market. Of course investors in the Fund need to understand that, while the product is expected to rise when markets go down, it is also expected to fall in value when markets rise. Investors should consider their circumstances and the PDS and obtain professional financial advice before making any investment decision.

The Bear Fund’s “portfolio exposure” is displayed on the BetaShares website and updated daily. Portfolio exposure represents the approximate exposure that the Fund will have, on any given day, to movements in the Australian share market (as measured by the S&P/ASX 200 index). Generally this number is close to 100% (short). However, market movements may cause the Fund’s exposure to vary between 90% to 110% on a given day. Therefore a 1% fall in the Australian share market on a given day can be expected to deliver a 0.9% to 1.1% increase in the value of the Fund.

Although it follows a rules based strategy, the Bear Fund is managed actively. As such, investors should check BetaShares’ website frequently for details of the Fund’s historical performance, as well as the current portfolio exposure, to ensure that the Fund continues to meet their investment objectives.

The Fund seeks to generate additional income from the underlying share portfolio, over and above the existing dividend yield and franking credits. It does this by selling away some of the upside share price potential of the portfolio. Additional income potential is generated using options.

To generate additional income, the Fund buys a share portfolio of the 20 blue-chip Australian shares (as represented in the S&P/ASX 20 index), and simultaneously sells, or "writes", call options on the relevant shares. By selling call options, the Fund is selling to the buyer of the option, for a premium, the right to buy the relevant share from the Fund at a certain exercise price.

By doing this, the Fund will receive option premiums which are expected to provide an additional source of income to the investor and will be earned regardless of how the underlying shares perform.

There are three sources of income earned by the Fund:

The Fund's strategy can typically be expected to outperform a stock-only portfolio in certain market environments, namely:

As the strategy involves forgoing returns resulting from the price appreciation of the relevant security above the exercise price of the option, the Fund's strategy can be expected to underperform in a strongly rising market when stocks regularly rise through their exercise prices.