The
FLEX Options that the Fund will hold through the Subsidiary that reference the
Underlying ETF will give the Fund the right to receive or
deliver shares of the Underlying ETF on the option expiration date at a strike
price, depending on whether the option is a put or call option and whether the
Fund purchases or sells the option. The FLEX Options held by the Fund are
European style options, which are exercisable at the strike price only on the
FLEX Option expiration date.
The
Fund, through the Subsidiary, will generally, under normal conditions, hold
three kinds of FLEX Options for each Target Outcome 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
(i.e., writing) a call
option (giving the Fund the 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 payouts at expiration
from the purchased FLEX Options and the U.S. Treasury securities and cash and
cash equivalents. As a result, the FLEX Options will be fully covered and no
additional collateral will be necessary during the life of the Fund. The Fund
receives premiums in exchange for the written FLEX Options and pays premiums in
exchange for the purchased FLEX Options. The OCC and securities exchanges on
which the FLEX Options are listed do not charge ongoing fees to writers or
purchasers of the FLEX Options during their life for continuing to hold the
option contracts, but may charge transaction fees. Each of the FLEX Options
purchased and sold throughout the Target Outcome Period will have the same
terms, such as strike price and expiration date, as the FLEX Options purchased
and sold on the first day of the Target Outcome
Period.
On
the FLEX Option’s expiration date, the Fund, through the Subsidiary, intends to
sell the FLEX Options prior to their expiration and use the resulting
proceeds to purchase new FLEX Options for the next Target Outcome
Period.
The
Underlying ETF
The
Underlying ETF is an exchange-traded investment trust that holds physical gold
bars. World Gold Trust Services, LLC (“WGTS”) serves as the
Underlying ETF’s sponsor and HSBC Bank plc serves as the Underlying ETF’s
custodian. The Underlying ETF's custodian may utilize subcustodians that hold
the Underlying ETF's gold on its behalf. The Underlying ETF is not expected to
pay dividends. You can find the Underlying ETF’s prospectus and other
information about the ETF, including the most recent reports to shareholders,
online at spdrgoldshares.com.
The
summary information below regarding the Underlying ETF comes from its filings
with the SEC. You are urged to refer to the SEC filings made
by the Underlying ETF and to other publicly available information (e.g., the ETF’s annual
reports) to obtain an understanding of the ETF’s business and financial
prospects.
The
following description of the Underlying ETF’s principal investment strategies
was taken directly from the Underlying ETF’s prospectus, dated
February 28, 2022 (“GLD” refers to the
Underlying ETF; other defined terms have been
modified).
The
investment objective of GLD is for its shares to reflect the performance of the
price of gold bullion, less GLD’s expenses. WGTS believes that,
for many investors, GLD's shares represent a cost-effective investment in gold.
GLD’s shares represent units of fractional undivided beneficial interest in and
ownership of GLD and trade under the ticker symbol “GLD” on the NYSE
Arca.
GLD
is treated as a “grantor trust” for U.S. federal income tax purposes. As a
result, GLD itself is not subject to U.S. federal income tax. Instead,
GLD’s income and expenses “flow through” to the shareholders, and the Trustee
will report the GLD’s income, gains, losses and deductions to the Internal
Revenue Service on that basis.
At
December 31, 2021, the amount of gold owned by GLD and held by CLD's custodian
in its vault was 31,368,572 ounces, 100% of which is
allocated gold in the form of London Good Delivery gold bars with a market value
of $57,093,938,097 based on the London Bullion Market Association Gold Price AM
on December 31, 2021 (cost—
$48,753,564,928). At December 31, 2021,
subcustodians did not hold any gold on behalf of
GLD.
An
allocated account is an account with a bullion dealer, which may also be a bank,
to which individually identified gold bars owned by the
account holder are credited. The gold bars in an allocated gold account are
specific to that account and are identified by a list which shows, for each gold
bar, the refiner, assay or fineness, serial number and gross and fine weight.
All of the GLD’s gold is fully allocated at the end of each business day. GLD’s
custodian provides the trustee with regular reports detailing the gold transfers
in and out of GLD’s allocated account at the custodian and identifying the gold
bars held in GLD’s allocated account at the custodian. Gold held in GLD’s
allocated account is the property of GLD and is not traded, leased or loaned
under any circumstances.