The S&P U.S. Spin-Off Index is based on the S&P U.S. BMI. The index contains all spin-offs added to the S&P U.S. BMI that have a float-adjusted market capitalization of at least $1 billion. The index also contains split-offs added to, or already included in, the S&P U.S. BMI that have float-adjusted market capitalizations of at least $1 billion. Additions are made to the index on a monthly basis after the close of the third Friday of each month. Any eligible spin-offs occurring at least seven business days prior to the rebalancing date are included in the index at the monthly rebalancing. Constituents are included in the index for a maximum of 48 months. If a constituent has been in the index for 48 months, it is removed at the subsequent monthly rebalancing. In addition, any consituents removed from the S&P U.S. BMI are removed from the S&P U.S. Spin-Off Index simultaneously. If the deletion of a constituent at the monthly rebalancing would result in a constituent count of less than 20, the deletion will be delayed until the next rebalancing period in which the resulting constituent count would be at least 20.
Universe. All companies must be constituents of the S&P U.S. BMI that have been spun off from a parent company withing the last four years.
Weighting. Each constituent in the index is weighted by float-adjusted market capitalization, subject to a 7.5% cap for any single stock. Companies with multiple share class lines in the index have their weights combined with the sum total subject to the 7/5% cap.
Deletions. Constituents are included in the index for a maximum of 48 months. Any constituent removed from the S&P U.S. BMI is removed from the S&P U.S. Spin-Off Index simultaneously.
Size. Companies must have a float-adjusted market capitalization of at least USD 1 billion.
Rebalancing. The index is rebalanced monthly, after the close of the third Friday of each month.
RISKS AND OTHER CONSIDERATIONS
Investors should consider the following risk factors and special considerations associated with investing in the fund, which may cause you to lose money, including the entire principal amount that you invest.
Equity Risk: The value of the equity securities held by the fund will fall due to general market and economic conditions, perceptions regarding the industries in which the issuers of securities held by the fund participate, or factors relating to specific companies in which the fund invests.
Foreign Investment Risk: The fund’s investments in non-U.S. issuers, although generally limited to ADRs, may involve unique risks compared to investing in securities of U.S. issuers, including less market liquidity, generally greater market volatility than U.S. securities and less complete financial information than for U.S. issuers.
Consumer Discretionary Sector Risk: The success of consumer product manufacturers and retailers is tied closely to the performance of the overall domestic and international economy, interest rates, competitive and consumer confidence. Success depends heavily on disposable household income and consumer spending. Changes in demographics and consumer tastes can also affect the demand for, and success of, consumer products in the marketplace.
Computer/Technology Sector Risk: Competitive pressures may have a significant effect on the financial condition of companies in the computer/technology sector. Also, many of the products and services offered by computer and technology companies are subject to the risks of short product cycles and rapid obsolescence.
Small- and Medium-Sized Company Risk: Investing in securities of small and medium-sized companies involves greater risk than is customarily associated with investing in larger, more established companies.
Micro-Cap Company Risk: Micro-cap stocks involve substantially greater risks of loss and price fluctuations because their earnings and revenues tend to be less predictable (and some companies may be experiencing significant losses), and their share prices tend to be more volatile and their markets less liquid than companies with larger market capitalizations.
MLP Risk: Investments in securities of MLPs involve risks that differ from an investment in common stock. Holders of the units of MLPs have more limited control and limited rights to vote on matters affecting the partnership. There are also certain tax risks associated with an investment in units of MLPs.
Concentration Risk: If the Index concentrates in an industry or group of industries the fund’s investments will be concentrated accordingly. In such event, the value of the fund’s shares may rise and fall more than the value of shares of a fund that invests in securities of companies in abroader range of industries. In addition the fund is subject to Non-Correlation Risk, Replication Management Risk, Issuer- Specific Changes and Non-Diversified fund Risk.