an investor of an investment in the Fund on a daily basis, including the position of the Fund against the cap (both gross and net fee) and buffer. Before purchasing shares of the Fund, an investor should visit the website of the Fund to review this information and understand the possible outcomes of investing in shares of the Fund on any given day.
The Fund is classified as “undiversified” under the Investment Companies Act 1940, as amended (the “Law of 1940”). The Fund may not invest 25% or more of the value of its total assets in securities of issuers in a sector or group of sectors. This restriction does not apply to bonds issued or guaranteed by the United States government, its agencies or instruments, or the securities of other investment companies.
General information on FLEX options
For each target earnings period, the Fund will invest in both bought and sold FLEX put and call options referencing the Underlying ETF. FLEX options are customizable exchange-traded option contracts whose settlement is guaranteed by option clearing.
Society (“OCC”). The OCC guarantees the performance of each of the counterparties to the FLEX Options, becoming “the buyer of every seller and seller for every buyer ”, protecting clearing members and options traders from counterparty risk. OCC can make adjustments to the FLEX options for certain important events, as described in more detail in the Statement of
Information. Although guaranteed for settlement by the OCC, FLEX options are still subject to counterparty risk with the OCC and subject to the risk that the OCC will not settle the FLEX Options due to bankruptcy or other adverse reasons.
The FLEX options that the Fund will hold through the affiliate referring to the Underlying ETF will give the Fund the right to receive or deliver shares of the underlying ETF on the option’s expiration date at an exercise price, depending on whether the option is a call or put option and whether the Fund buys or sells the option. The FLEX Options held by the Fund are European style options, which can be exercised at the exercise price only on the expiration date of the FLEX option.
The Fund, through the Subsidiary, will generally hold, under normal conditions, three types of FLEX Options for each Target Result Period. The Fund, through the Subsidiary, will purchase a call option (giving the Fund the right to receive shares of the underlying ETF), while simultaneously selling (that is to say, write) a call option (giving the Fund an obligation to deliver shares of the underlying ETF) and a put option (giving the Fund the right to deliver shares of the underlying ETF). The Fund intends to structure the FLEX Options so that any amount owed by the Fund on the Written FLEX Options will be covered by payments upon expiration of the purchased FLEX Options and US Treasury securities and cash and cash equivalents. As a result, the FLEX options will be fully covered and no additional guarantees will be required during the life of the Fund. The Fund receives premiums in exchange for the FLEX options issued and pays premiums in exchange for purchased FLEX options. The OCC and the stock exchanges on which the FLEX Options are
listed do not charge an ongoing fee to writers or buyers of FLEX options during their lifetime to continue to hold the option contracts, but may charge transaction fees. Each of the FLEX options bought and sold throughout the target earnings period will have the same conditions, such as strike price and expiration date, as FLEX options bought and sold on the first day of the target result Period.
On the expiration date of the FLEX Option, the Fund, through the Subsidiary, intends to sell the FLEX Options prior to their expiration and use the proceeds to purchase new FLEX options for the next target performance period.
The underlying ETF
The underlying ETF is a publicly traded investment trust that holds physical gold bars. World Gold Trust Services, LLC (“WGTS”) serves as the sponsor of the Underlying ETF and HSBC plc serves as the custodian of the Underlying ETF. The custodian of the underlying ETF may use sub-custodians who hold the underlying ETF’s gold on its behalf. The underlying ETF is not expected to pay dividends. You can find the prospectus of the underlying ETF and other information about the ETF, including the most recent reports to shareholders, online at spdrgoldshares.com.
The following summary information about the Underlying ETF was taken from its filings with the SEC. Please refer to the SEC deposits made by the underlying ETF and other publicly available information (for example, ETF Annual Reports) to understand the business and financial outlook of the ETF.
The following description of the main investment strategies of the Underlying ETF was taken directly from the Underlying ETF.
prospectus, dated August 18, 2020 (“GLD»Refers to the underlying ETF; other defined terms have been changed).
GLD’s investment objective is that its actions reflect the price performance of gold bullion, less GLD’s expenses. GLD the shares represent units of undivided fractional and owned beneficial interest of GLD and trade under the ticker symbol “GLD” on the NYSE Arca.
GLD is treated as a “grantor trust” for US federal income tax purposes. As a result, GLD itself is not subject to US federal income. tax. Instead, GLD’s income and expenses “pass” to shareholders, and the trustee will report the income, earnings, expenses. losses and deductions to the Internal Revenue Service on this basis.
As of June 30, 2020, GLD’s custodian held 37,902,740.8 ounces of gold on behalf of GLD, of which 100% is allocated to gold in the
form of good delivery gold bars with a market value of $ 67,015,836,086 (cost–$ 54,307,578,223) which includes gold held with a sub-custodian (Bank of England). The largest amount of gold held by the Bank of England during the quarter ended