|
As filed with the Securities and Exchange Commission on September 20, 2021
|
||||
|
File Nos.
|
||||
|
333-257356
|
||||
|
811-23710
|
||||
|
UNITED STATES
|
||||
|
SECURITIES AND EXCHANGE COMMISSION
|
||||
|
Washington, D.C. 20549
|
||||
|
FORM N-1A
|
||||
|
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
|
[X]
|
|||
|
Pre-Effective Amendment No. 1
|
||||
|
Post-Effective Amendment No.
|
||||
|
and/or
|
||||
|
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
|
[X]
|
|||
|
Amendment No. 1
|
||||
|
MILLIMAN VARIABLE INSURANCE TRUST
|
||||
|
(Exact Name of Registrant as Specified in Charter)
|
||||
|
71 S. Wacker Dr., 31st Floor
Chicago, IL 60606
|
||||
|
(Address of Principal Executive Offices) (Zip Code)
|
||||
|
(312) 726-0677
|
||||
|
(Registrant's Telephone Number, Including Area Code)
|
||||
|
Ehsan Sheikh
71 South Wacker Drive, 31st Floor
Chicago, IL 60606
|
||||
|
(Name and Address of Agent for Service of Process)
|
||||
|
With Copies to:
|
||||
|
Alan P. Goldberg
Stradley Ronon Stevens & Young, LLP
191 North Wacker Drive, Suite 1601
Chicago, IL 60606
|
Joel D. Corriero
Stradley Ronon Stevens & Young, LLP
2005 Market Street, Suite 2600
Philadelphia, PA 19103
|
|||
|
Approximate Date of Proposed Public Offering:
|
As soon as practicable following the effective date of this registration statement.
|
|||
The Registrant hereby amends this Registration Statement on such dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until this
Registration Statement shall become effective on such date as the Commission, acting pursuant to such Section 8(a), may determine.
The information in this Prospectus is not complete and may be changed. We may not sell these securities until the
registration statement filed with the Securities and Exchange Commission is effective. This Prospectus is not an offer to sell these securities and is not soliciting an offer to buy these securities in any state where the offer or sale is not
permitted.
Milliman Variable Insurance Trust
Prospectus
[______], 2021
|
Milliman S&P 500 6-Month Buffer with Par Up Strategy
Milliman S&P 500 6-Month Buffer with Par Up Fund - Jan/Jul
Milliman S&P 500 6-Month Buffer with Par Up Fund - Feb/Aug
Milliman S&P 500 6-Month Buffer with Par Up Fund - Mar/Sep
Milliman S&P 500 6-Month Buffer with Par Up Fund - Apr/Oct
Milliman S&P 500 6-Month Buffer with Par Up Fund - May/Nov
Milliman S&P 500 6-Month Buffer with Par Up Fund - Jun/Dec
Milliman S&P 500 6-Month Par Down with Par Up Strategy
Milliman S&P 500 6-Month Par Down with Par Up Fund - Jan/Jul
Milliman S&P 500 6-Month Par Down with Par Up Fund - Feb/Aug
Milliman S&P 500 6-Month Par Down with Par Up Fund - Mar/Sep
Milliman S&P 500 6-Month Par Down with Par Up Fund - Apr/Oct
Milliman S&P 500 6-Month Par Down with Par Up Fund - May/Nov
Milliman S&P 500 6-Month Par Down with Par Up Fund - Jun/Dec
Milliman S&P 500 1-Year Buffer with Spread Strategy
Milliman S&P 500 1-Year Buffer with Spread Fund - Jan
Milliman S&P 500 1-Year Buffer with Spread Fund - Feb
Milliman S&P 500 1-Year Buffer with Spread Fund - Mar
Milliman S&P 500 1-Year Buffer with Spread Fund - Apr
Milliman S&P 500 1-Year Buffer with Spread Fund - Sep
Milliman S&P 500 1-Year Buffer with Spread Fund - Oct
Milliman S&P 500 1-Year Buffer with Spread Fund - Nov
Milliman S&P 500 1-Year Buffer with Spread Fund - Dec
Milliman S&P 500 1-Year Floor with Par Up Strategy
Milliman S&P 500 1-Year Floor with Par Up Fund - Jan
Milliman S&P 500 1-Year Floor with Par Up Fund - Feb
Milliman S&P 500 1-Year Floor with Par Up Fund - Mar
Milliman S&P 500 1-Year Floor with Par Up Fund - Apr
Milliman S&P 500 1-Year Floor with Par Up Fund - Sep
Milliman S&P 500 1-Year Floor with Par Up Fund - Oct
Milliman S&P 500 1-Year Floor with Par Up Fund - Nov
Milliman S&P 500 1-Year Floor with Par Up Fund - Dec
|
Milliman S&P 500 & Nasdaq 1-Year Buffer with Stacker Cap Strategy
Milliman S&P 500 & Nasdaq 1-Year Buffer with Stacker Cap Fund - Jan
Milliman S&P 500 & Nasdaq 1-Year Buffer with Stacker Cap Fund - Feb
Milliman S&P 500 & Nasdaq 1-Year Buffer with Stacker Cap Fund - Mar
Milliman S&P 500 & Nasdaq 1-Year Buffer with Stacker Cap Fund - Apr
Milliman S&P 500 & Nasdaq 1-Year Buffer with Stacker Cap Fund - Sep
Milliman S&P 500 & Nasdaq 1-Year Buffer with Stacker Cap Fund - Oct
Milliman S&P 500 & Nasdaq 1-Year Buffer with Stacker Cap Fund - Nov
Milliman S&P 500 & Nasdaq 1-Year Buffer with Stacker Cap Fund - Dec
Milliman S&P 500 & Russell 2000 1-Year Buffer with Stacker Cap Strategy
Milliman S&P 500 & Russell 2000 1-Year Buffer with Stacker Cap Fund - Jan
Milliman S&P 500 & Russell 2000 1-Year Buffer with Stacker Cap Fund - Feb
Milliman S&P 500 & Russell 2000 1-Year Buffer with Stacker Cap Fund - Mar
Milliman S&P 500 & Russell 2000 1-Year Buffer with Stacker Cap Fund - Apr
Milliman S&P 500 & Russell 2000 1-Year Buffer with Stacker Cap Fund - Sep
Milliman S&P 500 & Russell 2000 1-Year Buffer with Stacker Cap Fund - Oct
Milliman S&P 500 & Russell 2000 1-Year Buffer with Stacker Cap Fund - Nov
Milliman S&P 500 & Russell 2000 1-Year Buffer with Stacker Cap Fund - Dec
Milliman S&P 500 & MSCI EAFE 1-Year Buffer with Stacker Cap Strategy
Milliman S&P 500 & MSCI EAFE 1-Year Buffer with Stacker Cap Fund - Jan
Milliman S&P 500 & MSCI EAFE 1-Year Buffer with Stacker Cap Fund - Feb
Milliman S&P 500 & MSCI EAFE 1-Year Buffer with Stacker Cap Fund - Mar
Milliman S&P 500 & MSCI EAFE 1-Year Buffer with Stacker Cap Fund - Apr
Milliman S&P 500 & MSCI EAFE 1-Year Buffer with Stacker Cap Fund - Sep
Milliman S&P 500 & MSCI EAFE 1-Year Buffer with Stacker Cap Fund - Oct
Milliman S&P 500 & MSCI EAFE 1-Year Buffer with Stacker Cap Fund - Nov
Milliman S&P 500 & MSCI EAFE 1-Year Buffer with Stacker Cap Fund - Dec
Milliman S&P 500 6-Year Buffer with Par Up Strategy
Milliman S&P 500 6-Year Buffer with Par Up Fund - Jan (I)
Milliman S&P 500 6-Year Buffer with Par Up Fund - Apr (I)
Milliman S&P 500 6-Year Buffer with Par Up Fund - Oct (I)
Milliman S&P 500 6-Year Par Down with Par Up Strategy
Milliman S&P 500 6-Year Par Down with Par Up Fund - Jan (I)
Milliman S&P 500 6-Year Par Down with Par Up Fund - Apr (I)
Milliman S&P 500 6-Year Par Down with Par Up Fund - Oct (I)
|
This Prospectus relates only to the series of Milliman Variable Insurance Trust (the “Trust”) that are listed
above (each, a “Fund,” and, collectively, the “Funds”). Each Fund currently offers only Class 3 shares, and only to insurance company separate accounts funding
variable annuity contracts and variable life insurance policies and other qualified investors. You cannot purchase Fund shares (“Shares”) directly. Please contact your insurance company or other financial
intermediary regarding how to invest in Shares of a Fund.
The Securities and Exchange Commission has not approved or disapproved these securities or passed upon the adequacy of this Prospectus. Any
representation to the contrary is a criminal offense.
Important Information About the Funds
please read before making an investment
|
●
|
The Funds have characteristics unlike traditional investment products and will not be suitable for all investors. Carefully read this Prospectus before determining
whether any Fund may be a suitable investment.
|
|
●
|
A Fund is not operational and cannot be purchased by an investor until approximately the tenth day of the month indicated in the name of the Fund.
|
|
●
|
Each Fund seeks to provide exposure to the S&P 500 Index, prior to taking into account any fees or expenses or the performance of any fixed income exposure included in the Fund’s portfolio, while
providing a combination of two of the below “Options Strategies,” which are designed to produce certain pre-determined outcomes (the “Outcomes”), over a
six-month, one-year or six-year period (each, an “Outcome Period”), as specified in each Fund’s name. There is no guarantee that a Fund will be successful in
its attempt to achieve its investment objective and/or Outcomes. There also is no guarantee that a particular Options Strategy will be successful. An investor may lose some or all of their
investment in a Fund.
|
|
Options Strategies
|
Description
|
|
1. Buffer Strategy
|
Designed to provide a cushion against a specified percentage of losses in the Fund’s S&P 500 Index exposure (the “Buffer”)
if the S&P 500 Index experiences losses during the Outcome Period.
|
|
2. Floor Strategy
|
Designed to limit losses in the Fund’s S&P 500 Index exposure to a specified percentage (the “Floor”) if the
S&P 500 Index experiences losses during the Outcome Period.
|
|
3. Par Up Strategy
|
Designed to provide participation in the gains of the S&P 500 Index at a declared participation rate (the “Par Up Rate”)
if the S&P 500 Index experiences gains during the Outcome Period.
|
|
4. Par Down Strategy
|
Designed to limit losses in the Fund’s S&P 500 Index exposure at a declared participation rate (the “Par Down Rate”)
if the S&P 500 Index experiences losses during the Outcome Period.
|
|
5. Spread Strategy
|
Designed to provide participation in the gains of the S&P 500 Index if the S&P 500 Index experiences gains during the Outcome Period that exceed a
declared spread (the “Spread”).
|
|
6. Stacker Cap Strategy
|
Designed to provide participation in the gains of the S&P 500 Index up to a declared cap (the “S&P 500 Index Cap”)
if the S&P 500 Index experiences gains during the Outcome Period plus additional gains equal to any upside market performance of a secondary market index (the S&P 500 Index and each secondary
market index is referred to as a “Reference Index,” and, collectively, the “Reference Indices”) up to a declared cap (such cap together with the S&P 500
Index Cap, the “Index Caps,” and, each, an “Index Cap”) if that secondary Reference Index experiences gains during the Outcome Period.
|
|
●
|
Each Fund seeks to achieve its investment objective by transacting in FLexible EXchange® Options (“FLEX Options”) and by separately
maintaining a collateral portfolio comprised of fixed income securities, including money market funds and other interest-bearing instruments, cash, exchange-traded funds (“ETFs”) that primarily
invest in any of the foregoing instruments, and options on ETFs and options box spreads (the “Collateral Portfolio”). An options box spread is the combination of different options trades that
have offsetting spreads (e.g., purchases and sales on the same underlying instrument, such as an index or an ETF, but with different strike prices and/or expiration dates) for the purpose of
generating income. While the Funds will primarily transact in FLEX Options, each Fund may utilize over-the-counter
|
ii
|
(“OTC”) options if no FLEX Options are available or appropriate for use in that Fund. The Collateral Portfolio is designed primarily to serve
as margin or collateral for a Fund’s options positions and secondarily to enhance the Fund’s upside S&P 500 Index and/or secondary Reference Index options’ exposure (i.e., by utilizing
anticipated income to measure the ability to purchase additional options contracts). FLEX Options are exchange-traded options contracts with uniquely customizable terms, that reference (i.e.,
derive their value from) either a Reference Index or an ETF, and are guaranteed for settlement by the Options Clearing Corporation (“OCC”). OTC options are traded and privately negotiated in the
OTC market, and which also reference either a Reference Index or an ETF, as well as being subject to counterparty risk of the writer of the options contract. The Funds with six-month and one-year Outcome Periods will also transact in
options contracts on fixed income securities and/or one or more ETFs that provide exposure to fixed income securities to create a put spread (i.e., writing and purchasing options contracts on the
same underlying asset) (the “Put Spread Strategy”). The Put Spread Strategy may be used as part of the Collateral Portfolio or for other purposes consistent with a Fund’s investment strategy,
such as to enhance the Fund’s upside S&P 500 Index and/or secondary Reference Index options’ exposure. If the Collateral Portfolio and/or the Put Spread Strategy experiences losses, it could have
the effect of reducing the impact of, or completely eliminating, a Fund’s Buffer, Floor or the Par Down Rate, as applicable, on the Fund’s S&P 500 Index exposure. In certain market conditions, the performance of the Collateral
Portfolio and/or the Put Spread Strategy could cause a Fund to significantly underperform the S&P 500 Index. Despite the intended Buffer, Floor or Par Down Rate, as applicable, an investor could lose their entire investment. Any
stated Buffer, Floor or Par Down Rate is not operative against losses in the Collateral Portfolio or the Put Spread Strategy.
|
|
●
|
The Funds do not use defensive strategies or attempt to reduce their exposures to poor performing positions during an Outcome Period. This differs from funds that typically seek to
outperform a benchmark index. Therefore, in the event of a general market decline, a Fund’s value may fall more than the value of another fund that does attempt to hedge against such market declines.
|
|
●
|
On the last business day of any stated Outcome Period, all of a Fund’s existing options contracts will expire and the Fund’s investment adviser will transact in a new set of options
contracts on the same business day, which will commence a new Outcome Period beginning the following business day. Accordingly, Shares can be held indefinitely if investors determine to participate in additional Outcome Periods.
|
|
●
|
Each Fund’s website will provide information about the definitive Par Up Rate, Spread or Index Cap(s), as applicable to that Fund as of a specific time. This website will also
provide information relating to the Outcomes of each Fund on a daily basis, including the Fund’s position relative to the Par Up Rate, Spread or Index Cap(s), as applicable. Investors considering
purchasing Shares should visit the applicable Fund’s website before making an investment in that Fund.
|
|
●
|
Each Fund’s investment strategy is designed to deliver returns that provide exposure to the S&P 500 Index if Shares are bought on the day on which the Fund enters into the
options contracts and held until those options contracts expire at the end of the Outcome Period. In the event an investor purchases Shares after the date on which the options contracts were entered into
or redeems Shares prior to the expiration of the options contracts, the returns realized by the investor will not match those that the Fund seeks to achieve. Investors considering purchasing
Shares after an Outcome Period has begun or redeeming Shares prior to the end of the Outcome Period should visit the applicable Fund’s website prior to making such a decision to fully understand their potential investment outcomes in that Fund at that time.
|
Investor Suitability
An investment in Shares may be suitable for you only if all of the following apply to you:
|
●
|
Each Fund seeks to achieve specified Outcomes, but there is no guarantee that the Outcomes for an Outcome Period will be achieved. You fully understand the risks inherent in an investment in a Fund,
including that you may lose some or all of your investment.
|
iii
|
●
|
The Outcomes described in this prospectus are specifically designed to apply only if you hold Shares on the first day of the Outcome Period and continue to hold them on the last day of the Outcome
Period. You therefore desire to invest in a product with a return that depends upon the performance of the S&P 500 Index and any additional Reference Index (for the Stacker Cap Strategy) over a full Outcome Period.
|
|
●
|
You are willing to hold Shares for the duration of the Outcome Period or, if you choose to purchase or redeem Shares during the Outcome Period, you understand the associated risks, including that you may
receive a very different return based on the Fund’s value at the time of your purchase or redemption. Investors purchasing Shares of a Fund after the Outcome Period begins can access the Funds’ website at www.[______].com for additional
information regarding possible Outcomes depending upon projected index performance.
|
|
●
|
At the end of any particular Outcome Period, the relevant Fund will reset for a new Outcome Period tied to the same Reference Index(es) and with the same downside protection rate (whether a Buffer
Strategy, Floor Strategy or Par Down Strategy), but the potential upside participation rate in the relevant Reference Index(es) (whether a Par Up Strategy, Spread Strategy or Stacker Cap Strategy) may change based on (i) evaluation by
Milliman Financial Risk Management LLC, the Funds’ investment adviser (“Milliman”), of prevailing market conditions on the first day of the Outcome Period, and (ii) the total number (for the Par
Up Rate and Index Caps) or strike price (for the Spread) of long call options contracts on the applicable Reference Index(es) that Milliman is able to purchase at that time (the number of which will depend, in part, upon the expected
income from the Collateral Portfolio and the Put Spread Strategy).
|
|
●
|
You can tolerate fluctuations in the value of the net asset value of the Shares prior to the end of the Outcome Period that may be similar to, or exceed, the downside fluctuations in the value of the
S&P 500 Index and additional Reference Index (for the Stacker Cap Strategy).
|
|
●
|
You understand and accept the risks associated with the Collateral Portfolio and the Put Spread Strategy, including that either or both may (a) cause a Fund not to achieve its investment objective and/or
Outcomes or (b) otherwise negatively impact the Fund’s Options Strategies.
|
|
●
|
You understand that the performance of the Collateral Portfolio and/or the Put Spread Strategy could cause a Fund to significantly underperform the S&P 500 Index.
|
|
●
|
Investors investing in Funds utilizing the Buffer Strategy only: You are willing to be exposed to
the downside performance of the S&P 500 Index beyond the stated Buffer at a rate of 1% for each 1% decrease in value of the S&P 500 Index.
|
|
●
|
Investors investing in Funds utilizing the Floor Strategy only: You are willing to be exposed to
the downside performance of the S&P 500 Index prior to reaching the stated Floor at a rate of 1% for each 1% that the value of the S&P 500 Index decreases.
|
|
●
|
Investors investing in Funds utilizing the Par Down Strategy only: You understand and accept that you may experience losses in excess of the Par Down Rate in a
Fund’s S&P 500 Index exposure for the applicable Outcome Period at the time of your investment.
|
|
●
|
Investors investing in Funds utilizing the Par Up Strategy only: You understand and accept that
your potential return is limited by the Par Up Rate in effect for the applicable Outcome Period at the time of your investment.
|
|
●
|
Investors investing in Funds utilizing the Spread Strategy only: You understand and accept that you will forgo any potential gains if the value of S&P 500
Index does not surpass the declared Spread for the applicable Outcome Period at the time of your investment.
|
|
●
|
Investors investing in Funds utilizing the Stacker Cap Strategy only:
|
|
o
|
You believe that the value of the S&P 500 and/or additional Reference Index will increase over the term of the Outcome Period and you are willing to give up any gains of the Reference Indices in excess
of the Index Caps.
|
|
o
|
You understand and accept that your potential return is limited by the Index Caps and you are willing to forego any gains in excess of the Index Caps.
|
|
●
|
You understand that a Fund’s investment strategy is not expected to provide dividends to you.
|
|
●
|
You understand and accept the risks associated with the Funds’ investments in underlying investment companies (i.e., ETFs and money market funds).
|
|
●
|
You are willing to assume counterparty risk with the relevant counterparty to a Fund’s options positions.
|
|
●
|
You have visited the relevant Fund’s website and understand the Outcomes available to you based upon the Fund you selected at the time of your purchase.
|
iv
Table of Contents
|
Page
|
|
|
Fund Summaries
|
1
|
|
Milliman S&P 500 6-Month Buffer with Par Up Strategy
|
|
|
Milliman S&P 500 6-Month Buffer with Par Up Fund – Mar/Sep
|
1
|
|
Milliman S&P 500 6-Month Buffer with Par Up Fund – Apr/Oct
|
11
|
|
Milliman S&P 500 6-Month Buffer with Par Up Fund – May/Nov
|
21
|
|
Milliman S&P 500 6-Month Buffer with Par Up Fund – Jun/Dec
|
31
|
|
Milliman S&P 500 6-Month Buffer with Par Up Fund – Jan/Jul
|
41
|
|
Milliman S&P 500 6-Month Buffer with Par Up Fund – Feb/Aug
|
51
|
|
Milliman S&P 500 6-Month Par Down with Par Up Strategy
|
|
|
Milliman S&P 500 6-Month Par Down with Par Up Fund – Mar/Sep
|
61
|
|
Milliman S&P 500 6-Month Par Down with Par Up Fund – Apr/Oct
|
71
|
|
Milliman S&P 500 6-Month Par Down with Par Up Fund – May/Nov
|
81
|
|
Milliman S&P 500 6-Month Par Down with Par Up Fund – Jun/Dec
|
91
|
|
Milliman S&P 500 6-Month Par Down with Par Up Fund – Jan/Jul
|
101
|
|
Milliman S&P 500 6-Month Par Down with Par Up Fund – Feb/Aug
|
111
|
|
Milliman S&P 500 1-Year Buffer with Spread Strategy
|
|
|
Milliman S&P 500 1-Year Buffer with Spread Fund – Sep
|
121
|
|
Milliman S&P 500 1-Year Buffer with Spread Fund – Oct
|
131
|
|
Milliman S&P 500 1-Year Buffer with Spread Fund – Nov
|
141
|
|
Milliman S&P 500 1-Year Buffer with Spread Fund – Dec
|
151
|
|
Milliman S&P 500 1-Year Buffer with Spread Fund – Jan
|
161
|
|
Milliman S&P 500 1-Year Buffer with Spread Fund – Feb
|
171
|
|
Milliman S&P 500 1-Year Buffer with Spread Fund – Mar
|
181
|
|
Milliman S&P 500 1-Year Buffer with Spread Fund – Apr
|
191
|
|
Milliman S&P 500 1-Year Floor with Par Up Strategy
|
|
|
Milliman S&P 500 1-Year Floor with Par Up Fund – Sep
|
201
|
|
Milliman S&P 500 1-Year Floor with Par Up Fund – Oct
|
211
|
|
Milliman S&P 500 1-Year Floor with Par Up Fund – Nov
|
221
|
|
Milliman S&P 500 1-Year Floor with Par Up Fund – Dec
|
231
|
|
Milliman S&P 500 1-Year Floor with Par Up Fund – Jan
|
241
|
|
Milliman S&P 500 1-Year Floor with Par Up Fund – Feb
|
251
|
|
Milliman S&P 500 1-Year Floor with Par Up Fund – Mar
|
261
|
|
Milliman S&P 500 1-Year Floor with Par Up Fund – Apr
|
271
|
|
Milliman S&P 500 & Nasdaq 1-Year Buffer with Stacker Cap Strategy
|
|
|
Milliman S&P 500 & Nasdaq 1-Year Buffer with Stacker Cap Fund – Sep
|
281
|
|
Milliman S&P 500 & Nasdaq 1-Year Buffer with Stacker Cap Fund – Oct
|
292
|
|
Milliman S&P 500 & Nasdaq 1-Year Buffer with Stacker Cap Fund – Nov
|
303
|
|
Milliman S&P 500 & Nasdaq 1-Year Buffer with Stacker Cap Fund – Dec
|
314
|
|
Milliman S&P 500 & Nasdaq 1-Year Buffer with Stacker Cap Fund – Jan
|
325
|
|
Milliman S&P 500 & Nasdaq 1-Year Buffer with Stacker Cap Fund – Feb
|
336
|
|
Milliman S&P 500 & Nasdaq 1-Year Buffer with Stacker Cap Fund – Mar
|
347
|
|
Milliman S&P 500 & Nasdaq 1-Year Buffer with Stacker Cap Fund – Apr
|
358
|
|
Milliman S&P 500 & Russell 2000 1-Year Buffer with Stacker Cap Strategy
|
|
|
Milliman S&P 500 & Russell 2000 1-Year Buffer with Stacker Cap Fund – Sep
|
369
|
|
Milliman S&P 500 & Russell 2000 1-Year Buffer with Stacker Cap Fund – Oct
|
380
|
|
Milliman S&P 500 & Russell 2000 1-Year Buffer with Stacker Cap Fund – Nov
|
391
|
|
Milliman S&P 500 & Russell 2000 1-Year Buffer with Stacker Cap Fund – Dec
|
402
|
|
Milliman S&P 500 & Russell 2000 1-Year Buffer with Stacker Cap Fund – Jan
|
413
|
|
Milliman S&P 500 & Russell 2000 1-Year Buffer with Stacker Cap Fund – Feb
|
424
|
|
Milliman S&P 500 & Russell 2000 1-Year Buffer with Stacker Cap Fund – Mar
|
435
|
|
Milliman S&P 500 & Russell 2000 1-Year Buffer with Stacker Cap Fund – Apr
|
446
|
v
|
Milliman S&P 500 & MSCI EAFE 1-Year Buffer with Stacker Cap Strategy
|
|
|
Milliman S&P 500 & MSCI EAFE 1-Year Buffer with Stacker Cap Fund – Sep
|
457
|
|
Milliman S&P 500 & MSCI EAFE 1-Year Buffer with Stacker Cap Fund – Oct
|
468
|
|
Milliman S&P 500 & MSCI EAFE 1-Year Buffer with Stacker Cap Fund – Nov
|
479
|
|
Milliman S&P 500 & MSCI EAFE 1-Year Buffer with Stacker Cap Fund – Dec
|
490
|
|
Milliman S&P 500 & MSCI EAFE 1-Year Buffer with Stacker Cap Fund – Jan
|
501
|
|
Milliman S&P 500 & MSCI EAFE 1-Year Buffer with Stacker Cap Fund – Feb
|
512
|
|
Milliman S&P 500 & MSCI EAFE 1-Year Buffer with Stacker Cap Fund – Mar
|
523
|
|
Milliman S&P 500 & MSCI EAFE 1-Year Buffer with Stacker Cap Fund – Apr
|
534
|
|
Milliman S&P 500 6-Year Buffer with Par Up Strategy
|
|
|
Milliman S&P 500 6-Year Buffer with Par Up Fund – Oct (I)
|
545
|
|
Milliman S&P 500 6-Year Buffer with Par Up Fund – Jan (I)
|
555
|
|
Milliman S&P 500 6-Year Buffer with Par Up Fund – Apr (I)
|
565
|
|
Milliman S&P 500 6-Year Par Down with Par Up Strategy
|
|
|
Milliman S&P 500 6-Year Par Down with Par Up Fund – Oct (I)
|
575
|
|
Milliman S&P 500 6-Year Par Down with Par Up Fund – Jan (I)
|
585
|
|
Milliman S&P 500 6-Year Par Down with Par Up Fund – Apr (I)
|
595
|
|
Additional Information About the Funds and the Risks of Investing
|
605
|
|
Investor Suitability
|
615
|
|
Disclosure of Portfolio Holdings
|
616
|
|
Management and Organization
|
616
|
|
Additional Information About the Shares
|
617
|
|
Distribution and Servicing of Shares
|
619
|
|
Taxes
|
621
|
|
Financial Highlights
|
622
|
|
Disclaimers
|
622
|
vi
Fund Summary: Milliman S&P 500 6-Month Buffer with Par
Up Fund – Mar/Sep
Investment Objective
The Fund seeks to provide exposure to the S&P 500 Index, while providing a buffer against the first 10% of losses associated with S&P 500
Index performance and participating in S&P 500 Index gains at a declared rate, prior to taking into account any fees or expenses or the performance of any fixed income exposure included in the Fund’s portfolio, over the period from September
1, 2021 through February 28, 2022.
Fees and Expenses of the Fund
This table describes the fees and expenses that you may pay if you buy, hold and sell shares of the Fund (“Shares”).
This table and the example below do not include any fees or sales charges imposed by your variable product. If they were included, the expenses listed below would be higher.
Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment)
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Class 3
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|
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Management Fees
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0.49%
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|
Distribution and Service (12b-1) Fees
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0.25%
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Other Expenses(1)
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0.50%
|
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Acquired Fund Fees and Expenses(1)
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[_.__]%
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|
Total Annual Fund Operating Expenses
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1.24%
|
|
Fee Waiver and/or Expense Reimbursement(2)(3)
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(0.25)%
|
|
Total Annual Fund Operating Expenses After Fee Waiver and/or Expense Reimbursement
|
0.99%
|
|
(1)
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“Other Expenses” and “Acquired Fund Fees and Expenses” are based on estimated amounts for the current fiscal year.
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|
(2)
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The Fund’s investment adviser, Milliman Financial Risk Management LLC (“Milliman”), has contractually
agreed to waive advisory fees and/or reimburse expenses to the extent necessary to limit the Fund’s total annual Fund operating expenses (excluding taxes, interest, brokerage fees and commissions, Rule 12b-1 fees, acquired fund fees and
expenses, short-sale dividend expenses, administrative services fees, other expenses that are capitalized in accordance with generally accepted accounting principles, and extraordinary or non-routine expenses not incurred in the
ordinary course of the Fund’s business) to 0.74% of the Fund's average daily net assets (the “Expense Limitation Agreement”) until at least November 1, 2022. During its term, the Expense
Limitation Agreement cannot be terminated or amended to increase the applicable limit without approval of the Board of Trustees of the Trust (the “Board”). Milliman may recoup from the Fund any
advisory fees waived or expenses reimbursed pursuant to the Expense Limitation Agreement for a period of three years from the date on which such waiver or reimbursement occurred; provided, however, that such recoupment shall not be made
if it would cause the Fund’s total annual Fund operating expenses to exceed the lesser of (a) the expense limitation in effect at the time of the reimbursement, or (b) the expense limitation in effect at the time of recoupment, if any.
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|
(3)
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In addition to the Expense Limitation Agreement, Milliman has contractually agreed to waive its advisory fees in an amount equal to the Fund’s
acquired fund fees and expenses until at least November 1, 2022 (the “Fee Waiver”). This contract cannot be terminated or modified without the consent of the Board.
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Example
This example is intended to help you compare the cost of investing in the Fund with the cost of investing in other funds. This example assumes that you
invest $10,000 in the Fund for the time periods indicated and then sell all of your Shares at the end of those periods. This example also assumes that your investment has a 5% return each year and that the Fund’s operating expenses remain at
current levels and that the Expense Limitation Agreement and Fee Waiver remain in place for their contractual periods. Although your actual costs may be higher or lower, your costs, based on these assumptions, would be:
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1 Year
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3 Years
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|
|
Class 3
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$104
|
$384
|
This example does not include any fees or sales charges imposed by your variable product. If they were included, the expenses listed above would be
higher.
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Portfolio Turnover
The Fund pays transaction costs, such as commissions, when it purchases and sells securities (or “turns over” its portfolio). A higher portfolio turnover
will cause the Fund to incur additional transaction costs. These costs, which are not reflected in Total Annual Fund Operating Expenses or in the example, may affect the Fund’s performance. Because the Fund has not yet commenced investment
operations, no portfolio turnover information is available at this time.
Principal Investment Strategies
The Fund seeks to achieve its investment objective by transacting in FLexible EXchange® Options (“FLEX Options”)
and by separately maintaining a collateral portfolio (the “Collateral Portfolio”), which is designed primarily to serve as margin or collateral for the Fund’s FLEX Options positions and secondarily to
enhance the Fund’s upside S&P 500 Index FLEX Options’ exposure (i.e., by utilizing anticipated income to measure the ability to purchase additional FLEX Options). FLEX Options are exchange-traded
options contracts with uniquely customizable terms. In general, an options contract is an agreement between a buyer and seller that gives the purchaser of the option the right to buy or sell a particular asset at a specified future date at an
agreed upon price, commonly known as the “strike price.” The reference assets for the Fund’s FLEX Options positions will include the S&P 500 Index, which is a large-capitalization, market-weighted, U.S. equities index that tracks the price
(excluding dividends) of 500 leading companies in leading industries of the U.S. economy, and certain exchange-traded funds (“ETFs”), as described further below.
The Collateral Portfolio may be invested in short-term fixed-income securities, including corporate bonds and other corporate debt securities,
asset-backed securities (“ABS”), securities issued by the U.S. Government or its agencies and instrumentalities, securities issued by non-U.S. governments or their agencies and instrumentalities, money
market securities and funds, other interest-bearing instruments, cash, ETFs that primarily invest in any of the foregoing instruments, options on ETFs and options box spreads. An options box spread is the combination of different options trades
that have offsetting spreads (e.g., purchases and sales on the same underlying instrument, such as an index or an ETF, but with different strike prices and/or expiration dates) for the purpose of
generating income. The Fund may invest in short-term fixed income securities or other instruments, including through ETFs, of any maturity and credit quality. The Fund will generally invest up to 35% of its net assets in one or more ETFs that
provide exposure to investment grade corporate bonds.
Due to the unique mechanics of the Fund’s strategy, the return an investor can expect to receive from an investment in the Fund has characteristics that
are distinct from the returns of many other investment vehicles. It is important that an investor understand these characteristics before making an investment in the Fund.
In seeking to achieve its investment objective, the Fund seeks to produce pre-determined outcomes (the “Outcomes”)
that are based upon the performance of the S&P 500 Index over a six-month period (the “Outcome Period”). The initial Outcome Period for the Fund is September 1, 2021 through February 28, 2022.
Following the initial Outcome Period, each subsequent Outcome Period will be a six-month period commencing upon the expiration of the prior Outcome Period. The Fund seeks to achieve the Outcomes by purchasing and writing (selling) FLEX Options to
create layers within the Fund’s portfolio. One layer is designed to produce returns that correlate to those of the S&P 500 Index for the Outcome Period at a declared rate (the “Par Up Rate”) if the
S&P 500 Index experiences gains during that time, as described below. A separate layer is designed to produce returns that correlate to those of the S&P 500 Index for the Outcome Period that are
buffered up to 10% if the S&P 500 Index experiences losses during that time (the “Buffer”). There is no guarantee that the Fund will be successful in its attempt to
produce returns that correlate to those of the S&P 500 Index at the Par Up Rate or produce buffered returns against the Fund’s S&P 500 Index exposure.
Milliman Financial Risk Management, LLC (“Milliman”), the investment adviser of the Fund, seeks to establish the
Buffer by writing one put FLEX Option on the S&P 500 Index with a strike price that is 10% lower than the value of the S&P 500 Index at the beginning of the Outcome Period.
Milliman seeks to establish the Par Up Rate by purchasing long call FLEX Options on the S&P 500 Index with a strike price approximately equal to
the value of the S&P 500 Index at the beginning of the Outcome Period.
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Milliman purchases these FLEX Options with a portion of the Fund’s net assets plus (i) the cash received from writing the put FLEX Option designed to
create the Buffer, (ii) additional cash received by utilizing FLEX Options to create a put spread (the “Put Spread Strategy”) on fixed income securities and/or one or more ETFs that provide exposure to
fixed income securities, and (iii) yield received from the Collateral Portfolio. Milliman seeks to achieve the Put Spread Strategy for the Fund by writing a put FLEX Option on an underlying asset at a strike price at or lower than the underlying
asset’s market price or current value at the beginning of the Outcome Period, and buying a put FLEX Option on the same underlying asset at a lower strike price than the written put FLEX Option.
The Par Up Rate is the rate at which the Fund will seek to track any upside market performance of the S&P 500 Index. Milliman calculates the Par
Up Rate based upon (i) its evaluation of prevailing market conditions on the first day of the Outcome Period and (ii) the total number of long call FLEX Options on the S&P 500 Index that it is able to purchase at that time. As of the date of
this Prospectus, and assuming current market conditions persist, Milliman expects that the Par Up Rate will be between the below ranges (both gross and net of Fund fees and expenses). Any fees or expenses imposed by your variable product, and any
other expenses incurred by the Fund, will have the effect of further reducing the Par Up Rate. Once calculated, the Par Up Rate for a particular Outcome Period will not change during that Outcome Period;
however, in certain market conditions, the performance of the Collateral Portfolio and the Put Spread Strategy could reduce the impact of the Par Up Rate.
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Share Class
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Estimated Par Up Rate Ranges
(As of [___])
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|
|
Prior to Taking into Account Fund Fees and Expenses
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After Taking into Account Fund Fees and Expenses
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|
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Class 3
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[__]% and [__]%
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[__]% and [__]%
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The Buffer is only operative against the first 10% of losses in the Fund’s S&P 500 Index exposure for the Outcome Period. If the S&P 500 Index
decreases in value by more than 10% during the Outcome Period, the Fund (and therefore investors in Shares) will experience all subsequent losses in the Fund’s S&P 500 Index exposure on a one-to-one basis for the Outcome Period. The Fund
seeks to produce buffered returns against its S&P 500 Index exposure prior to taking into account any fees or expenses or the performance of the Collateral Portfolio or the Put Spread Strategy. The Buffer
is not operative against losses in the Collateral Portfolio or the Put Spread Strategy. If the Collateral Portfolio and/or the Put Spread Strategy experiences losses, it could have the effect of reducing the impact of, or completely
eliminating, the Buffer on the Fund’s S&P 500 Index exposure. In certain market conditions, the performance of the Collateral Portfolio and/or the Put Spread Strategy could cause the Fund to significantly underperform the S&P 500
Index. The following table reflects the Buffer both gross and net of Fund fees and expenses:
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Share Class
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Buffer
(As of [___])
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|
|
Prior to Taking into Account Fund Fees and Expenses
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After Taking into Account Fund Fees and Expenses
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|
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Class 3
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10%
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[__]%
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The definitive Par Up Rate and Buffer will be set forth on the Fund’s website. The Fund’s website will also provide information relating to the
Outcomes on a daily basis, including the Fund’s position relative to the Par Up Rate and the Buffer. You may also contact your insurance company or other financial intermediary for more information.
Additionally, the Fund’s net asset value (“NAV”) will not increase or decrease at the same rate as the
S&P 500 Index because the Fund’s strategy relies upon the performance of the Collateral Portfolio and the Put Spread Strategy, in addition to the value of the Fund’s FLEX Options positions on the S&P 500 Index. While Milliman anticipates
that the Fund’s NAV will generally move in the same direction as the S&P 500 Index (meaning that the Fund’s NAV will generally increase if the S&P 500 Index experiences gains or decrease if the S&P 500 Index experiences losses), the
Fund’s NAV may not decrease at the same rate as the S&P 500 Index (especially when factoring in the performance of the Collateral Portfolio and the Put Spread Strategy) and will not increase at the same rate as the S&P 500 Index
(especially when factoring in the Par Up Rate and the performance of the Collateral Portfolio and the Put Spread Strategy). Similarly, the amount of time remaining until the end of the Outcome Period also affects
3
the impact of the Buffer on the Fund’s NAV, because the Buffer may not be in full effect prior to the end of the Outcome Period.
The FLEX Options utilized in the Fund’s portfolio are each set to expire on the last day of the Outcome Period. The customizable nature of FLEX Options
will allow Milliman to select the strike price at which each FLEX Option will be exercised at the expiration of the FLEX Option term. At the commencement of the Outcome Period, Milliman will specifically select the strike price for each FLEX Option
in a manner designed to achieve the Outcomes when the FLEX Options are exercised on the final day of the Outcome Period, depending on the anticipated performance of the S&P 500 Index, the Collateral Portfolio and the Put Spread Strategy over
the duration of that Outcome Period.
The hypothetical graphical illustrations provided below are designed to illustrate the Outcomes based upon the
hypothetical performance of the S&P 500 Index for an investor who holds Shares for the entirety of the Outcome Period. The hypothetical graphical illustrations do not include any fees or expenses imposed by your variable product or expenses
incurred by the Fund, and do not reflect the performance of the Collateral Portfolio or the Put Spread Strategy. Additional hypothetical graphical representations of the Outcomes are provided in “Additional Information About the Funds and
the Risks of Investing.” There is no guarantee that the Fund will be successful in its attempt to achieve the Outcomes for the Outcome Period.
The following table contains hypothetical examples designed to illustrate the Outcomes the Fund seeks to
achieve over the Outcome Period, based upon the performance of the S&P 500 Index from (100)% to 100% after taking into account the Par Up Rate and the Buffer, but prior to taking into account any fees or expenses or the performance of the
Collateral Portfolio or the Put Spread Strategy. The table is provided for illustrative purposes only and does not provide every possible performance scenario for Shares over the course of the Outcome Period. There is no guarantee that the Fund will be successful in its attempt to achieve the Outcomes for an Outcome
Period. The table is not intended to predict or project the performance of the FLEX Options or the Fund. Investors should not take this information as an assurance of the expected performance of the
S&P 500 Index or the Fund. Actual Fund performance will vary with fluctuations in the performance of the Collateral Portfolio and the Put Spread Strategy, in addition to the value of the Fund’s FLEX Options positions on the S&P
500 Index, during the Outcome Period, among other factors. The performance of the Collateral Portfolio and the Put Spread
4
Strategy could significantly impact the performance of the Fund, which could prevent the Fund from achieving the
Outcomes that it seeks to produce. The table does not reflect any fees or expenses imposed by your variable product or expenses incurred by the Fund. If it did, the returns shown for the Fund would be lower. Please refer to the Fund’s
website, which provides updated information relating to this table on a daily basis throughout the Outcome Period. Please contact your insurance company or other financial intermediary for more information.
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Index/Fund
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Hypothetical Performance1
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|||||||||||
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S&P 500 Index Price Performance
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(100)%
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(50)%
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(20)%
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(10)%
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(5)%
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0%
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5%
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10%
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15%
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20%
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50%
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100%
|
|
Fund Performance at NAV
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(90)%
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(40)%
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(10)%
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0%2
|
0%2
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0%
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4.0%3
|
8.0%3
|
12%3
|
16%3
|
40%3
|
80%3
|
| 1 |
Does not take into account any fees or expenses or the performance of the Collateral Portfolio or the Put Spread Strategy.
|
| 2 |
Reflects the impact of the Buffer.
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| 3 |
Reflects the impact of an assumed Par Up Rate of 80%.
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Understanding Outcomes. The Outcomes the Fund seeks to achieve are measured based upon the
Fund’s NAV on the first day of the Outcome Period. The Outcome Period begins on the day Milliman transacts in the FLEX Options on behalf of the Fund, and ends on the day those FLEX Options expire. An investor who
purchases Shares after the commencement of the Outcome Period will likely have purchased Shares at a different NAV than the NAV on the first day of the Outcome Period (the NAV upon which the Outcomes are based) and may experience investment
outcomes very different from those the Fund seeks to achieve, especially when factoring in any fees or expenses or the performance of the Collateral Portfolio and the Put Spread Strategy. An investor who redeems Shares prior to the end of the
Outcome Period may also experience investment outcomes very different from those the Fund seeks to achieve. The Outcomes are designed with the expectation that an investor will hold Shares on the day that Milliman transacts in the FLEX Options on
behalf of the Fund, and on the day those FLEX Options expire. There is no guarantee that the Fund will be successful in its attempt to achieve the Outcomes.
Understanding the Par Up Rate. Unlike other investment products, the potential returns an
investor can receive from an investment in the Fund are subject to the Par Up Rate. This means that if the S&P 500 Index experiences gains for the Outcome Period, an investor in the Fund will only experience
a percentage of those gains (equal to the Par Up Rate multiplied by the S&P 500 Index gains). Milliman calculates the Par Up Rate for each Outcome Period based upon (i) its evaluation of prevailing market conditions on the first day
of the Outcome Period and (ii) the total number of long call FLEX Options on the S&P 500 Index that it is able to purchase at that time. In certain market conditions, the performance of the Collateral
Portfolio and the Put Spread Strategy could reduce the impact of the Par Up Rate. An investor should consider the amount and impact of the Par Up Rate, and the Fund’s position relative to it, before investing in the Fund.
Understanding the Buffer. The Buffer that the Fund seeks to provide is only operative
against the first 10% of losses in the Fund’s S&P 500 Index exposure for the Outcome Period. If an investor is considering purchasing Shares during the Outcome Period, and the S&P 500 Index has decreased
in value by an amount equal to or greater than 10%, an investor purchasing Shares at that time will be able to participate in any gains thereafter, but will not benefit from the Buffer that the Fund seeks to offer for the remainder of the
Outcome Period if the losses continue to be equal to or greater than 10% during that period. Conversely, if an investor is considering purchasing Shares during the Outcome Period, and the Fund’s NAV has increased in value, then an investor may
experience losses before implementation of the Buffer that the Fund seeks to provide. While the Fund seeks to produce returns that correlate to those of the S&P 500 Index for the Outcome Period that are buffered up to 10% (prior to
taking into account any fees or expenses or the performance of the Collateral Portfolio or the Put Spread Strategy) for investors who hold Shares for the entire Outcome Period, there is no guarantee it will successfully do so. In addition, the Buffer is not operative against losses in the Collateral Portfolio or the Put Spread Strategy. If the Collateral Portfolio and/or the Put Spread Strategy experiences losses, it could have the
effect of reducing the impact of, or completely eliminating, the Buffer on the Fund’s S&P 500 Index exposure. In certain market conditions, the performance of the Collateral Portfolio and/or the Put Spread Strategy could cause the Fund to
significantly underperform the S&P 500 Index. Investors who
5
purchase Shares at the beginning of the Outcome Period may lose their entire investment. Investors who purchase Shares after the
Outcome Period has begun may also lose their entire investment. An investment in the Fund is only appropriate for investors willing to bear those losses.
Fund Rebalance. Milliman implements the Fund’s strategy on a semi-annual basis, seeking to
produce the Outcomes for an Outcome Period. On the last business day of any stated Outcome Period, all of the Fund’s existing FLEX Options, which includes those used to establish the Buffer, the Par Up Rate and the Put Spread Strategy, will
expire and Milliman will transact in a new set of FLEX Options on the same business day, which will commence a new Outcome Period beginning the following business day. At that same time, Milliman will also evaluate whether to make any adjustments
to the Collateral Portfolio. Accordingly, Shares can be held indefinitely if investors determine to participate in additional Outcome Periods.
Approximately one week prior to the end of each Outcome Period, the Fund will file a prospectus supplement, which will notify existing investors of
(i) the date on which the existing Outcome Period will end; (ii) the date on which the new Outcome Period will commence; and (iii) the anticipated ranges of the Par Up Rate that will be used for the new Outcome Period. Immediately preceding the
commencement date of the new Outcome Period, the Fund will file a prospectus supplement disclosing the Fund’s final Par Up Rate (both gross and net of Fund fees and expenses) for the new Outcome Period. This information will also be available
online at www.[___________].com, and on your insurance company’s website. Please contact your insurance company or other financial intermediary for more information.
Fund Classification. The Fund is classified as “non-diversified” under the Investment
Company Act of 1940, as amended (the “1940 Act”).
Principal Risks
You could lose money by investing in the Fund. An investment in the Fund is not a deposit of a bank and is not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other governmental agency. There can be no assurance that the Fund’s investment objectives will be achieved.
Downside Loss Buffer Risk. There can be no guarantee that the Fund will be successful in its strategy to
buffer against S&P 500 Index losses if the S&P 500 Index decreases in value over the Outcome Period. The Fund’s strategy is designed to produce returns that correlate to those of the S&P 500 Index at the Par Up Rate, while limiting
downside losses in the Fund’s S&P 500 Index exposure, if Shares are bought on the day on which Milliman transacts in the FLEX Options on behalf of the Fund and held until those FLEX Options expire at the end of each Outcome Period. The
success of the Buffer also depends upon the performance of the Collateral Portfolio and the Put Spread Strategy. If the Collateral Portfolio and/or the Put Spread Strategy experiences losses, it could have the
effect of reducing the impact of, or completely eliminating, the Buffer on the Fund’s S&P 500 Index exposure. In certain market conditions, the performance of the Collateral Portfolio and/or the Put Spread Strategy could cause the Fund to
significantly underperform the S&P 500 Index. Despite the intended Buffer, an investor could lose their entire investment. In the event an investor purchases Shares after the date on which Milliman transacted in the FLEX
Options on behalf of the Fund, or redeems Shares prior to the expiration of those FLEX Options, the Buffer that the Fund seeks to provide may not be available or fully applicable.
Risk of the Par Up Rate on Upside Returns. The Fund’s strategy is designed to produce returns that correlate
to those of the S&P 500 Index at the Par Up Rate if Shares are bought on the day on which Milliman transacts in the FLEX Options on behalf of the Fund and held until those FLEX Options expire at the end of the Outcome Period. Accordingly, the
Fund will not fully participate in any gains achieved by the S&P 500 Index. In addition, in the event an investor purchases Shares after the date on which Milliman transacted in the FLEX Options on behalf of the Fund, or redeems Shares prior
to the expiration of those FLEX Options, the returns realized by that investor may not match those that the Fund seeks to achieve pursuant to the Par Up Rate. In certain market conditions, the performance of
the Collateral Portfolio and the Put Spread Strategy could reduce the impact of the Par Up Rate. An investor should consider the amount and impact of the Par Up Rate, and the Fund’s position relative to it, before investing in the Fund.
6
Par Up Rate Change Risk. Because the Par Up Rate for each Outcome Period is calculated based upon (i)
Milliman’s evaluation of prevailing market conditions on the first day of the Outcome Period and (ii) the total number of long call FLEX Options on the S&P 500 Index that Milliman is able to purchase at that time, the Par Up Rate may rise or
fall from one Outcome Period to the next. Any change in the Par Up Rate could be significant and it is unlikely to remain the same for consecutive Outcome Periods.
FLEX Options Risk. The Fund will transact in FLEX Options issued and guaranteed for settlement by the OCC. The
Fund bears the risk that the OCC will be unable or unwilling to perform its obligations under the FLEX Options contracts, which could result in significant losses to the Fund. In less liquid markets, terminating a FLEX Option may require the
payment of a premium or acceptance of a discounted price, and may take longer to complete. In addition, a less liquid trading market may adversely impact the value of the Fund’s FLEX Options and therefore the NAV of the Fund. In addition, the value
of the Fund’s FLEX Options positions is not anticipated to increase or decrease at the same rate as the reference asset; and while it is anticipated that they will generally move in the same direction, it is possible that they may move in different
directions. Certain FLEX Options positions may also expire worthless. The use of FLEX Options involves leverage, which can cause the Fund’s portfolio to be more volatile than if the portfolio had not been leveraged. Leverage can significantly
magnify the effect of price movements of the reference asset, disproportionately increasing the Fund’s losses and reducing the Fund’s opportunities for gains when the reference asset changes in unexpected ways. In some instances, such leverage
could result in losses that exceed the original amount invested.
Investment Objective and Outcomes Risk. There is no guarantee that the Fund will be successful in its attempt
to achieve its investment objective and/or the Outcomes, and an investor could lose some or all of their investment in the Fund. Certain circumstances under which the Fund might not achieve its objective and/or the Outcomes include, but are not
limited to (i) if the Fund disposes of FLEX Options, (ii) if the Fund is unable to maintain the proportional relationship based on the number of FLEX Options in the Fund’s portfolio, (iii) significant accrual of Fund expenses in connection with
effecting the Fund’s principal investment strategy, (iv) losses incurred by the Fund’s holdings in the Collateral Portfolio and/or losses resulting from the Put Spread Strategy, or (iv) adverse tax law changes affecting the treatment of FLEX
Options.
Tax Risk. The Fund intends to elect, and to qualify each year, to be treated as a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”). As a RIC, the Fund will not be subject to U.S. federal income tax on the portion
of its net investment income and net capital gain that it distributes to shareholders, provided that it satisfies certain requirements of the Code. To maintain its status as a RIC, the Fund must meet certain income, diversification and
distributions tests. For purposes of the diversification test, the identification of the issuer (or, in some cases, issuers) of a particular Fund investment can depend on the terms and conditions of that investment. In particular, there is no
published IRS guidance or case law on how to determine the “issuer” of certain derivatives that the Fund will enter into and the Fund has not received a private letter ruling on this point. Therefore, there is a risk that the Fund will not meet the
Code’s diversification requirements and will not qualify, or will be disqualified, as a RIC. If the Fund does not qualify as a RIC for any taxable year and certain relief provisions are not available, the Fund’s taxable income will be subject to
tax at the Fund level and to a further tax at the shareholder level when such income is distributed.
The Fund also intends to comply with the diversification requirements of Section 817(h) of the Code, and the regulations thereunder, relating to the
tax-deferred status of variable accounts that are based on insurance company separate accounts (referred to as “segregated asset accounts” for federal income tax purposes). These diversification requirements apply in addition to the RIC
diversification requirements discussed above. There also is no published guidance or case law on how to determine the “issuer” of the derivatives referred to above for purposes of the diversification requirements of Section 817(h) of the Code and
the Fund has not received a private letter ruling on this point. If these requirements are not met, or under other circumstances, such as if the Fund does not qualify as a RIC for any taxable year, it is possible that the contract owners (rather
than the insurance company) will be treated for federal income tax purposes as the taxable owners of the assets held by the segregated asset accounts.
Clearing Member Default Risk. The Fund will hold FLEX Options through accounts at members of clearing houses (“clearing members”) rather than a bank or a broker. Assets deposited by the Fund with any clearing member as margin for its FLEX Options positions may, in certain circumstances, be used to satisfy losses of other
clients of the Fund’s clearing member where such assets may be held in commingled omnibus accounts. In addition, although
7
clearing members guarantee performance of their clients’ obligations to the clearing house, there is a risk that the assets of the Fund might not be
fully protected in the event of the clearing member’s bankruptcy, as the Fund would be limited to recovering only a pro rata share of all available funds segregated on behalf of the clearing member’s
customers for the relevant account class.
Debt Securities Risk. The prices of debt securities will be affected by changes in interest rates, the
creditworthiness of the issuer and other factors. These risks could affect the value of investments in which the Fund invests, possibly causing the Fund’s NAV to be reduced and fluctuate more than other types of investments. During periods of
falling interest rates, an issuer of a callable bond may repay the security before its stated maturity, and the Fund may have to reinvest the proceeds in securities with lower yields, which would result in a decline in the Fund’s income, or in
securities with greater risks or with other less favorable features. Changing interest rates, including rates that fall below zero, may have unpredictable effects on markets, result in heightened market volatility and detract from the Fund’s
performance to the extent the Fund is exposed to such interest rates. An increase in interest rates will generally cause the value of fixed-income securities held by the Fund to decline, may lead to heightened volatility in the fixed-income
markets and may adversely affect the liquidity of certain fixed-income investments, including those held by the Fund. Risks associated with rising interest rates are heightened given that interest rates in the U.S. are near historic lows.
Adjustable-rate instruments also react to interest rate changes in a similar manner, although generally to a lesser degree (depending, however, on the characteristics of the reset terms, including the index chosen, frequency of reset and reset
caps or floors, among other factors). Interest rate sensitivity is generally more pronounced and less predictable in instruments with uncertain payment or prepayment schedules and also for those with longer maturities.
Foreign Securities and Credit Exposure Risk. U.S. dollar-denominated securities carrying foreign credit exposure
may be affected by unfavorable political, economic or governmental developments that could affect payments of principal and interest. Furthermore, the value of the Fund’s foreign investments (whether direct or indirect) may be adversely affected by
political and social instability in their home countries, by changes in economic or taxation policies in those countries, or by the difficulty in enforcing obligations in those countries. Foreign companies generally may be subject to less stringent
regulations than U.S. companies, including financial reporting requirements and auditing and accounting controls. As a result, there generally is less publicly available information about foreign companies than about U.S. companies. Trading in many
foreign securities may be less liquid and more volatile than U.S. securities due to the size of the market or other factors.
U.S. Government Securities Risk. U.S. Government securities are subject to interest rate risk but generally do
not involve the credit risks associated with investments in other types of debt securities. As a result, the yields available from U.S. Government securities are generally lower than the yields available from other debt securities. U.S. Government
securities are guaranteed only as to the timely payment of interest and the payment of principal when held to maturity. While securities issued or guaranteed by U.S. federal government agencies are backed by the full faith and credit of the U.S.
Department of the Treasury, securities issued by government sponsored entities are solely the obligation of the issuer and generally do not carry any guarantee from the U.S. Government.
ABS Risk. ABS are subject to the general debt securities risks described above. In addition, ABS may be less
liquid than other bonds, and may be more sensitive than other bonds to the market’s perception of issuers and creditworthiness of payees, which may result in the Fund experiencing difficulty selling or valuing these securities. ABS markets have
experienced extraordinary weakness and volatility at various times in recent years, and may decline quickly in the event of a substantial economic or market downturn. Accordingly, these securities may be subject to greater risk of default during
periods of economic downturn than other securities, which could result in possible losses to the Fund.
Issuer Risk. The performance of the Fund depends on the performance of individual securities to which the Fund
has exposure. The Fund may be adversely affected if an issuer of underlying securities held by the Fund is unable or unwilling to repay principal or interest when due. Changes in the financial condition or credit rating of an issuer of those
securities may cause the value of the securities to decline.
Management Risk. The Fund is subject to management risk because it is an actively managed portfolio. Milliman
will apply investment techniques and risk analyses in making investment decisions for the Fund, but there can be no guarantee that the Fund will meet its investment objective and/or the Outcomes. In addition, Milliman does not use
8
defensive strategies or attempt to reduce the Fund’s exposures to poor performing positions during an Outcome Period. This differs from funds that are
managed to seek to outperform a benchmark index. Therefore, in the event of a general market decline, the Fund’s value may fall more than the value of another fund that does attempt to hedge against such market declines.
Market Risk. The Fund could lose money over short periods due to short-term market movements and over longer
periods during more prolonged market downturns. Assets may decline in value due to factors affecting financial markets generally or particular asset classes or industries represented in the markets. The value of a FLEX Option or other asset may
also decline due to general market conditions, economic trends or events that are not specifically related to the issuer of the security or other asset, or due to factors that affect a particular issuer, country, region, market, industry, sector or
asset class.
Non-Diversification Risk. The Fund may invest a relatively high percentage of its assets in a limited number of
issuers. As a result, the Fund may be more susceptible to a single adverse economic or regulatory occurrence affecting one or more of these issuers, experience increased volatility and be highly invested in certain issuers.
Large Shareholder Risk. At times, the Fund may experience adverse effects when certain large shareholders,
including insurance company separate accounts, redeem large amounts of shares of the Fund. Large redemptions may cause the Fund to sell portfolio holdings at times when it would not otherwise do so and may increase transaction costs and/or result
in an increase to the Fund’s expense ratio. A large redemption could be detrimental to the Fund and its remaining shareholders.
Risks of Investing in ETFs. In addition to the risks associated with the underlying assets held by the ETFs in
which the Fund invests, investments in ETFs are also subject to the following additional risks: (i) only authorized participants may engage in transactions directly with ETFs but none are obligated to do so, which could result in an ETF’s shares
trading at a premium or discount to its NAV or possibly face trading halts or delisting; (ii) certain ETFs seek to track the performance of an underlying index and will not attempt to take defensive positions under any market conditions, including
declining markets, which could result in losses; and (iii) because ETF shares trade on the secondary market, there is not guarantee that an active market will be developed or maintained, which could result in the ETF’s shares trading at a premium
or discount to its NAV. Investments in ETFs may involve duplication of management fees and certain other expenses, as the Fund indirectly bears its proportionate share of any expenses paid by the ETFs in which it invests.
Risks of Investing in Money Market Funds. Money market funds seek to preserve the value of shareholder
investments at $1.00 per share, but shareholders, such as the Fund, may still lose money by investing in such funds. In addition, a money market fund may impose a fee upon the sale of its shares or may temporarily suspend the ability to sell shares
if the fund’s liquidity falls below required minimums because of market conditions or other factors. The credit quality of a money market fund’s holdings can change rapidly in certain markets, and the default of a single holding could have an
adverse impact on the fund’s share price. A money market fund’s share price can also be negatively affected during periods of high redemption pressures, illiquid markets, and/or significant market volatility.
Performance
As of the date of this Prospectus, the Fund has not commenced operations and therefore does not have a performance history. Once available, the Fund’s
performance information will be accessible online at www.[________].com and will provide some indication of the risks of investing in the Fund.
Management
Investment Adviser
Milliman Financial Risk Management LLC (“Milliman”) serves as investment adviser to the Fund.
9
Portfolio Managers
The following persons serve as portfolio managers of the Fund.
|
●
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Robert T. Cummings, Principal & Head of Portfolio Management at Milliman.
|
|
●
|
Maria Schiopu, Principal & Head of Portfolio Management at Milliman.
|
|
●
|
Jeff Greco, Principal & Head of Strategy Research at Milliman.
|
|
●
|
Jordan Rosenfeld, Portfolio Manager at Milliman.
|
Each portfolio manager is jointly and primarily responsible for the day-to-day management of the Fund’s portfolio and has served in such capacity
since the Fund’s inception in 2021.
Purchase and Sale of Shares
Shares are available as underlying investment options for variable insurance contracts and variable life insurance policies (each, a “variable contract,” and, collectively, the “variable contracts”) issued by insurance companies. These insurance companies are the record owners of the separate accounts
holding the Shares. You do not buy, sell or exchange Shares directly; rather, you choose investment options through your variable contracts. The insurance companies then cause the separate accounts to purchase and redeem Shares according to
the investment options you choose.
Tax Information
The dividends and distributions paid by the Fund to the insurance company separate accounts will consist of ordinary income, capital gains, or some
combination of both. Because Shares must be purchased through separate accounts used to fund variable contracts, such dividends and distributions will be exempt from current taxation by owners of variable contracts (each, a “contract owner,” and, collectively “contract owners”) if left to accumulate within a separate account. Consult the variable contract prospectus for additional tax
information.
Payments to Insurance Companies and Other Financial Intermediaries
If you allocate contract value to the Fund through an insurance company or other financial intermediary, the Fund, Milliman, the Fund’s distributor or
their related companies may pay the insurance company and/or its affiliates or other intermediary for the sale of Shares and related services. These payments may create a conflict of interest by influencing the insurance company or other
intermediary and your salesperson to recommend an indirect investment in the Fund over another investment. The prospectus or other disclosure documents for the variable contracts may contain additional information about these payments, if any.
You may also ask your salesperson or financial intermediary, or visit your financial intermediary’s website, for more information.
10
Fund Summary: Milliman S&P 500 6-Month Buffer with Par Up Fund – Apr/Oct
Investment Objective
The Fund seeks to provide exposure to the S&P 500 Index, while providing a buffer against the first 10% of losses associated with S&P 500
Index performance and participating in S&P 500 Index gains at a declared rate, prior to taking into account any fees or expenses or the performance of any fixed income exposure included in the Fund’s portfolio, over the period from October 1,
2021 through March 31, 2022.
Fees and Expenses of the Fund
This table describes the fees and expenses that you may pay if you buy, hold and sell shares of the Fund (“Shares”).
This table and the example below do not include any fees or sales charges imposed by your variable product. If they were included, the expenses listed below would be higher.
Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment)
|
Class 3
|
|
|
Management Fees
|
0.49%
|
|
Distribution and Service (12b-1) Fees
|
0.25%
|
|
Other Expenses(1)
|
0.50%
|
|
Acquired Fund Fees and Expenses(1)
|
[_.__]%
|
|
Total Annual Fund Operating Expenses
|
1.24%
|
|
Fee Waiver and/or Expense Reimbursement(2)(3)
|
(0.25)%
|
|
Total Annual Fund Operating Expenses After Fee Waiver and/or Expense Reimbursement
|
0.99%
|
|
(1)
|
“Other Expenses” and “Acquired Fund Fees and Expenses” are based on estimated amounts for the current fiscal year.
|
|
(2)
|
The Fund’s investment adviser, Milliman Financial Risk Management LLC (“Milliman”), has contractually
agreed to waive advisory fees and/or reimburse expenses to the extent necessary to limit the Fund’s total annual Fund operating expenses (excluding taxes, interest, brokerage fees and commissions, Rule 12b-1 fees, acquired fund fees and
expenses, short-sale dividend expenses, administrative services fees, other expenses that are capitalized in accordance with generally accepted accounting principles, and extraordinary or non-routine expenses not incurred in the
ordinary course of the Fund’s business) to 0.74% of the Fund's average daily net assets (the “Expense Limitation Agreement”) until at least November 1, 2022. During its term, the Expense
Limitation Agreement cannot be terminated or amended to increase the applicable limit without approval of the Board of Trustees of the Trust (the “Board”). Milliman may recoup from the Fund any
advisory fees waived or expenses reimbursed pursuant to the Expense Limitation Agreement for a period of three years from the date on which such waiver or reimbursement occurred; provided, however, that such recoupment shall not be made
if it would cause the Fund’s total annual Fund operating expenses to exceed the lesser of (a) the expense limitation in effect at the time of the reimbursement, or (b) the expense limitation in effect at the time of recoupment, if any.
|
|
(3)
|
In addition to the Expense Limitation Agreement, Milliman has contractually agreed to waive its advisory fees in an amount equal to the Fund’s
acquired fund fees and expenses until at least November 1, 2022 (the “Fee Waiver”). This contract cannot be terminated or modified without the consent of the Board.
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Example
This example is intended to help you compare the cost of investing in the Fund with the cost of investing in other funds. This example assumes that you
invest $10,000 in the Fund for the time periods indicated and then sell all of your Shares at the end of those periods. This example also assumes that your investment has a 5% return each year and that the Fund’s operating expenses remain at
current levels and that the Expense Limitation Agreement and Fee Waiver remain in place for their contractual periods. Although your actual costs may be higher or lower, your costs, based on these assumptions, would be:
|
1 Year
|
3 Years
|
|
|
Class 3
|
$104
|
$384
|
This example does not include any fees or sales charges imposed by your variable product. If they were included, the expenses listed above would be
higher.
11
Portfolio Turnover
The Fund pays transaction costs, such as commissions, when it purchases and sells securities (or “turns over” its portfolio). A higher portfolio turnover
will cause the Fund to incur additional transaction costs. These costs, which are not reflected in Total Annual Fund Operating Expenses or in the example, may affect the Fund’s performance. Because the Fund has not yet commenced investment
operations, no portfolio turnover information is available at this time.
Principal Investment Strategies
The Fund seeks to achieve its investment objective by transacting in FLexible EXchange® Options (“FLEX Options”)
and by separately maintaining a collateral portfolio (the “Collateral Portfolio”), which is designed primarily to serve as margin or collateral for the Fund’s FLEX Options positions and secondarily to
enhance the Fund’s upside S&P 500 Index FLEX Options’ exposure (i.e., by utilizing anticipated income to measure the ability to purchase additional FLEX Options). FLEX Options are exchange-traded
options contracts with uniquely customizable terms. In general, an options contract is an agreement between a buyer and seller that gives the purchaser of the option the right to buy or sell a particular asset at a specified future date at an
agreed upon price, commonly known as the “strike price.” The reference assets for the Fund’s FLEX Options positions will include the S&P 500 Index, which is a large-capitalization, market-weighted, U.S. equities index that tracks the price
(excluding dividends) of 500 leading companies in leading industries of the U.S. economy, and certain exchange-traded funds (“ETFs”), as described further below.
The Collateral Portfolio may be invested in short-term fixed-income securities, including corporate bonds and other corporate debt securities,
asset-backed securities (“ABS”), securities issued by the U.S. Government or its agencies and instrumentalities, securities issued by non-U.S. governments or their agencies and instrumentalities, money
market securities and funds, other interest-bearing instruments, cash, ETFs that primarily invest in any of the foregoing instruments, options on ETFs and options box spreads. An options box spread is the combination of different options trades
that have offsetting spreads (e.g., purchases and sales on the same underlying instrument, such as an index or an ETF, but with different strike prices and/or expiration dates) for the purpose of
generating income. The Fund may invest in short-term fixed income securities or other instruments, including through ETFs, of any maturity and credit quality. The Fund will generally invest up to 35% of its net assets in one or more ETFs that
provide exposure to investment grade corporate bonds.
Due to the unique mechanics of the Fund’s strategy, the return an investor can expect to receive from an investment in the Fund has characteristics that
are distinct from the returns of many other investment vehicles. It is important that an investor understand these characteristics before making an investment in the Fund.
In seeking to achieve its investment objective, the Fund seeks to produce pre-determined outcomes (the “Outcomes”)
that are based upon the performance of the S&P 500 Index over a six-month period (the “Outcome Period”). The initial Outcome Period for the Fund is October 1, 2021 through March 31, 2022. Following the
initial Outcome Period, each subsequent Outcome Period will be a six-month period commencing upon the expiration of the prior Outcome Period. The Fund seeks to achieve the Outcomes by purchasing and writing (selling) FLEX Options to create layers
within the Fund’s portfolio. One layer is designed to produce returns that correlate to those of the S&P 500 Index for the Outcome Period at a declared rate (the “Par Up Rate”) if the S&P 500 Index
experiences gains during that time, as described below. A separate layer is designed to produce returns that correlate to those of the S&P 500 Index for the Outcome Period that are buffered up to 10% if
the S&P 500 Index experiences losses during that time (the “Buffer”). There is no guarantee that the Fund will be successful in its attempt to produce returns that
correlate to those of the S&P 500 Index at the Par Up Rate or produce buffered returns against the Fund’s S&P 500 Index exposure.
Milliman Financial Risk Management, LLC (“Milliman”), the investment adviser of the Fund, seeks to establish the
Buffer by writing one put FLEX Option on the S&P 500 Index with a strike price that is 10% lower than the value of the S&P 500 Index at the beginning of the Outcome Period.
Milliman seeks to establish the Par Up Rate by purchasing long call FLEX Options on the S&P 500 Index with a strike price approximately equal to
the value of the S&P 500 Index at the beginning of the Outcome Period.
12
Milliman purchases these FLEX Options with a portion of the Fund’s net assets plus (i) the cash received from writing the put FLEX Option designed to
create the Buffer, (ii) additional cash received by utilizing FLEX Options to create a put spread (the “Put Spread Strategy”) on fixed income securities and/or one or more ETFs that provide exposure to
fixed income securities, and (iii) yield received from the Collateral Portfolio. Milliman seeks to achieve the Put Spread Strategy for the Fund by writing a put FLEX Option on an underlying asset at a strike price at or lower than the underlying
asset’s market price or current value at the beginning of the Outcome Period, and buying a put FLEX Option on the same underlying asset at a lower strike price than the written put FLEX Option.
The Par Up Rate is the rate at which the Fund will seek to track any upside market performance of the S&P 500 Index. Milliman calculates the Par
Up Rate based upon (i) its evaluation of prevailing market conditions on the first day of the Outcome Period and (ii) the total number of long call FLEX Options on the S&P 500 Index that it is able to purchase at that time. As of the date of
this Prospectus, and assuming current market conditions persist, Milliman expects that the Par Up Rate will be between the below ranges (both gross and net of Fund fees and expenses). Any fees or expenses imposed by your variable product, and any
other expenses incurred by the Fund, will have the effect of further reducing the Par Up Rate. Once calculated, the Par Up Rate for a particular Outcome Period will not change during that Outcome Period;
however, in certain market conditions, the performance of the Collateral Portfolio and the Put Spread Strategy could reduce the impact of the Par Up Rate.
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Share Class
|
Estimated Par Up Rate Ranges
(As of [___])
|
|
|
Prior to Taking into Account Fund Fees and Expenses
|
After Taking into Account Fund Fees and Expenses
|
|
|
Class 3
|
[__]% and [__]%
|
[__]% and [__]%
|
The Buffer is only operative against the first 10% of losses in the Fund’s S&P 500 Index exposure for the Outcome Period. If the S&P 500 Index
decreases in value by more than 10% during the Outcome Period, the Fund (and therefore investors in Shares) will experience all subsequent losses in the Fund’s S&P 500 Index exposure on a one-to-one basis for the Outcome Period. The Fund
seeks to produce buffered returns against its S&P 500 Index exposure prior to taking into account any fees or expenses or the performance of the Collateral Portfolio or the Put Spread Strategy. The Buffer
is not operative against losses in the Collateral Portfolio or the Put Spread Strategy. If the Collateral Portfolio and/or the Put Spread Strategy experiences losses, it could have the effect of reducing the impact of, or completely
eliminating, the Buffer on the Fund’s S&P 500 Index exposure. In certain market conditions, the performance of the Collateral Portfolio and/or the Put Spread Strategy could cause the Fund to
significantly underperform the S&P 500 Index. The following table reflects the Buffer both gross and net of Fund fees and expenses:
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Share Class
|
Buffer
(As of [___])
|
|
|
Prior to Taking into Account Fund Fees and Expenses
|
After Taking into Account Fund Fees and Expenses
|
|
|
Class 3
|
10%
|
[__]%
|
The definitive Par Up Rate and Buffer will be set forth on the Fund’s website. The Fund’s website will also provide information relating to the
Outcomes on a daily basis, including the Fund’s position relative to the Par Up Rate and the Buffer. You may also contact your insurance company or other financial intermediary for more information.
Additionally, the Fund’s net asset value (“NAV”) will not increase or decrease at the same rate as the
S&P 500 Index because the Fund’s strategy relies upon the performance of the Collateral Portfolio and the Put Spread Strategy, in addition to the value of the Fund’s FLEX Options positions on the S&P 500 Index. While Milliman anticipates
that the Fund’s NAV will generally move in the same direction as the S&P 500 Index (meaning that the Fund’s NAV will generally increase if the S&P 500 Index experiences gains or decrease if the S&P 500 Index experiences losses), the
Fund’s NAV may not decrease at the same rate as the S&P 500 Index (especially when factoring in the performance of the Collateral Portfolio and the Put Spread Strategy) and will not increase at the same rate as the S&P 500 Index
(especially when factoring in the Par Up Rate and the performance of the Collateral Portfolio and the Put Spread Strategy). Similarly, the amount of time remaining until the end of the Outcome Period also affects
13
the impact of the Buffer on the Fund’s NAV, because the Buffer may not be in full effect prior to the end of the Outcome Period.
The FLEX Options utilized in the Fund’s portfolio are each set to expire on the last day of the Outcome Period. The customizable nature of FLEX Options
will allow Milliman to select the strike price at which each FLEX Option will be exercised at the expiration of the FLEX Option term. At the commencement of the Outcome Period, Milliman will specifically select the strike price for each FLEX Option
in a manner designed to achieve the Outcomes when the FLEX Options are exercised on the final day of the Outcome Period, depending on the anticipated performance of the S&P 500 Index, the Collateral Portfolio and the Put Spread Strategy over
the duration of that Outcome Period.
The hypothetical graphical illustrations provided below are designed to illustrate the Outcomes based upon the
hypothetical performance of the S&P 500 Index for an investor who holds Shares for the entirety of the Outcome Period. The hypothetical graphical illustrations do not include any fees or expenses imposed by your variable product or expenses
incurred by the Fund, and do not reflect the performance of the Collateral Portfolio or the Put Spread Strategy. Additional hypothetical graphical representations of the Outcomes are provided in “Additional Information About the Funds and
the Risks of Investing.” There is no guarantee that the Fund will be successful in its attempt to achieve the Outcomes for the Outcome Period.
The following table contains hypothetical examples designed to illustrate the Outcomes the Fund seeks to
achieve over the Outcome Period, based upon the performance of the S&P 500 Index from (100)% to 100% after taking into account the Par Up Rate and the Buffer, but prior to taking into account any fees or expenses or the performance of the
Collateral Portfolio or the Put Spread Strategy. The table is provided for illustrative purposes only and does not provide every possible performance scenario for Shares over the course of the Outcome Period. There is no guarantee that the Fund will be successful in its attempt to achieve the Outcomes for an Outcome
Period. The table is not intended to predict or project the performance of the FLEX Options or the Fund. Investors should not take this information as an assurance of the expected performance of the
S&P 500 Index or the Fund. Actual Fund performance will vary with fluctuations in the performance of the Collateral Portfolio and the Put Spread Strategy, in addition to the value of the Fund’s FLEX Options positions on the S&P
500 Index, during the Outcome Period, among other factors. The performance of the Collateral Portfolio and the Put Spread
14
Strategy could significantly impact the performance of the Fund, which could prevent the Fund from achieving the
Outcomes that it seeks to produce. The table does not reflect any fees or expenses imposed by your variable product or expenses incurred by the Fund. If it did, the returns shown for the Fund would be lower. Please refer to the Fund’s
website, which provides updated information relating to this table on a daily basis throughout the Outcome Period. Please contact your insurance company or other financial intermediary for more information.
|
Index/Fund
|
Hypothetical Performance1
|
|||||||||||
|
S&P 500 Index Price Performance
|
(100)%
|
(50)%
|
(20)%
|
(10)%
|
(5)%
|
0%
|
5%
|
10%
|
15%
|
20%
|
50%
|
100%
|
|
Fund Performance at NAV
|
(90)%
|
(40)%
|
(10)%
|
0%2
|
0%2
|
0%
|
4.0%3
|
8.0%3
|
12%3
|
16%3
|
40%3
|
80%3
|
| 1 |
Does not take into account any fees or expenses or the performance of the Collateral Portfolio or the Put Spread Strategy.
|
| 2 |
Reflects the impact of the Buffer.
|
| 3 |
Reflects the impact of an assumed Par Up Rate of 80%.
|
Understanding Outcomes. The Outcomes the Fund seeks to achieve are measured based upon the
Fund’s NAV on the first day of the Outcome Period. The Outcome Period begins on the day Milliman transacts in the FLEX Options on behalf of the Fund, and ends on the day those FLEX Options expire. An investor who
purchases Shares after the commencement of the Outcome Period will likely have purchased Shares at a different NAV than the NAV on the first day of the Outcome Period (the NAV upon which the Outcomes are based) and may experience investment
outcomes very different from those the Fund seeks to achieve, especially when factoring in any fees or expenses or the performance of the Collateral Portfolio and the Put Spread Strategy. An investor who redeems Shares prior to the end of the
Outcome Period may also experience investment outcomes very different from those the Fund seeks to achieve. The Outcomes are designed with the expectation that an investor will hold Shares on the day that Milliman transacts in the FLEX Options on
behalf of the Fund, and on the day those FLEX Options expire. There is no guarantee that the Fund will be successful in its attempt to achieve the Outcomes.
Understanding the Par Up Rate. Unlike other investment products, the potential returns an
investor can receive from an investment in the Fund are subject to the Par Up Rate. This means that if the S&P 500 Index experiences gains for the Outcome Period, an investor in the Fund will only experience
a percentage of those gains (equal to the Par Up Rate multiplied by the S&P 500 Index gains). Milliman calculates the Par Up Rate for each Outcome Period based upon (i) its evaluation of prevailing market conditions on the first day
of the Outcome Period and (ii) the total number of long call FLEX Options on the S&P 500 Index that it is able to purchase at that time. In certain market conditions, the performance of the Collateral
Portfolio and the Put Spread Strategy could reduce the impact of the Par Up Rate. An investor should consider the amount and impact of the Par Up Rate, and the Fund’s position relative to it, before investing in the Fund.
Understanding the Buffer. The Buffer that the Fund seeks to provide is only operative
against the first 10% of losses in the Fund’s S&P 500 Index exposure for the Outcome Period. If an investor is considering purchasing Shares during the Outcome Period, and the S&P 500 Index has decreased
in value by an amount equal to or greater than 10%, an investor purchasing Shares at that time will be able to participate in any gains thereafter, but will not benefit from the Buffer that the Fund seeks to offer for the remainder of the
Outcome Period if the losses continue to be equal to or greater than 10% during that period. Conversely, if an investor is considering purchasing Shares during the Outcome Period, and the Fund’s NAV has increased in value, then an investor may
experience losses before implementation of the Buffer that the Fund seeks to provide. While the Fund seeks to produce returns that correlate to those of the S&P 500 Index for the Outcome Period that are buffered up to 10% (prior to
taking into account any fees or expenses or the performance of the Collateral Portfolio or the Put Spread Strategy) for investors who hold Shares for the entire Outcome Period, there is no guarantee it will successfully do so. In addition, the Buffer is not operative against losses in the Collateral Portfolio or the Put Spread Strategy. If the Collateral Portfolio and/or the Put Spread Strategy experiences losses, it could have the
effect of reducing the impact of, or completely eliminating, the Buffer on the Fund’s S&P 500 Index exposure. In certain market conditions, the performance of the Collateral Portfolio and/or the Put Spread Strategy could cause the Fund to
significantly underperform the S&P 500 Index. Investors who
15
purchase Shares at the beginning of the Outcome Period may lose their entire investment. Investors who purchase Shares after the
Outcome Period has begun may also lose their entire investment. An investment in the Fund is only appropriate for investors willing to bear those losses.
Fund Rebalance. Milliman implements the Fund’s strategy on a semi-annual basis, seeking to
produce the Outcomes for an Outcome Period. On the last business day of any stated Outcome Period, all of the Fund’s existing FLEX Options, which includes those used to establish the Buffer, the Par Up Rate and the Put Spread Strategy, will
expire and Milliman will transact in a new set of FLEX Options on the same business day, which will commence a new Outcome Period beginning the following business day. At that same time, Milliman will also evaluate whether to make any adjustments
to the Collateral Portfolio. Accordingly, Shares can be held indefinitely if investors determine to participate in additional Outcome Periods.
Approximately one week prior to the end of each Outcome Period, the Fund will file a prospectus supplement, which will notify existing investors of
(i) the date on which the existing Outcome Period will end; (ii) the date on which the new Outcome Period will commence; and (iii) the anticipated ranges of the Par Up Rate that will be used for the new Outcome Period. Immediately preceding the
commencement date of the new Outcome Period, the Fund will file a prospectus supplement disclosing the Fund’s final Par Up Rate (both gross and net of Fund fees and expenses) for the new Outcome Period. This information will also be available
online at www.[___________].com, and on your insurance company’s website. Please contact your insurance company or other financial intermediary for more information.
Fund Classification. The Fund is classified as “non-diversified” under the Investment
Company Act of 1940, as amended (the “1940 Act”).
Principal Risks
You could lose money by investing in the Fund. An investment in the Fund is not a deposit of a bank and is not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other governmental agency. There can be no assurance that the Fund’s investment objectives will be achieved.
Downside Loss Buffer Risk. There can be no guarantee that the Fund will be successful in its strategy to
buffer against S&P 500 Index losses if the S&P 500 Index decreases in value over the Outcome Period. The Fund’s strategy is designed to produce returns that correlate to those of the S&P 500 Index at the Par Up Rate, while limiting
downside losses in the Fund’s S&P 500 Index exposure, if Shares are bought on the day on which Milliman transacts in the FLEX Options on behalf of the Fund and held until those FLEX Options expire at the end of each Outcome Period. The
success of the Buffer also depends upon the performance of the Collateral Portfolio and the Put Spread Strategy. If the Collateral Portfolio and/or the Put Spread Strategy experiences losses, it could have the
effect of reducing the impact of, or completely eliminating, the Buffer on the Fund’s S&P 500 Index exposure. In certain market conditions, the performance of the Collateral Portfolio and/or the Put Spread Strategy could cause the Fund to
significantly underperform the S&P 500 Index. Despite the intended Buffer, an investor could lose their entire investment. In the event an investor purchases Shares after the date on which Milliman transacted in the FLEX
Options on behalf of the Fund, or redeems Shares prior to the expiration of those FLEX Options, the Buffer that the Fund seeks to provide may not be available or fully applicable.
Risk of the Par Up Rate on Upside Returns. The Fund’s strategy is designed to produce returns that correlate
to those of the S&P 500 Index at the Par Up Rate if Shares are bought on the day on which Milliman transacts in the FLEX Options on behalf of the Fund and held until those FLEX Options expire at the end of the Outcome Period. Accordingly, the
Fund will not fully participate in any gains achieved by the S&P 500 Index. In addition, in the event an investor purchases Shares after the date on which Milliman transacted in the FLEX Options on behalf of the Fund, or redeems Shares prior
to the expiration of those FLEX Options, the returns realized by that investor may not match those that the Fund seeks to achieve pursuant to the Par Up Rate. In certain market conditions, the performance of
the Collateral Portfolio and the Put Spread Strategy could reduce the impact of the Par Up Rate. An investor should consider the amount and impact of the Par Up Rate, and the Fund’s position relative to it, before investing in the Fund.
16
Par Up Rate Change Risk. Because the Par Up Rate for each Outcome Period is calculated based upon (i)
Milliman’s evaluation of prevailing market conditions on the first day of the Outcome Period and (ii) the total number of long call FLEX Options on the S&P 500 Index that Milliman is able to purchase at that time, the Par Up Rate may rise or
fall from one Outcome Period to the next. Any change in the Par Up Rate could be significant and it is unlikely to remain the same for consecutive Outcome Periods.
FLEX Options Risk. The Fund will transact in FLEX Options issued and guaranteed for settlement by the OCC. The
Fund bears the risk that the OCC will be unable or unwilling to perform its obligations under the FLEX Options contracts, which could result in significant losses to the Fund. In less liquid markets, terminating a FLEX Option may require the
payment of a premium or acceptance of a discounted price, and may take longer to complete. In addition, a less liquid trading market may adversely impact the value of the Fund’s FLEX Options and therefore the NAV of the Fund. In addition, the value
of the Fund’s FLEX Options positions is not anticipated to increase or decrease at the same rate as the reference asset; and while it is anticipated that they will generally move in the same direction, it is possible that they may move in different
directions. Certain FLEX Options positions may also expire worthless. The use of FLEX Options involves leverage, which can cause the Fund’s portfolio to be more volatile than if the portfolio had not been leveraged. Leverage can significantly
magnify the effect of price movements of the reference asset, disproportionately increasing the Fund’s losses and reducing the Fund’s opportunities for gains when the reference asset changes in unexpected ways. In some instances, such leverage
could result in losses that exceed the original amount invested.
Investment Objective and Outcomes Risk. There is no guarantee that the Fund will be successful in its attempt
to achieve its investment objective and/or the Outcomes, and an investor could lose some or all of their investment in the Fund. Certain circumstances under which the Fund might not achieve its objective and/or the Outcomes include, but are not
limited to (i) if the Fund disposes of FLEX Options, (ii) if the Fund is unable to maintain the proportional relationship based on the number of FLEX Options in the Fund’s portfolio, (iii) significant accrual of Fund expenses in connection with
effecting the Fund’s principal investment strategy, (iv) losses incurred by the Fund’s holdings in the Collateral Portfolio and/or losses resulting from the Put Spread Strategy, or (iv) adverse tax law changes affecting the treatment of FLEX
Options.
Tax Risk. The Fund intends to elect, and to qualify each year, to be treated as a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”). As a RIC, the Fund will not be subject to U.S. federal income tax on the portion
of its net investment income and net capital gain that it distributes to shareholders, provided that it satisfies certain requirements of the Code. To maintain its status as a RIC, the Fund must meet certain income, diversification and
distributions tests. For purposes of the diversification test, the identification of the issuer (or, in some cases, issuers) of a particular Fund investment can depend on the terms and conditions of that investment. In particular, there is no
published IRS guidance or case law on how to determine the “issuer” of certain derivatives that the Fund will enter into and the Fund has not received a private letter ruling on this point. Therefore, there is a risk that the Fund will not meet the
Code’s diversification requirements and will not qualify, or will be disqualified, as a RIC. If the Fund does not qualify as a RIC for any taxable year and certain relief provisions are not available, the Fund’s taxable income will be subject to
tax at the Fund level and to a further tax at the shareholder level when such income is distributed.
The Fund also intends to comply with the diversification requirements of Section 817(h) of the Code, and the regulations thereunder, relating to the
tax-deferred status of variable accounts that are based on insurance company separate accounts (referred to as “segregated asset accounts” for federal income tax purposes). These diversification requirements apply in addition to the RIC
diversification requirements discussed above. There also is no published guidance or case law on how to determine the “issuer” of the derivatives referred to above for purposes of the diversification requirements of Section 817(h) of the Code and
the Fund has not received a private letter ruling on this point. If these requirements are not met, or under other circumstances, such as if the Fund does not qualify as a RIC for any taxable year, it is possible that the contract owners (rather
than the insurance company) will be treated for federal income tax purposes as the taxable owners of the assets held by the segregated asset accounts.
Clearing Member Default Risk. The Fund will hold FLEX Options through accounts at members of clearing houses (“clearing members”) rather than a bank or a broker. Assets deposited by the Fund with any clearing member as margin for its FLEX Options positions may, in certain circumstances, be used to satisfy losses of other
clients of the Fund’s clearing member where such assets may be held in commingled omnibus accounts. In addition, although
17
clearing members guarantee performance of their clients’ obligations to the clearing house, there is a risk that the assets of the Fund might not be
fully protected in the event of the clearing member’s bankruptcy, as the Fund would be limited to recovering only a pro rata share of all available funds segregated on behalf of the clearing member’s
customers for the relevant account class.
Debt Securities Risk. The prices of debt securities will be affected by changes in interest rates, the
creditworthiness of the issuer and other factors. These risks could affect the value of investments in which the Fund invests, possibly causing the Fund’s NAV to be reduced and fluctuate more than other types of investments. During periods of
falling interest rates, an issuer of a callable bond may repay the security before its stated maturity, and the Fund may have to reinvest the proceeds in securities with lower yields, which would result in a decline in the Fund’s income, or in
securities with greater risks or with other less favorable features. Changing interest rates, including rates that fall below zero, may have unpredictable effects on markets, result in heightened market volatility and detract from the Fund’s
performance to the extent the Fund is exposed to such interest rates. An increase in interest rates will generally cause the value of fixed-income securities held by the Fund to decline, may lead to heightened volatility in the fixed-income
markets and may adversely affect the liquidity of certain fixed-income investments, including those held by the Fund. Risks associated with rising interest rates are heightened given that interest rates in the U.S. are near historic lows.
Adjustable-rate instruments also react to interest rate changes in a similar manner, although generally to a lesser degree (depending, however, on the characteristics of the reset terms, including the index chosen, frequency of reset and reset
caps or floors, among other factors). Interest rate sensitivity is generally more pronounced and less predictable in instruments with uncertain payment or prepayment schedules and also for those with longer maturities.
Foreign Securities and Credit Exposure Risk. U.S. dollar-denominated securities carrying foreign credit exposure
may be affected by unfavorable political, economic or governmental developments that could affect payments of principal and interest. Furthermore, the value of the Fund’s foreign investments (whether direct or indirect) may be adversely affected by
political and social instability in their home countries, by changes in economic or taxation policies in those countries, or by the difficulty in enforcing obligations in those countries. Foreign companies generally may be subject to less stringent
regulations than U.S. companies, including financial reporting requirements and auditing and accounting controls. As a result, there generally is less publicly available information about foreign companies than about U.S. companies. Trading in many
foreign securities may be less liquid and more volatile than U.S. securities due to the size of the market or other factors.
U.S. Government Securities Risk. U.S. Government securities are subject to interest rate risk but generally do
not involve the credit risks associated with investments in other types of debt securities. As a result, the yields available from U.S. Government securities are generally lower than the yields available from other debt securities. U.S. Government
securities are guaranteed only as to the timely payment of interest and the payment of principal when held to maturity. While securities issued or guaranteed by U.S. federal government agencies are backed by the full faith and credit of the U.S.
Department of the Treasury, securities issued by government sponsored entities are solely the obligation of the issuer and generally do not carry any guarantee from the U.S. Government.
ABS Risk. ABS are subject to the general debt securities risks described above. In addition, ABS may be less
liquid than other bonds, and may be more sensitive than other bonds to the market’s perception of issuers and creditworthiness of payees, which may result in the Fund experiencing difficulty selling or valuing these securities. ABS markets have
experienced extraordinary weakness and volatility at various times in recent years, and may decline quickly in the event of a substantial economic or market downturn. Accordingly, these securities may be subject to greater risk of default during
periods of economic downturn than other securities, which could result in possible losses to the Fund.
Issuer Risk. The performance of the Fund depends on the performance of individual securities to which the Fund
has exposure. The Fund may be adversely affected if an issuer of underlying securities held by the Fund is unable or unwilling to repay principal or interest when due. Changes in the financial condition or credit rating of an issuer of those
securities may cause the value of the securities to decline.
Management Risk. The Fund is subject to management risk because it is an actively managed portfolio. Milliman
will apply investment techniques and risk analyses in making investment decisions for the Fund, but there can be no guarantee that the Fund will meet its investment objective and/or the Outcomes. In addition, Milliman does not use
18
defensive strategies or attempt to reduce the Fund’s exposures to poor performing positions during an Outcome Period. This differs from funds that are
managed to seek to outperform a benchmark index. Therefore, in the event of a general market decline, the Fund’s value may fall more than the value of another fund that does attempt to hedge against such market declines.
Market Risk. The Fund could lose money over short periods due to short-term market movements and over longer
periods during more prolonged market downturns. Assets may decline in value due to factors affecting financial markets generally or particular asset classes or industries represented in the markets. The value of a FLEX Option or other asset may
also decline due to general market conditions, economic trends or events that are not specifically related to the issuer of the security or other asset, or due to factors that affect a particular issuer, country, region, market, industry, sector or
asset class.
Non-Diversification Risk. The Fund may invest a relatively high percentage of its assets in a limited number of
issuers. As a result, the Fund may be more susceptible to a single adverse economic or regulatory occurrence affecting one or more of these issuers, experience increased volatility and be highly invested in certain issuers.
Large Shareholder Risk. At times, the Fund may experience adverse effects when certain large shareholders,
including insurance company separate accounts, redeem large amounts of shares of the Fund. Large redemptions may cause the Fund to sell portfolio holdings at times when it would not otherwise do so and may increase transaction costs and/or result
in an increase to the Fund’s expense ratio. A large redemption could be detrimental to the Fund and its remaining shareholders.
Risks of Investing in ETFs. In addition to the risks associated with the underlying assets held by the ETFs in
which the Fund invests, investments in ETFs are also subject to the following additional risks: (i) only authorized participants may engage in transactions directly with ETFs but none are obligated to do so, which could result in an ETF’s shares
trading at a premium or discount to its NAV or possibly face trading halts or delisting; (ii) certain ETFs seek to track the performance of an underlying index and will not attempt to take defensive positions under any market conditions, including
declining markets, which could result in losses; and (iii) because ETF shares trade on the secondary market, there is not guarantee that an active market will be developed or maintained, which could result in the ETF’s shares trading at a premium
or discount to its NAV. Investments in ETFs may involve duplication of management fees and certain other expenses, as the Fund indirectly bears its proportionate share of any expenses paid by the ETFs in which it invests.
Risks of Investing in Money Market Funds. Money market funds seek to preserve the value of shareholder
investments at $1.00 per share, but shareholders, such as the Fund, may still lose money by investing in such funds. In addition, a money market fund may impose a fee upon the sale of its shares or may temporarily suspend the ability to sell shares
if the fund’s liquidity falls below required minimums because of market conditions or other factors. The credit quality of a money market fund’s holdings can change rapidly in certain markets, and the default of a single holding could have an
adverse impact on the fund’s share price. A money market fund’s share price can also be negatively affected during periods of high redemption pressures, illiquid markets, and/or significant market volatility.
Performance
As of the date of this Prospectus, the Fund has not commenced operations and therefore does not have a performance history. Once available, the Fund’s
performance information will be accessible online at www.[________].com and will provide some indication of the risks of investing in the Fund.
Management
Investment Adviser
Milliman Financial Risk Management LLC (“Milliman”) serves as investment adviser to the Fund.
19
Portfolio Managers
The following persons serve as portfolio managers of the Fund.
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●
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Robert T. Cummings, Principal & Head of Portfolio Management at Milliman.
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●
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Maria Schiopu, Principal & Head of Portfolio Management at Milliman.
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●
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Jeff Greco, Principal & Head of Strategy Research at Milliman.
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|
●
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Jordan Rosenfeld, Portfolio Manager at Milliman.
|
Each portfolio manager is jointly and primarily responsible for the day-to-day management of the Fund’s portfolio and has served in such capacity
since the Fund’s inception in 2021.
Purchase and Sale of Shares
Shares are available as underlying investment options for variable insurance contracts and variable life insurance policies (each, a “variable contract,” and, collectively, the “variable contracts”) issued by insurance companies. These insurance companies are the record owners of the separate accounts
holding the Shares. You do not buy, sell or exchange Shares directly; rather, you choose investment options through your variable contracts. The insurance companies then cause the separate accounts to purchase and redeem Shares according to
the investment options you choose.
Tax Information
The dividends and distributions paid by the Fund to the insurance company separate accounts will consist of ordinary income, capital gains, or some
combination of both. Because Shares must be purchased through separate accounts used to fund variable contracts, such dividends and distributions will be exempt from current taxation by owners of variable contracts (each, a “contract owner,” and, collectively “contract owners”) if left to accumulate within a separate account. Consult the variable contract prospectus for additional tax
information.
Payments to Insurance Companies and Other Financial Intermediaries
If you allocate contract value to the Fund through an insurance company or other financial intermediary, the Fund, Milliman, the Fund’s distributor or
their related companies may pay the insurance company and/or its affiliates or other intermediary for the sale of Shares and related services. These payments may create a conflict of interest by influencing the insurance company or other
intermediary and your salesperson to recommend an indirect investment in the Fund over another investment. The prospectus or other disclosure documents for the variable contracts may contain additional information about these payments, if any.
You may also ask your salesperson or financial intermediary, or visit your financial intermediary’s website, for more information.
20
Fund Summary: Milliman S&P 500 6-Month Buffer with Par Up Fund – May/Nov
Investment Objective
The Fund seeks to provide exposure to the S&P 500 Index, while providing a buffer against the first 10% of losses associated with S&P 500
Index performance and participating in S&P 500 Index gains at a declared rate, prior to taking into account any fees or expenses or the performance of any fixed income exposure included in the Fund’s portfolio, over the period from November
1, 2021 through April 30, 2022.
Fees and Expenses of the Fund
This table describes the fees and expenses that you may pay if you buy, hold and sell shares of the Fund (“Shares”).
This table and the example below do not include any fees or sales charges imposed by your variable product. If they were included, the expenses listed below would be higher.
Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment)
|
Class 3
|
|
|
Management Fees
|
0.49%
|
|
Distribution and Service (12b-1) Fees
|
0.25%
|
|
Other Expenses(1)
|
0.50%
|
|
Acquired Fund Fees and Expenses(1)
|
[_.__]%
|
|
Total Annual Fund Operating Expenses
|
1.24%
|
|
Fee Waiver and/or Expense Reimbursement(2)(3)
|
(0.25)%
|
|
Total Annual Fund Operating Expenses After Fee Waiver and/or Expense Reimbursement
|
0.99%
|
|
(1)
|
“Other Expenses” and “Acquired Fund Fees and Expenses” are based on estimated amounts for the current fiscal year.
|
|
(2)
|
The Fund’s investment adviser, Milliman Financial Risk Management LLC (“Milliman”), has contractually
agreed to waive advisory fees and/or reimburse expenses to the extent necessary to limit the Fund’s total annual Fund operating expenses (excluding taxes, interest, brokerage fees and commissions, Rule 12b-1 fees, acquired fund fees and
expenses, short-sale dividend expenses, administrative services fees, other expenses that are capitalized in accordance with generally accepted accounting principles, and extraordinary or non-routine expenses not incurred in the
ordinary course of the Fund’s business) to 0.74% of the Fund's average daily net assets (the “Expense Limitation Agreement”) until at least November 1, 2022. During its term, the Expense
Limitation Agreement cannot be terminated or amended to increase the applicable limit without approval of the Board of Trustees of the Trust (the “Board”). Milliman may recoup from the Fund any
advisory fees waived or expenses reimbursed pursuant to the Expense Limitation Agreement for a period of three years from the date on which such waiver or reimbursement occurred; provided, however, that such recoupment shall not be made
if it would cause the Fund’s total annual Fund operating expenses to exceed the lesser of (a) the expense limitation in effect at the time of the reimbursement, or (b) the expense limitation in effect at the time of recoupment, if any.
|
|
(3)
|
In addition to the Expense Limitation Agreement, Milliman has contractually agreed to waive its advisory fees in an amount equal to the Fund’s
acquired fund fees and expenses until at least November 1, 2022 (the “Fee Waiver”). This contract cannot be terminated or modified without the consent of the Board.
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Example
This example is intended to help you compare the cost of investing in the Fund with the cost of investing in other funds. This example assumes that you
invest $10,000 in the Fund for the time periods indicated and then sell all of your Shares at the end of those periods. This example also assumes that your investment has a 5% return each year and that the Fund’s operating expenses remain at
current levels and that the Expense Limitation Agreement and Fee Waiver remain in place for their contractual periods. Although your actual costs may be higher or lower, your costs, based on these assumptions, would be:
|
1 Year
|
3 Years
|
|
|
Class 3
|
$104
|
$384
|
This example does not include any fees or sales charges imposed by your variable product. If they were included, the expenses listed above would be
higher.
21
Portfolio Turnover
The Fund pays transaction costs, such as commissions, when it purchases and sells securities (or “turns over” its portfolio). A higher portfolio turnover
will cause the Fund to incur additional transaction costs. These costs, which are not reflected in Total Annual Fund Operating Expenses or in the example, may affect the Fund’s performance. Because the Fund has not yet commenced investment
operations, no portfolio turnover information is available at this time.
Principal Investment Strategies
The Fund seeks to achieve its investment objective by transacting in FLexible EXchange® Options (“FLEX Options”)
and by separately maintaining a collateral portfolio (the “Collateral Portfolio”), which is designed primarily to serve as margin or collateral for the Fund’s FLEX Options positions and secondarily to
enhance the Fund’s upside S&P 500 Index FLEX Options’ exposure (i.e., by utilizing anticipated income to measure the ability to purchase additional FLEX Options). FLEX Options are exchange-traded
options contracts with uniquely customizable terms. In general, an options contract is an agreement between a buyer and seller that gives the purchaser of the option the right to buy or sell a particular asset at a specified future date at an
agreed upon price, commonly known as the “strike price.” The reference assets for the Fund’s FLEX Options positions will include the S&P 500 Index, which is a large-capitalization, market-weighted, U.S. equities index that tracks the price
(excluding dividends) of 500 leading companies in leading industries of the U.S. economy, and certain exchange-traded funds (“ETFs”), as described further below.
The Collateral Portfolio may be invested in short-term fixed-income securities, including corporate bonds and other corporate debt securities,
asset-backed securities (“ABS”), securities issued by the U.S. Government or its agencies and instrumentalities, securities issued by non-U.S. governments or their agencies and instrumentalities, money
market securities and funds, other interest-bearing instruments, cash, ETFs that primarily invest in any of the foregoing instruments, options on ETFs and options box spreads. An options box spread is the combination of different options trades
that have offsetting spreads (e.g., purchases and sales on the same underlying instrument, such as an index or an ETF, but with different strike prices and/or expiration dates) for the purpose of
generating income. The Fund may invest in short-term fixed income securities or other instruments, including through ETFs, of any maturity and credit quality. The Fund will generally invest up to 35% of its net assets in one or more ETFs that
provide exposure to investment grade corporate bonds.
Due to the unique mechanics of the Fund’s strategy, the return an investor can expect to receive from an investment in the Fund has characteristics that
are distinct from the returns of many other investment vehicles. It is important that an investor understand these characteristics before making an investment in the Fund.
In seeking to achieve its investment objective, the Fund seeks to produce pre-determined outcomes (the “Outcomes”)
that are based upon the performance of the S&P 500 Index over a six-month period (the “Outcome Period”). The initial Outcome Period for the Fund is November 1, 2021 through April 30, 2022. Following
the initial Outcome Period, each subsequent Outcome Period will be a six-month period commencing upon the expiration of the prior Outcome Period. The Fund seeks to achieve the Outcomes by purchasing and writing (selling) FLEX Options to create
layers within the Fund’s portfolio. One layer is designed to produce returns that correlate to those of the S&P 500 Index for the Outcome Period at a declared rate (the “Par Up Rate”) if the S&P
500 Index experiences gains during that time, as described below. A separate layer is designed to produce returns that correlate to those of the S&P 500 Index for the Outcome Period that are buffered up
to 10% if the S&P 500 Index experiences losses during that time (the “Buffer”). There is no guarantee that the Fund will be successful in its attempt to produce
returns that correlate to those of the S&P 500 Index at the Par Up Rate or produce buffered returns against the Fund’s S&P 500 Index exposure.
Milliman Financial Risk Management, LLC (“Milliman”), the investment adviser of the Fund, seeks to establish the
Buffer by writing one put FLEX Option on the S&P 500 Index with a strike price that is 10% lower than the value of the S&P 500 Index at the beginning of the Outcome Period.
Milliman seeks to establish the Par Up Rate by purchasing long call FLEX Options on the S&P 500 Index with a strike price approximately equal to
the value of the S&P 500 Index at the beginning of the Outcome Period.
22
Milliman purchases these FLEX Options with a portion of the Fund’s net assets plus (i) the cash received from writing the put FLEX Option designed to
create the Buffer, (ii) additional cash received by utilizing FLEX Options to create a put spread (the “Put Spread Strategy”) on fixed income securities and/or one or more ETFs that provide exposure to
fixed income securities, and (iii) yield received from the Collateral Portfolio. Milliman seeks to achieve the Put Spread Strategy for the Fund by writing a put FLEX Option on an underlying asset at a strike price at or lower than the underlying
asset’s market price or current value at the beginning of the Outcome Period, and buying a put FLEX Option on the same underlying asset at a lower strike price than the written put FLEX Option.
The Par Up Rate is the rate at which the Fund will seek to track any upside market performance of the S&P 500 Index. Milliman calculates the Par
Up Rate based upon (i) its evaluation of prevailing market conditions on the first day of the Outcome Period and (ii) the total number of long call FLEX Options on the S&P 500 Index that it is able to purchase at that time. As of the date of
this Prospectus, and assuming current market conditions persist, Milliman expects that the Par Up Rate will be between the below ranges (both gross and net of Fund fees and expenses). Any fees or expenses imposed by your variable product, and any
other expenses incurred by the Fund, will have the effect of further reducing the Par Up Rate. Once calculated, the Par Up Rate for a particular Outcome Period will not change during that Outcome Period;
however, in certain market conditions, the performance of the Collateral Portfolio and the Put Spread Strategy could reduce the impact of the Par Up Rate.
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Share Class
|
Estimated Par Up Rate Ranges
(As of [___])
|
|
|
Prior to Taking into Account Fund Fees and Expenses
|
After Taking into Account Fund Fees and Expenses
|
|
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Class 3
|
[__]% and [__]%
|
[__]% and [__]%
|
The Buffer is only operative against the first 10% of losses in the Fund’s S&P 500 Index exposure for the Outcome Period. If the S&P 500 Index
decreases in value by more than 10% during the Outcome Period, the Fund (and therefore investors in Shares) will experience all subsequent losses in the Fund’s S&P 500 Index exposure on a one-to-one basis for the Outcome Period. The Fund
seeks to produce buffered returns against its S&P 500 Index exposure prior to taking into account any fees or expenses or the performance of the Collateral Portfolio or the Put Spread Strategy. The Buffer
is not operative against losses in the Collateral Portfolio or the Put Spread Strategy. If the Collateral Portfolio and/or the Put Spread Strategy experiences losses, it could have the effect of reducing the impact of, or completely
eliminating, the Buffer on the Fund’s S&P 500 Index exposure. In certain market conditions, the performance of the Collateral Portfolio and/or the Put Spread Strategy could cause the Fund to significantly underperform the S&P 500
Index. The following table reflects the Buffer both gross and net of Fund fees and expenses:
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Share Class
|
Buffer
(As of [___])
|
|
|
Prior to Taking into Account Fund Fees and Expenses
|
After Taking into Account Fund Fees and Expenses
|
|
|
Class 3
|
10%
|
[__]%
|
The definitive Par Up Rate and Buffer will be set forth on the Fund’s website. The Fund’s website will also provide information relating to the
Outcomes on a daily basis, including the Fund’s position relative to the Par Up Rate and the Buffer. You may also contact your insurance company or other financial intermediary for more information.
Additionally, the Fund’s net asset value (“NAV”) will not increase or decrease at the same rate as the
S&P 500 Index because the Fund’s strategy relies upon the performance of the Collateral Portfolio and the Put Spread Strategy, in addition to the value of the Fund’s FLEX Options positions on the S&P 500 Index. While Milliman anticipates
that the Fund’s NAV will generally move in the same direction as the S&P 500 Index (meaning that the Fund’s NAV will generally increase if the S&P 500 Index experiences gains or decrease if the S&P 500 Index experiences losses), the
Fund’s NAV may not decrease at the same rate as the S&P 500 Index (especially when factoring in the performance of the Collateral Portfolio and the Put Spread Strategy) and will not increase at the same rate as the S&P 500 Index
(especially when factoring in the Par Up Rate and the performance of the Collateral Portfolio and the Put Spread Strategy). Similarly, the amount of time remaining until the end of the Outcome Period also affects
23
the impact of the Buffer on the Fund’s NAV, because the Buffer may not be in full effect prior to the end of the Outcome Period.
The FLEX Options utilized in the Fund’s portfolio are each set to expire on the last day of the Outcome Period. The customizable nature of FLEX Options
will allow Milliman to select the strike price at which each FLEX Option will be exercised at the expiration of the FLEX Option term. At the commencement of the Outcome Period, Milliman will specifically select the strike price for each FLEX Option
in a manner designed to achieve the Outcomes when the FLEX Options are exercised on the final day of the Outcome Period, depending on the anticipated performance of the S&P 500 Index, the Collateral Portfolio and the Put Spread Strategy over
the duration of that Outcome Period.
The hypothetical graphical illustrations provided below are designed to illustrate the Outcomes based upon the
hypothetical performance of the S&P 500 Index for an investor who holds Shares for the entirety of the Outcome Period. The hypothetical graphical illustrations do not include any fees or expenses imposed by your variable product or expenses
incurred by the Fund, and do not reflect the performance of the Collateral Portfolio or the Put Spread Strategy. Additional hypothetical graphical representations of the Outcomes are provided in “Additional Information About the Funds and
the Risks of Investing.” There is no guarantee that the Fund will be successful in its attempt to achieve the Outcomes for the Outcome Period.
The following table contains hypothetical examples designed to illustrate the Outcomes the Fund seeks to
achieve over the Outcome Period, based upon the performance of the S&P 500 Index from (100)% to 100% after taking into account the Par Up Rate and the Buffer, but prior to taking into account any fees or expenses or the performance of the
Collateral Portfolio or the Put Spread Strategy. The table is provided for illustrative purposes only and does not provide every possible performance scenario for Shares over the course of the Outcome Period. There is no guarantee that the Fund will be successful in its attempt to achieve the Outcomes for an Outcome
Period. The table is not intended to predict or project the performance of the FLEX Options or the Fund. Investors should not take this information as an assurance of the expected performance of the
S&P 500 Index or the Fund. Actual Fund performance will vary with fluctuations in the performance of the Collateral Portfolio and the Put Spread Strategy, in addition to the value of the Fund’s FLEX Options positions on the S&P
500 Index, during the Outcome Period, among other factors. The performance of the Collateral Portfolio and the Put Spread
24
Strategy could significantly impact the performance of the Fund, which could prevent the Fund from achieving the
Outcomes that it seeks to produce. The table does not reflect any fees or expenses imposed by your variable product or expenses incurred by the Fund. If it did, the returns shown for the Fund would be lower. Please refer to the Fund’s
website, which provides updated information relating to this table on a daily basis throughout the Outcome Period. Please contact your insurance company or other financial intermediary for more information.
|
Index/Fund
|
Hypothetical Performance1
|
|||||||||||
|
S&P 500 Index Price Performance
|
(100)%
|
(50)%
|
(20)%
|
(10)%
|
(5)%
|
0%
|
5%
|
10%
|
15%
|
20%
|
50%
|
100%
|
|
Fund Performance at NAV
|
(90)%
|
(40)%
|
(10)%
|
0%2
|
0%2
|
0%
|
4.0%3
|
8.0%3
|
12%3
|
16%3
|
40%3
|
80%3
|
| 1 |
Does not take into account any fees or expenses or the performance of the Collateral Portfolio or the Put Spread Strategy.
|
| 2 |
Reflects the impact of the Buffer.
|
| 3 |
Reflects the impact of an assumed Par Up Rate of 80%.
|
Understanding Outcomes. The Outcomes the Fund seeks to achieve are measured based upon the
Fund’s NAV on the first day of the Outcome Period. The Outcome Period begins on the day Milliman transacts in the FLEX Options on behalf of the Fund, and ends on the day those FLEX Options expire. An investor who
purchases Shares after the commencement of the Outcome Period will likely have purchased Shares at a different NAV than the NAV on the first day of the Outcome Period (the NAV upon which the Outcomes are based) and may experience investment
outcomes very different from those the Fund seeks to achieve, especially when factoring in any fees or expenses or the performance of the Collateral Portfolio and the Put Spread Strategy. An investor who redeems Shares prior to the end of the
Outcome Period may also experience investment outcomes very different from those the Fund seeks to achieve. The Outcomes are designed with the expectation that an investor will hold Shares on the day that Milliman transacts in the FLEX Options on
behalf of the Fund, and on the day those FLEX Options expire. There is no guarantee that the Fund will be successful in its attempt to achieve the Outcomes.
Understanding the Par Up Rate. Unlike other investment products, the potential returns an
investor can receive from an investment in the Fund are subject to the Par Up Rate. This means that if the S&P 500 Index experiences gains for the Outcome Period, an investor in the Fund will only experience
a percentage of those gains (equal to the Par Up Rate multiplied by the S&P 500 Index gains). Milliman calculates the Par Up Rate for each Outcome Period based upon (i) its evaluation of prevailing market conditions on the first day
of the Outcome Period and (ii) the total number of long call FLEX Options on the S&P 500 Index that it is able to purchase at that time. In certain market conditions, the performance of the Collateral
Portfolio and the Put Spread Strategy could reduce the impact of the Par Up Rate. An investor should consider the amount and impact of
the Par Up Rate, and the Fund’s position relative to it, before investing in the Fund.
Understanding the Buffer. The Buffer that the Fund seeks to provide is only operative
against the first 10% of losses in the Fund’s S&P 500 Index exposure for the Outcome Period. If an investor is considering purchasing Shares during the Outcome Period, and the S&P 500 Index has decreased
in value by an amount equal to or greater than 10%, an investor purchasing Shares at that time will be able to participate in any gains thereafter, but will not benefit from the Buffer that the Fund seeks to offer for the remainder of the
Outcome Period if the losses continue to be equal to or greater than 10% during that period. Conversely, if an investor is considering purchasing Shares during the Outcome Period, and the Fund’s NAV has increased in value, then an investor may
experience losses before implementation of the Buffer that the Fund seeks to provide. While the Fund seeks to produce returns that correlate to those of the S&P 500 Index for the Outcome Period that are buffered up to 10% (prior to
taking into account any fees or expenses or the performance of the Collateral Portfolio or the Put Spread Strategy) for investors who hold Shares for the entire Outcome Period, there is no guarantee it will successfully do so. In addition, the Buffer is not operative against losses in the Collateral Portfolio or the Put Spread Strategy. If the Collateral Portfolio and/or the Put Spread Strategy experiences losses, it could have the
effect of reducing the impact of, or completely eliminating, the Buffer on the Fund’s S&P 500 Index exposure. In certain market conditions, the performance of the Collateral Portfolio and/or the
25
Put Spread Strategy could cause the Fund to significantly underperform the S&P 500 Index. Investors who purchase Shares at
the beginning of the Outcome Period may lose their entire investment. Investors who purchase Shares after the Outcome Period has begun may also lose their entire investment. An investment in the Fund is only appropriate for investors willing to
bear those losses.
Fund Rebalance. Milliman implements the Fund’s strategy on a semi-annual basis, seeking to
produce the Outcomes for an Outcome Period. On the last business day of any stated Outcome Period, all of the Fund’s existing FLEX Options, which includes those used to establish the Buffer, the Par Up Rate and the Put Spread Strategy, will
expire and Milliman will transact in a new set of FLEX Options on the same business day, which will commence a new Outcome Period beginning the following business day. At that same time, Milliman will also evaluate whether to make any adjustments
to the Collateral Portfolio. Accordingly, Shares can be held indefinitely if investors determine to participate in additional Outcome Periods.
Approximately one week prior to the end of each Outcome Period, the Fund will file a prospectus supplement, which will notify existing investors of
(i) the date on which the existing Outcome Period will end; (ii) the date on which the new Outcome Period will commence; and (iii) the anticipated ranges of the Par Up Rate that will be used for the new Outcome Period. Immediately preceding the
commencement date of the new Outcome Period, the Fund will file a prospectus supplement disclosing the Fund’s final Par Up Rate (both gross and net of Fund fees and expenses) for the new Outcome Period. This information will also be available
online at www.[___________].com, and on your insurance company’s website. Please contact your insurance company or other financial intermediary for more information.
Fund Classification. The Fund is classified as “non-diversified” under the Investment
Company Act of 1940, as amended (the “1940 Act”).
Principal Risks
You could lose money by investing in the Fund. An investment in the Fund is not a deposit of a bank and is not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other governmental agency. There can be no assurance that the Fund’s investment objectives will be achieved.
Downside Loss Buffer Risk. There can be no guarantee that the Fund will be successful in its strategy to
buffer against S&P 500 Index losses if the S&P 500 Index decreases in value over the Outcome Period. The Fund’s strategy is designed to produce returns that correlate to those of the S&P 500 Index at the Par Up Rate, while limiting
downside losses in the Fund’s S&P 500 Index exposure, if Shares are bought on the day on which Milliman transacts in the FLEX Options on behalf of the Fund and held until those FLEX Options expire at the end of each Outcome Period. The
success of the Buffer also depends upon the performance of the Collateral Portfolio and the Put Spread Strategy. If the Collateral Portfolio and/or the Put Spread Strategy experiences losses, it could have the
effect of reducing the impact of, or completely eliminating, the Buffer on the Fund’s S&P 500 Index exposure. In certain market conditions, the performance of the Collateral Portfolio and/or the Put Spread Strategy could cause the Fund to
significantly underperform the S&P 500 Index. Despite the intended Buffer, an investor could lose their entire investment. In the event an investor purchases Shares after the date on which Milliman transacted in the FLEX
Options on behalf of the Fund, or redeems Shares prior to the expiration of those FLEX Options, the Buffer that the Fund seeks to provide may not be available or fully applicable.
Risk of the Par Up Rate on Upside Returns. The Fund’s strategy is designed to produce returns that correlate
to those of the S&P 500 Index at the Par Up Rate if Shares are bought on the day on which Milliman transacts in the FLEX Options on behalf of the Fund and held until those FLEX Options expire at the end of the Outcome Period. Accordingly, the
Fund will not fully participate in any gains achieved by the S&P 500 Index. In addition, in the event an investor purchases Shares after the date on which Milliman transacted in the FLEX Options on behalf of the Fund, or redeems Shares prior
to the expiration of those FLEX Options, the returns realized by that investor may not match those that the Fund seeks to achieve pursuant to the Par Up Rate. In certain market conditions, the performance of
the Collateral Portfolio and the Put Spread Strategy could reduce the impact of the Par Up Rate. An investor should consider the amount and impact of the Par Up Rate, and the Fund’s position relative to it, before investing in the Fund.
26
Par Up Rate Change Risk. Because the Par Up Rate for each Outcome Period is calculated based upon (i)
Milliman’s evaluation of prevailing market conditions on the first day of the Outcome Period and (ii) the total number of long call FLEX Options on the S&P 500 Index that Milliman is able to purchase at that time, the Par Up Rate may rise or
fall from one Outcome Period to the next. Any change in the Par Up Rate could be significant and it is unlikely to remain the same for consecutive Outcome Periods.
FLEX Options Risk. The Fund will transact in FLEX Options issued and guaranteed for settlement by the OCC. The
Fund bears the risk that the OCC will be unable or unwilling to perform its obligations under the FLEX Options contracts, which could result in significant losses to the Fund. In less liquid markets, terminating a FLEX Option may require the
payment of a premium or acceptance of a discounted price, and may take longer to complete. In addition, a less liquid trading market may adversely impact the value of the Fund’s FLEX Options and therefore the NAV of the Fund. In addition, the value
of the Fund’s FLEX Options positions is not anticipated to increase or decrease at the same rate as the reference asset; and while it is anticipated that they will generally move in the same direction, it is possible that they may move in different
directions. Certain FLEX Options positions may also expire worthless. The use of FLEX Options involves leverage, which can cause the Fund’s portfolio to be more volatile than if the portfolio had not been leveraged. Leverage can significantly
magnify the effect of price movements of the reference asset, disproportionately increasing the Fund’s losses and reducing the Fund’s opportunities for gains when the reference asset changes in unexpected ways. In some instances, such leverage
could result in losses that exceed the original amount invested.
Investment Objective and Outcomes Risk. There is no guarantee that the Fund will be successful in its attempt
to achieve its investment objective and/or the Outcomes, and an investor could lose some or all of their investment in the Fund. Certain circumstances under which the Fund might not achieve its objective and/or the Outcomes include, but are not
limited to (i) if the Fund disposes of FLEX Options, (ii) if the Fund is unable to maintain the proportional relationship based on the number of FLEX Options in the Fund’s portfolio, (iii) significant accrual of Fund expenses in connection with
effecting the Fund’s principal investment strategy, (iv) losses incurred by the Fund’s holdings in the Collateral Portfolio and/or losses resulting from the Put Spread Strategy, or (iv) adverse tax law changes affecting the treatment of FLEX
Options.
Tax Risk. The Fund intends to elect, and to qualify each year, to be treated as a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”). As a RIC, the Fund will not be subject to U.S. federal income tax on the portion
of its net investment income and net capital gain that it distributes to shareholders, provided that it satisfies certain requirements of the Code. To maintain its status as a RIC, the Fund must meet certain income, diversification and
distributions tests. For purposes of the diversification test, the identification of the issuer (or, in some cases, issuers) of a particular Fund investment can depend on the terms and conditions of that investment. In particular, there is no
published IRS guidance or case law on how to determine the “issuer” of certain derivatives that the Fund will enter into and the Fund has not received a private letter ruling on this point. Therefore, there is a risk that the Fund will not meet the
Code’s diversification requirements and will not qualify, or will be disqualified, as a RIC. If the Fund does not qualify as a RIC for any taxable year and certain relief provisions are not available, the Fund’s taxable income will be subject to
tax at the Fund level and to a further tax at the shareholder level when such income is distributed.
The Fund also intends to comply with the diversification requirements of Section 817(h) of the Code, and the regulations thereunder, relating to the
tax-deferred status of variable accounts that are based on insurance company separate accounts (referred to as “segregated asset accounts” for federal income tax purposes). These diversification requirements apply in addition to the RIC
diversification requirements discussed above. There also is no published guidance or case law on how to determine the “issuer” of the derivatives referred to above for purposes of the diversification requirements of Section 817(h) of the Code and
the Fund has not received a private letter ruling on this point. If these requirements are not met, or under other circumstances, such as if the Fund does not qualify as a RIC for any taxable year, it is possible that the contract owners (rather
than the insurance company) will be treated for federal income tax purposes as the taxable owners of the assets held by the segregated asset accounts.
Clearing Member Default Risk. The Fund will hold FLEX Options through accounts at members of clearing houses (“clearing members”) rather than a bank or a broker. Assets deposited by the Fund with any clearing member as margin for its FLEX Options positions may, in certain circumstances, be used to satisfy losses of other
clients of the Fund’s clearing member where such assets may be held in commingled omnibus accounts. In addition, although
27
clearing members guarantee performance of their clients’ obligations to the clearing house, there is a risk that the assets of the Fund might not be
fully protected in the event of the clearing member’s bankruptcy, as the Fund would be limited to recovering only a pro rata share of all available funds segregated on behalf of the clearing member’s
customers for the relevant account class.
Debt Securities Risk. The prices of debt securities will be affected by changes in interest rates, the
creditworthiness of the issuer and other factors. These risks could affect the value of investments in which the Fund invests, possibly causing the Fund’s NAV to be reduced and fluctuate more than other types of investments. During periods of
falling interest rates, an issuer of a callable bond may repay the security before its stated maturity, and the Fund may have to reinvest the proceeds in securities with lower yields, which would result in a decline in the Fund’s income, or in
securities with greater risks or with other less favorable features. Changing interest rates, including rates that fall below zero, may have unpredictable effects on markets, result in heightened market volatility and detract from the Fund’s
performance to the extent the Fund is exposed to such interest rates. An increase in interest rates will generally cause the value of fixed-income securities held by the Fund to decline, may lead to heightened volatility in the fixed-income
markets and may adversely affect the liquidity of certain fixed-income investments, including those held by the Fund. Risks associated with rising interest rates are heightened given that interest rates in the U.S. are near historic lows.
Adjustable-rate instruments also react to interest rate changes in a similar manner, although generally to a lesser degree (depending, however, on the characteristics of the reset terms, including the index chosen, frequency of reset and reset
caps or floors, among other factors). Interest rate sensitivity is generally more pronounced and less predictable in instruments with uncertain payment or prepayment schedules and also for those with longer maturities.
Foreign Securities and Credit Exposure Risk. U.S. dollar-denominated securities carrying foreign credit exposure
may be affected by unfavorable political, economic or governmental developments that could affect payments of principal and interest. Furthermore, the value of the Fund’s foreign investments (whether direct or indirect) may be adversely affected by
political and social instability in their home countries, by changes in economic or taxation policies in those countries, or by the difficulty in enforcing obligations in those countries. Foreign companies generally may be subject to less stringent
regulations than U.S. companies, including financial reporting requirements and auditing and accounting controls. As a result, there generally is less publicly available information about foreign companies than about U.S. companies. Trading in many
foreign securities may be less liquid and more volatile than U.S. securities due to the size of the market or other factors.
U.S. Government Securities Risk. U.S. Government securities are subject to interest rate risk but generally do
not involve the credit risks associated with investments in other types of debt securities. As a result, the yields available from U.S. Government securities are generally lower than the yields available from other debt securities. U.S. Government
securities are guaranteed only as to the timely payment of interest and the payment of principal when held to maturity. While securities issued or guaranteed by U.S. federal government agencies are backed by the full faith and credit of the U.S.
Department of the Treasury, securities issued by government sponsored entities are solely the obligation of the issuer and generally do not carry any guarantee from the U.S. Government.
ABS Risk. ABS are subject to the general debt securities risks described above. In addition, ABS may be less
liquid than other bonds, and may be more sensitive than other bonds to the market’s perception of issuers and creditworthiness of payees, which may result in the Fund experiencing difficulty selling or valuing these securities. ABS markets have
experienced extraordinary weakness and volatility at various times in recent years, and may decline quickly in the event of a substantial economic or market downturn. Accordingly, these securities may be subject to greater risk of default during
periods of economic downturn than other securities, which could result in possible losses to the Fund.
Issuer Risk. The performance of the Fund depends on the performance of individual securities to which the Fund
has exposure. The Fund may be adversely affected if an issuer of underlying securities held by the Fund is unable or unwilling to repay principal or interest when due. Changes in the financial condition or credit rating of an issuer of those
securities may cause the value of the securities to decline.
Management Risk. The Fund is subject to management risk because it is an actively managed portfolio. Milliman
will apply investment techniques and risk analyses in making investment decisions for the Fund, but there can be no guarantee that the Fund will meet its investment objective and/or the Outcomes. In addition, Milliman does not use
28
defensive strategies or attempt to reduce the Fund’s exposures to poor performing positions during an Outcome Period. This differs from funds that are
managed to seek to outperform a benchmark index. Therefore, in the event of a general market decline, the Fund’s value may fall more than the value of another fund that does attempt to hedge against such market declines.
Market Risk. The Fund could lose money over short periods due to short-term market movements and over longer
periods during more prolonged market downturns. Assets may decline in value due to factors affecting financial markets generally or particular asset classes or industries represented in the markets. The value of a FLEX Option or other asset may
also decline due to general market conditions, economic trends or events that are not specifically related to the issuer of the security or other asset, or due to factors that affect a particular issuer, country, region, market, industry, sector or
asset class.
Non-Diversification Risk. The Fund may invest a relatively high percentage of its assets in a limited number of
issuers. As a result, the Fund may be more susceptible to a single adverse economic or regulatory occurrence affecting one or more of these issuers, experience increased volatility and be highly invested in certain issuers.
Large Shareholder Risk. At times, the Fund may experience adverse effects when certain large shareholders,
including insurance company separate accounts, redeem large amounts of shares of the Fund. Large redemptions may cause the Fund to sell portfolio holdings at times when it would not otherwise do so and may increase transaction costs and/or result
in an increase to the Fund’s expense ratio. A large redemption could be detrimental to the Fund and its remaining shareholders.
Risks of Investing in ETFs. In addition to the risks associated with the underlying assets held by the ETFs in
which the Fund invests, investments in ETFs are also subject to the following additional risks: (i) only authorized participants may engage in transactions directly with ETFs but none are obligated to do so, which could result in an ETF’s shares
trading at a premium or discount to its NAV or possibly face trading halts or delisting; (ii) certain ETFs seek to track the performance of an underlying index and will not attempt to take defensive positions under any market conditions, including
declining markets, which could result in losses; and (iii) because ETF shares trade on the secondary market, there is not guarantee that an active market will be developed or maintained, which could result in the ETF’s shares trading at a premium
or discount to its NAV. Investments in ETFs may involve duplication of management fees and certain other expenses, as the Fund indirectly bears its proportionate share of any expenses paid by the ETFs in which it invests.
Risks of Investing in Money Market Funds. Money market funds seek to preserve the value of shareholder
investments at $1.00 per share, but shareholders, such as the Fund, may still lose money by investing in such funds. In addition, a money market fund may impose a fee upon the sale of its shares or may temporarily suspend the ability to sell shares
if the fund’s liquidity falls below required minimums because of market conditions or other factors. The credit quality of a money market fund’s holdings can change rapidly in certain markets, and the default of a single holding could have an
adverse impact on the fund’s share price. A money market fund’s share price can also be negatively affected during periods of high redemption pressures, illiquid markets, and/or significant market volatility.
Performance
As of the date of this Prospectus, the Fund has not commenced operations and therefore does not have a performance history. Once available, the Fund’s
performance information will be accessible online at www.[________].com and will provide some indication of the risks of investing in the Fund.
Management
Investment Adviser
Milliman Financial Risk Management LLC (“Milliman”) serves as investment adviser to the Fund.
29
Portfolio Managers
The following persons serve as portfolio managers of the Fund.
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Robert T. Cummings, Principal & Head of Portfolio Management at Milliman.
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Maria Schiopu, Principal & Head of Portfolio Management at Milliman.
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●
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Jeff Greco, Principal & Head of Strategy Research at Milliman.
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●
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Jordan Rosenfeld, Portfolio Manager at Milliman.
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Each portfolio manager is jointly and primarily responsible for the day-to-day management of the Fund’s portfolio and has served in such capacity
since the Fund’s inception in 2021.
Purchase and Sale of Shares
Shares are available as underlying investment options for variable insurance contracts and variable life insurance policies (each, a “variable contract,” and, collectively, the “variable contracts”) issued by insurance companies. These insurance companies are the record owners of the separate accounts
holding the Shares. You do not buy, sell or exchange Shares directly; rather, you choose investment options through your variable contracts. The insurance companies then cause the separate accounts to purchase and redeem Shares according to
the investment options you choose.
Tax Information
The dividends and distributions paid by the Fund to the insurance company separate accounts will consist of ordinary income, capital gains, or some
combination of both. Because Shares must be purchased through separate accounts used to fund variable contracts, such dividends and distributions will be exempt from current taxation by owners of variable contracts (each, a “contract owner,” and, collectively “contract owners”) if left to accumulate within a separate account. Consult the variable contract prospectus for additional tax
information.
Payments to Insurance Companies and Other Financial Intermediaries
If you allocate contract value to the Fund through an insurance company or other financial intermediary, the Fund, Milliman, the Fund’s distributor or
their related companies may pay the insurance company and/or its affiliates or other intermediary for the sale of Shares and related services. These payments may create a conflict of interest by influencing the insurance company or other
intermediary and your salesperson to recommend an indirect investment in the Fund over another investment. The prospectus or other disclosure documents for the variable contracts may contain additional information about these payments, if any.
You may also ask your salesperson or financial intermediary, or visit your financial intermediary’s website, for more information.
30
Fund Summary: Milliman S&P 500 6-Month Buffer with Par Up Fund – Jun/Dec
Investment Objective
The Fund seeks to provide exposure to the S&P 500 Index, while providing a buffer against the first 10% of losses associated with S&P 500
Index performance and participating in S&P 500 Index gains at a declared rate, prior to taking into account any fees or expenses or the performance of any fixed income exposure included in the Fund’s portfolio, over the period from December
1, 2021 through May 31, 2022.
Fees and Expenses of the Fund
This table describes the fees and expenses that you may pay if you buy, hold and sell shares of the Fund (“Shares”).
This table and the example below do not include any fees or sales charges imposed by your variable product. If they were included, the expenses listed below would be higher.
Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment)
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Class 3
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Management Fees
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0.49%
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Distribution and Service (12b-1) Fees
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0.25%
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Other Expenses(1)
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0.50%
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Acquired Fund Fees and Expenses(1)
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[_.__]%
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Total Annual Fund Operating Expenses
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1.24%
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Fee Waiver and/or Expense Reimbursement(2)(3)
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(0.25)%
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Total Annual Fund Operating Expenses After Fee Waiver and/or Expense Reimbursement
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0.99%
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(1)
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“Other Expenses” and “Acquired Fund Fees and Expenses” are based on estimated amounts for the current fiscal year.
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(2)
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The Fund’s investment adviser, Milliman Financial Risk Management LLC (“Milliman”), has contractually
agreed to waive advisory fees and/or reimburse expenses to the extent necessary to limit the Fund’s total annual Fund operating expenses (excluding taxes, interest, brokerage fees and commissions, Rule 12b-1 fees, acquired fund fees and
expenses, short-sale dividend expenses, administrative services fees, other expenses that are capitalized in accordance with generally accepted accounting principles, and extraordinary or non-routine expenses not incurred in the
ordinary course of the Fund’s business) to 0.74% of the Fund's average daily net assets (the “Expense Limitation Agreement”) until at least November 1, 2022. During its term, the Expense
Limitation Agreement cannot be terminated or amended to increase the applicable limit without approval of the Board of Trustees of the Trust (the “Board”). Milliman may recoup from the Fund any
advisory fees waived or expenses reimbursed pursuant to the Expense Limitation Agreement for a period of three years from the date on which such waiver or reimbursement occurred; provided, however, that such recoupment shall not be made
if it would cause the Fund’s total annual Fund operating expenses to exceed the lesser of (a) the expense limitation in effect at the time of the reimbursement, or (b) the expense limitation in effect at the time of recoupment, if any.
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(3)
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In addition to the Expense Limitation Agreement, Milliman has contractually agreed to waive its advisory fees in an amount equal to the Fund’s
acquired fund fees and expenses until at least November 1, 2022 (the “Fee Waiver”). This contract cannot be terminated or modified without the consent of the Board.
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Example
This example is intended to help you compare the cost of investing in the Fund with the cost of investing in other funds. This example assumes that you
invest $10,000 in the Fund for the time periods indicated and then sell all of your Shares at the end of those periods. This example also assumes that your investment has a 5% return each year and that the Fund’s operating expenses remain at
current levels and that the Expense Limitation Agreement and Fee Waiver remain in place for their contractual periods. Although your actual costs may be higher or lower, your costs, based on these assumptions, would be:
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1 Year
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3 Years
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|
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Class 3
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$104
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$384
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This example does not include any fees or sales charges imposed by your variable product. If they were included, the expenses listed above would be
higher.
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Portfolio Turnover
The Fund pays transaction costs, such as commissions, when it purchases and sells securities (or “turns over” its portfolio). A higher portfolio turnover
will cause the Fund to incur additional transaction costs. These costs, which are not reflected in Total Annual Fund Operating Expenses or in the example, may affect the Fund’s performance. Because the Fund has not yet commenced investment
operations, no portfolio turnover information is available at this time.
Principal Investment Strategies
The Fund seeks to achieve its investment objective by transacting in FLexible EXchange® Options (“FLEX Options”)
and by separately maintaining a collateral portfolio (the “Collateral Portfolio”), which is designed primarily to serve as margin or collateral for the Fund’s FLEX Options positions and secondarily to
enhance the Fund’s upside S&P 500 Index FLEX Options’ exposure (i.e., by utilizing anticipated income to measure the ability to purchase additional FLEX Options). FLEX Options are exchange-traded
options contracts with uniquely customizable terms. In general, an options contract is an agreement between a buyer and seller that gives the purchaser of the option the right to buy or sell a particular asset at a specified future date at an
agreed upon price, commonly known as the “strike price.” The reference assets for the Fund’s FLEX Options positions will include the S&P 500 Index, which is a large-capitalization, market-weighted, U.S. equities index that tracks the price
(excluding dividends) of 500 leading companies in leading industries of the U.S. economy, and certain exchange-traded funds (“ETFs”), as described further below.
The Collateral Portfolio may be invested in short-term fixed-income securities, including corporate bonds and other corporate debt securities,
asset-backed securities (“ABS”), securities issued by the U.S. Government or its agencies and instrumentalities, securities issued by non-U.S. governments or their agencies and instrumentalities, money
market securities and funds, other interest-bearing instruments, cash, ETFs that primarily invest in any of the foregoing instruments, options on ETFs and options box spreads. An options box spread is the combination of different options trades
that have offsetting spreads (e.g., purchases and sales on the same underlying instrument, such as an index or an ETF, but with different strike prices and/or expiration dates) for the purpose of
generating income. The Fund may invest in short-term fixed income securities or other instruments, including through ETFs, of any maturity and credit quality. The Fund will generally invest up to 35% of its net assets in one or more ETFs that
provide exposure to investment grade corporate bonds.
Due to the unique mechanics of the Fund’s strategy, the return an investor can expect to receive from an investment in the Fund has characteristics that
are distinct from the returns of many other investment vehicles. It is important that an investor understand these characteristics before making an investment in the Fund.
In seeking to achieve its investment objective, the Fund seeks to produce pre-determined outcomes (the “Outcomes”)
that are based upon the performance of the S&P 500 Index over a six-month period (the “Outcome Period”). The initial Outcome Period for the Fund is December 1, 2021 through May 31, 2022. Following the
initial Outcome Period, each subsequent Outcome Period will be a six-month period commencing upon the expiration of the prior Outcome Period. The Fund seeks to achieve the Outcomes by purchasing and writing (selling) FLEX Options to create layers
within the Fund’s portfolio. One layer is designed to produce returns that correlate to those of the S&P 500 Index for the Outcome Period at a declared rate (the “Par Up Rate”) if the S&P 500 Index
experiences gains during that time, as described below. A separate layer is designed to produce returns that correlate to those of the S&P 500 Index for the Outcome Period that are buffered up to 10% if
the S&P 500 Index experiences losses during that time (the “Buffer”). There is no guarantee that the Fund will be successful in its attempt to produce returns that
correlate to those of the S&P 500 Index at the Par Up Rate or produce buffered returns against the Fund’s S&P 500 Index exposure.
Milliman Financial Risk Management, LLC (“Milliman”), the investment adviser of the Fund, seeks to establish the
Buffer by writing one put FLEX Option on the S&P 500 Index with a strike price that is 10% lower than the value of the S&P 500 Index at the beginning of the Outcome Period.
Milliman seeks to establish the Par Up Rate by purchasing long call FLEX Options on the S&P 500 Index with a strike price approximately equal to
the value of the S&P 500 Index at the beginning of the Outcome Period.
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Milliman purchases these FLEX Options with a portion of the Fund’s net assets plus (i) the cash received from writing the put FLEX Option designed to
create the Buffer, (ii) additional cash received by utilizing FLEX Options to create a put spread (the “Put Spread Strategy”) on fixed income securities and/or one or more ETFs that provide exposure to
fixed income securities, and (iii) yield received from the Collateral Portfolio. Milliman seeks to achieve the Put Spread Strategy for the Fund by writing a put FLEX Option on an underlying asset at a strike price at or lower than the underlying
asset’s market price or current value at the beginning of the Outcome Period, and buying a put FLEX Option on the same underlying asset at a lower strike price than the written put FLEX Option.
The Par Up Rate is the rate at which the Fund will seek to track any upside market performance of the S&P 500 Index. Milliman calculates the Par
Up Rate based upon (i) its evaluation of prevailing market conditions on the first day of the Outcome Period and (ii) the total number of long call FLEX Options on the S&P 500 Index that it is able to purchase at that time. As of the date of
this Prospectus, and assuming current market conditions persist, Milliman expects that the Par Up Rate will be between the below ranges (both gross and net of Fund fees and expenses). Any fees or expenses imposed by your variable product, and any
other expenses incurred by the Fund, will have the effect of further reducing the Par Up Rate. Once calculated, the Par Up Rate for a particular Outcome Period will not change during that Outcome Period;
however, in certain market conditions, the performance of the Collateral Portfolio and the Put Spread Strategy could reduce the impact of the Par Up Rate.
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Share Class
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Estimated Par Up Rate Ranges
(As of [___])
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Prior to Taking into Account Fund Fees and Expenses
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After Taking into Account Fund Fees and Expenses
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Class 3
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[__]% and [__]%
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[__]% and [__]%
|
The Buffer is only operative against the first 10% of losses in the Fund’s S&P 500 Index exposure for the Outcome Period. If the S&P 500 Index
decreases in value by more than 10% during the Outcome Period, the Fund (and therefore investors in Shares) will experience all subsequent losses in the Fund’s S&P 500 Index exposure on a one-to-one basis for the Outcome Period. The Fund
seeks to produce buffered returns against its S&P 500 Index exposure prior to taking into account any fees or expenses or the performance of the Collateral Portfolio or the Put Spread Strategy. The Buffer
is not operative against losses in the Collateral Portfolio or the Put Spread Strategy. If the Collateral Portfolio and/or the Put Spread Strategy experiences losses, it could have the effect of reducing the impact of, or completely
eliminating, the Buffer on the Fund’s S&P 500 Index exposure. In certain market conditions, the performance of the Collateral Portfolio and/or the Put Spread Strategy could cause the Fund to significantly underperform the S&P 500
Index. The following table reflects the Buffer both gross and net of Fund fees and expenses:
|
Share Class
|
Buffer
(As of [___])
|
|
|
Prior to Taking into Account Fund Fees and Expenses
|
After Taking into Account Fund Fees and Expenses
|
|
|
Class 3
|
10%
|
[__]%
|
The definitive Par Up Rate and Buffer will be set forth on the Fund’s website. The Fund’s website will also provide information relating to the
Outcomes on a daily basis, including the Fund’s position relative to the Par Up Rate and the Buffer. You may also contact your insurance company or other financial intermediary for more information.
Additionally, the Fund’s net asset value (“NAV”) will not increase or decrease at the same rate as the
S&P 500 Index because the Fund’s strategy relies upon the performance of the Collateral Portfolio and the Put Spread Strategy, in addition to the value of the Fund’s FLEX Options positions on the S&P 500 Index. While Milliman anticipates
that the Fund’s NAV will generally move in the same direction as the S&P 500 Index (meaning that the Fund’s NAV will generally increase if the S&P 500 Index experiences gains or decrease if the S&P 500 Index experiences losses), the
Fund’s NAV may not decrease at the same rate as the S&P 500 Index (especially when factoring in the performance of the Collateral Portfolio and the Put Spread Strategy) and will not increase at the same rate as the S&P 500 Index
(especially when factoring in the Par Up Rate and the performance of the Collateral Portfolio and the Put Spread Strategy). Similarly, the amount of time remaining until the end of the Outcome Period also affects
33
the impact of the Buffer on the Fund’s NAV, because the Buffer may not be in full effect prior to the end of the Outcome Period.
The FLEX Options utilized in the Fund’s portfolio are each set to expire on the last day of the Outcome Period. The customizable nature of FLEX Options
will allow Milliman to select the strike price at which each FLEX Option will be exercised at the expiration of the FLEX Option term. At the commencement of the Outcome Period, Milliman will specifically select the strike price for each FLEX Option
in a manner designed to achieve the Outcomes when the FLEX Options are exercised on the final day of the Outcome Period, depending on the anticipated performance of the S&P 500 Index, the Collateral Portfolio and the Put Spread Strategy over
the duration of that Outcome Period.
The hypothetical graphical illustrations provided below are designed to illustrate the Outcomes based upon the
hypothetical performance of the S&P 500 Index for an investor who holds Shares for the entirety of the Outcome Period. The hypothetical graphical illustrations do not include any fees or expenses imposed by your variable product or expenses
incurred by the Fund, and do not reflect the performance of the Collateral Portfolio or the Put Spread Strategy. Additional hypothetical graphical representations of the Outcomes are provided in “Additional Information About the Funds and
the Risks of Investing.” There is no guarantee that the Fund will be successful in its attempt to achieve the Outcomes for the Outcome Period.
The following table contains hypothetical examples designed to illustrate the Outcomes the Fund seeks to
achieve over the Outcome Period, based upon the performance of the S&P 500 Index from (100)% to 100% after taking into account the Par Up Rate and the Buffer, but prior to taking into account any fees or expenses or the performance of the
Collateral Portfolio or the Put Spread Strategy. The table is provided for illustrative purposes only and does not provide every possible performance scenario for Shares over the course of the Outcome Period. There is no guarantee that the Fund will be successful in its attempt to achieve the Outcomes for an Outcome
Period. The table is not intended to predict or project the performance of the FLEX Options or the Fund. Investors should not take this information as an assurance of the expected performance of the
S&P 500 Index or the Fund. Actual Fund performance will vary with fluctuations in the performance of the Collateral Portfolio and the Put Spread Strategy, in addition to the value of the Fund’s FLEX Options positions on the S&P
500 Index, during the Outcome Period, among other factors. The performance of the Collateral Portfolio and the Put Spread
34
Strategy could significantly impact the performance of the Fund, which could prevent the Fund from achieving the
Outcomes that it seeks to produce. The table does not reflect any fees or expenses imposed by your variable product or expenses incurred by the Fund. If it did, the returns shown for the Fund would be lower. Please refer to the Fund’s
website, which provides updated information relating to this table on a daily basis throughout the Outcome Period. Please contact your insurance company or other financial intermediary for more information.
|
Index/Fund
|
Hypothetical Performance1
|
|||||||||||
|
S&P 500 Index Price Performance
|
(100)%
|
(50)%
|
(20)%
|
(10)%
|
(5)%
|
0%
|
5%
|
10%
|
15%
|
20%
|
50%
|
100%
|
|
Fund Performance at NAV
|
(90)%
|
(40)%
|
(10)%
|
0%2
|
0%2
|
0%
|
4.0%3
|
8.0%3
|
12%3
|
16%3
|
40%3
|
80%3
|
| 1 |
Does not take into account any fees or expenses or the performance of the Collateral Portfolio or the Put Spread Strategy.
|
| 2 |
Reflects the impact of the Buffer.
|
| 3 |
Reflects the impact of an assumed Par Up Rate of 80%.
|
Understanding Outcomes. The Outcomes the Fund seeks to achieve are measured based upon the
Fund’s NAV on the first day of the Outcome Period. The Outcome Period begins on the day Milliman transacts in the FLEX Options on behalf of the Fund, and ends on the day those FLEX Options expire. An investor who
purchases Shares after the commencement of the Outcome Period will likely have purchased Shares at a different NAV than the NAV on the first day of the Outcome Period (the NAV upon which the Outcomes are based) and may experience investment
outcomes very different from those the Fund seeks to achieve, especially when factoring in any fees or expenses or the performance of the Collateral Portfolio and the Put Spread Strategy. An investor who redeems Shares prior to the end of the
Outcome Period may also experience investment outcomes very different from those the Fund seeks to achieve. The Outcomes are designed with the expectation that an investor will hold Shares on the day that Milliman transacts in the FLEX Options on
behalf of the Fund, and on the day those FLEX Options expire. There is no guarantee that the Fund will be successful in its attempt to achieve the Outcomes.
Understanding the Par Up Rate. Unlike other investment products, the potential returns an
investor can receive from an investment in the Fund are subject to the Par Up Rate. This means that if the S&P 500 Index experiences gains for the Outcome Period, an investor in the Fund will only experience
a percentage of those gains (equal to the Par Up Rate multiplied by the S&P 500 Index gains). Milliman calculates the Par Up Rate for each Outcome Period based upon (i) its evaluation of prevailing market conditions on the first day
of the Outcome Period and (ii) the total number of long call FLEX Options on the S&P 500 Index that it is able to purchase at that time. In certain market conditions, the performance of the Collateral
Portfolio and the Put Spread Strategy could reduce the impact of the Par Up Rate. An investor should consider the amount and impact of the Par Up Rate, and the Fund’s position relative to it, before investing in the Fund.
Understanding the Buffer. The Buffer that the Fund seeks to provide is only operative
against the first 10% of losses in the Fund’s S&P 500 Index exposure for the Outcome Period. If an investor is considering purchasing Shares during the Outcome Period, and the S&P 500 Index has decreased
in value by an amount equal to or greater than 10%, an investor purchasing Shares at that time will be able to participate in any gains thereafter, but will not benefit from the Buffer that the Fund seeks to offer for the remainder of the
Outcome Period if the losses continue to be equal to or greater than 10% during that period. Conversely, if an investor is considering purchasing Shares during the Outcome Period, and the Fund’s NAV has increased in value, then an investor may
experience losses before implementation of the Buffer that the Fund seeks to provide. While the Fund seeks to produce returns that correlate to those of the S&P 500 Index for the Outcome Period that are buffered up to 10% (prior to
taking into account any fees or expenses or the performance of the Collateral Portfolio or the Put Spread Strategy) for investors who hold Shares for the entire Outcome Period, there is no guarantee it will successfully do so. In addition, the Buffer is not operative against losses in the Collateral Portfolio or the Put Spread Strategy. If the Collateral Portfolio and/or the Put Spread Strategy experiences losses, it could have the
effect of reducing the impact of, or completely eliminating, the Buffer on the Fund’s S&P 500 Index exposure. In certain market conditions, the performance of the Collateral Portfolio and/or the Put Spread Strategy could cause the Fund to
significantly underperform the S&P 500 Index. Investors who
35
purchase Shares at the beginning of the Outcome Period may lose their entire investment. Investors who purchase Shares after the
Outcome Period has begun may also lose their entire investment. An investment in the Fund is only appropriate for investors willing to bear those losses.
Fund Rebalance. Milliman implements the Fund’s strategy on a semi-annual basis, seeking to
produce the Outcomes for an Outcome Period. On the last business day of any stated Outcome Period, all of the Fund’s existing FLEX Options, which includes those used to establish the Buffer, the Par Up Rate and the Put Spread Strategy, will
expire and Milliman will transact in a new set of FLEX Options on the same business day, which will commence a new Outcome Period beginning the following business day. At that same time, Milliman will also evaluate whether to make any adjustments
to the Collateral Portfolio. Accordingly, Shares can be held indefinitely if investors determine to participate in additional Outcome Periods.
Approximately one week prior to the end of each Outcome Period, the Fund will file a prospectus supplement, which will notify existing investors of
(i) the date on which the existing Outcome Period will end; (ii) the date on which the new Outcome Period will commence; and (iii) the anticipated ranges of the Par Up Rate that will be used for the new Outcome Period. Immediately preceding the
commencement date of the new Outcome Period, the Fund will file a prospectus supplement disclosing the Fund’s final Par Up Rate (both gross and net of Fund fees and expenses) for the new Outcome Period. This information will also be available
online at www.[___________].com, and on your insurance company’s website. Please contact your insurance company or other financial intermediary for more information.
Fund Classification. The Fund is classified as “non-diversified” under the Investment
Company Act of 1940, as amended (the “1940 Act”).
Principal Risks
You could lose money by investing in the Fund. An investment in the Fund is not a deposit of a bank and is not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other governmental agency. There can be no assurance that the Fund’s investment objectives will be achieved.
Downside Loss Buffer Risk. There can be no guarantee that the Fund will be successful in its strategy to
buffer against S&P 500 Index losses if the S&P 500 Index decreases in value over the Outcome Period. The Fund’s strategy is designed to produce returns that correlate to those of the S&P 500 Index at the Par Up Rate, while limiting
downside losses in the Fund’s S&P 500 Index exposure, if Shares are bought on the day on which Milliman transacts in the FLEX Options on behalf of the Fund and held until those FLEX Options expire at the end of each Outcome Period. The
success of the Buffer also depends upon the performance of the Collateral Portfolio and the Put Spread Strategy. If the Collateral Portfolio and/or the Put Spread Strategy experiences losses, it could have the
effect of reducing the impact of, or completely eliminating, the Buffer on the Fund’s S&P 500 Index exposure. In certain market conditions, the performance of the Collateral Portfolio and/or the Put Spread Strategy could cause the Fund to
significantly underperform the S&P 500 Index. Despite the intended Buffer, an investor could lose their entire investment. In the event an investor purchases Shares after the date on which Milliman transacted in the FLEX
Options on behalf of the Fund, or redeems Shares prior to the expiration of those FLEX Options, the Buffer that the Fund seeks to provide may not be available or fully applicable.
Risk of the Par Up Rate on Upside Returns. The Fund’s strategy is designed to produce returns that correlate
to those of the S&P 500 Index at the Par Up Rate if Shares are bought on the day on which Milliman transacts in the FLEX Options on behalf of the Fund and held until those FLEX Options expire at the end of the Outcome Period. Accordingly, the
Fund will not fully participate in any gains achieved by the S&P 500 Index. In addition, in the event an investor purchases Shares after the date on which Milliman transacted in the FLEX Options on behalf of the Fund, or redeems Shares prior
to the expiration of those FLEX Options, the returns realized by that investor may not match those that the Fund seeks to achieve pursuant to the Par Up Rate. In certain market conditions, the performance of
the Collateral Portfolio and the Put Spread Strategy could reduce the impact of the Par Up Rate. An investor should consider the amount and impact of the Par Up Rate, and the Fund’s position relative to it, before investing in the Fund.
36
Par Up Rate Change Risk. Because the Par Up Rate for each Outcome Period is calculated based upon (i)
Milliman’s evaluation of prevailing market conditions on the first day of the Outcome Period and (ii) the total number of long call FLEX Options on the S&P 500 Index that Milliman is able to purchase at that time, the Par Up Rate may rise or
fall from one Outcome Period to the next. Any change in the Par Up Rate could be significant and it is unlikely to remain the same for consecutive Outcome Periods.
FLEX Options Risk. The Fund will transact in FLEX Options issued and guaranteed for settlement by the OCC. The
Fund bears the risk that the OCC will be unable or unwilling to perform its obligations under the FLEX Options contracts, which could result in significant losses to the Fund. In less liquid markets, terminating a FLEX Option may require the
payment of a premium or acceptance of a discounted price, and may take longer to complete. In addition, a less liquid trading market may adversely impact the value of the Fund’s FLEX Options and therefore the NAV of the Fund. In addition, the value
of the Fund’s FLEX Options positions is not anticipated to increase or decrease at the same rate as the reference asset; and while it is anticipated that they will generally move in the same direction, it is possible that they may move in different
directions. Certain FLEX Options positions may also expire worthless. The use of FLEX Options involves leverage, which can cause the Fund’s portfolio to be more volatile than if the portfolio had not been leveraged. Leverage can significantly
magnify the effect of price movements of the reference asset, disproportionately increasing the Fund’s losses and reducing the Fund’s opportunities for gains when the reference asset changes in unexpected ways. In some instances, such leverage
could result in losses that exceed the original amount invested.
Investment Objective and Outcomes Risk. There is no guarantee that the Fund will be successful in its attempt
to achieve its investment objective and/or the Outcomes, and an investor could lose some or all of their investment in the Fund. Certain circumstances under which the Fund might not achieve its objective and/or the Outcomes include, but are not
limited to (i) if the Fund disposes of FLEX Options, (ii) if the Fund is unable to maintain the proportional relationship based on the number of FLEX Options in the Fund’s portfolio, (iii) significant accrual of Fund expenses in connection with
effecting the Fund’s principal investment strategy, (iv) losses incurred by the Fund’s holdings in the Collateral Portfolio and/or losses resulting from the Put Spread Strategy, or (iv) adverse tax law changes affecting the treatment of FLEX
Options.
Tax Risk. The Fund intends to elect, and to qualify each year, to be treated as a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”). As a RIC, the Fund will not be subject to U.S. federal income tax on the portion
of its net investment income and net capital gain that it distributes to shareholders, provided that it satisfies certain requirements of the Code. To maintain its status as a RIC, the Fund must meet certain income, diversification and
distributions tests. For purposes of the diversification test, the identification of the issuer (or, in some cases, issuers) of a particular Fund investment can depend on the terms and conditions of that investment. In particular, there is no
published IRS guidance or case law on how to determine the “issuer” of certain derivatives that the Fund will enter into and the Fund has not received a private letter ruling on this point. Therefore, there is a risk that the Fund will not meet the
Code’s diversification requirements and will not qualify, or will be disqualified, as a RIC. If the Fund does not qualify as a RIC for any taxable year and certain relief provisions are not available, the Fund’s taxable income will be subject to
tax at the Fund level and to a further tax at the shareholder level when such income is distributed.
The Fund also intends to comply with the diversification requirements of Section 817(h) of the Code, and the regulations thereunder, relating to the
tax-deferred status of variable accounts that are based on insurance company separate accounts (referred to as “segregated asset accounts” for federal income tax purposes). These diversification requirements apply in addition to the RIC
diversification requirements discussed above. There also is no published guidance or case law on how to determine the “issuer” of the derivatives referred to above for purposes of the diversification requirements of Section 817(h) of the Code and
the Fund has not received a private letter ruling on this point. If these requirements are not met, or under other circumstances, such as if the Fund does not qualify as a RIC for any taxable year, it is possible that the contract owners (rather
than the insurance company) will be treated for federal income tax purposes as the taxable owners of the assets held by the segregated asset accounts.
Clearing Member Default Risk. The Fund will hold FLEX Options through accounts at members of clearing houses (“clearing members”) rather than a bank or a broker. Assets deposited by the Fund with any clearing member as margin for its FLEX Options positions may, in certain circumstances, be used to satisfy losses of other
clients of the Fund’s clearing member where such assets may be held in commingled omnibus accounts. In addition, although
37
clearing members guarantee performance of their clients’ obligations to the clearing house, there is a risk that the assets of the Fund might not be
fully protected in the event of the clearing member’s bankruptcy, as the Fund would be limited to recovering only a pro rata share of all available funds segregated on behalf of the clearing member’s
customers for the relevant account class.
Debt Securities Risk. The prices of debt securities will be affected by changes in interest rates, the
creditworthiness of the issuer and other factors. These risks could affect the value of investments in which the Fund invests, possibly causing the Fund’s NAV to be reduced and fluctuate more than other types of investments. During periods of
falling interest rates, an issuer of a callable bond may repay the security before its stated maturity, and the Fund may have to reinvest the proceeds in securities with lower yields, which would result in a decline in the Fund’s income, or in
securities with greater risks or with other less favorable features. Changing interest rates, including rates that fall below zero, may have unpredictable effects on markets, result in heightened market volatility and detract from the Fund’s
performance to the extent the Fund is exposed to such interest rates. An increase in interest rates will generally cause the value of fixed-income securities held by the Fund to decline, may lead to heightened volatility in the fixed-income
markets and may adversely affect the liquidity of certain fixed-income investments, including those held by the Fund. Risks associated with rising interest rates are heightened given that interest rates in the U.S. are near historic lows.
Adjustable-rate instruments also react to interest rate changes in a similar manner, although generally to a lesser degree (depending, however, on the characteristics of the reset terms, including the index chosen, frequency of reset and reset
caps or floors, among other factors). Interest rate sensitivity is generally more pronounced and less predictable in instruments with uncertain payment or prepayment schedules and also for those with longer maturities.
Foreign Securities and Credit Exposure Risk. U.S. dollar-denominated securities carrying foreign credit exposure
may be affected by unfavorable political, economic or governmental developments that could affect payments of principal and interest. Furthermore, the value of the Fund’s foreign investments (whether direct or indirect) may be adversely affected by
political and social instability in their home countries, by changes in economic or taxation policies in those countries, or by the difficulty in enforcing obligations in those countries. Foreign companies generally may be subject to less stringent
regulations than U.S. companies, including financial reporting requirements and auditing and accounting controls. As a result, there generally is less publicly available information about foreign companies than about U.S. companies. Trading in many
foreign securities may be less liquid and more volatile than U.S. securities due to the size of the market or other factors.
U.S. Government Securities Risk. U.S. Government securities are subject to interest rate risk but generally do
not involve the credit risks associated with investments in other types of debt securities. As a result, the yields available from U.S. Government securities are generally lower than the yields available from other debt securities. U.S. Government
securities are guaranteed only as to the timely payment of interest and the payment of principal when held to maturity. While securities issued or guaranteed by U.S. federal government agencies are backed by the full faith and credit of the U.S.
Department of the Treasury, securities issued by government sponsored entities are solely the obligation of the issuer and generally do not carry any guarantee from the U.S. Government.
ABS Risk. ABS are subject to the general debt securities risks described above. In addition, ABS may be less
liquid than other bonds, and may be more sensitive than other bonds to the market’s perception of issuers and creditworthiness of payees, which may result in the Fund experiencing difficulty selling or valuing these securities. ABS markets have
experienced extraordinary weakness and volatility at various times in recent years, and may decline quickly in the event of a substantial economic or market downturn. Accordingly, these securities may be subject to greater risk of default during
periods of economic downturn than other securities, which could result in possible losses to the Fund.
Issuer Risk. The performance of the Fund depends on the performance of individual securities to which the Fund
has exposure. The Fund may be adversely affected if an issuer of underlying securities held by the Fund is unable or unwilling to repay principal or interest when due. Changes in the financial condition or credit rating of an issuer of those
securities may cause the value of the securities to decline.
Management Risk. The Fund is subject to management risk because it is an actively managed portfolio. Milliman
will apply investment techniques and risk analyses in making investment decisions for the Fund, but there can be no guarantee that the Fund will meet its investment objective and/or the Outcomes. In addition, Milliman does not use
38
defensive strategies or attempt to reduce the Fund’s exposures to poor performing positions during an Outcome Period. This differs from funds that are
managed to seek to outperform a benchmark index. Therefore, in the event of a general market decline, the Fund’s value may fall more than the value of another fund that does attempt to hedge against such market declines.
Market Risk. The Fund could lose money over short periods due to short-term market movements and over longer
periods during more prolonged market downturns. Assets may decline in value due to factors affecting financial markets generally or particular asset classes or industries represented in the markets. The value of a FLEX Option or other asset may
also decline due to general market conditions, economic trends or events that are not specifically related to the issuer of the security or other asset, or due to factors that affect a particular issuer, country, region, market, industry, sector or
asset class.
Non-Diversification Risk. The Fund may invest a relatively high percentage of its assets in a limited number of
issuers. As a result, the Fund may be more susceptible to a single adverse economic or regulatory occurrence affecting one or more of these issuers, experience increased volatility and be highly invested in certain issuers.
Large Shareholder Risk. At times, the Fund may experience adverse effects when certain large shareholders,
including insurance company separate accounts, redeem large amounts of shares of the Fund. Large redemptions may cause the Fund to sell portfolio holdings at times when it would not otherwise do so and may increase transaction costs and/or result
in an increase to the Fund’s expense ratio. A large redemption could be detrimental to the Fund and its remaining shareholders.
Risks of Investing in ETFs. In addition to the risks associated with the underlying assets held by the ETFs in
which the Fund invests, investments in ETFs are also subject to the following additional risks: (i) only authorized participants may engage in transactions directly with ETFs but none are obligated to do so, which could result in an ETF’s shares
trading at a premium or discount to its NAV or possibly face trading halts or delisting; (ii) certain ETFs seek to track the performance of an underlying index and will not attempt to take defensive positions under any market conditions, including
declining markets, which could result in losses; and (iii) because ETF shares trade on the secondary market, there is not guarantee that an active market will be developed or maintained, which could result in the ETF’s shares trading at a premium
or discount to its NAV. Investments in ETFs may involve duplication of management fees and certain other expenses, as the Fund indirectly bears its proportionate share of any expenses paid by the ETFs in which it invests.
Risks of Investing in Money Market Funds. Money market funds seek to preserve the value of shareholder
investments at $1.00 per share, but shareholders, such as the Fund, may still lose money by investing in such funds. In addition, a money market fund may impose a fee upon the sale of its shares or may temporarily suspend the ability to sell shares
if the fund’s liquidity falls below required minimums because of market conditions or other factors. The credit quality of a money market fund’s holdings can change rapidly in certain markets, and the default of a single holding could have an
adverse impact on the fund’s share price. A money market fund’s share price can also be negatively affected during periods of high redemption pressures, illiquid markets, and/or significant market volatility.
Performance
As of the date of this Prospectus, the Fund has not commenced operations and therefore does not have a performance history. Once available, the Fund’s
performance information will be accessible online at www.[________].com and will provide some indication of the risks of investing in the Fund.
Management
Investment Adviser
Milliman Financial Risk Management LLC (“Milliman”) serves as investment adviser to the Fund.
39
Portfolio Managers
The following persons serve as portfolio managers of the Fund.
|
●
|
Robert T. Cummings, Principal & Head of Portfolio Management at Milliman.
|
|
●
|
Maria Schiopu, Principal & Head of Portfolio Management at Milliman.
|
|
●
|
Jeff Greco, Principal & Head of Strategy Research at Milliman.
|
|
●
|
Jordan Rosenfeld, Portfolio Manager at Milliman.
|
Each portfolio manager is jointly and primarily responsible for the day-to-day management of the Fund’s portfolio and has served in such capacity
since the Fund’s inception in 2021.
Purchase and Sale of Shares
Shares are available as underlying investment options for variable insurance contracts and variable life insurance policies (each, a “variable contract,” and, collectively, the “variable contracts”) issued by insurance companies. These insurance companies are the record owners of the separate accounts
holding the Shares. You do not buy, sell or exchange Shares directly; rather, you choose investment options through your variable contracts. The insurance companies then cause the separate accounts to purchase and redeem Shares according to
the investment options you choose.
Tax Information
The dividends and distributions paid by the Fund to the insurance company separate accounts will consist of ordinary income, capital gains, or some
combination of both. Because Shares must be purchased through separate accounts used to fund variable contracts, such dividends and distributions will be exempt from current taxation by owners of variable contracts (each, a “contract owner,” and, collectively “contract owners”) if left to accumulate within a separate account. Consult the variable contract prospectus for additional tax
information.
Payments to Insurance Companies and Other Financial Intermediaries
If you allocate contract value to the Fund through an insurance company or other financial intermediary, the Fund, Milliman, the Fund’s distributor or
their related companies may pay the insurance company and/or its affiliates or other intermediary for the sale of Shares and related services. These payments may create a conflict of interest by influencing the insurance company or other
intermediary and your salesperson to recommend an indirect investment in the Fund over another investment. The prospectus or other disclosure documents for the variable contracts may contain additional information about these payments, if any.
You may also ask your salesperson or financial intermediary, or visit your financial intermediary’s website, for more information.
40
Fund Summary: Milliman S&P 500 6-Month Buffer with Par
Up Fund – Jan/Jul
Investment Objective
The Fund seeks to provide exposure to the S&P 500 Index, while providing a buffer against the first 10% of losses associated with S&P 500
Index performance and participating in S&P 500 Index gains at a declared rate, prior to taking into account any fees or expenses or the performance of any fixed income exposure included in the Fund’s portfolio, over the period from January 1,
2022 through June 30, 2022.
Fees and Expenses of the Fund
This table describes the fees and expenses that you may pay if you buy, hold and sell shares of the Fund (“Shares”).
This table and the example below do not include any fees or sales charges imposed by your variable product. If they were included, the expenses listed below would be higher.
Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment)
|
Class 3
|
|
|
Management Fees
|
0.49%
|
|
Distribution and Service (12b-1) Fees
|
0.25%
|
|
Other Expenses(1)
|
0.50%
|
|
Acquired Fund Fees and Expenses(1)
|
[_.__]%
|
|
Total Annual Fund Operating Expenses
|
1.24%
|
|
Fee Waiver and/or Expense Reimbursement(2)(3)
|
(0.25)%
|
|
Total Annual Fund Operating Expenses After Fee Waiver and/or Expense Reimbursement
|
0.99%
|
|
(1)
|
“Other Expenses” and “Acquired Fund Fees and Expenses” are based on estimated amounts for the current fiscal year.
|
|
(2)
|
The Fund’s investment adviser, Milliman Financial Risk Management LLC (“Milliman”), has contractually
agreed to waive advisory fees and/or reimburse expenses to the extent necessary to limit the Fund’s total annual Fund operating expenses (excluding taxes, interest, brokerage fees and commissions, Rule 12b-1 fees, acquired fund fees and
expenses, short-sale dividend expenses, administrative services fees, other expenses that are capitalized in accordance with generally accepted accounting principles, and extraordinary or non-routine expenses not incurred in the
ordinary course of the Fund’s business) to 0.74% of the Fund's average daily net assets (the “Expense Limitation Agreement”) until at least November 1, 2022. During its term, the Expense
Limitation Agreement cannot be terminated or amended to increase the applicable limit without approval of the Board of Trustees of the Trust (the “Board”). Milliman may recoup from the Fund any
advisory fees waived or expenses reimbursed pursuant to the Expense Limitation Agreement for a period of three years from the date on which such waiver or reimbursement occurred; provided, however, that such recoupment shall not be made
if it would cause the Fund’s total annual Fund operating expenses to exceed the lesser of (a) the expense limitation in effect at the time of the reimbursement, or (b) the expense limitation in effect at the time of recoupment, if any.
|
|
(3)
|
In addition to the Expense Limitation Agreement, Milliman has contractually agreed to waive its advisory fees in an amount equal to the Fund’s
acquired fund fees and expenses until at least November 1, 2022 (the “Fee Waiver”). This contract cannot be terminated or modified without the consent of the Board.
|
Example
This example is intended to help you compare the cost of investing in the Fund with the cost of investing in other funds. This example assumes that you
invest $10,000 in the Fund for the time periods indicated and then sell all of your Shares at the end of those periods. This example also assumes that your investment has a 5% return each year and that the Fund’s operating expenses remain at
current levels and that the Expense Limitation Agreement and Fee Waiver remain in place for their contractual periods. Although your actual costs may be higher or lower, your costs, based on these assumptions, would be:
|
1 Year
|
3 Years
|
|
|
Class 3
|
$104
|
$384
|
This example does not include any fees or sales charges imposed by your variable product. If they were included, the expenses listed above would be
higher.
41
Portfolio Turnover
The Fund pays transaction costs, such as commissions, when it purchases and sells securities (or “turns over” its portfolio). A higher portfolio turnover
will cause the Fund to incur additional transaction costs. These costs, which are not reflected in Total Annual Fund Operating Expenses or in the example, may affect the Fund’s performance. Because the Fund has not yet commenced investment
operations, no portfolio turnover information is available at this time.
Principal Investment Strategies
The Fund seeks to achieve its investment objective by transacting in FLexible EXchange® Options (“FLEX Options”)
and by separately maintaining a collateral portfolio (the “Collateral Portfolio”), which is designed primarily to serve as margin or collateral for the Fund’s FLEX Options positions and secondarily to
enhance the Fund’s upside S&P 500 Index FLEX Options’ exposure (i.e., by utilizing anticipated income to measure the ability to purchase additional FLEX Options). FLEX Options are exchange-traded
options contracts with uniquely customizable terms. In general, an options contract is an agreement between a buyer and seller that gives the purchaser of the option the right to buy or sell a particular asset at a specified future date at an
agreed upon price, commonly known as the “strike price.” The reference assets for the Fund’s FLEX Options positions will include the S&P 500 Index, which is a large-capitalization, market-weighted, U.S. equities index that tracks the price
(excluding dividends) of 500 leading companies in leading industries of the U.S. economy, and certain exchange-traded funds (“ETFs”), as described further below.
The Collateral Portfolio may be invested in short-term fixed-income securities, including corporate bonds and other corporate debt securities,
asset-backed securities (“ABS”), securities issued by the U.S. Government or its agencies and instrumentalities, securities issued by non-U.S. governments or their agencies and instrumentalities, money
market securities and funds, other interest-bearing instruments, cash, ETFs that primarily invest in any of the foregoing instruments, options on ETFs and options box spreads. An options box spread is the combination of different options trades
that have offsetting spreads (e.g., purchases and sales on the same underlying instrument, such as an index or an ETF, but with different strike prices and/or expiration dates) for the purpose of
generating income. The Fund may invest in short-term fixed income securities or other instruments, including through ETFs, of any maturity and credit quality. The Fund will generally invest up to 35% of its net assets in one or more ETFs that
provide exposure to investment grade corporate bonds.
Due to the unique mechanics of the Fund’s strategy, the return an investor can expect to receive from an investment in the Fund has characteristics that
are distinct from the returns of many other investment vehicles. It is important that an investor understand these characteristics before making an investment in the Fund.
In seeking to achieve its investment objective, the Fund seeks to produce pre-determined outcomes (the “Outcomes”)
that are based upon the performance of the S&P 500 Index over a six-month period (the “Outcome Period”). The initial Outcome Period for the Fund is January 1, 2022 through June 30, 2022. Following the
initial Outcome Period, each subsequent Outcome Period will be a six-month period commencing upon the expiration of the prior Outcome Period. The Fund seeks to achieve the Outcomes by purchasing and writing (selling) FLEX Options to create layers
within the Fund’s portfolio. One layer is designed to produce returns that correlate to those of the S&P 500 Index for the Outcome Period at a declared rate (the “Par Up Rate”) if the S&P 500 Index
experiences gains during that time, as described below. A separate layer is designed to produce returns that correlate to those of the S&P 500 Index for the Outcome Period that are buffered up to 10% if
the S&P 500 Index experiences losses during that time (the “Buffer”). There is no guarantee that the Fund will be successful in its attempt to produce returns that
correlate to those of the S&P 500 Index at the Par Up Rate or produce buffered returns against the Fund’s S&P 500 Index exposure.
Milliman Financial Risk Management, LLC (“Milliman”), the investment adviser of the Fund, seeks to establish the
Buffer by writing one put FLEX Option on the S&P 500 Index with a strike price that is 10% lower than the value of the S&P 500 Index at the beginning of the Outcome Period.
Milliman seeks to establish the Par Up Rate by purchasing long call FLEX Options on the S&P 500 Index with a strike price approximately equal to
the value of the S&P 500 Index at the beginning of the Outcome Period.
42
Milliman purchases these FLEX Options with a portion of the Fund’s net assets plus (i) the cash received from writing the put FLEX Option designed to
create the Buffer, (ii) additional cash received by utilizing FLEX Options to create a put spread (the “Put Spread Strategy”) on fixed income securities and/or one or more ETFs that provide exposure to
fixed income securities, and (iii) yield received from the Collateral Portfolio. Milliman seeks to achieve the Put Spread Strategy for the Fund by writing a put FLEX Option on an underlying asset at a strike price at or lower than the underlying
asset’s market price or current value at the beginning of the Outcome Period, and buying a put FLEX Option on the same underlying asset at a lower strike price than the written put FLEX Option.
The Par Up Rate is the rate at which the Fund will seek to track any upside market performance of the S&P 500 Index. Milliman calculates the Par
Up Rate based upon (i) its evaluation of prevailing market conditions on the first day of the Outcome Period and (ii) the total number of long call FLEX Options on the S&P 500 Index that it is able to purchase at that time. As of the date of
this Prospectus, and assuming current market conditions persist, Milliman expects that the Par Up Rate will be between the below ranges (both gross and net of Fund fees and expenses). Any fees or expenses imposed by your variable product, and any
other expenses incurred by the Fund, will have the effect of further reducing the Par Up Rate. Once calculated, the Par Up Rate for a particular Outcome Period will not change during that Outcome Period;
however, in certain market conditions, the performance of the Collateral Portfolio and the Put Spread Strategy could reduce the impact of the Par Up Rate.
|
Share Class
|
Estimated Par Up Rate Ranges
(As of [___])
|
|
|
Prior to Taking into Account Fund Fees and Expenses
|
After Taking into Account Fund Fees and Expenses
|
|
|
Class 3
|
[__]% and [__]%
|
[__]% and [__]%
|
The Buffer is only operative against the first 10% of losses in the Fund’s S&P 500 Index exposure for the Outcome Period. If the S&P 500 Index
decreases in value by more than 10% during the Outcome Period, the Fund (and therefore investors in Shares) will experience all subsequent losses in the Fund’s S&P 500 Index exposure on a one-to-one basis for the Outcome Period. The Fund
seeks to produce buffered returns against its S&P 500 Index exposure prior to taking into account any fees or expenses or the performance of the Collateral Portfolio or the Put Spread Strategy. The Buffer
is not operative against losses in the Collateral Portfolio or the Put Spread Strategy. If the Collateral Portfolio and/or the Put Spread Strategy experiences losses, it could have the effect of reducing the impact of, or completely
eliminating, the Buffer on the Fund’s S&P 500 Index exposure. In certain market conditions, the performance of the Collateral Portfolio and/or the Put Spread Strategy could cause the Fund to significantly underperform the S&P 500
Index. The following table reflects the Buffer both gross and net of Fund fees and expenses:
|
Share Class
|
Buffer
(As of [___])
|
|
|
Prior to Taking into Account Fund Fees and Expenses
|
After Taking into Account Fund Fees and Expenses
|
|
|
Class 3
|
10%
|
[__]%
|
The definitive Par Up Rate and Buffer will be set forth on the Fund’s website. The Fund’s website will also provide information relating to the
Outcomes on a daily basis, including the Fund’s position relative to the Par Up Rate and the Buffer. You may also contact your insurance company or other financial intermediary for more information.
Additionally, the Fund’s net asset value (“NAV”) will not increase or decrease at the same rate as the
S&P 500 Index because the Fund’s strategy relies upon the performance of the Collateral Portfolio and the Put Spread Strategy, in addition to the value of the Fund’s FLEX Options positions on the S&P 500 Index. While Milliman anticipates
that the Fund’s NAV will generally move in the same direction as the S&P 500 Index (meaning that the Fund’s NAV will generally increase if the S&P 500 Index experiences gains or decrease if the S&P 500 Index experiences losses), the
Fund’s NAV may not decrease at the same rate as the S&P 500 Index (especially when factoring in the performance of the Collateral Portfolio and the Put Spread Strategy) and will not increase at the same rate as the S&P 500 Index
(especially when factoring in the Par Up Rate and the performance of the Collateral Portfolio and the Put Spread Strategy). Similarly, the amount of time remaining until the end of the Outcome Period also affects
43
the impact of the Buffer on the Fund’s NAV, because the Buffer may not be in full effect prior to the end of the Outcome Period.
The FLEX Options utilized in the Fund’s portfolio are each set to expire on the last day of the Outcome Period. The customizable nature of FLEX Options
will allow Milliman to select the strike price at which each FLEX Option will be exercised at the expiration of the FLEX Option term. At the commencement of the Outcome Period, Milliman will specifically select the strike price for each FLEX Option
in a manner designed to achieve the Outcomes when the FLEX Options are exercised on the final day of the Outcome Period, depending on the anticipated performance of the S&P 500 Index, the Collateral Portfolio and the Put Spread Strategy over
the duration of that Outcome Period.
The hypothetical graphical illustrations provided below are designed to illustrate the Outcomes based upon the
hypothetical performance of the S&P 500 Index for an investor who holds Shares for the entirety of the Outcome Period. The hypothetical graphical illustrations do not include any fees or expenses imposed by your variable product or expenses
incurred by the Fund, and do not reflect the performance of the Collateral Portfolio or the Put Spread Strategy. Additional hypothetical graphical representations of the Outcomes are provided in “Additional Information About the Funds and
the Risks of Investing.” There is no guarantee that the Fund will be successful in its attempt to achieve the Outcomes for the Outcome Period.
The following table contains hypothetical examples designed to illustrate the Outcomes the Fund seeks to
achieve over the Outcome Period, based upon the performance of the S&P 500 Index from (100)% to 100% after taking into account the Par Up Rate and the Buffer, but prior to taking into account any fees or expenses or the performance of the
Collateral Portfolio or the Put Spread Strategy. The table is provided for illustrative purposes only and does not provide every possible performance scenario for Shares over the course of the Outcome Period. There is no guarantee that the Fund will be successful in its attempt to achieve the Outcomes for an Outcome
Period. The table is not intended to predict or project the performance of the FLEX Options or the Fund. Investors should not take this information as an assurance of the expected performance of the
S&P 500 Index or the Fund. Actual Fund performance will vary with fluctuations in the performance of the Collateral Portfolio and the Put Spread Strategy, in addition to the value of the Fund’s FLEX Options positions on the S&P
500 Index, during the Outcome Period, among other factors. The performance of the Collateral Portfolio and the Put Spread
44
Strategy could significantly impact the performance of the Fund, which could prevent the Fund from achieving the
Outcomes that it seeks to produce. The table does not reflect any fees or expenses imposed by your variable product or expenses incurred by the Fund. If it did, the returns shown for the Fund would be lower. Please refer to the Fund’s
website, which provides updated information relating to this table on a daily basis throughout the Outcome Period. Please contact your insurance company or other financial intermediary for more information.
|
Index/Fund
|
Hypothetical Performance1
|
|||||||||||
|
S&P 500 Index Price Performance
|
(100)%
|
(50)%
|
(20)%
|
(10)%
|
(5)%
|
0%
|
5%
|
10%
|
15%
|
20%
|
50%
|
100%
|
|
Fund Performance at NAV
|
(90)%
|
(40)%
|
(10)%
|
0%2
|
0%2
|
0%
|
4.0%3
|
8.0%3
|
12%3
|
16%3
|
40%3
|
80%3
|
| 1 |
Does not take into account any fees or expenses or the performance of the Collateral Portfolio or the Put Spread Strategy.
|
| 2 |
Reflects the impact of the Buffer.
|
| 3 |
Reflects the impact of an assumed Par Up Rate of 80%.
|
Understanding Outcomes. The Outcomes the Fund seeks to achieve are measured based upon the
Fund’s NAV on the first day of the Outcome Period. The Outcome Period begins on the day Milliman transacts in the FLEX Options on behalf of the Fund, and ends on the day those FLEX Options expire. An investor who
purchases Shares after the commencement of the Outcome Period will likely have purchased Shares at a different NAV than the NAV on the first day of the Outcome Period (the NAV upon which the Outcomes are based) and may experience investment
outcomes very different from those the Fund seeks to achieve, especially when factoring in any fees or expenses or the performance of the Collateral Portfolio and the Put Spread Strategy. An investor who redeems Shares prior to the end of the
Outcome Period may also experience investment outcomes very different from those the Fund seeks to achieve. The Outcomes are designed with the expectation that an investor will hold Shares on the day that Milliman
transacts in the FLEX Options on behalf of the Fund, and on the day those FLEX Options expire. There is no guarantee that the Fund will be successful in its attempt to achieve the Outcomes.
Understanding the Par Up Rate. Unlike other investment products, the potential returns an
investor can receive from an investment in the Fund are subject to the Par Up Rate. This means that if the S&P 500 Index experiences gains for the Outcome Period, an investor in the Fund will only experience
a percentage of those gains (equal to the Par Up Rate multiplied by the S&P 500 Index gains). Milliman calculates the Par Up Rate for each Outcome Period based upon (i) its evaluation of prevailing market conditions on the first day
of the Outcome Period and (ii) the total number of long call FLEX Options on the S&P 500 Index that it is able to purchase at that time. In certain market conditions, the performance of the Collateral
Portfolio and the Put Spread Strategy could reduce the impact of the Par Up Rate. An investor should consider the amount and impact of the Par Up Rate, and the Fund’s position relative to it, before investing in the Fund.
Understanding the Buffer. The Buffer that the Fund seeks to provide is only operative
against the first 10% of losses in the Fund’s S&P 500 Index exposure for the Outcome Period. If an investor is considering purchasing Shares during the Outcome Period, and the S&P 500 Index has decreased
in value by an amount equal to or greater than 10%, an investor purchasing Shares at that time will be able to participate in any gains thereafter, but will not benefit from the Buffer that the Fund seeks to offer for the remainder of the
Outcome Period if the losses continue to be equal to or greater than 10% during that period. Conversely, if an investor is considering purchasing Shares during the Outcome Period, and the Fund’s NAV has increased in value, then an investor may
experience losses before implementation of the Buffer that the Fund seeks to provide. While the Fund seeks to produce returns that correlate to those of the S&P 500 Index for the Outcome Period that are buffered up to 10% (prior to
taking into account any fees or expenses or the performance of the Collateral Portfolio or the Put Spread Strategy) for investors who hold Shares for the entire Outcome Period, there is no guarantee it will successfully do so. In addition, the Buffer is not operative against losses in the Collateral Portfolio or the Put Spread Strategy. If the Collateral Portfolio and/or the Put Spread
Strategy experiences losses, it could have the effect of reducing the impact of, or completely eliminating, the Buffer on the Fund’s S&P 500 Index exposure. In certain market conditions, the performance of the Collateral Portfolio and/or
the Put Spread Strategy could cause the Fund to significantly underperform the S&P 500 Index. Investors who
45
purchase Shares at the beginning of the Outcome Period may lose their entire investment. Investors who purchase Shares after the
Outcome Period has begun may also lose their entire investment. An investment in the Fund is only appropriate for investors willing to bear those losses.
Fund Rebalance. Milliman implements the Fund’s strategy on a semi-annual basis, seeking to
produce the Outcomes for an Outcome Period. On the last business day of any stated Outcome Period, all of the Fund’s existing FLEX Options, which includes those used to establish the Buffer, the Par Up Rate and the Put Spread Strategy, will
expire and Milliman will transact in a new set of FLEX Options on the same business day, which will commence a new Outcome Period beginning the following business day. At that same time, Milliman will also evaluate whether to make any adjustments
to the Collateral Portfolio. Accordingly, Shares can be held indefinitely if investors determine to participate in additional Outcome Periods.
Approximately one week prior to the end of each Outcome Period, the Fund will file a prospectus supplement, which will notify existing investors of
(i) the date on which the existing Outcome Period will end; (ii) the date on which the new Outcome Period will commence; and (iii) the anticipated ranges of the Par Up Rate that will be used for the new Outcome Period. Immediately preceding the
commencement date of the new Outcome Period, the Fund will file a prospectus supplement disclosing the Fund’s final Par Up Rate (both gross and net of Fund fees and expenses) for the new Outcome Period. This information will also be available
online at www.[___________].com, and on your insurance company’s website. Please contact your insurance company or other financial intermediary for more information.
Fund Classification. The Fund is classified as “non-diversified” under the Investment
Company Act of 1940, as amended (the “1940 Act”).
Principal Risks
You could lose money by investing in the Fund. An investment in the Fund is not a deposit of a bank and is not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other governmental agency. There can be no assurance that the Fund’s investment objectives will be achieved.
Downside Loss Buffer Risk. There can be no guarantee that the Fund will be successful in its strategy to
buffer against S&P 500 Index losses if the S&P 500 Index decreases in value over the Outcome Period. The Fund’s strategy is designed to produce returns that correlate to those of the S&P 500 Index at the Par Up Rate, while limiting
downside losses in the Fund’s S&P 500 Index exposure, if Shares are bought on the day on which Milliman transacts in the FLEX Options on behalf of the Fund and held until those FLEX Options expire at the end of each Outcome Period. The
success of the Buffer also depends upon the performance of the Collateral Portfolio and the Put Spread Strategy. If the Collateral Portfolio and/or the Put Spread Strategy experiences losses, it could have the
effect of reducing the impact of, or completely eliminating, the Buffer on the Fund’s S&P 500 Index exposure. In certain market conditions, the performance of the Collateral Portfolio and/or the Put Spread Strategy could cause the Fund to
significantly underperform the S&P 500 Index. Despite the intended Buffer, an investor could lose their entire investment. In the event an investor purchases Shares after the date on which Milliman transacted in the FLEX
Options on behalf of the Fund, or redeems Shares prior to the expiration of those FLEX Options, the Buffer that the Fund seeks to provide may not be available or fully applicable.
Risk of the Par Up Rate on Upside Returns. The Fund’s strategy is designed to produce returns that correlate
to those of the S&P 500 Index at the Par Up Rate if Shares are bought on the day on which Milliman transacts in the FLEX Options on behalf of the Fund and held until those FLEX Options expire at the end of the Outcome Period. Accordingly, the
Fund will not fully participate in any gains achieved by the S&P 500 Index. In addition, in the event an investor purchases Shares after the date on which Milliman transacted in the FLEX Options on behalf of the Fund, or redeems Shares prior
to the expiration of those FLEX Options, the returns realized by that investor may not match those that the Fund seeks to achieve pursuant to the Par Up Rate. In certain market conditions, the performance of
the Collateral Portfolio and the Put Spread Strategy could reduce the impact of the Par Up Rate. An investor should consider the amount and impact of the Par Up Rate, and the Fund’s position relative to it, before investing in the Fund.
46
Par Up Rate Change Risk. Because the Par Up Rate for each Outcome Period is calculated based upon (i)
Milliman’s evaluation of prevailing market conditions on the first day of the Outcome Period and (ii) the total number of long call FLEX Options on the S&P 500 Index that Milliman is able to purchase at that time, the Par Up Rate may rise or
fall from one Outcome Period to the next. Any change in the Par Up Rate could be significant and it is unlikely to remain the same for consecutive Outcome Periods.
FLEX Options Risk. The Fund will transact in FLEX Options issued and guaranteed for settlement by the OCC. The
Fund bears the risk that the OCC will be unable or unwilling to perform its obligations under the FLEX Options contracts, which could result in significant losses to the Fund. In less liquid markets, terminating a FLEX Option may require the
payment of a premium or acceptance of a discounted price, and may take longer to complete. In addition, a less liquid trading market may adversely impact the value of the Fund’s FLEX Options and therefore the NAV of the Fund. In addition, the value
of the Fund’s FLEX Options positions is not anticipated to increase or decrease at the same rate as the reference asset; and while it is anticipated that they will generally move in the same direction, it is possible that they may move in different
directions. Certain FLEX Options positions may also expire worthless. The use of FLEX Options involves leverage, which can cause the Fund’s portfolio to be more volatile than if the portfolio had not been leveraged. Leverage can significantly
magnify the effect of price movements of the reference asset, disproportionately increasing the Fund’s losses and reducing the Fund’s opportunities for gains when the reference asset changes in unexpected ways. In some instances, such leverage
could result in losses that exceed the original amount invested.
Investment Objective and Outcomes Risk. There is no guarantee that the Fund will be successful in its attempt to
achieve its investment objective and/or the Outcomes, and an investor could lose some or all of their investment in the Fund. Certain circumstances under which the Fund might not achieve its objective and/or the Outcomes include, but are not
limited to (i) if the Fund disposes of FLEX Options, (ii) if the Fund is unable to maintain the proportional relationship based on the number of FLEX Options in the Fund’s portfolio, (iii) significant accrual of Fund expenses in connection with
effecting the Fund’s principal investment strategy, (iv) losses incurred by the Fund’s holdings in the Collateral Portfolio and/or losses resulting from the Put Spread Strategy, or (iv) adverse tax law changes affecting the treatment of FLEX
Options.
Tax Risk. The Fund intends to elect, and to qualify each year, to be treated as a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”). As a RIC, the Fund will not be subject to U.S. federal income tax on the portion
of its net investment income and net capital gain that it distributes to shareholders, provided that it satisfies certain requirements of the Code. To maintain its status as a RIC, the Fund must meet certain income, diversification and
distributions tests. For purposes of the diversification test, the identification of the issuer (or, in some cases, issuers) of a particular Fund investment can depend on the terms and conditions of that investment. In particular, there is no
published IRS guidance or case law on how to determine the “issuer” of certain derivatives that the Fund will enter into and the Fund has not received a private letter ruling on this point. Therefore, there is a risk that the Fund will not meet the
Code’s diversification requirements and will not qualify, or will be disqualified, as a RIC. If the Fund does not qualify as a RIC for any taxable year and certain relief provisions are not available, the Fund’s taxable income will be subject to
tax at the Fund level and to a further tax at the shareholder level when such income is distributed.
The Fund also intends to comply with the diversification requirements of Section 817(h) of the Code, and the regulations thereunder, relating to the
tax-deferred status of variable accounts that are based on insurance company separate accounts (referred to as “segregated asset accounts” for federal income tax purposes). These diversification requirements apply in addition to the RIC
diversification requirements discussed above. There also is no published guidance or case law on how to determine the “issuer” of the derivatives referred to above for purposes of the diversification requirements of Section 817(h) of the Code and
the Fund has not received a private letter ruling on this point. If these requirements are not met, or under other circumstances, such as if the Fund does not qualify as a RIC for any taxable year, it is possible that the contract owners (rather
than the insurance company) will be treated for federal income tax purposes as the taxable owners of the assets held by the segregated asset accounts.
Clearing Member Default Risk. The Fund will hold FLEX Options through accounts at members of clearing houses (“clearing members”) rather than a bank or a broker. Assets deposited by the Fund with any clearing member as margin for its FLEX Options positions may, in certain circumstances, be used to satisfy losses of other
clients of the Fund’s clearing member where such assets may be held in commingled omnibus accounts. In addition, although
47
clearing members guarantee performance of their clients’ obligations to the clearing house, there is a risk that the assets of the Fund might not be
fully protected in the event of the clearing member’s bankruptcy, as the Fund would be limited to recovering only a pro rata share of all available funds segregated on behalf of the clearing member’s
customers for the relevant account class.
Debt Securities Risk. The prices of debt securities will be affected by changes in interest rates, the
creditworthiness of the issuer and other factors. These risks could affect the value of investments in which the Fund invests, possibly causing the Fund’s NAV to be reduced and fluctuate more than other types of investments. During periods of
falling interest rates, an issuer of a callable bond may repay the security before its stated maturity, and the Fund may have to reinvest the proceeds in securities with lower yields, which would result in a decline in the Fund’s income, or in
securities with greater risks or with other less favorable features. Changing interest rates, including rates that fall below zero, may have unpredictable effects on markets, result in heightened market volatility and detract from the Fund’s
performance to the extent the Fund is exposed to such interest rates. An increase in interest rates will generally cause the value of fixed-income securities held by the Fund to decline, may lead to heightened volatility in the fixed-income
markets and may adversely affect the liquidity of certain fixed-income investments, including those held by the Fund. Risks associated with rising interest rates are heightened given that interest rates in the U.S. are near historic lows.
Adjustable-rate instruments also react to interest rate changes in a similar manner, although generally to a lesser degree (depending, however, on the characteristics of the reset terms, including the index chosen, frequency of reset and reset
caps or floors, among other factors). Interest rate sensitivity is generally more pronounced and less predictable in instruments with uncertain payment or prepayment schedules and also for those with longer maturities.
Foreign Securities and Credit Exposure Risk. U.S. dollar-denominated securities carrying foreign credit exposure
may be affected by unfavorable political, economic or governmental developments that could affect payments of principal and interest. Furthermore, the value of the Fund’s foreign investments (whether direct or indirect) may be adversely affected by
political and social instability in their home countries, by changes in economic or taxation policies in those countries, or by the difficulty in enforcing obligations in those countries. Foreign companies generally may be subject to less stringent
regulations than U.S. companies, including financial reporting requirements and auditing and accounting controls. As a result, there generally is less publicly available information about foreign companies than about U.S. companies. Trading in many
foreign securities may be less liquid and more volatile than U.S. securities due to the size of the market or other factors.
U.S. Government Securities Risk. U.S. Government securities are subject to interest rate risk but generally do
not involve the credit risks associated with investments in other types of debt securities. As a result, the yields available from U.S. Government securities are generally lower than the yields available from other debt securities. U.S. Government
securities are guaranteed only as to the timely payment of interest and the payment of principal when held to maturity. While securities issued or guaranteed by U.S. federal government agencies are backed by the full faith and credit of the U.S.
Department of the Treasury, securities issued by government sponsored entities are solely the obligation of the issuer and generally do not carry any guarantee from the U.S. Government.
ABS Risk. ABS are subject to the general debt securities risks described above. In addition, ABS may be less
liquid than other bonds, and may be more sensitive than other bonds to the market’s perception of issuers and creditworthiness of payees, which may result in the Fund experiencing difficulty selling or valuing these securities. ABS markets have
experienced extraordinary weakness and volatility at various times in recent years, and may decline quickly in the event of a substantial economic or market downturn. Accordingly, these securities may be subject to greater risk of default during
periods of economic downturn than other securities, which could result in possible losses to the Fund.
Issuer Risk. The performance of the Fund depends on the performance of individual securities to which the Fund
has exposure. The Fund may be adversely affected if an issuer of underlying securities held by the Fund is unable or unwilling to repay principal or interest when due. Changes in the financial condition or credit rating of an issuer of those
securities may cause the value of the securities to decline.
Management Risk. The Fund is subject to management risk because it is an actively managed portfolio. Milliman
will apply investment techniques and risk analyses in making investment decisions for the Fund, but there can be no guarantee that the Fund will meet its investment objective and/or the Outcomes. In addition, Milliman does not use
48
defensive strategies or attempt to reduce the Fund’s exposures to poor performing positions during an Outcome Period. This differs from funds that are
managed to seek to outperform a benchmark index. Therefore, in the event of a general market decline, the Fund’s value may fall more than the value of another fund that does attempt to hedge against such market declines.
Market Risk. The Fund could lose money over short periods due to short-term market movements and over longer
periods during more prolonged market downturns. Assets may decline in value due to factors affecting financial markets generally or particular asset classes or industries represented in the markets. The value of a FLEX Option or other asset may
also decline due to general market conditions, economic trends or events that are not specifically related to the issuer of the security or other asset, or due to factors that affect a particular issuer, country, region, market, industry, sector or
asset class.
Non-Diversification Risk. The Fund may invest a relatively high percentage of its assets in a limited number of
issuers. As a result, the Fund may be more susceptible to a single adverse economic or regulatory occurrence affecting one or more of these issuers, experience increased volatility and be highly invested in certain issuers.
Large Shareholder Risk. At times, the Fund may experience adverse effects when certain large shareholders,
including insurance company separate accounts, redeem large amounts of shares of the Fund. Large redemptions may cause the Fund to sell portfolio holdings at times when it would not otherwise do so and may increase transaction costs and/or result
in an increase to the Fund’s expense ratio. A large redemption could be detrimental to the Fund and its remaining shareholders.
Risks of Investing in ETFs. In addition to the risks associated with the underlying assets held by the ETFs in
which the Fund invests, investments in ETFs are also subject to the following additional risks: (i) only authorized participants may engage in transactions directly with ETFs but none are obligated to do so, which could result in an ETF’s shares
trading at a premium or discount to its NAV or possibly face trading halts or delisting; (ii) certain ETFs seek to track the performance of an underlying index and will not attempt to take defensive positions under any market conditions, including
declining markets, which could result in losses; and (iii) because ETF shares trade on the secondary market, there is not guarantee that an active market will be developed or maintained, which could result in the ETF’s shares trading at a premium
or discount to its NAV. Investments in ETFs may involve duplication of management fees and certain other expenses, as the Fund indirectly bears its proportionate share of any expenses paid by the ETFs in which it invests.
Risks of Investing in Money Market Funds. Money market funds seek to preserve the value of shareholder
investments at $1.00 per share, but shareholders, such as the Fund, may still lose money by investing in such funds. In addition, a money market fund may impose a fee upon the sale of its shares or may temporarily suspend the ability to sell shares
if the fund’s liquidity falls below required minimums because of market conditions or other factors. The credit quality of a money market fund’s holdings can change rapidly in certain markets, and the default of a single holding could have an
adverse impact on the fund’s share price. A money market fund’s share price can also be negatively affected during periods of high redemption pressures, illiquid markets, and/or significant market volatility.
Performance
As of the date of this Prospectus, the Fund has not commenced operations and therefore does not have a performance history. Once available, the Fund’s
performance information will be accessible online at www.[________].com and will provide some indication of the risks of investing in the Fund.
Management
Investment Adviser
Milliman Financial Risk Management LLC (“Milliman”) serves as investment adviser to the Fund.
49
Portfolio Managers
The following persons serve as portfolio managers of the Fund.
|
●
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Robert T. Cummings, Principal & Head of Portfolio Management at Milliman.
|
|
●
|
Maria Schiopu, Principal & Head of Portfolio Management at Milliman.
|
|
●
|
Jeff Greco, Principal & Head of Strategy Research at Milliman.
|
|
●
|
Jordan Rosenfeld, Portfolio Manager at Milliman.
|
Each portfolio manager is jointly and primarily responsible for the day-to-day management of the Fund’s portfolio and has served in such capacity
since the Fund’s inception in 2021.
Purchase and Sale of Shares
Shares are available as underlying investment options for variable insurance contracts and variable life insurance policies (each, a “variable contract,” and, collectively, the “variable contracts”) issued by insurance companies. These insurance companies are the record owners of the separate accounts
holding the Shares. You do not buy, sell or exchange Shares directly; rather, you choose investment options through your variable contracts. The insurance companies then cause the separate accounts to purchase and redeem Shares according to
the investment options you choose.
Tax Information
The dividends and distributions paid by the Fund to the insurance company separate accounts will consist of ordinary income, capital gains, or some
combination of both. Because Shares must be purchased through separate accounts used to fund variable contracts, such dividends and distributions will be exempt from current taxation by owners of variable contracts (each, a “contract owner,” and, collectively “contract owners”) if left to accumulate within a separate account. Consult the variable contract prospectus for additional tax
information.
Payments to Insurance Companies and Other Financial Intermediaries
If you allocate contract value to the Fund through an insurance company or other financial intermediary, the Fund, Milliman, the Fund’s distributor or
their related companies may pay the insurance company and/or its affiliates or other intermediary for the sale of Shares and related services. These payments may create a conflict of interest by influencing the insurance company or other
intermediary and your salesperson to recommend an indirect investment in the Fund over another investment. The prospectus or other disclosure documents for the variable contracts may contain additional information about these payments, if any.
You may also ask your salesperson or financial intermediary, or visit your financial intermediary’s website, for more information.
50
Fund Summary: Milliman S&P 500 6-Month Buffer with Par Up Fund – Feb/Aug
Investment Objective
The Fund seeks to provide exposure to the S&P 500 Index, while providing a buffer against the first 10% of losses associated with S&P 500
Index performance and participating in S&P 500 Index gains at a declared rate, prior to taking into account any fees or expenses or the performance of any fixed income exposure included in the Fund’s portfolio, over the period from February
1, 2022 through July 31, 2022.
Fees and Expenses of the Fund
This table describes the fees and expenses that you may pay if you buy, hold and sell shares of the Fund (“Shares”).
This table and the example below do not include any fees or sales charges imposed by your variable product. If they were included, the expenses listed below would be higher.
Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment)
|
Class 3
|
|
|
Management Fees
|
0.49%
|
|
Distribution and Service (12b-1) Fees
|
0.25%
|
|
Other Expenses(1)
|
0.50%
|
|
Acquired Fund Fees and Expenses(1)
|
[_.__]%
|
|
Total Annual Fund Operating Expenses
|
1.24%
|
|
Fee Waiver and/or Expense Reimbursement(2)(3)
|
(0.25)%
|
|
Total Annual Fund Operating Expenses After Fee Waiver and/or Expense Reimbursement
|
0.99%
|
|
(1)
|
“Other Expenses” and “Acquired Fund Fees and Expenses” are based on estimated amounts for the current fiscal year.
|
|
(2)
|
The Fund’s investment adviser, Milliman Financial Risk Management LLC (“Milliman”), has contractually
agreed to waive advisory fees and/or reimburse expenses to the extent necessary to limit the Fund’s total annual Fund operating expenses (excluding taxes, interest, brokerage fees and commissions, Rule 12b-1 fees, acquired fund fees and
expenses, short-sale dividend expenses, administrative services fees, other expenses that are capitalized in accordance with generally accepted accounting principles, and extraordinary or non-routine expenses not incurred in the
ordinary course of the Fund’s business) to 0.74% of the Fund's average daily net assets (the “Expense Limitation Agreement”) until at least November 1, 2022. During its term, the Expense
Limitation Agreement cannot be terminated or amended to increase the applicable limit without approval of the Board of Trustees of the Trust (the “Board”). Milliman may recoup from the Fund any
advisory fees waived or expenses reimbursed pursuant to the Expense Limitation Agreement for a period of three years from the date on which such waiver or reimbursement occurred; provided, however, that such recoupment shall not be made
if it would cause the Fund’s total annual Fund operating expenses to exceed the lesser of (a) the expense limitation in effect at the time of the reimbursement, or (b) the expense limitation in effect at the time of recoupment, if any.
|
|
(3)
|
In addition to the Expense Limitation Agreement, Milliman has contractually agreed to waive its advisory fees in an amount equal to the Fund’s
acquired fund fees and expenses until at least November 1, 2022 (the “Fee Waiver”). This contract cannot be terminated or modified without the consent of the Board.
|
Example
This example is intended to help you compare the cost of investing in the Fund with the cost of investing in other funds. This example assumes that you
invest $10,000 in the Fund for the time periods indicated and then sell all of your Shares at the end of those periods. This example also assumes that your investment has a 5% return each year and that the Fund’s operating expenses remain at
current levels and that the Expense Limitation Agreement and Fee Waiver remain in place for their contractual periods. Although your actual costs may be higher or lower, your costs, based on these assumptions, would be:
|
1 Year
|
3 Years
|
|
|
Class 3
|
$104
|
$384
|
This example does not include any fees or sales charges imposed by your variable product. If they were included, the expenses listed above would be
higher.
51
Portfolio Turnover
The Fund pays transaction costs, such as commissions, when it purchases and sells securities (or “turns over” its portfolio). A higher portfolio turnover
will cause the Fund to incur additional transaction costs. These costs, which are not reflected in Total Annual Fund Operating Expenses or in the example, may affect the Fund’s performance. Because the Fund has not yet commenced investment
operations, no portfolio turnover information is available at this time.
Principal Investment Strategies
The Fund seeks to achieve its investment objective by transacting in FLexible EXchange® Options (“FLEX Options”)
and by separately maintaining a collateral portfolio (the “Collateral Portfolio”), which is designed primarily to serve as margin or collateral for the Fund’s FLEX Options positions and secondarily to
enhance the Fund’s upside S&P 500 Index FLEX Options’ exposure (i.e., by utilizing anticipated income to measure the ability to purchase additional FLEX Options). FLEX Options are exchange-traded
options contracts with uniquely customizable terms. In general, an options contract is an agreement between a buyer and seller that gives the purchaser of the option the right to buy or sell a particular asset at a specified future date at an
agreed upon price, commonly known as the “strike price.” The reference assets for the Fund’s FLEX Options positions will include the S&P 500 Index, which is a large-capitalization, market-weighted, U.S. equities index that tracks the price
(excluding dividends) of 500 leading companies in leading industries of the U.S. economy, and certain exchange-traded funds (“ETFs”), as described further below.
The Collateral Portfolio may be invested in short-term fixed-income securities, including corporate bonds and other corporate debt securities,
asset-backed securities (“ABS”), securities issued by the U.S. Government or its agencies and instrumentalities, securities issued by non-U.S. governments or their agencies and instrumentalities, money
market securities and funds, other interest-bearing instruments, cash, ETFs that primarily invest in any of the foregoing instruments, options on ETFs and options box spreads. An options box spread is the combination of different options trades
that have offsetting spreads (e.g., purchases and sales on the same underlying instrument, such as an index or an ETF, but with different strike prices and/or expiration dates) for the purpose of
generating income. The Fund may invest in short-term fixed income securities or other instruments, including through ETFs, of any maturity and credit quality. The Fund will generally invest up to 35% of its net assets in one or more ETFs that
provide exposure to investment grade corporate bonds.
Due to the unique mechanics of the Fund’s strategy, the return an investor can expect to receive from an investment in the Fund has characteristics that
are distinct from the returns of many other investment vehicles. It is important that an investor understand these characteristics before making an investment in the Fund.
In seeking to achieve its investment objective, the Fund seeks to produce pre-determined outcomes (the “Outcomes”)
that are based upon the performance of the S&P 500 Index over a six-month period (the “Outcome Period”). The initial Outcome Period for the Fund is February 1, 2022 through July 31, 2022. Following the
initial Outcome Period, each subsequent Outcome Period will be a six-month period commencing upon the expiration of the prior Outcome Period. The Fund seeks to achieve the Outcomes by purchasing and writing (selling) FLEX Options to create layers
within the Fund’s portfolio. One layer is designed to produce returns that correlate to those of the S&P 500 Index for the Outcome Period at a declared rate (the “Par Up Rate”) if the S&P 500 Index
experiences gains during that time, as described below. A separate layer is designed to produce returns that correlate to those of the S&P 500 Index for the Outcome Period that are buffered up to 10% if
the S&P 500 Index experiences losses during that time (the “Buffer”). There is no guarantee that the Fund will be successful in its attempt to produce returns that
correlate to those of the S&P 500 Index at the Par Up Rate or produce buffered returns against the Fund’s S&P 500 Index exposure.
Milliman Financial Risk Management, LLC (“Milliman”), the investment adviser of the Fund, seeks to establish the
Buffer by writing one put FLEX Option on the S&P 500 Index with a strike price that is 10% lower than the value of the S&P 500 Index at the beginning of the Outcome Period.
Milliman seeks to establish the Par Up Rate by purchasing long call FLEX Options on the S&P 500 Index with a strike price approximately equal to
the value of the S&P 500 Index at the beginning of the Outcome Period.
52
Milliman purchases these FLEX Options with a portion of the Fund’s net assets plus (i) the cash received from writing the put FLEX Option designed to
create the Buffer, (ii) additional cash received by utilizing FLEX Options to create a put spread (the “Put Spread Strategy”) on fixed income securities and/or one or more ETFs that provide exposure to
fixed income securities, and (iii) yield received from the Collateral Portfolio. Milliman seeks to achieve the Put Spread Strategy for the Fund by writing a put FLEX Option on an underlying asset at a strike price at or lower than the underlying
asset’s market price or current value at the beginning of the Outcome Period, and buying a put FLEX Option on the same underlying asset at a lower strike price than the written put FLEX Option.
The Par Up Rate is the rate at which the Fund will seek to track any upside market performance of the S&P 500 Index. Milliman calculates the Par
Up Rate based upon (i) its evaluation of prevailing market conditions on the first day of the Outcome Period and (ii) the total number of long call FLEX Options on the S&P 500 Index that it is able to purchase at that time. As of the date of
this Prospectus, and assuming current market conditions persist, Milliman expects that the Par Up Rate will be between the below ranges (both gross and net of Fund fees and expenses). Any fees or expenses imposed by your variable product, and any
other expenses incurred by the Fund, will have the effect of further reducing the Par Up Rate. Once calculated, the Par Up Rate for a particular Outcome Period will not change during that Outcome Period;
however, in certain market conditions, the performance of the Collateral Portfolio and the Put Spread Strategy could reduce the impact of the Par Up Rate.
|
Share Class
|
Estimated Par Up Rate Ranges
(As of [___])
|
|
|
Prior to Taking into Account Fund Fees and Expenses
|
After Taking into Account Fund Fees and Expenses
|
|
|
Class 3
|
[__]% and [__]%
|
[__]% and [__]%
|
The Buffer is only operative against the first 10% of losses in the Fund’s S&P 500 Index exposure for the Outcome Period. If the S&P 500 Index
decreases in value by more than 10% during the Outcome Period, the Fund (and therefore investors in Shares) will experience all subsequent losses in the Fund’s S&P 500 Index exposure on a one-to-one basis for the Outcome Period. The Fund
seeks to produce buffered returns against its S&P 500 Index exposure prior to taking into account any fees or expenses or the performance of the Collateral Portfolio or the Put Spread Strategy. The Buffer
is not operative against losses in the Collateral Portfolio or the Put Spread Strategy. If the Collateral Portfolio and/or the Put Spread Strategy experiences losses, it could have the effect of reducing the impact of, or completely
eliminating, the Buffer on the Fund’s S&P 500 Index exposure. In certain market conditions, the performance of the Collateral Portfolio and/or the Put Spread Strategy could cause the Fund to significantly underperform the S&P 500
Index. The following table reflects the Buffer both gross and net of Fund fees and expenses:
|
Share Class
|
Buffer
(As of [___])
|
|
|
Prior to Taking into Account Fund Fees and Expenses
|
After Taking into Account Fund Fees and Expenses
|
|
|
Class 3
|
10%
|
[__]%
|
The definitive Par Up Rate and Buffer will be set forth on the Fund’s website. The Fund’s website will also provide information relating to the
Outcomes on a daily basis, including the Fund’s position relative to the Par Up Rate and the Buffer. You may also contact your insurance company or other financial intermediary for more information.
Additionally, the Fund’s net asset value (“NAV”) will not increase or decrease at the same rate as the
S&P 500 Index because the Fund’s strategy relies upon the performance of the Collateral Portfolio and the Put Spread Strategy, in addition to the value of the Fund’s FLEX Options positions on the S&P 500 Index. While Milliman anticipates
that the Fund’s NAV will generally move in the same direction as the S&P 500 Index (meaning that the Fund’s NAV will generally increase if the S&P 500 Index experiences gains or decrease if the S&P 500 Index experiences losses), the
Fund’s NAV may not decrease at the same rate as the S&P 500 Index (especially when factoring in the performance of the Collateral Portfolio and the Put Spread Strategy) and will not increase at the same rate as the S&P 500 Index
(especially when factoring in the Par Up Rate and the performance of the Collateral Portfolio and the Put Spread Strategy). Similarly, the amount of time remaining until the end of the Outcome Period also affects
53
the impact of the Buffer on the Fund’s NAV, because the Buffer may not be in full effect prior to the end of the Outcome Period.
The FLEX Options utilized in the Fund’s portfolio are each set to expire on the last day of the Outcome Period. The customizable nature of FLEX Options
will allow Milliman to select the strike price at which each FLEX Option will be exercised at the expiration of the FLEX Option term. At the commencement of the Outcome Period, Milliman will specifically select the strike price for each FLEX Option
in a manner designed to achieve the Outcomes when the FLEX Options are exercised on the final day of the Outcome Period, depending on the anticipated performance of the S&P 500 Index, the Collateral Portfolio and the Put Spread Strategy over
the duration of that Outcome Period.
The hypothetical graphical illustrations provided below are designed to illustrate the Outcomes based upon the
hypothetical performance of the S&P 500 Index for an investor who holds Shares for the entirety of the Outcome Period. The hypothetical graphical illustrations do not include any fees or expenses imposed by your variable product or expenses
incurred by the Fund, and do not reflect the performance of the Collateral Portfolio or the Put Spread Strategy. Additional hypothetical graphical representations of the Outcomes are provided in “Additional Information About the Funds and
the Risks of Investing.” There is no guarantee that the Fund will be successful in its attempt to achieve the Outcomes for the Outcome Period.
The following table contains hypothetical examples designed to illustrate the Outcomes the Fund seeks to
achieve over the Outcome Period, based upon the performance of the S&P 500 Index from (100)% to 100% after taking into account the Par Up Rate and the Buffer, but prior to taking into account any fees or expenses or the performance of the
Collateral Portfolio or the Put Spread Strategy. The table is provided for illustrative purposes only and does not provide every possible performance scenario for Shares over the course of the Outcome Period. There is no guarantee that the Fund will be successful in its attempt to achieve the Outcomes for an Outcome
Period. The table is not intended to predict or project the performance of the FLEX Options or the Fund. Investors should not take this information as an assurance of the expected performance of the
S&P 500 Index or the Fund. Actual Fund performance will vary with fluctuations in the performance of the Collateral Portfolio and the Put Spread Strategy, in addition to the value of the Fund’s FLEX Options positions on the S&P
500 Index, during the Outcome Period, among other factors. The performance of the Collateral Portfolio and the Put Spread
54
Strategy could significantly impact the performance of the Fund, which could prevent the Fund from achieving the
Outcomes that it seeks to produce. The table does not reflect any fees or expenses imposed by your variable product or expenses incurred by the Fund. If it did, the returns shown for the Fund would be lower. Please refer to the Fund’s
website, which provides updated information relating to this table on a daily basis throughout the Outcome Period. Please contact your insurance company or other financial intermediary for more information.
|
Index/Fund
|
Hypothetical Performance1
|
|||||||||||
|
S&P 500 Index Price Performance
|
(100)%
|
(50)%
|
(20)%
|
(10)%
|
(5)%
|
0%
|
5%
|
10%
|
15%
|
20%
|
50%
|
100%
|
|
Fund Performance at NAV
|
(90)%
|
(40)%
|
(10)%
|
0%2
|
0%2
|
0%
|
4.0%3
|
8.0%3
|
12%3
|
16%3
|
40%3
|
80%3
|
| 1 |
Does not take into account any fees or expenses or the performance of the Collateral Portfolio or the Put Spread Strategy.
|
| 2 |
Reflects the impact of the Buffer.
|
| 3 |
Reflects the impact of an assumed Par Up Rate of 80%.
|
Understanding Outcomes. The Outcomes the Fund seeks to achieve are measured based upon the
Fund’s NAV on the first day of the Outcome Period. The Outcome Period begins on the day Milliman transacts in the FLEX Options on behalf of the Fund, and ends on the day those FLEX Options expire. An investor who
purchases Shares after the commencement of the Outcome Period will likely have purchased Shares at a different NAV than the NAV on the first day of the Outcome Period (the NAV upon which the Outcomes are based) and may experience investment
outcomes very different from those the Fund seeks to achieve, especially when factoring in any fees or expenses or the performance of the Collateral Portfolio and the Put Spread Strategy. An investor who redeems Shares prior to the end of the
Outcome Period may also experience investment outcomes very different from those the Fund seeks to achieve. The Outcomes are designed with the expectation that an investor will hold Shares on the day that Milliman transacts in the FLEX Options on
behalf of the Fund, and on the day those FLEX Options expire. There is no guarantee that the Fund will be successful in its attempt to achieve the Outcomes.
Understanding the Par Up Rate. Unlike other investment products, the potential returns an
investor can receive from an investment in the Fund are subject to the Par Up Rate. This means that if the S&P 500 Index experiences gains for the Outcome Period, an investor in the Fund will only experience
a percentage of those gains (equal to the Par Up Rate multiplied by the S&P 500 Index gains). Milliman calculates the Par Up Rate for each Outcome Period based upon (i) its evaluation of prevailing market conditions on the first day
of the Outcome Period and (ii) the total number of long call FLEX Options on the S&P 500 Index that it is able to purchase at that time. In certain market conditions, the performance of the Collateral
Portfolio and the Put Spread Strategy could reduce the impact of the Par Up Rate. An investor should consider the amount and impact of the Par Up Rate, and the Fund’s position relative to it, before investing in the Fund.
Understanding the Buffer. The Buffer that the Fund seeks to provide is only operative
against the first 10% of losses in the Fund’s S&P 500 Index exposure for the Outcome Period. If an investor is considering purchasing Shares during the Outcome Period, and the S&P 500 Index has decreased
in value by an amount equal to or greater than 10%, an investor purchasing Shares at that time will be able to participate in any gains thereafter, but will not benefit from the Buffer that the Fund seeks to offer for the remainder of the
Outcome Period if the losses continue to be equal to or greater than 10% during that period. Conversely, if an investor is considering purchasing Shares during the Outcome Period, and the Fund’s NAV has increased in value, then an investor may
experience losses before implementation of the Buffer that the Fund seeks to provide. While the Fund seeks to produce returns that correlate to those of the S&P 500 Index for the Outcome Period that are buffered up to 10% (prior to
taking into account any fees or expenses or the performance of the Collateral Portfolio or the Put Spread Strategy) for investors who hold Shares for the entire Outcome Period, there is no guarantee it will successfully do so. In addition, the Buffer is not operative against losses in the Collateral Portfolio or the Put Spread Strategy. If the Collateral Portfolio and/or the Put Spread Strategy experiences losses, it could have the
effect of reducing the impact of, or completely eliminating, the Buffer on the Fund’s S&P 500 Index exposure. In certain market conditions, the performance of the Collateral Portfolio and/or the Put Spread Strategy could cause the Fund to
significantly underperform the S&P 500 Index. Investors who
55
purchase Shares at the beginning of the Outcome Period may lose their entire investment. Investors who purchase Shares after the
Outcome Period has begun may also lose their entire investment. An investment in the Fund is only appropriate for investors willing to bear those losses.
Fund Rebalance. Milliman implements the Fund’s strategy on a semi-annual basis, seeking to
produce the Outcomes for an Outcome Period. On the last business day of any stated Outcome Period, all of the Fund’s existing FLEX Options, which includes those used to establish the Buffer, the Par Up Rate and the Put Spread Strategy, will
expire and Milliman will transact in a new set of FLEX Options on the same business day, which will commence a new Outcome Period beginning the following business day. At that same time, Milliman will also evaluate whether to make any adjustments
to the Collateral Portfolio. Accordingly, Shares can be held indefinitely if investors determine to participate in additional Outcome Periods.
Approximately one week prior to the end of each Outcome Period, the Fund will file a prospectus supplement, which will notify existing investors of
(i) the date on which the existing Outcome Period will end; (ii) the date on which the new Outcome Period will commence; and (iii) the anticipated ranges of the Par Up Rate that will be used for the new Outcome Period. Immediately preceding the
commencement date of the new Outcome Period, the Fund will file a prospectus supplement disclosing the Fund’s final Par Up Rate (both gross and net of Fund fees and expenses) for the new Outcome Period. This information will also be available
online at www.[___________].com, and on your insurance company’s website. Please contact your insurance company or other financial intermediary for more information.
Fund Classification. The Fund is classified as “non-diversified” under the Investment
Company Act of 1940, as amended (the “1940 Act”).
Principal Risks
You could lose money by investing in the Fund. An investment in the Fund is not a deposit of a bank and is not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other governmental agency. There can be no assurance that the Fund’s investment objectives will be achieved.
Downside Loss Buffer Risk. There can be no guarantee that the Fund will be successful in its strategy to
buffer against S&P 500 Index losses if the S&P 500 Index decreases in value over the Outcome Period. The Fund’s strategy is designed to produce returns that correlate to those of the S&P 500 Index at the Par Up Rate, while limiting
downside losses in the Fund’s S&P 500 Index exposure, if Shares are bought on the day on which Milliman transacts in the FLEX Options on behalf of the Fund and held until those FLEX Options expire at the end of each Outcome Period. The
success of the Buffer also depends upon the performance of the Collateral Portfolio and the Put Spread Strategy. If the Collateral Portfolio and/or the Put Spread Strategy experiences losses, it could have the
effect of reducing the impact of, or completely eliminating, the Buffer on the Fund’s S&P 500 Index exposure. In certain market conditions, the performance of the Collateral Portfolio and/or the Put Spread Strategy could cause the Fund to
significantly underperform the S&P 500 Index. Despite the intended Buffer, an investor could lose their entire investment. In the event an investor purchases Shares after the date on which Milliman transacted in the FLEX
Options on behalf of the Fund, or redeems Shares prior to the expiration of those FLEX Options, the Buffer that the Fund seeks to provide may not be available or fully applicable.
Risk of the Par Up Rate on Upside Returns. The Fund’s strategy is designed to produce returns that correlate
to those of the S&P 500 Index at the Par Up Rate if Shares are bought on the day on which Milliman transacts in the FLEX Options on behalf of the Fund and held until those FLEX Options expire at the end of the Outcome Period. Accordingly, the
Fund will not fully participate in any gains achieved by the S&P 500 Index. In addition, in the event an investor purchases Shares after the date on which Milliman transacted in the FLEX Options on behalf of the Fund, or redeems Shares prior
to the expiration of those FLEX Options, the returns realized by that investor may not match those that the Fund seeks to achieve pursuant to the Par Up Rate. In certain market conditions, the performance of
the Collateral Portfolio and the Put Spread Strategy could reduce the impact of the Par Up Rate. An investor should consider the amount and impact of the Par Up Rate, and the Fund’s position relative to it, before investing in the Fund.
56
Par Up Rate Change Risk. Because the Par Up Rate for each Outcome Period is calculated based upon (i)
Milliman’s evaluation of prevailing market conditions on the first day of the Outcome Period and (ii) the total number of long call FLEX Options on the S&P 500 Index that Milliman is able to purchase at that time, the Par Up Rate may rise or
fall from one Outcome Period to the next. Any change in the Par Up Rate could be significant and it is unlikely to remain the same for consecutive Outcome Periods.
FLEX Options Risk. The Fund will transact in FLEX Options issued and guaranteed for settlement by the OCC. The
Fund bears the risk that the OCC will be unable or unwilling to perform its obligations under the FLEX Options contracts, which could result in significant losses to the Fund. In less liquid markets, terminating a FLEX Option may require the
payment of a premium or acceptance of a discounted price, and may take longer to complete. In addition, a less liquid trading market may adversely impact the value of the Fund’s FLEX Options and therefore the NAV of the Fund. In addition, the value
of the Fund’s FLEX Options positions is not anticipated to increase or decrease at the same rate as the reference asset; and while it is anticipated that they will generally move in the same direction, it is possible that they may move in different
directions. Certain FLEX Options positions may also expire worthless. The use of FLEX Options involves leverage, which can cause the Fund’s portfolio to be more volatile than if the portfolio had not been leveraged. Leverage can significantly
magnify the effect of price movements of the reference asset, disproportionately increasing the Fund’s losses and reducing the Fund’s opportunities for gains when the reference asset changes in unexpected ways. In some instances, such leverage
could result in losses that exceed the original amount invested.
Investment Objective and Outcomes Risk. There is no guarantee that the Fund will be successful in its attempt
to achieve its investment objective and/or the Outcomes, and an investor could lose some or all of their investment in the Fund. Certain circumstances under which the Fund might not achieve its objective and/or the Outcomes include, but are not
limited to (i) if the Fund disposes of FLEX Options, (ii) if the Fund is unable to maintain the proportional relationship based on the number of FLEX Options in the Fund’s portfolio, (iii) significant accrual of Fund expenses in connection with
effecting the Fund’s principal investment strategy, (iv) losses incurred by the Fund’s holdings in the Collateral Portfolio and/or losses resulting from the Put Spread Strategy, or (iv) adverse tax law changes affecting the treatment of FLEX
Options.
Tax Risk. The Fund intends to elect, and to qualify each year, to be treated as a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”). As a RIC, the Fund will not be subject to U.S. federal income tax on the portion
of its net investment income and net capital gain that it distributes to shareholders, provided that it satisfies certain requirements of the Code. To maintain its status as a RIC, the Fund must meet certain income, diversification and
distributions tests. For purposes of the diversification test, the identification of the issuer (or, in some cases, issuers) of a particular Fund investment can depend on the terms and conditions of that investment. In particular, there is no
published IRS guidance or case law on how to determine the “issuer” of certain derivatives that the Fund will enter into and the Fund has not received a private letter ruling on this point. Therefore, there is a risk that the Fund will not meet the
Code’s diversification requirements and will not qualify, or will be disqualified, as a RIC. If the Fund does not qualify as a RIC for any taxable year and certain relief provisions are not available, the Fund’s taxable income will be subject to
tax at the Fund level and to a further tax at the shareholder level when such income is distributed.
The Fund also intends to comply with the diversification requirements of Section 817(h) of the Code, and the regulations thereunder, relating to the
tax-deferred status of variable accounts that are based on insurance company separate accounts (referred to as “segregated asset accounts” for federal income tax purposes). These diversification requirements apply in addition to the RIC
diversification requirements discussed above. There also is no published guidance or case law on how to determine the “issuer” of the derivatives referred to above for purposes of the diversification requirements of Section 817(h) of the Code and
the Fund has not received a private letter ruling on this point. If these requirements are not met, or under other circumstances, such as if the Fund does not qualify as a RIC for any taxable year, it is possible that the contract owners (rather
than the insurance company) will be treated for federal income tax purposes as the taxable owners of the assets held by the segregated asset accounts.
Clearing Member Default Risk. The Fund will hold FLEX Options through accounts at members of clearing houses (“clearing members”) rather than a bank or a broker. Assets deposited by the Fund with any clearing member as margin for its FLEX Options positions may, in certain circumstances, be used to satisfy losses of other
clients of the Fund’s clearing member where such assets may be held in commingled omnibus accounts. In addition, although
57
clearing members guarantee performance of their clients’ obligations to the clearing house, there is a risk that the assets of the Fund might not be
fully protected in the event of the clearing member’s bankruptcy, as the Fund would be limited to recovering only a pro rata share of all available funds segregated on behalf of the clearing member’s
customers for the relevant account class.
Debt Securities Risk. The prices of debt securities will be affected by changes in interest rates, the
creditworthiness of the issuer and other factors. These risks could affect the value of investments in which the Fund invests, possibly causing the Fund’s NAV to be reduced and fluctuate more than other types of investments. During periods of
falling interest rates, an issuer of a callable bond may repay the security before its stated maturity, and the Fund may have to reinvest the proceeds in securities with lower yields, which would result in a decline in the Fund’s income, or in
securities with greater risks or with other less favorable features. Changing interest rates, including rates that fall below zero, may have unpredictable effects on markets, result in heightened market volatility and detract from the Fund’s
performance to the extent the Fund is exposed to such interest rates. An increase in interest rates will generally cause the value of fixed-income securities held by the Fund to decline, may lead to heightened volatility in the fixed-income
markets and may adversely affect the liquidity of certain fixed-income investments, including those held by the Fund. Risks associated with rising interest rates are heightened given that interest rates in the U.S. are near historic lows.
Adjustable-rate instruments also react to interest rate changes in a similar manner, although generally to a lesser degree (depending, however, on the characteristics of the reset terms, including the index chosen, frequency of reset and reset
caps or floors, among other factors). Interest rate sensitivity is generally more pronounced and less predictable in instruments with uncertain payment or prepayment schedules and also for those with longer maturities.
Foreign Securities and Credit Exposure Risk. U.S. dollar-denominated securities carrying foreign credit exposure
may be affected by unfavorable political, economic or governmental developments that could affect payments of principal and interest. Furthermore, the value of the Fund’s foreign investments (whether direct or indirect) may be adversely affected by
political and social instability in their home countries, by changes in economic or taxation policies in those countries, or by the difficulty in enforcing obligations in those countries. Foreign companies generally may be subject to less stringent
regulations than U.S. companies, including financial reporting requirements and auditing and accounting controls. As a result, there generally is less publicly available information about foreign companies than about U.S. companies. Trading in many
foreign securities may be less liquid and more volatile than U.S. securities due to the size of the market or other factors.
U.S. Government Securities Risk. U.S. Government securities are subject to interest rate risk but generally do
not involve the credit risks associated with investments in other types of debt securities. As a result, the yields available from U.S. Government securities are generally lower than the yields available from other debt securities. U.S. Government
securities are guaranteed only as to the timely payment of interest and the payment of principal when held to maturity. While securities issued or guaranteed by U.S. federal government agencies are backed by the full faith and credit of the U.S.
Department of the Treasury, securities issued by government sponsored entities are solely the obligation of the issuer and generally do not carry any guarantee from the U.S. Government.
ABS Risk. ABS are subject to the general debt securities risks described above. In addition, ABS may be less
liquid than other bonds, and may be more sensitive than other bonds to the market’s perception of issuers and creditworthiness of payees, which may result in the Fund experiencing difficulty selling or valuing these securities. ABS markets have
experienced extraordinary weakness and volatility at various times in recent years, and may decline quickly in the event of a substantial economic or market downturn. Accordingly, these securities may be subject to greater risk of default during
periods of economic downturn than other securities, which could result in possible losses to the Fund.
Issuer Risk. The performance of the Fund depends on the performance of individual securities to which the Fund
has exposure. The Fund may be adversely affected if an issuer of underlying securities held by the Fund is unable or unwilling to repay principal or interest when due. Changes in the financial condition or credit rating of an issuer of those
securities may cause the value of the securities to decline.
Management Risk. The Fund is subject to management risk because it is an actively managed portfolio. Milliman
will apply investment techniques and risk analyses in making investment decisions for the Fund, but there can be no guarantee that the Fund will meet its investment objective and/or the Outcomes. In addition, Milliman does not use
58
defensive strategies or attempt to reduce the Fund’s exposures to poor performing positions during an Outcome Period. This differs from funds that are
managed to seek to outperform a benchmark index. Therefore, in the event of a general market decline, the Fund’s value may fall more than the value of another fund that does attempt to hedge against such market declines.
Market Risk. The Fund could lose money over short periods due to short-term market movements and over longer
periods during more prolonged market downturns. Assets may decline in value due to factors affecting financial markets generally or particular asset classes or industries represented in the markets. The value of a FLEX Option or other asset may
also decline due to general market conditions, economic trends or events that are not specifically related to the issuer of the security or other asset, or due to factors that affect a particular issuer, country, region, market, industry, sector or
asset class.
Non-Diversification Risk. The Fund may invest a relatively high percentage of its assets in a limited number of
issuers. As a result, the Fund may be more susceptible to a single adverse economic or regulatory occurrence affecting one or more of these issuers, experience increased volatility and be highly invested in certain issuers.
Large Shareholder Risk. At times, the Fund may experience adverse effects when certain large shareholders,
including insurance company separate accounts, redeem large amounts of shares of the Fund. Large redemptions may cause the Fund to sell portfolio holdings at times when it would not otherwise do so and may increase transaction costs and/or result
in an increase to the Fund’s expense ratio. A large redemption could be detrimental to the Fund and its remaining shareholders.
Risks of Investing in ETFs. In addition to the risks associated with the underlying assets held by the ETFs in
which the Fund invests, investments in ETFs are also subject to the following additional risks: (i) only authorized participants may engage in transactions directly with ETFs but none are obligated to do so, which could result in an ETF’s shares
trading at a premium or discount to its NAV or possibly face trading halts or delisting; (ii) certain ETFs seek to track the performance of an underlying index and will not attempt to take defensive positions under any market conditions, including
declining markets, which could result in losses; and (iii) because ETF shares trade on the secondary market, there is not guarantee that an active market will be developed or maintained, which could result in the ETF’s shares trading at a premium
or discount to its NAV. Investments in ETFs may involve duplication of management fees and certain other expenses, as the Fund indirectly bears its proportionate share of any expenses paid by the ETFs in which it invests.
Risks of Investing in Money Market Funds. Money market funds seek to preserve the value of shareholder
investments at $1.00 per share, but shareholders, such as the Fund, may still lose money by investing in such funds. In addition, a money market fund may impose a fee upon the sale of its shares or may temporarily suspend the ability to sell shares
if the fund’s liquidity falls below required minimums because of market conditions or other factors. The credit quality of a money market fund’s holdings can change rapidly in certain markets, and the default of a single holding could have an
adverse impact on the fund’s share price. A money market fund’s share price can also be negatively affected during periods of high redemption pressures, illiquid markets, and/or significant market volatility.
Performance
As of the date of this Prospectus, the Fund has not commenced operations and therefore does not have a performance history. Once available, the Fund’s
performance information will be accessible online at www.[________].com and will provide some indication of the risks of investing in the Fund.
Management
Investment Adviser
Milliman Financial Risk Management LLC (“Milliman”) serves as investment adviser to the Fund.
59
Portfolio Managers
The following persons serve as portfolio managers of the Fund.
|
●
|
Robert T. Cummings, Principal & Head of Portfolio Management at Milliman.
|
|
●
|
Maria Schiopu, Principal & Head of Portfolio Management at Milliman.
|
|
●
|
Jeff Greco, Principal & Head of Strategy Research at Milliman.
|
|
●
|
Jordan Rosenfeld, Portfolio Manager at Milliman.
|
Each portfolio manager is jointly and primarily responsible for the day-to-day management of the Fund’s portfolio and has served in such capacity
since the Fund’s inception in 2021.
Purchase and Sale of Shares
Shares are available as underlying investment options for variable insurance contracts and variable life insurance policies (each, a “variable contract,” and, collectively, the “variable contracts”) issued by insurance companies. These insurance companies are the record owners of the separate accounts
holding the Shares. You do not buy, sell or exchange Shares directly; rather, you choose investment options through your variable contracts. The insurance companies then cause the separate accounts to purchase and redeem Shares according to
the investment options you choose.
Tax Information
The dividends and distributions paid by the Fund to the insurance company separate accounts will consist of ordinary income, capital gains, or some
combination of both. Because Shares must be purchased through separate accounts used to fund variable contracts, such dividends and distributions will be exempt from current taxation by owners of variable contracts (each, a “contract owner,” and, collectively “contract owners”) if left to accumulate within a separate account. Consult the variable contract prospectus for additional tax
information.
Payments to Insurance Companies and Other Financial Intermediaries
If you allocate contract value to the Fund through an insurance company or other financial intermediary, the Fund, Milliman, the Fund’s distributor or
their related companies may pay the insurance company and/or its affiliates or other intermediary for the sale of Shares and related services. These payments may create a conflict of interest by influencing the insurance company or other
intermediary and your salesperson to recommend an indirect investment in the Fund over another investment. The prospectus or other disclosure documents for the variable contracts may contain additional information about these payments, if any.
You may also ask your salesperson or financial intermediary, or visit your financial intermediary’s website, for more information.
60
Fund Summary: Milliman S&P 500 6-Month Par Down with Par Up Fund – Mar/Sep
Investment Objective
The Fund seeks to provide exposure to the S&P 500 Index, while limiting losses to 50% of the losses associated with S&P 500 Index performance
and participating in S&P 500 Index gains at a declared rate, prior to taking into account any fees or expenses or the performance of any fixed income exposure included in the Fund’s portfolio, over the period from September 1, 2021 through
February 28, 2022.
Fees and Expenses of the Fund
This table describes the fees and expenses that you may pay if you buy, hold and sell shares of the Fund (“Shares”).
This table and the example below do not include any fees or sales charges imposed by your variable product. If they were included, the expenses listed below would be higher.
Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment)
|
Class 3
|
|
|
Management Fees
|
0.49%
|
|
Distribution and Service (12b-1) Fees
|
0.25%
|
|
Other Expenses(1)
|
0.50%
|
|
Acquired Fund Fees and Expenses(1)
|
[_.__]%
|
|
Total Annual Fund Operating Expenses
|
1.24%
|
|
Fee Waiver and/or Expense Reimbursement(2)(3)
|
(0.25)%
|
|
Total Annual Fund Operating Expenses After Fee Waiver and/or Expense Reimbursement
|
0.99%
|
|
(1)
|
“Other Expenses” and “Acquired Fund Fees and Expenses” are based on estimated amounts for the current fiscal year.
|
|
(2)
|
The Fund’s investment adviser, Milliman Financial Risk Management LLC (“Milliman”), has contractually
agreed to waive advisory fees and/or reimburse expenses to the extent necessary to limit the Fund’s total annual Fund operating expenses (excluding taxes, interest, brokerage fees and commissions, Rule 12b-1 fees, acquired fund fees and
expenses, short-sale dividend expenses, administrative services fees, other expenses that are capitalized in accordance with generally accepted accounting principles, and extraordinary or non-routine expenses not incurred in the
ordinary course of the Fund’s business) to 0.74% of the Fund's average daily net assets (the “Expense Limitation Agreement”) until at least November 1, 2022. During its term, the Expense
Limitation Agreement cannot be terminated or amended to increase the applicable limit without approval of the Board of Trustees of the Trust (the “Board”). Milliman may recoup from the Fund any
advisory fees waived or expenses reimbursed pursuant to the Expense Limitation Agreement for a period of three years from the date on which such waiver or reimbursement occurred; provided, however, that such recoupment shall not be made
if it would cause the Fund’s total annual Fund operating expenses to exceed the lesser of (a) the expense limitation in effect at the time of the reimbursement, or (b) the expense limitation in effect at the time of recoupment, if any.
|
|
(3)
|
In addition to the Expense Limitation Agreement, Milliman has contractually agreed to waive its advisory fees in an amount equal to the Fund’s
acquired fund fees and expenses until at least November 1, 2022 (the “Fee Waiver”). This contract cannot be terminated or modified without the consent of the Board.
|
Example
This example is intended to help you compare the cost of investing in the Fund with the cost of investing in other funds. This example assumes that you
invest $10,000 in the Fund for the time periods indicated and then sell all of your Shares at the end of those periods. This example also assumes that your investment has a 5% return each year and that the Fund’s operating expenses remain at
current levels and that the Expense Limitation Agreement and Fee Waiver remain in place for their contractual periods. Although your actual costs may be higher or lower, your costs, based on these assumptions, would be:
|
1 Year
|
3 Years
|
|
|
Class 3
|
$104
|
$384
|
This example does not include any fees or sales charges imposed by your variable product. If they were included, the expenses listed above would be
higher.
61
Portfolio Turnover
The Fund pays transaction costs, such as commissions, when it purchases and sells securities (or “turns over” its portfolio). A higher portfolio turnover
will cause the Fund to incur additional transaction costs. These costs, which are not reflected in Total Annual Fund Operating Expenses or in the example, may affect the Fund’s performance. Because the Fund has not yet commenced investment
operations, no portfolio turnover information is available at this time.
Principal Investment Strategies
The Fund seeks to achieve its investment objective by transacting in FLexible EXchange® Options (“FLEX Options”)
and by separately maintaining a collateral portfolio (the “Collateral Portfolio”), which is designed primarily to serve as margin or collateral for the Fund’s FLEX Options positions and secondarily to
enhance the Fund’s upside S&P 500 Index FLEX Options’ exposure (i.e., by utilizing anticipated income to measure the ability to purchase additional FLEX Options). FLEX Options are exchange-traded
options contracts with uniquely customizable terms. In general, an options contract is an agreement between a buyer and seller that gives the purchaser of the option the right to buy or sell a particular asset at a specified future date at an
agreed upon price, commonly known as the “strike price.” The reference assets for the Fund’s FLEX Options positions will include the S&P 500 Index, which is a large-capitalization, market-weighted, U.S. equities index that tracks the price
(excluding dividends) of 500 leading companies in leading industries of the U.S. economy, and certain exchange-traded funds (“ETFs”), as described further below.
The Collateral Portfolio may be invested in short-term fixed-income securities, including corporate bonds and other corporate debt securities,
asset-backed securities (“ABS”), securities issued by the U.S. Government or its agencies and instrumentalities, securities issued by non-U.S. governments or their agencies and instrumentalities, money
market securities and funds, other interest-bearing instruments, cash, ETFs that primarily invest in any of the foregoing instruments, options on ETFs and options box spreads. An options box spread is the combination of different options trades
that have offsetting spreads (e.g., purchases and sales on the same underlying instrument, such as an index or an ETF, but with different strike prices and/or expiration dates) for the purpose of
generating income. The Fund may invest in short-term fixed income securities or other instruments, including through ETFs, of any maturity and credit quality. The Fund will generally invest up to 35% of its net assets in one or more ETFs that
provide exposure to investment grade corporate bonds.
Due to the unique mechanics of the Fund’s strategy, the return an investor can expect to receive from an investment in the Fund has characteristics that
are distinct from the returns of many other investment vehicles. It is important that an investor understand these characteristics before making an investment in the Fund.
In seeking to achieve its investment objective, the Fund seeks to produce pre-determined outcomes (the “Outcomes”)
that are based upon the performance of the S&P 500 Index over a six-month period (the “Outcome Period”). The initial Outcome Period for the Fund is September 1, 2021 through February 28, 2022.
Following the initial Outcome Period, each subsequent Outcome Period will be a six-month period commencing upon the expiration of the prior Outcome Period. The Fund seeks to achieve the Outcomes by purchasing and writing (selling) FLEX Options to
create layers within the Fund’s portfolio. One layer is designed to produce returns that correlate to those of the S&P 500 Index for the Outcome Period at a declared rate (the “Par Up Rate”) if the
S&P 500 Index experiences gains during that time, as described below. A separate layer is designed to limit losses to 50% of the losses experienced by the S&P 500 Index for the Outcome Period (the “Par Down Rate”). There is no guarantee that the Fund will be successful in its attempt to produce returns that correlate to those of the S&P 500 Index at the Par Up
Rate or limit losses that correlate to those of the S&P 500 Index at the Par Down Rate.
Milliman Financial Risk Management, LLC (“Milliman”), the investment adviser of the Fund, seeks to establish the
Par Down Rate by writing 50% of the exposure of one put FLEX Option on the S&P 500 Index with a strike price that is equal to the value of the S&P 500 Index at the beginning of the Outcome Period.
Milliman seeks to establish the Par Up Rate by purchasing long call FLEX Options on the S&P 500 Index with a strike price approximately equal to the
value of the S&P 500 Index at the beginning of the Outcome Period. Milliman purchases these FLEX Options with a portion of the Fund’s net assets plus (i) the cash received from
62
writing the put FLEX Option designed to create the Par Down Rate, (ii) additional cash received by utilizing FLEX Options to create a put spread (the
“Put Spread Strategy”) on fixed income securities and/or one or more ETFs that provide exposure to fixed income securities, and (iii) yield received from the Collateral Portfolio. Milliman seeks to achieve
the Put Spread Strategy for the Fund by writing a put FLEX Option on an underlying asset at a strike price at or lower than the underlying asset’s market price or current value at the beginning of the Outcome Period, and buying a put FLEX Option
on the same underlying asset at a lower strike price than the written put FLEX Option.
The Par Up Rate is the rate at which the Fund will seek to track any upside market performance of the S&P 500 Index. Milliman calculates the Par
Up Rate based upon (i) its evaluation of prevailing market conditions on the first day of the Outcome Period and (ii) the total number of long call FLEX Options on the S&P 500 Index that it is able to purchase at that time. As of the date of
this Prospectus, and assuming current market conditions persist, Milliman expects that the Par Up Rate will be between the below ranges (both gross and net of Fund fees and expenses). Any fees or expenses imposed by your variable product, and any
other expenses incurred by the Fund, will have the effect of further reducing the Par Up Rate. Once calculated, the Par Up Rate for a particular Outcome Period will not change during that Outcome Period;
however, in certain market conditions, the performance of the Collateral Portfolio and the Put Spread Strategy could reduce the impact of the Par Up Rate.
|
Share Class
|
Estimated Par Up Rate Ranges
(As of [___])
|
|
|
Prior to Taking into Account Fund Fees and Expenses
|
After Taking into Account Fund Fees and Expenses
|
|
|
Class 3
|
[__]% and [__]%
|
[__]% and [__]%
|
The Par Down Rate is the rate at which the Fund will seek to track any downside market performance of the S&P 500 Index. The Par Down Rate is
designed to limit losses in the Fund’s S&P 500 Index exposure to 50% for the Outcome Period. The Fund seeks to limit losses against its S&P 500 Index exposure prior to taking into account any fees or expenses or the performance of the
Collateral Portfolio or the Put Spread Strategy. The Par Down Rate is not operative against losses in the Collateral Portfolio or the Put Spread Strategy. If the Collateral Portfolio and/or the Put Spread
Strategy experiences losses, it could have the effect of reducing the impact of, or completely eliminating, the Par Down Rate on the Fund’s S&P 500 Index exposure. In certain market conditions, the performance of the Collateral Portfolio
and/or the Put Spread Strategy could cause the Fund to significantly underperform the S&P 500 Index. The following table reflects the Par Down Rate both gross and net of Fund fees and expenses:
|
Share Class
|
Par Down Rate
(As of [___])
|
|
|
Prior to Taking into Account Fund Fees and Expenses
|
After Taking into Account Fund Fees and Expenses
|
|
|
Class 3
|
50%
|
[__]%
|
The definitive Par Up Rate and Par Down Rate will be set forth on the Fund’s website. The Fund’s website will also provide information relating to the
Outcomes on a daily basis, including the Fund’s position relative to the Par Up Rate and the Par Down Rate. You may also contact your insurance company or other financial intermediary for more information.
Additionally, the Fund’s net asset value (“NAV”) will not increase or decrease at the same rate as the
S&P 500 Index because the Fund’s strategy relies upon the performance of the Collateral Portfolio and the Put Spread Strategy, in addition to the value of the Fund’s FLEX Options positions on the S&P 500 Index. While Milliman anticipates
that the Fund’s NAV will generally move in the same direction as the S&P 500 Index (meaning that the Fund’s NAV will generally increase if the S&P 500 Index experiences gains or decrease if the S&P 500 Index experiences losses), the
Fund’s NAV will not decrease at the same rate as the S&P 500 Index (especially when factoring in the Par Down Rate and the performance of the Collateral Portfolio and the Put Spread Strategy) and will not increase at the same rate as the
S&P 500 Index (especially when factoring in the Par Up Rate and the performance of the Collateral Portfolio and the Put Spread Strategy). Similarly, the amount of time remaining until the end of the
63
Outcome Period also affects the impact of the Par Down Rate on the Fund’s NAV, because the Par Down Rate may not be in full effect prior to the end of
the Outcome Period.
The FLEX Options utilized in the Fund’s portfolio are each set to expire on the last day of the Outcome Period. The customizable nature of FLEX Options
will allow Milliman to select the strike price at which each FLEX Option will be exercised at the expiration of the FLEX Option term. At the commencement of the Outcome Period, Milliman will specifically select the strike price for each FLEX Option
in a manner designed to achieve the Outcomes when the FLEX Options are exercised on the final day of the Outcome Period, depending on the anticipated performance of the S&P 500 Index, the Collateral Portfolio and the Put Spread Strategy over
the duration of that Outcome Period.
The hypothetical graphical illustrations provided below are designed to illustrate the Outcomes based upon the
hypothetical performance of the S&P 500 Index for an investor who holds Shares for the entirety of the Outcome Period. The hypothetical graphical illustrations do not include any fees or expenses imposed by your variable product or expenses
incurred by the Fund, and do not reflect the performance of the Collateral Portfolio or the Put Spread Strategy. Additional hypothetical graphical representations of the Outcomes are provided in “Additional Information About the Funds and
the Risks of Investing.” There is no guarantee that the Fund will be successful in its attempt to achieve the Outcomes for the Outcome Period.
The following table contains hypothetical examples designed to illustrate the Outcomes the Fund seeks to
achieve over the Outcome Period, based upon the performance of the S&P 500 Index from (100)% to 100% after taking into account the Par Up Rate and the Par Down Rate, but prior to taking into account any fees or expenses or the performance of
the Collateral Portfolio or the Put Spread Strategy. The table is provided for illustrative purposes only and does not provide every possible performance scenario for Shares over the course of the Outcome Period.
There is no guarantee that the Fund will be successful in its attempt to achieve the Outcomes for an Outcome Period. The table is not intended to predict or project the performance of the FLEX Options or the Fund. Investors should not take this information as an assurance of the expected
performance of the S&P 500 Index or the Fund. Actual Fund performance will vary with fluctuations in the performance of the Collateral Portfolio and the Put Spread Strategy, in addition to the value of the Fund’s FLEX Options
positions on the S&P
64
500 Index, during the Outcome Period, among other factors. The performance of
the Collateral Portfolio and the Put Spread Strategy could significantly impact the performance of the Fund, which could prevent the Fund from achieving the Outcomes that it seeks to produce. The table does not reflect any fees or
expenses imposed by your variable product or expenses incurred by the Fund. If it did, the returns shown for the Fund would be lower. Please refer to the Fund’s website, which provides updated information relating to this table on a daily basis
throughout the Outcome Period. Please contact your insurance company or other financial intermediary for more information.
|
Index/Fund
|
Hypothetical Performance1
|
|||||||||||
|
S&P 500 Index Price Performance
|
(100)%
|
(50)%
|
(20)%
|
(10)%
|
(5)%
|
0%
|
5%
|
10%
|
15%
|
20%
|
50%
|
100%
|
|
Fund Performance at NAV
|
(50)%2
|
(25)%2
|
(10)%2
|
(5)%2
|
(2.5)%2
|
0%
|
3.4%3
|
6.7%3
|
10.05%3
|
13.4%3
|
33.5%3
|
67%3
|
| 1 |
Does not take into account any fees or expenses or the performance of the Collateral Portfolio or the Put Spread Strategy.
|
| 2 |
Reflects the impact of the Par Down Rate.
|
| 3 |
Reflects the impact of an assumed Par Up Rate of 67%.
|
Understanding Outcomes. The Outcomes the Fund seeks to achieve are measured based upon the
Fund’s NAV on the first day of the Outcome Period. The Outcome Period begins on the day Milliman transacts in the FLEX Options on behalf of the Fund, and ends on the day those FLEX Options expire. An investor who
purchases Shares after the commencement of the Outcome Period will likely have purchased Shares at a different NAV than the NAV on the first day of the Outcome Period (the NAV upon which the Outcomes are based) and may experience investment
outcomes very different from those the Fund seeks to achieve, especially when factoring in any fees or expenses or the performance of the Collateral Portfolio and the Put Spread Strategy. An investor who redeems Shares prior to the end of the
Outcome Period may also experience investment outcomes very different from those the Fund seeks to achieve. The Outcomes are designed with the expectation that an investor will hold Shares on the day that Milliman transacts in the FLEX Options on
behalf of the Fund, and on the day those FLEX Options expire. There is no guarantee that the Fund will be successful in its attempt to achieve the Outcomes.
Understanding the Par Up Rate. Unlike other investment products, the potential returns an
investor can receive from an investment in the Fund are subject to the Par Up Rate. This means that if the S&P 500 Index experiences gains for the Outcome Period, an investor in the Fund will only experience
a percentage of those gains (equal to the Par Up Rate multiplied by the S&P 500 Index gains). Milliman calculates the Par Up Rate for each Outcome Period based upon (i) its evaluation of prevailing market conditions on the first day
of the Outcome Period and (ii) the total number of long call FLEX Options on the S&P 500 Index that it is able to purchase at that time. In certain market conditions, the performance of the Collateral
Portfolio and the Put Spread Strategy could reduce the impact of the Par Up Rate. An investor should consider the amount and impact of the Par Up Rate, and the Fund’s position relative to it, before investing in the Fund.
Understanding the Par Down Rate. The Par Down Rate is intended to limit losses in the
Fund’s S&P 500 Index exposure to 50% of the losses the S&P 500 Index experiences for the Outcome Period. While the Fund seeks to provide returns that are limited to 50% (prior to taking into account any fees or expenses or the performance
of the Collateral Portfolio or the Put Spread Strategy) for investors who hold Shares for the entire Outcome Period, there is no guarantee it will successfully do so. In addition, the Par Down Rate is not
operative against losses in the Collateral Portfolio or the Put Spread Strategy. If the Collateral Portfolio and/or the Put Spread Strategy experiences losses, it could have the effect of reducing the impact of, or completely eliminating, the
Par Down Rate on the Fund’s S&P 500 Index exposure. In certain market conditions, the performance of the Collateral Portfolio and/or the Put Spread Strategy could cause the Fund to significantly underperform the S&P 500 Index.
Investors who purchase Shares at the beginning of the Outcome Period may lose their entire investment. Investors who purchase Shares after the Outcome Period has begun may also lose their entire investment. An investment in the Fund is only
appropriate for investors willing to bear those losses.
65
Fund Rebalance. Milliman implements the Fund’s strategy on a semi-annual basis, seeking to
produce the Outcomes for an Outcome Period. On the last business day of any stated Outcome Period, all of the Fund’s existing FLEX Options, which includes those used to establish the Par Up Rate, the Par Down Rate and the Put Spread Strategy,
will expire and Milliman will transact in a new set of FLEX Options on the same business day, which will commence a new Outcome Period beginning the following business day. At that same time, Milliman will also evaluate whether to make any
adjustments to the Collateral Portfolio. Accordingly, Shares can be held indefinitely if investors determine to participate in additional Outcome Periods.
Approximately one week prior to the end of each Outcome Period, the Fund will file a prospectus supplement, which will notify existing investors of
(i) the date on which the existing Outcome Period will end; (ii) the date on which the new Outcome Period will commence; and (iii) the anticipated ranges of the Par Up Rate that will be used for the new Outcome Period. Immediately preceding the
commencement date of the new Outcome Period, the Fund will file a prospectus supplement disclosing the Fund’s final Par Up Rate (both gross and net of Fund fees and expenses) for the new Outcome Period. This information will also be available
online at www.[___________].com, and on your insurance company’s website. Please contact your insurance company or other financial intermediary for more information.
Fund Classification. The Fund is classified as “non-diversified” under the Investment
Company Act of 1940, as amended (the “1940 Act”).
Principal Risks
You could lose money by investing in the Fund. An investment in the Fund is not a deposit of a bank and is not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other governmental agency. There can be no assurance that the Fund’s investment objectives will be achieved.
Downside Loss Par Down Rate Risk. There can be no guarantee that the Fund will be successful in its strategy
to limit losses in the Fund’s S&P 500 Index exposure to 50% of the losses experienced by the S&P 500 Index over the Outcome Period. The success of the Par Down Rate also depends upon the performance of the Collateral Portfolio and the Put
Spread Strategy. If the Collateral Portfolio and/or the Put Spread Strategy experiences losses, it could have the effect of reducing the impact of, or completely eliminating, the Par Down Rate on the Fund’s
S&P 500 Index exposure. In certain market conditions, the performance of the Collateral Portfolio and/or the Put Spread Strategy could cause the Fund to significantly underperform the S&P 500 Index. Despite the intended Par Down Rate,
an investor could lose their entire investment. In the event an investor purchases Shares after the date on which Milliman transacted in the FLEX Options on behalf of the Fund, or redeems Shares prior to the expiration of those
FLEX Options, the Par Down Rate that the Fund seeks to provide may not be available or fully applicable.
Risk of the Par Up Rate on Upside Returns. The Fund’s strategy is designed to produce returns that correlate
to those of the S&P 500 Index at the Par Up Rate if Shares are bought on the day on which Milliman transacts in the FLEX Options on behalf of the Fund and held until those FLEX Options expire at the end of the Outcome Period. Accordingly, the
Fund will not fully participate in any gains achieved by the S&P 500 Index. In addition, in the event an investor purchases Shares after the date on which Milliman transacted in the FLEX Options on behalf of the Fund, or redeems Shares prior
to the expiration of those FLEX Options, the returns realized by that investor may not match those that the Fund seeks to achieve pursuant to the Par Up Rate. In certain market conditions, the performance of
the Collateral Portfolio and the Put Spread Strategy could reduce the impact of the Par Up Rate. An investor should consider the amount and impact of the Par Up Rate, and the Fund’s position relative to it, before investing in the Fund.
Par Up Rate Change Risk. Because the Par Up Rate for each Outcome Period is calculated based upon (i)
Milliman’s evaluation of prevailing market conditions on the first day of the Outcome Period and (ii) the total number of long call FLEX Options on the S&P 500 Index that Milliman is able to purchase at that time, the Par Up Rate may rise or
fall from one Outcome Period to the next. Any change in the Par Up Rate could be significant and it is unlikely to remain the same for consecutive Outcome Periods.
66
FLEX Options Risk. The Fund will transact in FLEX Options issued and guaranteed for settlement by the OCC. The
Fund bears the risk that the OCC will be unable or unwilling to perform its obligations under the FLEX Options contracts, which could result in significant losses to the Fund. In less liquid markets, terminating a FLEX Option may require the
payment of a premium or acceptance of a discounted price, and may take longer to complete. In addition, a less liquid trading market may adversely impact the value of the Fund’s FLEX Options and therefore the NAV of the Fund. In addition, the value
of the Fund’s FLEX Options positions is not anticipated to increase or decrease at the same rate as the reference asset; and while it is anticipated that they will generally move in the same direction, it is possible that they may move in different
directions. Certain FLEX Options positions may also expire worthless. The use of FLEX Options involves leverage, which can cause the Fund’s portfolio to be more volatile than if the portfolio had not been leveraged. Leverage can significantly
magnify the effect of price movements of the reference asset, disproportionately increasing the Fund’s losses and reducing the Fund’s opportunities for gains when the reference asset changes in unexpected ways. In some instances, such leverage
could result in losses that exceed the original amount invested.
Investment Objective and Outcomes Risk. There is no guarantee that the Fund will be successful in its attempt
to achieve its investment objective and/or the Outcomes, and an investor could lose some or all of their investment in the Fund. Certain circumstances under which the Fund might not achieve its objective and/or the Outcomes include, but are not
limited to (i) if the Fund disposes of FLEX Options, (ii) if the Fund is unable to maintain the proportional relationship based on the number of FLEX Options in the Fund’s portfolio, (iii) significant accrual of Fund expenses in connection with
effecting the Fund’s principal investment strategy, (iv) losses incurred by the Fund’s holdings in the Collateral Portfolio and/or losses resulting from the Put Spread Strategy, or (iv) adverse tax law changes affecting the treatment of FLEX
Options.
Tax Risk. The Fund intends to elect, and to qualify each year, to be treated as a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”). As a RIC, the Fund will not be subject to U.S. federal income tax on the portion
of its net investment income and net capital gain that it distributes to shareholders, provided that it satisfies certain requirements of the Code. To maintain its status as a RIC, the Fund must meet certain income, diversification and
distributions tests. For purposes of the diversification test, the identification of the issuer (or, in some cases, issuers) of a particular Fund investment can depend on the terms and conditions of that investment. In particular, there is no
published IRS guidance or case law on how to determine the “issuer” of certain derivatives that the Fund will enter into and the Fund has not received a private letter ruling on this point. Therefore, there is a risk that the Fund will not meet the
Code’s diversification requirements and will not qualify, or will be disqualified, as a RIC. If the Fund does not qualify as a RIC for any taxable year and certain relief provisions are not available, the Fund’s taxable income will be subject to
tax at the Fund level and to a further tax at the shareholder level when such income is distributed.
The Fund also intends to comply with the diversification requirements of Section 817(h) of the Code, and the regulations thereunder, relating to the
tax-deferred status of variable accounts that are based on insurance company separate accounts (referred to as “segregated asset accounts” for federal income tax purposes). These diversification requirements apply in addition to the RIC
diversification requirements discussed above. There also is no published guidance or case law on how to determine the “issuer” of the derivatives referred to above for purposes of the diversification requirements of Section 817(h) of the Code and
the Fund has not received a private letter ruling on this point. If these requirements are not met, or under other circumstances, such as if the Fund does not qualify as a RIC for any taxable year, it is possible that the contract owners (rather
than the insurance company) will be treated for federal income tax purposes as the taxable owners of the assets held by the segregated asset accounts.
Clearing Member Default Risk. The Fund will hold FLEX Options through accounts at members of clearing houses (“clearing members”) rather than a bank or a broker. Assets deposited by the Fund with any clearing member as margin for its FLEX Options positions may, in certain circumstances, be used to satisfy losses of other
clients of the Fund’s clearing member where such assets may be held in commingled omnibus accounts. In addition, although clearing members guarantee performance of their clients’ obligations to the clearing house, there is a risk that the assets of
the Fund might not be fully protected in the event of the clearing member’s bankruptcy, as the Fund would be limited to recovering only a pro rata share of all available funds segregated on behalf of the
clearing member’s customers for the relevant account class.
67
Debt Securities Risk. The prices of debt securities will be affected by changes in interest rates, the
creditworthiness of the issuer and other factors. These risks could affect the value of investments in which the Fund invests, possibly causing the Fund’s NAV to be reduced and fluctuate more than other types of investments. During periods of
falling interest rates, an issuer of a callable bond may repay the security before its stated maturity, and the Fund may have to reinvest the proceeds in securities with lower yields, which would result in a decline in the Fund’s income, or in
securities with greater risks or with other less favorable features. Changing interest rates, including rates that fall below zero, may have unpredictable effects on markets, result in heightened market volatility and detract from the Fund’s
performance to the extent the Fund is exposed to such interest rates. An increase in interest rates will generally cause the value of fixed-income securities held by the Fund to decline, may lead to heightened volatility in the fixed-income
markets and may adversely affect the liquidity of certain fixed-income investments, including those held by the Fund. Risks associated with rising interest rates are heightened given that interest rates in the U.S. are near historic lows.
Adjustable-rate instruments also react to interest rate changes in a similar manner, although generally to a lesser degree (depending, however, on the characteristics of the reset terms, including the index chosen, frequency of reset and reset
caps or floors, among other factors). Interest rate sensitivity is generally more pronounced and less predictable in instruments with uncertain payment or prepayment schedules and also for those with longer maturities.
Foreign Securities and Credit Exposure Risk. U.S. dollar-denominated securities carrying foreign credit exposure
may be affected by unfavorable political, economic or governmental developments that could affect payments of principal and interest. Furthermore, the value of the Fund’s foreign investments (whether direct or indirect) may be adversely affected by
political and social instability in their home countries, by changes in economic or taxation policies in those countries, or by the difficulty in enforcing obligations in those countries. Foreign companies generally may be subject to less stringent
regulations than U.S. companies, including financial reporting requirements and auditing and accounting controls. As a result, there generally is less publicly available information about foreign companies than about U.S. companies. Trading in many
foreign securities may be less liquid and more volatile than U.S. securities due to the size of the market or other factors.
U.S. Government Securities Risk. U.S. Government securities are subject to interest rate risk but generally do
not involve the credit risks associated with investments in other types of debt securities. As a result, the yields available from U.S. Government securities are generally lower than the yields available from other debt securities. U.S. Government
securities are guaranteed only as to the timely payment of interest and the payment of principal when held to maturity. While securities issued or guaranteed by U.S. federal government agencies are backed by the full faith and credit of the U.S.
Department of the Treasury, securities issued by government sponsored entities are solely the obligation of the issuer and generally do not carry any guarantee from the U.S. Government.
ABS Risk. ABS are subject to the general debt securities risks described above. In addition, ABS may be less
liquid than other bonds, and may be more sensitive than other bonds to the market’s perception of issuers and creditworthiness of payees, which may result in the Fund experiencing difficulty selling or valuing these securities. ABS markets have
experienced extraordinary weakness and volatility at various times in recent years, and may decline quickly in the event of a substantial economic or market downturn. Accordingly, these securities may be subject to greater risk of default during
periods of economic downturn than other securities, which could result in possible losses to the Fund.
Issuer Risk. The performance of the Fund depends on the performance of individual securities to which the Fund
has exposure. The Fund may be adversely affected if an issuer of underlying securities held by the Fund is unable or unwilling to repay principal or interest when due. Changes in the financial condition or credit rating of an issuer of those
securities may cause the value of the securities to decline.
Management Risk. The Fund is subject to management risk because it is an actively managed portfolio. Milliman
will apply investment techniques and risk analyses in making investment decisions for the Fund, but there can be no guarantee that the Fund will meet its investment objective and/or the Outcomes. In addition, Milliman does not use defensive
strategies or attempt to reduce the Fund’s exposures to poor performing positions during an Outcome Period. This differs from funds that are managed to seek to outperform a benchmark index. Therefore, in the event of a general market decline, the
Fund’s value may fall more than the value of another fund that does attempt to hedge against such market declines.
68
Market Risk. The Fund could lose money over short periods due to short-term market movements and over longer
periods during more prolonged market downturns. Assets may decline in value due to factors affecting financial markets generally or particular asset classes or industries represented in the markets. The value of a FLEX Option or other asset may
also decline due to general market conditions, economic trends or events that are not specifically related to the issuer of the security or other asset, or due to factors that affect a particular issuer, country, region, market, industry, sector or
asset class.
Non-Diversification Risk. The Fund may invest a relatively high percentage of its assets in a limited number of
issuers. As a result, the Fund may be more susceptible to a single adverse economic or regulatory occurrence affecting one or more of these issuers, experience increased volatility and be highly invested in certain issuers.
Large Shareholder Risk. At times, the Fund may experience adverse effects when certain large shareholders,
including insurance company separate accounts, redeem large amounts of shares of the Fund. Large redemptions may cause the Fund to sell portfolio holdings at times when it would not otherwise do so and may increase transaction costs and/or result
in an increase to the Fund’s expense ratio. A large redemption could be detrimental to the Fund and its remaining shareholders.
Risks of Investing in ETFs. In addition to the risks associated with the underlying assets held by the ETFs in
which the Fund invests, investments in ETFs are also subject to the following additional risks: (i) only authorized participants may engage in transactions directly with ETFs but none are obligated to do so, which could result in an ETF’s shares
trading at a premium or discount to its NAV or possibly face trading halts or delisting; (ii) certain ETFs seek to track the performance of an underlying index and will not attempt to take defensive positions under any market conditions, including
declining markets, which could result in losses; and (iii) because ETF shares trade on the secondary market, there is not guarantee that an active market will be developed or maintained, which could result in the ETF’s shares trading at a premium
or discount to its NAV. Investments in ETFs may involve duplication of management fees and certain other expenses, as the Fund indirectly bears its proportionate share of any expenses paid by the ETFs in which it invests.
Risks of Investing in Money Market Funds. Money market funds seek to preserve the value of shareholder
investments at $1.00 per share, but shareholders, such as the Fund, may still lose money by investing in such funds. In addition, a money market fund may impose a fee upon the sale of its shares or may temporarily suspend the ability to sell shares
if the fund’s liquidity falls below required minimums because of market conditions or other factors. The credit quality of a money market fund’s holdings can change rapidly in certain markets, and the default of a single holding could have an
adverse impact on the fund’s share price. A money market fund’s share price can also be negatively affected during periods of high redemption pressures, illiquid markets, and/or significant market volatility.
Performance
As of the date of this Prospectus, the Fund has not commenced operations and therefore does not have a performance history. Once available, the Fund’s
performance information will be accessible online at www.[________].com and will provide some indication of the risks of investing in the Fund.
Management
Investment Adviser
Milliman Financial Risk Management LLC (“Milliman”) serves as investment adviser to the Fund.
Portfolio Managers
The following persons serve as portfolio managers of the Fund.
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●
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Robert T. Cummings, Principal & Head of Portfolio Management at Milliman.
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●
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Maria Schiopu, Principal & Head of Portfolio Management at Milliman.
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69
|
●
|
Jeff Greco, Principal & Head of Strategy Research at Milliman.
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|
●
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Jordan Rosenfeld, Portfolio Manager at Milliman.
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Each portfolio manager is jointly and primarily responsible for the day-to-day management of the Fund’s portfolio and has served in such capacity
since the Fund’s inception in 2021.
Purchase and Sale of Shares
Shares are available as underlying investment options for variable insurance contracts and variable life insurance policies (each, a “variable contract,” and, collectively, the “variable contracts”) issued by insurance companies. These insurance companies are the record owners of the separate accounts
holding the Shares. You do not buy, sell or exchange Shares directly; rather, you choose investment options through your variable contracts. The insurance companies then cause the separate accounts to purchase and redeem Shares according to
the investment options you choose.
Tax Information
The dividends and distributions paid by the Fund to the insurance company separate accounts will consist of ordinary income, capital gains, or some
combination of both. Because Shares must be purchased through separate accounts used to fund variable contracts, such dividends and distributions will be exempt from current taxation by owners of variable contracts (each, a “contract owner,” and, collectively “contract owners”) if left to accumulate within a separate account. Consult the variable contract prospectus for additional tax
information.
Payments to Insurance Companies and Other Financial Intermediaries
If you allocate contract value to the Fund through an insurance company or other financial intermediary, the Fund, Milliman, the Fund’s distributor or
their related companies may pay the insurance company and/or its affiliates or other intermediary for the sale of Shares and related services. These payments may create a conflict of interest by influencing the insurance company or other
intermediary and your salesperson to recommend an indirect investment in the Fund over another investment. The prospectus or other disclosure documents for the variable contracts may contain additional information about these payments, if any.
You may also ask your salesperson or financial intermediary, or visit your financial intermediary’s website, for more information.
70
Fund Summary: Milliman S&P 500 6-Month Par Down with Par Up Fund – Apr/Oct
Investment Objective
The Fund seeks to provide exposure to the S&P 500 Index, while limiting losses to 50% of the losses associated with S&P 500 Index performance
and participating in S&P 500 Index gains at a declared rate, prior to taking into account any fees or expenses or the performance of any fixed income exposure included in the Fund’s portfolio, over the period from October 1, 2021 through
March 31, 2022.
Fees and Expenses of the Fund
This table describes the fees and expenses that you may pay if you buy, hold and sell shares of the Fund (“Shares”).
This table and the example below do not include any fees or sales charges imposed by your variable product. If they were included, the expenses listed below would be higher.
Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment)
|
Class 3
|
|
|
Management Fees
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0.49%
|
|
Distribution and Service (12b-1) Fees
|
0.25%
|
|
Other Expenses(1)
|
0.50%
|
|
Acquired Fund Fees and Expenses(1)
|
[_.__]%
|
|
Total Annual Fund Operating Expenses
|
1.24%
|
|
Fee Waiver and/or Expense Reimbursement(2)(3)
|
(0.25)%
|
|
Total Annual Fund Operating Expenses After Fee Waiver and/or Expense Reimbursement
|
0.99%
|
|
(1)
|
“Other Expenses” and “Acquired Fund Fees and Expenses” are based on estimated amounts for the current fiscal year.
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|
(2)
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The Fund’s investment adviser, Milliman Financial Risk Management LLC (“Milliman”), has contractually
agreed to waive advisory fees and/or reimburse expenses to the extent necessary to limit the Fund’s total annual Fund operating expenses (excluding taxes, interest, brokerage fees and commissions, Rule 12b-1 fees, acquired fund fees and
expenses, short-sale dividend expenses, administrative services fees, other expenses that are capitalized in accordance with generally accepted accounting principles, and extraordinary or non-routine expenses not incurred in the
ordinary course of the Fund’s business) to 0.74% of the Fund's average daily net assets (the “Expense Limitation Agreement”) until at least November 1, 2022. During its term, the Expense
Limitation Agreement cannot be terminated or amended to increase the applicable limit without approval of the Board of Trustees of the Trust (the “Board”). Milliman may recoup from the Fund any
advisory fees waived or expenses reimbursed pursuant to the Expense Limitation Agreement for a period of three years from the date on which such waiver or reimbursement occurred; provided, however, that such recoupment shall not be made
if it would cause the Fund’s total annual Fund operating expenses to exceed the lesser of (a) the expense limitation in effect at the time of the reimbursement, or (b) the expense limitation in effect at the time of recoupment, if any.
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|
(3)
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In addition to the Expense Limitation Agreement, Milliman has contractually agreed to waive its advisory fees in an amount equal to the Fund’s
acquired fund fees and expenses until at least November 1, 2022 (the “Fee Waiver”). This contract cannot be terminated or modified without the consent of the Board.
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Example
This example is intended to help you compare the cost of investing in the Fund with the cost of investing in other funds. This example assumes that you
invest $10,000 in the Fund for the time periods indicated and then sell all of your Shares at the end of those periods. This example also assumes that your investment has a 5% return each year and that the Fund’s operating expenses remain at
current levels and that the Expense Limitation Agreement and Fee Waiver remain in place for their contractual periods. Although your actual costs may be higher or lower, your costs, based on these assumptions, would be:
|
1 Year
|
3 Years
|
|
|
Class 3
|
$104
|
$384
|
This example does not include any fees or sales charges imposed by your variable product. If they were included, the expenses listed above would be
higher.
71
Portfolio Turnover
The Fund pays transaction costs, such as commissions, when it purchases and sells securities (or “turns over” its portfolio). A higher portfolio turnover
will cause the Fund to incur additional transaction costs. These costs, which are not reflected in Total Annual Fund Operating Expenses or in the example, may affect the Fund’s performance. Because the Fund has not yet commenced investment
operations, no portfolio turnover information is available at this time.
Principal Investment Strategies
The Fund seeks to achieve its investment objective by transacting in FLexible EXchange® Options (“FLEX Options”)
and by separately maintaining a collateral portfolio (the “Collateral Portfolio”), which is designed primarily to serve as margin or collateral for the Fund’s FLEX Options positions and secondarily to
enhance the Fund’s upside S&P 500 Index FLEX Options’ exposure (i.e., by utilizing anticipated income to measure the ability to purchase additional FLEX Options). FLEX Options are exchange-traded
options contracts with uniquely customizable terms. In general, an options contract is an agreement between a buyer and seller that gives the purchaser of the option the right to buy or sell a particular asset at a specified future date at an
agreed upon price, commonly known as the “strike price.” The reference assets for the Fund’s FLEX Options positions will include the S&P 500 Index, which is a large-capitalization, market-weighted, U.S. equities index that tracks the price
(excluding dividends) of 500 leading companies in leading industries of the U.S. economy, and certain exchange-traded funds (“ETFs”), as described further below.
The Collateral Portfolio may be invested in short-term fixed-income securities, including corporate bonds and other corporate debt securities,
asset-backed securities (“ABS”), securities issued by the U.S. Government or its agencies and instrumentalities, securities issued by non-U.S. governments or their agencies and instrumentalities, money
market securities and funds, other interest-bearing instruments, cash, ETFs that primarily invest in any of the foregoing instruments, options on ETFs and options box spreads. An options box spread is the combination of different options trades
that have offsetting spreads (e.g., purchases and sales on the same underlying instrument, such as an index or an ETF, but with different strike prices and/or expiration dates) for the purpose of
generating income. The Fund may invest in short-term fixed income securities or other instruments, including through ETFs, of any maturity and credit quality. The Fund will generally invest up to 35% of its net assets in one or more ETFs that
provide exposure to investment grade corporate bonds.
Due to the unique mechanics of the Fund’s strategy, the return an investor can expect to receive from an investment in the Fund has characteristics that
are distinct from the returns of many other investment vehicles. It is important that an investor understand these characteristics before making an investment in the Fund.
In seeking to achieve its investment objective, the Fund seeks to produce pre-determined outcomes (the “Outcomes”)
that are based upon the performance of the S&P 500 Index over a six-month period (the “Outcome Period”). The initial Outcome Period for the Fund is October 1, 2021 through March 31, 2022. Following the
initial Outcome Period, each subsequent Outcome Period will be a six-month period commencing upon the expiration of the prior Outcome Period. The Fund seeks to achieve the Outcomes by purchasing and writing (selling) FLEX Options to create layers
within the Fund’s portfolio. One layer is designed to produce returns that correlate to those of the S&P 500 Index for the Outcome Period at a declared rate (the “Par Up
Rate”) if the S&P 500 Index experiences gains during that time, as described below. A separate layer is designed to limit losses to 50% of the losses experienced by the S&P 500 Index for the
Outcome Period (the “Par Down Rate”). There is no guarantee that the Fund will be successful in its attempt to produce returns that correlate to those of the S&P
500 Index at the Par Up Rate or limit losses that correlate to those of the S&P 500 Index at the Par Down Rate.
Milliman Financial Risk Management, LLC (“Milliman”), the investment adviser of the Fund, seeks to establish the
Par Down Rate by writing 50% of the exposure of one put FLEX Option on the S&P 500 Index with a strike price that is equal to the value of the S&P 500 Index at the beginning of the Outcome Period.
Milliman seeks to establish the Par Up Rate by purchasing long call FLEX Options on the S&P 500 Index with a strike price approximately equal to
the value of the S&P 500 Index at the beginning of the Outcome Period. Milliman purchases these FLEX Options with a portion of the Fund’s net assets plus (i) the cash received from
72
writing the put FLEX Option designed to create the Par Down Rate, (ii) additional cash received by utilizing FLEX Options to create a put spread (the
“Put Spread Strategy”) on fixed income securities and/or one or more ETFs that provide exposure to fixed income securities, and (iii) yield received from the Collateral Portfolio. Milliman seeks to achieve
the Put Spread Strategy for the Fund by writing a put FLEX Option on an underlying asset at a strike price at or lower than the underlying asset’s market price or current value at the beginning of the Outcome Period, and buying a put FLEX Option
on the same underlying asset at a lower strike price than the written put FLEX Option.
The Par Up Rate is the rate at which the Fund will seek to track any upside market performance of the S&P 500 Index. Milliman calculates the Par
Up Rate based upon (i) its evaluation of prevailing market conditions on the first day of the Outcome Period and (ii) the total number of long call FLEX Options on the S&P 500 Index that it is able to purchase at that time. As of the date of
this Prospectus, and assuming current market conditions persist, Milliman expects that the Par Up Rate will be between the below ranges (both gross and net of Fund fees and expenses). Any fees or expenses imposed by your variable product, and any
other expenses incurred by the Fund, will have the effect of further reducing the Par Up Rate. Once calculated, the Par Up Rate for a particular Outcome Period will not change during that Outcome Period;
however, in certain market conditions, the performance of the Collateral Portfolio and the Put Spread Strategy could reduce the impact of the Par Up Rate.
|
Share Class
|
Estimated Par Up Rate Ranges
(As of [___])
|
|
|
Prior to Taking into Account Fund Fees and Expenses
|
After Taking into Account Fund Fees and Expenses
|
|
|
Class 3
|
[__]% and [__]%
|
[__]% and [__]%
|
The Par Down Rate is the rate at which the Fund will seek to track any downside market performance of the S&P 500 Index. The Par Down Rate is
designed to limit losses in the Fund’s S&P 500 Index exposure to 50% for the Outcome Period. The Fund seeks to limit losses against its S&P 500 Index exposure prior to taking into account any fees or expenses or the performance of the
Collateral Portfolio or the Put Spread Strategy. The Par Down Rate is not operative against losses in the Collateral Portfolio or the Put Spread Strategy. If the Collateral Portfolio and/or the Put Spread
Strategy experiences losses, it could have the effect of reducing the impact of, or completely eliminating, the Par Down Rate on the Fund’s S&P 500 Index exposure. In certain market conditions, the performance of the Collateral Portfolio
and/or the Put Spread Strategy could cause the Fund to significantly underperform the S&P 500 Index. The following table reflects the Par Down Rate both gross and net of Fund fees and expenses:
|
Share Class
|
Par Down Rate
(As of [___])
|
|
|
Prior to Taking into Account Fund Fees and Expenses
|
After Taking into Account Fund Fees and Expenses
|
|
|
Class 3
|
50%
|
[__]%
|
The definitive Par Up Rate and Par Down Rate will be set forth on the Fund’s website. The Fund’s website will also provide information relating to the
Outcomes on a daily basis, including the Fund’s position relative to the Par Up Rate and the Par Down Rate. You may also contact your insurance company or other financial intermediary for more information.
Additionally, the Fund’s net asset value (“NAV”) will not increase or decrease at the same rate as the
S&P 500 Index because the Fund’s strategy relies upon the performance of the Collateral Portfolio and the Put Spread Strategy, in addition to the value of the Fund’s FLEX Options positions on the S&P 500 Index. While Milliman anticipates
that the Fund’s NAV will generally move in the same direction as the S&P 500 Index (meaning that the Fund’s NAV will generally increase if the S&P 500 Index experiences gains or decrease if the S&P 500 Index experiences losses), the
Fund’s NAV will not decrease at the same rate as the S&P 500 Index (especially when factoring in the Par Down Rate and the performance of the Collateral Portfolio and the Put Spread Strategy) and will not increase at the same rate as the
S&P 500 Index (especially when factoring in the Par Up Rate and the performance of the Collateral Portfolio and the Put Spread Strategy). Similarly, the amount of time remaining until the end of the
73
Outcome Period also affects the impact of the Par Down Rate on the Fund’s NAV, because the Par Down Rate may not be in full effect prior to the end of
the Outcome Period.
The FLEX Options utilized in the Fund’s portfolio are each set to expire on the last day of the Outcome Period. The customizable nature of FLEX Options
will allow Milliman to select the strike price at which each FLEX Option will be exercised at the expiration of the FLEX Option term. At the commencement of the Outcome Period, Milliman will specifically select the strike price for each FLEX Option
in a manner designed to achieve the Outcomes when the FLEX Options are exercised on the final day of the Outcome Period, depending on the anticipated performance of the S&P 500 Index, the Collateral Portfolio and the Put Spread Strategy over
the duration of that Outcome Period.
The hypothetical graphical illustrations provided below are designed to illustrate the Outcomes based upon the
hypothetical performance of the S&P 500 Index for an investor who holds Shares for the entirety of the Outcome Period. The hypothetical graphical illustrations do not include any fees or expenses imposed by your variable product or expenses
incurred by the Fund, and do not reflect the performance of the Collateral Portfolio or the Put Spread Strategy. Additional hypothetical graphical representations of the Outcomes are provided in “Additional Information About the Funds and
the Risks of Investing.” There is no guarantee that the Fund will be successful in its attempt to achieve the Outcomes for the Outcome Period.
The following table contains hypothetical examples designed to illustrate the Outcomes the Fund seeks to
achieve over the Outcome Period, based upon the performance of the S&P 500 Index from (100)% to 100% after taking into account the Par Up Rate and the Par Down Rate, but prior to taking into account any fees or expenses or the performance of
the Collateral Portfolio or the Put Spread Strategy. The table is provided for illustrative purposes only and does not provide every possible performance scenario for Shares over the course of the Outcome Period.
There is no guarantee that the Fund will be successful in its attempt to achieve the Outcomes for an Outcome Period. The table is not intended to predict or project the performance of the FLEX Options or the Fund. Investors should not take this information as an assurance of the expected
performance of the S&P 500 Index or the Fund. Actual Fund performance will vary with fluctuations in the performance of the Collateral Portfolio and the Put Spread Strategy, in addition to the value of the Fund’s FLEX Options
positions on the S&P
74
500 Index, during the Outcome Period, among other factors. The performance of
the Collateral Portfolio and the Put Spread Strategy could significantly impact the performance of the Fund, which could prevent the Fund from achieving the Outcomes that it seeks to produce. The table does not reflect any fees or
expenses imposed by your variable product or expenses incurred by the Fund. If it did, the returns shown for the Fund would be lower. Please refer to the Fund’s website, which provides updated information relating to this table on a daily basis
throughout the Outcome Period. Please contact your insurance company or other financial intermediary for more information.
|
Index/Fund
|
Hypothetical Performance1
|
|||||||||||
|
S&P 500 Index Price Performance
|
(100)%
|
(50)%
|
(20)%
|
(10)%
|
(5)%
|
0%
|
5%
|
10%
|
15%
|
20%
|
50%
|
100%
|
|
Fund Performance at NAV
|
(50)%2
|
(25)%2
|
(10)%2
|
(5)%2
|
(2.5)%2
|
0%
|
3.4%3
|
6.7%3
|
10.05%3
|
13.4%3
|
33.5%3
|
67%3
|
| 1 |
Does not take into account any fees or expenses or the performance of the Collateral Portfolio or the Put Spread Strategy.
|
| 2 |
Reflects the impact of the Par Down Rate.
|
| 3 |
Reflects the impact of an assumed Par Up Rate of 67%.
|
Understanding Outcomes. The Outcomes the Fund seeks to achieve are measured based upon the
Fund’s NAV on the first day of the Outcome Period. The Outcome Period begins on the day Milliman transacts in the FLEX Options on behalf of the Fund, and ends on the day those FLEX Options expire. An investor who
purchases Shares after the commencement of the Outcome Period will likely have purchased Shares at a different NAV than the NAV on the first day of the Outcome Period (the NAV upon which the Outcomes are based) and may experience investment
outcomes very different from those the Fund seeks to achieve, especially when factoring in any fees or expenses or the performance of the Collateral Portfolio and the Put Spread Strategy. An investor who redeems Shares prior to the end of the
Outcome Period may also experience investment outcomes very different from those the Fund seeks to achieve. The Outcomes are designed with the expectation that an investor will hold Shares on the day that Milliman transacts in the FLEX Options on
behalf of the Fund, and on the day those FLEX Options expire. There is no guarantee that the Fund will be successful in its attempt to achieve the Outcomes.
Understanding the Par Up Rate. Unlike other investment products, the potential returns an
investor can receive from an investment in the Fund are subject to the Par Up Rate. This means that if the S&P 500 Index experiences gains for the Outcome Period, an investor in the Fund will only experience
a percentage of those gains (equal to the Par Up Rate multiplied by the S&P 500 Index gains). Milliman calculates the Par Up Rate for each Outcome Period based upon (i) its evaluation of prevailing market conditions on the first day
of the Outcome Period and (ii) the total number of long call FLEX Options on the S&P 500 Index that it is able to purchase at that time. In certain market conditions, the performance of the Collateral
Portfolio and the Put Spread Strategy could reduce the impact of the Par Up Rate. An investor should consider the amount and impact of the Par Up Rate, and the Fund’s position relative to it, before investing in the Fund.
Understanding the Par Down Rate. The Par Down Rate is intended to limit losses in the
Fund’s S&P 500 Index exposure to 50% of the losses the S&P 500 Index experiences for the Outcome Period. While the Fund seeks to provide returns that are limited to 50% (prior to taking into account any fees or expenses or the performance
of the Collateral Portfolio or the Put Spread Strategy) for investors who hold Shares for the entire Outcome Period, there is no guarantee it will successfully do so. In addition, the Par Down Rate is not
operative against losses in the Collateral Portfolio or the Put Spread Strategy. If the Collateral Portfolio and/or the Put Spread Strategy experiences losses, it could have the effect of reducing the impact of, or completely eliminating, the
Par Down Rate on the Fund’s S&P 500 Index exposure. In certain market conditions, the performance of the Collateral Portfolio and/or the Put Spread Strategy could cause the Fund to significantly underperform the S&P 500 Index.
Investors who purchase Shares at the beginning of the Outcome Period may lose their entire investment. Investors who purchase Shares after the Outcome Period has begun may also lose their entire investment. An investment in the Fund is only
appropriate for investors willing to bear those losses.
75
Fund Rebalance. Milliman implements the Fund’s strategy on a semi-annual basis, seeking to
produce the Outcomes for an Outcome Period. On the last business day of any stated Outcome Period, all of the Fund’s existing FLEX Options, which includes those used to establish the Par Up Rate, the Par Down Rate and the Put Spread Strategy,
will expire and Milliman will transact in a new set of FLEX Options on the same business day, which will commence a new Outcome Period beginning the following business day. At that same time, Milliman will also evaluate whether to make any
adjustments to the Collateral Portfolio. Accordingly, Shares can be held indefinitely if investors determine to participate in additional Outcome Periods.
Approximately one week prior to the end of each Outcome Period, the Fund will file a prospectus supplement, which will notify existing investors of
(i) the date on which the existing Outcome Period will end; (ii) the date on which the new Outcome Period will commence; and (iii) the anticipated ranges of the Par Up Rate that will be used for the new Outcome Period. Immediately preceding the
commencement date of the new Outcome Period, the Fund will file a prospectus supplement disclosing the Fund’s final Par Up Rate (both gross and net of Fund fees and expenses) for the new Outcome Period. This information will also be available
online at www.[___________].com, and on your insurance company’s website. Please contact your insurance company or other financial intermediary for more information.
Fund Classification. The Fund is classified as “non-diversified” under the Investment
Company Act of 1940, as amended (the “1940 Act”).
Principal Risks
You could lose money by investing in the Fund. An investment in the Fund is not a deposit of a bank and is not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other governmental agency. There can be no assurance that the Fund’s investment objectives will be achieved.
Downside Loss Par Down Rate Risk. There can be no guarantee that the Fund will be successful in its strategy
to limit losses in the Fund’s S&P 500 Index exposure to 50% of the losses experienced by the S&P 500 Index over the Outcome Period. The success of the Par Down Rate also depends upon the performance of the Collateral Portfolio and the Put
Spread Strategy. If the Collateral Portfolio and/or the Put Spread Strategy experiences losses, it could have the effect of reducing the impact of, or completely eliminating, the Par Down Rate on the Fund’s
S&P 500 Index exposure. In certain market conditions, the performance of the Collateral Portfolio and/or the Put Spread Strategy could cause the Fund to significantly underperform the S&P 500 Index. Despite the intended Par Down Rate,
an investor could lose their entire investment. In the event an investor purchases Shares after the date on which Milliman transacted in the FLEX Options on behalf of the Fund, or redeems Shares prior to the expiration of those
FLEX Options, the Par Down Rate that the Fund seeks to provide may not be available or fully applicable.
Risk of the Par Up Rate on Upside Returns. The Fund’s strategy is designed to produce returns that correlate
to those of the S&P 500 Index at the Par Up Rate if Shares are bought on the day on which Milliman transacts in the FLEX Options on behalf of the Fund and held until those FLEX Options expire at the end of the Outcome Period. Accordingly, the
Fund will not fully participate in any gains achieved by the S&P 500 Index. In addition, in the event an investor purchases Shares after the date on which Milliman transacted in the FLEX Options on behalf of the Fund, or redeems Shares prior
to the expiration of those FLEX Options, the returns realized by that investor may not match those that the Fund seeks to achieve pursuant to the Par Up Rate. In certain market conditions, the performance of
the Collateral Portfolio and the Put Spread Strategy could reduce the impact of the Par Up Rate. An investor should consider the amount and impact of the Par Up Rate, and the Fund’s position relative to it, before investing in the Fund.
Par Up Rate Change Risk. Because the Par Up Rate for each Outcome Period is calculated based upon (i)
Milliman’s evaluation of prevailing market conditions on the first day of the Outcome Period and (ii) the total number of long call FLEX Options on the S&P 500 Index that Milliman is able to purchase at that time, the Par Up Rate may rise or
fall from one Outcome Period to the next. Any change in the Par Up Rate could be significant and it is unlikely to remain the same for consecutive Outcome Periods.
76
FLEX Options Risk. The Fund will transact in FLEX Options issued and guaranteed for settlement by the OCC. The
Fund bears the risk that the OCC will be unable or unwilling to perform its obligations under the FLEX Options contracts, which could result in significant losses to the Fund. In less liquid markets, terminating a FLEX Option may require the
payment of a premium or acceptance of a discounted price, and may take longer to complete. In addition, a less liquid trading market may adversely impact the value of the Fund’s FLEX Options and therefore the NAV of the Fund. In addition, the value
of the Fund’s FLEX Options positions is not anticipated to increase or decrease at the same rate as the reference asset; and while it is anticipated that they will generally move in the same direction, it is possible that they may move in different
directions. Certain FLEX Options positions may also expire worthless. The use of FLEX Options involves leverage, which can cause the Fund’s portfolio to be more volatile than if the portfolio had not been leveraged. Leverage can significantly
magnify the effect of price movements of the reference asset, disproportionately increasing the Fund’s losses and reducing the Fund’s opportunities for gains when the reference asset changes in unexpected ways. In some instances, such leverage
could result in losses that exceed the original amount invested.
Investment Objective and Outcomes Risk. There is no guarantee that the Fund will be successful in its attempt
to achieve its investment objective and/or the Outcomes, and an investor could lose some or all of their investment in the Fund. Certain circumstances under which the Fund might not achieve its objective and/or the Outcomes include, but are not
limited to (i) if the Fund disposes of FLEX Options, (ii) if the Fund is unable to maintain the proportional relationship based on the number of FLEX Options in the Fund’s portfolio, (iii) significant accrual of Fund expenses in connection with
effecting the Fund’s principal investment strategy, (iv) losses incurred by the Fund’s holdings in the Collateral Portfolio and/or losses resulting from the Put Spread Strategy, or (iv) adverse tax law changes affecting the treatment of FLEX
Options.
Tax Risk. The Fund intends to elect, and to qualify each year, to be treated as a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”). As a RIC, the Fund will not be subject to U.S. federal income tax on the portion
of its net investment income and net capital gain that it distributes to shareholders, provided that it satisfies certain requirements of the Code. To maintain its status as a RIC, the Fund must meet certain income, diversification and
distributions tests. For purposes of the diversification test, the identification of the issuer (or, in some cases, issuers) of a particular Fund investment can depend on the terms and conditions of that investment. In particular, there is no
published IRS guidance or case law on how to determine the “issuer” of certain derivatives that the Fund will enter into and the Fund has not received a private letter ruling on this point. Therefore, there is a risk that the Fund will not meet the
Code’s diversification requirements and will not qualify, or will be disqualified, as a RIC. If the Fund does not qualify as a RIC for any taxable year and certain relief provisions are not available, the Fund’s taxable income will be subject to
tax at the Fund level and to a further tax at the shareholder level when such income is distributed.
The Fund also intends to comply with the diversification requirements of Section 817(h) of the Code, and the regulations thereunder, relating to the
tax-deferred status of variable accounts that are based on insurance company separate accounts (referred to as “segregated asset accounts” for federal income tax purposes). These diversification requirements apply in addition to the RIC
diversification requirements discussed above. There also is no published guidance or case law on how to determine the “issuer” of the derivatives referred to above for purposes of the diversification requirements of Section 817(h) of the Code and
the Fund has not received a private letter ruling on this point. If these requirements are not met, or under other circumstances, such as if the Fund does not qualify as a RIC for any taxable year, it is possible that the contract owners (rather
than the insurance company) will be treated for federal income tax purposes as the taxable owners of the assets held by the segregated asset accounts.
Clearing Member Default Risk. The Fund will hold FLEX Options through accounts at members of clearing houses (“clearing members”) rather than a bank or a broker. Assets deposited by the Fund with any clearing member as margin for its FLEX Options positions may, in certain circumstances, be used to satisfy losses of other
clients of the Fund’s clearing member where such assets may be held in commingled omnibus accounts. In addition, although clearing members guarantee performance of their clients’ obligations to the clearing house, there is a risk that the assets of
the Fund might not be fully protected in the event of the clearing member’s bankruptcy, as the Fund would be limited to recovering only a pro rata share of all available funds segregated on behalf of the
clearing member’s customers for the relevant account class.
77
Debt Securities Risk. The prices of debt securities will be affected by changes in interest rates, the
creditworthiness of the issuer and other factors. These risks could affect the value of investments in which the Fund invests, possibly causing the Fund’s NAV to be reduced and fluctuate more than other types of investments. During periods of
falling interest rates, an issuer of a callable bond may repay the security before its stated maturity, and the Fund may have to reinvest the proceeds in securities with lower yields, which would result in a decline in the Fund’s income, or in
securities with greater risks or with other less favorable features. Changing interest rates, including rates that fall below zero, may have unpredictable effects on markets, result in heightened market volatility and detract from the Fund’s
performance to the extent the Fund is exposed to such interest rates. An increase in interest rates will generally cause the value of fixed-income securities held by the Fund to decline, may lead to heightened volatility in the fixed-income
markets and may adversely affect the liquidity of certain fixed-income investments, including those held by the Fund. Risks associated with rising interest rates are heightened given that interest rates in the U.S. are near historic lows.
Adjustable-rate instruments also react to interest rate changes in a similar manner, although generally to a lesser degree (depending, however, on the characteristics of the reset terms, including the index chosen, frequency of reset and reset
caps or floors, among other factors). Interest rate sensitivity is generally more pronounced and less predictable in instruments with uncertain payment or prepayment schedules and also for those with longer maturities.
Foreign Securities and Credit Exposure Risk. U.S. dollar-denominated securities carrying foreign credit exposure
may be affected by unfavorable political, economic or governmental developments that could affect payments of principal and interest. Furthermore, the value of the Fund’s foreign investments (whether direct or indirect) may be adversely affected by
political and social instability in their home countries, by changes in economic or taxation policies in those countries, or by the difficulty in enforcing obligations in those countries. Foreign companies generally may be subject to less stringent
regulations than U.S. companies, including financial reporting requirements and auditing and accounting controls. As a result, there generally is less publicly available information about foreign companies than about U.S. companies. Trading in many
foreign securities may be less liquid and more volatile than U.S. securities due to the size of the market or other factors.
U.S. Government Securities Risk. U.S. Government securities are subject to interest rate risk but generally do
not involve the credit risks associated with investments in other types of debt securities. As a result, the yields available from U.S. Government securities are generally lower than the yields available from other debt securities. U.S. Government
securities are guaranteed only as to the timely payment of interest and the payment of principal when held to maturity. While securities issued or guaranteed by U.S. federal government agencies are backed by the full faith and credit of the U.S.
Department of the Treasury, securities issued by government sponsored entities are solely the obligation of the issuer and generally do not carry any guarantee from the U.S. Government.
ABS Risk. ABS are subject to the general debt securities risks described above. In addition, ABS may be less
liquid than other bonds, and may be more sensitive than other bonds to the market’s perception of issuers and creditworthiness of payees, which may result in the Fund experiencing difficulty selling or valuing these securities. ABS markets have
experienced extraordinary weakness and volatility at various times in recent years, and may decline quickly in the event of a substantial economic or market downturn. Accordingly, these securities may be subject to greater risk of default during
periods of economic downturn than other securities, which could result in possible losses to the Fund.
Issuer Risk. The performance of the Fund depends on the performance of individual securities to which the Fund
has exposure. The Fund may be adversely affected if an issuer of underlying securities held by the Fund is unable or unwilling to repay principal or interest when due. Changes in the financial condition or credit rating of an issuer of those
securities may cause the value of the securities to decline.
Management Risk. The Fund is subject to management risk because it is an actively managed portfolio. Milliman
will apply investment techniques and risk analyses in making investment decisions for the Fund, but there can be no guarantee that the Fund will meet its investment objective and/or the Outcomes. In addition, Milliman does not use defensive
strategies or attempt to reduce the Fund’s exposures to poor performing positions during an Outcome Period. This differs from funds that are managed to seek to outperform a benchmark index. Therefore, in the event of a general market decline, the
Fund’s value may fall more than the value of another fund that does attempt to hedge against such market declines.
78
Market Risk. The Fund could lose money over short periods due to short-term market movements and over longer
periods during more prolonged market downturns. Assets may decline in value due to factors affecting financial markets generally or particular asset classes or industries represented in the markets. The value of a FLEX Option or other asset may
also decline due to general market conditions, economic trends or events that are not specifically related to the issuer of the security or other asset, or due to factors that affect a particular issuer, country, region, market, industry, sector or
asset class.
Non-Diversification Risk. The Fund may invest a relatively high percentage of its assets in a limited number of
issuers. As a result, the Fund may be more susceptible to a single adverse economic or regulatory occurrence affecting one or more of these issuers, experience increased volatility and be highly invested in certain issuers.
Large Shareholder Risk. At times, the Fund may experience adverse effects when certain large shareholders,
including insurance company separate accounts, redeem large amounts of shares of the Fund. Large redemptions may cause the Fund to sell portfolio holdings at times when it would not otherwise do so and may increase transaction costs and/or result
in an increase to the Fund’s expense ratio. A large redemption could be detrimental to the Fund and its remaining shareholders.
Risks of Investing in ETFs. In addition to the risks associated with the underlying assets held by the ETFs in
which the Fund invests, investments in ETFs are also subject to the following additional risks: (i) only authorized participants may engage in transactions directly with ETFs but none are obligated to do so, which could result in an ETF’s shares
trading at a premium or discount to its NAV or possibly face trading halts or delisting; (ii) certain ETFs seek to track the performance of an underlying index and will not attempt to take defensive positions under any market conditions, including
declining markets, which could result in losses; and (iii) because ETF shares trade on the secondary market, there is not guarantee that an active market will be developed or maintained, which could result in the ETF’s shares trading at a premium
or discount to its NAV. Investments in ETFs may involve duplication of management fees and certain other expenses, as the Fund indirectly bears its proportionate share of any expenses paid by the ETFs in which it invests.
Risks of Investing in Money Market Funds. Money market funds seek to preserve the value of shareholder
investments at $1.00 per share, but shareholders, such as the Fund, may still lose money by investing in such funds. In addition, a money market fund may impose a fee upon the sale of its shares or may temporarily suspend the ability to sell shares
if the fund’s liquidity falls below required minimums because of market conditions or other factors. The credit quality of a money market fund’s holdings can change rapidly in certain markets, and the default of a single holding could have an
adverse impact on the fund’s share price. A money market fund’s share price can also be negatively affected during periods of high redemption pressures, illiquid markets, and/or significant market volatility.
Performance
As of the date of this Prospectus, the Fund has not commenced operations and therefore does not have a performance history. Once available, the Fund’s
performance information will be accessible online at www.[________].com and will provide some indication of the risks of investing in the Fund.
Management
Investment Adviser
Milliman Financial Risk Management LLC (“Milliman”) serves as investment adviser to the Fund.
Portfolio Managers
The following persons serve as portfolio managers of the Fund.
|
●
|
Robert T. Cummings, Principal & Head of Portfolio Management at Milliman.
|
|
●
|
Maria Schiopu, Principal & Head of Portfolio Management at Milliman.
|
79
|
●
|
Jeff Greco, Principal & Head of Strategy Research at Milliman.
|
|
●
|
Jordan Rosenfeld, Portfolio Manager at Milliman.
|
Each portfolio manager is jointly and primarily responsible for the day-to-day management of the Fund’s portfolio and has served in such capacity
since the Fund’s inception in 2021.
Purchase and Sale of Shares
Shares are available as underlying investment options for variable insurance contracts and variable life insurance policies (each, a “variable contract,” and, collectively, the “variable contracts”) issued by insurance companies. These insurance companies are the record owners of the separate accounts
holding the Shares. You do not buy, sell or exchange Shares directly; rather, you choose investment options through your variable contracts. The insurance companies then cause the separate accounts to purchase and redeem Shares according to
the investment options you choose.
Tax Information
The dividends and distributions paid by the Fund to the insurance company separate accounts will consist of ordinary income, capital gains, or some
combination of both. Because Shares must be purchased through separate accounts used to fund variable contracts, such dividends and distributions will be exempt from current taxation by owners of variable contracts (each, a “contract owner,” and, collectively “contract owners”) if left to accumulate within a separate account. Consult the variable contract prospectus for additional tax
information.
Payments to Insurance Companies and Other Financial Intermediaries
If you allocate contract value to the Fund through an insurance company or other financial intermediary, the Fund, Milliman, the Fund’s distributor or
their related companies may pay the insurance company and/or its affiliates or other intermediary for the sale of Shares and related services. These payments may create a conflict of interest by influencing the insurance company or other
intermediary and your salesperson to recommend an indirect investment in the Fund over another investment. The prospectus or other disclosure documents for the variable contracts may contain additional information about these payments, if any. You
may also ask your salesperson or financial intermediary, or visit your financial intermediary’s website, for more information.
80
Fund Summary: Milliman S&P 500 6-Month Par Down with Par Up Fund – May/Nov
Investment Objective
The Fund seeks to provide exposure to the S&P 500 Index, while limiting losses to 50% of the losses associated with S&P 500 Index performance
and participating in S&P 500 Index gains at a declared rate, prior to taking into account any fees or expenses or the performance of any fixed income exposure included in the Fund’s portfolio, over the period from November 1, 2021 through
April 30, 2022.
Fees and Expenses of the Fund
This table describes the fees and expenses that you may pay if you buy, hold and sell shares of the Fund (“Shares”).
This table and the example below do not include any fees or sales charges imposed by your variable product. If they were included, the expenses listed below would be higher.
Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment)
|
Class 3
|
|
|
Management Fees
|
0.49%
|
|
Distribution and Service (12b-1) Fees
|
0.25%
|
|
Other Expenses(1)
|
0.50%
|
|
Acquired Fund Fees and Expenses(1)
|
[_.__]%
|
|
Total Annual Fund Operating Expenses
|
1.24%
|
|
Fee Waiver and/or Expense Reimbursement(2)(3)
|
(0.25)%
|
|
Total Annual Fund Operating Expenses After Fee Waiver and/or Expense Reimbursement
|
0.99%
|
|
(1)
|
“Other Expenses” and “Acquired Fund Fees and Expenses” are based on estimated amounts for the current fiscal year.
|
|
(2)
|
The Fund’s investment adviser, Milliman Financial Risk Management LLC (“Milliman”), has contractually
agreed to waive advisory fees and/or reimburse expenses to the extent necessary to limit the Fund’s total annual Fund operating expenses (excluding taxes, interest, brokerage fees and commissions, Rule 12b-1 fees, acquired fund fees and
expenses, short-sale dividend expenses, administrative services fees, other expenses that are capitalized in accordance with generally accepted accounting principles, and extraordinary or non-routine expenses not incurred in the
ordinary course of the Fund’s business) to 0.74% of the Fund's average daily net assets (the “Expense Limitation Agreement”) until at least November 1, 2022. During its term, the Expense
Limitation Agreement cannot be terminated or amended to increase the applicable limit without approval of the Board of Trustees of the Trust (the “Board”). Milliman may recoup from the Fund any
advisory fees waived or expenses reimbursed pursuant to the Expense Limitation Agreement for a period of three years from the date on which such waiver or reimbursement occurred; provided, however, that such recoupment shall not be made
if it would cause the Fund’s total annual Fund operating expenses to exceed the lesser of (a) the expense limitation in effect at the time of the reimbursement, or (b) the expense limitation in effect at the time of recoupment, if any.
|
|
(3)
|
In addition to the Expense Limitation Agreement, Milliman has contractually agreed to waive its advisory fees in an amount equal to the Fund’s
acquired fund fees and expenses until at least November 1, 2022 (the “Fee Waiver”). This contract cannot be terminated or modified without the consent of the Board.
|
Example
This example is intended to help you compare the cost of investing in the Fund with the cost of investing in other funds. This example assumes that you
invest $10,000 in the Fund for the time periods indicated and then sell all of your Shares at the end of those periods. This example also assumes that your investment has a 5% return each year and that the Fund’s operating expenses remain at
current levels and that the Expense Limitation Agreement and Fee Waiver remain in place for their contractual periods. Although your actual costs may be higher or lower, your costs, based on these assumptions, would be:
|
1 Year
|
3 Years
|
|
|
Class 3
|
$104
|
$384
|
This example does not include any fees or sales charges imposed by your variable product. If they were included, the expenses listed above would be
higher.
81
Portfolio Turnover
The Fund pays transaction costs, such as commissions, when it purchases and sells securities (or “turns over” its portfolio). A higher portfolio turnover
will cause the Fund to incur additional transaction costs. These costs, which are not reflected in Total Annual Fund Operating Expenses or in the example, may affect the Fund’s performance. Because the Fund has not yet commenced investment
operations, no portfolio turnover information is available at this time.
Principal Investment Strategies
The Fund seeks to achieve its investment objective by transacting in FLexible EXchange® Options (“FLEX Options”)
and by separately maintaining a collateral portfolio (the “Collateral Portfolio”), which is designed primarily to serve as margin or collateral for the Fund’s FLEX Options positions and secondarily to
enhance the Fund’s upside S&P 500 Index FLEX Options’ exposure (i.e., by utilizing anticipated income to measure the ability to purchase additional FLEX Options). FLEX Options are exchange-traded
options contracts with uniquely customizable terms. In general, an options contract is an agreement between a buyer and seller that gives the purchaser of the option the right to buy or sell a particular asset at a specified future date at an
agreed upon price, commonly known as the “strike price.” The reference assets for the Fund’s FLEX Options positions will include the S&P 500 Index, which is a large-capitalization, market-weighted, U.S. equities index that tracks the price
(excluding dividends) of 500 leading companies in leading industries of the U.S. economy, and certain exchange-traded funds (“ETFs”), as described further below.
The Collateral Portfolio may be invested in short-term fixed-income securities, including corporate bonds and other corporate debt securities,
asset-backed securities (“ABS”), securities issued by the U.S. Government or its agencies and instrumentalities, securities issued by non-U.S. governments or their agencies and instrumentalities, money
market securities and funds, other interest-bearing instruments, cash, ETFs that primarily invest in any of the foregoing instruments, options on ETFs and options box spreads. An options box spread is the combination of different options trades
that have offsetting spreads (e.g., purchases and sales on the same underlying instrument, such as an index or an ETF, but with different strike prices and/or expiration dates) for the purpose of
generating income. The Fund may invest in short-term fixed income securities or other instruments, including through ETFs, of any maturity and credit quality. The Fund will generally invest up to 35% of its net assets in one or more ETFs that
provide exposure to investment grade corporate bonds.
Due to the unique mechanics of the Fund’s strategy, the return an investor can expect to receive from an investment in the Fund has characteristics that
are distinct from the returns of many other investment vehicles. It is important that an investor understand these characteristics before making an investment in the Fund.
In seeking to achieve its investment objective, the Fund seeks to produce pre-determined outcomes (the “Outcomes”)
that are based upon the performance of the S&P 500 Index over a six-month period (the “Outcome Period”). The initial Outcome Period for the Fund is November 1, 2021 through April 30, 2022. Following
the initial Outcome Period, each subsequent Outcome Period will be a six-month period commencing upon the expiration of the prior Outcome Period. The Fund seeks to achieve the Outcomes by purchasing and writing (selling) FLEX Options to create
layers within the Fund’s portfolio. One layer is designed to produce returns that correlate to those of the S&P 500 Index for the Outcome Period at a declared rate (the “Par Up Rate”) if the S&P
500 Index experiences gains during that time, as described below. A separate layer is designed to limit losses to 50% of the losses experienced by the S&P 500 Index for the Outcome Period (the “Par Down Rate”). There is no guarantee that the Fund will be successful in its attempt to produce returns that correlate to those of the S&P 500 Index at the Par Up
Rate or limit losses that correlate to those of the S&P 500 Index at the Par Down Rate.
Milliman Financial Risk Management, LLC (“Milliman”), the investment adviser of the Fund, seeks to establish the
Par Down Rate by writing 50% of the exposure of one put FLEX Option on the S&P 500 Index with a strike price that is equal to the value of the S&P 500 Index at the beginning of the Outcome Period.
Milliman seeks to establish the Par Up Rate by purchasing long call FLEX Options on the S&P 500 Index with a strike price approximately equal to
the value of the S&P 500 Index at the beginning of the Outcome Period. Milliman purchases these FLEX Options with a portion of the Fund’s net assets plus (i) the cash received from
82
writing the put FLEX Option designed to create the Par Down Rate, (ii) additional cash received by utilizing FLEX Options to create a put spread (the
“Put Spread Strategy”) on fixed income securities and/or one or more ETFs that provide exposure to fixed income securities, and (iii) yield received from the Collateral Portfolio. Milliman seeks to achieve
the Put Spread Strategy for the Fund by writing a put FLEX Option on an underlying asset at a strike price at or lower than the underlying asset’s market price or current value at the beginning of the Outcome Period, and buying a put FLEX Option
on the same underlying asset at a lower strike price than the written put FLEX Option.
The Par Up Rate is the rate at which the Fund will seek to track any upside market performance of the S&P 500 Index. Milliman calculates the Par
Up Rate based upon (i) its evaluation of prevailing market conditions on the first day of the Outcome Period and (ii) the total number of long call FLEX Options on the S&P 500 Index that it is able to purchase at that time. As of the date of
this Prospectus, and assuming current market conditions persist, Milliman expects that the Par Up Rate will be between the below ranges (both gross and net of Fund fees and expenses). Any fees or expenses imposed by your variable product, and any
other expenses incurred by the Fund, will have the effect of further reducing the Par Up Rate. Once calculated, the Par Up Rate for a particular Outcome Period will not change during that Outcome Period;
however, in certain market conditions, the performance of the Collateral Portfolio and the Put Spread Strategy could reduce the impact of the Par Up Rate.
|
Share Class
|
Estimated Par Up Rate Ranges
(As of [___])
|
|
|
Prior to Taking into Account Fund Fees and Expenses
|
After Taking into Account Fund Fees and Expenses
|
|
|
Class 3
|
[__]% and [__]%
|
[__]% and [__]%
|
The Par Down Rate is the rate at which the Fund will seek to track any downside market performance of the S&P 500 Index. The Par Down Rate is
designed to limit losses in the Fund’s S&P 500 Index exposure to 50% for the Outcome Period. The Fund seeks to limit losses against its S&P 500 Index exposure prior to taking into account any fees or expenses or the performance of the
Collateral Portfolio or the Put Spread Strategy. The Par Down Rate is not operative against losses in the Collateral Portfolio or the Put Spread Strategy. If the Collateral Portfolio and/or the Put Spread
Strategy experiences losses, it could have the effect of reducing the impact of, or completely eliminating, the Par Down Rate on the Fund’s S&P 500 Index exposure. In certain market conditions, the performance of the Collateral Portfolio
and/or the Put Spread Strategy could cause the Fund to significantly underperform the S&P 500 Index. The following table reflects the Par Down Rate both gross and net of Fund fees and expenses:
|
Share Class
|
Par Down Rate
(As of [___])
|
|
|
Prior to Taking into Account Fund Fees and Expenses
|
After Taking into Account Fund Fees and Expenses
|
|
|
Class 3
|
50%
|
[__]%
|
The definitive Par Up Rate and Par Down Rate will be set forth on the Fund’s website. The Fund’s website will also provide information relating to the
Outcomes on a daily basis, including the Fund’s position relative to the Par Up Rate and the Par Down Rate. You may also contact your insurance company or other financial intermediary for more information.
Additionally, the Fund’s net asset value (“NAV”) will not increase or decrease at the same rate as the
S&P 500 Index because the Fund’s strategy relies upon the performance of the Collateral Portfolio and the Put Spread Strategy, in addition to the value of the Fund’s FLEX Options positions on the S&P 500 Index. While Milliman anticipates
that the Fund’s NAV will generally move in the same direction as the S&P 500 Index (meaning that the Fund’s NAV will generally increase if the S&P 500 Index experiences gains or decrease if the S&P 500 Index experiences losses), the
Fund’s NAV will not decrease at the same rate as the S&P 500 Index (especially when factoring in the Par Down Rate and the performance of the Collateral Portfolio and the Put Spread Strategy) and will not increase at the same rate as the
S&P 500 Index (especially when factoring in the Par Up Rate and the performance of the Collateral Portfolio and the Put Spread Strategy). Similarly, the amount of time remaining until the end of the
83
Outcome Period also affects the impact of the Par Down Rate on the Fund’s NAV, because the Par Down Rate may not be in full effect prior to the end of
the Outcome Period.
The FLEX Options utilized in the Fund’s portfolio are each set to expire on the last day of the Outcome Period. The customizable nature of FLEX Options
will allow Milliman to select the strike price at which each FLEX Option will be exercised at the expiration of the FLEX Option term. At the commencement of the Outcome Period, Milliman will specifically select the strike price for each FLEX Option
in a manner designed to achieve the Outcomes when the FLEX Options are exercised on the final day of the Outcome Period, depending on the anticipated performance of the S&P 500 Index, the Collateral Portfolio and the Put Spread Strategy over
the duration of that Outcome Period.
The hypothetical graphical illustrations provided below are designed to illustrate the Outcomes based upon the
hypothetical performance of the S&P 500 Index for an investor who holds Shares for the entirety of the Outcome Period. The hypothetical graphical illustrations do not include any fees or expenses imposed by your variable product or expenses
incurred by the Fund, and do not reflect the performance of the Collateral Portfolio or the Put Spread Strategy. Additional hypothetical graphical representations of the Outcomes are provided in “Additional Information About the Funds and
the Risks of Investing.” There is no guarantee that the Fund will be successful in its attempt to achieve the Outcomes for the Outcome Period.
The following table contains hypothetical examples designed to illustrate the Outcomes the Fund seeks to
achieve over the Outcome Period, based upon the performance of the S&P 500 Index from (100)% to 100% after taking into account the Par Up Rate and the Par Down Rate, but prior to taking into account any fees or expenses or the performance of
the Collateral Portfolio or the Put Spread Strategy. The table is provided for illustrative purposes only and does not provide every possible performance scenario for Shares over the course of the Outcome Period.
There is no guarantee that the Fund will be successful in its attempt to achieve the Outcomes for an Outcome Period. The table is not intended to predict or project the performance of the FLEX Options or the Fund. Investors should not take this information as an assurance of the expected
performance of the S&P 500 Index or the Fund. Actual Fund performance will vary with fluctuations in the performance of the Collateral Portfolio and the Put Spread Strategy, in addition to the value of the Fund’s FLEX Options
positions on the S&P
84
500 Index, during the Outcome Period, among other factors. The performance of
the Collateral Portfolio and the Put Spread Strategy could significantly impact the performance of the Fund, which could prevent the Fund from achieving the Outcomes that it seeks to produce. The table does not reflect any fees or
expenses imposed by your variable product or expenses incurred by the Fund. If it did, the returns shown for the Fund would be lower. Please refer to the Fund’s website, which provides updated information relating to this table on a daily basis
throughout the Outcome Period. Please contact your insurance company or other financial intermediary for more information.
|
Index/Fund
|
Hypothetical Performance1
|
|||||||||||
|
S&P 500 Index Price Performance
|
(100)%
|
(50)%
|
(20)%
|
(10)%
|
(5)%
|
0%
|
5%
|
10%
|
15%
|
20%
|
50%
|
100%
|
|
Fund Performance at NAV
|
(50)%2
|
(25)%2
|
(10)%2
|
(5)%2
|
(2.5)%2
|
0%
|
3.4%3
|
6.7%3
|
10.05%3
|
13.4%3
|
33.5%3
|
67%3
|
| 1 |
Does not take into account any fees or expenses or the performance of the Collateral Portfolio or the Put Spread Strategy.
|
| 2 |
Reflects the impact of the Par Down Rate.
|
| 3 |
Reflects the impact of an assumed Par Up Rate of 67%.
|
Understanding Outcomes. The Outcomes the Fund seeks to achieve are measured based upon the
Fund’s NAV on the first day of the Outcome Period. The Outcome Period begins on the day Milliman transacts in the FLEX Options on behalf of the Fund, and ends on the day those FLEX Options expire. An investor who
purchases Shares after the commencement of the Outcome Period will likely have purchased Shares at a different NAV than the NAV on the first day of the Outcome Period (the NAV upon which the Outcomes are based) and may experience investment
outcomes very different from those the Fund seeks to achieve, especially when factoring in any fees or expenses or the performance of the Collateral Portfolio and the Put Spread Strategy. An investor who redeems Shares prior to the end of the
Outcome Period may also experience investment outcomes very different from those the Fund seeks to achieve. The Outcomes are designed with the expectation that an investor will hold Shares on the day that Milliman transacts in the FLEX Options on
behalf of the Fund, and on the day those FLEX Options expire. There is no guarantee that the Fund will be successful in its attempt to achieve the Outcomes.
Understanding the Par Up Rate. Unlike other investment products, the potential returns an
investor can receive from an investment in the Fund are subject to the Par Up Rate. This means that if the S&P 500 Index experiences gains for the Outcome Period, an investor in the Fund will only experience
a percentage of those gains (equal to the Par Up Rate multiplied by the S&P 500 Index gains). Milliman calculates the Par Up Rate for each Outcome Period based upon (i) its evaluation of prevailing market conditions on the first day
of the Outcome Period and (ii) the total number of long call FLEX Options on the S&P 500 Index that it is able to purchase at that time. In certain market conditions, the performance of the Collateral
Portfolio and the Put Spread Strategy could reduce the impact of the Par Up Rate. An investor should consider the amount and impact of the Par Up Rate, and the Fund’s position relative to it, before investing in the Fund.
Understanding the Par Down Rate. The Par Down Rate is intended to limit losses in the
Fund’s S&P 500 Index exposure to 50% of the losses the S&P 500 Index experiences for the Outcome Period. While the Fund seeks to provide returns that are limited to 50% (prior to taking into account any fees or expenses or the performance
of the Collateral Portfolio or the Put Spread Strategy) for investors who hold Shares for the entire Outcome Period, there is no guarantee it will successfully do so. In addition, the Par Down Rate is not
operative against losses in the Collateral Portfolio or the Put Spread Strategy. If the Collateral Portfolio and/or the Put Spread Strategy experiences losses, it could have the effect of reducing the impact of, or completely eliminating, the
Par Down Rate on the Fund’s S&P 500 Index exposure. In certain market conditions, the performance of the Collateral Portfolio and/or the Put Spread Strategy could cause the Fund to significantly underperform the S&P 500 Index.
Investors who purchase Shares at the beginning of the Outcome Period may lose their entire investment. Investors who purchase Shares after the Outcome Period has begun may also lose their entire investment. An investment in the Fund is only
appropriate for investors willing to bear those losses.
85
Fund Rebalance. Milliman implements the Fund’s strategy on a semi-annual basis, seeking to
produce the Outcomes for an Outcome Period. On the last business day of any stated Outcome Period, all of the Fund’s existing FLEX Options, which includes those used to establish the Par Up Rate, the Par Down Rate and the Put Spread Strategy,
will expire and Milliman will transact in a new set of FLEX Options on the same business day, which will commence a new Outcome Period beginning the following business day. At that same time, Milliman will also evaluate whether to make any
adjustments to the Collateral Portfolio. Accordingly, Shares can be held indefinitely if investors determine to participate in additional Outcome Periods.
Approximately one week prior to the end of each Outcome Period, the Fund will file a prospectus supplement, which will notify existing investors of
(i) the date on which the existing Outcome Period will end; (ii) the date on which the new Outcome Period will commence; and (iii) the anticipated ranges of the Par Up Rate that will be used for the new Outcome Period. Immediately preceding the
commencement date of the new Outcome Period, the Fund will file a prospectus supplement disclosing the Fund’s final Par Up Rate (both gross and net of Fund fees and expenses) for the new Outcome Period. This information will also be available
online at www.[___________].com, and on your insurance company’s website. Please contact your insurance company or other financial intermediary for more information.
Fund Classification. The Fund is classified as “non-diversified” under the Investment
Company Act of 1940, as amended (the “1940 Act”).
Principal Risks
You could lose money by investing in the Fund. An investment in the Fund is not a deposit of a bank and is not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other governmental agency. There can be no assurance that the Fund’s investment objectives will be achieved.
Downside Loss Par Down Rate Risk. There can be no guarantee that the Fund will be successful in its strategy
to limit losses in the Fund’s S&P 500 Index exposure to 50% of the losses experienced by the S&P 500 Index over the Outcome Period. The success of the Par Down Rate also depends upon the performance of the Collateral Portfolio and the Put
Spread Strategy. If the Collateral Portfolio and/or the Put Spread Strategy experiences losses, it could have the effect of reducing the impact of, or completely eliminating, the Par Down Rate on the Fund’s
S&P 500 Index exposure. In certain market conditions, the performance of the Collateral Portfolio and/or the Put Spread Strategy could cause the Fund to significantly underperform the S&P 500 Index. Despite the intended Par Down Rate,
an investor could lose their entire investment. In the event an investor purchases Shares after the date on which Milliman transacted in the FLEX Options on behalf of the Fund, or redeems Shares prior to the expiration of those
FLEX Options, the Par Down Rate that the Fund seeks to provide may not be available or fully applicable.
Risk of the Par Up Rate on Upside Returns. The Fund’s strategy is designed to produce returns that correlate
to those of the S&P 500 Index at the Par Up Rate if Shares are bought on the day on which Milliman transacts in the FLEX Options on behalf of the Fund and held until those FLEX Options expire at the end of the Outcome Period. Accordingly, the
Fund will not fully participate in any gains achieved by the S&P 500 Index. In addition, in the event an investor purchases Shares after the date on which Milliman transacted in the FLEX Options on behalf of the Fund, or redeems Shares prior
to the expiration of those FLEX Options, the returns realized by that investor may not match those that the Fund seeks to achieve pursuant to the Par Up Rate. In certain market conditions, the performance of
the Collateral Portfolio and the Put Spread Strategy could reduce the impact of the Par Up Rate. An investor should consider the amount and impact of the Par Up Rate, and the Fund’s position relative to it, before investing in the Fund.
Par Up Rate Change Risk. Because the Par Up Rate for each Outcome Period is calculated based upon (i)
Milliman’s evaluation of prevailing market conditions on the first day of the Outcome Period and (ii) the total number of long call FLEX Options on the S&P 500 Index that Milliman is able to purchase at that time, the Par Up Rate may rise or
fall from one Outcome Period to the next. Any change in the Par Up Rate could be significant and it is unlikely to remain the same for consecutive Outcome Periods.
86
FLEX Options Risk. The Fund will transact in FLEX Options issued and guaranteed for settlement by the OCC. The
Fund bears the risk that the OCC will be unable or unwilling to perform its obligations under the FLEX Options contracts, which could result in significant losses to the Fund. In less liquid markets, terminating a FLEX Option may require the
payment of a premium or acceptance of a discounted price, and may take longer to complete. In addition, a less liquid trading market may adversely impact the value of the Fund’s FLEX Options and therefore the NAV of the Fund. In addition, the value
of the Fund’s FLEX Options positions is not anticipated to increase or decrease at the same rate as the reference asset; and while it is anticipated that they will generally move in the same direction, it is possible that they may move in different
directions. Certain FLEX Options positions may also expire worthless. The use of FLEX Options involves leverage, which can cause the Fund’s portfolio to be more volatile than if the portfolio had not been leveraged. Leverage can significantly
magnify the effect of price movements of the reference asset, disproportionately increasing the Fund’s losses and reducing the Fund’s opportunities for gains when the reference asset changes in unexpected ways. In some instances, such leverage
could result in losses that exceed the original amount invested.
Investment Objective and Outcomes Risk. There is no guarantee that the Fund will be successful in its attempt
to achieve its investment objective and/or the Outcomes, and an investor could lose some or all of their investment in the Fund. Certain circumstances under which the Fund might not achieve its objective and/or the Outcomes include, but are not
limited to (i) if the Fund disposes of FLEX Options, (ii) if the Fund is unable to maintain the proportional relationship based on the number of FLEX Options in the Fund’s portfolio, (iii) significant accrual of Fund expenses in connection with
effecting the Fund’s principal investment strategy, (iv) losses incurred by the Fund’s holdings in the Collateral Portfolio and/or losses resulting from the Put Spread Strategy, or (iv) adverse tax law changes affecting the treatment of FLEX
Options.
Tax Risk. The Fund intends to elect, and to qualify each year, to be treated as a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”). As a RIC, the Fund will not be subject to U.S. federal income tax on the portion
of its net investment income and net capital gain that it distributes to shareholders, provided that it satisfies certain requirements of the Code. To maintain its status as a RIC, the Fund must meet certain income, diversification and
distributions tests. For purposes of the diversification test, the identification of the issuer (or, in some cases, issuers) of a particular Fund investment can depend on the terms and conditions of that investment. In particular, there is no
published IRS guidance or case law on how to determine the “issuer” of certain derivatives that the Fund will enter into and the Fund has not received a private letter ruling on this point. Therefore, there is a risk that the Fund will not meet the
Code’s diversification requirements and will not qualify, or will be disqualified, as a RIC. If the Fund does not qualify as a RIC for any taxable year and certain relief provisions are not available, the Fund’s taxable income will be subject to
tax at the Fund level and to a further tax at the shareholder level when such income is distributed.
The Fund also intends to comply with the diversification requirements of Section 817(h) of the Code, and the regulations thereunder, relating to the
tax-deferred status of variable accounts that are based on insurance company separate accounts (referred to as “segregated asset accounts” for federal income tax purposes). These diversification requirements apply in addition to the RIC
diversification requirements discussed above. There also is no published guidance or case law on how to determine the “issuer” of the derivatives referred to above for purposes of the diversification requirements of Section 817(h) of the Code and
the Fund has not received a private letter ruling on this point. If these requirements are not met, or under other circumstances, such as if the Fund does not qualify as a RIC for any taxable year, it is possible that the contract owners (rather
than the insurance company) will be treated for federal income tax purposes as the taxable owners of the assets held by the segregated asset accounts.
Clearing Member Default Risk. The Fund will hold FLEX Options through accounts at members of clearing houses (“clearing members”) rather than a bank or a broker. Assets deposited by the Fund with any clearing member as margin for its FLEX Options positions may, in certain circumstances, be used to satisfy losses of other
clients of the Fund’s clearing member where such assets may be held in commingled omnibus accounts. In addition, although clearing members guarantee performance of their clients’ obligations to the clearing house, there is a risk that the assets of
the Fund might not be fully protected in the event of the clearing member’s bankruptcy, as the Fund would be limited to recovering only a pro rata share of all available funds segregated on behalf of the
clearing member’s customers for the relevant account class.
87
Debt Securities Risk. The prices of debt securities will be affected by changes in interest rates, the
creditworthiness of the issuer and other factors. These risks could affect the value of investments in which the Fund invests, possibly causing the Fund’s NAV to be reduced and fluctuate more than other types of investments. During periods of
falling interest rates, an issuer of a callable bond may repay the security before its stated maturity, and the Fund may have to reinvest the proceeds in securities with lower yields, which would result in a decline in the Fund’s income, or in
securities with greater risks or with other less favorable features. Changing interest rates, including rates that fall below zero, may have unpredictable effects on markets, result in heightened market volatility and detract from the Fund’s
performance to the extent the Fund is exposed to such interest rates. An increase in interest rates will generally cause the value of fixed-income securities held by the Fund to decline, may lead to heightened volatility in the fixed-income
markets and may adversely affect the liquidity of certain fixed-income investments, including those held by the Fund. Risks associated with rising interest rates are heightened given that interest rates in the U.S. are near historic lows.
Adjustable-rate instruments also react to interest rate changes in a similar manner, although generally to a lesser degree (depending, however, on the characteristics of the reset terms, including the index chosen, frequency of reset and reset
caps or floors, among other factors). Interest rate sensitivity is generally more pronounced and less predictable in instruments with uncertain payment or prepayment schedules and also for those with longer maturities.
Foreign Securities and Credit Exposure Risk. U.S. dollar-denominated securities carrying foreign credit exposure
may be affected by unfavorable political, economic or governmental developments that could affect payments of principal and interest. Furthermore, the value of the Fund’s foreign investments (whether direct or indirect) may be adversely affected by
political and social instability in their home countries, by changes in economic or taxation policies in those countries, or by the difficulty in enforcing obligations in those countries. Foreign companies generally may be subject to less stringent
regulations than U.S. companies, including financial reporting requirements and auditing and accounting controls. As a result, there generally is less publicly available information about foreign companies than about U.S. companies. Trading in many
foreign securities may be less liquid and more volatile than U.S. securities due to the size of the market or other factors.
U.S. Government Securities Risk. U.S. Government securities are subject to interest rate risk but generally do
not involve the credit risks associated with investments in other types of debt securities. As a result, the yields available from U.S. Government securities are generally lower than the yields available from other debt securities. U.S. Government
securities are guaranteed only as to the timely payment of interest and the payment of principal when held to maturity. While securities issued or guaranteed by U.S. federal government agencies are backed by the full faith and credit of the U.S.
Department of the Treasury, securities issued by government sponsored entities are solely the obligation of the issuer and generally do not carry any guarantee from the U.S. Government.
ABS Risk. ABS are subject to the general debt securities risks described above. In addition, ABS may be less
liquid than other bonds, and may be more sensitive than other bonds to the market’s perception of issuers and creditworthiness of payees, which may result in the Fund experiencing difficulty selling or valuing these securities. ABS markets have
experienced extraordinary weakness and volatility at various times in recent years, and may decline quickly in the event of a substantial economic or market downturn. Accordingly, these securities may be subject to greater risk of default during
periods of economic downturn than other securities, which could result in possible losses to the Fund.
Issuer Risk. The performance of the Fund depends on the performance of individual securities to which the Fund
has exposure. The Fund may be adversely affected if an issuer of underlying securities held by the Fund is unable or unwilling to repay principal or interest when due. Changes in the financial condition or credit rating of an issuer of those
securities may cause the value of the securities to decline.
Management Risk. The Fund is subject to management risk because it is an actively managed portfolio. Milliman
will apply investment techniques and risk analyses in making investment decisions for the Fund, but there can be no guarantee that the Fund will meet its investment objective and/or the Outcomes. In addition, Milliman does not use defensive
strategies or attempt to reduce the Fund’s exposures to poor performing positions during an Outcome Period. This differs from funds that are managed to seek to outperform a benchmark index. Therefore, in the event of a general market decline, the
Fund’s value may fall more than the value of another fund that does attempt to hedge against such market declines.
88
Market Risk. The Fund could lose money over short periods due to short-term market movements and over longer
periods during more prolonged market downturns. Assets may decline in value due to factors affecting financial markets generally or particular asset classes or industries represented in the markets. The value of a FLEX Option or other asset may
also decline due to general market conditions, economic trends or events that are not specifically related to the issuer of the security or other asset, or due to factors that affect a particular issuer, country, region, market, industry, sector or
asset class.
Non-Diversification Risk. The Fund may invest a relatively high percentage of its assets in a limited number of
issuers. As a result, the Fund may be more susceptible to a single adverse economic or regulatory occurrence affecting one or more of these issuers, experience increased volatility and be highly invested in certain issuers.
Large Shareholder Risk. At times, the Fund may experience adverse effects when certain large shareholders,
including insurance company separate accounts, redeem large amounts of shares of the Fund. Large redemptions may cause the Fund to sell portfolio holdings at times when it would not otherwise do so and may increase transaction costs and/or result
in an increase to the Fund’s expense ratio. A large redemption could be detrimental to the Fund and its remaining shareholders.
Risks of Investing in ETFs. In addition to the risks associated with the underlying assets held by the ETFs in
which the Fund invests, investments in ETFs are also subject to the following additional risks: (i) only authorized participants may engage in transactions directly with ETFs but none are obligated to do so, which could result in an ETF’s shares
trading at a premium or discount to its NAV or possibly face trading halts or delisting; (ii) certain ETFs seek to track the performance of an underlying index and will not attempt to take defensive positions under any market conditions, including
declining markets, which could result in losses; and (iii) because ETF shares trade on the secondary market, there is not guarantee that an active market will be developed or maintained, which could result in the ETF’s shares trading at a premium
or discount to its NAV. Investments in ETFs may involve duplication of management fees and certain other expenses, as the Fund indirectly bears its proportionate share of any expenses paid by the ETFs in which it invests.
Risks of Investing in Money Market Funds. Money market funds seek to preserve the value of shareholder
investments at $1.00 per share, but shareholders, such as the Fund, may still lose money by investing in such funds. In addition, a money market fund may impose a fee upon the sale of its shares or may temporarily suspend the ability to sell shares
if the fund’s liquidity falls below required minimums because of market conditions or other factors. The credit quality of a money market fund’s holdings can change rapidly in certain markets, and the default of a single holding could have an
adverse impact on the fund’s share price. A money market fund’s share price can also be negatively affected during periods of high redemption pressures, illiquid markets, and/or significant market volatility.
Performance
As of the date of this Prospectus, the Fund has not commenced operations and therefore does not have a performance history. Once available, the Fund’s
performance information will be accessible online at www.[________].com and will provide some indication of the risks of investing in the Fund.
Management
Investment Adviser
Milliman Financial Risk Management LLC (“Milliman”) serves as investment adviser to the Fund.
Portfolio Managers
The following persons serve as portfolio managers of the Fund.
|
●
|
Robert T. Cummings, Principal & Head of Portfolio Management at Milliman.
|
|
●
|
Maria Schiopu, Principal & Head of Portfolio Management at Milliman.
|
89
|
●
|
Jordan Rosenfeld, Portfolio Manager at Milliman.
|
Each portfolio manager is jointly and primarily responsible for the day-to-day management of the Fund’s portfolio and has served in such capacity
since the Fund’s inception in 2021.
Purchase and Sale of Shares
Shares are available as underlying investment options for variable insurance contracts and variable life insurance policies (each, a “variable contract,” and, collectively, the “variable contracts”) issued by insurance companies. These insurance companies are the record owners of the separate accounts
holding the Shares. You do not buy, sell or exchange Shares directly; rather, you choose investment options through your variable contracts. The insurance companies then cause the separate accounts to purchase and redeem Shares according to
the investment options you choose.
Tax Information
The dividends and distributions paid by the Fund to the insurance company separate accounts will consist of ordinary income, capital gains, or some
combination of both. Because Shares must be purchased through separate accounts used to fund variable contracts, such dividends and distributions will be exempt from current taxation by owners of variable contracts (each, a “contract owner,” and, collectively “contract owners”) if left to accumulate within a separate account. Consult the variable contract prospectus for additional tax
information.
Payments to Insurance Companies and Other Financial Intermediaries
If you allocate contract value to the Fund through an insurance company or other financial intermediary, the Fund, Milliman, the Fund’s distributor or
their related companies may pay the insurance company and/or its affiliates or other intermediary for the sale of Shares and related services. These payments may create a conflict of interest by influencing the insurance company or other
intermediary and your salesperson to recommend an indirect investment in the Fund over another investment. The prospectus or other disclosure documents for the variable contracts may contain additional information about these payments, if any.
You may also ask your salesperson or financial intermediary, or visit your financial intermediary’s website, for more information.
90
Fund Summary: Milliman S&P 500 6-Month Par Down with Par Up Fund – Jun/Dec
Investment Objective
The Fund seeks to provide exposure to the S&P 500 Index, while limiting losses to 50% of the losses associated with S&P 500 Index performance
and participating in S&P 500 Index gains at a declared rate, prior to taking into account any fees or expenses or the performance of any fixed income exposure included in the Fund’s portfolio, over the period from December 1, 2021 through May
31, 2022.
Fees and Expenses of the Fund
This table describes the fees and expenses that you may pay if you buy, hold and sell shares of the Fund (“Shares”).
This table and the example below do not include any fees or sales charges imposed by your variable product. If they were included, the expenses listed below would be higher.
Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment)
|
Class 3
|
|
|
Management Fees
|
0.49%
|
|
Distribution and Service (12b-1) Fees
|
0.25%
|
|
Other Expenses(1)
|
0.50%
|
|
Acquired Fund Fees and Expenses(1)
|
[_.__]%
|
|
Total Annual Fund Operating Expenses
|
1.24%
|
|
Fee Waiver and/or Expense Reimbursement(2)(3)
|
(0.25)%
|
|
Total Annual Fund Operating Expenses After Fee Waiver and/or Expense Reimbursement
|
0.99%
|
|
(1)
|
“Other Expenses” and “Acquired Fund Fees and Expenses” are based on estimated amounts for the current fiscal year.
|
|
(2)
|
The Fund’s investment adviser, Milliman Financial Risk Management LLC (“Milliman”), has contractually
agreed to waive advisory fees and/or reimburse expenses to the extent necessary to limit the Fund’s total annual Fund operating expenses (excluding taxes, interest, brokerage fees and commissions, Rule 12b-1 fees, acquired fund fees and
expenses, short-sale dividend expenses, administrative services fees, other expenses that are capitalized in accordance with generally accepted accounting principles, and extraordinary or non-routine expenses not incurred in the
ordinary course of the Fund’s business) to 0.74% of the Fund's average daily net assets (the “Expense Limitation Agreement”) until at least November 1, 2022. During its term, the Expense
Limitation Agreement cannot be terminated or amended to increase the applicable limit without approval of the Board of Trustees of the Trust (the “Board”). Milliman may recoup from the Fund any
advisory fees waived or expenses reimbursed pursuant to the Expense Limitation Agreement for a period of three years from the date on which such waiver or reimbursement occurred; provided, however, that such recoupment shall not be made
if it would cause the Fund’s total annual Fund operating expenses to exceed the lesser of (a) the expense limitation in effect at the time of the reimbursement, or (b) the expense limitation in effect at the time of recoupment, if any.
|
|
(3)
|
In addition to the Expense Limitation Agreement, Milliman has contractually agreed to waive its advisory fees in an amount equal to the Fund’s
acquired fund fees and expenses until at least November 1, 2022 (the “Fee Waiver”). This contract cannot be terminated or modified without the consent of the Board.
|
Example
This example is intended to help you compare the cost of investing in the Fund with the cost of investing in other funds. This example assumes that you
invest $10,000 in the Fund for the time periods indicated and then sell all of your Shares at the end of those periods. This example also assumes that your investment has a 5% return each year and that the Fund’s operating expenses remain at
current levels and that the Expense Limitation Agreement and Fee Waiver remain in place for their contractual periods. Although your actual costs may be higher or lower, your costs, based on these assumptions, would be:
|
1 Year
|
3 Years
|
|
|
Class 3
|
$104
|
$384
|
This example does not include any fees or sales charges imposed by your variable product. If they were included, the expenses listed above would be
higher.
91
Portfolio Turnover
The Fund pays transaction costs, such as commissions, when it purchases and sells securities (or “turns over” its portfolio). A higher portfolio turnover
will cause the Fund to incur additional transaction costs. These costs, which are not reflected in Total Annual Fund Operating Expenses or in the example, may affect the Fund’s performance. Because the Fund has not yet commenced investment
operations, no portfolio turnover information is available at this time.
Principal Investment Strategies
The Fund seeks to achieve its investment objective by transacting in FLexible EXchange® Options (“FLEX Options”)
and by separately maintaining a collateral portfolio (the “Collateral Portfolio”), which is designed primarily to serve as margin or collateral for the Fund’s FLEX Options positions and secondarily to
enhance the Fund’s upside S&P 500 Index FLEX Options’ exposure (i.e., by utilizing anticipated income to measure the ability to purchase additional FLEX Options). FLEX Options are exchange-traded
options contracts with uniquely customizable terms. In general, an options contract is an agreement between a buyer and seller that gives the purchaser of the option the right to buy or sell a particular asset at a specified future date at an
agreed upon price, commonly known as the “strike price.” The reference assets for the Fund’s FLEX Options positions will include the S&P 500 Index, which is a large-capitalization, market-weighted, U.S. equities index that tracks the price
(excluding dividends) of 500 leading companies in leading industries of the U.S. economy, and certain exchange-traded funds (“ETFs”), as described further below.
The Collateral Portfolio may be invested in short-term fixed-income securities, including corporate bonds and other corporate debt securities,
asset-backed securities (“ABS”), securities issued by the U.S. Government or its agencies and instrumentalities, securities issued by non-U.S. governments or their agencies and instrumentalities, money
market securities and funds, other interest-bearing instruments, cash, ETFs that primarily invest in any of the foregoing instruments, options on ETFs and options box spreads. An options box spread is the combination of different options trades
that have offsetting spreads (e.g., purchases and sales on the same underlying instrument, such as an index or an ETF, but with different strike prices and/or expiration dates) for the purpose of
generating income. The Fund may invest in short-term fixed income securities or other instruments, including through ETFs, of any maturity and credit quality. The Fund will generally invest up to 35% of its net assets in one or more ETFs that
provide exposure to investment grade corporate bonds.
Due to the unique mechanics of the Fund’s strategy, the return an investor can expect to receive from an investment in the Fund has characteristics that
are distinct from the returns of many other investment vehicles. It is important that an investor understand these characteristics before making an investment in the Fund.
In seeking to achieve its investment objective, the Fund seeks to produce pre-determined outcomes (the “Outcomes”)
that are based upon the performance of the S&P 500 Index over a six-month period (the “Outcome Period”). The initial Outcome Period for the Fund is December 1, 2021 through May 31, 2022. Following the
initial Outcome Period, each subsequent Outcome Period will be a six-month period commencing upon the expiration of the prior Outcome Period. The Fund seeks to achieve the Outcomes by purchasing and writing (selling) FLEX Options to create layers
within the Fund’s portfolio. One layer is designed to produce returns that correlate to those of the S&P 500 Index for the Outcome Period at a declared rate (the “Par Up Rate”) if the S&P 500 Index
experiences gains during that time, as described below. A separate layer is designed to limit losses to 50% of the losses experienced by the S&P 500 Index for the Outcome Period (the “Par Down Rate”). There is no guarantee that the Fund will be successful in its attempt to produce returns that correlate to those of the S&P 500 Index at the Par Up
Rate or limit losses that correlate to those of the S&P 500 Index at the Par Down Rate.
Milliman Financial Risk Management, LLC (“Milliman”), the investment adviser of the Fund, seeks to establish the
Par Down Rate by writing 50% of the exposure of one put FLEX Option on the S&P 500 Index with a strike price that is equal to the value of the S&P 500 Index at the beginning of the Outcome Period.
Milliman seeks to establish the Par Up Rate by purchasing long call FLEX Options on the S&P 500 Index with a strike price approximately equal to
the value of the S&P 500 Index at the beginning of the Outcome Period. Milliman purchases these FLEX Options with a portion of the Fund’s net assets plus (i) the cash received from
92
writing the put FLEX Option designed to create the Par Down Rate, (ii) additional cash received by utilizing FLEX Options to create a put spread (the
“Put Spread Strategy”) on fixed income securities and/or one or more ETFs that provide exposure to fixed income securities, and (iii) yield received from the Collateral Portfolio. Milliman seeks to achieve
the Put Spread Strategy for the Fund by writing a put FLEX Option on an underlying asset at a strike price at or lower than the underlying asset’s market price or current value at the beginning of the Outcome Period, and buying a put FLEX Option
on the same underlying asset at a lower strike price than the written put FLEX Option.
The Par Up Rate is the rate at which the Fund will seek to track any upside market performance of the S&P 500 Index. Milliman calculates the Par
Up Rate based upon (i) its evaluation of prevailing market conditions on the first day of the Outcome Period and (ii) the total number of long call FLEX Options on the S&P 500 Index that it is able to purchase at that time. As of the date of
this Prospectus, and assuming current market conditions persist, Milliman expects that the Par Up Rate will be between the below ranges (both gross and net of Fund fees and expenses). Any fees or expenses imposed by your variable product, and any
other expenses incurred by the Fund, will have the effect of further reducing the Par Up Rate. Once calculated, the Par Up Rate for a particular Outcome Period will not change during that Outcome Period;
however, in certain market conditions, the performance of the Collateral Portfolio and the Put Spread Strategy could reduce the impact of the Par Up Rate.
|
Share Class
|
Estimated Par Up Rate Ranges
(As of [___])
|
|
|
Prior to Taking into Account Fund Fees and Expenses
|
After Taking into Account Fund Fees and Expenses
|
|
|
Class 3
|
[__]% and [__]%
|
[__]% and [__]%
|
The Par Down Rate is the rate at which the Fund will seek to track any downside market performance of the S&P 500 Index. The Par Down Rate is
designed to limit losses in the Fund’s S&P 500 Index exposure to 50% for the Outcome Period. The Fund seeks to limit losses against its S&P 500 Index exposure prior to taking into account any fees or expenses or the performance of the
Collateral Portfolio or the Put Spread Strategy. The Par Down Rate is not operative against losses in the Collateral Portfolio or the Put Spread Strategy. If the Collateral Portfolio and/or the Put Spread
Strategy experiences losses, it could have the effect of reducing the impact of, or completely eliminating, the Par Down Rate on the Fund’s S&P 500 Index exposure. In certain market conditions, the performance of the Collateral Portfolio
and/or the Put Spread Strategy could cause the Fund to significantly underperform the S&P 500 Index. The following table reflects the Par Down Rate both gross and net of Fund fees and expenses:
|
Share Class
|
Par Down Rate
(As of [___])
|
|
|
Prior to Taking into Account Fund Fees and Expenses
|
After Taking into Account Fund Fees and Expenses
|
|
|
Class 3
|
50%
|
[__]%
|
The definitive Par Up Rate and Par Down Rate will be set forth on the Fund’s website. The Fund’s website will also provide information relating to the
Outcomes on a daily basis, including the Fund’s position relative to the Par Up Rate and the Par Down Rate. You may also contact your insurance company or other financial intermediary for more information.
Additionally, the Fund’s net asset value (“NAV”) will not increase or decrease at the same rate as the S&P
500 Index because the Fund’s strategy relies upon the performance of the Collateral Portfolio and the Put Spread Strategy, in addition to the value of the Fund’s FLEX Options positions on the S&P 500 Index. While Milliman anticipates that the
Fund’s NAV will generally move in the same direction as the S&P 500 Index (meaning that the Fund’s NAV will generally increase if the S&P 500 Index experiences gains or decrease if the S&P 500 Index experiences losses), the Fund’s NAV
will not decrease at the same rate as the S&P 500 Index (especially when factoring in the Par Down Rate and the performance of the Collateral Portfolio and the Put Spread Strategy) and will not increase at the same rate as the S&P 500 Index
(especially when factoring in the Par Up Rate and the performance of the Collateral Portfolio and the Put Spread Strategy). Similarly, the amount of time remaining until the end of the
93
Outcome Period also affects the impact of the Par Down Rate on the Fund’s NAV, because the Par Down Rate may not be in full effect prior to the end of
the Outcome Period.
The FLEX Options utilized in the Fund’s portfolio are each set to expire on the last day of the Outcome Period. The customizable nature of FLEX Options
will allow Milliman to select the strike price at which each FLEX Option will be exercised at the expiration of the FLEX Option term. At the commencement of the Outcome Period, Milliman will specifically select the strike price for each FLEX Option
in a manner designed to achieve the Outcomes when the FLEX Options are exercised on the final day of the Outcome Period, depending on the anticipated performance of the S&P 500 Index, the Collateral Portfolio and the Put Spread Strategy over
the duration of that Outcome Period.
The hypothetical graphical illustrations provided below are designed to illustrate the Outcomes based upon the
hypothetical performance of the S&P 500 Index for an investor who holds Shares for the entirety of the Outcome Period. The hypothetical graphical illustrations do not include any fees or expenses imposed by your variable product or expenses
incurred by the Fund, and do not reflect the performance of the Collateral Portfolio or the Put Spread Strategy. Additional hypothetical graphical representations of the Outcomes are provided in “Additional Information About the Funds and
the Risks of Investing.” There is no guarantee that the Fund will be successful in its attempt to achieve the Outcomes for the Outcome Period.
The following table contains hypothetical examples designed to illustrate the Outcomes the Fund seeks to
achieve over the Outcome Period, based upon the performance of the S&P 500 Index from (100)% to 100% after taking into account the Par Up Rate and the Par Down Rate, but prior to taking into account any fees or expenses or the performance of
the Collateral Portfolio or the Put Spread Strategy. The table is provided for illustrative purposes only and does not provide every possible performance scenario for Shares over the course of the Outcome Period.
There is no guarantee that the Fund will be successful in its attempt to achieve the Outcomes for an Outcome Period. The table is not intended to predict or project the performance of the FLEX Options or the Fund. Investors should not take this information as an assurance of the expected
performance of the S&P 500 Index or the Fund. Actual Fund performance will vary with fluctuations in the performance of the Collateral Portfolio and the Put Spread Strategy, in addition to the value of the Fund’s FLEX Options
positions on the S&P
94
500 Index, during the Outcome Period, among other factors. The performance of
the Collateral Portfolio and the Put Spread Strategy could significantly impact the performance of the Fund, which could prevent the Fund from achieving the Outcomes that it seeks to produce. The table does not reflect any fees or
expenses imposed by your variable product or expenses incurred by the Fund. If it did, the returns shown for the Fund would be lower. Please refer to the Fund’s website, which provides updated information relating to this table on a daily basis
throughout the Outcome Period. Please contact your insurance company or other financial intermediary for more information.
|
Index/Fund
|
Hypothetical Performance1
|
|||||||||||
|
S&P 500 Index Price Performance
|
(100)%
|
(50)%
|
(20)%
|
(10)%
|
(5)%
|
0%
|
5%
|
10%
|
15%
|
20%
|
50%
|
100%
|
|
Fund Performance at NAV
|
(50)%2
|
(25)%2
|
(10)%2
|
(5)%2
|
(2.5)%2
|
0%
|
3.4%3
|
6.7%3
|
10.05%3
|
13.4%3
|
33.5%3
|
67%3
|
| 1 |
Does not take into account any fees or expenses or the performance of the Collateral Portfolio or the Put Spread Strategy.
|
| 2 |
Reflects the impact of the Par Down Rate.
|
| 3 |
Reflects the impact of an assumed Par Up Rate of 67%.
|
Understanding Outcomes. The Outcomes the Fund seeks to achieve are measured based upon the
Fund’s NAV on the first day of the Outcome Period. The Outcome Period begins on the day Milliman transacts in the FLEX Options on behalf of the Fund, and ends on the day those FLEX Options expire. An investor who
purchases Shares after the commencement of the Outcome Period will likely have purchased Shares at a different NAV than the NAV on the first day of the Outcome Period (the NAV upon which the Outcomes are based) and may experience investment
outcomes very different from those the Fund seeks to achieve, especially when factoring in any fees or expenses or the performance of the Collateral Portfolio and the Put Spread Strategy. An investor who redeems Shares prior to the end of the
Outcome Period may also experience investment outcomes very different from those the Fund seeks to achieve. The Outcomes are designed with the expectation that an investor will hold Shares on the day that Milliman transacts in the FLEX Options on
behalf of the Fund, and on the day those FLEX Options expire. There is no guarantee that the Fund will be successful in its attempt to achieve the Outcomes.
Understanding the Par Up Rate. Unlike other investment products, the potential returns an
investor can receive from an investment in the Fund are subject to the Par Up Rate. This means that if the S&P 500 Index experiences gains for the Outcome Period, an investor in the Fund will only experience
a percentage of those gains (equal to the Par Up Rate multiplied by the S&P 500 Index gains). Milliman calculates the Par Up Rate for each Outcome Period based upon (i) its evaluation of prevailing market conditions on the first day
of the Outcome Period and (ii) the total number of long call FLEX Options on the S&P 500 Index that it is able to purchase at that time. In certain market conditions, the performance of the Collateral
Portfolio and the Put Spread Strategy could reduce the impact of the Par Up Rate. An investor should consider the amount and impact of the Par Up Rate, and the Fund’s position relative to it, before investing in the Fund.
Understanding the Par Down Rate. The Par Down Rate is intended to limit losses in the
Fund’s S&P 500 Index exposure to 50% of the losses the S&P 500 Index experiences for the Outcome Period. While the Fund seeks to provide returns that are limited to 50% (prior to taking into account any fees or expenses or the performance
of the Collateral Portfolio or the Put Spread Strategy) for investors who hold Shares for the entire Outcome Period, there is no guarantee it will successfully do so. In addition, the Par Down Rate is not
operative against losses in the Collateral Portfolio or the Put Spread Strategy. If the Collateral Portfolio and/or the Put Spread Strategy experiences losses, it could have the effect of reducing the impact of, or completely eliminating, the
Par Down Rate on the Fund’s S&P 500 Index exposure. In certain market conditions, the performance of the Collateral Portfolio and/or the Put Spread Strategy could cause the Fund to significantly underperform the S&P 500 Index.
Investors who purchase Shares at the beginning of the Outcome Period may lose their entire investment. Investors who purchase Shares after the Outcome Period has begun may also lose their entire investment. An investment in the Fund is only
appropriate for investors willing to bear those losses.
95
Fund Rebalance. Milliman implements the Fund’s strategy on a semi-annual basis, seeking to
produce the Outcomes for an Outcome Period. On the last business day of any stated Outcome Period, all of the Fund’s existing FLEX Options, which includes those used to establish the Par Up Rate, the Par Down Rate and the Put Spread Strategy,
will expire and Milliman will transact in a new set of FLEX Options on the same business day, which will commence a new Outcome Period beginning the following business day. At that same time, Milliman will also evaluate whether to make any
adjustments to the Collateral Portfolio. Accordingly, Shares can be held indefinitely if investors determine to participate in additional Outcome Periods.
Approximately one week prior to the end of each Outcome Period, the Fund will file a prospectus supplement, which will notify existing investors of
(i) the date on which the existing Outcome Period will end; (ii) the date on which the new Outcome Period will commence; and (iii) the anticipated ranges of the Par Up Rate that will be used for the new Outcome Period. Immediately preceding the
commencement date of the new Outcome Period, the Fund will file a prospectus supplement disclosing the Fund’s final Par Up Rate (both gross and net of Fund fees and expenses) for the new Outcome Period. This information will also be available
online at www.[___________].com, and on your insurance company’s website. Please contact your insurance company or other financial intermediary for more information.
Fund Classification. The Fund is classified as “non-diversified” under the Investment
Company Act of 1940, as amended (the “1940 Act”).
Principal Risks
You could lose money by investing in the Fund. An investment in the Fund is not a deposit of a bank and is not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other governmental agency. There can be no assurance that the Fund’s investment objectives will be achieved.
Downside Loss Par Down Rate Risk. There can be no guarantee that the Fund will be successful in its strategy
to limit losses in the Fund’s S&P 500 Index exposure to 50% of the losses experienced by the S&P 500 Index over the Outcome Period. The success of the Par Down Rate also depends upon the performance of the Collateral Portfolio and the Put
Spread Strategy. If the Collateral Portfolio and/or the Put Spread Strategy experiences losses, it could have the effect of reducing the impact of, or completely eliminating, the Par Down Rate on the Fund’s
S&P 500 Index exposure. In certain market conditions, the performance of the Collateral Portfolio and/or the Put Spread Strategy could cause the Fund to significantly underperform the S&P 500 Index. Despite the intended Par Down Rate,
an investor could lose their entire investment. In the event an investor purchases Shares after the date on which Milliman transacted in the FLEX Options on behalf of the Fund, or redeems Shares prior to the expiration of those
FLEX Options, the Par Down Rate that the Fund seeks to provide may not be available or fully applicable.
Risk of the Par Up Rate on Upside Returns. The Fund’s strategy is designed to produce returns that correlate
to those of the S&P 500 Index at the Par Up Rate if Shares are bought on the day on which Milliman transacts in the FLEX Options on behalf of the Fund and held until those FLEX Options expire at the end of the Outcome Period. Accordingly, the
Fund will not fully participate in any gains achieved by the S&P 500 Index. In addition, in the event an investor purchases Shares after the date on which Milliman transacted in the FLEX Options on behalf of the Fund, or redeems Shares prior
to the expiration of those FLEX Options, the returns realized by that investor may not match those that the Fund seeks to achieve pursuant to the Par Up Rate. In certain market conditions, the performance of
the Collateral Portfolio and the Put Spread Strategy could reduce the impact of the Par Up Rate. An investor should consider the amount and impact of the Par Up Rate, and the Fund’s position relative to it, before investing in the Fund.
Par Up Rate Change Risk. Because the Par Up Rate for each Outcome Period is calculated based upon (i)
Milliman’s evaluation of prevailing market conditions on the first day of the Outcome Period and (ii) the total number of long call FLEX Options on the S&P 500 Index that Milliman is able to purchase at that time, the Par Up Rate may rise or
fall from one Outcome Period to the next. Any change in the Par Up Rate could be significant and it is unlikely to remain the same for consecutive Outcome Periods.
96
FLEX Options Risk. The Fund will transact in FLEX Options issued and guaranteed for settlement by the OCC. The
Fund bears the risk that the OCC will be unable or unwilling to perform its obligations under the FLEX Options contracts, which could result in significant losses to the Fund. In less liquid markets, terminating a FLEX Option may require the
payment of a premium or acceptance of a discounted price, and may take longer to complete. In addition, a less liquid trading market may adversely impact the value of the Fund’s FLEX Options and therefore the NAV of the Fund. In addition, the value
of the Fund’s FLEX Options positions is not anticipated to increase or decrease at the same rate as the reference asset; and while it is anticipated that they will generally move in the same direction, it is possible that they may move in different
directions. Certain FLEX Options positions may also expire worthless. The use of FLEX Options involves leverage, which can cause the Fund’s portfolio to be more volatile than if the portfolio had not been leveraged. Leverage can significantly
magnify the effect of price movements of the reference asset, disproportionately increasing the Fund’s losses and reducing the Fund’s opportunities for gains when the reference asset changes in unexpected ways. In some instances, such leverage
could result in losses that exceed the original amount invested.
Investment Objective and Outcomes Risk. There is no guarantee that the Fund will be successful in its attempt
to achieve its investment objective and/or the Outcomes, and an investor could lose some or all of their investment in the Fund. Certain circumstances under which the Fund might not achieve its objective and/or the Outcomes include, but are not
limited to (i) if the Fund disposes of FLEX Options, (ii) if the Fund is unable to maintain the proportional relationship based on the number of FLEX Options in the Fund’s portfolio, (iii) significant accrual of Fund expenses in connection with
effecting the Fund’s principal investment strategy, (iv) losses incurred by the Fund’s holdings in the Collateral Portfolio and/or losses resulting from the Put Spread Strategy, or (iv) adverse tax law changes affecting the treatment of FLEX
Options.
Tax Risk. The Fund intends to elect, and to qualify each year, to be treated as a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”). As a RIC, the Fund will not be subject to U.S. federal income tax on the portion
of its net investment income and net capital gain that it distributes to shareholders, provided that it satisfies certain requirements of the Code. To maintain its status as a RIC, the Fund must meet certain income, diversification and
distributions tests. For purposes of the diversification test, the identification of the issuer (or, in some cases, issuers) of a particular Fund investment can depend on the terms and conditions of that investment. In particular, there is no
published IRS guidance or case law on how to determine the “issuer” of certain derivatives that the Fund will enter into and the Fund has not received a private letter ruling on this point. Therefore, there is a risk that the Fund will not meet the
Code’s diversification requirements and will not qualify, or will be disqualified, as a RIC. If the Fund does not qualify as a RIC for any taxable year and certain relief provisions are not available, the Fund’s taxable income will be subject to
tax at the Fund level and to a further tax at the shareholder level when such income is distributed.
The Fund also intends to comply with the diversification requirements of Section 817(h) of the Code, and the regulations thereunder, relating to the
tax-deferred status of variable accounts that are based on insurance company separate accounts (referred to as “segregated asset accounts” for federal income tax purposes). These diversification requirements apply in addition to the RIC
diversification requirements discussed above. There also is no published guidance or case law on how to determine the “issuer” of the derivatives referred to above for purposes of the diversification requirements of Section 817(h) of the Code and
the Fund has not received a private letter ruling on this point. If these requirements are not met, or under other circumstances, such as if the Fund does not qualify as a RIC for any taxable year, it is possible that the contract owners (rather
than the insurance company) will be treated for federal income tax purposes as the taxable owners of the assets held by the segregated asset accounts.
Clearing Member Default Risk. The Fund will hold FLEX Options through accounts at members of clearing houses (“clearing members”) rather than a bank or a broker. Assets deposited by the Fund with any clearing member as margin for its FLEX Options positions may, in certain circumstances, be used to satisfy losses of other
clients of the Fund’s clearing member where such assets may be held in commingled omnibus accounts. In addition, although clearing members guarantee performance of their clients’ obligations to the clearing house, there is a risk that the assets of
the Fund might not be fully protected in the event of the clearing member’s bankruptcy, as the Fund would be limited to recovering only a pro rata share of all available funds segregated on behalf of the
clearing member’s customers for the relevant account class.
97
Debt Securities Risk. The prices of debt securities will be affected by changes in interest rates, the
creditworthiness of the issuer and other factors. These risks could affect the value of investments in which the Fund invests, possibly causing the Fund’s NAV to be reduced and fluctuate more than other types of investments. During periods of
falling interest rates, an issuer of a callable bond may repay the security before its stated maturity, and the Fund may have to reinvest the proceeds in securities with lower yields, which would result in a decline in the Fund’s income, or in
securities with greater risks or with other less favorable features. Changing interest rates, including rates that fall below zero, may have unpredictable effects on markets, result in heightened market volatility and detract from the Fund’s
performance to the extent the Fund is exposed to such interest rates. An increase in interest rates will generally cause the value of fixed-income securities held by the Fund to decline, may lead to heightened volatility in the fixed-income
markets and may adversely affect the liquidity of certain fixed-income investments, including those held by the Fund. Risks associated with rising interest rates are heightened given that interest rates in the U.S. are near historic lows.
Adjustable-rate instruments also react to interest rate changes in a similar manner, although generally to a lesser degree (depending, however, on the characteristics of the reset terms, including the index chosen, frequency of reset and reset
caps or floors, among other factors). Interest rate sensitivity is generally more pronounced and less predictable in instruments with uncertain payment or prepayment schedules and also for those with longer maturities.
Foreign Securities and Credit Exposure Risk. U.S. dollar-denominated securities carrying foreign credit exposure
may be affected by unfavorable political, economic or governmental developments that could affect payments of principal and interest. Furthermore, the value of the Fund’s foreign investments (whether direct or indirect) may be adversely affected by
political and social instability in their home countries, by changes in economic or taxation policies in those countries, or by the difficulty in enforcing obligations in those countries. Foreign companies generally may be subject to less stringent
regulations than U.S. companies, including financial reporting requirements and auditing and accounting controls. As a result, there generally is less publicly available information about foreign companies than about U.S. companies. Trading in many
foreign securities may be less liquid and more volatile than U.S. securities due to the size of the market or other factors.
U.S. Government Securities Risk. U.S. Government securities are subject to interest rate risk but generally do
not involve the credit risks associated with investments in other types of debt securities. As a result, the yields available from U.S. Government securities are generally lower than the yields available from other debt securities. U.S. Government
securities are guaranteed only as to the timely payment of interest and the payment of principal when held to maturity. While securities issued or guaranteed by U.S. federal government agencies are backed by the full faith and credit of the U.S.
Department of the Treasury, securities issued by government sponsored entities are solely the obligation of the issuer and generally do not carry any guarantee from the U.S. Government.
ABS Risk. ABS are subject to the general debt securities risks described above. In addition, ABS may be less
liquid than other bonds, and may be more sensitive than other bonds to the market’s perception of issuers and creditworthiness of payees, which may result in the Fund experiencing difficulty selling or valuing these securities. ABS markets have
experienced extraordinary weakness and volatility at various times in recent years, and may decline quickly in the event of a substantial economic or market downturn. Accordingly, these securities may be subject to greater risk of default during
periods of economic downturn than other securities, which could result in possible losses to the Fund.
Issuer Risk. The performance of the Fund depends on the performance of individual securities to which the Fund
has exposure. The Fund may be adversely affected if an issuer of underlying securities held by the Fund is unable or unwilling to repay principal or interest when due. Changes in the financial condition or credit rating of an issuer of those
securities may cause the value of the securities to decline.
Management Risk. The Fund is subject to management risk because it is an actively managed portfolio. Milliman
will apply investment techniques and risk analyses in making investment decisions for the Fund, but there can be no guarantee that the Fund will meet its investment objective and/or the Outcomes. In addition, Milliman does not use defensive
strategies or attempt to reduce the Fund’s exposures to poor performing positions during an Outcome Period. This differs from funds that are managed to seek to outperform a benchmark index. Therefore, in the event of a general market decline, the
Fund’s value may fall more than the value of another fund that does attempt to hedge against such market declines.
98
Market Risk. The Fund could lose money over short periods due to short-term market movements and over longer
periods during more prolonged market downturns. Assets may decline in value due to factors affecting financial markets generally or particular asset classes or industries represented in the markets. The value of a FLEX Option or other asset may
also decline due to general market conditions, economic trends or events that are not specifically related to the issuer of the security or other asset, or due to factors that affect a particular issuer, country, region, market, industry, sector or
asset class.
Non-Diversification Risk. The Fund may invest a relatively high percentage of its assets in a limited number of
issuers. As a result, the Fund may be more susceptible to a single adverse economic or regulatory occurrence affecting one or more of these issuers, experience increased volatility and be highly invested in certain issuers.
Large Shareholder Risk. At times, the Fund may experience adverse effects when certain large shareholders,
including insurance company separate accounts, redeem large amounts of shares of the Fund. Large redemptions may cause the Fund to sell portfolio holdings at times when it would not otherwise do so and may increase transaction costs and/or result
in an increase to the Fund’s expense ratio. A large redemption could be detrimental to the Fund and its remaining shareholders.
Risks of Investing in ETFs. In addition to the risks associated with the underlying assets held by the ETFs in
which the Fund invests, investments in ETFs are also subject to the following additional risks: (i) only authorized participants may engage in transactions directly with ETFs but none are obligated to do so, which could result in an ETF’s shares
trading at a premium or discount to its NAV or possibly face trading halts or delisting; (ii) certain ETFs seek to track the performance of an underlying index and will not attempt to take defensive positions under any market conditions, including
declining markets, which could result in losses; and (iii) because ETF shares trade on the secondary market, there is not guarantee that an active market will be developed or maintained, which could result in the ETF’s shares trading at a premium
or discount to its NAV. Investments in ETFs may involve duplication of management fees and certain other expenses, as the Fund indirectly bears its proportionate share of any expenses paid by the ETFs in which it invests.
Risks of Investing in Money Market Funds. Money market funds seek to preserve the value of shareholder
investments at $1.00 per share, but shareholders, such as the Fund, may still lose money by investing in such funds. In addition, a money market fund may impose a fee upon the sale of its shares or may temporarily suspend the ability to sell shares
if the fund’s liquidity falls below required minimums because of market conditions or other factors. The credit quality of a money market fund’s holdings can change rapidly in certain markets, and the default of a single holding could have an
adverse impact on the fund’s share price. A money market fund’s share price can also be negatively affected during periods of high redemption pressures, illiquid markets, and/or significant market volatility.
Performance
As of the date of this Prospectus, the Fund has not commenced operations and therefore does not have a performance history. Once available, the Fund’s
performance information will be accessible online at www.[________].com and will provide some indication of the risks of investing in the Fund.
Management
Investment Adviser
Milliman Financial Risk Management LLC (“Milliman”) serves as investment adviser to the Fund.
Portfolio Managers
The following persons serve as portfolio managers of the Fund.
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●
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Robert T. Cummings, Principal & Head of Portfolio Management at Milliman.
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|
●
|
Maria Schiopu, Principal & Head of Portfolio Management at Milliman.
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|
●
|
Jeff Greco, Principal & Head of Strategy Research at Milliman.
|
|
●
|
Jordan Rosenfeld, Portfolio Manager at Milliman.
|
Each portfolio manager is jointly and primarily responsible for the day-to-day management of the Fund’s portfolio and has served in such capacity
since the Fund’s inception in 2021.
Purchase and Sale of Shares
Shares are available as underlying investment options for variable insurance contracts and variable life insurance policies (each, a “variable contract,” and, collectively, the “variable contracts”) issued by insurance companies. These insurance companies are the record owners of the separate accounts
holding the Shares. You do not buy, sell or exchange Shares directly; rather, you choose investment options through your variable contracts. The insurance companies then cause the separate accounts to purchase and redeem Shares according to
the investment options you choose.
Tax Information
The dividends and distributions paid by the Fund to the insurance company separate accounts will consist of ordinary income, capital gains, or some
combination of both. Because Shares must be purchased through separate accounts used to fund variable contracts, such dividends and distributions will be exempt from current taxation by owners of variable contracts (each, a “contract owner,” and, collectively “contract owners”) if left to accumulate within a separate account. Consult the variable contract prospectus for additional tax
information.
Payments to Insurance Companies and Other Financial Intermediaries
If you allocate contract value to the Fund through an insurance company or other financial intermediary, the Fund, Milliman, the Fund’s distributor or
their related companies may pay the insurance company and/or its affiliates or other intermediary for the sale of Shares and related services. These payments may create a conflict of interest by influencing the insurance company or other
intermediary and your salesperson to recommend an indirect investment in the Fund over another investment. The prospectus or other disclosure documents for the variable contracts may contain additional information about these payments, if any.
You may also ask your salesperson or financial intermediary, or visit your financial intermediary’s website, for more information.
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Fund Summary: Milliman S&P 500 6-Month Par Down with Par Up Fund – Jan/Jul
Investment Objective
The Fund seeks to provide exposure to the S&P 500 Index, while limiting losses to 50% of the losses associated with S&P 500 Index performance
and participating in S&P 500 Index gains at a declared rate, prior to taking into account any fees or expenses or the performance of any fixed income exposure included in the Fund’s portfolio, over the period from January 1, 2022 through June
30, 2022.
Fees and Expenses of the Fund
This table describes the fees and expenses that you may pay if you buy, hold and sell shares of the Fund (“Shares”).
This table and the example below do not include any fees or sales charges imposed by your variable product. If they were included, the expenses listed below would be higher.
Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment)
|
Class 3
|
|
|
Management Fees
|
0.49%
|
|
Distribution and Service (12b-1) Fees
|
0.25%
|
|
Other Expenses(1)
|
0.50%
|
|
Acquired Fund Fees and Expenses(1)
|
[_.__]%
|
|
Total Annual Fund Operating Expenses
|
1.24%
|
|
Fee Waiver and/or Expense Reimbursement(2)(3)
|
(0.25)%
|
|
Total Annual Fund Operating Expenses After Fee Waiver and/or Expense Reimbursement
|
0.99%
|
|
(1)
|
“Other Expenses” and “Acquired Fund Fees and Expenses” are based on estimated amounts for the current fiscal year.
|
|
(2)
|
The Fund’s investment adviser, Milliman Financial Risk Management LLC (“Milliman”), has contractually
agreed to waive advisory fees and/or reimburse expenses to the extent necessary to limit the Fund’s total annual Fund operating expenses (excluding taxes, interest, brokerage fees and commissions, Rule 12b-1 fees, acquired fund fees and
expenses, short-sale dividend expenses, administrative services fees, other expenses that are capitalized in accordance with generally accepted accounting principles, and extraordinary or non-routine expenses not incurred in the
ordinary course of the Fund’s business) to 0.74% of the Fund's average daily net assets (the “Expense Limitation Agreement”) until at least November 1, 2022. During its term, the Expense
Limitation Agreement cannot be terminated or amended to increase the applicable limit without approval of the Board of Trustees of the Trust (the “Board”). Milliman may recoup from the Fund any
advisory fees waived or expenses reimbursed pursuant to the Expense Limitation Agreement for a period of three years from the date on which such waiver or reimbursement occurred; provided, however, that such recoupment shall not be made
if it would cause the Fund’s total annual Fund operating expenses to exceed the lesser of (a) the expense limitation in effect at the time of the reimbursement, or (b) the expense limitation in effect at the time of recoupment, if any.
|
|
(3)
|
In addition to the Expense Limitation Agreement, Milliman has contractually agreed to waive its advisory fees in an amount equal to the Fund’s
acquired fund fees and expenses until at least November 1, 2022 (the “Fee Waiver”). This contract cannot be terminated or modified without the consent of the Board.
|
Example
This example is intended to help you compare the cost of investing in the Fund with the cost of investing in other funds. This example assumes that you
invest $10,000 in the Fund for the time periods indicated and then sell all of your Shares at the end of those periods. This example also assumes that your investment has a 5% return each year and that the Fund’s operating expenses remain at
current levels and that the Expense Limitation Agreement and Fee Waiver remain in place for their contractual periods. Although your actual costs may be higher or lower, your costs, based on these assumptions, would be:
|
1 Year
|
3 Years
|
|
|
Class 3
|
$104
|
$384
|
This example does not include any fees or sales charges imposed by your variable product. If they were included, the expenses listed above would be
higher.
101
Portfolio Turnover
The Fund pays transaction costs, such as commissions, when it purchases and sells securities (or “turns over” its portfolio). A higher portfolio turnover
will cause the Fund to incur additional transaction costs. These costs, which are not reflected in Total Annual Fund Operating Expenses or in the example, may affect the Fund’s performance. Because the Fund has not yet commenced investment
operations, no portfolio turnover information is available at this time.
Principal Investment Strategies
The Fund seeks to achieve its investment objective by transacting in FLexible EXchange® Options (“FLEX Options”)
and by separately maintaining a collateral portfolio (the “Collateral Portfolio”), which is designed primarily to serve as margin or collateral for the Fund’s FLEX Options positions and secondarily to
enhance the Fund’s upside S&P 500 Index FLEX Options’ exposure (i.e., by utilizing anticipated income to measure the ability to purchase additional FLEX Options). FLEX Options are exchange-traded
options contracts with uniquely customizable terms. In general, an options contract is an agreement between a buyer and seller that gives the purchaser of the option the right to buy or sell a particular asset at a specified future date at an
agreed upon price, commonly known as the “strike price.” The reference assets for the Fund’s FLEX Options positions will include the S&P 500 Index, which is a large-capitalization, market-weighted, U.S. equities index that tracks the price
(excluding dividends) of 500 leading companies in leading industries of the U.S. economy, and certain exchange-traded funds (“ETFs”), as described further below.
The Collateral Portfolio may be invested in short-term fixed-income securities, including corporate bonds and other corporate debt securities,
asset-backed securities (“ABS”), securities issued by the U.S. Government or its agencies and instrumentalities, securities issued by non-U.S. governments or their agencies and instrumentalities, money
market securities and funds, other interest-bearing instruments, cash, ETFs that primarily invest in any of the foregoing instruments, options on ETFs and options box spreads. An options box spread is the combination of different options trades
that have offsetting spreads (e.g., purchases and sales on the same underlying instrument, such as an index or an ETF, but with different strike prices and/or expiration dates) for the purpose of
generating income. The Fund may invest in short-term fixed income securities or other instruments, including through ETFs, of any maturity and credit quality. The Fund will generally invest up to 35% of its net assets in one or more ETFs that
provide exposure to investment grade corporate bonds.
Due to the unique mechanics of the Fund’s strategy, the return an investor can expect to receive from an investment in the Fund has characteristics that
are distinct from the returns of many other investment vehicles. It is important that an investor understand these characteristics before making an investment in the Fund.
In seeking to achieve its investment objective, the Fund seeks to produce pre-determined outcomes (the “Outcomes”)
that are based upon the performance of the S&P 500 Index over a six-month period (the “Outcome Period”). The initial Outcome Period for the Fund is January 1, 2022 through June 30, 2022. Following the
initial Outcome Period, each subsequent Outcome Period will be a six-month period commencing upon the expiration of the prior Outcome Period. The Fund seeks to achieve the Outcomes by purchasing and writing (selling) FLEX Options to create layers
within the Fund’s portfolio. One layer is designed to produce returns that correlate to those of the S&P 500 Index for the Outcome Period at a declared rate (the “Par Up Rate”) if the S&P 500 Index
experiences gains during that time, as described below. A separate layer is designed to limit losses to 50% of the losses experienced by the S&P 500 Index for the Outcome Period (the “Par Down Rate”). There is no guarantee that the Fund will be successful in its attempt to produce returns that correlate to those of the S&P 500 Index at the Par Up
Rate or limit losses that correlate to those of the S&P 500 Index at the Par Down Rate.
Milliman Financial Risk Management, LLC (“Milliman”), the investment adviser of the Fund, seeks to establish the
Par Down Rate by writing 50% of the exposure of one put FLEX Option on the S&P 500 Index with a strike price that is equal to the value of the S&P 500 Index at the beginning of the Outcome Period.
Milliman seeks to establish the Par Up Rate by purchasing long call FLEX Options on the S&P 500 Index with a strike price approximately equal to
the value of the S&P 500 Index at the beginning of the Outcome Period. Milliman purchases these FLEX Options with a portion of the Fund’s net assets plus (i) the cash received from
102
writing the put FLEX Option designed to create the Par Down Rate, (ii) additional cash received by utilizing FLEX Options to create a put spread (the
“Put Spread Strategy”) on fixed income securities and/or one or more ETFs that provide exposure to fixed income securities, and (iii) yield received from the Collateral Portfolio. Milliman seeks to achieve
the Put Spread Strategy for the Fund by writing a put FLEX Option on an underlying asset at a strike price at or lower than the underlying asset’s market price or current value at the beginning of the Outcome Period, and buying a put FLEX Option
on the same underlying asset at a lower strike price than the written put FLEX Option.
The Par Up Rate is the rate at which the Fund will seek to track any upside market performance of the S&P 500 Index. Milliman calculates the Par
Up Rate based upon (i) its evaluation of prevailing market conditions on the first day of the Outcome Period and (ii) the total number of long call FLEX Options on the S&P 500 Index that it is able to purchase at that time. As of the date of
this Prospectus, and assuming current market conditions persist, Milliman expects that the Par Up Rate will be between the below ranges (both gross and net of Fund fees and expenses). Any fees or expenses imposed by your variable product, and any
other expenses incurred by the Fund, will have the effect of further reducing the Par Up Rate. Once calculated, the Par Up Rate for a particular Outcome Period will not change during that Outcome Period;
however, in certain market conditions, the performance of the Collateral Portfolio and the Put Spread Strategy could reduce the impact of the Par Up Rate.
|
Share Class
|
Estimated Par Up Rate Ranges
(As of [___])
|
|
|
Prior to Taking into Account Fund Fees and Expenses
|
After Taking into Account Fund Fees and Expenses
|
|
|
Class 3
|
[__]% and [__]%
|
[__]% and [__]%
|
The Par Down Rate is the rate at which the Fund will seek to track any downside market performance of the S&P 500 Index. The Par Down Rate is
designed to limit losses in the Fund’s S&P 500 Index exposure to 50% for the Outcome Period. The Fund seeks to limit losses against its S&P 500 Index exposure prior to taking into account any fees or expenses or the performance of the
Collateral Portfolio or the Put Spread Strategy. The Par Down Rate is not operative against losses in the Collateral Portfolio or the Put Spread Strategy. If the Collateral Portfolio and/or the Put Spread
Strategy experiences losses, it could have the effect of reducing the impact of, or completely eliminating, the Par Down Rate on the Fund’s S&P 500 Index exposure. In certain market conditions, the performance of the Collateral Portfolio
and/or the Put Spread Strategy could cause the Fund to significantly underperform the S&P 500 Index. The following table reflects the Par Down Rate both gross and net of Fund fees and expenses:
|
Share Class
|
Par Down Rate
(As of [___])
|
|
|
Prior to Taking into Account Fund Fees and Expenses
|
After Taking into Account Fund Fees and Expenses
|
|
|
Class 3
|
50%
|
[__]%
|
The definitive Par Up Rate and Par Down Rate will be set forth on the Fund’s website. The Fund’s website will also provide information relating to the
Outcomes on a daily basis, including the Fund’s position relative to the Par Up Rate and the Par Down Rate. You may also contact your insurance company or other financial intermediary for more information.
Additionally, the Fund’s net asset value (“NAV”) will not increase or decrease at the same rate as the
S&P 500 Index because the Fund’s strategy relies upon the performance of the Collateral Portfolio and the Put Spread Strategy, in addition to the value of the Fund’s FLEX Options positions on the S&P 500 Index. While Milliman anticipates
that the Fund’s NAV will generally move in the same direction as the S&P 500 Index (meaning that the Fund’s NAV will generally increase if the S&P 500 Index experiences gains or decrease if the S&P 500 Index experiences losses), the
Fund’s NAV will not decrease at the same rate as the S&P 500 Index (especially when factoring in the Par Down Rate and the performance of the Collateral Portfolio and the Put Spread Strategy) and will not increase at the same rate as the
S&P 500 Index (especially when factoring in the Par Up Rate and the performance of the Collateral Portfolio and the Put Spread Strategy). Similarly, the amount of time remaining until the end of the
103
Outcome Period also affects the impact of the Par Down Rate on the Fund’s NAV, because the Par Down Rate may not be in full effect prior to the end of
the Outcome Period.
The FLEX Options utilized in the Fund’s portfolio are each set to expire on the last day of the Outcome Period. The customizable nature of FLEX Options
will allow Milliman to select the strike price at which each FLEX Option will be exercised at the expiration of the FLEX Option term. At the commencement of the Outcome Period, Milliman will specifically select the strike price for each FLEX Option
in a manner designed to achieve the Outcomes when the FLEX Options are exercised on the final day of the Outcome Period, depending on the anticipated performance of the S&P 500 Index, the Collateral Portfolio and the Put Spread Strategy over
the duration of that Outcome Period.
The hypothetical graphical illustrations provided below are designed to illustrate the Outcomes based upon the
hypothetical performance of the S&P 500 Index for an investor who holds Shares for the entirety of the Outcome Period. The hypothetical graphical illustrations do not include any fees or expenses imposed by your variable product or expenses
incurred by the Fund, and do not reflect the performance of the Collateral Portfolio or the Put Spread Strategy. Additional hypothetical graphical representations of the Outcomes are provided in “Additional Information About the Funds and
the Risks of Investing.” There is no guarantee that the Fund will be successful in its attempt to achieve the Outcomes for the Outcome Period.
The following table contains hypothetical examples designed to illustrate the Outcomes the Fund seeks to
achieve over the Outcome Period, based upon the performance of the S&P 500 Index from (100)% to 100% after taking into account the Par Up Rate and the Par Down Rate, but prior to taking into account any fees or expenses or the performance of
the Collateral Portfolio or the Put Spread Strategy. The table is provided for illustrative purposes only and does not provide every possible performance scenario for Shares over the course of the Outcome Period.
There is no guarantee that the Fund will be successful in its attempt to achieve the Outcomes for an Outcome Period. The table is not intended to predict or project the performance of the FLEX Options or the Fund. Investors should not take this information as an assurance of the expected
performance of the S&P 500 Index or the Fund. Actual Fund performance will vary with fluctuations in the performance of the Collateral Portfolio and the Put Spread Strategy, in addition to the value of the Fund’s FLEX Options
positions on the S&P
104
500 Index, during the Outcome Period, among other factors. The performance of
the Collateral Portfolio and the Put Spread Strategy could significantly impact the performance of the Fund, which could prevent the Fund from achieving the Outcomes that it seeks to produce. The table does not reflect any fees or
expenses imposed by your variable product or expenses incurred by the Fund. If it did, the returns shown for the Fund would be lower. Please refer to the Fund’s website, which provides updated information relating to this table on a daily basis
throughout the Outcome Period. Please contact your insurance company or other financial intermediary for more information.
|
Index/Fund
|
Hypothetical Performance1
|
|||||||||||
|
S&P 500 Index Price Performance
|
(100)%
|
(50)%
|
(20)%
|
(10)%
|
(5)%
|
0%
|
5%
|
10%
|
15%
|
20%
|
50%
|
100%
|
|
Fund Performance at NAV
|
(50)%2
|
(25)%2
|
(10)%2
|
(5)%2
|
(2.5)%2
|
0%
|
3.4%3
|
6.7%3
|
10.05%3
|
13.4%3
|
33.5%3
|
67%3
|
| 1 |
Does not take into account any fees or expenses or the performance of the Collateral Portfolio or the Put Spread Strategy.
|
| 2 |
Reflects the impact of the Par Down Rate.
|
| 3 |
Reflects the impact of an assumed Par Up Rate of 67%.
|
Understanding Outcomes. The Outcomes the Fund seeks to achieve are measured based upon the
Fund’s NAV on the first day of the Outcome Period. The Outcome Period begins on the day Milliman transacts in the FLEX Options on behalf of the Fund, and ends on the day those FLEX Options expire. An investor who
purchases Shares after the commencement of the Outcome Period will likely have purchased Shares at a different NAV than the NAV on the first day of the Outcome Period (the NAV upon which the Outcomes are based) and may experience investment
outcomes very different from those the Fund seeks to achieve, especially when factoring in any fees or expenses or the performance of the Collateral Portfolio and the Put Spread Strategy. An investor who redeems Shares prior to the end of the
Outcome Period may also experience investment outcomes very different from those the Fund seeks to achieve. The Outcomes are designed with the expectation that an investor will hold Shares on the day that Milliman transacts in the FLEX Options on
behalf of the Fund, and on the day those FLEX Options expire. There is no guarantee that the Fund will be successful in its attempt to achieve the Outcomes.
Understanding the Par Up Rate. Unlike other investment products, the potential returns an
investor can receive from an investment in the Fund are subject to the Par Up Rate. This means that if the S&P 500 Index experiences gains for the Outcome Period, an investor in the Fund will only experience
a percentage of those gains (equal to the Par Up Rate multiplied by the S&P 500 Index gains). Milliman calculates the Par Up Rate for each Outcome Period based upon (i) its evaluation of prevailing market conditions on the first day
of the Outcome Period and (ii) the total number of long call FLEX Options on the S&P 500 Index that it is able to purchase at that time. In certain market conditions, the performance of the Collateral
Portfolio and the Put Spread Strategy could reduce the impact of the Par Up Rate. An investor should consider the amount and impact of the Par Up Rate, and the Fund’s position relative to it, before investing in the Fund.
Understanding the Par Down Rate. The Par Down Rate is intended to limit losses in the
Fund’s S&P 500 Index exposure to 50% of the losses the S&P 500 Index experiences for the Outcome Period. While the Fund seeks to provide returns that are limited to 50% (prior to taking into account any fees or expenses or the performance
of the Collateral Portfolio or the Put Spread Strategy) for investors who hold Shares for the entire Outcome Period, there is no guarantee it will successfully do so. In addition, the Par Down Rate is not
operative against losses in the Collateral Portfolio or the Put Spread Strategy. If the Collateral Portfolio and/or the Put Spread Strategy experiences losses, it could have the effect of reducing the impact of, or completely eliminating, the
Par Down Rate on the Fund’s S&P 500 Index exposure. In certain market conditions, the performance of the Collateral Portfolio and/or the Put Spread Strategy could cause the Fund to significantly underperform the S&P 500 Index.
Investors who purchase Shares at the beginning of the Outcome Period may lose their entire investment. Investors who purchase Shares after the Outcome Period has begun may also lose their entire investment. An investment in the Fund is only
appropriate for investors willing to bear those losses.
105
Fund Rebalance. Milliman implements the Fund’s strategy on a semi-annual basis, seeking to
produce the Outcomes for an Outcome Period. On the last business day of any stated Outcome Period, all of the Fund’s existing FLEX Options, which includes those used to establish the Par Up Rate, the Par Down Rate and the Put Spread Strategy,
will expire and Milliman will transact in a new set of FLEX Options on the same business day, which will commence a new Outcome Period beginning the following business day. At that same time, Milliman will also evaluate whether to make any
adjustments to the Collateral Portfolio. Accordingly, Shares can be held indefinitely if investors determine to participate in additional Outcome Periods.
Approximately one week prior to the end of each Outcome Period, the Fund will file a prospectus supplement, which will notify existing investors of
(i) the date on which the existing Outcome Period will end; (ii) the date on which the new Outcome Period will commence; and (iii) the anticipated ranges of the Par Up Rate that will be used for the new Outcome Period. Immediately preceding the
commencement date of the new Outcome Period, the Fund will file a prospectus supplement disclosing the Fund’s final Par Up Rate (both gross and net of Fund fees and expenses) for the new Outcome Period. This information will also be available
online at www.[___________].com, and on your insurance company’s website. Please contact your insurance company or other financial intermediary for more information.
Fund Classification. The Fund is classified as “non-diversified” under the Investment
Company Act of 1940, as amended (the “1940 Act”).
Principal Risks
You could lose money by investing in the Fund. An investment in the Fund is not a deposit of a bank and is not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other governmental agency. There can be no assurance that the Fund’s investment objectives will be achieved.
Downside Loss Par Down Rate Risk. There can be no guarantee that the Fund will be successful in its strategy
to limit losses in the Fund’s S&P 500 Index exposure to 50% of the losses experienced by the S&P 500 Index over the Outcome Period. The success of the Par Down Rate also depends upon the performance of the Collateral Portfolio and the Put
Spread Strategy. If the Collateral Portfolio and/or the Put Spread Strategy experiences losses, it could have the effect of reducing the impact of, or completely eliminating, the Par Down Rate on the Fund’s
S&P 500 Index exposure. In certain market conditions, the performance of the Collateral Portfolio and/or the Put Spread Strategy could cause the Fund to significantly underperform the S&P 500 Index. Despite the intended Par Down Rate,
an investor could lose their entire investment. In the event an investor purchases Shares after the date on which Milliman transacted in the FLEX Options on behalf of the Fund, or redeems Shares prior to the expiration of those
FLEX Options, the Par Down Rate that the Fund seeks to provide may not be available or fully applicable.
Risk of the Par Up Rate on Upside Returns. The Fund’s strategy is designed to produce returns that correlate
to those of the S&P 500 Index at the Par Up Rate if Shares are bought on the day on which Milliman transacts in the FLEX Options on behalf of the Fund and held until those FLEX Options expire at the end of the Outcome Period. Accordingly, the
Fund will not fully participate in any gains achieved by the S&P 500 Index. In addition, in the event an investor purchases Shares after the date on which Milliman transacted in the FLEX Options on behalf of the Fund, or redeems Shares prior
to the expiration of those FLEX Options, the returns realized by that investor may not match those that the Fund seeks to achieve pursuant to the Par Up Rate. In certain market conditions, the performance of
the Collateral Portfolio and the Put Spread Strategy could reduce the impact of the Par Up Rate. An investor should consider the amount and impact of the Par Up Rate, and the Fund’s position relative to it, before investing in the Fund.
Par Up Rate Change Risk. Because the Par Up Rate for each Outcome Period is calculated based upon (i)
Milliman’s evaluation of prevailing market conditions on the first day of the Outcome Period and (ii) the total number of long call FLEX Options on the S&P 500 Index that Milliman is able to purchase at that time, the Par Up Rate may rise or
fall from one Outcome Period to the next. Any change in the Par Up Rate could be significant and it is unlikely to remain the same for consecutive Outcome Periods.
106
FLEX Options Risk. The Fund will transact in FLEX Options issued and guaranteed for settlement by the OCC. The
Fund bears the risk that the OCC will be unable or unwilling to perform its obligations under the FLEX Options contracts, which could result in significant losses to the Fund. In less liquid markets, terminating a FLEX Option may require the
payment of a premium or acceptance of a discounted price, and may take longer to complete. In addition, a less liquid trading market may adversely impact the value of the Fund’s FLEX Options and therefore the NAV of the Fund. In addition, the value
of the Fund’s FLEX Options positions is not anticipated to increase or decrease at the same rate as the reference asset; and while it is anticipated that they will generally move in the same direction, it is possible that they may move in different
directions. Certain FLEX Options positions may also expire worthless. The use of FLEX Options involves leverage, which can cause the Fund’s portfolio to be more volatile than if the portfolio had not been leveraged. Leverage can significantly
magnify the effect of price movements of the reference asset, disproportionately increasing the Fund’s losses and reducing the Fund’s opportunities for gains when the reference asset changes in unexpected ways. In some instances, such leverage
could result in losses that exceed the original amount invested.
Investment Objective and Outcomes Risk. There is no guarantee that the Fund will be successful in its attempt
to achieve its investment objective and/or the Outcomes, and an investor could lose some or all of their investment in the Fund. Certain circumstances under which the Fund might not achieve its objective and/or the Outcomes include, but are not
limited to (i) if the Fund disposes of FLEX Options, (ii) if the Fund is unable to maintain the proportional relationship based on the number of FLEX Options in the Fund’s portfolio, (iii) significant accrual of Fund expenses in connection with
effecting the Fund’s principal investment strategy, (iv) losses incurred by the Fund’s holdings in the Collateral Portfolio and/or losses resulting from the Put Spread Strategy, or (iv) adverse tax law changes affecting the treatment of FLEX
Options.
Tax Risk. The Fund intends to elect, and to qualify each year, to be treated as a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”). As a RIC, the Fund will not be subject to U.S. federal income tax on the portion
of its net investment income and net capital gain that it distributes to shareholders, provided that it satisfies certain requirements of the Code. To maintain its status as a RIC, the Fund must meet certain income, diversification and
distributions tests. For purposes of the diversification test, the identification of the issuer (or, in some cases, issuers) of a particular Fund investment can depend on the terms and conditions of that investment. In particular, there is no
published IRS guidance or case law on how to determine the “issuer” of certain derivatives that the Fund will enter into and the Fund has not received a private letter ruling on this point. Therefore, there is a risk that the Fund will not meet the
Code’s diversification requirements and will not qualify, or will be disqualified, as a RIC. If the Fund does not qualify as a RIC for any taxable year and certain relief provisions are not available, the Fund’s taxable income will be subject to
tax at the Fund level and to a further tax at the shareholder level when such income is distributed.
The Fund also intends to comply with the diversification requirements of Section 817(h) of the Code, and the regulations thereunder, relating to the
tax-deferred status of variable accounts that are based on insurance company separate accounts (referred to as “segregated asset accounts” for federal income tax purposes). These diversification requirements apply in addition to the RIC
diversification requirements discussed above. There also is no published guidance or case law on how to determine the “issuer” of the derivatives referred to above for purposes of the diversification requirements of Section 817(h) of the Code and
the Fund has not received a private letter ruling on this point. If these requirements are not met, or under other circumstances, such as if the Fund does not qualify as a RIC for any taxable year, it is possible that the contract owners (rather
than the insurance company) will be treated for federal income tax purposes as the taxable owners of the assets held by the segregated asset accounts.
Clearing Member Default Risk. The Fund will hold FLEX Options through accounts at members of clearing houses (“clearing members”) rather than a bank or a broker. Assets deposited by the Fund with any clearing member as margin for its FLEX Options positions may, in certain circumstances, be used to satisfy losses of other
clients of the Fund’s clearing member where such assets may be held in commingled omnibus accounts. In addition, although clearing members guarantee performance of their clients’ obligations to the clearing house, there is a risk that the assets of
the Fund might not be fully protected in the event of the clearing member’s bankruptcy, as the Fund would be limited to recovering only a pro rata share of all available funds segregated on behalf of the
clearing member’s customers for the relevant account class.
107
Debt Securities Risk. The prices of debt securities will be affected by changes in interest rates, the
creditworthiness of the issuer and other factors. These risks could affect the value of investments in which the Fund invests, possibly causing the Fund’s NAV to be reduced and fluctuate more than other types of investments. During periods of
falling interest rates, an issuer of a callable bond may repay the security before its stated maturity, and the Fund may have to reinvest the proceeds in securities with lower yields, which would result in a decline in the Fund’s income, or in
securities with greater risks or with other less favorable features. Changing interest rates, including rates that fall below zero, may have unpredictable effects on markets, result in heightened market volatility and detract from the Fund’s
performance to the extent the Fund is exposed to such interest rates. An increase in interest rates will generally cause the value of fixed-income securities held by the Fund to decline, may lead to heightened volatility in the fixed-income
markets and may adversely affect the liquidity of certain fixed-income investments, including those held by the Fund. Risks associated with rising interest rates are heightened given that interest rates in the U.S. are near historic lows.
Adjustable-rate instruments also react to interest rate changes in a similar manner, although generally to a lesser degree (depending, however, on the characteristics of the reset terms, including the index chosen, frequency of reset and reset
caps or floors, among other factors). Interest rate sensitivity is generally more pronounced and less predictable in instruments with uncertain payment or prepayment schedules and also for those with longer maturities.
Foreign Securities and Credit Exposure Risk. U.S. dollar-denominated securities carrying foreign credit exposure
may be affected by unfavorable political, economic or governmental developments that could affect payments of principal and interest. Furthermore, the value of the Fund’s foreign investments (whether direct or indirect) may be adversely affected by
political and social instability in their home countries, by changes in economic or taxation policies in those countries, or by the difficulty in enforcing obligations in those countries. Foreign companies generally may be subject to less stringent
regulations than U.S. companies, including financial reporting requirements and auditing and accounting controls. As a result, there generally is less publicly available information about foreign companies than about U.S. companies. Trading in many
foreign securities may be less liquid and more volatile than U.S. securities due to the size of the market or other factors.
U.S. Government Securities Risk. U.S. Government securities are subject to interest rate risk but generally do
not involve the credit risks associated with investments in other types of debt securities. As a result, the yields available from U.S. Government securities are generally lower than the yields available from other debt securities. U.S. Government
securities are guaranteed only as to the timely payment of interest and the payment of principal when held to maturity. While securities issued or guaranteed by U.S. federal government agencies are backed by the full faith and credit of the U.S.
Department of the Treasury, securities issued by government sponsored entities are solely the obligation of the issuer and generally do not carry any guarantee from the U.S. Government.
ABS Risk. ABS are subject to the general debt securities risks described above. In addition, ABS may be less
liquid than other bonds, and may be more sensitive than other bonds to the market’s perception of issuers and creditworthiness of payees, which may result in the Fund experiencing difficulty selling or valuing these securities. ABS markets have
experienced extraordinary weakness and volatility at various times in recent years, and may decline quickly in the event of a substantial economic or market downturn. Accordingly, these securities may be subject to greater risk of default during
periods of economic downturn than other securities, which could result in possible losses to the Fund.
Issuer Risk. The performance of the Fund depends on the performance of individual securities to which the Fund
has exposure. The Fund may be adversely affected if an issuer of underlying securities held by the Fund is unable or unwilling to repay principal or interest when due. Changes in the financial condition or credit rating of an issuer of those
securities may cause the value of the securities to decline.
Management Risk. The Fund is subject to management risk because it is an actively managed portfolio. Milliman
will apply investment techniques and risk analyses in making investment decisions for the Fund, but there can be no guarantee that the Fund will meet its investment objective and/or the Outcomes. In addition, Milliman does not use defensive
strategies or attempt to reduce the Fund’s exposures to poor performing positions during an Outcome Period. This differs from funds that are managed to seek to outperform a benchmark index. Therefore, in the event of a general market decline, the
Fund’s value may fall more than the value of another fund that does attempt to hedge against such market declines.
108
Market Risk. The Fund could lose money over short periods due to short-term market movements and over longer
periods during more prolonged market downturns. Assets may decline in value due to factors affecting financial markets generally or particular asset classes or industries represented in the markets. The value of a FLEX Option or other asset may
also decline due to general market conditions, economic trends or events that are not specifically related to the issuer of the security or other asset, or due to factors that affect a particular issuer, country, region, market, industry, sector or
asset class.
Non-Diversification Risk. The Fund may invest a relatively high percentage of its assets in a limited number of
issuers. As a result, the Fund may be more susceptible to a single adverse economic or regulatory occurrence affecting one or more of these issuers, experience increased volatility and be highly invested in certain issuers.
Large Shareholder Risk. At times, the Fund may experience adverse effects when certain large shareholders,
including insurance company separate accounts, redeem large amounts of shares of the Fund. Large redemptions may cause the Fund to sell portfolio holdings at times when it would not otherwise do so and may increase transaction costs and/or result
in an increase to the Fund’s expense ratio. A large redemption could be detrimental to the Fund and its remaining shareholders.
Risks of Investing in ETFs. In addition to the risks associated with the underlying assets held by the ETFs in
which the Fund invests, investments in ETFs are also subject to the following additional risks: (i) only authorized participants may engage in transactions directly with ETFs but none are obligated to do so, which could result in an ETF’s shares
trading at a premium or discount to its NAV or possibly face trading halts or delisting; (ii) certain ETFs seek to track the performance of an underlying index and will not attempt to take defensive positions under any market conditions, including
declining markets, which could result in losses; and (iii) because ETF shares trade on the secondary market, there is not guarantee that an active market will be developed or maintained, which could result in the ETF’s shares trading at a premium
or discount to its NAV. Investments in ETFs may involve duplication of management fees and certain other expenses, as the Fund indirectly bears its proportionate share of any expenses paid by the ETFs in which it invests.
Risks of Investing in Money Market Funds. Money market funds seek to preserve the value of shareholder
investments at $1.00 per share, but shareholders, such as the Fund, may still lose money by investing in such funds. In addition, a money market fund may impose a fee upon the sale of its shares or may temporarily suspend the ability to sell shares
if the fund’s liquidity falls below required minimums because of market conditions or other factors. The credit quality of a money market fund’s holdings can change rapidly in certain markets, and the default of a single holding could have an
adverse impact on the fund’s share price. A money market fund’s share price can also be negatively affected during periods of high redemption pressures, illiquid markets, and/or significant market volatility.
Performance
As of the date of this Prospectus, the Fund has not commenced operations and therefore does not have a performance history. Once available, the Fund’s
performance information will be accessible online at www.[________].com and will provide some indication of the risks of investing in the Fund.
Management
Investment Adviser
Milliman Financial Risk Management LLC (“Milliman”) serves as investment adviser to the Fund.
Portfolio Managers
The following persons serve as portfolio managers of the Fund.
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●
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Robert T. Cummings, Principal & Head of Portfolio Management at Milliman.
|
|
●
|
Maria Schiopu, Principal & Head of Portfolio Management at Milliman.
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109
|
●
|
Jeff Greco, Principal & Head of Strategy Research at Milliman.
|
|
●
|
Jordan Rosenfeld, Portfolio Manager at Milliman.
|
Each portfolio manager is jointly and primarily responsible for the day-to-day management of the Fund’s portfolio and has served in such capacity
since the Fund’s inception in 2021.
Purchase and Sale of Shares
Shares are available as underlying investment options for variable insurance contracts and variable life insurance policies (each, a “variable contract,” and, collectively, the “variable contracts”) issued by insurance companies. These insurance companies are the record owners of the separate accounts
holding the Shares. You do not buy, sell or exchange Shares directly; rather, you choose investment options through your variable contracts. The insurance companies then cause the separate accounts to purchase and redeem Shares according to
the investment options you choose.
Tax Information
The dividends and distributions paid by the Fund to the insurance company separate accounts will consist of ordinary income, capital gains, or some
combination of both. Because Shares must be purchased through separate accounts used to fund variable contracts, such dividends and distributions will be exempt from current taxation by owners of variable contracts (each, a “contract owner,” and, collectively “contract owners”) if left to accumulate within a separate account. Consult the variable contract prospectus for additional tax
information.
Payments to Insurance Companies and Other Financial Intermediaries
If you allocate contract value to the Fund through an insurance company or other financial intermediary, the Fund, Milliman, the Fund’s distributor or
their related companies may pay the insurance company and/or its affiliates or other intermediary for the sale of Shares and related services. These payments may create a conflict of interest by influencing the insurance company or other
intermediary and your salesperson to recommend an indirect investment in the Fund over another investment. The prospectus or other disclosure documents for the variable contracts may contain additional information about these payments, if any.
You may also ask your salesperson or financial intermediary, or visit your financial intermediary’s website, for more information.
110
Fund Summary: Milliman S&P 500 6-Month Par Down with Par Up Fund – Feb/Aug
Investment Objective
The Fund seeks to provide exposure to the S&P 500 Index, while limiting losses to 50% of the losses associated with S&P 500 Index performance
and participating in S&P 500 Index gains at a declared rate, prior to taking into account any fees or expenses or the performance of any fixed income exposure included in the Fund’s portfolio, over the period from February 1, 2022 through
July 31, 2022.
Fees and Expenses of the Fund
This table describes the fees and expenses that you may pay if you buy, hold and sell shares of the Fund (“Shares”).
This table and the example below do not include any fees or sales charges imposed by your variable product. If they were included, the expenses listed below would be higher.
Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment)
|
Class 3
|
|
|
Management Fees
|
0.49%
|
|
Distribution and Service (12b-1) Fees
|
0.25%
|
|
Other Expenses(1)
|
0.50%
|
|
Acquired Fund Fees and Expenses(1)
|
[_.__]%
|
|
Total Annual Fund Operating Expenses
|
1.24%
|
|
Fee Waiver and/or Expense Reimbursement(2)(3)
|
(0.25)%
|
|
Total Annual Fund Operating Expenses After Fee Waiver and/or Expense Reimbursement
|
0.99%
|
|
(1)
|
“Other Expenses” and “Acquired Fund Fees and Expenses” are based on estimated amounts for the current fiscal year.
|
|
(2)
|
The Fund’s investment adviser, Milliman Financial Risk Management LLC (“Milliman”), has contractually
agreed to waive advisory fees and/or reimburse expenses to the extent necessary to limit the Fund’s total annual Fund operating expenses (excluding taxes, interest, brokerage fees and commissions, Rule 12b-1 fees, acquired fund fees and
expenses, short-sale dividend expenses, administrative services fees, other expenses that are capitalized in accordance with generally accepted accounting principles, and extraordinary or non-routine expenses not incurred in the
ordinary course of the Fund’s business) to 0.74% of the Fund's average daily net assets (the “Expense Limitation Agreement”) until at least November 1, 2022. During its term, the Expense
Limitation Agreement cannot be terminated or amended to increase the applicable limit without approval of the Board of Trustees of the Trust (the “Board”). Milliman may recoup from the Fund any
advisory fees waived or expenses reimbursed pursuant to the Expense Limitation Agreement for a period of three years from the date on which such waiver or reimbursement occurred; provided, however, that such recoupment shall not be made
if it would cause the Fund’s total annual Fund operating expenses to exceed the lesser of (a) the expense limitation in effect at the time of the reimbursement, or (b) the expense limitation in effect at the time of recoupment, if any.
|
|
(3)
|
In addition to the Expense Limitation Agreement, Milliman has contractually agreed to waive its advisory fees in an amount equal to the Fund’s
acquired fund fees and expenses until at least November 1, 2022 (the “Fee Waiver”). This contract cannot be terminated or modified without the consent of the Board.
|
Example
This example is intended to help you compare the cost of investing in the Fund with the cost of investing in other funds. This example assumes that you
invest $10,000 in the Fund for the time periods indicated and then sell all of your Shares at the end of those periods. This example also assumes that your investment has a 5% return each year and that the Fund’s operating expenses remain at
current levels and that the Expense Limitation Agreement and Fee Waiver remain in place for their contractual periods. Although your actual costs may be higher or lower, your costs, based on these assumptions, would be:
|
1 Year
|
3 Years
|
|
|
Class 3
|
$104
|
$384
|
This example does not include any fees or sales charges imposed by your variable product. If they were included, the expenses listed above would be
higher.
111
Portfolio Turnover
The Fund pays transaction costs, such as commissions, when it purchases and sells securities (or “turns over” its portfolio). A higher portfolio turnover
will cause the Fund to incur additional transaction costs. These costs, which are not reflected in Total Annual Fund Operating Expenses or in the example, may affect the Fund’s performance. Because the Fund has not yet commenced investment
operations, no portfolio turnover information is available at this time.
Principal Investment Strategies
The Fund seeks to achieve its investment objective by transacting in FLexible EXchange® Options (“FLEX Options”)
and by separately maintaining a collateral portfolio (the “Collateral Portfolio”), which is designed primarily to serve as margin or collateral for the Fund’s FLEX Options positions and secondarily to
enhance the Fund’s upside S&P 500 Index FLEX Options’ exposure (i.e., by utilizing anticipated income to measure the ability to purchase additional FLEX Options). FLEX Options are exchange-traded
options contracts with uniquely customizable terms. In general, an options contract is an agreement between a buyer and seller that gives the purchaser of the option the right to buy or sell a particular asset at a specified future date at an
agreed upon price, commonly known as the “strike price.” The reference assets for the Fund’s FLEX Options positions will include the S&P 500 Index, which is a large-capitalization, market-weighted, U.S. equities index that tracks the price
(excluding dividends) of 500 leading companies in leading industries of the U.S. economy, and certain exchange-traded funds (“ETFs”), as described further below.
The Collateral Portfolio may be invested in short-term fixed-income securities, including corporate bonds and other corporate debt securities,
asset-backed securities (“ABS”), securities issued by the U.S. Government or its agencies and instrumentalities, securities issued by non-U.S. governments or their agencies and instrumentalities, money
market securities and funds, other interest-bearing instruments, cash, ETFs that primarily invest in any of the foregoing instruments, options on ETFs and options box spreads. An options box spread is the combination of different options trades
that have offsetting spreads (e.g., purchases and sales on the same underlying instrument, such as an index or an ETF, but with different strike prices and/or expiration dates) for the purpose of
generating income. The Fund may invest in short-term fixed income securities or other instruments, including through ETFs, of any maturity and credit quality. The Fund will generally invest up to 35% of its net assets in one or more ETFs that
provide exposure to investment grade corporate bonds.
Due to the unique mechanics of the Fund’s strategy, the return an investor can expect to receive from an investment in the Fund has characteristics that
are distinct from the returns of many other investment vehicles. It is important that an investor understand these characteristics before making an investment in the Fund.
In seeking to achieve its investment objective, the Fund seeks to produce pre-determined outcomes (the “Outcomes”)
that are based upon the performance of the S&P 500 Index over a six-month period (the “Outcome Period”). The initial Outcome Period for the Fund is February 1, 2022 through July 31, 2022. Following the
initial Outcome Period, each subsequent Outcome Period will be a six-month period commencing upon the expiration of the prior Outcome Period. The Fund seeks to achieve the Outcomes by purchasing and writing (selling) FLEX Options to create layers
within the Fund’s portfolio. One layer is designed to produce returns that correlate to those of the S&P 500 Index for the Outcome Period at a declared rate (the “Par Up Rate”) if the S&P 500 Index
experiences gains during that time, as described below. A separate layer is designed to limit losses to 50% of the losses experienced by the S&P 500 Index for the Outcome Period (the “Par Down Rate”). There is no guarantee that the Fund will be successful in its attempt to produce returns that correlate to those of the S&P 500 Index at the Par Up
Rate or limit losses that correlate to those of the S&P 500 Index at the Par Down Rate.
Milliman Financial Risk Management, LLC (“Milliman”), the investment adviser of the Fund, seeks to establish the
Par Down Rate by writing 50% of the exposure of one put FLEX Option on the S&P 500 Index with a strike price that is equal to the value of the S&P 500 Index at the beginning of the Outcome Period.
Milliman seeks to establish the Par Up Rate by purchasing long call FLEX Options on the S&P 500 Index with a strike price approximately equal to
the value of the S&P 500 Index at the beginning of the Outcome Period. Milliman purchases these FLEX Options with a portion of the Fund’s net assets plus (i) the cash received from
112
writing the put FLEX Option designed to create the Par Down Rate, (ii) additional cash received by utilizing FLEX Options to create a put spread (the
“Put Spread Strategy”) on fixed income securities and/or one or more ETFs that provide exposure to fixed income securities, and (iii) yield received from the Collateral Portfolio. Milliman seeks to achieve
the Put Spread Strategy for the Fund by writing a put FLEX Option on an underlying asset at a strike price at or lower than the underlying asset’s market price or current value at the beginning of the Outcome Period, and buying a put FLEX Option
on the same underlying asset at a lower strike price than the written put FLEX Option.
The Par Up Rate is the rate at which the Fund will seek to track any upside market performance of the S&P 500 Index. Milliman calculates the Par
Up Rate based upon (i) its evaluation of prevailing market conditions on the first day of the Outcome Period and (ii) the total number of long call FLEX Options on the S&P 500 Index that it is able to purchase at that time. As of the date of
this Prospectus, and assuming current market conditions persist, Milliman expects that the Par Up Rate will be between the below ranges (both gross and net of Fund fees and expenses). Any fees or expenses imposed by your variable product, and any
other expenses incurred by the Fund, will have the effect of further reducing the Par Up Rate. Once calculated, the Par Up Rate for a particular Outcome Period will not change during that Outcome Period;
however, in certain market conditions, the performance of the Collateral Portfolio and the Put Spread Strategy could reduce the impact of the Par Up Rate.
|
Share Class
|
Estimated Par Up Rate Ranges
(As of [___])
|
|
|
Prior to Taking into Account Fund Fees and Expenses
|
After Taking into Account Fund Fees and Expenses
|
|
|
Class 3
|
[__]% and [__]%
|
[__]% and [__]%
|
The Par Down Rate is the rate at which the Fund will seek to track any downside market performance of the S&P 500 Index. The Par Down Rate is
designed to limit losses in the Fund’s S&P 500 Index exposure to 50% for the Outcome Period. The Fund seeks to limit losses against its S&P 500 Index exposure prior to taking into account any fees or expenses or the performance of the
Collateral Portfolio or the Put Spread Strategy. The Par Down Rate is not operative against losses in the Collateral Portfolio or the Put Spread Strategy. If the Collateral Portfolio and/or the Put Spread
Strategy experiences losses, it could have the effect of reducing the impact of, or completely eliminating, the Par Down Rate on the Fund’s S&P 500 Index exposure. In certain market conditions, the performance of the Collateral Portfolio
and/or the Put Spread Strategy could cause the Fund to significantly underperform the S&P 500 Index. The following table reflects the Par Down Rate both gross and net of Fund fees and expenses:
|
Share Class
|
Par Down Rate
(As of [___])
|
|
|
Prior to Taking into Account Fund Fees and Expenses
|
After Taking into Account Fund Fees and Expenses
|
|
|
Class 3
|
50%
|
[__]%
|
The definitive Par Up Rate and Par Down Rate will be set forth on the Fund’s website. The Fund’s website will also provide information relating to the
Outcomes on a daily basis, including the Fund’s position relative to the Par Up Rate and the Par Down Rate. You may also contact your insurance company or other financial intermediary for more information.
Additionally, the Fund’s net asset value (“NAV”) will not increase or decrease at the same rate as the
S&P 500 Index because the Fund’s strategy relies upon the performance of the Collateral Portfolio and the Put Spread Strategy, in addition to the value of the Fund’s FLEX Options positions on the S&P 500 Index. While Milliman anticipates
that the Fund’s NAV will generally move in the same direction as the S&P 500 Index (meaning that the Fund’s NAV will generally increase if the S&P 500 Index experiences gains or decrease if the S&P 500 Index experiences losses), the
Fund’s NAV will not decrease at the same rate as the S&P 500 Index (especially when factoring in the Par Down Rate and the performance of the Collateral Portfolio and the Put Spread Strategy) and will not increase at the same rate as the
S&P 500 Index (especially when factoring in the Par Up Rate and the performance of the Collateral Portfolio and the Put Spread Strategy). Similarly, the amount of time remaining until the end of the
113
Outcome Period also affects the impact of the Par Down Rate on the Fund’s NAV, because the Par Down Rate may not be in full effect prior to the end of
the Outcome Period.
The FLEX Options utilized in the Fund’s portfolio are each set to expire on the last day of the Outcome Period. The customizable nature of FLEX Options
will allow Milliman to select the strike price at which each FLEX Option will be exercised at the expiration of the FLEX Option term. At the commencement of the Outcome Period, Milliman will specifically select the strike price for each FLEX Option
in a manner designed to achieve the Outcomes when the FLEX Options are exercised on the final day of the Outcome Period, depending on the anticipated performance of the S&P 500 Index, the Collateral Portfolio and the Put Spread Strategy over
the duration of that Outcome Period.
The hypothetical graphical illustrations provided below are designed to illustrate the Outcomes based upon the
hypothetical performance of the S&P 500 Index for an investor who holds Shares for the entirety of the Outcome Period. The hypothetical graphical illustrations do not include any fees or expenses imposed by your variable product or expenses
incurred by the Fund, and do not reflect the performance of the Collateral Portfolio or the Put Spread Strategy. Additional hypothetical graphical representations of the Outcomes are provided in “Additional Information About the Funds and
the Risks of Investing.” There is no guarantee that the Fund will be successful in its attempt to achieve the Outcomes for the Outcome Period.
The following table contains hypothetical examples designed to illustrate the Outcomes the Fund seeks to
achieve over the Outcome Period, based upon the performance of the S&P 500 Index from (100)% to 100% after taking into account the Par Up Rate and the Par Down Rate, but prior to taking into account any fees or expenses or the performance of
the Collateral Portfolio or the Put Spread Strategy. The table is provided for illustrative purposes only and does not provide every possible performance scenario for Shares over the course of the Outcome Period.
There is no guarantee that the Fund will be successful in its attempt to achieve the Outcomes for an Outcome Period. The table is not intended to predict or project the performance of the FLEX Options or the Fund. Investors should not take this information as an assurance of the expected
performance of the S&P 500 Index or the Fund. Actual Fund performance will vary with fluctuations in the performance of the Collateral Portfolio and the Put Spread Strategy, in addition to the value of the Fund’s FLEX Options
positions on the S&P
114
500 Index, during the Outcome Period, among other factors. The performance of
the Collateral Portfolio and the Put Spread Strategy could significantly impact the performance of the Fund, which could prevent the Fund from achieving the Outcomes that it seeks to produce. The table does not reflect any fees or
expenses imposed by your variable product or expenses incurred by the Fund. If it did, the returns shown for the Fund would be lower. Please refer to the Fund’s website, which provides updated information relating to this table on a daily basis
throughout the Outcome Period. Please contact your insurance company or other financial intermediary for more information.
|
Index/Fund
|
Hypothetical Performance1
|
|||||||||||
|
S&P 500 Index Price Performance
|
(100)%
|
(50)%
|
(20)%
|
(10)%
|
(5)%
|
0%
|
5%
|
10%
|
15%
|
20%
|
50%
|
100%
|
|
Fund Performance at NAV
|
(50)%2
|
(25)%2
|
(10)%2
|
(5)%2
|
(2.5)%2
|
0%
|
3.4%3
|
6.7%3
|
10.05%3
|
13.4%3
|
33.5%3
|
67%3
|
| 1 |
Does not take into account any fees or expenses or the performance of the Collateral Portfolio or the Put Spread Strategy.
|
| 2 |
Reflects the impact of the Par Down Rate.
|
| 3 |
Reflects the impact of an assumed Par Up Rate of 67%.
|
Understanding Outcomes. The Outcomes the Fund seeks to achieve are measured based upon the
Fund’s NAV on the first day of the Outcome Period. The Outcome Period begins on the day Milliman transacts in the FLEX Options on behalf of the Fund, and ends on the day those FLEX Options expire. An investor who
purchases Shares after the commencement of the Outcome Period will likely have purchased Shares at a different NAV than the NAV on the first day of the Outcome Period (the NAV upon which the Outcomes are based) and may experience investment
outcomes very different from those the Fund seeks to achieve, especially when factoring in any fees or expenses or the performance of the Collateral Portfolio and the Put Spread Strategy. An investor who redeems Shares prior to the end of the
Outcome Period may also experience investment outcomes very different from those the Fund seeks to achieve. The Outcomes are designed with the expectation that an investor will hold Shares on the day that Milliman transacts in the FLEX Options on
behalf of the Fund, and on the day those FLEX Options expire. There is no guarantee that the Fund will be successful in its attempt to achieve the Outcomes.
Understanding the Par Up Rate. Unlike other investment products, the potential returns an
investor can receive from an investment in the Fund are subject to the Par Up Rate. This means that if the S&P 500 Index experiences gains for the Outcome Period, an investor in the Fund will only experience
a percentage of those gains (equal to the Par Up Rate multiplied by the S&P 500 Index gains). Milliman calculates the Par Up Rate for each Outcome Period based upon (i) its evaluation of prevailing market conditions on the first day
of the Outcome Period and (ii) the total number of long call FLEX Options on the S&P 500 Index that it is able to purchase at that time. In certain market conditions, the performance of the Collateral
Portfolio and the Put Spread Strategy could reduce the impact of the Par Up Rate. An investor should consider the amount and impact of the Par Up Rate, and the Fund’s position relative to it, before investing in the Fund.
Understanding the Par Down Rate. The Par Down Rate is intended to limit losses in the
Fund’s S&P 500 Index exposure to 50% of the losses the S&P 500 Index experiences for the Outcome Period. While the Fund seeks to provide returns that are limited to 50% (prior to taking into account any fees or expenses or the performance
of the Collateral Portfolio or the Put Spread Strategy) for investors who hold Shares for the entire Outcome Period, there is no guarantee it will successfully do so. In addition, the Par Down Rate is not
operative against losses in the Collateral Portfolio or the Put Spread Strategy. If the Collateral Portfolio and/or the Put Spread Strategy experiences losses, it could have the effect of reducing the impact of, or completely eliminating, the
Par Down Rate on the Fund’s S&P 500 Index exposure. In certain market conditions, the performance of the Collateral Portfolio and/or the Put Spread Strategy could cause the Fund to significantly underperform the S&P 500 Index.
Investors who purchase Shares at the beginning of the Outcome Period may lose their entire investment. Investors who purchase Shares after the Outcome Period has begun may also lose their entire investment. An investment in the Fund is only
appropriate for investors willing to bear those losses.
115
Fund Rebalance. Milliman implements the Fund’s strategy on a semi-annual basis, seeking to
produce the Outcomes for an Outcome Period. On the last business day of any stated Outcome Period, all of the Fund’s existing FLEX Options, which includes those used to establish the Par Up Rate, the Par Down Rate and the Put Spread Strategy,
will expire and Milliman will transact in a new set of FLEX Options on the same business day, which will commence a new Outcome Period beginning the following business day. At that same time, Milliman will also evaluate whether to make any
adjustments to the Collateral Portfolio. Accordingly, Shares can be held indefinitely if investors determine to participate in additional Outcome Periods.
Approximately one week prior to the end of each Outcome Period, the Fund will file a prospectus supplement, which will notify existing investors of
(i) the date on which the existing Outcome Period will end; (ii) the date on which the new Outcome Period will commence; and (iii) the anticipated ranges of the Par Up Rate that will be used for the new Outcome Period. Immediately preceding the
commencement date of the new Outcome Period, the Fund will file a prospectus supplement disclosing the Fund’s final Par Up Rate (both gross and net of Fund fees and expenses) for the new Outcome Period. This information will also be available
online at www.[___________].com, and on your insurance company’s website. Please contact your insurance company or other financial intermediary for more information.
Fund Classification. The Fund is classified as “non-diversified” under the Investment
Company Act of 1940, as amended (the “1940 Act”).
Principal Risks
You could lose money by investing in the Fund. An investment in the Fund is not a deposit of a bank and is not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other governmental agency. There can be no assurance that the Fund’s investment objectives will be achieved.
Downside Loss Par Down Rate Risk. There can be no guarantee that the Fund will be successful in its strategy
to limit losses in the Fund’s S&P 500 Index exposure to 50% of the losses experienced by the S&P 500 Index over the Outcome Period. The success of the Par Down Rate also depends upon the performance of the Collateral Portfolio and the Put
Spread Strategy. If the Collateral Portfolio and/or the Put Spread Strategy experiences losses, it could have the effect of reducing the impact of, or completely eliminating, the Par Down Rate on the Fund’s
S&P 500 Index exposure. In certain market conditions, the performance of the Collateral Portfolio and/or the Put Spread Strategy could cause the Fund to significantly underperform the S&P 500 Index. Despite the intended Par Down Rate,
an investor could lose their entire investment. In the event an investor purchases Shares after the date on which Milliman transacted in the FLEX Options on behalf of the Fund, or redeems Shares prior to the expiration of those
FLEX Options, the Par Down Rate that the Fund seeks to provide may not be available or fully applicable.
Risk of the Par Up Rate on Upside Returns. The Fund’s strategy is designed to produce returns that correlate
to those of the S&P 500 Index at the Par Up Rate if Shares are bought on the day on which Milliman transacts in the FLEX Options on behalf of the Fund and held until those FLEX Options expire at the end of the Outcome Period. Accordingly, the
Fund will not fully participate in any gains achieved by the S&P 500 Index. In addition, in the event an investor purchases Shares after the date on which Milliman transacted in the FLEX Options on behalf of the Fund, or redeems Shares prior
to the expiration of those FLEX Options, the returns realized by that investor may not match those that the Fund seeks to achieve pursuant to the Par Up Rate. In certain market conditions, the performance of
the Collateral Portfolio and the Put Spread Strategy could reduce the impact of the Par Up Rate. An investor should consider the amount and impact of the Par Up Rate, and the Fund’s position relative to it, before investing in the Fund.
Par Up Rate Change Risk. Because the Par Up Rate for each Outcome
Period is calculated based upon (i) Milliman’s evaluation of prevailing market conditions on the first day of the Outcome Period and (ii) the total number of long call FLEX Options on the S&P 500 Index that Milliman is able to purchase at
that time, the Par Up Rate may rise or fall from one Outcome Period to the next. Any change in the Par Up Rate could be significant and it is unlikely to remain the same for consecutive Outcome Periods.
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FLEX Options Risk. The Fund will transact in FLEX Options issued and guaranteed for settlement by the OCC. The
Fund bears the risk that the OCC will be unable or unwilling to perform its obligations under the FLEX Options contracts, which could result in significant losses to the Fund. In less liquid markets, terminating a FLEX Option may require the
payment of a premium or acceptance of a discounted price, and may take longer to complete. In addition, a less liquid trading market may adversely impact the value of the Fund’s FLEX Options and therefore the NAV of the Fund. In addition, the value
of the Fund’s FLEX Options positions is not anticipated to increase or decrease at the same rate as the reference asset; and while it is anticipated that they will generally move in the same direction, it is possible that they may move in different
directions. Certain FLEX Options positions may also expire worthless. The use of FLEX Options involves leverage, which can cause the Fund’s portfolio to be more volatile than if the portfolio had not been leveraged. Leverage can significantly
magnify the effect of price movements of the reference asset, disproportionately increasing the Fund’s losses and reducing the Fund’s opportunities for gains when the reference asset changes in unexpected ways. In some instances, such leverage
could result in losses that exceed the original amount invested.
Investment Objective and Outcomes Risk. There is no guarantee that the Fund will be successful in its attempt
to achieve its investment objective and/or the Outcomes, and an investor could lose some or all of their investment in the Fund. Certain circumstances under which the Fund might not achieve its objective and/or the Outcomes include, but are not
limited to (i) if the Fund disposes of FLEX Options, (ii) if the Fund is unable to maintain the proportional relationship based on the number of FLEX Options in the Fund’s portfolio, (iii) significant accrual of Fund expenses in connection with
effecting the Fund’s principal investment strategy, (iv) losses incurred by the Fund’s holdings in the Collateral Portfolio and/or losses resulting from the Put Spread Strategy, or (iv) adverse tax law changes affecting the treatment of FLEX
Options.
Tax Risk. The Fund intends to elect, and to qualify each year, to be treated as a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”). As a RIC, the Fund will not be subject to U.S. federal income tax on the portion
of its net investment income and net capital gain that it distributes to shareholders, provided that it satisfies certain requirements of the Code. To maintain its status as a RIC, the Fund must meet certain income, diversification and
distributions tests. For purposes of the diversification test, the identification of the issuer (or, in some cases, issuers) of a particular Fund investment can depend on the terms and conditions of that investment. In particular, there is no
published IRS guidance or case law on how to determine the “issuer” of certain derivatives that the Fund will enter into and the Fund has not received a private letter ruling on this point. Therefore, there is a risk that the Fund will not meet the
Code’s diversification requirements and will not qualify, or will be disqualified, as a RIC. If the Fund does not qualify as a RIC for any taxable year and certain relief provisions are not available, the Fund’s taxable income will be subject to
tax at the Fund level and to a further tax at the shareholder level when such income is distributed.
The Fund also intends to comply with the diversification requirements of Section 817(h) of the Code, and the regulations thereunder, relating to the
tax-deferred status of variable accounts that are based on insurance company separate accounts (referred to as “segregated asset accounts” for federal income tax purposes). These diversification requirements apply in addition to the RIC
diversification requirements discussed above. There also is no published guidance or case law on how to determine the “issuer” of the derivatives referred to above for purposes of the diversification requirements of Section 817(h) of the Code and
the Fund has not received a private letter ruling on this point. If these requirements are not met, or under other circumstances, such as if the Fund does not qualify as a RIC for any taxable year, it is possible that the contract owners (rather
than the insurance company) will be treated for federal income tax purposes as the taxable owners of the assets held by the segregated asset accounts.
Clearing Member Default Risk. The Fund will hold FLEX Options through accounts at members of clearing houses (“clearing members”) rather than a bank or a broker. Assets deposited by the Fund with any clearing member as margin for its FLEX Options positions may, in certain circumstances, be used to satisfy losses of other
clients of the Fund’s clearing member where such assets may be held in commingled omnibus accounts. In addition, although clearing members guarantee performance of their clients’ obligations to the clearing house, there is a risk that the assets of
the Fund might not be fully protected in the event of the clearing member’s bankruptcy, as the Fund would be limited to recovering only a pro rata share of all available funds segregated on behalf of the
clearing member’s customers for the relevant account class.
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Debt Securities Risk. The prices of debt securities will be affected by changes in interest rates, the
creditworthiness of the issuer and other factors. These risks could affect the value of investments in which the Fund invests, possibly causing the Fund’s NAV to be reduced and fluctuate more than other types of investments. During periods of
falling interest rates, an issuer of a callable bond may repay the security before its stated maturity, and the Fund may have to reinvest the proceeds in securities with lower yields, which would result in a decline in the Fund’s income, or in
securities with greater risks or with other less favorable features. Changing interest rates, including rates that fall below zero, may have unpredictable effects on markets, result in heightened market volatility and detract from the Fund’s
performance to the extent the Fund is exposed to such interest rates. An increase in interest rates will generally cause the value of fixed-income securities held by the Fund to decline, may lead to heightened volatility in the fixed-income
markets and may adversely affect the liquidity of certain fixed-income investments, including those held by the Fund. Risks associated with rising interest rates are heightened given that interest rates in the U.S. are near historic lows.
Adjustable-rate instruments also react to interest rate changes in a similar manner, although generally to a lesser degree (depending, however, on the characteristics of the reset terms, including the index chosen, frequency of reset and reset
caps or floors, among other factors). Interest rate sensitivity is generally more pronounced and less predictable in instruments with uncertain payment or prepayment schedules and also for those with longer maturities.
Foreign Securities and Credit Exposure Risk. U.S. dollar-denominated securities carrying foreign credit exposure
may be affected by unfavorable political, economic or governmental developments that could affect payments of principal and interest. Furthermore, the value of the Fund’s foreign investments (whether direct or indirect) may be adversely affected by
political and social instability in their home countries, by changes in economic or taxation policies in those countries, or by the difficulty in enforcing obligations in those countries. Foreign companies generally may be subject to less stringent
regulations than U.S. companies, including financial reporting requirements and auditing and accounting controls. As a result, there generally is less publicly available information about foreign companies than about U.S. companies. Trading in many
foreign securities may be less liquid and more volatile than U.S. securities due to the size of the market or other factors.
U.S. Government Securities Risk. U.S. Government securities are subject to interest rate risk but generally do
not involve the credit risks associated with investments in other types of debt securities. As a result, the yields available from U.S. Government securities are generally lower than the yields available from other debt securities. U.S. Government
securities are guaranteed only as to the timely payment of interest and the payment of principal when held to maturity. While securities issued or guaranteed by U.S. federal government agencies are backed by the full faith and credit of the U.S.
Department of the Treasury, securities issued by government sponsored entities are solely the obligation of the issuer and generally do not carry any guarantee from the U.S. Government.
ABS Risk. ABS are subject to the general debt securities risks described above. In addition, ABS may be less
liquid than other bonds, and may be more sensitive than other bonds to the market’s perception of issuers and creditworthiness of payees, which may result in the Fund experiencing difficulty selling or valuing these securities. ABS markets have
experienced extraordinary weakness and volatility at various times in recent years, and may decline quickly in the event of a substantial economic or market downturn. Accordingly, these securities may be subject to greater risk of default during
periods of economic downturn than other securities, which could result in possible losses to the Fund.
Issuer Risk. The performance of the Fund depends on the performance of individual securities to which the Fund
has exposure. The Fund may be adversely affected if an issuer of underlying securities held by the Fund is unable or unwilling to repay principal or interest when due. Changes in the financial condition or credit rating of an issuer of those
securities may cause the value of the securities to decline.
Management Risk. The Fund is subject to management risk because it is an actively managed portfolio. Milliman
will apply investment techniques and risk analyses in making investment decisions for the Fund, but there can be no guarantee that the Fund will meet its investment objective and/or the Outcomes. In addition, Milliman does not use defensive
strategies or attempt to reduce the Fund’s exposures to poor performing positions during an Outcome Period. This differs from funds that are managed to seek to outperform a benchmark index. Therefore, in the event of a general market decline, the
Fund’s value may fall more than the value of another fund that does attempt to hedge against such market declines.
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Market Risk. The Fund could lose money over short periods due to short-term market movements and over longer
periods during more prolonged market downturns. Assets may decline in value due to factors affecting financial markets generally or particular asset classes or industries represented in the markets. The value of a FLEX Option or other asset may
also decline due to general market conditions, economic trends or events that are not specifically related to the issuer of the security or other asset, or due to factors that affect a particular issuer, country, region, market, industry, sector or
asset class.
Non-Diversification Risk. The Fund may invest a relatively high percentage of its assets in a limited number of
issuers. As a result, the Fund may be more susceptible to a single adverse economic or regulatory occurrence affecting one or more of these issuers, experience increased volatility and be highly invested in certain issuers.
Large Shareholder Risk. At times, the Fund may experience adverse effects when certain large shareholders,
including insurance company separate accounts, redeem large amounts of shares of the Fund. Large redemptions may cause the Fund to sell portfolio holdings at times when it would not otherwise do so and may increase transaction costs and/or result
in an increase to the Fund’s expense ratio. A large redemption could be detrimental to the Fund and its remaining shareholders.
Risks of Investing in ETFs. In addition to the risks associated with the underlying assets held by the ETFs in
which the Fund invests, investments in ETFs are also subject to the following additional risks: (i) only authorized participants may engage in transactions directly with ETFs but none are obligated to do so, which could result in an ETF’s shares
trading at a premium or discount to its NAV or possibly face trading halts or delisting; (ii) certain ETFs seek to track the performance of an underlying index and will not attempt to take defensive positions under any market conditions, including
declining markets, which could result in losses; and (iii) because ETF shares trade on the secondary market, there is not guarantee that an active market will be developed or maintained, which could result in the ETF’s shares trading at a premium
or discount to its NAV. Investments in ETFs may involve duplication of management fees and certain other expenses, as the Fund indirectly bears its proportionate share of any expenses paid by the ETFs in which it invests.
Risks of Investing in Money Market Funds. Money market funds seek to preserve the value of shareholder
investments at $1.00 per share, but shareholders, such as the Fund, may still lose money by investing in such funds. In addition, a money market fund may impose a fee upon the sale of its shares or may temporarily suspend the ability to sell shares
if the fund’s liquidity falls below required minimums because of market conditions or other factors. The credit quality of a money market fund’s holdings can change rapidly in certain markets, and the default of a single holding could have an
adverse impact on the fund’s share price. A money market fund’s share price can also be negatively affected during periods of high redemption pressures, illiquid markets, and/or significant market volatility.
Performance
As of the date of this Prospectus, the Fund has not commenced operations and therefore does not have a performance history. Once available, the Fund’s
performance information will be accessible online at www.[________].com and will provide some indication of the risks of investing in the Fund.
Management
Investment Adviser
Milliman Financial Risk Management LLC (“Milliman”) serves as investment adviser to the Fund.
Portfolio Managers
The following persons serve as portfolio managers of the Fund.
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●
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Robert T. Cummings, Principal & Head of Portfolio Management at Milliman.
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Maria Schiopu, Principal & Head of Portfolio Management at Milliman.
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Jeff Greco, Principal & Head of Strategy Research at Milliman.
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●
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Jordan Rosenfeld, Portfolio Manager at Milliman.
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Each portfolio manager is jointly and primarily responsible for the day-to-day management of the Fund’s portfolio and has served in such capacity
since the Fund’s inception in 2021.
Purchase and Sale of Shares
Shares are available as underlying investment options for variable insurance contracts and variable life insurance policies (each, a “variable contract,” and, collectively, the “variable contracts”) issued by insurance companies. These insurance companies are the record owners of the separate accounts
holding the Shares. You do not buy, sell or exchange Shares directly; rather, you choose investment options through your variable contracts. The insurance companies then cause the separate accounts to purchase and redeem Shares according to
the investment options you choose.
Tax Information
The dividends and distributions paid by the Fund to the insurance company separate accounts will consist of ordinary income, capital gains, or some
combination of both. Because Shares must be purchased through separate accounts used to fund variable contracts, such dividends and distributions will be exempt from current taxation by owners of variable contracts (each, a “contract owner,” and, collectively “contract owners”) if left to accumulate within a separate account. Consult the variable contract prospectus for additional tax
information.
Payments to Insurance Companies and Other Financial Intermediaries
If you allocate contract value to the Fund through an insurance company or other financial intermediary, the Fund, Milliman, the Fund’s distributor or
their related companies may pay the insurance company and/or its affiliates or other intermediary for the sale of Shares and related services. These payments may create a conflict of interest by influencing the insurance company or other
intermediary and your salesperson to recommend an indirect investment in the Fund over another investment. The prospectus or other disclosure documents for the variable contracts may contain additional information about these payments, if any.
You may also ask your salesperson or financial intermediary, or visit your financial intermediary’s website, for more information.
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Fund Summary: Milliman S&P 500 1-Year Buffer with Spread Fund – Sep
Investment Objective
The Fund seeks to provide exposure to the S&P 500 Index, while providing a buffer against the first 10% of losses associated with S&P 500
Index performance and participating in S&P 500 Index gains that exceed a declared spread, prior to taking into account any fees or expenses or the performance of any fixed income exposure included in the Fund’s portfolio, over the period from
September 1, 2021 through August 31, 2022.
Fees and Expenses of the Fund
This table describes the fees and expenses that you may pay if you buy, hold and sell shares of the Fund (“Shares”).
This table and the example below do not include any fees or sales charges imposed by your variable product. If they were included, the expenses listed below would be higher.
Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment)
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Class 3
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Management Fees
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0.49%
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Distribution and Service (12b-1) Fees
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0.25%
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Other Expenses(1)
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0.50%
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Acquired Fund Fees and Expenses(1)
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[_.__]%
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Total Annual Fund Operating Expenses
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1.24%
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Fee Waiver and/or Expense Reimbursement(2)(3)
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(0.25)%
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Total Annual Fund Operating Expenses After Fee Waiver and/or Expense Reimbursement
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0.99%
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(1)
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“Other Expenses” and “Acquired Fund Fees and Expenses” are based on estimated amounts for the current fiscal year.
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(2)
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The Fund’s investment adviser, Milliman Financial Risk Management LLC (“Milliman”), has contractually
agreed to waive advisory fees and/or reimburse expenses to the extent necessary to limit the Fund’s total annual Fund operating expenses (excluding taxes, interest, brokerage fees and commissions, Rule 12b-1 fees, acquired fund fees and
expenses, short-sale dividend expenses, administrative services fees, other expenses that are capitalized in accordance with generally accepted accounting principles, and extraordinary or non-routine expenses not incurred in the
ordinary course of the Fund’s business) to 0.74% of the Fund's average daily net assets (the “Expense Limitation Agreement”) until at least November 1, 2022. During its term, the Expense
Limitation Agreement cannot be terminated or amended to increase the applicable limit without approval of the Board of Trustees of the Trust (the “Board”). Milliman may recoup from the Fund any
advisory fees waived or expenses reimbursed pursuant to the Expense Limitation Agreement for a period of three years from the date on which such waiver or reimbursement occurred; provided, however, that such recoupment shall not be made
if it would cause the Fund’s total annual Fund operating expenses to exceed the lesser of (a) the expense limitation in effect at the time of the reimbursement, or (b) the expense limitation in effect at the time of recoupment, if any.
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(3)
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In addition to the Expense Limitation Agreement, Milliman has contractually agreed to waive its advisory fees in an amount equal to the Fund’s
acquired fund fees and expenses until at least November 1, 2022 (the “Fee Waiver”). This contract cannot be terminated or modified without the consent of the Board.
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Example
This example is intended to help you compare the cost of investing in the Fund with the cost of investing in other funds. This example assumes that you
invest $10,000 in the Fund for the time periods indicated and then sell all of your Shares at the end of those periods. This example also assumes that your investment has a 5% return each year and that the Fund’s operating expenses remain at
current levels and that the Expense Limitation Agreement and Fee Waiver remain in place for their contractual periods. Although your actual costs may be higher or lower, your costs, based on these assumptions, would be:
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1 Year
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3 Years
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|
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Class 3
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$104
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$384
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This example does not include any fees or sales charges imposed by your variable product. If they were included, the expenses listed above would be
higher.
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Portfolio Turnover
The Fund pays transaction costs, such as commissions, when it purchases and sells securities (or “turns over” its portfolio). A higher portfolio turnover
will cause the Fund to incur additional transaction costs. These costs, which are not reflected in Total Annual Fund Operating Expenses or in the example, may affect the Fund’s performance. Because the Fund has not yet commenced investment
operations, no portfolio turnover information is available at this time.
Principal Investment Strategies
The Fund seeks to achieve its investment objective by transacting in FLexible EXchange® Options (“FLEX Options”)
and by separately maintaining a collateral portfolio (the “Collateral Portfolio”), which is designed primarily to serve as margin or collateral for the Fund’s FLEX Options positions and secondarily to
enhance the Fund’s upside S&P 500 Index FLEX Options’ exposure (i.e., by utilizing anticipated income to measure the ability to purchase additional FLEX Options). FLEX Options are exchange-traded
options contracts with uniquely customizable terms. In general, an options contract is an agreement between a buyer and seller that gives the purchaser of the option the right to buy or sell a particular asset at a specified future date at an
agreed upon price, commonly known as the “strike price.” The reference assets for the Fund’s FLEX Options positions will include the S&P 500 Index, which is a large-capitalization, market-weighted, U.S. equities index that tracks the price
(excluding dividends) of 500 leading companies in leading industries of the U.S. economy, and certain exchange-traded funds (“ETFs”), as described further below.
The Collateral Portfolio may be invested in short-term fixed-income securities, including corporate bonds and other corporate debt securities,
asset-backed securities (“ABS”), securities issued by the U.S. Government or its agencies and instrumentalities, securities issued by non-U.S. governments or their agencies and instrumentalities, money
market securities and funds, other interest-bearing instruments, cash, ETFs that primarily invest in any of the foregoing instruments, options on ETFs and options box spreads. An options box spread is the combination of different options trades
that have offsetting spreads (e.g., purchases and sales on the same underlying instrument, such as an index or an ETF, but with different strike prices and/or expiration dates) for the purpose of
generating income. The Fund may invest in short-term fixed income securities or other instruments, including through ETFs, of any maturity and credit quality. The Fund will generally invest up to 35% of its net assets in one or more ETFs that
provide exposure to investment grade corporate bonds.
Due to the unique mechanics of the Fund’s strategy, the return an investor can expect to receive from an investment in the Fund has characteristics that
are distinct from the returns of many other investment vehicles. It is important that an investor understand these characteristics before making an investment in the Fund.
In seeking to achieve its investment objective, the Fund seeks to produce pre-determined outcomes (the “Outcomes”)
that are based upon the performance of the S&P 500 Index over a one-year period (the “Outcome Period”). The initial Outcome Period for the Fund is September 1, 2021 through August 31, 2022. Following the
initial Outcome Period, each subsequent Outcome Period will be a one-year period commencing upon the expiration of the prior Outcome Period. The Fund seeks to achieve the Outcomes by purchasing and writing (selling) FLEX Options to create layers
within the Fund’s portfolio. One layer is designed to produce returns that correlate to those of the S&P 500 Index for the Outcome Period if the S&P 500 Index experiences gains during that time in excess of a declared spread (the “Spread”), as described below. A separate layer is designed to produce returns that correlate to those of the S&P 500 Index for the Outcome Period that are buffered up to
10% if the S&P 500 Index experiences losses during that time (the “Buffer”). There is no guarantee that the Fund will be successful in its attempt to produce returns
that correlate to those of the S&P 500 Index in excess of the Spread or produce buffered returns against the Fund’s S&P 500 Index exposure.
Milliman Financial Risk Management, LLC (“Milliman”), the investment adviser of the Fund, seeks to establish the
Buffer by writing one put FLEX Option on the S&P 500 Index with a strike price that is 10% lower than the value of the S&P 500 Index at the beginning of the Outcome Period.
Milliman seeks to establish the Spread by purchasing long call FLEX Options on the S&P 500 Index and by writing put FLEX Options with a strike
price equal to the stated Buffer level. Milliman purchases these FLEX Options with
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a portion of the Fund’s net assets plus (i) the cash received from writing the put FLEX Option designed to create the Buffer, (ii) additional cash
received by utilizing FLEX Options to create a put spread (the “Put Spread Strategy”) on fixed income securities and/or one or more ETFs that provide exposure to fixed income securities, and (iii) yield
received from the Collateral Portfolio. Milliman seeks to achieve the Put Spread Strategy for the Fund by writing a put FLEX Option on an underlying asset at a strike price at or lower than the underlying asset’s market price or current value at
the beginning of the Outcome Period, and buying a put FLEX Option on the same underlying asset at a lower strike price than the written put FLEX Option.
The Spread is the minimum rate of return the S&P 500 Index must surpass for the Fund to track any upside market performance of the S&P 500
Index. Milliman calculates the Spread based upon (i) its evaluation of prevailing market conditions on the first day of the Outcome Period and (ii) the strike price of the long call FLEX Options on the S&P 500 Index that it is able to
purchase at that time. As of the date of this Prospectus, and assuming current market conditions persist, Milliman expects that the Spread will be between the below ranges (both gross and net of Fund fees and expenses). Any fees or expenses
imposed by your variable product, and any other expenses incurred by the Fund, will have the effect of further increasing the Spread. In addition, in certain market conditions, the performance of the
Collateral Portfolio and the Put Spread Strategy could cause the Fund to underperform relative to the S&P 500 Index, which would require greater upside performance of the S&P 500 Index to generate a total return of the Fund that
exceeds the Spread.
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Share Class
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Estimated Spread Ranges
(As of [___])
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|
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Prior to Taking into Account Fund Fees and Expenses
|
After Taking into Account Fund Fees and Expenses
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|
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Class 3
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[__]% and [__]%
|
[__]% and [__]%
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The Buffer is only operative against the first 10% of losses in the Fund’s S&P 500 Index exposure for the Outcome Period. If the S&P 500 Index
decreases in value by more than 10% during the Outcome Period, the Fund (and therefore investors in Shares) will experience all subsequent losses in the Fund’s S&P 500 Index exposure on a one-to-one basis for the Outcome Period. The Fund
seeks to produce buffered returns against its S&P 500 Index exposure prior to taking into account any fees or expenses or the performance of the Collateral Portfolio or the Put Spread Strategy. The Buffer
is not operative against losses in the Collateral Portfolio or the Put Spread Strategy. If the Collateral Portfolio and/or the Put Spread Strategy experiences losses, it could have the effect of reducing the impact of, or completely
eliminating, the Buffer on the Fund’s S&P 500 Index exposure. In certain market conditions, the performance of the Collateral Portfolio and/or the Put Spread Strategy could cause the Fund to significantly underperform the S&P 500
Index. The following table reflects the Buffer both gross and net of Fund fees and expenses:
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Share Class
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Buffer
(As of [___])
|
|
|
Prior to Taking into Account Fund Fees and Expenses
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After Taking into Account Fund Fees and Expenses
|
|
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Class 3
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10%
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[__]%
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The definitive Spread and Buffer will be set forth on the Fund’s website. The Fund’s website will also provide information relating to the Outcomes on
a daily basis, including the Fund’s position relative to the Spread and the Buffer. You may also contact your insurance company or other financial intermediary for more information.
Additionally, the Fund’s net asset value (“NAV”) will not increase or decrease at the same rate as the S&P
500 Index because the Fund’s strategy relies upon the performance of the Collateral Portfolio and the Put Spread Strategy, in addition to the value of the Fund’s FLEX Options positions on the S&P 500 Index. While Milliman anticipates that the
Fund’s NAV will generally move in the same direction as the S&P 500 Index (meaning that the Fund’s NAV will generally increase if the S&P 500 Index experiences gains or decrease if the S&P 500 Index experiences losses), the Fund’s NAV
may not decrease at the same rate as the S&P 500 Index (especially when factoring in the performance of the Collateral Portfolio and the Put Spread Strategy) and will not increase at the same rate as the S&P 500 Index (especially when
factoring in the Spread and the performance of the Collateral Portfolio and the Put
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Spread Strategy). Similarly, the amount of time remaining until the end of the Outcome Period also affects the impact of the Buffer on the Fund’s NAV,
because the Buffer may not be in full effect prior to the end of the Outcome Period.
The FLEX Options utilized in the Fund’s portfolio are each set to expire on the last day of the Outcome Period. The customizable nature of FLEX Options
will allow Milliman to select the strike price at which each FLEX Option will be exercised at the expiration of the FLEX Option term. At the commencement of the Outcome Period, Milliman will specifically select the strike price for each FLEX Option
in a manner designed to achieve the Outcomes when the FLEX Options are exercised on the final day of the Outcome Period, depending on the anticipated performance of the S&P 500 Index, the Collateral Portfolio and the Put Spread Strategy over
the duration of that Outcome Period.
The hypothetical graphical illustrations provided below are designed to illustrate the Outcomes based upon the
hypothetical performance of the S&P 500 Index for an investor who holds Shares for the entirety of the Outcome Period. The hypothetical graphical illustrations do not include any fees or expenses imposed by your variable product or expenses
incurred by the Fund, and do not reflect the performance of the Collateral Portfolio or the Put Spread Strategy. Additional hypothetical graphical representations of the Outcomes are provided in “Additional Information About the Funds and
the Risks of Investing.” There is no guarantee that the Fund will be successful in its attempt to achieve the Outcomes for the Outcome Period.
The following table contains hypothetical examples designed to illustrate the Outcomes the Fund seeks to
achieve over the Outcome Period, based upon the performance of the S&P 500 Index from (100)% to 100% after taking into account the Spread and the Buffer, but prior to taking into account any fees or expenses or the performance of the
Collateral Portfolio or the Put Spread Strategy. The table is provided for illustrative purposes only and does not provide every possible performance scenario for Shares over the course of the Outcome Period. There is no guarantee that the Fund will be successful in its attempt to achieve the Outcomes for an Outcome
Period. The table is not intended to predict or project the performance of the FLEX Options or the Fund. Investors should not take this information as an assurance of the expected performance of the
S&P 500 Index or the Fund. Actual Fund performance will vary with fluctuations in the performance of the Collateral Portfolio and the Put Spread Strategy, in addition to the value of the Fund’s FLEX Options positions on the S&P
500 Index, during
124
the Outcome Period, among other factors. The performance of the Collateral
Portfolio and the Put Spread Strategy could significantly impact the performance of the Fund, which could prevent the Fund from achieving the Outcomes that it seeks to produce. The table does not reflect any fees or expenses imposed by
your variable product or expenses incurred by the Fund. If it did, the returns shown for the Fund would be lower. Please refer to the Fund’s website, which provides updated information relating to this table on a daily basis throughout the
Outcome Period. Please contact your insurance company or other financial intermediary for more information.
|
Index/Fund
|
Hypothetical Performance1
|
|||||||||||
|
S&P 500 Index Price Performance
|
(100)%
|
(50)%
|
(20)%
|
(10)%
|
(5)%
|
0%
|
5%
|
10%
|
15%
|
20%
|
50%
|
100%
|
|
Fund Performance at NAV
|
(90)%
|
(40)%
|
(10)%
|
0%2
|
0%2
|
0%
|
4%3
|
9%3
|
14%3
|
19%3
|
49%3
|
99%3
|
| 1 |
Does not take into account any fees or expenses or the performance of the Collateral Portfolio or the Put Spread Strategy.
|
| 2 |
Reflects the impact of the Buffer.
|
| 3 |
Reflects the impact of an assumed Spread of 1.0%.
|
Understanding Outcomes. The Outcomes the Fund seeks to achieve are measured based upon the
Fund’s NAV on the first day of the Outcome Period. The Outcome Period begins on the day Milliman transacts in the FLEX Options on behalf of the Fund, and ends on the day those FLEX Options expire. An investor who
purchases Shares after the commencement of the Outcome Period will likely have purchased Shares at a different NAV than the NAV on the first day of the Outcome Period (the NAV upon which the Outcomes are based) and may experience investment
outcomes very different from those the Fund seeks to achieve, especially when factoring in any fees or expenses or the performance of the Collateral Portfolio and the Put Spread Strategy. An investor who redeems Shares prior to the end of the
Outcome Period may also experience investment outcomes very different from those the Fund seeks to achieve. The Outcomes are designed with the expectation that an investor will hold Shares on the day that Milliman transacts in the FLEX Options on
behalf of the Fund, and on the day those FLEX Options expire. There is no guarantee that the Fund will be successful in its attempt to achieve the Outcomes.
Understanding the Spread. Unlike other investment products, the potential returns an
investor can receive from an investment in the Fund are subject to the Spread. This means that if the S&P 500 Index experiences gains for the Outcome Period, an investor in the Fund will only experience those
gains if they exceed the Spread and only by the amount those gains have exceeded the Spread. If the S&P 500 Index does not experience gains that exceed the Spread, an investor in the Fund will not experience any gains. Milliman
calculates the Spread for each Outcome Period based upon (i) its evaluation of prevailing market conditions on the first day of the Outcome Period and (ii) the strike price of the long call FLEX Options on the S&P 500 Index that it is able to
purchase at that time. In certain market conditions, the performance of the Collateral Portfolio and the Put Spread Strategy could cause the Fund to underperform relative to the S&P 500 Index, which would
require greater upside performance of the S&P 500 Index to generate a total return of the Fund that exceeds the Spread. An investor should consider the amount and impact of the Spread, and the Fund’s position relative to it, before
investing in the Fund.
Understanding the Buffer. The Buffer that the Fund seeks to provide is only operative
against the first 10% of losses in the Fund’s S&P 500 Index exposure for the Outcome Period. If an investor is considering purchasing Shares during the Outcome Period, and the S&P 500 Index has decreased
in value by an amount equal to or greater than 10%, an investor purchasing Shares at that time will be able to participate in any gains thereafter (subject to the Spread), but will not benefit from the Buffer that the Fund seeks to offer for
the remainder of the Outcome Period if the losses continue to be equal to or greater than 10% during that period. Conversely, if an investor is considering purchasing Shares during the Outcome Period, and the Fund’s NAV has increased in value
in an amount exceeding the Spread, then an investor may experience losses before implementation of the Buffer that the Fund seeks to provide. While the Fund seeks to produce returns that correlate to those of the S&P 500 Index for
the Outcome Period that are buffered up to 10% (prior to taking into account any fees or expenses or the performance of the Collateral Portfolio or the Put Spread Strategy) for investors who hold Shares for the entire Outcome Period, there is no
guarantee it will successfully do so. In addition, the
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Buffer is not operative against losses in the Collateral Portfolio or the Put Spread Strategy. If the Collateral Portfolio and/or
the Put Spread Strategy experiences losses, it could have the effect of reducing the impact of, or completely eliminating, the Buffer on the Fund’s S&P 500 Index exposure. In certain market conditions, the performance of the Collateral
Portfolio and/or the Put Spread Strategy could cause the Fund to significantly underperform the S&P 500 Index. Investors who purchase Shares at the beginning of the Outcome Period may lose their entire investment. Investors who purchase
Shares after the Outcome Period has begun may also lose their entire investment. An investment in the Fund is only appropriate for investors willing to bear those losses.
Fund Rebalance. Milliman implements the Fund’s strategy on a semi-annual basis, seeking to
produce the Outcomes for an Outcome Period. On the last business day of any stated Outcome Period, all of the Fund’s existing FLEX Options, which includes those used to establish the Buffer, the Spread and the Put Spread Strategy, will expire and
Milliman will transact in a new set of FLEX Options on the same business day, which will commence a new Outcome Period beginning the following business day. At that same time, Milliman will also evaluate whether to make any adjustments to the
Collateral Portfolio. Accordingly, Shares can be held indefinitely if investors determine to participate in additional Outcome Periods.
Approximately one week prior to the end of each Outcome Period, the Fund will file a prospectus supplement, which will notify existing investors of
(i) the date on which the existing Outcome Period will end; (ii) the date on which the new Outcome Period will commence; and (iii) the anticipated ranges of the Spread that will be used for the new Outcome Period. Immediately preceding the
commencement date of the new Outcome Period, the Fund will file a prospectus supplement disclosing the Fund’s final Spread (both gross and net of Fund fees and expenses) for the new Outcome Period. This information will also be available online
at www.[___________].com, and on your insurance company’s website. Please contact your insurance company or other financial intermediary for more information.
Fund Classification. The Fund is classified as “non-diversified” under the Investment
Company Act of 1940, as amended (the “1940 Act”).
Principal Risks
You could lose money by investing in the Fund. An investment in the Fund is not a deposit of a bank and is not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other governmental agency. There can be no assurance that the Fund’s investment objectives will be achieved.
Downside Loss Buffer Risk. There can be no guarantee that the Fund will be successful in its strategy to
buffer against S&P 500 Index losses if the S&P 500 Index decreases in value over the Outcome Period. The Fund’s strategy is designed to produce returns that correlate to those of the S&P 500 Index at the Spread, while limiting
downside losses in the Fund’s S&P 500 Index exposure, if Shares are bought on the day on which Milliman transacts in the FLEX Options on behalf of the Fund and held until those FLEX Options expire at the end of each Outcome Period. The
success of the Buffer also depends upon the performance of the Collateral Portfolio and the Put Spread Strategy. If the Collateral Portfolio and/or the Put Spread Strategy experiences losses, it could have the
effect of reducing the impact of, or completely eliminating, the Buffer on the Fund’s S&P 500 Index exposure. In certain market conditions, the performance of the Collateral Portfolio and/or the Put Spread Strategy could cause the Fund to
significantly underperform the S&P 500 Index. Despite the intended Buffer, an investor could lose their entire investment. In the event an investor purchases Shares after the date on which Milliman transacted in the FLEX
Options on behalf of the Fund, or redeems Shares prior to the expiration of those FLEX Options, the Buffer that the Fund seeks to provide may not be available or fully applicable.
Risk of the Spread on Upside Returns. The Fund’s strategy is designed to produce returns that correlate to
those of the S&P 500 Index if Shares are bought on the day on which Milliman transacts in the FLEX Options on behalf of the Fund and held until those FLEX Options expire at the end of the Outcome Period, subject to the Spread. In the event
that the S&P 500 Index has gains that do not exceed the Spread for the Outcome Period, the Fund will not participate in those gains. In addition, in the event an investor purchases Shares after the date on which Milliman transacted in the
FLEX Options on behalf of the Fund, or redeems Shares prior to the expiration of those FLEX Options, the returns realized by that investor will not match those that the Fund seeks to achieve. In certain market
126
conditions, the performance of the Collateral Portfolio and the Put Spread Strategy could cause the Fund to underperform
relative to the S&P 500 Index, which would require greater upside performance of the S&P 500 Index to generate a total return of the Fund that exceeds the Spread. An investor should consider the amount and impact of the Spread, and the
Fund’s position relative to it, before investing in the Fund.
Spread Change Risk. Because the Spread for each Outcome Period is calculated based upon (i) Milliman’s evaluation
of prevailing market conditions on the first day of the Outcome Period and (ii) the strike price of the long call FLEX Options on the S&P 500 Index that Milliman is able to purchase at that time, the Spread may rise or fall from one Outcome
Period to the next. Any change in the Spread could be significant and it is unlikely to remain the same for consecutive Outcome Periods.
FLEX Options Risk. The Fund will transact in FLEX Options issued and guaranteed for settlement by the OCC. The
Fund bears the risk that the OCC will be unable or unwilling to perform its obligations under the FLEX Options contracts, which could result in significant losses to the Fund. In less liquid markets, terminating a FLEX Option may require the
payment of a premium or acceptance of a discounted price, and may take longer to complete. In addition, a less liquid trading market may adversely impact the value of the Fund’s FLEX Options and therefore the NAV of the Fund. In addition, the value
of the Fund’s FLEX Options positions is not anticipated to increase or decrease at the same rate as the reference asset; and while it is anticipated that they will generally move in the same direction, it is possible that they may move in different
directions. Certain FLEX Options positions may also expire worthless. The use of FLEX Options involves leverage, which can cause the Fund’s portfolio to be more volatile than if the portfolio had not been leveraged. Leverage can significantly
magnify the effect of price movements of the reference asset, disproportionately increasing the Fund’s losses and reducing the Fund’s opportunities for gains when the reference asset changes in unexpected ways. In some instances, such leverage
could result in losses that exceed the original amount invested.
Investment Objective and Outcomes Risk. There is no guarantee that the Fund will be successful in its attempt
to achieve its investment objective and/or the Outcomes, and an investor could lose some or all of their investment in the Fund. Certain circumstances under which the Fund might not achieve its objective and/or the Outcomes include, but are not
limited to (i) if the Fund disposes of FLEX Options, (ii) if the Fund is unable to maintain the proportional relationship based on the number of FLEX Options in the Fund’s portfolio, (iii) significant accrual of Fund expenses in connection with
effecting the Fund’s principal investment strategy, (iv) losses incurred by the Fund’s holdings in the Collateral Portfolio and/or losses resulting from the Put Spread Strategy, or (iv) adverse tax law changes affecting the treatment of FLEX
Options.
Tax Risk. The Fund intends to elect, and to qualify each year, to be treated as a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”). As a RIC, the Fund will not be subject to U.S. federal income tax on the portion
of its net investment income and net capital gain that it distributes to shareholders, provided that it satisfies certain requirements of the Code. To maintain its status as a RIC, the Fund must meet certain income, diversification and
distributions tests. For purposes of the diversification test, the identification of the issuer (or, in some cases, issuers) of a particular Fund investment can depend on the terms and conditions of that investment. In particular, there is no
published IRS guidance or case law on how to determine the “issuer” of certain derivatives that the Fund will enter into and the Fund has not received a private letter ruling on this point. Therefore, there is a risk that the Fund will not meet the
Code’s diversification requirements and will not qualify, or will be disqualified, as a RIC. If the Fund does not qualify as a RIC for any taxable year and certain relief provisions are not available, the Fund’s taxable income will be subject to
tax at the Fund level and to a further tax at the shareholder level when such income is distributed.
The Fund also intends to comply with the diversification requirements of Section 817(h) of the Code, and the regulations thereunder, relating to the
tax-deferred status of variable accounts that are based on insurance company separate accounts (referred to as “segregated asset accounts” for federal income tax purposes). These diversification requirements apply in addition to the RIC
diversification requirements discussed above. There also is no published guidance or case law on how to determine the “issuer” of the derivatives referred to above for purposes of the diversification requirements of Section 817(h) of the Code and
the Fund has not received a private letter ruling on this point. If these requirements are not met, or under other circumstances, such as if the Fund does not qualify as a RIC for any taxable year, it is possible that the contract owners (rather
than the insurance company) will be treated for federal income tax purposes as the taxable owners of the assets held by the segregated asset accounts.
127
Clearing Member Default Risk. The Fund will hold FLEX Options through accounts at members of clearing houses (“clearing members”) rather than a bank or a broker. Assets deposited by the Fund with any clearing member as margin for its FLEX Options positions may, in certain circumstances, be used to satisfy losses of other
clients of the Fund’s clearing member where such assets may be held in commingled omnibus accounts. In addition, although clearing members guarantee performance of their clients’ obligations to the clearing house, there is a risk that the assets of
the Fund might not be fully protected in the event of the clearing member’s bankruptcy, as the Fund would be limited to recovering only a pro rata share of all available funds segregated on behalf of the
clearing member’s customers for the relevant account class.
Debt Securities Risk. The prices of debt securities will be affected by changes in interest rates, the
creditworthiness of the issuer and other factors. These risks could affect the value of investments in which the Fund invests, possibly causing the Fund’s NAV to be reduced and fluctuate more than other types of investments. During periods of
falling interest rates, an issuer of a callable bond may repay the security before its stated maturity, and the Fund may have to reinvest the proceeds in securities with lower yields, which would result in a decline in the Fund’s income, or in
securities with greater risks or with other less favorable features. Changing interest rates, including rates that fall below zero, may have unpredictable effects on markets, result in heightened market volatility and detract from the Fund’s
performance to the extent the Fund is exposed to such interest rates. An increase in interest rates will generally cause the value of fixed-income securities held by the Fund to decline, may lead to heightened volatility in the fixed-income
markets and may adversely affect the liquidity of certain fixed-income investments, including those held by the Fund. Risks associated with rising interest rates are heightened given that interest rates in the U.S. are near historic lows.
Adjustable-rate instruments also react to interest rate changes in a similar manner, although generally to a lesser degree (depending, however, on the characteristics of the reset terms, including the index chosen, frequency of reset and reset
caps or floors, among other factors). Interest rate sensitivity is generally more pronounced and less predictable in instruments with uncertain payment or prepayment schedules and also for those with longer maturities.
Foreign Securities and Credit Exposure Risk. U.S. dollar-denominated securities carrying foreign credit exposure
may be affected by unfavorable political, economic or governmental developments that could affect payments of principal and interest. Furthermore, the value of the Fund’s foreign investments (whether direct or indirect) may be adversely affected by
political and social instability in their home countries, by changes in economic or taxation policies in those countries, or by the difficulty in enforcing obligations in those countries. Foreign companies generally may be subject to less stringent
regulations than U.S. companies, including financial reporting requirements and auditing and accounting controls. As a result, there generally is less publicly available information about foreign companies than about U.S. companies. Trading in many
foreign securities may be less liquid and more volatile than U.S. securities due to the size of the market or other factors.
U.S. Government Securities Risk. U.S. Government securities are subject to interest rate risk but generally do
not involve the credit risks associated with investments in other types of debt securities. As a result, the yields available from U.S. Government securities are generally lower than the yields available from other debt securities. U.S. Government
securities are guaranteed only as to the timely payment of interest and the payment of principal when held to maturity. While securities issued or guaranteed by U.S. federal government agencies are backed by the full faith and credit of the U.S.
Department of the Treasury, securities issued by government sponsored entities are solely the obligation of the issuer and generally do not carry any guarantee from the U.S. Government.
ABS Risk. ABS are subject to the general debt securities risks described above. In addition, ABS may be less
liquid than other bonds, and may be more sensitive than other bonds to the market’s perception of issuers and creditworthiness of payees, which may result in the Fund experiencing difficulty selling or valuing these securities. ABS markets have
experienced extraordinary weakness and volatility at various times in recent years, and may decline quickly in the event of a substantial economic or market downturn. Accordingly, these securities may be subject to greater risk of default during
periods of economic downturn than other securities, which could result in possible losses to the Fund.
Issuer Risk. The performance of the Fund depends on the performance of individual securities to which the Fund
has exposure. The Fund may be adversely affected if an issuer of underlying securities held by the Fund is unable or
128
unwilling to repay principal or interest when due. Changes in the financial condition or credit rating of an issuer of those securities may cause the
value of the securities to decline.
Management Risk. The Fund is subject to management risk because it is an actively managed portfolio. Milliman
will apply investment techniques and risk analyses in making investment decisions for the Fund, but there can be no guarantee that the Fund will meet its investment objective and/or the Outcomes. In addition, Milliman does not use defensive
strategies or attempt to reduce the Fund’s exposures to poor performing positions during an Outcome Period. This differs from funds that are managed to seek to outperform a benchmark index. Therefore, in the event of a general market decline, the
Fund’s value may fall more than the value of another fund that does attempt to hedge against such market declines.
Market Risk. The Fund could lose money over short periods due to short-term market movements and over longer
periods during more prolonged market downturns. Assets may decline in value due to factors affecting financial markets generally or particular asset classes or industries represented in the markets. The value of a FLEX Option or other asset may
also decline due to general market conditions, economic trends or events that are not specifically related to the issuer of the security or other asset, or due to factors that affect a particular issuer, country, region, market, industry, sector or
asset class.
Non-Diversification Risk. The Fund may invest a relatively high percentage of its assets in a limited number of
issuers. As a result, the Fund may be more susceptible to a single adverse economic or regulatory occurrence affecting one or more of these issuers, experience increased volatility and be highly invested in certain issuers.
Large Shareholder Risk. At times, the Fund may experience adverse effects when certain large shareholders,
including insurance company separate accounts, redeem large amounts of shares of the Fund. Large redemptions may cause the Fund to sell portfolio holdings at times when it would not otherwise do so and may increase transaction costs and/or result
in an increase to the Fund’s expense ratio. A large redemption could be detrimental to the Fund and its remaining shareholders.
Risks of Investing in ETFs. In addition to the risks associated with the underlying assets held by the ETFs in
which the Fund invests, investments in ETFs are also subject to the following additional risks: (i) only authorized participants may engage in transactions directly with ETFs but none are obligated to do so, which could result in an ETF’s shares
trading at a premium or discount to its NAV or possibly face trading halts or delisting; (ii) certain ETFs seek to track the performance of an underlying index and will not attempt to take defensive positions under any market conditions, including
declining markets, which could result in losses; and (iii) because ETF shares trade on the secondary market, there is not guarantee that an active market will be developed or maintained, which could result in the ETF’s shares trading at a premium
or discount to its NAV. Investments in ETFs may involve duplication of management fees and certain other expenses, as the Fund indirectly bears its proportionate share of any expenses paid by the ETFs in which it invests.
Risks of Investing in Money Market Funds. Money market funds seek to preserve the value of
shareholder investments at $1.00 per share, but shareholders, such as the Fund, may still lose money by investing in such funds. In addition, a money market fund may impose a fee upon the sale of its shares or may temporarily suspend the ability to
sell shares if the fund’s liquidity falls below required minimums because of market conditions or other factors. The credit quality of a money market fund’s holdings can change rapidly in certain markets, and the default of a single holding could
have an adverse impact on the fund’s share price. A money market fund’s share price can also be negatively affected during periods of high redemption pressures, illiquid markets, and/or significant market volatility.
Performance
As of the date of this Prospectus, the Fund has not commenced operations and therefore does not have a performance history. Once available, the Fund’s
performance information will be accessible online at www.[________].com and will provide some indication of the risks of investing in the Fund.
Management
129
Investment Adviser
Milliman Financial Risk Management LLC (“Milliman”) serves as investment adviser to the Fund.
Portfolio Managers
The following persons serve as portfolio managers of the Fund.
|
●
|
Robert T. Cummings, Principal & Head of Portfolio Management at Milliman.
|
|
●
|
Maria Schiopu, Principal & Head of Portfolio Management at Milliman.
|
|
●
|
Jeff Greco, Principal & Head of Strategy Research at Milliman.
|
|
●
|
Jordan Rosenfeld, Portfolio Manager at Milliman.
|
Each portfolio manager is jointly and primarily responsible for the day-to-day management of the Fund’s portfolio and has served in such capacity
since the Fund’s inception in 2021.
Purchase and Sale of Shares
Shares are available as underlying investment options for variable insurance contracts and variable life insurance policies (each, a “variable contract,” and, collectively, the “variable contracts”) issued by insurance companies. These insurance companies are the record owners of the separate accounts
holding the Shares. You do not buy, sell or exchange Shares directly; rather, you choose investment options through your variable contracts. The insurance companies then cause the separate accounts to purchase and redeem Shares according to
the investment options you choose.
Tax Information
The dividends and distributions paid by the Fund to the insurance company separate accounts will consist of ordinary income, capital gains, or some
combination of both. Because Shares must be purchased through separate accounts used to fund variable contracts, such dividends and distributions will be exempt from current taxation by owners of variable contracts (each, a “contract owner,” and, collectively “contract owners”) if left to accumulate within a separate account. Consult the variable contract prospectus for additional tax
information.
Payments to Insurance Companies and Other Financial Intermediaries
If you allocate contract value to the Fund through an insurance company or other financial intermediary, the Fund, Milliman, the Fund’s distributor or
their related companies may pay the insurance company and/or its affiliates or other intermediary for the sale of Shares and related services. These payments may create a conflict of interest by influencing the insurance company or other
intermediary and your salesperson to recommend an indirect investment in the Fund over another investment. The prospectus or other disclosure documents for the variable contracts may contain additional information about these payments, if any.
You may also ask your salesperson or financial intermediary, or visit your financial intermediary’s website, for more information.
130
Fund Summary: Milliman S&P 500 1-Year Buffer with Spread Fund – Oct
Investment Objective
The Fund seeks to provide exposure to the S&P 500 Index, while providing a buffer against the first 10% of losses associated with S&P 500
Index performance and participating in S&P 500 Index gains that exceed a declared spread, prior to taking into account any fees or expenses or the performance of any fixed income exposure included in the Fund’s portfolio, over the period from
October 1, 2021 through September 30, 2022.
Fees and Expenses of the Fund
This table describes the fees and expenses that you may pay if you buy, hold and sell shares of the Fund (“Shares”).
This table and the example below do not include any fees or sales charges imposed by your variable product. If they were included, the expenses listed below would be higher.
Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment)
|
Class 3
|
|
|
Management Fees
|
0.49%
|
|
Distribution and Service (12b-1) Fees
|
0.25%
|
|
Other Expenses(1)
|
0.50%
|
|
Acquired Fund Fees and Expenses(1)
|
[_.__]%
|
|
Total Annual Fund Operating Expenses
|
1.24%
|
|
Fee Waiver and/or Expense Reimbursement(2)(3)
|
(0.25)%
|
|
Total Annual Fund Operating Expenses After Fee Waiver and/or Expense Reimbursement
|
0.99%
|
|
(1)
|
“Other Expenses” and “Acquired Fund Fees and Expenses” are based on estimated amounts for the current fiscal year.
|
|
(2)
|
The Fund’s investment adviser, Milliman Financial Risk Management LLC (“Milliman”), has contractually
agreed to waive advisory fees and/or reimburse expenses to the extent necessary to limit the Fund’s total annual Fund operating expenses (excluding taxes, interest, brokerage fees and commissions, Rule 12b-1 fees, acquired fund fees and
expenses, short-sale dividend expenses, administrative services fees, other expenses that are capitalized in accordance with generally accepted accounting principles, and extraordinary or non-routine expenses not incurred in the
ordinary course of the Fund’s business) to 0.74% of the Fund's average daily net assets (the “Expense Limitation Agreement”) until at least November 1, 2022. During its term, the Expense
Limitation Agreement cannot be terminated or amended to increase the applicable limit without approval of the Board of Trustees of the Trust (the “Board”). Milliman may recoup from the Fund any
advisory fees waived or expenses reimbursed pursuant to the Expense Limitation Agreement for a period of three years from the date on which such waiver or reimbursement occurred; provided, however, that such recoupment shall not be made
if it would cause the Fund’s total annual Fund operating expenses to exceed the lesser of (a) the expense limitation in effect at the time of the reimbursement, or (b) the expense limitation in effect at the time of recoupment, if any.
|
|
(3)
|
In addition to the Expense Limitation Agreement, Milliman has contractually agreed to waive its advisory fees in an amount equal to the Fund’s
acquired fund fees and expenses until at least November 1, 2022 (the “Fee Waiver”). This contract cannot be terminated or modified without the consent of the Board.
|
Example
This example is intended to help you compare the cost of investing in the Fund with the cost of investing in other funds. This example assumes that you
invest $10,000 in the Fund for the time periods indicated and then sell all of your Shares at the end of those periods. This example also assumes that your investment has a 5% return each year and that the Fund’s operating expenses remain at
current levels and that the Expense Limitation Agreement and Fee Waiver remain in place for their contractual periods. Although your actual costs may be higher or lower, your costs, based on these assumptions, would be:
|
1 Year
|
3 Years
|
|
|
Class 3
|
$104
|
$384
|
This example does not include any fees or sales charges imposed by your variable product. If they were included, the expenses listed above would be
higher.
131
Portfolio Turnover
The Fund pays transaction costs, such as commissions, when it purchases and sells securities (or “turns over” its portfolio). A higher portfolio turnover
will cause the Fund to incur additional transaction costs. These costs, which are not reflected in Total Annual Fund Operating Expenses or in the example, may affect the Fund’s performance. Because the Fund has not yet commenced investment
operations, no portfolio turnover information is available at this time.
Principal Investment Strategies
The Fund seeks to achieve its investment objective by transacting in FLexible EXchange® Options (“FLEX Options”)
and by separately maintaining a collateral portfolio (the “Collateral Portfolio”), which is designed primarily to serve as margin or collateral for the Fund’s FLEX Options positions and secondarily to
enhance the Fund’s upside S&P 500 Index FLEX Options’ exposure (i.e., by utilizing anticipated income to measure the ability to purchase additional FLEX Options). FLEX Options are exchange-traded
options contracts with uniquely customizable terms. In general, an options contract is an agreement between a buyer and seller that gives the purchaser of the option the right to buy or sell a particular asset at a specified future date at an
agreed upon price, commonly known as the “strike price.” The reference assets for the Fund’s FLEX Options positions will include the S&P 500 Index, which is a large-capitalization, market-weighted, U.S. equities index that tracks the price
(excluding dividends) of 500 leading companies in leading industries of the U.S. economy, and certain exchange-traded funds (“ETFs”), as described further below.
The Collateral Portfolio may be invested in short-term fixed-income securities, including corporate bonds and other corporate debt securities,
asset-backed securities (“ABS”), securities issued by the U.S. Government or its agencies and instrumentalities, securities issued by non-U.S. governments or their agencies and instrumentalities, money
market securities and funds, other interest-bearing instruments, cash, ETFs that primarily invest in any of the foregoing instruments, options on ETFs and options box spreads. An options box spread is the combination of different options trades
that have offsetting spreads (e.g., purchases and sales on the same underlying instrument, such as an index or an ETF, but with different strike prices and/or expiration dates) for the purpose of
generating income. The Fund may invest in short-term fixed income securities or other instruments, including through ETFs, of any maturity and credit quality. The Fund will generally invest up to 35% of its net assets in one or more ETFs that
provide exposure to investment grade corporate bonds.
Due to the unique mechanics of the Fund’s strategy, the return an investor can expect to receive from an investment in the Fund has characteristics that
are distinct from the returns of many other investment vehicles. It is important that an investor understand these characteristics before making an investment in the Fund.
In seeking to achieve its investment objective, the Fund seeks to produce pre-determined outcomes (the “Outcomes”)
that are based upon the performance of the S&P 500 Index over a one-year period (the “Outcome Period”). The initial Outcome Period for the Fund is October 1, 2021 through September 30, 2022. Following
the initial Outcome Period, each subsequent Outcome Period will be a one-year period commencing upon the expiration of the prior Outcome Period. The Fund seeks to achieve the Outcomes by purchasing and writing (selling) FLEX Options to create
layers within the Fund’s portfolio. One layer is designed to produce returns that correlate to those of the S&P 500 Index for the Outcome Period if the S&P 500 Index experiences gains during that time in excess of a declared spread (the “Spread”), as described below. A separate layer is designed to produce returns that correlate to those of the S&P 500 Index for the Outcome Period that are buffered up to
10% if the S&P 500 Index experiences losses during that time (the “Buffer”). There is no guarantee that the Fund will be successful in its attempt to produce returns
that correlate to those of the S&P 500 Index in excess of the Spread or produce buffered returns against the Fund’s S&P 500 Index exposure.
Milliman Financial Risk Management, LLC (“Milliman”), the investment adviser of the Fund, seeks to establish the
Buffer by writing one put FLEX Option on the S&P 500 Index with a strike price that is 10% lower than the value of the S&P 500 Index at the beginning of the Outcome Period.
Milliman seeks to establish the Spread by purchasing long call FLEX Options on the S&P 500 Index and by writing put FLEX Options with a strike
price equal to the stated Buffer level. Milliman purchases these FLEX Options with
132
a portion of the Fund’s net assets plus (i) the cash received from writing the put FLEX Option designed to create the Buffer, (ii) additional cash
received by utilizing FLEX Options to create a put spread (the “Put Spread Strategy”) on fixed income securities and/ or one or more ETFs that provide exposure to fixed income securities, and (iii) yield
received from the Collateral Portfolio. Milliman seeks to achieve the Put Spread Strategy for the Fund by writing a put FLEX Option on an underlying asset at a strike price at or lower than the underlying asset’s market price or current value at
the beginning of the Outcome Period, and buying a put FLEX Option on the same underlying asset at a lower strike price than the written put FLEX Option.
The Spread is the minimum rate of return the S&P 500 Index must surpass for the Fund to track any upside market performance of the S&P 500
Index. Milliman calculates the Spread based upon (i) its evaluation of prevailing market conditions on the first day of the Outcome Period and (ii) the strike price of the long call FLEX Options on the S&P 500 Index that it is able to
purchase at that time. As of the date of this Prospectus, and assuming current market conditions persist, Milliman expects that the Spread will be between the below ranges (both gross and net of Fund fees and expenses). Any fees or expenses
imposed by your variable product, and any other expenses incurred by the Fund, will have the effect of further increasing the Spread. In addition, in certain market conditions, the performance of the
Collateral Portfolio and the Put Spread Strategy could cause the Fund to underperform relative to the S&P 500 Index, which would require greater upside performance of the S&P 500 Index to generate a total return of the Fund that
exceeds the Spread.
|
Share Class
|
Estimated Spread Ranges
(As of [___])
|
|
|
Prior to Taking into Account Fund Fees and Expenses
|
After Taking into Account Fund Fees and Expenses
|
|
|
Class 3
|
[__]% and [__]%
|
[__]% and [__]%
|
The Buffer is only operative against the first 10% of losses in the Fund’s S&P 500 Index exposure for the Outcome Period. If the S&P 500 Index
decreases in value by more than 10% during the Outcome Period, the Fund (and therefore investors in Shares) will experience all subsequent losses in the Fund’s S&P 500 Index exposure on a one-to-one basis for the Outcome Period. The Fund
seeks to produce buffered returns against its S&P 500 Index exposure prior to taking into account any fees or expenses or the performance of the Collateral Portfolio or the Put Spread Strategy. The Buffer
is not operative against losses in the Collateral Portfolio or the Put Spread Strategy. If the Collateral Portfolio and/or the Put Spread Strategy experiences losses, it could have the effect of reducing the impact of, or completely
eliminating, the Buffer on the Fund’s S&P 500 Index exposure. In certain market conditions, the performance of the Collateral Portfolio and/or the Put Spread Strategy could cause the Fund to significantly underperform the S&P 500
Index. The following table reflects the Buffer both gross and net of Fund fees and expenses:
|
Share Class
|
Buffer
(As of [___])
|
|
|
Prior to Taking into Account Fund Fees and Expenses
|
After Taking into Account Fund Fees and Expenses
|
|
|
Class 3
|
10%
|
[__]%
|
The definitive Spread and Buffer will be set forth on the Fund’s website. The Fund’s website will also provide information relating to the Outcomes on
a daily basis, including the Fund’s position relative to the Spread and the Buffer. You may also contact your insurance company or other financial intermediary for more information.
Additionally, the Fund’s net asset value (“NAV”) will not increase or decrease at the same rate as the S&P
500 Index because the Fund’s strategy relies upon the performance of the Collateral Portfolio and the Put Spread Strategy, in addition to the value of the Fund’s FLEX Options positions on the S&P 500 Index. While Milliman anticipates that the
Fund’s NAV will generally move in the same direction as the S&P 500 Index (meaning that the Fund’s NAV will generally increase if the S&P 500 Index experiences gains or decrease if the S&P 500 Index experiences losses), the Fund’s NAV
may not decrease at the same rate as the S&P 500 Index (especially when factoring in the performance of the Collateral Portfolio and the Put Spread Strategy) and will not increase at the same rate as the S&P 500 Index (especially when
factoring in the Spread and the performance of the Collateral Portfolio and the Put
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Spread Strategy). Similarly, the amount of time remaining until the end of the Outcome Period also affects the impact of the Buffer on the Fund’s NAV,
because the Buffer may not be in full effect prior to the end of the Outcome Period.
The FLEX Options utilized in the Fund’s portfolio are each set to expire on the last day of the Outcome Period. The customizable nature of FLEX Options
will allow Milliman to select the strike price at which each FLEX Option will be exercised at the expiration of the FLEX Option term. At the commencement of the Outcome Period, Milliman will specifically select the strike price for each FLEX Option
in a manner designed to achieve the Outcomes when the FLEX Options are exercised on the final day of the Outcome Period, depending on the anticipated performance of the S&P 500 Index, the Collateral Portfolio and the Put Spread Strategy over
the duration of that Outcome Period.
The hypothetical graphical illustrations provided below are designed to illustrate the Outcomes based upon the
hypothetical performance of the S&P 500 Index for an investor who holds Shares for the entirety of the Outcome Period. The hypothetical graphical illustrations do not include any fees or expenses imposed by your variable product or expenses
incurred by the Fund, and do not reflect the performance of the Collateral Portfolio or the Put Spread Strategy. Additional hypothetical graphical representations of the Outcomes are provided in “Additional Information About the Funds and
the Risks of Investing.” There is no guarantee that the Fund will be successful in its attempt to achieve the Outcomes for the Outcome Period.
The following table contains hypothetical examples designed to illustrate the Outcomes the Fund seeks to
achieve over the Outcome Period, based upon the performance of the S&P 500 Index from (100)% to 100% after taking into account the Spread and the Buffer, but prior to taking into account any fees or expenses or the performance of the
Collateral Portfolio or the Put Spread Strategy. The table is provided for illustrative purposes only and does not provide every possible performance scenario for Shares over the course of the Outcome Period. There is no guarantee that the Fund will be successful in its attempt to achieve the Outcomes for an Outcome
Period. The table is not intended to predict or project the performance of the FLEX Options or the Fund. Investors should not take this information as an assurance of the expected performance of the
S&P 500 Index or the Fund. Actual Fund performance will vary with fluctuations in the performance of the Collateral Portfolio and the Put Spread Strategy, in addition to the value of the Fund’s FLEX Options positions on the S&P
500 Index, during
134
the Outcome Period, among other factors. The performance of the Collateral
Portfolio and the Put Spread Strategy could significantly impact the performance of the Fund, which could prevent the Fund from achieving the Outcomes that it seeks to produce. The table does not reflect any fees or expenses imposed by
your variable product or expenses incurred by the Fund. If it did, the returns shown for the Fund would be lower. Please refer to the Fund’s website, which provides updated information relating to this table on a daily basis throughout the
Outcome Period. Please contact your insurance company or other financial intermediary for more information.
|
Index/Fund
|
Hypothetical Performance1
|
|||||||||||
|
S&P 500 Index Price Performance
|
(100)%
|
(50)%
|
(20)%
|
(10)%
|
(5)%
|
0%
|
5%
|
10%
|
15%
|
20%
|
50%
|
100%
|
|
Fund Performance at NAV
|
(90)%
|
(40)%
|
(10)%
|
0%2
|
0%2
|
0%
|
4%3
|
9%3
|
14%3
|
19%3
|
49%3
|
99%3
|
| 1 |
Does not take into account any fees or expenses or the performance of the Collateral Portfolio or the Put Spread Strategy.
|
| 2 |
Reflects the impact of the Buffer.
|
| 3 |
Reflects the impact of an assumed Spread of 1.0%.
|
Understanding Outcomes. The Outcomes the Fund seeks to achieve are measured based upon the
Fund’s NAV on the first day of the Outcome Period. The Outcome Period begins on the day Milliman transacts in the FLEX Options on behalf of the Fund, and ends on the day those FLEX Options expire. An investor who
purchases Shares after the commencement of the Outcome Period will likely have purchased Shares at a different NAV than the NAV on the first day of the Outcome Period (the NAV upon which the Outcomes are based) and may experience investment
outcomes very different from those the Fund seeks to achieve, especially when factoring in any fees or expenses or the performance of the Collateral Portfolio and the Put Spread Strategy. An investor who redeems Shares prior to the end of the
Outcome Period may also experience investment outcomes very different from those the Fund seeks to achieve. The Outcomes are designed with the expectation that an investor will hold Shares on the day that Milliman transacts in the FLEX Options on
behalf of the Fund, and on the day those FLEX Options expire. There is no guarantee that the Fund will be successful in its attempt to achieve the Outcomes.
Understanding the Spread. Unlike other investment products, the potential returns an
investor can receive from an investment in the Fund are subject to the Spread. This means that if the S&P 500 Index experiences gains for the Outcome Period, an investor in the Fund will only experience those
gains if they exceed the Spread and only by the amount those gains have exceeded the Spread. If the S&P 500 Index does not experience gains that exceed the Spread, an investor in the Fund will not experience any gains. Milliman
calculates the Spread for each Outcome Period based upon (i) its evaluation of prevailing market conditions on the first day of the Outcome Period and (ii) the strike price of the long call FLEX Options on the S&P 500 Index that it is able to
purchase at that time. In certain market conditions, the performance of the Collateral Portfolio and the Put Spread Strategy could cause the Fund to underperform relative to the S&P 500 Index, which would
require greater upside performance of the S&P 500 Index to generate a total return of the Fund that exceeds the Spread. An investor should consider the amount and impact of the Spread, and the Fund’s position relative to it, before
investing in the Fund.
Understanding the Buffer. The Buffer that the Fund seeks to provide is only operative
against the first 10% of losses in the Fund’s S&P 500 Index exposure for the Outcome Period. If an investor is considering purchasing Shares during the Outcome Period, and the S&P 500 Index has decreased
in value by an amount equal to or greater than 10%, an investor purchasing Shares at that time will be able to participate in any gains thereafter (subject to the Spread), but will not benefit from the Buffer that the Fund seeks to offer for
the remainder of the Outcome Period if the losses continue to be equal to or greater than 10% during that period. Conversely, if an investor is considering purchasing Shares during the Outcome Period, and the Fund’s NAV has increased in value
in an amount exceeding the Spread, then an investor may experience losses before implementation of the Buffer that the Fund seeks to provide. While the Fund seeks to produce returns that correlate to those of the S&P 500 Index for
the Outcome Period that are buffered up to 10% (prior to taking into account any fees or expenses or the performance of the Collateral Portfolio or the Put Spread Strategy) for investors who hold Shares for the entire Outcome Period, there is no
guarantee it will successfully do so. In addition, the
135
Buffer is not operative against losses in the Collateral Portfolio or the Put Spread Strategy. If the Collateral Portfolio
and/or the Put Spread Strategy experiences losses, it could have the effect of reducing the impact of, or completely eliminating, the Buffer on the Fund’s S&P 500 Index exposure. In certain market conditions, the performance of the
Collateral Portfolio and/or the Put Spread Strategy could cause the Fund to significantly underperform the S&P 500 Index. Investors who purchase Shares at the beginning of the Outcome Period may lose their entire investment. Investors who
purchase Shares after the Outcome Period has begun may also lose their entire investment. An investment in the Fund is only appropriate for investors willing to bear those losses.
Fund Rebalance. Milliman implements the Fund’s strategy on a semi-annual basis, seeking to
produce the Outcomes for an Outcome Period. On the last business day of any stated Outcome Period, all of the Fund’s existing FLEX Options, which includes those used to establish the Buffer, the Spread and the Put Spread Strategy, will expire and
Milliman will transact in a new set of FLEX Options on the same business day, which will commence a new Outcome Period beginning the following business day. At that same time, Milliman will also evaluate whether to make any adjustments to the
Collateral Portfolio. Accordingly, Shares can be held indefinitely if investors determine to participate in additional Outcome Periods.
Approximately one week prior to the end of each Outcome Period, the Fund will file a prospectus supplement, which will notify existing investors of
(i) the date on which the existing Outcome Period will end; (ii) the date on which the new Outcome Period will commence; and (iii) the anticipated ranges of the Spread that will be used for the new Outcome Period. Immediately preceding the
commencement date of the new Outcome Period, the Fund will file a prospectus supplement disclosing the Fund’s final Spread (both gross and net of Fund fees and expenses) for the new Outcome Period. This information will also be available online
at www.[___________].com, and on your insurance company’s website. Please contact your insurance company or other financial intermediary for more information.
Fund Classification. The Fund is classified as “non-diversified” under the Investment
Company Act of 1940, as amended (the “1940 Act”).
Principal Risks
You could lose money by investing in the Fund. An investment in the Fund is not a deposit of a bank and is not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other governmental agency. There can be no assurance that the Fund’s investment objectives will be achieved.
Downside Loss Buffer Risk. There can be no guarantee that the Fund will be successful in its strategy to
buffer against S&P 500 Index losses if the S&P 500 Index decreases in value over the Outcome Period. The Fund’s strategy is designed to produce returns that correlate to those of the S&P 500 Index at the Spread, while limiting
downside losses in the Fund’s S&P 500 Index exposure, if Shares are bought on the day on which Milliman transacts in the FLEX Options on behalf of the Fund and held until those FLEX Options expire at the end of each Outcome Period. The
success of the Buffer also depends upon the performance of the Collateral Portfolio and the Put Spread Strategy. If the Collateral Portfolio and/or the Put Spread Strategy experiences losses, it could have the
effect of reducing the impact of, or completely eliminating, the Buffer on the Fund’s S&P 500 Index exposure. In certain market conditions, the performance of the Collateral Portfolio and/or the Put Spread Strategy could cause the Fund to
significantly underperform the S&P 500 Index. Despite the intended Buffer, an investor could lose their entire investment. In the event an investor purchases Shares after the date on which Milliman transacted in the FLEX
Options on behalf of the Fund, or redeems Shares prior to the expiration of those FLEX Options, the Buffer that the Fund seeks to provide may not be available or fully applicable.
Risk of the Spread on Upside Returns. The Fund’s strategy is designed to produce returns that correlate to
those of the S&P 500 Index if Shares are bought on the day on which Milliman transacts in the FLEX Options on behalf of the Fund and held until those FLEX Options expire at the end of the Outcome Period, subject to the Spread. In the event
that the S&P 500 Index has gains that do not exceed the Spread for the Outcome Period, the Fund will not participate in those gains. In addition, in the event an investor purchases Shares after the date on which Milliman transacted in the
FLEX Options on behalf of the Fund, or redeems Shares prior to the expiration of those FLEX Options, the returns realized by that investor will not match those that the Fund seeks to achieve. In certain market
136
conditions, the performance of the Collateral Portfolio and the Put Spread Strategy could cause the Fund to underperform
relative to the S&P 500 Index, which would require greater upside performance of the S&P 500 Index to generate a total return of the Fund that exceeds the Spread. An investor should consider the amount and impact of the Spread, and the
Fund’s position relative to it, before investing in the Fund.
Spread Change Risk. Because the Spread for each Outcome Period is calculated based upon (i) Milliman’s evaluation
of prevailing market conditions on the first day of the Outcome Period and (ii) the strike price of the long call FLEX Options on the S&P 500 Index that Milliman is able to purchase at that time, the Spread may rise or fall from one Outcome
Period to the next. Any change in the Spread could be significant and it is unlikely to remain the same for consecutive Outcome Periods.
FLEX Options Risk. The Fund will transact in FLEX Options issued and guaranteed for settlement by the OCC. The
Fund bears the risk that the OCC will be unable or unwilling to perform its obligations under the FLEX Options contracts, which could result in significant losses to the Fund. In less liquid markets, terminating a FLEX Option may require the
payment of a premium or acceptance of a discounted price, and may take longer to complete. In addition, a less liquid trading market may adversely impact the value of the Fund’s FLEX Options and therefore the NAV of the Fund. In addition, the value
of the Fund’s FLEX Options positions is not anticipated to increase or decrease at the same rate as the reference asset; and while it is anticipated that they will generally move in the same direction, it is possible that they may move in different
directions. Certain FLEX Options positions may also expire worthless. The use of FLEX Options involves leverage, which can cause the Fund’s portfolio to be more volatile than if the portfolio had not been leveraged. Leverage can significantly
magnify the effect of price movements of the reference asset, disproportionately increasing the Fund’s losses and reducing the Fund’s opportunities for gains when the reference asset changes in unexpected ways. In some instances, such leverage
could result in losses that exceed the original amount invested.
Investment Objective and Outcomes Risk. There is no guarantee that the Fund will be successful in its attempt
to achieve its investment objective and/or the Outcomes, and an investor could lose some or all of their investment in the Fund. Certain circumstances under which the Fund might not achieve its objective and/or the Outcomes include, but are not
limited to (i) if the Fund disposes of FLEX Options, (ii) if the Fund is unable to maintain the proportional relationship based on the number of FLEX Options in the Fund’s portfolio, (iii) significant accrual of Fund expenses in connection with
effecting the Fund’s principal investment strategy, (iv) losses incurred by the Fund’s holdings in the Collateral Portfolio and/or losses resulting from the Put Spread Strategy, or (iv) adverse tax law changes affecting the treatment of FLEX
Options.
Tax Risk. The Fund intends to elect, and to qualify each year, to be treated as a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”). As a RIC, the Fund will not be subject to U.S. federal income tax on the portion
of its net investment income and net capital gain that it distributes to shareholders, provided that it satisfies certain requirements of the Code. To maintain its status as a RIC, the Fund must meet certain income, diversification and
distributions tests. For purposes of the diversification test, the identification of the issuer (or, in some cases, issuers) of a particular Fund investment can depend on the terms and conditions of that investment. In particular, there is no
published IRS guidance or case law on how to determine the “issuer” of certain derivatives that the Fund will enter into and the Fund has not received a private letter ruling on this point. Therefore, there is a risk that the Fund will not meet the
Code’s diversification requirements and will not qualify, or will be disqualified, as a RIC. If the Fund does not qualify as a RIC for any taxable year and certain relief provisions are not available, the Fund’s taxable income will be subject to
tax at the Fund level and to a further tax at the shareholder level when such income is distributed.
The Fund also intends to comply with the diversification requirements of Section 817(h) of the Code, and the regulations thereunder, relating to the
tax-deferred status of variable accounts that are based on insurance company separate accounts (referred to as “segregated asset accounts” for federal income tax purposes). These diversification requirements apply in addition to the RIC
diversification requirements discussed above. There also is no published guidance or case law on how to determine the “issuer” of the derivatives referred to above for purposes of the diversification requirements of Section 817(h) of the Code and
the Fund has not received a private letter ruling on this point. If these requirements are not met, or under other circumstances, such as if the Fund does not qualify as a RIC for any taxable year, it is possible that the contract owners (rather
than the insurance company) will be treated for federal income tax purposes as the taxable owners of the assets held by the segregated asset accounts.
137
Clearing Member Default Risk. The Fund will hold FLEX Options through accounts at members of clearing houses (“clearing members”) rather than a bank or a broker. Assets deposited by the Fund with any clearing member as margin for its FLEX Options positions may, in certain circumstances, be used to satisfy losses of other
clients of the Fund’s clearing member where such assets may be held in commingled omnibus accounts. In addition, although clearing members guarantee performance of their clients’ obligations to the clearing house, there is a risk that the assets of
the Fund might not be fully protected in the event of the clearing member’s bankruptcy, as the Fund would be limited to recovering only a pro rata share of all available funds segregated on behalf of the
clearing member’s customers for the relevant account class.
Debt Securities Risk. The prices of debt securities will be affected by changes in interest rates, the
creditworthiness of the issuer and other factors. These risks could affect the value of investments in which the Fund invests, possibly causing the Fund’s NAV to be reduced and fluctuate more than other types of investments. During periods of
falling interest rates, an issuer of a callable bond may repay the security before its stated maturity, and the Fund may have to reinvest the proceeds in securities with lower yields, which would result in a decline in the Fund’s income, or in
securities with greater risks or with other less favorable features. Changing interest rates, including rates that fall below zero, may have unpredictable effects on markets, result in heightened market volatility and detract from the Fund’s
performance to the extent the Fund is exposed to such interest rates. An increase in interest rates will generally cause the value of fixed-income securities held by the Fund to decline, may lead to heightened volatility in the fixed-income
markets and may adversely affect the liquidity of certain fixed-income investments, including those held by the Fund. Risks associated with rising interest rates are heightened given that interest rates in the U.S. are near historic lows.
Adjustable-rate instruments also react to interest rate changes in a similar manner, although generally to a lesser degree (depending, however, on the characteristics of the reset terms, including the index chosen, frequency of reset and reset
caps or floors, among other factors). Interest rate sensitivity is generally more pronounced and less predictable in instruments with uncertain payment or prepayment schedules and also for those with longer maturities.
Foreign Securities and Credit Exposure Risk. U.S. dollar-denominated securities carrying foreign credit exposure
may be affected by unfavorable political, economic or governmental developments that could affect payments of principal and interest. Furthermore, the value of the Fund’s foreign investments (whether direct or indirect) may be adversely affected by
political and social instability in their home countries, by changes in economic or taxation policies in those countries, or by the difficulty in enforcing obligations in those countries. Foreign companies generally may be subject to less stringent
regulations than U.S. companies, including financial reporting requirements and auditing and accounting controls. As a result, there generally is less publicly available information about foreign companies than about U.S. companies. Trading in many
foreign securities may be less liquid and more volatile than U.S. securities due to the size of the market or other factors.
U.S. Government Securities Risk. U.S. Government securities are subject to interest rate risk but generally do
not involve the credit risks associated with investments in other types of debt securities. As a result, the yields available from U.S. Government securities are generally lower than the yields available from other debt securities. U.S. Government
securities are guaranteed only as to the timely payment of interest and the payment of principal when held to maturity. While securities issued or guaranteed by U.S. federal government agencies are backed by the full faith and credit of the U.S.
Department of the Treasury, securities issued by government sponsored entities are solely the obligation of the issuer and generally do not carry any guarantee from the U.S. Government.
ABS Risk. ABS are subject to the general debt securities risks described above. In addition, ABS may be less
liquid than other bonds, and may be more sensitive than other bonds to the market’s perception of issuers and creditworthiness of payees, which may result in the Fund experiencing difficulty selling or valuing these securities. ABS markets have
experienced extraordinary weakness and volatility at various times in recent years, and may decline quickly in the event of a substantial economic or market downturn. Accordingly, these securities may be subject to greater risk of default during
periods of economic downturn than other securities, which could result in possible losses to the Fund.
Issuer Risk. The performance of the Fund depends on the performance of individual securities to which the Fund
has exposure. The Fund may be adversely affected if an issuer of underlying securities held by the Fund is unable or
138
unwilling to repay principal or interest when due. Changes in the financial condition or credit rating of an issuer of those securities may cause the
value of the securities to decline.
Management Risk. The Fund is subject to management risk because it is an actively managed portfolio. Milliman
will apply investment techniques and risk analyses in making investment decisions for the Fund, but there can be no guarantee that the Fund will meet its investment objective and/or the Outcomes. In addition, Milliman does not use defensive
strategies or attempt to reduce the Fund’s exposures to poor performing positions during an Outcome Period. This differs from funds that are managed to seek to outperform a benchmark index. Therefore, in the event of a general market decline, the
Fund’s value may fall more than the value of another fund that does attempt to hedge against such market declines.
Market Risk. The Fund could lose money over short periods due to short-term market movements and over longer
periods during more prolonged market downturns. Assets may decline in value due to factors affecting financial markets generally or particular asset classes or industries represented in the markets. The value of a FLEX Option or other asset may
also decline due to general market conditions, economic trends or events that are not specifically related to the issuer of the security or other asset, or due to factors that affect a particular issuer, country, region, market, industry, sector or
asset class.
Non-Diversification Risk. The Fund may invest a relatively high percentage of its assets in a limited number of
issuers. As a result, the Fund may be more susceptible to a single adverse economic or regulatory occurrence affecting one or more of these issuers, experience increased volatility and be highly invested in certain issuers.
Large Shareholder Risk. At times, the Fund may experience adverse effects when certain large shareholders,
including insurance company separate accounts, redeem large amounts of shares of the Fund. Large redemptions may cause the Fund to sell portfolio holdings at times when it would not otherwise do so and may increase transaction costs and/or result
in an increase to the Fund’s expense ratio. A large redemption could be detrimental to the Fund and its remaining shareholders.
Risks of Investing in ETFs. In addition to the risks associated with the underlying assets held by the ETFs in
which the Fund invests, investments in ETFs are also subject to the following additional risks: (i) only authorized participants may engage in transactions directly with ETFs but none are obligated to do so, which could result in an ETF’s shares
trading at a premium or discount to its NAV or possibly face trading halts or delisting; (ii) certain ETFs seek to track the performance of an underlying index and will not attempt to take defensive positions under any market conditions, including
declining markets, which could result in losses; and (iii) because ETF shares trade on the secondary market, there is not guarantee that an active market will be developed or maintained, which could result in the ETF’s shares trading at a premium
or discount to its NAV. Investments in ETFs may involve duplication of management fees and certain other expenses, as the Fund indirectly bears its proportionate share of any expenses paid by the ETFs in which it invests.
Risks of Investing in Money Market Funds. Money market funds seek to preserve the value of
shareholder investments at $1.00 per share, but shareholders, such as the Fund, may still lose money by investing in such funds. In addition, a money market fund may impose a fee upon the sale of its shares or may temporarily suspend the ability to
sell shares if the fund’s liquidity falls below required minimums because of market conditions or other factors. The credit quality of a money market fund’s holdings can change rapidly in certain markets, and the default of a single holding could
have an adverse impact on the fund’s share price. A money market fund’s share price can also be negatively affected during periods of high redemption pressures, illiquid markets, and/or significant market volatility.
Performance
As of the date of this Prospectus, the Fund has not commenced operations and therefore does not have a performance history. Once available, the Fund’s
performance information will be accessible online at www.[________].com and will provide some indication of the risks of investing in the Fund.
Management
139
Investment Adviser
Milliman Financial Risk Management LLC (“Milliman”) serves as investment adviser to the Fund.
Portfolio Managers
The following persons serve as portfolio managers of the Fund.
|
●
|
Robert T. Cummings, Principal & Head of Portfolio Management at Milliman.
|
|
●
|
Maria Schiopu, Principal & Head of Portfolio Management at Milliman.
|
|
●
|
Jeff Greco, Principal & Head of Strategy Research at Milliman.
|
|
●
|
Jordan Rosenfeld, Portfolio Manager at Milliman.
|
Each portfolio manager is jointly and primarily responsible for the day-to-day management of the Fund’s portfolio and has served in such capacity
since the Fund’s inception in 2021.
Purchase and Sale of Shares
Shares are available as underlying investment options for variable insurance contracts and variable life insurance policies (each, a “variable contract,” and, collectively, the “variable contracts”) issued by insurance companies. These insurance companies are the record owners of the separate accounts
holding the Shares. You do not buy, sell or exchange Shares directly; rather, you choose investment options through your variable contracts. The insurance companies then cause the separate accounts to purchase and redeem Shares according to
the investment options you choose.
Tax Information
The dividends and distributions paid by the Fund to the insurance company separate accounts will consist of ordinary income, capital gains, or some
combination of both. Because Shares must be purchased through separate accounts used to fund variable contracts, such dividends and distributions will be exempt from current taxation by owners of variable contracts (each, a “contract owner,” and, collectively “contract owners”) if left to accumulate within a separate account. Consult the variable contract prospectus for additional tax
information.
Payments to Insurance Companies and Other Financial Intermediaries
If you allocate contract value to the Fund through an insurance company or other financial intermediary, the Fund, Milliman, the Fund’s distributor or
their related companies may pay the insurance company and/or its affiliates or other intermediary for the sale of Shares and related services. These payments may create a conflict of interest by influencing the insurance company or other
intermediary and your salesperson to recommend an indirect investment in the Fund over another investment. The prospectus or other disclosure documents for the variable contracts may contain additional information about these payments, if any.
You may also ask your salesperson or financial intermediary, or visit your financial intermediary’s website, for more information.
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Fund Summary: Milliman S&P 500 1-Year Buffer with Spread Fund – Nov
Investment Objective
The Fund seeks to provide exposure to the S&P 500 Index, while providing a buffer against the first 10% of losses associated with S&P 500
Index performance and participating in S&P 500 Index gains that exceed a declared spread, prior to taking into account any fees or expenses or the performance of any fixed income exposure included in the Fund’s portfolio, over the period from
November 1, 2021 through October 31, 2022.
Fees and Expenses of the Fund
This table describes the fees and expenses that you may pay if you buy, hold and sell shares of the Fund (“Shares”).
This table and the example below do not include any fees or sales charges imposed by your variable product. If they were included, the expenses listed below would be higher.
Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment)
|
Class 3
|
|
|
Management Fees
|
0.49%
|
|
Distribution and Service (12b-1) Fees
|
0.25%
|
|
Other Expenses(1)
|
0.50%
|
|
Acquired Fund Fees and Expenses(1)
|
[_.__]%
|
|
Total Annual Fund Operating Expenses
|
1.24%
|
|
Fee Waiver and/or Expense Reimbursement(2)(3)
|
(0.25)%
|
|
Total Annual Fund Operating Expenses After Fee Waiver and/or Expense Reimbursement
|
0.99%
|
|
(1)
|
“Other Expenses” and “Acquired Fund Fees and Expenses” are based on estimated amounts for the current fiscal year.
|
|
(2)
|
The Fund’s investment adviser, Milliman Financial Risk Management LLC (“Milliman”), has contractually
agreed to waive advisory fees and/or reimburse expenses to the extent necessary to limit the Fund’s total annual Fund operating expenses (excluding taxes, interest, brokerage fees and commissions, Rule 12b-1 fees, acquired fund fees and
expenses, short-sale dividend expenses, administrative services fees, other expenses that are capitalized in accordance with generally accepted accounting principles, and extraordinary or non-routine expenses not incurred in the
ordinary course of the Fund’s business) to 0.74% of the Fund's average daily net assets (the “Expense Limitation Agreement”) until at least November 1, 2022. During its term, the Expense
Limitation Agreement cannot be terminated or amended to increase the applicable limit without approval of the Board of Trustees of the Trust (the “Board”). Milliman may recoup from the Fund any
advisory fees waived or expenses reimbursed pursuant to the Expense Limitation Agreement for a period of three years from the date on which such waiver or reimbursement occurred; provided, however, that such recoupment shall not be made
if it would cause the Fund’s total annual Fund operating expenses to exceed the lesser of (a) the expense limitation in effect at the time of the reimbursement, or (b) the expense limitation in effect at the time of recoupment, if any.
|
|
(3)
|
In addition to the Expense Limitation Agreement, Milliman has contractually agreed to waive its advisory fees in an amount equal to the Fund’s
acquired fund fees and expenses until at least November 1, 2022 (the “Fee Waiver”). This contract cannot be terminated or modified without the consent of the Board.
|
Example
This example is intended to help you compare the cost of investing in the Fund with the cost of investing in other funds. This example assumes that you
invest $10,000 in the Fund for the time periods indicated and then sell all of your Shares at the end of those periods. This example also assumes that your investment has a 5% return each year and that the Fund’s operating expenses remain at
current levels and that the Expense Limitation Agreement and Fee Waiver remain in place for their contractual periods. Although your actual costs may be higher or lower, your costs, based on these assumptions, would be:
|
1 Year
|
3 Years
|
|
|
Class 3
|
$104
|
$384
|
This example does not include any fees or sales charges imposed by your variable product. If they were included, the expenses listed above would be
higher.
141
Portfolio Turnover
The Fund pays transaction costs, such as commissions, when it purchases and sells securities (or “turns over” its portfolio). A higher portfolio turnover
will cause the Fund to incur additional transaction costs. These costs, which are not reflected in Total Annual Fund Operating Expenses or in the example, may affect the Fund’s performance. Because the Fund has not yet commenced investment
operations, no portfolio turnover information is available at this time.
Principal Investment Strategies
The Fund seeks to achieve its investment objective by transacting in FLexible EXchange® Options (“FLEX Options”)
and by separately maintaining a collateral portfolio (the “Collateral Portfolio”), which is designed primarily to serve as margin or collateral for the Fund’s FLEX Options positions and secondarily to
enhance the Fund’s upside S&P 500 Index FLEX Options’ exposure (i.e., by utilizing anticipated income to measure the ability to purchase additional FLEX Options). FLEX Options are exchange-traded
options contracts with uniquely customizable terms. In general, an options contract is an agreement between a buyer and seller that gives the purchaser of the option the right to buy or sell a particular asset at a specified future date at an
agreed upon price, commonly known as the “strike price.” The reference assets for the Fund’s FLEX Options positions will include the S&P 500 Index, which is a large-capitalization, market-weighted, U.S. equities index that tracks the price
(excluding dividends) of 500 leading companies in leading industries of the U.S. economy, and certain exchange-traded funds (“ETFs”), as described further below.
The Collateral Portfolio may be invested in short-term fixed-income securities, including corporate bonds and other corporate debt securities,
asset-backed securities (“ABS”), securities issued by the U.S. Government or its agencies and instrumentalities, securities issued by non-U.S. governments or their agencies and instrumentalities, money
market securities and funds, other interest-bearing instruments, cash, ETFs that primarily invest in any of the foregoing instruments, options on ETFs and options box spreads. An options box spread is the combination of different options trades
that have offsetting spreads (e.g., purchases and sales on the same underlying instrument, such as an index or an ETF, but with different strike prices and/or expiration dates) for the purpose of
generating income. The Fund may invest in short-term fixed income securities or other instruments, including through ETFs, of any maturity and credit quality. The Fund will generally invest up to 35% of its net assets in one or more ETFs that
provide exposure to investment grade corporate bonds.
Due to the unique mechanics of the Fund’s strategy, the return an investor can expect to receive from an investment in the Fund has characteristics that
are distinct from the returns of many other investment vehicles. It is important that an investor understand these characteristics before making an investment in the Fund.
In seeking to achieve its investment objective, the Fund seeks to produce pre-determined outcomes (the “Outcomes”)
that are based upon the performance of the S&P 500 Index over a one-year period (the “Outcome Period”). The initial Outcome Period for the Fund is November 1, 2021 through October 31, 2022. Following the
initial Outcome Period, each subsequent Outcome Period will be a one-year period commencing upon the expiration of the prior Outcome Period. The Fund seeks to achieve the Outcomes by purchasing and writing (selling) FLEX Options to create layers
within the Fund’s portfolio. One layer is designed to produce returns that correlate to those of the S&P 500 Index for the Outcome Period if the S&P 500 Index experiences gains during that time in excess of a declared spread (the “Spread”), as described below. A separate layer is designed to produce returns that correlate to those of the S&P 500 Index for the Outcome Period that are buffered up to
10% if the S&P 500 Index experiences losses during that time (the “Buffer”). There is no guarantee that the Fund will be successful in its attempt to produce returns
that correlate to those of the S&P 500 Index in excess of the Spread or produce buffered returns against the Fund’s S&P 500 Index exposure.
Milliman Financial Risk Management, LLC (“Milliman”), the investment adviser of the Fund, seeks to establish the
Buffer by writing one put FLEX Option on the S&P 500 Index with a strike price that is 10% lower than the value of the S&P 500 Index at the beginning of the Outcome Period.
Milliman seeks to establish the Spread by purchasing long call FLEX Options on the S&P 500 Index and by writing put FLEX Options with a strike
price equal to the stated Buffer level. Milliman purchases these FLEX Options with
142
a portion of the Fund’s net assets plus (i) the cash received from writing the put FLEX Option designed to create the Buffer, (ii) additional cash
received by utilizing FLEX Options to create a put spread (the “Put Spread Strategy”) on fixed income securities and/or one or more ETFs that provide exposure to fixed income securities, and (iii) yield
received from the Collateral Portfolio. Milliman seeks to achieve the Put Spread Strategy for the Fund by writing a put FLEX Option on an underlying asset at a strike price at or lower than the underlying asset’s market price or current value at
the beginning of the Outcome Period, and buying a put FLEX Option on the same underlying asset at a lower strike price than the written put FLEX Option.
The Spread is the minimum rate of return the S&P 500 Index must surpass for the Fund to track any upside market performance of the S&P 500
Index. Milliman calculates the Spread based upon (i) its evaluation of prevailing market conditions on the first day of the Outcome Period and (ii) the strike price of the long call FLEX Options on the S&P 500 Index that it is able to
purchase at that time. As of the date of this Prospectus, and assuming current market conditions persist, Milliman expects that the Spread will be between the below ranges (both gross and net of Fund fees and expenses). Any fees or expenses
imposed by your variable product, and any other expenses incurred by the Fund, will have the effect of further increasing the Spread. In addition, in certain market conditions, the performance of the
Collateral Portfolio and the Put Spread Strategy could cause the Fund to underperform relative to the S&P 500 Index, which would require greater upside performance of the S&P 500 Index to generate a total return of the Fund that
exceeds the Spread.
|
Share Class
|
Estimated Spread Ranges
(As of [___])
|
|
|
Prior to Taking into Account Fund Fees and Expenses
|
After Taking into Account Fund Fees and Expenses
|
|
|
Class 3
|
[__]% and [__]%
|
[__]% and [__]%
|
The Buffer is only operative against the first 10% of losses in the Fund’s S&P 500 Index exposure for the Outcome Period. If the S&P 500 Index
decreases in value by more than 10% during the Outcome Period, the Fund (and therefore investors in Shares) will experience all subsequent losses in the Fund’s S&P 500 Index exposure on a one-to-one basis for the Outcome Period. The Fund
seeks to produce buffered returns against its S&P 500 Index exposure prior to taking into account any fees or expenses or the performance of the Collateral Portfolio or the Put Spread Strategy. The Buffer
is not operative against losses in the Collateral Portfolio or the Put Spread Strategy. If the Collateral Portfolio and/or the Put Spread Strategy experiences losses, it could have the effect of reducing the impact of, or completely
eliminating, the Buffer on the Fund’s S&P 500 Index exposure. In certain market conditions, the performance of the Collateral Portfolio and/or the Put Spread Strategy could cause the Fund to significantly underperform the S&P 500
Index. The following table reflects the Buffer both gross and net of Fund fees and expenses:
|
Share Class
|
Buffer
(As of [___])
|
|
|
Prior to Taking into Account Fund Fees and Expenses
|
After Taking into Account Fund Fees and Expenses
|
|
|
Class 3
|
10%
|
[__]%
|
The definitive Spread and Buffer will be set forth on the Fund’s website. The Fund’s website will also provide information relating to the Outcomes on
a daily basis, including the Fund’s position relative to the Spread and the Buffer. You may also contact your insurance company or other financial intermediary for more information.
Additionally, the Fund’s net asset value (“NAV”) will not increase or decrease at the same rate as the S&P
500 Index because the Fund’s strategy relies upon the performance of the Collateral Portfolio and the Put Spread Strategy, in addition to the value of the Fund’s FLEX Options positions on the S&P 500 Index. While Milliman anticipates that the
Fund’s NAV will generally move in the same direction as the S&P 500 Index (meaning that the Fund’s NAV will generally increase if the S&P 500 Index experiences gains or decrease if the S&P 500 Index experiences losses), the Fund’s NAV
may not decrease at the same rate as the S&P 500 Index (especially when factoring in the performance of the Collateral Portfolio and the Put Spread Strategy) and will not increase at the same rate as the S&P 500 Index (especially when
factoring in the Spread and the performance of the Collateral Portfolio and the Put
143
Spread Strategy). Similarly, the amount of time remaining until the end of the Outcome Period also affects the impact of the Buffer on the Fund’s NAV,
because the Buffer may not be in full effect prior to the end of the Outcome Period.
The FLEX Options utilized in the Fund’s portfolio are each set to expire on the last day of the Outcome Period. The customizable nature of FLEX Options
will allow Milliman to select the strike price at which each FLEX Option will be exercised at the expiration of the FLEX Option term. At the commencement of the Outcome Period, Milliman will specifically select the strike price for each FLEX Option
in a manner designed to achieve the Outcomes when the FLEX Options are exercised on the final day of the Outcome Period, depending on the anticipated performance of the S&P 500 Index, the Collateral Portfolio and the Put Spread Strategy over
the duration of that Outcome Period.
The hypothetical graphical illustrations provided below are designed to illustrate the Outcomes based upon the
hypothetical performance of the S&P 500 Index for an investor who holds Shares for the entirety of the Outcome Period. The hypothetical graphical illustrations do not include any fees or expenses imposed by your variable product or expenses
incurred by the Fund, and do not reflect the performance of the Collateral Portfolio or the Put Spread Strategy. Additional hypothetical graphical representations of the Outcomes are provided in “Additional Information About the Funds and
the Risks of Investing.” There is no guarantee that the Fund will be successful in its attempt to achieve the Outcomes for the Outcome Period.
The following table contains hypothetical examples designed to illustrate the Outcomes the Fund seeks to
achieve over the Outcome Period, based upon the performance of the S&P 500 Index from (100)% to 100% after taking into account the Spread and the Buffer, but prior to taking into account any fees or expenses or the performance of the
Collateral Portfolio or the Put Spread Strategy. The table is provided for illustrative purposes only and does not provide every possible performance scenario for Shares over the course of the Outcome Period. There is no guarantee that the Fund will be successful in its attempt to achieve the Outcomes for an Outcome
Period. The table is not intended to predict or project the performance of the FLEX Options or the Fund. Investors should not take this information as an assurance of the expected performance of the
S&P 500 Index or the Fund. Actual Fund performance will vary with fluctuations in the performance of the Collateral Portfolio and the Put Spread Strategy, in addition to the value of the Fund’s FLEX Options positions on the S&P
500 Index, during
144
the Outcome Period, among other factors. The performance of the Collateral
Portfolio and the Put Spread Strategy could significantly impact the performance of the Fund, which could prevent the Fund from achieving the Outcomes that it seeks to produce. The table does not reflect any fees or expenses imposed by
your variable product or expenses incurred by the Fund. If it did, the returns shown for the Fund would be lower. Please refer to the Fund’s website, which provides updated information relating to this table on a daily basis throughout the
Outcome Period. Please contact your insurance company or other financial intermediary for more information.
|
Index/Fund
|
Hypothetical Performance1
|
|||||||||||
|
S&P 500 Index Price Performance
|
(100)%
|
(50)%
|
(20)%
|
(10)%
|
(5)%
|
0%
|
5%
|
10%
|
15%
|
20%
|
50%
|
100%
|
|
Fund Performance at NAV
|
(90)%
|
(40)%
|
(10)%
|
0%2
|
0%2
|
0%
|
4%3
|
9%3
|
14%3
|
19%3
|
49%3
|
99%3
|
| 1 |
Does not take into account any fees or expenses or the performance of the Collateral Portfolio or the Put Spread Strategy.
|
| 2 |
Reflects the impact of the Buffer.
|
| 3 |
Reflects the impact of an assumed Spread of 1.0%.
|
Understanding Outcomes. The Outcomes the Fund seeks to achieve are measured based upon the
Fund’s NAV on the first day of the Outcome Period. The Outcome Period begins on the day Milliman transacts in the FLEX Options on behalf of the Fund, and ends on the day those FLEX Options expire. An investor who
purchases Shares after the commencement of the Outcome Period will likely have purchased Shares at a different NAV than the NAV on the first day of the Outcome Period (the NAV upon which the Outcomes are based) and may experience investment
outcomes very different from those the Fund seeks to achieve, especially when factoring in any fees or expenses or the performance of the Collateral Portfolio and the Put Spread Strategy. An investor who redeems Shares prior to the end of the
Outcome Period may also experience investment outcomes very different from those the Fund seeks to achieve. The Outcomes are designed with the expectation that an investor will hold Shares on the day that Milliman transacts in the FLEX Options on
behalf of the Fund, and on the day those FLEX Options expire. There is no guarantee that the Fund will be successful in its attempt to achieve the Outcomes.
Understanding the Spread. Unlike other investment products, the potential returns an
investor can receive from an investment in the Fund are subject to the Spread. This means that if the S&P 500 Index experiences gains for the Outcome Period, an investor in the Fund will only experience those
gains if they exceed the Spread and only by the amount those gains have exceeded the Spread. If the S&P 500 Index does not experience gains that exceed the Spread, an investor in the Fund will not experience any gains. Milliman
calculates the Spread for each Outcome Period based upon (i) its evaluation of prevailing market conditions on the first day of the Outcome Period and (ii) the strike price of the long call FLEX Options on the S&P 500 Index that it is able to
purchase at that time. In certain market conditions, the performance of the Collateral Portfolio and the Put Spread Strategy could cause the Fund to underperform relative to the S&P 500 Index, which would
require greater upside performance of the S&P 500 Index to generate a total return of the Fund that exceeds the Spread. An investor should consider the amount and impact of the Spread, and the Fund’s position relative to it, before
investing in the Fund.
Understanding the Buffer. The Buffer that the Fund seeks to provide is only operative
against the first 10% of losses in the Fund’s S&P 500 Index exposure for the Outcome Period. If an investor is considering purchasing Shares during the Outcome Period, and the S&P 500 Index has decreased
in value by an amount equal to or greater than 10%, an investor purchasing Shares at that time will be able to participate in any gains thereafter (subject to the Spread), but will not benefit from the Buffer that the Fund seeks to offer for
the remainder of the Outcome Period if the losses continue to be equal to or greater than 10% during that period. Conversely, if an investor is considering purchasing Shares during the Outcome Period, and the Fund’s NAV has increased in value
in an amount exceeding the Spread, then an investor may experience losses before implementation of the Buffer that the Fund seeks to provide. While the Fund seeks to produce returns that correlate to those of the S&P 500 Index for
the Outcome Period that are buffered up to 10% (prior to taking into account any fees or expenses or the performance of the Collateral Portfolio or the Put Spread Strategy) for investors who hold Shares for the entire Outcome Period, there is no
guarantee it will successfully do so. In addition, the
145
Buffer is not operative against losses in the Collateral Portfolio or the Put Spread Strategy. If the Collateral Portfolio
and/or the Put Spread Strategy experiences losses, it could have the effect of reducing the impact of, or completely eliminating, the Buffer on the Fund’s S&P 500 Index exposure. In certain market conditions, the performance of the
Collateral Portfolio and/or the Put Spread Strategy could cause the Fund to significantly underperform the S&P 500 Index. Investors who purchase Shares at the beginning of the Outcome Period may lose their entire investment. Investors who
purchase Shares after the Outcome Period has begun may also lose their entire investment. An investment in the Fund is only appropriate for investors willing to bear those losses.
Fund Rebalance. Milliman implements the Fund’s strategy on a semi-annual basis, seeking to
produce the Outcomes for an Outcome Period. On the last business day of any stated Outcome Period, all of the Fund’s existing FLEX Options, which includes those used to establish the Buffer, the Spread and the Put Spread Strategy, will expire and
Milliman will transact in a new set of FLEX Options on the same business day, which will commence a new Outcome Period beginning the following business day. At that same time, Milliman will also evaluate whether to make any adjustments to the
Collateral Portfolio. Accordingly, Shares can be held indefinitely if investors determine to participate in additional Outcome Periods.
Approximately one week prior to the end of each Outcome Period, the Fund will file a prospectus supplement, which will notify existing investors of
(i) the date on which the existing Outcome Period will end; (ii) the date on which the new Outcome Period will commence; and (iii) the anticipated ranges of the Spread that will be used for the new Outcome Period. Immediately preceding the
commencement date of the new Outcome Period, the Fund will file a prospectus supplement disclosing the Fund’s final Spread (both gross and net of Fund fees and expenses) for the new Outcome Period. This information will also be available online
at www.[___________].com, and on your insurance company’s website. Please contact your insurance company or other financial intermediary for more information.
Fund Classification. The Fund is classified as “non-diversified” under the Investment
Company Act of 1940, as amended (the “1940 Act”).
Principal Risks
You could lose money by investing in the Fund. An investment in the Fund is not a deposit of a bank and is not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other governmental agency. There can be no assurance that the Fund’s investment objectives will be achieved.
Downside Loss Buffer Risk. There can be no guarantee that the Fund will be successful in its strategy to
buffer against S&P 500 Index losses if the S&P 500 Index decreases in value over the Outcome Period. The Fund’s strategy is designed to produce returns that correlate to those of the S&P 500 Index at the Spread, while limiting
downside losses in the Fund’s S&P 500 Index exposure, if Shares are bought on the day on which Milliman transacts in the FLEX Options on behalf of the Fund and held until those FLEX Options expire at the end of each Outcome Period. The
success of the Buffer also depends upon the performance of the Collateral Portfolio and the Put Spread Strategy. If the Collateral Portfolio and/or the Put Spread Strategy experiences losses, it could have the
effect of reducing the impact of, or completely eliminating, the Buffer on the Fund’s S&P 500 Index exposure. In certain market conditions, the performance of the Collateral Portfolio and/or the Put Spread Strategy could cause the Fund to
significantly underperform the S&P 500 Index. Despite the intended Buffer, an investor could lose their entire investment. In the event an investor purchases Shares after the date on which Milliman transacted in the FLEX
Options on behalf of the Fund, or redeems Shares prior to the expiration of those FLEX Options, the Buffer that the Fund seeks to provide may not be available or fully applicable.
Risk of the Spread on Upside Returns. The Fund’s strategy is designed to produce returns that correlate to
those of the S&P 500 Index if Shares are bought on the day on which Milliman transacts in the FLEX Options on behalf of the Fund and held until those FLEX Options expire at the end of the Outcome Period, subject to the Spread. In the event
that the S&P 500 Index has gains that do not exceed the Spread for the Outcome Period, the Fund will not participate in those gains. In addition, in the event an investor purchases Shares after the date on which Milliman transacted in the
FLEX Options on behalf of the Fund, or redeems Shares prior to the expiration of those FLEX Options, the returns realized by that investor will not match those that the Fund seeks to achieve. In certain market
146
conditions, the performance of the Collateral Portfolio and the Put Spread Strategy could cause the Fund to underperform
relative to the S&P 500 Index, which would require greater upside performance of the S&P 500 Index to generate a total return of the Fund that exceeds the Spread. An investor should consider the amount and impact of the Spread, and the
Fund’s position relative to it, before investing in the Fund.
Spread Change Risk. Because the Spread for each Outcome Period is calculated based upon (i) Milliman’s evaluation
of prevailing market conditions on the first day of the Outcome Period and (ii) the strike price of the long call FLEX Options on the S&P 500 Index that Milliman is able to purchase at that time, the Spread may rise or fall from one Outcome
Period to the next. Any change in the Spread could be significant and it is unlikely to remain the same for consecutive Outcome Periods.
FLEX Options Risk. The Fund will transact in FLEX Options issued and guaranteed for settlement by the OCC. The
Fund bears the risk that the OCC will be unable or unwilling to perform its obligations under the FLEX Options contracts, which could result in significant losses to the Fund. In less liquid markets, terminating a FLEX Option may require the
payment of a premium or acceptance of a discounted price, and may take longer to complete. In addition, a less liquid trading market may adversely impact the value of the Fund’s FLEX Options and therefore the NAV of the Fund. In addition, the value
of the Fund’s FLEX Options positions is not anticipated to increase or decrease at the same rate as the reference asset; and while it is anticipated that they will generally move in the same direction, it is possible that they may move in different
directions. Certain FLEX Options positions may also expire worthless. The use of FLEX Options involves leverage, which can cause the Fund’s portfolio to be more volatile than if the portfolio had not been leveraged. Leverage can significantly
magnify the effect of price movements of the reference asset, disproportionately increasing the Fund’s losses and reducing the Fund’s opportunities for gains when the reference asset changes in unexpected ways. In some instances, such leverage
could result in losses that exceed the original amount invested.
Investment Objective and Outcomes Risk. There is no guarantee that the Fund will be successful in its attempt
to achieve its investment objective and/or the Outcomes, and an investor could lose some or all of their investment in the Fund. Certain circumstances under which the Fund might not achieve its objective and/or the Outcomes include, but are not
limited to (i) if the Fund disposes of FLEX Options, (ii) if the Fund is unable to maintain the proportional relationship based on the number of FLEX Options in the Fund’s portfolio, (iii) significant accrual of Fund expenses in connection with
effecting the Fund’s principal investment strategy, (iv) losses incurred by the Fund’s holdings in the Collateral Portfolio and/or losses resulting from the Put Spread Strategy, or (iv) adverse tax law changes affecting the treatment of FLEX
Options.
Tax Risk. The Fund intends to elect, and to qualify each year, to be treated as a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”). As a RIC, the Fund will not be subject to U.S. federal income tax on the portion
of its net investment income and net capital gain that it distributes to shareholders, provided that it satisfies certain requirements of the Code. To maintain its status as a RIC, the Fund must meet certain income, diversification and
distributions tests. For purposes of the diversification test, the identification of the issuer (or, in some cases, issuers) of a particular Fund investment can depend on the terms and conditions of that investment. In particular, there is no
published IRS guidance or case law on how to determine the “issuer” of certain derivatives that the Fund will enter into and the Fund has not received a private letter ruling on this point. Therefore, there is a risk that the Fund will not meet the
Code’s diversification requirements and will not qualify, or will be disqualified, as a RIC. If the Fund does not qualify as a RIC for any taxable year and certain relief provisions are not available, the Fund’s taxable income will be subject to
tax at the Fund level and to a further tax at the shareholder level when such income is distributed.
The Fund also intends to comply with the diversification requirements of Section 817(h) of the Code, and the regulations thereunder, relating to the
tax-deferred status of variable accounts that are based on insurance company separate accounts (referred to as “segregated asset accounts” for federal income tax purposes). These diversification requirements apply in addition to the RIC
diversification requirements discussed above. There also is no published guidance or case law on how to determine the “issuer” of the derivatives referred to above for purposes of the diversification requirements of Section 817(h) of the Code and
the Fund has not received a private letter ruling on this point. If these requirements are not met, or under other circumstances, such as if the Fund does not qualify as a RIC for any taxable year, it is possible that the contract owners (rather
than the insurance company) will be treated for federal income tax purposes as the taxable owners of the assets held by the segregated asset accounts.
147
Clearing Member Default Risk. The Fund will hold FLEX Options through accounts at members of clearing houses (“clearing members”) rather than a bank or a broker. Assets deposited by the Fund with any clearing member as margin for its FLEX Options positions may, in certain circumstances, be used to satisfy losses of other
clients of the Fund’s clearing member where such assets may be held in commingled omnibus accounts. In addition, although clearing members guarantee performance of their clients’ obligations to the clearing house, there is a risk that the assets of
the Fund might not be fully protected in the event of the clearing member’s bankruptcy, as the Fund would be limited to recovering only a pro rata share of all available funds segregated on behalf of the
clearing member’s customers for the relevant account class.
Debt Securities Risk. The prices of debt securities will be affected by changes in interest rates, the
creditworthiness of the issuer and other factors. These risks could affect the value of investments in which the Fund invests, possibly causing the Fund’s NAV to be reduced and fluctuate more than other types of investments. During periods of
falling interest rates, an issuer of a callable bond may repay the security before its stated maturity, and the Fund may have to reinvest the proceeds in securities with lower yields, which would result in a decline in the Fund’s income, or in
securities with greater risks or with other less favorable features. Changing interest rates, including rates that fall below zero, may have unpredictable effects on markets, result in heightened market volatility and detract from the Fund’s
performance to the extent the Fund is exposed to such interest rates. An increase in interest rates will generally cause the value of fixed-income securities held by the Fund to decline, may lead to heightened volatility in the fixed-income
markets and may adversely affect the liquidity of certain fixed-income investments, including those held by the Fund. Risks associated with rising interest rates are heightened given that interest rates in the U.S. are near historic lows.
Adjustable-rate instruments also react to interest rate changes in a similar manner, although generally to a lesser degree (depending, however, on the characteristics of the reset terms, including the index chosen, frequency of reset and reset
caps or floors, among other factors). Interest rate sensitivity is generally more pronounced and less predictable in instruments with uncertain payment or prepayment schedules and also for those with longer maturities.
Foreign Securities and Credit Exposure Risk. U.S. dollar-denominated securities carrying foreign credit exposure
may be affected by unfavorable political, economic or governmental developments that could affect payments of principal and interest. Furthermore, the value of the Fund’s foreign investments (whether direct or indirect) may be adversely affected by
political and social instability in their home countries, by changes in economic or taxation policies in those countries, or by the difficulty in enforcing obligations in those countries. Foreign companies generally may be subject to less stringent
regulations than U.S. companies, including financial reporting requirements and auditing and accounting controls. As a result, there generally is less publicly available information about foreign companies than about U.S. companies. Trading in many
foreign securities may be less liquid and more volatile than U.S. securities due to the size of the market or other factors.
U.S. Government Securities Risk. U.S. Government securities are subject to interest rate risk but generally do
not involve the credit risks associated with investments in other types of debt securities. As a result, the yields available from U.S. Government securities are generally lower than the yields available from other debt securities. U.S. Government
securities are guaranteed only as to the timely payment of interest and the payment of principal when held to maturity. While securities issued or guaranteed by U.S. federal government agencies are backed by the full faith and credit of the U.S.
Department of the Treasury, securities issued by government sponsored entities are solely the obligation of the issuer and generally do not carry any guarantee from the U.S. Government.
ABS Risk. ABS are subject to the general debt securities risks described above. In addition, ABS may be less
liquid than other bonds, and may be more sensitive than other bonds to the market’s perception of issuers and creditworthiness of payees, which may result in the Fund experiencing difficulty selling or valuing these securities. ABS markets have
experienced extraordinary weakness and volatility at various times in recent years, and may decline quickly in the event of a substantial economic or market downturn. Accordingly, these securities may be subject to greater risk of default during
periods of economic downturn than other securities, which could result in possible losses to the Fund.
Issuer Risk. The performance of the Fund depends on the performance of individual securities to which the Fund
has exposure. The Fund may be adversely affected if an issuer of underlying securities held by the Fund is unable or
148
unwilling to repay principal or interest when due. Changes in the financial condition or credit rating of an issuer of those securities may cause the
value of the securities to decline.
Management Risk. The Fund is subject to management risk because it is an actively managed portfolio. Milliman
will apply investment techniques and risk analyses in making investment decisions for the Fund, but there can be no guarantee that the Fund will meet its investment objective and/or the Outcomes. In addition, Milliman does not use defensive
strategies or attempt to reduce the Fund’s exposures to poor performing positions during an Outcome Period. This differs from funds that are managed to seek to outperform a benchmark index. Therefore, in the event of a general market decline, the
Fund’s value may fall more than the value of another fund that does attempt to hedge against such market declines.
Market Risk. The Fund could lose money over short periods due to short-term market movements and over longer
periods during more prolonged market downturns. Assets may decline in value due to factors affecting financial markets generally or particular asset classes or industries represented in the markets. The value of a FLEX Option or other asset may
also decline due to general market conditions, economic trends or events that are not specifically related to the issuer of the security or other asset, or due to factors that affect a particular issuer, country, region, market, industry, sector or
asset class.
Non-Diversification Risk. The Fund may invest a relatively high percentage of its assets in a limited number of
issuers. As a result, the Fund may be more susceptible to a single adverse economic or regulatory occurrence affecting one or more of these issuers, experience increased volatility and be highly invested in certain issuers.
Large Shareholder Risk. At times, the Fund may experience adverse effects when certain large shareholders,
including insurance company separate accounts, redeem large amounts of shares of the Fund. Large redemptions may cause the Fund to sell portfolio holdings at times when it would not otherwise do so and may increase transaction costs and/or result
in an increase to the Fund’s expense ratio. A large redemption could be detrimental to the Fund and its remaining shareholders.
Risks of Investing in ETFs. In addition to the risks associated with the underlying assets held by the ETFs in
which the Fund invests, investments in ETFs are also subject to the following additional risks: (i) only authorized participants may engage in transactions directly with ETFs but none are obligated to do so, which could result in an ETF’s shares
trading at a premium or discount to its NAV or possibly face trading halts or delisting; (ii) certain ETFs seek to track the performance of an underlying index and will not attempt to take defensive positions under any market conditions, including
declining markets, which could result in losses; and (iii) because ETF shares trade on the secondary market, there is not guarantee that an active market will be developed or maintained, which could result in the ETF’s shares trading at a premium
or discount to its NAV. Investments in ETFs may involve duplication of management fees and certain other expenses, as the Fund indirectly bears its proportionate share of any expenses paid by the ETFs in which it invests.
Risks of Investing in Money Market Funds. Money market funds seek to preserve the value of
shareholder investments at $1.00 per share, but shareholders, such as the Fund, may still lose money by investing in such funds. In addition, a money market fund may impose a fee upon the sale of its shares or may temporarily suspend the ability to
sell shares if the fund’s liquidity falls below required minimums because of market conditions or other factors. The credit quality of a money market fund’s holdings can change rapidly in certain markets, and the default of a single holding could
have an adverse impact on the fund’s share price. A money market fund’s share price can also be negatively affected during periods of high redemption pressures, illiquid markets, and/or significant market volatility.
Performance
As of the date of this Prospectus, the Fund has not commenced operations and therefore does not have a performance history. Once available, the Fund’s
performance information will be accessible online at www.[________].com and will provide some indication of the risks of investing in the Fund.
Management
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Investment Adviser
Milliman Financial Risk Management LLC (“Milliman”) serves as investment adviser to the Fund.
Portfolio Managers
The following persons serve as portfolio managers of the Fund.
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●
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Robert T. Cummings, Principal & Head of Portfolio Management at Milliman.
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|
●
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Maria Schiopu, Principal & Head of Portfolio Management at Milliman.
|
|
●
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Jeff Greco, Principal & Head of Strategy Research at Milliman.
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|
●
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Jordan Rosenfeld, Portfolio Manager at Milliman.
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Each portfolio manager is jointly and primarily responsible for the day-to-day management of the Fund’s portfolio and has served in such capacity
since the Fund’s inception in 2021.
Purchase and Sale of Shares
Shares are available as underlying investment options for variable insurance contracts and variable life insurance policies (each, a “variable contract,” and, collectively, the “variable contracts”) issued by insurance companies. These insurance companies are the record owners of the separate accounts
holding the Shares. You do not buy, sell or exchange Shares directly; rather, you choose investment options through your variable contracts. The insurance companies then cause the separate accounts to purchase and redeem Shares according to
the investment options you choose.
Tax Information
The dividends and distributions paid by the Fund to the insurance company separate accounts will consist of ordinary income, capital gains, or some
combination of both. Because Shares must be purchased through separate accounts used to fund variable contracts, such dividends and distributions will be exempt from current taxation by owners of variable contracts (each, a “contract owner,” and, collectively “contract owners”) if left to accumulate within a separate account. Consult the variable contract prospectus for additional tax
information.
Payments to Insurance Companies and Other Financial Intermediaries
If you allocate contract value to the Fund through an insurance company or other financial intermediary, the Fund, Milliman, the Fund’s distributor or
their related companies may pay the insurance company and/or its affiliates or other intermediary for the sale of Shares and related services. These payments may create a conflict of interest by influencing the insurance company or other
intermediary and your salesperson to recommend an indirect investment in the Fund over another investment. The prospectus or other disclosure documents for the variable contracts may contain additional information about these payments, if any.
You may also ask your salesperson or financial intermediary, or visit your financial intermediary’s website, for more information.
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Fund Summary: Milliman S&P 500 1-Year Buffer with Spread Fund – Dec
Investment Objective
The Fund seeks to provide exposure to the S&P 500 Index, while providing a buffer against the first 10% of losses associated with S&P 500
Index performance and participating in S&P 500 Index gains that exceed a declared spread, prior to taking into account any fees or expenses or the performance of any fixed income exposure included in the Fund’s portfolio, over the period from
December 1, 2021 through November 30, 2022.
Fees and Expenses of the Fund
This table describes the fees and expenses that you may pay if you buy, hold and sell shares of the Fund (“Shares”).
This table and the example below do not include any fees or sales charges imposed by your variable product. If they were included, the expenses listed below would be higher.
Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment)
|
Class 3
|
|
|
Management Fees
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0.49%
|
|
Distribution and Service (12b-1) Fees
|
0.25%
|
|
Other Expenses(1)
|
0.50%
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|
Acquired Fund Fees and Expenses(1)
|
[_.__]%
|
|
Total Annual Fund Operating Expenses
|
1.24%
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|
Fee Waiver and/or Expense Reimbursement(2)(3)
|
(0.25)%
|
|
Total Annual Fund Operating Expenses After Fee Waiver and/or Expense Reimbursement
|
0.99%
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|
(1)
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“Other Expenses” and “Acquired Fund Fees and Expenses” are based on estimated amounts for the current fiscal year.
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|
(2)
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The Fund’s investment adviser, Milliman Financial Risk Management LLC (“Milliman”), has contractually
agreed to waive advisory fees and/or reimburse expenses to the extent necessary to limit the Fund’s total annual Fund operating expenses (excluding taxes, interest, brokerage fees and commissions, Rule 12b-1 fees, acquired fund fees and
expenses, short-sale dividend expenses, administrative services fees, other expenses that are capitalized in accordance with generally accepted accounting principles, and extraordinary or non-routine expenses not incurred in the
ordinary course of the Fund’s business) to 0.74% of the Fund's average daily net assets (the “Expense Limitation Agreement”) until at least November 1, 2022. During its term, the Expense
Limitation Agreement cannot be terminated or amended to increase the applicable limit without approval of the Board of Trustees of the Trust (the “Board”). Milliman may recoup from the Fund any
advisory fees waived or expenses reimbursed pursuant to the Expense Limitation Agreement for a period of three years from the date on which such waiver or reimbursement occurred; provided, however, that such recoupment shall not be made
if it would cause the Fund’s total annual Fund operating expenses to exceed the lesser of (a) the expense limitation in effect at the time of the reimbursement, or (b) the expense limitation in effect at the time of recoupment, if any.
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|
(3)
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In addition to the Expense Limitation Agreement, Milliman has contractually agreed to waive its advisory fees in an amount equal to the Fund’s
acquired fund fees and expenses until at least November 1, 2022 (the “Fee Waiver”). This contract cannot be terminated or modified without the consent of the Board.
|
Example
This example is intended to help you compare the cost of investing in the Fund with the cost of investing in other funds. This example assumes that you
invest $10,000 in the Fund for the time periods indicated and then sell all of your Shares at the end of those periods. This example also assumes that your investment has a 5% return each year and that the Fund’s operating expenses remain at
current levels and that the Expense Limitation Agreement and Fee Waiver remain in place for their contractual periods. Although your actual costs may be higher or lower, your costs, based on these assumptions, would be:
|
1 Year
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3 Years
|
|
|
Class 3
|
$104
|
$384
|
This example does not include any fees or sales charges imposed by your variable product. If they were included, the expenses listed above would be
higher.
151
Portfolio Turnover
The Fund pays transaction costs, such as commissions, when it purchases and sells securities (or “turns over” its portfolio). A higher portfolio turnover
will cause the Fund to incur additional transaction costs. These costs, which are not reflected in Total Annual Fund Operating Expenses or in the example, may affect the Fund’s performance. Because the Fund has not yet commenced investment
operations, no portfolio turnover information is available at this time.
Principal Investment Strategies
The Fund seeks to achieve its investment objective by transacting in FLexible EXchange® Options (“FLEX Options”)
and by separately maintaining a collateral portfolio (the “Collateral Portfolio”), which is designed primarily to serve as margin or collateral for the Fund’s FLEX Options positions and secondarily to
enhance the Fund’s upside S&P 500 Index FLEX Options’ exposure (i.e., by utilizing anticipated income to measure the ability to purchase additional FLEX Options). FLEX Options are exchange-traded
options contracts with uniquely customizable terms. In general, an options contract is an agreement between a buyer and seller that gives the purchaser of the option the right to buy or sell a particular asset at a specified future date at an
agreed upon price, commonly known as the “strike price.” The reference assets for the Fund’s FLEX Options positions will include the S&P 500 Index, which is a large-capitalization, market-weighted, U.S. equities index that tracks the price
(excluding dividends) of 500 leading companies in leading industries of the U.S. economy, and certain exchange-traded funds (“ETFs”), as described further below.
The Collateral Portfolio may be invested in short-term fixed-income securities, including corporate bonds and other corporate debt securities,
asset-backed securities (“ABS”), securities issued by the U.S. Government or its agencies and instrumentalities, securities issued by non-U.S. governments or their agencies and instrumentalities, money
market securities and funds, other interest-bearing instruments, cash, ETFs that primarily invest in any of the foregoing instruments, options on ETFs and options box spreads. An options box spread is the combination of different options trades
that have offsetting spreads (e.g., purchases and sales on the same underlying instrument, such as an index or an ETF, but with different strike prices and/or expiration dates) for the purpose of
generating income. The Fund may invest in short-term fixed income securities or other instruments, including through ETFs, of any maturity and credit quality. The Fund will generally invest up to 35% of its net assets in one or more ETFs that
provide exposure to investment grade corporate bonds.
Due to the unique mechanics of the Fund’s strategy, the return an investor can expect to receive from an investment in the Fund has characteristics that
are distinct from the returns of many other investment vehicles. It is important that an investor understand these characteristics before making an investment in the Fund.
In seeking to achieve its investment objective, the Fund seeks to produce pre-determined outcomes (the “Outcomes”)
that are based upon the performance of the S&P 500 Index over a one-year period (the “Outcome Period”). The initial Outcome Period for the Fund is December 1, 2021 through November 30, 2022. Following
the initial Outcome Period, each subsequent Outcome Period will be a one-year period commencing upon the expiration of the prior Outcome Period. The Fund seeks to achieve the Outcomes by purchasing and writing (selling) FLEX Options to create
layers within the Fund’s portfolio. One layer is designed to produce returns that correlate to those of the S&P 500 Index for the Outcome Period if the S&P 500 Index experiences gains during that time in excess of a declared spread (the “Spread”), as described below. A separate layer is designed to produce returns that correlate to those of the S&P 500 Index for the Outcome Period that are buffered up to
10% if the S&P 500 Index experiences losses during that time (the “Buffer”). There is no guarantee that the Fund will be successful in its attempt to produce returns
that correlate to those of the S&P 500 Index in excess of the Spread or produce buffered returns against the Fund’s S&P 500 Index exposure.
Milliman Financial Risk Management, LLC (“Milliman”), the investment adviser of the Fund, seeks to establish the
Buffer by writing one put FLEX Option on the S&P 500 Index with a strike price that is 10% lower than the value of the S&P 500 Index at the beginning of the Outcome Period.
Milliman seeks to establish the Spread by purchasing long call FLEX Options on the S&P 500 Index and by writing put FLEX Options with a strike
price equal to the stated Buffer level. Milliman purchases these FLEX Options with
152
a portion of the Fund’s net assets plus (i) the cash received from writing the put FLEX Option designed to create the Buffer, (ii) additional cash
received by utilizing FLEX Options to create a put spread (the “Put Spread Strategy”) on fixed income securities and/ or one or more ETFs that provide exposure to fixed income securities, and (iii) yield
received from the Collateral Portfolio. Milliman seeks to achieve the Put Spread Strategy for the Fund by writing a put FLEX Option on an underlying asset at a strike price at or lower than the underlying asset’s market price or current value at
the beginning of the Outcome Period, and buying a put FLEX Option on the same underlying asset at a lower strike price than the written put FLEX Option.
The Spread is the minimum rate of return the S&P 500 Index must surpass for the Fund to track any upside market performance of the S&P 500
Index. Milliman calculates the Spread based upon (i) its evaluation of prevailing market conditions on the first day of the Outcome Period and (ii) the strike price of the long call FLEX Options on the S&P 500 Index that it is able to
purchase at that time. As of the date of this Prospectus, and assuming current market conditions persist, Milliman expects that the Spread will be between the below ranges (both gross and net of Fund fees and expenses). Any fees or expenses
imposed by your variable product, and any other expenses incurred by the Fund, will have the effect of further increasing the Spread. In addition, in certain market conditions, the performance of the
Collateral Portfolio and the Put Spread Strategy could cause the Fund to underperform relative to the S&P 500 Index, which would require greater upside performance of the S&P 500 Index to generate a total return of the Fund that
exceeds the Spread.
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Share Class
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Estimated Spread Ranges
(As of [___])
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|
|
Prior to Taking into Account Fund Fees and Expenses
|
After Taking into Account Fund Fees and Expenses
|
|
|
Class 3
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[__]% and [__]%
|
[__]% and [__]%
|
The Buffer is only operative against the first 10% of losses in the Fund’s S&P 500 Index exposure for the Outcome Period. If the S&P 500 Index
decreases in value by more than 10% during the Outcome Period, the Fund (and therefore investors in Shares) will experience all subsequent losses in the Fund’s S&P 500 Index exposure on a one-to-one basis for the Outcome Period. The Fund
seeks to produce buffered returns against its S&P 500 Index exposure prior to taking into account any fees or expenses or the performance of the Collateral Portfolio or the Put Spread Strategy. The Buffer
is not operative against losses in the Collateral Portfolio or the Put Spread Strategy. If the Collateral Portfolio and/or the Put Spread Strategy experiences losses, it could have the effect of reducing the impact of, or completely
eliminating, the Buffer on the Fund’s S&P 500 Index exposure. In certain market conditions, the performance of the Collateral Portfolio and/or the Put Spread Strategy could cause the Fund to significantly underperform the S&P 500
Index. The following table reflects the Buffer both gross and net of Fund fees and expenses:
|
Share Class
|
Buffer
(As of [___])
|
|
|
Prior to Taking into Account Fund Fees and Expenses
|
After Taking into Account Fund Fees and Expenses
|
|
|
Class 3
|
10%
|
[__]%
|
The definitive Spread and Buffer will be set forth on the Fund’s website. The Fund’s website will also provide information relating to the Outcomes on
a daily basis including the Fund’s position relative to the Spread and the Buffer. You may also contact your insurance company or other financial intermediary for more information.
Additionally, the Fund’s net asset value (“NAV”) will not increase or decrease at the same rate as the S&P
500 Index because the Fund’s strategy relies upon the performance of the Collateral Portfolio and the Put Spread Strategy, in addition to the value of the Fund’s FLEX Options positions on the S&P 500 Index. While Milliman anticipates that the
Fund’s NAV will generally move in the same direction as the S&P 500 Index (meaning that the Fund’s NAV will generally increase if the S&P 500 Index experiences gains or decrease if the S&P 500 Index experiences losses), the Fund’s NAV
may not decrease at the same rate as the S&P 500 Index (especially when factoring in the performance of the Collateral Portfolio and the Put Spread Strategy) and will not increase at the same rate as the S&P 500 Index (especially when
factoring in the Spread and the performance of the Collateral Portfolio and the Put
153
Spread Strategy). Similarly, the amount of time remaining until the end of the Outcome Period also affects the impact of the Buffer on the Fund’s NAV,
because the Buffer may not be in full effect prior to the end of the Outcome Period.
The FLEX Options utilized in the Fund’s portfolio are each set to expire on the last day of the Outcome Period. The customizable nature of FLEX Options
will allow Milliman to select the strike price at which each FLEX Option will be exercised at the expiration of the FLEX Option term. At the commencement of the Outcome Period, Milliman will specifically select the strike price for each FLEX Option
in a manner designed to achieve the Outcomes when the FLEX Options are exercised on the final day of the Outcome Period, depending on the anticipated performance of the S&P 500 Index, the Collateral Portfolio and the Put Spread Strategy over
the duration of that Outcome Period.
The hypothetical graphical illustrations provided below are designed to illustrate the Outcomes based upon the
hypothetical performance of the S&P 500 Index for an investor who holds Shares for the entirety of the Outcome Period. The hypothetical graphical illustrations do not include any fees or expenses imposed by your variable product or expenses
incurred by the Fund, and do not reflect the performance of the Collateral Portfolio or the Put Spread Strategy. Additional hypothetical graphical representations of the Outcomes are provided in “Additional Information About the Funds and
the Risks of Investing.” There is no guarantee that the Fund will be successful in its attempt to achieve the Outcomes for the Outcome Period.
The following table contains hypothetical examples designed to illustrate the Outcomes the Fund seeks to
achieve over the Outcome Period, based upon the performance of the S&P 500 Index from (100)% to 100% after taking into account the Spread and the Buffer, but prior to taking into account any fees or expenses or the performance of the
Collateral Portfolio or the Put Spread Strategy. The table is provided for illustrative purposes only and does not provide every possible performance scenario for Shares over the course of the Outcome Period. There is no guarantee that the Fund will be successful in its attempt to achieve the Outcomes for an Outcome
Period. The table is not intended to predict or project the performance of the FLEX Options or the Fund. Investors should not take this information as an assurance of the expected performance of the
S&P 500 Index or the Fund. Actual Fund performance will vary with fluctuations in the performance of the Collateral Portfolio and the Put Spread Strategy, in addition to the value of the Fund’s FLEX Options positions on the S&P
500 Index, during
154
the Outcome Period, among other factors. The performance of the Collateral
Portfolio and the Put Spread Strategy could significantly impact the performance of the Fund, which could prevent the Fund from achieving the Outcomes that it seeks to produce. The table does not reflect any fees or expenses imposed by
your variable product or expenses incurred by the Fund. If it did, the returns shown for the Fund would be lower. Please refer to the Fund’s website, which provides updated information relating to this table on a daily basis throughout the
Outcome Period. Please contact your insurance company or other financial intermediary for more information.
|
Index/Fund
|
Hypothetical Performance1
|
|||||||||||
|
S&P 500 Index Price Performance
|
(100)%
|
(50)%
|
(20)%
|
(10)%
|
(5)%
|
0%
|
5%
|
10%
|
15%
|
20%
|
50%
|
100%
|
|
Fund Performance at NAV
|
(90)%
|
(40)%
|
(10)%
|
0%2
|
0%2
|
0%
|
4%3
|
9%3
|
14%3
|
19%3
|
49%3
|
99%3
|
| 1 |
Does not take into account any fees or expenses or the performance of the Collateral Portfolio or the Put Spread Strategy.
|
| 2 |
Reflects the impact of the Buffer.
|
| 3 |
Reflects the impact of an assumed Spread of 1.0%.
|
Understanding Outcomes. The Outcomes the Fund seeks to achieve are measured based upon the
Fund’s NAV on the first day of the Outcome Period. The Outcome Period begins on the day Milliman transacts in the FLEX Options on behalf of the Fund, and ends on the day those FLEX Options expire. An investor who
purchases Shares after the commencement of the Outcome Period will likely have purchased Shares at a different NAV than the NAV on the first day of the Outcome Period (the NAV upon which the Outcomes are based) and may experience investment
outcomes very different from those the Fund seeks to achieve, especially when factoring in any fees or expenses or the performance of the Collateral Portfolio and the Put Spread Strategy. An investor who redeems Shares prior to the end of the
Outcome Period may also experience investment outcomes very different from those the Fund seeks to achieve. The Outcomes are designed with the expectation that an investor will hold Shares on the day that Milliman transacts in the FLEX Options on
behalf of the Fund, and on the day those FLEX Options expire. There is no guarantee that the Fund will be successful in its attempt to achieve the Outcomes.
Understanding the Spread. Unlike other investment products, the potential returns an
investor can receive from an investment in the Fund are subject to the Spread. This means that if the S&P 500 Index experiences gains for the Outcome Period, an investor in the Fund will only experience those
gains if they exceed the Spread and only by the amount those gains have exceeded the Spread. If the S&P 500 Index does not experience gains that exceed the Spread, an investor in the Fund will not experience any gains. Milliman
calculates the Spread for each Outcome Period based upon (i) its evaluation of prevailing market conditions on the first day of the Outcome Period and (ii) the strike price of the long call FLEX Options on the S&P 500 Index that it is able to
purchase at that time. In certain market conditions, the performance of the Collateral Portfolio and the Put Spread Strategy could cause the Fund to underperform relative to the S&P 500 Index, which would
require greater upside performance of the S&P 500 Index to generate a total return of the Fund that exceeds the Spread. An investor should consider the amount and impact of the Spread, and the Fund’s position relative to it, before
investing in the Fund.
Understanding the Buffer. The Buffer that the Fund seeks to provide is only operative
against the first 10% of losses in the Fund’s S&P 500 Index exposure for the Outcome Period. If an investor is considering purchasing Shares during the Outcome Period, and the S&P 500 Index has decreased
in value by an amount equal to or greater than 10%, an investor purchasing Shares at that time will be able to participate in any gains thereafter (subject to the Spread), but will not benefit from the Buffer that the Fund seeks to offer for
the remainder of the Outcome Period if the losses continue to be equal to or greater than 10% during that period. Conversely, if an investor is considering purchasing Shares during the Outcome Period, and the Fund’s NAV has increased in value
in an amount exceeding the Spread, then an investor may experience losses before implementation of the Buffer that the Fund seeks to provide. While the Fund seeks to produce returns that correlate to those of the S&P 500 Index for
the Outcome Period that are buffered up to 10% (prior to taking into account any fees or expenses or the performance of the Collateral Portfolio or the Put Spread Strategy) for investors who hold Shares for the entire Outcome Period, there is no
guarantee it will successfully do so. In addition, the
155
Buffer is not operative against losses in the Collateral Portfolio or the Put Spread Strategy. If the Collateral Portfolio and/or
the Put Spread Strategy experiences losses, it could have the effect of reducing the impact of, or completely eliminating, the Buffer on the Fund’s S&P 500 Index exposure. In certain market conditions, the performance of the Collateral
Portfolio and/or the Put Spread Strategy could cause the Fund to significantly underperform the S&P 500 Index. Investors who purchase Shares at the beginning of the Outcome Period may lose their entire investment. Investors who purchase
Shares after the Outcome Period has begun may also lose their entire investment. An investment in the Fund is only appropriate for investors willing to bear those losses.
Fund Rebalance. Milliman implements the Fund’s strategy on a semi-annual basis, seeking to
produce the Outcomes for an Outcome Period. On the last business day of any stated Outcome Period, all of the Fund’s existing FLEX Options, which includes those used to establish the Buffer, the Spread and the Put Spread Strategy, will expire and
Milliman will transact in a new set of FLEX Options on the same business day, which will commence a new Outcome Period beginning the following business day. At that same time, Milliman will also evaluate whether to make any adjustments to the
Collateral Portfolio. Accordingly, Shares can be held indefinitely if investors determine to participate in additional Outcome Periods.
Approximately one week prior to the end of each Outcome Period, the Fund will file a prospectus supplement, which will notify existing investors of (i)
the date on which the existing Outcome Period will end; (ii) the date on which the new Outcome Period will commence; and (iii) the anticipated ranges of the Spread that will be used for the new Outcome Period. Immediately preceding the commencement
date of the new Outcome Period, the Fund will file a prospectus supplement disclosing the Fund’s final Spread (both gross and net of Fund fees and expenses) for the new Outcome Period. This information will also be available online at
www.[___________].com, and on your insurance company’s website. Please contact your insurance company or other financial intermediary for more information.
Fund Classification. The Fund is classified as “non-diversified” under the Investment
Company Act of 1940, as amended (the “1940 Act”).
Principal Risks
You could lose money by investing in the Fund. An investment in the Fund is not a deposit of a bank and is not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other governmental agency. There can be no assurance that the Fund’s investment objectives will be achieved.
Downside Loss Buffer Risk. There can be no guarantee that the Fund will be successful in its strategy to
buffer against S&P 500 Index losses if the S&P 500 Index decreases in value over the Outcome Period. The Fund’s strategy is designed to produce returns that correlate to those of the S&P 500 Index at the Spread, while limiting
downside losses in the Fund’s S&P 500 Index exposure, if Shares are bought on the day on which Milliman transacts in the FLEX Options on behalf of the Fund and held until those FLEX Options expire at the end of each Outcome Period. The
success of the Buffer also depends upon the performance of the Collateral Portfolio and the Put Spread Strategy. If the Collateral Portfolio and/or the Put Spread Strategy experiences losses, it could have the
effect of reducing the impact of, or completely eliminating, the Buffer on the Fund’s S&P 500 Index exposure. In certain market conditions, the performance of the Collateral Portfolio and/or the Put Spread Strategy could cause the Fund to
significantly underperform the S&P 500 Index. Despite the intended Buffer, an investor could lose their entire investment. In the event an investor purchases Shares after the date on which Milliman transacted in the FLEX
Options on behalf of the Fund, or redeems Shares prior to the expiration of those FLEX Options, the Buffer that the Fund seeks to provide may not be available or fully applicable.
Risk of the Spread on Upside Returns. The Fund’s strategy is designed to produce returns that correlate to
those of the S&P 500 Index if Shares are bought on the day on which Milliman transacts in the FLEX Options on behalf of the Fund and held until those FLEX Options expire at the end of the Outcome Period, subject to the Spread. In the event
that the S&P 500 Index has gains that do not exceed the Spread for the Outcome Period, the Fund will not participate in those gains. In addition, in the event an investor purchases Shares after the date on which Milliman transacted in the
FLEX Options on behalf of the Fund, or redeems Shares prior to the expiration of those FLEX Options, the returns realized by that investor will not match those that the Fund seeks to achieve. In certain market
156
conditions, the performance of the Collateral Portfolio and the Put Spread Strategy could cause the Fund to underperform
relative to the S&P 500 Index, which would require greater upside performance of the S&P 500 Index to generate a total return of the Fund that exceeds the Spread. An investor should consider the amount and impact of the Spread, and the
Fund’s position relative to it, before investing in the Fund.
Spread Change Risk. Because the Spread for each Outcome Period is calculated based upon (i) Milliman’s evaluation
of prevailing market conditions on the first day of the Outcome Period and (ii) the strike price of the long call FLEX Options on the S&P 500 Index that Milliman is able to purchase at that time, the Spread may rise or fall from one Outcome
Period to the next. Any change in the Spread could be significant and it is unlikely to remain the same for consecutive Outcome Periods.
FLEX Options Risk. The Fund will transact in FLEX Options issued and guaranteed for settlement by the OCC. The
Fund bears the risk that the OCC will be unable or unwilling to perform its obligations under the FLEX Options contracts, which could result in significant losses to the Fund. In less liquid markets, terminating a FLEX Option may require the
payment of a premium or acceptance of a discounted price, and may take longer to complete. In addition, a less liquid trading market may adversely impact the value of the Fund’s FLEX Options and therefore the NAV of the Fund. In addition, the value
of the Fund’s FLEX Options positions is not anticipated to increase or decrease at the same rate as the reference asset; and while it is anticipated that they will generally move in the same direction, it is possible that they may move in different
directions. Certain FLEX Options positions may also expire worthless. The use of FLEX Options involves leverage, which can cause the Fund’s portfolio to be more volatile than if the portfolio had not been leveraged. Leverage can significantly
magnify the effect of price movements of the reference asset, disproportionately increasing the Fund’s losses and reducing the Fund’s opportunities for gains when the reference asset changes in unexpected ways. In some instances, such leverage
could result in losses that exceed the original amount invested.
Investment Objective and Outcomes Risk. There is no guarantee that the Fund will be successful in its attempt
to achieve its investment objective and/or the Outcomes, and an investor could lose some or all of their investment in the Fund. Certain circumstances under which the Fund might not achieve its objective and/or the Outcomes include, but are not
limited to (i) if the Fund disposes of FLEX Options, (ii) if the Fund is unable to maintain the proportional relationship based on the number of FLEX Options in the Fund’s portfolio, (iii) significant accrual of Fund expenses in connection with
effecting the Fund’s principal investment strategy, (iv) losses incurred by the Fund’s holdings in the Collateral Portfolio and/or losses resulting from the Put Spread Strategy, or (iv) adverse tax law changes affecting the treatment of FLEX
Options.
Tax Risk. The Fund intends to elect, and to qualify each year, to be treated as a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”). As a RIC, the Fund will not be subject to U.S. federal income tax on the portion
of its net investment income and net capital gain that it distributes to shareholders, provided that it satisfies certain requirements of the Code. To maintain its status as a RIC, the Fund must meet certain income, diversification and
distributions tests. For purposes of the diversification test, the identification of the issuer (or, in some cases, issuers) of a particular Fund investment can depend on the terms and conditions of that investment. In particular, there is no
published IRS guidance or case law on how to determine the “issuer” of certain derivatives that the Fund will enter into and the Fund has not received a private letter ruling on this point. Therefore, there is a risk that the Fund will not meet the
Code’s diversification requirements and will not qualify, or will be disqualified, as a RIC. If the Fund does not qualify as a RIC for any taxable year and certain relief provisions are not available, the Fund’s taxable income will be subject to
tax at the Fund level and to a further tax at the shareholder level when such income is distributed.
The Fund also intends to comply with the diversification requirements of Section 817(h) of the Code, and the regulations thereunder, relating to the
tax-deferred status of variable accounts that are based on insurance company separate accounts (referred to as “segregated asset accounts” for federal income tax purposes). These diversification requirements apply in addition to the RIC
diversification requirements discussed above. There also is no published guidance or case law on how to determine the “issuer” of the derivatives referred to above for purposes of the diversification requirements of Section 817(h) of the Code and
the Fund has not received a private letter ruling on this point. If these requirements are not met, or under other circumstances, such as if the Fund does not qualify as a RIC for any taxable year, it is possible that the contract owners (rather
than the insurance company) will be treated for federal income tax purposes as the taxable owners of the assets held by the segregated asset accounts.
157
Clearing Member Default Risk. The Fund will hold FLEX Options through accounts at members of clearing houses (“clearing members”) rather than a bank or a broker. Assets deposited by the Fund with any clearing member as margin for its FLEX Options positions may, in certain circumstances, be used to satisfy losses of other
clients of the Fund’s clearing member where such assets may be held in commingled omnibus accounts. In addition, although clearing members guarantee performance of their clients’ obligations to the clearing house, there is a risk that the assets of
the Fund might not be fully protected in the event of the clearing member’s bankruptcy, as the Fund would be limited to recovering only a pro rata share of all available funds segregated on behalf of the
clearing member’s customers for the relevant account class.
Debt Securities Risk. The prices of debt securities will be affected by changes in interest rates, the
creditworthiness of the issuer and other factors. These risks could affect the value of investments in which the Fund invests, possibly causing the Fund’s NAV to be reduced and fluctuate more than other types of investments. During periods of
falling interest rates, an issuer of a callable bond may repay the security before its stated maturity, and the Fund may have to reinvest the proceeds in securities with lower yields, which would result in a decline in the Fund’s income, or in
securities with greater risks or with other less favorable features. Changing interest rates, including rates that fall below zero, may have unpredictable effects on markets, result in heightened market volatility and detract from the Fund’s
performance to the extent the Fund is exposed to such interest rates. An increase in interest rates will generally cause the value of fixed-income securities held by the Fund to decline, may lead to heightened volatility in the fixed-income
markets and may adversely affect the liquidity of certain fixed-income investments, including those held by the Fund. Risks associated with rising interest rates are heightened given that interest rates in the U.S. are near historic lows.
Adjustable-rate instruments also react to interest rate changes in a similar manner, although generally to a lesser degree (depending, however, on the characteristics of the reset terms, including the index chosen, frequency of reset and reset
caps or floors, among other factors). Interest rate sensitivity is generally more pronounced and less predictable in instruments with uncertain payment or prepayment schedules and also for those with longer maturities.
Foreign Securities and Credit Exposure Risk. U.S. dollar-denominated securities carrying foreign credit exposure
may be affected by unfavorable political, economic or governmental developments that could affect payments of principal and interest. Furthermore, the value of the Fund’s foreign investments (whether direct or indirect) may be adversely affected by
political and social instability in their home countries, by changes in economic or taxation policies in those countries, or by the difficulty in enforcing obligations in those countries. Foreign companies generally may be subject to less stringent
regulations than U.S. companies, including financial reporting requirements and auditing and accounting controls. As a result, there generally is less publicly available information about foreign companies than about U.S. companies. Trading in many
foreign securities may be less liquid and more volatile than U.S. securities due to the size of the market or other factors.
U.S. Government Securities Risk. U.S. Government securities are subject to interest rate risk but generally do
not involve the credit risks associated with investments in other types of debt securities. As a result, the yields available from U.S. Government securities are generally lower than the yields available from other debt securities. U.S. Government
securities are guaranteed only as to the timely payment of interest and the payment of principal when held to maturity. While securities issued or guaranteed by U.S. federal government agencies are backed by the full faith and credit of the U.S.
Department of the Treasury, securities issued by government sponsored entities are solely the obligation of the issuer and generally do not carry any guarantee from the U.S. Government.
ABS Risk. ABS are subject to the general debt securities risks described above. In addition, ABS may be less
liquid than other bonds, and may be more sensitive than other bonds to the market’s perception of issuers and creditworthiness of payees, which may result in the Fund experiencing difficulty selling or valuing these securities. ABS markets have
experienced extraordinary weakness and volatility at various times in recent years, and may decline quickly in the event of a substantial economic or market downturn. Accordingly, these securities may be subject to greater risk of default during
periods of economic downturn than other securities, which could result in possible losses to the Fund.
Issuer Risk. The performance of the Fund depends on the performance of individual securities to which the Fund
has exposure. The Fund may be adversely affected if an issuer of underlying securities held by the Fund is unable or
158
unwilling to repay principal or interest when due. Changes in the financial condition or credit rating of an issuer of those securities may cause the
value of the securities to decline.
Management Risk. The Fund is subject to management risk because it is an actively managed portfolio. Milliman
will apply investment techniques and risk analyses in making investment decisions for the Fund, but there can be no guarantee that the Fund will meet its investment objective and/or the Outcomes. In addition, Milliman does not use defensive
strategies or attempt to reduce the Fund’s exposures to poor performing positions during an Outcome Period. This differs from funds that are managed to seek to outperform a benchmark index. Therefore, in the event of a general market decline, the
Fund’s value may fall more than the value of another fund that does attempt to hedge against such market declines.
Market Risk. The Fund could lose money over short periods due to short-term market movements and over longer
periods during more prolonged market downturns. Assets may decline in value due to factors affecting financial markets generally or particular asset classes or industries represented in the markets. The value of a FLEX Option or other asset may
also decline due to general market conditions, economic trends or events that are not specifically related to the issuer of the security or other asset, or due to factors that affect a particular issuer, country, region, market, industry, sector or
asset class.
Non-Diversification Risk. The Fund may invest a relatively high percentage of its assets in a limited number of
issuers. As a result, the Fund may be more susceptible to a single adverse economic or regulatory occurrence affecting one or more of these issuers, experience increased volatility and be highly invested in certain issuers.
Large Shareholder Risk. At times, the Fund may experience adverse effects when certain large shareholders,
including insurance company separate accounts, redeem large amounts of shares of the Fund. Large redemptions may cause the Fund to sell portfolio holdings at times when it would not otherwise do so and may increase transaction costs and/or result
in an increase to the Fund’s expense ratio. A large redemption could be detrimental to the Fund and its remaining shareholders.
Risks of Investing in ETFs. In addition to the risks associated with the underlying assets held by the ETFs in
which the Fund invests, investments in ETFs are also subject to the following additional risks: (i) only authorized participants may engage in transactions directly with ETFs but none are obligated to do so, which could result in an ETF’s shares
trading at a premium or discount to its NAV or possibly face trading halts or delisting; (ii) certain ETFs seek to track the performance of an underlying index and will not attempt to take defensive positions under any market conditions, including
declining markets, which could result in losses; and (iii) because ETF shares trade on the secondary market, there is not guarantee that an active market will be developed or maintained, which could result in the ETF’s shares trading at a premium
or discount to its NAV. Investments in ETFs may involve duplication of management fees and certain other expenses, as the Fund indirectly bears its proportionate share of any expenses paid by the ETFs in which it invests.
Risks of Investing in Money Market Funds. Money market funds seek to preserve the value of
shareholder investments at $1.00 per share, but shareholders, such as the Fund, may still lose money by investing in such funds. In addition, a money market fund may impose a fee upon the sale of its shares or may temporarily suspend the ability to
sell shares if the fund’s liquidity falls below required minimums because of market conditions or other factors. The credit quality of a money market fund’s holdings can change rapidly in certain markets, and the default of a single holding could
have an adverse impact on the fund’s share price. A money market fund’s share price can also be negatively affected during periods of high redemption pressures, illiquid markets, and/or significant market volatility.
Performance
As of the date of this Prospectus, the Fund has not commenced operations and therefore does not have a performance history. Once available, the Fund’s
performance information will be accessible online at www.[________].com and will provide some indication of the risks of investing in the Fund.
Management
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Investment Adviser
Milliman Financial Risk Management LLC (“Milliman”) serves as investment adviser to the Fund.
Portfolio Managers
The following persons serve as portfolio managers of the Fund.
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●
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Robert T. Cummings, Principal & Head of Portfolio Management at Milliman.
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Maria Schiopu, Principal & Head of Portfolio Management at Milliman.
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●
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Jeff Greco, Principal & Head of Strategy Research at Milliman.
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●
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Jordan Rosenfeld, Portfolio Manager at Milliman.
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Each portfolio manager is jointly and primarily responsible for the day-to-day management of the Fund’s portfolio and has served in such capacity
since the Fund’s inception in 2021.
Purchase and Sale of Shares
Shares are available as underlying investment options for variable insurance contracts and variable life insurance policies (each, a “variable contract,” and, collectively, the “variable contracts”) issued by insurance companies. These insurance companies are the record owners of the separate accounts
holding the Shares. You do not buy, sell or exchange Shares directly; rather, you choose investment options through your variable contracts. The insurance companies then cause the separate accounts to purchase and redeem Shares according to
the investment options you choose.
Tax Information
The dividends and distributions paid by the Fund to the insurance company separate accounts will consist of ordinary income, capital gains, or some
combination of both. Because Shares must be purchased through separate accounts used to fund variable contracts, such dividends and distributions will be exempt from current taxation by owners of variable contracts (each, a “contract owner,” and, collectively “contract owners”) if left to accumulate within a separate account. Consult the variable contract prospectus for additional tax
information.
Payments to Insurance Companies and Other Financial Intermediaries
If you allocate contract value to the Fund through an insurance company or other financial intermediary, the Fund, Milliman, the Fund’s distributor or
their related companies may pay the insurance company and/or its affiliates or other intermediary for the sale of Shares and related services. These payments may create a conflict of interest by influencing the insurance company or other
intermediary and your salesperson to recommend an indirect investment in the Fund over another investment. The prospectus or other disclosure documents for the variable contracts may contain additional information about these payments, if any.
You may also ask your salesperson or financial intermediary, or visit your financial intermediary’s website, for more information.
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Fund Summary: Milliman S&P 500 1-Year Buffer with Spread Fund – Jan
Investment Objective
The Fund seeks to provide exposure to the S&P 500 Index, while providing a buffer against the first 10% of losses associated with S&P 500
Index performance and participating in S&P 500 Index gains that exceed a declared spread, prior to taking into account any fees or expenses or the performance of any fixed income exposure included in the Fund’s portfolio, over the period from
January 1, 2022 through December 31, 2022.
Fees and Expenses of the Fund
This table describes the fees and expenses that you may pay if you buy, hold and sell shares of the Fund (“Shares”).
This table and the example below do not include any fees or sales charges imposed by your variable product. If they were included, the expenses listed below would be higher.
Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment)
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Class 3
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|
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Management Fees
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0.49%
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Distribution and Service (12b-1) Fees
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0.25%
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Other Expenses(1)
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0.50%
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Acquired Fund Fees and Expenses(1)
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[_.__]%
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Total Annual Fund Operating Expenses
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1.24%
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Fee Waiver and/or Expense Reimbursement(2)(3)
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(0.25)%
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Total Annual Fund Operating Expenses After Fee Waiver and/or Expense Reimbursement
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0.99%
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(1)
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“Other Expenses” and “Acquired Fund Fees and Expenses” are based on estimated amounts for the current fiscal year.
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|
(2)
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The Fund’s investment adviser, Milliman Financial Risk Management LLC (“Milliman”), has contractually
agreed to waive advisory fees and/or reimburse expenses to the extent necessary to limit the Fund’s total annual Fund operating expenses (excluding taxes, interest, brokerage fees and commissions, Rule 12b-1 fees, acquired fund fees and
expenses, short-sale dividend expenses, administrative services fees, other expenses that are capitalized in accordance with generally accepted accounting principles, and extraordinary or non-routine expenses not incurred in the
ordinary course of the Fund’s business) to 0.74% of the Fund's average daily net assets (the “Expense Limitation Agreement”) until at least November 1, 2022. During its term, the Expense
Limitation Agreement cannot be terminated or amended to increase the applicable limit without approval of the Board of Trustees of the Trust (the “Board”). Milliman may recoup from the Fund any
advisory fees waived or expenses reimbursed pursuant to the Expense Limitation Agreement for a period of three years from the date on which such waiver or reimbursement occurred; provided, however, that such recoupment shall not be made
if it would cause the Fund’s total annual Fund operating expenses to exceed the lesser of (a) the expense limitation in effect at the time of the reimbursement, or (b) the expense limitation in effect at the time of recoupment, if any.
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(3)
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In addition to the Expense Limitation Agreement, Milliman has contractually agreed to waive its advisory fees in an amount equal to the Fund’s
acquired fund fees and expenses until at least November 1, 2022 (the “Fee Waiver”). This contract cannot be terminated or modified without the consent of the Board.
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Example
This example is intended to help you compare the cost of investing in the Fund with the cost of investing in other funds. This example assumes that you
invest $10,000 in the Fund for the time periods indicated and then sell all of your Shares at the end of those periods. This example also assumes that your investment has a 5% return each year and that the Fund’s operating expenses remain at
current levels and that the Expense Limitation Agreement and Fee Waiver remain in place for their contractual periods. Although your actual costs may be higher or lower, your costs, based on these assumptions, would be:
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1 Year
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3 Years
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|
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Class 3
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$104
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$384
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This example does not include any fees or sales charges imposed by your variable product. If they were included, the expenses listed above would be
higher.
161
Portfolio Turnover
The Fund pays transaction costs, such as commissions, when it purchases and sells securities (or “turns over” its portfolio). A higher portfolio turnover
will cause the Fund to incur additional transaction costs. These costs, which are not reflected in Total Annual Fund Operating Expenses or in the example, may affect the Fund’s performance. Because the Fund has not yet commenced investment
operations, no portfolio turnover information is available at this time.
Principal Investment Strategies
The Fund seeks to achieve its investment objective by transacting in FLexible EXchange® Options (“FLEX Options”)
and by separately maintaining a collateral portfolio (the “Collateral Portfolio”), which is designed primarily to serve as margin or collateral for the Fund’s FLEX Options positions and secondarily to
enhance the Fund’s upside S&P 500 Index FLEX Options’ exposure (i.e., by utilizing anticipated income to measure the ability to purchase additional FLEX Options). FLEX Options are exchange-traded
options contracts with uniquely customizable terms. In general, an options contract is an agreement between a buyer and seller that gives the purchaser of the option the right to buy or sell a particular asset at a specified future date at an
agreed upon price, commonly known as the “strike price.” The reference assets for the Fund’s FLEX Options positions will include the S&P 500 Index, which is a large-capitalization, market-weighted, U.S. equities index that tracks the price
(excluding dividends) of 500 leading companies in leading industries of the U.S. economy, and certain exchange-traded funds (“ETFs”), as described further below.
The Collateral Portfolio may be invested in short-term fixed-income securities, including corporate bonds and other corporate debt securities,
asset-backed securities (“ABS”), securities issued by the U.S. Government or its agencies and instrumentalities, securities issued by non-U.S. governments or their agencies and instrumentalities, money
market securities and funds, other interest-bearing instruments, cash, ETFs that primarily invest in any of the foregoing instruments, options on ETFs and options box spreads. An options box spread is the combination of different options trades
that have offsetting spreads (e.g., purchases and sales on the same underlying instrument, such as an index or an ETF, but with different strike prices and/or expiration dates) for the purpose of
generating income. The Fund may invest in short-term fixed income securities or other instruments, including through ETFs, of any maturity and credit quality. The Fund will generally invest up to 35% of its net assets in one or more ETFs that
provide exposure to investment grade corporate bonds.
Due to the unique mechanics of the Fund’s strategy, the return an investor can expect to receive from an investment in the Fund has characteristics that
are distinct from the returns of many other investment vehicles. It is important that an investor understand these characteristics before making an investment in the Fund.
In seeking to achieve its investment objective, the Fund seeks to produce pre-determined outcomes (the “Outcomes”)
that are based upon the performance of the S&P 500 Index over a one-year period (the “Outcome Period”). The initial Outcome Period for the Fund is January 1, 2022 through December 31, 2022. Following the
initial Outcome Period, each subsequent Outcome Period will be a one-year period commencing upon the expiration of the prior Outcome Period. The Fund seeks to achieve the Outcomes by purchasing and writing (selling) FLEX Options to create layers
within the Fund’s portfolio. One layer is designed to produce returns that correlate to those of the S&P 500 Index for the Outcome Period if the S&P 500 Index experiences gains during that time in excess of a declared spread (the “Spread”), as described below. A separate layer is designed to produce returns that correlate to those of the S&P 500 Index for the Outcome Period that are buffered up to
10% if the S&P 500 Index experiences losses during that time (the “Buffer”). There is no guarantee that the Fund will be successful in its attempt to produce returns
that correlate to those of the S&P 500 Index in excess of the Spread or produce buffered returns against the Fund’s S&P 500 Index exposure.
Milliman Financial Risk Management, LLC (“Milliman”), the investment adviser of the Fund, seeks to establish the
Buffer by writing one put FLEX Option on the S&P 500 Index with a strike price that is 10% lower than the value of the S&P 500 Index at the beginning of the Outcome Period.
Milliman seeks to establish the Spread by purchasing long call FLEX Options on the S&P 500 Index and by writing put FLEX Options with a strike
price equal to the stated Buffer level. Milliman purchases these FLEX Options with
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a portion of the Fund’s net assets plus (i) the cash received from writing the put FLEX Option designed to create the Buffer, (ii) additional cash
received by utilizing FLEX Options to create a put spread (the “Put Spread Strategy”) on fixed income securities and/or one or more ETFs that provide exposure to fixed income securities, and (iii) yield
received from the Collateral Portfolio. Milliman seeks to achieve the Put Spread Strategy for the Fund by writing a put FLEX Option on an underlying asset at a strike price at or lower than the underlying asset’s market price or current value at
the beginning of the Outcome Period, and buying a put FLEX Option on the same underlying asset at a lower strike price than the written put FLEX Option.
The Spread is the minimum rate of return the S&P 500 Index must surpass for the Fund to track any upside market performance of the S&P 500
Index. Milliman calculates the Spread based upon (i) its evaluation of prevailing market conditions on the first day of the Outcome Period and (ii) the strike price of the long call FLEX Options on the S&P 500 Index that it is able to
purchase at that time. As of the date of this Prospectus, and assuming current market conditions persist, Milliman expects that the Spread will be between the below ranges (both gross and net of Fund fees and expenses). Any fees or expenses
imposed by your variable product, and any other expenses incurred by the Fund, will have the effect of further increasing the Spread. In addition, in certain market conditions, the performance of the
Collateral Portfolio and the Put Spread Strategy could cause the Fund to underperform relative to the S&P 500 Index, which would require greater upside performance of the S&P 500 Index to generate a total return of the Fund that
exceeds the Spread.
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Share Class
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Estimated Spread Ranges
(As of [___])
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|
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Prior to Taking into Account Fund Fees and Expenses
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After Taking into Account Fund Fees and Expenses
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|
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Class 3
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[__]% and [__]%
|
[__]% and [__]%
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The Buffer is only operative against the first 10% of losses in the Fund’s S&P 500 Index exposure for the Outcome Period. If the S&P 500 Index
decreases in value by more than 10% during the Outcome Period, the Fund (and therefore investors in Shares) will experience all subsequent losses in the Fund’s S&P 500 Index exposure on a one-to-one basis for the Outcome Period. The Fund
seeks to produce buffered returns against its S&P 500 Index exposure prior to taking into account any fees or expenses or the performance of the Collateral Portfolio or the Put Spread Strategy. The Buffer
is not operative against losses in the Collateral Portfolio or the Put Spread Strategy. If the Collateral Portfolio and/or the Put Spread Strategy experiences losses, it could have the effect of reducing the impact of, or completely
eliminating, the Buffer on the Fund’s S&P 500 Index exposure. In certain market conditions, the performance of the Collateral Portfolio and/or the Put Spread Strategy could cause the Fund to significantly underperform the S&P 500
Index. The following table reflects the Buffer both gross and net of Fund fees and expenses:
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Share Class
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Buffer
(As of [___])
|
|
|
Prior to Taking into Account Fund Fees and Expenses
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After Taking into Account Fund Fees and Expenses
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|
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Class 3
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10%
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[__]%
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The definitive Spread and Buffer will be set forth on the Fund’s website. The Fund’s website will also provide information relating to the Outcomes on
a daily basis, including the Fund’s position relative to the Spread and the Buffer. You may also contact your insurance company or other financial intermediary for more information.
Additionally, the Fund’s net asset value (“NAV”) will not increase or decrease at the same rate as the S&P
500 Index because the Fund’s strategy relies upon the performance of the Collateral Portfolio and the Put Spread Strategy, in addition to the value of the Fund’s FLEX Options positions on the S&P 500 Index. While Milliman anticipates that the
Fund’s NAV will generally move in the same direction as the S&P 500 Index (meaning that the Fund’s NAV will generally increase if the S&P 500 Index experiences gains or decrease if the S&P 500 Index experiences losses), the Fund’s NAV
may not decrease at the same rate as the S&P 500 Index (especially when factoring in the performance of the Collateral Portfolio and the Put Spread Strategy) and will not increase at the same rate as the S&P 500 Index (especially when
factoring in the Spread and the performance of the Collateral Portfolio and the Put
163
Spread Strategy). Similarly, the amount of time remaining until the end of the Outcome Period also affects the impact of the Buffer on the Fund’s NAV,
because the Buffer may not be in full effect prior to the end of the Outcome Period.
The FLEX Options utilized in the Fund’s portfolio are each set to expire on the last day of the Outcome Period. The customizable nature of FLEX Options
will allow Milliman to select the strike price at which each FLEX Option will be exercised at the expiration of the FLEX Option term. At the commencement of the Outcome Period, Milliman will specifically select the strike price for each FLEX Option
in a manner designed to achieve the Outcomes when the FLEX Options are exercised on the final day of the Outcome Period, depending on the anticipated performance of the S&P 500 Index, the Collateral Portfolio and the Put Spread Strategy over
the duration of that Outcome Period.
The hypothetical graphical illustrations provided below are designed to illustrate the Outcomes based upon the
hypothetical performance of the S&P 500 Index for an investor who holds Shares for the entirety of the Outcome Period. The hypothetical graphical illustrations do not include any fees or expenses imposed by your variable product or expenses
incurred by the Fund, and do not reflect the performance of the Collateral Portfolio or the Put Spread Strategy. Additional hypothetical graphical representations of the Outcomes are provided in “Additional Information About the Funds and
the Risks of Investing.” There is no guarantee that the Fund will be successful in its attempt to achieve the Outcomes for the Outcome Period.
The following table contains hypothetical examples designed to illustrate the Outcomes the Fund seeks to achieve
over the Outcome Period, based upon the performance of the S&P 500 Index from (100)% to 100% after taking into account the Spread and the Buffer, but prior to taking into account any fees or expenses or the performance of the Collateral
Portfolio or the Put Spread Strategy. The table is provided for illustrative purposes only and does not provide every possible performance scenario for Shares over the course of the Outcome Period. There is no guarantee that the Fund will be successful in its attempt to achieve the Outcomes for an Outcome
Period. The table is not intended to predict or project the performance of the FLEX Options or the Fund. Investors should not take this information as an assurance of the expected performance of the
S&P 500 Index or the Fund. Actual Fund performance will vary with fluctuations in the performance of the Collateral Portfolio and the Put Spread Strategy, in addition to the value of the Fund’s FLEX Options positions on the S&P
500 Index, during
164
the Outcome Period, among other factors. The performance of the Collateral
Portfolio and the Put Spread Strategy could significantly impact the performance of the Fund, which could prevent the Fund from achieving the Outcomes that it seeks to produce. The table does not reflect any fees or expenses imposed by
your variable product or expenses incurred by the Fund. If it did, the returns shown for the Fund would be lower. Please refer to the Fund’s website, which provides updated information relating to this table on a daily basis throughout the
Outcome Period. Please contact your insurance company or other financial intermediary for more information.
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Index/Fund
|
Hypothetical Performance1
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S&P 500 Index Price Performance
|
(100)%
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(50)%
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(20)%
|
(10)%
|
(5)%
|
0%
|
5%
|
10%
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15%
|
20%
|
50%
|
100%
|
|
Fund Performance at NAV
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(90)%
|
(40)%
|
(10)%
|
0%2
|
0%2
|
0%
|
4%3
|
9%3
|
14%3
|
19%3
|
49%3
|
99%3
|
| 1 |
Does not take into account any fees or expenses or the performance of the Collateral Portfolio or the Put Spread Strategy.
|
| 2 |
Reflects the impact of the Buffer.
|
| 3 |
Reflects the impact of an assumed Spread of 1.0%.
|
Understanding Outcomes. The Outcomes the Fund seeks to achieve are measured based upon the
Fund’s NAV on the first day of the Outcome Period. The Outcome Period begins on the day Milliman transacts in the FLEX Options on behalf of the Fund, and ends on the day those FLEX Options expire. An investor who
purchases Shares after the commencement of the Outcome Period will likely have purchased Shares at a different NAV than the NAV on the first day of the Outcome Period (the NAV upon which the Outcomes are based) and may experience investment
outcomes very different from those the Fund seeks to achieve, especially when factoring in any fees or expenses or the performance of the Collateral Portfolio and the Put Spread Strategy. An investor who redeems Shares prior to the end of the
Outcome Period may also experience investment outcomes very different from those the Fund seeks to achieve. The Outcomes are designed with the expectation that an investor will hold Shares on the day that Milliman transacts in the FLEX Options on
behalf of the Fund, and on the day those FLEX Options expire. There is no guarantee that the Fund will be successful in its attempt to achieve the Outcomes.
Understanding the Spread. Unlike other investment products, the potential returns an
investor can receive from an investment in the Fund are subject to the Spread. This means that if the S&P 500 Index experiences gains for the Outcome Period, an investor in the Fund will only experience those
gains if they exceed the Spread and only by the amount those gains have exceeded the Spread. If the S&P 500 Index does not experience gains that exceed the Spread, an investor in the Fund will not experience any gains. Milliman
calculates the Spread for each Outcome Period based upon (i) its evaluation of prevailing market conditions on the first day of the Outcome Period and (ii) the strike price of the long call FLEX Options on the S&P 500 Index that it is able to
purchase at that time. In certain market conditions, the performance of the Collateral Portfolio and the Put Spread Strategy could cause the Fund to underperform relative to the S&P 500 Index, which would
require greater upside performance of the S&P 500 Index to generate a total return of the Fund that exceeds the Spread. An investor should consider the amount and impact of the Spread, and the Fund’s position relative to it, before
investing in the Fund.
Understanding the Buffer. The Buffer that the Fund seeks to provide is only operative
against the first 10% of losses in the Fund’s S&P 500 Index exposure for the Outcome Period. If an investor is considering purchasing Shares during the Outcome Period, and the S&P 500 Index has decreased
in value by an amount equal to or greater than 10%, an investor purchasing Shares at that time will be able to participate in any gains thereafter (subject to the Spread), but will not benefit from the Buffer that the Fund seeks to offer for
the remainder of the Outcome Period if the losses continue to be equal to or greater than 10% during that period. Conversely, if an investor is considering purchasing Shares during the Outcome Period, and the Fund’s NAV has increased in value
in an amount exceeding the Spread, then an investor may experience losses before implementation of the Buffer that the Fund seeks to provide. While the Fund seeks to produce returns that correlate to those of the S&P 500 Index for
the Outcome Period that are buffered up to 10% (prior to taking into account any fees or expenses or the performance of the Collateral Portfolio or the Put Spread Strategy) for investors who hold Shares for the entire Outcome Period, there is no
guarantee it will successfully do so. In addition, the
165
Buffer is not operative against losses in the Collateral Portfolio or the Put Spread Strategy. If the Collateral Portfolio
and/or the Put Spread Strategy experiences losses, it could have the effect of reducing the impact of, or completely eliminating, the Buffer on the Fund’s S&P 500 Index exposure. In certain market conditions, the performance of the
Collateral Portfolio and/or the Put Spread Strategy could cause the Fund to significantly underperform the S&P 500 Index. Investors who purchase Shares at the beginning of the Outcome Period may lose their entire investment. Investors who
purchase Shares after the Outcome Period has begun may also lose their entire investment. An investment in the Fund is only appropriate for investors willing to bear those losses.
Fund Rebalance. Milliman implements the Fund’s strategy on a semi-annual basis, seeking to
produce the Outcomes for an Outcome Period. On the last business day of any stated Outcome Period, all of the Fund’s existing FLEX Options, which includes those used to establish the Buffer, the Spread and the Put Spread Strategy, will expire and
Milliman will transact in a new set of FLEX Options on the same business day, which will commence a new Outcome Period beginning the following business day. At that same time, Milliman will also evaluate whether to make any adjustments to the
Collateral Portfolio. Accordingly, Shares can be held indefinitely if investors determine to participate in additional Outcome Periods.
Approximately one week prior to the end of each Outcome Period, the Fund will file a prospectus supplement, which will notify existing investors of
(i) the date on which the existing Outcome Period will end; (ii) the date on which the new Outcome Period will commence; and (iii) the anticipated ranges of the Spread that will be used for the new Outcome Period. Immediately preceding the
commencement date of the new Outcome Period, the Fund will file a prospectus supplement disclosing the Fund’s final Spread (both gross and net of Fund fees and expenses) for the new Outcome Period. This information will also be available online
at www.[___________].com, and on your insurance company’s website. Please contact your insurance company or other financial intermediary for more information.
Fund Classification. The Fund is classified as “non-diversified” under the Investment
Company Act of 1940, as amended (the “1940 Act”).
Principal Risks
You could lose money by investing in the Fund. An investment in the Fund is not a deposit of a bank and is not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other governmental agency. There can be no assurance that the Fund’s investment objectives will be achieved.
Downside Loss Buffer Risk. There can be no guarantee that the Fund will be successful in its strategy to
buffer against S&P 500 Index losses if the S&P 500 Index decreases in value over the Outcome Period. The Fund’s strategy is designed to produce returns that correlate to those of the S&P 500 Index at the Spread, while limiting
downside losses in the Fund’s S&P 500 Index exposure, if Shares are bought on the day on which Milliman transacts in the FLEX Options on behalf of the Fund and held until those FLEX Options expire at the end of each Outcome Period. The
success of the Buffer also depends upon the performance of the Collateral Portfolio and the Put Spread Strategy. If the Collateral Portfolio and/or the Put Spread Strategy experiences losses, it could have the
effect of reducing the impact of, or completely eliminating, the Buffer on the Fund’s S&P 500 Index exposure. In certain market conditions, the performance of the Collateral Portfolio and/or the Put Spread Strategy could cause the Fund to
significantly underperform the S&P 500 Index. Despite the intended Buffer, an investor could lose their entire investment. In the event an investor purchases Shares after the date on which Milliman transacted in the FLEX
Options on behalf of the Fund, or redeems Shares prior to the expiration of those FLEX Options, the Buffer that the Fund seeks to provide may not be available or fully applicable.
Risk of the Spread on Upside Returns. The Fund’s strategy is designed to produce returns that correlate to those
of the S&P 500 Index if Shares are bought on the day on which Milliman transacts in the FLEX Options on behalf of the Fund and held until those FLEX Options expire at the end of the Outcome Period, subject to the Spread. In the event that the
S&P 500 Index has gains that do not exceed the Spread for the Outcome Period, the Fund will not participate in those gains. In addition, in the event an investor purchases Shares after the date on which Milliman transacted in the FLEX Options
on behalf of the Fund, or redeems Shares prior to the expiration of those FLEX Options, the returns realized by that investor will not match those that the Fund seeks to achieve. In certain market
166
conditions, the performance of the Collateral Portfolio and the Put Spread Strategy could cause the Fund to underperform
relative to the S&P 500 Index, which would require greater upside performance of the S&P 500 Index to generate a total return of the Fund that exceeds the Spread. An investor should consider the amount and impact of the Spread, and the
Fund’s position relative to it, before investing in the Fund.
Spread Change Risk. Because the Spread for each Outcome Period is calculated based upon (i) Milliman’s evaluation
of prevailing market conditions on the first day of the Outcome Period and (ii) the strike price of the long call FLEX Options on the S&P 500 Index that Milliman is able to purchase at that time, the Spread may rise or fall from one Outcome
Period to the next. Any change in the Spread could be significant and it is unlikely to remain the same for consecutive Outcome Periods.
FLEX Options Risk. The Fund will transact in FLEX Options issued and guaranteed for settlement by the OCC. The
Fund bears the risk that the OCC will be unable or unwilling to perform its obligations under the FLEX Options contracts, which could result in significant losses to the Fund. In less liquid markets, terminating a FLEX Option may require the
payment of a premium or acceptance of a discounted price, and may take longer to complete. In addition, a less liquid trading market may adversely impact the value of the Fund’s FLEX Options and therefore the NAV of the Fund. In addition, the value
of the Fund’s FLEX Options positions is not anticipated to increase or decrease at the same rate as the reference asset; and while it is anticipated that they will generally move in the same direction, it is possible that they may move in different
directions. Certain FLEX Options positions may also expire worthless. The use of FLEX Options involves leverage, which can cause the Fund’s portfolio to be more volatile than if the portfolio had not been leveraged. Leverage can significantly
magnify the effect of price movements of the reference asset, disproportionately increasing the Fund’s losses and reducing the Fund’s opportunities for gains when the reference asset changes in unexpected ways. In some instances, such leverage
could result in losses that exceed the original amount invested.
Investment Objective and Outcomes Risk. There is no guarantee that the Fund will be successful in its attempt
to achieve its investment objective and/or the Outcomes, and an investor could lose some or all of their investment in the Fund. Certain circumstances under which the Fund might not achieve its objective and/or the Outcomes include, but are not
limited to (i) if the Fund disposes of FLEX Options, (ii) if the Fund is unable to maintain the proportional relationship based on the number of FLEX Options in the Fund’s portfolio, (iii) significant accrual of Fund expenses in connection with
effecting the Fund’s principal investment strategy, (iv) losses incurred by the Fund’s holdings in the Collateral Portfolio and/or losses resulting from the Put Spread Strategy, or (iv) adverse tax law changes affecting the treatment of FLEX
Options.
Tax Risk. The Fund intends to elect, and to qualify each year, to be treated as a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”). As a RIC, the Fund will not be subject to U.S. federal income tax on the portion
of its net investment income and net capital gain that it distributes to shareholders, provided that it satisfies certain requirements of the Code. To maintain its status as a RIC, the Fund must meet certain income, diversification and
distributions tests. For purposes of the diversification test, the identification of the issuer (or, in some cases, issuers) of a particular Fund investment can depend on the terms and conditions of that investment. In particular, there is no
published IRS guidance or case law on how to determine the “issuer” of certain derivatives that the Fund will enter into and the Fund has not received a private letter ruling on this point. Therefore, there is a risk that the Fund will not meet the
Code’s diversification requirements and will not qualify, or will be disqualified, as a RIC. If the Fund does not qualify as a RIC for any taxable year and certain relief provisions are not available, the Fund’s taxable income will be subject to
tax at the Fund level and to a further tax at the shareholder level when such income is distributed.
The Fund also intends to comply with the diversification requirements of Section 817(h) of the Code, and the regulations thereunder, relating to the
tax-deferred status of variable accounts that are based on insurance company separate accounts (referred to as “segregated asset accounts” for federal income tax purposes). These diversification requirements apply in addition to the RIC
diversification requirements discussed above. There also is no published guidance or case law on how to determine the “issuer” of the derivatives referred to above for purposes of the diversification requirements of Section 817(h) of the Code and
the Fund has not received a private letter ruling on this point. If these requirements are not met, or under other circumstances, such as if the Fund does not qualify as a RIC for any taxable year, it is possible that the contract owners (rather
than the insurance company) will be treated for federal income tax purposes as the taxable owners of the assets held by the segregated asset accounts.
167
Clearing Member Default Risk. The Fund will hold FLEX Options through accounts at members of clearing houses (“clearing members”) rather than a bank or a broker. Assets deposited by the Fund with any clearing member as margin for its FLEX Options positions may, in certain circumstances, be used to satisfy losses of other
clients of the Fund’s clearing member where such assets may be held in commingled omnibus accounts. In addition, although clearing members guarantee performance of their clients’ obligations to the clearing house, there is a risk that the assets of
the Fund might not be fully protected in the event of the clearing member’s bankruptcy, as the Fund would be limited to recovering only a pro rata share of all available funds segregated on behalf of the
clearing member’s customers for the relevant account class.
Debt Securities Risk. The prices of debt securities will be affected by changes in interest rates, the
creditworthiness of the issuer and other factors. These risks could affect the value of investments in which the Fund invests, possibly causing the Fund’s NAV to be reduced and fluctuate more than other types of investments. During periods of
falling interest rates, an issuer of a callable bond may repay the security before its stated maturity, and the Fund may have to reinvest the proceeds in securities with lower yields, which would result in a decline in the Fund’s income, or in
securities with greater risks or with other less favorable features. Changing interest rates, including rates that fall below zero, may have unpredictable effects on markets, result in heightened market volatility and detract from the Fund’s
performance to the extent the Fund is exposed to such interest rates. An increase in interest rates will generally cause the value of fixed-income securities held by the Fund to decline, may lead to heightened volatility in the fixed-income
markets and may adversely affect the liquidity of certain fixed-income investments, including those held by the Fund. Risks associated with rising interest rates are heightened given that interest rates in the U.S. are near historic lows.
Adjustable-rate instruments also react to interest rate changes in a similar manner, although generally to a lesser degree (depending, however, on the characteristics of the reset terms, including the index chosen, frequency of reset and reset
caps or floors, among other factors). Interest rate sensitivity is generally more pronounced and less predictable in instruments with uncertain payment or prepayment schedules and also for those with longer maturities.
Foreign Securities and Credit Exposure Risk. U.S. dollar-denominated securities carrying foreign credit exposure
may be affected by unfavorable political, economic or governmental developments that could affect payments of principal and interest. Furthermore, the value of the Fund’s foreign investments (whether direct or indirect) may be adversely affected by
political and social instability in their home countries, by changes in economic or taxation policies in those countries, or by the difficulty in enforcing obligations in those countries. Foreign companies generally may be subject to less stringent
regulations than U.S. companies, including financial reporting requirements and auditing and accounting controls. As a result, there generally is less publicly available information about foreign companies than about U.S. companies. Trading in many
foreign securities may be less liquid and more volatile than U.S. securities due to the size of the market or other factors.
U.S. Government Securities Risk. U.S. Government securities are subject to interest rate risk but generally do
not involve the credit risks associated with investments in other types of debt securities. As a result, the yields available from U.S. Government securities are generally lower than the yields available from other debt securities. U.S. Government
securities are guaranteed only as to the timely payment of interest and the payment of principal when held to maturity. While securities issued or guaranteed by U.S. federal government agencies are backed by the full faith and credit of the U.S.
Department of the Treasury, securities issued by government sponsored entities are solely the obligation of the issuer and generally do not carry any guarantee from the U.S. Government.
ABS Risk. ABS are subject to the general debt securities risks described above. In addition, ABS may be less
liquid than other bonds, and may be more sensitive than other bonds to the market’s perception of issuers and creditworthiness of payees, which may result in the Fund experiencing difficulty selling or valuing these securities. ABS markets have
experienced extraordinary weakness and volatility at various times in recent years, and may decline quickly in the event of a substantial economic or market downturn. Accordingly, these securities may be subject to greater risk of default during
periods of economic downturn than other securities, which could result in possible losses to the Fund.
Issuer Risk. The performance of the Fund depends on the performance of individual securities to which the Fund
has exposure. The Fund may be adversely affected if an issuer of underlying securities held by the Fund is unable or
168
unwilling to repay principal or interest when due. Changes in the financial condition or credit rating of an issuer of those securities may cause the
value of the securities to decline.
Management Risk. The Fund is subject to management risk because it is an actively managed portfolio. Milliman
will apply investment techniques and risk analyses in making investment decisions for the Fund, but there can be no guarantee that the Fund will meet its investment objective and/or the Outcomes. In addition, Milliman does not use defensive
strategies or attempt to reduce the Fund’s exposures to poor performing positions during an Outcome Period. This differs from funds that are managed to seek to outperform a benchmark index. Therefore, in the event of a general market decline, the
Fund’s value may fall more than the value of another fund that does attempt to hedge against such market declines.
Market Risk. The Fund could lose money over short periods due to short-term market movements and over longer
periods during more prolonged market downturns. Assets may decline in value due to factors affecting financial markets generally or particular asset classes or industries represented in the markets. The value of a FLEX Option or other asset may
also decline due to general market conditions, economic trends or events that are not specifically related to the issuer of the security or other asset, or due to factors that affect a particular issuer, country, region, market, industry, sector or
asset class.
Non-Diversification Risk. The Fund may invest a relatively high percentage of its assets in a limited number of
issuers. As a result, the Fund may be more susceptible to a single adverse economic or regulatory occurrence affecting one or more of these issuers, experience increased volatility and be highly invested in certain issuers.
Large Shareholder Risk. At times, the Fund may experience adverse effects when certain large shareholders,
including insurance company separate accounts, redeem large amounts of shares of the Fund. Large redemptions may cause the Fund to sell portfolio holdings at times when it would not otherwise do so and may increase transaction costs and/or result
in an increase to the Fund’s expense ratio. A large redemption could be detrimental to the Fund and its remaining shareholders.
Risks of Investing in ETFs. In addition to the risks associated with the underlying assets held by the ETFs in
which the Fund invests, investments in ETFs are also subject to the following additional risks: (i) only authorized participants may engage in transactions directly with ETFs but none are obligated to do so, which could result in an ETF’s shares
trading at a premium or discount to its NAV or possibly face trading halts or delisting; (ii) certain ETFs seek to track the performance of an underlying index and will not attempt to take defensive positions under any market conditions, including
declining markets, which could result in losses; and (iii) because ETF shares trade on the secondary market, there is not guarantee that an active market will be developed or maintained, which could result in the ETF’s shares trading at a premium
or discount to its NAV. Investments in ETFs may involve duplication of management fees and certain other expenses, as the Fund indirectly bears its proportionate share of any expenses paid by the ETFs in which it invests.
Risks of Investing in Money Market Funds. Money market funds seek to preserve the value of
shareholder investments at $1.00 per share, but shareholders, such as the Fund, may still lose money by investing in such funds. In addition, a money market fund may impose a fee upon the sale of its shares or may temporarily suspend the ability to
sell shares if the fund’s liquidity falls below required minimums because of market conditions or other factors. The credit quality of a money market fund’s holdings can change rapidly in certain markets, and the default of a single holding could
have an adverse impact on the fund’s share price. A money market fund’s share price can also be negatively affected during periods of high redemption pressures, illiquid markets, and/or significant market volatility.
Performance
As of the date of this Prospectus, the Fund has not commenced operations and therefore does not have a performance history. Once available, the Fund’s
performance information will be accessible online at www.[________].com and will provide some indication of the risks of investing in the Fund.
Management
169
Investment Adviser
Milliman Financial Risk Management LLC (“Milliman”) serves as investment adviser to the Fund.
Portfolio Managers
The following persons serve as portfolio managers of the Fund.
|
●
|
Robert T. Cummings, Principal & Head of Portfolio Management at Milliman.
|
|
●
|
Maria Schiopu, Principal & Head of Portfolio Management at Milliman.
|
|
●
|
Jeff Greco, Principal & Head of Strategy Research at Milliman.
|
|
●
|
Jordan Rosenfeld, Portfolio Manager at Milliman.
|
Each portfolio manager is jointly and primarily responsible for the day-to-day management of the Fund’s portfolio and has served in such capacity
since the Fund’s inception in 2021.
Purchase and Sale of Shares
Shares are available as underlying investment options for variable insurance contracts and variable life insurance policies (each, a “variable contract,” and, collectively, the “variable contracts”) issued by insurance companies. These insurance companies are the record owners of the separate accounts
holding the Shares. You do not buy, sell or exchange Shares directly; rather, you choose investment options through your variable contracts. The insurance companies then cause the separate accounts to purchase and redeem Shares according to
the investment options you choose.
Tax Information
The dividends and distributions paid by the Fund to the insurance company separate accounts will consist of ordinary income, capital gains, or some
combination of both. Because Shares must be purchased through separate accounts used to fund variable contracts, such dividends and distributions will be exempt from current taxation by owners of variable contracts (each, a “contract owner,” and, collectively “contract owners”) if left to accumulate within a separate account. Consult the variable contract prospectus for additional tax
information.
Payments to Insurance Companies and Other Financial Intermediaries
If you allocate contract value to the Fund through an insurance company or other financial intermediary, the Fund, Milliman, the Fund’s distributor or
their related companies may pay the insurance company and/or its affiliates or other intermediary for the sale of Shares and related services. These payments may create a conflict of interest by influencing the insurance company or other
intermediary and your salesperson to recommend an indirect investment in the Fund over another investment. The prospectus or other disclosure documents for the variable contracts may contain additional information about these payments, if any.
You may also ask your salesperson or financial intermediary, or visit your financial intermediary’s website, for more information.
170
Fund Summary: Milliman S&P 500 1-Year Buffer with Spread Fund – Feb
Investment Objective
The Fund seeks to provide exposure to the S&P 500 Index, while providing a buffer against the first 10% of losses associated with S&P 500
Index performance and participating in S&P 500 Index gains that exceed a declared spread, prior to taking into account any fees or expenses or the performance of any fixed income exposure included in the Fund’s portfolio, over the period from
February 1, 2022 through January 31, 2023.
Fees and Expenses of the Fund
This table describes the fees and expenses that you may pay if you buy, hold and sell shares of the Fund (“Shares”).
This table and the example below do not include any fees or sales charges imposed by your variable product. If they were included, the expenses listed below would be higher.
Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment)
|
Class 3
|
|
|
Management Fees
|
0.49%
|
|
Distribution and Service (12b-1) Fees
|
0.25%
|
|
Other Expenses(1)
|
0.50%
|
|
Acquired Fund Fees and Expenses(1)
|
[_.__]%
|
|
Total Annual Fund Operating Expenses
|
1.24%
|
|
Fee Waiver and/or Expense Reimbursement(2)(3)
|
(0.25)%
|
|
Total Annual Fund Operating Expenses After Fee Waiver and/or Expense Reimbursement
|
0.99%
|
|
(1)
|
“Other Expenses” and “Acquired Fund Fees and Expenses” are based on estimated amounts for the current fiscal year.
|
|
(2)
|
The Fund’s investment adviser, Milliman Financial Risk Management LLC (“Milliman”), has contractually
agreed to waive advisory fees and/or reimburse expenses to the extent necessary to limit the Fund’s total annual Fund operating expenses (excluding taxes, interest, brokerage fees and commissions, Rule 12b-1 fees, acquired fund fees and
expenses, short-sale dividend expenses, administrative services fees, other expenses that are capitalized in accordance with generally accepted accounting principles, and extraordinary or non-routine expenses not incurred in the
ordinary course of the Fund’s business) to 0.74% of the Fund's average daily net assets (the “Expense Limitation Agreement”) until at least November 1, 2022. During its term, the Expense
Limitation Agreement cannot be terminated or amended to increase the applicable limit without approval of the Board of Trustees of the Trust (the “Board”). Milliman may recoup from the Fund any
advisory fees waived or expenses reimbursed pursuant to the Expense Limitation Agreement for a period of three years from the date on which such waiver or reimbursement occurred; provided, however, that such recoupment shall not be made
if it would cause the Fund’s total annual Fund operating expenses to exceed the lesser of (a) the expense limitation in effect at the time of the reimbursement, or (b) the expense limitation in effect at the time of recoupment, if any.
|
|
(3)
|
In addition to the Expense Limitation Agreement, Milliman has contractually agreed to waive its advisory fees in an amount equal to the Fund’s
acquired fund fees and expenses until at least November 1, 2022 (the “Fee Waiver”). This contract cannot be terminated or modified without the consent of the Board.
|
Example
This example is intended to help you compare the cost of investing in the Fund with the cost of investing in other funds. This example assumes that you
invest $10,000 in the Fund for the time periods indicated and then sell all of your Shares at the end of those periods. This example also assumes that your investment has a 5% return each year and that the Fund’s operating expenses remain at
current levels and that the Expense Limitation Agreement and Fee Waiver remain in place for their contractual periods. Although your actual costs may be higher or lower, your costs, based on these assumptions, would be:
|
1 Year
|
3 Years
|
|
|
Class 3
|
$104
|
$384
|
This example does not include any fees or sales charges imposed by your variable product. If they were included, the expenses listed above would be
higher.
171
Portfolio Turnover
The Fund pays transaction costs, such as commissions, when it purchases and sells securities (or “turns over” its portfolio). A higher portfolio turnover
will cause the Fund to incur additional transaction costs. These costs, which are not reflected in Total Annual Fund Operating Expenses or in the example, may affect the Fund’s performance. Because the Fund has not yet commenced investment
operations, no portfolio turnover information is available at this time.
Principal Investment Strategies
The Fund seeks to achieve its investment objective by transacting in FLexible EXchange® Options (“FLEX Options”)
and by separately maintaining a collateral portfolio (the “Collateral Portfolio”), which is designed primarily to serve as margin or collateral for the Fund’s FLEX Options positions and secondarily to
enhance the Fund’s upside S&P 500 Index FLEX Options’ exposure (i.e., by utilizing anticipated income to measure the ability to purchase additional FLEX Options). FLEX Options are exchange-traded
options contracts with uniquely customizable terms. In general, an options contract is an agreement between a buyer and seller that gives the purchaser of the option the right to buy or sell a particular asset at a specified future date at an
agreed upon price, commonly known as the “strike price.” The reference assets for the Fund’s FLEX Options positions will include the S&P 500 Index, which is a large-capitalization, market-weighted, U.S. equities index that tracks the price
(excluding dividends) of 500 leading companies in leading industries of the U.S. economy, and certain exchange-traded funds (“ETFs”), as described further below.
The Collateral Portfolio may be invested in short-term fixed-income securities, including corporate bonds and other corporate debt securities,
asset-backed securities (“ABS”), securities issued by the U.S. Government or its agencies and instrumentalities, securities issued by non-U.S. governments or their agencies and instrumentalities, money
market securities and funds, other interest-bearing instruments, cash, ETFs that primarily invest in any of the foregoing instruments, options on ETFs and options box spreads. An options box spread is the combination of different options trades
that have offsetting spreads (e.g., purchases and sales on the same underlying instrument, such as an index or an ETF, but with different strike prices and/or expiration dates) for the purpose of
generating income. The Fund may invest in short-term fixed income securities or other instruments, including through ETFs, of any maturity and credit quality. The Fund will generally invest up to 35% of its net assets in one or more ETFs that
provide exposure to investment grade corporate bonds.
Due to the unique mechanics of the Fund’s strategy, the return an investor can expect to receive from an investment in the Fund has characteristics that
are distinct from the returns of many other investment vehicles. It is important that an investor understand these characteristics before making an investment in the Fund.
In seeking to achieve its investment objective, the Fund seeks to produce pre-determined outcomes (the “Outcomes”)
that are based upon the performance of the S&P 500 Index over a one-year period (the “Outcome Period”). The initial Outcome Period for the Fund is February 1, 2022 through January 31, 2023. Following the
initial Outcome Period, each subsequent Outcome Period will be a one-year period commencing upon the expiration of the prior Outcome Period. The Fund seeks to achieve the Outcomes by purchasing and writing (selling) FLEX Options to create layers
within the Fund’s portfolio. One layer is designed to produce returns that correlate to those of the S&P 500 Index for the Outcome Period if the S&P 500 Index experiences gains during that time in excess of a declared spread (the “Spread”), as described below. A separate layer is designed to produce returns that correlate to those of the S&P 500 Index for the Outcome Period that are buffered up to
10% if the S&P 500 Index experiences losses during that time (the “Buffer”). There is no guarantee that the Fund will be successful in its attempt to produce returns
that correlate to those of the S&P 500 Index in excess of the Spread or produce buffered returns against the Fund’s S&P 500 Index exposure.
Milliman Financial Risk Management, LLC (“Milliman”), the investment adviser of the Fund, seeks to establish the
Buffer by writing one put FLEX Option on the S&P 500 Index with a strike price that is 10% lower than the value of the S&P 500 Index at the beginning of the Outcome Period.
Milliman seeks to establish the Spread by purchasing long call FLEX Options on the S&P 500 Index and by writing put FLEX Options with a strike price
equal to the stated Buffer level. Milliman purchases these FLEX Options with
172
a portion of the Fund’s net assets plus (i) the cash received from writing the put FLEX Option designed to create the Buffer, (ii) additional cash
received by utilizing FLEX Options to create a put spread (the “Put Spread Strategy”) on fixed income securities and/or one or more ETFs that provide exposure to fixed income securities, and (iii) yield
received from the Collateral Portfolio. Milliman seeks to achieve the Put Spread Strategy for the Fund by writing a put FLEX Option on an underlying asset at a strike price at or lower than the underlying asset’s market price or current value at
the beginning of the Outcome Period, and buying a put FLEX Option on the same underlying asset at a lower strike price than the written put FLEX Option.
The Spread is the minimum rate of return the S&P 500 Index must surpass for the Fund to track any upside market performance of the S&P 500
Index. Milliman calculates the Spread based upon (i) its evaluation of prevailing market conditions on the first day of the Outcome Period and (ii) the strike price of the long call FLEX Options on the S&P 500 Index that it is able to
purchase at that time. As of the date of this Prospectus, and assuming current market conditions persist, Milliman expects that the Spread will be between the below ranges (both gross and net of Fund fees and expenses). Any fees or expenses
imposed by your variable product, and any other expenses incurred by the Fund, will have the effect of further increasing the Spread. In addition, in certain market conditions, the performance of the
Collateral Portfolio and the Put Spread Strategy could cause the Fund to underperform relative to the S&P 500 Index, which would require greater upside performance of the S&P 500 Index to generate a total return of the Fund that
exceeds the Spread.
|
Share Class
|
Estimated Spread Ranges
(As of [___])
|
|
|
Prior to Taking into Account Fund Fees and Expenses
|
After Taking into Account Fund Fees and Expenses
|
|
|
Class 3
|
[__]% and [__]%
|
[__]% and [__]%
|
The Buffer is only operative against the first 10% of losses in the Fund’s S&P 500 Index exposure for the Outcome Period. If the S&P 500 Index
decreases in value by more than 10% during the Outcome Period, the Fund (and therefore investors in Shares) will experience all subsequent losses in the Fund’s S&P 500 Index exposure on a one-to-one basis for the Outcome Period. The Fund
seeks to produce buffered returns against its S&P 500 Index exposure prior to taking into account any fees or expenses or the performance of the Collateral Portfolio or the Put Spread Strategy. The Buffer
is not operative against losses in the Collateral Portfolio or the Put Spread Strategy. If the Collateral Portfolio and/or the Put Spread Strategy experiences losses, it could have the effect of reducing the impact of, or completely
eliminating, the Buffer on the Fund’s S&P 500 Index exposure. In certain market conditions, the performance of the Collateral Portfolio and/or the Put Spread Strategy could cause the Fund to significantly underperform the S&P 500
Index. The following table reflects the Buffer both gross and net of Fund fees and expenses:
|
Share Class
|
Buffer
(As of [___])
|
|
|
Prior to Taking into Account Fund Fees and Expenses
|
After Taking into Account Fund Fees and Expenses
|
|
|
Class 3
|
10%
|
[__]%
|
The definitive Spread and Buffer will be set forth on the Fund’s website. The Fund’s website will also provide information relating to the Outcomes on
a daily basis, including the Fund’s position relative to the Spread and the Buffer. You may also contact your insurance company or other financial intermediary for more information.
Additionally, the Fund’s net asset value (“NAV”) will not increase or decrease at the same rate as the S&P
500 Index because the Fund’s strategy relies upon the performance of the Collateral Portfolio and the Put Spread Strategy, in addition to the value of the Fund’s FLEX Options positions on the S&P 500 Index. While Milliman anticipates that the
Fund’s NAV will generally move in the same direction as the S&P 500 Index (meaning that the Fund’s NAV will generally increase if the S&P 500 Index experiences gains or decrease if the S&P 500 Index experiences losses), the Fund’s NAV
may not decrease at the same rate as the S&P 500 Index (especially when factoring in the performance of the Collateral Portfolio and the Put Spread Strategy) and will not increase at the same rate as the S&P 500 Index (especially when
factoring in the Spread and the performance of the Collateral Portfolio and the Put
173
Spread Strategy). Similarly, the amount of time remaining until the end of the Outcome Period also affects the impact of the Buffer on the Fund’s NAV,
because the Buffer may not be in full effect prior to the end of the Outcome Period.
The FLEX Options utilized in the Fund’s portfolio are each set to expire on the last day of the Outcome Period. The customizable nature of FLEX Options
will allow Milliman to select the strike price at which each FLEX Option will be exercised at the expiration of the FLEX Option term. At the commencement of the Outcome Period, Milliman will specifically select the strike price for each FLEX Option
in a manner designed to achieve the Outcomes when the FLEX Options are exercised on the final day of the Outcome Period, depending on the anticipated performance of the S&P 500 Index, the Collateral Portfolio and the Put Spread Strategy over
the duration of that Outcome Period.
The hypothetical graphical illustrations provided below are designed to illustrate the Outcomes based upon the
hypothetical performance of the S&P 500 Index for an investor who holds Shares for the entirety of the Outcome Period. The hypothetical graphical illustrations do not include any fees or expenses imposed by your variable product or expenses
incurred by the Fund, and do not reflect the performance of the Collateral Portfolio or the Put Spread Strategy. Additional hypothetical graphical representations of the Outcomes are provided in “Additional Information About the Funds and
the Risks of Investing.” There is no guarantee that the Fund will be successful in its attempt to achieve the Outcomes for the Outcome Period.
The following table contains hypothetical examples designed to illustrate the Outcomes the Fund seeks to achieve
over the Outcome Period, based upon the performance of the S&P 500 Index from (100)% to 100% after taking into account the Spread and the Buffer, but prior to taking into account any fees or expenses or the performance of the Collateral
Portfolio or the Put Spread Strategy. The table is provided for illustrative purposes only and does not provide every possible performance scenario for Shares over the course of the Outcome Period. There is no guarantee that the Fund will be successful in its attempt to achieve the Outcomes for an Outcome
Period. The table is not intended to predict or project the performance of the FLEX Options or the Fund. Investors should not take this information as an assurance of the expected performance of the
S&P 500 Index or the Fund. Actual Fund performance will vary with fluctuations in the performance of the Collateral Portfolio and the Put Spread Strategy, in addition to the value of the Fund’s FLEX Options positions on the S&P
500 Index, during
174
the Outcome Period, among other factors. The performance of the Collateral
Portfolio and the Put Spread Strategy could significantly impact the performance of the Fund, which could prevent the Fund from achieving the Outcomes that it seeks to produce. The table does not reflect any fees or expenses imposed by
your variable product or expenses incurred by the Fund. If it did, the returns shown for the Fund would be lower. Please refer to the Fund’s website, which provides updated information relating to this table on a daily basis throughout the
Outcome Period. Please contact your insurance company or other financial intermediary for more information.
|
Index/Fund
|
Hypothetical Performance1
|
|||||||||||
|
S&P 500 Index Price Performance
|
(100)%
|
(50)%
|
(20)%
|
(10)%
|
(5)%
|
0%
|
5%
|
10%
|
15%
|
20%
|
50%
|
100%
|
|
Fund Performance at NAV
|
(90)%
|
(40)%
|
(10)%
|
0%2
|
0%2
|
0%
|
4%3
|
9%3
|
14%3
|
19%3
|
49%3
|
99%3
|
| 1 |
Does not take into account any fees or expenses or the performance of the Collateral Portfolio or the Put Spread Strategy.
|
| 2 |
Reflects the impact of the Buffer.
|
| 3 |
Reflects the impact of an assumed Spread of 1.0%.
|
Understanding Outcomes. The Outcomes the Fund seeks to achieve are measured based upon the
Fund’s NAV on the first day of the Outcome Period. The Outcome Period begins on the day Milliman transacts in the FLEX Options on behalf of the Fund, and ends on the day those FLEX Options expire. An investor who
purchases Shares after the commencement of the Outcome Period will likely have purchased Shares at a different NAV than the NAV on the first day of the Outcome Period (the NAV upon which the Outcomes are based) and may experience investment
outcomes very different from those the Fund seeks to achieve, especially when factoring in any fees or expenses or the performance of the Collateral Portfolio and the Put Spread Strategy. An investor who redeems Shares prior to the end of the
Outcome Period may also experience investment outcomes very different from those the Fund seeks to achieve. The Outcomes are designed with the expectation that an investor will hold Shares on the day that Milliman transacts in the FLEX Options on
behalf of the Fund, and on the day those FLEX Options expire. There is no guarantee that the Fund will be successful in its attempt to achieve the Outcomes.
Understanding the Spread. Unlike other investment products, the potential returns an
investor can receive from an investment in the Fund are subject to the Spread. This means that if the S&P 500 Index experiences gains for the Outcome Period, an investor in the Fund will only experience those
gains if they exceed the Spread and only by the amount those gains have exceeded the Spread. If the S&P 500 Index does not experience gains that exceed the Spread, an investor in the Fund will not experience any gains. Milliman
calculates the Spread for each Outcome Period based upon (i) its evaluation of prevailing market conditions on the first day of the Outcome Period and (ii) the strike price of the long call FLEX Options on the S&P 500 Index that it is able to
purchase at that time. In certain market conditions, the performance of the Collateral Portfolio and the Put Spread Strategy could cause the Fund to underperform relative to the S&P 500 Index, which would
require greater upside performance of the S&P 500 Index to generate a total return of the Fund that exceeds the Spread. An investor should consider the amount and impact of the Spread, and the Fund’s position relative to it, before
investing in the Fund.
Understanding the Buffer. The Buffer that the Fund seeks to provide is only operative
against the first 10% of losses in the Fund’s S&P 500 Index exposure for the Outcome Period. If an investor is considering purchasing Shares during the Outcome Period, and the S&P 500 Index has decreased
in value by an amount equal to or greater than 10%, an investor purchasing Shares at that time will be able to participate in any gains thereafter (subject to the Spread), but will not benefit from the Buffer that the Fund seeks to offer for
the remainder of the Outcome Period if the losses continue to be equal to or greater than 10% during that period. Conversely, if an investor is considering purchasing Shares during the Outcome Period, and the Fund’s NAV has increased in value
in an amount exceeding the Spread, then an investor may experience losses before implementation of the Buffer that the Fund seeks to provide. While the Fund seeks to produce returns that correlate to those of the S&P 500 Index for
the Outcome Period that are buffered up to 10% (prior to taking into account any fees or expenses or the performance of the Collateral Portfolio or the Put Spread Strategy) for investors who hold Shares for the entire Outcome Period, there is no
guarantee it will successfully do so. In addition, the
175
Buffer is not operative against losses in the Collateral Portfolio or the Put Spread Strategy. If the Collateral Portfolio
and/or the Put Spread Strategy experiences losses, it could have the effect of reducing the impact of, or completely eliminating, the Buffer on the Fund’s S&P 500 Index exposure. In certain market conditions, the performance of the
Collateral Portfolio and/or the Put Spread Strategy could cause the Fund to significantly underperform the S&P 500 Index. Investors who purchase Shares at the beginning of the Outcome Period may lose their entire investment. Investors who
purchase Shares after the Outcome Period has begun may also lose their entire investment. An investment in the Fund is only appropriate for investors willing to bear those losses.
Fund Rebalance. Milliman implements the Fund’s strategy on a semi-annual basis, seeking to
produce the Outcomes for an Outcome Period. On the last business day of any stated Outcome Period, all of the Fund’s existing FLEX Options, which includes those used to establish the Buffer, the Spread and the Put Spread Strategy, will expire and
Milliman will transact in a new set of FLEX Options on the same business day, which will commence a new Outcome Period beginning the following business day. At that same time, Milliman will also evaluate whether to make any adjustments to the
Collateral Portfolio. Accordingly, Shares can be held indefinitely if investors determine to participate in additional Outcome Periods.
Approximately one week prior to the end of each Outcome Period, the Fund will file a prospectus supplement, which will notify existing investors of
(i) the date on which the existing Outcome Period will end; (ii) the date on which the new Outcome Period will commence; and (iii) the anticipated ranges of the Spread that will be used for the new Outcome Period. Immediately preceding the
commencement date of the new Outcome Period, the Fund will file a prospectus supplement disclosing the Fund’s final Spread (both gross and net of Fund fees and expenses) for the new Outcome Period. This information will also be available online
at www.[___________].com, and on your insurance company’s website. Please contact your insurance company or other financial intermediary for more information.
Fund Classification. The Fund is classified as “non-diversified” under the Investment
Company Act of 1940, as amended (the “1940 Act”).
Principal Risks
You could lose money by investing in the Fund. An investment in the Fund is not a deposit of a bank and is not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other governmental agency. There can be no assurance that the Fund’s investment objectives will be achieved.
Downside Loss Buffer Risk. There can be no guarantee that the Fund will be successful in its strategy to
buffer against S&P 500 Index losses if the S&P 500 Index decreases in value over the Outcome Period. The Fund’s strategy is designed to produce returns that correlate to those of the S&P 500 Index at the Spread, while limiting
downside losses in the Fund’s S&P 500 Index exposure, if Shares are bought on the day on which Milliman transacts in the FLEX Options on behalf of the Fund and held until those FLEX Options expire at the end of each Outcome Period. The
success of the Buffer also depends upon the performance of the Collateral Portfolio and the Put Spread Strategy. If the Collateral Portfolio and/or the Put Spread Strategy experiences losses, it could have the
effect of reducing the impact of, or completely eliminating, the Buffer on the Fund’s S&P 500 Index exposure. In certain market conditions, the performance of the Collateral Portfolio and/or the Put Spread Strategy could cause the Fund to
significantly underperform the S&P 500 Index. Despite the intended Buffer, an investor could lose their entire investment. In the event an investor purchases Shares after the date on which Milliman transacted in the FLEX
Options on behalf of the Fund, or redeems Shares prior to the expiration of those FLEX Options, the Buffer that the Fund seeks to provide may not be available or fully applicable.
Risk of the Spread on Upside Returns. The Fund’s strategy is designed to produce returns that correlate to
those of the S&P 500 Index if Shares are bought on the day on which Milliman transacts in the FLEX Options on behalf of the Fund and held until those FLEX Options expire at the end of the Outcome Period, subject to the Spread. In the event
that the S&P 500 Index has gains that do not exceed the Spread for the Outcome Period, the Fund will not participate in those gains. In addition, in the event an investor purchases Shares after the date on which Milliman transacted in the
FLEX Options on behalf of the Fund, or redeems Shares prior to the expiration of those FLEX Options, the returns realized by that investor will not match those that the Fund seeks to achieve. In certain market
176
conditions, the performance of the Collateral Portfolio and the Put Spread Strategy could cause the Fund to underperform relative
to the S&P 500 Index, which would require greater upside performance of the S&P 500 Index to generate a total return of the Fund that exceeds the Spread. An investor should consider the amount and impact of the Spread, and the Fund’s
position relative to it, before investing in the Fund.
Spread Change Risk. Because the Spread for each Outcome Period is calculated based upon (i) Milliman’s evaluation
of prevailing market conditions on the first day of the Outcome Period and (ii) the strike price of the long call FLEX Options on the S&P 500 Index that Milliman is able to purchase at that time, the Spread may rise or fall from one Outcome
Period to the next. Any change in the Spread could be significant and it is unlikely to remain the same for consecutive Outcome Periods.
FLEX Options Risk. The Fund will transact in FLEX Options issued and guaranteed for settlement by the OCC. The
Fund bears the risk that the OCC will be unable or unwilling to perform its obligations under the FLEX Options contracts, which could result in significant losses to the Fund. In less liquid markets, terminating a FLEX Option may require the
payment of a premium or acceptance of a discounted price, and may take longer to complete. In addition, a less liquid trading market may adversely impact the value of the Fund’s FLEX Options and therefore the NAV of the Fund. In addition, the value
of the Fund’s FLEX Options positions is not anticipated to increase or decrease at the same rate as the reference asset; and while it is anticipated that they will generally move in the same direction, it is possible that they may move in different
directions. Certain FLEX Options positions may also expire worthless. The use of FLEX Options involves leverage, which can cause the Fund’s portfolio to be more volatile than if the portfolio had not been leveraged. Leverage can significantly
magnify the effect of price movements of the reference asset, disproportionately increasing the Fund’s losses and reducing the Fund’s opportunities for gains when the reference asset changes in unexpected ways. In some instances, such leverage
could result in losses that exceed the original amount invested.
Investment Objective and Outcomes Risk. There is no guarantee that the Fund will be successful in its attempt
to achieve its investment objective and/or the Outcomes, and an investor could lose some or all of their investment in the Fund. Certain circumstances under which the Fund might not achieve its objective and/or the Outcomes include, but are not
limited to (i) if the Fund disposes of FLEX Options, (ii) if the Fund is unable to maintain the proportional relationship based on the number of FLEX Options in the Fund’s portfolio, (iii) significant accrual of Fund expenses in connection with
effecting the Fund’s principal investment strategy, (iv) losses incurred by the Fund’s holdings in the Collateral Portfolio and/or losses resulting from the Put Spread Strategy, or (iv) adverse tax law changes affecting the treatment of FLEX
Options.
Tax Risk. The Fund intends to elect, and to qualify each year, to be treated as a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”). As a RIC, the Fund will not be subject to U.S. federal income tax on the portion
of its net investment income and net capital gain that it distributes to shareholders, provided that it satisfies certain requirements of the Code. To maintain its status as a RIC, the Fund must meet certain income, diversification and
distributions tests. For purposes of the diversification test, the identification of the issuer (or, in some cases, issuers) of a particular Fund investment can depend on the terms and conditions of that investment. In particular, there is no
published IRS guidance or case law on how to determine the “issuer” of certain derivatives that the Fund will enter into and the Fund has not received a private letter ruling on this point. Therefore, there is a risk that the Fund will not meet the
Code’s diversification requirements and will not qualify, or will be disqualified, as a RIC. If the Fund does not qualify as a RIC for any taxable year and certain relief provisions are not available, the Fund’s taxable income will be subject to
tax at the Fund level and to a further tax at the shareholder level when such income is distributed.
The Fund also intends to comply with the diversification requirements of Section 817(h) of the Code, and the regulations thereunder, relating to the
tax-deferred status of variable accounts that are based on insurance company separate accounts (referred to as “segregated asset accounts” for federal income tax purposes). These diversification requirements apply in addition to the RIC
diversification requirements discussed above. There also is no published guidance or case law on how to determine the “issuer” of the derivatives referred to above for purposes of the diversification requirements of Section 817(h) of the Code and
the Fund has not received a private letter ruling on this point. If these requirements are not met, or under other circumstances, such as if the Fund does not qualify as a RIC for any taxable year, it is possible that the contract owners (rather
than the insurance company) will be treated for federal income tax purposes as the taxable owners of the assets held by the segregated asset accounts.
177
Clearing Member Default Risk. The Fund will hold FLEX Options through accounts at members of clearing houses (“clearing members”) rather than a bank or a broker. Assets deposited by the Fund with any clearing member as margin for its FLEX Options positions may, in certain circumstances, be used to satisfy losses of other
clients of the Fund’s clearing member where such assets may be held in commingled omnibus accounts. In addition, although clearing members guarantee performance of their clients’ obligations to the clearing house, there is a risk that the assets of
the Fund might not be fully protected in the event of the clearing member’s bankruptcy, as the Fund would be limited to recovering only a pro rata share of all available funds segregated on behalf of the
clearing member’s customers for the relevant account class.
Debt Securities Risk. The prices of debt securities will be affected by changes in interest rates, the
creditworthiness of the issuer and other factors. These risks could affect the value of investments in which the Fund invests, possibly causing the Fund’s NAV to be reduced and fluctuate more than other types of investments. During periods of
falling interest rates, an issuer of a callable bond may repay the security before its stated maturity, and the Fund may have to reinvest the proceeds in securities with lower yields, which would result in a decline in the Fund’s income, or in
securities with greater risks or with other less favorable features. Changing interest rates, including rates that fall below zero, may have unpredictable effects on markets, result in heightened market volatility and detract from the Fund’s
performance to the extent the Fund is exposed to such interest rates. An increase in interest rates will generally cause the value of fixed-income securities held by the Fund to decline, may lead to heightened volatility in the fixed-income
markets and may adversely affect the liquidity of certain fixed-income investments, including those held by the Fund. Risks associated with rising interest rates are heightened given that interest rates in the U.S. are near historic lows.
Adjustable-rate instruments also react to interest rate changes in a similar manner, although generally to a lesser degree (depending, however, on the characteristics of the reset terms, including the index chosen, frequency of reset and reset
caps or floors, among other factors). Interest rate sensitivity is generally more pronounced and less predictable in instruments with uncertain payment or prepayment schedules and also for those with longer maturities.
Foreign Securities and Credit Exposure Risk. U.S. dollar-denominated securities carrying foreign credit exposure
may be affected by unfavorable political, economic or governmental developments that could affect payments of principal and interest. Furthermore, the value of the Fund’s foreign investments (whether direct or indirect) may be adversely affected by
political and social instability in their home countries, by changes in economic or taxation policies in those countries, or by the difficulty in enforcing obligations in those countries. Foreign companies generally may be subject to less stringent
regulations than U.S. companies, including financial reporting requirements and auditing and accounting controls. As a result, there generally is less publicly available information about foreign companies than about U.S. companies. Trading in many
foreign securities may be less liquid and more volatile than U.S. securities due to the size of the market or other factors.
U.S. Government Securities Risk. U.S. Government securities are subject to interest rate risk but generally do
not involve the credit risks associated with investments in other types of debt securities. As a result, the yields available from U.S. Government securities are generally lower than the yields available from other debt securities. U.S. Government
securities are guaranteed only as to the timely payment of interest and the payment of principal when held to maturity. While securities issued or guaranteed by U.S. federal government agencies are backed by the full faith and credit of the U.S.
Department of the Treasury, securities issued by government sponsored entities are solely the obligation of the issuer and generally do not carry any guarantee from the U.S. Government.
ABS Risk. ABS are subject to the general debt securities risks described above. In addition, ABS may be less
liquid than other bonds, and may be more sensitive than other bonds to the market’s perception of issuers and creditworthiness of payees, which may result in the Fund experiencing difficulty selling or valuing these securities. ABS markets have
experienced extraordinary weakness and volatility at various times in recent years, and may decline quickly in the event of a substantial economic or market downturn. Accordingly, these securities may be subject to greater risk of default during
periods of economic downturn than other securities, which could result in possible losses to the Fund.
Issuer Risk. The performance of the Fund depends on the performance of individual securities to which the Fund
has exposure. The Fund may be adversely affected if an issuer of underlying securities held by the Fund is unable or
178
unwilling to repay principal or interest when due. Changes in the financial condition or credit rating of an issuer of those securities may cause the
value of the securities to decline.
Management Risk. The Fund is subject to management risk because it is an actively managed portfolio. Milliman
will apply investment techniques and risk analyses in making investment decisions for the Fund, but there can be no guarantee that the Fund will meet its investment objective and/or the Outcomes. In addition, Milliman does not use defensive
strategies or attempt to reduce the Fund’s exposures to poor performing positions during an Outcome Period. This differs from funds that are managed to seek to outperform a benchmark index. Therefore, in the event of a general market decline, the
Fund’s value may fall more than the value of another fund that does attempt to hedge against such market declines.
Market Risk. The Fund could lose money over short periods due to short-term market movements and over longer
periods during more prolonged market downturns. Assets may decline in value due to factors affecting financial markets generally or particular asset classes or industries represented in the markets. The value of a FLEX Option or other asset may
also decline due to general market conditions, economic trends or events that are not specifically related to the issuer of the security or other asset, or due to factors that affect a particular issuer, country, region, market, industry, sector or
asset class.
Non-Diversification Risk. The Fund may invest a relatively high percentage of its assets in a limited number of
issuers. As a result, the Fund may be more susceptible to a single adverse economic or regulatory occurrence affecting one or more of these issuers, experience increased volatility and be highly invested in certain issuers.
Large Shareholder Risk. At times, the Fund may experience adverse effects when certain large shareholders,
including insurance company separate accounts, redeem large amounts of shares of the Fund. Large redemptions may cause the Fund to sell portfolio holdings at times when it would not otherwise do so and may increase transaction costs and/or result
in an increase to the Fund’s expense ratio. A large redemption could be detrimental to the Fund and its remaining shareholders.
Risks of Investing in ETFs. In addition to the risks associated with the underlying assets held by the ETFs in
which the Fund invests, investments in ETFs are also subject to the following additional risks: (i) only authorized participants may engage in transactions directly with ETFs but none are obligated to do so, which could result in an ETF’s shares
trading at a premium or discount to its NAV or possibly face trading halts or delisting; (ii) certain ETFs seek to track the performance of an underlying index and will not attempt to take defensive positions under any market conditions, including
declining markets, which could result in losses; and (iii) because ETF shares trade on the secondary market, there is not guarantee that an active market will be developed or maintained, which could result in the ETF’s shares trading at a premium
or discount to its NAV. Investments in ETFs may involve duplication of management fees and certain other expenses, as the Fund indirectly bears its proportionate share of any expenses paid by the ETFs in which it invests.
Risks of Investing in Money Market Funds. Money market funds seek to preserve the value of
shareholder investments at $1.00 per share, but shareholders, such as the Fund, may still lose money by investing in such funds. In addition, a money market fund may impose a fee upon the sale of its shares or may temporarily suspend the ability to
sell shares if the fund’s liquidity falls below required minimums because of market conditions or other factors. The credit quality of a money market fund’s holdings can change rapidly in certain markets, and the default of a single holding could
have an adverse impact on the fund’s share price. A money market fund’s share price can also be negatively affected during periods of high redemption pressures, illiquid markets, and/or significant market volatility.
Performance
As of the date of this Prospectus, the Fund has not commenced operations and therefore does not have a performance history. Once available, the Fund’s
performance information will be accessible online at www.[________].com and will provide some indication of the risks of investing in the Fund.
Management
179
Investment Adviser
Milliman Financial Risk Management LLC (“Milliman”) serves as investment adviser to the Fund.
Portfolio Managers
The following persons serve as portfolio managers of the Fund.
|
●
|
Robert T. Cummings, Principal & Head of Portfolio Management at Milliman.
|
|
●
|
Maria Schiopu, Principal & Head of Portfolio Management at Milliman.
|
|
●
|
Jeff Greco, Principal & Head of Strategy Research at Milliman.
|
|
●
|
Jordan Rosenfeld, Portfolio Manager at Milliman.
|
Each portfolio manager is jointly and primarily responsible for the day-to-day management of the Fund’s portfolio and has served in such capacity since
the Fund’s inception in 2021.
Purchase and Sale of Shares
Shares are available as underlying investment options for variable insurance contracts and variable life insurance policies (each, a “variable contract,” and, collectively, the “variable contracts”) issued by insurance companies. These insurance companies are the record owners of the separate accounts
holding the Shares. You do not buy, sell or exchange Shares directly; rather, you choose investment options through your variable contracts. The insurance companies then cause the separate accounts to purchase and redeem Shares according to
the investment options you choose.
Tax Information
The dividends and distributions paid by the Fund to the insurance company separate accounts will consist of ordinary income, capital gains, or some
combination of both. Because Shares must be purchased through separate accounts used to fund variable contracts, such dividends and distributions will be exempt from current taxation by owners of variable contracts (each, a “contract owner,” and, collectively “contract owners”) if left to accumulate within a separate account. Consult the variable contract prospectus for additional tax
information.
Payments to Insurance Companies and Other Financial Intermediaries
If you allocate contract value to the Fund through an insurance company or other financial intermediary, the Fund, Milliman, the Fund’s distributor or
their related companies may pay the insurance company and/or its affiliates or other intermediary for the sale of Shares and related services. These payments may create a conflict of interest by influencing the insurance company or other
intermediary and your salesperson to recommend an indirect investment in the Fund over another investment. The prospectus or other disclosure documents for the variable contracts may contain additional information about these payments, if any.
You may also ask your salesperson or financial intermediary, or visit your financial intermediary’s website, for more information.
180
Fund Summary: Milliman S&P 500 1-Year Buffer with Spread Fund – Mar
Investment Objective
The Fund seeks to provide exposure to the S&P 500 Index, while providing a buffer against the first 10% of losses associated with S&P 500
Index performance and participating in S&P 500 Index gains that exceed a declared spread, prior to taking into account any fees or expenses or the performance of any fixed income exposure included in the Fund’s portfolio, over the period from
March 1, 2022 through February 28, 2023.
Fees and Expenses of the Fund
This table describes the fees and expenses that you may pay if you buy, hold and sell shares of the Fund (“Shares”).
This table and the example below do not include any fees or sales charges imposed by your variable product. If they were included, the expenses listed below would be higher.
Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment)
|
Class 3
|
|
|
Management Fees
|
0.49%
|
|
Distribution and Service (12b-1) Fees
|
0.25%
|
|
Other Expenses(1)
|
0.50%
|
|
Acquired Fund Fees and Expenses(1)
|
[_.__]%
|
|
Total Annual Fund Operating Expenses
|
1.24%
|
|
Fee Waiver and/or Expense Reimbursement(2)(3)
|
(0.25)%
|
|
Total Annual Fund Operating Expenses After Fee Waiver and/or Expense Reimbursement
|
0.99%
|
|
(1)
|
“Other Expenses” and “Acquired Fund Fees and Expenses” are based on estimated amounts for the current fiscal year.
|
|
(2)
|
The Fund’s investment adviser, Milliman Financial Risk Management LLC (“Milliman”), has contractually
agreed to waive advisory fees and/or reimburse expenses to the extent necessary to limit the Fund’s total annual Fund operating expenses (excluding taxes, interest, brokerage fees and commissions, Rule 12b-1 fees, acquired fund fees and
expenses, short-sale dividend expenses, administrative services fees, other expenses that are capitalized in accordance with generally accepted accounting principles, and extraordinary or non-routine expenses not incurred in the
ordinary course of the Fund’s business) to 0.74% of the Fund's average daily net assets (the “Expense Limitation Agreement”) until at least November 1, 2022. During its term, the Expense
Limitation Agreement cannot be terminated or amended to increase the applicable limit without approval of the Board of Trustees of the Trust (the “Board”). Milliman may recoup from the Fund any
advisory fees waived or expenses reimbursed pursuant to the Expense Limitation Agreement for a period of three years from the date on which such waiver or reimbursement occurred; provided, however, that such recoupment shall not be made
if it would cause the Fund’s total annual Fund operating expenses to exceed the lesser of (a) the expense limitation in effect at the time of the reimbursement, or (b) the expense limitation in effect at the time of recoupment, if any.
|
|
(3)
|
In addition to the Expense Limitation Agreement, Milliman has contractually agreed to waive its advisory fees in an amount equal to the Fund’s
acquired fund fees and expenses until at least November 1, 2022 (the “Fee Waiver”). This contract cannot be terminated or modified without the consent of the Board.
|
Example
This example is intended to help you compare the cost of investing in the Fund with the cost of investing in other funds. This example assumes that you
invest $10,000 in the Fund for the time periods indicated and then sell all of your Shares at the end of those periods. This example also assumes that your investment has a 5% return each year and that the Fund’s operating expenses remain at
current levels and that the Expense Limitation Agreement and Fee Waiver remain in place for their contractual periods. Although your actual costs may be higher or lower, your costs, based on these assumptions, would be:
|
1 Year
|
3 Years
|
|
|
Class 3
|
$104
|
$384
|
This example does not include any fees or sales charges imposed by your variable product. If they were included, the expenses listed above would be
higher.
181
Portfolio Turnover
The Fund pays transaction costs, such as commissions, when it purchases and sells securities (or “turns over” its portfolio). A higher portfolio turnover
will cause the Fund to incur additional transaction costs. These costs, which are not reflected in Total Annual Fund Operating Expenses or in the example, may affect the Fund’s performance. Because the Fund has not yet commenced investment
operations, no portfolio turnover information is available at this time.
Principal Investment Strategies
The Fund seeks to achieve its investment objective by transacting in FLexible EXchange® Options (“FLEX Options”)
and by separately maintaining a collateral portfolio (the “Collateral Portfolio”), which is designed primarily to serve as margin or collateral for the Fund’s FLEX Options positions and secondarily to
enhance the Fund’s upside S&P 500 Index FLEX Options’ exposure (i.e., by utilizing anticipated income to measure the ability to purchase additional FLEX Options). FLEX Options are exchange-traded
options contracts with uniquely customizable terms. In general, an options contract is an agreement between a buyer and seller that gives the purchaser of the option the right to buy or sell a particular asset at a specified future date at an
agreed upon price, commonly known as the “strike price.” The reference assets for the Fund’s FLEX Options positions will include the S&P 500 Index, which is a large-capitalization, market-weighted, U.S. equities index that tracks the price
(excluding dividends) of 500 leading companies in leading industries of the U.S. economy, and certain exchange-traded funds (“ETFs”), as described further below.
The Collateral Portfolio may be invested in short-term fixed-income securities, including corporate bonds and other corporate debt securities,
asset-backed securities (“ABS”), securities issued by the U.S. Government or its agencies and instrumentalities, securities issued by non-U.S. governments or their agencies and instrumentalities, money
market securities and funds, other interest-bearing instruments, cash, ETFs that primarily invest in any of the foregoing instruments, options on ETFs and options box spreads. An options box spread is the combination of different options trades
that have offsetting spreads (e.g., purchases and sales on the same underlying instrument, such as an index or an ETF, but with different strike prices and/or expiration dates) for the purpose of
generating income. The Fund may invest in short-term fixed income securities or other instruments, including through ETFs, of any maturity and credit quality. The Fund will generally invest up to 35% of its net assets in one or more ETFs that
provide exposure to investment grade corporate bonds.
Due to the unique mechanics of the Fund’s strategy, the return an investor can expect to receive from an investment in the Fund has characteristics that
are distinct from the returns of many other investment vehicles. It is important that an investor understand these characteristics before making an investment in the Fund.
In seeking to achieve its investment objective, the Fund seeks to produce pre-determined outcomes (the “Outcomes”)
that are based upon the performance of the S&P 500 Index over a one-year period (the “Outcome Period”). The initial Outcome Period for the Fund is March 1, 2022 through February 28, 2023. Following the
initial Outcome Period, each subsequent Outcome Period will be a one-year period commencing upon the expiration of the prior Outcome Period. The Fund seeks to achieve the Outcomes by purchasing and writing (selling) FLEX Options to create layers
within the Fund’s portfolio. One layer is designed to produce returns that correlate to those of the S&P 500 Index for the Outcome Period if the S&P 500 Index experiences gains during that time in excess of a declared spread (the “Spread”), as described below. A separate layer is designed to produce returns that correlate to those of the S&P 500 Index for the Outcome Period that are buffered up to
10% if the S&P 500 Index experiences losses during that time (the “Buffer”). There is no guarantee that the Fund will be successful in its attempt to produce returns
that correlate to those of the S&P 500 Index in excess of the Spread or produce buffered returns against the Fund’s S&P 500 Index exposure.
Milliman Financial Risk Management, LLC (“Milliman”), the investment adviser of the Fund, seeks to establish the
Buffer by writing one put FLEX Option on the S&P 500 Index with a strike price that is 10% lower than the value of the S&P 500 Index at the beginning of the Outcome Period.
Milliman seeks to establish the Spread by purchasing long call FLEX Options on the S&P 500 Index and by writing put FLEX Options with a strike price
equal to the stated Buffer level. Milliman purchases these FLEX Options with
182
a portion of the Fund’s net assets plus (i) the cash received from writing the put FLEX Option designed to create the Buffer, (ii) additional cash
received by utilizing FLEX Options to create a put spread (the “Put Spread Strategy”) on fixed income securities and/or one or more ETFs that provide exposure to fixed income securities, and (iii) yield
received from the Collateral Portfolio. Milliman seeks to achieve the Put Spread Strategy for the Fund by writing a put FLEX Option on an underlying asset at a strike price at or lower than the underlying asset’s market price or current value at
the beginning of the Outcome Period, and buying a put FLEX Option on the same underlying asset at a lower strike price than the written put FLEX Option.
The Spread is the minimum rate of return the S&P 500 Index must surpass for the Fund to track any upside market performance of the S&P 500
Index. Milliman calculates the Spread based upon (i) its evaluation of prevailing market conditions on the first day of the Outcome Period and (ii) the strike price of the long call FLEX Options on the S&P 500 Index that it is able to
purchase at that time. As of the date of this Prospectus, and assuming current market conditions persist, Milliman expects that the Spread will be between the below ranges (both gross and net of Fund fees and expenses). Any fees or expenses
imposed by your variable product, and any other expenses incurred by the Fund, will have the effect of further increasing the Spread. In addition, in certain market conditions, the performance of the
Collateral Portfolio and the Put Spread Strategy could cause the Fund to underperform relative to the S&P 500 Index, which would require greater upside performance of the S&P 500 Index to generate a total return of the Fund that
exceeds the Spread.
|
Share Class
|
Estimated Spread Ranges
(As of [___])
|
|
|
Prior to Taking into Account Fund Fees and Expenses
|
After Taking into Account Fund Fees and Expenses
|
|
|
Class 3
|
[__]% and [__]%
|
[__]% and [__]%
|
The Buffer is only operative against the first 10% of losses in the Fund’s S&P 500 Index exposure for the Outcome Period. If the S&P 500 Index
decreases in value by more than 10% during the Outcome Period, the Fund (and therefore investors in Shares) will experience all subsequent losses in the Fund’s S&P 500 Index exposure on a one-to-one basis for the Outcome Period. The Fund
seeks to produce buffered returns against its S&P 500 Index exposure prior to taking into account any fees or expenses or the performance of the Collateral Portfolio or the Put Spread Strategy. The Buffer
is not operative against losses in the Collateral Portfolio or the Put Spread Strategy. If the Collateral Portfolio and/or the Put Spread Strategy experiences losses, it could have the effect of reducing the impact of, or completely
eliminating, the Buffer on the Fund’s S&P 500 Index exposure. In certain market conditions, the performance of the Collateral Portfolio and/or the Put Spread Strategy could cause the Fund to significantly underperform the S&P 500
Index. The following table reflects the Buffer both gross and net of Fund fees and expenses:
|
Share Class
|
Buffer
(As of [___])
|
|
|
Prior to Taking into Account Fund Fees and Expenses
|
After Taking into Account Fund Fees and Expenses
|
|
|
Class 3
|
10%
|
[__]%
|
The definitive Spread and Buffer will be set forth on the Fund’s website. The Fund’s website will also provide information relating to the Outcomes on
a daily basis, including the Fund’s position relative to the Spread and the Buffer. You may also contact your insurance company or other financial intermediary for more information.
Additionally, the Fund’s net asset value (“NAV”) will not increase or decrease at the same rate as the S&P
500 Index because the Fund’s strategy relies upon the performance of the Collateral Portfolio and the Put Spread Strategy, in addition to the value of the Fund’s FLEX Options positions on the S&P 500 Index. While Milliman anticipates that the
Fund’s NAV will generally move in the same direction as the S&P 500 Index (meaning that the Fund’s NAV will generally increase if the S&P 500 Index experiences gains or decrease if the S&P 500 Index experiences losses), the Fund’s NAV
may not decrease at the same rate as the S&P 500 Index (especially when factoring in the performance of the Collateral Portfolio and the Put Spread Strategy) and will not increase at the same rate as the S&P 500 Index (especially when
factoring in the Spread and the performance of the Collateral Portfolio and the Put
183
Spread Strategy). Similarly, the amount of time remaining until the end of the Outcome Period also affects the impact of the Buffer on the Fund’s NAV,
because the Buffer may not be in full effect prior to the end of the Outcome Period.
The FLEX Options utilized in the Fund’s portfolio are each set to expire on the last day of the Outcome Period. The customizable nature of FLEX Options
will allow Milliman to select the strike price at which each FLEX Option will be exercised at the expiration of the FLEX Option term. At the commencement of the Outcome Period, Milliman will specifically select the strike price for each FLEX Option
in a manner designed to achieve the Outcomes when the FLEX Options are exercised on the final day of the Outcome Period, depending on the anticipated performance of the S&P 500 Index, the Collateral Portfolio and the Put Spread Strategy over
the duration of that Outcome Period.
The hypothetical graphical illustrations provided below are designed to illustrate the Outcomes based upon the
hypothetical performance of the S&P 500 Index for an investor who holds Shares for the entirety of the Outcome Period. The hypothetical graphical illustrations do not include any fees or expenses imposed by your variable product or expenses
incurred by the Fund, and do not reflect the performance of the Collateral Portfolio or the Put Spread Strategy. Additional hypothetical graphical representations of the Outcomes are provided in “Additional Information About the Funds and
the Risks of Investing.” There is no guarantee that the Fund will be successful in its attempt to achieve the Outcomes for the Outcome Period.
The following table contains hypothetical examples designed to illustrate the Outcomes the Fund seeks to achieve
over the Outcome Period, based upon the performance of the S&P 500 Index from (100)% to 100% after taking into account the Spread and the Buffer, but prior to taking into account any fees or expenses or the performance of the Collateral
Portfolio or the Put Spread Strategy. The table is provided for illustrative purposes only and does not provide every possible performance scenario for Shares over the course of the Outcome Period. There is no guarantee that the Fund will be successful in its attempt to achieve the Outcomes for an Outcome
Period. The table is not intended to predict or project the performance of the FLEX Options or the Fund. Investors should not take this information as an assurance of the expected performance of the
S&P 500 Index or the Fund. Actual Fund performance will vary with fluctuations in the performance of the Collateral Portfolio and the Put Spread Strategy, in addition to the value of the Fund’s FLEX Options positions on the S&P
500 Index, during
184
the Outcome Period, among other factors. The performance of the Collateral
Portfolio and the Put Spread Strategy could significantly impact the performance of the Fund, which could prevent the Fund from achieving the Outcomes that it seeks to produce. The table does not reflect any fees or expenses imposed by
your variable product or expenses incurred by the Fund. If it did, the returns shown for the Fund would be lower. Please refer to the Fund’s website, which provides updated information relating to this table on a daily basis throughout the
Outcome Period. Please contact your insurance company or other financial intermediary for more information.
|
Index/Fund
|
Hypothetical Performance1
|
|||||||||||
|
S&P 500 Index Price Performance
|
(100)%
|
(50)%
|
(20)%
|
(10)%
|
(5)%
|
0%
|
5%
|
10%
|
15%
|
20%
|
50%
|
100%
|
|
Fund Performance at NAV
|
(90)%
|
(40)%
|
(10)%
|
0%2
|
0%2
|
0%
|
4%3
|
9%3
|
14%3
|
19%3
|
49%3
|
99%3
|
| 1 |
Does not take into account any fees or expenses or the performance of the Collateral Portfolio or the Put Spread Strategy.
|
| 2 |
Reflects the impact of the Buffer.
|
| 3 |
Reflects the impact of an assumed Spread of 1.0%.
|
Understanding Outcomes. The Outcomes the Fund seeks to achieve are measured based upon the
Fund’s NAV on the first day of the Outcome Period. The Outcome Period begins on the day Milliman transacts in the FLEX Options on behalf of the Fund, and ends on the day those FLEX Options expire. An investor who
purchases Shares after the commencement of the Outcome Period will likely have purchased Shares at a different NAV than the NAV on the first day of the Outcome Period (the NAV upon which the Outcomes are based) and may experience investment
outcomes very different from those the Fund seeks to achieve, especially when factoring in any fees or expenses or the performance of the Collateral Portfolio and the Put Spread Strategy. An investor who redeems Shares prior to the end of the
Outcome Period may also experience investment outcomes very different from those the Fund seeks to achieve. The Outcomes are designed with the expectation that an investor will hold Shares on the day that Milliman transacts in the FLEX Options on
behalf of the Fund, and on the day those FLEX Options expire. There is no guarantee that the Fund will be successful in its attempt to achieve the Outcomes.
Understanding the Spread. Unlike other investment products, the potential returns an
investor can receive from an investment in the Fund are subject to the Spread. This means that if the S&P 500 Index experiences gains for the Outcome Period, an investor in the Fund will only experience those
gains if they exceed the Spread and only by the amount those gains have exceeded the Spread. If the S&P 500 Index does not experience gains that exceed the Spread, an investor in the Fund will not experience any gains. Milliman
calculates the Spread for each Outcome Period based upon (i) its evaluation of prevailing market conditions on the first day of the Outcome Period and (ii) the strike price of the long call FLEX Options on the S&P 500 Index that it is able to
purchase at that time. In certain market conditions, the performance of the Collateral Portfolio and the Put Spread Strategy could cause the Fund to underperform relative to the S&P 500 Index, which would
require greater upside performance of the S&P 500 Index to generate a total return of the Fund that exceeds the Spread. An investor should consider the amount and impact of the Spread, and the Fund’s position relative to it, before
investing in the Fund.
Understanding the Buffer. The Buffer that the Fund seeks to provide is only operative
against the first 10% of losses in the Fund’s S&P 500 Index exposure for the Outcome Period. If an investor is considering purchasing Shares during the Outcome Period, and the S&P 500 Index has decreased
in value by an amount equal to or greater than 10%, an investor purchasing Shares at that time will be able to participate in any gains thereafter (subject to the Spread), but will not benefit from the Buffer that the Fund seeks to offer for
the remainder of the Outcome Period if the losses continue to be equal to or greater than 10% during that period. Conversely, if an investor is considering purchasing Shares during the Outcome Period, and the Fund’s NAV has increased in value
in an amount exceeding the Spread, then an investor may experience losses before implementation of the Buffer that the Fund seeks to provide. While the Fund seeks to produce returns that correlate to those of the S&P 500 Index for
the Outcome Period that are buffered up to 10% (prior to taking into account any fees or expenses or the performance of the Collateral Portfolio or the Put Spread Strategy) for investors who hold Shares for the entire Outcome Period, there is no
guarantee it will successfully do so. In addition, the
185
Buffer is not operative against losses in the Collateral Portfolio or the Put Spread Strategy. If the Collateral Portfolio
and/or the Put Spread Strategy experiences losses, it could have the effect of reducing the impact of, or completely eliminating, the Buffer on the Fund’s S&P 500 Index exposure. In certain market conditions, the performance of the
Collateral Portfolio and/or the Put Spread Strategy could cause the Fund to significantly underperform the S&P 500 Index. Investors who purchase Shares at the beginning of the Outcome Period may lose their entire investment. Investors who
purchase Shares after the Outcome Period has begun may also lose their entire investment. An investment in the Fund is only appropriate for investors willing to bear those losses.
Fund Rebalance. Milliman implements the Fund’s strategy on a semi-annual basis, seeking to
produce the Outcomes for an Outcome Period. On the last business day of any stated Outcome Period, all of the Fund’s existing FLEX Options, which includes those used to establish the Buffer, the Spread and the Put Spread Strategy, will expire and
Milliman will transact in a new set of FLEX Options on the same business day, which will commence a new Outcome Period beginning the following business day. At that same time, Milliman will also evaluate whether to make any adjustments to the
Collateral Portfolio. Accordingly, Shares can be held indefinitely if investors determine to participate in additional Outcome Periods.
Approximately one week prior to the end of each Outcome Period, the Fund will file a prospectus supplement, which will notify existing investors of
(i) the date on which the existing Outcome Period will end; (ii) the date on which the new Outcome Period will commence; and (iii) the anticipated ranges of the Spread that will be used for the new Outcome Period. Immediately preceding the
commencement date of the new Outcome Period, the Fund will file a prospectus supplement disclosing the Fund’s final Spread (both gross and net of Fund fees and expenses) for the new Outcome Period. This information will also be available online
at www.[___________].com, and on your insurance company’s website. Please contact your insurance company or other financial intermediary for more information.
Fund Classification. The Fund is classified as “non-diversified” under the Investment
Company Act of 1940, as amended (the “1940 Act”).
Principal Risks
You could lose money by investing in the Fund. An investment in the Fund is not a deposit of a bank and is not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other governmental agency. There can be no assurance that the Fund’s investment objectives will be achieved.
Downside Loss Buffer Risk. There can be no guarantee that the Fund will be successful in its strategy to
buffer against S&P 500 Index losses if the S&P 500 Index decreases in value over the Outcome Period. The Fund’s strategy is designed to produce returns that correlate to those of the S&P 500 Index at the Spread, while limiting
downside losses in the Fund’s S&P 500 Index exposure, if Shares are bought on the day on which Milliman transacts in the FLEX Options on behalf of the Fund and held until those FLEX Options expire at the end of each Outcome Period. The
success of the Buffer also depends upon the performance of the Collateral Portfolio and the Put Spread Strategy. If the Collateral Portfolio and/or the Put Spread Strategy experiences losses, it could have the
effect of reducing the impact of, or completely eliminating, the Buffer on the Fund’s S&P 500 Index exposure. In certain market conditions, the performance of the Collateral Portfolio and/or the Put Spread Strategy could cause the Fund to
significantly underperform the S&P 500 Index. Despite the intended Buffer, an investor could lose their entire investment. In the event an investor purchases Shares after the date on which Milliman transacted in the FLEX
Options on behalf of the Fund, or redeems Shares prior to the expiration of those FLEX Options, the Buffer that the Fund seeks to provide may not be available or fully applicable.
Risk of the Spread on Upside Returns. The Fund’s strategy is designed to produce returns that correlate to
those of the S&P 500 Index if Shares are bought on the day on which Milliman transacts in the FLEX Options on behalf of the Fund and held until those FLEX Options expire at the end of the Outcome Period, subject to the Spread. In the event
that the S&P 500 Index has gains that do not exceed the Spread for the Outcome Period, the Fund will not participate in those gains. In addition, in the event an investor purchases Shares after the date on which Milliman transacted in the
FLEX Options on behalf of the Fund, or redeems Shares prior to the expiration of those FLEX Options, the returns realized by that investor will not match those that the Fund seeks to achieve. In certain market
186
conditions, the performance of the Collateral Portfolio and the Put Spread Strategy could cause the Fund to underperform
relative to the S&P 500 Index, which would require greater upside performance of the S&P 500 Index to generate a total return of the Fund that exceeds the Spread. An investor should consider the amount and impact of the Spread, and the
Fund’s position relative to it, before investing in the Fund.
Spread Change Risk. Because the Spread for each Outcome Period is calculated based upon (i) Milliman’s evaluation
of prevailing market conditions on the first day of the Outcome Period and (ii) the strike price of the long call FLEX Options on the S&P 500 Index that Milliman is able to purchase at that time, the Spread may rise or fall from one Outcome
Period to the next. Any change in the Spread could be significant and it is unlikely to remain the same for consecutive Outcome Periods.
FLEX Options Risk. The Fund will transact in FLEX Options issued and guaranteed for settlement by the OCC. The
Fund bears the risk that the OCC will be unable or unwilling to perform its obligations under the FLEX Options contracts, which could result in significant losses to the Fund. In less liquid markets, terminating a FLEX Option may require the
payment of a premium or acceptance of a discounted price, and may take longer to complete. In addition, a less liquid trading market may adversely impact the value of the Fund’s FLEX Options and therefore the NAV of the Fund. In addition, the value
of the Fund’s FLEX Options positions is not anticipated to increase or decrease at the same rate as the reference asset; and while it is anticipated that they will generally move in the same direction, it is possible that they may move in different
directions. Certain FLEX Options positions may also expire worthless. The use of FLEX Options involves leverage, which can cause the Fund’s portfolio to be more volatile than if the portfolio had not been leveraged. Leverage can significantly
magnify the effect of price movements of the reference asset, disproportionately increasing the Fund’s losses and reducing the Fund’s opportunities for gains when the reference asset changes in unexpected ways. In some instances, such leverage
could result in losses that exceed the original amount invested.
Investment Objective and Outcomes Risk. There is no guarantee that the Fund will be successful in its attempt
to achieve its investment objective and/or the Outcomes, and an investor could lose some or all of their investment in the Fund. Certain circumstances under which the Fund might not achieve its objective and/or the Outcomes include, but are not
limited to (i) if the Fund disposes of FLEX Options, (ii) if the Fund is unable to maintain the proportional relationship based on the number of FLEX Options in the Fund’s portfolio, (iii) significant accrual of Fund expenses in connection with
effecting the Fund’s principal investment strategy, (iv) losses incurred by the Fund’s holdings in the Collateral Portfolio and/or losses resulting from the Put Spread Strategy, or (iv) adverse tax law changes affecting the treatment of FLEX
Options.
Tax Risk. The Fund intends to elect, and to qualify each year, to be treated as a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”). As a RIC, the Fund will not be subject to U.S. federal income tax on the portion
of its net investment income and net capital gain that it distributes to shareholders, provided that it satisfies certain requirements of the Code. To maintain its status as a RIC, the Fund must meet certain income, diversification and
distributions tests. For purposes of the diversification test, the identification of the issuer (or, in some cases, issuers) of a particular Fund investment can depend on the terms and conditions of that investment. In particular, there is no
published IRS guidance or case law on how to determine the “issuer” of certain derivatives that the Fund will enter into and the Fund has not received a private letter ruling on this point. Therefore, there is a risk that the Fund will not meet the
Code’s diversification requirements and will not qualify, or will be disqualified, as a RIC. If the Fund does not qualify as a RIC for any taxable year and certain relief provisions are not available, the Fund’s taxable income will be subject to
tax at the Fund level and to a further tax at the shareholder level when such income is distributed.
The Fund also intends to comply with the diversification requirements of Section 817(h) of the Code, and the regulations thereunder, relating to the
tax-deferred status of variable accounts that are based on insurance company separate accounts (referred to as “segregated asset accounts” for federal income tax purposes). These diversification requirements apply in addition to the RIC
diversification requirements discussed above. There also is no published guidance or case law on how to determine the “issuer” of the derivatives referred to above for purposes of the diversification requirements of Section 817(h) of the Code and
the Fund has not received a private letter ruling on this point. If these requirements are not met, or under other circumstances, such as if the Fund does not qualify as a RIC for any taxable year, it is possible that the contract owners (rather
than the insurance company) will be treated for federal income tax purposes as the taxable owners of the assets held by the segregated asset accounts.
187
Clearing Member Default Risk. The Fund will hold FLEX Options through accounts at members of clearing houses (“clearing members”) rather than a bank or a broker. Assets deposited by the Fund with any clearing member as margin for its FLEX Options positions may, in certain circumstances, be used to satisfy losses of other
clients of the Fund’s clearing member where such assets may be held in commingled omnibus accounts. In addition, although clearing members guarantee performance of their clients’ obligations to the clearing house, there is a risk that the assets of
the Fund might not be fully protected in the event of the clearing member’s bankruptcy, as the Fund would be limited to recovering only a pro rata share of all available funds segregated on behalf of the
clearing member’s customers for the relevant account class.
Debt Securities Risk. The prices of debt securities will be affected by changes in interest rates, the
creditworthiness of the issuer and other factors. These risks could affect the value of investments in which the Fund invests, possibly causing the Fund’s NAV to be reduced and fluctuate more than other types of investments. During periods of
falling interest rates, an issuer of a callable bond may repay the security before its stated maturity, and the Fund may have to reinvest the proceeds in securities with lower yields, which would result in a decline in the Fund’s income, or in
securities with greater risks or with other less favorable features. Changing interest rates, including rates that fall below zero, may have unpredictable effects on markets, result in heightened market volatility and detract from the Fund’s
performance to the extent the Fund is exposed to such interest rates. An increase in interest rates will generally cause the value of fixed-income securities held by the Fund to decline, may lead to heightened volatility in the fixed-income
markets and may adversely affect the liquidity of certain fixed-income investments, including those held by the Fund. Risks associated with rising interest rates are heightened given that interest rates in the U.S. are near historic lows.
Adjustable-rate instruments also react to interest rate changes in a similar manner, although generally to a lesser degree (depending, however, on the characteristics of the reset terms, including the index chosen, frequency of reset and reset
caps or floors, among other factors). Interest rate sensitivity is generally more pronounced and less predictable in instruments with uncertain payment or prepayment schedules and also for those with longer maturities.
Foreign Securities and Credit Exposure Risk. U.S. dollar-denominated securities carrying foreign credit exposure
may be affected by unfavorable political, economic or governmental developments that could affect payments of principal and interest. Furthermore, the value of the Fund’s foreign investments (whether direct or indirect) may be adversely affected by
political and social instability in their home countries, by changes in economic or taxation policies in those countries, or by the difficulty in enforcing obligations in those countries. Foreign companies generally may be subject to less stringent
regulations than U.S. companies, including financial reporting requirements and auditing and accounting controls. As a result, there generally is less publicly available information about foreign companies than about U.S. companies. Trading in many
foreign securities may be less liquid and more volatile than U.S. securities due to the size of the market or other factors.
U.S. Government Securities Risk. U.S. Government securities are subject to interest rate risk but generally do
not involve the credit risks associated with investments in other types of debt securities. As a result, the yields available from U.S. Government securities are generally lower than the yields available from other debt securities. U.S. Government
securities are guaranteed only as to the timely payment of interest and the payment of principal when held to maturity. While securities issued or guaranteed by U.S. federal government agencies are backed by the full faith and credit of the U.S.
Department of the Treasury, securities issued by government sponsored entities are solely the obligation of the issuer and generally do not carry any guarantee from the U.S. Government.
ABS Risk. ABS are subject to the general debt securities risks described above. In addition, ABS may be less
liquid than other bonds, and may be more sensitive than other bonds to the market’s perception of issuers and creditworthiness of payees, which may result in the Fund experiencing difficulty selling or valuing these securities. ABS markets have
experienced extraordinary weakness and volatility at various times in recent years, and may decline quickly in the event of a substantial economic or market downturn. Accordingly, these securities may be subject to greater risk of default during
periods of economic downturn than other securities, which could result in possible losses to the Fund.
Issuer Risk. The performance of the Fund depends on the performance of individual securities to which the Fund
has exposure. The Fund may be adversely affected if an issuer of underlying securities held by the Fund is unable or
188
unwilling to repay principal or interest when due. Changes in the financial condition or credit rating of an issuer of those securities may cause the
value of the securities to decline.
Management Risk. The Fund is subject to management risk because it is an actively managed portfolio. Milliman
will apply investment techniques and risk analyses in making investment decisions for the Fund, but there can be no guarantee that the Fund will meet its investment objective and/or the Outcomes. In addition, Milliman does not use defensive
strategies or attempt to reduce the Fund’s exposures to poor performing positions during an Outcome Period. This differs from funds that are managed to seek to outperform a benchmark index. Therefore, in the event of a general market decline, the
Fund’s value may fall more than the value of another fund that does attempt to hedge against such market declines.
Market Risk. The Fund could lose money over short periods due to short-term market movements and over longer
periods during more prolonged market downturns. Assets may decline in value due to factors affecting financial markets generally or particular asset classes or industries represented in the markets. The value of a FLEX Option or other asset may
also decline due to general market conditions, economic trends or events that are not specifically related to the issuer of the security or other asset, or due to factors that affect a particular issuer, country, region, market, industry, sector or
asset class.
Non-Diversification Risk. The Fund may invest a relatively high percentage of its assets in a limited number of
issuers. As a result, the Fund may be more susceptible to a single adverse economic or regulatory occurrence affecting one or more of these issuers, experience increased volatility and be highly invested in certain issuers.
Large Shareholder Risk. At times, the Fund may experience adverse effects when certain large shareholders,
including insurance company separate accounts, redeem large amounts of shares of the Fund. Large redemptions may cause the Fund to sell portfolio holdings at times when it would not otherwise do so and may increase transaction costs and/or result
in an increase to the Fund’s expense ratio. A large redemption could be detrimental to the Fund and its remaining shareholders.
Risks of Investing in ETFs. In addition to the risks associated with the underlying assets held by the ETFs in
which the Fund invests, investments in ETFs are also subject to the following additional risks: (i) only authorized participants may engage in transactions directly with ETFs but none are obligated to do so, which could result in an ETF’s shares
trading at a premium or discount to its NAV or possibly face trading halts or delisting; (ii) certain ETFs seek to track the performance of an underlying index and will not attempt to take defensive positions under any market conditions, including
declining markets, which could result in losses; and (iii) because ETF shares trade on the secondary market, there is not guarantee that an active market will be developed or maintained, which could result in the ETF’s shares trading at a premium
or discount to its NAV. Investments in ETFs may involve duplication of management fees and certain other expenses, as the Fund indirectly bears its proportionate share of any expenses paid by the ETFs in which it invests.
Risks of Investing in Money Market Funds. Money market funds seek to preserve the value of
shareholder investments at $1.00 per share, but shareholders, such as the Fund, may still lose money by investing in such funds. In addition, a money market fund may impose a fee upon the sale of its shares or may temporarily suspend the ability to
sell shares if the fund’s liquidity falls below required minimums because of market conditions or other factors. The credit quality of a money market fund’s holdings can change rapidly in certain markets, and the default of a single holding could
have an adverse impact on the fund’s share price. A money market fund’s share price can also be negatively affected during periods of high redemption pressures, illiquid markets, and/or significant market volatility.
Performance
As of the date of this Prospectus, the Fund has not commenced operations and therefore does not have a performance history. Once available, the Fund’s
performance information will be accessible online at www.[________].com and will provide some indication of the risks of investing in the Fund.
Management
189
Investment Adviser
Milliman Financial Risk Management LLC (“Milliman”) serves as investment adviser to the Fund.
Portfolio Managers
The following persons serve as portfolio managers of the Fund.
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●
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Robert T. Cummings, Principal & Head of Portfolio Management at Milliman.
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●
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Maria Schiopu, Principal & Head of Portfolio Management at Milliman.
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●
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Jeff Greco, Principal & Head of Strategy Research at Milliman.
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●
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Jordan Rosenfeld, Portfolio Manager at Milliman.
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Each portfolio manager is jointly and primarily responsible for the day-to-day management of the Fund’s portfolio and has served in such capacity
since the Fund’s inception in 2021.
Purchase and Sale of Shares
Shares are available as underlying investment options for variable insurance contracts and variable life insurance policies (each, a “variable contract,” and, collectively, the “variable contracts”) issued by insurance companies. These insurance companies are the record owners of the separate accounts
holding the Shares. You do not buy, sell or exchange Shares directly; rather, you choose investment options through your variable contracts. The insurance companies then cause the separate accounts to purchase and redeem Shares according to
the investment options you choose.
Tax Information
The dividends and distributions paid by the Fund to the insurance company separate accounts will consist of ordinary income, capital gains, or some
combination of both. Because Shares must be purchased through separate accounts used to fund variable contracts, such dividends and distributions will be exempt from current taxation by owners of variable contracts (each, a “contract owner,” and, collectively “contract owners”) if left to accumulate within a separate account. Consult the variable contract prospectus for additional tax
information.
Payments to Insurance Companies and Other Financial Intermediaries
If you allocate contract value to the Fund through an insurance company or other financial intermediary, the Fund, Milliman, the Fund’s distributor or
their related companies may pay the insurance company and/or its affiliates or other intermediary for the sale of Shares and related services. These payments may create a conflict of interest by influencing the insurance company or other
intermediary and your salesperson to recommend an indirect investment in the Fund over another investment. The prospectus or other disclosure documents for the variable contracts may contain additional information about these payments, if any.
You may also ask your salesperson or financial intermediary, or visit your financial intermediary’s website, for more information.
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Fund Summary: Milliman S&P 500 1-Year Buffer with Spread Fund – Apr
Investment Objective
The Fund seeks to provide exposure to the S&P 500 Index, while providing a buffer against the first 10% of losses associated with S&P 500
Index performance and participating in S&P 500 Index gains that exceed a declared spread, prior to taking into account any fees or expenses or the performance of any fixed income exposure included in the Fund’s portfolio, over the period from
April 1, 2022 through March 31, 2023.
Fees and Expenses of the Fund
This table describes the fees and expenses that you may pay if you buy, hold and sell shares of the Fund (“Shares”).
This table and the example below do not include any fees or sales charges imposed by your variable product. If they were included, the expenses listed below would be higher.
Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment)
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Class 3
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|
|
Management Fees
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0.49%
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Distribution and Service (12b-1) Fees
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0.25%
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Other Expenses(1)
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0.50%
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Acquired Fund Fees and Expenses(1)
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[_.__]%
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Total Annual Fund Operating Expenses
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1.24%
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Fee Waiver and/or Expense Reimbursement(2)(3)
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(0.25)%
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Total Annual Fund Operating Expenses After Fee Waiver and/or Expense Reimbursement
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0.99%
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(1)
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“Other Expenses” and “Acquired Fund Fees and Expenses” are based on estimated amounts for the current fiscal year.
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|
(2)
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The Fund’s investment adviser, Milliman Financial Risk Management LLC (“Milliman”), has contractually
agreed to waive advisory fees and/or reimburse expenses to the extent necessary to limit the Fund’s total annual Fund operating expenses (excluding taxes, interest, brokerage fees and commissions, Rule 12b-1 fees, acquired fund fees and
expenses, short-sale dividend expenses, administrative services fees, other expenses that are capitalized in accordance with generally accepted accounting principles, and extraordinary or non-routine expenses not incurred in the
ordinary course of the Fund’s business) to 0.74% of the Fund's average daily net assets (the “Expense Limitation Agreement”) until at least November 1, 2022. During its term, the Expense
Limitation Agreement cannot be terminated or amended to increase the applicable limit without approval of the Board of Trustees of the Trust (the “Board”). Milliman may recoup from the Fund any
advisory fees waived or expenses reimbursed pursuant to the Expense Limitation Agreement for a period of three years from the date on which such waiver or reimbursement occurred; provided, however, that such recoupment shall not be made
if it would cause the Fund’s total annual Fund operating expenses to exceed the lesser of (a) the expense limitation in effect at the time of the reimbursement, or (b) the expense limitation in effect at the time of recoupment, if any.
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(3)
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In addition to the Expense Limitation Agreement, Milliman has contractually agreed to waive its advisory fees in an amount equal to the Fund’s
acquired fund fees and expenses until at least November 1, 2022 (the “Fee Waiver”). This contract cannot be terminated or modified without the consent of the Board.
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Example
This example is intended to help you compare the cost of investing in the Fund with the cost of investing in other funds. This example assumes that you
invest $10,000 in the Fund for the time periods indicated and then sell all of your Shares at the end of those periods. This example also assumes that your investment has a 5% return each year and that the Fund’s operating expenses remain at
current levels and that the Expense Limitation Agreement and Fee Waiver remain in place for their contractual periods. Although your actual costs may be higher or lower, your costs, based on these assumptions, would be:
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1 Year
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3 Years
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|
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Class 3
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$104
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$384
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This example does not include any fees or sales charges imposed by your variable product. If they were included, the expenses listed above would be
higher.
191
Portfolio Turnover
The Fund pays transaction costs, such as commissions, when it purchases and sells securities (or “turns over” its portfolio). A higher portfolio turnover
will cause the Fund to incur additional transaction costs. These costs, which are not reflected in Total Annual Fund Operating Expenses or in the example, may affect the Fund’s performance. Because the Fund has not yet commenced investment
operations, no portfolio turnover information is available at this time.
Principal Investment Strategies
The Fund seeks to achieve its investment objective by transacting in FLexible EXchange® Options (“FLEX Options”)
and by separately maintaining a collateral portfolio (the “Collateral Portfolio”), which is designed primarily to serve as margin or collateral for the Fund’s FLEX Options positions and secondarily to
enhance the Fund’s upside S&P 500 Index FLEX Options’ exposure (i.e., by utilizing anticipated income to measure the ability to purchase additional FLEX Options). FLEX Options are exchange-traded
options contracts with uniquely customizable terms. In general, an options contract is an agreement between a buyer and seller that gives the purchaser of the option the right to buy or sell a particular asset at a specified future date at an
agreed upon price, commonly known as the “strike price.” The reference assets for the Fund’s FLEX Options positions will include the S&P 500 Index, which is a large-capitalization, market-weighted, U.S. equities index that tracks the price
(excluding dividends) of 500 leading companies in leading industries of the U.S. economy, and certain exchange-traded funds (“ETFs”), as described further below.
The Collateral Portfolio may be invested in short-term fixed-income securities, including corporate bonds and other corporate debt securities,
asset-backed securities (“ABS”), securities issued by the U.S. Government or its agencies and instrumentalities, securities issued by non-U.S. governments or their agencies and instrumentalities, money
market securities and funds, other interest-bearing instruments, cash, ETFs that primarily invest in any of the foregoing instruments, options on ETFs and options box spreads. An options box spread is the combination of different options trades
that have offsetting spreads (e.g., purchases and sales on the same underlying instrument, such as an index or an ETF, but with different strike prices and/or expiration dates) for the purpose of
generating income. The Fund may invest in short-term fixed income securities or other instruments, including through ETFs, of any maturity and credit quality. The Fund will generally invest up to 35% of its net assets in one or more ETFs that
provide exposure to investment grade corporate bonds.
Due to the unique mechanics of the Fund’s strategy, the return an investor can expect to receive from an investment in the Fund has characteristics that
are distinct from the returns of many other investment vehicles. It is important that an investor understand these characteristics before making an investment in the Fund.
In seeking to achieve its investment objective, the Fund seeks to produce pre-determined outcomes (the “Outcomes”)
that are based upon the performance of the S&P 500 Index over a one-year period (the “Outcome Period”). The initial Outcome Period for the Fund is April 1, 2022 through March 31, 2023. Following the
initial Outcome Period, each subsequent Outcome Period will be a one-year period commencing upon the expiration of the prior Outcome Period. The Fund seeks to achieve the Outcomes by purchasing and writing (selling) FLEX Options to create layers
within the Fund’s portfolio. One layer is designed to produce returns that correlate to those of the S&P 500 Index for the Outcome Period if the S&P 500 Index experiences gains during that time in excess of a declared spread (the “Spread”), as described below. A separate layer is designed to produce returns that correlate to those of the S&P 500 Index for the Outcome Period that are buffered up to
10% if the S&P 500 Index experiences losses during that time (the “Buffer”). There is no guarantee that the Fund will be successful in its attempt to produce returns
that correlate to those of the S&P 500 Index in excess of the Spread or produce buffered returns against the Fund’s S&P 500 Index exposure.
Milliman Financial Risk Management, LLC (“Milliman”), the investment adviser of the Fund, seeks to establish the
Buffer by writing one put FLEX Option on the S&P 500 Index with a strike price that is 10% lower than the value of the S&P 500 Index at the beginning of the Outcome Period.
Milliman seeks to establish the Spread by purchasing long call FLEX Options on the S&P 500 Index and by writing put FLEX Options with a strike price
equal to the stated Buffer level. Milliman purchases these FLEX Options with
192
a portion of the Fund’s net assets plus (i) the cash received from writing the put FLEX Option designed to create the Buffer, (ii) additional cash
received by utilizing FLEX Options to create a put spread (the “Put Spread Strategy”) on fixed income securities and/or one or more ETFs that provide exposure to fixed income securities, and (iii) yield
received from the Collateral Portfolio. Milliman seeks to achieve the Put Spread Strategy for the Fund by writing a put FLEX Option on an underlying asset at a strike price at or lower than the underlying asset’s market price or current value at
the beginning of the Outcome Period, and buying a put FLEX Option on the same underlying asset at a lower strike price than the written put FLEX Option.
The Spread is the minimum rate of return the S&P 500 Index must surpass for the Fund to track any upside market performance of the S&P 500
Index. Milliman calculates the Spread based upon (i) its evaluation of prevailing market conditions on the first day of the Outcome Period and (ii) the strike price of the long call FLEX Options on the S&P 500 Index that it is able to
purchase at that time. As of the date of this Prospectus, and assuming current market conditions persist, Milliman expects that the Spread will be between the below ranges (both gross and net of Fund fees and expenses). Any fees or expenses
imposed by your variable product, and any other expenses incurred by the Fund, will have the effect of further increasing the Spread. In addition, in certain market conditions, the performance of the
Collateral Portfolio and the Put Spread Strategy could cause the Fund to underperform relative to the S&P 500 Index, which would require greater upside performance of the S&P 500 Index to generate a total return of the Fund that
exceeds the Spread.
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Share Class
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Estimated Spread Ranges
(As of [___])
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|
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Prior to Taking into Account Fund Fees and Expenses
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After Taking into Account Fund Fees and Expenses
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|
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Class 3
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[__]% and [__]%
|
[__]% and [__]%
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The Buffer is only operative against the first 10% of losses in the Fund’s S&P 500 Index exposure for the Outcome Period. If the S&P 500 Index
decreases in value by more than 10% during the Outcome Period, the Fund (and therefore investors in Shares) will experience all subsequent losses in the Fund’s S&P 500 Index exposure on a one-to-one basis for the Outcome Period. The Fund
seeks to produce buffered returns against its S&P 500 Index exposure prior to taking into account any fees or expenses or the performance of the Collateral Portfolio or the Put Spread Strategy. The Buffer
is not operative against losses in the Collateral Portfolio or the Put Spread Strategy. If the Collateral Portfolio and/or the Put Spread Strategy experiences losses, it could have the effect of reducing the impact of, or completely
eliminating, the Buffer on the Fund’s S&P 500 Index exposure. In certain market conditions, the performance of the Collateral Portfolio and/or the Put Spread Strategy could cause the Fund to significantly underperform the S&P 500
Index. The following table reflects the Buffer both gross and net of Fund fees and expenses:
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Share Class
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Buffer
(As of [___])
|
|
|
Prior to Taking into Account Fund Fees and Expenses
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After Taking into Account Fund Fees and Expenses
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|
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Class 3
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10%
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[__]%
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The definitive Spread and Buffer will be set forth on the Fund’s website. The Fund’s website will also provide information relating to the Outcomes on
a daily basis, including the Fund’s position relative to the Spread and the Buffer. You may also contact your insurance company or other financial intermediary for more information.
Additionally, the Fund’s net asset value (“NAV”) will not increase or decrease at the same rate as the S&P
500 Index because the Fund’s strategy relies upon the performance of the Collateral Portfolio and the Put Spread Strategy, in addition to the value of the Fund’s FLEX Options positions on the S&P 500 Index. While Milliman anticipates that the
Fund’s NAV will generally move in the same direction as the S&P 500 Index (meaning that the Fund’s NAV will generally increase if the S&P 500 Index experiences gains or decrease if the S&P 500 Index experiences losses), the Fund’s NAV
may not decrease at the same rate as the S&P 500 Index (especially when factoring in the performance of the Collateral Portfolio and the Put Spread Strategy) and will not increase at the same rate as the S&P 500 Index (especially when
factoring in the Spread and the performance of the Collateral Portfolio and the Put
193
Spread Strategy). Similarly, the amount of time remaining until the end of the Outcome Period also affects the impact of the Buffer on the Fund’s NAV,
because the Buffer may not be in full effect prior to the end of the Outcome Period.
The FLEX Options utilized in the Fund’s portfolio are each set to expire on the last day of the Outcome Period. The customizable nature of FLEX Options
will allow Milliman to select the strike price at which each FLEX Option will be exercised at the expiration of the FLEX Option term. At the commencement of the Outcome Period, Milliman will specifically select the strike price for each FLEX Option
in a manner designed to achieve the Outcomes when the FLEX Options are exercised on the final day of the Outcome Period, depending on the anticipated performance of the S&P 500 Index, the Collateral Portfolio and the Put Spread Strategy over
the duration of that Outcome Period.
The hypothetical graphical illustrations provided below are designed to illustrate the Outcomes based upon the
hypothetical performance of the S&P 500 Index for an investor who holds Shares for the entirety of the Outcome Period. The hypothetical graphical illustrations do not include any fees or expenses imposed by your variable product or expenses
incurred by the Fund, and do not reflect the performance of the Collateral Portfolio or the Put Spread Strategy. Additional hypothetical graphical representations of the Outcomes are provided in “Additional Information About the Funds and
the Risks of Investing.” There is no guarantee that the Fund will be successful in its attempt to achieve the Outcomes for the Outcome Period.
The following table contains hypothetical examples designed to illustrate the Outcomes the Fund seeks to achieve
over the Outcome Period, based upon the performance of the S&P 500 Index from (100)% to 100% after taking into account the Spread and the Buffer, but prior to taking into account any fees or expenses or the performance of the Collateral
Portfolio or the Put Spread Strategy. The table is provided for illustrative purposes only and does not provide every possible performance scenario for Shares over the course of the Outcome Period. There is no guarantee that the Fund will be successful in its attempt to achieve the Outcomes for an Outcome
Period. The table is not intended to predict or project the performance of the FLEX Options or the Fund. Investors should not take this information as an assurance of the expected performance of the
S&P 500 Index or the Fund. Actual Fund performance will vary with fluctuations in the performance of the Collateral Portfolio and the Put Spread Strategy, in addition to the value of the Fund’s FLEX Options positions on the S&P
500 Index, during
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the Outcome Period, among other factors. The performance of the Collateral
Portfolio and the Put Spread Strategy could significantly impact the performance of the Fund, which could prevent the Fund from achieving the Outcomes that it seeks to produce. The table does not reflect any fees or expenses imposed by
your variable product or expenses incurred by the Fund. If it did, the returns shown for the Fund would be lower. Please refer to the Fund’s website, which provides updated information relating to this table on a daily basis throughout the
Outcome Period. Please contact your insurance company or other financial intermediary for more information.
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Index/Fund
|
Hypothetical Performance1
|
|||||||||||
|
S&P 500 Index Price Performance
|
(100)%
|
(50)%
|
(20)%
|
(10)%
|
(5)%
|
0%
|
5%
|
10%
|
15%
|
20%
|
50%
|
100%
|
|
Fund Performance at NAV
|
(90)%
|
(40)%
|
(10)%
|
0%2
|
0%2
|
0%
|
4%3
|
9%3
|
14%3
|
19%3
|
49%3
|
99%3
|
| 1 |
Does not take into account any fees or expenses or the performance of the Collateral Portfolio or the Put Spread Strategy.
|
| 2 |
Reflects the impact of the Buffer.
|
| 3 |
Reflects the impact of an assumed Spread of 1.0%.
|
Understanding Outcomes. The Outcomes the Fund seeks to achieve are measured based upon the
Fund’s NAV on the first day of the Outcome Period. The Outcome Period begins on the day Milliman transacts in the FLEX Options on behalf of the Fund, and ends on the day those FLEX Options expire. An investor who
purchases Shares after the commencement of the Outcome Period will likely have purchased Shares at a different NAV than the NAV on the first day of the Outcome Period (the NAV upon which the Outcomes are based) and may experience investment
outcomes very different from those the Fund seeks to achieve, especially when factoring in any fees or expenses or the performance of the Collateral Portfolio and the Put Spread Strategy. An investor who redeems Shares prior to the end of the
Outcome Period may also experience investment outcomes very different from those the Fund seeks to achieve. The Outcomes are designed with the expectation that an investor will hold Shares on the day that Milliman transacts in the FLEX Options on
behalf of the Fund, and on the day those FLEX Options expire. There is no guarantee that the Fund will be successful in its attempt to achieve the Outcomes.
Understanding the Spread. Unlike other investment products, the potential returns an
investor can receive from an investment in the Fund are subject to the Spread. This means that if the S&P 500 Index experiences gains for the Outcome Period, an investor in the Fund will only experience those
gains if they exceed the Spread and only by the amount those gains have exceeded the Spread. If the S&P 500 Index does not experience gains that exceed the Spread, an investor in the Fund will not experience any gains. Milliman
calculates the Spread for each Outcome Period based upon (i) its evaluation of prevailing market conditions on the first day of the Outcome Period and (ii) the strike price of the long call FLEX Options on the S&P 500 Index that it is able to
purchase at that time. In certain market conditions, the performance of the Collateral Portfolio and the Put Spread Strategy could cause the Fund to underperform relative to the S&P 500 Index, which would
require greater upside performance of the S&P 500 Index to generate a total return of the Fund that exceeds the Spread. An investor should consider the amount and impact of the Spread, and the Fund’s position relative to it, before
investing in the Fund.
Understanding the Buffer. The Buffer that the Fund seeks to provide is only operative
against the first 10% of losses in the Fund’s S&P 500 Index exposure for the Outcome Period. If an investor is considering purchasing Shares during the Outcome Period, and the S&P 500 Index has decreased
in value by an amount equal to or greater than 10%, an investor purchasing Shares at that time will be able to participate in any gains thereafter (subject to the Spread), but will not benefit from the Buffer that the Fund seeks to offer for
the remainder of the Outcome Period if the losses continue to be equal to or greater than 10% during that period. Conversely, if an investor is considering purchasing Shares during the Outcome Period, and the Fund’s NAV has increased in value
in an amount exceeding the Spread, then an investor may experience losses before implementation of the Buffer that the Fund seeks to provide. While the Fund seeks to produce returns that correlate to those of the S&P 500 Index for
the Outcome Period that are buffered up to 10% (prior to taking into account any fees or expenses or the performance of the Collateral Portfolio or the Put Spread Strategy) for investors who hold Shares for the entire Outcome Period, there is no
guarantee it will successfully do so. In addition, the
195
Buffer is not operative against losses in the Collateral Portfolio or the Put Spread Strategy. If the Collateral Portfolio
and/or the Put Spread Strategy experiences losses, it could have the effect of reducing the impact of, or completely eliminating, the Buffer on the Fund’s S&P 500 Index exposure. In certain market conditions, the performance of the
Collateral Portfolio and/or the Put Spread Strategy could cause the Fund to significantly underperform the S&P 500 Index. Investors who purchase Shares at the beginning of the Outcome Period may lose their entire investment. Investors who
purchase Shares after the Outcome Period has begun may also lose their entire investment. An investment in the Fund is only appropriate for investors willing to bear those losses.
Fund Rebalance. Milliman implements the Fund’s strategy on a semi-annual basis, seeking to
produce the Outcomes for an Outcome Period. On the last business day of any stated Outcome Period, all of the Fund’s existing FLEX Options, which includes those used to establish the Buffer, the Spread and the Put Spread Strategy, will expire and
Milliman will transact in a new set of FLEX Options on the same business day, which will commence a new Outcome Period beginning the following business day. At that same time, Milliman will also evaluate whether to make any adjustments to the
Collateral Portfolio. Accordingly, Shares can be held indefinitely if investors determine to participate in additional Outcome Periods.
Approximately one week prior to the end of each Outcome Period, the Fund will file a prospectus supplement, which will notify existing investors of
(i) the date on which the existing Outcome Period will end; (ii) the date on which the new Outcome Period will commence; and (iii) the anticipated ranges of the Spread that will be used for the new Outcome Period. Immediately preceding the
commencement date of the new Outcome Period, the Fund will file a prospectus supplement disclosing the Fund’s final Spread (both gross and net of Fund fees and expenses) for the new Outcome Period. This information will also be available online
at www.[___________].com, and on your insurance company’s website. Please contact your insurance company or other financial intermediary for more information.
Fund Classification. The Fund is classified as “non-diversified” under the Investment
Company Act of 1940, as amended (the “1940 Act”).
Principal Risks
You could lose money by investing in the Fund. An investment in the Fund is not a deposit of a bank and is not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other governmental agency. There can be no assurance that the Fund’s investment objectives will be achieved.
Downside Loss Buffer Risk. There can be no guarantee that the Fund will be successful in its strategy to
buffer against S&P 500 Index losses if the S&P 500 Index decreases in value over the Outcome Period. The Fund’s strategy is designed to produce returns that correlate to those of the S&P 500 Index at the Spread, while limiting
downside losses in the Fund’s S&P 500 Index exposure, if Shares are bought on the day on which Milliman transacts in the FLEX Options on behalf of the Fund and held until those FLEX Options expire at the end of each Outcome Period. The
success of the Buffer also depends upon the performance of the Collateral Portfolio and the Put Spread Strategy. If the Collateral Portfolio and/or the Put Spread Strategy experiences losses, it could have the
effect of reducing the impact of, or completely eliminating, the Buffer on the Fund’s S&P 500 Index exposure. In certain market conditions, the performance of the Collateral Portfolio and/or the Put Spread Strategy could cause the Fund to
significantly underperform the S&P 500 Index. Despite the intended Buffer, an investor could lose their entire investment. In the event an investor purchases Shares after the date on which Milliman transacted in the FLEX
Options on behalf of the Fund, or redeems Shares prior to the expiration of those FLEX Options, the Buffer that the Fund seeks to provide may not be available or fully applicable.
Risk of the Spread on Upside Returns. The Fund’s strategy is designed to produce returns that correlate to those
of the S&P 500 Index if Shares are bought on the day on which Milliman transacts in the FLEX Options on behalf of the Fund and held until those FLEX Options expire at the end of the Outcome Period, subject to the Spread. In the event that the
S&P 500 Index has gains that do not exceed the Spread for the Outcome Period, the Fund will not participate in those gains. In addition, in the event an investor purchases Shares after the date on which Milliman transacted in the FLEX Options
on behalf of the Fund, or redeems Shares prior to the expiration of those FLEX Options, the returns realized by that investor will not match those that the Fund seeks to achieve. In certain market
196
conditions, the performance of the Collateral Portfolio and the Put Spread Strategy could cause the Fund to underperform
relative to the S&P 500 Index, which would require greater upside performance of the S&P 500 Index to generate a total return of the Fund that exceeds the Spread. An investor should consider the amount and impact of the Spread, and the
Fund’s position relative to it, before investing in the Fund.
Spread Change Risk. Because the Spread for each Outcome Period is calculated based upon (i) Milliman’s evaluation
of prevailing market conditions on the first day of the Outcome Period and (ii) the strike price of the long call FLEX Options on the S&P 500 Index that Milliman is able to purchase at that time, the Spread may rise or fall from one Outcome
Period to the next. Any change in the Spread could be significant and it is unlikely to remain the same for consecutive Outcome Periods.
FLEX Options Risk. The Fund will transact in FLEX Options issued and guaranteed for settlement by the OCC. The
Fund bears the risk that the OCC will be unable or unwilling to perform its obligations under the FLEX Options contracts, which could result in significant losses to the Fund. In less liquid markets, terminating a FLEX Option may require the
payment of a premium or acceptance of a discounted price, and may take longer to complete. In addition, a less liquid trading market may adversely impact the value of the Fund’s FLEX Options and therefore the NAV of the Fund. In addition, the value
of the Fund’s FLEX Options positions is not anticipated to increase or decrease at the same rate as the reference asset; and while it is anticipated that they will generally move in the same direction, it is possible that they may move in different
directions. Certain FLEX Options positions may also expire worthless. The use of FLEX Options involves leverage, which can cause the Fund’s portfolio to be more volatile than if the portfolio had not been leveraged. Leverage can significantly
magnify the effect of price movements of the reference asset, disproportionately increasing the Fund’s losses and reducing the Fund’s opportunities for gains when the reference asset changes in unexpected ways. In some instances, such leverage
could result in losses that exceed the original amount invested.
Investment Objective and Outcomes Risk. There is no guarantee that the Fund will be successful in its attempt
to achieve its investment objective and/or the Outcomes, and an investor could lose some or all of their investment in the Fund. Certain circumstances under which the Fund might not achieve its objective and/or the Outcomes include, but are not
limited to (i) if the Fund disposes of FLEX Options, (ii) if the Fund is unable to maintain the proportional relationship based on the number of FLEX Options in the Fund’s portfolio, (iii) significant accrual of Fund expenses in connection with
effecting the Fund’s principal investment strategy, (iv) losses incurred by the Fund’s holdings in the Collateral Portfolio and/or losses resulting from the Put Spread Strategy, or (iv) adverse tax law changes affecting the treatment of FLEX
Options.
Tax Risk. The Fund intends to elect, and to qualify each year, to be treated as a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”). As a RIC, the Fund will not be subject to U.S. federal income tax on the portion
of its net investment income and net capital gain that it distributes to shareholders, provided that it satisfies certain requirements of the Code. To maintain its status as a RIC, the Fund must meet certain income, diversification and
distributions tests. For purposes of the diversification test, the identification of the issuer (or, in some cases, issuers) of a particular Fund investment can depend on the terms and conditions of that investment. In particular, there is no
published IRS guidance or case law on how to determine the “issuer” of certain derivatives that the Fund will enter into and the Fund has not received a private letter ruling on this point. Therefore, there is a risk that the Fund will not meet the
Code’s diversification requirements and will not qualify, or will be disqualified, as a RIC. If the Fund does not qualify as a RIC for any taxable year and certain relief provisions are not available, the Fund’s taxable income will be subject to
tax at the Fund level and to a further tax at the shareholder level when such income is distributed.
The Fund also intends to comply with the diversification requirements of Section 817(h) of the Code, and the regulations thereunder, relating to the
tax-deferred status of variable accounts that are based on insurance company separate accounts (referred to as “segregated asset accounts” for federal income tax purposes). These diversification requirements apply in addition to the RIC
diversification requirements discussed above. There also is no published guidance or case law on how to determine the “issuer” of the derivatives referred to above for purposes of the diversification requirements of Section 817(h) of the Code and
the Fund has not received a private letter ruling on this point. If these requirements are not met, or under other circumstances, such as if the Fund does not qualify as a RIC for any taxable year, it is possible that the contract owners (rather
than the insurance company) will be treated for federal income tax purposes as the taxable owners of the assets held by the segregated asset accounts.
197
Clearing Member Default Risk. The Fund will hold FLEX Options through accounts at members of clearing houses (“clearing members”) rather than a bank or a broker. Assets deposited by the Fund with any clearing member as margin for its FLEX Options positions may, in certain circumstances, be used to satisfy losses of other
clients of the Fund’s clearing member where such assets may be held in commingled omnibus accounts. In addition, although clearing members guarantee performance of their clients’ obligations to the clearing house, there is a risk that the assets of
the Fund might not be fully protected in the event of the clearing member’s bankruptcy, as the Fund would be limited to recovering only a pro rata share of all available funds segregated on behalf of the
clearing member’s customers for the relevant account class.
Debt Securities Risk. The prices of debt securities will be affected by changes in interest rates, the
creditworthiness of the issuer and other factors. These risks could affect the value of investments in which the Fund invests, possibly causing the Fund’s NAV to be reduced and fluctuate more than other types of investments. During periods of
falling interest rates, an issuer of a callable bond may repay the security before its stated maturity, and the Fund may have to reinvest the proceeds in securities with lower yields, which would result in a decline in the Fund’s income, or in
securities with greater risks or with other less favorable features. Changing interest rates, including rates that fall below zero, may have unpredictable effects on markets, result in heightened market volatility and detract from the Fund’s
performance to the extent the Fund is exposed to such interest rates. An increase in interest rates will generally cause the value of fixed-income securities held by the Fund to decline, may lead to heightened volatility in the fixed-income
markets and may adversely affect the liquidity of certain fixed-income investments, including those held by the Fund. Risks associated with rising interest rates are heightened given that interest rates in the U.S. are near historic lows.
Adjustable-rate instruments also react to interest rate changes in a similar manner, although generally to a lesser degree (depending, however, on the characteristics of the reset terms, including the index chosen, frequency of reset and reset
caps or floors, among other factors). Interest rate sensitivity is generally more pronounced and less predictable in instruments with uncertain payment or prepayment schedules and also for those with longer maturities.
Foreign Securities and Credit Exposure Risk. U.S. dollar-denominated securities carrying foreign credit exposure
may be affected by unfavorable political, economic or governmental developments that could affect payments of principal and interest. Furthermore, the value of the Fund’s foreign investments (whether direct or indirect) may be adversely affected by
political and social instability in their home countries, by changes in economic or taxation policies in those countries, or by the difficulty in enforcing obligations in those countries. Foreign companies generally may be subject to less stringent
regulations than U.S. companies, including financial reporting requirements and auditing and accounting controls. As a result, there generally is less publicly available information about foreign companies than about U.S. companies. Trading in many
foreign securities may be less liquid and more volatile than U.S. securities due to the size of the market or other factors.
U.S. Government Securities Risk. U.S. Government securities are subject to interest rate risk but generally do
not involve the credit risks associated with investments in other types of debt securities. As a result, the yields available from U.S. Government securities are generally lower than the yields available from other debt securities. U.S. Government
securities are guaranteed only as to the timely payment of interest and the payment of principal when held to maturity. While securities issued or guaranteed by U.S. federal government agencies are backed by the full faith and credit of the U.S.
Department of the Treasury, securities issued by government sponsored entities are solely the obligation of the issuer and generally do not carry any guarantee from the U.S. Government.
ABS Risk. ABS are subject to the general debt securities risks described above. In addition, ABS may be less
liquid than other bonds, and may be more sensitive than other bonds to the market’s perception of issuers and creditworthiness of payees, which may result in the Fund experiencing difficulty selling or valuing these securities. ABS markets have
experienced extraordinary weakness and volatility at various times in recent years, and may decline quickly in the event of a substantial economic or market downturn. Accordingly, these securities may be subject to greater risk of default during
periods of economic downturn than other securities, which could result in possible losses to the Fund.
Issuer Risk. The performance of the Fund depends on the performance of individual securities to which the Fund
has exposure. The Fund may be adversely affected if an issuer of underlying securities held by the Fund is unable or
198
unwilling to repay principal or interest when due. Changes in the financial condition or credit rating of an issuer of those securities may cause the
value of the securities to decline.
Management Risk. The Fund is subject to management risk because it is an actively managed portfolio. Milliman
will apply investment techniques and risk analyses in making investment decisions for the Fund, but there can be no guarantee that the Fund will meet its investment objective and/or the Outcomes. In addition, Milliman does not use defensive
strategies or attempt to reduce the Fund’s exposures to poor performing positions during an Outcome Period. This differs from funds that are managed to seek to outperform a benchmark index. Therefore, in the event of a general market decline, the
Fund’s value may fall more than the value of another fund that does attempt to hedge against such market declines.
Market Risk. The Fund could lose money over short periods due to short-term market movements and over longer
periods during more prolonged market downturns. Assets may decline in value due to factors affecting financial markets generally or particular asset classes or industries represented in the markets. The value of a FLEX Option or other asset may
also decline due to general market conditions, economic trends or events that are not specifically related to the issuer of the security or other asset, or due to factors that affect a particular issuer, country, region, market, industry, sector or
asset class.
Non-Diversification Risk. The Fund may invest a relatively high percentage of its assets in a limited number of
issuers. As a result, the Fund may be more susceptible to a single adverse economic or regulatory occurrence affecting one or more of these issuers, experience increased volatility and be highly invested in certain issuers.
Large Shareholder Risk. At times, the Fund may experience adverse effects when certain large shareholders,
including insurance company separate accounts, redeem large amounts of shares of the Fund. Large redemptions may cause the Fund to sell portfolio holdings at times when it would not otherwise do so and may increase transaction costs and/or result
in an increase to the Fund’s expense ratio. A large redemption could be detrimental to the Fund and its remaining shareholders.
Risks of Investing in ETFs. In addition to the risks associated with the underlying assets held by the ETFs in
which the Fund invests, investments in ETFs are also subject to the following additional risks: (i) only authorized participants may engage in transactions directly with ETFs but none are obligated to do so, which could result in an ETF’s shares
trading at a premium or discount to its NAV or possibly face trading halts or delisting; (ii) certain ETFs seek to track the performance of an underlying index and will not attempt to take defensive positions under any market conditions, including
declining markets, which could result in losses; and (iii) because ETF shares trade on the secondary market, there is not guarantee that an active market will be developed or maintained, which could result in the ETF’s shares trading at a premium
or discount to its NAV. Investments in ETFs may involve duplication of management fees and certain other expenses, as the Fund indirectly bears its proportionate share of any expenses paid by the ETFs in which it invests.
Risks of Investing in Money Market Funds. Money market funds seek to preserve the value of
shareholder investments at $1.00 per share, but shareholders, such as the Fund, may still lose money by investing in such funds. In addition, a money market fund may impose a fee upon the sale of its shares or may temporarily suspend the ability to
sell shares if the fund’s liquidity falls below required minimums because of market conditions or other factors. The credit quality of a money market fund’s holdings can change rapidly in certain markets, and the default of a single holding could
have an adverse impact on the fund’s share price. A money market fund’s share price can also be negatively affected during periods of high redemption pressures, illiquid markets, and/or significant market volatility.
Performance
As of the date of this Prospectus, the Fund has not commenced operations and therefore does not have a performance history. Once available, the Fund’s
performance information will be accessible online at www.[________].com and will provide some indication of the risks of investing in the Fund.
Management
199
Investment Adviser
Milliman Financial Risk Management LLC (“Milliman”) serves as investment adviser to the Fund.
Portfolio Managers
The following persons serve as portfolio managers of the Fund.
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●
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Robert T. Cummings, Principal & Head of Portfolio Management at Milliman.
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Maria Schiopu, Principal & Head of Portfolio Management at Milliman.
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●
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Jeff Greco, Principal & Head of Strategy Research at Milliman.
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●
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Jordan Rosenfeld, Portfolio Manager at Milliman.
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Each portfolio manager is jointly and primarily responsible for the day-to-day management of the Fund’s portfolio and has served in such capacity since
the Fund’s inception in 2021.
Purchase and Sale of Shares
Shares are available as underlying investment options for variable insurance contracts and variable life insurance policies (each, a “variable contract,” and, collectively, the “variable contracts”) issued by insurance companies. These insurance companies are the record owners of the separate accounts
holding the Shares. You do not buy, sell or exchange Shares directly; rather, you choose investment options through your variable contracts. The insurance companies then cause the separate accounts to purchase and redeem Shares according to
the investment options you choose.
Tax Information
The dividends and distributions paid by the Fund to the insurance company separate accounts will consist of ordinary income, capital gains, or some
combination of both. Because Shares must be purchased through separate accounts used to fund variable contracts, such dividends and distributions will be exempt from current taxation by owners of variable contracts (each, a “contract owner,” and, collectively “contract owners”) if left to accumulate within a separate account. Consult the variable contract prospectus for additional tax
information.
Payments to Insurance Companies and Other Financial Intermediaries
If you allocate contract value to the Fund through an insurance company or other financial intermediary, the Fund, Milliman, the Fund’s distributor or
their related companies may pay the insurance company and/or its affiliates or other intermediary for the sale of Shares and related services. These payments may create a conflict of interest by influencing the insurance company or other
intermediary and your salesperson to recommend an indirect investment in the Fund over another investment. The prospectus or other disclosure documents for the variable contracts may contain additional information about these payments, if any.
You may also ask your salesperson or financial intermediary, or visit your financial intermediary’s website, for more information.
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Fund Summary: Milliman S&P 500 1-Year Floor with Par Up Fund – Sep
Investment Objective
The Fund seeks to provide exposure to the S&P 500 Index, while limiting losses associated with S&P 500 Index performance to 10% and
participating in S&P 500 Index gains at a declared rate, prior to taking into account any fees or expenses or the performance of any fixed income exposure included in the Fund’s portfolio, over the period from September 1, 2021 through August
31, 2022.
Fees and Expenses of the Fund
This table describes the fees and expenses that you may pay if you buy, hold and sell shares of the Fund (“Shares”).
This table and the example below do not include any fees or sales charges imposed by your variable product. If they were included, the expenses listed below would be higher.
Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment)
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Class 3
|
|
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Management Fees
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0.49%
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Distribution and Service (12b-1) Fees
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0.25%
|
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Other Expenses(1)
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0.50%
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Acquired Fund Fees and Expenses(1)
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[_.__]%
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Total Annual Fund Operating Expenses
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1.24%
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Fee Waiver and/or Expense Reimbursement(2)(3)
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(0.25)%
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Total Annual Fund Operating Expenses After Fee Waiver and/or Expense Reimbursement
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0.99%
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(1)
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“Other Expenses” and “Acquired Fund Fees and Expenses” are based on estimated amounts for the current fiscal year.
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(2)
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The Fund’s investment adviser, Milliman Financial Risk Management LLC (“Milliman”), has contractually
agreed to waive advisory fees and/or reimburse expenses to the extent necessary to limit the Fund’s total annual Fund operating expenses (excluding taxes, interest, brokerage fees and commissions, Rule 12b-1 fees, acquired fund fees and
expenses, short-sale dividend expenses, administrative services fees, other expenses that are capitalized in accordance with generally accepted accounting principles, and extraordinary or non-routine expenses not incurred in the
ordinary course of the Fund’s business) to 0.74% of the Fund's average daily net assets (the “Expense Limitation Agreement”) until at least November 1, 2022. During its term, the Expense
Limitation Agreement cannot be terminated or amended to increase the applicable limit without approval of the Board of Trustees of the Trust (the “Board”). Milliman may recoup from the Fund any
advisory fees waived or expenses reimbursed pursuant to the Expense Limitation Agreement for a period of three years from the date on which such waiver or reimbursement occurred; provided, however, that such recoupment shall not be made
if it would cause the Fund’s total annual Fund operating expenses to exceed the lesser of (a) the expense limitation in effect at the time of the reimbursement, or (b) the expense limitation in effect at the time of recoupment, if any.
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(3)
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In addition to the Expense Limitation Agreement, Milliman has contractually agreed to waive its advisory fees in an amount equal to the Fund’s
acquired fund fees and expenses until at least November 1, 2022 (the “Fee Waiver”). This contract cannot be terminated or modified without the consent of the Board.
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Example
This example is intended to help you compare the cost of investing in the Fund with the cost of investing in other funds. This example assumes that you
invest $10,000 in the Fund for the time periods indicated and then sell all of your Shares at the end of those periods. This example also assumes that your investment has a 5% return each year and that the Fund’s operating expenses remain at
current levels and that the Expense Limitation Agreement and Fee Waiver remain in place for their contractual periods. Although your actual costs may be higher or lower, your costs, based on these assumptions, would be:
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1 Year
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3 Years
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Class 3
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$104
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$384
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This example does not include any fees or sales charges imposed by your variable product. If they were included, the expenses listed above would be
higher.
201
Portfolio Turnover
The Fund pays transaction costs, such as commissions, when it purchases and sells securities (or “turns over” its portfolio). A higher portfolio turnover
will cause the Fund to incur additional transaction costs. These costs, which are not reflected in Total Annual Fund Operating Expenses or in the example, may affect the Fund’s performance. Because the Fund has not yet commenced investment
operations, no portfolio turnover information is available at this time.
Principal Investment Strategies
The Fund seeks to achieve its investment objective by transacting in FLexible EXchange® Options (“FLEX Options”)
and by separately maintaining a collateral portfolio (the “Collateral Portfolio”), which is designed primarily to serve as margin or collateral for the Fund’s FLEX Options positions and secondarily to
enhance the Fund’s upside S&P 500 Index FLEX Options’ exposure (i.e., by utilizing anticipated income to measure the ability to purchase additional FLEX Options). FLEX Options are exchange-traded
options contracts with uniquely customizable terms. In general, an options contract is an agreement between a buyer and seller that gives the purchaser of the option the right to buy or sell a particular asset at a specified future date at an
agreed upon price, commonly known as the “strike price.” The reference assets for the Fund’s FLEX Options positions will include the S&P 500 Index, which is a large-capitalization, market-weighted, U.S.
equities index that tracks the price (excluding dividends) of 500 leading companies in leading industries of the U.S. economy, and certain exchange-traded funds (“ETFs”), as described further below.
The Collateral Portfolio may be invested in short-term fixed-income securities, including corporate bonds and other corporate debt securities,
asset-backed securities (“ABS”), securities issued by the U.S. Government or its agencies and instrumentalities, securities issued by non-U.S. governments or their agencies and instrumentalities, money
market securities and funds, other interest-bearing instruments, cash, ETFs that primarily invest in any of the foregoing instruments, options on ETFs and options box spreads. An options box spread is the combination of different options trades
that have offsetting spreads (e.g., purchases and sales on the same underlying instrument, such as an index or an ETF, but with different strike prices and/or expiration dates) for the purpose of
generating income. The Fund may invest in short-term fixed income securities or other instruments, including through ETFs, of any maturity and credit quality. The Fund will generally invest up to 35% of its net assets in one or more ETFs that
provide exposure to investment grade corporate bonds.
Due to the unique mechanics of the Fund’s strategy, the return an investor can expect to receive from an investment in the Fund has characteristics that
are distinct from the returns of many other investment vehicles. It is important that an investor understand these characteristics before making an investment in the Fund.
In seeking to achieve its investment objective, the Fund seeks to produce pre-determined outcomes (the “Outcomes”)
that are based upon the performance of the S&P 500 Index over a one-year period (the “Outcome Period”). The initial Outcome Period for the Fund is September 1, 2021 through August 31, 2022. Following
the initial Outcome Period, each subsequent Outcome Period will be a one-year period commencing upon the expiration of the prior Outcome Period. The Fund seeks to achieve the Outcomes by purchasing and writing (selling) FLEX Options to create
layers within the Fund’s portfolio. One layer is designed to produce returns that correlate to those of the S&P 500 Index for the Outcome Period at a declared rate (the “Par Up Rate”) if the S&P
500 Index experiences gains during that time, as described below. A separate layer is designed to produce returns that correlate to those of the S&P 500 Index for the Outcome Period that limit losses to
10% if the S&P 500 Index experiences losses during that time (the “Floor”). There is no guarantee that the Fund will be successful in its attempt to produce returns
that correlate to those of the S&P 500 Index at the Par Up Rate or limit losses to the amount of the Floor.
Milliman Financial Risk Management, LLC (“Milliman”), the investment adviser of the Fund, seeks to establish the
Floor by purchasing one put FLEX Option on the S&P 500 Index with a strike price that is 10% lower than the value of the S&P 500 Index at the beginning of the Outcome Period.
Milliman seeks to establish the Par Up Rate by purchasing long call FLEX Options on the S&P 500 Index with a strike price approximately equal to
the value of the S&P 500 Index at the beginning of the Outcome Period.
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Milliman purchases these FLEX Options with a portion of the Fund’s net assets plus (i) the cash received by utilizing FLEX Options to create a put
spread (the “Put Spread Strategy”) on fixed income securities and/or one or more ETFs that provide exposure to fixed income securities, and (ii) yield received from the Collateral Portfolio. Milliman seeks
to achieve the Put Spread Strategy for the Fund by writing a put FLEX Option on an underlying asset at a strike price at or lower than the underlying asset’s market price or current value at the beginning of the Outcome Period, and buying a put
FLEX Option on the same underlying asset at a lower strike price than the written put FLEX Option.
The Par Up Rate is the rate at which the Fund will seek to track any upside market performance of the S&P 500 Index. Milliman calculates the Par
Up Rate based upon (i) its evaluation of prevailing market conditions on the first day of the Outcome Period and (ii) the total number of long call FLEX Options on the S&P 500 Index that it is able to purchase at that time. As of the date of
this Prospectus, and assuming current market conditions persist, Milliman expects that the Par Up Rate will be between the below ranges (both gross and net of Fund fees and expenses). Any fees or expenses imposed by your variable product, and any
other expenses incurred by the Fund, will have the effect of further reducing the Par Up Rate. Once calculated, the Par Up Rate for a particular Outcome Period will not change during that Outcome Period;
however, in certain market conditions, the performance of the Collateral Portfolio and the Put Spread Strategy could reduce the impact of the Par Up Rate.
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Share Class
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Estimated Par Up Rate Ranges
(As of [___])
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|
|
Prior to Taking into Account Fund Fees and Expenses
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After Taking into Account Fund Fees and Expenses
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|
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Class 3
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[__]% and [__]%
|
[__]% and [__]%
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The Floor is only triggered if losses in the Fund’s S&P 500 Index exposure exceed 10% for the Outcome Period. If the S&P 500 Index decreases
in value by more than 10% during the Outcome Period, the Fund (and therefore investors in Shares) will not experience subsequent losses in the Fund’s S&P 500 Index exposure. However, the Fund (and therefore investors in Shares) will
experience the first 10% of losses in the Fund’s S&P 500 Index exposure on a one-to-one basis for the Outcome Period. The Fund seeks to limit losses against its S&P 500 Index exposure prior to taking into account any fees or expenses or
the performance of the Collateral Portfolio or the Put Spread Strategy. The Floor is not operative against losses in the Collateral Portfolio or the Put Spread Strategy. If the Collateral Portfolio and/or the
Put Spread Strategy experiences losses, it could have the effect of reducing the impact of, or completely eliminating, the Floor on the Fund’s S&P 500 Index exposure. In certain market conditions, the performance of the Collateral
Portfolio and/or the Put Spread Strategy could cause the Fund to significantly underperform the S&P 500 Index. The following table reflects the Floor both gross and net of Fund fees and expenses:
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Share Class
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Floor
(As of [___])
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|
|
Prior to Taking into Account Fund Fees and Expenses
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After Taking into Account Fund Fees and Expenses
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|
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Class 3
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10%
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[__]%
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The definitive Par Up Rate and Floor will be set forth on the Fund’s website. The Fund’s website will also provide information relating to the
Outcomes on a daily basis, including the Fund’s position relative to the Par Up Rate and the Floor. You may also contact your insurance company or other financial intermediary for more information.
Additionally, the Fund’s net asset value (“NAV”) will not increase or decrease at the same rate as the
S&P 500 Index because the Fund’s strategy relies upon the performance of the Collateral Portfolio and the Put Spread Strategy, in addition to the value of the Fund’s FLEX Options positions on the S&P 500 Index. While Milliman anticipates
that the Fund’s NAV will generally move in the same direction as the S&P 500 Index (meaning that the Fund’s NAV will generally increase if the S&P 500 Index experiences gains or decrease if the S&P 500 Index experiences losses,
subject to the Floor), the Fund’s NAV may not decrease at the same rate as the S&P 500 Index (especially when factoring in the performance of the Collateral Portfolio and the Put Spread Strategy) and will not increase at the same rate as the
S&P 500 Index (especially when factoring in the Par Up Rate and the performance of the Collateral
203
Portfolio and the Put Spread Strategy). Similarly, the amount of time remaining until the end of the Outcome Period also affects the impact of the Floor
on the Fund’s NAV, because the Floor may not be in full effect prior to the end of the Outcome Period.
The FLEX Options utilized in the Fund’s portfolio are each set to expire on the last day of the Outcome Period. The customizable nature of FLEX Options
will allow Milliman to select the strike price at which each FLEX Option will be exercised at the expiration of the FLEX Option term. At the commencement of the Outcome Period, Milliman will specifically select the strike price for each FLEX Option
in a manner designed to achieve the Outcomes when the FLEX Options are exercised on the final day of the Outcome Period, depending on the anticipated performance of the S&P 500 Index, the Collateral Portfolio and the Put Spread Strategy over
the duration of that Outcome Period.
The hypothetical graphical illustrations provided below are designed to illustrate the Outcomes based upon the
hypothetical performance of the S&P 500 Index for an investor who holds Shares for the entirety of the Outcome Period. The hypothetical graphical illustrations do not include any fees or expenses
imposed by your variable product or expenses incurred by the Fund, and do not reflect the performance of the Collateral Portfolio or the Put Spread Strategy. Additional hypothetical graphical representations of the Outcomes are provided in
“Additional Information About the Funds and the Risks of Investing.” There is no guarantee that the Fund will be successful in its attempt to achieve the Outcomes for the Outcome Period.
The following table contains hypothetical examples designed to illustrate the Outcomes the Fund seeks to
achieve over the Outcome Period, based upon the performance of the S&P 500 Index from (100)% to 100% after taking into account the Par Up Rate and the Floor, but prior to taking into account any fees or expenses or the performance of the
Collateral Portfolio or the Put Spread Strategy. The table is provided for illustrative purposes only and does not provide every possible performance scenario for Shares over the course of the Outcome Period. There is no guarantee that the Fund will be successful in its attempt to achieve the Outcomes for an Outcome
Period. The table is not intended to predict or project the performance of the FLEX Options or the Fund. Investors should not take this information as an assurance of the expected performance of the
S&P 500 Index or the Fund. Actual Fund performance will vary with fluctuations in the performance of the Collateral Portfolio and the Put Spread Strategy, in addition to the value of the Fund’s FLEX Options positions on the S&P
500 Index, during the Outcome Period, among other factors. The performance of the Collateral Portfolio and the Put Spread
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Strategy could significantly impact the performance of the Fund, which could prevent the Fund from achieving the
Outcomes that it seeks to produce. The table does not reflect any fees or expenses imposed by your variable product or expenses incurred by the Fund. If it did, the returns shown for the Fund would
be lower. Please refer to the Fund’s website, which provides updated information relating to this table on a daily basis throughout the Outcome Period. Please contact your insurance company or other financial intermediary for more information.
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Index/Fund
|
Hypothetical Performance1
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|||||||||||
|
S&P 500 Index Price Performance
|
(100)%
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(50)%
|
(20)%
|
(10)%
|
(5)%
|
0%
|
5%
|
10%
|
15%
|
20%
|
50%
|
100%
|
|
Fund Performance at NAV
|
(10)%2
|
(10)%2
|
(10)%2
|
(10)%
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(5)%
|
0%
|
3%3
|
6%3
|
9%3
|
12%3
|
33.5%3
|
60%3
|
| 1 |
Does not take into account any fees or expenses or the performance of the Collateral Portfolio or the Put Spread Strategy.
|
| 2 |
Reflects the impact of the Floor.
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| 3 |
Reflects the impact of an assumed Par Up Rate of 60%.
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Understanding Outcomes. The Outcomes the Fund seeks to achieve are measured based upon the
Fund’s NAV on the first day of the Outcome Period. The Outcome Period begins on the day Milliman transacts in the FLEX Options on behalf of the Fund, and ends on the day those FLEX Options expire. An investor who
purchases Shares after the commencement of the Outcome Period will likely have purchased Shares at a different NAV than the NAV on the first day of the Outcome Period (the NAV upon which the Outcomes are based) and may experience investment
outcomes very different from those the Fund seeks to achieve, especially when factoring in any fees or expenses or the performance of the Collateral Portfolio and the
Put Spread Strategy. An investor who redeems Shares prior to the end of the Outcome Period may also experience investment outcomes very different from those the Fund seeks to achieve. The Outcomes are designed with the expectation that an
investor will hold Shares on the day that Milliman transacts in the FLEX Options on behalf of the Fund, and on the day those FLEX Options expire. There is no guarantee that the Fund will be successful
in its attempt to achieve the Outcomes.
Understanding the Par Up Rate.
Unlike other investment products, the potential returns an investor can receive from an investment in the Fund are subject to the Par Up Rate. This means that if the S&P 500 Index experiences gains for the
Outcome Period, an investor in the Fund will only experience a percentage of those gains (equal to the Par Up Rate multiplied by the S&P 500 Index gains). Milliman calculates the Par Up Rate for each Outcome Period based upon (i)
its evaluation of prevailing market conditions on the first day of the Outcome Period and (ii) the total number of long call FLEX Options on the S&P 500 Index that it is able to purchase at that time. In
certain market conditions, the performance of the Collateral Portfolio and the Put Spread Strategy could reduce the impact of the Par Up Rate. An investor should consider the amount and impact of the Par Up Rate, and the Fund’s position
relative to it, before investing in the Fund.
Understanding the Floor. The Floor that the Fund seeks to provide is only triggered if
losses in the Fund’s S&P 500 Index exposure exceed 10% for the Outcome Period. If an investor is considering purchasing Shares during the Outcome Period, and the Fund’s NAV has increased in value, then that
investor will be subject to additional losses before implementation of the Floor that the Fund seeks to provide. While the Fund seeks to produce returns that correlate to those of the S&P 500 Index for the Outcome Period that are
limited to 10% (prior to taking into account any fees or expenses or the performance of the Collateral Portfolio or the Put Spread Strategy) for investors who hold Shares for the entire Outcome Period, there is no guarantee it will successfully
do so. In addition, the Floor is not operative against losses in the Collateral Portfolio or the Put Spread Strategy. If the Collateral Portfolio and/or the Put Spread Strategy experiences losses, it could
have the effect of reducing the impact of, or completely eliminating, the Floor on the Fund’s S&P 500 Index exposure. In certain market conditions, the performance of the Collateral Portfolio and/or the Put Spread Strategy could cause the
Fund to significantly underperform the S&P 500 Index. Investors who purchase Shares at the beginning of the Outcome Period may lose their entire investment. Investors who purchase Shares after the Outcome Period has begun may also lose
their entire investment. An investment in the Fund is only appropriate for investors willing to bear those losses.
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Fund Rebalance. Milliman implements the Fund’s strategy on an annual basis, seeking to
produce the Outcomes for an Outcome Period. On the last business day of any stated Outcome Period, all of the Fund’s existing FLEX Options, which includes those used to establish the Floor, the Par Up Rate and
the Put Spread Strategy, will expire and Milliman will transact in a new set of FLEX Options on the same business day, which will commence a new Outcome Period beginning the following business day. At that
same time, Milliman will also evaluate whether to make any adjustments to the Collateral Portfolio. Accordingly, Shares can be held indefinitely if investors determine to participate in additional Outcome Periods.
Approximately one week prior to the end of each Outcome Period, the Fund will file a prospectus supplement, which will notify existing investors of (i)
the date on which the existing Outcome Period will end; (ii) the date on which the new Outcome Period will commence; and (iii) the anticipated ranges of the Par Up Rate that will be used for the new Outcome Period. Immediately preceding the
commencement date of the new Outcome Period, the Fund will file a prospectus supplement disclosing the Fund’s final Par Up Rate (both gross and net of Fund fees and expenses) for the new Outcome Period. This information will also be available
online at www.[___________].com, and on your insurance company’s website. Please contact your insurance company or other financial intermediary for more information.
Fund Classification. The Fund is classified as “non-diversified” under the Investment
Company Act of 1940, as amended (the “1940 Act”).
Principal Risks
You could lose money by investing in the Fund. An investment in the Fund is not a deposit of a bank and is not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other governmental agency. There can be no assurance that the Fund’s investment objectives will be achieved.
Downside Loss Floor Risk. There can be no guarantee that the Fund will be successful in its strategy to limit
losses in the Fund’s S&P 500 Index exposure to a specified floor if the S&P 500 Index decreases in value over the Outcome Period. The Fund’s strategy is designed to produce returns that correlate to those of the S&P 500 Index at the
Par Up Rate, while limiting downside losses in the Fund’s S&P 500 Index exposure, if Shares are bought on the day on which Milliman transacts in the FLEX Options on behalf of the Fund and held until those FLEX Options expire at the end of
each Outcome Period. The success of the Floor also depends upon the performance of the Collateral Portfolio and the Put Spread Strategy. If the Collateral Portfolio and/or the Put Spread Strategy experiences
losses, it could have the effect of reducing the impact of, or completely eliminating, the Floor on the Fund’s S&P 500 Index exposure. In certain market conditions, the performance of the Collateral Portfolio and/or the Put Spread
Strategy could cause the Fund to significantly underperform the S&P 500 Index. Despite the intended Floor, an investor could lose their entire investment. In the event an investor purchases Shares after the date on which
Milliman transacted in the FLEX Options on behalf of the Fund, or redeems Shares prior to the expiration of those FLEX Options, the Floor that the Fund seeks to provide may not be available or fully applicable.
Risk of the Par Up Rate on Upside Returns. The Fund’s strategy is designed to produce returns that correlate
to those of the S&P 500 Index at the Par Up Rate if Shares are bought on the day on which Milliman transacts in the FLEX Options on behalf of the Fund and held until those FLEX Options expire at the end of the Outcome Period. Accordingly, the
Fund will not fully participate in any gains achieved by the S&P 500 Index. In addition, in the event an investor purchases Shares after the date on which Milliman transacted in the FLEX Options on behalf of the Fund, or redeems Shares prior
to the expiration of those FLEX Options, the returns realized by that investor may not match those that the Fund seeks to achieve pursuant to the Par Up Rate. In certain market conditions, the performance of
the Collateral Portfolio and the Put Spread Strategy could reduce the impact of the Par Up Rate. An investor should consider the amount and impact of the Par Up Rate, and the Fund’s position relative to it, before investing in the Fund.
Par Up Rate Change Risk. Because the Par Up Rate for each Outcome Period is calculated based upon (i)
Milliman’s evaluation of prevailing market conditions on the first day of the Outcome Period and (ii) the total number of long call FLEX Options on the S&P 500 Index that Milliman is able to purchase at that time, the Par Up
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Rate may rise or fall from one Outcome Period to the next. Any change in the Par Up Rate could be significant and it is unlikely to remain the same
for consecutive Outcome Periods.
FLEX Options Risk. The Fund will transact in FLEX Options issued and guaranteed for settlement by the OCC. The
Fund bears the risk that the OCC will be unable or unwilling to perform its obligations under the FLEX Options contracts, which could result in significant losses to the Fund. In less liquid markets, terminating a FLEX Option may require the
payment of a premium or acceptance of a discounted price, and may take longer to complete. In addition, a less liquid trading market may adversely impact the value of the Fund’s FLEX Options and therefore the NAV of the Fund. In addition, the value
of the Fund’s FLEX Options positions is not anticipated to increase or decrease at the same rate as the reference asset; and while it is anticipated that they will generally move in the same direction, it is possible that they may move in different
directions. Certain FLEX Options positions may also expire worthless. The use of FLEX Options involves leverage, which can cause the Fund’s portfolio to be more volatile than if the portfolio had not been leveraged. Leverage can significantly
magnify the effect of price movements of the reference asset, disproportionately increasing the Fund’s losses and reducing the Fund’s opportunities for gains when the reference asset changes in unexpected ways. In some instances, such leverage
could result in losses that exceed the original amount invested.
Investment Objective and Outcomes Risk. There is no guarantee that the Fund will be successful in its attempt
to achieve its investment objective and/or the Outcomes, and an investor could lose some or all of their investment in the Fund. Certain circumstances under which the Fund might not achieve its objective and/or the Outcomes include, but are not
limited to (i) if the Fund disposes of FLEX Options, (ii) if the Fund is unable to maintain the proportional relationship based on the number of FLEX Options in the Fund’s portfolio, (iii) significant accrual of Fund expenses in connection with
effecting the Fund’s principal investment strategy, (iv) losses incurred by the Fund’s holdings in the Collateral Portfolio and/or losses resulting from the Put Spread Strategy, or (iv) adverse tax law changes affecting the treatment of FLEX
Options.
Tax Risk. The Fund intends to elect, and to qualify each year, to be treated as a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”). As a RIC, the Fund will not be subject to U.S. federal income tax on the portion
of its net investment income and net capital gain that it distributes to shareholders, provided that it satisfies certain requirements of the Code. To maintain its status as a RIC, the Fund must meet certain income, diversification and
distributions tests. For purposes of the diversification test, the identification of the issuer (or, in some cases, issuers) of a particular Fund investment can depend on the terms and conditions of that investment. In particular, there is no
published IRS guidance or case law on how to determine the “issuer” of certain derivatives that the Fund will enter into and the Fund has not received a private letter ruling on this point. Therefore, there is a risk that the Fund will not meet the
Code’s diversification requirements and will not qualify, or will be disqualified, as a RIC. If the Fund does not qualify as a RIC for any taxable year and certain relief provisions are not available, the Fund’s taxable income will be subject to
tax at the Fund level and to a further tax at the shareholder level when such income is distributed.
The Fund also intends to comply with the diversification requirements of Section 817(h) of the Code, and the regulations thereunder, relating to the
tax-deferred status of variable accounts that are based on insurance company separate accounts (referred to as “segregated asset accounts” for federal income tax purposes). These diversification requirements apply in addition to the RIC
diversification requirements discussed above. There also is no published guidance or case law on how to determine the “issuer” of the derivatives referred to above for purposes of the diversification requirements of Section 817(h) of the Code and
the Fund has not received a private letter ruling on this point. If these requirements are not met, or under other circumstances, such as if the Fund does not qualify as a RIC for any taxable year, it is possible that the contract owners (rather
than the insurance company) will be treated for federal income tax purposes as the taxable owners of the assets held by the segregated asset accounts.
Clearing Member Default Risk. The Fund will hold FLEX Options through accounts at members of clearing houses (“clearing members”) rather than a bank or a broker. Assets deposited by the Fund with any clearing member as margin for its FLEX Options positions may, in certain circumstances, be used to satisfy losses of other
clients of the Fund’s clearing member where such assets may be held in commingled omnibus accounts. In addition, although clearing members guarantee performance of their clients’ obligations to the clearing house, there is a risk that the assets of
the Fund might not be fully protected in the event of the clearing member’s bankruptcy, as the Fund would
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be limited to recovering only a pro rata share of all available funds segregated on behalf of the clearing
member’s customers for the relevant account class.
Debt Securities Risk. The prices of debt securities will be affected by changes in interest rates, the
creditworthiness of the issuer and other factors. These risks could affect the value of investments in which the Fund invests, possibly causing the Fund’s NAV to be reduced and fluctuate more than other types of investments. During periods of
falling interest rates, an issuer of a callable bond may repay the security before its stated maturity, and the Fund may have to reinvest the proceeds in securities with lower yields, which would result in a decline in the Fund’s income, or in
securities with greater risks or with other less favorable features. Changing interest rates, including rates that fall below zero, may have unpredictable effects on markets, result in heightened market volatility and detract from the Fund’s
performance to the extent the Fund is exposed to such interest rates. An increase in interest rates will generally cause the value of fixed-income securities held by the Fund to decline, may lead to heightened volatility in the fixed-income
markets and may adversely affect the liquidity of certain fixed-income investments, including those held by the Fund. Risks associated with rising interest rates are heightened given that interest rates in the U.S. are near historic lows.
Adjustable-rate instruments also react to interest rate changes in a similar manner, although generally to a lesser degree (depending, however, on the characteristics of the reset terms, including the index chosen, frequency of reset and reset
caps or floors, among other factors). Interest rate sensitivity is generally more pronounced and less predictable in instruments with uncertain payment or prepayment schedules and also for those with longer maturities.
Foreign Securities and Credit Exposure Risk. U.S. dollar-denominated securities carrying foreign credit exposure
may be affected by unfavorable political, economic or governmental developments that could affect payments of principal and interest. Furthermore, the value of the Fund’s foreign investments (whether direct or indirect) may be adversely affected by
political and social instability in their home countries, by changes in economic or taxation policies in those countries, or by the difficulty in enforcing obligations in those countries. Foreign companies generally may be subject to less stringent
regulations than U.S. companies, including financial reporting requirements and auditing and accounting controls. As a result, there generally is less publicly available information about foreign companies than about U.S. companies. Trading in many
foreign securities may be less liquid and more volatile than U.S. securities due to the size of the market or other factors.
U.S. Government Securities Risk. U.S. Government securities are subject to interest rate risk but generally do
not involve the credit risks associated with investments in other types of debt securities. As a result, the yields available from U.S. Government securities are generally lower than the yields available from other debt securities. U.S. Government
securities are guaranteed only as to the timely payment of interest and the payment of principal when held to maturity. While securities issued or guaranteed by U.S. federal government agencies are backed by the full faith and credit of the U.S.
Department of the Treasury, securities issued by government sponsored entities are solely the obligation of the issuer and generally do not carry any guarantee from the U.S. Government.
ABS Risk. ABS are subject to the general debt securities risks described above. In addition, ABS may be less
liquid than other bonds, and may be more sensitive than other bonds to the market’s perception of issuers and creditworthiness of payees, which may result in the Fund experiencing difficulty selling or valuing these securities. ABS markets have
experienced extraordinary weakness and volatility at various times in recent years, and may decline quickly in the event of a substantial economic or market downturn. Accordingly, these securities may be subject to greater risk of default during
periods of economic downturn than other securities, which could result in possible losses to the Fund.
Issuer Risk. The performance of the Fund depends on the performance of individual securities to which the Fund
has exposure. The Fund may be adversely affected if an issuer of underlying securities held by the Fund is unable or unwilling to repay principal or interest when due. Changes in the financial condition or credit rating of an issuer of those
securities may cause the value of the securities to decline.
Management Risk. The Fund is subject to management risk because it is an actively managed portfolio. Milliman
will apply investment techniques and risk analyses in making investment decisions for the Fund, but there can be no guarantee that the Fund will meet its investment objective and/or the Outcomes. In addition, Milliman does not use defensive
strategies or attempt to reduce the Fund’s exposures to poor performing positions during an Outcome Period. This differs from funds that are managed to seek to outperform a benchmark index. Therefore, in the event
208
of a general market decline, the Fund’s value may fall more than the value of another fund that does attempt to hedge against such market declines.
Market Risk. The Fund could lose money over short periods due to short-term market movements and over longer
periods during more prolonged market downturns. Assets may decline in value due to factors affecting financial markets generally or particular asset classes or industries represented in the markets. The value of a FLEX Option or other asset may
also decline due to general market conditions, economic trends or events that are not specifically related to the issuer of the security or other asset, or due to factors that affect a particular issuer, country, region, market, industry, sector or
asset class.
Non-Diversification Risk. The Fund may invest a relatively high percentage of its assets in a limited number of
issuers. As a result, the Fund may be more susceptible to a single adverse economic or regulatory occurrence affecting one or more of these issuers, experience increased volatility and be highly invested in certain issuers.
Large Shareholder Risk. At times, the Fund may experience adverse effects when certain large shareholders,
including insurance company separate accounts, redeem large amounts of shares of the Fund. Large redemptions may cause the Fund to sell portfolio holdings at times when it would not otherwise do so and may increase transaction costs and/or result
in an increase to the Fund’s expense ratio. A large redemption could be detrimental to the Fund and its remaining shareholders.
Risks of Investing in ETFs. In addition to the risks associated with the underlying assets held by the ETFs in
which the Fund invests, investments in ETFs are also subject to the following additional risks: (i) only authorized participants may engage in transactions directly with ETFs but none are obligated to do so, which could result in an ETF’s shares
trading at a premium or discount to its NAV or possibly face trading halts or delisting; (ii) certain ETFs seek to track the performance of an underlying index and will not attempt to take defensive positions under any market conditions, including
declining markets, which could result in losses; and (iii) because ETF shares trade on the secondary market, there is not guarantee that an active market will be developed or maintained, which could result in the ETF’s shares trading at a premium
or discount to its NAV. Investments in ETFs may involve duplication of management fees and certain other expenses, as the Fund indirectly bears its proportionate share of any expenses paid by the ETFs in which it invests.
Risks of Investing in Money Market Funds. Money market funds seek to preserve the value of
shareholder investments at $1.00 per share, but shareholders, such as the Fund, may still lose money by investing in such funds. In addition, a money market fund may impose a fee upon the sale of its shares or may temporarily suspend the ability to
sell shares if the fund’s liquidity falls below required minimums because of market conditions or other factors. The credit quality of a money market fund’s holdings can change rapidly in certain markets, and the default of a single holding could
have an adverse impact on the fund’s share price. A money market fund’s share price can also be negatively affected during periods of high redemption pressures, illiquid markets, and/or significant market volatility.
Performance
As of the date of this Prospectus, the Fund has not commenced operations and therefore does not have a performance history. Once available, the Fund’s
performance information will be accessible online at www.[________].com and will provide some indication of the risks of investing in the Fund.
Management
Investment Adviser
Milliman Financial Risk Management LLC (“Milliman”) serves as investment adviser to the Fund.
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Portfolio Managers
The following persons serve as portfolio managers of the Fund.
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Robert T. Cummings, Principal & Head of Portfolio Management at Milliman.
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Maria Schiopu, Principal & Head of Portfolio Management at Milliman.
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Jeff Greco, Principal & Head of Strategy Research at Milliman.
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Jordan Rosenfeld, Portfolio Manager at Milliman.
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Each portfolio manager is jointly and primarily responsible for the day-to-day management of the Fund’s portfolio and has served in such capacity
since the Fund’s inception in 2021.
Purchase and Sale of Shares
Shares are available as underlying investment options for variable insurance contracts and variable life insurance policies (each, a “variable contract,” and, collectively, the “variable contracts”) issued by insurance companies. These insurance companies are the record owners of the separate accounts
holding the Shares. You do not buy, sell or exchange Shares directly; rather, you choose investment options through your variable contracts. The insurance companies then cause the separate accounts to purchase and redeem Shares according to
the investment options you choose.
Tax Information
The dividends and distributions paid by the Fund to the insurance company separate accounts will consist of ordinary income, capital gains, or some
combination of both. Because Shares must be purchased through separate accounts used to fund variable contracts, such dividends and distributions will be exempt from current taxation by owners of variable contracts (each, a “contract owner,” and, collectively “contract owners”) if left to accumulate within a separate account. Consult the variable contract prospectus for additional tax
information.
Payments to Insurance Companies and Other Financial Intermediaries
If you allocate contract value to the Fund through an insurance company or other financial intermediary, the Fund, Milliman, the Fund’s distributor or
their related companies may pay the insurance company and/or its affiliates or other intermediary for the sale of Shares and related services. These payments may create a conflict of interest by influencing the insurance company or other
intermediary and your salesperson to recommend an indirect investment in the Fund over another investment. The prospectus or other disclosure documents for the variable contracts may contain additional information about these payments, if any.
You may also ask your salesperson or financial intermediary, or visit your financial intermediary’s website, for more information.
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Fund Summary: Milliman S&P 500 1-Year Floor with Par Up Fund – Oct
Investment Objective
The Fund seeks to provide exposure to the S&P 500 Index, while limiting losses associated with S&P 500 Index performance to 10% and
participating in S&P 500 Index gains at a declared rate, prior to taking into account any fees or expenses or the performance of any fixed income exposure included in the Fund’s portfolio, over the period from October 1, 2021 through
September 30, 2022.
Fees and Expenses of the Fund
This table describes the fees and expenses that you may pay if you buy, hold and sell shares of the Fund (“Shares”).
This table and the example below do not include any fees or sales charges imposed by your variable product. If they were included, the expenses listed below would be higher.
Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment)
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Class 3
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Management Fees
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0.49%
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Distribution and Service (12b-1) Fees
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0.25%
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Other Expenses(1)
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0.50%
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Acquired Fund Fees and Expenses(1)
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[_.__]%
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Total Annual Fund Operating Expenses
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1.24%
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Fee Waiver and/or Expense Reimbursement(2)(3)
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(0.25)%
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Total Annual Fund Operating Expenses After Fee Waiver and/or Expense Reimbursement
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0.99%
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(1)
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“Other Expenses” and “Acquired Fund Fees and Expenses” are based on estimated amounts for the current fiscal year.
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(2)
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The Fund’s investment adviser, Milliman Financial Risk Management LLC (“Milliman”), has contractually
agreed to waive advisory fees and/or reimburse expenses to the extent necessary to limit the Fund’s total annual Fund operating expenses (excluding taxes, interest, brokerage fees and commissions, Rule 12b-1 fees, acquired fund fees and
expenses, short-sale dividend expenses, administrative services fees, other expenses that are capitalized in accordance with generally accepted accounting principles, and extraordinary or non-routine expenses not incurred in the
ordinary course of the Fund’s business) to 0.74% of the Fund's average daily net assets (the “Expense Limitation Agreement”) until at least November 1, 2022. During its term, the Expense
Limitation Agreement cannot be terminated or amended to increase the applicable limit without approval of the Board of Trustees of the Trust (the “Board”). Milliman may recoup from the Fund any
advisory fees waived or expenses reimbursed pursuant to the Expense Limitation Agreement for a period of three years from the date on which such waiver or reimbursement occurred; provided, however, that such recoupment shall not be made
if it would cause the Fund’s total annual Fund operating expenses to exceed the lesser of (a) the expense limitation in effect at the time of the reimbursement, or (b) the expense limitation in effect at the time of recoupment, if any.
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(3)
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In addition to the Expense Limitation Agreement, Milliman has contractually agreed to waive its advisory fees in an amount equal to the Fund’s
acquired fund fees and expenses until at least November 1, 2022 (the “Fee Waiver”). This contract cannot be terminated or modified without the consent of the Board.
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Example
This example is intended to help you compare the cost of investing in the Fund with the cost of investing in other funds. This example assumes that you
invest $10,000 in the Fund for the time periods indicated and then sell all of your Shares at the end of those periods. This example also assumes that your investment has a 5% return each year and that the Fund’s operating expenses remain at
current levels and that the Expense Limitation Agreement and Fee Waiver remain in place for their contractual periods. Although your actual costs may be higher or lower, your costs, based on these assumptions, would be:
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1 Year
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3 Years
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Class 3
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$104
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$384
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This example does not include any fees or sales charges imposed by your variable product. If they were included, the expenses listed above would be
higher.
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Portfolio Turnover
The Fund pays transaction costs, such as commissions, when it purchases and sells securities (or “turns over” its portfolio). A higher portfolio turnover
will cause the Fund to incur additional transaction costs. These costs, which are not reflected in Total Annual Fund Operating Expenses or in the example, may affect the Fund’s performance. Because the Fund has not yet commenced investment
operations, no portfolio turnover information is available at this time.
Principal Investment Strategies
The Fund seeks to achieve its investment objective by transacting in FLexible EXchange® Options (“FLEX Options”)
and by separately maintaining a collateral portfolio (the “Collateral Portfolio”), which is designed primarily to serve as margin or collateral for the Fund’s FLEX Options positions and secondarily to
enhance the Fund’s upside S&P 500 Index FLEX Options’ exposure (i.e., by utilizing anticipated income to measure the ability to purchase additional FLEX Options). FLEX Options are exchange-traded
options contracts with uniquely customizable terms. In general, an options contract is an agreement between a buyer and seller that gives the purchaser of the option the right to buy or sell a particular asset at a specified future date at an
agreed upon price, commonly known as the “strike price.” The reference assets for the Fund’s FLEX Options positions will include the S&P 500 Index, which is a large-capitalization, market-weighted, U.S.
equities index that tracks the price (excluding dividends) of 500 leading companies in leading industries of the U.S. economy, and certain exchange-traded funds (“ETFs”), as described further below.
The Collateral Portfolio may be invested in short-term fixed-income securities, including corporate bonds and other corporate debt securities,
asset-backed securities (“ABS”), securities issued by the U.S. Government or its agencies and instrumentalities, securities issued by non-U.S. governments or their agencies and instrumentalities, money
market securities and funds, other interest-bearing instruments, cash, ETFs that primarily invest in any of the foregoing instruments, options on ETFs and options box spreads. An options box spread is the combination of different options trades
that have offsetting spreads (e.g., purchases and sales on the same underlying instrument, such as an index or an ETF, but with different strike prices and/or expiration dates) for the purpose of
generating income. The Fund may invest in short-term fixed income securities or other instruments, including through ETFs, of any maturity and credit quality. The Fund will generally invest up to 35% of its net assets in one or more ETFs that
provide exposure to investment grade corporate bonds.
Due to the unique mechanics of the Fund’s strategy, the return an investor can expect to receive from an investment in the Fund has characteristics that
are distinct from the returns of many other investment vehicles. It is important that an investor understand these characteristics before making an investment in the Fund.
In seeking to achieve its investment objective, the Fund seeks to produce pre-determined outcomes (the “Outcomes”)
that are based upon the performance of the S&P 500 Index over a one-year period (the “Outcome Period”). The initial Outcome Period for the Fund is October 1, 2021 through September 30, 2022. Following
the initial Outcome Period, each subsequent Outcome Period will be a one-year period commencing upon the expiration of the prior Outcome Period. The Fund seeks to achieve the Outcomes by purchasing and writing (selling) FLEX Options to create
layers within the Fund’s portfolio. One layer is designed to produce returns that correlate to those of the S&P 500 Index for the Outcome Period at a declared rate (the “Par Up Rate”) if the S&P
500 Index experiences gains during that time, as described below. A separate layer is designed to produce returns that correlate to those of the S&P 500 Index for the Outcome Period that limit losses to
10% if the S&P 500 Index experiences losses during that time (the “Floor”). There is no guarantee that the Fund will be successful in its attempt to produce returns
that correlate to those of the S&P 500 Index at the Par Up Rate or limit losses to the amount of the Floor.
Milliman Financial Risk Management, LLC (“Milliman”), the investment adviser of the Fund, seeks to establish the
Floor by purchasing one put FLEX Option on the S&P 500 Index with a strike price that is 10% lower than the value of the S&P 500 Index at the beginning of the Outcome Period.
Milliman seeks to establish the Par Up Rate by purchasing long call FLEX Options on the S&P 500 Index with a strike price approximately equal to
the value of the S&P 500 Index at the beginning of the Outcome Period.
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Milliman purchases these FLEX Options with a portion of the Fund’s net assets plus (i) the cash received by utilizing FLEX Options to create a put
spread (the “Put Spread Strategy”) on fixed income securities and/or one or more ETFs that provide exposure to fixed income securities, and (ii) yield received from the Collateral Portfolio. Milliman seeks
to achieve the Put Spread Strategy for the Fund by writing a put FLEX Option on an underlying asset at a strike price at or lower than the underlying asset’s market price or current value at the beginning of the Outcome Period, and buying a put
FLEX Option on the same underlying asset at a lower strike price than the written put FLEX Option.
The Par Up Rate is the rate at which the Fund will seek to track any upside market performance of the S&P 500 Index. Milliman calculates the Par
Up Rate based upon (i) its evaluation of prevailing market conditions on the first day of the Outcome Period and (ii) the total number of long call FLEX Options on the S&P 500 Index that it is able to purchase at that time. As of the date of
this Prospectus, and assuming current market conditions persist, Milliman expects that the Par Up Rate will be between the below ranges (both gross and net of Fund fees and expenses). Any fees or expenses imposed by your variable product, and any
other expenses incurred by the Fund, will have the effect of further reducing the Par Up Rate. Once calculated, the Par Up Rate for a particular Outcome Period will not change during that Outcome Period;
however, in certain market conditions, the performance of the Collateral Portfolio and the Put Spread Strategy could reduce the impact of the Par Up Rate.
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Share Class
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Estimated Par Up Rate Ranges
(As of [___])
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Prior to Taking into Account Fund Fees and Expenses
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After Taking into Account Fund Fees and Expenses
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Class 3
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[__]% and [__]%
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[__]% and [__]%
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The Floor is only triggered if losses in the Fund’s S&P 500 Index exposure exceed 10% for the Outcome Period. If the S&P 500 Index decreases
in value by more than 10% during the Outcome Period, the Fund (and therefore investors in Shares) will not experience subsequent losses in the Fund’s S&P 500 Index exposure. However, the Fund (and therefore investors in Shares) will
experience the first 10% of losses in the Fund’s S&P 500 Index exposure on a one-to-one basis for the Outcome Period. The Fund seeks to limit losses against its S&P 500 Index exposure prior to taking into account any fees or expenses or
the performance of the Collateral Portfolio or the Put Spread Strategy. The Floor is not operative against losses in the Collateral Portfolio or the Put Spread Strategy. If the Collateral Portfolio and/or the
Put Spread Strategy experiences losses, it could have the effect of reducing the impact of, or completely eliminating, the Floor on the Fund’s S&P 500 Index exposure. In certain market conditions, the performance of the Collateral
Portfolio and/or the Put Spread Strategy could cause the Fund to significantly underperform the S&P 500 Index. The following table reflects the Floor both gross and net of Fund fees and expenses:
|
Share Class
|
Floor
(As of [___])
|
|
|
Prior to Taking into Account Fund Fees and Expenses
|
After Taking into Account Fund Fees and Expenses
|
|
|
Class 3
|
10%
|
[__]%
|
The definitive Par Up Rate and Floor will be set forth on the Fund’s website. The Fund’s website will also provide information relating to the Outcomes
on a daily basis, including the Fund’s position relative to the Par Up Rate and the Floor. You may also contact your insurance company or other financial intermediary for more information.
Additionally, the Fund’s net asset value (“NAV”) will not increase or decrease at the same rate as the
S&P 500 Index because the Fund’s strategy relies upon the performance of the Collateral Portfolio and the Put Spread Strategy, in addition to the value of the Fund’s FLEX Options positions on the S&P 500 Index. While Milliman anticipates
that the Fund’s NAV will generally move in the same direction as the S&P 500 Index (meaning that the Fund’s NAV will generally increase if the S&P 500 Index experiences gains or decrease if the S&P 500 Index experiences losses,
subject to the Floor), the Fund’s NAV may not decrease at the same rate as the S&P 500 Index (especially when factoring in the performance of the Collateral Portfolio and the Put Spread Strategy) and will not increase at the same rate as the
S&P 500 Index (especially when factoring in the Par Up Rate and the performance of the Collateral
213
Portfolio and the Put Spread Strategy). Similarly, the amount of time remaining until the end of the Outcome Period also affects the impact of the Floor
on the Fund’s NAV, because the Floor may not be in full effect prior to the end of the Outcome Period.
The FLEX Options utilized in the Fund’s portfolio are each set to expire on the last day of the Outcome Period. The customizable nature of FLEX Options
will allow Milliman to select the strike price at which each FLEX Option will be exercised at the expiration of the FLEX Option term. At the commencement of the Outcome Period, Milliman will specifically select the strike price for each FLEX Option
in a manner designed to achieve the Outcomes when the FLEX Options are exercised on the final day of the Outcome Period, depending on the anticipated performance of the S&P 500 Index, the Collateral Portfolio and the Put Spread Strategy over
the duration of that Outcome Period.
The hypothetical graphical illustrations provided below are designed to illustrate the Outcomes based upon the
hypothetical performance of the S&P 500 Index for an investor who holds Shares for the entirety of the Outcome Period. The hypothetical graphical illustrations do not include any fees or expenses
imposed by your variable product or expenses incurred by the Fund, and do not reflect the performance of the Collateral Portfolio or the Put Spread Strategy. Additional hypothetical graphical representations of the Outcomes are provided in
“Additional Information About the Funds and the Risks of Investing.” There is no guarantee that the Fund will be successful in its attempt to achieve the Outcomes for the Outcome Period.
The following table contains hypothetical examples designed to illustrate the Outcomes the Fund seeks to
achieve over the Outcome Period, based upon the performance of the S&P 500 Index from (100)% to 100% after taking into account the Par Up Rate and the Floor, but prior to taking into account any fees or expenses or the performance of the
Collateral Portfolio or the Put Spread Strategy. The table is provided for illustrative purposes only and does not provide every possible performance scenario for Shares over the course of the Outcome Period. There is no guarantee that the Fund will be successful in its attempt to achieve the Outcomes for an Outcome
Period. The table is not intended to predict or project the performance of the FLEX Options or the Fund. Investors should not take this information as an assurance of the expected performance of the
S&P 500 Index or the Fund. Actual Fund performance will vary with fluctuations in the performance of the Collateral Portfolio and the Put Spread Strategy, in addition to the value of the Fund’s FLEX Options positions on the S&P
500 Index, during the Outcome Period, among other factors. The performance of the Collateral Portfolio and the Put Spread
214
Strategy could significantly impact the performance of the Fund, which could prevent the Fund from achieving the
Outcomes that it seeks to produce. The table does not reflect any fees or expenses imposed by your variable product or expenses incurred by the Fund. If it did, the returns shown for the Fund would
be lower. Please refer to the Fund’s website, which provides updated information relating to this table on a daily basis throughout the Outcome Period. Please contact your insurance company or other financial intermediary for more information.
|
Index/Fund
|
Hypothetical Performance1
|
|||||||||||
|
S&P 500 Index Price Performance
|
(100)%
|
(50)%
|
(20)%
|
(10)%
|
(5)%
|
0%
|
5%
|
10%
|
15%
|
20%
|
50%
|
100%
|
|
Fund Performance at NAV
|
(10)%2
|
(10)%2
|
(10)%2
|
(10)%
|
(5)%
|
0%
|
3%3
|
6%3
|
9%3
|
12%3
|
33.5%3
|
60%3
|
| 1 |
Does not take into account any fees or expenses or the performance of the Collateral Portfolio or the Put Spread Strategy.
|
| 2 |
Reflects the impact of the Floor.
|
| 3 |
Reflects the impact of an assumed Par Up Rate of 60%.
|
Understanding Outcomes. The Outcomes the Fund seeks to achieve are measured based upon the
Fund’s NAV on the first day of the Outcome Period. The Outcome Period begins on the day Milliman transacts in the FLEX Options on behalf of the Fund, and ends on the day those FLEX Options expire. An investor who
purchases Shares after the commencement of the Outcome Period will likely have purchased Shares at a different NAV than the NAV on the first day of the Outcome Period (the NAV upon which the Outcomes are based) and may experience investment
outcomes very different from those the Fund seeks to achieve, especially when factoring in any fees or expenses or the performance of the Collateral Portfolio and the
Put Spread Strategy. An investor who redeems Shares prior to the end of the Outcome Period may also experience investment outcomes very different from those the Fund seeks to achieve. The Outcomes are designed with the expectation that an
investor will hold Shares on the day that Milliman transacts in the FLEX Options on behalf of the Fund, and on the day those FLEX Options expire. There is no guarantee that the Fund will be successful
in its attempt to achieve the Outcomes.
Understanding the Par Up Rate. Unlike other investment products, the potential returns an
investor can receive from an investment in the Fund are subject to the Par Up Rate. This means that if the S&P 500 Index experiences gains for the Outcome Period, an investor in the Fund will only experience
a percentage of those gains (equal to the Par Up Rate multiplied by the S&P 500 Index gains). Milliman calculates the Par Up Rate for each Outcome Period based upon (i) its evaluation of prevailing market conditions on the first day
of the Outcome Period and (ii) the total number of long call FLEX Options on the S&P 500 Index that it is able to purchase at that time. In certain market conditions, the performance of the Collateral
Portfolio and the Put Spread Strategy could reduce the impact of the Par Up Rate. An investor should consider the amount and impact of the Par Up Rate, and the Fund’s position relative to it, before investing in the Fund.
Understanding the Floor. The Floor that the Fund seeks to provide is only triggered if
losses in the Fund’s S&P 500 Index exposure exceed 10% for the Outcome Period. If an investor is considering purchasing Shares during the Outcome Period, and the Fund’s NAV has increased in value, then that
investor will be subject to additional losses before implementation of the Floor that the Fund seeks to provide. While the Fund seeks to produce returns that correlate to those of the S&P 500 Index for the Outcome Period that are
limited to 10% (prior to taking into account any fees or expenses or the performance of the Collateral Portfolio or the Put Spread Strategy) for investors who hold Shares for the entire Outcome Period, there is no guarantee it will successfully
do so. In addition, the Floor is not operative against losses in the Collateral Portfolio or the Put Spread Strategy. If the Collateral Portfolio and/or the Put Spread Strategy experiences losses, it could
have the effect of reducing the impact of, or completely eliminating, the Floor on the Fund’s S&P 500 Index exposure. In certain market conditions, the performance of the Collateral Portfolio and/or the Put Spread Strategy could cause the
Fund to significantly underperform the S&P 500 Index. Investors who purchase Shares at the beginning of the Outcome Period may lose their entire investment. Investors who purchase Shares after the Outcome Period has begun may also lose
their entire investment. An investment in the Fund is only appropriate for investors willing to bear those losses.
215
Fund Rebalance. Milliman implements the Fund’s strategy on an annual basis, seeking to
produce the Outcomes for an Outcome Period. On the last business day of any stated Outcome Period, all of the Fund’s existing FLEX Options, which includes those used to establish the Floor, the Par Up Rate
and the Put Spread Strategy, will expire and Milliman will transact in a new set of FLEX Options on the same business day, which will commence a new Outcome Period beginning the following business day. At
that same time, Milliman will also evaluate whether to make any adjustments to the Collateral Portfolio. Accordingly, Shares can be held indefinitely if investors determine to participate in additional Outcome Periods.
Approximately one week prior to the end of each Outcome Period, the Fund will file a prospectus supplement, which will notify existing investors of
(i) the date on which the existing Outcome Period will end; (ii) the date on which the new Outcome Period will commence; and (iii) the anticipated ranges of the Par Up Rate that will be used for the new Outcome Period. Immediately preceding the
commencement date of the new Outcome Period, the Fund will file a prospectus supplement disclosing the Fund’s final Par Up Rate (both gross and net of Fund fees and expenses) for the new Outcome Period. This information will also be available
online at www.[___________].com, and on your insurance company’s website. Please contact your insurance company or other financial intermediary for more information.
Fund Classification. The Fund is classified as “non-diversified” under the Investment
Company Act of 1940, as amended (the “1940 Act”).
Principal Risks
You could lose money by investing in the Fund. An investment in the Fund is not a deposit of a bank and is not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other governmental agency. There can be no assurance that the Fund’s investment objectives will be achieved.
Downside Loss Floor Risk. There can be no guarantee that the Fund will be successful in its strategy to limit
losses in the Fund’s S&P 500 Index exposure to a specified floor if the S&P 500 Index decreases in value over the Outcome Period. The Fund’s strategy is designed to produce returns that correlate to those of the S&P 500 Index at the
Par Up Rate, while limiting downside losses in the Fund’s S&P 500 Index exposure, if Shares are bought on the day on which Milliman transacts in the FLEX Options on behalf of the Fund and held until those FLEX Options expire at the end of
each Outcome Period. The success of the Floor also depends upon the performance of the Collateral Portfolio and the Put Spread Strategy. If the Collateral Portfolio and/or the Put Spread Strategy experiences
losses, it could have the effect of reducing the impact of, or completely eliminating, the Floor on the Fund’s S&P 500 Index exposure. In certain market conditions, the performance of the Collateral Portfolio and/or the Put Spread
Strategy could cause the Fund to significantly underperform the S&P 500 Index. Despite the intended Floor, an investor could lose their entire investment. In the event an investor purchases Shares after the date on which
Milliman transacted in the FLEX Options on behalf of the Fund, or redeems Shares prior to the expiration of those FLEX Options, the Floor that the Fund seeks to provide may not be available or fully applicable.
Risk of the Par Up Rate on Upside Returns. The Fund’s strategy is designed to produce returns that correlate
to those of the S&P 500 Index at the Par Up Rate if Shares are bought on the day on which Milliman transacts in the FLEX Options on behalf of the Fund and held until those FLEX Options expire at the end of the Outcome Period. Accordingly, the
Fund will not fully participate in any gains achieved by the S&P 500 Index. In addition, in the event an investor purchases Shares after the date on which Milliman transacted in the FLEX Options on behalf of the Fund, or redeems Shares prior
to the expiration of those FLEX Options, the returns realized by that investor may not match those that the Fund seeks to achieve pursuant to the Par Up Rate. In certain market conditions, the performance of
the Collateral Portfolio and the Put Spread Strategy could reduce the impact of the Par Up Rate. An investor should consider the amount and impact of the Par Up Rate, and the Fund’s position relative to it, before investing in the Fund.
Par Up Rate Change Risk. Because the Par Up Rate for each Outcome Period is calculated based upon (i)
Milliman’s evaluation of prevailing market conditions on the first day of the Outcome Period and (ii) the total number of long call FLEX Options on the S&P 500 Index that Milliman is able to purchase at that time, the Par Up
216
Rate may rise or fall from one Outcome Period to the next. Any change in the Par Up Rate could be significant and it is unlikely to remain the same
for consecutive Outcome Periods.
FLEX Options Risk. The Fund will transact in FLEX Options issued and guaranteed for settlement by the OCC. The
Fund bears the risk that the OCC will be unable or unwilling to perform its obligations under the FLEX Options contracts, which could result in significant losses to the Fund. In less liquid markets, terminating a FLEX Option may require the
payment of a premium or acceptance of a discounted price, and may take longer to complete. In addition, a less liquid trading market may adversely impact the value of the Fund’s FLEX Options and therefore the NAV of the Fund. In addition, the value
of the Fund’s FLEX Options positions is not anticipated to increase or decrease at the same rate as the reference asset; and while it is anticipated that they will generally move in the same direction, it is possible that they may move in different
directions. Certain FLEX Options positions may also expire worthless. The use of FLEX Options involves leverage, which can cause the Fund’s portfolio to be more volatile than if the portfolio had not been leveraged. Leverage can significantly
magnify the effect of price movements of the reference asset, disproportionately increasing the Fund’s losses and reducing the Fund’s opportunities for gains when the reference asset changes in unexpected ways. In some instances, such leverage
could result in losses that exceed the original amount invested.
Investment Objective and Outcomes Risk. There is no guarantee that the Fund will be successful in its attempt
to achieve its investment objective and/or the Outcomes, and an investor could lose some or all of their investment in the Fund. Certain circumstances under which the Fund might not achieve its objective and/or the Outcomes include, but are not
limited to (i) if the Fund disposes of FLEX Options, (ii) if the Fund is unable to maintain the proportional relationship based on the number of FLEX Options in the Fund’s portfolio, (iii) significant accrual of Fund expenses in connection with
effecting the Fund’s principal investment strategy, (iv) losses incurred by the Fund’s holdings in the Collateral Portfolio and/or losses resulting from the Put Spread Strategy, or (iv) adverse tax law changes affecting the treatment of FLEX
Options.
Tax Risk. The Fund intends to elect, and to qualify each year, to be treated as a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”). As a RIC, the Fund will not be subject to U.S. federal income tax on the portion
of its net investment income and net capital gain that it distributes to shareholders, provided that it satisfies certain requirements of the Code. To maintain its status as a RIC, the Fund must meet certain income, diversification and
distributions tests. For purposes of the diversification test, the identification of the issuer (or, in some cases, issuers) of a particular Fund investment can depend on the terms and conditions of that investment. In particular, there is no
published IRS guidance or case law on how to determine the “issuer” of certain derivatives that the Fund will enter into and the Fund has not received a private letter ruling on this point. Therefore, there is a risk that the Fund will not meet the
Code’s diversification requirements and will not qualify, or will be disqualified, as a RIC. If the Fund does not qualify as a RIC for any taxable year and certain relief provisions are not available, the Fund’s taxable income will be subject to
tax at the Fund level and to a further tax at the shareholder level when such income is distributed.
The Fund also intends to comply with the diversification requirements of Section 817(h) of the Code, and the regulations thereunder, relating to the
tax-deferred status of variable accounts that are based on insurance company separate accounts (referred to as “segregated asset accounts” for federal income tax purposes). These diversification requirements apply in addition to the RIC
diversification requirements discussed above. There also is no published guidance or case law on how to determine the “issuer” of the derivatives referred to above for purposes of the diversification requirements of Section 817(h) of the Code and
the Fund has not received a private letter ruling on this point. If these requirements are not met, or under other circumstances, such as if the Fund does not qualify as a RIC for any taxable year, it is possible that the contract owners (rather
than the insurance company) will be treated for federal income tax purposes as the taxable owners of the assets held by the segregated asset accounts.
Clearing Member Default Risk. The Fund will hold FLEX Options through accounts at members of clearing houses (“clearing members”) rather than a bank or a broker. Assets deposited by the Fund with any clearing member as margin for its FLEX Options positions may, in certain circumstances, be used to satisfy losses of other
clients of the Fund’s clearing member where such assets may be held in commingled omnibus accounts. In addition, although clearing members guarantee performance of their clients’ obligations to the clearing house, there is a risk that the assets of
the Fund might not be fully protected in the event of the clearing member’s bankruptcy, as the Fund would
217
be limited to recovering only a pro rata share of all available funds segregated on behalf of the clearing
member’s customers for the relevant account class.
Debt Securities Risk. The prices of debt securities will be affected by changes in interest rates, the
creditworthiness of the issuer and other factors. These risks could affect the value of investments in which the Fund invests, possibly causing the Fund’s NAV to be reduced and fluctuate more than other types of investments. During periods of
falling interest rates, an issuer of a callable bond may repay the security before its stated maturity, and the Fund may have to reinvest the proceeds in securities with lower yields, which would result in a decline in the Fund’s income, or in
securities with greater risks or with other less favorable features. Changing interest rates, including rates that fall below zero, may have unpredictable effects on markets, result in heightened market volatility and detract from the Fund’s
performance to the extent the Fund is exposed to such interest rates. An increase in interest rates will generally cause the value of fixed-income securities held by the Fund to decline, may lead to heightened volatility in the fixed-income
markets and may adversely affect the liquidity of certain fixed-income investments, including those held by the Fund. Risks associated with rising interest rates are heightened given that interest rates in the U.S. are near historic lows.
Adjustable-rate instruments also react to interest rate changes in a similar manner, although generally to a lesser degree (depending, however, on the characteristics of the reset terms, including the index chosen, frequency of reset and reset
caps or floors, among other factors). Interest rate sensitivity is generally more pronounced and less predictable in instruments with uncertain payment or prepayment schedules and also for those with longer maturities.
Foreign Securities and Credit Exposure Risk. U.S. dollar-denominated securities carrying foreign credit exposure
may be affected by unfavorable political, economic or governmental developments that could affect payments of principal and interest. Furthermore, the value of the Fund’s foreign investments (whether direct or indirect) may be adversely affected by
political and social instability in their home countries, by changes in economic or taxation policies in those countries, or by the difficulty in enforcing obligations in those countries. Foreign companies generally may be subject to less stringent
regulations than U.S. companies, including financial reporting requirements and auditing and accounting controls. As a result, there generally is less publicly available information about foreign companies than about U.S. companies. Trading in many
foreign securities may be less liquid and more volatile than U.S. securities due to the size of the market or other factors.
U.S. Government Securities Risk. U.S. Government securities are subject to interest rate risk but generally do
not involve the credit risks associated with investments in other types of debt securities. As a result, the yields available from U.S. Government securities are generally lower than the yields available from other debt securities. U.S. Government
securities are guaranteed only as to the timely payment of interest and the payment of principal when held to maturity. While securities issued or guaranteed by U.S. federal government agencies are backed by the full faith and credit of the U.S.
Department of the Treasury, securities issued by government sponsored entities are solely the obligation of the issuer and generally do not carry any guarantee from the U.S. Government.
ABS Risk. ABS are subject to the general debt securities risks described above. In addition, ABS may be less
liquid than other bonds, and may be more sensitive than other bonds to the market’s perception of issuers and creditworthiness of payees, which may result in the Fund experiencing difficulty selling or valuing these securities. ABS markets have
experienced extraordinary weakness and volatility at various times in recent years, and may decline quickly in the event of a substantial economic or market downturn. Accordingly, these securities may be subject to greater risk of default during
periods of economic downturn than other securities, which could result in possible losses to the Fund.
Issuer Risk. The performance of the Fund depends on the performance of individual securities to which the Fund
has exposure. The Fund may be adversely affected if an issuer of underlying securities held by the Fund is unable or unwilling to repay principal or interest when due. Changes in the financial condition or credit rating of an issuer of those
securities may cause the value of the securities to decline.
Management Risk. The Fund is subject to management risk because it is an actively managed portfolio. Milliman
will apply investment techniques and risk analyses in making investment decisions for the Fund, but there can be no guarantee that the Fund will meet its investment objective and/or the Outcomes. In addition, Milliman does not use defensive
strategies or attempt to reduce the Fund’s exposures to poor performing positions during an Outcome Period. This differs from funds that are managed to seek to outperform a benchmark index. Therefore, in the event
218
of a general market decline, the Fund’s value may fall more than the value of another fund that does attempt to hedge against such market declines.
Market Risk. The Fund could lose money over short periods due to short-term market movements and over longer
periods during more prolonged market downturns. Assets may decline in value due to factors affecting financial markets generally or particular asset classes or industries represented in the markets. The value of a FLEX Option or other asset may
also decline due to general market conditions, economic trends or events that are not specifically related to the issuer of the security or other asset, or due to factors that affect a particular issuer, country, region, market, industry, sector or
asset class.
Non-Diversification Risk. The Fund may invest a relatively high percentage of its assets in a limited number of
issuers. As a result, the Fund may be more susceptible to a single adverse economic or regulatory occurrence affecting one or more of these issuers, experience increased volatility and be highly invested in certain issuers.
Large Shareholder Risk. At times, the Fund may experience adverse effects when certain large shareholders,
including insurance company separate accounts, redeem large amounts of shares of the Fund. Large redemptions may cause the Fund to sell portfolio holdings at times when it would not otherwise do so and may increase transaction costs and/or result
in an increase to the Fund’s expense ratio. A large redemption could be detrimental to the Fund and its remaining shareholders.
Risks of Investing in ETFs. In addition to the risks associated with the underlying assets held by the ETFs in
which the Fund invests, investments in ETFs are also subject to the following additional risks: (i) only authorized participants may engage in transactions directly with ETFs but none are obligated to do so, which could result in an ETF’s shares
trading at a premium or discount to its NAV or possibly face trading halts or delisting; (ii) certain ETFs seek to track the performance of an underlying index and will not attempt to take defensive positions under any market conditions, including
declining markets, which could result in losses; and (iii) because ETF shares trade on the secondary market, there is not guarantee that an active market will be developed or maintained, which could result in the ETF’s shares trading at a premium
or discount to its NAV. Investments in ETFs may involve duplication of management fees and certain other expenses, as the Fund indirectly bears its proportionate share of any expenses paid by the ETFs in which it invests.
Risks of Investing in Money Market Funds. Money market funds seek to preserve the value of
shareholder investments at $1.00 per share, but shareholders, such as the Fund, may still lose money by investing in such funds. In addition, a money market fund may impose a fee upon the sale of its shares or may temporarily suspend the ability to
sell shares if the fund’s liquidity falls below required minimums because of market conditions or other factors. The credit quality of a money market fund’s holdings can change rapidly in certain markets, and the default of a single holding could
have an adverse impact on the fund’s share price. A money market fund’s share price can also be negatively affected during periods of high redemption pressures, illiquid markets, and/or significant market volatility.
Performance
As of the date of this Prospectus, the Fund has not commenced operations and therefore does not have a performance history. Once available, the Fund’s
performance information will be accessible online at www.[________].com and will provide some indication of the risks of investing in the Fund.
Management
Investment Adviser
Milliman Financial Risk Management LLC (“Milliman”) serves as investment adviser to the Fund.
219
Portfolio Managers
The following persons serve as portfolio managers of the Fund.
|
●
|
Robert T. Cummings, Principal & Head of Portfolio Management at Milliman.
|
|
●
|
Maria Schiopu, Principal & Head of Portfolio Management at Milliman.
|
|
●
|
Jeff Greco, Principal & Head of Strategy Research at Milliman.
|
|
●
|
Jordan Rosenfeld, Portfolio Manager at Milliman.
|
Each portfolio manager is jointly and primarily responsible for the day-to-day management of the Fund’s portfolio and has served in such capacity
since the Fund’s inception in 2021.
Purchase and Sale of Shares
Shares are available as underlying investment options for variable insurance contracts and variable life insurance policies (each, a “variable contract,” and, collectively, the “variable contracts”) issued by insurance companies. These insurance companies are the record owners of the separate accounts
holding the Shares. You do not buy, sell or exchange Shares directly; rather, you choose investment options through your variable contracts. The insurance companies then cause the separate accounts to purchase and redeem Shares according to
the investment options you choose.
Tax Information
The dividends and distributions paid by the Fund to the insurance company separate accounts will consist of ordinary income, capital gains, or some
combination of both. Because Shares must be purchased through separate accounts used to fund variable contracts, such dividends and distributions will be exempt from current taxation by owners of variable contracts (each, a “contract owner,” and, collectively “contract owners”) if left to accumulate within a separate account. Consult the variable contract prospectus for additional tax
information.
Payments to Insurance Companies and Other Financial Intermediaries
If you allocate contract value to the Fund through an insurance company or other financial intermediary, the Fund, Milliman, the Fund’s distributor or
their related companies may pay the insurance company and/or its affiliates or other intermediary for the sale of Shares and related services. These payments may create a conflict of interest by influencing the insurance company or other
intermediary and your salesperson to recommend an indirect investment in the Fund over another investment. The prospectus or other disclosure documents for the variable contracts may contain additional information about these payments, if any.
You may also ask your salesperson or financial intermediary, or visit your financial intermediary’s website, for more information.
220
Fund Summary: Milliman S&P 500 1-Year Floor with Par Up Fund – Nov
Investment Objective
The Fund seeks to provide exposure to the S&P 500 Index, while limiting losses associated with S&P 500 Index performance to 10% and
participating in S&P 500 Index gains at a declared rate, prior to taking into account any fees or expenses or the performance of any fixed income exposure included in the Fund’s portfolio, over the period from November 1, 2021 through October
31, 2022.
Fees and Expenses of the Fund
This table describes the fees and expenses that you may pay if you buy, hold and sell shares of the Fund (“Shares”).
This table and the example below do not include any fees or sales charges imposed by your variable product. If they were included, the expenses listed below would be higher.
Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment)
|
Class 3
|
|
|
Management Fees
|
0.49%
|
|
Distribution and Service (12b-1) Fees
|
0.25%
|
|
Other Expenses(1)
|
0.50%
|
|
Acquired Fund Fees and Expenses(1)
|
[_.__]%
|
|
Total Annual Fund Operating Expenses
|
1.24%
|
|
Fee Waiver and/or Expense Reimbursement(2)(3)
|
(0.25)%
|
|
Total Annual Fund Operating Expenses After Fee Waiver and/or Expense Reimbursement
|
0.99%
|
|
(1)
|
“Other Expenses” and “Acquired Fund Fees and Expenses” are based on estimated amounts for the current fiscal year.
|
|
(2)
|
The Fund’s investment adviser, Milliman Financial Risk Management LLC (“Milliman”), has contractually
agreed to waive advisory fees and/or reimburse expenses to the extent necessary to limit the Fund’s total annual Fund operating expenses (excluding taxes, interest, brokerage fees and commissions, Rule 12b-1 fees, acquired fund fees and
expenses, short-sale dividend expenses, administrative services fees, other expenses that are capitalized in accordance with generally accepted accounting principles, and extraordinary or non-routine expenses not incurred in the
ordinary course of the Fund’s business) to 0.74% of the Fund's average daily net assets (the “Expense Limitation Agreement”) until at least November 1, 2022. During its term, the Expense
Limitation Agreement cannot be terminated or amended to increase the applicable limit without approval of the Board of Trustees of the Trust (the “Board”). Milliman may recoup from the Fund any
advisory fees waived or expenses reimbursed pursuant to the Expense Limitation Agreement for a period of three years from the date on which such waiver or reimbursement occurred; provided, however, that such recoupment shall not be made
if it would cause the Fund’s total annual Fund operating expenses to exceed the lesser of (a) the expense limitation in effect at the time of the reimbursement, or (b) the expense limitation in effect at the time of recoupment, if any.
|
|
(3)
|
In addition to the Expense Limitation Agreement, Milliman has contractually agreed to waive its advisory fees in an amount equal to the Fund’s
acquired fund fees and expenses until at least November 1, 2022 (the “Fee Waiver”). This contract cannot be terminated or modified without the consent of the Board.
|
Example
This example is intended to help you compare the cost of investing in the Fund with the cost of investing in other funds. This example assumes that you
invest $10,000 in the Fund for the time periods indicated and then sell all of your Shares at the end of those periods. This example also assumes that your investment has a 5% return each year and that the Fund’s operating expenses remain at
current levels and that the Expense Limitation Agreement and Fee Waiver remain in place for their contractual periods. Although your actual costs may be higher or lower, your costs, based on these assumptions, would be:
|
1 Year
|
3 Years
|
|
|
Class 3
|
$104
|
$384
|
This example does not include any fees or sales charges imposed by your variable product. If they were included, the expenses listed above would be
higher.
221
Portfolio Turnover
The Fund pays transaction costs, such as commissions, when it purchases and sells securities (or “turns over” its portfolio). A higher portfolio turnover
will cause the Fund to incur additional transaction costs. These costs, which are not reflected in Total Annual Fund Operating Expenses or in the example, may affect the Fund’s performance. Because the Fund has not yet commenced investment
operations, no portfolio turnover information is available at this time.
Principal Investment Strategies
The Fund seeks to achieve its investment objective by transacting in FLexible EXchange® Options (“FLEX Options”)
and by separately maintaining a collateral portfolio (the “Collateral Portfolio”), which is designed primarily to serve as margin or collateral for the Fund’s FLEX Options positions and secondarily to
enhance the Fund’s upside S&P 500 Index FLEX Options’ exposure (i.e., by utilizing anticipated income to measure the ability to purchase additional FLEX Options). FLEX Options are exchange-traded
options contracts with uniquely customizable terms. In general, an options contract is an agreement between a buyer and seller that gives the purchaser of the option the right to buy or sell a particular asset at a specified future date at an
agreed upon price, commonly known as the “strike price.” The reference assets for the Fund’s FLEX Options positions will include the S&P 500 Index, which is a large-capitalization, market-weighted, U.S.
equities index that tracks the price (excluding dividends) of 500 leading companies in leading industries of the U.S. economy, and certain exchange-traded funds (“ETFs”), as described further below.
The Collateral Portfolio may be invested in short-term fixed-income securities, including corporate bonds and other corporate debt securities,
asset-backed securities (“ABS”), securities issued by the U.S. Government or its agencies and instrumentalities, securities issued by non-U.S. governments or their agencies and instrumentalities, money
market securities and funds, other interest-bearing instruments, cash, ETFs that primarily invest in any of the foregoing instruments, options on ETFs and options box spreads. An options box spread is the combination of different options trades
that have offsetting spreads (e.g., purchases and sales on the same underlying instrument, such as an index or an ETF, but with different strike prices and/or expiration dates) for the purpose of
generating income. The Fund may invest in short-term fixed income securities or other instruments, including through ETFs, of any maturity and credit quality. The Fund will generally invest up to 35% of its net assets in one or more ETFs that
provide exposure to investment grade corporate bonds.
Due to the unique mechanics of the Fund’s strategy, the return an investor can expect to receive from an investment in the Fund has characteristics that
are distinct from the returns of many other investment vehicles. It is important that an investor understand these characteristics before making an investment in the Fund.
In seeking to achieve its investment objective, the Fund seeks to produce pre-determined outcomes (the “Outcomes”)
that are based upon the performance of the S&P 500 Index over a one-year period (the “Outcome Period”). The initial Outcome Period for the Fund is November 1, 2021 through October 31, 2022. Following
the initial Outcome Period, each subsequent Outcome Period will be a one-year period commencing upon the expiration of the prior Outcome Period. The Fund seeks to achieve the Outcomes by purchasing and writing (selling) FLEX Options to create
layers within the Fund’s portfolio. One layer is designed to produce returns that correlate to those of the S&P 500 Index for the Outcome Period at a declared rate (the “Par Up Rate”) if the S&P
500 Index experiences gains during that time, as described below. A separate layer is designed to produce returns that correlate to those of the S&P 500 Index for the Outcome Period that limit losses to
10% if the S&P 500 Index experiences losses during that time (the “Floor”). There is no guarantee that the Fund will be successful in its attempt to produce returns
that correlate to those of the S&P 500 Index at the Par Up Rate or limit losses to the amount of the Floor.
Milliman Financial Risk Management, LLC (“Milliman”), the investment adviser of the Fund, seeks to establish the
Floor by purchasing one put FLEX Option on the S&P 500 Index with a strike price that is 10% lower than the value of the S&P 500 Index at the beginning of the Outcome Period.
Milliman seeks to establish the Par Up Rate by purchasing long call FLEX Options on the S&P 500 Index with a strike price approximately equal to
the value of the S&P 500 Index at the beginning of the Outcome Period.
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Milliman purchases these FLEX Options with a portion of the Fund’s net assets plus (i) the cash received by utilizing FLEX Options to create a put
spread (the “Put Spread Strategy”) on fixed income securities and/or one or more ETFs that provide exposure to fixed income securities, and (ii) yield received from the Collateral Portfolio. Milliman seeks
to achieve the Put Spread Strategy for the Fund by writing a put FLEX Option on an underlying asset at a strike price at or lower than the underlying asset’s market price or current value at the beginning of the Outcome Period, and buying a put
FLEX Option on the same underlying asset at a lower strike price than the written put FLEX Option.
The Par Up Rate is the rate at which the Fund will seek to track any upside market performance of the S&P 500 Index. Milliman calculates the Par
Up Rate based upon (i) its evaluation of prevailing market conditions on the first day of the Outcome Period and (ii) the total number of long call FLEX Options on the S&P 500 Index that it is able to purchase at that time. As of the date of
this Prospectus, and assuming current market conditions persist, Milliman expects that the Par Up Rate will be between the below ranges (both gross and net of Fund fees and expenses). Any fees or expenses imposed by your variable product, and any
other expenses incurred by the Fund, will have the effect of further reducing the Par Up Rate. Once calculated, the Par Up Rate for a particular Outcome Period will not change during that Outcome Period;
however, in certain market conditions, the performance of the Collateral Portfolio and the Put Spread Strategy could reduce the impact of the Par Up Rate.
|
Share Class
|
Estimated Par Up Rate Ranges
(As of [___])
|
|
|
Prior to Taking into Account Fund Fees and Expenses
|
After Taking into Account Fund Fees and Expenses
|
|
|
Class 3
|
[__]% and [__]%
|
[__]% and [__]%
|
The Floor is only triggered if losses in the Fund’s S&P 500 Index exposure exceed 10% for the Outcome Period. If the S&P 500 Index decreases
in value by more than 10% during the Outcome Period, the Fund (and therefore investors in Shares) will not experience subsequent losses in the Fund’s S&P 500 Index exposure. However, the Fund (and therefore investors in Shares) will
experience the first 10% of losses in the Fund’s S&P 500 Index exposure on a one-to-one basis for the Outcome Period. The Fund seeks to limit losses against its S&P 500 Index exposure prior to taking into account any fees or expenses or
the performance of the Collateral Portfolio or the Put Spread Strategy. The Floor is not operative against losses in the Collateral Portfolio or the Put Spread Strategy. If the Collateral Portfolio and/or the
Put Spread Strategy experiences losses, it could have the effect of reducing the impact of, or completely eliminating, the Floor on the Fund’s S&P 500 Index exposure. In certain market conditions, the performance of the Collateral
Portfolio and/or the Put Spread Strategy could cause the Fund to significantly underperform the S&P 500 Index. The following table reflects the Floor both gross and net of Fund fees and expenses:
|
Share Class
|
Floor
(As of [___])
|
|
|
Prior to Taking into Account Fund Fees and Expenses
|
After Taking into Account Fund Fees and Expenses
|
|
|
Class 3
|
10%
|
[__]%
|
The definitive Par Up Rate and Floor will be set forth on the Fund’s website. The Fund’s website will also provide information relating to the
Outcomes on a daily basis, including the Fund’s position relative to the Par Up Rate and the Floor. You may also contact your insurance company or other financial intermediary for more information.
Additionally, the Fund’s net asset value (“NAV”) will not increase or decrease at the same rate as the
S&P 500 Index because the Fund’s strategy relies upon the performance of the Collateral Portfolio and the Put Spread Strategy, in addition to the value of the Fund’s FLEX Options positions on the S&P 500 Index. While Milliman anticipates
that the Fund’s NAV will generally move in the same direction as the S&P 500 Index (meaning that the Fund’s NAV will generally increase if the S&P 500 Index experiences gains or decrease if the S&P 500 Index experiences losses,
subject to the Floor), the Fund’s NAV may not decrease at the same rate as the S&P 500 Index (especially when factoring in the performance of the Collateral Portfolio and the Put Spread Strategy) and will not increase at the same rate as the
S&P 500 Index (especially when factoring in the Par Up Rate and the performance of the Collateral
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Portfolio and the Put Spread Strategy). Similarly, the amount of time remaining until the end of the Outcome Period also affects the impact of the Floor
on the Fund’s NAV, because the Floor may not be in full effect prior to the end of the Outcome Period.
The FLEX Options utilized in the Fund’s portfolio are each set to expire on the last day of the Outcome Period. The customizable nature of FLEX Options
will allow Milliman to select the strike price at which each FLEX Option will be exercised at the expiration of the FLEX Option term. At the commencement of the Outcome Period, Milliman will specifically select the strike price for each FLEX Option
in a manner designed to achieve the Outcomes when the FLEX Options are exercised on the final day of the Outcome Period, depending on the anticipated performance of the S&P 500 Index, the Collateral Portfolio and the Put Spread Strategy over
the duration of that Outcome Period.
The hypothetical graphical illustrations provided below are designed to illustrate the Outcomes based upon the
hypothetical performance of the S&P 500 Index for an investor who holds Shares for the entirety of the Outcome Period. The hypothetical graphical illustrations do not include any fees or expenses
imposed by your variable product or expenses incurred by the Fund, and do not reflect the performance of the Collateral Portfolio or the Put Spread Strategy. Additional hypothetical graphical representations of the Outcomes are provided in
“Additional Information About the Funds and the Risks of Investing.” There is no guarantee that the Fund will be successful in its attempt to achieve the Outcomes for the Outcome Period.
The following table contains hypothetical examples designed to illustrate the Outcomes the Fund seeks to
achieve over the Outcome Period, based upon the performance of the S&P 500 Index from (100)% to 100% after taking into account the Par Up Rate and the Floor, but prior to taking into account any fees or expenses or the performance of the
Collateral Portfolio or the Put Spread Strategy. The table is provided for illustrative purposes only and does not provide every possible performance scenario for Shares over the course of the Outcome Period. There is no guarantee that the Fund will be successful in its attempt to achieve the Outcomes for an Outcome
Period. The table is not intended to predict or project the performance of the FLEX Options or the Fund. Investors should not take this information as an assurance of the expected performance of the
S&P 500 Index or the Fund. Actual Fund performance will vary with fluctuations in the performance of the Collateral Portfolio and the Put Spread Strategy, in addition to the value of the Fund’s FLEX Options positions on the S&P
500 Index, during the Outcome Period, among other factors. The performance of the Collateral Portfolio and the Put Spread
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Strategy could significantly impact the performance of the Fund, which could prevent the Fund from achieving the
Outcomes that it seeks to produce. The table does not reflect any fees or expenses imposed by your variable product or expenses incurred by the Fund. If it did, the returns shown for the Fund would
be lower. Please refer to the Fund’s website, which provides updated information relating to this table on a daily basis throughout the Outcome Period. Please contact your insurance company or other financial intermediary for more information.
|
Index/Fund
|
Hypothetical Performance1
|
|||||||||||
|
S&P 500 Index Price Performance
|
(100)%
|
(50)%
|
(20)%
|
(10)%
|
(5)%
|
0%
|
5%
|
10%
|
15%
|
20%
|
50%
|
100%
|
|
Fund Performance at NAV
|
(10)%2
|
(10)%2
|
(10)%2
|
(10)%
|
(5)%
|
0%
|
3%3
|
6%3
|
9%3
|
12%3
|
33.5%3
|
60%3
|
| 1 |
Does not take into account any fees or expenses or the performance of the Collateral Portfolio or the Put Spread Strategy.
|
| 2 |
Reflects the impact of the Floor.
|
| 3 |
Reflects the impact of an assumed Par Up Rate of 60%.
|
Understanding Outcomes. The Outcomes the Fund seeks to achieve are measured based upon the
Fund’s NAV on the first day of the Outcome Period. The Outcome Period begins on the day Milliman transacts in the FLEX Options on behalf of the Fund, and ends on the day those FLEX Options expire. An investor who
purchases Shares after the commencement of the Outcome Period will likely have purchased Shares at a different NAV than the NAV on the first day of the Outcome Period (the NAV upon which the Outcomes are based) and may experience investment
outcomes very different from those the Fund seeks to achieve, especially when factoring in any fees or expenses or the performance of the Collateral Portfolio and the
Put Spread Strategy. An investor who redeems Shares prior to the end of the Outcome Period may also experience investment outcomes very different from those the Fund seeks to achieve. The Outcomes are designed with the expectation that an
investor will hold Shares on the day that Milliman transacts in the FLEX Options on behalf of the Fund, and on the day those FLEX Options expire. There is no guarantee that the Fund will be successful
in its attempt to achieve the Outcomes.
Understanding the Par Up Rate. Unlike other investment products, the potential returns an
investor can receive from an investment in the Fund are subject to the Par Up Rate. This means that if the S&P 500 Index experiences gains for the Outcome Period, an investor in the Fund will only experience
a percentage of those gains (equal to the Par Up Rate multiplied by the S&P 500 Index gains). Milliman calculates the Par Up Rate for each Outcome Period based upon (i) its evaluation of prevailing market conditions on the first day
of the Outcome Period and (ii) the total number of long call FLEX Options on the S&P 500 Index that it is able to purchase at that time. In certain market conditions, the performance of the Collateral
Portfolio and the Put Spread Strategy could reduce the impact of the Par Up Rate. An investor should consider the amount and impact of the Par Up Rate, and the Fund’s position relative to it, before investing in the Fund.
Understanding the Floor. The Floor that the Fund seeks to provide is only triggered if
losses in the Fund’s S&P 500 Index exposure exceed 10% for the Outcome Period. If an investor is considering purchasing Shares during the Outcome Period, and the Fund’s NAV has increased in value, then that
investor will be subject to additional losses before implementation of the Floor that the Fund seeks to provide. While the Fund seeks to produce returns that correlate to those of the S&P 500 Index for the Outcome Period that are
limited to 10% (prior to taking into account any fees or expenses or the performance of the Collateral Portfolio or the Put Spread Strategy) for investors who hold Shares for the entire Outcome Period, there is no guarantee it will successfully
do so. In addition, the Floor is not operative against losses in the Collateral Portfolio or the Put Spread Strategy. If the Collateral Portfolio and/or the Put Spread Strategy experiences losses, it could
have the effect of reducing the impact of, or completely eliminating, the Floor on the Fund’s S&P 500 Index exposure. In certain market conditions, the performance of the Collateral Portfolio and/or the Put Spread Strategy could cause the
Fund to significantly underperform the S&P 500 Index. Investors who purchase Shares at the beginning of the Outcome Period may lose their entire investment. Investors who purchase Shares after the Outcome Period has begun may also lose
their entire investment. An investment in the Fund is only appropriate for investors willing to bear those losses.
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Fund Rebalance. Milliman implements the Fund’s strategy on an annual basis, seeking to
produce the Outcomes for an Outcome Period. On the last business day of any stated Outcome Period, all of the Fund’s existing FLEX Options, which includes those used to establish the Floor, the Par Up Rate
and the Put Spread Strategy, will expire and Milliman will transact in a new set of FLEX Options on the same business day, which will commence a new Outcome Period beginning the following business day. At
that same time, Milliman will also evaluate whether to make any adjustments to the Collateral Portfolio. Accordingly, Shares can be held indefinitely if investors determine to participate in additional Outcome Periods.
Approximately one week prior to the end of each Outcome Period, the Fund will file a prospectus supplement, which will notify existing investors of
(i) the date on which the existing Outcome Period will end; (ii) the date on which the new Outcome Period will commence; and (iii) the anticipated ranges of the Par Up Rate that will be used for the new Outcome Period. Immediately preceding the
commencement date of the new Outcome Period, the Fund will file a prospectus supplement disclosing the Fund’s final Par Up Rate (both gross and net of Fund fees and expenses) for the new Outcome Period. This information will also be available
online at www.[___________].com, and on your insurance company’s website. Please contact your insurance company or other financial intermediary for more information.
Fund Classification. The Fund is classified as “non-diversified” under the Investment
Company Act of 1940, as amended (the “1940 Act”).
Principal Risks
You could lose money by investing in the Fund. An investment in the Fund is not a deposit of a bank and is not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other governmental agency. There can be no assurance that the Fund’s investment objectives will be achieved.
Downside Loss Floor Risk. There can be no guarantee that the Fund will be successful in its strategy to limit
losses in the Fund’s S&P 500 Index exposure to a specified floor if the S&P 500 Index decreases in value over the Outcome Period. The Fund’s strategy is designed to produce returns that correlate to those of the S&P 500 Index at the
Par Up Rate, while limiting downside losses in the Fund’s S&P 500 Index exposure, if Shares are bought on the day on which Milliman transacts in the FLEX Options on behalf of the Fund and held until those FLEX Options expire at the end of
each Outcome Period. The success of the Floor also depends upon the performance of the Collateral Portfolio and the Put Spread Strategy. If the Collateral Portfolio and/or the Put Spread Strategy experiences
losses, it could have the effect of reducing the impact of, or completely eliminating, the Floor on the Fund’s S&P 500 Index exposure. In certain market conditions, the performance of the Collateral Portfolio and/or the Put Spread
Strategy could cause the Fund to significantly underperform the S&P 500 Index. Despite the intended Floor, an investor could lose their entire investment. In the event an investor purchases Shares after the date on which
Milliman transacted in the FLEX Options on behalf of the Fund, or redeems Shares prior to the expiration of those FLEX Options, the Floor that the Fund seeks to provide may not be available or fully applicable.
Risk of the Par Up Rate on Upside Returns. The Fund’s strategy is designed to produce returns that correlate
to those of the S&P 500 Index at the Par Up Rate if Shares are bought on the day on which Milliman transacts in the FLEX Options on behalf of the Fund and held until those FLEX Options expire at the end of the Outcome Period. Accordingly, the
Fund will not fully participate in any gains achieved by the S&P 500 Index. In addition, in the event an investor purchases Shares after the date on which Milliman transacted in the FLEX Options on behalf of the Fund, or redeems Shares prior
to the expiration of those FLEX Options, the returns realized by that investor may not match those that the Fund seeks to achieve pursuant to the Par Up Rate. In certain market conditions, the performance of
the Collateral Portfolio and the Put Spread Strategy could reduce the impact of the Par Up Rate. An investor should consider the amount and impact of the Par Up Rate, and the Fund’s position relative to it, before investing in the Fund.
Par Up Rate Change Risk. Because the Par Up Rate for each Outcome Period is calculated based upon (i)
Milliman’s evaluation of prevailing market conditions on the first day of the Outcome Period and (ii) the total number of long call FLEX Options on the S&P 500 Index that Milliman is able to purchase at that time, the Par Up
226
Rate may rise or fall from one Outcome Period to the next. Any change in the Par Up Rate could be significant and it is unlikely to remain the same
for consecutive Outcome Periods.
FLEX Options Risk. The Fund will transact in FLEX Options issued and guaranteed for settlement by the OCC. The
Fund bears the risk that the OCC will be unable or unwilling to perform its obligations under the FLEX Options contracts, which could result in significant losses to the Fund. In less liquid markets, terminating a FLEX Option may require the
payment of a premium or acceptance of a discounted price, and may take longer to complete. In addition, a less liquid trading market may adversely impact the value of the Fund’s FLEX Options and therefore the NAV of the Fund. In addition, the value
of the Fund’s FLEX Options positions is not anticipated to increase or decrease at the same rate as the reference asset; and while it is anticipated that they will generally move in the same direction, it is possible that they may move in different
directions. Certain FLEX Options positions may also expire worthless. The use of FLEX Options involves leverage, which can cause the Fund’s portfolio to be more volatile than if the portfolio had not been leveraged. Leverage can significantly
magnify the effect of price movements of the reference asset, disproportionately increasing the Fund’s losses and reducing the Fund’s opportunities for gains when the reference asset changes in unexpected ways. In some instances, such leverage
could result in losses that exceed the original amount invested.
Investment Objective and Outcomes Risk. There is no guarantee that the Fund will be successful in its attempt
to achieve its investment objective and/or the Outcomes, and an investor could lose some or all of their investment in the Fund. Certain circumstances under which the Fund might not achieve its objective and/or the Outcomes include, but are not
limited to (i) if the Fund disposes of FLEX Options, (ii) if the Fund is unable to maintain the proportional relationship based on the number of FLEX Options in the Fund’s portfolio, (iii) significant accrual of Fund expenses in connection with
effecting the Fund’s principal investment strategy, (iv) losses incurred by the Fund’s holdings in the Collateral Portfolio and/or losses resulting from the Put Spread Strategy, or (iv) adverse tax law changes affecting the treatment of FLEX
Options.
Tax Risk. The Fund intends to elect, and to qualify each year, to be treated as a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”). As a RIC, the Fund will not be subject to U.S. federal income tax on the portion
of its net investment income and net capital gain that it distributes to shareholders, provided that it satisfies certain requirements of the Code. To maintain its status as a RIC, the Fund must meet certain income, diversification and
distributions tests. For purposes of the diversification test, the identification of the issuer (or, in some cases, issuers) of a particular Fund investment can depend on the terms and conditions of that investment. In particular, there is no
published IRS guidance or case law on how to determine the “issuer” of certain derivatives that the Fund will enter into and the Fund has not received a private letter ruling on this point. Therefore, there is a risk that the Fund will not meet the
Code’s diversification requirements and will not qualify, or will be disqualified, as a RIC. If the Fund does not qualify as a RIC for any taxable year and certain relief provisions are not available, the Fund’s taxable income will be subject to
tax at the Fund level and to a further tax at the shareholder level when such income is distributed.
The Fund also intends to comply with the diversification requirements of Section 817(h) of the Code, and the regulations thereunder, relating to the
tax-deferred status of variable accounts that are based on insurance company separate accounts (referred to as “segregated asset accounts” for federal income tax purposes). These diversification requirements apply in addition to the RIC
diversification requirements discussed above. There also is no published guidance or case law on how to determine the “issuer” of the derivatives referred to above for purposes of the diversification requirements of Section 817(h) of the Code and
the Fund has not received a private letter ruling on this point. If these requirements are not met, or under other circumstances, such as if the Fund does not qualify as a RIC for any taxable year, it is possible that the contract owners (rather
than the insurance company) will be treated for federal income tax purposes as the taxable owners of the assets held by the segregated asset accounts.
Clearing Member Default Risk. The Fund will hold FLEX Options through accounts at members of clearing houses (“clearing members”) rather than a bank or a broker. Assets deposited by the Fund with any clearing member as margin for its FLEX Options positions may, in certain circumstances, be used to satisfy losses of other
clients of the Fund’s clearing member where such assets may be held in commingled omnibus accounts. In addition, although clearing members guarantee performance of their clients’ obligations to the clearing house, there is a risk that the assets of
the Fund might not be fully protected in the event of the clearing member’s bankruptcy, as the Fund would
227
be limited to recovering only a pro rata share of all available funds segregated on behalf of the clearing
member’s customers for the relevant account class.
Debt Securities Risk. The prices of debt securities will be affected by changes in interest rates, the
creditworthiness of the issuer and other factors. These risks could affect the value of investments in which the Fund invests, possibly causing the Fund’s NAV to be reduced and fluctuate more than other types of investments. During periods of
falling interest rates, an issuer of a callable bond may repay the security before its stated maturity, and the Fund may have to reinvest the proceeds in securities with lower yields, which would result in a decline in the Fund’s income, or in
securities with greater risks or with other less favorable features. Changing interest rates, including rates that fall below zero, may have unpredictable effects on markets, result in heightened market volatility and detract from the Fund’s
performance to the extent the Fund is exposed to such interest rates. An increase in interest rates will generally cause the value of fixed-income securities held by the Fund to decline, may lead to heightened volatility in the fixed-income
markets and may adversely affect the liquidity of certain fixed-income investments, including those held by the Fund. Risks associated with rising interest rates are heightened given that interest rates in the U.S. are near historic lows.
Adjustable-rate instruments also react to interest rate changes in a similar manner, although generally to a lesser degree (depending, however, on the characteristics of the reset terms, including the index chosen, frequency of reset and reset
caps or floors, among other factors). Interest rate sensitivity is generally more pronounced and less predictable in instruments with uncertain payment or prepayment schedules and also for those with longer maturities.
Foreign Securities and Credit Exposure Risk. U.S. dollar-denominated securities carrying foreign credit exposure
may be affected by unfavorable political, economic or governmental developments that could affect payments of principal and interest. Furthermore, the value of the Fund’s foreign investments (whether direct or indirect) may be adversely affected by
political and social instability in their home countries, by changes in economic or taxation policies in those countries, or by the difficulty in enforcing obligations in those countries. Foreign companies generally may be subject to less stringent
regulations than U.S. companies, including financial reporting requirements and auditing and accounting controls. As a result, there generally is less publicly available information about foreign companies than about U.S. companies. Trading in many
foreign securities may be less liquid and more volatile than U.S. securities due to the size of the market or other factors.
U.S. Government Securities Risk. U.S. Government securities are subject to interest rate risk but generally do
not involve the credit risks associated with investments in other types of debt securities. As a result, the yields available from U.S. Government securities are generally lower than the yields available from other debt securities. U.S. Government
securities are guaranteed only as to the timely payment of interest and the payment of principal when held to maturity. While securities issued or guaranteed by U.S. federal government agencies are backed by the full faith and credit of the U.S.
Department of the Treasury, securities issued by government sponsored entities are solely the obligation of the issuer and generally do not carry any guarantee from the U.S. Government.
ABS Risk. ABS are subject to the general debt securities risks described above. In addition, ABS may be less
liquid than other bonds, and may be more sensitive than other bonds to the market’s perception of issuers and creditworthiness of payees, which may result in the Fund experiencing difficulty selling or valuing these securities. ABS markets have
experienced extraordinary weakness and volatility at various times in recent years, and may decline quickly in the event of a substantial economic or market downturn. Accordingly, these securities may be subject to greater risk of default during
periods of economic downturn than other securities, which could result in possible losses to the Fund.
Issuer Risk. The performance of the Fund depends on the performance of individual securities to which the Fund
has exposure. The Fund may be adversely affected if an issuer of underlying securities held by the Fund is unable or unwilling to repay principal or interest when due. Changes in the financial condition or credit rating of an issuer of those
securities may cause the value of the securities to decline.
Management Risk. The Fund is subject to management risk because it is an actively managed portfolio. Milliman
will apply investment techniques and risk analyses in making investment decisions for the Fund, but there can be no guarantee that the Fund will meet its investment objective and/or the Outcomes. In addition, Milliman does not use defensive
strategies or attempt to reduce the Fund’s exposures to poor performing positions during an Outcome Period. This differs from funds that are managed to seek to outperform a benchmark index. Therefore, in the event
228
of a general market decline, the Fund’s value may fall more than the value of another fund that does attempt to hedge against such market declines.
Market Risk. The Fund could lose money over short periods due to short-term market movements and over longer
periods during more prolonged market downturns. Assets may decline in value due to factors affecting financial markets generally or particular asset classes or industries represented in the markets. The value of a FLEX Option or other asset may
also decline due to general market conditions, economic trends or events that are not specifically related to the issuer of the security or other asset, or due to factors that affect a particular issuer, country, region, market, industry, sector or
asset class.
Non-Diversification Risk. The Fund may invest a relatively high percentage of its assets in a limited number of
issuers. As a result, the Fund may be more susceptible to a single adverse economic or regulatory occurrence affecting one or more of these issuers, experience increased volatility and be highly invested in certain issuers.
Large Shareholder Risk. At times, the Fund may experience adverse effects when certain large shareholders,
including insurance company separate accounts, redeem large amounts of shares of the Fund. Large redemptions may cause the Fund to sell portfolio holdings at times when it would not otherwise do so and may increase transaction costs and/or result
in an increase to the Fund’s expense ratio. A large redemption could be detrimental to the Fund and its remaining shareholders.
Risks of Investing in ETFs. In addition to the risks associated with the underlying assets held by the ETFs in
which the Fund invests, investments in ETFs are also subject to the following additional risks: (i) only authorized participants may engage in transactions directly with ETFs but none are obligated to do so, which could result in an ETF’s shares
trading at a premium or discount to its NAV or possibly face trading halts or delisting; (ii) certain ETFs seek to track the performance of an underlying index and will not attempt to take defensive positions under any market conditions, including
declining markets, which could result in losses; and (iii) because ETF shares trade on the secondary market, there is not guarantee that an active market will be developed or maintained, which could result in the ETF’s shares trading at a premium
or discount to its NAV. Investments in ETFs may involve duplication of management fees and certain other expenses, as the Fund indirectly bears its proportionate share of any expenses paid by the ETFs in which it invests.
Risks of Investing in Money Market Funds. Money market funds seek to preserve the value of
shareholder investments at $1.00 per share, but shareholders, such as the Fund, may still lose money by investing in such funds. In addition, a money market fund may impose a fee upon the sale of its shares or may temporarily suspend the ability to
sell shares if the fund’s liquidity falls below required minimums because of market conditions or other factors. The credit quality of a money market fund’s holdings can change rapidly in certain markets, and the default of a single holding could
have an adverse impact on the fund’s share price. A money market fund’s share price can also be negatively affected during periods of high redemption pressures, illiquid markets, and/or significant market volatility.
Performance
As of the date of this Prospectus, the Fund has not commenced operations and therefore does not have a performance history. Once available, the Fund’s
performance information will be accessible online at www.[________].com and will provide some indication of the risks of investing in the Fund.
Management
Investment Adviser
Milliman Financial Risk Management LLC (“Milliman”) serves as investment adviser to the Fund.
229
Portfolio Managers
The following persons serve as portfolio managers of the Fund.
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●
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Robert T. Cummings, Principal & Head of Portfolio Management at Milliman.
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●
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Maria Schiopu, Principal & Head of Portfolio Management at Milliman.
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●
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Jeff Greco, Principal & Head of Strategy Research at Milliman.
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●
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Jordan Rosenfeld, Portfolio Manager at Milliman.
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Each portfolio manager is jointly and primarily responsible for the day-to-day management of the Fund’s portfolio and has served in such capacity
since the Fund’s inception in 2021.
Purchase and Sale of Shares
Shares are available as underlying investment options for variable insurance contracts and variable life insurance policies (each, a “variable contract,” and, collectively, the “variable contracts”) issued by insurance companies. These insurance companies are the record owners of the separate accounts
holding the Shares. You do not buy, sell or exchange Shares directly; rather, you choose investment options through your variable contracts. The insurance companies then cause the separate accounts to purchase and redeem Shares according to
the investment options you choose.
Tax Information
The dividends and distributions paid by the Fund to the insurance company separate accounts will consist of ordinary income, capital gains, or some
combination of both. Because Shares must be purchased through separate accounts used to fund variable contracts, such dividends and distributions will be exempt from current taxation by owners of variable contracts (each, a “contract owner,” and, collectively “contract owners”) if left to accumulate within a separate account. Consult the variable contract prospectus for additional tax
information.
Payments to Insurance Companies and Other Financial Intermediaries
If you allocate contract value to the Fund through an insurance company or other financial intermediary, the Fund, Milliman, the Fund’s distributor or
their related companies may pay the insurance company and/or its affiliates or other intermediary for the sale of Shares and related services. These payments may create a conflict of interest by influencing the insurance company or other
intermediary and your salesperson to recommend an indirect investment in the Fund over another investment. The prospectus or other disclosure documents for the variable contracts may contain additional information about these payments, if any.
You may also ask your salesperson or financial intermediary, or visit your financial intermediary’s website, for more information.
230
Fund Summary: Milliman S&P 500 1-Year Floor with Par Up Fund – Dec
Investment Objective
The Fund seeks to provide exposure to the S&P 500 Index, while limiting losses associated with S&P 500 Index performance to 10% and
participating in S&P 500 Index gains at a declared rate, prior to taking into account any fees or expenses or the performance of any fixed income exposure included in the Fund’s portfolio, over the period from December 1, 2021 through
November 30, 2022.
Fees and Expenses of the Fund
This table describes the fees and expenses that you may pay if you buy, hold and sell shares of the Fund (“Shares”).
This table and the example below do not include any fees or sales charges imposed by your variable product. If they were included, the expenses listed below would be higher.
Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment)
|
Class 3
|
|
|
Management Fees
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0.49%
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|
Distribution and Service (12b-1) Fees
|
0.25%
|
|
Other Expenses(1)
|
0.50%
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|
Acquired Fund Fees and Expenses(1)
|
[_.__]%
|
|
Total Annual Fund Operating Expenses
|
1.24%
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|
Fee Waiver and/or Expense Reimbursement(2)(3)
|
(0.25)%
|
|
Total Annual Fund Operating Expenses After Fee Waiver and/or Expense Reimbursement
|
0.99%
|
|
(1)
|
“Other Expenses” and “Acquired Fund Fees and Expenses” are based on estimated amounts for the current fiscal year.
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|
(2)
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The Fund’s investment adviser, Milliman Financial Risk Management LLC (“Milliman”), has contractually
agreed to waive advisory fees and/or reimburse expenses to the extent necessary to limit the Fund’s total annual Fund operating expenses (excluding taxes, interest, brokerage fees and commissions, Rule 12b-1 fees, acquired fund fees and
expenses, short-sale dividend expenses, administrative services fees, other expenses that are capitalized in accordance with generally accepted accounting principles, and extraordinary or non-routine expenses not incurred in the
ordinary course of the Fund’s business) to 0.74% of the Fund's average daily net assets (the “Expense Limitation Agreement”) until at least November 1, 2022. During its term, the Expense
Limitation Agreement cannot be terminated or amended to increase the applicable limit without approval of the Board of Trustees of the Trust (the “Board”). Milliman may recoup from the Fund any
advisory fees waived or expenses reimbursed pursuant to the Expense Limitation Agreement for a period of three years from the date on which such waiver or reimbursement occurred; provided, however, that such recoupment shall not be made
if it would cause the Fund’s total annual Fund operating expenses to exceed the lesser of (a) the expense limitation in effect at the time of the reimbursement, or (b) the expense limitation in effect at the time of recoupment, if any.
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|
(3)
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In addition to the Expense Limitation Agreement, Milliman has contractually agreed to waive its advisory fees in an amount equal to the Fund’s
acquired fund fees and expenses until at least November 1, 2022 (the “Fee Waiver”). This contract cannot be terminated or modified without the consent of the Board.
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Example
This example is intended to help you compare the cost of investing in the Fund with the cost of investing in other funds. This example assumes that you
invest $10,000 in the Fund for the time periods indicated and then sell all of your Shares at the end of those periods. This example also assumes that your investment has a 5% return each year and that the Fund’s operating expenses remain at
current levels and that the Expense Limitation Agreement and Fee Waiver remain in place for their contractual periods. Although your actual costs may be higher or lower, your costs, based on these assumptions, would be:
|
1 Year
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3 Years
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|
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Class 3
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$104
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$384
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This example does not include any fees or sales charges imposed by your variable product. If they were included, the expenses listed above would be
higher.
231
Portfolio Turnover
The Fund pays transaction costs, such as commissions, when it purchases and sells securities (or “turns over” its portfolio). A higher portfolio turnover
will cause the Fund to incur additional transaction costs. These costs, which are not reflected in Total Annual Fund Operating Expenses or in the example, may affect the Fund’s performance. Because the Fund has not yet commenced investment
operations, no portfolio turnover information is available at this time.
Principal Investment Strategies
The Fund seeks to achieve its investment objective by transacting in FLexible EXchange® Options (“FLEX Options”)
and by separately maintaining a collateral portfolio (the “Collateral Portfolio”), which is designed primarily to serve as margin or collateral for the Fund’s FLEX Options positions and secondarily to
enhance the Fund’s upside S&P 500 Index FLEX Options’ exposure (i.e., by utilizing anticipated income to measure the ability to purchase additional FLEX Options). FLEX Options are exchange-traded
options contracts with uniquely customizable terms. In general, an options contract is an agreement between a buyer and seller that gives the purchaser of the option the right to buy or sell a particular asset at a specified future date at an
agreed upon price, commonly known as the “strike price.” The reference assets for the Fund’s FLEX Options positions will include the S&P 500 Index, which is a large-capitalization, market-weighted, U.S.
equities index that tracks the price (excluding dividends) of 500 leading companies in leading industries of the U.S. economy, and certain exchange-traded funds (“ETFs”), as described further below.
The Collateral Portfolio may be invested in short-term fixed-income securities, including corporate bonds and other corporate debt securities,
asset-backed securities (“ABS”), securities issued by the U.S. Government or its agencies and instrumentalities, securities issued by non-U.S. governments or their agencies and instrumentalities, money
market securities and funds, other interest-bearing instruments, cash, ETFs that primarily invest in any of the foregoing instruments, options on ETFs and options box spreads. An options box spread is the combination of different options trades
that have offsetting spreads (e.g., purchases and sales on the same underlying instrument, such as an index or an ETF, but with different strike prices and/or expiration dates) for the purpose of
generating income. The Fund may invest in short-term fixed income securities or other instruments, including through ETFs, of any maturity and credit quality. The Fund will generally invest up to 35% of its net assets in one or more ETFs that
provide exposure to investment grade corporate bonds.
Due to the unique mechanics of the Fund’s strategy, the return an investor can expect to receive from an investment in the Fund has characteristics that
are distinct from the returns of many other investment vehicles. It is important that an investor understand these characteristics before making an investment in the Fund.
In seeking to achieve its investment objective, the Fund seeks to produce pre-determined outcomes (the “Outcomes”)
that are based upon the performance of the S&P 500 Index over a one-year period (the “Outcome Period”). The initial Outcome Period for the Fund is December 1, 2021 through November 30, 2022. Following
the initial Outcome Period, each subsequent Outcome Period will be a one-year period commencing upon the expiration of the prior Outcome Period. The Fund seeks to achieve the Outcomes by purchasing and writing (selling) FLEX Options to create
layers within the Fund’s portfolio. One layer is designed to produce returns that correlate to those of the S&P 500 Index for the Outcome Period at a declared rate (the “Par Up Rate”) if the S&P
500 Index experiences gains during that time, as described below. A separate layer is designed to produce returns that correlate to those of the S&P 500 Index for the Outcome Period that limit losses to
10% if the S&P 500 Index experiences losses during that time (the “Floor”). There is no guarantee that the Fund will be successful in its attempt to produce returns
that correlate to those of the S&P 500 Index at the Par Up Rate or limit losses to the amount of the Floor.
Milliman Financial Risk Management, LLC (“Milliman”), the investment adviser of the Fund, seeks to establish the
Floor by purchasing one put FLEX Option on the S&P 500 Index with a strike price that is 10% lower than the value of the S&P 500 Index at the beginning of the Outcome Period.
Milliman seeks to establish the Par Up Rate by purchasing long call FLEX Options on the S&P 500 Index with a strike price approximately equal to
the value of the S&P 500 Index at the beginning of the Outcome Period.
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Milliman purchases these FLEX Options with a portion of the Fund’s net assets plus (i) the cash received by utilizing FLEX Options to create a put
spread (the “Put Spread Strategy”) on fixed income securities and/or one or more ETFs that provide exposure to fixed income securities, and (ii) yield received from the Collateral Portfolio. Milliman seeks
to achieve the Put Spread Strategy for the Fund by writing a put FLEX Option on an underlying asset at a strike price at or lower than the underlying asset’s market price or current value at the beginning of the Outcome Period, and buying a put
FLEX Option on the same underlying asset at a lower strike price than the written put FLEX Option.
The Par Up Rate is the rate at which the Fund will seek to track any upside market performance of the S&P 500 Index. Milliman calculates the Par
Up Rate based upon (i) its evaluation of prevailing market conditions on the first day of the Outcome Period and (ii) the total number of long call FLEX Options on the S&P 500 Index that it is able to purchase at that time. As of the date of
this Prospectus, and assuming current market conditions persist, Milliman expects that the Par Up Rate will be between the below ranges (both gross and net of Fund fees and expenses). Any fees or expenses imposed by your variable product, and any
other expenses incurred by the Fund, will have the effect of further reducing the Par Up Rate. Once calculated, the Par Up Rate for a particular Outcome Period will not change during that Outcome Period;
however, in certain market conditions, the performance of the Collateral Portfolio and the Put Spread Strategy could reduce the impact of the Par Up Rate.
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Share Class
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Estimated Par Up Rate Ranges
(As of [___])
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|
|
Prior to Taking into Account Fund Fees and Expenses
|
After Taking into Account Fund Fees and Expenses
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|
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Class 3
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[__]% and [__]%
|
[__]% and [__]%
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The Floor is only triggered if losses in the Fund’s S&P 500 Index exposure exceed 10% for the Outcome Period. If the S&P 500 Index decreases
in value by more than 10% during the Outcome Period, the Fund (and therefore investors in Shares) will not experience subsequent losses in the Fund’s S&P 500 Index exposure. However, the Fund (and therefore investors in Shares) will
experience the first 10% of losses in the Fund’s S&P 500 Index exposure on a one-to-one basis for the Outcome Period. The Fund seeks to limit losses against its S&P 500 Index exposure prior to taking into account any fees or expenses or
the performance of the Collateral Portfolio or the Put Spread Strategy. The Floor is not operative against losses in the Collateral Portfolio or the Put Spread Strategy. If the Collateral Portfolio and/or the
Put Spread Strategy experiences losses, it could have the effect of reducing the impact of, or completely eliminating, the Floor on the Fund’s S&P 500 Index exposure. In certain market conditions, the performance of the Collateral
Portfolio and/or the Put Spread Strategy could cause the Fund to significantly underperform the S&P 500 Index. The following table reflects the Floor both gross and net of Fund fees and expenses:
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Share Class
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Floor
(As of [___])
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|
|
Prior to Taking into Account Fund Fees and Expenses
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After Taking into Account Fund Fees and Expenses
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|
|
Class 3
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10%
|
[__]%
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The definitive Par Up Rate and Floor will be set forth on the Fund’s website. The Fund’s website will also provide information relating to the
Outcomes on a daily basis, including the Fund’s position relative to the Par Up Rate and the Floor. You may also contact your insurance company or other financial intermediary for more information.
Additionally, the Fund’s net asset value (“NAV”) will not increase or decrease at the same rate as the
S&P 500 Index because the Fund’s strategy relies upon the performance of the Collateral Portfolio and the Put Spread Strategy, in addition to the value of the Fund’s FLEX Options positions on the S&P 500 Index. While Milliman anticipates
that the Fund’s NAV will generally move in the same direction as the S&P 500 Index (meaning that the Fund’s NAV will generally increase if the S&P 500 Index experiences gains or decrease if the S&P 500 Index experiences losses,
subject to the Floor), the Fund’s NAV may not decrease at the same rate as the S&P 500 Index (especially when factoring in the performance of the Collateral Portfolio and the Put Spread Strategy) and will not increase at the same rate as the
S&P 500 Index (especially when factoring in the Par Up Rate and the performance of the Collateral
233
Portfolio and the Put Spread Strategy). Similarly, the amount of time remaining until the end of the Outcome Period also affects the impact of the Floor
on the Fund’s NAV, because the Floor may not be in full effect prior to the end of the Outcome Period.
The FLEX Options utilized in the Fund’s portfolio are each set to expire on the last day of the Outcome Period. The customizable nature of FLEX Options
will allow Milliman to select the strike price at which each FLEX Option will be exercised at the expiration of the FLEX Option term. At the commencement of the Outcome Period, Milliman will specifically select the strike price for each FLEX Option
in a manner designed to achieve the Outcomes when the FLEX Options are exercised on the final day of the Outcome Period, depending on the anticipated performance of the S&P 500 Index, the Collateral Portfolio and the Put Spread Strategy over
the duration of that Outcome Period.
The hypothetical graphical illustrations provided below are designed to illustrate the Outcomes based upon the
hypothetical performance of the S&P 500 Index for an investor who holds Shares for the entirety of the Outcome Period. The hypothetical graphical illustrations do not include any fees or expenses
imposed by your variable product or expenses incurred by the Fund, and do not reflect the performance of the Collateral Portfolio or the Put Spread Strategy. Additional hypothetical graphical representations of the Outcomes are provided in
“Additional Information About the Funds and the Risks of Investing.” There is no guarantee that the Fund will be successful in its attempt to achieve the Outcomes for the Outcome Period.
The following table contains hypothetical examples designed to illustrate the Outcomes the Fund seeks to
achieve over the Outcome Period, based upon the performance of the S&P 500 Index from (100)% to 100% after taking into account the Par Up Rate and the Floor, but prior to taking into account any fees or expenses or the performance of the
Collateral Portfolio or the Put Spread Strategy. The table is provided for illustrative purposes only and does not provide every possible performance scenario for Shares over the course of the Outcome Period. There is no guarantee that the Fund will be successful in its attempt to achieve the Outcomes for an Outcome
Period. The table is not intended to predict or project the performance of the FLEX Options or the Fund. Investors should not take this information as an assurance of the expected performance of the
S&P 500 Index or the Fund. Actual Fund performance will vary with fluctuations in the performance of the Collateral Portfolio and the Put Spread Strategy, in addition to the value of the Fund’s FLEX Options positions on the S&P
500 Index, during the Outcome Period, among other factors. The performance of the Collateral Portfolio and the Put Spread
234
Strategy could significantly impact the performance of the Fund, which could prevent the Fund from achieving the
Outcomes that it seeks to produce. The table does not reflect any fees or expenses imposed by your variable product or expenses incurred by the Fund. If it did, the returns shown for the Fund would
be lower. Please refer to the Fund’s website, which provides updated information relating to this table on a daily basis throughout the Outcome Period. Please contact your insurance company or other financial intermediary for more information.
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Index/Fund
|
Hypothetical Performance1
|
|||||||||||
|
S&P 500 Index Price Performance
|
(100)%
|
(50)%
|
(20)%
|
(10)%
|
(5)%
|
0%
|
5%
|
10%
|
15%
|
20%
|
50%
|
100%
|
|
Fund Performance at NAV
|
(10)%2
|
(10)%2
|
(10)%2
|
(10)%
|
(5)%
|
0%
|
3%3
|
6%3
|
9%3
|
12%3
|
33.5%3
|
60%3
|
| 1 |
Does not take into account any fees or expenses or the performance of the Collateral Portfolio or the Put Spread Strategy.
|
| 2 |
Reflects the impact of the Floor.
|
| 3 |
Reflects the impact of an assumed Par Up Rate of 60%.
|
Understanding Outcomes. The Outcomes the Fund seeks to achieve are measured based upon the
Fund’s NAV on the first day of the Outcome Period. The Outcome Period begins on the day Milliman transacts in the FLEX Options on behalf of the Fund, and ends on the day those FLEX Options expire. An investor who
purchases Shares after the commencement of the Outcome Period will likely have purchased Shares at a different NAV than the NAV on the first day of the Outcome Period (the NAV upon which the Outcomes are based) and may experience investment
outcomes very different from those the Fund seeks to achieve, especially when factoring in any fees or expenses or the performance of the Collateral Portfolio and the
Put Spread Strategy. An investor who redeems Shares prior to the end of the Outcome Period may also experience investment outcomes very different from those the Fund seeks to achieve. The Outcomes are designed with the expectation that an
investor will hold Shares on the day that Milliman transacts in the FLEX Options on behalf of the Fund, and on the day those FLEX Options expire. There is no guarantee that the Fund will be successful
in its attempt to achieve the Outcomes.
Understanding the Par Up Rate. Unlike other investment products, the potential returns an
investor can receive from an investment in the Fund are subject to the Par Up Rate. This means that if the S&P 500 Index experiences gains for the Outcome Period, an investor in the Fund will only experience
a percentage of those gains (equal to the Par Up Rate multiplied by the S&P 500 Index gains). Milliman calculates the Par Up Rate for each Outcome Period based upon (i) its evaluation of prevailing market conditions on the first day
of the Outcome Period and (ii) the total number of long call FLEX Options on the S&P 500 Index that it is able to purchase at that time. In certain market conditions, the performance of the Collateral
Portfolio and the Put Spread Strategy could reduce the impact of the Par Up Rate. An investor should consider the amount and impact of the Par Up Rate, and the Fund’s position relative to it, before investing in the Fund.
Understanding the Floor. The Floor that the Fund seeks to provide is only triggered if
losses in the Fund’s S&P 500 Index exposure exceed 10% for the Outcome Period. If an investor is considering purchasing Shares during the Outcome Period, and the Fund’s NAV has increased in value, then that
investor will be subject to additional losses before implementation of the Floor that the Fund seeks to provide. While the Fund seeks to produce returns that correlate to those of the S&P 500 Index for the Outcome Period that are
limited to 10% (prior to taking into account any fees or expenses or the performance of the Collateral Portfolio or the Put Spread Strategy) for investors who hold Shares for the entire Outcome Period, there is no guarantee it will successfully
do so. In addition, the Floor is not operative against losses in the Collateral Portfolio or the Put Spread Strategy. If the Collateral Portfolio and/or the Put Spread Strategy experiences losses, it could
have the effect of reducing the impact of, or completely eliminating, the Floor on the Fund’s S&P 500 Index exposure. In certain market conditions, the performance of the Collateral Portfolio and/or the Put Spread Strategy could cause the
Fund to significantly underperform the S&P 500 Index. Investors who purchase Shares at the beginning of the Outcome Period may lose their entire investment. Investors who purchase Shares after the Outcome Period has begun may also lose
their entire investment. An investment in the Fund is only appropriate for investors willing to bear those losses.
235
Fund Rebalance. Milliman implements the Fund’s strategy on an annual basis, seeking to
produce the Outcomes for an Outcome Period. On the last business day of any stated Outcome Period, all of the Fund’s existing FLEX Options, which includes those used to establish the Floor, the Par Up Rate
and the Put Spread Strategy, will expire and Milliman will transact in a new set of FLEX Options on the same business day, which will commence a new Outcome Period beginning the following business day. At
that same time, Milliman will also evaluate whether to make any adjustments to the Collateral Portfolio. Accordingly, Shares can be held indefinitely if investors determine to participate in additional Outcome Periods.
Approximately one week prior to the end of each Outcome Period, the Fund will file a prospectus supplement, which will notify existing investors of
(i) the date on which the existing Outcome Period will end; (ii) the date on which the new Outcome Period will commence; and (iii) the anticipated ranges of the Par Up Rate that will be used for the new Outcome Period. Immediately preceding the
commencement date of the new Outcome Period, the Fund will file a prospectus supplement disclosing the Fund’s final Par Up Rate (both gross and net of Fund fees and expenses) for the new Outcome Period. This information will also be available
online at www.[___________].com, and on your insurance company’s website. Please contact your insurance company or other financial intermediary for more information.
Fund Classification. The Fund is classified as “non-diversified” under the Investment
Company Act of 1940, as amended (the “1940 Act”).
Principal Risks
You could lose money by investing in the Fund. An investment in the Fund is not a deposit of a bank and is not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other governmental agency. There can be no assurance that the Fund’s investment objectives will be achieved.
Downside Loss Floor Risk. There can be no guarantee that the Fund will be successful in its strategy to limit
losses in the Fund’s S&P 500 Index exposure to a specified floor if the S&P 500 Index decreases in value over the Outcome Period. The Fund’s strategy is designed to produce returns that correlate to those of the S&P 500 Index at the
Par Up Rate, while limiting downside losses in the Fund’s S&P 500 Index exposure, if Shares are bought on the day on which Milliman transacts in the FLEX Options on behalf of the Fund and held until those FLEX Options expire at the end of
each Outcome Period. The success of the Floor also depends upon the performance of the Collateral Portfolio and the Put Spread Strategy. If the Collateral Portfolio and/or the Put Spread Strategy experiences
losses, it could have the effect of reducing the impact of, or completely eliminating, the Floor on the Fund’s S&P 500 Index exposure. In certain market conditions, the performance of the Collateral Portfolio and/or the Put Spread
Strategy could cause the Fund to significantly underperform the S&P 500 Index. Despite the intended Floor, an investor could lose their entire investment. In the event an investor purchases Shares after the date on which
Milliman transacted in the FLEX Options on behalf of the Fund, or redeems Shares prior to the expiration of those FLEX Options, the Floor that the Fund seeks to provide may not be available or fully applicable.
Risk of the Par Up Rate on Upside Returns. The Fund’s strategy is designed to produce returns that correlate
to those of the S&P 500 Index at the Par Up Rate if Shares are bought on the day on which Milliman transacts in the FLEX Options on behalf of the Fund and held until those FLEX Options expire at the end of the Outcome Period. Accordingly, the
Fund will not fully participate in any gains achieved by the S&P 500 Index. In addition, in the event an investor purchases Shares after the date on which Milliman transacted in the FLEX Options on behalf of the Fund, or redeems Shares prior
to the expiration of those FLEX Options, the returns realized by that investor may not match those that the Fund seeks to achieve pursuant to the Par Up Rate. In certain market conditions, the performance of
the Collateral Portfolio and the Put Spread Strategy could reduce the impact of the Par Up Rate. An investor should consider the amount and impact of the Par Up Rate, and the Fund’s position relative to it, before investing in the Fund.
Par Up Rate Change Risk. Because the Par Up Rate for each Outcome Period is calculated based upon (i)
Milliman’s evaluation of prevailing market conditions on the first day of the Outcome Period and (ii) the total number of long call FLEX Options on the S&P 500 Index that Milliman is able to purchase at that time, the Par Up
236
Rate may rise or fall from one Outcome Period to the next. Any change in the Par Up Rate could be significant and it is unlikely to remain the same
for consecutive Outcome Periods.
FLEX Options Risk. The Fund will transact in FLEX Options issued and guaranteed for settlement by the OCC. The
Fund bears the risk that the OCC will be unable or unwilling to perform its obligations under the FLEX Options contracts, which could result in significant losses to the Fund. In less liquid markets, terminating a FLEX Option may require the
payment of a premium or acceptance of a discounted price, and may take longer to complete. In addition, a less liquid trading market may adversely impact the value of the Fund’s FLEX Options and therefore the NAV of the Fund. In addition, the value
of the Fund’s FLEX Options positions is not anticipated to increase or decrease at the same rate as the reference asset; and while it is anticipated that they will generally move in the same direction, it is possible that they may move in different
directions. Certain FLEX Options positions may also expire worthless. The use of FLEX Options involves leverage, which can cause the Fund’s portfolio to be more volatile than if the portfolio had not been leveraged. Leverage can significantly
magnify the effect of price movements of the reference asset, disproportionately increasing the Fund’s losses and reducing the Fund’s opportunities for gains when the reference asset changes in unexpected ways. In some instances, such leverage
could result in losses that exceed the original amount invested.
Investment Objective and Outcomes Risk. There is no guarantee that the Fund will be successful in its attempt
to achieve its investment objective and/or the Outcomes, and an investor could lose some or all of their investment in the Fund. Certain circumstances under which the Fund might not achieve its objective and/or the Outcomes include, but are not
limited to (i) if the Fund disposes of FLEX Options, (ii) if the Fund is unable to maintain the proportional relationship based on the number of FLEX Options in the Fund’s portfolio, (iii) significant accrual of Fund expenses in connection with
effecting the Fund’s principal investment strategy, (iv) losses incurred by the Fund’s holdings in the Collateral Portfolio and/or losses resulting from the Put Spread Strategy, or (iv) adverse tax law changes affecting the treatment of FLEX
Options.
Tax Risk. The Fund intends to elect, and to qualify each year, to be treated as a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”). As a RIC, the Fund will not be subject to U.S. federal income tax on the portion
of its net investment income and net capital gain that it distributes to shareholders, provided that it satisfies certain requirements of the Code. To maintain its status as a RIC, the Fund must meet certain income, diversification and
distributions tests. For purposes of the diversification test, the identification of the issuer (or, in some cases, issuers) of a particular Fund investment can depend on the terms and conditions of that investment. In particular, there is no
published IRS guidance or case law on how to determine the “issuer” of certain derivatives that the Fund will enter into and the Fund has not received a private letter ruling on this point. Therefore, there is a risk that the Fund will not meet the
Code’s diversification requirements and will not qualify, or will be disqualified, as a RIC. If the Fund does not qualify as a RIC for any taxable year and certain relief provisions are not available, the Fund’s taxable income will be subject to
tax at the Fund level and to a further tax at the shareholder level when such income is distributed.
The Fund also intends to comply with the diversification requirements of Section 817(h) of the Code, and the regulations thereunder, relating to the
tax-deferred status of variable accounts that are based on insurance company separate accounts (referred to as “segregated asset accounts” for federal income tax purposes). These diversification requirements apply in addition to the RIC
diversification requirements discussed above. There also is no published guidance or case law on how to determine the “issuer” of the derivatives referred to above for purposes of the diversification requirements of Section 817(h) of the Code and
the Fund has not received a private letter ruling on this point. If these requirements are not met, or under other circumstances, such as if the Fund does not qualify as a RIC for any taxable year, it is possible that the contract owners (rather
than the insurance company) will be treated for federal income tax purposes as the taxable owners of the assets held by the segregated asset accounts.
Clearing Member Default Risk. The Fund will hold FLEX Options through accounts at members of clearing houses (“clearing members”) rather than a bank or a broker. Assets deposited by the Fund with any clearing member as margin for its FLEX Options positions may, in certain circumstances, be used to satisfy losses of other
clients of the Fund’s clearing member where such assets may be held in commingled omnibus accounts. In addition, although clearing members guarantee performance of their clients’ obligations to the clearing house, there is a risk that the assets of
the Fund might not be fully protected in the event of the clearing member’s bankruptcy, as the Fund would
237
be limited to recovering only a pro rata share of all available funds segregated on behalf of the clearing
member’s customers for the relevant account class.
Debt Securities Risk. The prices of debt securities will be affected by changes in interest rates, the
creditworthiness of the issuer and other factors. These risks could affect the value of investments in which the Fund invests, possibly causing the Fund’s NAV to be reduced and fluctuate more than other types of investments. During periods of
falling interest rates, an issuer of a callable bond may repay the security before its stated maturity, and the Fund may have to reinvest the proceeds in securities with lower yields, which would result in a decline in the Fund’s income, or in
securities with greater risks or with other less favorable features. Changing interest rates, including rates that fall below zero, may have unpredictable effects on markets, result in heightened market volatility and detract from the Fund’s
performance to the extent the Fund is exposed to such interest rates. An increase in interest rates will generally cause the value of fixed-income securities held by the Fund to decline, may lead to heightened volatility in the fixed-income
markets and may adversely affect the liquidity of certain fixed-income investments, including those held by the Fund. Risks associated with rising interest rates are heightened given that interest rates in the U.S. are near historic lows.
Adjustable-rate instruments also react to interest rate changes in a similar manner, although generally to a lesser degree (depending, however, on the characteristics of the reset terms, including the index chosen, frequency of reset and reset
caps or floors, among other factors). Interest rate sensitivity is generally more pronounced and less predictable in instruments with uncertain payment or prepayment schedules and also for those with longer maturities.
Foreign Securities and Credit Exposure Risk. U.S. dollar-denominated securities carrying foreign credit exposure
may be affected by unfavorable political, economic or governmental developments that could affect payments of principal and interest. Furthermore, the value of the Fund’s foreign investments (whether direct or indirect) may be adversely affected by
political and social instability in their home countries, by changes in economic or taxation policies in those countries, or by the difficulty in enforcing obligations in those countries. Foreign companies generally may be subject to less stringent
regulations than U.S. companies, including financial reporting requirements and auditing and accounting controls. As a result, there generally is less publicly available information about foreign companies than about U.S. companies. Trading in many
foreign securities may be less liquid and more volatile than U.S. securities due to the size of the market or other factors.
U.S. Government Securities Risk. U.S. Government securities are subject to interest rate risk but generally do
not involve the credit risks associated with investments in other types of debt securities. As a result, the yields available from U.S. Government securities are generally lower than the yields available from other debt securities. U.S. Government
securities are guaranteed only as to the timely payment of interest and the payment of principal when held to maturity. While securities issued or guaranteed by U.S. federal government agencies are backed by the full faith and credit of the U.S.
Department of the Treasury, securities issued by government sponsored entities are solely the obligation of the issuer and generally do not carry any guarantee from the U.S. Government.
ABS Risk. ABS are subject to the general debt securities risks described above. In addition, ABS may be less
liquid than other bonds, and may be more sensitive than other bonds to the market’s perception of issuers and creditworthiness of payees, which may result in the Fund experiencing difficulty selling or valuing these securities. ABS markets have
experienced extraordinary weakness and volatility at various times in recent years, and may decline quickly in the event of a substantial economic or market downturn. Accordingly, these securities may be subject to greater risk of default during
periods of economic downturn than other securities, which could result in possible losses to the Fund.
Issuer Risk. The performance of the Fund depends on the performance of individual securities to which the Fund
has exposure. The Fund may be adversely affected if an issuer of underlying securities held by the Fund is unable or unwilling to repay principal or interest when due. Changes in the financial condition or credit rating of an issuer of those
securities may cause the value of the securities to decline.
Management Risk. The Fund is subject to management risk because it is an actively managed portfolio. Milliman
will apply investment techniques and risk analyses in making investment decisions for the Fund, but there can be no guarantee that the Fund will meet its investment objective and/or the Outcomes. In addition, Milliman does not use defensive
strategies or attempt to reduce the Fund’s exposures to poor performing positions during an Outcome Period. This differs from funds that are managed to seek to outperform a benchmark index. Therefore, in the event
238
of a general market decline, the Fund’s value may fall more than the value of another fund that does attempt to hedge against such market declines.
Market Risk. The Fund could lose money over short periods due to short-term market movements and over longer
periods during more prolonged market downturns. Assets may decline in value due to factors affecting financial markets generally or particular asset classes or industries represented in the markets. The value of a FLEX Option or other asset may
also decline due to general market conditions, economic trends or events that are not specifically related to the issuer of the security or other asset, or due to factors that affect a particular issuer, country, region, market, industry, sector or
asset class.
Non-Diversification Risk. The Fund may invest a relatively high percentage of its assets in a limited number of
issuers. As a result, the Fund may be more susceptible to a single adverse economic or regulatory occurrence affecting one or more of these issuers, experience increased volatility and be highly invested in certain issuers.
Large Shareholder Risk. At times, the Fund may experience adverse effects when certain large shareholders,
including insurance company separate accounts, redeem large amounts of shares of the Fund. Large redemptions may cause the Fund to sell portfolio holdings at times when it would not otherwise do so and may increase transaction costs and/or result
in an increase to the Fund’s expense ratio. A large redemption could be detrimental to the Fund and its remaining shareholders.
Risks of Investing in ETFs. In addition to the risks associated with the underlying assets held by the ETFs in
which the Fund invests, investments in ETFs are also subject to the following additional risks: (i) only authorized participants may engage in transactions directly with ETFs but none are obligated to do so, which could result in an ETF’s shares
trading at a premium or discount to its NAV or possibly face trading halts or delisting; (ii) certain ETFs seek to track the performance of an underlying index and will not attempt to take defensive positions under any market conditions, including
declining markets, which could result in losses; and (iii) because ETF shares trade on the secondary market, there is not guarantee that an active market will be developed or maintained, which could result in the ETF’s shares trading at a premium
or discount to its NAV. Investments in ETFs may involve duplication of management fees and certain other expenses, as the Fund indirectly bears its proportionate share of any expenses paid by the ETFs in which it invests.
Risks of Investing in Money Market Funds. Money market funds seek to preserve the value of
shareholder investments at $1.00 per share, but shareholders, such as the Fund, may still lose money by investing in such funds. In addition, a money market fund may impose a fee upon the sale of its shares or may temporarily suspend the ability to
sell shares if the fund’s liquidity falls below required minimums because of market conditions or other factors. The credit quality of a money market fund’s holdings can change rapidly in certain markets, and the default of a single holding could
have an adverse impact on the fund’s share price. A money market fund’s share price can also be negatively affected during periods of high redemption pressures, illiquid markets, and/or significant market volatility.
Performance
As of the date of this Prospectus, the Fund has not commenced operations and therefore does not have a performance history. Once available, the Fund’s
performance information will be accessible online at www.[________].com and will provide some indication of the risks of investing in the Fund.
Management
Investment Adviser
Milliman Financial Risk Management LLC (“Milliman”) serves as investment adviser to the Fund.
239
Portfolio Managers
The following persons serve as portfolio managers of the Fund.
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●
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Robert T. Cummings, Principal & Head of Portfolio Management at Milliman.
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●
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Maria Schiopu, Principal & Head of Portfolio Management at Milliman.
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|
●
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Jeff Greco, Principal & Head of Strategy Research at Milliman.
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|
●
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Jordan Rosenfeld, Portfolio Manager at Milliman.
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Each portfolio manager is jointly and primarily responsible for the day-to-day management of the Fund’s portfolio and has served in such capacity
since the Fund’s inception in 2021.
Purchase and Sale of Shares
Shares are available as underlying investment options for variable insurance contracts and variable life insurance policies (each, a “variable contract,” and, collectively, the “variable contracts”) issued by insurance companies. These insurance companies are the record owners of the separate accounts
holding the Shares. You do not buy, sell or exchange Shares directly; rather, you choose investment options through your variable contracts. The insurance companies then cause the separate accounts to purchase and redeem Shares according to
the investment options you choose.
Tax Information
The dividends and distributions paid by the Fund to the insurance company separate accounts will consist of ordinary income, capital gains, or some
combination of both. Because Shares must be purchased through separate accounts used to fund variable contracts, such dividends and distributions will be exempt from current taxation by owners of variable contracts (each, a “contract owner,” and, collectively “contract owners”) if left to accumulate within a separate account. Consult the variable contract prospectus for additional tax
information.
Payments to Insurance Companies and Other Financial Intermediaries
If you allocate contract value to the Fund through an insurance company or other financial intermediary, the Fund, Milliman, the Fund’s distributor or
their related companies may pay the insurance company and/or its affiliates or other intermediary for the sale of Shares and related services. These payments may create a conflict of interest by influencing the insurance company or other
intermediary and your salesperson to recommend an indirect investment in the Fund over another investment. The prospectus or other disclosure documents for the variable contracts may contain additional information about these payments, if any.
You may also ask your salesperson or financial intermediary, or visit your financial intermediary’s website, for more information.
240
Fund Summary: Milliman S&P 500 1-Year Floor with Par Up Fund – Jan
Investment Objective
The Fund seeks to provide exposure to the S&P 500 Index, while limiting losses associated with S&P 500 Index performance to 10% and
participating in S&P 500 Index gains at a declared rate, prior to taking into account any fees or expenses or the performance of any fixed income exposure included in the Fund’s portfolio, over the period from January 1, 2022 through December
31, 2022.
Fees and Expenses of the Fund
This table describes the fees and expenses that you may pay if you buy, hold and sell shares of the Fund (“Shares”).
This table and the example below do not include any fees or sales charges imposed by your variable product. If they were included, the expenses listed below would be higher.
Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment)
|
Class 3
|
|
|
Management Fees
|
0.49%
|
|
Distribution and Service (12b-1) Fees
|
0.25%
|
|
Other Expenses(1)
|
0.50%
|
|
Acquired Fund Fees and Expenses(1)
|
[_.__]%
|
|
Total Annual Fund Operating Expenses
|
1.24%
|
|
Fee Waiver and/or Expense Reimbursement(2)(3)
|
(0.25)%
|
|
Total Annual Fund Operating Expenses After Fee Waiver and/or Expense Reimbursement
|
0.99%
|
|
(1)
|
“Other Expenses” and “Acquired Fund Fees and Expenses” are based on estimated amounts for the current fiscal year.
|
|
(2)
|
The Fund’s investment adviser, Milliman Financial Risk Management LLC (“Milliman”), has contractually
agreed to waive advisory fees and/or reimburse expenses to the extent necessary to limit the Fund’s total annual Fund operating expenses (excluding taxes, interest, brokerage fees and commissions, Rule 12b-1 fees, acquired fund fees and
expenses, short-sale dividend expenses, administrative services fees, other expenses that are capitalized in accordance with generally accepted accounting principles, and extraordinary or non-routine expenses not incurred in the
ordinary course of the Fund’s business) to 0.74% of the Fund's average daily net assets (the “Expense Limitation Agreement”) until at least November 1, 2022. During its term, the Expense
Limitation Agreement cannot be terminated or amended to increase the applicable limit without approval of the Board of Trustees of the Trust (the “Board”). Milliman may recoup from the Fund any
advisory fees waived or expenses reimbursed pursuant to the Expense Limitation Agreement for a period of three years from the date on which such waiver or reimbursement occurred; provided, however, that such recoupment shall not be made
if it would cause the Fund’s total annual Fund operating expenses to exceed the lesser of (a) the expense limitation in effect at the time of the reimbursement, or (b) the expense limitation in effect at the time of recoupment, if any.
|
|
(3)
|
In addition to the Expense Limitation Agreement, Milliman has contractually agreed to waive its advisory fees in an amount equal to the Fund’s
acquired fund fees and expenses until at least November 1, 2022 (the “Fee Waiver”). This contract cannot be terminated or modified without the consent of the Board.
|
Example
This example is intended to help you compare the cost of investing in the Fund with the cost of investing in other funds. This example assumes that you
invest $10,000 in the Fund for the time periods indicated and then sell all of your Shares at the end of those periods. This example also assumes that your investment has a 5% return each year and that the Fund’s operating expenses remain at
current levels and that the Expense Limitation Agreement and Fee Waiver remain in place for their contractual periods. Although your actual costs may be higher or lower, your costs, based on these assumptions, would be:
|
1 Year
|
3 Years
|
|
|
Class 3
|
$104
|
$384
|
This example does not include any fees or sales charges imposed by your variable product. If they were included, the expenses listed above would be
higher.
241
Portfolio Turnover
The Fund pays transaction costs, such as commissions, when it purchases and sells securities (or “turns over” its portfolio). A higher portfolio turnover
will cause the Fund to incur additional transaction costs. These costs, which are not reflected in Total Annual Fund Operating Expenses or in the example, may affect the Fund’s performance. Because the Fund has not yet commenced investment
operations, no portfolio turnover information is available at this time.
Principal Investment Strategies
The Fund seeks to achieve its investment objective by transacting in FLexible EXchange® Options (“FLEX Options”)
and by separately maintaining a collateral portfolio (the “Collateral Portfolio”), which is designed primarily to serve as margin or collateral for the Fund’s FLEX Options positions and secondarily to
enhance the Fund’s upside S&P 500 Index FLEX Options’ exposure (i.e., by utilizing anticipated income to measure the ability to purchase additional FLEX Options). FLEX Options are exchange-traded
options contracts with uniquely customizable terms. In general, an options contract is an agreement between a buyer and seller that gives the purchaser of the option the right to buy or sell a particular asset at a specified future date at an
agreed upon price, commonly known as the “strike price.” The reference assets for the Fund’s FLEX Options positions will include the S&P 500 Index, which is a large-capitalization, market-weighted, U.S.
equities index that tracks the price (excluding dividends) of 500 leading companies in leading industries of the U.S. economy, and certain exchange-traded funds (“ETFs”), as described further below.
The Collateral Portfolio may be invested in short-term fixed-income securities, including corporate bonds and other corporate debt securities,
asset-backed securities (“ABS”), securities issued by the U.S. Government or its agencies and instrumentalities, securities issued by non-U.S. governments or their agencies and instrumentalities, money
market securities and funds, other interest-bearing instruments, cash, ETFs that primarily invest in any of the foregoing instruments, options on ETFs and options box spreads. An options box spread is the combination of different options trades
that have offsetting spreads (e.g., purchases and sales on the same underlying instrument, such as an index or an ETF, but with different strike prices and/or expiration dates) for the purpose of
generating income. The Fund may invest in short-term fixed income securities or other instruments, including through ETFs, of any maturity and credit quality. The Fund will generally invest up to 35% of its net assets in one or more ETFs that
provide exposure to investment grade corporate bonds.
Due to the unique mechanics of the Fund’s strategy, the return an investor can expect to receive from an investment in the Fund has characteristics that
are distinct from the returns of many other investment vehicles. It is important that an investor understand these characteristics before making an investment in the Fund.
In seeking to achieve its investment objective, the Fund seeks to produce pre-determined outcomes (the “Outcomes”)
that are based upon the performance of the S&P 500 Index over a one-year period (the “Outcome Period”). The initial Outcome Period for the Fund is January 1, 2022 through December 31, 2023. Following
the initial Outcome Period, each subsequent Outcome Period will be a one-year period commencing upon the expiration of the prior Outcome Period. The Fund seeks to achieve the Outcomes by purchasing and writing (selling) FLEX Options to create
layers within the Fund’s portfolio. One layer is designed to produce returns that correlate to those of the S&P 500 Index for the Outcome Period at a declared rate (the “Par Up Rate”) if the S&P
500 Index experiences gains during that time, as described below. A separate layer is designed to produce returns that correlate to those of the S&P 500 Index for the Outcome Period that limit losses to
10% if the S&P 500 Index experiences losses during that time (the “Floor”). There is no guarantee that the Fund will be successful in its attempt to produce returns
that correlate to those of the S&P 500 Index at the Par Up Rate or limit losses to the amount of the Floor.
Milliman Financial Risk Management, LLC (“Milliman”), the investment adviser of the Fund, seeks to establish the
Floor by purchasing one put FLEX Option on the S&P 500 Index with a strike price that is 10% lower than the value of the S&P 500 Index at the beginning of the Outcome Period.
Milliman seeks to establish the Par Up Rate by purchasing long call FLEX Options on the S&P 500 Index with a strike price approximately equal to
the value of the S&P 500 Index at the beginning of the Outcome Period.
242
Milliman purchases these FLEX Options with a portion of the Fund’s net assets plus (i) the cash received by utilizing FLEX Options to create a put
spread (the “Put Spread Strategy”) on fixed income securities and/or one or more ETFs that provide exposure to fixed income securities, and (ii) yield received from the Collateral Portfolio. Milliman seeks
to achieve the Put Spread Strategy for the Fund by writing a put FLEX Option on an underlying asset at a strike price at or lower than the underlying asset’s market price or current value at the beginning of the Outcome Period, and buying a put
FLEX Option on the same underlying asset at a lower strike price than the written put FLEX Option.
The Par Up Rate is the rate at which the Fund will seek to track any upside market performance of the S&P 500 Index. Milliman calculates the Par
Up Rate based upon (i) its evaluation of prevailing market conditions on the first day of the Outcome Period and (ii) the total number of long call FLEX Options on the S&P 500 Index that it is able to purchase at that time. As of the date of
this Prospectus, and assuming current market conditions persist, Milliman expects that the Par Up Rate will be between the below ranges (both gross and net of Fund fees and expenses). Any fees or expenses imposed by your variable product, and any
other expenses incurred by the Fund, will have the effect of further reducing the Par Up Rate. Once calculated, the Par Up Rate for a particular Outcome Period will not change during that Outcome Period;
however, in certain market conditions, the performance of the Collateral Portfolio and the Put Spread Strategy could reduce the impact of the Par Up Rate.
|
Share Class
|
Estimated Par Up Rate Ranges
(As of [___])
|
|
|
Prior to Taking into Account Fund Fees and Expenses
|
After Taking into Account Fund Fees and Expenses
|
|
|
Class 3
|
[__]% and [__]%
|
[__]% and [__]%
|
The Floor is only triggered if losses in the Fund’s S&P 500 Index exposure exceed 10% for the Outcome Period. If the S&P 500 Index decreases
in value by more than 10% during the Outcome Period, the Fund (and therefore investors in Shares) will not experience subsequent losses in the Fund’s S&P 500 Index exposure. However, the Fund (and therefore investors in Shares) will
experience the first 10% of losses in the Fund’s S&P 500 Index exposure on a one-to-one basis for the Outcome Period. The Fund seeks to limit losses against its S&P 500 Index exposure prior to taking into account any fees or expenses or
the performance of the Collateral Portfolio or the Put Spread Strategy. The Floor is not operative against losses in the Collateral Portfolio or the Put Spread Strategy. If the Collateral Portfolio and/or the
Put Spread Strategy experiences losses, it could have the effect of reducing the impact of, or completely eliminating, the Floor on the Fund’s S&P 500 Index exposure. In certain market conditions, the performance of the Collateral
Portfolio and/or the Put Spread Strategy could cause the Fund to significantly underperform the S&P 500 Index. The following table reflects the Floor both gross and net of Fund fees and expenses:
|
Share Class
|
Floor
(As of [___])
|
|
|
Prior to Taking into Account Fund Fees and Expenses
|
After Taking into Account Fund Fees and Expenses
|
|
|
Class 3
|
10%
|
[__]%
|
The definitive Par Up Rate and Floor will be set forth on the Fund’s website. The Fund’s website will also provide information relating to the
Outcomes on a daily basis, including the Fund’s position relative to the Par Up Rate and the Floor. You may also contact your insurance company or other financial intermediary for more information.
Additionally, the Fund’s net asset value (“NAV”) will not increase or decrease at the same rate as the
S&P 500 Index because the Fund’s strategy relies upon the performance of the Collateral Portfolio and the Put Spread Strategy, in addition to the value of the Fund’s FLEX Options positions on the S&P 500 Index. While Milliman anticipates
that the Fund’s NAV will generally move in the same direction as the S&P 500 Index (meaning that the Fund’s NAV will generally increase if the S&P 500 Index experiences gains or decrease if the S&P 500 Index experiences losses,
subject to the Floor), the Fund’s NAV may not decrease at the same rate as the S&P 500 Index (especially when factoring in the performance of the Collateral Portfolio and the Put Spread Strategy) and will not increase at the same rate as the
S&P 500 Index (especially when factoring in the Par Up Rate and the performance of the Collateral
243
Portfolio and the Put Spread Strategy). Similarly, the amount of time remaining until the end of the Outcome Period also affects the impact of the Floor
on the Fund’s NAV, because the Floor may not be in full effect prior to the end of the Outcome Period.
The FLEX Options utilized in the Fund’s portfolio are each set to expire on the last day of the Outcome Period. The customizable nature of FLEX Options
will allow Milliman to select the strike price at which each FLEX Option will be exercised at the expiration of the FLEX Option term. At the commencement of the Outcome Period, Milliman will specifically select the strike price for each FLEX Option
in a manner designed to achieve the Outcomes when the FLEX Options are exercised on the final day of the Outcome Period, depending on the anticipated performance of the S&P 500 Index, the Collateral Portfolio and the Put Spread Strategy over
the duration of that Outcome Period.
The hypothetical graphical illustrations provided below are designed to illustrate the Outcomes based upon the
hypothetical performance of the S&P 500 Index for an investor who holds Shares for the entirety of the Outcome Period. The hypothetical graphical illustrations do not include any fees or expenses
imposed by your variable product or expenses incurred by the Fund, and do not reflect the performance of the Collateral Portfolio or the Put Spread Strategy. Additional hypothetical graphical representations of the Outcomes are provided in
“Additional Information About the Funds and the Risks of Investing.” There is no guarantee that the Fund will be successful in its attempt to achieve the Outcomes for the Outcome Period.
The following table contains hypothetical examples designed to illustrate the Outcomes the Fund seeks to
achieve over the Outcome Period, based upon the performance of the S&P 500 Index from (100)% to 100% after taking into account the Par Up Rate and the Floor, but prior to taking into account any fees or expenses or the performance of the
Collateral Portfolio or the Put Spread Strategy. The table is provided for illustrative purposes only and does not provide every possible performance scenario for Shares over the course of the Outcome Period. There is no guarantee that the Fund will be successful in its attempt to achieve the Outcomes for an Outcome
Period. The table is not intended to predict or project the performance of the FLEX Options or the Fund. Investors should not take this information as an assurance of the expected performance of the
S&P 500 Index or the Fund. Actual Fund performance will vary with fluctuations in the performance of the Collateral Portfolio and the Put Spread Strategy, in addition to the value of the Fund’s FLEX Options positions on the S&P
500 Index, during the Outcome Period, among other factors. The performance of the Collateral Portfolio and the Put Spread
244
Strategy could significantly impact the performance of the Fund, which could prevent the Fund from achieving the
Outcomes that it seeks to produce. The table does not reflect any fees or expenses imposed by your variable product or expenses incurred by the Fund. If it did, the returns shown for the Fund would
be lower. Please refer to the Fund’s website, which provides updated information relating to this table on a daily basis throughout the Outcome Period. Please contact your insurance company or other financial intermediary for more information.
|
Index/Fund
|
Hypothetical Performance1
|
|||||||||||
|
S&P 500 Index Price Performance
|
(100)%
|
(50)%
|
(20)%
|
(10)%
|
(5)%
|
0%
|
5%
|
10%
|
15%
|
20%
|
50%
|
100%
|
|
Fund Performance at NAV
|
(10)%2
|
(10)%2
|
(10)%2
|
(10)%
|
(5)%
|
0%
|
3%3
|
6%3
|
9%3
|
12%3
|
33.5%3
|
60%3
|
| 1 |
Does not take into account any fees or expenses or the performance of the Collateral Portfolio or the Put Spread Strategy.
|
| 2 |
Reflects the impact of the Floor.
|
| 3 |
Reflects the impact of an assumed Par Up Rate of 60%.
|
Understanding Outcomes. The Outcomes the Fund seeks to achieve are measured based upon the
Fund’s NAV on the first day of the Outcome Period. The Outcome Period begins on the day Milliman transacts in the FLEX Options on behalf of the Fund, and ends on the day those FLEX Options expire. An investor who
purchases Shares after the commencement of the Outcome Period will likely have purchased Shares at a different NAV than the NAV on the first day of the Outcome Period (the NAV upon which the Outcomes are based) and may experience investment
outcomes very different from those the Fund seeks to achieve, especially when factoring in any fees or expenses or the performance of the Collateral Portfolio and the
Put Spread Strategy. An investor who redeems Shares prior to the end of the Outcome Period may also experience investment outcomes very different from those the Fund seeks to achieve. The Outcomes are designed with the expectation that an
investor will hold Shares on the day that Milliman transacts in the FLEX Options on behalf of the Fund, and on the day those FLEX Options expire. There is no guarantee that the Fund will be successful
in its attempt to achieve the Outcomes.
Understanding the Par Up Rate. Unlike other investment products, the potential returns an
investor can receive from an investment in the Fund are subject to the Par Up Rate. This means that if the S&P 500 Index experiences gains for the Outcome Period, an investor in the Fund will only experience
a percentage of those gains (equal to the Par Up Rate multiplied by the S&P 500 Index gains). Milliman calculates the Par Up Rate for each Outcome Period based upon (i) its evaluation of prevailing market conditions on the first day
of the Outcome Period and (ii) the total number of long call FLEX Options on the S&P 500 Index that it is able to purchase at that time. In certain market conditions, the performance of the Collateral
Portfolio and the Put Spread Strategy could reduce the impact of the Par Up Rate. An investor should consider the amount and impact of the Par Up Rate, and the Fund’s position relative to it, before investing in the Fund.
Understanding the Floor. The Floor that the Fund seeks to provide is only triggered if
losses in the Fund’s S&P 500 Index exposure exceed 10% for the Outcome Period. If an investor is considering purchasing Shares during the Outcome Period, and the Fund’s NAV has increased in value, then that
investor will be subject to additional losses before implementation of the Floor that the Fund seeks to provide. While the Fund seeks to produce returns that correlate to those of the S&P 500 Index for the Outcome Period that are
limited to 10% (prior to taking into account any fees or expenses or the performance of the Collateral Portfolio or the Put Spread Strategy) for investors who hold Shares for the entire Outcome Period, there is no guarantee it will successfully
do so. In addition, the Floor is not operative against losses in the Collateral Portfolio or the Put Spread Strategy. If the Collateral Portfolio and/or the Put Spread Strategy experiences losses, it could
have the effect of reducing the impact of, or completely eliminating, the Floor on the Fund’s S&P 500 Index exposure. In certain market conditions, the performance of the Collateral Portfolio and/or the Put Spread Strategy could cause the
Fund to significantly underperform the S&P 500 Index. Investors who purchase Shares at the beginning of the Outcome Period may lose their entire investment. Investors who purchase Shares after the Outcome Period has begun may also lose
their entire investment. An investment in the Fund is only appropriate for investors willing to bear those losses.
245
Fund Rebalance. Milliman implements the Fund’s strategy on an annual basis, seeking to
produce the Outcomes for an Outcome Period. On the last business day of any stated Outcome Period, all of the Fund’s existing FLEX Options, which includes those used to establish the Floor, the Par Up Rate
and the Put Spread Strategy, will expire and Milliman will transact in a new set of FLEX Options on the same business day, which will commence a new Outcome Period beginning the following business day. At
that same time, Milliman will also evaluate whether to make any adjustments to the Collateral Portfolio. Accordingly, Shares can be held indefinitely if investors determine to participate in additional Outcome Periods.
Approximately one week prior to the end of each Outcome Period, the Fund will file a prospectus supplement, which will notify existing investors of
(i) the date on which the existing Outcome Period will end; (ii) the date on which the new Outcome Period will commence; and (iii) the anticipated ranges of the Par Up Rate that will be used for the new Outcome Period. Immediately preceding the
commencement date of the new Outcome Period, the Fund will file a prospectus supplement disclosing the Fund’s final Par Up Rate (both gross and net of Fund fees and expenses) for the new Outcome Period. This information will also be available
online at www.[___________].com, and on your insurance company’s website. Please contact your insurance company or other financial intermediary for more information.
Fund Classification. The Fund is classified as “non-diversified” under the Investment
Company Act of 1940, as amended (the “1940 Act”).
Principal Risks
You could lose money by investing in the Fund. An investment in the Fund is not a deposit of a bank and is not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other governmental agency. There can be no assurance that the Fund’s investment objectives will be achieved.
Downside Loss Floor Risk. There can be no guarantee that the Fund will be successful in its strategy to limit
losses in the Fund’s S&P 500 Index exposure to a specified floor if the S&P 500 Index decreases in value over the Outcome Period. The Fund’s strategy is designed to produce returns that correlate to those of the S&P 500 Index at the
Par Up Rate, while limiting downside losses in the Fund’s S&P 500 Index exposure, if Shares are bought on the day on which Milliman transacts in the FLEX Options on behalf of the Fund and held until those FLEX Options expire at the end of
each Outcome Period. The success of the Floor also depends upon the performance of the Collateral Portfolio and the Put Spread Strategy. If the Collateral Portfolio and/or the Put Spread Strategy experiences
losses, it could have the effect of reducing the impact of, or completely eliminating, the Floor on the Fund’s S&P 500 Index exposure. In certain market conditions, the performance of the Collateral Portfolio and/or the Put Spread
Strategy could cause the Fund to significantly underperform the S&P 500 Index. Despite the intended Floor, an investor could lose their entire investment. In the event an investor purchases Shares after the date on which
Milliman transacted in the FLEX Options on behalf of the Fund, or redeems Shares prior to the expiration of those FLEX Options, the Floor that the Fund seeks to provide may not be available or fully applicable.
Risk of the Par Up Rate on Upside Returns. The Fund’s strategy is designed to produce returns that correlate
to those of the S&P 500 Index at the Par Up Rate if Shares are bought on the day on which Milliman transacts in the FLEX Options on behalf of the Fund and held until those FLEX Options expire at the end of the Outcome Period. Accordingly, the
Fund will not fully participate in any gains achieved by the S&P 500 Index. In addition, in the event an investor purchases Shares after the date on which Milliman transacted in the FLEX Options on behalf of the Fund, or redeems Shares prior
to the expiration of those FLEX Options, the returns realized by that investor may not match those that the Fund seeks to achieve pursuant to the Par Up Rate. In certain market conditions, the performance of
the Collateral Portfolio and the Put Spread Strategy could reduce the impact of the Par Up Rate. An investor should consider the amount and impact of the Par Up Rate, and the Fund’s position relative to it, before investing in the Fund.
Par Up Rate Change Risk. Because the Par Up Rate for each Outcome Period is calculated based upon (i)
Milliman’s evaluation of prevailing market conditions on the first day of the Outcome Period and (ii) the total number of long call FLEX Options on the S&P 500 Index that Milliman is able to purchase at that time, the Par Up
246
Rate may rise or fall from one Outcome Period to the next. Any change in the Par Up Rate could be significant and it is unlikely to remain the same
for consecutive Outcome Periods.
FLEX Options Risk. The Fund will transact in FLEX Options issued and guaranteed for settlement by the OCC. The
Fund bears the risk that the OCC will be unable or unwilling to perform its obligations under the FLEX Options contracts, which could result in significant losses to the Fund. In less liquid markets, terminating a FLEX Option may require the
payment of a premium or acceptance of a discounted price, and may take longer to complete. In addition, a less liquid trading market may adversely impact the value of the Fund’s FLEX Options and therefore the NAV of the Fund. In addition, the value
of the Fund’s FLEX Options positions is not anticipated to increase or decrease at the same rate as the reference asset; and while it is anticipated that they will generally move in the same direction, it is possible that they may move in different
directions. Certain FLEX Options positions may also expire worthless. The use of FLEX Options involves leverage, which can cause the Fund’s portfolio to be more volatile than if the portfolio had not been leveraged. Leverage can significantly
magnify the effect of price movements of the reference asset, disproportionately increasing the Fund’s losses and reducing the Fund’s opportunities for gains when the reference asset changes in unexpected ways. In some instances, such leverage
could result in losses that exceed the original amount invested.
Investment Objective and Outcomes Risk. There is no guarantee that the Fund will be successful in its attempt
to achieve its investment objective and/or the Outcomes, and an investor could lose some or all of their investment in the Fund. Certain circumstances under which the Fund might not achieve its objective and/or the Outcomes include, but are not
limited to (i) if the Fund disposes of FLEX Options, (ii) if the Fund is unable to maintain the proportional relationship based on the number of FLEX Options in the Fund’s portfolio, (iii) significant accrual of Fund expenses in connection with
effecting the Fund’s principal investment strategy, (iv) losses incurred by the Fund’s holdings in the Collateral Portfolio and/or losses resulting from the Put Spread Strategy, or (iv) adverse tax law changes affecting the treatment of FLEX
Options.
Tax Risk. The Fund intends to elect, and to qualify each year, to be treated as a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”). As a RIC, the Fund will not be subject to U.S. federal income tax on the portion
of its net investment income and net capital gain that it distributes to shareholders, provided that it satisfies certain requirements of the Code. To maintain its status as a RIC, the Fund must meet certain income, diversification and
distributions tests. For purposes of the diversification test, the identification of the issuer (or, in some cases, issuers) of a particular Fund investment can depend on the terms and conditions of that investment. In particular, there is no
published IRS guidance or case law on how to determine the “issuer” of certain derivatives that the Fund will enter into and the Fund has not received a private letter ruling on this point. Therefore, there is a risk that the Fund will not meet the
Code’s diversification requirements and will not qualify, or will be disqualified, as a RIC. If the Fund does not qualify as a RIC for any taxable year and certain relief provisions are not available, the Fund’s taxable income will be subject to
tax at the Fund level and to a further tax at the shareholder level when such income is distributed.
The Fund also intends to comply with the diversification requirements of Section 817(h) of the Code, and the regulations thereunder, relating to the
tax-deferred status of variable accounts that are based on insurance company separate accounts (referred to as “segregated asset accounts” for federal income tax purposes). These diversification requirements apply in addition to the RIC
diversification requirements discussed above. There also is no published guidance or case law on how to determine the “issuer” of the derivatives referred to above for purposes of the diversification requirements of Section 817(h) of the Code and
the Fund has not received a private letter ruling on this point. If these requirements are not met, or under other circumstances, such as if the Fund does not qualify as a RIC for any taxable year, it is possible that the contract owners (rather
than the insurance company) will be treated for federal income tax purposes as the taxable owners of the assets held by the segregated asset accounts.
Clearing Member Default Risk. The Fund will hold FLEX Options through accounts at members of clearing houses (“clearing members”) rather than a bank or a broker. Assets deposited by the Fund with any clearing member as margin for its FLEX Options positions may, in certain circumstances, be used to satisfy losses of other
clients of the Fund’s clearing member where such assets may be held in commingled omnibus accounts. In addition, although clearing members guarantee performance of their clients’ obligations to the clearing house, there is a risk that the assets of
the Fund might not be fully protected in the event of the clearing member’s bankruptcy, as the Fund would
247
be limited to recovering only a pro rata share of all available funds segregated on behalf of the clearing
member’s customers for the relevant account class.
Debt Securities Risk. The prices of debt securities will be affected by changes in interest rates, the
creditworthiness of the issuer and other factors. These risks could affect the value of investments in which the Fund invests, possibly causing the Fund’s NAV to be reduced and fluctuate more than other types of investments. During periods of
falling interest rates, an issuer of a callable bond may repay the security before its stated maturity, and the Fund may have to reinvest the proceeds in securities with lower yields, which would result in a decline in the Fund’s income, or in
securities with greater risks or with other less favorable features. Changing interest rates, including rates that fall below zero, may have unpredictable effects on markets, result in heightened market volatility and detract from the Fund’s
performance to the extent the Fund is exposed to such interest rates. An increase in interest rates will generally cause the value of fixed-income securities held by the Fund to decline, may lead to heightened volatility in the fixed-income
markets and may adversely affect the liquidity of certain fixed-income investments, including those held by the Fund. Risks associated with rising interest rates are heightened given that interest rates in the U.S. are near historic lows.
Adjustable-rate instruments also react to interest rate changes in a similar manner, although generally to a lesser degree (depending, however, on the characteristics of the reset terms, including the index chosen, frequency of reset and reset
caps or floors, among other factors). Interest rate sensitivity is generally more pronounced and less predictable in instruments with uncertain payment or prepayment schedules and also for those with longer maturities.
Foreign Securities and Credit Exposure Risk. U.S. dollar-denominated securities carrying foreign credit exposure
may be affected by unfavorable political, economic or governmental developments that could affect payments of principal and interest. Furthermore, the value of the Fund’s foreign investments (whether direct or indirect) may be adversely affected by
political and social instability in their home countries, by changes in economic or taxation policies in those countries, or by the difficulty in enforcing obligations in those countries. Foreign companies generally may be subject to less stringent
regulations than U.S. companies, including financial reporting requirements and auditing and accounting controls. As a result, there generally is less publicly available information about foreign companies than about U.S. companies. Trading in many
foreign securities may be less liquid and more volatile than U.S. securities due to the size of the market or other factors.
U.S. Government Securities Risk. U.S. Government securities are subject to interest rate risk but generally do
not involve the credit risks associated with investments in other types of debt securities. As a result, the yields available from U.S. Government securities are generally lower than the yields available from other debt securities. U.S. Government
securities are guaranteed only as to the timely payment of interest and the payment of principal when held to maturity. While securities issued or guaranteed by U.S. federal government agencies are backed by the full faith and credit of the U.S.
Department of the Treasury, securities issued by government sponsored entities are solely the obligation of the issuer and generally do not carry any guarantee from the U.S. Government.
ABS Risk. ABS are subject to the general debt securities risks described above. In addition, ABS may be less
liquid than other bonds, and may be more sensitive than other bonds to the market’s perception of issuers and creditworthiness of payees, which may result in the Fund experiencing difficulty selling or valuing these securities. ABS markets have
experienced extraordinary weakness and volatility at various times in recent years, and may decline quickly in the event of a substantial economic or market downturn. Accordingly, these securities may be subject to greater risk of default during
periods of economic downturn than other securities, which could result in possible losses to the Fund.
Issuer Risk. The performance of the Fund depends on the performance of individual securities to which the Fund
has exposure. The Fund may be adversely affected if an issuer of underlying securities held by the Fund is unable or unwilling to repay principal or interest when due. Changes in the financial condition or credit rating of an issuer of those
securities may cause the value of the securities to decline.
Management Risk. The Fund is subject to management risk because it is an actively managed portfolio. Milliman
will apply investment techniques and risk analyses in making investment decisions for the Fund, but there can be no guarantee that the Fund will meet its investment objective and/or the Outcomes. In addition, Milliman does not use defensive
strategies or attempt to reduce the Fund’s exposures to poor performing positions during an Outcome Period. This differs from funds that are managed to seek to outperform a benchmark index. Therefore, in the event
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of a general market decline, the Fund’s value may fall more than the value of another fund that does attempt to hedge against such market declines.
Market Risk. The Fund could lose money over short periods due to short-term market movements and over longer
periods during more prolonged market downturns. Assets may decline in value due to factors affecting financial markets generally or particular asset classes or industries represented in the markets. The value of a FLEX Option or other asset may
also decline due to general market conditions, economic trends or events that are not specifically related to the issuer of the security or other asset, or due to factors that affect a particular issuer, country, region, market, industry, sector or
asset class.
Non-Diversification Risk. The Fund may invest a relatively high percentage of its assets in a limited number of
issuers. As a result, the Fund may be more susceptible to a single adverse economic or regulatory occurrence affecting one or more of these issuers, experience increased volatility and be highly invested in certain issuers.
Large Shareholder Risk. At times, the Fund may experience adverse effects when certain large shareholders,
including insurance company separate accounts, redeem large amounts of shares of the Fund. Large redemptions may cause the Fund to sell portfolio holdings at times when it would not otherwise do so and may increase transaction costs and/or result
in an increase to the Fund’s expense ratio. A large redemption could be detrimental to the Fund and its remaining shareholders.
Risks of Investing in ETFs. In addition to the risks associated with the underlying assets held by the ETFs in
which the Fund invests, investments in ETFs are also subject to the following additional risks: (i) only authorized participants may engage in transactions directly with ETFs but none are obligated to do so, which could result in an ETF’s shares
trading at a premium or discount to its NAV or possibly face trading halts or delisting; (ii) certain ETFs seek to track the performance of an underlying index and will not attempt to take defensive positions under any market conditions, including
declining markets, which could result in losses; and (iii) because ETF shares trade on the secondary market, there is not guarantee that an active market will be developed or maintained, which could result in the ETF’s shares trading at a premium
or discount to its NAV. Investments in ETFs may involve duplication of management fees and certain other expenses, as the Fund indirectly bears its proportionate share of any expenses paid by the ETFs in which it invests.
Risks of Investing in Money Market Funds. Money market funds seek to preserve the value of
shareholder investments at $1.00 per share, but shareholders, such as the Fund, may still lose money by investing in such funds. In addition, a money market fund may impose a fee upon the sale of its shares or may temporarily suspend the ability to
sell shares if the fund’s liquidity falls below required minimums because of market conditions or other factors. The credit quality of a money market fund’s holdings can change rapidly in certain markets, and the default of a single holding could
have an adverse impact on the fund’s share price. A money market fund’s share price can also be negatively affected during periods of high redemption pressures, illiquid markets, and/or significant market volatility.
Performance
As of the date of this Prospectus, the Fund has not commenced operations and therefore does not have a performance history. Once available, the Fund’s
performance information will be accessible online at www.[________].com and will provide some indication of the risks of investing in the Fund.
Management
Investment Adviser
Milliman Financial Risk Management LLC (“Milliman”) serves as investment adviser to the Fund.
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Portfolio Managers
The following persons serve as portfolio managers of the Fund.
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●
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Robert T. Cummings, Principal & Head of Portfolio Management at Milliman.
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Maria Schiopu, Principal & Head of Portfolio Management at Milliman.
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●
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Jeff Greco, Principal & Head of Strategy Research at Milliman.
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Jordan Rosenfeld, Portfolio Manager at Milliman.
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Each portfolio manager is jointly and primarily responsible for the day-to-day management of the Fund’s portfolio and has served in such capacity
since the Fund’s inception in 2021.
Purchase and Sale of Shares
Shares are available as underlying investment options for variable insurance contracts and variable life insurance policies (each, a “variable contract,” and, collectively, the “variable contracts”) issued by insurance companies. These insurance companies are the record owners of the separate accounts
holding the Shares. You do not buy, sell or exchange Shares directly; rather, you choose investment options through your variable contracts. The insurance companies then cause the separate accounts to purchase and redeem Shares according to
the investment options you choose.
Tax Information
The dividends and distributions paid by the Fund to the insurance company separate accounts will consist of ordinary income, capital gains, or some
combination of both. Because Shares must be purchased through separate accounts used to fund variable contracts, such dividends and distributions will be exempt from current taxation by owners of variable contracts (each, a “contract owner,” and, collectively “contract owners”) if left to accumulate within a separate account. Consult the variable contract prospectus for additional tax
information.
Payments to Insurance Companies and Other Financial Intermediaries
If you allocate contract value to the Fund through an insurance company or other financial intermediary, the Fund, Milliman, the Fund’s distributor or
their related companies may pay the insurance company and/or its affiliates or other intermediary for the sale of Shares and related services. These payments may create a conflict of interest by influencing the insurance company or other
intermediary and your salesperson to recommend an indirect investment in the Fund over another investment. The prospectus or other disclosure documents for the variable contracts may contain additional information about these payments, if any.
You may also ask your salesperson or financial intermediary, or visit your financial intermediary’s website, for more information.
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Fund Summary: Milliman S&P 500 1-Year Floor with Par Up Fund – Feb
Investment Objective
The Fund seeks to provide exposure to the S&P 500 Index, while limiting losses associated with S&P 500 Index performance to 10% and
participating in S&P 500 Index gains at a declared rate, prior to taking into account any fees or expenses or the performance of any fixed income exposure included in the Fund’s portfolio, over the period from February 1, 2022 through January
31, 2023.
Fees and Expenses of the Fund
This table describes the fees and expenses that you may pay if you buy, hold and sell shares of the Fund (“Shares”).
This table and the example below do not include any fees or sales charges imposed by your variable product. If they were included, the expenses listed below would be higher.
Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment)
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Class 3
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Management Fees
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0.49%
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Distribution and Service (12b-1) Fees
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0.25%
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Other Expenses(1)
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0.50%
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Acquired Fund Fees and Expenses(1)
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[_.__]%
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Total Annual Fund Operating Expenses
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1.24%
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Fee Waiver and/or Expense Reimbursement(2)(3)
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(0.25)%
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Total Annual Fund Operating Expenses After Fee Waiver and/or Expense Reimbursement
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0.99%
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(1)
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“Other Expenses” and “Acquired Fund Fees and Expenses” are based on estimated amounts for the current fiscal year.
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(2)
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The Fund’s investment adviser, Milliman Financial Risk Management LLC (“Milliman”), has contractually
agreed to waive advisory fees and/or reimburse expenses to the extent necessary to limit the Fund’s total annual Fund operating expenses (excluding taxes, interest, brokerage fees and commissions, Rule 12b-1 fees, acquired fund fees and
expenses, short-sale dividend expenses, administrative services fees, other expenses that are capitalized in accordance with generally accepted accounting principles, and extraordinary or non-routine expenses not incurred in the
ordinary course of the Fund’s business) to 0.74% of the Fund's average daily net assets (the “Expense Limitation Agreement”) until at least November 1, 2022. During its term, the Expense
Limitation Agreement cannot be terminated or amended to increase the applicable limit without approval of the Board of Trustees of the Trust (the “Board”). Milliman may recoup from the Fund any
advisory fees waived or expenses reimbursed pursuant to the Expense Limitation Agreement for a period of three years from the date on which such waiver or reimbursement occurred; provided, however, that such recoupment shall not be made
if it would cause the Fund’s total annual Fund operating expenses to exceed the lesser of (a) the expense limitation in effect at the time of the reimbursement, or (b) the expense limitation in effect at the time of recoupment, if any.
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(3)
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In addition to the Expense Limitation Agreement, Milliman has contractually agreed to waive its advisory fees in an amount equal to the Fund’s
acquired fund fees and expenses until at least November 1, 2022 (the “Fee Waiver”). This contract cannot be terminated or modified without the consent of the Board.
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Example
This example is intended to help you compare the cost of investing in the Fund with the cost of investing in other funds. This example assumes that you
invest $10,000 in the Fund for the time periods indicated and then sell all of your Shares at the end of those periods. This example also assumes that your investment has a 5% return each year and that the Fund’s operating expenses remain at
current levels and that the Expense Limitation Agreement and Fee Waiver remain in place for their contractual periods. Although your actual costs may be higher or lower, your costs, based on these assumptions, would be:
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1 Year
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3 Years
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Class 3
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$104
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$384
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This example does not include any fees or sales charges imposed by your variable product. If they were included, the expenses listed above would be
higher.
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Portfolio Turnover
The Fund pays transaction costs, such as commissions, when it purchases and sells securities (or “turns over” its portfolio). A higher portfolio turnover
will cause the Fund to incur additional transaction costs. These costs, which are not reflected in Total Annual Fund Operating Expenses or in the example, may affect the Fund’s performance. Because the Fund has not yet commenced investment
operations, no portfolio turnover information is available at this time.
Principal Investment Strategies
The Fund seeks to achieve its investment objective by transacting in FLexible EXchange® Options (“FLEX Options”)
and by separately maintaining a collateral portfolio (the “Collateral Portfolio”), which is designed primarily to serve as margin or collateral for the Fund’s FLEX Options positions and secondarily to
enhance the Fund’s upside S&P 500 Index FLEX Options’ exposure (i.e., by utilizing anticipated income to measure the ability to purchase additional FLEX Options). FLEX Options are exchange-traded
options contracts with uniquely customizable terms. In general, an options contract is an agreement between a buyer and seller that gives the purchaser of the option the right to buy or sell a particular asset at a specified future date at an
agreed upon price, commonly known as the “strike price.” The reference assets for the Fund’s FLEX Options positions will include the S&P 500 Index, which is a large-capitalization, market-weighted, U.S.
equities index that tracks the price (excluding dividends) of 500 leading companies in leading industries of the U.S. economy, and certain exchange-traded funds (“ETFs”), as described further below.
The Collateral Portfolio may be invested in short-term fixed-income securities, including corporate bonds and other corporate debt securities,
asset-backed securities (“ABS”), securities issued by the U.S. Government or its agencies and instrumentalities, securities issued by non-U.S. governments or their agencies and instrumentalities, money
market securities and funds, other interest-bearing instruments, cash, ETFs that primarily invest in any of the foregoing instruments, options on ETFs and options box spreads. An options box spread is the combination of different options trades
that have offsetting spreads (e.g., purchases and sales on the same underlying instrument, such as an index or an ETF, but with different strike prices and/or expiration dates) for the purpose of
generating income. The Fund may invest in short-term fixed income securities or other instruments, including through ETFs, of any maturity and credit quality. The Fund will generally invest up to 35% of its net assets in one or more ETFs that
provide exposure to investment grade corporate bonds.
Due to the unique mechanics of the Fund’s strategy, the return an investor can expect to receive from an investment in the Fund has characteristics that
are distinct from the returns of many other investment vehicles. It is important that an investor understand these characteristics before making an investment in the Fund.
In seeking to achieve its investment objective, the Fund seeks to produce pre-determined outcomes (the “Outcomes”)
that are based upon the performance of the S&P 500 Index over a one-year period (the “Outcome Period”). The initial Outcome Period for the Fund is February 1, 2022 through January 31, 2023. Following
the initial Outcome Period, each subsequent Outcome Period will be a one-year period commencing upon the expiration of the prior Outcome Period. The Fund seeks to achieve the Outcomes by purchasing and writing (selling) FLEX Options to create
layers within the Fund’s portfolio. One layer is designed to produce returns that correlate to those of the S&P 500 Index for the Outcome Period at a declared rate (the “Par Up Rate”) if the S&P
500 Index experiences gains during that time, as described below. A separate layer is designed to produce returns that correlate to those of the S&P 500 Index for the Outcome Period that limit losses to
10% if the S&P 500 Index experiences losses during that time (the “Floor”). There is no guarantee that the Fund will be successful in its attempt to produce returns
that correlate to those of the S&P 500 Index at the Par Up Rate or limit losses to the amount of the Floor.
Milliman Financial Risk Management, LLC (“Milliman”), the investment adviser of the Fund, seeks to establish the
Floor by purchasing one put FLEX Option on the S&P 500 Index with a strike price that is 10% lower than the value of the S&P 500 Index at the beginning of the Outcome Period.
Milliman seeks to establish the Par Up Rate by purchasing long call FLEX Options on the S&P 500 Index with a strike price approximately equal to
the value of the S&P 500 Index at the beginning of the Outcome Period.
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Milliman purchases these FLEX Options with a portion of the Fund’s net assets plus (i) the cash received by utilizing FLEX Options to create a put
spread (the “Put Spread Strategy”) on fixed income securities and/or one or more ETFs that provide exposure to fixed income securities, and (ii) yield received from the Collateral Portfolio. Milliman seeks
to achieve the Put Spread Strategy for the Fund by writing a put FLEX Option on an underlying asset at a strike price at or lower than the underlying asset’s market price or current value at the beginning of the Outcome Period, and buying a put
FLEX Option on the same underlying asset at a lower strike price than the written put FLEX Option.
The Par Up Rate is the rate at which the Fund will seek to track any upside market performance of the S&P 500 Index. Milliman calculates the Par
Up Rate based upon (i) its evaluation of prevailing market conditions on the first day of the Outcome Period and (ii) the total number of long call FLEX Options on the S&P 500 Index that it is able to purchase at that time. As of the date of
this Prospectus, and assuming current market conditions persist, Milliman expects that the Par Up Rate will be between the below ranges (both gross and net of Fund fees and expenses). Any fees or expenses imposed by your variable product, and any
other expenses incurred by the Fund, will have the effect of further reducing the Par Up Rate. Once calculated, the Par Up Rate for a particular Outcome Period will not change during that Outcome Period;
however, in certain market conditions, the performance of the Collateral Portfolio and the Put Spread Strategy could reduce the impact of the Par Up Rate.
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Share Class
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Estimated Par Up Rate Ranges
(As of [___])
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|
|
Prior to Taking into Account Fund Fees and Expenses
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After Taking into Account Fund Fees and Expenses
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|
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Class 3
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[__]% and [__]%
|
[__]% and [__]%
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The Floor is only triggered if losses in the Fund’s S&P 500 Index exposure exceed 10% for the Outcome Period. If the S&P 500 Index decreases
in value by more than 10% during the Outcome Period, the Fund (and therefore investors in Shares) will not experience subsequent losses in the Fund’s S&P 500 Index exposure. However, the Fund (and therefore investors in Shares) will
experience the first 10% of losses in the Fund’s S&P 500 Index exposure on a one-to-one basis for the Outcome Period. The Fund seeks to limit losses against its S&P 500 Index exposure prior to taking into account any fees or expenses or
the performance of the Collateral Portfolio or the Put Spread Strategy. The Floor is not operative against losses in the Collateral Portfolio or the Put Spread Strategy. If the Collateral Portfolio and/or the
Put Spread Strategy experiences losses, it could have the effect of reducing the impact of, or completely eliminating, the Floor on the Fund’s S&P 500 Index exposure. In certain market conditions, the performance of the Collateral
Portfolio and/or the Put Spread Strategy could cause the Fund to significantly underperform the S&P 500 Index. The following table reflects the Floor both gross and net of Fund fees and expenses:
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Share Class
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Floor
(As of [___])
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|
|
Prior to Taking into Account Fund Fees and Expenses
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After Taking into Account Fund Fees and Expenses
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|
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Class 3
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10%
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[__]%
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The definitive Par Up Rate and Floor will be set forth on the Fund’s website. The Fund’s website will also provide information relating to the
Outcomes on a daily basis, including the Fund’s position relative to the Par Up Rate and the Floor. You may also contact your insurance company or other financial intermediary for more information.
Additionally, the Fund’s net asset value (“NAV”) will not increase or decrease at the same rate as the
S&P 500 Index because the Fund’s strategy relies upon the performance of the Collateral Portfolio and the Put Spread Strategy, in addition to the value of the Fund’s FLEX Options positions on the S&P 500 Index. While Milliman anticipates
that the Fund’s NAV will generally move in the same direction as the S&P 500 Index (meaning that the Fund’s NAV will generally increase if the S&P 500 Index experiences gains or decrease if the S&P 500 Index experiences losses,
subject to the Floor), the Fund’s NAV may not decrease at the same rate as the S&P 500 Index (especially when factoring in the performance of the Collateral Portfolio and the Put Spread Strategy) and will not increase at the same rate as the
S&P 500 Index (especially when factoring in the Par Up Rate and the performance of the Collateral
253
Portfolio and the Put Spread Strategy). Similarly, the amount of time remaining until the end of the Outcome Period also affects the impact of the Floor
on the Fund’s NAV, because the Floor may not be in full effect prior to the end of the Outcome Period.
The FLEX Options utilized in the Fund’s portfolio are each set to expire on the last day of the Outcome Period. The customizable nature of FLEX Options
will allow Milliman to select the strike price at which each FLEX Option will be exercised at the expiration of the FLEX Option term. At the commencement of the Outcome Period, Milliman will specifically select the strike price for each FLEX Option
in a manner designed to achieve the Outcomes when the FLEX Options are exercised on the final day of the Outcome Period, depending on the anticipated performance of the S&P 500 Index, the Collateral Portfolio and the Put Spread Strategy over
the duration of that Outcome Period.
The hypothetical graphical illustrations provided below are designed to illustrate the Outcomes based upon the
hypothetical performance of the S&P 500 Index for an investor who holds Shares for the entirety of the Outcome Period. The hypothetical graphical illustrations do not include any fees or expenses
imposed by your variable product or expenses incurred by the Fund, and do not reflect the performance of the Collateral Portfolio or the Put Spread Strategy. Additional hypothetical graphical representations of the Outcomes are provided in
“Additional Information About the Funds and the Risks of Investing.” There is no guarantee that the Fund will be successful in its attempt to achieve the Outcomes for the Outcome Period.
The following table contains hypothetical examples designed to illustrate the Outcomes the Fund seeks to
achieve over the Outcome Period, based upon the performance of the S&P 500 Index from (100)% to 100% after taking into account the Par Up Rate and the Floor, but prior to taking into account any fees or expenses or the performance of the
Collateral Portfolio or the Put Spread Strategy. The table is provided for illustrative purposes only and does not provide every possible performance scenario for Shares over the course of the Outcome Period. There is no guarantee that the Fund will be successful in its attempt to achieve the Outcomes for an Outcome
Period. The table is not intended to predict or project the performance of the FLEX Options or the Fund. Investors should not take this information as an assurance of the expected performance of the
S&P 500 Index or the Fund. Actual Fund performance will vary with fluctuations in the performance of the Collateral Portfolio and the Put Spread Strategy, in addition to the value of the Fund’s FLEX Options positions on the S&P
500 Index, during the Outcome Period, among other factors. The performance of the Collateral Portfolio and the Put Spread
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Strategy could significantly impact the performance of the Fund, which could prevent the Fund from achieving the
Outcomes that it seeks to produce. The table does not reflect any fees or expenses imposed by your variable product or expenses incurred by the Fund. If it did, the returns shown for the Fund would
be lower. Please refer to the Fund’s website, which provides updated information relating to this table on a daily basis throughout the Outcome Period. Please contact your insurance company or other financial intermediary for more information.
|
Index/Fund
|
Hypothetical Performance1
|
|||||||||||
|
S&P 500 Index Price Performance
|
(100)%
|
(50)%
|
(20)%
|
(10)%
|
(5)%
|
0%
|
5%
|
10%
|
15%
|
20%
|
50%
|
100%
|
|
Fund Performance at NAV
|
(10)%2
|
(10)%2
|
(10)%2
|
(10)%
|
(5)%
|
0%
|
3%3
|
6%3
|
9%3
|
12%3
|
33.5%3
|
60%3
|
| 1 |
Does not take into account any fees or expenses or the performance of the Collateral Portfolio or the Put Spread Strategy.
|
| 2 |
Reflects the impact of the Floor.
|
| 3 |
Reflects the impact of an assumed Par Up Rate of 60%.
|
Understanding Outcomes. The Outcomes the Fund seeks to achieve are measured based upon the
Fund’s NAV on the first day of the Outcome Period. The Outcome Period begins on the day Milliman transacts in the FLEX Options on behalf of the Fund, and ends on the day those FLEX Options expire. An investor who
purchases Shares after the commencement of the Outcome Period will likely have purchased Shares at a different NAV than the NAV on the first day of the Outcome Period (the NAV upon which the Outcomes are based) and may experience investment
outcomes very different from those the Fund seeks to achieve, especially when factoring in any fees or expenses or the performance of the Collateral Portfolio and the
Put Spread Strategy. An investor who redeems Shares prior to the end of the Outcome Period may also experience investment outcomes very different from those the Fund seeks to achieve. The Outcomes are designed with the expectation that an
investor will hold Shares on the day that Milliman transacts in the FLEX Options on behalf of the Fund, and on the day those FLEX Options expire. There is no guarantee that the Fund will be successful
in its attempt to achieve the Outcomes.
Understanding the Par Up Rate. Unlike other investment products, the potential returns an
investor can receive from an investment in the Fund are subject to the Par Up Rate. This means that if the S&P 500 Index experiences gains for the Outcome Period, an investor in the Fund will only experience
a percentage of those gains (equal to the Par Up Rate multiplied by the S&P 500 Index gains). Milliman calculates the Par Up Rate for each Outcome Period based upon (i) its evaluation of prevailing market conditions on the first day
of the Outcome Period and (ii) the total number of long call FLEX Options on the S&P 500 Index that it is able to purchase at that time. In certain market conditions, the performance of the Collateral
Portfolio and the Put Spread Strategy could reduce the impact of the Par Up Rate. An investor should consider the amount and impact of the Par Up Rate, and the Fund’s position relative to it, before investing in the Fund.
Understanding the Floor. The Floor that the Fund seeks to provide is only triggered if
losses in the Fund’s S&P 500 Index exposure exceed 10% for the Outcome Period. If an investor is considering purchasing Shares during the Outcome Period, and the Fund’s NAV has increased in value, then that
investor will be subject to additional losses before implementation of the Floor that the Fund seeks to provide. While the Fund seeks to produce returns that correlate to those of the S&P 500 Index for the Outcome Period that are
limited to 10% (prior to taking into account any fees or expenses or the performance of the Collateral Portfolio or the Put Spread Strategy) for investors who hold Shares for the entire Outcome Period, there is no guarantee it will successfully
do so. In addition, the Floor is not operative against losses in the Collateral Portfolio or the Put Spread Strategy. If the Collateral Portfolio and/or the Put Spread Strategy experiences losses, it could
have the effect of reducing the impact of, or completely eliminating, the Floor on the Fund’s S&P 500 Index exposure. In certain market conditions, the performance of the Collateral Portfolio and/or the Put Spread Strategy could cause the
Fund to significantly underperform the S&P 500 Index. Investors who purchase Shares at the beginning of the Outcome Period may lose their entire investment. Investors who purchase Shares after the Outcome Period has begun may also lose
their entire investment. An investment in the Fund is only appropriate for investors willing to bear those losses.
255
Fund Rebalance. Milliman implements the Fund’s strategy on an annual basis, seeking to
produce the Outcomes for an Outcome Period. On the last business day of any stated Outcome Period, all of the Fund’s existing FLEX Options, which includes those used to establish the Floor, the Par Up Rate
and the Put Spread Strategy, will expire and Milliman will transact in a new set of FLEX Options on the same business day, which will commence a new Outcome Period beginning the following business day. At
that same time, Milliman will also evaluate whether to make any adjustments to the Collateral Portfolio. Accordingly, Shares can be held indefinitely if investors determine to participate in additional Outcome Periods.
Approximately one week prior to the end of each Outcome Period, the Fund will file a prospectus supplement, which will notify existing investors of
(i) the date on which the existing Outcome Period will end; (ii) the date on which the new Outcome Period will commence; and (iii) the anticipated ranges of the Par Up Rate that will be used for the new Outcome Period. Immediately preceding the
commencement date of the new Outcome Period, the Fund will file a prospectus supplement disclosing the Fund’s final Par Up Rate (both gross and net of Fund fees and expenses) for the new Outcome Period. This information will also be available
online at www.[___________].com, and on your insurance company’s website. Please contact your insurance company or other financial intermediary for more information.
Fund Classification. The Fund is classified as “non-diversified” under the Investment
Company Act of 1940, as amended (the “1940 Act”).
Principal Risks
You could lose money by investing in the Fund. An investment in the Fund is not a deposit of a bank and is not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other governmental agency. There can be no assurance that the Fund’s investment objectives will be achieved.
Downside Loss Floor Risk. There can be no guarantee that the Fund will be successful in its strategy to limit
losses in the Fund’s S&P 500 Index exposure to a specified floor if the S&P 500 Index decreases in value over the Outcome Period. The Fund’s strategy is designed to produce returns that correlate to those of the S&P 500 Index at the
Par Up Rate, while limiting downside losses in the Fund’s S&P 500 Index exposure, if Shares are bought on the day on which Milliman transacts in the FLEX Options on behalf of the Fund and held until those FLEX Options expire at the end of
each Outcome Period. The success of the Floor also depends upon the performance of the Collateral Portfolio and the Put Spread Strategy. If the Collateral Portfolio and/or the Put Spread Strategy experiences
losses, it could have the effect of reducing the impact of, or completely eliminating, the Floor on the Fund’s S&P 500 Index exposure. In certain market conditions, the performance of the Collateral Portfolio and/or the Put Spread
Strategy could cause the Fund to significantly underperform the S&P 500 Index. Despite the intended Floor, an investor could lose their entire investment. In the event an investor purchases Shares after the date on which
Milliman transacted in the FLEX Options on behalf of the Fund, or redeems Shares prior to the expiration of those FLEX Options, the Floor that the Fund seeks to provide may not be available or fully applicable.
Risk of the Par Up Rate on Upside Returns. The Fund’s strategy is designed to produce returns that correlate
to those of the S&P 500 Index at the Par Up Rate if Shares are bought on the day on which Milliman transacts in the FLEX Options on behalf of the Fund and held until those FLEX Options expire at the end of the Outcome Period. Accordingly, the
Fund will not fully participate in any gains achieved by the S&P 500 Index. In addition, in the event an investor purchases Shares after the date on which Milliman transacted in the FLEX Options on behalf of the Fund, or redeems Shares prior
to the expiration of those FLEX Options, the returns realized by that investor may not match those that the Fund seeks to achieve pursuant to the Par Up Rate. In certain market conditions, the performance of
the Collateral Portfolio and the Put Spread Strategy could reduce the impact of the Par Up Rate. An investor should consider the amount and impact of the Par Up Rate, and the Fund’s position relative to it, before investing in the Fund.
Par Up Rate Change Risk. Because the Par Up Rate for each Outcome Period is calculated based upon (i)
Milliman’s evaluation of prevailing market conditions on the first day of the Outcome Period and (ii) the total number of long call FLEX Options on the S&P 500 Index that Milliman is able to purchase at that time, the Par Up
256
Rate may rise or fall from one Outcome Period to the next. Any change in the Par Up Rate could be significant and it is unlikely to remain the same for
consecutive Outcome Periods.
FLEX Options Risk. The Fund will transact in FLEX Options issued and guaranteed for settlement by the OCC. The
Fund bears the risk that the OCC will be unable or unwilling to perform its obligations under the FLEX Options contracts, which could result in significant losses to the Fund. In less liquid markets, terminating a FLEX Option may require the
payment of a premium or acceptance of a discounted price, and may take longer to complete. In addition, a less liquid trading market may adversely impact the value of the Fund’s FLEX Options and therefore the NAV of the Fund. In addition, the value
of the Fund’s FLEX Options positions is not anticipated to increase or decrease at the same rate as the reference asset; and while it is anticipated that they will generally move in the same direction, it is possible that they may move in different
directions. Certain FLEX Options positions may also expire worthless. The use of FLEX Options involves leverage, which can cause the Fund’s portfolio to be more volatile than if the portfolio had not been leveraged. Leverage can significantly
magnify the effect of price movements of the reference asset, disproportionately increasing the Fund’s losses and reducing the Fund’s opportunities for gains when the reference asset changes in unexpected ways. In some instances, such leverage
could result in losses that exceed the original amount invested.
Investment Objective and Outcomes Risk. There is no guarantee that the Fund will be successful in its attempt
to achieve its investment objective and/or the Outcomes, and an investor could lose some or all of their investment in the Fund. Certain circumstances under which the Fund might not achieve its objective and/or the Outcomes include, but are not
limited to (i) if the Fund disposes of FLEX Options, (ii) if the Fund is unable to maintain the proportional relationship based on the number of FLEX Options in the Fund’s portfolio, (iii) significant accrual of Fund expenses in connection with
effecting the Fund’s principal investment strategy, (iv) losses incurred by the Fund’s holdings in the Collateral Portfolio and/or losses resulting from the Put Spread Strategy, or (iv) adverse tax law changes affecting the treatment of FLEX
Options.
Tax Risk. The Fund intends to elect, and to qualify each year, to be treated as a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”). As a RIC, the Fund will not be subject to U.S. federal income tax on the portion
of its net investment income and net capital gain that it distributes to shareholders, provided that it satisfies certain requirements of the Code. To maintain its status as a RIC, the Fund must meet certain income, diversification and
distributions tests. For purposes of the diversification test, the identification of the issuer (or, in some cases, issuers) of a particular Fund investment can depend on the terms and conditions of that investment. In particular, there is no
published IRS guidance or case law on how to determine the “issuer” of certain derivatives that the Fund will enter into and the Fund has not received a private letter ruling on this point. Therefore, there is a risk that the Fund will not meet the
Code’s diversification requirements and will not qualify, or will be disqualified, as a RIC. If the Fund does not qualify as a RIC for any taxable year and certain relief provisions are not available, the Fund’s taxable income will be subject to
tax at the Fund level and to a further tax at the shareholder level when such income is distributed.
The Fund also intends to comply with the diversification requirements of Section 817(h) of the Code, and the regulations thereunder, relating to the
tax-deferred status of variable accounts that are based on insurance company separate accounts (referred to as “segregated asset accounts” for federal income tax purposes). These diversification requirements apply in addition to the RIC
diversification requirements discussed above. There also is no published guidance or case law on how to determine the “issuer” of the derivatives referred to above for purposes of the diversification requirements of Section 817(h) of the Code and
the Fund has not received a private letter ruling on this point. If these requirements are not met, or under other circumstances, such as if the Fund does not qualify as a RIC for any taxable year, it is possible that the contract owners (rather
than the insurance company) will be treated for federal income tax purposes as the taxable owners of the assets held by the segregated asset accounts.
Clearing Member Default Risk. The Fund will hold FLEX Options through accounts at members of clearing houses (“clearing members”) rather than a bank or a broker. Assets deposited by the Fund with any clearing member as margin for its FLEX Options positions may, in certain circumstances, be used to satisfy losses of other
clients of the Fund’s clearing member where such assets may be held in commingled omnibus accounts. In addition, although clearing members guarantee performance of their clients’ obligations to the clearing house, there is a risk that the assets of
the Fund might not be fully protected in the event of the clearing member’s bankruptcy, as the Fund would
257
be limited to recovering only a pro rata share of all available funds segregated on behalf of the clearing
member’s customers for the relevant account class.
Debt Securities Risk. The prices of debt securities will be affected by changes in interest rates, the
creditworthiness of the issuer and other factors. These risks could affect the value of investments in which the Fund invests, possibly causing the Fund’s NAV to be reduced and fluctuate more than other types of investments. During periods of
falling interest rates, an issuer of a callable bond may repay the security before its stated maturity, and the Fund may have to reinvest the proceeds in securities with lower yields, which would result in a decline in the Fund’s income, or in
securities with greater risks or with other less favorable features. Changing interest rates, including rates that fall below zero, may have unpredictable effects on markets, result in heightened market volatility and detract from the Fund’s
performance to the extent the Fund is exposed to such interest rates. An increase in interest rates will generally cause the value of fixed-income securities held by the Fund to decline, may lead to heightened volatility in the fixed-income
markets and may adversely affect the liquidity of certain fixed-income investments, including those held by the Fund. Risks associated with rising interest rates are heightened given that interest rates in the U.S. are near historic lows.
Adjustable-rate instruments also react to interest rate changes in a similar manner, although generally to a lesser degree (depending, however, on the characteristics of the reset terms, including the index chosen, frequency of reset and reset
caps or floors, among other factors). Interest rate sensitivity is generally more pronounced and less predictable in instruments with uncertain payment or prepayment schedules and also for those with longer maturities.
Foreign Securities and Credit Exposure Risk. U.S. dollar-denominated securities carrying foreign credit exposure
may be affected by unfavorable political, economic or governmental developments that could affect payments of principal and interest. Furthermore, the value of the Fund’s foreign investments (whether direct or indirect) may be adversely affected by
political and social instability in their home countries, by changes in economic or taxation policies in those countries, or by the difficulty in enforcing obligations in those countries. Foreign companies generally may be subject to less stringent
regulations than U.S. companies, including financial reporting requirements and auditing and accounting controls. As a result, there generally is less publicly available information about foreign companies than about U.S. companies. Trading in many
foreign securities may be less liquid and more volatile than U.S. securities due to the size of the market or other factors.
U.S. Government Securities Risk. U.S. Government securities are subject to interest rate risk but generally do
not involve the credit risks associated with investments in other types of debt securities. As a result, the yields available from U.S. Government securities are generally lower than the yields available from other debt securities. U.S. Government
securities are guaranteed only as to the timely payment of interest and the payment of principal when held to maturity. While securities issued or guaranteed by U.S. federal government agencies are backed by the full faith and credit of the U.S.
Department of the Treasury, securities issued by government sponsored entities are solely the obligation of the issuer and generally do not carry any guarantee from the U.S. Government.
ABS Risk. ABS are subject to the general debt securities risks described above. In addition, ABS may be less
liquid than other bonds, and may be more sensitive than other bonds to the market’s perception of issuers and creditworthiness of payees, which may result in the Fund experiencing difficulty selling or valuing these securities. ABS markets have
experienced extraordinary weakness and volatility at various times in recent years, and may decline quickly in the event of a substantial economic or market downturn. Accordingly, these securities may be subject to greater risk of default during
periods of economic downturn than other securities, which could result in possible losses to the Fund.
Issuer Risk. The performance of the Fund depends on the performance of individual securities to which the Fund
has exposure. The Fund may be adversely affected if an issuer of underlying securities held by the Fund is unable or unwilling to repay principal or interest when due. Changes in the financial condition or credit rating of an issuer of those
securities may cause the value of the securities to decline.
Management Risk. The Fund is subject to management risk because it is an actively managed portfolio. Milliman
will apply investment techniques and risk analyses in making investment decisions for the Fund, but there can be no guarantee that the Fund will meet its investment objective and/or the Outcomes. In addition, Milliman does not use defensive
strategies or attempt to reduce the Fund’s exposures to poor performing positions during an Outcome Period. This differs from funds that are managed to seek to outperform a benchmark index. Therefore, in the event
258
of a general market decline, the Fund’s value may fall more than the value of another fund that does attempt to hedge against such market declines.
Market Risk. The Fund could lose money over short periods due to short-term market movements and over longer
periods during more prolonged market downturns. Assets may decline in value due to factors affecting financial markets generally or particular asset classes or industries represented in the markets. The value of a FLEX Option or other asset may
also decline due to general market conditions, economic trends or events that are not specifically related to the issuer of the security or other asset, or due to factors that affect a particular issuer, country, region, market, industry, sector or
asset class.
Non-Diversification Risk. The Fund may invest a relatively high percentage of its assets in a limited number of
issuers. As a result, the Fund may be more susceptible to a single adverse economic or regulatory occurrence affecting one or more of these issuers, experience increased volatility and be highly invested in certain issuers.
Large Shareholder Risk. At times, the Fund may experience adverse effects when certain large shareholders,
including insurance company separate accounts, redeem large amounts of shares of the Fund. Large redemptions may cause the Fund to sell portfolio holdings at times when it would not otherwise do so and may increase transaction costs and/or result
in an increase to the Fund’s expense ratio. A large redemption could be detrimental to the Fund and its remaining shareholders.
Risks of Investing in ETFs. In addition to the risks associated with the underlying assets held by the ETFs in
which the Fund invests, investments in ETFs are also subject to the following additional risks: (i) only authorized participants may engage in transactions directly with ETFs but none are obligated to do so, which could result in an ETF’s shares
trading at a premium or discount to its NAV or possibly face trading halts or delisting; (ii) certain ETFs seek to track the performance of an underlying index and will not attempt to take defensive positions under any market conditions, including
declining markets, which could result in losses; and (iii) because ETF shares trade on the secondary market, there is not guarantee that an active market will be developed or maintained, which could result in the ETF’s shares trading at a premium
or discount to its NAV. Investments in ETFs may involve duplication of management fees and certain other expenses, as the Fund indirectly bears its proportionate share of any expenses paid by the ETFs in which it invests.
Risks of Investing in Money Market Funds. Money market funds seek to preserve the value of
shareholder investments at $1.00 per share, but shareholders, such as the Fund, may still lose money by investing in such funds. In addition, a money market fund may impose a fee upon the sale of its shares or may temporarily suspend the ability to
sell shares if the fund’s liquidity falls below required minimums because of market conditions or other factors. The credit quality of a money market fund’s holdings can change rapidly in certain markets, and the default of a single holding could
have an adverse impact on the fund’s share price. A money market fund’s share price can also be negatively affected during periods of high redemption pressures, illiquid markets, and/or significant market volatility.
Performance
As of the date of this Prospectus, the Fund has not commenced operations and therefore does not have a performance history. Once available, the Fund’s
performance information will be accessible online at www.[________].com and will provide some indication of the risks of investing in the Fund.
Management
Investment Adviser
Milliman Financial Risk Management LLC (“Milliman”) serves as investment adviser to the Fund.
259
Portfolio Managers
The following persons serve as portfolio managers of the Fund.
|
●
|
Robert T. Cummings, Principal & Head of Portfolio Management at Milliman.
|
|
●
|
Maria Schiopu, Principal & Head of Portfolio Management at Milliman.
|
|
●
|
Jeff Greco, Principal & Head of Strategy Research at Milliman.
|
|
●
|
Jordan Rosenfeld, Portfolio Manager at Milliman.
|
Each portfolio manager is jointly and primarily responsible for the day-to-day management of the Fund’s portfolio and has served in such capacity
since the Fund’s inception in 2021.
Purchase and Sale of Shares
Shares are available as underlying investment options for variable insurance contracts and variable life insurance policies (each, a “variable contract,” and, collectively, the “variable contracts”) issued by insurance companies. These insurance companies are the record owners of the separate accounts
holding the Shares. You do not buy, sell or exchange Shares directly; rather, you choose investment options through your variable contracts. The insurance companies then cause the separate accounts to purchase and redeem Shares according to
the investment options you choose.
Tax Information
The dividends and distributions paid by the Fund to the insurance company separate accounts will consist of ordinary income, capital gains, or some
combination of both. Because Shares must be purchased through separate accounts used to fund variable contracts, such dividends and distributions will be exempt from current taxation by owners of variable contracts (each, a “contract owner,” and, collectively “contract owners”) if left to accumulate within a separate account. Consult the variable contract prospectus for additional tax
information.
Payments to Insurance Companies and Other Financial Intermediaries
If you allocate contract value to the Fund through an insurance company or other financial intermediary, the Fund, Milliman, the Fund’s distributor or
their related companies may pay the insurance company and/or its affiliates or other intermediary for the sale of Shares and related services. These payments may create a conflict of interest by influencing the insurance company or other
intermediary and your salesperson to recommend an indirect investment in the Fund over another investment. The prospectus or other disclosure documents for the variable contracts may contain additional information about these payments, if any.
You may also ask your salesperson or financial intermediary, or visit your financial intermediary’s website, for more information.
260
Fund Summary: Milliman S&P 500 1-Year Floor with Par Up Fund – Mar
Investment Objective
The Fund seeks to provide exposure to the S&P 500 Index, while limiting losses associated with S&P 500 Index performance to 10% and
participating in S&P 500 Index gains at a declared rate, prior to taking into account any fees or expenses or the performance of any fixed income exposure included in the Fund’s portfolio, over the period from March 1, 2022 through February
28, 2023.
Fees and Expenses of the Fund
This table describes the fees and expenses that you may pay if you buy, hold and sell shares of the Fund (“Shares”).
This table and the example below do not include any fees or sales charges imposed by your variable product. If they were included, the expenses listed below would be higher.
Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment)
|
Class 3
|
|
|
Management Fees
|
0.49%
|
|
Distribution and Service (12b-1) Fees
|
0.25%
|
|
Other Expenses(1)
|
0.50%
|
|
Acquired Fund Fees and Expenses(1)
|
[_.__]%
|
|
Total Annual Fund Operating Expenses
|
1.24%
|
|
Fee Waiver and/or Expense Reimbursement(2)(3)
|
(0.25)%
|
|
Total Annual Fund Operating Expenses After Fee Waiver and/or Expense Reimbursement
|
0.99%
|
|
(1)
|
“Other Expenses” and “Acquired Fund Fees and Expenses” are based on estimated amounts for the current fiscal year.
|
|
(2)
|
The Fund’s investment adviser, Milliman Financial Risk Management LLC (“Milliman”), has contractually
agreed to waive advisory fees and/or reimburse expenses to the extent necessary to limit the Fund’s total annual Fund operating expenses (excluding taxes, interest, brokerage fees and commissions, Rule 12b-1 fees, acquired fund fees and
expenses, short-sale dividend expenses, administrative services fees, other expenses that are capitalized in accordance with generally accepted accounting principles, and extraordinary or non-routine expenses not incurred in the
ordinary course of the Fund’s business) to 0.74% of the Fund's average daily net assets (the “Expense Limitation Agreement”) until at least November 1, 2022. During its term, the Expense
Limitation Agreement cannot be terminated or amended to increase the applicable limit without approval of the Board of Trustees of the Trust (the “Board”). Milliman may recoup from the Fund any
advisory fees waived or expenses reimbursed pursuant to the Expense Limitation Agreement for a period of three years from the date on which such waiver or reimbursement occurred; provided, however, that such recoupment shall not be made
if it would cause the Fund’s total annual Fund operating expenses to exceed the lesser of (a) the expense limitation in effect at the time of the reimbursement, or (b) the expense limitation in effect at the time of recoupment, if any.
|
|
(3)
|
In addition to the Expense Limitation Agreement, Milliman has contractually agreed to waive its advisory fees in an amount equal to the Fund’s
acquired fund fees and expenses until at least November 1, 2022 (the “Fee Waiver”). This contract cannot be terminated or modified without the consent of the Board.
|
Example
This example is intended to help you compare the cost of investing in the Fund with the cost of investing in other funds. This example assumes that you
invest $10,000 in the Fund for the time periods indicated and then sell all of your Shares at the end of those periods. This example also assumes that your investment has a 5% return each year and that the Fund’s operating expenses remain at
current levels and that the Expense Limitation Agreement and Fee Waiver remain in place for their contractual periods. Although your actual costs may be higher or lower, your costs, based on these assumptions, would be:
|
1 Year
|
3 Years
|
|
|
Class 3
|
$104
|
$384
|
This example does not include any fees or sales charges imposed by your variable product. If they were included, the expenses listed above would be
higher.
261
Portfolio Turnover
The Fund pays transaction costs, such as commissions, when it purchases and sells securities (or “turns over” its portfolio). A higher portfolio turnover
will cause the Fund to incur additional transaction costs. These costs, which are not reflected in Total Annual Fund Operating Expenses or in the example, may affect the Fund’s performance. Because the Fund has not yet commenced investment
operations, no portfolio turnover information is available at this time.
Principal Investment Strategies
The Fund seeks to achieve its investment objective by transacting in FLexible EXchange® Options (“FLEX Options”)
and by separately maintaining a collateral portfolio (the “Collateral Portfolio”), which is designed primarily to serve as margin or collateral for the Fund’s FLEX Options positions and secondarily to
enhance the Fund’s upside S&P 500 Index FLEX Options’ exposure (i.e., by utilizing anticipated income to measure the ability to purchase additional FLEX Options). FLEX Options are exchange-traded
options contracts with uniquely customizable terms. In general, an options contract is an agreement between a buyer and seller that gives the purchaser of the option the right to buy or sell a particular asset at a specified future date at an
agreed upon price, commonly known as the “strike price.” The reference assets for the Fund’s FLEX Options positions will include the S&P 500 Index, which is a large-capitalization, market-weighted, U.S.
equities index that tracks the price (excluding dividends) of 500 leading companies in leading industries of the U.S. economy, and certain exchange-traded funds (“ETFs”), as described further below.
The Collateral Portfolio may be invested in short-term fixed-income securities, including corporate bonds and other corporate debt securities,
asset-backed securities (“ABS”), securities issued by the U.S. Government or its agencies and instrumentalities, securities issued by non-U.S. governments or their agencies and instrumentalities, money
market securities and funds, other interest-bearing instruments, cash, ETFs that primarily invest in any of the foregoing instruments, options on ETFs and options box spreads. An options box spread is the combination of different options trades
that have offsetting spreads (e.g., purchases and sales on the same underlying instrument, such as an index or an ETF, but with different strike prices and/or expiration dates) for the purpose of
generating income. The Fund may invest in short-term fixed income securities or other instruments, including through ETFs, of any maturity and credit quality. The Fund will generally invest up to 35% of its net assets in one or more ETFs that
provide exposure to investment grade corporate bonds.
Due to the unique mechanics of the Fund’s strategy, the return an investor can expect to receive from an investment in the Fund has characteristics that
are distinct from the returns of many other investment vehicles. It is important that an investor understand these characteristics before making an investment in the Fund.
In seeking to achieve its investment objective, the Fund seeks to produce pre-determined outcomes (the “Outcomes”)
that are based upon the performance of the S&P 500 Index over a one-year period (the “Outcome Period”). The initial Outcome Period for the Fund is March 1, 2022 through February 28, 2023. Following the
initial Outcome Period, each subsequent Outcome Period will be a one-year period commencing upon the expiration of the prior Outcome Period. The Fund seeks to achieve the Outcomes by purchasing and writing (selling) FLEX Options to create layers
within the Fund’s portfolio. One layer is designed to produce returns that correlate to those of the S&P 500 Index for the Outcome Period at a declared rate (the “Par Up Rate”) if the S&P 500 Index
experiences gains during that time, as described below. A separate layer is designed to produce returns that correlate to those of the S&P 500 Index for the Outcome Period that limit losses to 10% if the
S&P 500 Index experiences losses during that time (the “Floor”). There is no guarantee that the Fund will be successful in its attempt to produce returns that
correlate to those of the S&P 500 Index at the Par Up Rate or limit losses to the amount of the Floor.
Milliman Financial Risk Management, LLC (“Milliman”), the investment adviser of the Fund, seeks to establish the
Floor by purchasing one put FLEX Option on the S&P 500 Index with a strike price that is 10% lower than the value of the S&P 500 Index at the beginning of the Outcome Period.
Milliman seeks to establish the Par Up Rate by purchasing long call FLEX Options on the S&P 500 Index with a strike price approximately equal to
the value of the S&P 500 Index at the beginning of the Outcome Period. Milliman purchases these FLEX Options with a portion of the Fund’s net assets plus (i) the cash received by
262
utilizing FLEX Options to create a put spread (the “Put Spread Strategy”) on fixed income securities and/or
one or more ETFs that provide exposure to fixed income securities, and (ii) yield received from the Collateral Portfolio. Milliman seeks to achieve the Put Spread Strategy for the Fund by writing a put FLEX Option on an underlying asset at a
strike price at or lower than the underlying asset’s market price or current value at the beginning of the Outcome Period, and buying a put FLEX Option on the same underlying asset at a lower strike price than the written put FLEX Option.
The Par Up Rate is the rate at which the Fund will seek to track any upside market performance of the S&P 500 Index. Milliman calculates the Par
Up Rate based upon (i) its evaluation of prevailing market conditions on the first day of the Outcome Period and (ii) the total number of long call FLEX Options on the S&P 500 Index that it is able to purchase at that time. As of the date of
this Prospectus, and assuming current market conditions persist, Milliman expects that the Par Up Rate will be between the below ranges (both gross and net of Fund fees and expenses). Any fees or expenses imposed by your variable product, and any
other expenses incurred by the Fund, will have the effect of further reducing the Par Up Rate. Once calculated, the Par Up Rate for a particular Outcome Period will not change during that Outcome Period;
however, in certain market conditions, the performance of the Collateral Portfolio and the Put Spread Strategy could reduce the impact of the Par Up Rate.
|
Share Class
|
Estimated Par Up Rate Ranges
(As of [___])
|
|
|
Prior to Taking into Account Fund Fees and Expenses
|
After Taking into Account Fund Fees and Expenses
|
|
|
Class 3
|
[__]% and [__]%
|
[__]% and [__]%
|
The Floor is only triggered if losses in the Fund’s S&P 500 Index exposure exceed 10% for the Outcome Period. If the S&P 500 Index decreases
in value by more than 10% during the Outcome Period, the Fund (and therefore investors in Shares) will not experience subsequent losses in the Fund’s S&P 500 Index exposure. However, the Fund (and therefore investors in Shares) will
experience the first 10% of losses in the Fund’s S&P 500 Index exposure on a one-to-one basis for the Outcome Period. The Fund seeks to limit losses against its S&P 500 Index exposure prior to taking into account any fees or expenses or
the performance of the Collateral Portfolio or the Put Spread Strategy. The Floor is not operative against losses in the Collateral Portfolio or the Put Spread Strategy. If the Collateral Portfolio and/or the
Put Spread Strategy experiences losses, it could have the effect of reducing the impact of, or completely eliminating, the Floor on the Fund’s S&P 500 Index exposure. In certain market conditions, the performance of the Collateral
Portfolio and/or the Put Spread Strategy could cause the Fund to significantly underperform the S&P 500 Index. The following table reflects the Floor both gross and net of Fund fees and expenses:
|
Share Class
|
Floor
(As of [___])
|
|
|
Prior to Taking into Account Fund Fees and Expenses
|
After Taking into Account Fund Fees and Expenses
|
|
|
Class 3
|
10%
|
[__]%
|
The definitive Par Up Rate and Floor will be set forth on the Fund’s website. The Fund’s website will also provide information relating to the
Outcomes on a daily basis, including the Fund’s position relative to the Par Up Rate and the Floor. You may also contact your insurance company or other financial intermediary for more information.
Additionally, the Fund’s net asset value (“NAV”) will not increase or decrease at the same rate as the
S&P 500 Index because the Fund’s strategy relies upon the performance of the Collateral Portfolio and the Put Spread Strategy, in addition to the value of the Fund’s FLEX Options positions on the S&P 500 Index. While Milliman anticipates
that the Fund’s NAV will generally move in the same direction as the S&P 500 Index (meaning that the Fund’s NAV will generally increase if the S&P 500 Index experiences gains or decrease if the S&P 500 Index experiences losses,
subject to the Floor), the Fund’s NAV may not decrease at the same rate as the S&P 500 Index (especially when factoring in the performance of the Collateral Portfolio and the Put Spread Strategy) and will not increase at the same rate as the
S&P 500 Index (especially when factoring in the Par Up Rate and the performance of the Collateral Portfolio and the Put Spread Strategy). Similarly, the amount of time remaining until the end of the Outcome Period
263
also affects the impact of the Floor on the Fund’s NAV, because the Floor may not be in full effect prior to the end of the Outcome Period.
The FLEX Options utilized in the Fund’s portfolio are each set to expire on the last day of the Outcome Period. The customizable nature of FLEX Options
will allow Milliman to select the strike price at which each FLEX Option will be exercised at the expiration of the FLEX Option term. At the commencement of the Outcome Period, Milliman will specifically select the strike price for each FLEX Option
in a manner designed to achieve the Outcomes when the FLEX Options are exercised on the final day of the Outcome Period, depending on the anticipated performance of the S&P 500 Index, the Collateral Portfolio and the Put Spread Strategy over
the duration of that Outcome Period.
The hypothetical graphical illustrations provided below are designed to illustrate the Outcomes based upon the
hypothetical performance of the S&P 500 Index for an investor who holds Shares for the entirety of the Outcome Period. The hypothetical graphical illustrations do not include any fees or expenses
imposed by your variable product or expenses incurred by the Fund, and do not reflect the performance of the Collateral Portfolio or the Put Spread Strategy. Additional hypothetical graphical representations of the Outcomes are provided in
“Additional Information About the Funds and the Risks of Investing.” There is no guarantee that the Fund will be successful in its attempt to achieve the Outcomes for the Outcome Period.
The following table contains hypothetical examples designed to illustrate the Outcomes the Fund seeks to
achieve over the Outcome Period, based upon the performance of the S&P 500 Index from (100)% to 100% after taking into account the Par Up Rate and the Floor, but prior to taking into account any fees or expenses or the performance of the
Collateral Portfolio or the Put Spread Strategy. The table is provided for illustrative purposes only and does not provide every possible performance scenario for Shares over the course of the Outcome Period. There is no guarantee that the Fund will be successful in its attempt to achieve the Outcomes for an Outcome
Period. The table is not intended to predict or project the performance of the FLEX Options or the Fund. Investors should not take this information as an assurance of the expected performance of the
S&P 500 Index or the Fund. Actual Fund performance will vary with fluctuations in the performance of the Collateral Portfolio and the Put Spread Strategy, in addition to the value of the Fund’s FLEX Options positions on the S&P
500 Index, during the Outcome Period, among other factors. The performance of the Collateral Portfolio and the Put Spread Strategy could significantly impact the performance
of the Fund, which could prevent the Fund from
264
achieving the Outcomes that it seeks to produce. The table does not reflect
any fees or expenses imposed by your variable product or expenses incurred by the Fund. If it did, the returns shown for the Fund would be lower. Please refer to the Fund’s website, which provides updated information relating to this table on a
daily basis throughout the Outcome Period. Please contact your insurance company or other financial intermediary for more information.
|
Index/Fund
|
Hypothetical Performance1
|
|||||||||||
|
S&P 500 Index Price Performance
|
(100)%
|
(50)%
|
(20)%
|
(10)%
|
(5)%
|
0%
|
5%
|
10%
|
15%
|
20%
|
50%
|
100%
|
|
Fund Performance at NAV
|
(10)%2
|
(10)%2
|
(10)%2
|
(10)%
|
(5)%
|
0%
|
3%3
|
6%3
|
9%3
|
12%3
|
33.5%3
|
60%3
|
| 1 |
Does not take into account any fees or expenses or the performance of the Collateral Portfolio or the Put Spread Strategy.
|
| 2 |
Reflects the impact of the Floor.
|
| 3 |
Reflects the impact of an assumed Par Up Rate of 60%.
|
Understanding Outcomes. The Outcomes the Fund seeks to achieve are measured based upon the
Fund’s NAV on the first day of the Outcome Period. The Outcome Period begins on the day Milliman transacts in the FLEX Options on behalf of the Fund, and ends on the day those FLEX Options expire. An investor who
purchases Shares after the commencement of the Outcome Period will likely have purchased Shares at a different NAV than the NAV on the first day of the Outcome Period (the NAV upon which the Outcomes are based) and may experience investment
outcomes very different from those the Fund seeks to achieve, especially when factoring in any fees or expenses or the performance of the Collateral Portfolio and the
Put Spread Strategy. An investor who redeems Shares prior to the end of the Outcome Period may also experience investment outcomes very different from those the Fund seeks to achieve. The Outcomes are designed with the expectation that an
investor will hold Shares on the day that Milliman transacts in the FLEX Options on behalf of the Fund, and on the day those FLEX Options expire. There is no guarantee that the Fund will be successful
in its attempt to achieve the Outcomes.
Understanding the Par Up Rate. Unlike other investment products, the potential returns an
investor can receive from an investment in the Fund are subject to the Par Up Rate. This means that if the S&P 500 Index experiences gains for the Outcome Period, an investor in the Fund will only experience
a percentage of those gains (equal to the Par Up Rate multiplied by the S&P 500 Index gains). Milliman calculates the Par Up Rate for each Outcome Period based upon (i) its evaluation of prevailing market conditions on the first day
of the Outcome Period and (ii) the total number of long call FLEX Options on the S&P 500 Index that it is able to purchase at that time. In certain market conditions, the performance of the Collateral
Portfolio and the Put Spread Strategy could reduce the impact of the Par Up Rate. An investor should consider the amount and impact of the Par Up Rate, and the Fund’s position relative to it, before investing in the Fund.
Understanding the Floor. The Floor that the Fund seeks to provide is only triggered if
losses in the Fund’s S&P 500 Index exposure exceed 10% for the Outcome Period. If an investor is considering purchasing Shares during the Outcome Period, and the Fund’s NAV has increased in value, then that
investor will be subject to additional losses before implementation of the Floor that the Fund seeks to provide. While the Fund seeks to produce returns that correlate to those of the S&P 500 Index for the Outcome Period that are
limited to 10% (prior to taking into account any fees or expenses or the performance of the Collateral Portfolio or the Put Spread Strategy) for investors who hold Shares for the entire Outcome Period, there is no guarantee it will successfully
do so. In addition, the Floor is not operative against losses in the Collateral Portfolio or the Put Spread Strategy. If the Collateral Portfolio and/or the Put Spread Strategy experiences losses, it could
have the effect of reducing the impact of, or completely eliminating, the Floor on the Fund’s S&P 500 Index exposure. In certain market conditions, the performance of the Collateral Portfolio and/or the Put Spread Strategy could cause the
Fund to significantly underperform the S&P 500 Index. Investors who purchase Shares at the beginning of the Outcome Period may lose their entire investment. Investors who purchase Shares after the Outcome Period has begun may also lose
their entire investment. An investment in the Fund is only appropriate for investors willing to bear those losses.
265
Fund Rebalance. Milliman implements the Fund’s strategy on an annual basis, seeking to
produce the Outcomes for an Outcome Period. On the last business day of any stated Outcome Period, all of the Fund’s existing FLEX Options, which includes those used to establish the Floor, the Par Up Rate
and the Put Spread Strategy, will expire and Milliman will transact in a new set of FLEX Options on the same business day, which will commence a new Outcome Period beginning the following business day. At
that same time, Milliman will also evaluate whether to make any adjustments to the Collateral Portfolio. Accordingly, Shares can be held indefinitely if investors determine to participate in additional Outcome Periods.
Approximately one week prior to the end of each Outcome Period, the Fund will file a prospectus supplement, which will notify existing investors of
(i) the date on which the existing Outcome Period will end; (ii) the date on which the new Outcome Period will commence; and (iii) the anticipated ranges of the Par Up Rate that will be used for the new Outcome Period. Immediately preceding the
commencement date of the new Outcome Period, the Fund will file a prospectus supplement disclosing the Fund’s final Par Up Rate (both gross and net of Fund fees and expenses) for the new Outcome Period. This information will also be available
online at www.[___________].com, and on your insurance company’s website. Please contact your insurance company or other financial intermediary for more information.
Fund Classification. The Fund is classified as “non-diversified” under the Investment
Company Act of 1940, as amended (the “1940 Act”).
Principal Risks
You could lose money by investing in the Fund. An investment in the Fund is not a deposit of a bank and is not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other governmental agency. There can be no assurance that the Fund’s investment objectives will be achieved.
Downside Loss Floor Risk. There can be no guarantee that the Fund will be successful in its strategy to limit
losses in the Fund’s S&P 500 Index exposure to a specified floor if the S&P 500 Index decreases in value over the Outcome Period. The Fund’s strategy is designed to produce returns that correlate to those of the S&P 500 Index at the
Par Up Rate, while limiting downside losses in the Fund’s S&P 500 Index exposure, if Shares are bought on the day on which Milliman transacts in the FLEX Options on behalf of the Fund and held until those FLEX Options expire at the end of
each Outcome Period. The success of the Floor also depends upon the performance of the Collateral Portfolio and the Put Spread Strategy. If the Collateral Portfolio and/or the Put Spread Strategy experiences
losses, it could have the effect of reducing the impact of, or completely eliminating, the Floor on the Fund’s S&P 500 Index exposure. In certain market conditions, the performance of the Collateral Portfolio and/or the Put Spread
Strategy could cause the Fund to significantly underperform the S&P 500 Index. Despite the intended Floor, an investor could lose their entire investment. In the event an investor purchases Shares after the date on which
Milliman transacted in the FLEX Options on behalf of the Fund, or redeems Shares prior to the expiration of those FLEX Options, the Floor that the Fund seeks to provide may not be available or fully applicable.
Risk of the Par Up Rate on Upside Returns. The Fund’s strategy is designed to produce returns that correlate
to those of the S&P 500 Index at the Par Up Rate if Shares are bought on the day on which Milliman transacts in the FLEX Options on behalf of the Fund and held until those FLEX Options expire at the end of the Outcome Period. Accordingly, the
Fund will not fully participate in any gains achieved by the S&P 500 Index. In addition, in the event an investor purchases Shares after the date on which Milliman transacted in the FLEX Options on behalf of the Fund, or redeems Shares prior
to the expiration of those FLEX Options, the returns realized by that investor may not match those that the Fund seeks to achieve pursuant to the Par Up Rate. In certain market conditions, the performance of
the Collateral Portfolio and the Put Spread Strategy could reduce the impact of the Par Up Rate. An investor should consider the amount and impact of the Par Up Rate, and the Fund’s position relative to it, before investing in the Fund.
Par Up Rate Change Risk. Because the Par Up Rate for each Outcome Period is calculated based upon (i)
Milliman’s evaluation of prevailing market conditions on the first day of the Outcome Period and (ii) the total number of long call FLEX Options on the S&P 500 Index that Milliman is able to purchase at that time, the Par Up
266
Rate may rise or fall from one Outcome Period to the next. Any change in the Par Up Rate could be significant and it is unlikely to remain the same
for consecutive Outcome Periods.
FLEX Options Risk. The Fund will transact in FLEX Options issued and guaranteed for settlement by the OCC. The
Fund bears the risk that the OCC will be unable or unwilling to perform its obligations under the FLEX Options contracts, which could result in significant losses to the Fund. In less liquid markets, terminating a FLEX Option may require the
payment of a premium or acceptance of a discounted price, and may take longer to complete. In addition, a less liquid trading market may adversely impact the value of the Fund’s FLEX Options and therefore the NAV of the Fund. In addition, the value
of the Fund’s FLEX Options positions is not anticipated to increase or decrease at the same rate as the reference asset; and while it is anticipated that they will generally move in the same direction, it is possible that they may move in different
directions. Certain FLEX Options positions may also expire worthless. The use of FLEX Options involves leverage, which can cause the Fund’s portfolio to be more volatile than if the portfolio had not been leveraged. Leverage can significantly
magnify the effect of price movements of the reference asset, disproportionately increasing the Fund’s losses and reducing the Fund’s opportunities for gains when the reference asset changes in unexpected ways. In some instances, such leverage
could result in losses that exceed the original amount invested.
Investment Objective and Outcomes Risk. There is no guarantee that the Fund will be successful in its attempt
to achieve its investment objective and/or the Outcomes, and an investor could lose some or all of their investment in the Fund. Certain circumstances under which the Fund might not achieve its objective and/or the Outcomes include, but are not
limited to (i) if the Fund disposes of FLEX Options, (ii) if the Fund is unable to maintain the proportional relationship based on the number of FLEX Options in the Fund’s portfolio, (iii) significant accrual of Fund expenses in connection with
effecting the Fund’s principal investment strategy, (iv) losses incurred by the Fund’s holdings in the Collateral Portfolio and/or losses resulting from the Put Spread Strategy, or (iv) adverse tax law changes affecting the treatment of FLEX
Options.
Tax Risk. The Fund intends to elect, and to qualify each year, to be treated as a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”). As a RIC, the Fund will not be subject to U.S. federal income tax on the portion
of its net investment income and net capital gain that it distributes to shareholders, provided that it satisfies certain requirements of the Code. To maintain its status as a RIC, the Fund must meet certain income, diversification and
distributions tests. For purposes of the diversification test, the identification of the issuer (or, in some cases, issuers) of a particular Fund investment can depend on the terms and conditions of that investment. In particular, there is no
published IRS guidance or case law on how to determine the “issuer” of certain derivatives that the Fund will enter into and the Fund has not received a private letter ruling on this point. Therefore, there is a risk that the Fund will not meet the
Code’s diversification requirements and will not qualify, or will be disqualified, as a RIC. If the Fund does not qualify as a RIC for any taxable year and certain relief provisions are not available, the Fund’s taxable income will be subject to
tax at the Fund level and to a further tax at the shareholder level when such income is distributed.
The Fund also intends to comply with the diversification requirements of Section 817(h) of the Code, and the regulations thereunder, relating to the
tax-deferred status of variable accounts that are based on insurance company separate accounts (referred to as “segregated asset accounts” for federal income tax purposes). These diversification requirements apply in addition to the RIC
diversification requirements discussed above. There also is no published guidance or case law on how to determine the “issuer” of the derivatives referred to above for purposes of the diversification requirements of Section 817(h) of the Code and
the Fund has not received a private letter ruling on this point. If these requirements are not met, or under other circumstances, such as if the Fund does not qualify as a RIC for any taxable year, it is possible that the contract owners (rather
than the insurance company) will be treated for federal income tax purposes as the taxable owners of the assets held by the segregated asset accounts.
Clearing Member Default Risk. The Fund will hold FLEX Options through accounts at members of clearing houses (“clearing members”) rather than a bank or a broker. Assets deposited by the Fund with any clearing member as margin for its FLEX Options positions may, in certain circumstances, be used to satisfy losses of other
clients of the Fund’s clearing member where such assets may be held in commingled omnibus accounts. In addition, although clearing members guarantee performance of their clients’ obligations to the clearing house, there is a risk that the assets of
the Fund might not be fully protected in the event of the clearing member’s bankruptcy, as the Fund would
267
be limited to recovering only a pro rata share of all available funds segregated on behalf of the clearing
member’s customers for the relevant account class.
Debt Securities Risk. The prices of debt securities will be affected by changes in interest rates, the
creditworthiness of the issuer and other factors. These risks could affect the value of investments in which the Fund invests, possibly causing the Fund’s NAV to be reduced and fluctuate more than other types of investments. During periods of
falling interest rates, an issuer of a callable bond may repay the security before its stated maturity, and the Fund may have to reinvest the proceeds in securities with lower yields, which would result in a decline in the Fund’s income, or in
securities with greater risks or with other less favorable features. Changing interest rates, including rates that fall below zero, may have unpredictable effects on markets, result in heightened market volatility and detract from the Fund’s
performance to the extent the Fund is exposed to such interest rates. An increase in interest rates will generally cause the value of fixed-income securities held by the Fund to decline, may lead to heightened volatility in the fixed-income markets
and may adversely affect the liquidity of certain fixed-income investments, including those held by the Fund. Risks associated with rising interest rates are heightened given that interest rates in the U.S. are near historic lows. Adjustable-rate
instruments also react to interest rate changes in a similar manner, although generally to a lesser degree (depending, however, on the characteristics of the reset terms, including the index chosen, frequency of reset and reset caps or floors,
among other factors). Interest rate sensitivity is generally more pronounced and less predictable in instruments with uncertain payment or prepayment schedules and also for those with longer maturities.
Foreign Securities and Credit Exposure Risk. U.S. dollar-denominated securities carrying foreign credit exposure
may be affected by unfavorable political, economic or governmental developments that could affect payments of principal and interest. Furthermore, the value of the Fund’s foreign investments (whether direct or indirect) may be adversely affected by
political and social instability in their home countries, by changes in economic or taxation policies in those countries, or by the difficulty in enforcing obligations in those countries. Foreign companies generally may be subject to less stringent
regulations than U.S. companies, including financial reporting requirements and auditing and accounting controls. As a result, there generally is less publicly available information about foreign companies than about U.S. companies. Trading in many
foreign securities may be less liquid and more volatile than U.S. securities due to the size of the market or other factors.
U.S. Government Securities Risk. U.S. Government securities are subject to interest rate risk but generally do
not involve the credit risks associated with investments in other types of debt securities. As a result, the yields available from U.S. Government securities are generally lower than the yields available from other debt securities. U.S. Government
securities are guaranteed only as to the timely payment of interest and the payment of principal when held to maturity. While securities issued or guaranteed by U.S. federal government agencies are backed by the full faith and credit of the U.S.
Department of the Treasury, securities issued by government sponsored entities are solely the obligation of the issuer and generally do not carry any guarantee from the U.S. Government.
ABS Risk. ABS are subject to the general debt securities risks described above. In addition, ABS may be less
liquid than other bonds, and may be more sensitive than other bonds to the market’s perception of issuers and creditworthiness of payees, which may result in the Fund experiencing difficulty selling or valuing these securities. ABS markets have
experienced extraordinary weakness and volatility at various times in recent years, and may decline quickly in the event of a substantial economic or market downturn. Accordingly, these securities may be subject to greater risk of default during
periods of economic downturn than other securities, which could result in possible losses to the Fund.
Issuer Risk. The performance of the Fund depends on the performance of individual securities to which the Fund
has exposure. The Fund may be adversely affected if an issuer of underlying securities held by the Fund is unable or unwilling to repay principal or interest when due. Changes in the financial condition or credit rating of an issuer of those
securities may cause the value of the securities to decline.
Management Risk. The Fund is subject to management risk because it is an actively managed portfolio. Milliman
will apply investment techniques and risk analyses in making investment decisions for the Fund, but there can be no guarantee that the Fund will meet its investment objective and/or the Outcomes. In addition, Milliman does not use defensive
strategies or attempt to reduce the Fund’s exposures to poor performing positions during an Outcome Period. This differs from funds that are managed to seek to outperform a benchmark index. Therefore, in the event
268
of a general market decline, the Fund’s value may fall more than the value of another fund that does attempt to hedge against such market declines.
Market Risk. The Fund could lose money over short periods due to short-term market movements and over longer
periods during more prolonged market downturns. Assets may decline in value due to factors affecting financial markets generally or particular asset classes or industries represented in the markets. The value of a FLEX Option or other asset may
also decline due to general market conditions, economic trends or events that are not specifically related to the issuer of the security or other asset, or due to factors that affect a particular issuer, country, region, market, industry, sector or
asset class.
Non-Diversification Risk. The Fund may invest a relatively high percentage of its assets in a limited number of
issuers. As a result, the Fund may be more susceptible to a single adverse economic or regulatory occurrence affecting one or more of these issuers, experience increased volatility and be highly invested in certain issuers.
Large Shareholder Risk. At times, the Fund may experience adverse effects when certain large shareholders,
including insurance company separate accounts, redeem large amounts of shares of the Fund. Large redemptions may cause the Fund to sell portfolio holdings at times when it would not otherwise do so and may increase transaction costs and/or result
in an increase to the Fund’s expense ratio. A large redemption could be detrimental to the Fund and its remaining shareholders.
Risks of Investing in ETFs. In addition to the risks associated with the underlying assets held by the ETFs in
which the Fund invests, investments in ETFs are also subject to the following additional risks: (i) only authorized participants may engage in transactions directly with ETFs but none are obligated to do so, which could result in an ETF’s shares
trading at a premium or discount to its NAV or possibly face trading halts or delisting; (ii) certain ETFs seek to track the performance of an underlying index and will not attempt to take defensive positions under any market conditions, including
declining markets, which could result in losses; and (iii) because ETF shares trade on the secondary market, there is not guarantee that an active market will be developed or maintained, which could result in the ETF’s shares trading at a premium
or discount to its NAV. Investments in ETFs may involve duplication of management fees and certain other expenses, as the Fund indirectly bears its proportionate share of any expenses paid by the ETFs in which it invests.
Risks of Investing in Money Market Funds. Money market funds seek to preserve the value of
shareholder investments at $1.00 per share, but shareholders, such as the Fund, may still lose money by investing in such funds. In addition, a money market fund may impose a fee upon the sale of its shares or may temporarily suspend the ability to
sell shares if the fund’s liquidity falls below required minimums because of market conditions or other factors. The credit quality of a money market fund’s holdings can change rapidly in certain markets, and the default of a single holding could
have an adverse impact on the fund’s share price. A money market fund’s share price can also be negatively affected during periods of high redemption pressures, illiquid markets, and/or significant market volatility.
Performance
As of the date of this Prospectus, the Fund has not commenced operations and therefore does not have a performance history. Once available, the Fund’s
performance information will be accessible online at www.[________].com and will provide some indication of the risks of investing in the Fund.
Management
Investment Adviser
Milliman Financial Risk Management LLC (“Milliman”) serves as investment adviser to the Fund.
269
Portfolio Managers
The following persons serve as portfolio managers of the Fund.
|
●
|
Robert T. Cummings, Principal & Head of Portfolio Management at Milliman.
|
|
●
|
Maria Schiopu, Principal & Head of Portfolio Management at Milliman.
|
|
●
|
Jeff Greco, Principal & Head of Strategy Research at Milliman.
|
|
●
|
Jordan Rosenfeld, Portfolio Manager at Milliman.
|
Each portfolio manager is jointly and primarily responsible for the day-to-day management of the Fund’s portfolio and has served in such capacity since
the Fund’s inception in 2021.
Purchase and Sale of Shares
Shares are available as underlying investment options for variable insurance contracts and variable life insurance policies (each, a “variable contract,” and, collectively, the “variable contracts”) issued by insurance companies. These insurance companies are the record owners of the separate accounts
holding the Shares. You do not buy, sell or exchange Shares directly; rather, you choose investment options through your variable contracts. The insurance companies then cause the separate accounts to purchase and redeem Shares according to
the investment options you choose.
Tax Information
The dividends and distributions paid by the Fund to the insurance company separate accounts will consist of ordinary income, capital gains, or some
combination of both. Because Shares must be purchased through separate accounts used to fund variable contracts, such dividends and distributions will be exempt from current taxation by owners of variable contracts (each, a “contract owner,” and, collectively “contract owners”) if left to accumulate within a separate account. Consult the variable contract prospectus for additional tax
information.
Payments to Insurance Companies and Other Financial Intermediaries
If you allocate contract value to the Fund through an insurance company or other financial intermediary, the Fund, Milliman, the Fund’s distributor or
their related companies may pay the insurance company and/or its affiliates or other intermediary for the sale of Shares and related services. These payments may create a conflict of interest by influencing the insurance company or other
intermediary and your salesperson to recommend an indirect investment in the Fund over another investment. The prospectus or other disclosure documents for the variable contracts may contain additional information about these payments, if any.
You may also ask your salesperson or financial intermediary, or visit your financial intermediary’s website, for more information.
270
Fund Summary: Milliman S&P 500 1-Year Floor with Par Up Fund – Apr
Investment Objective
The Fund seeks to provide exposure to the S&P 500 Index, while limiting losses associated with S&P 500 Index performance to 10% and
participating in S&P 500 Index gains at a declared rate, prior to taking into account any fees or expenses or the performance of any fixed income exposure included in the Fund’s portfolio, over the period from April 1, 2022 through March 31,
2023.
Fees and Expenses of the Fund
This table describes the fees and expenses that you may pay if you buy, hold and sell shares of the Fund (“Shares”).
This table and the example below do not include any fees or sales charges imposed by your variable product. If they were included, the expenses listed below would be higher.
Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment)
|
Class 3
|
|
|
Management Fees
|
0.49%
|
|
Distribution and Service (12b-1) Fees
|
0.25%
|
|
Other Expenses(1)
|
0.50%
|
|
Acquired Fund Fees and Expenses(1)
|
[_.__]%
|
|
Total Annual Fund Operating Expenses
|
1.24%
|
|
Fee Waiver and/or Expense Reimbursement(2)(3)
|
(0.25)%
|
|
Total Annual Fund Operating Expenses After Fee Waiver and/or Expense Reimbursement
|
0.99%
|
|
(1)
|
“Other Expenses” and “Acquired Fund Fees and Expenses” are based on estimated amounts for the current fiscal year.
|
|
(2)
|
The Fund’s investment adviser, Milliman Financial Risk Management LLC (“Milliman”), has contractually
agreed to waive advisory fees and/or reimburse expenses to the extent necessary to limit the Fund’s total annual Fund operating expenses (excluding taxes, interest, brokerage fees and commissions, Rule 12b-1 fees, acquired fund fees and
expenses, short-sale dividend expenses, administrative services fees, other expenses that are capitalized in accordance with generally accepted accounting principles, and extraordinary or non-routine expenses not incurred in the
ordinary course of the Fund’s business) to 0.74% of the Fund's average daily net assets (the “Expense Limitation Agreement”) until at least November 1, 2022. During its term, the Expense
Limitation Agreement cannot be terminated or amended to increase the applicable limit without approval of the Board of Trustees of the Trust (the “Board”). Milliman may recoup from the Fund any
advisory fees waived or expenses reimbursed pursuant to the Expense Limitation Agreement for a period of three years from the date on which such waiver or reimbursement occurred; provided, however, that such recoupment shall not be made
if it would cause the Fund’s total annual Fund operating expenses to exceed the lesser of (a) the expense limitation in effect at the time of the reimbursement, or (b) the expense limitation in effect at the time of recoupment, if any.
|
|
(3)
|
In addition to the Expense Limitation Agreement, Milliman has contractually agreed to waive its advisory fees in an amount equal to the Fund’s
acquired fund fees and expenses until at least November 1, 2022 (the “Fee Waiver”). This contract cannot be terminated or modified without the consent of the Board.
|
Example
This example is intended to help you compare the cost of investing in the Fund with the cost of investing in other funds. This example assumes that you
invest $10,000 in the Fund for the time periods indicated and then sell all of your Shares at the end of those periods. This example also assumes that your investment has a 5% return each year and that the Fund’s operating expenses remain at
current levels and that the Expense Limitation Agreement and Fee Waiver remain in place for their contractual periods. Although your actual costs may be higher or lower, your costs, based on these assumptions, would be:
|
1 Year
|
3 Years
|
|
|
Class 3
|
$104
|
$384
|
This example does not include any fees or sales charges imposed by your variable product. If they were included, the expenses listed above would be
higher.
271
Portfolio Turnover
The Fund pays transaction costs, such as commissions, when it purchases and sells securities (or “turns over” its portfolio). A higher portfolio turnover
will cause the Fund to incur additional transaction costs. These costs, which are not reflected in Total Annual Fund Operating Expenses or in the example, may affect the Fund’s performance. Because the Fund has not yet commenced investment
operations, no portfolio turnover information is available at this time.
Principal Investment Strategies
The Fund seeks to achieve its investment objective by transacting in FLexible EXchange® Options (“FLEX Options”)
and by separately maintaining a collateral portfolio (the “Collateral Portfolio”), which is designed primarily to serve as margin or collateral for the Fund’s FLEX Options positions and secondarily to
enhance the Fund’s upside S&P 500 Index FLEX Options’ exposure (i.e., by utilizing anticipated income to measure the ability to purchase additional FLEX Options). FLEX Options are exchange-traded
options contracts with uniquely customizable terms. In general, an options contract is an agreement between a buyer and seller that gives the purchaser of the option the right to buy or sell a particular asset at a specified future date at an
agreed upon price, commonly known as the “strike price.” The reference assets for the Fund’s FLEX Options positions will include the S&P 500 Index, which is a large-capitalization, market-weighted, U.S.
equities index that tracks the price (excluding dividends) of 500 leading companies in leading industries of the U.S. economy, and certain exchange-traded funds (“ETFs”), as described further below.
The Collateral Portfolio may be invested in short-term fixed-income securities, including corporate bonds and other corporate debt securities,
asset-backed securities (“ABS”), securities issued by the U.S. Government or its agencies and instrumentalities, securities issued by non-U.S. governments or their agencies and instrumentalities, money
market securities and funds, other interest-bearing instruments, cash, ETFs that primarily invest in any of the foregoing instruments, options on ETFs and options box spreads. An options box spread is the combination of different options trades
that have offsetting spreads (e.g., purchases and sales on the same underlying instrument, such as an index or an ETF, but with different strike prices and/or expiration dates) for the purpose of
generating income. The Fund may invest in short-term fixed income securities or other instruments, including through ETFs, of any maturity and credit quality. The Fund will generally invest up to 35% of its net assets in one or more ETFs that
provide exposure to investment grade corporate bonds.
Due to the unique mechanics of the Fund’s strategy, the return an investor can expect to receive from an investment in the Fund has characteristics that
are distinct from the returns of many other investment vehicles. It is important that an investor understand these characteristics before making an investment in the Fund.
In seeking to achieve its investment objective, the Fund seeks to produce pre-determined outcomes (the “Outcomes”)
that are based upon the performance of the S&P 500 Index over a one-year period (the “Outcome Period”). The initial Outcome Period for the Fund is April 1, 2022 through March 31, 2023. Following the
initial Outcome Period, each subsequent Outcome Period will be a one-year period commencing upon the expiration of the prior Outcome Period. The Fund seeks to achieve the Outcomes by purchasing and writing (selling) FLEX Options to create layers
within the Fund’s portfolio. One layer is designed to produce returns that correlate to those of the S&P 500 Index for the Outcome Period at a declared rate (the “Par Up Rate”) if the S&P 500 Index
experiences gains during that time, as described below. A separate layer is designed to produce returns that correlate to those of the S&P 500 Index for the Outcome Period that limit losses to 10% if the
S&P 500 Index experiences losses during that time (the “Floor”). There is no guarantee that the Fund will be successful in its attempt to produce returns that
correlate to those of the S&P 500 Index at the Par Up Rate or limit losses to the amount of the Floor.
Milliman Financial Risk Management, LLC (“Milliman”), the investment adviser of the Fund, seeks to establish the
Floor by purchasing one put FLEX Option on the S&P 500 Index with a strike price that is 10% lower than the value of the S&P 500 Index at the beginning of the Outcome Period.
Milliman seeks to establish the Par Up Rate by purchasing long call FLEX Options on the S&P 500 Index with a strike price approximately equal to
the value of the S&P 500 Index at the beginning of the Outcome Period. Milliman purchases these FLEX Options with a portion of the Fund’s net assets plus (i) the cash received by
272
utilizing FLEX Options to create a put spread (the “Put Spread Strategy”) on fixed income securities and/or
one or more ETFs that provide exposure to fixed income securities, and (ii) yield received from the Collateral Portfolio. Milliman seeks to achieve the Put Spread Strategy for the Fund by writing a put FLEX Option on an underlying asset at a
strike price at or lower than the underlying asset’s market price or current value at the beginning of the Outcome Period, and buying a put FLEX Option on the same underlying asset at a lower strike price than the written put FLEX Option.
The Par Up Rate is the rate at which the Fund will seek to track any upside market performance of the S&P 500 Index. Milliman calculates the Par
Up Rate based upon (i) its evaluation of prevailing market conditions on the first day of the Outcome Period and (ii) the total number of long call FLEX Options on the S&P 500 Index that it is able to purchase at that time. As of the date of
this Prospectus, and assuming current market conditions persist, Milliman expects that the Par Up Rate will be between the below ranges (both gross and net of Fund fees and expenses). Any fees or expenses imposed by your variable product, and any
other expenses incurred by the Fund, will have the effect of further reducing the Par Up Rate. Once calculated, the Par Up Rate for a particular Outcome Period will not change during that Outcome Period;
however, in certain market conditions, the performance of the Collateral Portfolio and the Put Spread Strategy could reduce the impact of the Par Up Rate.
|
Share Class
|
Estimated Par Up Rate Ranges
(As of [___])
|
|
|
Prior to Taking into Account Fund Fees and Expenses
|
After Taking into Account Fund Fees and Expenses
|
|
|
Class 3
|
[__]% and [__]%
|
[__]% and [__]%
|
The Floor is only triggered if losses in the Fund’s S&P 500 Index exposure exceed 10% for the Outcome Period. If the S&P 500 Index decreases
in value by more than 10% during the Outcome Period, the Fund (and therefore investors in Shares) will not experience subsequent losses in the Fund’s S&P 500 Index exposure. However, the Fund (and therefore investors in Shares) will
experience the first 10% of losses in the Fund’s S&P 500 Index exposure on a one-to-one basis for the Outcome Period. The Fund seeks to limit losses against its S&P 500 Index exposure prior to taking into account any fees or expenses or
the performance of the Collateral Portfolio or the Put Spread Strategy. The Floor is not operative against losses in the Collateral Portfolio or the Put Spread Strategy. If the Collateral Portfolio and/or the
Put Spread Strategy experiences losses, it could have the effect of reducing the impact of, or completely eliminating, the Floor on the Fund’s S&P 500 Index exposure. In certain market conditions, the performance of the Collateral
Portfolio and/or the Put Spread Strategy could cause the Fund to significantly underperform the S&P 500 Index. The following table reflects the Floor both gross and net of Fund fees and expenses:
|
Share Class
|
Floor
(As of [___])
|
|
|
Prior to Taking into Account Fund Fees and Expenses
|
After Taking into Account Fund Fees and Expenses
|
|
|
Class 3
|
10%
|
[__]%
|
The definitive Par Up Rate and Floor will be set forth on the Fund’s website. The Fund’s website will also provide information relating to the
Outcomes on a daily basis, including the Fund’s position relative to the Par Up Rate and the Floor. You may also contact your insurance company or other financial intermediary for more information.
Additionally, the Fund’s net asset value (“NAV”) will not increase or decrease at the same rate as the
S&P 500 Index because the Fund’s strategy relies upon the performance of the Collateral Portfolio and the Put Spread Strategy, in addition to the value of the Fund’s FLEX Options positions on the S&P 500 Index. While Milliman anticipates
that the Fund’s NAV will generally move in the same direction as the S&P 500 Index (meaning that the Fund’s NAV will generally increase if the S&P 500 Index experiences gains or decrease if the S&P 500 Index experiences losses,
subject to the Floor), the Fund’s NAV may not decrease at the same rate as the S&P 500 Index (especially when factoring in the performance of the Collateral Portfolio and the Put Spread Strategy) and will not increase at the same rate as the
S&P 500 Index (especially when factoring in the Par Up Rate and the performance of the Collateral Portfolio and the Put Spread Strategy). Similarly, the amount of time remaining until the end of the Outcome Period
273
also affects the impact of the Floor on the Fund’s NAV, because the Floor may not be in full effect prior to the end of the Outcome Period.
The FLEX Options utilized in the Fund’s portfolio are each set to expire on the last day of the Outcome Period. The customizable nature of FLEX Options
will allow Milliman to select the strike price at which each FLEX Option will be exercised at the expiration of the FLEX Option term. At the commencement of the Outcome Period, Milliman will specifically select the strike price for each FLEX Option
in a manner designed to achieve the Outcomes when the FLEX Options are exercised on the final day of the Outcome Period, depending on the anticipated performance of the S&P 500 Index, the Collateral Portfolio and the Put Spread Strategy over
the duration of that Outcome Period.
The hypothetical graphical illustrations provided below are designed to illustrate the Outcomes based upon the
hypothetical performance of the S&P 500 Index for an investor who holds Shares for the entirety of the Outcome Period. The hypothetical graphical illustrations do not include any fees or expenses
imposed by your variable product or expenses incurred by the Fund, and do not reflect the performance of the Collateral Portfolio or the Put Spread Strategy. Additional hypothetical graphical representations of the Outcomes are provided in
“Additional Information About the Funds and the Risks of Investing.” There is no guarantee that the Fund will be successful in its attempt to achieve the Outcomes for the Outcome Period.
The following table contains hypothetical examples designed to illustrate the Outcomes the Fund seeks to
achieve over the Outcome Period, based upon the performance of the S&P 500 Index from (100)% to 100% after taking into account the Par Up Rate and the Floor, but prior to taking into account any fees or expenses or the performance of the
Collateral Portfolio or the Put Spread Strategy. The table is provided for illustrative purposes only and does not provide every possible performance scenario for Shares over the course of the Outcome Period. There is no guarantee that the Fund will be successful in its attempt to achieve the Outcomes for an Outcome
Period. The table is not intended to predict or project the performance of the FLEX Options or the Fund. Investors should not take this information as an assurance of the expected performance of the
S&P 500 Index or the Fund. Actual Fund performance will vary with fluctuations in the performance of the Collateral Portfolio and the Put Spread Strategy, in addition to the value of the Fund’s FLEX Options positions on the S&P
500 Index, during the Outcome Period, among other factors. The performance of the Collateral Portfolio and the Put Spread Strategy could significantly impact the performance
of the Fund, which could prevent the Fund from
274
achieving the Outcomes that it seeks to produce. The table does not
reflect any fees or expenses imposed by your variable product or expenses incurred by the Fund. If it did, the returns shown for the Fund would be lower. Please refer to the Fund’s website, which provides updated information relating to this
table on a daily basis throughout the Outcome Period. Please contact your insurance company or other financial intermediary for more information.
|
Index/Fund
|
Hypothetical Performance1
|
|||||||||||
|
S&P 500 Index Price Performance
|
(100)%
|
(50)%
|
(20)%
|
(10)%
|
(5)%
|
0%
|
5%
|
10%
|
15%
|
20%
|
50%
|
100%
|
|
Fund Performance at NAV
|
(10)%2
|
(10)%2
|
(10)%2
|
(10)%
|
(5)%
|
0%
|
3%3
|
6%3
|
9%3
|
12%3
|
33.5%3
|
60%3
|
| 1 |
Does not take into account any fees or expenses or the performance of the Collateral Portfolio or the Put Spread Strategy.
|
| 2 |
Reflects the impact of the Floor.
|
| 3 |
Reflects the impact of an assumed Par Up Rate of 60%.
|
Understanding Outcomes. The Outcomes the Fund seeks to achieve are measured based upon the
Fund’s NAV on the first day of the Outcome Period. The Outcome Period begins on the day Milliman transacts in the FLEX Options on behalf of the Fund, and ends on the day those FLEX Options expire. An investor who
purchases Shares after the commencement of the Outcome Period will likely have purchased Shares at a different NAV than the NAV on the first day of the Outcome Period (the NAV upon which the Outcomes are based) and may experience investment
outcomes very different from those the Fund seeks to achieve, especially when factoring in any fees or expenses or the performance of the Collateral Portfolio and the
Put Spread Strategy. An investor who redeems Shares prior to the end of the Outcome Period may also experience investment outcomes very different from those the Fund seeks to achieve. The Outcomes are designed with the expectation that an
investor will hold Shares on the day that Milliman transacts in the FLEX Options on behalf of the Fund, and on the day those FLEX Options expire. There is no guarantee that the Fund will be successful
in its attempt to achieve the Outcomes.
Understanding the Par Up Rate. Unlike other investment products, the potential returns an
investor can receive from an investment in the Fund are subject to the Par Up Rate. This means that if the S&P 500 Index experiences gains for the Outcome Period, an investor in the Fund will only experience
a percentage of those gains (equal to the Par Up Rate multiplied by the S&P 500 Index gains). Milliman calculates the Par Up Rate for each Outcome Period based upon (i) its evaluation of prevailing market conditions on the first day
of the Outcome Period and (ii) the total number of long call FLEX Options on the S&P 500 Index that it is able to purchase at that time. In certain market conditions, the performance of the Collateral
Portfolio and the Put Spread Strategy could reduce the impact of the Par Up Rate. An investor should consider the amount and impact of the Par Up Rate, and the Fund’s position relative to it, before investing in the Fund.
Understanding the Floor. The Floor that the Fund seeks to provide is only triggered if
losses in the Fund’s S&P 500 Index exposure exceed 10% for the Outcome Period. If an investor is considering purchasing Shares during the Outcome Period, and the Fund’s NAV has increased in value, then that
investor will be subject to additional losses before implementation of the Floor that the Fund seeks to provide. While the Fund seeks to produce returns that correlate to those of the S&P 500 Index for the Outcome Period that are
limited to 10% (prior to taking into account any fees or expenses or the performance of the Collateral Portfolio or the Put Spread Strategy) for investors who hold Shares for the entire Outcome Period, there is no guarantee it will successfully
do so. In addition, the Floor is not operative against losses in the Collateral Portfolio or the Put Spread Strategy. If the Collateral Portfolio and/or the Put Spread Strategy experiences losses, it could
have the effect of reducing the impact of, or completely eliminating, the Floor on the Fund’s S&P 500 Index exposure. In certain market conditions, the performance of the Collateral Portfolio and/or the Put Spread Strategy could cause the
Fund to significantly underperform the S&P 500 Index. Investors who purchase Shares at the beginning of the Outcome Period may lose their entire investment. Investors who purchase Shares after the Outcome Period has begun may also lose
their entire investment. An investment in the Fund is only appropriate for investors willing to bear those losses.
275
Fund Rebalance. Milliman implements the Fund’s strategy on an annual basis, seeking to
produce the Outcomes for an Outcome Period. On the last business day of any stated Outcome Period, all of the Fund’s existing FLEX Options, which includes those used to establish the Floor, the Par Up Rate
and the Put Spread Strategy, will expire and Milliman will transact in a new set of FLEX Options on the same business day, which will commence a new Outcome Period beginning the following business day. At
that same time, Milliman will also evaluate whether to make any adjustments to the Collateral Portfolio. Accordingly, Shares can be held indefinitely if investors determine to participate in additional Outcome Periods.
Approximately one week prior to the end of each Outcome Period, the Fund will file a prospectus supplement, which will notify existing investors of
(i) the date on which the existing Outcome Period will end; (ii) the date on which the new Outcome Period will commence; and (iii) the anticipated ranges of the Par Up Rate that will be used for the new Outcome Period. Immediately preceding the
commencement date of the new Outcome Period, the Fund will file a prospectus supplement disclosing the Fund’s final Par Up Rate (both gross and net of Fund fees and expenses) for the new Outcome Period. This information will also be available
online at www.[___________].com, and on your insurance company’s website. Please contact your insurance company or other financial intermediary for more information.
Fund Classification. The Fund is classified as “non-diversified” under the Investment
Company Act of 1940, as amended (the “1940 Act”).
Principal Risks
You could lose money by investing in the Fund. An investment in the Fund is not a deposit of a bank and is not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other governmental agency. There can be no assurance that the Fund’s investment objectives will be achieved.
Downside Loss Floor Risk. There can be no guarantee that the Fund will be successful in its strategy to limit
losses in the Fund’s S&P 500 Index exposure to a specified floor if the S&P 500 Index decreases in value over the Outcome Period. The Fund’s strategy is designed to produce returns that correlate to those of the S&P 500 Index at the
Par Up Rate, while limiting downside losses in the Fund’s S&P 500 Index exposure, if Shares are bought on the day on which Milliman transacts in the FLEX Options on behalf of the Fund and held until those FLEX Options expire at the end of
each Outcome Period. The success of the Floor also depends upon the performance of the Collateral Portfolio and the Put Spread Strategy. If the Collateral Portfolio and/or the Put Spread Strategy experiences
losses, it could have the effect of reducing the impact of, or completely eliminating, the Floor on the Fund’s S&P 500 Index exposure. In certain market conditions, the performance of the Collateral Portfolio and/or the Put Spread
Strategy could cause the Fund to significantly underperform the S&P 500 Index. Despite the intended Floor, an investor could lose their entire investment. In the event an investor purchases Shares after the date on which
Milliman transacted in the FLEX Options on behalf of the Fund, or redeems Shares prior to the expiration of those FLEX Options, the Floor that the Fund seeks to provide may not be available or fully applicable.
Risk of the Par Up Rate on Upside Returns. The Fund’s strategy is designed to produce returns that correlate
to those of the S&P 500 Index at the Par Up Rate if Shares are bought on the day on which Milliman transacts in the FLEX Options on behalf of the Fund and held until those FLEX Options expire at the end of the Outcome Period. Accordingly, the
Fund will not fully participate in any gains achieved by the S&P 500 Index. In addition, in the event an investor purchases Shares after the date on which Milliman transacted in the FLEX Options on behalf of the Fund, or redeems Shares prior
to the expiration of those FLEX Options, the returns realized by that investor may not match those that the Fund seeks to achieve pursuant to the Par Up Rate. In certain market conditions, the performance of
the Collateral Portfolio and the Put Spread Strategy could reduce the impact of the Par Up Rate. An investor should consider the amount and impact of the Par Up Rate, and the Fund’s position relative to it, before investing in the Fund.
Par Up Rate Change Risk. Because the Par Up Rate for each Outcome Period is calculated based upon (i)
Milliman’s evaluation of prevailing market conditions on the first day of the Outcome Period and (ii) the total number of long call FLEX Options on the S&P 500 Index that Milliman is able to purchase at that time, the Par Up
276
Rate may rise or fall from one Outcome Period to the next. Any change in the Par Up Rate could be significant and it is unlikely to remain the same
for consecutive Outcome Periods.
FLEX Options Risk. The Fund will transact in FLEX Options issued and guaranteed for settlement by the OCC. The
Fund bears the risk that the OCC will be unable or unwilling to perform its obligations under the FLEX Options contracts, which could result in significant losses to the Fund. In less liquid markets, terminating a FLEX Option may require the
payment of a premium or acceptance of a discounted price, and may take longer to complete. In addition, a less liquid trading market may adversely impact the value of the Fund’s FLEX Options and therefore the NAV of the Fund. In addition, the value
of the Fund’s FLEX Options positions is not anticipated to increase or decrease at the same rate as the reference asset; and while it is anticipated that they will generally move in the same direction, it is possible that they may move in different
directions. Certain FLEX Options positions may also expire worthless. The use of FLEX Options involves leverage, which can cause the Fund’s portfolio to be more volatile than if the portfolio had not been leveraged. Leverage can significantly
magnify the effect of price movements of the reference asset, disproportionately increasing the Fund’s losses and reducing the Fund’s opportunities for gains when the reference asset changes in unexpected ways. In some instances, such leverage
could result in losses that exceed the original amount invested.
Investment Objective and Outcomes Risk. There is no guarantee that the Fund will be successful in its attempt
to achieve its investment objective and/or the Outcomes, and an investor could lose some or all of their investment in the Fund. Certain circumstances under which the Fund might not achieve its objective and/or the Outcomes include, but are not
limited to (i) if the Fund disposes of FLEX Options, (ii) if the Fund is unable to maintain the proportional relationship based on the number of FLEX Options in the Fund’s portfolio, (iii) significant accrual of Fund expenses in connection with
effecting the Fund’s principal investment strategy, (iv) losses incurred by the Fund’s holdings in the Collateral Portfolio and/or losses resulting from the Put Spread Strategy, or (iv) adverse tax law changes affecting the treatment of FLEX
Options.
Tax Risk. The Fund intends to elect, and to qualify each year, to be treated as a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”). As a RIC, the Fund will not be subject to U.S. federal income tax on the portion
of its net investment income and net capital gain that it distributes to shareholders, provided that it satisfies certain requirements of the Code. To maintain its status as a RIC, the Fund must meet certain income, diversification and
distributions tests. For purposes of the diversification test, the identification of the issuer (or, in some cases, issuers) of a particular Fund investment can depend on the terms and conditions of that investment. In particular, there is no
published IRS guidance or case law on how to determine the “issuer” of certain derivatives that the Fund will enter into and the Fund has not received a private letter ruling on this point. Therefore, there is a risk that the Fund will not meet the
Code’s diversification requirements and will not qualify, or will be disqualified, as a RIC. If the Fund does not qualify as a RIC for any taxable year and certain relief provisions are not available, the Fund’s taxable income will be subject to
tax at the Fund level and to a further tax at the shareholder level when such income is distributed.
The Fund also intends to comply with the diversification requirements of Section 817(h) of the Code, and the regulations thereunder, relating to the
tax-deferred status of variable accounts that are based on insurance company separate accounts (referred to as “segregated asset accounts” for federal income tax purposes). These diversification requirements apply in addition to the RIC
diversification requirements discussed above. There also is no published guidance or case law on how to determine the “issuer” of the derivatives referred to above for purposes of the diversification requirements of Section 817(h) of the Code and
the Fund has not received a private letter ruling on this point. If these requirements are not met, or under other circumstances, such as if the Fund does not qualify as a RIC for any taxable year, it is possible that the contract owners (rather
than the insurance company) will be treated for federal income tax purposes as the taxable owners of the assets held by the segregated asset accounts.
Clearing Member Default Risk. The Fund will hold FLEX Options through accounts at members of clearing houses (“clearing members”) rather than a bank or a broker. Assets deposited by the Fund with any clearing member as margin for its FLEX Options positions may, in certain circumstances, be used to satisfy losses of other
clients of the Fund’s clearing member where such assets may be held in commingled omnibus accounts. In addition, although clearing members guarantee performance of their clients’ obligations to the clearing house, there is a risk that the assets of
the Fund might not be fully protected in the event of the clearing member’s bankruptcy, as the Fund would
277
be limited to recovering only a pro rata share of all available funds segregated on behalf of the clearing
member’s customers for the relevant account class.
Debt Securities Risk. The prices of debt securities will be affected by changes in interest rates, the
creditworthiness of the issuer and other factors. These risks could affect the value of investments in which the Fund invests, possibly causing the Fund’s NAV to be reduced and fluctuate more than other types of investments. During periods of
falling interest rates, an issuer of a callable bond may repay the security before its stated maturity, and the Fund may have to reinvest the proceeds in securities with lower yields, which would result in a decline in the Fund’s income, or in
securities with greater risks or with other less favorable features. Changing interest rates, including rates that fall below zero, may have unpredictable effects on markets, result in heightened market volatility and detract from the Fund’s
performance to the extent the Fund is exposed to such interest rates. An increase in interest rates will generally cause the value of fixed-income securities held by the Fund to decline, may lead to heightened volatility in the fixed-income
markets and may adversely affect the liquidity of certain fixed-income investments, including those held by the Fund. Risks associated with rising interest rates are heightened given that interest rates in the U.S. are near historic lows.
Adjustable-rate instruments also react to interest rate changes in a similar manner, although generally to a lesser degree (depending, however, on the characteristics of the reset terms, including the index chosen, frequency of reset and reset
caps or floors, among other factors). Interest rate sensitivity is generally more pronounced and less predictable in instruments with uncertain payment or prepayment schedules and also for those with longer maturities.
Foreign Securities and Credit Exposure Risk. U.S. dollar-denominated securities carrying foreign credit exposure
may be affected by unfavorable political, economic or governmental developments that could affect payments of principal and interest. Furthermore, the value of the Fund’s foreign investments (whether direct or indirect) may be adversely affected by
political and social instability in their home countries, by changes in economic or taxation policies in those countries, or by the difficulty in enforcing obligations in those countries. Foreign companies generally may be subject to less stringent
regulations than U.S. companies, including financial reporting requirements and auditing and accounting controls. As a result, there generally is less publicly available information about foreign companies than about U.S. companies. Trading in many
foreign securities may be less liquid and more volatile than U.S. securities due to the size of the market or other factors.
U.S. Government Securities Risk. U.S. Government securities are subject to interest rate risk but generally do
not involve the credit risks associated with investments in other types of debt securities. As a result, the yields available from U.S. Government securities are generally lower than the yields available from other debt securities. U.S. Government
securities are guaranteed only as to the timely payment of interest and the payment of principal when held to maturity. While securities issued or guaranteed by U.S. federal government agencies are backed by the full faith and credit of the U.S.
Department of the Treasury, securities issued by government sponsored entities are solely the obligation of the issuer and generally do not carry any guarantee from the U.S. Government.
ABS Risk. ABS are subject to the general debt securities risks described above. In addition, ABS may be less
liquid than other bonds, and may be more sensitive than other bonds to the market’s perception of issuers and creditworthiness of payees, which may result in the Fund experiencing difficulty selling or valuing these securities. ABS markets have
experienced extraordinary weakness and volatility at various times in recent years, and may decline quickly in the event of a substantial economic or market downturn. Accordingly, these securities may be subject to greater risk of default during
periods of economic downturn than other securities, which could result in possible losses to the Fund.
Issuer Risk. The performance of the Fund depends on the performance of individual securities to which the Fund
has exposure. The Fund may be adversely affected if an issuer of underlying securities held by the Fund is unable or unwilling to repay principal or interest when due. Changes in the financial condition or credit rating of an issuer of those
securities may cause the value of the securities to decline.
Management Risk. The Fund is subject to management risk because it is an actively managed portfolio. Milliman
will apply investment techniques and risk analyses in making investment decisions for the Fund, but there can be no guarantee that the Fund will meet its investment objective and/or the Outcomes. In addition, Milliman does not use defensive
strategies or attempt to reduce the Fund’s exposures to poor performing positions during an Outcome Period. This differs from funds that are managed to seek to outperform a benchmark index. Therefore, in the event
278
of a general market decline, the Fund’s value may fall more than the value of another fund that does attempt to hedge against such market declines.
Market Risk. The Fund could lose money over short periods due to short-term market movements and over longer
periods during more prolonged market downturns. Assets may decline in value due to factors affecting financial markets generally or particular asset classes or industries represented in the markets. The value of a FLEX Option or other asset may
also decline due to general market conditions, economic trends or events that are not specifically related to the issuer of the security or other asset, or due to factors that affect a particular issuer, country, region, market, industry, sector or
asset class.
Non-Diversification Risk. The Fund may invest a relatively high percentage of its assets in a limited number of
issuers. As a result, the Fund may be more susceptible to a single adverse economic or regulatory occurrence affecting one or more of these issuers, experience increased volatility and be highly invested in certain issuers.
Large Shareholder Risk. At times, the Fund may experience adverse effects when certain large shareholders,
including insurance company separate accounts, redeem large amounts of shares of the Fund. Large redemptions may cause the Fund to sell portfolio holdings at times when it would not otherwise do so and may increase transaction costs and/or result
in an increase to the Fund’s expense ratio. A large redemption could be detrimental to the Fund and its remaining shareholders.
Risks of Investing in ETFs. In addition to the risks associated with the underlying assets held by the ETFs in
which the Fund invests, investments in ETFs are also subject to the following additional risks: (i) only authorized participants may engage in transactions directly with ETFs but none are obligated to do so, which could result in an ETF’s shares
trading at a premium or discount to its NAV or possibly face trading halts or delisting; (ii) certain ETFs seek to track the performance of an underlying index and will not attempt to take defensive positions under any market conditions, including
declining markets, which could result in losses; and (iii) because ETF shares trade on the secondary market, there is not guarantee that an active market will be developed or maintained, which could result in the ETF’s shares trading at a premium
or discount to its NAV. Investments in ETFs may involve duplication of management fees and certain other expenses, as the Fund indirectly bears its proportionate share of any expenses paid by the ETFs in which it invests.
Risks of Investing in Money Market Funds. Money market funds seek to preserve the value of
shareholder investments at $1.00 per share, but shareholders, such as the Fund, may still lose money by investing in such funds. In addition, a money market fund may impose a fee upon the sale of its shares or may temporarily suspend the ability to
sell shares if the fund’s liquidity falls below required minimums because of market conditions or other factors. The credit quality of a money market fund’s holdings can change rapidly in certain markets, and the default of a single holding could
have an adverse impact on the fund’s share price. A money market fund’s share price can also be negatively affected during periods of high redemption pressures, illiquid markets, and/or significant market volatility.
Performance
As of the date of this Prospectus, the Fund has not commenced operations and therefore does not have a performance history. Once available, the Fund’s
performance information will be accessible online at www.[________].com and will provide some indication of the risks of investing in the Fund.
Management
Investment Adviser
Milliman Financial Risk Management LLC (“Milliman”) serves as investment adviser to the Fund.
279
Portfolio Managers
The following persons serve as portfolio managers of the Fund.
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●
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Robert T. Cummings, Principal & Head of Portfolio Management at Milliman.
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●
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Maria Schiopu, Principal & Head of Portfolio Management at Milliman.
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●
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Jeff Greco, Principal & Head of Strategy Research at Milliman.
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●
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Jordan Rosenfeld, Portfolio Manager at Milliman.
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Each portfolio manager is jointly and primarily responsible for the day-to-day management of the Fund’s portfolio and has served in such capacity
since the Fund’s inception in 2021.
Purchase and Sale of Shares
Shares are available as underlying investment options for variable insurance contracts and variable life insurance policies (each, a “variable contract,” and, collectively, the “variable contracts”) issued by insurance companies. These insurance companies are the record owners of the separate accounts
holding the Shares. You do not buy, sell or exchange Shares directly; rather, you choose investment options through your variable contracts. The insurance companies then cause the separate accounts to purchase and redeem Shares according to
the investment options you choose.
Tax Information
The dividends and distributions paid by the Fund to the insurance company separate accounts will consist of ordinary income, capital gains, or some
combination of both. Because Shares must be purchased through separate accounts used to fund variable contracts, such dividends and distributions will be exempt from current taxation by owners of variable contracts (each, a “contract owner,” and, collectively “contract owners”) if left to accumulate within a separate account. Consult the variable contract prospectus for additional tax
information.
Payments to Insurance Companies and Other Financial Intermediaries
If you allocate contract value to the Fund through an insurance company or other financial intermediary, the Fund, Milliman, the Fund’s distributor or
their related companies may pay the insurance company and/or its affiliates or other intermediary for the sale of Shares and related services. These payments may create a conflict of interest by influencing the insurance company or other
intermediary and your salesperson to recommend an indirect investment in the Fund over another investment. The prospectus or other disclosure documents for the variable contracts may contain additional information about these payments, if any.
You may also ask your salesperson or financial intermediary, or visit your financial intermediary’s website, for more information.
280
Fund Summary: Milliman S&P 500 & Nasdaq 1-Year Buffer with Stacker Cap Fund
– Sep
Investment Objective
The Fund seeks to provide exposure to the S&P 500 Index, while providing a buffer against the first 10% of losses associated with S&P 500
Index performance and participating in S&P 500 Index gains up to a declared cap, prior to taking into account any fees or expenses or the performance of any fixed income exposure included in the Fund’s portfolio, over the period from
September 1, 2021 through August 31, 2022. The Fund also seeks to provide upside exposure to the Nasdaq-100® Index up to a declared cap, prior to taking into account any fees or expenses or the performance of any fixed income exposure
included in the Fund’s portfolio, over the same period.
Fees and Expenses of the Fund
This table describes the fees and expenses that you may pay if you buy, hold and sell shares of the Fund (“Shares”).
This table and the example below do not include any fees or sales charges imposed by your variable product. If they were included, the expenses listed below would be higher.
Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment)
|
Class 3
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|
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Management Fees
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0.49%
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|
Distribution and Service (12b-1) Fees
|
0.25%
|
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Other Expenses(1)
|
0.50%
|
|
Acquired Fund Fees and Expenses(1)
|
[_.__]%
|
|
Total Annual Fund Operating Expenses
|
1.24%
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|
Fee Waiver and/or Expense Reimbursement(2)(3)
|
(0.25)%
|
|
Total Annual Fund Operating Expenses After Fee Waiver and/or Expense Reimbursement
|
0.99%
|
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(1)
|
“Other Expenses” and “Acquired Fund Fees and Expenses” are based on estimated amounts for the current fiscal year.
|
|
(2)
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The Fund’s investment adviser, Milliman Financial Risk Management LLC (“Milliman”), has contractually
agreed to waive advisory fees and/or reimburse expenses to the extent necessary to limit the Fund’s total annual Fund operating expenses (excluding taxes, interest, brokerage fees and commissions, Rule 12b-1 fees, acquired fund fees and
expenses, short-sale dividend expenses, administrative services fees, other expenses that are capitalized in accordance with generally accepted accounting principles, and extraordinary or non-routine expenses not incurred in the
ordinary course of the Fund’s business) to 0.74% of the Fund's average daily net assets (the “Expense Limitation Agreement”) until at least November 1, 2022. During its term, the Expense
Limitation Agreement cannot be terminated or amended to increase the applicable limit without approval of the Board of Trustees of the Trust (the “Board”). Milliman may recoup from the Fund any
advisory fees waived or expenses reimbursed pursuant to the Expense Limitation Agreement for a period of three years from the date on which such waiver or reimbursement occurred; provided, however, that such recoupment shall not be made
if it would cause the Fund’s total annual Fund operating expenses to exceed the lesser of (a) the expense limitation in effect at the time of the reimbursement, or (b) the expense limitation in effect at the time of recoupment, if any.
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|
(3)
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In addition to the Expense Limitation Agreement, Milliman has contractually agreed to waive its advisory fees in an amount equal to the Fund’s
acquired fund fees and expenses until at least November 1, 2022 (the “Fee Waiver”). This contract cannot be terminated or modified without the consent of the Board.
|
Example
This example is intended to help you compare the cost of investing in the Fund with the cost of investing in other funds. This example assumes that you
invest $10,000 in the Fund for the time periods indicated and then sell all of your Shares at the end of those periods. This example also assumes that your investment has a 5% return each year and that the Fund’s operating expenses remain at
current levels and that the Expense Limitation Agreement and Fee Waiver remain in place for their contractual periods. Although your actual costs may be higher or lower, your costs, based on these assumptions, would be:
|
1 Year
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3 Years
|
|
|
Class 3
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$104
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$384
|
281
This example does not include any fees or sales charges imposed by your variable product. If they were included, the expenses listed above would be
higher.
Portfolio Turnover
The Fund pays transaction costs, such as commissions, when it purchases and sells securities (or “turns over” its portfolio). A higher portfolio turnover
will cause the Fund to incur additional transaction costs. These costs, which are not reflected in Total Annual Fund Operating Expenses or in the example, may affect the Fund’s performance. Because the Fund has not yet commenced investment
operations, no portfolio turnover information is available at this time.
Principal Investment Strategies
The Fund seeks to achieve its investment objective by transacting in FLexible EXchange® Options (“FLEX Options”)
and by separately maintaining a collateral portfolio (the “Collateral Portfolio”), which is designed primarily to serve as margin or collateral for the Fund’s FLEX Options positions and secondarily to
enhance the Fund’s upside S&P 500 Index and Nasdaq-100® Index FLEX Options’ exposure (i.e., by utilizing anticipated income to measure the ability to purchase additional FLEX Options). FLEX
Options are exchange-traded options contracts with uniquely customizable terms. In general, an options contract is an agreement between a buyer and seller that gives the purchaser of the option the right to buy or sell a particular asset at a
specified future date at an agreed upon price, commonly known as the “strike price.” The reference assets for the Fund’s FLEX Options positions will include the S&P 500 Index, the Nasdaq-100® Index (the “Secondary Index,” and together with the S&P 500 Index, the “Reference Indices,” and, each, a “Reference Index”), and certain exchange-traded
funds (“ETFs”), as described further below. The S&P 500 Index is a large-capitalization, market-weighted, U.S. equities index that tracks the price (excluding
dividends) of 500 leading companies in leading industries of the U.S. economy. The Secondary Index is [a market capitalization-weighted index that is designed to represent the performance of all domestic and international common type stocks
listed on The Nasdaq Stock Market LLC].
The Collateral Portfolio may be invested in short-term fixed-income securities, including corporate bonds and other corporate debt securities,
asset-backed securities (“ABS”), securities issued by the U.S. Government or its agencies and instrumentalities, securities issued by non-U.S. governments or their agencies and instrumentalities, money
market securities and funds, other interest-bearing instruments, cash, ETFs that primarily invest in any of the foregoing instruments, options on ETFs and options box spreads. An options box spread is the combination of different options trades
that have offsetting spreads (e.g., purchases and sales on the same underlying instrument, such as an index or an ETF, but with different strike prices and/or expiration dates) for the purpose of
generating income. The Fund may invest in short-term fixed income securities or other instruments, including through ETFs, of any maturity and credit quality. The Fund will generally invest up to 35% of its net assets in one or more ETFs that
provide exposure to investment grade corporate bonds.
Due to the unique mechanics of the Fund’s strategy, the return an investor can expect to receive from an investment in the Fund has characteristics that
are distinct from the returns of many other investment vehicles. It is important that an investor understand these characteristics before making an investment in the Fund.
In seeking to achieve its investment objective, the Fund seeks to produce pre-determined outcomes (the “Outcomes”)
that are based upon the performance of the Reference Indices over a one-year period (the “Outcome Period”). The initial Outcome Period for the Fund is September 1, 2021 through August 31, 2022. Following the
initial Outcome Period, each subsequent Outcome Period will be a one-year period commencing upon the expiration of the prior Outcome Period. The Fund seeks to achieve the Outcomes by purchasing and writing (selling) FLEX Options to create layers
within the Fund’s portfolio. One layer is designed to produce returns that correlate to those of the S&P 500 Index for the Outcome Period if the S&P 500 Index experiences gains during that time, subject to an upside return cap (the “S&P 500 Index Cap”), as described below. A second layer is designed to produce returns that correlate to any upside market performance of the Secondary Index over the
Outcome Period, subject to an upside return cap (the “Secondary Index Cap,” and, together with the S&P 500 Index Cap, the “Index Caps,” and, each, an “Index Cap”), as described below. A third layer is designed to produce returns that correlate to those of the S&P 500 Index for the Outcome Period that are buffered up to 10% if the S&P 500 Index
experiences losses during that time (the “Buffer”). There is no guarantee that the Fund will be successful in its attempt to produce
282
returns that correlate to those of the S&P 500 Index or the Secondary Index up to the applicable Index Caps or produce buffered
returns against the Fund’s S&P 500 Index exposure.
Milliman Financial Risk Management, LLC (“Milliman”), the investment adviser of the Fund, seeks to establish the
Buffer by writing one put FLEX Option on the S&P 500 Index with a strike price that is 10% lower than the value of the S&P 500 Index at the beginning of the Outcome Period.
Milliman seeks to establish the Index Caps by purchasing long call FLEX Options on each Reference Index with a strike price approximately equal to the
value of the respective Reference Index at the beginning of the Outcome Period. Milliman purchases these FLEX Options with a portion of the Fund’s net assets plus (i) the cash received from writing the put FLEX Option designed to create the
Buffer, (ii) additional cash received by utilizing FLEX Options to create a put spread (the “Put Spread Strategy”) on fixed income securities and/or one or more ETFs that provide exposure to fixed income
securities, and (iii) yield received from the Collateral Portfolio. Milliman seeks to achieve the Put Spread Strategy for the Fund by writing a put FLEX Option on an underlying asset at a strike price at or lower than the underlying asset’s
market price or current value at the beginning of the Outcome Period, and buying a put FLEX Option on the same underlying asset at a lower strike price than the written put FLEX Option.
The Index Caps represent the maximum rate of return in each Reference Index that an investor can achieve from an investment in the Fund over the Outcome
Period. Milliman calculates the Index Caps based upon (i) its evaluation of prevailing market conditions on the first day of the Outcome Period and (ii) the total number of long call FLEX Options on each Reference Index that it is able to purchase
at that time. As of the date of this Prospectus, and assuming current market conditions persist, Milliman expects that the Index Caps will be between the below ranges (both gross and net of Fund fees and expenses). Any fees or expenses imposed by
your variable product, and any other expenses incurred by the Fund, will have the effect of further reducing each Index Cap. In addition, in certain market conditions, the performance of the Collateral Portfolio
and the Put Spread Strategy could cause the Fund to underperform relative to the Reference Indices, which could further limit Fund gains below the Index Caps, notwithstanding any performance of the Reference Indices in excess of the Index Caps.
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Estimated Index Cap Ranges
(As of [___])
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||
|
Prior to Taking into Account Fund Fees and Expenses
|
After Taking into Account Fund Fees and Expenses
|
|
|
S&P 500 Index Cap
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||
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Class 3
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[__]% and [__]%
|
[__]% and [__]%
|
|
Secondary Index Cap
|
||
|
Class 3
|
[__]% and [__]%
|
[__]% and [__]%
|
The Buffer is only operative against the first 10% of losses in the Fund’s S&P 500 Index exposure for the Outcome Period. If the S&P 500 Index
decreases in value by more than 10% during the Outcome Period, the Fund (and therefore investors in Shares) will experience all subsequent losses in the Fund’s S&P 500 Index exposure on a one-to-one basis for the Outcome Period. The Fund
seeks to produce buffered returns against its S&P 500 Index exposure prior to taking into account any fees or expenses or the performance of the Collateral Portfolio or the Put Spread Strategy. The Buffer
is not operative against losses in the Collateral Portfolio or the Put Spread Strategy. If the Collateral Portfolio and/or the Put Spread Strategy experiences losses, it could have the effect of reducing the impact of, or completely
eliminating, the Buffer on the Fund’s S&P 500 Index exposure. In certain market conditions, the performance of the Collateral Portfolio and/or the Put Spread Strategy could cause the Fund to significantly underperform the S&P 500
Index. The following table reflects the Buffer both gross and net of Fund fees and expenses:
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Share Class
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Buffer
(As of [___])
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|
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Prior to Taking into Account Fund Fees and Expenses
|
After Taking into Account Fund Fees and Expenses
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|
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Class 3
|
10%
|
[__]%
|
283
Because the Fund also seeks to provide only upside exposure to the Secondary Index during the Outcome Period, the Fund’s NAV will not be impacted by any
losses experienced by the Secondary Index when measured from the beginning to the end of the Outcome Period. If the Secondary Index increases in value during the Outcome Period and later decreases in value during the Outcome Period, the Fund’s NAV
will reflect any such decreases until the Secondary Index reaches its initial value (measured as of the first day of the Outcome Period). If the Secondary Index decreases in value over the course of an entire Outcome Period, the Fund’s NAV will not
reflect such losses; therefore, the Fund’s overall performance will be approximately that of the S&P 500 Index for the Outcome Period, subject to the Buffer and the S&P 500 Index Cap.
The definitive Index Caps and Buffer will be set forth on the Fund’s website. The Fund’s website will also provide information relating to the
Outcomes on a daily basis, including the Fund’s position relative to the Index Caps and the Buffer. You may also contact your insurance company or other financial intermediary for more information.
Additionally, the Fund’s net asset value (“NAV”) will not increase or decrease at the same rate as the Reference
Indices because the Fund’s strategy relies upon the performance of the Collateral Portfolio and the Put Spread Strategy, in addition to the value of the Fund’s FLEX Options positions on the Reference Indices. While Milliman anticipates that the
Fund’s NAV will generally move in the same direction as the S&P 500 Index, and correspond to any upside returns of the Secondary Index (meaning that the Fund’s NAV will generally increase if the Reference Indices experience gains or decrease if
the Reference Indices experience losses), the Fund’s NAV may not decrease at the same rate as the Reference Indices (especially when factoring in the performance of the Collateral Portfolio and the Put Spread Strategy) and will not increase at the
same rate as the Reference Indices (especially when factoring in the Index Caps and the performance of the Collateral Portfolio and the Put Spread Strategy). Similarly, the amount of time remaining until the end of the Outcome Period also affects
the impact of the Buffer on the Fund’s NAV, because the Buffer may not be in full effect prior to the end of the Outcome Period.
The FLEX Options utilized in the Fund’s portfolio are each set to expire on the last day of the Outcome Period. The customizable nature of FLEX Options
will allow Milliman to select the strike price at which each FLEX Option will be exercised at the expiration of the FLEX Option term. At the commencement of the Outcome Period, Milliman will specifically select the strike price for each FLEX Option
in a manner designed to achieve the Outcomes when the FLEX Options are exercised on the final day of the Outcome Period, depending on the anticipated performance of the Reference Indices, the Collateral Portfolio and the Put Spread Strategy over
the duration of that Outcome Period.
The hypothetical graphical illustrations provided below are designed to illustrate the Outcomes based upon the
hypothetical performance of the Reference Indices for an investor who holds Shares for the entirety of the Outcome Period. The hypothetical graphical illustrations do not include any fees or expenses
imposed by your variable product or expenses incurred by the Fund, and do not reflect the performance of the Collateral Portfolio or the Put Spread Strategy. Additional hypothetical graphical representations of the Outcomes are provided in
“Additional Information About the Funds and the Risks of Investing.” There is no guarantee that the Fund will be successful in its attempt to achieve the Outcomes for the Outcome Period.
284
The following table contains hypothetical examples designed to illustrate the Outcomes the Fund seeks to
achieve over the Outcome Period, based upon the performance of the Reference Indices from (100)% to 100% after taking into account the Index Caps and the Buffer, but prior to taking into account any fees or
expenses or the performance of the Collateral Portfolio or the Put Spread Strategy. The table is provided for illustrative purposes only and does not provide every possible performance scenario for Shares over
the course of the Outcome Period. There is no guarantee that the Fund will be successful in its attempt to achieve the Outcomes for an Outcome Period. The table is not intended to predict or project the performance of the FLEX Options or the Fund. Investors should not take this information as an
assurance of the expected performance of the Reference Indices or the Fund. Actual Fund performance will vary with fluctuations in the performance of the Collateral Portfolio and the Put Spread Strategy, in addition to the value of the
Fund’s FLEX Options positions on the Reference Indices, during the Outcome Period, among other factors. The performance of the Collateral Portfolio and the Put Spread Strategy
could significantly impact the performance of the Fund, which could prevent the Fund from achieving the Outcomes that it seeks to produce. The table does not reflect any fees or expenses imposed by your variable product or expenses
incurred by the Fund. If it did, the returns shown for the Fund would be lower. Please refer to the Fund’s website, which provides updated information relating to this table on a daily basis throughout the Outcome Period. Please contact your
insurance company or other financial intermediary for more information.
285
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Index/Fund
|
Hypothetical Performance1
|
|||||||||||
|
S&P 500 Index Price Performance
|
(100)%
|
(50)%
|
(20)%
|
(10)%
|
(5)%
|
0%
|
5%
|
10%
|
15%
|
20%
|
50%
|
100%
|
|
Secondary Index Price Performance
|
(100)%
|
(50)%
|
(20)%
|
(10)%
|
(5)%
|
0%
|
5%
|
10%
|
15%
|
20%
|
50%
|
100%
|
|
Fund Performance at NAV
|
(90)%
|
(40)%
|
(10)%
|
0%2
|
0%2
|
0%
|
10%3
|
14%3
|
14%3
|
14%3
|
14%3
|
14%3
|
| 1 |
Does not take into account any fees or expenses or the performance of the Collateral Portfolio or the Put Spread Strategy.
|
| 2 |
Reflects the impact of the Buffer.
|
| 3 |
Reflects the impact of assumed Index Caps of 7% per index, 14% total.
|
Understanding Outcomes. The Outcomes the Fund seeks to achieve are measured based upon the
Fund’s NAV on the first day of the Outcome Period. The Outcome Period begins on the day Milliman transacts in the FLEX Options on behalf of the Fund, and ends on the day those FLEX Options expire. An investor who
purchases Shares after the commencement of the Outcome Period will likely have purchased Shares at a different NAV than the NAV on the first day of the Outcome Period (the NAV upon which the Outcomes are based) and may experience investment
outcomes very different from those the Fund seeks to achieve, especially when factoring in any fees or expenses or the performance of the Collateral Portfolio and the Put Spread Strategy. An investor who redeems Shares prior to the end of the
Outcome Period may also experience investment outcomes very different from those the Fund seeks to achieve. The Outcomes are designed with the expectation that an investor will hold Shares on the day that Milliman transacts in the FLEX Options on
behalf of the Fund, and on the day those FLEX Options expire. There is no guarantee that the Fund will be successful in its attempt to achieve the Outcomes.
Understanding the Index Caps. Unlike other investment products, the potential returns an
investor can receive from an investment in the Fund are subject to the Index Caps. This means that if one or both of the Reference Indices experience gains for the Outcome Period, an investor in the Fund will only
experience those gains up to the applicable Index Cap. Milliman calculates the Index Caps for each Outcome Period based upon (i) its evaluation of prevailing market conditions on the first day of the Outcome Period and (ii) the total
number of long call FLEX Options on each Reference Index that it is able to purchase at that time. If an investor is considering purchasing Shares during the Outcome Period, and the Fund’s NAV has increased in
value to a level near one or both of the Index Caps, an investor purchasing Shares at that price will have limited to no gains available for the remainder of the Outcome Period, but will remain vulnerable to significant downside risks (with
respect to the S&P 500 Index FLEX Options’ exposure). In certain market conditions, the performance of the Collateral Portfolio and the Put Spread Strategy could cause the Fund to underperform
relative to the Reference Indices, which could further limit Fund gains below the Index Caps, notwithstanding any performance of the Reference Indices in excess of the Index Caps.
Understanding the Buffer. The Buffer that the Fund seeks to provide is only operative
against the first 10% of losses in the Fund’s S&P 500 Index exposure for the Outcome Period. If an investor is considering purchasing Shares during the Outcome Period, and the S&P 500 Index has decreased
in value by an amount equal to or greater than 10%, an investor purchasing Shares at that time will be able to participate in any gains thereafter (up to the Index Caps), but will not benefit from the Buffer that the Fund seeks to offer for the
remainder of the Outcome Period if the losses continue to be equal to or greater than 10% during that period. Conversely, if an investor is considering purchasing Shares during the Outcome Period, and the Fund’s NAV has increased in value, then
an investor may experience losses before implementation of the Buffer that the Fund seeks to provide. While the Fund seeks to produce returns that correlate to those of the S&P 500 Index for the Outcome Period that are buffered up to
10% (prior to taking into account any fees or expenses or the performance of the Collateral Portfolio or the Put Spread Strategy) for investors who hold Shares for the entire Outcome Period, there is no guarantee it will successfully do so. In addition, the Buffer is not operative against losses in the Collateral Portfolio or the Put Spread Strategy. If the Collateral Portfolio and/or the Put Spread Strategy experiences losses, it could have the
effect of reducing the impact of, or completely eliminating, the Buffer on the Fund’s S&P 500 Index exposure. In certain market conditions, the performance of the Collateral Portfolio and/or the Put Spread Strategy could cause the Fund to
significantly underperform the S&P 500 Index. Investors who purchase Shares at the beginning of the Outcome Period may lose their entire
286
investment. Investors who purchase Shares after the Outcome Period has begun may also lose their entire investment. An
investment in the Fund is only appropriate for investors willing to bear those losses.
Fund Rebalance. Milliman implements the Fund’s strategy on an annual basis, seeking to
produce the Outcomes for an Outcome Period. On the last business day of any stated Outcome Period, all of the Fund’s existing FLEX Options, which includes those used to establish the Buffer, the Index Caps and the Put Spread Strategy, will expire
and Milliman will transact in a new set of FLEX Options on the same business day, which will commence a new Outcome Period beginning the following business day. At that same time, Milliman will also evaluate whether to make any adjustments to the
Collateral Portfolio. Accordingly, Shares can be held indefinitely if investors determine to participate in additional Outcome Periods.
Approximately one week prior to the end of each Outcome Period, the Fund will file a prospectus supplement, which will notify existing investors of
(i) the date on which the existing Outcome Period will end; (ii) the date on which the new Outcome Period will commence; and (iii) the anticipated ranges of the Index Caps that will be used for the new Outcome Period. Immediately preceding the
commencement date of the new Outcome Period, the Fund will file a prospectus supplement disclosing the Fund’s final Index Caps (both gross and net of Fund fees and expenses) for the new Outcome Period. This information will also be available
online at www.[___________].com, and on your insurance company’s website. Please contact your insurance company or other financial intermediary for more information.
Fund Classification. The Fund is classified as “non-diversified” under the Investment
Company Act of 1940, as amended (the “1940 Act”).
Principal Risks
You could lose money by investing in the Fund. An investment in the Fund is not a deposit of a bank and is not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other governmental agency. There can be no assurance that the Fund’s investment objectives will be achieved.
Downside Loss Buffer Risk. There can be no guarantee that the Fund will be successful in its strategy to
buffer against S&P 500 Index losses if the S&P 500 Index decreases in value over the Outcome Period. The Fund’s strategy is designed to produce returns that correlate to those of the S&P 500 Index, subject to the S&P 500 Index
Cap, while limiting downside S&P 500 Index losses and providing additional upside exposure to the Secondary Index, subject to the Secondary Index Cap, if Shares are bought on the day on which Milliman transacts in the FLEX Options on behalf
of the Fund and held until those FLEX Options expire at the end of each Outcome Period. The success of the Buffer also depends upon the performance of the Collateral Portfolio and the Put Spread Strategy. If
the Collateral Portfolio and/or the Put Spread Strategy experiences losses, it could have the effect of reducing the impact of, or completely eliminating, the Buffer on the Fund’s S&P 500 Index exposure. In certain market conditions, the
performance of the Collateral Portfolio and/or the Put Spread Strategy could cause the Fund to significantly underperform the S&P 500 Index. Despite the intended Buffer, an investor could lose their entire investment. In the
event an investor purchases Shares after the date on which Milliman transacted in the FLEX Options on behalf of the Fund, or redeems Shares prior to the expiration of those FLEX Options, the Buffer that the Fund seeks to provide may not be
available or fully applicable.
Risk of Capped Upside Returns. The Fund’s strategy is designed to produce returns that correlate to those of the
Reference Indices up to the Index Caps if Shares are bought on the day on which Milliman transacts in the FLEX Options on behalf of the Fund and held until those FLEX Options expire at the end of the Outcome Period, subject to the Index Caps. In
the event that one or both of the Reference Indices experience gains during the Outcome Period, the Fund will only participate in those gains up to the applicable Index Cap. In the event that one or both Reference Indices experience gains in excess
of the applicable Index Cap over the duration of the Outcome Period, the Fund will not participate in those excess gains. Because the Fund’s strategy provides capped exposure to two Reference Indices, the Index Caps may be lower than if the Fund
provided capped exposure to only a single Reference Index. In the event an investor purchases Shares after the date on which the FLEX Options were entered into and the Fund has risen in value to a level near to an Index Cap, there may be little or
no ability for that investor to experience an investment gain on their Shares relating to that Reference Index. In certain market conditions, the performance of the Collateral Portfolio and the Put Spread
Strategy could cause the Fund to
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underperform relative to the Reference Indices, which could further limit Fund gains below the Index Caps, notwithstanding any
performance of the Reference Indices in excess of the Index Caps. An investor should consider the amount of the Index Caps, and the Fund’s position relative to each Index Cap, before investing in the Fund.
Index Cap Change Risk. Because the Index Caps for each Outcome Period are calculated based upon (i) Milliman’s
evaluation of prevailing market conditions on the first day of the Outcome Period and (ii) the total number of long call FLEX Options on the Reference Indices that Milliman is able to purchase at that time, the Index Caps may rise or fall from one
Outcome Period to the next. Any change in the Index Caps could be significant and they are unlikely to remain the same for consecutive Outcome Periods.
FLEX Options Risk. The Fund will transact in FLEX Options issued and guaranteed for settlement by the OCC. The
Fund bears the risk that the OCC will be unable or unwilling to perform its obligations under the FLEX Options contracts, which could result in significant losses to the Fund. In less liquid markets, terminating a FLEX Option may require the
payment of a premium or acceptance of a discounted price, and may take longer to complete. In addition, a less liquid trading market may adversely impact the value of the Fund’s FLEX Options and therefore the NAV of the Fund. In addition, the value
of the Fund’s FLEX Options positions is not anticipated to increase or decrease at the same rate as the reference asset; and while it is anticipated that they will generally move in the same direction, it is possible that they may move in different
directions. Certain FLEX Options positions may also expire worthless. The use of FLEX Options involves leverage, which can cause the Fund’s portfolio to be more volatile than if the portfolio had not been leveraged. Leverage can significantly
magnify the effect of price movements of the reference asset, disproportionately increasing the Fund’s losses and reducing the Fund’s opportunities for gains when the reference asset changes in unexpected ways. In some instances, such leverage
could result in losses that exceed the original amount invested.
Investment Objective and Outcomes Risk. There is no guarantee that the Fund will be successful in its attempt
to achieve its investment objective and/or the Outcomes, and an investor could lose some or all of their investment in the Fund. Certain circumstances under which the Fund might not achieve its objective and/or the Outcomes include, but are not
limited to (i) if the Fund disposes of FLEX Options, (ii) if the Fund is unable to maintain the proportional relationship based on the number of FLEX Options in the Fund’s portfolio, (iii) significant accrual of Fund expenses in connection with
effecting the Fund’s principal investment strategy, (iv) losses incurred by the Fund’s holdings in the Collateral Portfolio and/or losses resulting from the Put Spread Strategy, or (iv) adverse tax law changes affecting the treatment of FLEX
Options.
Tax Risk. The Fund intends to elect, and to qualify each year, to be treated as a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”). As a RIC, the Fund will not be subject to U.S. federal income tax on the portion
of its net investment income and net capital gain that it distributes to shareholders, provided that it satisfies certain requirements of the Code. To maintain its status as a RIC, the Fund must meet certain income, diversification and
distributions tests. For purposes of the diversification test, the identification of the issuer (or, in some cases, issuers) of a particular Fund investment can depend on the terms and conditions of that investment. In particular, there is no
published IRS guidance or case law on how to determine the “issuer” of certain derivatives that the Fund will enter into and the Fund has not received a private letter ruling on this point. Therefore, there is a risk that the Fund will not meet the
Code’s diversification requirements and will not qualify, or will be disqualified, as a RIC. If the Fund does not qualify as a RIC for any taxable year and certain relief provisions are not available, the Fund’s taxable income will be subject to
tax at the Fund level and to a further tax at the shareholder level when such income is distributed.
The Fund also intends to comply with the diversification requirements of Section 817(h) of the Code, and the regulations thereunder, relating to the
tax-deferred status of variable accounts that are based on insurance company separate accounts (referred to as “segregated asset accounts” for federal income tax purposes). These diversification requirements apply in addition to the RIC
diversification requirements discussed above. There also is no published guidance or case law on how to determine the “issuer” of the derivatives referred to above for purposes of the diversification requirements of Section 817(h) of the Code and
the Fund has not received a private letter ruling on this point. If these requirements are not met, or under other circumstances, such as if the Fund does not qualify as a RIC for any taxable year, it is possible that the contract owners (rather
than the insurance company) will be treated for federal income tax purposes as the taxable owners of the assets held by the segregated asset accounts.
288
Clearing Member Default Risk. The Fund will hold FLEX Options through accounts at members of clearing houses (“clearing members”) rather than a bank or a broker. Assets deposited by the Fund with any clearing member as margin for its FLEX Options positions may, in certain circumstances, be used to satisfy losses of other
clients of the Fund’s clearing member where such assets may be held in commingled omnibus accounts. In addition, although clearing members guarantee performance of their clients’ obligations to the clearing house, there is a risk that the assets of
the Fund might not be fully protected in the event of the clearing member’s bankruptcy, as the Fund would be limited to recovering only a pro rata share of all available funds segregated on behalf of the
clearing member’s customers for the relevant account class.
Debt Securities Risk. The prices of debt securities will be affected by changes in interest rates, the
creditworthiness of the issuer and other factors. These risks could affect the value of investments in which the Fund invests, possibly causing the Fund’s NAV to be reduced and fluctuate more than other types of investments. During periods of
falling interest rates, an issuer of a callable bond may repay the security before its stated maturity, and the Fund may have to reinvest the proceeds in securities with lower yields, which would result in a decline in the Fund’s income, or in
securities with greater risks or with other less favorable features. Changing interest rates, including rates that fall below zero, may have unpredictable effects on markets, result in heightened market volatility and detract from the Fund’s
performance to the extent the Fund is exposed to such interest rates. An increase in interest rates will generally cause the value of fixed-income securities held by the Fund to decline, may lead to heightened volatility in the fixed-income
markets and may adversely affect the liquidity of certain fixed-income investments, including those held by the Fund. Risks associated with rising interest rates are heightened given that interest rates in the U.S. are near historic lows.
Adjustable-rate instruments also react to interest rate changes in a similar manner, although generally to a lesser degree (depending, however, on the characteristics of the reset terms, including the index chosen, frequency of reset and reset
caps or floors, among other factors). Interest rate sensitivity is generally more pronounced and less predictable in instruments with uncertain payment or prepayment schedules and also for those with longer maturities.
Foreign Securities and Credit Exposure Risk. U.S. dollar-denominated securities carrying foreign credit exposure
may be affected by unfavorable political, economic or governmental developments that could affect payments of principal and interest. Furthermore, the value of the Fund’s foreign investments (whether direct or indirect) may be adversely affected by
political and social instability in their home countries, by changes in economic or taxation policies in those countries, or by the difficulty in enforcing obligations in those countries. Foreign companies generally may be subject to less stringent
regulations than U.S. companies, including financial reporting requirements and auditing and accounting controls. As a result, there generally is less publicly available information about foreign companies than about U.S. companies. Trading in many
foreign securities may be less liquid and more volatile than U.S. securities due to the size of the market or other factors.
U.S. Government Securities Risk. U.S. Government securities are subject to interest rate risk but generally do
not involve the credit risks associated with investments in other types of debt securities. As a result, the yields available from U.S. Government securities are generally lower than the yields available from other debt securities. U.S. Government
securities are guaranteed only as to the timely payment of interest and the payment of principal when held to maturity. While securities issued or guaranteed by U.S. federal government agencies are backed by the full faith and credit of the U.S.
Department of the Treasury, securities issued by government sponsored entities are solely the obligation of the issuer and generally do not carry any guarantee from the U.S. Government.
ABS Risk. ABS are subject to the general debt securities risks described above. In addition, ABS may be less
liquid than other bonds, and may be more sensitive than other bonds to the market’s perception of issuers and creditworthiness of payees, which may result in the Fund experiencing difficulty selling or valuing these securities. ABS markets have
experienced extraordinary weakness and volatility at various times in recent years, and may decline quickly in the event of a substantial economic or market downturn. Accordingly, these securities may be subject to greater risk of default during
periods of economic downturn than other securities, which could result in possible losses to the Fund.
Issuer Risk. The performance of the Fund depends on the performance of individual securities to which the Fund
has exposure. The Fund may be adversely affected if an issuer of underlying securities held by the Fund is unable or
289
unwilling to repay principal or interest when due. Changes in the financial condition or credit rating of an issuer of those securities may cause the
value of the securities to decline.
Management Risk. The Fund is subject to management risk because it is an actively managed portfolio. Milliman
will apply investment techniques and risk analyses in making investment decisions for the Fund, but there can be no guarantee that the Fund will meet its investment objective and/or the Outcomes. In addition, Milliman does not use defensive
strategies or attempt to reduce the Fund’s exposures to poor performing positions during an Outcome Period. This differs from funds that are managed to seek to outperform a benchmark index. Therefore, in the event of a general market decline, the
Fund’s value may fall more than the value of another fund that does attempt to hedge against such market declines.
Market Risk. The Fund could lose money over short periods due to short-term market movements and over longer
periods during more prolonged market downturns. Assets may decline in value due to factors affecting financial markets generally or particular asset classes or industries represented in the markets. The value of a FLEX Option or other asset may
also decline due to general market conditions, economic trends or events that are not specifically related to the issuer of the security or other asset, or due to factors that affect a particular issuer, country, region, market, industry, sector or
asset class.
Non-Diversification Risk. The Fund may invest a relatively high percentage of its assets in a limited number of
issuers. As a result, the Fund may be more susceptible to a single adverse economic or regulatory occurrence affecting one or more of these issuers, experience increased volatility and be highly invested in certain issuers.
Large Shareholder Risk. At times, the Fund may experience adverse effects when certain large shareholders,
including insurance company separate accounts, redeem large amounts of shares of the Fund. Large redemptions may cause the Fund to sell portfolio holdings at times when it would not otherwise do so and may increase transaction costs and/or result
in an increase to the Fund’s expense ratio. A large redemption could be detrimental to the Fund and its remaining shareholders.
Risks of Investing in ETFs. In addition to the risks associated with the underlying assets held by the ETFs in
which the Fund invests, investments in ETFs are also subject to the following additional risks: (i) only authorized participants may engage in transactions directly with ETFs but none are obligated to do so, which could result in an ETF’s shares
trading at a premium or discount to its NAV or possibly face trading halts or delisting; (ii) certain ETFs seek to track the performance of an underlying index and will not attempt to take defensive positions under any market conditions, including
declining markets, which could result in losses; and (iii) because ETF shares trade on the secondary market, there is not guarantee that an active market will be developed or maintained, which could result in the ETF’s shares trading at a premium
or discount to its NAV. Investments in ETFs may involve duplication of management fees and certain other expenses, as the Fund indirectly bears its proportionate share of any expenses paid by the ETFs in which it invests.
Risks of Investing in Money Market Funds. Money market funds seek to preserve the value of shareholder
investments at $1.00 per share, but shareholders, such as the Fund, may still lose money by investing in such funds. In addition, a money market fund may impose a fee upon the sale of its shares or may temporarily suspend the ability to sell shares
if the fund’s liquidity falls below required minimums because of market conditions or other factors. The credit quality of a money market fund’s holdings can change rapidly in certain markets, and the default of a single holding could have an
adverse impact on the fund’s share price. A money market fund’s share price can also be negatively affected during periods of high redemption pressures, illiquid markets, and/or significant market volatility.
Performance
As of the date of this Prospectus, the Fund has not commenced operations and therefore does not have a performance history. Once available, the Fund’s
performance information will be accessible online at www.[________].com and will provide some indication of the risks of investing in the Fund.
Management
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Investment Adviser
Milliman Financial Risk Management LLC (“Milliman”) serves as investment adviser to the Fund.
Portfolio Managers
The following persons serve as portfolio managers of the Fund.
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Robert T. Cummings, Principal & Head of Portfolio Management at Milliman.
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Maria Schiopu, Principal & Head of Portfolio Management at Milliman.
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Jeff Greco, Principal & Head of Strategy Research at Milliman.
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Jordan Rosenfeld, Portfolio Manager at Milliman.
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Each portfolio manager is jointly and primarily responsible for the day-to-day management of the Fund’s portfolio and has served in such capacity
since the Fund’s inception in 2021.
Purchase and Sale of Shares
Shares are available as underlying investment options for variable insurance contracts and variable life insurance policies (each, a “variable contract,” and, collectively, the “variable contracts”) issued by insurance companies. These insurance companies are the record owners of the separate accounts
holding the Shares. You do not buy, sell or exchange Shares directly; rather, you choose investment options through your variable contracts. The insurance companies then cause the separate accounts to purchase and redeem Shares according to
the investment options you choose.
Tax Information
The dividends and distributions paid by the Fund to the insurance company separate accounts will consist of ordinary income, capital gains, or some
combination of both. Because Shares must be purchased through separate accounts used to fund variable contracts, such dividends and distributions will be exempt from current taxation by owners of variable contracts (each, a “contract owner,” and, collectively “contract owners”) if left to accumulate within a separate account. Consult the variable contract prospectus for additional tax
information.
Payments to Insurance Companies and Other Financial Intermediaries
If you allocate contract value to the Fund through an insurance company or other financial intermediary, the Fund, Milliman, the Fund’s distributor or
their related companies may pay the insurance company and/or its affiliates or other intermediary for the sale of Shares and related services. These payments may create a conflict of interest by influencing the insurance company or other
intermediary and your salesperson to recommend an indirect investment in the Fund over another investment. The prospectus or other disclosure documents for the variable contracts may contain additional information about these payments, if any.
You may also ask your salesperson or financial intermediary, or visit your financial intermediary’s website, for more information.
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Fund Summary: Milliman S&P 500 & Nasdaq 1-Year Buffer with Stacker Cap Fund
– Oct
Investment Objective
The Fund seeks to provide exposure to the S&P 500 Index, while providing a buffer against the first 10% of losses associated with S&P 500
Index performance and participating in S&P 500 Index gains up to a declared cap, prior to taking into account any fees or expenses or the performance of any fixed income exposure included in the Fund’s portfolio, over the period from October
1, 2021 through September 30, 2022. The Fund also seeks to provide upside exposure to the Nasdaq-100® Index up to a declared cap, prior to taking into account any fees or expenses or the performance of any fixed income exposure
included in the Fund’s portfolio, over the same period.
Fees and Expenses of the Fund
This table describes the fees and expenses that you may pay if you buy, hold and sell shares of the Fund (“Shares”).
This table and the example below do not include any fees or sales charges imposed by your variable product. If they were included, the expenses listed below would be higher.
Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment)
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Class 3
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Management Fees
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0.49%
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Distribution and Service (12b-1) Fees
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0.25%
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Other Expenses(1)
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0.50%
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Acquired Fund Fees and Expenses(1)
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[_.__]%
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Total Annual Fund Operating Expenses
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1.24%
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Fee Waiver and/or Expense Reimbursement(2)(3)
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(0.25)%
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Total Annual Fund Operating Expenses After Fee Waiver and/or Expense Reimbursement
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0.99%
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(1)
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“Other Expenses” and “Acquired Fund Fees and Expenses” are based on estimated amounts for the current fiscal year.
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(2)
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The Fund’s investment adviser, Milliman Financial Risk Management LLC (“Milliman”), has contractually
agreed to waive advisory fees and/or reimburse expenses to the extent necessary to limit the Fund’s total annual Fund operating expenses (excluding taxes, interest, brokerage fees and commissions, Rule 12b-1 fees, acquired fund fees and
expenses, short-sale dividend expenses, administrative services fees, other expenses that are capitalized in accordance with generally accepted accounting principles, and extraordinary or non-routine expenses not incurred in the
ordinary course of the Fund’s business) to 0.74% of the Fund's average daily net assets (the “Expense Limitation Agreement”) until at least November 1, 2022. During its term, the Expense
Limitation Agreement cannot be terminated or amended to increase the applicable limit without approval of the Board of Trustees of the Trust (the “Board”). Milliman may recoup from the Fund any
advisory fees waived or expenses reimbursed pursuant to the Expense Limitation Agreement for a period of three years from the date on which such waiver or reimbursement occurred; provided, however, that such recoupment shall not be made
if it would cause the Fund’s total annual Fund operating expenses to exceed the lesser of (a) the expense limitation in effect at the time of the reimbursement, or (b) the expense limitation in effect at the time of recoupment, if any.
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(3)
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In addition to the Expense Limitation Agreement, Milliman has contractually agreed to waive its advisory fees in an amount equal to the Fund’s
acquired fund fees and expenses until at least November 1, 2022 (the “Fee Waiver”). This contract cannot be terminated or modified without the consent of the Board.
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Example
This example is intended to help you compare the cost of investing in the Fund with the cost of investing in other funds. This example assumes that you
invest $10,000 in the Fund for the time periods indicated and then sell all of your Shares at the end of those periods. This example also assumes that your investment has a 5% return each year and that the Fund’s operating expenses remain at
current levels and that the Expense Limitation Agreement and Fee Waiver remain in place for their contractual periods. Although your actual costs may be higher or lower, your costs, based on these assumptions, would be:
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1 Year
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3 Years
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Class 3
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$104
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$384
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This example does not include any fees or sales charges imposed by your variable product. If they were included, the expenses listed above would be
higher.
Portfolio Turnover
The Fund pays transaction costs, such as commissions, when it purchases and sells securities (or “turns over” its portfolio). A higher portfolio turnover
will cause the Fund to incur additional transaction costs. These costs, which are not reflected in Total Annual Fund Operating Expenses or in the example, may affect the Fund’s performance. Because the Fund has not yet commenced investment
operations, no portfolio turnover information is available at this time.
Principal Investment Strategies
The Fund seeks to achieve its investment objective by transacting in FLexible EXchange® Options (“FLEX Options”)
and by separately maintaining a collateral portfolio (the “Collateral Portfolio”), which is designed primarily to serve as margin or collateral for the Fund’s FLEX Options positions and secondarily to
enhance the Fund’s upside S&P 500 Index and Nasdaq-100® Index FLEX Options’ exposure (i.e., by utilizing anticipated income to measure the ability to purchase additional FLEX Options). FLEX
Options are exchange-traded options contracts with uniquely customizable terms. In general, an options contract is an agreement between a buyer and seller that gives the purchaser of the option the right to buy or sell a particular asset at a
specified future date at an agreed upon price, commonly known as the “strike price.” The reference assets for the Fund’s FLEX Options positions will include the S&P 500 Index, the Nasdaq-100® Index (the “Secondary Index,” and together with the S&P 500 Index, the “Reference Indices,” and, each, a “Reference Index”), and certain exchange-traded
funds (“ETFs”), as described further below. The S&P 500 Index is a large-capitalization, market-weighted, U.S. equities index that tracks the price (excluding
dividends) of 500 leading companies in leading industries of the U.S. economy. The Secondary Index is [a market capitalization-weighted index that is designed to represent the performance of all domestic and international common type stocks
listed on The Nasdaq Stock Market LLC].
The Collateral Portfolio may be invested in short-term fixed-income securities, including corporate bonds and other corporate debt securities,
asset-backed securities (“ABS”), securities issued by the U.S. Government or its agencies and instrumentalities, securities issued by non-U.S. governments or their agencies and instrumentalities, money
market securities and funds, other interest-bearing instruments, cash, ETFs that primarily invest in any of the foregoing instruments, options on ETFs and options box spreads. An options box spread is the combination of different options trades
that have offsetting spreads (e.g., purchases and sales on the same underlying instrument, such as an index or an ETF, but with different strike prices and/or expiration dates) for the purpose of
generating income. The Fund may invest in short-term fixed income securities or other instruments, including through ETFs, of any maturity and credit quality. The Fund will generally invest up to 35% of its net assets in one or more ETFs that
provide exposure to investment grade corporate bonds.
Due to the unique mechanics of the Fund’s strategy, the return an investor can expect to receive from an investment in the Fund has characteristics that
are distinct from the returns of many other investment vehicles. It is important that an investor understand these characteristics before making an investment in the Fund.
In seeking to achieve its investment objective, the Fund seeks to produce pre-determined outcomes (the “Outcomes”)
that are based upon the performance of the Reference Indices over a one-year period (the “Outcome Period”). The initial Outcome Period for the Fund is October 1, 2021 through September 30, 2022. Following
the initial Outcome Period, each subsequent Outcome Period will be a one-year period commencing upon the expiration of the prior Outcome Period. The Fund seeks to achieve the Outcomes by purchasing and writing (selling) FLEX Options to create
layers within the Fund’s portfolio. One layer is designed to produce returns that correlate to those of the S&P 500 Index for the Outcome Period if the S&P 500 Index experiences gains during that time, subject to an upside return cap (the “S&P 500 Index Cap”), as described below. A second layer is designed to produce returns that correlate to any upside market performance of the Secondary Index over the
Outcome Period, subject to an upside return cap (the “Secondary Index Cap,” and, together with the S&P 500 Index Cap, the “Index Caps,” and, each, an “Index Cap”), as described below. A third layer is designed to produce returns that correlate to those of the S&P 500 Index for the Outcome Period that are buffered up to 10% if the S&P 500 Index
experiences losses during that time (the “Buffer”). There is no guarantee that the Fund will be successful in its attempt to produce
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returns that correlate to those of the S&P 500 Index or the Secondary Index up to the applicable Index Caps or produce buffered
returns against the Fund’s S&P 500 Index exposure.
Milliman Financial Risk Management, LLC (“Milliman”), the investment adviser of the Fund, seeks to establish the
Buffer by writing one put FLEX Option on the S&P 500 Index with a strike price that is 10% lower than the value of the S&P 500 Index at the beginning of the Outcome Period.
Milliman seeks to establish the Index Caps by purchasing long call FLEX Options on each Reference Index with a strike price approximately equal to the
value of the respective Reference Index at the beginning of the Outcome Period. Milliman purchases these FLEX Options with a portion of the Fund’s net assets plus (i) the cash received from writing the put FLEX Option designed to create the
Buffer, (ii) additional cash received by utilizing FLEX Options to create a put spread (the “Put Spread Strategy”) on fixed income securities and/or one or more ETFs that provide exposure to fixed income
securities, and (iii) yield received from the Collateral Portfolio. Milliman seeks to achieve the Put Spread Strategy for the Fund by writing a put FLEX Option on an underlying asset at a strike price at or lower than the underlying asset’s
market price or current value at the beginning of the Outcome Period, and buying a put FLEX Option on the same underlying asset at a lower strike price than the written put FLEX Option.
The Index Caps represent the maximum rate of return in each Reference Index that an investor can achieve from an investment in the Fund over the Outcome
Period. Milliman calculates the Index Caps based upon (i) its evaluation of prevailing market conditions on the first day of the Outcome Period and (ii) the total number of long call FLEX Options on each Reference Index that it is able to purchase
at that time. As of the date of this Prospectus, and assuming current market conditions persist, Milliman expects that the Index Caps will be between the below ranges (both gross and net of Fund fees and expenses). Any fees or expenses imposed by
your variable product, and any other expenses incurred by the Fund, will have the effect of further reducing each Index Cap. In addition, in certain market conditions, the performance of the Collateral Portfolio
and the Put Spread Strategy could cause the Fund to underperform relative to the Reference Indices, which could further limit Fund gains below the Index Caps, notwithstanding any performance of the Reference Indices in excess of the Index Caps.
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Estimated Index Cap Ranges
(As of [___])
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Prior to Taking into Account Fund Fees and Expenses
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After Taking into Account Fund Fees and Expenses
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S&P 500 Index Cap
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Class 3
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[__]% and [__]%
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[__]% and [__]%
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Secondary Index Cap
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||
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Class 3
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[__]% and [__]%
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[__]% and [__]%
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The Buffer is only operative against the first 10% of losses in the Fund’s S&P 500 Index exposure for the Outcome Period. If the S&P 500 Index
decreases in value by more than 10% during the Outcome Period, the Fund (and therefore investors in Shares) will experience all subsequent losses in the Fund’s S&P 500 Index exposure on a one-to-one basis for the Outcome Period. The Fund
seeks to produce buffered returns against its S&P 500 Index exposure prior to taking into account any fees or expenses or the performance of the Collateral Portfolio or the Put Spread Strategy. The Buffer
is not operative against losses in the Collateral Portfolio or the Put Spread Strategy. If the Collateral Portfolio and/or the Put Spread Strategy experiences losses, it could have the effect of reducing the impact of, or completely
eliminating, the Buffer on the Fund’s S&P 500 Index exposure. In certain market conditions, the performance of the Collateral Portfolio and/or the Put Spread Strategy could cause the Fund to significantly underperform the S&P 500
Index. The following table reflects the Buffer both gross and net of Fund fees and expenses:
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Share Class
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Buffer
(As of [___])
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Prior to Taking into Account Fund Fees and Expenses
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After Taking into Account Fund Fees and Expenses
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Class 3
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10%
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[__]%
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294
Because the Fund also seeks to provide only upside exposure to the Secondary Index during the Outcome Period, the Fund’s NAV will not be impacted by any
losses experienced by the Secondary Index when measured from the beginning to the end of the Outcome Period. If the Secondary Index increases in value during the Outcome Period and later decreases in value during the Outcome Period, the Fund’s NAV
will reflect any such decreases until the Secondary Index reaches its initial value (measured as of the first day of the Outcome Period). If the Secondary Index decreases in value over the course of an entire Outcome Period, the Fund’s NAV will not
reflect such losses; therefore, the Fund’s overall performance will be approximately that of the S&P 500 Index for the Outcome Period, subject to the Buffer and the S&P 500 Index Cap.
The definitive Index Caps and Buffer will be set forth on the Fund’s website. The Fund’s website will also provide information relating to the
Outcomes on a daily basis, including the Fund’s position relative to the Index Caps and the Buffer. You may also contact your insurance company or other financial intermediary for more information.
Additionally, the Fund’s net asset value (“NAV”) will not increase or decrease at the same rate as the Reference
Indices because the Fund’s strategy relies upon the performance of the Collateral Portfolio and the Put Spread Strategy, in addition to the value of the Fund’s FLEX Options positions on the Reference Indices. While Milliman anticipates that the
Fund’s NAV will generally move in the same direction as the S&P 500 Index, and correspond to any upside returns of the Secondary Index (meaning that the Fund’s NAV will generally increase if the Reference Indices experience gains or decrease if
the Reference Indices experience losses), the Fund’s NAV may not decrease at the same rate as the Reference Indices (especially when factoring in the performance of the Collateral Portfolio and the Put Spread Strategy) and will not increase at the
same rate as the Reference Indices (especially when factoring in the Index Caps and the performance of the Collateral Portfolio and the Put Spread Strategy). Similarly, the amount of time remaining until the end of the Outcome Period also affects
the impact of the Buffer on the Fund’s NAV, because the Buffer may not be in full effect prior to the end of the Outcome Period.
The FLEX Options utilized in the Fund’s portfolio are each set to expire on the last day of the Outcome Period. The customizable nature of FLEX Options
will allow Milliman to select the strike price at which each FLEX Option will be exercised at the expiration of the FLEX Option term. At the commencement of the Outcome Period, Milliman will specifically select the strike price for each FLEX Option
in a manner designed to achieve the Outcomes when the FLEX Options are exercised on the final day of the Outcome Period, depending on the anticipated performance of the Reference Indices, the Collateral Portfolio and the Put Spread Strategy over
the duration of that Outcome Period.
The hypothetical graphical illustrations provided below are designed to illustrate the Outcomes based upon the
hypothetical performance of the Reference Indices for an investor who holds Shares for the entirety of the Outcome Period. The hypothetical graphical illustrations do not include any fees or expenses
imposed by your variable product or expenses incurred by the Fund, and do not reflect the performance of the Collateral Portfolio or the Put Spread Strategy. Additional hypothetical graphical representations of the Outcomes are provided in
“Additional Information About the Funds and the Risks of Investing.” There is no guarantee that the Fund will be successful in its attempt to achieve the Outcomes for the Outcome Period.
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The following table contains hypothetical examples designed to illustrate the Outcomes the Fund seeks to
achieve over the Outcome Period, based upon the performance of the Reference Indices from (100)% to 100% after taking into account the Index Caps and the Buffer, but prior to taking into account any fees or
expenses or the performance of the Collateral Portfolio or the Put Spread Strategy. The table is provided for illustrative purposes only and does not provide every possible performance scenario for Shares over
the course of the Outcome Period. There is no guarantee that the Fund will be successful in its attempt to achieve the Outcomes for an Outcome Period. The table is not intended to predict or project the performance of the FLEX Options or the Fund. Investors should not take this information as an
assurance of the expected performance of the Reference Indices or the Fund. Actual Fund performance will vary with fluctuations in the performance of the Collateral Portfolio and the Put Spread Strategy, in addition to the value of the
Fund’s FLEX Options positions on the Reference Indices, during the Outcome Period, among other factors. The performance of the Collateral Portfolio and the Put Spread Strategy
could significantly impact the performance of the Fund, which could prevent the Fund from achieving the Outcomes that it seeks to produce. The table does not reflect any fees or expenses imposed by your variable product or expenses
incurred by the Fund. If it did, the returns shown for the Fund would be lower. Please refer to the Fund’s website, which provides updated information relating to this table on a daily basis throughout the Outcome Period. Please contact your
insurance company or other financial intermediary for more information.
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|
Index/Fund
|
Hypothetical Performance1
|
|||||||||||
|
S&P 500 Index Price Performance
|
(100)%
|
(50)%
|
(20)%
|
(10)%
|
(5)%
|
0%
|
5%
|
10%
|
15%
|
20%
|
50%
|
100%
|
|
Secondary Index Price Performance
|
(100)%
|
(50)%
|
(20)%
|
(10)%
|
(5)%
|
0%
|
5%
|
10%
|
15%
|
20%
|
50%
|
100%
|
|
Fund Performance at NAV
|
(90)%
|
(40)%
|
(10)%
|
0%2
|
0%2
|
0%
|
10%3
|
14%3
|
14%3
|
14%3
|
14%3
|
14%3
|
| 1 |
Does not take into account any fees or expenses or the performance of the Collateral Portfolio or the Put Spread Strategy.
|
| 2 |
Reflects the impact of the Buffer.
|
| 3 |
Reflects the impact of assumed Index Caps of 7% per index, 14% total.
|
Understanding Outcomes. The Outcomes the Fund seeks to achieve are measured based upon the
Fund’s NAV on the first day of the Outcome Period. The Outcome Period begins on the day Milliman transacts in the FLEX Options on behalf of the Fund, and ends on the day those FLEX Options expire. An investor who
purchases Shares after the commencement of the Outcome Period will likely have purchased Shares at a different NAV than the NAV on the first day of the Outcome Period (the NAV upon which the Outcomes are based) and may experience investment
outcomes very different from those the Fund seeks to achieve, especially when factoring in any fees or expenses or the performance of the Collateral Portfolio and the Put Spread Strategy. An investor who redeems Shares prior to the end of the
Outcome Period may also experience investment outcomes very different from those the Fund seeks to achieve. The Outcomes are designed with the expectation that an investor will hold Shares on the day that Milliman transacts in the FLEX Options on
behalf of the Fund, and on the day those FLEX Options expire. There is no guarantee that the Fund will be successful in its attempt to achieve the Outcomes.
Understanding the Index Caps. Unlike other investment products, the potential returns an
investor can receive from an investment in the Fund are subject to the Index Caps. This means that if one or both of the Reference Indices experience gains for the Outcome Period, an investor in the Fund will only
experience those gains up to the applicable Index Cap. Milliman calculates the Index Caps for each Outcome Period based upon (i) its evaluation of prevailing market conditions on the first day of the Outcome Period and (ii) the total
number of long call FLEX Options on each Reference Index that it is able to purchase at that time. If an investor is considering purchasing Shares during the Outcome Period, and the Fund’s NAV has increased in
value to a level near one or both of the Index Caps, an investor purchasing Shares at that price will have limited to no gains available for the remainder of the Outcome Period, but will remain vulnerable to significant downside risks (with
respect to the S&P 500 Index FLEX Options’ exposure). In certain market conditions, the performance of the Collateral Portfolio and the Put Spread Strategy could cause the Fund to underperform
relative to the Reference Indices, which could further limit Fund gains below the Index Caps, notwithstanding any performance of the Reference Indices in excess of the Index Caps.
Understanding the Buffer. The Buffer that the Fund seeks to provide is only operative
against the first 10% of losses in the Fund’s S&P 500 Index exposure for the Outcome Period. If an investor is considering purchasing Shares during the Outcome Period, and the S&P 500 Index has decreased
in value by an amount equal to or greater than 10%, an investor purchasing Shares at that time will be able to participate in any gains thereafter (up to the Index Caps), but will not benefit from the Buffer that the Fund seeks to offer for the
remainder of the Outcome Period if the losses continue to be equal to or greater than 10% during that period. Conversely, if an investor is considering purchasing Shares during the Outcome Period, and the Fund’s NAV has increased in value, then
an investor may experience losses before implementation of the Buffer that the Fund seeks to provide. While the Fund seeks to produce returns that correlate to those of the S&P 500 Index for the Outcome Period that are buffered up to
10% (prior to taking into account any fees or expenses or the performance of the Collateral Portfolio or the Put Spread Strategy) for investors who hold Shares for the entire Outcome Period, there is no guarantee it will successfully do so. In addition, the Buffer is not operative against losses in the Collateral Portfolio or the Put Spread Strategy. If the Collateral Portfolio and/or the Put Spread Strategy experiences losses, it could have the
effect of reducing the impact of, or completely eliminating, the Buffer on the Fund’s S&P 500 Index exposure. In certain market conditions, the performance of the Collateral Portfolio and/or the Put Spread Strategy could cause the Fund to
significantly underperform the S&P 500 Index. Investors who purchase Shares at the beginning of the Outcome Period may lose their entire
297
investment. Investors who purchase Shares after the Outcome Period has begun may also lose their entire investment. An
investment in the Fund is only appropriate for investors willing to bear those losses.
Fund Rebalance. Milliman implements the Fund’s strategy on an annual basis, seeking to
produce the Outcomes for an Outcome Period. On the last business day of any stated Outcome Period, all of the Fund’s existing FLEX Options, which includes those used to establish the Buffer, the Index Caps and the Put Spread Strategy, will expire
and Milliman will transact in a new set of FLEX Options on the same business day, which will commence a new Outcome Period beginning the following business day. At that same time, Milliman will also evaluate whether to make any adjustments to the
Collateral Portfolio. Accordingly, Shares can be held indefinitely if investors determine to participate in additional Outcome Periods.
Approximately one week prior to the end of each Outcome Period, the Fund will file a prospectus supplement, which will notify existing investors of
(i) the date on which the existing Outcome Period will end; (ii) the date on which the new Outcome Period will commence; and (iii) the anticipated ranges of the Index Caps that will be used for the new Outcome Period. Immediately preceding the
commencement date of the new Outcome Period, the Fund will file a prospectus supplement disclosing the Fund’s final Index Caps (both gross and net of Fund fees and expenses) for the new Outcome Period. This information will also be available
online at www.[___________].com, and on your insurance company’s website. Please contact your insurance company or other financial intermediary for more information.
Fund Classification. The Fund is classified as “non-diversified” under the Investment
Company Act of 1940, as amended (the “1940 Act”).
Principal Risks
You could lose money by investing in the Fund. An investment in the Fund is not a deposit of a bank and is not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other governmental agency. There can be no assurance that the Fund’s investment objectives will be achieved.
Downside Loss Buffer Risk. There can be no guarantee that the Fund will be successful in its strategy to
buffer against S&P 500 Index losses if the S&P 500 Index decreases in value over the Outcome Period. The Fund’s strategy is designed to produce returns that correlate to those of the S&P 500 Index, subject to the S&P 500 Index
Cap, while limiting downside S&P 500 Index losses and providing additional upside exposure to the Secondary Index, subject to the Secondary Index Cap, if Shares are bought on the day on which Milliman transacts in the FLEX Options on behalf
of the Fund and held until those FLEX Options expire at the end of each Outcome Period. The success of the Buffer also depends upon the performance of the Collateral Portfolio and the Put Spread Strategy. If
the Collateral Portfolio and/or the Put Spread Strategy experiences losses, it could have the effect of reducing the impact of, or completely eliminating, the Buffer on the Fund’s S&P 500 Index exposure. In certain market conditions, the
performance of the Collateral Portfolio and/or the Put Spread Strategy could cause the Fund to significantly underperform the S&P 500 Index. Despite the intended Buffer, an investor could lose their entire investment. In the
event an investor purchases Shares after the date on which Milliman transacted in the FLEX Options on behalf of the Fund, or redeems Shares prior to the expiration of those FLEX Options, the Buffer that the Fund seeks to provide may not be
available or fully applicable.
Risk of Capped Upside Returns. The Fund’s strategy is designed to produce returns that correlate to those of the
Reference Indices up to the Index Caps if Shares are bought on the day on which Milliman transacts in the FLEX Options on behalf of the Fund and held until those FLEX Options expire at the end of the Outcome Period, subject to the Index Caps. In
the event that one or both of the Reference Indices experience gains during the Outcome Period, the Fund will only participate in those gains up to the applicable Index Cap. In the event that one or both Reference Indices experience gains in excess
of the applicable Index Cap over the duration of the Outcome Period, the Fund will not participate in those excess gains. Because the Fund’s strategy provides capped exposure to two Reference Indices, the Index Caps may be lower than if the Fund
provided capped exposure to only a single Reference Index. In the event an investor purchases Shares after the date on which the FLEX Options were entered into and the Fund has risen in value to a level near to an Index Cap, there may be little or
no ability for that investor to experience an investment gain on their Shares relating to that Reference Index. In certain market conditions, the performance of the Collateral Portfolio and the Put Spread
Strategy could cause the Fund to
298
underperform relative to the Reference Indices, which could further limit Fund gains below the Index Caps, notwithstanding any
performance of the Reference Indices in excess of the Index Caps. An investor should consider the amount of the Index Caps, and the Fund’s position relative to each Index Cap, before investing in the Fund.
Index Cap Change Risk. Because the Index Caps for each Outcome Period are calculated based upon (i) Milliman’s
evaluation of prevailing market conditions on the first day of the Outcome Period and (ii) the total number of long call FLEX Options on the Reference Indices that Milliman is able to purchase at that time, the Index Caps may rise or fall from one
Outcome Period to the next. Any change in the Index Caps could be significant and they are unlikely to remain the same for consecutive Outcome Periods.
FLEX Options Risk. The Fund will transact in FLEX Options issued and guaranteed for settlement by the OCC. The
Fund bears the risk that the OCC will be unable or unwilling to perform its obligations under the FLEX Options contracts, which could result in significant losses to the Fund. In less liquid markets, terminating a FLEX Option may require the
payment of a premium or acceptance of a discounted price, and may take longer to complete. In addition, a less liquid trading market may adversely impact the value of the Fund’s FLEX Options and therefore the NAV of the Fund. In addition, the value
of the Fund’s FLEX Options positions is not anticipated to increase or decrease at the same rate as the reference asset; and while it is anticipated that they will generally move in the same direction, it is possible that they may move in different
directions. Certain FLEX Options positions may also expire worthless. The use of FLEX Options involves leverage, which can cause the Fund’s portfolio to be more volatile than if the portfolio had not been leveraged. Leverage can significantly
magnify the effect of price movements of the reference asset, disproportionately increasing the Fund’s losses and reducing the Fund’s opportunities for gains when the reference asset changes in unexpected ways. In some instances, such leverage
could result in losses that exceed the original amount invested.
Investment Objective and Outcomes Risk. There is no guarantee that the Fund will be successful in its attempt
to achieve its investment objective and/or the Outcomes, and an investor could lose some or all of their investment in the Fund. Certain circumstances under which the Fund might not achieve its objective and/or the Outcomes include, but are not
limited to (i) if the Fund disposes of FLEX Options, (ii) if the Fund is unable to maintain the proportional relationship based on the number of FLEX Options in the Fund’s portfolio, (iii) significant accrual of Fund expenses in connection with
effecting the Fund’s principal investment strategy, (iv) losses incurred by the Fund’s holdings in the Collateral Portfolio and/or losses resulting from the Put Spread Strategy, or (iv) adverse tax law changes affecting the treatment of FLEX
Options.
Tax Risk. The Fund intends to elect, and to qualify each year, to be treated as a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”). As a RIC, the Fund will not be subject to U.S. federal income tax on the portion
of its net investment income and net capital gain that it distributes to shareholders, provided that it satisfies certain requirements of the Code. To maintain its status as a RIC, the Fund must meet certain income, diversification and
distributions tests. For purposes of the diversification test, the identification of the issuer (or, in some cases, issuers) of a particular Fund investment can depend on the terms and conditions of that investment. In particular, there is no
published IRS guidance or case law on how to determine the “issuer” of certain derivatives that the Fund will enter into and the Fund has not received a private letter ruling on this point. Therefore, there is a risk that the Fund will not meet the
Code’s diversification requirements and will not qualify, or will be disqualified, as a RIC. If the Fund does not qualify as a RIC for any taxable year and certain relief provisions are not available, the Fund’s taxable income will be subject to
tax at the Fund level and to a further tax at the shareholder level when such income is distributed.
The Fund also intends to comply with the diversification requirements of Section 817(h) of the Code, and the regulations thereunder, relating to the
tax-deferred status of variable accounts that are based on insurance company separate accounts (referred to as “segregated asset accounts” for federal income tax purposes). These diversification requirements apply in addition to the RIC
diversification requirements discussed above. There also is no published guidance or case law on how to determine the “issuer” of the derivatives referred to above for purposes of the diversification requirements of Section 817(h) of the Code and
the Fund has not received a private letter ruling on this point. If these requirements are not met, or under other circumstances, such as if the Fund does not qualify as a RIC for any taxable year, it is possible that the contract owners (rather
than the insurance company) will be treated for federal income tax purposes as the taxable owners of the assets held by the segregated asset accounts.
299
Clearing Member Default Risk. The Fund will hold FLEX Options through accounts at members of clearing houses (“clearing members”) rather than a bank or a broker. Assets deposited by the Fund with any clearing member as margin for its FLEX Options positions may, in certain circumstances, be used to satisfy losses of other
clients of the Fund’s clearing member where such assets may be held in commingled omnibus accounts. In addition, although clearing members guarantee performance of their clients’ obligations to the clearing house, there is a risk that the assets of
the Fund might not be fully protected in the event of the clearing member’s bankruptcy, as the Fund would be limited to recovering only a pro rata share of all available funds segregated on behalf of the
clearing member’s customers for the relevant account class.
Debt Securities Risk. The prices of debt securities will be affected by changes in interest rates, the
creditworthiness of the issuer and other factors. These risks could affect the value of investments in which the Fund invests, possibly causing the Fund’s NAV to be reduced and fluctuate more than other types of investments. During periods of
falling interest rates, an issuer of a callable bond may repay the security before its stated maturity, and the Fund may have to reinvest the proceeds in securities with lower yields, which would result in a decline in the Fund’s income, or in
securities with greater risks or with other less favorable features. Changing interest rates, including rates that fall below zero, may have unpredictable effects on markets, result in heightened market volatility and detract from the Fund’s
performance to the extent the Fund is exposed to such interest rates. An increase in interest rates will generally cause the value of fixed-income securities held by the Fund to decline, may lead to heightened volatility in the fixed-income
markets and may adversely affect the liquidity of certain fixed-income investments, including those held by the Fund. Risks associated with rising interest rates are heightened given that interest rates in the U.S. are near historic lows.
Adjustable-rate instruments also react to interest rate changes in a similar manner, although generally to a lesser degree (depending, however, on the characteristics of the reset terms, including the index chosen, frequency of reset and reset
caps or floors, among other factors). Interest rate sensitivity is generally more pronounced and less predictable in instruments with uncertain payment or prepayment schedules and also for those with longer maturities.
Foreign Securities and Credit Exposure Risk. U.S. dollar-denominated securities carrying foreign credit exposure
may be affected by unfavorable political, economic or governmental developments that could affect payments of principal and interest. Furthermore, the value of the Fund’s foreign investments (whether direct or indirect) may be adversely affected by
political and social instability in their home countries, by changes in economic or taxation policies in those countries, or by the difficulty in enforcing obligations in those countries. Foreign companies generally may be subject to less stringent
regulations than U.S. companies, including financial reporting requirements and auditing and accounting controls. As a result, there generally is less publicly available information about foreign companies than about U.S. companies. Trading in many
foreign securities may be less liquid and more volatile than U.S. securities due to the size of the market or other factors.
U.S. Government Securities Risk. U.S. Government securities are subject to interest rate risk but generally do
not involve the credit risks associated with investments in other types of debt securities. As a result, the yields available from U.S. Government securities are generally lower than the yields available from other debt securities. U.S. Government
securities are guaranteed only as to the timely payment of interest and the payment of principal when held to maturity. While securities issued or guaranteed by U.S. federal government agencies are backed by the full faith and credit of the U.S.
Department of the Treasury, securities issued by government sponsored entities are solely the obligation of the issuer and generally do not carry any guarantee from the U.S. Government.
ABS Risk. ABS are subject to the general debt securities risks described above. In addition, ABS may be less
liquid than other bonds, and may be more sensitive than other bonds to the market’s perception of issuers and creditworthiness of payees, which may result in the Fund experiencing difficulty selling or valuing these securities. ABS markets have
experienced extraordinary weakness and volatility at various times in recent years, and may decline quickly in the event of a substantial economic or market downturn. Accordingly, these securities may be subject to greater risk of default during
periods of economic downturn than other securities, which could result in possible losses to the Fund.
Issuer Risk. The performance of the Fund depends on the performance of individual securities to which the Fund
has exposure. The Fund may be adversely affected if an issuer of underlying securities held by the Fund is unable or
300
unwilling to repay principal or interest when due. Changes in the financial condition or credit rating of an issuer of those securities may cause the
value of the securities to decline.
Management Risk. The Fund is subject to management risk because it is an actively managed portfolio. Milliman
will apply investment techniques and risk analyses in making investment decisions for the Fund, but there can be no guarantee that the Fund will meet its investment objective and/or the Outcomes. In addition, Milliman does not use defensive
strategies or attempt to reduce the Fund’s exposures to poor performing positions during an Outcome Period. This differs from funds that are managed to seek to outperform a benchmark index. Therefore, in the event of a general market decline, the
Fund’s value may fall more than the value of another fund that does attempt to hedge against such market declines.
Market Risk. The Fund could lose money over short periods due to short-term market movements and over longer
periods during more prolonged market downturns. Assets may decline in value due to factors affecting financial markets generally or particular asset classes or industries represented in the markets. The value of a FLEX Option or other asset may
also decline due to general market conditions, economic trends or events that are not specifically related to the issuer of the security or other asset, or due to factors that affect a particular issuer, country, region, market, industry, sector or
asset class.
Non-Diversification Risk. The Fund may invest a relatively high percentage of its assets in a limited number of
issuers. As a result, the Fund may be more susceptible to a single adverse economic or regulatory occurrence affecting one or more of these issuers, experience increased volatility and be highly invested in certain issuers.
Large Shareholder Risk. At times, the Fund may experience adverse effects when certain large shareholders,
including insurance company separate accounts, redeem large amounts of shares of the Fund. Large redemptions may cause the Fund to sell portfolio holdings at times when it would not otherwise do so and may increase transaction costs and/or result
in an increase to the Fund’s expense ratio. A large redemption could be detrimental to the Fund and its remaining shareholders.
Risks of Investing in ETFs. In addition to the risks associated with the underlying assets held by the ETFs in
which the Fund invests, investments in ETFs are also subject to the following additional risks: (i) only authorized participants may engage in transactions directly with ETFs but none are obligated to do so, which could result in an ETF’s shares
trading at a premium or discount to its NAV or possibly face trading halts or delisting; (ii) certain ETFs seek to track the performance of an underlying index and will not attempt to take defensive positions under any market conditions, including
declining markets, which could result in losses; and (iii) because ETF shares trade on the secondary market, there is not guarantee that an active market will be developed or maintained, which could result in the ETF’s shares trading at a premium
or discount to its NAV. Investments in ETFs may involve duplication of management fees and certain other expenses, as the Fund indirectly bears its proportionate share of any expenses paid by the ETFs in which it invests.
Risks of Investing in Money Market Funds. Money market funds seek to preserve the value of shareholder
investments at $1.00 per share, but shareholders, such as the Fund, may still lose money by investing in such funds. In addition, a money market fund may impose a fee upon the sale of its shares or may temporarily suspend the ability to sell shares
if the fund’s liquidity falls below required minimums because of market conditions or other factors. The credit quality of a money market fund’s holdings can change rapidly in certain markets, and the default of a single holding could have an
adverse impact on the fund’s share price. A money market fund’s share price can also be negatively affected during periods of high redemption pressures, illiquid markets, and/or significant market volatility.
Performance
As of the date of this Prospectus, the Fund has not commenced operations and therefore does not have a performance history. Once available, the Fund’s
performance information will be accessible online at www.[________].com and will provide some indication of the risks of investing in the Fund.
Management
301
Investment Adviser
Milliman Financial Risk Management LLC (“Milliman”) serves as investment adviser to the Fund.
Portfolio Managers
The following persons serve as portfolio managers of the Fund.
|
●
|
Robert T. Cummings, Principal & Head of Portfolio Management at Milliman.
|
|
●
|
Maria Schiopu, Principal & Head of Portfolio Management at Milliman.
|
|
●
|
Jeff Greco, Principal & Head of Strategy Research at Milliman.
|
|
●
|
Jordan Rosenfeld, Portfolio Manager at Milliman.
|
Each portfolio manager is jointly and primarily responsible for the day-to-day management of the Fund’s portfolio and has served in such capacity
since the Fund’s inception in 2021.
Purchase and Sale of Shares
Shares are available as underlying investment options for variable insurance contracts and variable life insurance policies (each, a “variable contract,” and, collectively, the “variable contracts”) issued by insurance companies. These insurance companies are the record owners of the separate accounts
holding the Shares. You do not buy, sell or exchange Shares directly; rather, you choose investment options through your variable contracts. The insurance companies then cause the separate accounts to purchase and redeem Shares according to
the investment options you choose.
Tax Information
The dividends and distributions paid by the Fund to the insurance company separate accounts will consist of ordinary income, capital gains, or some
combination of both. Because Shares must be purchased through separate accounts used to fund variable contracts, such dividends and distributions will be exempt from current taxation by owners of variable contracts (each, a “contract owner,” and, collectively “contract owners”) if left to accumulate within a separate account. Consult the variable contract prospectus for additional tax
information.
Payments to Insurance Companies and Other Financial Intermediaries
If you allocate contract value to the Fund through an insurance company or other financial intermediary, the Fund, Milliman, the Fund’s distributor or
their related companies may pay the insurance company and/or its affiliates or other intermediary for the sale of Shares and related services. These payments may create a conflict of interest by influencing the insurance company or other
intermediary and your salesperson to recommend an indirect investment in the Fund over another investment. The prospectus or other disclosure documents for the variable contracts may contain additional information about these payments, if any.
You may also ask your salesperson or financial intermediary, or visit your financial intermediary’s website, for more information.
302
Fund Summary: Milliman S&P 500 & Nasdaq 1-Year Buffer with Stacker Cap Fund
– Nov
Investment Objective
The Fund seeks to provide exposure to the S&P 500 Index, while providing a buffer against the first 10% of losses associated with S&P 500
Index performance and participating in S&P 500 Index gains up to a declared cap, prior to taking into account any fees or expenses or the performance of any fixed income exposure included in the Fund’s portfolio, over the period from November
1, 2021 through October 31, 2022. The Fund also seeks to provide upside exposure to the Nasdaq-100® Index up to a declared cap, prior to taking into account any fees or expenses or the performance of any fixed income exposure included
in the Fund’s portfolio, over the same period.
Fees and Expenses of the Fund
This table describes the fees and expenses that you may pay if you buy, hold and sell shares of the Fund (“Shares”).
This table and the example below do not include any fees or sales charges imposed by your variable product. If they were included, the expenses listed below would be higher.
Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment)
|
Class 3
|
|
|
Management Fees
|
0.49%
|
|
Distribution and Service (12b-1) Fees
|
0.25%
|
|
Other Expenses(1)
|
0.50%
|
|
Acquired Fund Fees and Expenses(1)
|
[_.__]%
|
|
Total Annual Fund Operating Expenses
|
1.24%
|
|
Fee Waiver and/or Expense Reimbursement(2)(3)
|
(0.25)%
|
|
Total Annual Fund Operating Expenses After Fee Waiver and/or Expense Reimbursement
|
0.99%
|
|
(1)
|
“Other Expenses” and “Acquired Fund Fees and Expenses” are based on estimated amounts for the current fiscal year.
|
|
(2)
|
The Fund’s investment adviser, Milliman Financial Risk Management LLC (“Milliman”), has contractually
agreed to waive advisory fees and/or reimburse expenses to the extent necessary to limit the Fund’s total annual Fund operating expenses (excluding taxes, interest, brokerage fees and commissions, Rule 12b-1 fees, acquired fund fees and
expenses, short-sale dividend expenses, administrative services fees, other expenses that are capitalized in accordance with generally accepted accounting principles, and extraordinary or non-routine expenses not incurred in the
ordinary course of the Fund’s business) to 0.74% of the Fund's average daily net assets (the “Expense Limitation Agreement”) until at least November 1, 2022. During its term, the Expense
Limitation Agreement cannot be terminated or amended to increase the applicable limit without approval of the Board of Trustees of the Trust (the “Board”). Milliman may recoup from the Fund any
advisory fees waived or expenses reimbursed pursuant to the Expense Limitation Agreement for a period of three years from the date on which such waiver or reimbursement occurred; provided, however, that such recoupment shall not be made
if it would cause the Fund’s total annual Fund operating expenses to exceed the lesser of (a) the expense limitation in effect at the time of the reimbursement, or (b) the expense limitation in effect at the time of recoupment, if any.
|
|
(3)
|
In addition to the Expense Limitation Agreement, Milliman has contractually agreed to waive its advisory fees in an amount equal to the Fund’s
acquired fund fees and expenses until at least November 1, 2022 (the “Fee Waiver”). This contract cannot be terminated or modified without the consent of the Board.
|
Example
This example is intended to help you compare the cost of investing in the Fund with the cost of investing in other funds. This example assumes that you
invest $10,000 in the Fund for the time periods indicated and then sell all of your Shares at the end of those periods. This example also assumes that your investment has a 5% return each year and that the Fund’s operating expenses remain at
current levels and that the Expense Limitation Agreement and Fee Waiver remain in place for their contractual periods. Although your actual costs may be higher or lower, your costs, based on these assumptions, would be:
|
1 Year
|
3 Years
|
|
|
Class 3
|
$104
|
$384
|
303
This example does not include any fees or sales charges imposed by your variable product. If they were included, the expenses listed above would be
higher.
Portfolio Turnover
The Fund pays transaction costs, such as commissions, when it purchases and sells securities (or “turns over” its portfolio). A higher portfolio turnover
will cause the Fund to incur additional transaction costs. These costs, which are not reflected in Total Annual Fund Operating Expenses or in the example, may affect the Fund’s performance. Because the Fund has not yet commenced investment
operations, no portfolio turnover information is available at this time.
Principal Investment Strategies
The Fund seeks to achieve its investment objective by transacting in FLexible EXchange® Options (“FLEX Options”)
and by separately maintaining a collateral portfolio (the “Collateral Portfolio”), which is designed primarily to serve as margin or collateral for the Fund’s FLEX Options positions and secondarily to
enhance the Fund’s upside S&P 500 Index and Nasdaq-100® Index FLEX Options’ exposure (i.e., by utilizing anticipated income to measure the ability to purchase additional FLEX Options). FLEX
Options are exchange-traded options contracts with uniquely customizable terms. In general, an options contract is an agreement between a buyer and seller that gives the purchaser of the option the right to buy or sell a particular asset at a
specified future date at an agreed upon price, commonly known as the “strike price.” The reference assets for the Fund’s FLEX Options positions will include the S&P 500 Index, the Nasdaq-100® Index (the “Secondary Index,” and together with the S&P 500 Index, the “Reference Indices,” and, each, a “Reference Index”), and certain exchange-traded
funds (“ETFs”), as described further below. The S&P 500 Index is a large-capitalization, market-weighted, U.S. equities index that tracks the price (excluding
dividends) of 500 leading companies in leading industries of the U.S. economy. The Secondary Index is [a market capitalization-weighted index that is designed to represent the performance of all domestic and international common type stocks
listed on The Nasdaq Stock Market LLC].
The Collateral Portfolio may be invested in short-term fixed-income securities, including corporate bonds and other corporate debt securities,
asset-backed securities (“ABS”), securities issued by the U.S. Government or its agencies and instrumentalities, securities issued by non-U.S. governments or their agencies and instrumentalities, money
market securities and funds, other interest-bearing instruments, cash, ETFs that primarily invest in any of the foregoing instruments, options on ETFs and options box spreads. An options box spread is the combination of different options trades
that have offsetting spreads (e.g., purchases and sales on the same underlying instrument, such as an index or an ETF, but with different strike prices and/or expiration dates) for the purpose of
generating income. The Fund may invest in short-term fixed income securities or other instruments, including through ETFs, of any maturity and credit quality. The Fund will generally invest up to 35% of its net assets in one or more ETFs that
provide exposure to investment grade corporate bonds.
Due to the unique mechanics of the Fund’s strategy, the return an investor can expect to receive from an investment in the Fund has characteristics that
are distinct from the returns of many other investment vehicles. It is important that an investor understand these characteristics before making an investment in the Fund.
In seeking to achieve its investment objective, the Fund seeks to produce pre-determined outcomes (the “Outcomes”)
that are based upon the performance of the Reference Indices over a one-year period (the “Outcome Period”). The initial Outcome Period for the Fund is November 1, 2021 through October 31, 2022. Following the
initial Outcome Period, each subsequent Outcome Period will be a one-year period commencing upon the expiration of the prior Outcome Period. The Fund seeks to achieve the Outcomes by purchasing and writing (selling) FLEX Options to create layers
within the Fund’s portfolio. One layer is designed to produce returns that correlate to those of the S&P 500 Index for the Outcome Period if the S&P 500 Index experiences gains during that time, subject to an upside return cap (the “S&P 500 Index Cap”), as described below. A second layer is designed to produce returns that correlate to any upside market performance of the Secondary Index over the
Outcome Period, subject to an upside return cap (the “Secondary Index Cap,” and, together with the S&P 500 Index Cap, the “Index Caps,” and, each, an “Index Cap”), as described below. A third layer is designed to produce returns that correlate to those of the S&P 500 Index for the Outcome Period that are buffered up to 10% if the S&P 500 Index
experiences losses during that time (the “Buffer”). There is no guarantee that the Fund will be successful in its attempt to produce
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returns that correlate to those of the S&P 500 Index or the Secondary Index up to the applicable Index Caps or produce buffered
returns against the Fund’s S&P 500 Index exposure.
Milliman Financial Risk Management, LLC (“Milliman”), the investment adviser of the Fund, seeks to establish the
Buffer by writing one put FLEX Option on the S&P 500 Index with a strike price that is 10% lower than the value of the S&P 500 Index at the beginning of the Outcome Period.
Milliman seeks to establish the Index Caps by purchasing long call FLEX Options on each Reference Index with a strike price approximately equal to the
value of the respective Reference Index at the beginning of the Outcome Period. Milliman purchases these FLEX Options with a portion of the Fund’s net assets plus (i) the cash received from writing the put FLEX Option designed to create the
Buffer, (ii) additional cash received by utilizing FLEX Options to create a put spread (the “Put Spread Strategy”) on fixed income securities and/or one or more ETFs that provide exposure to fixed income
securities, and (iii) yield received from the Collateral Portfolio. Milliman seeks to achieve the Put Spread Strategy for the Fund by writing a put FLEX Option on an underlying asset at a strike price at or lower than the underlying asset’s
market price or current value at the beginning of the Outcome Period, and buying a put FLEX Option on the same underlying asset at a lower strike price than the written put FLEX Option.
The Index Caps represent the maximum rate of return in each Reference Index that an investor can achieve from an investment in the Fund over the Outcome
Period. Milliman calculates the Index Caps based upon (i) its evaluation of prevailing market conditions on the first day of the Outcome Period and (ii) the total number of long call FLEX Options on each Reference Index that it is able to purchase
at that time. As of the date of this Prospectus, and assuming current market conditions persist, Milliman expects that the Index Caps will be between the below ranges (both gross and net of Fund fees and expenses). Any fees or expenses imposed by
your variable product, and any other expenses incurred by the Fund, will have the effect of further reducing each Index Cap. In addition, in certain market conditions, the performance of the Collateral Portfolio
and the Put Spread Strategy could cause the Fund to underperform relative to the Reference Indices, which could further limit Fund gains below the Index Caps, notwithstanding any performance of the Reference Indices in excess of the Index Caps.
|
Estimated Index Cap Ranges
(As of [___])
|
||
|
Prior to Taking into Account Fund Fees and Expenses
|
After Taking into Account Fund Fees and Expenses
|
|
|
S&P 500 Index Cap
|
||
|
Class 3
|
[__]% and [__]%
|
[__]% and [__]%
|
|
Secondary Index Cap
|
||
|
Class 3
|
[__]% and [__]%
|
[__]% and [__]%
|
The Buffer is only operative against the first 10% of losses in the Fund’s S&P 500 Index exposure for the Outcome Period. If the S&P 500 Index
decreases in value by more than 10% during the Outcome Period, the Fund (and therefore investors in Shares) will experience all subsequent losses in the Fund’s S&P 500 Index exposure on a one-to-one basis for the Outcome Period. The Fund
seeks to produce buffered returns against its S&P 500 Index exposure prior to taking into account any fees or expenses or the performance of the Collateral Portfolio or the Put Spread Strategy. The Buffer
is not operative against losses in the Collateral Portfolio or the Put Spread Strategy. If the Collateral Portfolio and/or the Put Spread Strategy experiences losses, it could have the effect of reducing the impact of, or completely
eliminating, the Buffer on the Fund’s S&P 500 Index exposure. In certain market conditions, the performance of the Collateral Portfolio and/or the Put Spread Strategy could cause the Fund to significantly underperform the S&P 500
Index. The following table reflects the Buffer both gross and net of Fund fees and expenses:
|
Share Class
|
Buffer
(As of [___])
|
|
|
Prior to Taking into Account Fund Fees and Expenses
|
After Taking into Account Fund Fees and Expenses
|
|
|
Class 3
|
10%
|
[__]%
|
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Because the Fund also seeks to provide only upside exposure to the Secondary Index during the Outcome Period, the Fund’s NAV will not be impacted by any
losses experienced by the Secondary Index when measured from the beginning to the end of the Outcome Period. If the Secondary Index increases in value during the Outcome Period and later decreases in value during the Outcome Period, the Fund’s NAV
will reflect any such decreases until the Secondary Index reaches its initial value (measured as of the first day of the Outcome Period). If the Secondary Index decreases in value over the course of an entire Outcome Period, the Fund’s NAV will not
reflect such losses; therefore, the Fund’s overall performance will be approximately that of the S&P 500 Index for the Outcome Period, subject to the Buffer and the S&P 500 Index Cap.
The definitive Index Caps and Buffer will be set forth on the Fund’s website. The Fund’s website will also provide information relating to the
Outcomes on a daily basis, including the Fund’s position relative to the Index Caps and the Buffer. You may also contact your insurance company or other financial intermediary for more information.
Additionally, the Fund’s net asset value (“NAV”) will not increase or decrease at the same rate as the Reference
Indices because the Fund’s strategy relies upon the performance of the Collateral Portfolio and the Put Spread Strategy, in addition to the value of the Fund’s FLEX Options positions on the Reference Indices. While Milliman anticipates that the
Fund’s NAV will generally move in the same direction as the S&P 500 Index, and correspond to any upside returns of the Secondary Index (meaning that the Fund’s NAV will generally increase if the Reference Indices experience gains or decrease if
the Reference Indices experience losses), the Fund’s NAV may not decrease at the same rate as the Reference Indices (especially when factoring in the performance of the Collateral Portfolio and the Put Spread Strategy) and will not increase at the
same rate as the Reference Indices (especially when factoring in the Index Caps and the performance of the Collateral Portfolio and the Put Spread Strategy). Similarly, the amount of time remaining until the end of the Outcome Period also affects
the impact of the Buffer on the Fund’s NAV, because the Buffer may not be in full effect prior to the end of the Outcome Period.
The FLEX Options utilized in the Fund’s portfolio are each set to expire on the last day of the Outcome Period. The customizable nature of FLEX Options
will allow Milliman to select the strike price at which each FLEX Option will be exercised at the expiration of the FLEX Option term. At the commencement of the Outcome Period, Milliman will specifically select the strike price for each FLEX Option
in a manner designed to achieve the Outcomes when the FLEX Options are exercised on the final day of the Outcome Period, depending on the anticipated performance of the Reference Indices, the Collateral Portfolio and the Put Spread Strategy over
the duration of that Outcome Period.
The hypothetical graphical illustrations provided below are designed to illustrate the Outcomes based upon the
hypothetical performance of the Reference Indices for an investor who holds Shares for the entirety of the Outcome Period. The hypothetical graphical illustrations do not include any fees or expenses
imposed by your variable product or expenses incurred by the Fund, and do not reflect the performance of the Collateral Portfolio or the Put Spread Strategy. Additional hypothetical graphical representations of the Outcomes are provided in
“Additional Information About the Funds and the Risks of Investing.” There is no guarantee that the Fund will be successful in its attempt to achieve the Outcomes for the Outcome Period.
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The following table contains hypothetical examples designed to illustrate the Outcomes the Fund seeks to
achieve over the Outcome Period, based upon the performance of the Reference Indices from (100)% to 100% after taking into account the Index Caps and the Buffer, but prior to taking into account any fees or
expenses or the performance of the Collateral Portfolio or the Put Spread Strategy. The table is provided for illustrative purposes only and does not provide every possible performance scenario for Shares over
the course of the Outcome Period. There is no guarantee that the Fund will be successful in its attempt to achieve the Outcomes for an Outcome Period. The table is not intended to predict or project the performance of the FLEX Options or the Fund. Investors should not take this information as an
assurance of the expected performance of the Reference Indices or the Fund. Actual Fund performance will vary with fluctuations in the performance of the Collateral Portfolio and the Put Spread Strategy, in addition to the value of the
Fund’s FLEX Options positions on the Reference Indices, during the Outcome Period, among other factors. The performance of the Collateral Portfolio and the Put Spread Strategy
could significantly impact the performance of the Fund, which could prevent the Fund from achieving the Outcomes that it seeks to produce. The table does not reflect any fees or expenses imposed by your variable product or expenses
incurred by the Fund. If it did, the returns shown for the Fund would be lower. Please refer to the Fund’s website, which provides updated information relating to this table on a daily basis throughout the Outcome Period. Please contact your
insurance company or other financial intermediary for more information.
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|
Index/Fund
|
Hypothetical Performance1
|
|||||||||||
|
S&P 500 Index Price Performance
|
(100)%
|
(50)%
|
(20)%
|
(10)%
|
(5)%
|
0%
|
5%
|
10%
|
15%
|
20%
|
50%
|
100%
|
|
Secondary Index Price Performance
|
(100)%
|
(50)%
|
(20)%
|
(10)%
|
(5)%
|
0%
|
5%
|
10%
|
15%
|
20%
|
50%
|
100%
|
|
Fund Performance at NAV
|
(90)%
|
(40)%
|
(10)%
|
0%2
|
0%2
|
0%
|
10%3
|
14%3
|
14%3
|
14%3
|
14%3
|
14%3
|
| 1 |
Does not take into account any fees or expenses or the performance of the Collateral Portfolio or the Put Spread Strategy.
|
| 2 |
Reflects the impact of the Buffer.
|
| 3 |
Reflects the impact of assumed Index Caps of 7% per index, 14% total.
|
Understanding Outcomes. The Outcomes the Fund seeks to achieve are measured based upon the
Fund’s NAV on the first day of the Outcome Period. The Outcome Period begins on the day Milliman transacts in the FLEX Options on behalf of the Fund, and ends on the day those FLEX Options expire. An investor who
purchases Shares after the commencement of the Outcome Period will likely have purchased Shares at a different NAV than the NAV on the first day of the Outcome Period (the NAV upon which the Outcomes are based) and may experience investment
outcomes very different from those the Fund seeks to achieve, especially when factoring in any fees or expenses or the performance of the Collateral Portfolio and the Put Spread Strategy. An investor who redeems Shares prior to the end of the
Outcome Period may also experience investment outcomes very different from those the Fund seeks to achieve. The Outcomes are designed with the expectation that an investor will hold Shares on the day that Milliman transacts in the FLEX Options on
behalf of the Fund, and on the day those FLEX Options expire. There is no guarantee that the Fund will be successful in its attempt to achieve the Outcomes.
Understanding the Index Caps. Unlike other investment products, the potential returns an
investor can receive from an investment in the Fund are subject to the Index Caps. This means that if one or both of the Reference Indices experience gains for the Outcome Period, an investor in the Fund will only
experience those gains up to the applicable Index Cap. Milliman calculates the Index Caps for each Outcome Period based upon (i) its evaluation of prevailing market conditions on the first day of the Outcome Period and (ii) the total
number of long call FLEX Options on each Reference Index that it is able to purchase at that time. If an investor is considering purchasing Shares during the Outcome Period, and the Fund’s NAV has increased in
value to a level near one or both of the Index Caps, an investor purchasing Shares at that price will have limited to no gains available for the remainder of the Outcome Period, but will remain vulnerable to significant downside risks (with
respect to the S&P 500 Index FLEX Options’ exposure). In certain market conditions, the performance of the Collateral Portfolio and the Put Spread Strategy could cause the Fund to underperform
relative to the Reference Indices, which could further limit Fund gains below the Index Caps, notwithstanding any performance of the Reference Indices in excess of the Index Caps.
Understanding the Buffer. The Buffer that the Fund seeks to provide is only operative
against the first 10% of losses in the Fund’s S&P 500 Index exposure for the Outcome Period. If an investor is considering purchasing Shares during the Outcome Period, and the S&P 500 Index has decreased
in value by an amount equal to or greater than 10%, an investor purchasing Shares at that time will be able to participate in any gains thereafter (up to the Index Caps), but will not benefit from the Buffer that the Fund seeks to offer for the
remainder of the Outcome Period if the losses continue to be equal to or greater than 10% during that period. Conversely, if an investor is considering purchasing Shares during the Outcome Period, and the Fund’s NAV has increased in value, then
an investor may experience losses before implementation of the Buffer that the Fund seeks to provide. While the Fund seeks to produce returns that correlate to those of the S&P 500 Index for the Outcome Period that are buffered up to
10% (prior to taking into account any fees or expenses or the performance of the Collateral Portfolio or the Put Spread Strategy) for investors who hold Shares for the entire Outcome Period, there is no guarantee it will successfully do so. In addition, the Buffer is not operative against losses in the Collateral Portfolio or the Put Spread Strategy. If the Collateral Portfolio and/or the Put Spread Strategy experiences losses, it could have the
effect of reducing the impact of, or completely eliminating, the Buffer on the Fund’s S&P 500 Index exposure. In certain market conditions, the performance of the Collateral Portfolio and/or the Put Spread Strategy could cause the Fund to
significantly underperform the S&P 500 Index. Investors who purchase Shares at the beginning of the Outcome Period may lose their entire
308
investment. Investors who purchase Shares after the Outcome Period has begun may also lose their entire investment. An
investment in the Fund is only appropriate for investors willing to bear those losses.
Fund Rebalance. Milliman implements the Fund’s strategy on an annual basis, seeking to
produce the Outcomes for an Outcome Period. On the last business day of any stated Outcome Period, all of the Fund’s existing FLEX Options, which includes those used to establish the Buffer, the Index Caps and the Put Spread Strategy, will expire
and Milliman will transact in a new set of FLEX Options on the same business day, which will commence a new Outcome Period beginning the following business day. At that same time, Milliman will also evaluate whether to make any adjustments to the
Collateral Portfolio. Accordingly, Shares can be held indefinitely if investors determine to participate in additional Outcome Periods.
Approximately one week prior to the end of each Outcome Period, the Fund will file a prospectus supplement, which will notify existing investors of
(i) the date on which the existing Outcome Period will end; (ii) the date on which the new Outcome Period will commence; and (iii) the anticipated ranges of the Index Caps that will be used for the new Outcome Period. Immediately preceding the
commencement date of the new Outcome Period, the Fund will file a prospectus supplement disclosing the Fund’s final Index Caps (both gross and net of Fund fees and expenses) for the new Outcome Period. This information will also be available
online at www.[___________].com, and on your insurance company’s website. Please contact your insurance company or other financial intermediary for more information.
Fund Classification. The Fund is classified as “non-diversified” under the Investment
Company Act of 1940, as amended (the “1940 Act”).
Principal Risks
You could lose money by investing in the Fund. An investment in the Fund is not a deposit of a bank and is not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other governmental agency. There can be no assurance that the Fund’s investment objectives will be achieved.
Downside Loss Buffer Risk. There can be no guarantee that the Fund will be successful in its strategy to
buffer against S&P 500 Index losses if the S&P 500 Index decreases in value over the Outcome Period. The Fund’s strategy is designed to produce returns that correlate to those of the S&P 500 Index, subject to the S&P 500 Index
Cap, while limiting downside S&P 500 Index losses and providing additional upside exposure to the Secondary Index, subject to the Secondary Index Cap, if Shares are bought on the day on which Milliman transacts in the FLEX Options on behalf
of the Fund and held until those FLEX Options expire at the end of each Outcome Period. The success of the Buffer also depends upon the performance of the Collateral Portfolio and the Put Spread Strategy. If
the Collateral Portfolio and/or the Put Spread Strategy experiences losses, it could have the effect of reducing the impact of, or completely eliminating, the Buffer on the Fund’s S&P 500 Index exposure. In certain market conditions, the
performance of the Collateral Portfolio and/or the Put Spread Strategy could cause the Fund to significantly underperform the S&P 500 Index. Despite the intended Buffer, an investor could lose their entire investment. In the
event an investor purchases Shares after the date on which Milliman transacted in the FLEX Options on behalf of the Fund, or redeems Shares prior to the expiration of those FLEX Options, the Buffer that the Fund seeks to provide may not be
available or fully applicable.
Risk of Capped Upside Returns. The Fund’s strategy is designed to produce returns that correlate to those of the
Reference Indices up to the Index Caps if Shares are bought on the day on which Milliman transacts in the FLEX Options on behalf of the Fund and held until those FLEX Options expire at the end of the Outcome Period, subject to the Index Caps. In
the event that one or both of the Reference Indices experience gains during the Outcome Period, the Fund will only participate in those gains up to the applicable Index Cap. In the event that one or both Reference Indices experience gains in excess
of the applicable Index Cap over the duration of the Outcome Period, the Fund will not participate in those excess gains. Because the Fund’s strategy provides capped exposure to two Reference Indices, the Index Caps may be lower than if the Fund
provided capped exposure to only a single Reference Index. In the event an investor purchases Shares after the date on which the FLEX Options were entered into and the Fund has risen in value to a level near to an Index Cap, there may be little or
no ability for that investor to experience an investment gain on their Shares relating to that Reference Index. In certain market conditions, the performance of the Collateral Portfolio and the Put Spread
Strategy could cause the Fund to
309
underperform relative to the Reference Indices, which could further limit Fund gains below the Index Caps, notwithstanding any
performance of the Reference Indices in excess of the Index Caps. An investor should consider the amount of the Index Caps, and the Fund’s position relative to each Index Cap, before investing in the Fund.
Index Cap Change Risk. Because the Index Caps for each Outcome Period are calculated based upon (i) Milliman’s
evaluation of prevailing market conditions on the first day of the Outcome Period and (ii) the total number of long call FLEX Options on the Reference Indices that Milliman is able to purchase at that time, the Index Caps may rise or fall from one
Outcome Period to the next. Any change in the Index Caps could be significant and they are unlikely to remain the same for consecutive Outcome Periods.
FLEX Options Risk. The Fund will transact in FLEX Options issued and guaranteed for settlement by the OCC. The
Fund bears the risk that the OCC will be unable or unwilling to perform its obligations under the FLEX Options contracts, which could result in significant losses to the Fund. In less liquid markets, terminating a FLEX Option may require the
payment of a premium or acceptance of a discounted price, and may take longer to complete. In addition, a less liquid trading market may adversely impact the value of the Fund’s FLEX Options and therefore the NAV of the Fund. In addition, the value
of the Fund’s FLEX Options positions is not anticipated to increase or decrease at the same rate as the reference asset; and while it is anticipated that they will generally move in the same direction, it is possible that they may move in different
directions. Certain FLEX Options positions may also expire worthless. The use of FLEX Options involves leverage, which can cause the Fund’s portfolio to be more volatile than if the portfolio had not been leveraged. Leverage can significantly
magnify the effect of price movements of the reference asset, disproportionately increasing the Fund’s losses and reducing the Fund’s opportunities for gains when the reference asset changes in unexpected ways. In some instances, such leverage
could result in losses that exceed the original amount invested.
Investment Objective and Outcomes Risk. There is no guarantee that the Fund will be successful in its attempt
to achieve its investment objective and/or the Outcomes, and an investor could lose some or all of their investment in the Fund. Certain circumstances under which the Fund might not achieve its objective and/or the Outcomes include, but are not
limited to (i) if the Fund disposes of FLEX Options, (ii) if the Fund is unable to maintain the proportional relationship based on the number of FLEX Options in the Fund’s portfolio, (iii) significant accrual of Fund expenses in connection with
effecting the Fund’s principal investment strategy, (iv) losses incurred by the Fund’s holdings in the Collateral Portfolio and/or losses resulting from the Put Spread Strategy, or (iv) adverse tax law changes affecting the treatment of FLEX
Options.
Tax Risk. The Fund intends to elect, and to qualify each year, to be treated as a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”). As a RIC, the Fund will not be subject to U.S. federal income tax on the portion
of its net investment income and net capital gain that it distributes to shareholders, provided that it satisfies certain requirements of the Code. To maintain its status as a RIC, the Fund must meet certain income, diversification and
distributions tests. For purposes of the diversification test, the identification of the issuer (or, in some cases, issuers) of a particular Fund investment can depend on the terms and conditions of that investment. In particular, there is no
published IRS guidance or case law on how to determine the “issuer” of certain derivatives that the Fund will enter into and the Fund has not received a private letter ruling on this point. Therefore, there is a risk that the Fund will not meet the
Code’s diversification requirements and will not qualify, or will be disqualified, as a RIC. If the Fund does not qualify as a RIC for any taxable year and certain relief provisions are not available, the Fund’s taxable income will be subject to
tax at the Fund level and to a further tax at the shareholder level when such income is distributed.
The Fund also intends to comply with the diversification requirements of Section 817(h) of the Code, and the regulations thereunder, relating to the
tax-deferred status of variable accounts that are based on insurance company separate accounts (referred to as “segregated asset accounts” for federal income tax purposes). These diversification requirements apply in addition to the RIC
diversification requirements discussed above. There also is no published guidance or case law on how to determine the “issuer” of the derivatives referred to above for purposes of the diversification requirements of Section 817(h) of the Code and
the Fund has not received a private letter ruling on this point. If these requirements are not met, or under other circumstances, such as if the Fund does not qualify as a RIC for any taxable year, it is possible that the contract owners (rather
than the insurance company) will be treated for federal income tax purposes as the taxable owners of the assets held by the segregated asset accounts.
310
Clearing Member Default Risk. The Fund will hold FLEX Options through accounts at members of clearing houses (“clearing members”) rather than a bank or a broker. Assets deposited by the Fund with any clearing member as margin for its FLEX Options positions may, in certain circumstances, be used to satisfy losses of other
clients of the Fund’s clearing member where such assets may be held in commingled omnibus accounts. In addition, although clearing members guarantee performance of their clients’ obligations to the clearing house, there is a risk that the assets of
the Fund might not be fully protected in the event of the clearing member’s bankruptcy, as the Fund would be limited to recovering only a pro rata share of all available funds segregated on behalf of the
clearing member’s customers for the relevant account class.
Debt Securities Risk. The prices of debt securities will be affected by changes in interest rates, the
creditworthiness of the issuer and other factors. These risks could affect the value of investments in which the Fund invests, possibly causing the Fund’s NAV to be reduced and fluctuate more than other types of investments. During periods of
falling interest rates, an issuer of a callable bond may repay the security before its stated maturity, and the Fund may have to reinvest the proceeds in securities with lower yields, which would result in a decline in the Fund’s income, or in
securities with greater risks or with other less favorable features. Changing interest rates, including rates that fall below zero, may have unpredictable effects on markets, result in heightened market volatility and detract from the Fund’s
performance to the extent the Fund is exposed to such interest rates. An increase in interest rates will generally cause the value of fixed-income securities held by the Fund to decline, may lead to heightened volatility in the fixed-income
markets and may adversely affect the liquidity of certain fixed-income investments, including those held by the Fund. Risks associated with rising interest rates are heightened given that interest rates in the U.S. are near historic lows.
Adjustable-rate instruments also react to interest rate changes in a similar manner, although generally to a lesser degree (depending, however, on the characteristics of the reset terms, including the index chosen, frequency of reset and reset
caps or floors, among other factors). Interest rate sensitivity is generally more pronounced and less predictable in instruments with uncertain payment or prepayment schedules and also for those with longer maturities.
Foreign Securities and Credit Exposure Risk. U.S. dollar-denominated securities carrying foreign credit exposure
may be affected by unfavorable political, economic or governmental developments that could affect payments of principal and interest. Furthermore, the value of the Fund’s foreign investments (whether direct or indirect) may be adversely affected by
political and social instability in their home countries, by changes in economic or taxation policies in those countries, or by the difficulty in enforcing obligations in those countries. Foreign companies generally may be subject to less stringent
regulations than U.S. companies, including financial reporting requirements and auditing and accounting controls. As a result, there generally is less publicly available information about foreign companies than about U.S. companies. Trading in many
foreign securities may be less liquid and more volatile than U.S. securities due to the size of the market or other factors.
U.S. Government Securities Risk. U.S. Government securities are subject to interest rate risk but generally do
not involve the credit risks associated with investments in other types of debt securities. As a result, the yields available from U.S. Government securities are generally lower than the yields available from other debt securities. U.S. Government
securities are guaranteed only as to the timely payment of interest and the payment of principal when held to maturity. While securities issued or guaranteed by U.S. federal government agencies are backed by the full faith and credit of the U.S.
Department of the Treasury, securities issued by government sponsored entities are solely the obligation of the issuer and generally do not carry any guarantee from the U.S. Government.
ABS Risk. ABS are subject to the general debt securities risks described above. In addition, ABS may be less
liquid than other bonds, and may be more sensitive than other bonds to the market’s perception of issuers and creditworthiness of payees, which may result in the Fund experiencing difficulty selling or valuing these securities. ABS markets have
experienced extraordinary weakness and volatility at various times in recent years, and may decline quickly in the event of a substantial economic or market downturn. Accordingly, these securities may be subject to greater risk of default during
periods of economic downturn than other securities, which could result in possible losses to the Fund.
Issuer Risk. The performance of the Fund depends on the performance of individual securities to which the Fund
has exposure. The Fund may be adversely affected if an issuer of underlying securities held by the Fund is unable or
311
unwilling to repay principal or interest when due. Changes in the financial condition or credit rating of an issuer of those securities may cause the
value of the securities to decline.
Management Risk. The Fund is subject to management risk because it is an actively managed portfolio. Milliman
will apply investment techniques and risk analyses in making investment decisions for the Fund, but there can be no guarantee that the Fund will meet its investment objective and/or the Outcomes. In addition, Milliman does not use defensive
strategies or attempt to reduce the Fund’s exposures to poor performing positions during an Outcome Period. This differs from funds that are managed to seek to outperform a benchmark index. Therefore, in the event of a general market decline, the
Fund’s value may fall more than the value of another fund that does attempt to hedge against such market declines.
Market Risk. The Fund could lose money over short periods due to short-term market movements and over longer
periods during more prolonged market downturns. Assets may decline in value due to factors affecting financial markets generally or particular asset classes or industries represented in the markets. The value of a FLEX Option or other asset may
also decline due to general market conditions, economic trends or events that are not specifically related to the issuer of the security or other asset, or due to factors that affect a particular issuer, country, region, market, industry, sector or
asset class.
Non-Diversification Risk. The Fund may invest a relatively high percentage of its assets in a limited number of
issuers. As a result, the Fund may be more susceptible to a single adverse economic or regulatory occurrence affecting one or more of these issuers, experience increased volatility and be highly invested in certain issuers.
Large Shareholder Risk. At times, the Fund may experience adverse effects when certain large shareholders,
including insurance company separate accounts, redeem large amounts of shares of the Fund. Large redemptions may cause the Fund to sell portfolio holdings at times when it would not otherwise do so and may increase transaction costs and/or result
in an increase to the Fund’s expense ratio. A large redemption could be detrimental to the Fund and its remaining shareholders.
Risks of Investing in ETFs. In addition to the risks associated with the underlying assets held by the ETFs in
which the Fund invests, investments in ETFs are also subject to the following additional risks: (i) only authorized participants may engage in transactions directly with ETFs but none are obligated to do so, which could result in an ETF’s shares
trading at a premium or discount to its NAV or possibly face trading halts or delisting; (ii) certain ETFs seek to track the performance of an underlying index and will not attempt to take defensive positions under any market conditions, including
declining markets, which could result in losses; and (iii) because ETF shares trade on the secondary market, there is not guarantee that an active market will be developed or maintained, which could result in the ETF’s shares trading at a premium
or discount to its NAV. Investments in ETFs may involve duplication of management fees and certain other expenses, as the Fund indirectly bears its proportionate share of any expenses paid by the ETFs in which it invests.
Risks of Investing in Money Market Funds. Money market funds seek to preserve the value of shareholder
investments at $1.00 per share, but shareholders, such as the Fund, may still lose money by investing in such funds. In addition, a money market fund may impose a fee upon the sale of its shares or may temporarily suspend the ability to sell shares
if the fund’s liquidity falls below required minimums because of market conditions or other factors. The credit quality of a money market fund’s holdings can change rapidly in certain markets, and the default of a single holding could have an
adverse impact on the fund’s share price. A money market fund’s share price can also be negatively affected during periods of high redemption pressures, illiquid markets, and/or significant market volatility.
Performance
As of the date of this Prospectus, the Fund has not commenced operations and therefore does not have a performance history. Once available, the Fund’s
performance information will be accessible online at www.[________].com and will provide some indication of the risks of investing in the Fund.
Management
312
Investment Adviser
Milliman Financial Risk Management LLC (“Milliman”) serves as investment adviser to the Fund.
Portfolio Managers
The following persons serve as portfolio managers of the Fund.
|
●
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Robert T. Cummings, Principal & Head of Portfolio Management at Milliman.
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|
●
|
Maria Schiopu, Principal & Head of Portfolio Management at Milliman.
|
|
●
|
Jeff Greco, Principal & Head of Strategy Research at Milliman.
|
|
●
|
Jordan Rosenfeld, Portfolio Manager at Milliman.
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Each portfolio manager is jointly and primarily responsible for the day-to-day management of the Fund’s portfolio and has served in such capacity
since the Fund’s inception in 2021.
Purchase and Sale of Shares
Shares are available as underlying investment options for variable insurance contracts and variable life insurance policies (each, a “variable contract,” and, collectively, the “variable contracts”) issued by insurance companies. These insurance companies are the record owners of the separate accounts
holding the Shares. You do not buy, sell or exchange Shares directly; rather, you choose investment options through your variable contracts. The insurance companies then cause the separate accounts to purchase and redeem Shares according to
the investment options you choose.
Tax Information
The dividends and distributions paid by the Fund to the insurance company separate accounts will consist of ordinary income, capital gains, or some
combination of both. Because Shares must be purchased through separate accounts used to fund variable contracts, such dividends and distributions will be exempt from current taxation by owners of variable contracts (each, a “contract owner,” and, collectively “contract owners”) if left to accumulate within a separate account. Consult the variable contract prospectus for additional tax
information.
Payments to Insurance Companies and Other Financial Intermediaries
If you allocate contract value to the Fund through an insurance company or other financial intermediary, the Fund, Milliman, the Fund’s distributor or
their related companies may pay the insurance company and/or its affiliates or other intermediary for the sale of Shares and related services. These payments may create a conflict of interest by influencing the insurance company or other
intermediary and your salesperson to recommend an indirect investment in the Fund over another investment. The prospectus or other disclosure documents for the variable contracts may contain additional information about these payments, if any.
You may also ask your salesperson or financial intermediary, or visit your financial intermediary’s website, for more information.
313
Fund Summary: Milliman S&P 500 & Nasdaq 1-Year Buffer with Stacker Cap Fund
– Dec
Investment Objective
The Fund seeks to provide exposure to the S&P 500 Index, while providing a buffer against the first 10% of losses associated with S&P 500
Index performance and participating in S&P 500 Index gains up to a declared cap, prior to taking into account any fees or expenses or the performance of any fixed income exposure included in the Fund’s portfolio, over the period from December
1, 2021 through November 30, 2022. The Fund also seeks to provide upside exposure to the Nasdaq-100® Index up to a declared cap, prior to taking into account any fees or expenses or the performance of any fixed income exposure included
in the Fund’s portfolio, over the same period.
Fees and Expenses of the Fund
This table describes the fees and expenses that you may pay if you buy, hold and sell shares of the Fund (“Shares”).
This table and the example below do not include any fees or sales charges imposed by your variable product. If they were included, the expenses listed below would be higher.
Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment)
|
Class 3
|
|
|
Management Fees
|
0.49%
|
|
Distribution and Service (12b-1) Fees
|
0.25%
|
|
Other Expenses(1)
|
0.50%
|
|
Acquired Fund Fees and Expenses(1)
|
[_.__]%
|
|
Total Annual Fund Operating Expenses
|
1.24%
|
|
Fee Waiver and/or Expense Reimbursement(2)(3)
|
(0.25)%
|
|
Total Annual Fund Operating Expenses After Fee Waiver and/or Expense Reimbursement
|
0.99%
|
|
(1)
|
“Other Expenses” and “Acquired Fund Fees and Expenses” are based on estimated amounts for the current fiscal year.
|
|
(2)
|
The Fund’s investment adviser, Milliman Financial Risk Management LLC (“Milliman”), has contractually
agreed to waive advisory fees and/or reimburse expenses to the extent necessary to limit the Fund’s total annual Fund operating expenses (excluding taxes, interest, brokerage fees and commissions, Rule 12b-1 fees, acquired fund fees and
expenses, short-sale dividend expenses, administrative services fees, other expenses that are capitalized in accordance with generally accepted accounting principles, and extraordinary or non-routine expenses not incurred in the
ordinary course of the Fund’s business) to 0.74% of the Fund's average daily net assets (the “Expense Limitation Agreement”) until at least November 1, 2022. During its term, the Expense
Limitation Agreement cannot be terminated or amended to increase the applicable limit without approval of the Board of Trustees of the Trust (the “Board”). Milliman may recoup from the Fund any
advisory fees waived or expenses reimbursed pursuant to the Expense Limitation Agreement for a period of three years from the date on which such waiver or reimbursement occurred; provided, however, that such recoupment shall not be made
if it would cause the Fund’s total annual Fund operating expenses to exceed the lesser of (a) the expense limitation in effect at the time of the reimbursement, or (b) the expense limitation in effect at the time of recoupment, if any.
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|
(3)
|
In addition to the Expense Limitation Agreement, Milliman has contractually agreed to waive its advisory fees in an amount equal to the Fund’s
acquired fund fees and expenses until at least November 1, 2022 (the “Fee Waiver”). This contract cannot be terminated or modified without the consent of the Board.
|
Example
This example is intended to help you compare the cost of investing in the Fund with the cost of investing in other funds. This example assumes that you
invest $10,000 in the Fund for the time periods indicated and then sell all of your Shares at the end of those periods. This example also assumes that your investment has a 5% return each year and that the Fund’s operating expenses remain at
current levels and that the Expense Limitation Agreement and Fee Waiver remain in place for their contractual periods. Although your actual costs may be higher or lower, your costs, based on these assumptions, would be:
|
1 Year
|
3 Years
|
|
|
Class 3
|
$104
|
$384
|
314
This example does not include any fees or sales charges imposed by your variable product. If they were included, the expenses listed above would be
higher.
Portfolio Turnover
The Fund pays transaction costs, such as commissions, when it purchases and sells securities (or “turns over” its portfolio). A higher portfolio turnover
will cause the Fund to incur additional transaction costs. These costs, which are not reflected in Total Annual Fund Operating Expenses or in the example, may affect the Fund’s performance. Because the Fund has not yet commenced investment
operations, no portfolio turnover information is available at this time.
Principal Investment Strategies
The Fund seeks to achieve its investment objective by transacting in FLexible EXchange® Options (“FLEX Options”)
and by separately maintaining a collateral portfolio (the “Collateral Portfolio”), which is designed primarily to serve as margin or collateral for the Fund’s FLEX Options positions and secondarily to
enhance the Fund’s upside S&P 500 Index and Nasdaq-100® Index FLEX Options’ exposure (i.e., by utilizing anticipated income to measure the ability to purchase additional FLEX Options). FLEX
Options are exchange-traded options contracts with uniquely customizable terms. In general, an options contract is an agreement between a buyer and seller that gives the purchaser of the option the right to buy or sell a particular asset at a
specified future date at an agreed upon price, commonly known as the “strike price.” The reference assets for the Fund’s FLEX Options positions will include the S&P 500 Index, the Nasdaq-100® Index (the “Secondary Index,” and together with the S&P 500 Index, the “Reference Indices,” and, each, a “Reference Index”), and certain exchange-traded
funds (“ETFs”), as described further below. The S&P 500 Index is a large-capitalization, market-weighted, U.S. equities index that tracks the price (excluding
dividends) of 500 leading companies in leading industries of the U.S. economy. The Secondary Index is [a market capitalization-weighted index that is designed to represent the performance of all domestic and international common type stocks
listed on The Nasdaq Stock Market LLC].
The Collateral Portfolio may be invested in short-term fixed-income securities, including corporate bonds and other corporate debt securities,
asset-backed securities (“ABS”), securities issued by the U.S. Government or its agencies and instrumentalities, securities issued by non-U.S. governments or their agencies and instrumentalities, money
market securities and funds, other interest-bearing instruments, cash, ETFs that primarily invest in any of the foregoing instruments, options on ETFs and options box spreads. An options box spread is the combination of different options trades
that have offsetting spreads (e.g., purchases and sales on the same underlying instrument, such as an index or an ETF, but with different strike prices and/or expiration dates) for the purpose of
generating income. The Fund may invest in short-term fixed income securities or other instruments, including through ETFs, of any maturity and credit quality. The Fund will generally invest up to 35% of its net assets in one or more ETFs that
provide exposure to investment grade corporate bonds.
Due to the unique mechanics of the Fund’s strategy, the return an investor can expect to receive from an investment in the Fund has characteristics that
are distinct from the returns of many other investment vehicles. It is important that an investor understand these characteristics before making an investment in the Fund.
In seeking to achieve its investment objective, the Fund seeks to produce pre-determined outcomes (the “Outcomes”)
that are based upon the performance of the Reference Indices over a one-year period (the “Outcome Period”). The initial Outcome Period for the Fund is December 1, 2021 through November 30, 2022. Following
the initial Outcome Period, each subsequent Outcome Period will be a one-year period commencing upon the expiration of the prior Outcome Period. The Fund seeks to achieve the Outcomes by purchasing and writing (selling) FLEX Options to create
layers within the Fund’s portfolio. One layer is designed to produce returns that correlate to those of the S&P 500 Index for the Outcome Period if the S&P 500 Index experiences gains during that time, subject to an upside return cap (the “S&P 500 Index Cap”), as described below. A second layer is designed to produce returns that correlate to any upside market performance of the Secondary Index over the
Outcome Period, subject to an upside return cap (the “Secondary Index Cap,” and, together with the S&P 500 Index Cap, the “Index Caps,” and, each, an “Index Cap”), as described below. A third layer is designed to produce returns that correlate to those of the S&P 500 Index for the Outcome Period that are buffered up to 10% if the S&P 500 Index
experiences losses during that time (the “Buffer”). There is no guarantee that the Fund will be successful in its attempt to produce
315
returns that correlate to those of the S&P 500 Index or the Secondary Index up to the applicable Index Caps or produce buffered
returns against the Fund’s S&P 500 Index exposure.
Milliman Financial Risk Management, LLC (“Milliman”), the investment adviser of the Fund, seeks to establish the
Buffer by writing one put FLEX Option on the S&P 500 Index with a strike price that is 10% lower than the value of the S&P 500 Index at the beginning of the Outcome Period.
Milliman seeks to establish the Index Caps by purchasing long call FLEX Options on each Reference Index with a strike price approximately equal to the
value of the respective Reference Index at the beginning of the Outcome Period. Milliman purchases these FLEX Options with a portion of the Fund’s net assets plus (i) the cash received from writing the put FLEX Option designed to create the
Buffer, (ii) additional cash received by utilizing FLEX Options to create a put spread (the “Put Spread Strategy”) on fixed income securities and/or one or more ETFs that provide exposure to fixed income
securities, and (iii) yield received from the Collateral Portfolio. Milliman seeks to achieve the Put Spread Strategy for the Fund by writing a put FLEX Option on an underlying asset at a strike price at or lower than the underlying asset’s
market price or current value at the beginning of the Outcome Period, and buying a put FLEX Option on the same underlying asset at a lower strike price than the written put FLEX Option.
The Index Caps represent the maximum rate of return in each Reference Index that an investor can achieve from an investment in the Fund over the Outcome
Period. Milliman calculates the Index Caps based upon (i) its evaluation of prevailing market conditions on the first day of the Outcome Period and (ii) the total number of long call FLEX Options on each Reference Index that it is able to purchase
at that time. As of the date of this Prospectus, and assuming current market conditions persist, Milliman expects that the Index Caps will be between the below ranges (both gross and net of Fund fees and expenses). Any fees or expenses imposed by
your variable product, and any other expenses incurred by the Fund, will have the effect of further reducing each Index Cap. In addition, in certain market conditions, the performance of the Collateral Portfolio
and the Put Spread Strategy could cause the Fund to underperform relative to the Reference Indices, which could further limit Fund gains below the Index Caps, notwithstanding any performance of the Reference Indices in excess of the Index Caps.
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Estimated Index Cap Ranges
(As of [___])
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||
|
Prior to Taking into Account Fund Fees and Expenses
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After Taking into Account Fund Fees and Expenses
|
|
|
S&P 500 Index Cap
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||
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Class 3
|
[__]% and [__]%
|
[__]% and [__]%
|
|
Secondary Index Cap
|
||
|
Class 3
|
[__]% and [__]%
|
[__]% and [__]%
|
The Buffer is only operative against the first 10% of losses in the Fund’s S&P 500 Index exposure for the Outcome Period. If the S&P 500 Index
decreases in value by more than 10% during the Outcome Period, the Fund (and therefore investors in Shares) will experience all subsequent losses in the Fund’s S&P 500 Index exposure on a one-to-one basis for the Outcome Period. The Fund
seeks to produce buffered returns against its S&P 500 Index exposure prior to taking into account any fees or expenses or the performance of the Collateral Portfolio or the Put Spread Strategy. The Buffer
is not operative against losses in the Collateral Portfolio or the Put Spread Strategy. If the Collateral Portfolio and/or the Put Spread Strategy experiences losses, it could have the effect of reducing the impact of, or completely
eliminating, the Buffer on the Fund’s S&P 500 Index exposure. In certain market conditions, the performance of the Collateral Portfolio and/or the Put Spread Strategy could cause the Fund to significantly underperform the S&P 500
Index. The following table reflects the Buffer both gross and net of Fund fees and expenses:
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Share Class
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Buffer
(As of [___])
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|
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Prior to Taking into Account Fund Fees and Expenses
|
After Taking into Account Fund Fees and Expenses
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|
|
Class 3
|
10%
|
[__]%
|
316
Because the Fund also seeks to provide only upside exposure to the Secondary Index during the Outcome Period, the Fund’s NAV will not be impacted by any
losses experienced by the Secondary Index when measured from the beginning to the end of the Outcome Period. If the Secondary Index increases in value during the Outcome Period and later decreases in value during the Outcome Period, the Fund’s NAV
will reflect any such decreases until the Secondary Index reaches its initial value (measured as of the first day of the Outcome Period). If the Secondary Index decreases in value over the course of an entire Outcome Period, the Fund’s NAV will not
reflect such losses; therefore, the Fund’s overall performance will be approximately that of the S&P 500 Index for the Outcome Period, subject to the Buffer and the S&P 500 Index Cap.
The definitive Index Caps and Buffer will be set forth on the Fund’s website. The Fund’s website will also provide information relating to the
Outcomes on a daily basis, including the Fund’s position relative to the Index Caps and the Buffer. You may also contact your insurance company or other financial intermediary for more information.
Additionally, the Fund’s net asset value (“NAV”) will not increase or decrease at the same rate as the Reference
Indices because the Fund’s strategy relies upon the performance of the Collateral Portfolio and the Put Spread Strategy, in addition to the value of the Fund’s FLEX Options positions on the Reference Indices. While Milliman anticipates that the
Fund’s NAV will generally move in the same direction as the S&P 500 Index, and correspond to any upside returns of the Secondary Index (meaning that the Fund’s NAV will generally increase if the Reference Indices experience gains or decrease if
the Reference Indices experience losses), the Fund’s NAV may not decrease at the same rate as the Reference Indices (especially when factoring in the performance of the Collateral Portfolio and the Put Spread Strategy) and will not increase at the
same rate as the Reference Indices (especially when factoring in the Index Caps and the performance of the Collateral Portfolio and the Put Spread Strategy). Similarly, the amount of time remaining until the end of the Outcome Period also affects
the impact of the Buffer on the Fund’s NAV, because the Buffer may not be in full effect prior to the end of the Outcome Period.
The FLEX Options utilized in the Fund’s portfolio are each set to expire on the last day of the Outcome Period. The customizable nature of FLEX Options
will allow Milliman to select the strike price at which each FLEX Option will be exercised at the expiration of the FLEX Option term. At the commencement of the Outcome Period, Milliman will specifically select the strike price for each FLEX Option
in a manner designed to achieve the Outcomes when the FLEX Options are exercised on the final day of the Outcome Period, depending on the anticipated performance of the Reference Indices, the Collateral Portfolio and the Put Spread Strategy over
the duration of that Outcome Period.
The hypothetical graphical illustrations provided below are designed to illustrate the Outcomes based upon the
hypothetical performance of the Reference Indices for an investor who holds Shares for the entirety of the Outcome Period. The hypothetical graphical illustrations do not include any fees or expenses
imposed by your variable product or expenses incurred by the Fund, and do not reflect the performance of the Collateral Portfolio or the Put Spread Strategy. Additional hypothetical graphical representations of the Outcomes are provided in
“Additional Information About the Funds and the Risks of Investing.” There is no guarantee that the Fund will be successful in its attempt to achieve the Outcomes for the Outcome Period.
317
The following table contains hypothetical examples designed to illustrate the Outcomes the Fund seeks to
achieve over the Outcome Period, based upon the performance of the Reference Indices from (100)% to 100% after taking into account the Index Caps and the Buffer, but prior to taking into account any fees or
expenses or the performance of the Collateral Portfolio or the Put Spread Strategy. The table is provided for illustrative purposes only and does not provide every possible performance scenario for Shares over
the course of the Outcome Period. There is no guarantee that the Fund will be successful in its attempt to achieve the Outcomes for an Outcome Period. The table is not intended to predict or project the performance of the FLEX Options or the Fund. Investors should not take this information as an
assurance of the expected performance of the Reference Indices or the Fund. Actual Fund performance will vary with fluctuations in the performance of the Collateral Portfolio and the Put Spread Strategy, in addition to the value of the
Fund’s FLEX Options positions on the Reference Indices, during the Outcome Period, among other factors. The performance of the Collateral Portfolio and the Put Spread Strategy
could significantly impact the performance of the Fund, which could prevent the Fund from achieving the Outcomes that it seeks to produce. The table does not reflect any fees or expenses imposed by your variable product or expenses
incurred by the Fund. If it did, the returns shown for the Fund would be lower. Please refer to the Fund’s website, which provides updated information relating to this table on a daily basis throughout the Outcome Period. Please contact your
insurance company or other financial intermediary for more information.
318
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Index/Fund
|
Hypothetical Performance1
|
|||||||||||
|
S&P 500 Index Price Performance
|
(100)%
|
(50)%
|
(20)%
|
(10)%
|
(5)%
|
0%
|
5%
|
10%
|
15%
|
20%
|
50%
|
100%
|
|
Secondary Index Price Performance
|
(100)%
|
(50)%
|
(20)%
|
(10)%
|
(5)%
|
0%
|
5%
|
10%
|
15%
|
20%
|
50%
|
100%
|
|
Fund Performance at NAV
|
(90)%
|
(40)%
|
(10)%
|
0%2
|
0%2
|
0%
|
10%3
|
14%3
|
14%3
|
14%3
|
14%3
|
14%3
|
| 1 |
Does not take into account any fees or expenses or the performance of the Collateral Portfolio or the Put Spread Strategy.
|
| 2 |
Reflects the impact of the Buffer.
|
| 3 |
Reflects the impact of assumed Index Caps of 7% per index, 14% total.
|
Understanding Outcomes. The Outcomes the Fund seeks to achieve are measured based upon the
Fund’s NAV on the first day of the Outcome Period. The Outcome Period begins on the day Milliman transacts in the FLEX Options on behalf of the Fund, and ends on the day those FLEX Options expire. An investor who
purchases Shares after the commencement of the Outcome Period will likely have purchased Shares at a different NAV than the NAV on the first day of the Outcome Period (the NAV upon which the Outcomes are based) and may experience investment
outcomes very different from those the Fund seeks to achieve, especially when factoring in any fees or expenses or the performance of the Collateral Portfolio and the Put Spread Strategy. An investor who redeems Shares prior to the end of the
Outcome Period may also experience investment outcomes very different from those the Fund seeks to achieve. The Outcomes are designed with the expectation that an investor will hold Shares on the day that Milliman transacts in the FLEX Options on
behalf of the Fund, and on the day those FLEX Options expire. There is no guarantee that the Fund will be successful in its attempt to achieve the Outcomes.
Understanding the Index Caps. Unlike other investment products, the potential returns an
investor can receive from an investment in the Fund are subject to the Index Caps. This means that if one or both of the Reference Indices experience gains for the Outcome Period, an investor in the Fund will only
experience those gains up to the applicable Index Cap. Milliman calculates the Index Caps for each Outcome Period based upon (i) its evaluation of prevailing market conditions on the first day of the Outcome Period and (ii) the total
number of long call FLEX Options on each Reference Index that it is able to purchase at that time. If an investor is considering purchasing Shares during the Outcome Period, and the Fund’s NAV has increased in
value to a level near one or both of the Index Caps, an investor purchasing Shares at that price will have limited to no gains available for the remainder of the Outcome Period, but will remain vulnerable to significant downside risks (with
respect to the S&P 500 Index FLEX Options’ exposure). In certain market conditions, the performance of the Collateral Portfolio and the Put Spread Strategy could cause the Fund to underperform
relative to the Reference Indices, which could further limit Fund gains below the Index Caps, notwithstanding any performance of the Reference Indices in excess of the Index Caps.
Understanding the Buffer. The Buffer that the Fund seeks to provide is only operative
against the first 10% of losses in the Fund’s S&P 500 Index exposure for the Outcome Period. If an investor is considering purchasing Shares during the Outcome Period, and the S&P 500 Index has decreased
in value by an amount equal to or greater than 10%, an investor purchasing Shares at that time will be able to participate in any gains thereafter (up to the Index Caps), but will not benefit from the Buffer that the Fund seeks to offer for the
remainder of the Outcome Period if the losses continue to be equal to or greater than 10% during that period. Conversely, if an investor is considering purchasing Shares during the Outcome Period, and the Fund’s NAV has increased in value, then
an investor may experience losses before implementation of the Buffer that the Fund seeks to provide. While the Fund seeks to produce returns that correlate to those of the S&P 500 Index for the Outcome Period that are buffered up to
10% (prior to taking into account any fees or expenses or the performance of the Collateral Portfolio or the Put Spread Strategy) for investors who hold Shares for the entire Outcome Period, there is no guarantee it will successfully do so. In addition, the Buffer is not operative against losses in the Collateral Portfolio or the Put Spread Strategy. If the Collateral Portfolio and/or the Put Spread Strategy experiences losses, it could have the
effect of reducing the impact of, or completely eliminating, the Buffer on the Fund’s S&P 500 Index exposure. In certain market conditions, the performance of the Collateral Portfolio and/or the Put Spread Strategy could cause the Fund to
significantly underperform the S&P 500 Index. Investors who purchase Shares at the beginning of the Outcome Period may lose their entire
319
investment. Investors who purchase Shares after the Outcome Period has begun may also lose their entire investment. An
investment in the Fund is only appropriate for investors willing to bear those losses.
Fund Rebalance. Milliman implements the Fund’s strategy on an annual basis, seeking to
produce the Outcomes for an Outcome Period. On the last business day of any stated Outcome Period, all of the Fund’s existing FLEX Options, which includes those used to establish the Buffer, the Index Caps and the Put Spread Strategy, will expire
and Milliman will transact in a new set of FLEX Options on the same business day, which will commence a new Outcome Period beginning the following business day. At that same time, Milliman will also evaluate whether to make any adjustments to the
Collateral Portfolio. Accordingly, Shares can be held indefinitely if investors determine to participate in additional Outcome Periods.
Approximately one week prior to the end of each Outcome Period, the Fund will file a prospectus supplement, which will notify existing investors of
(i) the date on which the existing Outcome Period will end; (ii) the date on which the new Outcome Period will commence; and (iii) the anticipated ranges of the Index Caps that will be used for the new Outcome Period. Immediately preceding the
commencement date of the new Outcome Period, the Fund will file a prospectus supplement disclosing the Fund’s final Index Caps (both gross and net of Fund fees and expenses) for the new Outcome Period. This information will also be available
online at www.[___________].com, and on your insurance company’s website. Please contact your insurance company or other financial intermediary for more information.
Fund Classification. The Fund is classified as “non-diversified” under the Investment
Company Act of 1940, as amended (the “1940 Act”).
Principal Risks
You could lose money by investing in the Fund. An investment in the Fund is not a deposit of a bank and is not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other governmental agency. There can be no assurance that the Fund’s investment objectives will be achieved.
Downside Loss Buffer Risk. There can be no guarantee that the Fund will be successful in its strategy to
buffer against S&P 500 Index losses if the S&P 500 Index decreases in value over the Outcome Period. The Fund’s strategy is designed to produce returns that correlate to those of the S&P 500 Index, subject to the S&P 500 Index
Cap, while limiting downside S&P 500 Index losses and providing additional upside exposure to the Secondary Index, subject to the Secondary Index Cap, if Shares are bought on the day on which Milliman transacts in the FLEX Options on behalf
of the Fund and held until those FLEX Options expire at the end of each Outcome Period. The success of the Buffer also depends upon the performance of the Collateral Portfolio and the Put Spread Strategy. If
the Collateral Portfolio and/or the Put Spread Strategy experiences losses, it could have the effect of reducing the impact of, or completely eliminating, the Buffer on the Fund’s S&P 500 Index exposure. In certain market conditions, the
performance of the Collateral Portfolio and/or the Put Spread Strategy could cause the Fund to significantly underperform the S&P 500 Index. Despite the intended Buffer, an investor could lose their entire investment. In the
event an investor purchases Shares after the date on which Milliman transacted in the FLEX Options on behalf of the Fund, or redeems Shares prior to the expiration of those FLEX Options, the Buffer that the Fund seeks to provide may not be
available or fully applicable.
Risk of Capped Upside Returns. The Fund’s strategy is designed to produce returns that correlate to those of the
Reference Indices up to the Index Caps if Shares are bought on the day on which Milliman transacts in the FLEX Options on behalf of the Fund and held until those FLEX Options expire at the end of the Outcome Period, subject to the Index Caps. In
the event that one or both of the Reference Indices experience gains during the Outcome Period, the Fund will only participate in those gains up to the applicable Index Cap. In the event that one or both Reference Indices experience gains in excess
of the applicable Index Cap over the duration of the Outcome Period, the Fund will not participate in those excess gains. Because the Fund’s strategy provides capped exposure to two Reference Indices, the Index Caps may be lower than if the Fund
provided capped exposure to only a single Reference Index. In the event an investor purchases Shares after the date on which the FLEX Options were entered into and the Fund has risen in value to a level near to an Index Cap, there may be little or
no ability for that investor to experience an investment gain on their Shares relating to that Reference Index. In certain market conditions, the performance of the Collateral Portfolio and the Put Spread
Strategy could cause the Fund to
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underperform relative to the Reference Indices, which could further limit Fund gains below the Index Caps, notwithstanding any
performance of the Reference Indices in excess of the Index Caps. An investor should consider the amount of the Index Caps, and the Fund’s position relative to each Index Cap, before investing in the Fund.
Index Cap Change Risk. Because the Index Caps for each Outcome Period are calculated based upon (i) Milliman’s
evaluation of prevailing market conditions on the first day of the Outcome Period and (ii) the total number of long call FLEX Options on the Reference Indices that Milliman is able to purchase at that time, the Index Caps may rise or fall from one
Outcome Period to the next. Any change in the Index Caps could be significant and they are unlikely to remain the same for consecutive Outcome Periods.
FLEX Options Risk. The Fund will transact in FLEX Options issued and guaranteed for settlement by the OCC. The
Fund bears the risk that the OCC will be unable or unwilling to perform its obligations under the FLEX Options contracts, which could result in significant losses to the Fund. In less liquid markets, terminating a FLEX Option may require the
payment of a premium or acceptance of a discounted price, and may take longer to complete. In addition, a less liquid trading market may adversely impact the value of the Fund’s FLEX Options and therefore the NAV of the Fund. In addition, the value
of the Fund’s FLEX Options positions is not anticipated to increase or decrease at the same rate as the reference asset; and while it is anticipated that they will generally move in the same direction, it is possible that they may move in different
directions. Certain FLEX Options positions may also expire worthless. The use of FLEX Options involves leverage, which can cause the Fund’s portfolio to be more volatile than if the portfolio had not been leveraged. Leverage can significantly
magnify the effect of price movements of the reference asset, disproportionately increasing the Fund’s losses and reducing the Fund’s opportunities for gains when the reference asset changes in unexpected ways. In some instances, such leverage
could result in losses that exceed the original amount invested.
Investment Objective and Outcomes Risk. There is no guarantee that the Fund will be successful in its attempt
to achieve its investment objective and/or the Outcomes, and an investor could lose some or all of their investment in the Fund. Certain circumstances under which the Fund might not achieve its objective and/or the Outcomes include, but are not
limited to (i) if the Fund disposes of FLEX Options, (ii) if the Fund is unable to maintain the proportional relationship based on the number of FLEX Options in the Fund’s portfolio, (iii) significant accrual of Fund expenses in connection with
effecting the Fund’s principal investment strategy, (iv) losses incurred by the Fund’s holdings in the Collateral Portfolio and/or losses resulting from the Put Spread Strategy, or (iv) adverse tax law changes affecting the treatment of FLEX
Options.
Tax Risk. The Fund intends to elect, and to qualify each year, to be treated as a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”). As a RIC, the Fund will not be subject to U.S. federal income tax on the portion
of its net investment income and net capital gain that it distributes to shareholders, provided that it satisfies certain requirements of the Code. To maintain its status as a RIC, the Fund must meet certain income, diversification and
distributions tests. For purposes of the diversification test, the identification of the issuer (or, in some cases, issuers) of a particular Fund investment can depend on the terms and conditions of that investment. In particular, there is no
published IRS guidance or case law on how to determine the “issuer” of certain derivatives that the Fund will enter into and the Fund has not received a private letter ruling on this point. Therefore, there is a risk that the Fund will not meet the
Code’s diversification requirements and will not qualify, or will be disqualified, as a RIC. If the Fund does not qualify as a RIC for any taxable year and certain relief provisions are not available, the Fund’s taxable income will be subject to
tax at the Fund level and to a further tax at the shareholder level when such income is distributed.
The Fund also intends to comply with the diversification requirements of Section 817(h) of the Code, and the regulations thereunder, relating to the
tax-deferred status of variable accounts that are based on insurance company separate accounts (referred to as “segregated asset accounts” for federal income tax purposes). These diversification requirements apply in addition to the RIC
diversification requirements discussed above. There also is no published guidance or case law on how to determine the “issuer” of the derivatives referred to above for purposes of the diversification requirements of Section 817(h) of the Code and
the Fund has not received a private letter ruling on this point. If these requirements are not met, or under other circumstances, such as if the Fund does not qualify as a RIC for any taxable year, it is possible that the contract owners (rather
than the insurance company) will be treated for federal income tax purposes as the taxable owners of the assets held by the segregated asset accounts.
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Clearing Member Default Risk. The Fund will hold FLEX Options through accounts at members of clearing houses (“clearing members”) rather than a bank or a broker. Assets deposited by the Fund with any clearing member as margin for its FLEX Options positions may, in certain circumstances, be used to satisfy losses of other
clients of the Fund’s clearing member where such assets may be held in commingled omnibus accounts. In addition, although clearing members guarantee performance of their clients’ obligations to the clearing house, there is a risk that the assets of
the Fund might not be fully protected in the event of the clearing member’s bankruptcy, as the Fund would be limited to recovering only a pro rata share of all available funds segregated on behalf of the
clearing member’s customers for the relevant account class.
Debt Securities Risk. The prices of debt securities will be affected by changes in interest rates, the
creditworthiness of the issuer and other factors. These risks could affect the value of investments in which the Fund invests, possibly causing the Fund’s NAV to be reduced and fluctuate more than other types of investments. During periods of
falling interest rates, an issuer of a callable bond may repay the security before its stated maturity, and the Fund may have to reinvest the proceeds in securities with lower yields, which would result in a decline in the Fund’s income, or in
securities with greater risks or with other less favorable features. Changing interest rates, including rates that fall below zero, may have unpredictable effects on markets, result in heightened market volatility and detract from the Fund’s
performance to the extent the Fund is exposed to such interest rates. An increase in interest rates will generally cause the value of fixed-income securities held by the Fund to decline, may lead to heightened volatility in the fixed-income
markets and may adversely affect the liquidity of certain fixed-income investments, including those held by the Fund. Risks associated with rising interest rates are heightened given that interest rates in the U.S. are near historic lows.
Adjustable-rate instruments also react to interest rate changes in a similar manner, although generally to a lesser degree (depending, however, on the characteristics of the reset terms, including the index chosen, frequency of reset and reset
caps or floors, among other factors). Interest rate sensitivity is generally more pronounced and less predictable in instruments with uncertain payment or prepayment schedules and also for those with longer maturities.
Foreign Securities and Credit Exposure Risk. U.S. dollar-denominated securities carrying foreign credit exposure
may be affected by unfavorable political, economic or governmental developments that could affect payments of principal and interest. Furthermore, the value of the Fund’s foreign investments (whether direct or indirect) may be adversely affected by
political and social instability in their home countries, by changes in economic or taxation policies in those countries, or by the difficulty in enforcing obligations in those countries. Foreign companies generally may be subject to less stringent
regulations than U.S. companies, including financial reporting requirements and auditing and accounting controls. As a result, there generally is less publicly available information about foreign companies than about U.S. companies. Trading in many
foreign securities may be less liquid and more volatile than U.S. securities due to the size of the market or other factors.
U.S. Government Securities Risk. U.S. Government securities are subject to interest rate risk but generally do
not involve the credit risks associated with investments in other types of debt securities. As a result, the yields available from U.S. Government securities are generally lower than the yields available from other debt securities. U.S. Government
securities are guaranteed only as to the timely payment of interest and the payment of principal when held to maturity. While securities issued or guaranteed by U.S. federal government agencies are backed by the full faith and credit of the U.S.
Department of the Treasury, securities issued by government sponsored entities are solely the obligation of the issuer and generally do not carry any guarantee from the U.S. Government.
ABS Risk. ABS are subject to the general debt securities risks described above. In addition, ABS may be less
liquid than other bonds, and may be more sensitive than other bonds to the market’s perception of issuers and creditworthiness of payees, which may result in the Fund experiencing difficulty selling or valuing these securities. ABS markets have
experienced extraordinary weakness and volatility at various times in recent years, and may decline quickly in the event of a substantial economic or market downturn. Accordingly, these securities may be subject to greater risk of default during
periods of economic downturn than other securities, which could result in possible losses to the Fund.
Issuer Risk. The performance of the Fund depends on the performance of individual securities to which the Fund
has exposure. The Fund may be adversely affected if an issuer of underlying securities held by the Fund is unable or
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unwilling to repay principal or interest when due. Changes in the financial condition or credit rating of an issuer of those securities may cause the
value of the securities to decline.
Management Risk. The Fund is subject to management risk because it is an actively managed portfolio. Milliman
will apply investment techniques and risk analyses in making investment decisions for the Fund, but there can be no guarantee that the Fund will meet its investment objective and/or the Outcomes. In addition, Milliman does not use defensive
strategies or attempt to reduce the Fund’s exposures to poor performing positions during an Outcome Period. This differs from funds that are managed to seek to outperform a benchmark index. Therefore, in the event of a general market decline, the
Fund’s value may fall more than the value of another fund that does attempt to hedge against such market declines.
Market Risk. The Fund could lose money over short periods due to short-term market movements and over longer
periods during more prolonged market downturns. Assets may decline in value due to factors affecting financial markets generally or particular asset classes or industries represented in the markets. The value of a FLEX Option or other asset may
also decline due to general market conditions, economic trends or events that are not specifically related to the issuer of the security or other asset, or due to factors that affect a particular issuer, country, region, market, industry, sector or
asset class.
Non-Diversification Risk. The Fund may invest a relatively high percentage of its assets in a limited number of
issuers. As a result, the Fund may be more susceptible to a single adverse economic or regulatory occurrence affecting one or more of these issuers, experience increased volatility and be highly invested in certain issuers.
Large Shareholder Risk. At times, the Fund may experience adverse effects when certain large shareholders,
including insurance company separate accounts, redeem large amounts of shares of the Fund. Large redemptions may cause the Fund to sell portfolio holdings at times when it would not otherwise do so and may increase transaction costs and/or result
in an increase to the Fund’s expense ratio. A large redemption could be detrimental to the Fund and its remaining shareholders.
Risks of Investing in ETFs. In addition to the risks associated with the underlying assets held by the ETFs in
which the Fund invests, investments in ETFs are also subject to the following additional risks: (i) only authorized participants may engage in transactions directly with ETFs but none are obligated to do so, which could result in an ETF’s shares
trading at a premium or discount to its NAV or possibly face trading halts or delisting; (ii) certain ETFs seek to track the performance of an underlying index and will not attempt to take defensive positions under any market conditions, including
declining markets, which could result in losses; and (iii) because ETF shares trade on the secondary market, there is not guarantee that an active market will be developed or maintained, which could result in the ETF’s shares trading at a premium
or discount to its NAV. Investments in ETFs may involve duplication of management fees and certain other expenses, as the Fund indirectly bears its proportionate share of any expenses paid by the ETFs in which it invests.
Risks of Investing in Money Market Funds. Money market funds seek to preserve the value of shareholder
investments at $1.00 per share, but shareholders, such as the Fund, may still lose money by investing in such funds. In addition, a money market fund may impose a fee upon the sale of its shares or may temporarily suspend the ability to sell shares
if the fund’s liquidity falls below required minimums because of market conditions or other factors. The credit quality of a money market fund’s holdings can change rapidly in certain markets, and the default of a single holding could have an
adverse impact on the fund’s share price. A money market fund’s share price can also be negatively affected during periods of high redemption pressures, illiquid markets, and/or significant market volatility.
Performance
As of the date of this Prospectus, the Fund has not commenced operations and therefore does not have a performance history. Once available, the Fund’s
performance information will be accessible online at www.[________].com and will provide some indication of the risks of investing in the Fund.
Management
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Investment Adviser
Milliman Financial Risk Management LLC (“Milliman”) serves as investment adviser to the Fund.
Portfolio Managers
The following persons serve as portfolio managers of the Fund.
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Robert T. Cummings, Principal & Head of Portfolio Management at Milliman.
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Maria Schiopu, Principal & Head of Portfolio Management at Milliman.
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Jeff Greco, Principal & Head of Strategy Research at Milliman.
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Jordan Rosenfeld, Portfolio Manager at Milliman.
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Each portfolio manager is jointly and primarily responsible for the day-to-day management of the Fund’s portfolio and has served in such capacity
since the Fund’s inception in 2021.
Purchase and Sale of Shares
Shares are available as underlying investment options for variable insurance contracts and variable life insurance policies (each, a “variable contract,” and, collectively, the “variable contracts”) issued by insurance companies. These insurance companies are the record owners of the separate accounts
holding the Shares. You do not buy, sell or exchange Shares directly; rather, you choose investment options through your variable contracts. The insurance companies then cause the separate accounts to purchase and redeem Shares according to
the investment options you choose.
Tax Information
The dividends and distributions paid by the Fund to the insurance company separate accounts will consist of ordinary income, capital gains, or some
combination of both. Because Shares must be purchased through separate accounts used to fund variable contracts, such dividends and distributions will be exempt from current taxation by owners of variable contracts (each, a “contract owner,” and, collectively “contract owners”) if left to accumulate within a separate account. Consult the variable contract prospectus for additional tax
information.
Payments to Insurance Companies and Other Financial Intermediaries
If you allocate contract value to the Fund through an insurance company or other financial intermediary, the Fund, Milliman, the Fund’s distributor or
their related companies may pay the insurance company and/or its affiliates or other intermediary for the sale of Shares and related services. These payments may create a conflict of interest by influencing the insurance company or other
intermediary and your salesperson to recommend an indirect investment in the Fund over another investment. The prospectus or other disclosure documents for the variable contracts may contain additional information about these payments, if any.
You may also ask your salesperson or financial intermediary, or visit your financial intermediary’s website, for more information.
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Fund Summary: Milliman S&P 500 & Nasdaq 1-Year Buffer with Stacker Cap Fund
– Jan
Investment Objective
The Fund seeks to provide exposure to the S&P 500 Index, while providing a buffer against the first 10% of losses associated with S&P 500
Index performance and participating in S&P 500 Index gains up to a declared cap, prior to taking into account any fees or expenses or the performance of any fixed income exposure included in the Fund’s portfolio, over the period from January
1, 2022 through December 31, 2022. The Fund also seeks to provide upside exposure to the Nasdaq-100® Index up to a declared cap, prior to taking into account any fees or expenses or the performance of any fixed income exposure included
in the Fund’s portfolio, over the same period.
Fees and Expenses of the Fund
This table describes the fees and expenses that you may pay if you buy, hold and sell shares of the Fund (“Shares”).
This table and the example below do not include any fees or sales charges imposed by your variable product. If they were included, the expenses listed below would be higher.
Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment)
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Class 3
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Management Fees
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0.49%
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Distribution and Service (12b-1) Fees
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0.25%
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Other Expenses(1)
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0.50%
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Acquired Fund Fees and Expenses(1)
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[_.__]%
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Total Annual Fund Operating Expenses
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1.24%
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Fee Waiver and/or Expense Reimbursement(2)(3)
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(0.25)%
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Total Annual Fund Operating Expenses After Fee Waiver and/or Expense Reimbursement
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0.99%
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(1)
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“Other Expenses” and “Acquired Fund Fees and Expenses” are based on estimated amounts for the current fiscal year.
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(2)
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The Fund’s investment adviser, Milliman Financial Risk Management LLC (“Milliman”), has contractually
agreed to waive advisory fees and/or reimburse expenses to the extent necessary to limit the Fund’s total annual Fund operating expenses (excluding taxes, interest, brokerage fees and commissions, Rule 12b-1 fees, acquired fund fees and
expenses, short-sale dividend expenses, administrative services fees, other expenses that are capitalized in accordance with generally accepted accounting principles, and extraordinary or non-routine expenses not incurred in the
ordinary course of the Fund’s business) to 0.74% of the Fund's average daily net assets (the “Expense Limitation Agreement”) until at least November 1, 2022. During its term, the Expense
Limitation Agreement cannot be terminated or amended to increase the applicable limit without approval of the Board of Trustees of the Trust (the “Board”). Milliman may recoup from the Fund any
advisory fees waived or expenses reimbursed pursuant to the Expense Limitation Agreement for a period of three years from the date on which such waiver or reimbursement occurred; provided, however, that such recoupment shall not be made
if it would cause the Fund’s total annual Fund operating expenses to exceed the lesser of (a) the expense limitation in effect at the time of the reimbursement, or (b) the expense limitation in effect at the time of recoupment, if any.
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(3)
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In addition to the Expense Limitation Agreement, Milliman has contractually agreed to waive its advisory fees in an amount equal to the Fund’s
acquired fund fees and expenses until at least November 1, 2022 (the “Fee Waiver”). This contract cannot be terminated or modified without the consent of the Board.
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Example
This example is intended to help you compare the cost of investing in the Fund with the cost of investing in other funds. This example assumes that you
invest $10,000 in the Fund for the time periods indicated and then sell all of your Shares at the end of those periods. This example also assumes that your investment has a 5% return each year and that the Fund’s operating expenses remain at
current levels and that the Expense Limitation Agreement and Fee Waiver remain in place for their contractual periods. Although your actual costs may be higher or lower, your costs, based on these assumptions, would be:
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1 Year
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3 Years
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Class 3
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$104
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$384
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This example does not include any fees or sales charges imposed by your variable product. If they were included, the expenses listed above would be
higher.
Portfolio Turnover
The Fund pays transaction costs, such as commissions, when it purchases and sells securities (or “turns over” its portfolio). A higher portfolio turnover
will cause the Fund to incur additional transaction costs. These costs, which are not reflected in Total Annual Fund Operating Expenses or in the example, may affect the Fund’s performance. Because the Fund has not yet commenced investment
operations, no portfolio turnover information is available at this time.
Principal Investment Strategies
The Fund seeks to achieve its investment objective by transacting in FLexible EXchange® Options (“FLEX Options”)
and by separately maintaining a collateral portfolio (the “Collateral Portfolio”), which is designed primarily to serve as margin or collateral for the Fund’s FLEX Options positions and secondarily to
enhance the Fund’s upside S&P 500 Index and Nasdaq-100® Index FLEX Options’ exposure (i.e., by utilizing anticipated income to measure the ability to purchase additional FLEX Options). FLEX
Options are exchange-traded options contracts with uniquely customizable terms. In general, an options contract is an agreement between a buyer and seller that gives the purchaser of the option the right to buy or sell a particular asset at a
specified future date at an agreed upon price, commonly known as the “strike price.” The reference assets for the Fund’s FLEX Options positions will include the S&P 500 Index, the Nasdaq-100® Index (the “Secondary Index,” and together with the S&P 500 Index, the “Reference Indices,” and, each, a “Reference Index”), and certain exchange-traded
funds (“ETFs”), as described further below. The S&P 500 Index is a large-capitalization, market-weighted, U.S. equities index that tracks the price (excluding
dividends) of 500 leading companies in leading industries of the U.S. economy. The Secondary Index is [a market capitalization-weighted index that is designed to represent the performance of all domestic and international common type stocks
listed on The Nasdaq Stock Market LLC].
The Collateral Portfolio may be invested in short-term fixed-income securities, including corporate bonds and other corporate debt securities,
asset-backed securities (“ABS”), securities issued by the U.S. Government or its agencies and instrumentalities, securities issued by non-U.S. governments or their agencies and instrumentalities, money
market securities and funds, other interest-bearing instruments, cash, ETFs that primarily invest in any of the foregoing instruments, options on ETFs and options box spreads. An options box spread is the combination of different options trades
that have offsetting spreads (e.g., purchases and sales on the same underlying instrument, such as an index or an ETF, but with different strike prices and/or expiration dates) for the purpose of
generating income. The Fund may invest in short-term fixed income securities or other instruments, including through ETFs, of any maturity and credit quality. The Fund will generally invest up to 35% of its net assets in one or more ETFs that
provide exposure to investment grade corporate bonds.
Due to the unique mechanics of the Fund’s strategy, the return an investor can expect to receive from an investment in the Fund has characteristics that
are distinct from the returns of many other investment vehicles. It is important that an investor understand these characteristics before making an investment in the Fund.
In seeking to achieve its investment objective, the Fund seeks to produce pre-determined outcomes (the “Outcomes”)
that are based upon the performance of the Reference Indices over a one-year period (the “Outcome Period”). The initial Outcome Period for the Fund is January 1, 2022 through December 31, 2022. Following the
initial Outcome Period, each subsequent Outcome Period will be a one-year period commencing upon the expiration of the prior Outcome Period. The Fund seeks to achieve the Outcomes by purchasing and writing (selling) FLEX Options to create layers
within the Fund’s portfolio. One layer is designed to produce returns that correlate to those of the S&P 500 Index for the Outcome Period if the S&P 500 Index experiences gains during that time, subject to an upside return cap (the “S&P 500 Index Cap”), as described below. A second layer is designed to produce returns that correlate to any upside market performance of the Secondary Index over the
Outcome Period, subject to an upside return cap (the “Secondary Index Cap,” and, together with the S&P 500 Index Cap, the “Index Caps,” and, each, an “Index Cap”), as described below. A third layer is designed to produce returns that correlate to those of the S&P 500 Index for the Outcome Period that are buffered up to 10% if the S&P 500 Index
experiences losses during that time (the “Buffer”). There is no guarantee that the Fund will be successful in its attempt to produce
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returns that correlate to those of the S&P 500 Index or the Secondary Index up to the applicable Index Caps or produce buffered
returns against the Fund’s S&P 500 Index exposure.
Milliman Financial Risk Management, LLC (“Milliman”), the investment adviser of the Fund, seeks to establish the
Buffer by writing one put FLEX Option on the S&P 500 Index with a strike price that is 10% lower than the value of the S&P 500 Index at the beginning of the Outcome Period.
Milliman seeks to establish the Index Caps by purchasing long call FLEX Options on each Reference Index with a strike price approximately equal to the
value of the respective Reference Index at the beginning of the Outcome Period. Milliman purchases these FLEX Options with a portion of the Fund’s net assets plus (i) the cash received from writing the put FLEX Option designed to create the
Buffer, (ii) additional cash received by utilizing FLEX Options to create a put spread (the “Put Spread Strategy”) on fixed income securities and/or one or more ETFs that provide exposure to fixed income
securities, and (iii) yield received from the Collateral Portfolio. Milliman seeks to achieve the Put Spread Strategy for the Fund by writing a put FLEX Option on an underlying asset at a strike price at or lower than the underlying asset’s
market price or current value at the beginning of the Outcome Period, and buying a put FLEX Option on the same underlying asset at a lower strike price than the written put FLEX Option.
The Index Caps represent the maximum rate of return in each Reference Index that an investor can achieve from an investment in the Fund over the Outcome
Period. Milliman calculates the Index Caps based upon (i) its evaluation of prevailing market conditions on the first day of the Outcome Period and (ii) the total number of long call FLEX Options on each Reference Index that it is able to purchase
at that time. As of the date of this Prospectus, and assuming current market conditions persist, Milliman expects that the Index Caps will be between the below ranges (both gross and net of Fund fees and expenses). Any fees or expenses imposed by
your variable product, and any other expenses incurred by the Fund, will have the effect of further reducing each Index Cap. In addition, in certain market conditions, the performance of the Collateral Portfolio
and the Put Spread Strategy could cause the Fund to underperform relative to the Reference Indices, which could further limit Fund gains below the Index Caps, notwithstanding any performance of the Reference Indices in excess of the Index Caps.
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Estimated Index Cap Ranges
(As of [___])
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Prior to Taking into Account Fund Fees and Expenses
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After Taking into Account Fund Fees and Expenses
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S&P 500 Index Cap
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||
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Class 3
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[__]% and [__]%
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[__]% and [__]%
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Secondary Index Cap
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||
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Class 3
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[__]% and [__]%
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[__]% and [__]%
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The Buffer is only operative against the first 10% of losses in the Fund’s S&P 500 Index exposure for the Outcome Period. If the S&P 500 Index
decreases in value by more than 10% during the Outcome Period, the Fund (and therefore investors in Shares) will experience all subsequent losses in the Fund’s S&P 500 Index exposure on a one-to-one basis for the Outcome Period. The Fund
seeks to produce buffered returns against its S&P 500 Index exposure prior to taking into account any fees or expenses or the performance of the Collateral Portfolio or the Put Spread Strategy. The Buffer
is not operative against losses in the Collateral Portfolio or the Put Spread Strategy. If the Collateral Portfolio and/or the Put Spread Strategy experiences losses, it could have the effect of reducing the impact of, or completely
eliminating, the Buffer on the Fund’s S&P 500 Index exposure. In certain market conditions, the performance of the Collateral Portfolio and/or the Put Spread Strategy could cause the Fund to significantly underperform the S&P 500
Index. The following table reflects the Buffer both gross and net of Fund fees and expenses:
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Share Class
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Buffer
(As of [___])
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Prior to Taking into Account Fund Fees and Expenses
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After Taking into Account Fund Fees and Expenses
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Class 3
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10%
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[__]%
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327
Because the Fund also seeks to provide only upside exposure to the Secondary Index during the Outcome Period, the Fund’s NAV will not be impacted by any
losses experienced by the Secondary Index when measured from the beginning to the end of the Outcome Period. If the Secondary Index increases in value during the Outcome Period and later decreases in value during the Outcome Period, the Fund’s NAV
will reflect any such decreases until the Secondary Index reaches its initial value (measured as of the first day of the Outcome Period). If the Secondary Index decreases in value over the course of an entire Outcome Period, the Fund’s NAV will not
reflect such losses; therefore, the Fund’s overall performance will be approximately that of the S&P 500 Index for the Outcome Period, subject to the Buffer and the S&P 500 Index Cap.
The definitive Index Caps and Buffer will be set forth on the Fund’s website. The Fund’s website will also provide information relating to the
Outcomes on a daily basis, including the Fund’s position relative to the Index Caps and the Buffer. You may also contact your insurance company or other financial intermediary for more information.
Additionally, the Fund’s net asset value (“NAV”) will not increase or decrease at the same rate as the Reference
Indices because the Fund’s strategy relies upon the performance of the Collateral Portfolio and the Put Spread Strategy, in addition to the value of the Fund’s FLEX Options positions on the Reference Indices. While Milliman anticipates that the
Fund’s NAV will generally move in the same direction as the S&P 500 Index, and correspond to any upside returns of the Secondary Index (meaning that the Fund’s NAV will generally increase if the Reference Indices experience gains or decrease if
the Reference Indices experience losses), the Fund’s NAV may not decrease at the same rate as the Reference Indices (especially when factoring in the performance of the Collateral Portfolio and the Put Spread Strategy) and will not increase at the
same rate as the Reference Indices (especially when factoring in the Index Caps and the performance of the Collateral Portfolio and the Put Spread Strategy). Similarly, the amount of time remaining until the end of the Outcome Period also affects
the impact of the Buffer on the Fund’s NAV, because the Buffer may not be in full effect prior to the end of the Outcome Period.
The FLEX Options utilized in the Fund’s portfolio are each set to expire on the last day of the Outcome Period. The customizable nature of FLEX Options
will allow Milliman to select the strike price at which each FLEX Option will be exercised at the expiration of the FLEX Option term. At the commencement of the Outcome Period, Milliman will specifically select the strike price for each FLEX Option
in a manner designed to achieve the Outcomes when the FLEX Options are exercised on the final day of the Outcome Period, depending on the anticipated performance of the Reference Indices, the Collateral Portfolio and the Put Spread Strategy over
the duration of that Outcome Period.
The hypothetical graphical illustrations provided below are designed to illustrate the Outcomes based upon the
hypothetical performance of the Reference Indices for an investor who holds Shares for the entirety of the Outcome Period. The hypothetical graphical illustrations do not include any fees or expenses
imposed by your variable product or expenses incurred by the Fund, and do not reflect the performance of the Collateral Portfolio or the Put Spread Strategy. Additional hypothetical graphical representations of the Outcomes are provided in
“Additional Information About the Funds and the Risks of Investing.” There is no guarantee that the Fund will be successful in its attempt to achieve the Outcomes for the Outcome Period.
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The following table contains hypothetical examples designed to illustrate the Outcomes the Fund seeks to
achieve over the Outcome Period, based upon the performance of the Reference Indices from (100)% to 100% after taking into account the Index Caps and the Buffer, but prior to taking into account any fees or
expenses or the performance of the Collateral Portfolio or the Put Spread Strategy. The table is provided for illustrative purposes only and does not provide every possible performance scenario for Shares over
the course of the Outcome Period. There is no guarantee that the Fund will be successful in its attempt to achieve the Outcomes for an Outcome Period. The table is not intended to predict or project the performance of the FLEX Options or the Fund. Investors should not take this information as an
assurance of the expected performance of the Reference Indices or the Fund. Actual Fund performance will vary with fluctuations in the performance of the Collateral Portfolio and the Put Spread Strategy, in addition to the value of the
Fund’s FLEX Options positions on the Reference Indices, during the Outcome Period, among other factors. The performance of the Collateral Portfolio and the Put Spread Strategy
could significantly impact the performance of the Fund, which could prevent the Fund from achieving the Outcomes that it seeks to produce. The table does not reflect any fees or expenses imposed by your variable product or expenses
incurred by the Fund. If it did, the returns shown for the Fund would be lower. Please refer to the Fund’s website, which provides updated information relating to this table on a daily basis throughout the Outcome Period. Please contact your
insurance company or other financial intermediary for more information.
329
|
Index/Fund
|
Hypothetical Performance1
|
|||||||||||
|
S&P 500 Index Price Performance
|
(100)%
|
(50)%
|
(20)%
|
(10)%
|
(5)%
|
0%
|
5%
|
10%
|
15%
|
20%
|
50%
|
100%
|
|
Secondary Index Price Performance
|
(100)%
|
(50)%
|
(20)%
|
(10)%
|
(5)%
|
0%
|
5%
|
10%
|
15%
|
20%
|
50%
|
100%
|
|
Fund Performance at NAV
|
(90)%
|
(40)%
|
(10)%
|
0%2
|
0%2
|
0%
|
10%3
|
14%3
|
14%3
|
14%3
|
14%3
|
14%3
|
| 1 |
Does not take into account any fees or expenses or the performance of the Collateral Portfolio or the Put Spread Strategy.
|
| 2 |
Reflects the impact of the Buffer.
|
| 3 |
Reflects the impact of assumed Index Caps of 7% per index, 14% total.
|
Understanding Outcomes. The Outcomes the Fund seeks to achieve are measured based upon the
Fund’s NAV on the first day of the Outcome Period. The Outcome Period begins on the day Milliman transacts in the FLEX Options on behalf of the Fund, and ends on the day those FLEX Options expire. An investor who
purchases Shares after the commencement of the Outcome Period will likely have purchased Shares at a different NAV than the NAV on the first day of the Outcome Period (the NAV upon which the Outcomes are based) and may experience investment
outcomes very different from those the Fund seeks to achieve, especially when factoring in any fees or expenses or the performance of the Collateral Portfolio and the Put Spread Strategy. An investor who redeems Shares prior to the end of the
Outcome Period may also experience investment outcomes very different from those the Fund seeks to achieve. The Outcomes are designed with the expectation that an investor will hold Shares on the day that Milliman transacts in the FLEX Options on
behalf of the Fund, and on the day those FLEX Options expire. There is no guarantee that the Fund will be successful in its attempt to achieve the Outcomes.
Understanding the Index Caps. Unlike other investment products, the potential returns an
investor can receive from an investment in the Fund are subject to the Index Caps. This means that if one or both of the Reference Indices experience gains for the Outcome Period, an investor in the Fund will only
experience those gains up to the applicable Index Cap. Milliman calculates the Index Caps for each Outcome Period based upon (i) its evaluation of prevailing market conditions on the first day of the Outcome Period and (ii) the total
number of long call FLEX Options on each Reference Index that it is able to purchase at that time. If an investor is considering purchasing Shares during the Outcome Period, and the Fund’s NAV has increased in
value to a level near one or both of the Index Caps, an investor purchasing Shares at that price will have limited to no gains available for the remainder of the Outcome Period, but will remain vulnerable to significant downside risks (with
respect to the S&P 500 Index FLEX Options’ exposure). In certain market conditions, the performance of the Collateral Portfolio and the Put Spread Strategy could cause the Fund to underperform
relative to the Reference Indices, which could further limit Fund gains below the Index Caps, notwithstanding any performance of the Reference Indices in excess of the Index Caps.
Understanding the Buffer. The Buffer that the Fund seeks to provide is only operative
against the first 10% of losses in the Fund’s S&P 500 Index exposure for the Outcome Period. If an investor is considering purchasing Shares during the Outcome Period, and the S&P 500 Index has decreased
in value by an amount equal to or greater than 10%, an investor purchasing Shares at that time will be able to participate in any gains thereafter (up to the Index Caps), but will not benefit from the Buffer that the Fund seeks to offer for the
remainder of the Outcome Period if the losses continue to be equal to or greater than 10% during that period. Conversely, if an investor is considering purchasing Shares during the Outcome Period, and the Fund’s NAV has increased in value, then
an investor may experience losses before implementation of the Buffer that the Fund seeks to provide. While the Fund seeks to produce returns that correlate to those of the S&P 500 Index for the Outcome Period that are buffered up to
10% (prior to taking into account any fees or expenses or the performance of the Collateral Portfolio or the Put Spread Strategy) for investors who hold Shares for the entire Outcome Period, there is no guarantee it will successfully do so. In addition, the Buffer is not operative against losses in the Collateral Portfolio or the Put Spread Strategy. If the Collateral Portfolio and/or the Put Spread Strategy experiences losses, it could have the
effect of reducing the impact of, or completely eliminating, the Buffer on the Fund’s S&P 500 Index exposure. In certain market conditions, the performance of the Collateral Portfolio and/or the Put Spread Strategy could cause the Fund to
significantly underperform the S&P 500 Index. Investors who purchase Shares at the beginning of the Outcome Period may lose their entire
330
investment. Investors who purchase Shares after the Outcome Period has begun may also lose their entire investment. An investment
in the Fund is only appropriate for investors willing to bear those losses.
Fund Rebalance. Milliman implements the Fund’s strategy on an annual basis, seeking to
produce the Outcomes for an Outcome Period. On the last business day of any stated Outcome Period, all of the Fund’s existing FLEX Options, which includes those used to establish the Buffer, the Index Caps and the Put Spread Strategy, will expire
and Milliman will transact in a new set of FLEX Options on the same business day, which will commence a new Outcome Period beginning the following business day. At that same time, Milliman will also evaluate whether to make any adjustments to the
Collateral Portfolio. Accordingly, Shares can be held indefinitely if investors determine to participate in additional Outcome Periods.
Approximately one week prior to the end of each Outcome Period, the Fund will file a prospectus supplement, which will notify existing investors of
(i) the date on which the existing Outcome Period will end; (ii) the date on which the new Outcome Period will commence; and (iii) the anticipated ranges of the Index Caps that will be used for the new Outcome Period. Immediately preceding the
commencement date of the new Outcome Period, the Fund will file a prospectus supplement disclosing the Fund’s final Index Caps (both gross and net of Fund fees and expenses) for the new Outcome Period. This information will also be available
online at www.[___________].com, and on your insurance company’s website. Please contact your insurance company or other financial intermediary for more information.
Fund Classification. The Fund is classified as “non-diversified” under the Investment
Company Act of 1940, as amended (the “1940 Act”).
Principal Risks
You could lose money by investing in the Fund. An investment in the Fund is not a deposit of a bank and is not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other governmental agency. There can be no assurance that the Fund’s investment objectives will be achieved.
Downside Loss Buffer Risk. There can be no guarantee that the Fund will be successful in its strategy to
buffer against S&P 500 Index losses if the S&P 500 Index decreases in value over the Outcome Period. The Fund’s strategy is designed to produce returns that correlate to those of the S&P 500 Index, subject to the S&P 500 Index
Cap, while limiting downside S&P 500 Index losses and providing additional upside exposure to the Secondary Index, subject to the Secondary Index Cap, if Shares are bought on the day on which Milliman transacts in the FLEX Options on behalf
of the Fund and held until those FLEX Options expire at the end of each Outcome Period. The success of the Buffer also depends upon the performance of the Collateral Portfolio and the Put Spread Strategy. If
the Collateral Portfolio and/or the Put Spread Strategy experiences losses, it could have the effect of reducing the impact of, or completely eliminating, the Buffer on the Fund’s S&P 500 Index exposure. In certain market conditions, the
performance of the Collateral Portfolio and/or the Put Spread Strategy could cause the Fund to significantly underperform the S&P 500 Index. Despite the intended Buffer, an investor could lose their entire investment. In the
event an investor purchases Shares after the date on which Milliman transacted in the FLEX Options on behalf of the Fund, or redeems Shares prior to the expiration of those FLEX Options, the Buffer that the Fund seeks to provide may not be
available or fully applicable.
Risk of Capped Upside Returns. The Fund’s strategy is designed to produce returns that correlate to those of the
Reference Indices up to the Index Caps if Shares are bought on the day on which Milliman transacts in the FLEX Options on behalf of the Fund and held until those FLEX Options expire at the end of the Outcome Period, subject to the Index Caps. In
the event that one or both of the Reference Indices experience gains during the Outcome Period, the Fund will only participate in those gains up to the applicable Index Cap. In the event that one or both Reference Indices experience gains in excess
of the applicable Index Cap over the duration of the Outcome Period, the Fund will not participate in those excess gains. Because the Fund’s strategy provides capped exposure to two Reference Indices, the Index Caps may be lower than if the Fund
provided capped exposure to only a single Reference Index. In the event an investor purchases Shares after the date on which the FLEX Options were entered into and the Fund has risen in value to a level near to an Index Cap, there may be little or
no ability for that investor to experience an investment gain on their Shares relating to that Reference Index. In certain market conditions, the performance of the Collateral Portfolio and the Put Spread
Strategy could cause the Fund to
331
underperform relative to the Reference Indices, which could further limit Fund gains below the Index Caps, notwithstanding any
performance of the Reference Indices in excess of the Index Caps. An investor should consider the amount of the Index Caps, and the Fund’s position relative to each Index Cap, before investing in the Fund.
Index Cap Change Risk. Because the Index Caps for each Outcome Period are calculated based upon (i) Milliman’s
evaluation of prevailing market conditions on the first day of the Outcome Period and (ii) the total number of long call FLEX Options on the Reference Indices that Milliman is able to purchase at that time, the Index Caps may rise or fall from one
Outcome Period to the next. Any change in the Index Caps could be significant and they are unlikely to remain the same for consecutive Outcome Periods.
FLEX Options Risk. The Fund will transact in FLEX Options issued and guaranteed for settlement by the OCC. The
Fund bears the risk that the OCC will be unable or unwilling to perform its obligations under the FLEX Options contracts, which could result in significant losses to the Fund. In less liquid markets, terminating a FLEX Option may require the
payment of a premium or acceptance of a discounted price, and may take longer to complete. In addition, a less liquid trading market may adversely impact the value of the Fund’s FLEX Options and therefore the NAV of the Fund. In addition, the value
of the Fund’s FLEX Options positions is not anticipated to increase or decrease at the same rate as the reference asset; and while it is anticipated that they will generally move in the same direction, it is possible that they may move in different
directions. Certain FLEX Options positions may also expire worthless. The use of FLEX Options involves leverage, which can cause the Fund’s portfolio to be more volatile than if the portfolio had not been leveraged. Leverage can significantly
magnify the effect of price movements of the reference asset, disproportionately increasing the Fund’s losses and reducing the Fund’s opportunities for gains when the reference asset changes in unexpected ways. In some instances, such leverage
could result in losses that exceed the original amount invested.
Investment Objective and Outcomes Risk. There is no guarantee that the Fund will be successful in its attempt
to achieve its investment objective and/or the Outcomes, and an investor could lose some or all of their investment in the Fund. Certain circumstances under which the Fund might not achieve its objective and/or the Outcomes include, but are not
limited to (i) if the Fund disposes of FLEX Options, (ii) if the Fund is unable to maintain the proportional relationship based on the number of FLEX Options in the Fund’s portfolio, (iii) significant accrual of Fund expenses in connection with
effecting the Fund’s principal investment strategy, (iv) losses incurred by the Fund’s holdings in the Collateral Portfolio and/or losses resulting from the Put Spread Strategy, or (iv) adverse tax law changes affecting the treatment of FLEX
Options.
Tax Risk. The Fund intends to elect, and to qualify each year, to be treated as a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”). As a RIC, the Fund will not be subject to U.S. federal income tax on the portion
of its net investment income and net capital gain that it distributes to shareholders, provided that it satisfies certain requirements of the Code. To maintain its status as a RIC, the Fund must meet certain income, diversification and
distributions tests. For purposes of the diversification test, the identification of the issuer (or, in some cases, issuers) of a particular Fund investment can depend on the terms and conditions of that investment. In particular, there is no
published IRS guidance or case law on how to determine the “issuer” of certain derivatives that the Fund will enter into and the Fund has not received a private letter ruling on this point. Therefore, there is a risk that the Fund will not meet the
Code’s diversification requirements and will not qualify, or will be disqualified, as a RIC. If the Fund does not qualify as a RIC for any taxable year and certain relief provisions are not available, the Fund’s taxable income will be subject to
tax at the Fund level and to a further tax at the shareholder level when such income is distributed.
The Fund also intends to comply with the diversification requirements of Section 817(h) of the Code, and the regulations thereunder, relating to the
tax-deferred status of variable accounts that are based on insurance company separate accounts (referred to as “segregated asset accounts” for federal income tax purposes). These diversification requirements apply in addition to the RIC
diversification requirements discussed above. There also is no published guidance or case law on how to determine the “issuer” of the derivatives referred to above for purposes of the diversification requirements of Section 817(h) of the Code and
the Fund has not received a private letter ruling on this point. If these requirements are not met, or under other circumstances, such as if the Fund does not qualify as a RIC for any taxable year, it is possible that the contract owners (rather
than the insurance company) will be treated for federal income tax purposes as the taxable owners of the assets held by the segregated asset accounts.
332
Clearing Member Default Risk. The Fund will hold FLEX Options through accounts at members of clearing houses (“clearing members”) rather than a bank or a broker. Assets deposited by the Fund with any clearing member as margin for its FLEX Options positions may, in certain circumstances, be used to satisfy losses of other
clients of the Fund’s clearing member where such assets may be held in commingled omnibus accounts. In addition, although clearing members guarantee performance of their clients’ obligations to the clearing house, there is a risk that the assets of
the Fund might not be fully protected in the event of the clearing member’s bankruptcy, as the Fund would be limited to recovering only a pro rata share of all available funds segregated on behalf of the
clearing member’s customers for the relevant account class.
Debt Securities Risk. The prices of debt securities will be affected by changes in interest rates, the
creditworthiness of the issuer and other factors. These risks could affect the value of investments in which the Fund invests, possibly causing the Fund’s NAV to be reduced and fluctuate more than other types of investments. During periods of
falling interest rates, an issuer of a callable bond may repay the security before its stated maturity, and the Fund may have to reinvest the proceeds in securities with lower yields, which would result in a decline in the Fund’s income, or in
securities with greater risks or with other less favorable features. Changing interest rates, including rates that fall below zero, may have unpredictable effects on markets, result in heightened market volatility and detract from the Fund’s
performance to the extent the Fund is exposed to such interest rates. An increase in interest rates will generally cause the value of fixed-income securities held by the Fund to decline, may lead to heightened volatility in the fixed-income
markets and may adversely affect the liquidity of certain fixed-income investments, including those held by the Fund. Risks associated with rising interest rates are heightened given that interest rates in the U.S. are near historic lows.
Adjustable-rate instruments also react to interest rate changes in a similar manner, although generally to a lesser degree (depending, however, on the characteristics of the reset terms, including the index chosen, frequency of reset and reset
caps or floors, among other factors). Interest rate sensitivity is generally more pronounced and less predictable in instruments with uncertain payment or prepayment schedules and also for those with longer maturities.
Foreign Securities and Credit Exposure Risk. U.S. dollar-denominated securities carrying foreign credit exposure
may be affected by unfavorable political, economic or governmental developments that could affect payments of principal and interest. Furthermore, the value of the Fund’s foreign investments (whether direct or indirect) may be adversely affected by
political and social instability in their home countries, by changes in economic or taxation policies in those countries, or by the difficulty in enforcing obligations in those countries. Foreign companies generally may be subject to less stringent
regulations than U.S. companies, including financial reporting requirements and auditing and accounting controls. As a result, there generally is less publicly available information about foreign companies than about U.S. companies. Trading in many
foreign securities may be less liquid and more volatile than U.S. securities due to the size of the market or other factors.
U.S. Government Securities Risk. U.S. Government securities are subject to interest rate risk but generally do
not involve the credit risks associated with investments in other types of debt securities. As a result, the yields available from U.S. Government securities are generally lower than the yields available from other debt securities. U.S. Government
securities are guaranteed only as to the timely payment of interest and the payment of principal when held to maturity. While securities issued or guaranteed by U.S. federal government agencies are backed by the full faith and credit of the U.S.
Department of the Treasury, securities issued by government sponsored entities are solely the obligation of the issuer and generally do not carry any guarantee from the U.S. Government.
ABS Risk. ABS are subject to the general debt securities risks described above. In addition, ABS may be less
liquid than other bonds, and may be more sensitive than other bonds to the market’s perception of issuers and creditworthiness of payees, which may result in the Fund experiencing difficulty selling or valuing these securities. ABS markets have
experienced extraordinary weakness and volatility at various times in recent years, and may decline quickly in the event of a substantial economic or market downturn. Accordingly, these securities may be subject to greater risk of default during
periods of economic downturn than other securities, which could result in possible losses to the Fund.
Issuer Risk. The performance of the Fund depends on the performance of individual securities to which the Fund
has exposure. The Fund may be adversely affected if an issuer of underlying securities held by the Fund is unable or
333
unwilling to repay principal or interest when due. Changes in the financial condition or credit rating of an issuer of those securities may cause the
value of the securities to decline.
Management Risk. The Fund is subject to management risk because it is an actively managed portfolio. Milliman
will apply investment techniques and risk analyses in making investment decisions for the Fund, but there can be no guarantee that the Fund will meet its investment objective and/or the Outcomes. In addition, Milliman does not use defensive
strategies or attempt to reduce the Fund’s exposures to poor performing positions during an Outcome Period. This differs from funds that are managed to seek to outperform a benchmark index. Therefore, in the event of a general market decline, the
Fund’s value may fall more than the value of another fund that does attempt to hedge against such market declines.
Market Risk. The Fund could lose money over short periods due to short-term market movements and over longer
periods during more prolonged market downturns. Assets may decline in value due to factors affecting financial markets generally or particular asset classes or industries represented in the markets. The value of a FLEX Option or other asset may
also decline due to general market conditions, economic trends or events that are not specifically related to the issuer of the security or other asset, or due to factors that affect a particular issuer, country, region, market, industry, sector or
asset class.
Non-Diversification Risk. The Fund may invest a relatively high percentage of its assets in a limited number of
issuers. As a result, the Fund may be more susceptible to a single adverse economic or regulatory occurrence affecting one or more of these issuers, experience increased volatility and be highly invested in certain issuers.
Large Shareholder Risk. At times, the Fund may experience adverse effects when certain large shareholders,
including insurance company separate accounts, redeem large amounts of shares of the Fund. Large redemptions may cause the Fund to sell portfolio holdings at times when it would not otherwise do so and may increase transaction costs and/or result
in an increase to the Fund’s expense ratio. A large redemption could be detrimental to the Fund and its remaining shareholders.
Risks of Investing in ETFs. In addition to the risks associated with the underlying assets held by the ETFs in
which the Fund invests, investments in ETFs are also subject to the following additional risks: (i) only authorized participants may engage in transactions directly with ETFs but none are obligated to do so, which could result in an ETF’s shares
trading at a premium or discount to its NAV or possibly face trading halts or delisting; (ii) certain ETFs seek to track the performance of an underlying index and will not attempt to take defensive positions under any market conditions, including
declining markets, which could result in losses; and (iii) because ETF shares trade on the secondary market, there is not guarantee that an active market will be developed or maintained, which could result in the ETF’s shares trading at a premium
or discount to its NAV. Investments in ETFs may involve duplication of management fees and certain other expenses, as the Fund indirectly bears its proportionate share of any expenses paid by the ETFs in which it invests.
Risks of Investing in Money Market Funds. Money market funds seek to preserve the value of shareholder
investments at $1.00 per share, but shareholders, such as the Fund, may still lose money by investing in such funds. In addition, a money market fund may impose a fee upon the sale of its shares or may temporarily suspend the ability to sell shares
if the fund’s liquidity falls below required minimums because of market conditions or other factors. The credit quality of a money market fund’s holdings can change rapidly in certain markets, and the default of a single holding could have an
adverse impact on the fund’s share price. A money market fund’s share price can also be negatively affected during periods of high redemption pressures, illiquid markets, and/or significant market volatility.
Performance
As of the date of this Prospectus, the Fund has not commenced operations and therefore does not have a performance history. Once available, the Fund’s
performance information will be accessible online at www.[________].com and will provide some indication of the risks of investing in the Fund.
Management
334
Investment Adviser
Milliman Financial Risk Management LLC (“Milliman”) serves as investment adviser to the Fund.
Portfolio Managers
The following persons serve as portfolio managers of the Fund.
|
●
|
Robert T. Cummings, Principal & Head of Portfolio Management at Milliman.
|
|
●
|
Maria Schiopu, Principal & Head of Portfolio Management at Milliman.
|
|
●
|
Jeff Greco, Principal & Head of Strategy Research at Milliman.
|
|
●
|
Jordan Rosenfeld, Portfolio Manager at Milliman.
|
Each portfolio manager is jointly and primarily responsible for the day-to-day management of the Fund’s portfolio and has served in such capacity
since the Fund’s inception in 2021.
Purchase and Sale of Shares
Shares are available as underlying investment options for variable insurance contracts and variable life insurance policies (each, a “variable contract,” and, collectively, the “variable contracts”) issued by insurance companies. These insurance companies are the record owners of the separate accounts
holding the Shares. You do not buy, sell or exchange Shares directly; rather, you choose investment options through your variable contracts. The insurance companies then cause the separate accounts to purchase and redeem Shares according to
the investment options you choose.
Tax Information
The dividends and distributions paid by the Fund to the insurance company separate accounts will consist of ordinary income, capital gains, or some
combination of both. Because Shares must be purchased through separate accounts used to fund variable contracts, such dividends and distributions will be exempt from current taxation by owners of variable contracts (each, a “contract owner,” and, collectively “contract owners”) if left to accumulate within a separate account. Consult the variable contract prospectus for additional tax
information.
Payments to Insurance Companies and Other Financial Intermediaries
If you allocate contract value to the Fund through an insurance company or other financial intermediary, the Fund, Milliman, the Fund’s distributor or
their related companies may pay the insurance company and/or its affiliates or other intermediary for the sale of Shares and related services. These payments may create a conflict of interest by influencing the insurance company or other
intermediary and your salesperson to recommend an indirect investment in the Fund over another investment. The prospectus or other disclosure documents for the variable contracts may contain additional information about these payments, if any.
You may also ask your salesperson or financial intermediary, or visit your financial intermediary’s website, for more information.
335
Fund Summary: Milliman S&P 500 & Nasdaq 1-Year Buffer with Stacker Cap Fund
– Feb
Investment Objective
The Fund seeks to provide exposure to the S&P 500 Index, while providing a buffer against the first 10% of losses associated with S&P 500
Index performance and participating in S&P 500 Index gains up to a declared cap, prior to taking into account any fees or expenses or the performance of any fixed income exposure included in the Fund’s portfolio, over the period from February
1, 2022 through January 31, 2023. The Fund also seeks to provide upside exposure to the Nasdaq-100® Index up to a declared cap, prior to taking into account any fees or expenses or the performance of any fixed income exposure included
in the Fund’s portfolio, over the same period.
Fees and Expenses of the Fund
This table describes the fees and expenses that you may pay if you buy, hold and sell shares of the Fund (“Shares”).
This table and the example below do not include any fees or sales charges imposed by your variable product. If they were included, the expenses listed below would be higher.
Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment)
|
Class 3
|
|
|
Management Fees
|
0.49%
|
|
Distribution and Service (12b-1) Fees
|
0.25%
|
|
Other Expenses(1)
|
0.50%
|
|
Acquired Fund Fees and Expenses(1)
|
[_.__]%
|
|
Total Annual Fund Operating Expenses
|
1.24%
|
|
Fee Waiver and/or Expense Reimbursement(2)(3)
|
(0.25)%
|
|
Total Annual Fund Operating Expenses After Fee Waiver and/or Expense Reimbursement
|
0.99%
|
|
(1)
|
“Other Expenses” and “Acquired Fund Fees and Expenses” are based on estimated amounts for the current fiscal year.
|
|
(2)
|
The Fund’s investment adviser, Milliman Financial Risk Management LLC (“Milliman”), has contractually
agreed to waive advisory fees and/or reimburse expenses to the extent necessary to limit the Fund’s total annual Fund operating expenses (excluding taxes, interest, brokerage fees and commissions, Rule 12b-1 fees, acquired fund fees and
expenses, short-sale dividend expenses, administrative services fees, other expenses that are capitalized in accordance with generally accepted accounting principles, and extraordinary or non-routine expenses not incurred in the
ordinary course of the Fund’s business) to 0.74% of the Fund's average daily net assets (the “Expense Limitation Agreement”) until at least November 1, 2022. During its term, the Expense
Limitation Agreement cannot be terminated or amended to increase the applicable limit without approval of the Board of Trustees of the Trust (the “Board”). Milliman may recoup from the Fund any
advisory fees waived or expenses reimbursed pursuant to the Expense Limitation Agreement for a period of three years from the date on which such waiver or reimbursement occurred; provided, however, that such recoupment shall not be made
if it would cause the Fund’s total annual Fund operating expenses to exceed the lesser of (a) the expense limitation in effect at the time of the reimbursement, or (b) the expense limitation in effect at the time of recoupment, if any.
|
|
(3)
|
In addition to the Expense Limitation Agreement, Milliman has contractually agreed to waive its advisory fees in an amount equal to the Fund’s
acquired fund fees and expenses until at least November 1, 2022 (the “Fee Waiver”). This contract cannot be terminated or modified without the consent of the Board.
|
Example
This example is intended to help you compare the cost of investing in the Fund with the cost of investing in other funds. This example assumes that you
invest $10,000 in the Fund for the time periods indicated and then sell all of your Shares at the end of those periods. This example also assumes that your investment has a 5% return each year and that the Fund’s operating expenses remain at
current levels and that the Expense Limitation Agreement and Fee Waiver remain in place for their contractual periods. Although your actual costs may be higher or lower, your costs, based on these assumptions, would be:
|
1 Year
|
3 Years
|
|
|
Class 3
|
$104
|
$384
|
336
This example does not include any fees or sales charges imposed by your variable product. If they were included, the expenses listed above would be
higher.
Portfolio Turnover
The Fund pays transaction costs, such as commissions, when it purchases and sells securities (or “turns over” its portfolio). A higher portfolio turnover
will cause the Fund to incur additional transaction costs. These costs, which are not reflected in Total Annual Fund Operating Expenses or in the example, may affect the Fund’s performance. Because the Fund has not yet commenced investment
operations, no portfolio turnover information is available at this time.
Principal Investment Strategies
The Fund seeks to achieve its investment objective by transacting in FLexible EXchange® Options (“FLEX Options”)
and by separately maintaining a collateral portfolio (the “Collateral Portfolio”), which is designed primarily to serve as margin or collateral for the Fund’s FLEX Options positions and secondarily to
enhance the Fund’s upside S&P 500 Index and Nasdaq-100® Index FLEX Options’ exposure (i.e., by utilizing anticipated income to measure the ability to purchase additional FLEX Options). FLEX
Options are exchange-traded options contracts with uniquely customizable terms. In general, an options contract is an agreement between a buyer and seller that gives the purchaser of the option the right to buy or sell a particular asset at a
specified future date at an agreed upon price, commonly known as the “strike price.” The reference assets for the Fund’s FLEX Options positions will include the S&P 500 Index, the Nasdaq-100® Index (the “Secondary Index,” and together with the S&P 500 Index, the “Reference Indices,” and, each, a “Reference Index”), and certain exchange-traded
funds (“ETFs”), as described further below. The S&P 500 Index is a large-capitalization, market-weighted, U.S. equities index that tracks the price (excluding
dividends) of 500 leading companies in leading industries of the U.S. economy. The Secondary Index is [a market capitalization-weighted index that is designed to represent the performance of all domestic and international common type stocks
listed on The Nasdaq Stock Market LLC].
The Collateral Portfolio may be invested in short-term fixed-income securities, including corporate bonds and other corporate debt securities,
asset-backed securities (“ABS”), securities issued by the U.S. Government or its agencies and instrumentalities, securities issued by non-U.S. governments or their agencies and instrumentalities, money
market securities and funds, other interest-bearing instruments, cash, ETFs that primarily invest in any of the foregoing instruments, options on ETFs and options box spreads. An options box spread is the combination of different options trades
that have offsetting spreads (e.g., purchases and sales on the same underlying instrument, such as an index or an ETF, but with different strike prices and/or expiration dates) for the purpose of
generating income. The Fund may invest in short-term fixed income securities or other instruments, including through ETFs, of any maturity and credit quality. The Fund will generally invest up to 35% of its net assets in one or more ETFs that
provide exposure to investment grade corporate bonds.
Due to the unique mechanics of the Fund’s strategy, the return an investor can expect to receive from an investment in the Fund has characteristics that
are distinct from the returns of many other investment vehicles. It is important that an investor understand these characteristics before making an investment in the Fund.
In seeking to achieve its investment objective, the Fund seeks to produce pre-determined outcomes (the “Outcomes”)
that are based upon the performance of the Reference Indices over a one-year period (the “Outcome Period”). The initial Outcome Period for the Fund is February 1, 2022 through January 31, 2023. Following the
initial Outcome Period, each subsequent Outcome Period will be a one-year period commencing upon the expiration of the prior Outcome Period. The Fund seeks to achieve the Outcomes by purchasing and writing (selling) FLEX Options to create layers
within the Fund’s portfolio. One layer is designed to produce returns that correlate to those of the S&P 500 Index for the Outcome Period if the S&P 500 Index experiences gains during that time, subject to an upside return cap (the “S&P 500 Index Cap”), as described below. A second layer is designed to produce returns that correlate to any upside market performance of the Secondary Index over the
Outcome Period, subject to an upside return cap (the “Secondary Index Cap,” and, together with the S&P 500 Index Cap, the “Index Caps,” and, each, an “Index Cap”), as described below. A third layer is designed to produce returns that correlate to those of the S&P 500 Index for the Outcome Period that are buffered up to 10% if the S&P 500 Index
experiences losses during that time (the “Buffer”). There is no guarantee that the Fund will be successful in its attempt to produce
337
returns that correlate to those of the S&P 500 Index or the Secondary Index up to the applicable Index Caps or produce buffered
returns against the Fund’s S&P 500 Index exposure.
Milliman Financial Risk Management, LLC (“Milliman”), the investment adviser of the Fund, seeks to establish the
Buffer by writing one put FLEX Option on the S&P 500 Index with a strike price that is 10% lower than the value of the S&P 500 Index at the beginning of the Outcome Period.
Milliman seeks to establish the Index Caps by purchasing long call FLEX Options on each Reference Index with a strike price approximately equal to the
value of the respective Reference Index at the beginning of the Outcome Period. Milliman purchases these FLEX Options with a portion of the Fund’s net assets plus (i) the cash received from writing the put FLEX Option designed to create the
Buffer, (ii) additional cash received by utilizing FLEX Options to create a put spread (the “Put Spread Strategy”) on fixed income securities and/or one or more ETFs that provide exposure to fixed income
securities, and (iii) yield received from the Collateral Portfolio. Milliman seeks to achieve the Put Spread Strategy for the Fund by writing a put FLEX Option on an underlying asset at a strike price at or lower than the underlying asset’s
market price or current value at the beginning of the Outcome Period, and buying a put FLEX Option on the same underlying asset at a lower strike price than the written put FLEX Option.
The Index Caps represent the maximum rate of return in each Reference Index that an investor can achieve from an investment in the Fund over the Outcome
Period. Milliman calculates the Index Caps based upon (i) its evaluation of prevailing market conditions on the first day of the Outcome Period and (ii) the total number of long call FLEX Options on each Reference Index that it is able to purchase
at that time. As of the date of this Prospectus, and assuming current market conditions persist, Milliman expects that the Index Caps will be between the below ranges (both gross and net of Fund fees and expenses). Any fees or expenses imposed by
your variable product, and any other expenses incurred by the Fund, will have the effect of further reducing each Index Cap. In addition, in certain market conditions, the performance of the Collateral Portfolio
and the Put Spread Strategy could cause the Fund to underperform relative to the Reference Indices, which could further limit Fund gains below the Index Caps, notwithstanding any performance of the Reference Indices in excess of the Index Caps.
|
Estimated Index Cap Ranges
(As of [___])
|
||
|
Prior to Taking into Account Fund Fees and Expenses
|
After Taking into Account Fund Fees and Expenses
|
|
|
S&P 500 Index Cap
|
||
|
Class 3
|
[__]% and [__]%
|
[__]% and [__]%
|
|
Secondary Index Cap
|
||
|
Class 3
|
[__]% and [__]%
|
[__]% and [__]%
|
The Buffer is only operative against the first 10% of losses in the Fund’s S&P 500 Index exposure for the Outcome Period. If the S&P 500 Index
decreases in value by more than 10% during the Outcome Period, the Fund (and therefore investors in Shares) will experience all subsequent losses in the Fund’s S&P 500 Index exposure on a one-to-one basis for the Outcome Period. The Fund
seeks to produce buffered returns against its S&P 500 Index exposure prior to taking into account any fees or expenses or the performance of the Collateral Portfolio or the Put Spread Strategy. The Buffer
is not operative against losses in the Collateral Portfolio or the Put Spread Strategy. If the Collateral Portfolio and/or the Put Spread Strategy experiences losses, it could have the effect of reducing the impact of, or completely
eliminating, the Buffer on the Fund’s S&P 500 Index exposure. In certain market conditions, the performance of the Collateral Portfolio and/or the Put Spread Strategy could cause the Fund to significantly underperform the S&P 500
Index. The following table reflects the Buffer both gross and net of Fund fees and expenses:
|
Share Class
|
Buffer
(As of [___])
|
|
|
Prior to Taking into Account Fund Fees and Expenses
|
After Taking into Account Fund Fees and Expenses
|
|
|
Class 3
|
10%
|
[__]%
|
338
Because the Fund also seeks to provide only upside exposure to the Secondary Index during the Outcome Period, the Fund’s NAV will not be impacted by any
losses experienced by the Secondary Index when measured from the beginning to the end of the Outcome Period. If the Secondary Index increases in value during the Outcome Period and later decreases in value during the Outcome Period, the Fund’s NAV
will reflect any such decreases until the Secondary Index reaches its initial value (measured as of the first day of the Outcome Period). If the Secondary Index decreases in value over the course of an entire Outcome Period, the Fund’s NAV will not
reflect such losses; therefore, the Fund’s overall performance will be approximately that of the S&P 500 Index for the Outcome Period, subject to the Buffer and the S&P 500 Index Cap.
The definitive Index Caps and Buffer will be set forth on the Fund’s website. The Fund’s website will also provide information relating to the
Outcomes on a daily basis, including the Fund’s position relative to the Index Caps and the Buffer. You may also contact your insurance company or other financial intermediary for more information.
Additionally, the Fund’s net asset value (“NAV”) will not increase or decrease at the same rate as the Reference
Indices because the Fund’s strategy relies upon the performance of the Collateral Portfolio and the Put Spread Strategy, in addition to the value of the Fund’s FLEX Options positions on the Reference Indices. While Milliman anticipates that the
Fund’s NAV will generally move in the same direction as the S&P 500 Index, and correspond to any upside returns of the Secondary Index (meaning that the Fund’s NAV will generally increase if the Reference Indices experience gains or decrease if
the Reference Indices experience losses), the Fund’s NAV may not decrease at the same rate as the Reference Indices (especially when factoring in the performance of the Collateral Portfolio and the Put Spread Strategy) and will not increase at the
same rate as the Reference Indices (especially when factoring in the Index Caps and the performance of the Collateral Portfolio and the Put Spread Strategy). Similarly, the amount of time remaining until the end of the Outcome Period also affects
the impact of the Buffer on the Fund’s NAV, because the Buffer may not be in full effect prior to the end of the Outcome Period.
The FLEX Options utilized in the Fund’s portfolio are each set to expire on the last day of the Outcome Period. The customizable nature of FLEX Options
will allow Milliman to select the strike price at which each FLEX Option will be exercised at the expiration of the FLEX Option term. At the commencement of the Outcome Period, Milliman will specifically select the strike price for each FLEX Option
in a manner designed to achieve the Outcomes when the FLEX Options are exercised on the final day of the Outcome Period, depending on the anticipated performance of the Reference Indices, the Collateral Portfolio and the Put Spread Strategy over
the duration of that Outcome Period.
The hypothetical graphical illustrations provided below are designed to illustrate the Outcomes based upon the
hypothetical performance of the Reference Indices for an investor who holds Shares for the entirety of the Outcome Period. The hypothetical graphical illustrations do not include any fees or expenses
imposed by your variable product or expenses incurred by the Fund, and do not reflect the performance of the Collateral Portfolio or the Put Spread Strategy. Additional hypothetical graphical representations of the Outcomes are provided in
“Additional Information About the Funds and the Risks of Investing.” There is no guarantee that the Fund will be successful in its attempt to achieve the Outcomes for the Outcome Period.
339
The following table contains hypothetical examples designed to illustrate the Outcomes the Fund seeks to
achieve over the Outcome Period, based upon the performance of the Reference Indices from (100)% to 100% after taking into account the Index Caps and the Buffer, but prior to taking into account any fees or
expenses or the performance of the Collateral Portfolio or the Put Spread Strategy. The table is provided for illustrative purposes only and does not provide every possible performance scenario for Shares over
the course of the Outcome Period. There is no guarantee that the Fund will be successful in its attempt to achieve the Outcomes for an Outcome Period. The table is not intended to predict or project the performance of the FLEX Options or the Fund. Investors should not take this information as an
assurance of the expected performance of the Reference Indices or the Fund. Actual Fund performance will vary with fluctuations in the performance of the Collateral Portfolio and the Put Spread Strategy, in addition to the value of the
Fund’s FLEX Options positions on the Reference Indices, during the Outcome Period, among other factors. The performance of the Collateral Portfolio and the Put Spread Strategy
could significantly impact the performance of the Fund, which could prevent the Fund from achieving the Outcomes that it seeks to produce. The table does not reflect any fees or expenses imposed by your variable product or expenses
incurred by the Fund. If it did, the returns shown for the Fund would be lower. Please refer to the Fund’s website, which provides updated information relating to this table on a daily basis throughout the Outcome Period. Please contact your
insurance company or other financial intermediary for more information.
340
|
Index/Fund
|
Hypothetical Performance1
|
|||||||||||
|
S&P 500 Index Price Performance
|
(100)%
|
(50)%
|
(20)%
|
(10)%
|
(5)%
|
0%
|
5%
|
10%
|
15%
|
20%
|
50%
|
100%
|
|
Secondary Index Price Performance
|
(100)%
|
(50)%
|
(20)%
|
(10)%
|
(5)%
|
0%
|
5%
|
10%
|
15%
|
20%
|
50%
|
100%
|
|
Fund Performance at NAV
|
(90)%
|
(40)%
|
(10)%
|
0%2
|
0%2
|
0%
|
10%3
|
14%3
|
14%3
|
14%3
|
14%3
|
14%3
|
| 1 |
Does not take into account any fees or expenses or the performance of the Collateral Portfolio or the Put Spread Strategy.
|
| 2 |
Reflects the impact of the Buffer.
|
| 3 |
Reflects the impact of assumed Index Caps of 7% per index, 14% total.
|
Understanding Outcomes. The Outcomes the Fund seeks to achieve are measured based upon the
Fund’s NAV on the first day of the Outcome Period. The Outcome Period begins on the day Milliman transacts in the FLEX Options on behalf of the Fund, and ends on the day those FLEX Options expire. An investor who
purchases Shares after the commencement of the Outcome Period will likely have purchased Shares at a different NAV than the NAV on the first day of the Outcome Period (the NAV upon which the Outcomes are based) and may experience investment
outcomes very different from those the Fund seeks to achieve, especially when factoring in any fees or expenses or the performance of the Collateral Portfolio and the Put Spread Strategy. An investor who redeems Shares prior to the end of the
Outcome Period may also experience investment outcomes very different from those the Fund seeks to achieve. The Outcomes are designed with the expectation that an investor will hold Shares on the day that Milliman transacts in the FLEX Options on
behalf of the Fund, and on the day those FLEX Options expire. There is no guarantee that the Fund will be successful in its attempt to achieve the Outcomes.
Understanding the Index Caps. Unlike other investment products, the potential returns an
investor can receive from an investment in the Fund are subject to the Index Caps. This means that if one or both of the Reference Indices experience gains for the Outcome Period, an investor in the Fund will only
experience those gains up to the applicable Index Cap. Milliman calculates the Index Caps for each Outcome Period based upon (i) its evaluation of prevailing market conditions on the first day of the Outcome Period and (ii) the total
number of long call FLEX Options on each Reference Index that it is able to purchase at that time. If an investor is considering purchasing Shares during the Outcome Period, and the Fund’s NAV has increased in
value to a level near one or both of the Index Caps, an investor purchasing Shares at that price will have limited to no gains available for the remainder of the Outcome Period, but will remain vulnerable to significant downside risks (with
respect to the S&P 500 Index FLEX Options’ exposure). In certain market conditions, the performance of the Collateral Portfolio and the Put Spread Strategy could cause the Fund to underperform
relative to the Reference Indices, which could further limit Fund gains below the Index Caps, notwithstanding any performance of the Reference Indices in excess of the Index Caps.
Understanding the Buffer. The Buffer that the Fund seeks to provide is only operative
against the first 10% of losses in the Fund’s S&P 500 Index exposure for the Outcome Period. If an investor is considering purchasing Shares during the Outcome Period, and the S&P 500 Index has decreased
in value by an amount equal to or greater than 10%, an investor purchasing Shares at that time will be able to participate in any gains thereafter (up to the Index Caps), but will not benefit from the Buffer that the Fund seeks to offer for the
remainder of the Outcome Period if the losses continue to be equal to or greater than 10% during that period. Conversely, if an investor is considering purchasing Shares during the Outcome Period, and the Fund’s NAV has increased in value, then
an investor may experience losses before implementation of the Buffer that the Fund seeks to provide. While the Fund seeks to produce returns that correlate to those of the S&P 500 Index for the Outcome Period that are buffered up to
10% (prior to taking into account any fees or expenses or the performance of the Collateral Portfolio or the Put Spread Strategy) for investors who hold Shares for the entire Outcome Period, there is no guarantee it will successfully do so. In addition, the Buffer is not operative against losses in the Collateral Portfolio or the Put Spread Strategy. If the Collateral Portfolio and/or the Put Spread Strategy experiences losses, it could have the
effect of reducing the impact of, or completely eliminating, the Buffer on the Fund’s S&P 500 Index exposure. In certain market conditions, the performance of the Collateral Portfolio and/or the Put Spread Strategy could cause the Fund to
significantly underperform the S&P 500 Index. Investors who purchase Shares at the beginning of the Outcome Period may lose their entire
341
investment. Investors who purchase Shares after the Outcome Period has begun may also lose their entire investment. An
investment in the Fund is only appropriate for investors willing to bear those losses.
Fund Rebalance. Milliman implements the Fund’s strategy on an annual basis, seeking to
produce the Outcomes for an Outcome Period. On the last business day of any stated Outcome Period, all of the Fund’s existing FLEX Options, which includes those used to establish the Buffer, the Index Caps and the Put Spread Strategy, will expire
and Milliman will transact in a new set of FLEX Options on the same business day, which will commence a new Outcome Period beginning the following business day. At that same time, Milliman will also evaluate whether to make any adjustments to the
Collateral Portfolio. Accordingly, Shares can be held indefinitely if investors determine to participate in additional Outcome Periods.
Approximately one week prior to the end of each Outcome Period, the Fund will file a prospectus supplement, which will notify existing investors of
(i) the date on which the existing Outcome Period will end; (ii) the date on which the new Outcome Period will commence; and (iii) the anticipated ranges of the Index Caps that will be used for the new Outcome Period. Immediately preceding the
commencement date of the new Outcome Period, the Fund will file a prospectus supplement disclosing the Fund’s final Index Caps (both gross and net of Fund fees and expenses) for the new Outcome Period. This information will also be available
online at www.[___________].com, and on your insurance company’s website. Please contact your insurance company or other financial intermediary for more information.
Fund Classification. The Fund is classified as “non-diversified” under the Investment
Company Act of 1940, as amended (the “1940 Act”).
Principal Risks
You could lose money by investing in the Fund. An investment in the Fund is not a deposit of a bank and is not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other governmental agency. There can be no assurance that the Fund’s investment objectives will be achieved.
Downside Loss Buffer Risk. There can be no guarantee that the Fund will be successful in its strategy to
buffer against S&P 500 Index losses if the S&P 500 Index decreases in value over the Outcome Period. The Fund’s strategy is designed to produce returns that correlate to those of the S&P 500 Index, subject to the S&P 500 Index
Cap, while limiting downside S&P 500 Index losses and providing additional upside exposure to the Secondary Index, subject to the Secondary Index Cap, if Shares are bought on the day on which Milliman transacts in the FLEX Options on behalf
of the Fund and held until those FLEX Options expire at the end of each Outcome Period. The success of the Buffer also depends upon the performance of the Collateral Portfolio and the Put Spread Strategy. If
the Collateral Portfolio and/or the Put Spread Strategy experiences losses, it could have the effect of reducing the impact of, or completely eliminating, the Buffer on the Fund’s S&P 500 Index exposure. In certain market conditions, the
performance of the Collateral Portfolio and/or the Put Spread Strategy could cause the Fund to significantly underperform the S&P 500 Index. Despite the intended Buffer, an investor could lose their entire investment. In the
event an investor purchases Shares after the date on which Milliman transacted in the FLEX Options on behalf of the Fund, or redeems Shares prior to the expiration of those FLEX Options, the Buffer that the Fund seeks to provide may not be
available or fully applicable.
Risk of Capped Upside Returns. The Fund’s strategy is designed to produce returns that correlate to those of the
Reference Indices up to the Index Caps if Shares are bought on the day on which Milliman transacts in the FLEX Options on behalf of the Fund and held until those FLEX Options expire at the end of the Outcome Period, subject to the Index Caps. In
the event that one or both of the Reference Indices experience gains during the Outcome Period, the Fund will only participate in those gains up to the applicable Index Cap. In the event that one or both Reference Indices experience gains in excess
of the applicable Index Cap over the duration of the Outcome Period, the Fund will not participate in those excess gains. Because the Fund’s strategy provides capped exposure to two Reference Indices, the Index Caps may be lower than if the Fund
provided capped exposure to only a single Reference Index. In the event an investor purchases Shares after the date on which the FLEX Options were entered into and the Fund has risen in value to a level near to an Index Cap, there may be little or
no ability for that investor to experience an investment gain on their Shares relating to that Reference Index. In certain market conditions, the performance of the Collateral Portfolio and the Put Spread
Strategy could cause the Fund to
342
underperform relative to the Reference Indices, which could further limit Fund gains below the Index Caps, notwithstanding any
performance of the Reference Indices in excess of the Index Caps. An investor should consider the amount of the Index Caps, and the Fund’s position relative to each Index Cap, before investing in the Fund.
Index Cap Change Risk. Because the Index Caps for each Outcome Period are calculated based upon (i) Milliman’s
evaluation of prevailing market conditions on the first day of the Outcome Period and (ii) the total number of long call FLEX Options on the Reference Indices that Milliman is able to purchase at that time, the Index Caps may rise or fall from one
Outcome Period to the next. Any change in the Index Caps could be significant and they are unlikely to remain the same for consecutive Outcome Periods.
FLEX Options Risk. The Fund will transact in FLEX Options issued and guaranteed for settlement by the OCC. The
Fund bears the risk that the OCC will be unable or unwilling to perform its obligations under the FLEX Options contracts, which could result in significant losses to the Fund. In less liquid markets, terminating a FLEX Option may require the
payment of a premium or acceptance of a discounted price, and may take longer to complete. In addition, a less liquid trading market may adversely impact the value of the Fund’s FLEX Options and therefore the NAV of the Fund. In addition, the value
of the Fund’s FLEX Options positions is not anticipated to increase or decrease at the same rate as the reference asset; and while it is anticipated that they will generally move in the same direction, it is possible that they may move in different
directions. Certain FLEX Options positions may also expire worthless. The use of FLEX Options involves leverage, which can cause the Fund’s portfolio to be more volatile than if the portfolio had not been leveraged. Leverage can significantly
magnify the effect of price movements of the reference asset, disproportionately increasing the Fund’s losses and reducing the Fund’s opportunities for gains when the reference asset changes in unexpected ways. In some instances, such leverage
could result in losses that exceed the original amount invested.
Investment Objective and Outcomes Risk. There is no guarantee that the Fund will be successful in its attempt
to achieve its investment objective and/or the Outcomes, and an investor could lose some or all of their investment in the Fund. Certain circumstances under which the Fund might not achieve its objective and/or the Outcomes include, but are not
limited to (i) if the Fund disposes of FLEX Options, (ii) if the Fund is unable to maintain the proportional relationship based on the number of FLEX Options in the Fund’s portfolio, (iii) significant accrual of Fund expenses in connection with
effecting the Fund’s principal investment strategy, (iv) losses incurred by the Fund’s holdings in the Collateral Portfolio and/or losses resulting from the Put Spread Strategy, or (iv) adverse tax law changes affecting the treatment of FLEX
Options.
Tax Risk. The Fund intends to elect, and to qualify each year, to be treated as a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”). As a RIC, the Fund will not be subject to U.S. federal income tax on the portion
of its net investment income and net capital gain that it distributes to shareholders, provided that it satisfies certain requirements of the Code. To maintain its status as a RIC, the Fund must meet certain income, diversification and
distributions tests. For purposes of the diversification test, the identification of the issuer (or, in some cases, issuers) of a particular Fund investment can depend on the terms and conditions of that investment. In particular, there is no
published IRS guidance or case law on how to determine the “issuer” of certain derivatives that the Fund will enter into and the Fund has not received a private letter ruling on this point. Therefore, there is a risk that the Fund will not meet the
Code’s diversification requirements and will not qualify, or will be disqualified, as a RIC. If the Fund does not qualify as a RIC for any taxable year and certain relief provisions are not available, the Fund’s taxable income will be subject to
tax at the Fund level and to a further tax at the shareholder level when such income is distributed.
The Fund also intends to comply with the diversification requirements of Section 817(h) of the Code, and the regulations thereunder, relating to the
tax-deferred status of variable accounts that are based on insurance company separate accounts (referred to as “segregated asset accounts” for federal income tax purposes). These diversification requirements apply in addition to the RIC
diversification requirements discussed above. There also is no published guidance or case law on how to determine the “issuer” of the derivatives referred to above for purposes of the diversification requirements of Section 817(h) of the Code and
the Fund has not received a private letter ruling on this point. If these requirements are not met, or under other circumstances, such as if the Fund does not qualify as a RIC for any taxable year, it is possible that the contract owners (rather
than the insurance company) will be treated for federal income tax purposes as the taxable owners of the assets held by the segregated asset accounts.
343
Clearing Member Default Risk. The Fund will hold FLEX Options through accounts at members of clearing houses (“clearing members”) rather than a bank or a broker. Assets deposited by the Fund with any clearing member as margin for its FLEX Options positions may, in certain circumstances, be used to satisfy losses of other
clients of the Fund’s clearing member where such assets may be held in commingled omnibus accounts. In addition, although clearing members guarantee performance of their clients’ obligations to the clearing house, there is a risk that the assets of
the Fund might not be fully protected in the event of the clearing member’s bankruptcy, as the Fund would be limited to recovering only a pro rata share of all available funds segregated on behalf of the
clearing member’s customers for the relevant account class.
Debt Securities Risk. The prices of debt securities will be affected by changes in interest rates, the
creditworthiness of the issuer and other factors. These risks could affect the value of investments in which the Fund invests, possibly causing the Fund’s NAV to be reduced and fluctuate more than other types of investments. During periods of
falling interest rates, an issuer of a callable bond may repay the security before its stated maturity, and the Fund may have to reinvest the proceeds in securities with lower yields, which would result in a decline in the Fund’s income, or in
securities with greater risks or with other less favorable features. Changing interest rates, including rates that fall below zero, may have unpredictable effects on markets, result in heightened market volatility and detract from the Fund’s
performance to the extent the Fund is exposed to such interest rates. An increase in interest rates will generally cause the value of fixed-income securities held by the Fund to decline, may lead to heightened volatility in the fixed-income
markets and may adversely affect the liquidity of certain fixed-income investments, including those held by the Fund. Risks associated with rising interest rates are heightened given that interest rates in the U.S. are near historic lows.
Adjustable-rate instruments also react to interest rate changes in a similar manner, although generally to a lesser degree (depending, however, on the characteristics of the reset terms, including the index chosen, frequency of reset and reset
caps or floors, among other factors). Interest rate sensitivity is generally more pronounced and less predictable in instruments with uncertain payment or prepayment schedules and also for those with longer maturities.
Foreign Securities and Credit Exposure Risk. U.S. dollar-denominated securities carrying foreign credit exposure
may be affected by unfavorable political, economic or governmental developments that could affect payments of principal and interest. Furthermore, the value of the Fund’s foreign investments (whether direct or indirect) may be adversely affected by
political and social instability in their home countries, by changes in economic or taxation policies in those countries, or by the difficulty in enforcing obligations in those countries. Foreign companies generally may be subject to less stringent
regulations than U.S. companies, including financial reporting requirements and auditing and accounting controls. As a result, there generally is less publicly available information about foreign companies than about U.S. companies. Trading in many
foreign securities may be less liquid and more volatile than U.S. securities due to the size of the market or other factors.
U.S. Government Securities Risk. U.S. Government securities are subject to interest rate risk but generally do
not involve the credit risks associated with investments in other types of debt securities. As a result, the yields available from U.S. Government securities are generally lower than the yields available from other debt securities. U.S. Government
securities are guaranteed only as to the timely payment of interest and the payment of principal when held to maturity. While securities issued or guaranteed by U.S. federal government agencies are backed by the full faith and credit of the U.S.
Department of the Treasury, securities issued by government sponsored entities are solely the obligation of the issuer and generally do not carry any guarantee from the U.S. Government.
ABS Risk. ABS are subject to the general debt securities risks described above. In addition, ABS may be less
liquid than other bonds, and may be more sensitive than other bonds to the market’s perception of issuers and creditworthiness of payees, which may result in the Fund experiencing difficulty selling or valuing these securities. ABS markets have
experienced extraordinary weakness and volatility at various times in recent years, and may decline quickly in the event of a substantial economic or market downturn. Accordingly, these securities may be subject to greater risk of default during
periods of economic downturn than other securities, which could result in possible losses to the Fund.
Issuer Risk. The performance of the Fund depends on the performance of individual securities to which the Fund
has exposure. The Fund may be adversely affected if an issuer of underlying securities held by the Fund is unable or
344
unwilling to repay principal or interest when due. Changes in the financial condition or credit rating of an issuer of those securities may cause the
value of the securities to decline.
Management Risk. The Fund is subject to management risk because it is an actively managed portfolio. Milliman
will apply investment techniques and risk analyses in making investment decisions for the Fund, but there can be no guarantee that the Fund will meet its investment objective and/or the Outcomes. In addition, Milliman does not use defensive
strategies or attempt to reduce the Fund’s exposures to poor performing positions during an Outcome Period. This differs from funds that are managed to seek to outperform a benchmark index. Therefore, in the event of a general market decline, the
Fund’s value may fall more than the value of another fund that does attempt to hedge against such market declines.
Market Risk. The Fund could lose money over short periods due to short-term market movements and over longer
periods during more prolonged market downturns. Assets may decline in value due to factors affecting financial markets generally or particular asset classes or industries represented in the markets. The value of a FLEX Option or other asset may
also decline due to general market conditions, economic trends or events that are not specifically related to the issuer of the security or other asset, or due to factors that affect a particular issuer, country, region, market, industry, sector or
asset class.
Non-Diversification Risk. The Fund may invest a relatively high percentage of its assets in a limited number of
issuers. As a result, the Fund may be more susceptible to a single adverse economic or regulatory occurrence affecting one or more of these issuers, experience increased volatility and be highly invested in certain issuers.
Large Shareholder Risk. At times, the Fund may experience adverse effects when certain large shareholders,
including insurance company separate accounts, redeem large amounts of shares of the Fund. Large redemptions may cause the Fund to sell portfolio holdings at times when it would not otherwise do so and may increase transaction costs and/or result
in an increase to the Fund’s expense ratio. A large redemption could be detrimental to the Fund and its remaining shareholders.
Risks of Investing in ETFs. In addition to the risks associated with the underlying assets held by the ETFs in
which the Fund invests, investments in ETFs are also subject to the following additional risks: (i) only authorized participants may engage in transactions directly with ETFs but none are obligated to do so, which could result in an ETF’s shares
trading at a premium or discount to its NAV or possibly face trading halts or delisting; (ii) certain ETFs seek to track the performance of an underlying index and will not attempt to take defensive positions under any market conditions, including
declining markets, which could result in losses; and (iii) because ETF shares trade on the secondary market, there is not guarantee that an active market will be developed or maintained, which could result in the ETF’s shares trading at a premium
or discount to its NAV. Investments in ETFs may involve duplication of management fees and certain other expenses, as the Fund indirectly bears its proportionate share of any expenses paid by the ETFs in which it invests.
Risks of Investing in Money Market Funds. Money market funds seek to preserve the value of shareholder
investments at $1.00 per share, but shareholders, such as the Fund, may still lose money by investing in such funds. In addition, a money market fund may impose a fee upon the sale of its shares or may temporarily suspend the ability to sell shares
if the fund’s liquidity falls below required minimums because of market conditions or other factors. The credit quality of a money market fund’s holdings can change rapidly in certain markets, and the default of a single holding could have an
adverse impact on the fund’s share price. A money market fund’s share price can also be negatively affected during periods of high redemption pressures, illiquid markets, and/or significant market volatility.
Performance
As of the date of this Prospectus, the Fund has not commenced operations and therefore does not have a performance history. Once available, the Fund’s
performance information will be accessible online at www.[________].com and will provide some indication of the risks of investing in the Fund.
Management
345
Investment Adviser
Milliman Financial Risk Management LLC (“Milliman”) serves as investment adviser to the Fund.
Portfolio Managers
The following persons serve as portfolio managers of the Fund.
|
●
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Robert T. Cummings, Principal & Head of Portfolio Management at Milliman.
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|
●
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Maria Schiopu, Principal & Head of Portfolio Management at Milliman.
|
|
●
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Jeff Greco, Principal & Head of Strategy Research at Milliman.
|
|
●
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Jordan Rosenfeld, Portfolio Manager at Milliman.
|
Each portfolio manager is jointly and primarily responsible for the day-to-day management of the Fund’s portfolio and has served in such capacity
since the Fund’s inception in 2021.
Purchase and Sale of Shares
Shares are available as underlying investment options for variable insurance contracts and variable life insurance policies (each, a “variable contract,” and, collectively, the “variable contracts”) issued by insurance companies. These insurance companies are the record owners of the separate accounts
holding the Shares. You do not buy, sell or exchange Shares directly; rather, you choose investment options through your variable contracts. The insurance companies then cause the separate accounts to purchase and redeem Shares according to
the investment options you choose.
Tax Information
The dividends and distributions paid by the Fund to the insurance company separate accounts will consist of ordinary income, capital gains, or some
combination of both. Because Shares must be purchased through separate accounts used to fund variable contracts, such dividends and distributions will be exempt from current taxation by owners of variable contracts (each, a “contract owner,” and, collectively “contract owners”) if left to accumulate within a separate account. Consult the variable contract prospectus for additional tax
information.
Payments to Insurance Companies and Other Financial Intermediaries
If you allocate contract value to the Fund through an insurance company or other financial intermediary, the Fund, Milliman, the Fund’s distributor or
their related companies may pay the insurance company and/or its affiliates or other intermediary for the sale of Shares and related services. These payments may create a conflict of interest by influencing the insurance company or other
intermediary and your salesperson to recommend an indirect investment in the Fund over another investment. The prospectus or other disclosure documents for the variable contracts may contain additional information about these payments, if any.
You may also ask your salesperson or financial intermediary, or visit your financial intermediary’s website, for more information.
346
Fund Summary: Milliman S&P 500 & Nasdaq 1-Year Buffer with Stacker Cap Fund
– Mar
Investment Objective
The Fund seeks to provide exposure to the S&P 500 Index, while providing a buffer against the first 10% of losses associated with S&P 500
Index performance and participating in S&P 500 Index gains up to a declared cap, prior to taking into account any fees or expenses or the performance of any fixed income exposure included in the Fund’s portfolio, over the period from March 1,
2022 through February 28, 2023. The Fund also seeks to provide upside exposure to the Nasdaq-100® Index up to a declared cap, prior to taking into account any fees or expenses or the performance of any fixed income exposure included in
the Fund’s portfolio, over the same period.
Fees and Expenses of the Fund
This table describes the fees and expenses that you may pay if you buy, hold and sell shares of the Fund (“Shares”).
This table and the example below do not include any fees or sales charges imposed by your variable product. If they were included, the expenses listed below would be higher.
Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment)
|
Class 3
|
|
|
Management Fees
|
0.49%
|
|
Distribution and Service (12b-1) Fees
|
0.25%
|
|
Other Expenses(1)
|
0.50%
|
|
Acquired Fund Fees and Expenses(1)
|
[_.__]%
|
|
Total Annual Fund Operating Expenses
|
1.24%
|
|
Fee Waiver and/or Expense Reimbursement(2)(3)
|
(0.25)%
|
|
Total Annual Fund Operating Expenses After Fee Waiver and/or Expense Reimbursement
|
0.99%
|
|
(1)
|
“Other Expenses” and “Acquired Fund Fees and Expenses” are based on estimated amounts for the current fiscal year.
|
|
(2)
|
The Fund’s investment adviser, Milliman Financial Risk Management LLC (“Milliman”), has contractually
agreed to waive advisory fees and/or reimburse expenses to the extent necessary to limit the Fund’s total annual Fund operating expenses (excluding taxes, interest, brokerage fees and commissions, Rule 12b-1 fees, acquired fund fees and
expenses, short-sale dividend expenses, administrative services fees, other expenses that are capitalized in accordance with generally accepted accounting principles, and extraordinary or non-routine expenses not incurred in the
ordinary course of the Fund’s business) to 0.74% of the Fund's average daily net assets (the “Expense Limitation Agreement”) until at least November 1, 2022. During its term, the Expense
Limitation Agreement cannot be terminated or amended to increase the applicable limit without approval of the Board of Trustees of the Trust (the “Board”). Milliman may recoup from the Fund any
advisory fees waived or expenses reimbursed pursuant to the Expense Limitation Agreement for a period of three years from the date on which such waiver or reimbursement occurred; provided, however, that such recoupment shall not be made
if it would cause the Fund’s total annual Fund operating expenses to exceed the lesser of (a) the expense limitation in effect at the time of the reimbursement, or (b) the expense limitation in effect at the time of recoupment, if any.
|
|
(3)
|
In addition to the Expense Limitation Agreement, Milliman has contractually agreed to waive its advisory fees in an amount equal to the Fund’s
acquired fund fees and expenses until at least November 1, 2022 (the “Fee Waiver”). This contract cannot be terminated or modified without the consent of the Board.
|
Example
This example is intended to help you compare the cost of investing in the Fund with the cost of investing in other funds. This example assumes that you
invest $10,000 in the Fund for the time periods indicated and then sell all of your Shares at the end of those periods. This example also assumes that your investment has a 5% return each year and that the Fund’s operating expenses remain at
current levels and that the Expense Limitation Agreement and Fee Waiver remain in place for their contractual periods. Although your actual costs may be higher or lower, your costs, based on these assumptions, would be:
|
1 Year
|
3 Years
|
|
|
Class 3
|
$104
|
$384
|
347
This example does not include any fees or sales charges imposed by your variable product. If they were included, the expenses listed above would be
higher.
Portfolio Turnover
The Fund pays transaction costs, such as commissions, when it purchases and sells securities (or “turns over” its portfolio). A higher portfolio turnover
will cause the Fund to incur additional transaction costs. These costs, which are not reflected in Total Annual Fund Operating Expenses or in the example, may affect the Fund’s performance. Because the Fund has not yet commenced investment
operations, no portfolio turnover information is available at this time.
Principal Investment Strategies
The Fund seeks to achieve its investment objective by transacting in FLexible EXchange® Options (“FLEX Options”)
and by separately maintaining a collateral portfolio (the “Collateral Portfolio”), which is designed primarily to serve as margin or collateral for the Fund’s FLEX Options positions and secondarily to
enhance the Fund’s upside S&P 500 Index and Nasdaq-100® Index FLEX Options’ exposure (i.e., by utilizing anticipated income to measure the ability to purchase additional FLEX Options). FLEX
Options are exchange-traded options contracts with uniquely customizable terms. In general, an options contract is an agreement between a buyer and seller that gives the purchaser of the option the right to buy or sell a particular asset at a
specified future date at an agreed upon price, commonly known as the “strike price.” The reference assets for the Fund’s FLEX Options positions will include the S&P 500 Index, the Nasdaq-100® Index (the “Secondary Index,” and together with the S&P 500 Index, the “Reference Indices,” and, each, a “Reference Index”), and certain exchange-traded
funds (“ETFs”), as described further below. The S&P 500 Index is a large-capitalization, market-weighted, U.S. equities index that tracks the price (excluding
dividends) of 500 leading companies in leading industries of the U.S. economy. The Secondary Index is [a market capitalization-weighted index that is designed to represent the performance of all domestic and international common type stocks
listed on The Nasdaq Stock Market LLC].
The Collateral Portfolio may be invested in short-term fixed-income securities, including corporate bonds and other corporate debt securities,
asset-backed securities (“ABS”), securities issued by the U.S. Government or its agencies and instrumentalities, securities issued by non-U.S. governments or their agencies and instrumentalities, money
market securities and funds, other interest-bearing instruments, cash, ETFs that primarily invest in any of the foregoing instruments, options on ETFs and options box spreads. An options box spread is the combination of different options trades
that have offsetting spreads (e.g., purchases and sales on the same underlying instrument, such as an index or an ETF, but with different strike prices and/or expiration dates) for the purpose of
generating income. The Fund may invest in short-term fixed income securities or other instruments, including through ETFs, of any maturity and credit quality. The Fund will generally invest up to 35% of its net assets in one or more ETFs that
provide exposure to investment grade corporate bonds.
Due to the unique mechanics of the Fund’s strategy, the return an investor can expect to receive from an investment in the Fund has characteristics that
are distinct from the returns of many other investment vehicles. It is important that an investor understand these characteristics before making an investment in the Fund.
In seeking to achieve its investment objective, the Fund seeks to produce pre-determined outcomes (the “Outcomes”)
that are based upon the performance of the Reference Indices over a one-year period (the “Outcome Period”). The initial Outcome Period for the Fund is March 1, 2022 through February 28, 2023. Following the
initial Outcome Period, each subsequent Outcome Period will be a one-year period commencing upon the expiration of the prior Outcome Period. The Fund seeks to achieve the Outcomes by purchasing and writing (selling) FLEX Options to create layers
within the Fund’s portfolio. One layer is designed to produce returns that correlate to those of the S&P 500 Index for the Outcome Period if the S&P 500 Index experiences gains during that time, subject to an upside return cap (the “S&P 500 Index Cap”), as described below. A second layer is designed to produce returns that correlate to any upside market performance of the Secondary Index over the
Outcome Period, subject to an upside return cap (the “Secondary Index Cap,” and, together with the S&P 500 Index Cap, the “Index Caps,” and, each, an “Index Cap”), as described below. A third layer is designed to produce returns that correlate to those of the S&P 500 Index for the Outcome Period that are buffered up to 10% if the S&P 500 Index
experiences losses during that time (the “Buffer”). There is no guarantee that the Fund will be successful in its attempt to produce
348
returns that correlate to those of the S&P 500 Index or the Secondary Index up to the applicable Index Caps or produce buffered
returns against the Fund’s S&P 500 Index exposure.
Milliman Financial Risk Management, LLC (“Milliman”), the investment adviser of the Fund, seeks to establish the
Buffer by writing one put FLEX Option on the S&P 500 Index with a strike price that is 10% lower than the value of the S&P 500 Index at the beginning of the Outcome Period.
Milliman seeks to establish the Index Caps by purchasing long call FLEX Options on each Reference Index with a strike price approximately equal to the
value of the respective Reference Index at the beginning of the Outcome Period. Milliman purchases these FLEX Options with a portion of the Fund’s net assets plus (i) the cash received from writing the put FLEX Option designed to create the
Buffer, (ii) additional cash received by utilizing FLEX Options to create a put spread (the “Put Spread Strategy”) on fixed income securities and/or one or more ETFs that provide exposure to fixed income
securities, and (iii) yield received from the Collateral Portfolio. Milliman seeks to achieve the Put Spread Strategy for the Fund by writing a put FLEX Option on an underlying asset at a strike price at or lower than the underlying asset’s
market price or current value at the beginning of the Outcome Period, and buying a put FLEX Option on the same underlying asset at a lower strike price than the written put FLEX Option.
The Index Caps represent the maximum rate of return in each Reference Index that an investor can achieve from an investment in the Fund over the Outcome
Period. Milliman calculates the Index Caps based upon (i) its evaluation of prevailing market conditions on the first day of the Outcome Period and (ii) the total number of long call FLEX Options on each Reference Index that it is able to purchase
at that time. As of the date of this Prospectus, and assuming current market conditions persist, Milliman expects that the Index Caps will be between the below ranges (both gross and net of Fund fees and expenses). Any fees or expenses imposed by
your variable product, and any other expenses incurred by the Fund, will have the effect of further reducing each Index Cap. In addition, in certain market conditions, the performance of the Collateral Portfolio
and the Put Spread Strategy could cause the Fund to underperform relative to the Reference Indices, which could further limit Fund gains below the Index Caps, notwithstanding any performance of the Reference Indices in excess of the Index Caps.
|
Estimated Index Cap Ranges
(As of [___])
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||
|
Prior to Taking into Account Fund Fees and Expenses
|
After Taking into Account Fund Fees and Expenses
|
|
|
S&P 500 Index Cap
|
||
|
Class 3
|
[__]% and [__]%
|
[__]% and [__]%
|
|
Secondary Index Cap
|
||
|
Class 3
|
[__]% and [__]%
|
[__]% and [__]%
|
The Buffer is only operative against the first 10% of losses in the Fund’s S&P 500 Index exposure for the Outcome Period. If the S&P 500 Index
decreases in value by more than 10% during the Outcome Period, the Fund (and therefore investors in Shares) will experience all subsequent losses in the Fund’s S&P 500 Index exposure on a one-to-one basis for the Outcome Period. The Fund
seeks to produce buffered returns against its S&P 500 Index exposure prior to taking into account any fees or expenses or the performance of the Collateral Portfolio or the Put Spread Strategy. The Buffer
is not operative against losses in the Collateral Portfolio or the Put Spread Strategy. If the Collateral Portfolio and/or the Put Spread Strategy experiences losses, it could have the effect of reducing the impact of, or completely
eliminating, the Buffer on the Fund’s S&P 500 Index exposure. In certain market conditions, the performance of the Collateral Portfolio and/or the Put Spread Strategy could cause the Fund to significantly underperform the S&P 500
Index. The following table reflects the Buffer both gross and net of Fund fees and expenses:
|
Share Class
|
Buffer
(As of [___])
|
|
|
Prior to Taking into Account Fund Fees and Expenses
|
After Taking into Account Fund Fees and Expenses
|
|
|
Class 3
|
10%
|
[__]%
|
349
Because the Fund also seeks to provide only upside exposure to the Secondary Index during the Outcome Period, the Fund’s NAV will not be impacted by any
losses experienced by the Secondary Index when measured from the beginning to the end of the Outcome Period. If the Secondary Index increases in value during the Outcome Period and later decreases in value during the Outcome Period, the Fund’s NAV
will reflect any such decreases until the Secondary Index reaches its initial value (measured as of the first day of the Outcome Period). If the Secondary Index decreases in value over the course of an entire Outcome Period, the Fund’s NAV will not
reflect such losses; therefore, the Fund’s overall performance will be approximately that of the S&P 500 Index for the Outcome Period, subject to the Buffer and the S&P 500 Index Cap.
The definitive Index Caps and Buffer will be set forth on the Fund’s website. The Fund’s website will also provide information relating to the
Outcomes on a daily basis, including the Fund’s position relative to the Index Caps and the Buffer. You may also contact your insurance company or other financial intermediary for more information.
Additionally, the Fund’s net asset value (“NAV”) will not increase or decrease at the same rate as the Reference
Indices because the Fund’s strategy relies upon the performance of the Collateral Portfolio and the Put Spread Strategy, in addition to the value of the Fund’s FLEX Options positions on the Reference Indices. While Milliman anticipates that the
Fund’s NAV will generally move in the same direction as the S&P 500 Index, and correspond to any upside returns of the Secondary Index (meaning that the Fund’s NAV will generally increase if the Reference Indices experience gains or decrease if
the Reference Indices experience losses), the Fund’s NAV may not decrease at the same rate as the Reference Indices (especially when factoring in the performance of the Collateral Portfolio and the Put Spread Strategy) and will not increase at the
same rate as the Reference Indices (especially when factoring in the Index Caps and the performance of the Collateral Portfolio and the Put Spread Strategy). Similarly, the amount of time remaining until the end of the Outcome Period also affects
the impact of the Buffer on the Fund’s NAV, because the Buffer may not be in full effect prior to the end of the Outcome Period.
The FLEX Options utilized in the Fund’s portfolio are each set to expire on the last day of the Outcome Period. The customizable nature of FLEX Options
will allow Milliman to select the strike price at which each FLEX Option will be exercised at the expiration of the FLEX Option term. At the commencement of the Outcome Period, Milliman will specifically select the strike price for each FLEX Option
in a manner designed to achieve the Outcomes when the FLEX Options are exercised on the final day of the Outcome Period, depending on the anticipated performance of the Reference Indices, the Collateral Portfolio and the Put Spread Strategy over
the duration of that Outcome Period.
The hypothetical graphical illustrations provided below are designed to illustrate the Outcomes based upon the
hypothetical performance of the Reference Indices for an investor who holds Shares for the entirety of the Outcome Period. The hypothetical graphical illustrations do not include any fees or expenses
imposed by your variable product or expenses incurred by the Fund, and do not reflect the performance of the Collateral Portfolio or the Put Spread Strategy. Additional hypothetical graphical representations of the Outcomes are provided in
“Additional Information About the Funds and the Risks of Investing.” There is no guarantee that the Fund will be successful in its attempt to achieve the Outcomes for the Outcome Period.
350
The following table contains hypothetical examples designed to illustrate the Outcomes the Fund seeks to
achieve over the Outcome Period, based upon the performance of the Reference Indices from (100)% to 100% after taking into account the Index Caps and the Buffer, but prior to taking into account any fees or
expenses or the performance of the Collateral Portfolio or the Put Spread Strategy. The table is provided for illustrative purposes only and does not provide every possible performance scenario for Shares over
the course of the Outcome Period. There is no guarantee that the Fund will be successful in its attempt to achieve the Outcomes for an Outcome Period. The table is not intended to predict or project the performance of the FLEX Options or the Fund. Investors should not take this information as an
assurance of the expected performance of the Reference Indices or the Fund. Actual Fund performance will vary with fluctuations in the performance of the Collateral Portfolio and the Put Spread Strategy, in addition to the value of the
Fund’s FLEX Options positions on the Reference Indices, during the Outcome Period, among other factors. The performance of the Collateral Portfolio and the Put Spread Strategy
could significantly impact the performance of the Fund, which could prevent the Fund from achieving the Outcomes that it seeks to produce. The table does not reflect any fees or expenses imposed by your variable product or expenses
incurred by the Fund. If it did, the returns shown for the Fund would be lower. Please refer to the Fund’s website, which provides updated information relating to this table on a daily basis throughout the Outcome Period. Please contact your
insurance company or other financial intermediary for more information.
351
|
Index/Fund
|
Hypothetical Performance1
|
|||||||||||
|
S&P 500 Index Price Performance
|
(100)%
|
(50)%
|
(20)%
|
(10)%
|
(5)%
|
0%
|
5%
|
10%
|
15%
|
20%
|
50%
|
100%
|
|
Secondary Index Price Performance
|
(100)%
|
(50)%
|
(20)%
|
(10)%
|
(5)%
|
0%
|
5%
|
10%
|
15%
|
20%
|
50%
|
100%
|
|
Fund Performance at NAV
|
(90)%
|
(40)%
|
(10)%
|
0%2
|
0%2
|
0%
|
10%3
|
14%3
|
14%3
|
14%3
|
14%3
|
14%3
|
| 1 |
Does not take into account any fees or expenses or the performance of the Collateral Portfolio or the Put Spread Strategy.
|
| 2 |
Reflects the impact of the Buffer.
|
| 3 |
Reflects the impact of assumed Index Caps of 7% per index, 14% total.
|
Understanding Outcomes. The Outcomes the Fund seeks to achieve are measured based upon the
Fund’s NAV on the first day of the Outcome Period. The Outcome Period begins on the day Milliman transacts in the FLEX Options on behalf of the Fund, and ends on the day those FLEX Options expire. An investor who
purchases Shares after the commencement of the Outcome Period will likely have purchased Shares at a different NAV than the NAV on the first day of the Outcome Period (the NAV upon which the Outcomes are based) and may experience investment
outcomes very different from those the Fund seeks to achieve, especially when factoring in any fees or expenses or the performance of the Collateral Portfolio and the Put Spread Strategy. An investor who redeems Shares prior to the end of the
Outcome Period may also experience investment outcomes very different from those the Fund seeks to achieve. The Outcomes are designed with the expectation that an investor will hold Shares on the day that Milliman transacts in the FLEX Options on
behalf of the Fund, and on the day those FLEX Options expire. There is no guarantee that the Fund will be successful in its attempt to achieve the Outcomes.
Understanding the Index Caps. Unlike other investment products, the potential returns an
investor can receive from an investment in the Fund are subject to the Index Caps. This means that if one or both of the Reference Indices experience gains for the Outcome Period, an investor in the Fund will only
experience those gains up to the applicable Index Cap. Milliman calculates the Index Caps for each Outcome Period based upon (i) its evaluation of prevailing market conditions on the first day of the Outcome Period and (ii) the total
number of long call FLEX Options on each Reference Index that it is able to purchase at that time. If an investor is considering purchasing Shares during the Outcome Period, and the Fund’s NAV has increased in
value to a level near one or both of the Index Caps, an investor purchasing Shares at that price will have limited to no gains available for the remainder of the Outcome Period, but will remain vulnerable to significant downside risks (with
respect to the S&P 500 Index FLEX Options’ exposure). In certain market conditions, the performance of the Collateral Portfolio and the Put Spread Strategy could cause the Fund to underperform
relative to the Reference Indices, which could further limit Fund gains below the Index Caps, notwithstanding any performance of the Reference Indices in excess of the Index Caps.
Understanding the Buffer. The Buffer that the Fund seeks to provide is only operative
against the first 10% of losses in the Fund’s S&P 500 Index exposure for the Outcome Period. If an investor is considering purchasing Shares during the Outcome Period, and the S&P 500 Index has decreased
in value by an amount equal to or greater than 10%, an investor purchasing Shares at that time will be able to participate in any gains thereafter (up to the Index Caps), but will not benefit from the Buffer that the Fund seeks to offer for the
remainder of the Outcome Period if the losses continue to be equal to or greater than 10% during that period. Conversely, if an investor is considering purchasing Shares during the Outcome Period, and the Fund’s NAV has increased in value, then
an investor may experience losses before implementation of the Buffer that the Fund seeks to provide. While the Fund seeks to produce returns that correlate to those of the S&P 500 Index for the Outcome Period that are buffered up to
10% (prior to taking into account any fees or expenses or the performance of the Collateral Portfolio or the Put Spread Strategy) for investors who hold Shares for the entire Outcome Period, there is no guarantee it will successfully do so. In addition, the Buffer is not operative against losses in the Collateral Portfolio or the Put Spread Strategy. If the Collateral Portfolio and/or the Put Spread Strategy experiences losses, it could have the
effect of reducing the impact of, or completely eliminating, the Buffer on the Fund’s S&P 500 Index exposure. In certain market conditions, the performance of the Collateral Portfolio and/or the Put Spread Strategy could cause the Fund to
significantly underperform the S&P 500 Index. Investors who purchase Shares at the beginning of the Outcome Period may lose their entire
352
investment. Investors who purchase Shares after the Outcome Period has begun may also lose their entire investment. An
investment in the Fund is only appropriate for investors willing to bear those losses.
Fund Rebalance. Milliman implements the Fund’s strategy on an annual basis, seeking to
produce the Outcomes for an Outcome Period. On the last business day of any stated Outcome Period, all of the Fund’s existing FLEX Options, which includes those used to establish the Buffer, the Index Caps and the Put Spread Strategy, will expire
and Milliman will transact in a new set of FLEX Options on the same business day, which will commence a new Outcome Period beginning the following business day. At that same time, Milliman will also evaluate whether to make any adjustments to the
Collateral Portfolio. Accordingly, Shares can be held indefinitely if investors determine to participate in additional Outcome Periods.
Approximately one week prior to the end of each Outcome Period, the Fund will file a prospectus supplement, which will notify existing investors of
(i) the date on which the existing Outcome Period will end; (ii) the date on which the new Outcome Period will commence; and (iii) the anticipated ranges of the Index Caps that will be used for the new Outcome Period. Immediately preceding the
commencement date of the new Outcome Period, the Fund will file a prospectus supplement disclosing the Fund’s final Index Caps (both gross and net of Fund fees and expenses) for the new Outcome Period. This information will also be available
online at www.[___________].com, and on your insurance company’s website. Please contact your insurance company or other financial intermediary for more information.
Fund Classification. The Fund is classified as “non-diversified” under the Investment
Company Act of 1940, as amended (the “1940 Act”).
Principal Risks
You could lose money by investing in the Fund. An investment in the Fund is not a deposit of a bank and is not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other governmental agency. There can be no assurance that the Fund’s investment objectives will be achieved.
Downside Loss Buffer Risk. There can be no guarantee that the Fund will be successful in its strategy to
buffer against S&P 500 Index losses if the S&P 500 Index decreases in value over the Outcome Period. The Fund’s strategy is designed to produce returns that correlate to those of the S&P 500 Index, subject to the S&P 500 Index
Cap, while limiting downside S&P 500 Index losses and providing additional upside exposure to the Secondary Index, subject to the Secondary Index Cap, if Shares are bought on the day on which Milliman transacts in the FLEX Options on behalf
of the Fund and held until those FLEX Options expire at the end of each Outcome Period. The success of the Buffer also depends upon the performance of the Collateral Portfolio and the Put Spread Strategy. If
the Collateral Portfolio and/or the Put Spread Strategy experiences losses, it could have the effect of reducing the impact of, or completely eliminating, the Buffer on the Fund’s S&P 500 Index exposure. In certain market conditions, the
performance of the Collateral Portfolio and/or the Put Spread Strategy could cause the Fund to significantly underperform the S&P 500 Index. Despite the intended Buffer, an investor could lose their entire investment. In the
event an investor purchases Shares after the date on which Milliman transacted in the FLEX Options on behalf of the Fund, or redeems Shares prior to the expiration of those FLEX Options, the Buffer that the Fund seeks to provide may not be
available or fully applicable.
Risk of Capped Upside Returns. The Fund’s strategy is designed to produce returns that correlate to those of the
Reference Indices up to the Index Caps if Shares are bought on the day on which Milliman transacts in the FLEX Options on behalf of the Fund and held until those FLEX Options expire at the end of the Outcome Period, subject to the Index Caps. In
the event that one or both of the Reference Indices experience gains during the Outcome Period, the Fund will only participate in those gains up to the applicable Index Cap. In the event that one or both Reference Indices experience gains in excess
of the applicable Index Cap over the duration of the Outcome Period, the Fund will not participate in those excess gains. Because the Fund’s strategy provides capped exposure to two Reference Indices, the Index Caps may be lower than if the Fund
provided capped exposure to only a single Reference Index. In the event an investor purchases Shares after the date on which the FLEX Options were entered into and the Fund has risen in value to a level near to an Index Cap, there may be little or
no ability for that investor to experience an investment gain on their Shares relating to that Reference Index. In certain market conditions, the performance of the Collateral Portfolio and the Put Spread
Strategy could cause the Fund to
353
underperform relative to the Reference Indices, which could further limit Fund gains below the Index Caps, notwithstanding any
performance of the Reference Indices in excess of the Index Caps. An investor should consider the amount of the Index Caps, and the Fund’s position relative to each Index Cap, before investing in the Fund.
Index Cap Change Risk. Because the Index Caps for each Outcome Period are calculated based upon (i) Milliman’s
evaluation of prevailing market conditions on the first day of the Outcome Period and (ii) the total number of long call FLEX Options on the Reference Indices that Milliman is able to purchase at that time, the Index Caps may rise or fall from one
Outcome Period to the next. Any change in the Index Caps could be significant and they are unlikely to remain the same for consecutive Outcome Periods.
FLEX Options Risk. The Fund will transact in FLEX Options issued and guaranteed for settlement by the OCC. The
Fund bears the risk that the OCC will be unable or unwilling to perform its obligations under the FLEX Options contracts, which could result in significant losses to the Fund. In less liquid markets, terminating a FLEX Option may require the
payment of a premium or acceptance of a discounted price, and may take longer to complete. In addition, a less liquid trading market may adversely impact the value of the Fund’s FLEX Options and therefore the NAV of the Fund. In addition, the value
of the Fund’s FLEX Options positions is not anticipated to increase or decrease at the same rate as the reference asset; and while it is anticipated that they will generally move in the same direction, it is possible that they may move in different
directions. Certain FLEX Options positions may also expire worthless. The use of FLEX Options involves leverage, which can cause the Fund’s portfolio to be more volatile than if the portfolio had not been leveraged. Leverage can significantly
magnify the effect of price movements of the reference asset, disproportionately increasing the Fund’s losses and reducing the Fund’s opportunities for gains when the reference asset changes in unexpected ways. In some instances, such leverage
could result in losses that exceed the original amount invested.
Investment Objective and Outcomes Risk. There is no guarantee that the Fund will be successful in its attempt
to achieve its investment objective and/or the Outcomes, and an investor could lose some or all of their investment in the Fund. Certain circumstances under which the Fund might not achieve its objective and/or the Outcomes include, but are not
limited to (i) if the Fund disposes of FLEX Options, (ii) if the Fund is unable to maintain the proportional relationship based on the number of FLEX Options in the Fund’s portfolio, (iii) significant accrual of Fund expenses in connection with
effecting the Fund’s principal investment strategy, (iv) losses incurred by the Fund’s holdings in the Collateral Portfolio and/or losses resulting from the Put Spread Strategy, or (iv) adverse tax law changes affecting the treatment of FLEX
Options.
Tax Risk. The Fund intends to elect, and to qualify each year, to be treated as a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”). As a RIC, the Fund will not be subject to U.S. federal income tax on the portion
of its net investment income and net capital gain that it distributes to shareholders, provided that it satisfies certain requirements of the Code. To maintain its status as a RIC, the Fund must meet certain income, diversification and
distributions tests. For purposes of the diversification test, the identification of the issuer (or, in some cases, issuers) of a particular Fund investment can depend on the terms and conditions of that investment. In particular, there is no
published IRS guidance or case law on how to determine the “issuer” of certain derivatives that the Fund will enter into and the Fund has not received a private letter ruling on this point. Therefore, there is a risk that the Fund will not meet the
Code’s diversification requirements and will not qualify, or will be disqualified, as a RIC. If the Fund does not qualify as a RIC for any taxable year and certain relief provisions are not available, the Fund’s taxable income will be subject to
tax at the Fund level and to a further tax at the shareholder level when such income is distributed.
The Fund also intends to comply with the diversification requirements of Section 817(h) of the Code, and the regulations thereunder, relating to the
tax-deferred status of variable accounts that are based on insurance company separate accounts (referred to as “segregated asset accounts” for federal income tax purposes). These diversification requirements apply in addition to the RIC
diversification requirements discussed above. There also is no published guidance or case law on how to determine the “issuer” of the derivatives referred to above for purposes of the diversification requirements of Section 817(h) of the Code and
the Fund has not received a private letter ruling on this point. If these requirements are not met, or under other circumstances, such as if the Fund does not qualify as a RIC for any taxable year, it is possible that the contract owners (rather
than the insurance company) will be treated for federal income tax purposes as the taxable owners of the assets held by the segregated asset accounts.
354
Clearing Member Default Risk. The Fund will hold FLEX Options through accounts at members of clearing houses (“clearing members”) rather than a bank or a broker. Assets deposited by the Fund with any clearing member as margin for its FLEX Options positions may, in certain circumstances, be used to satisfy losses of other
clients of the Fund’s clearing member where such assets may be held in commingled omnibus accounts. In addition, although clearing members guarantee performance of their clients’ obligations to the clearing house, there is a risk that the assets of
the Fund might not be fully protected in the event of the clearing member’s bankruptcy, as the Fund would be limited to recovering only a pro rata share of all available funds segregated on behalf of the
clearing member’s customers for the relevant account class.
Debt Securities Risk. The prices of debt securities will be affected by changes in interest rates, the
creditworthiness of the issuer and other factors. These risks could affect the value of investments in which the Fund invests, possibly causing the Fund’s NAV to be reduced and fluctuate more than other types of investments. During periods of
falling interest rates, an issuer of a callable bond may repay the security before its stated maturity, and the Fund may have to reinvest the proceeds in securities with lower yields, which would result in a decline in the Fund’s income, or in
securities with greater risks or with other less favorable features. Changing interest rates, including rates that fall below zero, may have unpredictable effects on markets, result in heightened market volatility and detract from the Fund’s
performance to the extent the Fund is exposed to such interest rates. An increase in interest rates will generally cause the value of fixed-income securities held by the Fund to decline, may lead to heightened volatility in the fixed-income
markets and may adversely affect the liquidity of certain fixed-income investments, including those held by the Fund. Risks associated with rising interest rates are heightened given that interest rates in the U.S. are near historic lows.
Adjustable-rate instruments also react to interest rate changes in a similar manner, although generally to a lesser degree (depending, however, on the characteristics of the reset terms, including the index chosen, frequency of reset and reset
caps or floors, among other factors). Interest rate sensitivity is generally more pronounced and less predictable in instruments with uncertain payment or prepayment schedules and also for those with longer maturities.
Foreign Securities and Credit Exposure Risk. U.S. dollar-denominated securities carrying foreign credit exposure
may be affected by unfavorable political, economic or governmental developments that could affect payments of principal and interest. Furthermore, the value of the Fund’s foreign investments (whether direct or indirect) may be adversely affected by
political and social instability in their home countries, by changes in economic or taxation policies in those countries, or by the difficulty in enforcing obligations in those countries. Foreign companies generally may be subject to less stringent
regulations than U.S. companies, including financial reporting requirements and auditing and accounting controls. As a result, there generally is less publicly available information about foreign companies than about U.S. companies. Trading in many
foreign securities may be less liquid and more volatile than U.S. securities due to the size of the market or other factors.
U.S. Government Securities Risk. U.S. Government securities are subject to interest rate risk but generally do
not involve the credit risks associated with investments in other types of debt securities. As a result, the yields available from U.S. Government securities are generally lower than the yields available from other debt securities. U.S. Government
securities are guaranteed only as to the timely payment of interest and the payment of principal when held to maturity. While securities issued or guaranteed by U.S. federal government agencies are backed by the full faith and credit of the U.S.
Department of the Treasury, securities issued by government sponsored entities are solely the obligation of the issuer and generally do not carry any guarantee from the U.S. Government.
ABS Risk. ABS are subject to the general debt securities risks described above. In addition, ABS may be less
liquid than other bonds, and may be more sensitive than other bonds to the market’s perception of issuers and creditworthiness of payees, which may result in the Fund experiencing difficulty selling or valuing these securities. ABS markets have
experienced extraordinary weakness and volatility at various times in recent years, and may decline quickly in the event of a substantial economic or market downturn. Accordingly, these securities may be subject to greater risk of default during
periods of economic downturn than other securities, which could result in possible losses to the Fund.
Issuer Risk. The performance of the Fund depends on the performance of individual securities to which the Fund
has exposure. The Fund may be adversely affected if an issuer of underlying securities held by the Fund is unable or
355
unwilling to repay principal or interest when due. Changes in the financial condition or credit rating of an issuer of those securities may cause the
value of the securities to decline.
Management Risk. The Fund is subject to management risk because it is an actively managed portfolio. Milliman
will apply investment techniques and risk analyses in making investment decisions for the Fund, but there can be no guarantee that the Fund will meet its investment objective and/or the Outcomes. In addition, Milliman does not use defensive
strategies or attempt to reduce the Fund’s exposures to poor performing positions during an Outcome Period. This differs from funds that are managed to seek to outperform a benchmark index. Therefore, in the event of a general market decline, the
Fund’s value may fall more than the value of another fund that does attempt to hedge against such market declines.
Market Risk. The Fund could lose money over short periods due to short-term market movements and over longer
periods during more prolonged market downturns. Assets may decline in value due to factors affecting financial markets generally or particular asset classes or industries represented in the markets. The value of a FLEX Option or other asset may
also decline due to general market conditions, economic trends or events that are not specifically related to the issuer of the security or other asset, or due to factors that affect a particular issuer, country, region, market, industry, sector or
asset class.
Non-Diversification Risk. The Fund may invest a relatively high percentage of its assets in a limited number of
issuers. As a result, the Fund may be more susceptible to a single adverse economic or regulatory occurrence affecting one or more of these issuers, experience increased volatility and be highly invested in certain issuers.
Large Shareholder Risk. At times, the Fund may experience adverse effects when certain large shareholders,
including insurance company separate accounts, redeem large amounts of shares of the Fund. Large redemptions may cause the Fund to sell portfolio holdings at times when it would not otherwise do so and may increase transaction costs and/or result
in an increase to the Fund’s expense ratio. A large redemption could be detrimental to the Fund and its remaining shareholders.
Risks of Investing in ETFs. In addition to the risks associated with the underlying assets held by the ETFs in
which the Fund invests, investments in ETFs are also subject to the following additional risks: (i) only authorized participants may engage in transactions directly with ETFs but none are obligated to do so, which could result in an ETF’s shares
trading at a premium or discount to its NAV or possibly face trading halts or delisting; (ii) certain ETFs seek to track the performance of an underlying index and will not attempt to take defensive positions under any market conditions, including
declining markets, which could result in losses; and (iii) because ETF shares trade on the secondary market, there is not guarantee that an active market will be developed or maintained, which could result in the ETF’s shares trading at a premium
or discount to its NAV. Investments in ETFs may involve duplication of management fees and certain other expenses, as the Fund indirectly bears its proportionate share of any expenses paid by the ETFs in which it invests.
Risks of Investing in Money Market Funds. Money market funds seek to preserve the value of shareholder
investments at $1.00 per share, but shareholders, such as the Fund, may still lose money by investing in such funds. In addition, a money market fund may impose a fee upon the sale of its shares or may temporarily suspend the ability to sell shares
if the fund’s liquidity falls below required minimums because of market conditions or other factors. The credit quality of a money market fund’s holdings can change rapidly in certain markets, and the default of a single holding could have an
adverse impact on the fund’s share price. A money market fund’s share price can also be negatively affected during periods of high redemption pressures, illiquid markets, and/or significant market volatility.
Performance
As of the date of this Prospectus, the Fund has not commenced operations and therefore does not have a performance history. Once available, the Fund’s
performance information will be accessible online at www.[________].com and will provide some indication of the risks of investing in the Fund.
Management
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Investment Adviser
Milliman Financial Risk Management LLC (“Milliman”) serves as investment adviser to the Fund.
Portfolio Managers
The following persons serve as portfolio managers of the Fund.
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Robert T. Cummings, Principal & Head of Portfolio Management at Milliman.
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Maria Schiopu, Principal & Head of Portfolio Management at Milliman.
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Jeff Greco, Principal & Head of Strategy Research at Milliman.
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Jordan Rosenfeld, Portfolio Manager at Milliman.
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Each portfolio manager is jointly and primarily responsible for the day-to-day management of the Fund’s portfolio and has served in such capacity
since the Fund’s inception in 2021.
Purchase and Sale of Shares
Shares are available as underlying investment options for variable insurance contracts and variable life insurance policies (each, a “variable contract,” and, collectively, the “variable contracts”) issued by insurance companies. These insurance companies are the record owners of the separate accounts
holding the Shares. You do not buy, sell or exchange Shares directly; rather, you choose investment options through your variable contracts. The insurance companies then cause the separate accounts to purchase and redeem Shares according to
the investment options you choose.
Tax Information
The dividends and distributions paid by the Fund to the insurance company separate accounts will consist of ordinary income, capital gains, or some
combination of both. Because Shares must be purchased through separate accounts used to fund variable contracts, such dividends and distributions will be exempt from current taxation by owners of variable contracts (each, a “contract owner,” and, collectively “contract owners”) if left to accumulate within a separate account. Consult the variable contract prospectus for additional tax
information.
Payments to Insurance Companies and Other Financial Intermediaries
If you allocate contract value to the Fund through an insurance company or other financial intermediary, the Fund, Milliman, the Fund’s distributor or
their related companies may pay the insurance company and/or its affiliates or other intermediary for the sale of Shares and related services. These payments may create a conflict of interest by influencing the insurance company or other
intermediary and your salesperson to recommend an indirect investment in the Fund over another investment. The prospectus or other disclosure documents for the variable contracts may contain additional information about these payments, if any.
You may also ask your salesperson or financial intermediary, or visit your financial intermediary’s website, for more information.
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Fund Summary: Milliman S&P 500 & Nasdaq 1-Year Buffer with Stacker Cap Fund
– Apr
Investment Objective
The Fund seeks to provide exposure to the S&P 500 Index, while providing a buffer against the first 10% of losses associated with S&P 500
Index performance and participating in S&P 500 Index gains up to a declared cap, prior to taking into account any fees or expenses or the performance of any fixed income exposure included in the Fund’s portfolio, over the period from April 1,
2022 through March 31, 2023. The Fund also seeks to provide upside exposure to the Nasdaq-100® Index up to a declared cap, prior to taking into account any fees or expenses or the performance of any fixed income exposure included in
the Fund’s portfolio, over the same period.
Fees and Expenses of the Fund
This table describes the fees and expenses that you may pay if you buy, hold and sell shares of the Fund (“Shares”).
This table and the example below do not include any fees or sales charges imposed by your variable product. If they were included, the expenses listed below would be higher.
Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment)
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Class 3
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Management Fees
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0.49%
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Distribution and Service (12b-1) Fees
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0.25%
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Other Expenses(1)
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0.50%
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Acquired Fund Fees and Expenses(1)
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[_.__]%
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Total Annual Fund Operating Expenses
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1.24%
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Fee Waiver and/or Expense Reimbursement(2)(3)
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(0.25)%
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Total Annual Fund Operating Expenses After Fee Waiver and/or Expense Reimbursement
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0.99%
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(1)
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“Other Expenses” and “Acquired Fund Fees and Expenses” are based on estimated amounts for the current fiscal year.
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(2)
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The Fund’s investment adviser, Milliman Financial Risk Management LLC (“Milliman”), has contractually
agreed to waive advisory fees and/or reimburse expenses to the extent necessary to limit the Fund’s total annual Fund operating expenses (excluding taxes, interest, brokerage fees and commissions, Rule 12b-1 fees, acquired fund fees and
expenses, short-sale dividend expenses, administrative services fees, other expenses that are capitalized in accordance with generally accepted accounting principles, and extraordinary or non-routine expenses not incurred in the
ordinary course of the Fund’s business) to 0.74% of the Fund's average daily net assets (the “Expense Limitation Agreement”) until at least November 1, 2022. During its term, the Expense
Limitation Agreement cannot be terminated or amended to increase the applicable limit without approval of the Board of Trustees of the Trust (the “Board”). Milliman may recoup from the Fund any
advisory fees waived or expenses reimbursed pursuant to the Expense Limitation Agreement for a period of three years from the date on which such waiver or reimbursement occurred; provided, however, that such recoupment shall not be made
if it would cause the Fund’s total annual Fund operating expenses to exceed the lesser of (a) the expense limitation in effect at the time of the reimbursement, or (b) the expense limitation in effect at the time of recoupment, if any.
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(3)
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In addition to the Expense Limitation Agreement, Milliman has contractually agreed to waive its advisory fees in an amount equal to the Fund’s
acquired fund fees and expenses until at least November 1, 2022 (the “Fee Waiver”). This contract cannot be terminated or modified without the consent of the Board.
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Example
This example is intended to help you compare the cost of investing in the Fund with the cost of investing in other funds. This example assumes that you
invest $10,000 in the Fund for the time periods indicated and then sell all of your Shares at the end of those periods. This example also assumes that your investment has a 5% return each year and that the Fund’s operating expenses remain at
current levels and that the Expense Limitation Agreement and Fee Waiver remain in place for their contractual periods. Although your actual costs may be higher or lower, your costs, based on these assumptions, would be:
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1 Year
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3 Years
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Class 3
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$104
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$384
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358
This example does not include any fees or sales charges imposed by your variable product. If they were included, the expenses listed above would be
higher.
Portfolio Turnover
The Fund pays transaction costs, such as commissions, when it purchases and sells securities (or “turns over” its portfolio). A higher portfolio turnover
will cause the Fund to incur additional transaction costs. These costs, which are not reflected in Total Annual Fund Operating Expenses or in the example, may affect the Fund’s performance. Because the Fund has not yet commenced investment
operations, no portfolio turnover information is available at this time.
Principal Investment Strategies
The Fund seeks to achieve its investment objective by transacting in FLexible EXchange® Options (“FLEX Options”)
and by separately maintaining a collateral portfolio (the “Collateral Portfolio”), which is designed primarily to serve as margin or collateral for the Fund’s FLEX Options positions and secondarily to
enhance the Fund’s upside S&P 500 Index and Nasdaq-100® Index FLEX Options’ exposure (i.e., by utilizing anticipated income to measure the ability to purchase additional FLEX Options). FLEX
Options are exchange-traded options contracts with uniquely customizable terms. In general, an options contract is an agreement between a buyer and seller that gives the purchaser of the option the right to buy or sell a particular asset at a
specified future date at an agreed upon price, commonly known as the “strike price.” The reference assets for the Fund’s FLEX Options positions will include the S&P 500 Index, the Nasdaq-100® Index (the “Secondary Index,” and together with the S&P 500 Index, the “Reference Indices,” and, each, a “Reference Index”), and certain exchange-traded
funds (“ETFs”), as described further below. The S&P 500 Index is a large-capitalization, market-weighted, U.S. equities index that tracks the price (excluding
dividends) of 500 leading companies in leading industries of the U.S. economy. The Secondary Index is [a market capitalization-weighted index that is designed to represent the performance of all domestic and international common type stocks
listed on The Nasdaq Stock Market LLC].
The Collateral Portfolio may be invested in short-term fixed-income securities, including corporate bonds and other corporate debt securities,
asset-backed securities (“ABS”), securities issued by the U.S. Government or its agencies and instrumentalities, securities issued by non-U.S. governments or their agencies and instrumentalities, money
market securities and funds, other interest-bearing instruments, cash, ETFs that primarily invest in any of the foregoing instruments, options on ETFs and options box spreads. An options box spread is the combination of different options trades
that have offsetting spreads (e.g., purchases and sales on the same underlying instrument, such as an index or an ETF, but with different strike prices and/or expiration dates) for the purpose of
generating income. The Fund may invest in short-term fixed income securities or other instruments, including through ETFs, of any maturity and credit quality. The Fund will generally invest up to 35% of its net assets in one or more ETFs that
provide exposure to investment grade corporate bonds.
Due to the unique mechanics of the Fund’s strategy, the return an investor can expect to receive from an investment in the Fund has characteristics that
are distinct from the returns of many other investment vehicles. It is important that an investor understand these characteristics before making an investment in the Fund.
In seeking to achieve its investment objective, the Fund seeks to produce pre-determined outcomes (the “Outcomes”)
that are based upon the performance of the Reference Indices over a one-year period (the “Outcome Period”). The initial Outcome Period for the Fund is April 1, 2022 through March 31, 2023. Following the
initial Outcome Period, each subsequent Outcome Period will be a one-year period commencing upon the expiration of the prior Outcome Period. The Fund seeks to achieve the Outcomes by purchasing and writing (selling) FLEX Options to create layers
within the Fund’s portfolio. One layer is designed to produce returns that correlate to those of the S&P 500 Index for the Outcome Period if the S&P 500 Index experiences gains during that time, subject to an upside return cap (the “S&P 500 Index Cap”), as described below. A second layer is designed to produce returns that correlate to any upside market performance of the Secondary Index over the
Outcome Period, subject to an upside return cap (the “Secondary Index Cap,” and, together with the S&P 500 Index Cap, the “Index Caps,” and, each, an “Index Cap”), as described below. A third layer is designed to produce returns that correlate to those of the S&P 500 Index for the Outcome Period that are buffered up to 10% if the S&P 500 Index
experiences losses during that time (the “Buffer”). There is no guarantee that the Fund will be successful in its attempt to produce
359
returns that correlate to those of the S&P 500 Index or the Secondary Index up to the applicable Index Caps or produce buffered
returns against the Fund’s S&P 500 Index exposure.
Milliman Financial Risk Management, LLC (“Milliman”), the investment adviser of the Fund, seeks to establish the
Buffer by writing one put FLEX Option on the S&P 500 Index with a strike price that is 10% lower than the value of the S&P 500 Index at the beginning of the Outcome Period.
Milliman seeks to establish the Index Caps by purchasing long call FLEX Options on each Reference Index with a strike price approximately equal to the
value of the respective Reference Index at the beginning of the Outcome Period. Milliman purchases these FLEX Options with a portion of the Fund’s net assets plus (i) the cash received from writing the put FLEX Option designed to create the
Buffer, (ii) additional cash received by utilizing FLEX Options to create a put spread (the “Put Spread Strategy”) on fixed income securities and/or one or more ETFs that provide exposure to fixed income
securities, and (iii) yield received from the Collateral Portfolio. Milliman seeks to achieve the Put Spread Strategy for the Fund by writing a put FLEX Option on an underlying asset at a strike price at or lower than the underlying asset’s
market price or current value at the beginning of the Outcome Period, and buying a put FLEX Option on the same underlying asset at a lower strike price than the written put FLEX Option.
The Index Caps represent the maximum rate of return in each Reference Index that an investor can achieve from an investment in the Fund over the Outcome
Period. Milliman calculates the Index Caps based upon (i) its evaluation of prevailing market conditions on the first day of the Outcome Period and (ii) the total number of long call FLEX Options on each Reference Index that it is able to purchase
at that time. As of the date of this Prospectus, and assuming current market conditions persist, Milliman expects that the Index Caps will be between the below ranges (both gross and net of Fund fees and expenses). Any fees or expenses imposed by
your variable product, and any other expenses incurred by the Fund, will have the effect of further reducing each Index Cap. In addition, in certain market conditions, the performance of the Collateral Portfolio
and the Put Spread Strategy could cause the Fund to underperform relative to the Reference Indices, which could further limit Fund gains below the Index Caps, notwithstanding any performance of the Reference Indices in excess of the Index Caps.
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Estimated Index Cap Ranges
(As of [___])
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Prior to Taking into Account Fund Fees and Expenses
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After Taking into Account Fund Fees and Expenses
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S&P 500 Index Cap
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Class 3
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[__]% and [__]%
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[__]% and [__]%
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Secondary Index Cap
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Class 3
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[__]% and [__]%
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[__]% and [__]%
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The Buffer is only operative against the first 10% of losses in the Fund’s S&P 500 Index exposure for the Outcome Period. If the S&P 500 Index
decreases in value by more than 10% during the Outcome Period, the Fund (and therefore investors in Shares) will experience all subsequent losses in the Fund’s S&P 500 Index exposure on a one-to-one basis for the Outcome Period. The Fund
seeks to produce buffered returns against its S&P 500 Index exposure prior to taking into account any fees or expenses or the performance of the Collateral Portfolio or the Put Spread Strategy. The Buffer
is not operative against losses in the Collateral Portfolio or the Put Spread Strategy. If the Collateral Portfolio and/or the Put Spread Strategy experiences losses, it could have the effect of reducing the impact of, or completely
eliminating, the Buffer on the Fund’s S&P 500 Index exposure. In certain market conditions, the performance of the Collateral Portfolio and/or the Put Spread Strategy could cause the Fund to significantly underperform the S&P 500
Index. The following table reflects the Buffer both gross and net of Fund fees and expenses:
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Share Class
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Buffer
(As of [___])
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Prior to Taking into Account Fund Fees and Expenses
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After Taking into Account Fund Fees and Expenses
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Class 3
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10%
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[__]%
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360
Because the Fund also seeks to provide only upside exposure to the Secondary Index during the Outcome Period, the Fund’s NAV will not be impacted by any
losses experienced by the Secondary Index when measured from the beginning to the end of the Outcome Period. If the Secondary Index increases in value during the Outcome Period and later decreases in value during the Outcome Period, the Fund’s NAV
will reflect any such decreases until the Secondary Index reaches its initial value (measured as of the first day of the Outcome Period). If the Secondary Index decreases in value over the course of an entire Outcome Period, the Fund’s NAV will not
reflect such losses; therefore, the Fund’s overall performance will be approximately that of the S&P 500 Index for the Outcome Period, subject to the Buffer and the S&P 500 Index Cap.
The definitive Index Caps and Buffer will be set forth on the Fund’s website. The Fund’s website will also provide information relating to the
Outcomes on a daily basis, including the Fund’s position relative to the Index Caps and the Buffer. You may also contact your insurance company or other financial intermediary for more information.
Additionally, the Fund’s net asset value (“NAV”) will not increase or decrease at the same rate as the Reference
Indices because the Fund’s strategy relies upon the performance of the Collateral Portfolio and the Put Spread Strategy, in addition to the value of the Fund’s FLEX Options positions on the Reference Indices. While Milliman anticipates that the
Fund’s NAV will generally move in the same direction as the S&P 500 Index, and correspond to any upside returns of the Secondary Index (meaning that the Fund’s NAV will generally increase if the Reference Indices experience gains or decrease if
the Reference Indices experience losses), the Fund’s NAV may not decrease at the same rate as the Reference Indices (especially when factoring in the performance of the Collateral Portfolio and the Put Spread Strategy) and will not increase at the
same rate as the Reference Indices (especially when factoring in the Index Caps and the performance of the Collateral Portfolio and the Put Spread Strategy). Similarly, the amount of time remaining until the end of the Outcome Period also affects
the impact of the Buffer on the Fund’s NAV, because the Buffer may not be in full effect prior to the end of the Outcome Period.
The FLEX Options utilized in the Fund’s portfolio are each set to expire on the last day of the Outcome Period. The customizable nature of FLEX Options
will allow Milliman to select the strike price at which each FLEX Option will be exercised at the expiration of the FLEX Option term. At the commencement of the Outcome Period, Milliman will specifically select the strike price for each FLEX Option
in a manner designed to achieve the Outcomes when the FLEX Options are exercised on the final day of the Outcome Period, depending on the anticipated performance of the Reference Indices, the Collateral Portfolio and the Put Spread Strategy over
the duration of that Outcome Period.
The hypothetical graphical illustrations provided below are designed to illustrate the Outcomes based upon the
hypothetical performance of the Reference Indices for an investor who holds Shares for the entirety of the Outcome Period. The hypothetical graphical illustrations do not include any fees or expenses
imposed by your variable product or expenses incurred by the Fund, and do not reflect the performance of the Collateral Portfolio or the Put Spread Strategy. Additional hypothetical graphical representations of the Outcomes are provided in
“Additional Information About the Funds and the Risks of Investing.” There is no guarantee that the Fund will be successful in its attempt to achieve the Outcomes for the Outcome Period.
361
The following table contains hypothetical examples designed to illustrate the Outcomes the Fund seeks to
achieve over the Outcome Period, based upon the performance of the Reference Indices from (100)% to 100% after taking into account the Index Caps and the Buffer, but prior to taking into account any fees or
expenses or the performance of the Collateral Portfolio or the Put Spread Strategy. The table is provided for illustrative purposes only and does not provide every possible performance scenario for Shares over
the course of the Outcome Period. There is no guarantee that the Fund will be successful in its attempt to achieve the Outcomes for an Outcome Period. The table is not intended to predict or project the performance of the FLEX Options or the Fund. Investors should not take this information as an
assurance of the expected performance of the Reference Indices or the Fund. Actual Fund performance will vary with fluctuations in the performance of the Collateral Portfolio and the Put Spread Strategy, in addition to the value of the
Fund’s FLEX Options positions on the Reference Indices, during the Outcome Period, among other factors. The performance of the Collateral Portfolio and the Put Spread Strategy
could significantly impact the performance of the Fund, which could prevent the Fund from achieving the Outcomes that it seeks to produce. The table does not reflect any fees or expenses imposed by your variable product or expenses
incurred by the Fund. If it did, the returns shown for the Fund would be lower. Please refer to the Fund’s website, which provides updated information relating to this table on a daily basis throughout the Outcome Period. Please contact your
insurance company or other financial intermediary for more information.
362
|
Index/Fund
|
Hypothetical Performance1
|
|||||||||||
|
S&P 500 Index Price Performance
|
(100)%
|
(50)%
|
(20)%
|
(10)%
|
(5)%
|
0%
|
5%
|
10%
|
15%
|
20%
|
50%
|
100%
|
|
Secondary Index Price Performance
|
(100)%
|
(50)%
|
(20)%
|
(10)%
|
(5)%
|
0%
|
5%
|
10%
|
15%
|
20%
|
50%
|
100%
|
|
Fund Performance at NAV
|
(90)%
|
(40)%
|
(10)%
|
0%2
|
0%2
|
0%
|
10%3
|
14%3
|
14%3
|
14%3
|
14%3
|
14%3
|
| 1 |
Does not take into account any fees or expenses or the performance of the Collateral Portfolio or the Put Spread Strategy.
|
| 2 |
Reflects the impact of the Buffer.
|
| 3 |
Reflects the impact of assumed Index Caps of 7% per index, 14% total.
|
Understanding Outcomes. The Outcomes the Fund seeks to achieve are measured based upon the
Fund’s NAV on the first day of the Outcome Period. The Outcome Period begins on the day Milliman transacts in the FLEX Options on behalf of the Fund, and ends on the day those FLEX Options expire. An investor who
purchases Shares after the commencement of the Outcome Period will likely have purchased Shares at a different NAV than the NAV on the first day of the Outcome Period (the NAV upon which the Outcomes are based) and may experience investment
outcomes very different from those the Fund seeks to achieve, especially when factoring in any fees or expenses or the performance of the Collateral Portfolio and the Put Spread Strategy. An investor who redeems Shares prior to the end of the
Outcome Period may also experience investment outcomes very different from those the Fund seeks to achieve. The Outcomes are designed with the expectation that an investor will hold Shares on the day that Milliman transacts in the FLEX Options on
behalf of the Fund, and on the day those FLEX Options expire. There is no guarantee that the Fund will be successful in its attempt to achieve the Outcomes.
Understanding the Index Caps. Unlike other investment products, the potential returns an
investor can receive from an investment in the Fund are subject to the Index Caps. This means that if one or both of the Reference Indices experience gains for the Outcome Period, an investor in the Fund will only
experience those gains up to the applicable Index Cap. Milliman calculates the Index Caps for each Outcome Period based upon (i) its evaluation of prevailing market conditions on the first day of the Outcome Period and (ii) the total
number of long call FLEX Options on each Reference Index that it is able to purchase at that time. If an investor is considering purchasing Shares during the Outcome Period, and the Fund’s NAV has increased in
value to a level near one or both of the Index Caps, an investor purchasing Shares at that price will have limited to no gains available for the remainder of the Outcome Period, but will remain vulnerable to significant downside risks (with
respect to the S&P 500 Index FLEX Options’ exposure). In certain market conditions, the performance of the Collateral Portfolio and the Put Spread Strategy could cause the Fund to underperform
relative to the Reference Indices, which could further limit Fund gains below the Index Caps, notwithstanding any performance of the Reference Indices in excess of the Index Caps.
Understanding the Buffer. The Buffer that the Fund seeks to provide is only operative
against the first 10% of losses in the Fund’s S&P 500 Index exposure for the Outcome Period. If an investor is considering purchasing Shares during the Outcome Period, and the S&P 500 Index has decreased
in value by an amount equal to or greater than 10%, an investor purchasing Shares at that time will be able to participate in any gains thereafter (up to the Index Caps), but will not benefit from the Buffer that the Fund seeks to offer for the
remainder of the Outcome Period if the losses continue to be equal to or greater than 10% during that period. Conversely, if an investor is considering purchasing Shares during the Outcome Period, and the Fund’s NAV has increased in value, then
an investor may experience losses before implementation of the Buffer that the Fund seeks to provide. While the Fund seeks to produce returns that correlate to those of the S&P 500 Index for the Outcome Period that are buffered up to
10% (prior to taking into account any fees or expenses or the performance of the Collateral Portfolio or the Put Spread Strategy) for investors who hold Shares for the entire Outcome Period, there is no guarantee it will successfully do so. In addition, the Buffer is not operative against losses in the Collateral Portfolio or the Put Spread Strategy. If the Collateral Portfolio and/or the Put Spread Strategy experiences losses, it could have the
effect of reducing the impact of, or completely eliminating, the Buffer on the Fund’s S&P 500 Index exposure. In certain market conditions, the performance of the Collateral Portfolio and/or the Put Spread Strategy could cause the Fund to
significantly underperform the S&P 500 Index. Investors who purchase Shares at the beginning of the Outcome Period may lose their entire
363
investment. Investors who purchase Shares after the Outcome Period has begun may also lose their entire investment. An
investment in the Fund is only appropriate for investors willing to bear those losses.
Fund Rebalance. Milliman implements the Fund’s strategy on an annual basis, seeking to
produce the Outcomes for an Outcome Period. On the last business day of any stated Outcome Period, all of the Fund’s existing FLEX Options, which includes those used to establish the Buffer, the Index Caps and the Put Spread Strategy, will expire
and Milliman will transact in a new set of FLEX Options on the same business day, which will commence a new Outcome Period beginning the following business day. At that same time, Milliman will also evaluate whether to make any adjustments to the
Collateral Portfolio. Accordingly, Shares can be held indefinitely if investors determine to participate in additional Outcome Periods.
Approximately one week prior to the end of each Outcome Period, the Fund will file a prospectus supplement, which will notify existing investors of
(i) the date on which the existing Outcome Period will end; (ii) the date on which the new Outcome Period will commence; and (iii) the anticipated ranges of the Index Caps that will be used for the new Outcome Period. Immediately preceding the
commencement date of the new Outcome Period, the Fund will file a prospectus supplement disclosing the Fund’s final Index Caps (both gross and net of Fund fees and expenses) for the new Outcome Period. This information will also be available
online at www.[___________].com, and on your insurance company’s website. Please contact your insurance company or other financial intermediary for more information.
Fund Classification. The Fund is classified as “non-diversified” under the Investment
Company Act of 1940, as amended (the “1940 Act”).
Principal Risks
You could lose money by investing in the Fund. An investment in the Fund is not a deposit of a bank and is not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other governmental agency. There can be no assurance that the Fund’s investment objectives will be achieved.
Downside Loss Buffer Risk. There can be no guarantee that the Fund will be successful in its strategy to
buffer against S&P 500 Index losses if the S&P 500 Index decreases in value over the Outcome Period. The Fund’s strategy is designed to produce returns that correlate to those of the S&P 500 Index, subject to the S&P 500 Index
Cap, while limiting downside S&P 500 Index losses and providing additional upside exposure to the Secondary Index, subject to the Secondary Index Cap, if Shares are bought on the day on which Milliman transacts in the FLEX Options on behalf
of the Fund and held until those FLEX Options expire at the end of each Outcome Period. The success of the Buffer also depends upon the performance of the Collateral Portfolio and the Put Spread Strategy. If
the Collateral Portfolio and/or the Put Spread Strategy experiences losses, it could have the effect of reducing the impact of, or completely eliminating, the Buffer on the Fund’s S&P 500 Index exposure. In certain market conditions, the
performance of the Collateral Portfolio and/or the Put Spread Strategy could cause the Fund to significantly underperform the S&P 500 Index. Despite the intended Buffer, an investor could lose their entire investment. In the
event an investor purchases Shares after the date on which Milliman transacted in the FLEX Options on behalf of the Fund, or redeems Shares prior to the expiration of those FLEX Options, the Buffer that the Fund seeks to provide may not be
available or fully applicable.
Risk of Capped Upside Returns. The Fund’s strategy is designed to produce returns that correlate to those of the
Reference Indices up to the Index Caps if Shares are bought on the day on which Milliman transacts in the FLEX Options on behalf of the Fund and held until those FLEX Options expire at the end of the Outcome Period, subject to the Index Caps. In
the event that one or both of the Reference Indices experience gains during the Outcome Period, the Fund will only participate in those gains up to the applicable Index Cap. In the event that one or both Reference Indices experience gains in excess
of the applicable Index Cap over the duration of the Outcome Period, the Fund will not participate in those excess gains. Because the Fund’s strategy provides capped exposure to two Reference Indices, the Index Caps may be lower than if the Fund
provided capped exposure to only a single Reference Index. In the event an investor purchases Shares after the date on which the FLEX Options were entered into and the Fund has risen in value to a level near to an Index Cap, there may be little or
no ability for that investor to experience an investment gain on their Shares relating to that Reference Index. In certain market conditions, the performance of the Collateral Portfolio and the Put Spread
Strategy could cause the Fund to
364
underperform relative to the Reference Indices, which could further limit Fund gains below the Index Caps, notwithstanding any
performance of the Reference Indices in excess of the Index Caps. An investor should consider the amount of the Index Caps, and the Fund’s position relative to each Index Cap, before investing in the Fund.
Index Cap Change Risk. Because the Index Caps for each Outcome Period are calculated based upon (i) Milliman’s
evaluation of prevailing market conditions on the first day of the Outcome Period and (ii) the total number of long call FLEX Options on the Reference Indices that Milliman is able to purchase at that time, the Index Caps may rise or fall from one
Outcome Period to the next. Any change in the Index Caps could be significant and they are unlikely to remain the same for consecutive Outcome Periods.
FLEX Options Risk. The Fund will transact in FLEX Options issued and guaranteed for settlement by the OCC. The
Fund bears the risk that the OCC will be unable or unwilling to perform its obligations under the FLEX Options contracts, which could result in significant losses to the Fund. In less liquid markets, terminating a FLEX Option may require the
payment of a premium or acceptance of a discounted price, and may take longer to complete. In addition, a less liquid trading market may adversely impact the value of the Fund’s FLEX Options and therefore the NAV of the Fund. In addition, the value
of the Fund’s FLEX Options positions is not anticipated to increase or decrease at the same rate as the reference asset; and while it is anticipated that they will generally move in the same direction, it is possible that they may move in different
directions. Certain FLEX Options positions may also expire worthless. The use of FLEX Options involves leverage, which can cause the Fund’s portfolio to be more volatile than if the portfolio had not been leveraged. Leverage can significantly
magnify the effect of price movements of the reference asset, disproportionately increasing the Fund’s losses and reducing the Fund’s opportunities for gains when the reference asset changes in unexpected ways. In some instances, such leverage
could result in losses that exceed the original amount invested.
Investment Objective and Outcomes Risk. There is no guarantee that the Fund will be successful in its attempt
to achieve its investment objective and/or the Outcomes, and an investor could lose some or all of their investment in the Fund. Certain circumstances under which the Fund might not achieve its objective and/or the Outcomes include, but are not
limited to (i) if the Fund disposes of FLEX Options, (ii) if the Fund is unable to maintain the proportional relationship based on the number of FLEX Options in the Fund’s portfolio, (iii) significant accrual of Fund expenses in connection with
effecting the Fund’s principal investment strategy, (iv) losses incurred by the Fund’s holdings in the Collateral Portfolio and/or losses resulting from the Put Spread Strategy, or (iv) adverse tax law changes affecting the treatment of FLEX
Options.
Tax Risk. The Fund intends to elect, and to qualify each year, to be treated as a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”). As a RIC, the Fund will not be subject to U.S. federal income tax on the portion
of its net investment income and net capital gain that it distributes to shareholders, provided that it satisfies certain requirements of the Code. To maintain its status as a RIC, the Fund must meet certain income, diversification and
distributions tests. For purposes of the diversification test, the identification of the issuer (or, in some cases, issuers) of a particular Fund investment can depend on the terms and conditions of that investment. In particular, there is no
published IRS guidance or case law on how to determine the “issuer” of certain derivatives that the Fund will enter into and the Fund has not received a private letter ruling on this point. Therefore, there is a risk that the Fund will not meet the
Code’s diversification requirements and will not qualify, or will be disqualified, as a RIC. If the Fund does not qualify as a RIC for any taxable year and certain relief provisions are not available, the Fund’s taxable income will be subject to
tax at the Fund level and to a further tax at the shareholder level when such income is distributed.
The Fund also intends to comply with the diversification requirements of Section 817(h) of the Code, and the regulations thereunder, relating to the
tax-deferred status of variable accounts that are based on insurance company separate accounts (referred to as “segregated asset accounts” for federal income tax purposes). These diversification requirements apply in addition to the RIC
diversification requirements discussed above. There also is no published guidance or case law on how to determine the “issuer” of the derivatives referred to above for purposes of the diversification requirements of Section 817(h) of the Code and
the Fund has not received a private letter ruling on this point. If these requirements are not met, or under other circumstances, such as if the Fund does not qualify as a RIC for any taxable year, it is possible that the contract owners (rather
than the insurance company) will be treated for federal income tax purposes as the taxable owners of the assets held by the segregated asset accounts.
365
Clearing Member Default Risk. The Fund will hold FLEX Options through accounts at members of clearing houses (“clearing members”) rather than a bank or a broker. Assets deposited by the Fund with any clearing member as margin for its FLEX Options positions may, in certain circumstances, be used to satisfy losses of other
clients of the Fund’s clearing member where such assets may be held in commingled omnibus accounts. In addition, although clearing members guarantee performance of their clients’ obligations to the clearing house, there is a risk that the assets of
the Fund might not be fully protected in the event of the clearing member’s bankruptcy, as the Fund would be limited to recovering only a pro rata share of all available funds segregated on behalf of the
clearing member’s customers for the relevant account class.
Debt Securities Risk. The prices of debt securities will be affected by changes in interest rates, the
creditworthiness of the issuer and other factors. These risks could affect the value of investments in which the Fund invests, possibly causing the Fund’s NAV to be reduced and fluctuate more than other types of investments. During periods of
falling interest rates, an issuer of a callable bond may repay the security before its stated maturity, and the Fund may have to reinvest the proceeds in securities with lower yields, which would result in a decline in the Fund’s income, or in
securities with greater risks or with other less favorable features. Changing interest rates, including rates that fall below zero, may have unpredictable effects on markets, result in heightened market volatility and detract from the Fund’s
performance to the extent the Fund is exposed to such interest rates. An increase in interest rates will generally cause the value of fixed-income securities held by the Fund to decline, may lead to heightened volatility in the fixed-income
markets and may adversely affect the liquidity of certain fixed-income investments, including those held by the Fund. Risks associated with rising interest rates are heightened given that interest rates in the U.S. are near historic lows.
Adjustable-rate instruments also react to interest rate changes in a similar manner, although generally to a lesser degree (depending, however, on the characteristics of the reset terms, including the index chosen, frequency of reset and reset
caps or floors, among other factors). Interest rate sensitivity is generally more pronounced and less predictable in instruments with uncertain payment or prepayment schedules and also for those with longer maturities.
Foreign Securities and Credit Exposure Risk. U.S. dollar-denominated securities carrying foreign credit exposure
may be affected by unfavorable political, economic or governmental developments that could affect payments of principal and interest. Furthermore, the value of the Fund’s foreign investments (whether direct or indirect) may be adversely affected by
political and social instability in their home countries, by changes in economic or taxation policies in those countries, or by the difficulty in enforcing obligations in those countries. Foreign companies generally may be subject to less stringent
regulations than U.S. companies, including financial reporting requirements and auditing and accounting controls. As a result, there generally is less publicly available information about foreign companies than about U.S. companies. Trading in many
foreign securities may be less liquid and more volatile than U.S. securities due to the size of the market or other factors.
U.S. Government Securities Risk. U.S. Government securities are subject to interest rate risk but generally do
not involve the credit risks associated with investments in other types of debt securities. As a result, the yields available from U.S. Government securities are generally lower than the yields available from other debt securities. U.S. Government
securities are guaranteed only as to the timely payment of interest and the payment of principal when held to maturity. While securities issued or guaranteed by U.S. federal government agencies are backed by the full faith and credit of the U.S.
Department of the Treasury, securities issued by government sponsored entities are solely the obligation of the issuer and generally do not carry any guarantee from the U.S. Government.
ABS Risk. ABS are subject to the general debt securities risks described above. In addition, ABS may be less
liquid than other bonds, and may be more sensitive than other bonds to the market’s perception of issuers and creditworthiness of payees, which may result in the Fund experiencing difficulty selling or valuing these securities. ABS markets have
experienced extraordinary weakness and volatility at various times in recent years, and may decline quickly in the event of a substantial economic or market downturn. Accordingly, these securities may be subject to greater risk of default during
periods of economic downturn than other securities, which could result in possible losses to the Fund.
Issuer Risk. The performance of the Fund depends on the performance of individual securities to which the Fund
has exposure. The Fund may be adversely affected if an issuer of underlying securities held by the Fund is unable or
366
unwilling to repay principal or interest when due. Changes in the financial condition or credit rating of an issuer of those securities may cause the
value of the securities to decline.
Management Risk. The Fund is subject to management risk because it is an actively managed portfolio. Milliman
will apply investment techniques and risk analyses in making investment decisions for the Fund, but there can be no guarantee that the Fund will meet its investment objective and/or the Outcomes. In addition, Milliman does not use defensive
strategies or attempt to reduce the Fund’s exposures to poor performing positions during an Outcome Period. This differs from funds that are managed to seek to outperform a benchmark index. Therefore, in the event of a general market decline, the
Fund’s value may fall more than the value of another fund that does attempt to hedge against such market declines.
Market Risk. The Fund could lose money over short periods due to short-term market movements and over longer
periods during more prolonged market downturns. Assets may decline in value due to factors affecting financial markets generally or particular asset classes or industries represented in the markets. The value of a FLEX Option or other asset may
also decline due to general market conditions, economic trends or events that are not specifically related to the issuer of the security or other asset, or due to factors that affect a particular issuer, country, region, market, industry, sector or
asset class.
Non-Diversification Risk. The Fund may invest a relatively high percentage of its assets in a limited number of
issuers. As a result, the Fund may be more susceptible to a single adverse economic or regulatory occurrence affecting one or more of these issuers, experience increased volatility and be highly invested in certain issuers.
Large Shareholder Risk. At times, the Fund may experience adverse effects when certain large shareholders,
including insurance company separate accounts, redeem large amounts of shares of the Fund. Large redemptions may cause the Fund to sell portfolio holdings at times when it would not otherwise do so and may increase transaction costs and/or result
in an increase to the Fund’s expense ratio. A large redemption could be detrimental to the Fund and its remaining shareholders.
Risks of Investing in ETFs. In addition to the risks associated with the underlying assets held by the ETFs in
which the Fund invests, investments in ETFs are also subject to the following additional risks: (i) only authorized participants may engage in transactions directly with ETFs but none are obligated to do so, which could result in an ETF’s shares
trading at a premium or discount to its NAV or possibly face trading halts or delisting; (ii) certain ETFs seek to track the performance of an underlying index and will not attempt to take defensive positions under any market conditions, including
declining markets, which could result in losses; and (iii) because ETF shares trade on the secondary market, there is not guarantee that an active market will be developed or maintained, which could result in the ETF’s shares trading at a premium
or discount to its NAV. Investments in ETFs may involve duplication of management fees and certain other expenses, as the Fund indirectly bears its proportionate share of any expenses paid by the ETFs in which it invests.
Risks of Investing in Money Market Funds. Money market funds seek to preserve the value of shareholder
investments at $1.00 per share, but shareholders, such as the Fund, may still lose money by investing in such funds. In addition, a money market fund may impose a fee upon the sale of its shares or may temporarily suspend the ability to sell shares
if the fund’s liquidity falls below required minimums because of market conditions or other factors. The credit quality of a money market fund’s holdings can change rapidly in certain markets, and the default of a single holding could have an
adverse impact on the fund’s share price. A money market fund’s share price can also be negatively affected during periods of high redemption pressures, illiquid markets, and/or significant market volatility.
Performance
As of the date of this Prospectus, the Fund has not commenced operations and therefore does not have a performance history. Once available, the Fund’s
performance information will be accessible online at www.[________].com and will provide some indication of the risks of investing in the Fund.
Management
367
Investment Adviser
Milliman Financial Risk Management LLC (“Milliman”) serves as investment adviser to the Fund.
Portfolio Managers
The following persons serve as portfolio managers of the Fund.
|
●
|
Robert T. Cummings, Principal & Head of Portfolio Management at Milliman.
|
|
●
|
Maria Schiopu, Principal & Head of Portfolio Management at Milliman.
|
|
●
|
Jeff Greco, Principal & Head of Strategy Research at Milliman.
|
|
●
|
Jordan Rosenfeld, Portfolio Manager at Milliman.
|
Each portfolio manager is jointly and primarily responsible for the day-to-day management of the Fund’s portfolio and has served in such capacity since
the Fund’s inception in 2021.
Purchase and Sale of Shares
Shares are available as underlying investment options for variable insurance contracts and variable life insurance policies (each, a “variable contract,” and, collectively, the “variable contracts”) issued by insurance companies. These insurance companies are the record owners of the separate accounts
holding the Shares. You do not buy, sell or exchange Shares directly; rather, you choose investment options through your variable contracts. The insurance companies then cause the separate accounts to purchase and redeem Shares according to
the investment options you choose.
Tax Information
The dividends and distributions paid by the Fund to the insurance company separate accounts will consist of ordinary income, capital gains, or some
combination of both. Because Shares must be purchased through separate accounts used to fund variable contracts, such dividends and distributions will be exempt from current taxation by owners of variable contracts (each, a “contract owner,” and, collectively “contract owners”) if left to accumulate within a separate account. Consult the variable contract prospectus for additional tax
information.
Payments to Insurance Companies and Other Financial Intermediaries
If you allocate contract value to the Fund through an insurance company or other financial intermediary, the Fund, Milliman, the Fund’s distributor or
their related companies may pay the insurance company and/or its affiliates or other intermediary for the sale of Shares and related services. These payments may create a conflict of interest by influencing the insurance company or other
intermediary and your salesperson to recommend an indirect investment in the Fund over another investment. The prospectus or other disclosure documents for the variable contracts may contain additional information about these payments, if any.
You may also ask your salesperson or financial intermediary, or visit your financial intermediary’s website, for more information.
368
Fund Summary: Milliman S&P 500 & Russell 2000 1-Year Buffer with Stacker
Cap Fund – Sep
Investment Objective
The Fund seeks to provide exposure to the S&P 500 Index, while providing a buffer against the first 10% of losses associated with S&P 500 Index
performance and participating in S&P 500 Index gains up to a declared cap, prior to taking into account any fees or expenses or the performance of any fixed income exposure included in the Fund’s portfolio, over the period from September 1,
2021 through August 31, 2022. The Fund also seeks to provide upside exposure to the Russell 2000 Index up to a declared cap, prior to taking into account any fees or expenses or the performance of any fixed income exposure included in the Fund’s
portfolio, over the same period.
Fees and Expenses of the Fund
This table describes the fees and expenses that you may pay if you buy, hold and sell shares of the Fund (“Shares”).
This table and the example below do not include any fees or sales charges imposed by your variable product. If they were included, the expenses listed below would be higher.
Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment)
|
Class 3
|
|
|
Management Fees
|
0.49%
|
|
Distribution and Service (12b-1) Fees
|
0.25%
|
|
Other Expenses(1)
|
0.50%
|
|
Acquired Fund Fees and Expenses(1)
|
[_.__]%
|
|
Total Annual Fund Operating Expenses
|
1.24%
|
|
Fee Waiver and/or Expense Reimbursement(2)(3)
|
(0.25)%
|
|
Total Annual Fund Operating Expenses After Fee Waiver and/or Expense Reimbursement
|
0.99%
|
|
(1)
|
“Other Expenses” and “Acquired Fund Fees and Expenses” are based on estimated amounts for the current fiscal year.
|
|
(2)
|
The Fund’s investment adviser, Milliman Financial Risk Management LLC (“Milliman”), has contractually
agreed to waive advisory fees and/or reimburse expenses to the extent necessary to limit the Fund’s total annual Fund operating expenses (excluding taxes, interest, brokerage fees and commissions, Rule 12b-1 fees, acquired fund fees and
expenses, short-sale dividend expenses, administrative services fees, other expenses that are capitalized in accordance with generally accepted accounting principles, and extraordinary or non-routine expenses not incurred in the
ordinary course of the Fund’s business) to 0.74% of the Fund's average daily net assets (the “Expense Limitation Agreement”) until at least November 1, 2022. During its term, the Expense
Limitation Agreement cannot be terminated or amended to increase the applicable limit without approval of the Board of Trustees of the Trust (the “Board”). Milliman may recoup from the Fund any
advisory fees waived or expenses reimbursed pursuant to the Expense Limitation Agreement for a period of three years from the date on which such waiver or reimbursement occurred; provided, however, that such recoupment shall not be made
if it would cause the Fund’s total annual Fund operating expenses to exceed the lesser of (a) the expense limitation in effect at the time of the reimbursement, or (b) the expense limitation in effect at the time of recoupment, if any.
|
|
(3)
|
In addition to the Expense Limitation Agreement, Milliman has contractually agreed to waive its advisory fees in an amount equal to the Fund’s
acquired fund fees and expenses until at least November 1, 2022 (the “Fee Waiver”). This contract cannot be terminated or modified without the consent of the Board.
|
Example
This example is intended to help you compare the cost of investing in the Fund with the cost of investing in other funds. This example assumes that you
invest $10,000 in the Fund for the time periods indicated and then sell all of your Shares at the end of those periods. This example also assumes that your investment has a 5% return each year and that the Fund’s operating expenses remain at
current levels and that the Expense Limitation Agreement and Fee Waiver remain in place for their contractual periods. Although your actual costs may be higher or lower, your costs, based on these assumptions, would be:
|
1 Year
|
3 Years
|
|
|
Class 3
|
$104
|
$384
|
369
This example does not include any fees or sales charges imposed by your variable product. If they were included, the expenses listed above would be
higher.
Portfolio Turnover
The Fund pays transaction costs, such as commissions, when it purchases and sells securities (or “turns over” its portfolio). A higher portfolio turnover
will cause the Fund to incur additional transaction costs. These costs, which are not reflected in Total Annual Fund Operating Expenses or in the example, may affect the Fund’s performance. Because the Fund has not yet commenced investment
operations, no portfolio turnover information is available at this time.
Principal Investment Strategies
The Fund seeks to achieve its investment objective by transacting in FLexible EXchange® Options (“FLEX Options”)
and by separately maintaining a collateral portfolio (the “Collateral Portfolio”), which is designed primarily to serve as margin or collateral for the Fund’s FLEX Options positions and secondarily to
enhance the Fund’s upside S&P 500 Index and Russell 2000 Index FLEX Options’ exposure (i.e., by utilizing anticipated income to measure the ability to purchase additional FLEX Options). FLEX Options
are exchange-traded options contracts with uniquely customizable terms. In general, an options contract is an agreement between a buyer and seller that gives the purchaser of the option the right to buy or sell a particular asset at a specified
future date at an agreed upon price, commonly known as the “strike price.” The reference assets for the Fund’s FLEX Options positions will include the S&P 500 Index, the Russell 2000 Index (the “Secondary
Index,” and together with the S&P 500 Index, the “Reference Indices,” and, each, a “Reference Index”), and certain exchange-traded funds (“ETFs”), as described further below. The S&P 500 Index is a large-capitalization, market-weighted, U.S. equities index that tracks the price (excluding dividends) of
500 leading companies in leading industries of the U.S. economy. The Secondary Index is [a float-adjusted, market capitalization-weighted index that is designed to measure the performance of the small-capitalization segment of the U.S. equity
market, as defined by FTSE Russell].
The Collateral Portfolio may be invested in short-term fixed-income securities, including corporate bonds and other corporate debt securities,
asset-backed securities (“ABS”), securities issued by the U.S. Government or its agencies and instrumentalities, securities issued by non-U.S. governments or their agencies and instrumentalities, money
market securities and funds, other interest-bearing instruments, cash, ETFs that primarily invest in any of the foregoing instruments, options on ETFs and options box spreads. An options box spread is the combination of different options trades
that have offsetting spreads (e.g., purchases and sales on the same underlying instrument, such as an index or an ETF, but with different strike prices and/or expiration dates) for the purpose of
generating income. The Fund may invest in short-term fixed income securities or other instruments, including through ETFs, of any maturity and credit quality. The Fund will generally invest up to 35% of its net assets in one or more ETFs that
provide exposure to investment grade corporate bonds.
Due to the unique mechanics of the Fund’s strategy, the return an investor can expect to receive from an investment in the Fund has characteristics that
are distinct from the returns of many other investment vehicles. It is important that an investor understand these characteristics before making an investment in the Fund.
In seeking to achieve its investment objective, the Fund seeks to produce pre-determined outcomes (the “Outcomes”)
that are based upon the performance of the Reference Indices over a one-year period (the “Outcome Period”). The initial Outcome Period for the Fund is September 1, 2021 through August 31, 2022. Following the
initial Outcome Period, each subsequent Outcome Period will be a one-year period commencing upon the expiration of the prior Outcome Period. The Fund seeks to achieve the Outcomes by purchasing and writing (selling) FLEX Options to create layers
within the Fund’s portfolio. One layer is designed to produce returns that correlate to those of the S&P 500 Index for the Outcome Period if the S&P 500 Index experiences gains during that time, subject to an upside return cap (the “S&P 500 Index Cap”), as described below. A second layer is designed to produce returns that correlate to any upside market performance of the Secondary Index over the
Outcome Period, subject to an upside return cap (the “Secondary Index Cap,” and, together with the S&P 500 Index Cap, the “Index Caps,” and, each, an “Index Cap”), as described below. A third layer is designed to produce returns that correlate to those of the S&P 500 Index for the Outcome Period that are buffered up to 10% if the S&P 500 Index
experiences losses during that time (the “Buffer”). There is no guarantee that the Fund will be successful in its attempt to produce
370
returns that correlate to those of the S&P 500 Index or the Secondary Index up to the applicable Index Caps or produce buffered
returns against the Fund’s S&P 500 Index exposure.
Milliman Financial Risk Management, LLC (“Milliman”), the investment adviser of the Fund, seeks to establish the
Buffer by writing one put FLEX Option on the S&P 500 Index with a strike price that is 10% lower than the value of the S&P 500 Index at the beginning of the Outcome Period.
Milliman seeks to establish the Index Caps by purchasing long call FLEX Options on each Reference Index with a strike price approximately equal to the
value of the respective Reference Index at the beginning of the Outcome Period. Milliman purchases these FLEX Options with a portion of the Fund’s net assets plus (i) the cash received from writing the put FLEX Option designed to create the
Buffer, (ii) additional cash received by utilizing FLEX Options to create a put spread (the “Put Spread Strategy”) on fixed income securities and/or one or more ETFs that provide exposure to fixed income
securities, and (iii) yield received from the Collateral Portfolio. Milliman seeks to achieve the Put Spread Strategy for the Fund by writing a put FLEX Option on an underlying asset at a strike price at or lower than the underlying asset’s
market price or current value at the beginning of the Outcome Period, and buying a put FLEX Option on the same underlying asset at a lower strike price than the written put FLEX Option.
The Index Caps represent the maximum rate of return in each Reference Index that an investor can achieve from an investment in the Fund over the Outcome
Period. Milliman calculates the Index Caps based upon (i) its evaluation of prevailing market conditions on the first day of the Outcome Period and (ii) the total number of long call FLEX Options on each Reference Index that it is able to purchase
at that time. As of the date of this Prospectus, and assuming current market conditions persist, Milliman expects that the Index Caps will be between the below ranges (both gross and net of Fund fees and expenses). Any fees or expenses imposed by
your variable product, and any other expenses incurred by the Fund, will have the effect of further reducing each Index Cap. In addition, in certain market conditions, the performance of the Collateral Portfolio
and the Put Spread Strategy could cause the Fund to underperform relative to the Reference Indices, which could further limit Fund gains below the Index Caps, notwithstanding any performance of the Reference Indices in excess of the Index Caps.
|
Estimated Index Cap Ranges
(As of [___])
|
||
|
Prior to Taking into Account Fund Fees and Expenses
|
After Taking into Account Fund Fees and Expenses
|
|
|
S&P 500 Index Cap
|
||
|
Class 3
|
[__]% and [__]%
|
[__]% and [__]%
|
|
Secondary Index Cap
|
||
|
Class 3
|
[__]% and [__]%
|
[__]% and [__]%
|
The Buffer is only operative against the first 10% of losses in the Fund’s S&P 500 Index exposure for the Outcome Period. If the S&P 500 Index
decreases in value by more than 10% during the Outcome Period, the Fund (and therefore investors in Shares) will experience all subsequent losses in the Fund’s S&P 500 Index exposure on a one-to-one basis for the Outcome Period. The Fund
seeks to produce buffered returns against its S&P 500 Index exposure prior to taking into account any fees or expenses or the performance of the Collateral Portfolio or the Put Spread Strategy. The Buffer
is not operative against losses in the Collateral Portfolio or the Put Spread Strategy. If the Collateral Portfolio and/or the Put Spread Strategy experiences losses, it could have the effect of reducing the impact of, or completely
eliminating, the Buffer on the Fund’s S&P 500 Index exposure. In certain market conditions, the performance of the Collateral Portfolio and/or the Put Spread Strategy could cause the Fund to significantly underperform the S&P 500
Index. The following table reflects the Buffer both gross and net of Fund fees and expenses:
|
Share Class
|
Buffer
(As of [___])
|
|
|
Prior to Taking into Account Fund Fees and Expenses
|
After Taking into Account Fund Fees and Expenses
|
|
|
Class 3
|
10%
|
[__]%
|
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Because the Fund also seeks to provide only upside exposure to the Secondary Index during the Outcome Period, the Fund’s NAV will not be impacted by any
losses experienced by the Secondary Index when measured from the beginning to the end of the Outcome Period. If the Secondary Index increases in value during the Outcome Period and later decreases in value during the Outcome Period, the Fund’s NAV
will reflect any such decreases until the Secondary Index reaches its initial value (measured as of the first day of the Outcome Period). If the Secondary Index decreases in value over the course of an entire Outcome Period, the Fund’s NAV will not
reflect such losses; therefore, the Fund’s overall performance will be approximately that of the S&P 500 Index for the Outcome Period, subject to the Buffer and the S&P 500 Index Cap.
The definitive Index Caps and Buffer will be set forth on the Fund’s website. The Fund’s website will also provide information relating to the
Outcomes on a daily basis, including the Fund’s position relative to the Index Caps and the Buffer. You may also contact your insurance company or other financial intermediary for more information.
Additionally, the Fund’s net asset value (“NAV”) will not increase or decrease at the same rate as the Reference
Indices because the Fund’s strategy relies upon the performance of the Collateral Portfolio and the Put Spread Strategy, in addition to the value of the Fund’s FLEX Options positions on the Reference Indices. While Milliman anticipates that the
Fund’s NAV will generally move in the same direction as the S&P 500 Index, and correspond to any upside returns of the Secondary Index (meaning that the Fund’s NAV will generally increase if the Reference Indices experience gains or decrease if
the Reference Indices experience losses), the Fund’s NAV may not decrease at the same rate as the Reference Indices (especially when factoring in the performance of the Collateral Portfolio and the Put Spread Strategy) and will not increase at the
same rate as the Reference Indices (especially when factoring in the Index Caps and the performance of the Collateral Portfolio and the Put Spread Strategy). Similarly, the amount of time remaining until the end of the Outcome Period also affects
the impact of the Buffer on the Fund’s NAV, because the Buffer may not be in full effect prior to the end of the Outcome Period.
The FLEX Options utilized in the Fund’s portfolio are each set to expire on the last day of the Outcome Period. The customizable nature of FLEX Options
will allow Milliman to select the strike price at which each FLEX Option will be exercised at the expiration of the FLEX Option term. At the commencement of the Outcome Period, Milliman will specifically select the strike price for each FLEX Option
in a manner designed to achieve the Outcomes when the FLEX Options are exercised on the final day of the Outcome Period, depending on the anticipated performance of the Reference Indices, the Collateral Portfolio and the Put Spread Strategy over
the duration of that Outcome Period.
The hypothetical graphical illustrations provided below are designed to illustrate the Outcomes based upon the
hypothetical performance of the Reference Indices for an investor who holds Shares for the entirety of the Outcome Period. The hypothetical graphical illustrations do not include any fees or expenses
imposed by your variable product or expenses incurred by the Fund, and do not reflect the performance of the Collateral Portfolio or the Put Spread Strategy. Additional hypothetical graphical representations of the Outcomes are provided in
“Additional Information About the Funds and the Risks of Investing.” There is no guarantee that the Fund will be successful in its attempt to achieve the Outcomes for the Outcome Period.
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The following table contains hypothetical examples designed to illustrate the Outcomes the Fund seeks to
achieve over the Outcome Period, based upon the performance of the Reference Indices from (100)% to 100% after taking into account the Index Caps and the Buffer, but prior to taking into account any fees or
expenses or the performance of the Collateral Portfolio or the Put Spread Strategy. The table is provided for illustrative purposes only and does not provide every possible performance scenario for Shares over
the course of the Outcome Period. There is no guarantee that the Fund will be successful in its attempt to achieve the Outcomes for an Outcome Period. The table is not intended to predict or project the performance of the FLEX Options or the Fund. Investors should not take this information as an
assurance of the expected performance of the Reference Indices or the Fund. Actual Fund performance will vary with fluctuations in the performance of the Collateral Portfolio and the Put Spread Strategy, in addition to the value of the
Fund’s FLEX Options positions on the Reference Indices, during the Outcome Period, among other factors. The performance of the Collateral Portfolio and the Put Spread Strategy
could significantly impact the performance of the Fund, which could prevent the Fund from achieving the Outcomes that it seeks to produce. The table does not reflect any fees or expenses imposed by your variable product or expenses
incurred by the Fund. If it did, the returns shown for the Fund would be lower. Please refer to the Fund’s website, which provides updated information relating to this table on a daily basis throughout the Outcome Period. Please contact your
insurance company or other financial intermediary for more information.
373
|
Index/Fund
|
Hypothetical Performance1
|
|||||||||||
|
S&P 500 Index Price Performance
|
(100)%
|
(50)%
|
(20)%
|
(10)%
|
(5)%
|
0%
|
5%
|
10%
|
15%
|
20%
|
50%
|
100%
|
|
Secondary Index Price Performance
|
(100)%
|
(50)%
|
(20)%
|
(10)%
|
(5)%
|
0%
|
5%
|
10%
|
15%
|
20%
|
50%
|
100%
|
|
Fund Performance at NAV
|
(90)%
|
(40)%
|
(10)%
|
0%2
|
0%2
|
0%
|
10%3
|
14%3
|
14%3
|
14%3
|
14%3
|
14%3
|
| 1 |
Does not take into account any fees or expenses or the performance of the Collateral Portfolio or the Put Spread Strategy.
|
| 2 |
Reflects the impact of the Buffer.
|
| 3 |
Reflects the impact of assumed Index Caps of 7% per index, 14% total.
|
Understanding Outcomes. The Outcomes the Fund seeks to achieve are measured based upon the
Fund’s NAV on the first day of the Outcome Period. The Outcome Period begins on the day Milliman transacts in the FLEX Options on behalf of the Fund, and ends on the day those FLEX Options expire. An investor who
purchases Shares after the commencement of the Outcome Period will likely have purchased Shares at a different NAV than the NAV on the first day of the Outcome Period (the NAV upon which the Outcomes are based) and may experience investment
outcomes very different from those the Fund seeks to achieve, especially when factoring in any fees or expenses or the performance of the Collateral Portfolio and the Put Spread Strategy. An investor who redeems Shares prior to the end of the
Outcome Period may also experience investment outcomes very different from those the Fund seeks to achieve. The Outcomes are designed with the expectation that an investor will hold Shares on the day that Milliman transacts in the FLEX Options on
behalf of the Fund, and on the day those FLEX Options expire. There is no guarantee that the Fund will be successful in its attempt to achieve the Outcomes.
Understanding the Index Caps. Unlike other investment products, the potential returns an
investor can receive from an investment in the Fund are subject to the Index Caps. This means that if one or both of the Reference Indices experience gains for the Outcome Period, an investor in the Fund will only
experience those gains up to the applicable Index Cap. Milliman calculates the Index Caps for each Outcome Period based upon (i) its evaluation of prevailing market conditions on the first day of the Outcome Period and (ii) the total
number of long call FLEX Options on each Reference Index that it is able to purchase at that time. If an investor is considering purchasing Shares during the Outcome Period, and the Fund’s NAV has increased in
value to a level near one or both of the Index Caps, an investor purchasing Shares at that price will have limited to no gains available for the remainder of the Outcome Period, but will remain vulnerable to significant downside risks (with
respect to the S&P 500 Index FLEX Options’ exposure). In certain market conditions, the performance of the Collateral Portfolio and the Put Spread Strategy could cause the Fund to underperform
relative to the Reference Indices, which could further limit Fund gains below the Index Caps, notwithstanding any performance of the Reference Indices in excess of the Index Caps.
Understanding the Buffer. The Buffer that the Fund seeks to provide is only operative
against the first 10% of losses in the Fund’s S&P 500 Index exposure for the Outcome Period. If an investor is considering purchasing Shares during the Outcome Period, and the S&P 500 Index has decreased
in value by an amount equal to or greater than 10%, an investor purchasing Shares at that time will be able to participate in any gains thereafter (up to the Index Caps), but will not benefit from the Buffer that the Fund seeks to offer for the
remainder of the Outcome Period if the losses continue to be equal to or greater than 10% during that period. Conversely, if an investor is considering purchasing Shares during the Outcome Period, and the Fund’s NAV has increased in value, then
an investor may experience losses before implementation of the Buffer that the Fund seeks to provide. While the Fund seeks to produce returns that correlate to those of the S&P 500 Index for the Outcome Period that are buffered up to
10% (prior to taking into account any fees or expenses or the performance of the Collateral Portfolio or the Put Spread Strategy) for investors who hold Shares for the entire Outcome Period, there is no guarantee it will successfully do so. In addition, the Buffer is not operative against losses in the Collateral Portfolio or the Put Spread Strategy. If the Collateral Portfolio and/or the Put Spread Strategy experiences losses, it could have the
effect of reducing the impact of, or completely eliminating, the Buffer on the Fund’s S&P 500 Index exposure. In certain market conditions, the performance of the Collateral Portfolio and/or the Put Spread Strategy could cause the Fund to
significantly underperform the S&P 500 Index. Investors who purchase Shares at the beginning of the Outcome Period may lose their entire
374
investment. Investors who purchase Shares after the Outcome Period has begun may also lose their entire investment. An
investment in the Fund is only appropriate for investors willing to bear those losses.
Fund Rebalance. Milliman implements the Fund’s strategy on an annual basis, seeking to
produce the Outcomes for an Outcome Period. On the last business day of any stated Outcome Period, all of the Fund’s existing FLEX Options, which includes those used to establish the Buffer, the Index Caps and the Put Spread Strategy, will expire
and Milliman will transact in a new set of FLEX Options on the same business day, which will commence a new Outcome Period beginning the following business day. At that same time, Milliman will also evaluate whether to make any adjustments to the
Collateral Portfolio. Accordingly, Shares can be held indefinitely if investors determine to participate in additional Outcome Periods.
Approximately one week prior to the end of each Outcome Period, the Fund will file a prospectus supplement, which will notify existing investors of
(i) the date on which the existing Outcome Period will end; (ii) the date on which the new Outcome Period will commence; and (iii) the anticipated ranges of the Index Caps that will be used for the new Outcome Period. Immediately preceding the
commencement date of the new Outcome Period, the Fund will file a prospectus supplement disclosing the Fund’s final Index Caps (both gross and net of Fund fees and expenses) for the new Outcome Period. This information will also be available
online at www.[___________].com, and on your insurance company’s website. Please contact your insurance company or other financial intermediary for more information.
Fund Classification. The Fund is classified as “non-diversified” under the Investment
Company Act of 1940, as amended (the “1940 Act”).
Principal Risks
You could lose money by investing in the Fund. An investment in the Fund is not a deposit of a bank and is not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other governmental agency. There can be no assurance that the Fund’s investment objectives will be achieved.
Downside Loss Buffer Risk. There can be no guarantee that the Fund will be successful in its strategy to
buffer against S&P 500 Index losses if the S&P 500 Index decreases in value over the Outcome Period. The Fund’s strategy is designed to produce returns that correlate to those of the S&P 500 Index, subject to the S&P 500 Index
Cap, while limiting downside S&P 500 Index losses and providing additional upside exposure to the Secondary Index, subject to the Secondary Index Cap, if Shares are bought on the day on which Milliman transacts in the FLEX Options on behalf
of the Fund and held until those FLEX Options expire at the end of each Outcome Period. The success of the Buffer also depends upon the performance of the Collateral Portfolio and the Put Spread Strategy. If
the Collateral Portfolio and/or the Put Spread Strategy experiences losses, it could have the effect of reducing the impact of, or completely eliminating, the Buffer on the Fund’s S&P 500 Index exposure. In certain market conditions, the
performance of the Collateral Portfolio and/or the Put Spread Strategy could cause the Fund to significantly underperform the S&P 500 Index. Despite the intended Buffer, an investor could lose their entire investment. In the
event an investor purchases Shares after the date on which Milliman transacted in the FLEX Options on behalf of the Fund, or redeems Shares prior to the expiration of those FLEX Options, the Buffer that the Fund seeks to provide may not be
available or fully applicable.
Risk of Capped Upside Returns. The Fund’s strategy is designed to produce returns that correlate to those of the
Reference Indices up to the Index Caps if Shares are bought on the day on which Milliman transacts in the FLEX Options on behalf of the Fund and held until those FLEX Options expire at the end of the Outcome Period, subject to the Index Caps. In
the event that one or both of the Reference Indices experience gains during the Outcome Period, the Fund will only participate in those gains up to the applicable Index Cap. In the event that one or both Reference Indices experience gains in excess
of the applicable Index Cap over the duration of the Outcome Period, the Fund will not participate in those excess gains. Because the Fund’s strategy provides capped exposure to two Reference Indices, the Index Caps may be lower than if the Fund
provided capped exposure to only a single Reference Index. In the event an investor purchases Shares after the date on which the FLEX Options were entered into and the Fund has risen in value to a level near to an Index Cap, there may be little or
no ability for that investor to experience an investment gain on their Shares relating to that Reference Index. In certain market conditions, the performance of the Collateral Portfolio and the Put Spread
Strategy could cause the Fund to
375
underperform relative to the Reference Indices, which could further limit Fund gains below the Index Caps, notwithstanding any
performance of the Reference Indices in excess of the Index Caps. An investor should consider the amount of the Index Caps, and the Fund’s position relative to each Index Cap, before investing in the Fund.
Index Cap Change Risk. Because the Index Caps for each Outcome Period are calculated based upon (i) Milliman’s
evaluation of prevailing market conditions on the first day of the Outcome Period and (ii) the total number of long call FLEX Options on the Reference Indices that Milliman is able to purchase at that time, the Index Caps may rise or fall from one
Outcome Period to the next. Any change in the Index Caps could be significant and they are unlikely to remain the same for consecutive Outcome Periods.
FLEX Options Risk. The Fund will transact in FLEX Options issued and guaranteed for settlement by the OCC. The
Fund bears the risk that the OCC will be unable or unwilling to perform its obligations under the FLEX Options contracts, which could result in significant losses to the Fund. In less liquid markets, terminating a FLEX Option may require the
payment of a premium or acceptance of a discounted price, and may take longer to complete. In addition, a less liquid trading market may adversely impact the value of the Fund’s FLEX Options and therefore the NAV of the Fund. In addition, the value
of the Fund’s FLEX Options positions is not anticipated to increase or decrease at the same rate as the reference asset; and while it is anticipated that they will generally move in the same direction, it is possible that they may move in different
directions. Certain FLEX Options positions may also expire worthless. The use of FLEX Options involves leverage, which can cause the Fund’s portfolio to be more volatile than if the portfolio had not been leveraged. Leverage can significantly
magnify the effect of price movements of the reference asset, disproportionately increasing the Fund’s losses and reducing the Fund’s opportunities for gains when the reference asset changes in unexpected ways. In some instances, such leverage
could result in losses that exceed the original amount invested.
Investment Objective and Outcomes Risk. There is no guarantee that the Fund will be successful in its attempt
to achieve its investment objective and/or the Outcomes, and an investor could lose some or all of their investment in the Fund. Certain circumstances under which the Fund might not achieve its objective and/or the Outcomes include, but are not
limited to (i) if the Fund disposes of FLEX Options, (ii) if the Fund is unable to maintain the proportional relationship based on the number of FLEX Options in the Fund’s portfolio, (iii) significant accrual of Fund expenses in connection with
effecting the Fund’s principal investment strategy, (iv) losses incurred by the Fund’s holdings in the Collateral Portfolio and/or losses resulting from the Put Spread Strategy, or (iv) adverse tax law changes affecting the treatment of FLEX
Options.
Tax Risk. The Fund intends to elect, and to qualify each year, to be treated as a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”). As a RIC, the Fund will not be subject to U.S. federal income tax on the portion
of its net investment income and net capital gain that it distributes to shareholders, provided that it satisfies certain requirements of the Code. To maintain its status as a RIC, the Fund must meet certain income, diversification and
distributions tests. For purposes of the diversification test, the identification of the issuer (or, in some cases, issuers) of a particular Fund investment can depend on the terms and conditions of that investment. In particular, there is no
published IRS guidance or case law on how to determine the “issuer” of certain derivatives that the Fund will enter into and the Fund has not received a private letter ruling on this point. Therefore, there is a risk that the Fund will not meet the
Code’s diversification requirements and will not qualify, or will be disqualified, as a RIC. If the Fund does not qualify as a RIC for any taxable year and certain relief provisions are not available, the Fund’s taxable income will be subject to
tax at the Fund level and to a further tax at the shareholder level when such income is distributed.
The Fund also intends to comply with the diversification requirements of Section 817(h) of the Code, and the regulations thereunder, relating to the
tax-deferred status of variable accounts that are based on insurance company separate accounts (referred to as “segregated asset accounts” for federal income tax purposes). These diversification requirements apply in addition to the RIC
diversification requirements discussed above. There also is no published guidance or case law on how to determine the “issuer” of the derivatives referred to above for purposes of the diversification requirements of Section 817(h) of the Code and
the Fund has not received a private letter ruling on this point. If these requirements are not met, or under other circumstances, such as if the Fund does not qualify as a RIC for any taxable year, it is possible that the contract owners (rather
than the insurance company) will be treated for federal income tax purposes as the taxable owners of the assets held by the segregated asset accounts.
376
Clearing Member Default Risk. The Fund will hold FLEX Options through accounts at members of clearing houses (“clearing members”) rather than a bank or a broker. Assets deposited by the Fund with any clearing member as margin for its FLEX Options positions may, in certain circumstances, be used to satisfy losses of other
clients of the Fund’s clearing member where such assets may be held in commingled omnibus accounts. In addition, although clearing members guarantee performance of their clients’ obligations to the clearing house, there is a risk that the assets of
the Fund might not be fully protected in the event of the clearing member’s bankruptcy, as the Fund would be limited to recovering only a pro rata share of all available funds segregated on behalf of the
clearing member’s customers for the relevant account class.
Debt Securities Risk. The prices of debt securities will be affected by changes in interest rates, the
creditworthiness of the issuer and other factors. These risks could affect the value of investments in which the Fund invests, possibly causing the Fund’s NAV to be reduced and fluctuate more than other types of investments. During periods of
falling interest rates, an issuer of a callable bond may repay the security before its stated maturity, and the Fund may have to reinvest the proceeds in securities with lower yields, which would result in a decline in the Fund’s income, or in
securities with greater risks or with other less favorable features. Changing interest rates, including rates that fall below zero, may have unpredictable effects on markets, result in heightened market volatility and detract from the Fund’s
performance to the extent the Fund is exposed to such interest rates. An increase in interest rates will generally cause the value of fixed-income securities held by the Fund to decline, may lead to heightened volatility in the fixed-income
markets and may adversely affect the liquidity of certain fixed-income investments, including those held by the Fund. Risks associated with rising interest rates are heightened given that interest rates in the U.S. are near historic lows.
Adjustable-rate instruments also react to interest rate changes in a similar manner, although generally to a lesser degree (depending, however, on the characteristics of the reset terms, including the index chosen, frequency of reset and reset
caps or floors, among other factors). Interest rate sensitivity is generally more pronounced and less predictable in instruments with uncertain payment or prepayment schedules and also for those with longer maturities.
Foreign Securities and Credit Exposure Risk. U.S. dollar-denominated securities carrying foreign credit exposure
may be affected by unfavorable political, economic or governmental developments that could affect payments of principal and interest. Furthermore, the value of the Fund’s foreign investments (whether direct or indirect) may be adversely affected by
political and social instability in their home countries, by changes in economic or taxation policies in those countries, or by the difficulty in enforcing obligations in those countries. Foreign companies generally may be subject to less stringent
regulations than U.S. companies, including financial reporting requirements and auditing and accounting controls. As a result, there generally is less publicly available information about foreign companies than about U.S. companies. Trading in many
foreign securities may be less liquid and more volatile than U.S. securities due to the size of the market or other factors.
U.S. Government Securities Risk. U.S. Government securities are subject to interest rate risk but generally do
not involve the credit risks associated with investments in other types of debt securities. As a result, the yields available from U.S. Government securities are generally lower than the yields available from other debt securities. U.S. Government
securities are guaranteed only as to the timely payment of interest and the payment of principal when held to maturity. While securities issued or guaranteed by U.S. federal government agencies are backed by the full faith and credit of the U.S.
Department of the Treasury, securities issued by government sponsored entities are solely the obligation of the issuer and generally do not carry any guarantee from the U.S. Government.
ABS Risk. ABS are subject to the general debt securities risks described above. In addition, ABS may be less
liquid than other bonds, and may be more sensitive than other bonds to the market’s perception of issuers and creditworthiness of payees, which may result in the Fund experiencing difficulty selling or valuing these securities. ABS markets have
experienced extraordinary weakness and volatility at various times in recent years, and may decline quickly in the event of a substantial economic or market downturn. Accordingly, these securities may be subject to greater risk of default during
periods of economic downturn than other securities, which could result in possible losses to the Fund.
Issuer Risk. The performance of the Fund depends on the performance of individual securities to which the Fund
has exposure. The Fund may be adversely affected if an issuer of underlying securities held by the Fund is unable or
377
unwilling to repay principal or interest when due. Changes in the financial condition or credit rating of an issuer of those securities may cause the
value of the securities to decline.
Management Risk. The Fund is subject to management risk because it is an actively managed portfolio. Milliman
will apply investment techniques and risk analyses in making investment decisions for the Fund, but there can be no guarantee that the Fund will meet its investment objective and/or the Outcomes. In addition, Milliman does not use defensive
strategies or attempt to reduce the Fund’s exposures to poor performing positions during an Outcome Period. This differs from funds that are managed to seek to outperform a benchmark index. Therefore, in the event of a general market decline, the
Fund’s value may fall more than the value of another fund that does attempt to hedge against such market declines.
Market Risk. The Fund could lose money over short periods due to short-term market movements and over longer
periods during more prolonged market downturns. Assets may decline in value due to factors affecting financial markets generally or particular asset classes or industries represented in the markets. The value of a FLEX Option or other asset may
also decline due to general market conditions, economic trends or events that are not specifically related to the issuer of the security or other asset, or due to factors that affect a particular issuer, country, region, market, industry, sector or
asset class.
Non-Diversification Risk. The Fund may invest a relatively high percentage of its assets in a limited number of
issuers. As a result, the Fund may be more susceptible to a single adverse economic or regulatory occurrence affecting one or more of these issuers, experience increased volatility and be highly invested in certain issuers.
Large Shareholder Risk. At times, the Fund may experience adverse effects when certain large shareholders,
including insurance company separate accounts, redeem large amounts of shares of the Fund. Large redemptions may cause the Fund to sell portfolio holdings at times when it would not otherwise do so and may increase transaction costs and/or result
in an increase to the Fund’s expense ratio. A large redemption could be detrimental to the Fund and its remaining shareholders.
Risks of Investing in ETFs. In addition to the risks associated with the underlying assets held by the ETFs in
which the Fund invests, investments in ETFs are also subject to the following additional risks: (i) only authorized participants may engage in transactions directly with ETFs but none are obligated to do so, which could result in an ETF’s shares
trading at a premium or discount to its NAV or possibly face trading halts or delisting; (ii) certain ETFs seek to track the performance of an underlying index and will not attempt to take defensive positions under any market conditions, including
declining markets, which could result in losses; and (iii) because ETF shares trade on the secondary market, there is not guarantee that an active market will be developed or maintained, which could result in the ETF’s shares trading at a premium
or discount to its NAV. Investments in ETFs may involve duplication of management fees and certain other expenses, as the Fund indirectly bears its proportionate share of any expenses paid by the ETFs in which it invests.
Risks of Investing in Money Market Funds. Money market funds seek to preserve the value of shareholder
investments at $1.00 per share, but shareholders, such as the Fund, may still lose money by investing in such funds. In addition, a money market fund may impose a fee upon the sale of its shares or may temporarily suspend the ability to sell shares
if the fund’s liquidity falls below required minimums because of market conditions or other factors. The credit quality of a money market fund’s holdings can change rapidly in certain markets, and the default of a single holding could have an
adverse impact on the fund’s share price. A money market fund’s share price can also be negatively affected during periods of high redemption pressures, illiquid markets, and/or significant market volatility.
Performance
As of the date of this Prospectus, the Fund has not commenced operations and therefore does not have a performance history. Once available, the Fund’s
performance information will be accessible online at www.[________].com and will provide some indication of the risks of investing in the Fund.
Management
378
Investment Adviser
Milliman Financial Risk Management LLC (“Milliman”) serves as investment adviser to the Fund.
Portfolio Managers
The following persons serve as portfolio managers of the Fund.
|
●
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Robert T. Cummings, Principal & Head of Portfolio Management at Milliman.
|
|
●
|
Maria Schiopu, Principal & Head of Portfolio Management at Milliman.
|
|
●
|
Jeff Greco, Principal & Head of Strategy Research at Milliman.
|
|
●
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Jordan Rosenfeld, Portfolio Manager at Milliman.
|
Each portfolio manager is jointly and primarily responsible for the day-to-day management of the Fund’s portfolio and has served in such capacity since
the Fund’s inception in 2021.
Purchase and Sale of Shares
Shares are available as underlying investment options for variable insurance contracts and variable life insurance policies (each, a “variable contract,” and, collectively, the “variable contracts”) issued by insurance companies. These insurance companies are the record owners of the separate accounts
holding the Shares. You do not buy, sell or exchange Shares directly; rather, you choose investment options through your variable contracts. The insurance companies then cause the separate accounts to purchase and redeem Shares according to
the investment options you choose.
Tax Information
The dividends and distributions paid by the Fund to the insurance company separate accounts will consist of ordinary income, capital gains, or some
combination of both. Because Shares must be purchased through separate accounts used to fund variable contracts, such dividends and distributions will be exempt from current taxation by owners of variable contracts (each, a “contract owner,” and, collectively “contract owners”) if left to accumulate within a separate account. Consult the variable contract prospectus for additional tax
information.
Payments to Insurance Companies and Other Financial Intermediaries
If you allocate contract value to the Fund through an insurance company or other financial intermediary, the Fund, Milliman, the Fund’s distributor or
their related companies may pay the insurance company and/or its affiliates or other intermediary for the sale of Shares and related services. These payments may create a conflict of interest by influencing the insurance company or other
intermediary and your salesperson to recommend an indirect investment in the Fund over another investment. The prospectus or other disclosure documents for the variable contracts may contain additional information about these payments, if any.
You may also ask your salesperson or financial intermediary, or visit your financial intermediary’s website, for more information.
379
Fund Summary: Milliman S&P 500 & Russell 2000 1-Year Buffer with Stacker
Cap Fund – Oct
Investment Objective
The Fund seeks to provide exposure to the S&P 500 Index, while providing a buffer against the first 10% of losses associated with S&P 500
Index performance and participating in S&P 500 Index gains up to a declared cap, prior to taking into account any fees or expenses or the performance of any fixed income exposure included in the Fund’s portfolio, over the period from October
1, 2021 through September 30, 2022. The Fund also seeks to provide upside exposure to the Russell 2000 Index up to a declared cap, prior to taking into account any fees or expenses or the performance of any fixed income exposure included in the
Fund’s portfolio, over the same period.
Fees and Expenses of the Fund
This table describes the fees and expenses that you may pay if you buy, hold and sell shares of the Fund (“Shares”).
This table and the example below do not include any fees or sales charges imposed by your variable product. If they were included, the expenses listed below would be higher.
Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment)
|
Class 3
|
|
|
Management Fees
|
0.49%
|
|
Distribution and Service (12b-1) Fees
|
0.25%
|
|
Other Expenses(1)
|
0.50%
|
|
Acquired Fund Fees and Expenses(1)
|
[_.__]%
|
|
Total Annual Fund Operating Expenses
|
1.24%
|
|
Fee Waiver and/or Expense Reimbursement(2)(3)
|
(0.25)%
|
|
Total Annual Fund Operating Expenses After Fee Waiver and/or Expense Reimbursement
|
0.99%
|
|
(1)
|
“Other Expenses” and “Acquired Fund Fees and Expenses” are based on estimated amounts for the current fiscal year.
|
|
(2)
|
The Fund’s investment adviser, Milliman Financial Risk Management LLC (“Milliman”), has contractually
agreed to waive advisory fees and/or reimburse expenses to the extent necessary to limit the Fund’s total annual Fund operating expenses (excluding taxes, interest, brokerage fees and commissions, Rule 12b-1 fees, acquired fund fees and
expenses, short-sale dividend expenses, administrative services fees, other expenses that are capitalized in accordance with generally accepted accounting principles, and extraordinary or non-routine expenses not incurred in the
ordinary course of the Fund’s business) to 0.74% of the Fund's average daily net assets (the “Expense Limitation Agreement”) until at least November 1, 2022. During its term, the Expense
Limitation Agreement cannot be terminated or amended to increase the applicable limit without approval of the Board of Trustees of the Trust (the “Board”). Milliman may recoup from the Fund any
advisory fees waived or expenses reimbursed pursuant to the Expense Limitation Agreement for a period of three years from the date on which such waiver or reimbursement occurred; provided, however, that such recoupment shall not be made
if it would cause the Fund’s total annual Fund operating expenses to exceed the lesser of (a) the expense limitation in effect at the time of the reimbursement, or (b) the expense limitation in effect at the time of recoupment, if any.
|
|
(3)
|
In addition to the Expense Limitation Agreement, Milliman has contractually agreed to waive its advisory fees in an amount equal to the Fund’s
acquired fund fees and expenses until at least November 1, 2022 (the “Fee Waiver”). This contract cannot be terminated or modified without the consent of the Board.
|
Example
This example is intended to help you compare the cost of investing in the Fund with the cost of investing in other funds. This example assumes that you
invest $10,000 in the Fund for the time periods indicated and then sell all of your Shares at the end of those periods. This example also assumes that your investment has a 5% return each year and that the Fund’s operating expenses remain at
current levels and that the Expense Limitation Agreement and Fee Waiver remain in place for their contractual periods. Although your actual costs may be higher or lower, your costs, based on these assumptions, would be:
|
1 Year
|
3 Years
|
|
|
Class 3
|
$104
|
$384
|
380
This example does not include any fees or sales charges imposed by your variable product. If they were included, the expenses listed above would be
higher.
Portfolio Turnover
The Fund pays transaction costs, such as commissions, when it purchases and sells securities (or “turns over” its portfolio). A higher portfolio turnover
will cause the Fund to incur additional transaction costs. These costs, which are not reflected in Total Annual Fund Operating Expenses or in the example, may affect the Fund’s performance. Because the Fund has not yet commenced investment
operations, no portfolio turnover information is available at this time.
Principal Investment Strategies
The Fund seeks to achieve its investment objective by transacting in FLexible EXchange® Options (“FLEX Options”)
and by separately maintaining a collateral portfolio (the “Collateral Portfolio”), which is designed primarily to serve as margin or collateral for the Fund’s FLEX Options positions and secondarily to
enhance the Fund’s upside S&P 500 Index and Russell 2000 Index FLEX Options’ exposure (i.e., by utilizing anticipated income to measure the ability to purchase additional FLEX Options). FLEX Options
are exchange-traded options contracts with uniquely customizable terms. In general, an options contract is an agreement between a buyer and seller that gives the purchaser of the option the right to buy or sell a particular asset at a specified
future date at an agreed upon price, commonly known as the “strike price.” The reference assets for the Fund’s FLEX Options positions will include the S&P 500 Index, the Russell 2000 Index (the “Secondary
Index,” and together with the S&P 500 Index, the “Reference Indices,” and, each, a “Reference Index”), and certain exchange-traded funds (“ETFs”), as described further below. The S&P 500 Index is a large-capitalization, market-weighted, U.S. equities index that tracks the price (excluding dividends) of
500 leading companies in leading industries of the U.S. economy. The Secondary Index is [a float-adjusted, market capitalization-weighted index that is designed to measure the performance of the small-capitalization segment of the U.S. equity
market, as defined by FTSE Russell].
The Collateral Portfolio may be invested in short-term fixed-income securities, including corporate bonds and other corporate debt securities,
asset-backed securities (“ABS”), securities issued by the U.S. Government or its agencies and instrumentalities, securities issued by non-U.S. governments or their agencies and instrumentalities, money
market securities and funds, other interest-bearing instruments, cash, ETFs that primarily invest in any of the foregoing instruments, options on ETFs and options box spreads. An options box spread is the combination of different options trades
that have offsetting spreads (e.g., purchases and sales on the same underlying instrument, such as an index or an ETF, but with different strike prices and/or expiration dates) for the purpose of
generating income. The Fund may invest in short-term fixed income securities or other instruments, including through ETFs, of any maturity and credit quality. The Fund will generally invest up to 35% of its net assets in one or more ETFs that
provide exposure to investment grade corporate bonds.
Due to the unique mechanics of the Fund’s strategy, the return an investor can expect to receive from an investment in the Fund has characteristics that
are distinct from the returns of many other investment vehicles. It is important that an investor understand these characteristics before making an investment in the Fund.
In seeking to achieve its investment objective, the Fund seeks to produce pre-determined outcomes (the “Outcomes”)
that are based upon the performance of the Reference Indices over a one-year period (the “Outcome Period”). The initial Outcome Period for the Fund is October 1, 2021 through September 30, 2022. Following
the initial Outcome Period, each subsequent Outcome Period will be a one-year period commencing upon the expiration of the prior Outcome Period. The Fund seeks to achieve the Outcomes by purchasing and writing (selling) FLEX Options to create
layers within the Fund’s portfolio. One layer is designed to produce returns that correlate to those of the S&P 500 Index for the Outcome Period if the S&P 500 Index experiences gains during that time, subject to an upside return cap (the “S&P 500 Index Cap”), as described below. A second layer is designed to produce returns that correlate to any upside market performance of the Secondary Index over the
Outcome Period, subject to an upside return cap (the “Secondary Index Cap,” and, together with the S&P 500 Index Cap, the “Index Caps,” and, each, an “Index Cap”), as described below. A third layer is designed to produce returns that correlate to those of the S&P 500 Index for the Outcome Period that are buffered up to 10% if the S&P 500 Index
experiences losses during that time (the “Buffer”). There is no guarantee that the Fund will be successful in its attempt to produce
381
returns that correlate to those of the S&P 500 Index or the Secondary Index up to the applicable Index Caps or produce buffered
returns against the Fund’s S&P 500 Index exposure.
Milliman Financial Risk Management, LLC (“Milliman”), the investment adviser of the Fund, seeks to establish the
Buffer by writing one put FLEX Option on the S&P 500 Index with a strike price that is 10% lower than the value of the S&P 500 Index at the beginning of the Outcome Period.
Milliman seeks to establish the Index Caps by purchasing long call FLEX Options on each Reference Index with a strike price approximately equal to the
value of the respective Reference Index at the beginning of the Outcome Period. Milliman purchases these FLEX Options with a portion of the Fund’s net assets plus (i) the cash received from writing the put FLEX Option designed to create the
Buffer, (ii) additional cash received by utilizing FLEX Options to create a put spread (the “Put Spread Strategy”) on fixed income securities and/or one or more ETFs that provide exposure to fixed income
securities, and (iii) yield received from the Collateral Portfolio. Milliman seeks to achieve the Put Spread Strategy for the Fund by writing a put FLEX Option on an underlying asset at a strike price at or lower than the underlying asset’s
market price or current value at the beginning of the Outcome Period, and buying a put FLEX Option on the same underlying asset at a lower strike price than the written put FLEX Option.
The Index Caps represent the maximum rate of return in each Reference Index that an investor can achieve from an investment in the Fund over the Outcome
Period. Milliman calculates the Index Caps based upon (i) its evaluation of prevailing market conditions on the first day of the Outcome Period and (ii) the total number of long call FLEX Options on each Reference Index that it is able to purchase
at that time. As of the date of this Prospectus, and assuming current market conditions persist, Milliman expects that the Index Caps will be between the below ranges (both gross and net of Fund fees and expenses). Any fees or expenses imposed by
your variable product, and any other expenses incurred by the Fund, will have the effect of further reducing each Index Cap. In addition, in certain market conditions, the performance of the Collateral Portfolio
and the Put Spread Strategy could cause the Fund to underperform relative to the Reference Indices, which could further limit Fund gains below the Index Caps, notwithstanding any performance of the Reference Indices in excess of the Index Caps.
|
Estimated Index Cap Ranges
(As of [___])
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||
|
Prior to Taking into Account Fund Fees and Expenses
|
After Taking into Account Fund Fees and Expenses
|
|
|
S&P 500 Index Cap
|
||
|
Class 3
|
[__]% and [__]%
|
[__]% and [__]%
|
|
Secondary Index Cap
|
||
|
Class 3
|
[__]% and [__]%
|
[__]% and [__]%
|
The Buffer is only operative against the first 10% of losses in the Fund’s S&P 500 Index exposure for the Outcome Period. If the S&P 500 Index
decreases in value by more than 10% during the Outcome Period, the Fund (and therefore investors in Shares) will experience all subsequent losses in the Fund’s S&P 500 Index exposure on a one-to-one basis for the Outcome Period. The Fund
seeks to produce buffered returns against its S&P 500 Index exposure prior to taking into account any fees or expenses or the performance of the Collateral Portfolio or the Put Spread Strategy. The Buffer
is not operative against losses in the Collateral Portfolio or the Put Spread Strategy. If the Collateral Portfolio and/or the Put Spread Strategy experiences losses, it could have the effect of reducing the impact of, or completely
eliminating, the Buffer on the Fund’s S&P 500 Index exposure. In certain market conditions, the performance of the Collateral Portfolio and/or the Put Spread Strategy could cause the Fund to significantly underperform the S&P 500
Index. The following table reflects the Buffer both gross and net of Fund fees and expenses:
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Share Class
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Buffer
(As of [___])
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|
|
Prior to Taking into Account Fund Fees and Expenses
|
After Taking into Account Fund Fees and Expenses
|
|
|
Class 3
|
10%
|
[__]%
|
382
Because the Fund also seeks to provide only upside exposure to the Secondary Index during the Outcome Period, the Fund’s NAV will not be impacted by any
losses experienced by the Secondary Index when measured from the beginning to the end of the Outcome Period. If the Secondary Index increases in value during the Outcome Period and later decreases in value during the Outcome Period, the Fund’s NAV
will reflect any such decreases until the Secondary Index reaches its initial value (measured as of the first day of the Outcome Period). If the Secondary Index decreases in value over the course of an entire Outcome Period, the Fund’s NAV will not
reflect such losses; therefore, the Fund’s overall performance will be approximately that of the S&P 500 Index for the Outcome Period, subject to the Buffer and the S&P 500 Index Cap.
The definitive Index Caps and Buffer will be set forth on the Fund’s website. The Fund’s website will also provide information relating to the
Outcomes on a daily basis, including the Fund’s position relative to the Index Caps and the Buffer. You may also contact your insurance company or other financial intermediary for more information.
Additionally, the Fund’s net asset value (“NAV”) will not increase or decrease at the same rate as the Reference
Indices because the Fund’s strategy relies upon the performance of the Collateral Portfolio and the Put Spread Strategy, in addition to the value of the Fund’s FLEX Options positions on the Reference Indices. While Milliman anticipates that the
Fund’s NAV will generally move in the same direction as the S&P 500 Index, and correspond to any upside returns of the Secondary Index (meaning that the Fund’s NAV will generally increase if the Reference Indices experience gains or decrease if
the Reference Indices experience losses), the Fund’s NAV may not decrease at the same rate as the Reference Indices (especially when factoring in the performance of the Collateral Portfolio and the Put Spread Strategy) and will not increase at the
same rate as the Reference Indices (especially when factoring in the Index Caps and the performance of the Collateral Portfolio and the Put Spread Strategy). Similarly, the amount of time remaining until the end of the Outcome Period also affects
the impact of the Buffer on the Fund’s NAV, because the Buffer may not be in full effect prior to the end of the Outcome Period.
The FLEX Options utilized in the Fund’s portfolio are each set to expire on the last day of the Outcome Period. The customizable nature of FLEX Options
will allow Milliman to select the strike price at which each FLEX Option will be exercised at the expiration of the FLEX Option term. At the commencement of the Outcome Period, Milliman will specifically select the strike price for each FLEX Option
in a manner designed to achieve the Outcomes when the FLEX Options are exercised on the final day of the Outcome Period, depending on the anticipated performance of the Reference Indices, the Collateral Portfolio and the Put Spread Strategy over
the duration of that Outcome Period.
The hypothetical graphical illustrations provided below are designed to illustrate the Outcomes based upon the
hypothetical performance of the Reference Indices for an investor who holds Shares for the entirety of the Outcome Period. The hypothetical graphical illustrations do not include any fees or expenses
imposed by your variable product or expenses incurred by the Fund, and do not reflect the performance of the Collateral Portfolio or the Put Spread Strategy. Additional hypothetical graphical representations of the Outcomes are provided in
“Additional Information About the Funds and the Risks of Investing.” There is no guarantee that the Fund will be successful in its attempt to achieve the Outcomes for the Outcome Period.
383
The following table contains hypothetical examples designed to illustrate the Outcomes the Fund seeks to
achieve over the Outcome Period, based upon the performance of the Reference Indices from (100)% to 100% after taking into account the Index Caps and the Buffer, but prior to taking into account any fees or
expenses or the performance of the Collateral Portfolio or the Put Spread Strategy. The table is provided for illustrative purposes only and does not provide every possible performance scenario for Shares over
the course of the Outcome Period. There is no guarantee that the Fund will be successful in its attempt to achieve the Outcomes for an Outcome Period. The table is not intended to predict or project the performance of the FLEX Options or the Fund. Investors should not take this information as an
assurance of the expected performance of the Reference Indices or the Fund. Actual Fund performance will vary with fluctuations in the performance of the Collateral Portfolio and the Put Spread Strategy, in addition to the value of the
Fund’s FLEX Options positions on the Reference Indices, during the Outcome Period, among other factors. The performance of the Collateral Portfolio and the Put Spread Strategy
could significantly impact the performance of the Fund, which could prevent the Fund from achieving the Outcomes that it seeks to produce. The table does not reflect any fees or expenses imposed by your variable product or expenses
incurred by the Fund. If it did, the returns shown for the Fund would be lower. Please refer to the Fund’s website, which provides updated information relating to this table on a daily basis throughout the Outcome Period. Please contact your
insurance company or other financial intermediary for more information.
384
|
Index/Fund
|
Hypothetical Performance1
|
|||||||||||
|
S&P 500 Index Price Performance
|
(100)%
|
(50)%
|
(20)%
|
(10)%
|
(5)%
|
0%
|
5%
|
10%
|
15%
|
20%
|
50%
|
100%
|
|
Secondary Index Price Performance
|
(100)%
|
(50)%
|
(20)%
|
(10)%
|
(5)%
|
0%
|
5%
|
10%
|
15%
|
20%
|
50%
|
100%
|
|
Fund Performance at NAV
|
(90)%
|
(40)%
|
(10)%
|
0%2
|
0%2
|
0%
|
10%3
|
14%3
|
14%3
|
14%3
|
14%3
|
14%3
|
| 1 |
Does not take into account any fees or expenses or the performance of the Collateral Portfolio or the Put Spread Strategy.
|
| 2 |
Reflects the impact of the Buffer.
|
| 3 |
Reflects the impact of assumed Index Caps of 7% per index, 14% total.
|
Understanding Outcomes. The Outcomes the Fund seeks to achieve are measured based upon the
Fund’s NAV on the first day of the Outcome Period. The Outcome Period begins on the day Milliman transacts in the FLEX Options on behalf of the Fund, and ends on the day those FLEX Options expire. An investor who
purchases Shares after the commencement of the Outcome Period will likely have purchased Shares at a different NAV than the NAV on the first day of the Outcome Period (the NAV upon which the Outcomes are based) and may experience investment
outcomes very different from those the Fund seeks to achieve, especially when factoring in any fees or expenses or the performance of the Collateral Portfolio and the Put Spread Strategy. An investor who redeems Shares prior to the end of the
Outcome Period may also experience investment outcomes very different from those the Fund seeks to achieve. The Outcomes are designed with the expectation that an investor will hold Shares on the day that Milliman transacts in the FLEX Options on
behalf of the Fund, and on the day those FLEX Options expire. There is no guarantee that the Fund will be successful in its attempt to achieve the Outcomes.
Understanding the Index Caps. Unlike other investment products, the potential returns an
investor can receive from an investment in the Fund are subject to the Index Caps. This means that if one or both of the Reference Indices experience gains for the Outcome Period, an investor in the Fund will only
experience those gains up to the applicable Index Cap. Milliman calculates the Index Caps for each Outcome Period based upon (i) its evaluation of prevailing market conditions on the first day of the Outcome Period and (ii) the total
number of long call FLEX Options on each Reference Index that it is able to purchase at that time. If an investor is considering purchasing Shares during the Outcome Period, and the Fund’s NAV has increased in
value to a level near one or both of the Index Caps, an investor purchasing Shares at that price will have limited to no gains available for the remainder of the Outcome Period, but will remain vulnerable to significant downside risks (with
respect to the S&P 500 Index FLEX Options’ exposure). In certain market conditions, the performance of the Collateral Portfolio and the Put Spread Strategy could cause the Fund to underperform
relative to the Reference Indices, which could further limit Fund gains below the Index Caps, notwithstanding any performance of the Reference Indices in excess of the Index Caps.
Understanding the Buffer. The Buffer that the Fund seeks to provide is only operative
against the first 10% of losses in the Fund’s S&P 500 Index exposure for the Outcome Period. If an investor is considering purchasing Shares during the Outcome Period, and the S&P 500 Index has decreased
in value by an amount equal to or greater than 10%, an investor purchasing Shares at that time will be able to participate in any gains thereafter (up to the Index Caps), but will not benefit from the Buffer that the Fund seeks to offer for the
remainder of the Outcome Period if the losses continue to be equal to or greater than 10% during that period. Conversely, if an investor is considering purchasing Shares during the Outcome Period, and the Fund’s NAV has increased in value, then
an investor may experience losses before implementation of the Buffer that the Fund seeks to provide. While the Fund seeks to produce returns that correlate to those of the S&P 500 Index for the Outcome Period that are buffered up to
10% (prior to taking into account any fees or expenses or the performance of the Collateral Portfolio or the Put Spread Strategy) for investors who hold Shares for the entire Outcome Period, there is no guarantee it will successfully do so. In addition, the Buffer is not operative against losses in the Collateral Portfolio or the Put Spread Strategy. If the Collateral Portfolio and/or the Put Spread Strategy experiences losses, it could have the
effect of reducing the impact of, or completely eliminating, the Buffer on the Fund’s S&P 500 Index exposure. In certain market conditions, the performance of the Collateral Portfolio and/or the Put Spread Strategy could cause the Fund to
significantly underperform the S&P 500 Index. Investors who purchase Shares at the beginning of the Outcome Period may lose their entire
385
investment. Investors who purchase Shares after the Outcome Period has begun may also lose their entire investment. An
investment in the Fund is only appropriate for investors willing to bear those losses.
Fund Rebalance. Milliman implements the Fund’s strategy on an annual basis, seeking to
produce the Outcomes for an Outcome Period. On the last business day of any stated Outcome Period, all of the Fund’s existing FLEX Options, which includes those used to establish the Buffer, the Index Caps and the Put Spread Strategy, will expire
and Milliman will transact in a new set of FLEX Options on the same business day, which will commence a new Outcome Period beginning the following business day. At that same time, Milliman will also evaluate whether to make any adjustments to the
Collateral Portfolio. Accordingly, Shares can be held indefinitely if investors determine to participate in additional Outcome Periods.
Approximately one week prior to the end of each Outcome Period, the Fund will file a prospectus supplement, which will notify existing investors of
(i) the date on which the existing Outcome Period will end; (ii) the date on which the new Outcome Period will commence; and (iii) the anticipated ranges of the Index Caps that will be used for the new Outcome Period. Immediately preceding the
commencement date of the new Outcome Period, the Fund will file a prospectus supplement disclosing the Fund’s final Index Caps (both gross and net of Fund fees and expenses) for the new Outcome Period. This information will also be available
online at www.[___________].com, and on your insurance company’s website. Please contact your insurance company or other financial intermediary for more information.
Fund Classification. The Fund is classified as “non-diversified” under the Investment
Company Act of 1940, as amended (the “1940 Act”).
Principal Risks
You could lose money by investing in the Fund. An investment in the Fund is not a deposit of a bank and is not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other governmental agency. There can be no assurance that the Fund’s investment objectives will be achieved.
Downside Loss Buffer Risk. There can be no guarantee that the Fund will be successful in its strategy to
buffer against S&P 500 Index losses if the S&P 500 Index decreases in value over the Outcome Period. The Fund’s strategy is designed to produce returns that correlate to those of the S&P 500 Index, subject to the S&P 500 Index
Cap, while limiting downside S&P 500 Index losses and providing additional upside exposure to the Secondary Index, subject to the Secondary Index Cap, if Shares are bought on the day on which Milliman transacts in the FLEX Options on behalf
of the Fund and held until those FLEX Options expire at the end of each Outcome Period. The success of the Buffer also depends upon the performance of the Collateral Portfolio and the Put Spread Strategy. If
the Collateral Portfolio and/or the Put Spread Strategy experiences losses, it could have the effect of reducing the impact of, or completely eliminating, the Buffer on the Fund’s S&P 500 Index exposure. In certain market conditions, the
performance of the Collateral Portfolio and/or the Put Spread Strategy could cause the Fund to significantly underperform the S&P 500 Index. Despite the intended Buffer, an investor could lose their entire investment. In the
event an investor purchases Shares after the date on which Milliman transacted in the FLEX Options on behalf of the Fund, or redeems Shares prior to the expiration of those FLEX Options, the Buffer that the Fund seeks to provide may not be
available or fully applicable.
Risk of Capped Upside Returns. The Fund’s strategy is designed to produce returns that correlate to those of the
Reference Indices up to the Index Caps if Shares are bought on the day on which Milliman transacts in the FLEX Options on behalf of the Fund and held until those FLEX Options expire at the end of the Outcome Period, subject to the Index Caps. In
the event that one or both of the Reference Indices experience gains during the Outcome Period, the Fund will only participate in those gains up to the applicable Index Cap. In the event that one or both Reference Indices experience gains in excess
of the applicable Index Cap over the duration of the Outcome Period, the Fund will not participate in those excess gains. Because the Fund’s strategy provides capped exposure to two Reference Indices, the Index Caps may be lower than if the Fund
provided capped exposure to only a single Reference Index. In the event an investor purchases Shares after the date on which the FLEX Options were entered into and the Fund has risen in value to a level near to an Index Cap, there may be little or
no ability for that investor to experience an investment gain on their Shares relating to that Reference Index. In certain market conditions, the performance of the Collateral Portfolio and the Put Spread
Strategy could cause the Fund to
386
underperform relative to the Reference Indices, which could further limit Fund gains below the Index Caps, notwithstanding any
performance of the Reference Indices in excess of the Index Caps. An investor should consider the amount of the Index Caps, and the Fund’s position relative to each Index Cap, before investing in the Fund.
Index Cap Change Risk. Because the Index Caps for each Outcome Period are calculated based upon (i) Milliman’s
evaluation of prevailing market conditions on the first day of the Outcome Period and (ii) the total number of long call FLEX Options on the Reference Indices that Milliman is able to purchase at that time, the Index Caps may rise or fall from one
Outcome Period to the next. Any change in the Index Caps could be significant and they are unlikely to remain the same for consecutive Outcome Periods.
FLEX Options Risk. The Fund will transact in FLEX Options issued and guaranteed for settlement by the OCC. The
Fund bears the risk that the OCC will be unable or unwilling to perform its obligations under the FLEX Options contracts, which could result in significant losses to the Fund. In less liquid markets, terminating a FLEX Option may require the
payment of a premium or acceptance of a discounted price, and may take longer to complete. In addition, a less liquid trading market may adversely impact the value of the Fund’s FLEX Options and therefore the NAV of the Fund. In addition, the value
of the Fund’s FLEX Options positions is not anticipated to increase or decrease at the same rate as the reference asset; and while it is anticipated that they will generally move in the same direction, it is possible that they may move in different
directions. Certain FLEX Options positions may also expire worthless. The use of FLEX Options involves leverage, which can cause the Fund’s portfolio to be more volatile than if the portfolio had not been leveraged. Leverage can significantly
magnify the effect of price movements of the reference asset, disproportionately increasing the Fund’s losses and reducing the Fund’s opportunities for gains when the reference asset changes in unexpected ways. In some instances, such leverage
could result in losses that exceed the original amount invested.
Investment Objective and Outcomes Risk. There is no guarantee that the Fund will be successful in its attempt
to achieve its investment objective and/or the Outcomes, and an investor could lose some or all of their investment in the Fund. Certain circumstances under which the Fund might not achieve its objective and/or the Outcomes include, but are not
limited to (i) if the Fund disposes of FLEX Options, (ii) if the Fund is unable to maintain the proportional relationship based on the number of FLEX Options in the Fund’s portfolio, (iii) significant accrual of Fund expenses in connection with
effecting the Fund’s principal investment strategy, (iv) losses incurred by the Fund’s holdings in the Collateral Portfolio and/or losses resulting from the Put Spread Strategy, or (iv) adverse tax law changes affecting the treatment of FLEX
Options.
Tax Risk. The Fund intends to elect, and to qualify each year, to be treated as a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”). As a RIC, the Fund will not be subject to U.S. federal income tax on the portion
of its net investment income and net capital gain that it distributes to shareholders, provided that it satisfies certain requirements of the Code. To maintain its status as a RIC, the Fund must meet certain income, diversification and
distributions tests. For purposes of the diversification test, the identification of the issuer (or, in some cases, issuers) of a particular Fund investment can depend on the terms and conditions of that investment. In particular, there is no
published IRS guidance or case law on how to determine the “issuer” of certain derivatives that the Fund will enter into and the Fund has not received a private letter ruling on this point. Therefore, there is a risk that the Fund will not meet the
Code’s diversification requirements and will not qualify, or will be disqualified, as a RIC. If the Fund does not qualify as a RIC for any taxable year and certain relief provisions are not available, the Fund’s taxable income will be subject to
tax at the Fund level and to a further tax at the shareholder level when such income is distributed.
The Fund also intends to comply with the diversification requirements of Section 817(h) of the Code, and the regulations thereunder, relating to the
tax-deferred status of variable accounts that are based on insurance company separate accounts (referred to as “segregated asset accounts” for federal income tax purposes). These diversification requirements apply in addition to the RIC
diversification requirements discussed above. There also is no published guidance or case law on how to determine the “issuer” of the derivatives referred to above for purposes of the diversification requirements of Section 817(h) of the Code and
the Fund has not received a private letter ruling on this point. If these requirements are not met, or under other circumstances, such as if the Fund does not qualify as a RIC for any taxable year, it is possible that the contract owners (rather
than the insurance company) will be treated for federal income tax purposes as the taxable owners of the assets held by the segregated asset accounts.
387
Clearing Member Default Risk. The Fund will hold FLEX Options through accounts at members of clearing houses (“clearing members”) rather than a bank or a broker. Assets deposited by the Fund with any clearing member as margin for its FLEX Options positions may, in certain circumstances, be used to satisfy losses of other
clients of the Fund’s clearing member where such assets may be held in commingled omnibus accounts. In addition, although clearing members guarantee performance of their clients’ obligations to the clearing house, there is a risk that the assets of
the Fund might not be fully protected in the event of the clearing member’s bankruptcy, as the Fund would be limited to recovering only a pro rata share of all available funds segregated on behalf of the
clearing member’s customers for the relevant account class.
Debt Securities Risk. The prices of debt securities will be affected by changes in interest rates, the
creditworthiness of the issuer and other factors. These risks could affect the value of investments in which the Fund invests, possibly causing the Fund’s NAV to be reduced and fluctuate more than other types of investments. During periods of
falling interest rates, an issuer of a callable bond may repay the security before its stated maturity, and the Fund may have to reinvest the proceeds in securities with lower yields, which would result in a decline in the Fund’s income, or in
securities with greater risks or with other less favorable features. Changing interest rates, including rates that fall below zero, may have unpredictable effects on markets, result in heightened market volatility and detract from the Fund’s
performance to the extent the Fund is exposed to such interest rates. An increase in interest rates will generally cause the value of fixed-income securities held by the Fund to decline, may lead to heightened volatility in the fixed-income
markets and may adversely affect the liquidity of certain fixed-income investments, including those held by the Fund. Risks associated with rising interest rates are heightened given that interest rates in the U.S. are near historic lows.
Adjustable-rate instruments also react to interest rate changes in a similar manner, although generally to a lesser degree (depending, however, on the characteristics of the reset terms, including the index chosen, frequency of reset and reset
caps or floors, among other factors). Interest rate sensitivity is generally more pronounced and less predictable in instruments with uncertain payment or prepayment schedules and also for those with longer maturities.
Foreign Securities and Credit Exposure Risk. U.S. dollar-denominated securities carrying foreign credit exposure
may be affected by unfavorable political, economic or governmental developments that could affect payments of principal and interest. Furthermore, the value of the Fund’s foreign investments (whether direct or indirect) may be adversely affected by
political and social instability in their home countries, by changes in economic or taxation policies in those countries, or by the difficulty in enforcing obligations in those countries. Foreign companies generally may be subject to less stringent
regulations than U.S. companies, including financial reporting requirements and auditing and accounting controls. As a result, there generally is less publicly available information about foreign companies than about U.S. companies. Trading in many
foreign securities may be less liquid and more volatile than U.S. securities due to the size of the market or other factors.
U.S. Government Securities Risk. U.S. Government securities are subject to interest rate risk but generally do
not involve the credit risks associated with investments in other types of debt securities. As a result, the yields available from U.S. Government securities are generally lower than the yields available from other debt securities. U.S. Government
securities are guaranteed only as to the timely payment of interest and the payment of principal when held to maturity. While securities issued or guaranteed by U.S. federal government agencies are backed by the full faith and credit of the U.S.
Department of the Treasury, securities issued by government sponsored entities are solely the obligation of the issuer and generally do not carry any guarantee from the U.S. Government.
ABS Risk. ABS are subject to the general debt securities risks described above. In addition, ABS may be less
liquid than other bonds, and may be more sensitive than other bonds to the market’s perception of issuers and creditworthiness of payees, which may result in the Fund experiencing difficulty selling or valuing these securities. ABS markets have
experienced extraordinary weakness and volatility at various times in recent years, and may decline quickly in the event of a substantial economic or market downturn. Accordingly, these securities may be subject to greater risk of default during
periods of economic downturn than other securities, which could result in possible losses to the Fund.
Issuer Risk. The performance of the Fund depends on the performance of individual securities to which the Fund
has exposure. The Fund may be adversely affected if an issuer of underlying securities held by the Fund is unable or
388
unwilling to repay principal or interest when due. Changes in the financial condition or credit rating of an issuer of those securities may cause the
value of the securities to decline.
Management Risk. The Fund is subject to management risk because it is an actively managed portfolio. Milliman
will apply investment techniques and risk analyses in making investment decisions for the Fund, but there can be no guarantee that the Fund will meet its investment objective and/or the Outcomes. In addition, Milliman does not use defensive
strategies or attempt to reduce the Fund’s exposures to poor performing positions during an Outcome Period. This differs from funds that are managed to seek to outperform a benchmark index. Therefore, in the event of a general market decline, the
Fund’s value may fall more than the value of another fund that does attempt to hedge against such market declines.
Market Risk. The Fund could lose money over short periods due to short-term market movements and over longer
periods during more prolonged market downturns. Assets may decline in value due to factors affecting financial markets generally or particular asset classes or industries represented in the markets. The value of a FLEX Option or other asset may
also decline due to general market conditions, economic trends or events that are not specifically related to the issuer of the security or other asset, or due to factors that affect a particular issuer, country, region, market, industry, sector or
asset class.
Non-Diversification Risk. The Fund may invest a relatively high percentage of its assets in a limited number of
issuers. As a result, the Fund may be more susceptible to a single adverse economic or regulatory occurrence affecting one or more of these issuers, experience increased volatility and be highly invested in certain issuers.
Large Shareholder Risk. At times, the Fund may experience adverse effects when certain large shareholders,
including insurance company separate accounts, redeem large amounts of shares of the Fund. Large redemptions may cause the Fund to sell portfolio holdings at times when it would not otherwise do so and may increase transaction costs and/or result
in an increase to the Fund’s expense ratio. A large redemption could be detrimental to the Fund and its remaining shareholders.
Risks of Investing in ETFs. In addition to the risks associated with the underlying assets held by the ETFs in
which the Fund invests, investments in ETFs are also subject to the following additional risks: (i) only authorized participants may engage in transactions directly with ETFs but none are obligated to do so, which could result in an ETF’s shares
trading at a premium or discount to its NAV or possibly face trading halts or delisting; (ii) certain ETFs seek to track the performance of an underlying index and will not attempt to take defensive positions under any market conditions, including
declining markets, which could result in losses; and (iii) because ETF shares trade on the secondary market, there is not guarantee that an active market will be developed or maintained, which could result in the ETF’s shares trading at a premium
or discount to its NAV. Investments in ETFs may involve duplication of management fees and certain other expenses, as the Fund indirectly bears its proportionate share of any expenses paid by the ETFs in which it invests.
Risks of Investing in Money Market Funds. Money market funds seek to preserve the value of shareholder
investments at $1.00 per share, but shareholders, such as the Fund, may still lose money by investing in such funds. In addition, a money market fund may impose a fee upon the sale of its shares or may temporarily suspend the ability to sell shares
if the fund’s liquidity falls below required minimums because of market conditions or other factors. The credit quality of a money market fund’s holdings can change rapidly in certain markets, and the default of a single holding could have an
adverse impact on the fund’s share price. A money market fund’s share price can also be negatively affected during periods of high redemption pressures, illiquid markets, and/or significant market volatility.
Performance
As of the date of this Prospectus, the Fund has not commenced operations and therefore does not have a performance history. Once available, the Fund’s
performance information will be accessible online at www.[________].com and will provide some indication of the risks of investing in the Fund.
Management
389
Investment Adviser
Milliman Financial Risk Management LLC (“Milliman”) serves as investment adviser to the Fund.
Portfolio Managers
The following persons serve as portfolio managers of the Fund.
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Robert T. Cummings, Principal & Head of Portfolio Management at Milliman.
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Maria Schiopu, Principal & Head of Portfolio Management at Milliman.
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Jeff Greco, Principal & Head of Strategy Research at Milliman.
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Jordan Rosenfeld, Portfolio Manager at Milliman.
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Each portfolio manager is jointly and primarily responsible for the day-to-day management of the Fund’s portfolio and has served in such capacity
since the Fund’s inception in 2021.
Purchase and Sale of Shares
Shares are available as underlying investment options for variable insurance contracts and variable life insurance policies (each, a “variable contract,” and, collectively, the “variable contracts”) issued by insurance companies. These insurance companies are the record owners of the separate accounts
holding the Shares. You do not buy, sell or exchange Shares directly; rather, you choose investment options through your variable contracts. The insurance companies then cause the separate accounts to purchase and redeem Shares according to
the investment options you choose.
Tax Information
The dividends and distributions paid by the Fund to the insurance company separate accounts will consist of ordinary income, capital gains, or some
combination of both. Because Shares must be purchased through separate accounts used to fund variable contracts, such dividends and distributions will be exempt from current taxation by owners of variable contracts (each, a “contract owner,” and, collectively “contract owners”) if left to accumulate within a separate account. Consult the variable contract prospectus for additional tax
information.
Payments to Insurance Companies and Other Financial Intermediaries
If you allocate contract value to the Fund through an insurance company or other financial intermediary, the Fund, Milliman, the Fund’s distributor or
their related companies may pay the insurance company and/or its affiliates or other intermediary for the sale of Shares and related services. These payments may create a conflict of interest by influencing the insurance company or other
intermediary and your salesperson to recommend an indirect investment in the Fund over another investment. The prospectus or other disclosure documents for the variable contracts may contain additional information about these payments, if any.
You may also ask your salesperson or financial intermediary, or visit your financial intermediary’s website, for more information.
390
Fund Summary: Milliman S&P 500 & Russell 2000 1-Year Buffer with Stacker
Cap Fund – Nov
Investment Objective
The Fund seeks to provide exposure to the S&P 500 Index, while providing a buffer against the first 10% of losses associated with S&P 500
Index performance and participating in S&P 500 Index gains up to a declared cap, prior to taking into account any fees or expenses or the performance of any fixed income exposure included in the Fund’s portfolio, over the period from November
1, 2021 through October 31, 2022. The Fund also seeks to provide upside exposure to the Russell 2000 Index up to a declared cap, prior to taking into account any fees or expenses or the performance of any fixed income exposure included in the
Fund’s portfolio, over the same period.
Fees and Expenses of the Fund
This table describes the fees and expenses that you may pay if you buy, hold and sell shares of the Fund (“Shares”).
This table and the example below do not include any fees or sales charges imposed by your variable product. If they were included, the expenses listed below would be higher.
Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment)
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Class 3
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Management Fees
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0.49%
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Distribution and Service (12b-1) Fees
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0.25%
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Other Expenses(1)
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0.50%
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Acquired Fund Fees and Expenses(1)
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[_.__]%
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Total Annual Fund Operating Expenses
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1.24%
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Fee Waiver and/or Expense Reimbursement(2)(3)
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(0.25)%
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Total Annual Fund Operating Expenses After Fee Waiver and/or Expense Reimbursement
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0.99%
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(1)
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“Other Expenses” and “Acquired Fund Fees and Expenses” are based on estimated amounts for the current fiscal year.
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(2)
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The Fund’s investment adviser, Milliman Financial Risk Management LLC (“Milliman”), has contractually
agreed to waive advisory fees and/or reimburse expenses to the extent necessary to limit the Fund’s total annual Fund operating expenses (excluding taxes, interest, brokerage fees and commissions, Rule 12b-1 fees, acquired fund fees and
expenses, short-sale dividend expenses, administrative services fees, other expenses that are capitalized in accordance with generally accepted accounting principles, and extraordinary or non-routine expenses not incurred in the
ordinary course of the Fund’s business) to 0.74% of the Fund's average daily net assets (the “Expense Limitation Agreement”) until at least November 1, 2022. During its term, the Expense
Limitation Agreement cannot be terminated or amended to increase the applicable limit without approval of the Board of Trustees of the Trust (the “Board”). Milliman may recoup from the Fund any
advisory fees waived or expenses reimbursed pursuant to the Expense Limitation Agreement for a period of three years from the date on which such waiver or reimbursement occurred; provided, however, that such recoupment shall not be made
if it would cause the Fund’s total annual Fund operating expenses to exceed the lesser of (a) the expense limitation in effect at the time of the reimbursement, or (b) the expense limitation in effect at the time of recoupment, if any.
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(3)
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In addition to the Expense Limitation Agreement, Milliman has contractually agreed to waive its advisory fees in an amount equal to the Fund’s
acquired fund fees and expenses until at least November 1, 2022 (the “Fee Waiver”). This contract cannot be terminated or modified without the consent of the Board.
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Example
This example is intended to help you compare the cost of investing in the Fund with the cost of investing in other funds. This example assumes that you
invest $10,000 in the Fund for the time periods indicated and then sell all of your Shares at the end of those periods. This example also assumes that your investment has a 5% return each year and that the Fund’s operating expenses remain at
current levels and that the Expense Limitation Agreement and Fee Waiver remain in place for their contractual periods. Although your actual costs may be higher or lower, your costs, based on these assumptions, would be:
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1 Year
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3 Years
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Class 3
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$104
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$384
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391
This example does not include any fees or sales charges imposed by your variable product. If they were included, the expenses listed above would be
higher.
Portfolio Turnover
The Fund pays transaction costs, such as commissions, when it purchases and sells securities (or “turns over” its portfolio). A higher portfolio turnover
will cause the Fund to incur additional transaction costs. These costs, which are not reflected in Total Annual Fund Operating Expenses or in the example, may affect the Fund’s performance. Because the Fund has not yet commenced investment
operations, no portfolio turnover information is available at this time.
Principal Investment Strategies
The Fund seeks to achieve its investment objective by transacting in FLexible EXchange® Options (“FLEX Options”)
and by separately maintaining a collateral portfolio (the “Collateral Portfolio”), which is designed primarily to serve as margin or collateral for the Fund’s FLEX Options positions and secondarily to
enhance the Fund’s upside S&P 500 Index and Russell 2000 Index FLEX Options’ exposure (i.e., by utilizing anticipated income to measure the ability to purchase additional FLEX Options). FLEX Options
are exchange-traded options contracts with uniquely customizable terms. In general, an options contract is an agreement between a buyer and seller that gives the purchaser of the option the right to buy or sell a particular asset at a specified
future date at an agreed upon price, commonly known as the “strike price.” The reference assets for the Fund’s FLEX Options positions will include the S&P 500 Index, the Russell 2000 Index (the “Secondary
Index,” and together with the S&P 500 Index, the “Reference Indices,” and, each, a “Reference Index”), and certain exchange-traded funds (“ETFs”), as described further below. The S&P 500 Index is a large-capitalization, market-weighted, U.S. equities index that tracks the price (excluding dividends) of
500 leading companies in leading industries of the U.S. economy. The Secondary Index is [a float-adjusted, market capitalization-weighted index that is designed to measure the performance of the small-capitalization segment of the U.S. equity
market, as defined by FTSE Russell].
The Collateral Portfolio may be invested in short-term fixed-income securities, including corporate bonds and other corporate debt securities,
asset-backed securities (“ABS”), securities issued by the U.S. Government or its agencies and instrumentalities, securities issued by non-U.S. governments or their agencies and instrumentalities, money
market securities and funds, other interest-bearing instruments, cash, ETFs that primarily invest in any of the foregoing instruments, options on ETFs and options box spreads. An options box spread is the combination of different options trades
that have offsetting spreads (e.g., purchases and sales on the same underlying instrument, such as an index or an ETF, but with different strike prices and/or expiration dates) for the purpose of
generating income. The Fund may invest in short-term fixed income securities or other instruments, including through ETFs, of any maturity and credit quality. The Fund will generally invest up to 35% of its net assets in one or more ETFs that
provide exposure to investment grade corporate bonds.
Due to the unique mechanics of the Fund’s strategy, the return an investor can expect to receive from an investment in the Fund has characteristics that
are distinct from the returns of many other investment vehicles. It is important that an investor understand these characteristics before making an investment in the Fund.
In seeking to achieve its investment objective, the Fund seeks to produce pre-determined outcomes (the “Outcomes”)
that are based upon the performance of the Reference Indices over a one-year period (the “Outcome Period”). The initial Outcome Period for the Fund is November 1, 2021 through October 31, 2022. Following the
initial Outcome Period, each subsequent Outcome Period will be a one-year period commencing upon the expiration of the prior Outcome Period. The Fund seeks to achieve the Outcomes by purchasing and writing (selling) FLEX Options to create layers
within the Fund’s portfolio. One layer is designed to produce returns that correlate to those of the S&P 500 Index for the Outcome Period if the S&P 500 Index experiences gains during that time, subject to an upside return cap (the “S&P 500 Index Cap”), as described below. A second layer is designed to produce returns that correlate to any upside market performance of the Secondary Index over the
Outcome Period, subject to an upside return cap (the “Secondary Index Cap,” and, together with the S&P 500 Index Cap, the “Index Caps,” and, each, an “Index Cap”), as described below. A third layer is designed to produce returns that correlate to those of the S&P 500 Index for the Outcome Period that are buffered up to 10% if the S&P 500 Index
experiences losses during that time (the “Buffer”). There is no guarantee that the Fund will be successful in its attempt to produce
392
returns that correlate to those of the S&P 500 Index or the Secondary Index up to the applicable Index Caps or produce buffered
returns against the Fund’s S&P 500 Index exposure.
Milliman Financial Risk Management, LLC (“Milliman”), the investment adviser of the Fund, seeks to establish the
Buffer by writing one put FLEX Option on the S&P 500 Index with a strike price that is 10% lower than the value of the S&P 500 Index at the beginning of the Outcome Period.
Milliman seeks to establish the Index Caps by purchasing long call FLEX Options on each Reference Index with a strike price approximately equal to the
value of the respective Reference Index at the beginning of the Outcome Period. Milliman purchases these FLEX Options with a portion of the Fund’s net assets plus (i) the cash received from writing the put FLEX Option designed to create the
Buffer, (ii) additional cash received by utilizing FLEX Options to create a put spread (the “Put Spread Strategy”) on fixed income securities and/or one or more ETFs that provide exposure to fixed income
securities, and (iii) yield received from the Collateral Portfolio. Milliman seeks to achieve the Put Spread Strategy for the Fund by writing a put FLEX Option on an underlying asset at a strike price at or lower than the underlying asset’s
market price or current value at the beginning of the Outcome Period, and buying a put FLEX Option on the same underlying asset at a lower strike price than the written put FLEX Option.
The Index Caps represent the maximum rate of return in each Reference Index that an investor can achieve from an investment in the Fund over the Outcome
Period. Milliman calculates the Index Caps based upon (i) its evaluation of prevailing market conditions on the first day of the Outcome Period and (ii) the total number of long call FLEX Options on each Reference Index that it is able to purchase
at that time. As of the date of this Prospectus, and assuming current market conditions persist, Milliman expects that the Index Caps will be between the below ranges (both gross and net of Fund fees and expenses). Any fees or expenses imposed by
your variable product, and any other expenses incurred by the Fund, will have the effect of further reducing each Index Cap. In addition, in certain market conditions, the performance of the Collateral Portfolio
and the Put Spread Strategy could cause the Fund to underperform relative to the Reference Indices, which could further limit Fund gains below the Index Caps, notwithstanding any performance of the Reference Indices in excess of the Index Caps.
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Estimated Index Cap Ranges
(As of [___])
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Prior to Taking into Account Fund Fees and Expenses
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After Taking into Account Fund Fees and Expenses
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|
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S&P 500 Index Cap
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||
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Class 3
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[__]% and [__]%
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[__]% and [__]%
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Secondary Index Cap
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||
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Class 3
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[__]% and [__]%
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[__]% and [__]%
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The Buffer is only operative against the first 10% of losses in the Fund’s S&P 500 Index exposure for the Outcome Period. If the S&P 500 Index
decreases in value by more than 10% during the Outcome Period, the Fund (and therefore investors in Shares) will experience all subsequent losses in the Fund’s S&P 500 Index exposure on a one-to-one basis for the Outcome Period. The Fund
seeks to produce buffered returns against its S&P 500 Index exposure prior to taking into account any fees or expenses or the performance of the Collateral Portfolio or the Put Spread Strategy. The Buffer
is not operative against losses in the Collateral Portfolio or the Put Spread Strategy. If the Collateral Portfolio and/or the Put Spread Strategy experiences losses, it could have the effect of reducing the impact of, or completely
eliminating, the Buffer on the Fund’s S&P 500 Index exposure. In certain market conditions, the performance of the Collateral Portfolio and/or the Put Spread Strategy could cause the Fund to significantly underperform the S&P 500
Index. The following table reflects the Buffer both gross and net of Fund fees and expenses:
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Share Class
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Buffer
(As of [___])
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Prior to Taking into Account Fund Fees and Expenses
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After Taking into Account Fund Fees and Expenses
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Class 3
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10%
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[__]%
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393
Because the Fund also seeks to provide only upside exposure to the Secondary Index during the Outcome Period, the Fund’s NAV will not be impacted by any
losses experienced by the Secondary Index when measured from the beginning to the end of the Outcome Period. If the Secondary Index increases in value during the Outcome Period and later decreases in value during the Outcome Period, the Fund’s NAV
will reflect any such decreases until the Secondary Index reaches its initial value (measured as of the first day of the Outcome Period). If the Secondary Index decreases in value over the course of an entire Outcome Period, the Fund’s NAV will not
reflect such losses; therefore, the Fund’s overall performance will be approximately that of the S&P 500 Index for the Outcome Period, subject to the Buffer and the S&P 500 Index Cap.
The definitive Index Caps and Buffer will be set forth on the Fund’s website. The Fund’s website will also provide information relating to the
Outcomes on a daily basis, including the Fund’s position relative to the Index Caps and the Buffer. You may also contact your insurance company or other financial intermediary for more information.
Additionally, the Fund’s net asset value (“NAV”) will not increase or decrease at the same rate as the Reference
Indices because the Fund’s strategy relies upon the performance of the Collateral Portfolio and the Put Spread Strategy, in addition to the value of the Fund’s FLEX Options positions on the Reference Indices. While Milliman anticipates that the
Fund’s NAV will generally move in the same direction as the S&P 500 Index, and correspond to any upside returns of the Secondary Index (meaning that the Fund’s NAV will generally increase if the Reference Indices experience gains or decrease if
the Reference Indices experience losses), the Fund’s NAV may not decrease at the same rate as the Reference Indices (especially when factoring in the performance of the Collateral Portfolio and the Put Spread Strategy) and will not increase at the
same rate as the Reference Indices (especially when factoring in the Index Caps and the performance of the Collateral Portfolio and the Put Spread Strategy). Similarly, the amount of time remaining until the end of the Outcome Period also affects
the impact of the Buffer on the Fund’s NAV, because the Buffer may not be in full effect prior to the end of the Outcome Period.
The FLEX Options utilized in the Fund’s portfolio are each set to expire on the last day of the Outcome Period. The customizable nature of FLEX Options
will allow Milliman to select the strike price at which each FLEX Option will be exercised at the expiration of the FLEX Option term. At the commencement of the Outcome Period, Milliman will specifically select the strike price for each FLEX Option
in a manner designed to achieve the Outcomes when the FLEX Options are exercised on the final day of the Outcome Period, depending on the anticipated performance of the Reference Indices, the Collateral Portfolio and the Put Spread Strategy over
the duration of that Outcome Period.
The hypothetical graphical illustrations provided below are designed to illustrate the Outcomes based upon the
hypothetical performance of the Reference Indices for an investor who holds Shares for the entirety of the Outcome Period. The hypothetical graphical illustrations do not include any fees or expenses
imposed by your variable product or expenses incurred by the Fund, and do not reflect the performance of the Collateral Portfolio or the Put Spread Strategy. Additional hypothetical graphical representations of the Outcomes are provided in
“Additional Information About the Funds and the Risks of Investing.” There is no guarantee that the Fund will be successful in its attempt to achieve the Outcomes for the Outcome Period.
394
The following table contains hypothetical examples designed to illustrate the Outcomes the Fund seeks to
achieve over the Outcome Period, based upon the performance of the Reference Indices from (100)% to 100% after taking into account the Index Caps and the Buffer, but prior to taking into account any fees or
expenses or the performance of the Collateral Portfolio or the Put Spread Strategy. The table is provided for illustrative purposes only and does not provide every possible performance scenario for Shares over
the course of the Outcome Period. There is no guarantee that the Fund will be successful in its attempt to achieve the Outcomes for an Outcome Period. The table is not intended to predict or project the performance of the FLEX Options or the Fund. Investors should not take this information as an
assurance of the expected performance of the Reference Indices or the Fund. Actual Fund performance will vary with fluctuations in the performance of the Collateral Portfolio and the Put Spread Strategy, in addition to the value of the
Fund’s FLEX Options positions on the Reference Indices, during the Outcome Period, among other factors. The performance of the Collateral Portfolio and the Put Spread Strategy
could significantly impact the performance of the Fund, which could prevent the Fund from achieving the Outcomes that it seeks to produce. The table does not reflect any fees or expenses imposed by your variable product or expenses
incurred by the Fund. If it did, the returns shown for the Fund would be lower. Please refer to the Fund’s website, which provides updated information relating to this table on a daily basis throughout the Outcome Period. Please contact your
insurance company or other financial intermediary for more information.
395
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Index/Fund
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Hypothetical Performance1
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S&P 500 Index Price Performance
|
(100)%
|
(50)%
|
(20)%
|
(10)%
|
(5)%
|
0%
|
5%
|
10%
|
15%
|
20%
|
50%
|
100%
|
|
Secondary Index Price Performance
|
(100)%
|
(50)%
|
(20)%
|
(10)%
|
(5)%
|
0%
|
5%
|
10%
|
15%
|
20%
|
50%
|
100%
|
|
Fund Performance at NAV
|
(90)%
|
(40)%
|
(10)%
|
0%2
|
0%2
|
0%
|
10%3
|
14%3
|
14%3
|
14%3
|
14%3
|
14%3
|
| 1 |
Does not take into account any fees or expenses or the performance of the Collateral Portfolio or the Put Spread Strategy.
|
| 2 |
Reflects the impact of the Buffer.
|
| 3 |
Reflects the impact of assumed Index Caps of 7% per index, 14% total.
|
Understanding Outcomes. The Outcomes the Fund seeks to achieve are measured based upon the
Fund’s NAV on the first day of the Outcome Period. The Outcome Period begins on the day Milliman transacts in the FLEX Options on behalf of the Fund, and ends on the day those FLEX Options expire. An investor who
purchases Shares after the commencement of the Outcome Period will likely have purchased Shares at a different NAV than the NAV on the first day of the Outcome Period (the NAV upon which the Outcomes are based) and may experience investment
outcomes very different from those the Fund seeks to achieve, especially when factoring in any fees or expenses or the performance of the Collateral Portfolio and the Put Spread Strategy. An investor who redeems Shares prior to the end of the
Outcome Period may also experience investment outcomes very different from those the Fund seeks to achieve. The Outcomes are designed with the expectation that an investor will hold Shares on the day that Milliman transacts in the FLEX Options on
behalf of the Fund, and on the day those FLEX Options expire. There is no guarantee that the Fund will be successful in its attempt to achieve the Outcomes.
Understanding the Index Caps. Unlike other investment products, the potential returns an
investor can receive from an investment in the Fund are subject to the Index Caps. This means that if one or both of the Reference Indices experience gains for the Outcome Period, an investor in the Fund will only
experience those gains up to the applicable Index Cap. Milliman calculates the Index Caps for each Outcome Period based upon (i) its evaluation of prevailing market conditions on the first day of the Outcome Period and (ii) the total
number of long call FLEX Options on each Reference Index that it is able to purchase at that time. If an investor is considering purchasing Shares during the Outcome Period, and the Fund’s NAV has increased in
value to a level near one or both of the Index Caps, an investor purchasing Shares at that price will have limited to no gains available for the remainder of the Outcome Period, but will remain vulnerable to significant downside risks (with
respect to the S&P 500 Index FLEX Options’ exposure). In certain market conditions, the performance of the Collateral Portfolio and the Put Spread Strategy could cause the Fund to underperform
relative to the Reference Indices, which could further limit Fund gains below the Index Caps, notwithstanding any performance of the Reference Indices in excess of the Index Caps.
Understanding the Buffer. The Buffer that the Fund seeks to provide is only operative
against the first 10% of losses in the Fund’s S&P 500 Index exposure for the Outcome Period. If an investor is considering purchasing Shares during the Outcome Period, and the S&P 500 Index has decreased
in value by an amount equal to or greater than 10%, an investor purchasing Shares at that time will be able to participate in any gains thereafter (up to the Index Caps), but will not benefit from the Buffer that the Fund seeks to offer for the
remainder of the Outcome Period if the losses continue to be equal to or greater than 10% during that period. Conversely, if an investor is considering purchasing Shares during the Outcome Period, and the Fund’s NAV has increased in value, then
an investor may experience losses before implementation of the Buffer that the Fund seeks to provide. While the Fund seeks to produce returns that correlate to those of the S&P 500 Index for the Outcome Period that are buffered up to
10% (prior to taking into account any fees or expenses or the performance of the Collateral Portfolio or the Put Spread Strategy) for investors who hold Shares for the entire Outcome Period, there is no guarantee it will successfully do so. In addition, the Buffer is not operative against losses in the Collateral Portfolio or the Put Spread Strategy. If the Collateral Portfolio and/or the Put Spread Strategy experiences losses, it could have the
effect of reducing the impact of, or completely eliminating, the Buffer on the Fund’s S&P 500 Index exposure. In certain market conditions, the performance of the Collateral Portfolio and/or the Put Spread Strategy could cause the Fund to
significantly underperform the S&P 500 Index. Investors who purchase Shares at the beginning of the Outcome Period may lose their entire
396
investment. Investors who purchase Shares after the Outcome Period has begun may also lose their entire investment. An
investment in the Fund is only appropriate for investors willing to bear those losses.
Fund Rebalance. Milliman implements the Fund’s strategy on an annual basis, seeking to
produce the Outcomes for an Outcome Period. On the last business day of any stated Outcome Period, all of the Fund’s existing FLEX Options, which includes those used to establish the Buffer, the Index Caps and the Put Spread Strategy, will expire
and Milliman will transact in a new set of FLEX Options on the same business day, which will commence a new Outcome Period beginning the following business day. At that same time, Milliman will also evaluate whether to make any adjustments to the
Collateral Portfolio. Accordingly, Shares can be held indefinitely if investors determine to participate in additional Outcome Periods.
Approximately one week prior to the end of each Outcome Period, the Fund will file a prospectus supplement, which will notify existing investors of
(i) the date on which the existing Outcome Period will end; (ii) the date on which the new Outcome Period will commence; and (iii) the anticipated ranges of the Index Caps that will be used for the new Outcome Period. Immediately preceding the
commencement date of the new Outcome Period, the Fund will file a prospectus supplement disclosing the Fund’s final Index Caps (both gross and net of Fund fees and expenses) for the new Outcome Period. This information will also be available
online at www.[___________].com, and on your insurance company’s website. Please contact your insurance company or other financial intermediary for more information.
Fund Classification. The Fund is classified as “non-diversified” under the Investment
Company Act of 1940, as amended (the “1940 Act”).
Principal Risks
You could lose money by investing in the Fund. An investment in the Fund is not a deposit of a bank and is not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other governmental agency. There can be no assurance that the Fund’s investment objectives will be achieved.
Downside Loss Buffer Risk. There can be no guarantee that the Fund will be successful in its strategy to
buffer against S&P 500 Index losses if the S&P 500 Index decreases in value over the Outcome Period. The Fund’s strategy is designed to produce returns that correlate to those of the S&P 500 Index, subject to the S&P 500 Index
Cap, while limiting downside S&P 500 Index losses and providing additional upside exposure to the Secondary Index, subject to the Secondary Index Cap, if Shares are bought on the day on which Milliman transacts in the FLEX Options on behalf
of the Fund and held until those FLEX Options expire at the end of each Outcome Period. The success of the Buffer also depends upon the performance of the Collateral Portfolio and the Put Spread Strategy. If
the Collateral Portfolio and/or the Put Spread Strategy experiences losses, it could have the effect of reducing the impact of, or completely eliminating, the Buffer on the Fund’s S&P 500 Index exposure. In certain market conditions, the
performance of the Collateral Portfolio and/or the Put Spread Strategy could cause the Fund to significantly underperform the S&P 500 Index. Despite the intended Buffer, an investor could lose their entire investment. In the
event an investor purchases Shares after the date on which Milliman transacted in the FLEX Options on behalf of the Fund, or redeems Shares prior to the expiration of those FLEX Options, the Buffer that the Fund seeks to provide may not be
available or fully applicable.
Risk of Capped Upside Returns. The Fund’s strategy is designed to produce returns that correlate to those of the
Reference Indices up to the Index Caps if Shares are bought on the day on which Milliman transacts in the FLEX Options on behalf of the Fund and held until those FLEX Options expire at the end of the Outcome Period, subject to the Index Caps. In
the event that one or both of the Reference Indices experience gains during the Outcome Period, the Fund will only participate in those gains up to the applicable Index Cap. In the event that one or both Reference Indices experience gains in excess
of the applicable Index Cap over the duration of the Outcome Period, the Fund will not participate in those excess gains. Because the Fund’s strategy provides capped exposure to two Reference Indices, the Index Caps may be lower than if the Fund
provided capped exposure to only a single Reference Index. In the event an investor purchases Shares after the date on which the FLEX Options were entered into and the Fund has risen in value to a level near to an Index Cap, there may be little or
no ability for that investor to experience an investment gain on their Shares relating to that Reference Index. In certain market conditions, the performance of the Collateral Portfolio and the Put Spread
Strategy could cause the Fund to
397
underperform relative to the Reference Indices, which could further limit Fund gains below the Index Caps, notwithstanding any
performance of the Reference Indices in excess of the Index Caps. An investor should consider the amount of the Index Caps, and the Fund’s position relative to each Index Cap, before investing in the Fund.
Index Cap Change Risk. Because the Index Caps for each Outcome Period are calculated based upon (i) Milliman’s
evaluation of prevailing market conditions on the first day of the Outcome Period and (ii) the total number of long call FLEX Options on the Reference Indices that Milliman is able to purchase at that time, the Index Caps may rise or fall from one
Outcome Period to the next. Any change in the Index Caps could be significant and they are unlikely to remain the same for consecutive Outcome Periods.
FLEX Options Risk. The Fund will transact in FLEX Options issued and guaranteed for settlement by the OCC. The
Fund bears the risk that the OCC will be unable or unwilling to perform its obligations under the FLEX Options contracts, which could result in significant losses to the Fund. In less liquid markets, terminating a FLEX Option may require the
payment of a premium or acceptance of a discounted price, and may take longer to complete. In addition, a less liquid trading market may adversely impact the value of the Fund’s FLEX Options and therefore the NAV of the Fund. In addition, the value
of the Fund’s FLEX Options positions is not anticipated to increase or decrease at the same rate as the reference asset; and while it is anticipated that they will generally move in the same direction, it is possible that they may move in different
directions. Certain FLEX Options positions may also expire worthless. The use of FLEX Options involves leverage, which can cause the Fund’s portfolio to be more volatile than if the portfolio had not been leveraged. Leverage can significantly
magnify the effect of price movements of the reference asset, disproportionately increasing the Fund’s losses and reducing the Fund’s opportunities for gains when the reference asset changes in unexpected ways. In some instances, such leverage
could result in losses that exceed the original amount invested.
Investment Objective and Outcomes Risk. There is no guarantee that the Fund will be successful in its attempt
to achieve its investment objective and/or the Outcomes, and an investor could lose some or all of their investment in the Fund. Certain circumstances under which the Fund might not achieve its objective and/or the Outcomes include, but are not
limited to (i) if the Fund disposes of FLEX Options, (ii) if the Fund is unable to maintain the proportional relationship based on the number of FLEX Options in the Fund’s portfolio, (iii) significant accrual of Fund expenses in connection with
effecting the Fund’s principal investment strategy, (iv) losses incurred by the Fund’s holdings in the Collateral Portfolio and/or losses resulting from the Put Spread Strategy, or (iv) adverse tax law changes affecting the treatment of FLEX
Options.
Tax Risk. The Fund intends to elect, and to qualify each year, to be treated as a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”). As a RIC, the Fund will not be subject to U.S. federal income tax on the portion
of its net investment income and net capital gain that it distributes to shareholders, provided that it satisfies certain requirements of the Code. To maintain its status as a RIC, the Fund must meet certain income, diversification and
distributions tests. For purposes of the diversification test, the identification of the issuer (or, in some cases, issuers) of a particular Fund investment can depend on the terms and conditions of that investment. In particular, there is no
published IRS guidance or case law on how to determine the “issuer” of certain derivatives that the Fund will enter into and the Fund has not received a private letter ruling on this point. Therefore, there is a risk that the Fund will not meet the
Code’s diversification requirements and will not qualify, or will be disqualified, as a RIC. If the Fund does not qualify as a RIC for any taxable year and certain relief provisions are not available, the Fund’s taxable income will be subject to
tax at the Fund level and to a further tax at the shareholder level when such income is distributed.
The Fund also intends to comply with the diversification requirements of Section 817(h) of the Code, and the regulations thereunder, relating to the
tax-deferred status of variable accounts that are based on insurance company separate accounts (referred to as “segregated asset accounts” for federal income tax purposes). These diversification requirements apply in addition to the RIC
diversification requirements discussed above. There also is no published guidance or case law on how to determine the “issuer” of the derivatives referred to above for purposes of the diversification requirements of Section 817(h) of the Code and
the Fund has not received a private letter ruling on this point. If these requirements are not met, or under other circumstances, such as if the Fund does not qualify as a RIC for any taxable year, it is possible that the contract owners (rather
than the insurance company) will be treated for federal income tax purposes as the taxable owners of the assets held by the segregated asset accounts.
398
Clearing Member Default Risk. The Fund will hold FLEX Options through accounts at members of clearing houses (“clearing members”) rather than a bank or a broker. Assets deposited by the Fund with any clearing member as margin for its FLEX Options positions may, in certain circumstances, be used to satisfy losses of other
clients of the Fund’s clearing member where such assets may be held in commingled omnibus accounts. In addition, although clearing members guarantee performance of their clients’ obligations to the clearing house, there is a risk that the assets of
the Fund might not be fully protected in the event of the clearing member’s bankruptcy, as the Fund would be limited to recovering only a pro rata share of all available funds segregated on behalf of the
clearing member’s customers for the relevant account class.
Debt Securities Risk. The prices of debt securities will be affected by changes in interest rates, the
creditworthiness of the issuer and other factors. These risks could affect the value of investments in which the Fund invests, possibly causing the Fund’s NAV to be reduced and fluctuate more than other types of investments. During periods of
falling interest rates, an issuer of a callable bond may repay the security before its stated maturity, and the Fund may have to reinvest the proceeds in securities with lower yields, which would result in a decline in the Fund’s income, or in
securities with greater risks or with other less favorable features. Changing interest rates, including rates that fall below zero, may have unpredictable effects on markets, result in heightened market volatility and detract from the Fund’s
performance to the extent the Fund is exposed to such interest rates. An increase in interest rates will generally cause the value of fixed-income securities held by the Fund to decline, may lead to heightened volatility in the fixed-income
markets and may adversely affect the liquidity of certain fixed-income investments, including those held by the Fund. Risks associated with rising interest rates are heightened given that interest rates in the U.S. are near historic lows.
Adjustable-rate instruments also react to interest rate changes in a similar manner, although generally to a lesser degree (depending, however, on the characteristics of the reset terms, including the index chosen, frequency of reset and reset
caps or floors, among other factors). Interest rate sensitivity is generally more pronounced and less predictable in instruments with uncertain payment or prepayment schedules and also for those with longer maturities.
Foreign Securities and Credit Exposure Risk. U.S. dollar-denominated securities carrying foreign credit exposure
may be affected by unfavorable political, economic or governmental developments that could affect payments of principal and interest. Furthermore, the value of the Fund’s foreign investments (whether direct or indirect) may be adversely affected by
political and social instability in their home countries, by changes in economic or taxation policies in those countries, or by the difficulty in enforcing obligations in those countries. Foreign companies generally may be subject to less stringent
regulations than U.S. companies, including financial reporting requirements and auditing and accounting controls. As a result, there generally is less publicly available information about foreign companies than about U.S. companies. Trading in many
foreign securities may be less liquid and more volatile than U.S. securities due to the size of the market or other factors.
U.S. Government Securities Risk. U.S. Government securities are subject to interest rate risk but generally do
not involve the credit risks associated with investments in other types of debt securities. As a result, the yields available from U.S. Government securities are generally lower than the yields available from other debt securities. U.S. Government
securities are guaranteed only as to the timely payment of interest and the payment of principal when held to maturity. While securities issued or guaranteed by U.S. federal government agencies are backed by the full faith and credit of the U.S.
Department of the Treasury, securities issued by government sponsored entities are solely the obligation of the issuer and generally do not carry any guarantee from the U.S. Government.
ABS Risk. ABS are subject to the general debt securities risks described above. In addition, ABS may be less
liquid than other bonds, and may be more sensitive than other bonds to the market’s perception of issuers and creditworthiness of payees, which may result in the Fund experiencing difficulty selling or valuing these securities. ABS markets have
experienced extraordinary weakness and volatility at various times in recent years, and may decline quickly in the event of a substantial economic or market downturn. Accordingly, these securities may be subject to greater risk of default during
periods of economic downturn than other securities, which could result in possible losses to the Fund.
Issuer Risk. The performance of the Fund depends on the performance of individual securities to which the Fund
has exposure. The Fund may be adversely affected if an issuer of underlying securities held by the Fund is unable or
399
unwilling to repay principal or interest when due. Changes in the financial condition or credit rating of an issuer of those securities may cause the
value of the securities to decline.
Management Risk. The Fund is subject to management risk because it is an actively managed portfolio. Milliman
will apply investment techniques and risk analyses in making investment decisions for the Fund, but there can be no guarantee that the Fund will meet its investment objective and/or the Outcomes. In addition, Milliman does not use defensive
strategies or attempt to reduce the Fund’s exposures to poor performing positions during an Outcome Period. This differs from funds that are managed to seek to outperform a benchmark index. Therefore, in the event of a general market decline, the
Fund’s value may fall more than the value of another fund that does attempt to hedge against such market declines.
Market Risk. The Fund could lose money over short periods due to short-term market movements and over longer
periods during more prolonged market downturns. Assets may decline in value due to factors affecting financial markets generally or particular asset classes or industries represented in the markets. The value of a FLEX Option or other asset may
also decline due to general market conditions, economic trends or events that are not specifically related to the issuer of the security or other asset, or due to factors that affect a particular issuer, country, region, market, industry, sector or
asset class.
Non-Diversification Risk. The Fund may invest a relatively high percentage of its assets in a limited number of
issuers. As a result, the Fund may be more susceptible to a single adverse economic or regulatory occurrence affecting one or more of these issuers, experience increased volatility and be highly invested in certain issuers.
Large Shareholder Risk. At times, the Fund may experience adverse effects when certain large shareholders,
including insurance company separate accounts, redeem large amounts of shares of the Fund. Large redemptions may cause the Fund to sell portfolio holdings at times when it would not otherwise do so and may increase transaction costs and/or result
in an increase to the Fund’s expense ratio. A large redemption could be detrimental to the Fund and its remaining shareholders.
Risks of Investing in ETFs. In addition to the risks associated with the underlying assets held by the ETFs in
which the Fund invests, investments in ETFs are also subject to the following additional risks: (i) only authorized participants may engage in transactions directly with ETFs but none are obligated to do so, which could result in an ETF’s shares
trading at a premium or discount to its NAV or possibly face trading halts or delisting; (ii) certain ETFs seek to track the performance of an underlying index and will not attempt to take defensive positions under any market conditions, including
declining markets, which could result in losses; and (iii) because ETF shares trade on the secondary market, there is not guarantee that an active market will be developed or maintained, which could result in the ETF’s shares trading at a premium
or discount to its NAV. Investments in ETFs may involve duplication of management fees and certain other expenses, as the Fund indirectly bears its proportionate share of any expenses paid by the ETFs in which it invests.
Risks of Investing in Money Market Funds. Money market funds seek to preserve the value of shareholder
investments at $1.00 per share, but shareholders, such as the Fund, may still lose money by investing in such funds. In addition, a money market fund may impose a fee upon the sale of its shares or may temporarily suspend the ability to sell shares
if the fund’s liquidity falls below required minimums because of market conditions or other factors. The credit quality of a money market fund’s holdings can change rapidly in certain markets, and the default of a single holding could have an
adverse impact on the fund’s share price. A money market fund’s share price can also be negatively affected during periods of high redemption pressures, illiquid markets, and/or significant market volatility.
Performance
As of the date of this Prospectus, the Fund has not commenced operations and therefore does not have a performance history. Once available, the Fund’s
performance information will be accessible online at www.[________].com and will provide some indication of the risks of investing in the Fund.
Management
400
Investment Adviser
Milliman Financial Risk Management LLC (“Milliman”) serves as investment adviser to the Fund.
Portfolio Managers
The following persons serve as portfolio managers of the Fund.
|
●
|
Robert T. Cummings, Principal & Head of Portfolio Management at Milliman.
|
|
●
|
Maria Schiopu, Principal & Head of Portfolio Management at Milliman.
|
|
●
|
Jeff Greco, Principal & Head of Strategy Research at Milliman.
|
|
●
|
Jordan Rosenfeld, Portfolio Manager at Milliman.
|
Each portfolio manager is jointly and primarily responsible for the day-to-day management of the Fund’s portfolio and has served in such capacity
since the Fund’s inception in 2021.
Purchase and Sale of Shares
Shares are available as underlying investment options for variable insurance contracts and variable life insurance policies (each, a “variable contract,” and, collectively, the “variable contracts”) issued by insurance companies. These insurance companies are the record owners of the separate accounts
holding the Shares. You do not buy, sell or exchange Shares directly; rather, you choose investment options through your variable contracts. The insurance companies then cause the separate accounts to purchase and redeem Shares according to
the investment options you choose.
Tax Information
The dividends and distributions paid by the Fund to the insurance company separate accounts will consist of ordinary income, capital gains, or some
combination of both. Because Shares must be purchased through separate accounts used to fund variable contracts, such dividends and distributions will be exempt from current taxation by owners of variable contracts (each, a “contract owner,” and, collectively “contract owners”) if left to accumulate within a separate account. Consult the variable contract prospectus for additional tax
information.
Payments to Insurance Companies and Other Financial Intermediaries
If you allocate contract value to the Fund through an insurance company or other financial intermediary, the Fund, Milliman, the Fund’s distributor or
their related companies may pay the insurance company and/or its affiliates or other intermediary for the sale of Shares and related services. These payments may create a conflict of interest by influencing the insurance company or other
intermediary and your salesperson to recommend an indirect investment in the Fund over another investment. The prospectus or other disclosure documents for the variable contracts may contain additional information about these payments, if any.
You may also ask your salesperson or financial intermediary, or visit your financial intermediary’s website, for more information.
401
Fund Summary: Milliman S&P 500 & Russell 2000 1-Year Buffer with Stacker
Cap Fund – Dec
Investment Objective
The Fund seeks to provide exposure to the S&P 500 Index, while providing a buffer against the first 10% of losses associated with S&P 500
Index performance and participating in S&P 500 Index gains up to a declared cap, prior to taking into account any fees or expenses or the performance of any fixed income exposure included in the Fund’s portfolio, over the period from December
1, 2021 through November 30, 2022. The Fund also seeks to provide upside exposure to the Russell 2000 Index up to a declared cap, prior to taking into account any fees or expenses or the performance of any fixed income exposure included in the
Fund’s portfolio, over the same period.
Fees and Expenses of the Fund
This table describes the fees and expenses that you may pay if you buy, hold and sell shares of the Fund (“Shares”).
This table and the example below do not include any fees or sales charges imposed by your variable product. If they were included, the expenses listed below would be higher.
Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment)
|
Class 3
|
|
|
Management Fees
|
0.49%
|
|
Distribution and Service (12b-1) Fees
|
0.25%
|
|
Other Expenses(1)
|
0.50%
|
|
Acquired Fund Fees and Expenses(1)
|
[_.__]%
|
|
Total Annual Fund Operating Expenses
|
1.24%
|
|
Fee Waiver and/or Expense Reimbursement(2)(3)
|
(0.25)%
|
|
Total Annual Fund Operating Expenses After Fee Waiver and/or Expense Reimbursement
|
0.99%
|
|
(1)
|
“Other Expenses” and “Acquired Fund Fees and Expenses” are based on estimated amounts for the current fiscal year.
|
|
(2)
|
The Fund’s investment adviser, Milliman Financial Risk Management LLC (“Milliman”), has contractually
agreed to waive advisory fees and/or reimburse expenses to the extent necessary to limit the Fund’s total annual Fund operating expenses (excluding taxes, interest, brokerage fees and commissions, Rule 12b-1 fees, acquired fund fees and
expenses, short-sale dividend expenses, administrative services fees, other expenses that are capitalized in accordance with generally accepted accounting principles, and extraordinary or non-routine expenses not incurred in the
ordinary course of the Fund’s business) to 0.74% of the Fund's average daily net assets (the “Expense Limitation Agreement”) until at least November 1, 2022. During its term, the Expense
Limitation Agreement cannot be terminated or amended to increase the applicable limit without approval of the Board of Trustees of the Trust (the “Board”). Milliman may recoup from the Fund any
advisory fees waived or expenses reimbursed pursuant to the Expense Limitation Agreement for a period of three years from the date on which such waiver or reimbursement occurred; provided, however, that such recoupment shall not be made
if it would cause the Fund’s total annual Fund operating expenses to exceed the lesser of (a) the expense limitation in effect at the time of the reimbursement, or (b) the expense limitation in effect at the time of recoupment, if any.
|
|
(3)
|
In addition to the Expense Limitation Agreement, Milliman has contractually agreed to waive its advisory fees in an amount equal to the Fund’s
acquired fund fees and expenses until at least November 1, 2022 (the “Fee Waiver”). This contract cannot be terminated or modified without the consent of the Board.
|
Example
This example is intended to help you compare the cost of investing in the Fund with the cost of investing in other funds. This example assumes that you
invest $10,000 in the Fund for the time periods indicated and then sell all of your Shares at the end of those periods. This example also assumes that your investment has a 5% return each year and that the Fund’s operating expenses remain at
current levels and that the Expense Limitation Agreement and Fee Waiver remain in place for their contractual periods. Although your actual costs may be higher or lower, your costs, based on these assumptions, would be:
|
1 Year
|
3 Years
|
|
|
Class 3
|
$104
|
$384
|
402
This example does not include any fees or sales charges imposed by your variable product. If they were included, the expenses listed above would be
higher.
Portfolio Turnover
The Fund pays transaction costs, such as commissions, when it purchases and sells securities (or “turns over” its portfolio). A higher portfolio turnover
will cause the Fund to incur additional transaction costs. These costs, which are not reflected in Total Annual Fund Operating Expenses or in the example, may affect the Fund’s performance. Because the Fund has not yet commenced investment
operations, no portfolio turnover information is available at this time.
Principal Investment Strategies
The Fund seeks to achieve its investment objective by transacting in FLexible EXchange® Options (“FLEX Options”)
and by separately maintaining a collateral portfolio (the “Collateral Portfolio”), which is designed primarily to serve as margin or collateral for the Fund’s FLEX Options positions and secondarily to
enhance the Fund’s upside S&P 500 Index and Russell 2000 Index FLEX Options’ exposure (i.e., by utilizing anticipated income to measure the ability to purchase additional FLEX Options). FLEX Options
are exchange-traded options contracts with uniquely customizable terms. In general, an options contract is an agreement between a buyer and seller that gives the purchaser of the option the right to buy or sell a particular asset at a specified
future date at an agreed upon price, commonly known as the “strike price.” The reference assets for the Fund’s FLEX Options positions will include the S&P 500 Index, the Russell 2000 Index (the “Secondary
Index,” and together with the S&P 500 Index, the “Reference Indices,” and, each, a “Reference Index”), and certain exchange-traded funds (“ETFs”), as described further below. The S&P 500 Index is a large-capitalization, market-weighted, U.S. equities index that tracks the price (excluding dividends) of
500 leading companies in leading industries of the U.S. economy. The Secondary Index is [a float-adjusted, market capitalization-weighted index that is designed to measure the performance of the small-capitalization segment of the U.S. equity
market, as defined by FTSE Russell].
The Collateral Portfolio may be invested in short-term fixed-income securities, including corporate bonds and other corporate debt securities,
asset-backed securities (“ABS”), securities issued by the U.S. Government or its agencies and instrumentalities, securities issued by non-U.S. governments or their agencies and instrumentalities, money
market securities and funds, other interest-bearing instruments, cash, ETFs that primarily invest in any of the foregoing instruments, options on ETFs and options box spreads. An options box spread is the combination of different options trades
that have offsetting spreads (e.g., purchases and sales on the same underlying instrument, such as an index or an ETF, but with different strike prices and/or expiration dates) for the purpose of
generating income. The Fund may invest in short-term fixed income securities or other instruments, including through ETFs, of any maturity and credit quality. The Fund will generally invest up to 35% of its net assets in one or more ETFs that
provide exposure to investment grade corporate bonds.
Due to the unique mechanics of the Fund’s strategy, the return an investor can expect to receive from an investment in the Fund has characteristics that
are distinct from the returns of many other investment vehicles. It is important that an investor understand these characteristics before making an investment in the Fund.
In seeking to achieve its investment objective, the Fund seeks to produce pre-determined outcomes (the “Outcomes”)
that are based upon the performance of the Reference Indices over a one-year period (the “Outcome Period”). The initial Outcome Period for the Fund is December 1, 2021 through November 30, 2022. Following
the initial Outcome Period, each subsequent Outcome Period will be a one-year period commencing upon the expiration of the prior Outcome Period. The Fund seeks to achieve the Outcomes by purchasing and writing (selling) FLEX Options to create
layers within the Fund’s portfolio. One layer is designed to produce returns that correlate to those of the S&P 500 Index for the Outcome Period if the S&P 500 Index experiences gains during that time, subject to an upside return cap (the “S&P 500 Index Cap”), as described below. A second layer is designed to produce returns that correlate to any upside market performance of the Secondary Index over the
Outcome Period, subject to an upside return cap (the “Secondary Index Cap,” and, together with the S&P 500 Index Cap, the “Index Caps,” and, each, an “Index Cap”), as described below. A third layer is designed to produce returns that correlate to those of the S&P 500 Index for the Outcome Period that are buffered up to 10% if the S&P 500 Index
experiences losses during that time (the “Buffer”). There is no guarantee that the Fund will be successful in its attempt to produce
403
returns that correlate to those of the S&P 500 Index or the Secondary Index up to the applicable Index Caps or produce buffered
returns against the Fund’s S&P 500 Index exposure.
Milliman Financial Risk Management, LLC (“Milliman”), the investment adviser of the Fund, seeks to establish the
Buffer by writing one put FLEX Option on the S&P 500 Index with a strike price that is 10% lower than the value of the S&P 500 Index at the beginning of the Outcome Period.
Milliman seeks to establish the Index Caps by purchasing long call FLEX Options on each Reference Index with a strike price approximately equal to the
value of the respective Reference Index at the beginning of the Outcome Period. Milliman purchases these FLEX Options with a portion of the Fund’s net assets plus (i) the cash received from writing the put FLEX Option designed to create the
Buffer, (ii) additional cash received by utilizing FLEX Options to create a put spread (the “Put Spread Strategy”) on fixed income securities and/or one or more ETFs that provide exposure to fixed income
securities, and (iii) yield received from the Collateral Portfolio. Milliman seeks to achieve the Put Spread Strategy for the Fund by writing a put FLEX Option on an underlying asset at a strike price at or lower than the underlying asset’s
market price or current value at the beginning of the Outcome Period, and buying a put FLEX Option on the same underlying asset at a lower strike price than the written put FLEX Option.
The Index Caps represent the maximum rate of return in each Reference Index that an investor can achieve from an investment in the Fund over the Outcome
Period. Milliman calculates the Index Caps based upon (i) its evaluation of prevailing market conditions on the first day of the Outcome Period and (ii) the total number of long call FLEX Options on each Reference Index that it is able to purchase
at that time. As of the date of this Prospectus, and assuming current market conditions persist, Milliman expects that the Index Caps will be between the below ranges (both gross and net of Fund fees and expenses). Any fees or expenses imposed by
your variable product, and any other expenses incurred by the Fund, will have the effect of further reducing each Index Cap. In addition, in certain market conditions, the performance of the Collateral Portfolio
and the Put Spread Strategy could cause the Fund to underperform relative to the Reference Indices, which could further limit Fund gains below the Index Caps, notwithstanding any performance of the Reference Indices in excess of the Index Caps.
|
Estimated Index Cap Ranges
(As of [___])
|
||
|
Prior to Taking into Account Fund Fees and Expenses
|
After Taking into Account Fund Fees and Expenses
|
|
|
S&P 500 Index Cap
|
||
|
Class 3
|
[__]% and [__]%
|
[__]% and [__]%
|
|
Secondary Index Cap
|
||
|
Class 3
|
[__]% and [__]%
|
[__]% and [__]%
|
The Buffer is only operative against the first 10% of losses in the Fund’s S&P 500 Index exposure for the Outcome Period. If the S&P 500 Index
decreases in value by more than 10% during the Outcome Period, the Fund (and therefore investors in Shares) will experience all subsequent losses in the Fund’s S&P 500 Index exposure on a one-to-one basis for the Outcome Period. The Fund
seeks to produce buffered returns against its S&P 500 Index exposure prior to taking into account any fees or expenses or the performance of the Collateral Portfolio or the Put Spread Strategy. The Buffer
is not operative against losses in the Collateral Portfolio or the Put Spread Strategy. If the Collateral Portfolio and/or the Put Spread Strategy experiences losses, it could have the effect of reducing the impact of, or completely
eliminating, the Buffer on the Fund’s S&P 500 Index exposure. In certain market conditions, the performance of the Collateral Portfolio and/or the Put Spread Strategy could cause the Fund to significantly underperform the S&P 500
Index. The following table reflects the Buffer both gross and net of Fund fees and expenses:
|
Share Class
|
Buffer
(As of [___])
|
|
|
Prior to Taking into Account Fund Fees and Expenses
|
After Taking into Account Fund Fees and Expenses
|
|
|
Class 3
|
10%
|
[__]%
|
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Because the Fund also seeks to provide only upside exposure to the Secondary Index during the Outcome Period, the Fund’s NAV will not be impacted by any
losses experienced by the Secondary Index when measured from the beginning to the end of the Outcome Period. If the Secondary Index increases in value during the Outcome Period and later decreases in value during the Outcome Period, the Fund’s NAV
will reflect any such decreases until the Secondary Index reaches its initial value (measured as of the first day of the Outcome Period). If the Secondary Index decreases in value over the course of an entire Outcome Period, the Fund’s NAV will not
reflect such losses; therefore, the Fund’s overall performance will be approximately that of the S&P 500 Index for the Outcome Period, subject to the Buffer and the S&P 500 Index Cap.
The definitive Index Caps and Buffer will be set forth on the Fund’s website. The Fund’s website will also provide information relating to the
Outcomes on a daily basis, including the Fund’s position relative to the Index Caps and the Buffer. You may also contact your insurance company or other financial intermediary for more information.
Additionally, the Fund’s net asset value (“NAV”) will not increase or decrease at the same rate as the Reference
Indices because the Fund’s strategy relies upon the performance of the Collateral Portfolio and the Put Spread Strategy, in addition to the value of the Fund’s FLEX Options positions on the Reference Indices. While Milliman anticipates that the
Fund’s NAV will generally move in the same direction as the S&P 500 Index, and correspond to any upside returns of the Secondary Index (meaning that the Fund’s NAV will generally increase if the Reference Indices experience gains or decrease if
the Reference Indices experience losses), the Fund’s NAV may not decrease at the same rate as the Reference Indices (especially when factoring in the performance of the Collateral Portfolio and the Put Spread Strategy) and will not increase at the
same rate as the Reference Indices (especially when factoring in the Index Caps and the performance of the Collateral Portfolio and the Put Spread Strategy). Similarly, the amount of time remaining until the end of the Outcome Period also affects
the impact of the Buffer on the Fund’s NAV, because the Buffer may not be in full effect prior to the end of the Outcome Period.
The FLEX Options utilized in the Fund’s portfolio are each set to expire on the last day of the Outcome Period. The customizable nature of FLEX Options
will allow Milliman to select the strike price at which each FLEX Option will be exercised at the expiration of the FLEX Option term. At the commencement of the Outcome Period, Milliman will specifically select the strike price for each FLEX Option
in a manner designed to achieve the Outcomes when the FLEX Options are exercised on the final day of the Outcome Period, depending on the anticipated performance of the Reference Indices, the Collateral Portfolio and the Put Spread Strategy over
the duration of that Outcome Period.
The hypothetical graphical illustrations provided below are designed to illustrate the Outcomes based upon the
hypothetical performance of the Reference Indices for an investor who holds Shares for the entirety of the Outcome Period. The hypothetical graphical illustrations do not include any fees or expenses
imposed by your variable product or expenses incurred by the Fund, and do not reflect the performance of the Collateral Portfolio or the Put Spread Strategy. Additional hypothetical graphical representations of the Outcomes are provided in
“Additional Information About the Funds and the Risks of Investing.” There is no guarantee that the Fund will be successful in its attempt to achieve the Outcomes for the Outcome Period.
405
The following table contains hypothetical examples designed to illustrate the Outcomes the Fund seeks to
achieve over the Outcome Period, based upon the performance of the Reference Indices from (100)% to 100% after taking into account the Index Caps and the Buffer, but prior to taking into account any fees or
expenses or the performance of the Collateral Portfolio or the Put Spread Strategy. The table is provided for illustrative purposes only and does not provide every possible performance scenario for Shares over
the course of the Outcome Period. There is no guarantee that the Fund will be successful in its attempt to achieve the Outcomes for an Outcome Period. The table is not intended to predict or project the performance of the FLEX Options or the Fund. Investors should not take this information as an
assurance of the expected performance of the Reference Indices or the Fund. Actual Fund performance will vary with fluctuations in the performance of the Collateral Portfolio and the Put Spread Strategy, in addition to the value of the
Fund’s FLEX Options positions on the Reference Indices, during the Outcome Period, among other factors. The performance of the Collateral Portfolio and the Put Spread Strategy
could significantly impact the performance of the Fund, which could prevent the Fund from achieving the Outcomes that it seeks to produce. The table does not reflect any fees or expenses imposed by your variable product or expenses
incurred by the Fund. If it did, the returns shown for the Fund would be lower. Please refer to the Fund’s website, which provides updated information relating to this table on a daily basis throughout the Outcome Period. Please contact your
insurance company or other financial intermediary for more information.
406
|
Index/Fund
|
Hypothetical Performance1
|
|||||||||||
|
S&P 500 Index Price Performance
|
(100)%
|
(50)%
|
(20)%
|
(10)%
|
(5)%
|
0%
|
5%
|
10%
|
15%
|
20%
|
50%
|
100%
|
|
Secondary Index Price Performance
|
(100)%
|
(50)%
|
(20)%
|
(10)%
|
(5)%
|
0%
|
5%
|
10%
|
15%
|
20%
|
50%
|
100%
|
|
Fund Performance at NAV
|
(90)%
|
(40)%
|
(10)%
|
0%2
|
0%2
|
0%
|
10%3
|
14%3
|
14%3
|
14%3
|
14%3
|
14%3
|
| 1 |
Does not take into account any fees or expenses or the performance of the Collateral Portfolio or the Put Spread Strategy.
|
| 2 |
Reflects the impact of the Buffer.
|
| 3 |
Reflects the impact of assumed Index Caps of 7% per index, 14% total.
|
Understanding Outcomes. The Outcomes the Fund seeks to achieve are measured based upon the
Fund’s NAV on the first day of the Outcome Period. The Outcome Period begins on the day Milliman transacts in the FLEX Options on behalf of the Fund, and ends on the day those FLEX Options expire. An investor who
purchases Shares after the commencement of the Outcome Period will likely have purchased Shares at a different NAV than the NAV on the first day of the Outcome Period (the NAV upon which the Outcomes are based) and may experience investment
outcomes very different from those the Fund seeks to achieve, especially when factoring in any fees or expenses or the performance of the Collateral Portfolio and the Put Spread Strategy. An investor who redeems Shares prior to the end of the
Outcome Period may also experience investment outcomes very different from those the Fund seeks to achieve. The Outcomes are designed with the expectation that an investor will hold Shares on the day that Milliman transacts in the FLEX Options on
behalf of the Fund, and on the day those FLEX Options expire. There is no guarantee that the Fund will be successful in its attempt to achieve the Outcomes.
Understanding the Index Caps. Unlike other investment products, the potential returns an
investor can receive from an investment in the Fund are subject to the Index Caps. This means that if one or both of the Reference Indices experience gains for the Outcome Period, an investor in the Fund will only
experience those gains up to the applicable Index Cap. Milliman calculates the Index Caps for each Outcome Period based upon (i) its evaluation of prevailing market conditions on the first day of the Outcome Period and (ii) the total
number of long call FLEX Options on each Reference Index that it is able to purchase at that time. If an investor is considering purchasing Shares during the Outcome Period, and the Fund’s NAV has increased in
value to a level near one or both of the Index Caps, an investor purchasing Shares at that price will have limited to no gains available for the remainder of the Outcome Period, but will remain vulnerable to significant downside risks (with
respect to the S&P 500 Index FLEX Options’ exposure). In certain market conditions, the performance of the Collateral Portfolio and the Put Spread Strategy could cause the Fund to underperform
relative to the Reference Indices, which could further limit Fund gains below the Index Caps, notwithstanding any performance of the Reference Indices in excess of the Index Caps.
Understanding the Buffer. The Buffer that the Fund seeks to provide is only operative
against the first 10% of losses in the Fund’s S&P 500 Index exposure for the Outcome Period. If an investor is considering purchasing Shares during the Outcome Period, and the S&P 500 Index has decreased
in value by an amount equal to or greater than 10%, an investor purchasing Shares at that time will be able to participate in any gains thereafter (up to the Index Caps), but will not benefit from the Buffer that the Fund seeks to offer for the
remainder of the Outcome Period if the losses continue to be equal to or greater than 10% during that period. Conversely, if an investor is considering purchasing Shares during the Outcome Period, and the Fund’s NAV has increased in value, then
an investor may experience losses before implementation of the Buffer that the Fund seeks to provide. While the Fund seeks to produce returns that correlate to those of the S&P 500 Index for the Outcome Period that are buffered up to
10% (prior to taking into account any fees or expenses or the performance of the Collateral Portfolio or the Put Spread Strategy) for investors who hold Shares for the entire Outcome Period, there is no guarantee it will successfully do so. In addition, the Buffer is not operative against losses in the Collateral Portfolio or the Put Spread Strategy. If the Collateral Portfolio and/or the Put Spread Strategy experiences losses, it could have the
effect of reducing the impact of, or completely eliminating, the Buffer on the Fund’s S&P 500 Index exposure. In certain market conditions, the performance of the Collateral Portfolio and/or the Put Spread Strategy could cause the Fund to
significantly underperform the S&P 500 Index. Investors who purchase Shares at the beginning of the Outcome Period may lose their entire
407
investment. Investors who purchase Shares after the Outcome Period has begun may also lose their entire investment. An investment
in the Fund is only appropriate for investors willing to bear those losses.
Fund Rebalance. Milliman implements the Fund’s strategy on an annual basis, seeking to
produce the Outcomes for an Outcome Period. On the last business day of any stated Outcome Period, all of the Fund’s existing FLEX Options, which includes those used to establish the Buffer, the Index Caps and the Put Spread Strategy, will expire
and Milliman will transact in a new set of FLEX Options on the same business day, which will commence a new Outcome Period beginning the following business day. At that same time, Milliman will also evaluate whether to make any adjustments to the
Collateral Portfolio. Accordingly, Shares can be held indefinitely if investors determine to participate in additional Outcome Periods.
Approximately one week prior to the end of each Outcome Period, the Fund will file a prospectus supplement, which will notify existing investors of
(i) the date on which the existing Outcome Period will end; (ii) the date on which the new Outcome Period will commence; and (iii) the anticipated ranges of the Index Caps that will be used for the new Outcome Period. Immediately preceding the
commencement date of the new Outcome Period, the Fund will file a prospectus supplement disclosing the Fund’s final Index Caps (both gross and net of Fund fees and expenses) for the new Outcome Period. This information will also be available
online at www.[___________].com, and on your insurance company’s website. Please contact your insurance company or other financial intermediary for more information.
Fund Classification. The Fund is classified as “non-diversified” under the Investment
Company Act of 1940, as amended (the “1940 Act”).
Principal Risks
You could lose money by investing in the Fund. An investment in the Fund is not a deposit of a bank and is not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other governmental agency. There can be no assurance that the Fund’s investment objectives will be achieved.
Downside Loss Buffer Risk. There can be no guarantee that the Fund will be successful in its strategy to
buffer against S&P 500 Index losses if the S&P 500 Index decreases in value over the Outcome Period. The Fund’s strategy is designed to produce returns that correlate to those of the S&P 500 Index, subject to the S&P 500 Index
Cap, while limiting downside S&P 500 Index losses and providing additional upside exposure to the Secondary Index, subject to the Secondary Index Cap, if Shares are bought on the day on which Milliman transacts in the FLEX Options on behalf
of the Fund and held until those FLEX Options expire at the end of each Outcome Period. The success of the Buffer also depends upon the performance of the Collateral Portfolio and the Put Spread Strategy. If
the Collateral Portfolio and/or the Put Spread Strategy experiences losses, it could have the effect of reducing the impact of, or completely eliminating, the Buffer on the Fund’s S&P 500 Index exposure. In certain market conditions, the
performance of the Collateral Portfolio and/or the Put Spread Strategy could cause the Fund to significantly underperform the S&P 500 Index. Despite the intended Buffer, an investor could lose their entire investment. In the
event an investor purchases Shares after the date on which Milliman transacted in the FLEX Options on behalf of the Fund, or redeems Shares prior to the expiration of those FLEX Options, the Buffer that the Fund seeks to provide may not be
available or fully applicable.
Risk of Capped Upside Returns. The Fund’s strategy is designed to produce returns that correlate to those of the
Reference Indices up to the Index Caps if Shares are bought on the day on which Milliman transacts in the FLEX Options on behalf of the Fund and held until those FLEX Options expire at the end of the Outcome Period, subject to the Index Caps. In
the event that one or both of the Reference Indices experience gains during the Outcome Period, the Fund will only participate in those gains up to the applicable Index Cap. In the event that one or both Reference Indices experience gains in excess
of the applicable Index Cap over the duration of the Outcome Period, the Fund will not participate in those excess gains. Because the Fund’s strategy provides capped exposure to two Reference Indices, the Index Caps may be lower than if the Fund
provided capped exposure to only a single Reference Index. In the event an investor purchases Shares after the date on which the FLEX Options were entered into and the Fund has risen in value to a level near to an Index Cap, there may be little or
no ability for that investor to experience an investment gain on their Shares relating to that Reference Index. In certain market conditions, the performance of the Collateral Portfolio and the Put Spread
Strategy could cause the Fund to
408
underperform relative to the Reference Indices, which could further limit Fund gains below the Index Caps, notwithstanding any
performance of the Reference Indices in excess of the Index Caps. An investor should consider the amount of the Index Caps, and the Fund’s position relative to each Index Cap, before investing in the Fund.
Index Cap Change Risk. Because the Index Caps for each Outcome Period are calculated based upon (i) Milliman’s
evaluation of prevailing market conditions on the first day of the Outcome Period and (ii) the total number of long call FLEX Options on the Reference Indices that Milliman is able to purchase at that time, the Index Caps may rise or fall from one
Outcome Period to the next. Any change in the Index Caps could be significant and they are unlikely to remain the same for consecutive Outcome Periods.
FLEX Options Risk. The Fund will transact in FLEX Options issued and guaranteed for settlement by the OCC. The
Fund bears the risk that the OCC will be unable or unwilling to perform its obligations under the FLEX Options contracts, which could result in significant losses to the Fund. In less liquid markets, terminating a FLEX Option may require the
payment of a premium or acceptance of a discounted price, and may take longer to complete. In addition, a less liquid trading market may adversely impact the value of the Fund’s FLEX Options and therefore the NAV of the Fund. In addition, the value
of the Fund’s FLEX Options positions is not anticipated to increase or decrease at the same rate as the reference asset; and while it is anticipated that they will generally move in the same direction, it is possible that they may move in different
directions. Certain FLEX Options positions may also expire worthless. The use of FLEX Options involves leverage, which can cause the Fund’s portfolio to be more volatile than if the portfolio had not been leveraged. Leverage can significantly
magnify the effect of price movements of the reference asset, disproportionately increasing the Fund’s losses and reducing the Fund’s opportunities for gains when the reference asset changes in unexpected ways. In some instances, such leverage
could result in losses that exceed the original amount invested.
Investment Objective and Outcomes Risk. There is no guarantee that the Fund will be successful in its attempt
to achieve its investment objective and/or the Outcomes, and an investor could lose some or all of their investment in the Fund. Certain circumstances under which the Fund might not achieve its objective and/or the Outcomes include, but are not
limited to (i) if the Fund disposes of FLEX Options, (ii) if the Fund is unable to maintain the proportional relationship based on the number of FLEX Options in the Fund’s portfolio, (iii) significant accrual of Fund expenses in connection with
effecting the Fund’s principal investment strategy, (iv) losses incurred by the Fund’s holdings in the Collateral Portfolio and/or losses resulting from the Put Spread Strategy, or (iv) adverse tax law changes affecting the treatment of FLEX
Options.
Tax Risk. The Fund intends to elect, and to qualify each year, to be treated as a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”). As a RIC, the Fund will not be subject to U.S. federal income tax on the portion
of its net investment income and net capital gain that it distributes to shareholders, provided that it satisfies certain requirements of the Code. To maintain its status as a RIC, the Fund must meet certain income, diversification and
distributions tests. For purposes of the diversification test, the identification of the issuer (or, in some cases, issuers) of a particular Fund investment can depend on the terms and conditions of that investment. In particular, there is no
published IRS guidance or case law on how to determine the “issuer” of certain derivatives that the Fund will enter into and the Fund has not received a private letter ruling on this point. Therefore, there is a risk that the Fund will not meet the
Code’s diversification requirements and will not qualify, or will be disqualified, as a RIC. If the Fund does not qualify as a RIC for any taxable year and certain relief provisions are not available, the Fund’s taxable income will be subject to
tax at the Fund level and to a further tax at the shareholder level when such income is distributed.
The Fund also intends to comply with the diversification requirements of Section 817(h) of the Code, and the regulations thereunder, relating to the
tax-deferred status of variable accounts that are based on insurance company separate accounts (referred to as “segregated asset accounts” for federal income tax purposes). These diversification requirements apply in addition to the RIC
diversification requirements discussed above. There also is no published guidance or case law on how to determine the “issuer” of the derivatives referred to above for purposes of the diversification requirements of Section 817(h) of the Code and
the Fund has not received a private letter ruling on this point. If these requirements are not met, or under other circumstances, such as if the Fund does not qualify as a RIC for any taxable year, it is possible that the contract owners (rather
than the insurance company) will be treated for federal income tax purposes as the taxable owners of the assets held by the segregated asset accounts.
409
Clearing Member Default Risk. The Fund will hold FLEX Options through accounts at members of clearing houses (“clearing members”) rather than a bank or a broker. Assets deposited by the Fund with any clearing member as margin for its FLEX Options positions may, in certain circumstances, be used to satisfy losses of other
clients of the Fund’s clearing member where such assets may be held in commingled omnibus accounts. In addition, although clearing members guarantee performance of their clients’ obligations to the clearing house, there is a risk that the assets of
the Fund might not be fully protected in the event of the clearing member’s bankruptcy, as the Fund would be limited to recovering only a pro rata share of all available funds segregated on behalf of the
clearing member’s customers for the relevant account class.
Debt Securities Risk. The prices of debt securities will be affected by changes in interest rates, the
creditworthiness of the issuer and other factors. These risks could affect the value of investments in which the Fund invests, possibly causing the Fund’s NAV to be reduced and fluctuate more than other types of investments. During periods of
falling interest rates, an issuer of a callable bond may repay the security before its stated maturity, and the Fund may have to reinvest the proceeds in securities with lower yields, which would result in a decline in the Fund’s income, or in
securities with greater risks or with other less favorable features. Changing interest rates, including rates that fall below zero, may have unpredictable effects on markets, result in heightened market volatility and detract from the Fund’s
performance to the extent the Fund is exposed to such interest rates. An increase in interest rates will generally cause the value of fixed-income securities held by the Fund to decline, may lead to heightened volatility in the fixed-income
markets and may adversely affect the liquidity of certain fixed-income investments, including those held by the Fund. Risks associated with rising interest rates are heightened given that interest rates in the U.S. are near historic lows.
Adjustable-rate instruments also react to interest rate changes in a similar manner, although generally to a lesser degree (depending, however, on the characteristics of the reset terms, including the index chosen, frequency of reset and reset
caps or floors, among other factors). Interest rate sensitivity is generally more pronounced and less predictable in instruments with uncertain payment or prepayment schedules and also for those with longer maturities.
Foreign Securities and Credit Exposure Risk. U.S. dollar-denominated securities carrying foreign credit exposure
may be affected by unfavorable political, economic or governmental developments that could affect payments of principal and interest. Furthermore, the value of the Fund’s foreign investments (whether direct or indirect) may be adversely affected by
political and social instability in their home countries, by changes in economic or taxation policies in those countries, or by the difficulty in enforcing obligations in those countries. Foreign companies generally may be subject to less stringent
regulations than U.S. companies, including financial reporting requirements and auditing and accounting controls. As a result, there generally is less publicly available information about foreign companies than about U.S. companies. Trading in many
foreign securities may be less liquid and more volatile than U.S. securities due to the size of the market or other factors.
U.S. Government Securities Risk. U.S. Government securities are subject to interest rate risk but generally do
not involve the credit risks associated with investments in other types of debt securities. As a result, the yields available from U.S. Government securities are generally lower than the yields available from other debt securities. U.S. Government
securities are guaranteed only as to the timely payment of interest and the payment of principal when held to maturity. While securities issued or guaranteed by U.S. federal government agencies are backed by the full faith and credit of the U.S.
Department of the Treasury, securities issued by government sponsored entities are solely the obligation of the issuer and generally do not carry any guarantee from the U.S. Government.
ABS Risk. ABS are subject to the general debt securities risks described above. In addition, ABS may be less
liquid than other bonds, and may be more sensitive than other bonds to the market’s perception of issuers and creditworthiness of payees, which may result in the Fund experiencing difficulty selling or valuing these securities. ABS markets have
experienced extraordinary weakness and volatility at various times in recent years, and may decline quickly in the event of a substantial economic or market downturn. Accordingly, these securities may be subject to greater risk of default during
periods of economic downturn than other securities, which could result in possible losses to the Fund.
Issuer Risk. The performance of the Fund depends on the performance of individual securities to which the Fund
has exposure. The Fund may be adversely affected if an issuer of underlying securities held by the Fund is unable or
410
unwilling to repay principal or interest when due. Changes in the financial condition or credit rating of an issuer of those securities may cause the
value of the securities to decline.
Management Risk. The Fund is subject to management risk because it is an actively managed portfolio. Milliman
will apply investment techniques and risk analyses in making investment decisions for the Fund, but there can be no guarantee that the Fund will meet its investment objective and/or the Outcomes. In addition, Milliman does not use defensive
strategies or attempt to reduce the Fund’s exposures to poor performing positions during an Outcome Period. This differs from funds that are managed to seek to outperform a benchmark index. Therefore, in the event of a general market decline, the
Fund’s value may fall more than the value of another fund that does attempt to hedge against such market declines.
Market Risk. The Fund could lose money over short periods due to short-term market movements and over longer
periods during more prolonged market downturns. Assets may decline in value due to factors affecting financial markets generally or particular asset classes or industries represented in the markets. The value of a FLEX Option or other asset may
also decline due to general market conditions, economic trends or events that are not specifically related to the issuer of the security or other asset, or due to factors that affect a particular issuer, country, region, market, industry, sector or
asset class.
Non-Diversification Risk. The Fund may invest a relatively high percentage of its assets in a limited number of
issuers. As a result, the Fund may be more susceptible to a single adverse economic or regulatory occurrence affecting one or more of these issuers, experience increased volatility and be highly invested in certain issuers.
Large Shareholder Risk. At times, the Fund may experience adverse effects when certain large shareholders,
including insurance company separate accounts, redeem large amounts of shares of the Fund. Large redemptions may cause the Fund to sell portfolio holdings at times when it would not otherwise do so and may increase transaction costs and/or result
in an increase to the Fund’s expense ratio. A large redemption could be detrimental to the Fund and its remaining shareholders.
Risks of Investing in ETFs. In addition to the risks associated with the underlying assets held by the ETFs in
which the Fund invests, investments in ETFs are also subject to the following additional risks: (i) only authorized participants may engage in transactions directly with ETFs but none are obligated to do so, which could result in an ETF’s shares
trading at a premium or discount to its NAV or possibly face trading halts or delisting; (ii) certain ETFs seek to track the performance of an underlying index and will not attempt to take defensive positions under any market conditions, including
declining markets, which could result in losses; and (iii) because ETF shares trade on the secondary market, there is not guarantee that an active market will be developed or maintained, which could result in the ETF’s shares trading at a premium
or discount to its NAV. Investments in ETFs may involve duplication of management fees and certain other expenses, as the Fund indirectly bears its proportionate share of any expenses paid by the ETFs in which it invests.
Risks of Investing in Money Market Funds. Money market funds seek to preserve the value of shareholder
investments at $1.00 per share, but shareholders, such as the Fund, may still lose money by investing in such funds. In addition, a money market fund may impose a fee upon the sale of its shares or may temporarily suspend the ability to sell shares
if the fund’s liquidity falls below required minimums because of market conditions or other factors. The credit quality of a money market fund’s holdings can change rapidly in certain markets, and the default of a single holding could have an
adverse impact on the fund’s share price. A money market fund’s share price can also be negatively affected during periods of high redemption pressures, illiquid markets, and/or significant market volatility.
Performance
As of the date of this Prospectus, the Fund has not commenced operations and therefore does not have a performance history. Once available, the Fund’s
performance information will be accessible online at www.[________].com and will provide some indication of the risks of investing in the Fund.
Management
411
Investment Adviser
Milliman Financial Risk Management LLC (“Milliman”) serves as investment adviser to the Fund.
Portfolio Managers
The following persons serve as portfolio managers of the Fund.
|
●
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Robert T. Cummings, Principal & Head of Portfolio Management at Milliman.
|
|
●
|
Maria Schiopu, Principal & Head of Portfolio Management at Milliman.
|
|
●
|
Jeff Greco, Principal & Head of Strategy Research at Milliman.
|
|
●
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Jordan Rosenfeld, Portfolio Manager at Milliman.
|
Each portfolio manager is jointly and primarily responsible for the day-to-day management of the Fund’s portfolio and has served in such capacity
since the Fund’s inception in 2021.
Purchase and Sale of Shares
Shares are available as underlying investment options for variable insurance contracts and variable life insurance policies (each, a “variable contract,” and, collectively, the “variable contracts”) issued by insurance companies. These insurance companies are the record owners of the separate accounts
holding the Shares. You do not buy, sell or exchange Shares directly; rather, you choose investment options through your variable contracts. The insurance companies then cause the separate accounts to purchase and redeem Shares according to
the investment options you choose.
Tax Information
The dividends and distributions paid by the Fund to the insurance company separate accounts will consist of ordinary income, capital gains, or some
combination of both. Because Shares must be purchased through separate accounts used to fund variable contracts, such dividends and distributions will be exempt from current taxation by owners of variable contracts (each, a “contract owner,” and, collectively “contract owners”) if left to accumulate within a separate account. Consult the variable contract prospectus for additional tax
information.
Payments to Insurance Companies and Other Financial Intermediaries
If you allocate contract value to the Fund through an insurance company or other financial intermediary, the Fund, Milliman, the Fund’s distributor or
their related companies may pay the insurance company and/or its affiliates or other intermediary for the sale of Shares and related services. These payments may create a conflict of interest by influencing the insurance company or other
intermediary and your salesperson to recommend an indirect investment in the Fund over another investment. The prospectus or other disclosure documents for the variable contracts may contain additional information about these payments, if any.
You may also ask your salesperson or financial intermediary, or visit your financial intermediary’s website, for more information.
412
Fund Summary: Milliman S&P 500 & Russell 2000 1-Year Buffer with Stacker
Cap Fund – Jan
Investment Objective
The Fund seeks to provide exposure to the S&P 500 Index, while providing a buffer against the first 10% of losses associated with S&P 500
Index performance and participating in S&P 500 Index gains up to a declared cap, prior to taking into account any fees or expenses or the performance of any fixed income exposure included in the Fund’s portfolio, over the period from January
1, 2022 through December 31, 2022. The Fund also seeks to provide upside exposure to the Russell 2000 Index up to a declared cap, prior to taking into account any fees or expenses or the performance of any fixed income exposure included in the
Fund’s portfolio, over the same period.
Fees and Expenses of the Fund
This table describes the fees and expenses that you may pay if you buy, hold and sell shares of the Fund (“Shares”).
This table and the example below do not include any fees or sales charges imposed by your variable product. If they were included, the expenses listed below would be higher.
Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment)
|
Class 3
|
|
|
Management Fees
|
0.49%
|
|
Distribution and Service (12b-1) Fees
|
0.25%
|
|
Other Expenses(1)
|
0.50%
|
|
Acquired Fund Fees and Expenses(1)
|
[_.__]%
|
|
Total Annual Fund Operating Expenses
|
1.24%
|
|
Fee Waiver and/or Expense Reimbursement(2)(3)
|
(0.25)%
|
|
Total Annual Fund Operating Expenses After Fee Waiver and/or Expense Reimbursement
|
0.99%
|
|
(1)
|
“Other Expenses” and “Acquired Fund Fees and Expenses” are based on estimated amounts for the current fiscal year.
|
|
(2)
|
The Fund’s investment adviser, Milliman Financial Risk Management LLC (“Milliman”), has contractually
agreed to waive advisory fees and/or reimburse expenses to the extent necessary to limit the Fund’s total annual Fund operating expenses (excluding taxes, interest, brokerage fees and commissions, Rule 12b-1 fees, acquired fund fees and
expenses, short-sale dividend expenses, administrative services fees, other expenses that are capitalized in accordance with generally accepted accounting principles, and extraordinary or non-routine expenses not incurred in the
ordinary course of the Fund’s business) to 0.74% of the Fund's average daily net assets (the “Expense Limitation Agreement”) until at least November 1, 2022. During its term, the Expense
Limitation Agreement cannot be terminated or amended to increase the applicable limit without approval of the Board of Trustees of the Trust (the “Board”). Milliman may recoup from the Fund any
advisory fees waived or expenses reimbursed pursuant to the Expense Limitation Agreement for a period of three years from the date on which such waiver or reimbursement occurred; provided, however, that such recoupment shall not be made
if it would cause the Fund’s total annual Fund operating expenses to exceed the lesser of (a) the expense limitation in effect at the time of the reimbursement, or (b) the expense limitation in effect at the time of recoupment, if any.
|
|
(3)
|
In addition to the Expense Limitation Agreement, Milliman has contractually agreed to waive its advisory fees in an amount equal to the Fund’s
acquired fund fees and expenses until at least November 1, 2022 (the “Fee Waiver”). This contract cannot be terminated or modified without the consent of the Board.
|
Example
This example is intended to help you compare the cost of investing in the Fund with the cost of investing in other funds. This example assumes that you
invest $10,000 in the Fund for the time periods indicated and then sell all of your Shares at the end of those periods. This example also assumes that your investment has a 5% return each year and that the Fund’s operating expenses remain at
current levels and that the Expense Limitation Agreement and Fee Waiver remain in place for their contractual periods. Although your actual costs may be higher or lower, your costs, based on these assumptions, would be:
|
1 Year
|
3 Years
|
|
|
Class 3
|
$104
|
$384
|
413
This example does not include any fees or sales charges imposed by your variable product. If they were included, the expenses listed above would be
higher.
Portfolio Turnover
The Fund pays transaction costs, such as commissions, when it purchases and sells securities (or “turns over” its portfolio). A higher portfolio turnover
will cause the Fund to incur additional transaction costs. These costs, which are not reflected in Total Annual Fund Operating Expenses or in the example, may affect the Fund’s performance. Because the Fund has not yet commenced investment
operations, no portfolio turnover information is available at this time.
Principal Investment Strategies
The Fund seeks to achieve its investment objective by transacting in FLexible EXchange® Options (“FLEX Options”)
and by separately maintaining a collateral portfolio (the “Collateral Portfolio”), which is designed primarily to serve as margin or collateral for the Fund’s FLEX Options positions and secondarily to
enhance the Fund’s upside S&P 500 Index and Russell 2000 Index FLEX Options’ exposure (i.e., by utilizing anticipated income to measure the ability to purchase additional FLEX Options). FLEX Options
are exchange-traded options contracts with uniquely customizable terms. In general, an options contract is an agreement between a buyer and seller that gives the purchaser of the option the right to buy or sell a particular asset at a specified
future date at an agreed upon price, commonly known as the “strike price.” The reference assets for the Fund’s FLEX Options positions will include the S&P 500 Index, the Russell 2000 Index (the “Secondary
Index,” and together with the S&P 500 Index, the “Reference Indices,” and, each, a “Reference Index”), and certain exchange-traded funds (“ETFs”), as described further below. The S&P 500 Index is a large-capitalization, market-weighted, U.S. equities index that tracks the price (excluding dividends) of
500 leading companies in leading industries of the U.S. economy. The Secondary Index is [a float-adjusted, market capitalization-weighted index that is designed to measure the performance of the small-capitalization segment of the U.S. equity
market, as defined by FTSE Russell].
The Collateral Portfolio may be invested in short-term fixed-income securities, including corporate bonds and other corporate debt securities,
asset-backed securities (“ABS”), securities issued by the U.S. Government or its agencies and instrumentalities, securities issued by non-U.S. governments or their agencies and instrumentalities, money
market securities and funds, other interest-bearing instruments, cash, ETFs that primarily invest in any of the foregoing instruments, options on ETFs and options box spreads. An options box spread is the combination of different options trades
that have offsetting spreads (e.g., purchases and sales on the same underlying instrument, such as an index or an ETF, but with different strike prices and/or expiration dates) for the purpose of
generating income. The Fund may invest in short-term fixed income securities or other instruments, including through ETFs, of any maturity and credit quality. The Fund will generally invest up to 35% of its net assets in one or more ETFs that
provide exposure to investment grade corporate bonds.
Due to the unique mechanics of the Fund’s strategy, the return an investor can expect to receive from an investment in the Fund has characteristics that
are distinct from the returns of many other investment vehicles. It is important that an investor understand these characteristics before making an investment in the Fund.
In seeking to achieve its investment objective, the Fund seeks to produce pre-determined outcomes (the “Outcomes”)
that are based upon the performance of the Reference Indices over a one-year period (the “Outcome Period”). The initial Outcome Period for the Fund is January 1, 2022 through December 31, 2022. Following the
initial Outcome Period, each subsequent Outcome Period will be a one-year period commencing upon the expiration of the prior Outcome Period. The Fund seeks to achieve the Outcomes by purchasing and writing (selling) FLEX Options to create layers
within the Fund’s portfolio. One layer is designed to produce returns that correlate to those of the S&P 500 Index for the Outcome Period if the S&P 500 Index experiences gains during that time, subject to an upside return cap (the “S&P 500 Index Cap”), as described below. A second layer is designed to produce returns that correlate to any upside market performance of the Secondary Index over the
Outcome Period, subject to an upside return cap (the “Secondary Index Cap,” and, together with the S&P 500 Index Cap, the “Index Caps,” and, each, an “Index Cap”), as described below. A third layer is designed to produce returns that correlate to those of the S&P 500 Index for the Outcome Period that are buffered up to 10% if the S&P 500 Index
experiences losses during that time (the “Buffer”). There is no guarantee that the Fund will be successful in its attempt to produce
414
returns that correlate to those of the S&P 500 Index or the Secondary Index up to the applicable Index Caps or produce buffered
returns against the Fund’s S&P 500 Index exposure.
Milliman Financial Risk Management, LLC (“Milliman”), the investment adviser of the Fund, seeks to establish the
Buffer by writing one put FLEX Option on the S&P 500 Index with a strike price that is 10% lower than the value of the S&P 500 Index at the beginning of the Outcome Period.
Milliman seeks to establish the Index Caps by purchasing long call FLEX Options on each Reference Index with a strike price approximately equal to the
value of the respective Reference Index at the beginning of the Outcome Period. Milliman purchases these FLEX Options with a portion of the Fund’s net assets plus (i) the cash received from writing the put FLEX Option designed to create the
Buffer, (ii) additional cash received by utilizing FLEX Options to create a put spread (the “Put Spread Strategy”) on fixed income securities and/or one or more ETFs that provide exposure to fixed income
securities, and (iii) yield received from the Collateral Portfolio. Milliman seeks to achieve the Put Spread Strategy for the Fund by writing a put FLEX Option on an underlying asset at a strike price at or lower than the underlying asset’s
market price or current value at the beginning of the Outcome Period, and buying a put FLEX Option on the same underlying asset at a lower strike price than the written put FLEX Option.
The Index Caps represent the maximum rate of return in each Reference Index that an investor can achieve from an investment in the Fund over the Outcome
Period. Milliman calculates the Index Caps based upon (i) its evaluation of prevailing market conditions on the first day of the Outcome Period and (ii) the total number of long call FLEX Options on each Reference Index that it is able to purchase
at that time. As of the date of this Prospectus, and assuming current market conditions persist, Milliman expects that the Index Caps will be between the below ranges (both gross and net of Fund fees and expenses). Any fees or expenses imposed by
your variable product, and any other expenses incurred by the Fund, will have the effect of further reducing each Index Cap. In addition, in certain market conditions, the performance of the Collateral Portfolio
and the Put Spread Strategy could cause the Fund to underperform relative to the Reference Indices, which could further limit Fund gains below the Index Caps, notwithstanding any performance of the Reference Indices in excess of the Index Caps.
|
Estimated Index Cap Ranges
(As of [___])
|
||
|
Prior to Taking into Account Fund Fees and Expenses
|
After Taking into Account Fund Fees and Expenses
|
|
|
S&P 500 Index Cap
|
||
|
Class 3
|
[__]% and [__]%
|
[__]% and [__]%
|
|
Secondary Index Cap
|
||
|
Class 3
|
[__]% and [__]%
|
[__]% and [__]%
|
The Buffer is only operative against the first 10% of losses in the Fund’s S&P 500 Index exposure for the Outcome Period. If the S&P 500 Index
decreases in value by more than 10% during the Outcome Period, the Fund (and therefore investors in Shares) will experience all subsequent losses in the Fund’s S&P 500 Index exposure on a one-to-one basis for the Outcome Period. The Fund
seeks to produce buffered returns against its S&P 500 Index exposure prior to taking into account any fees or expenses or the performance of the Collateral Portfolio or the Put Spread Strategy. The Buffer
is not operative against losses in the Collateral Portfolio or the Put Spread Strategy. If the Collateral Portfolio and/or the Put Spread Strategy experiences losses, it could have the effect of reducing the impact of, or completely
eliminating, the Buffer on the Fund’s S&P 500 Index exposure. In certain market conditions, the performance of the Collateral Portfolio and/or the Put Spread Strategy could cause the Fund to significantly underperform the S&P 500
Index. The following table reflects the Buffer both gross and net of Fund fees and expenses:
|
Share Class
|
Buffer
(As of [___])
|
|
|
Prior to Taking into Account Fund Fees and Expenses
|
After Taking into Account Fund Fees and Expenses
|
|
|
Class 3
|
10%
|
[__]%
|
415
Because the Fund also seeks to provide only upside exposure to the Secondary Index during the Outcome Period, the Fund’s NAV will not be impacted by any
losses experienced by the Secondary Index when measured from the beginning to the end of the Outcome Period. If the Secondary Index increases in value during the Outcome Period and later decreases in value during the Outcome Period, the Fund’s NAV
will reflect any such decreases until the Secondary Index reaches its initial value (measured as of the first day of the Outcome Period). If the Secondary Index decreases in value over the course of an entire Outcome Period, the Fund’s NAV will not
reflect such losses; therefore, the Fund’s overall performance will be approximately that of the S&P 500 Index for the Outcome Period, subject to the Buffer and the S&P 500 Index Cap.
The definitive Index Caps and Buffer will be set forth on the Fund’s website. The Fund’s website will also provide information relating to the
Outcomes on a daily basis, including the Fund’s position relative to the Index Caps and the Buffer. You may also contact your insurance company or other financial intermediary for more information.
Additionally, the Fund’s net asset value (“NAV”) will not increase or decrease at the same rate as the Reference
Indices because the Fund’s strategy relies upon the performance of the Collateral Portfolio and the Put Spread Strategy, in addition to the value of the Fund’s FLEX Options positions on the Reference Indices. While Milliman anticipates that the
Fund’s NAV will generally move in the same direction as the S&P 500 Index, and correspond to any upside returns of the Secondary Index (meaning that the Fund’s NAV will generally increase if the Reference Indices experience gains or decrease if
the Reference Indices experience losses), the Fund’s NAV may not decrease at the same rate as the Reference Indices (especially when factoring in the performance of the Collateral Portfolio and the Put Spread Strategy) and will not increase at the
same rate as the Reference Indices (especially when factoring in the Index Caps and the performance of the Collateral Portfolio and the Put Spread Strategy). Similarly, the amount of time remaining until the end of the Outcome Period also affects
the impact of the Buffer on the Fund’s NAV, because the Buffer may not be in full effect prior to the end of the Outcome Period.
The FLEX Options utilized in the Fund’s portfolio are each set to expire on the last day of the Outcome Period. The customizable nature of FLEX Options
will allow Milliman to select the strike price at which each FLEX Option will be exercised at the expiration of the FLEX Option term. At the commencement of the Outcome Period, Milliman will specifically select the strike price for each FLEX Option
in a manner designed to achieve the Outcomes when the FLEX Options are exercised on the final day of the Outcome Period, depending on the anticipated performance of the Reference Indices, the Collateral Portfolio and the Put Spread Strategy over
the duration of that Outcome Period.
The hypothetical graphical illustrations provided below are designed to illustrate the Outcomes based upon the
hypothetical performance of the Reference Indices for an investor who holds Shares for the entirety of the Outcome Period. The hypothetical graphical illustrations do not include any fees or expenses
imposed by your variable product or expenses incurred by the Fund, and do not reflect the performance of the Collateral Portfolio or the Put Spread Strategy. Additional hypothetical graphical representations of the Outcomes are provided in
“Additional Information About the Funds and the Risks of Investing.” There is no guarantee that the Fund will be successful in its attempt to achieve the Outcomes for the Outcome Period.
416
The following table contains hypothetical examples designed to illustrate the Outcomes the Fund seeks to
achieve over the Outcome Period, based upon the performance of the Reference Indices from (100)% to 100% after taking into account the Index Caps and the Buffer, but prior to taking into account any fees or
expenses or the performance of the Collateral Portfolio or the Put Spread Strategy. The table is provided for illustrative purposes only and does not provide every possible performance scenario for Shares over
the course of the Outcome Period. There is no guarantee that the Fund will be successful in its attempt to achieve the Outcomes for an Outcome Period. The table is not intended to predict or project the performance of the FLEX Options or the Fund. Investors should not take this information as an
assurance of the expected performance of the Reference Indices or the Fund. Actual Fund performance will vary with fluctuations in the performance of the Collateral Portfolio and the Put Spread Strategy, in addition to the value of the
Fund’s FLEX Options positions on the Reference Indices, during the Outcome Period, among other factors. The performance of the Collateral Portfolio and the Put Spread Strategy
could significantly impact the performance of the Fund, which could prevent the Fund from achieving the Outcomes that it seeks to produce. The table does not reflect any fees or expenses imposed by your variable product or expenses
incurred by the Fund. If it did, the returns shown for the Fund would be lower. Please refer to the Fund’s website, which provides updated information relating to this table on a daily basis throughout the Outcome Period. Please contact your
insurance company or other financial intermediary for more information.
417
|
Index/Fund
|
Hypothetical Performance1
|
|||||||||||
|
S&P 500 Index Price Performance
|
(100)%
|
(50)%
|
(20)%
|
(10)%
|
(5)%
|
0%
|
5%
|
10%
|
15%
|
20%
|
50%
|
100%
|
|
Secondary Index Price Performance
|
(100)%
|
(50)%
|
(20)%
|
(10)%
|
(5)%
|
0%
|
5%
|
10%
|
15%
|
20%
|
50%
|
100%
|
|
Fund Performance at NAV
|
(90)%
|
(40)%
|
(10)%
|
0%2
|
0%2
|
0%
|
10%3
|
14%3
|
14%3
|
14%3
|
14%3
|
14%3
|
| 1 |
Does not take into account any fees or expenses or the performance of the Collateral Portfolio or the Put Spread Strategy.
|
| 2 |
Reflects the impact of the Buffer.
|
| 3 |
Reflects the impact of assumed Index Caps of 7% per index, 14% total.
|
Understanding Outcomes. The Outcomes the Fund seeks to achieve are measured based upon the
Fund’s NAV on the first day of the Outcome Period. The Outcome Period begins on the day Milliman transacts in the FLEX Options on behalf of the Fund, and ends on the day those FLEX Options expire. An investor who
purchases Shares after the commencement of the Outcome Period will likely have purchased Shares at a different NAV than the NAV on the first day of the Outcome Period (the NAV upon which the Outcomes are based) and may experience investment
outcomes very different from those the Fund seeks to achieve, especially when factoring in any fees or expenses or the performance of the Collateral Portfolio and the Put Spread Strategy. An investor who redeems Shares prior to the end of the
Outcome Period may also experience investment outcomes very different from those the Fund seeks to achieve. The Outcomes are designed with the expectation that an investor will hold Shares on the day that Milliman transacts in the FLEX Options on
behalf of the Fund, and on the day those FLEX Options expire. There is no guarantee that the Fund will be successful in its attempt to achieve the Outcomes.
Understanding the Index Caps. Unlike other investment products, the potential returns an
investor can receive from an investment in the Fund are subject to the Index Caps. This means that if one or both of the Reference Indices experience gains for the Outcome Period, an investor in the Fund will only
experience those gains up to the applicable Index Cap. Milliman calculates the Index Caps for each Outcome Period based upon (i) its evaluation of prevailing market conditions on the first day of the Outcome Period and (ii) the total
number of long call FLEX Options on each Reference Index that it is able to purchase at that time. If an investor is considering purchasing Shares during the Outcome Period, and the Fund’s NAV has increased in
value to a level near one or both of the Index Caps, an investor purchasing Shares at that price will have limited to no gains available for the remainder of the Outcome Period, but will remain vulnerable to significant downside risks (with
respect to the S&P 500 Index FLEX Options’ exposure). In certain market conditions, the performance of the Collateral Portfolio and the Put Spread Strategy could cause the Fund to underperform
relative to the Reference Indices, which could further limit Fund gains below the Index Caps, notwithstanding any performance of the Reference Indices in excess of the Index Caps.
Understanding the Buffer. The Buffer that the Fund seeks to provide is only operative
against the first 10% of losses in the Fund’s S&P 500 Index exposure for the Outcome Period. If an investor is considering purchasing Shares during the Outcome Period, and the S&P 500 Index has decreased
in value by an amount equal to or greater than 10%, an investor purchasing Shares at that time will be able to participate in any gains thereafter (up to the Index Caps), but will not benefit from the Buffer that the Fund seeks to offer for the
remainder of the Outcome Period if the losses continue to be equal to or greater than 10% during that period. Conversely, if an investor is considering purchasing Shares during the Outcome Period, and the Fund’s NAV has increased in value, then
an investor may experience losses before implementation of the Buffer that the Fund seeks to provide. While the Fund seeks to produce returns that correlate to those of the S&P 500 Index for the Outcome Period that are buffered up to
10% (prior to taking into account any fees or expenses or the performance of the Collateral Portfolio or the Put Spread Strategy) for investors who hold Shares for the entire Outcome Period, there is no guarantee it will successfully do so. In addition, the Buffer is not operative against losses in the Collateral Portfolio or the Put Spread Strategy. If the Collateral Portfolio and/or the Put Spread Strategy experiences losses, it could have the
effect of reducing the impact of, or completely eliminating, the Buffer on the Fund’s S&P 500 Index exposure. In certain market conditions, the performance of the Collateral Portfolio and/or the Put Spread Strategy could cause the Fund to
significantly underperform the S&P 500 Index. Investors who purchase Shares at the beginning of the Outcome Period may lose their entire
418
investment. Investors who purchase Shares after the Outcome Period has begun may also lose their entire investment. An
investment in the Fund is only appropriate for investors willing to bear those losses.
Fund Rebalance. Milliman implements the Fund’s strategy on an annual basis, seeking to
produce the Outcomes for an Outcome Period. On the last business day of any stated Outcome Period, all of the Fund’s existing FLEX Options, which includes those used to establish the Buffer, the Index Caps and the Put Spread Strategy, will expire
and Milliman will transact in a new set of FLEX Options on the same business day, which will commence a new Outcome Period beginning the following business day. At that same time, Milliman will also evaluate whether to make any adjustments to the
Collateral Portfolio. Accordingly, Shares can be held indefinitely if investors determine to participate in additional Outcome Periods.
Approximately one week prior to the end of each Outcome Period, the Fund will file a prospectus supplement, which will notify existing investors of
(i) the date on which the existing Outcome Period will end; (ii) the date on which the new Outcome Period will commence; and (iii) the anticipated ranges of the Index Caps that will be used for the new Outcome Period. Immediately preceding the
commencement date of the new Outcome Period, the Fund will file a prospectus supplement disclosing the Fund’s final Index Caps (both gross and net of Fund fees and expenses) for the new Outcome Period. This information will also be available
online at www.[___________].com, and on your insurance company’s website. Please contact your insurance company or other financial intermediary for more information.
Fund Classification. The Fund is classified as “non-diversified” under the Investment
Company Act of 1940, as amended (the “1940 Act”).
Principal Risks
You could lose money by investing in the Fund. An investment in the Fund is not a deposit of a bank and is not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other governmental agency. There can be no assurance that the Fund’s investment objectives will be achieved.
Downside Loss Buffer Risk. There can be no guarantee that the Fund will be successful in its strategy to
buffer against S&P 500 Index losses if the S&P 500 Index decreases in value over the Outcome Period. The Fund’s strategy is designed to produce returns that correlate to those of the S&P 500 Index, subject to the S&P 500 Index
Cap, while limiting downside S&P 500 Index losses and providing additional upside exposure to the Secondary Index, subject to the Secondary Index Cap, if Shares are bought on the day on which Milliman transacts in the FLEX Options on behalf
of the Fund and held until those FLEX Options expire at the end of each Outcome Period. The success of the Buffer also depends upon the performance of the Collateral Portfolio and the Put Spread Strategy. If
the Collateral Portfolio and/or the Put Spread Strategy experiences losses, it could have the effect of reducing the impact of, or completely eliminating, the Buffer on the Fund’s S&P 500 Index exposure. In certain market conditions, the
performance of the Collateral Portfolio and/or the Put Spread Strategy could cause the Fund to significantly underperform the S&P 500 Index. Despite the intended Buffer, an investor could lose their entire investment. In the
event an investor purchases Shares after the date on which Milliman transacted in the FLEX Options on behalf of the Fund, or redeems Shares prior to the expiration of those FLEX Options, the Buffer that the Fund seeks to provide may not be
available or fully applicable.
Risk of Capped Upside Returns. The Fund’s strategy is designed to produce returns that correlate to those of the
Reference Indices up to the Index Caps if Shares are bought on the day on which Milliman transacts in the FLEX Options on behalf of the Fund and held until those FLEX Options expire at the end of the Outcome Period, subject to the Index Caps. In
the event that one or both of the Reference Indices experience gains during the Outcome Period, the Fund will only participate in those gains up to the applicable Index Cap. In the event that one or both Reference Indices experience gains in excess
of the applicable Index Cap over the duration of the Outcome Period, the Fund will not participate in those excess gains. Because the Fund’s strategy provides capped exposure to two Reference Indices, the Index Caps may be lower than if the Fund
provided capped exposure to only a single Reference Index. In the event an investor purchases Shares after the date on which the FLEX Options were entered into and the Fund has risen in value to a level near to an Index Cap, there may be little or
no ability for that investor to experience an investment gain on their Shares relating to that Reference Index. In certain market conditions, the performance of the Collateral Portfolio and the Put Spread
Strategy could cause the Fund to
419
underperform relative to the Reference Indices, which could further limit Fund gains below the Index Caps, notwithstanding any
performance of the Reference Indices in excess of the Index Caps. An investor should consider the amount of the Index Caps, and the Fund’s position relative to each Index Cap, before investing in the Fund.
Index Cap Change Risk. Because the Index Caps for each Outcome Period are calculated based upon (i) Milliman’s
evaluation of prevailing market conditions on the first day of the Outcome Period and (ii) the total number of long call FLEX Options on the Reference Indices that Milliman is able to purchase at that time, the Index Caps may rise or fall from one
Outcome Period to the next. Any change in the Index Caps could be significant and they are unlikely to remain the same for consecutive Outcome Periods.
FLEX Options Risk. The Fund will transact in FLEX Options issued and guaranteed for settlement by the OCC. The
Fund bears the risk that the OCC will be unable or unwilling to perform its obligations under the FLEX Options contracts, which could result in significant losses to the Fund. In less liquid markets, terminating a FLEX Option may require the
payment of a premium or acceptance of a discounted price, and may take longer to complete. In addition, a less liquid trading market may adversely impact the value of the Fund’s FLEX Options and therefore the NAV of the Fund. In addition, the value
of the Fund’s FLEX Options positions is not anticipated to increase or decrease at the same rate as the reference asset; and while it is anticipated that they will generally move in the same direction, it is possible that they may move in different
directions. Certain FLEX Options positions may also expire worthless. The use of FLEX Options involves leverage, which can cause the Fund’s portfolio to be more volatile than if the portfolio had not been leveraged. Leverage can significantly
magnify the effect of price movements of the reference asset, disproportionately increasing the Fund’s losses and reducing the Fund’s opportunities for gains when the reference asset changes in unexpected ways. In some instances, such leverage
could result in losses that exceed the original amount invested.
Investment Objective and Outcomes Risk. There is no guarantee that the Fund will be successful in its attempt
to achieve its investment objective and/or the Outcomes, and an investor could lose some or all of their investment in the Fund. Certain circumstances under which the Fund might not achieve its objective and/or the Outcomes include, but are not
limited to (i) if the Fund disposes of FLEX Options, (ii) if the Fund is unable to maintain the proportional relationship based on the number of FLEX Options in the Fund’s portfolio, (iii) significant accrual of Fund expenses in connection with
effecting the Fund’s principal investment strategy, (iv) losses incurred by the Fund’s holdings in the Collateral Portfolio and/or losses resulting from the Put Spread Strategy, or (iv) adverse tax law changes affecting the treatment of FLEX
Options.
Tax Risk. The Fund intends to elect, and to qualify each year, to be treated as a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”). As a RIC, the Fund will not be subject to U.S. federal income tax on the portion
of its net investment income and net capital gain that it distributes to shareholders, provided that it satisfies certain requirements of the Code. To maintain its status as a RIC, the Fund must meet certain income, diversification and
distributions tests. For purposes of the diversification test, the identification of the issuer (or, in some cases, issuers) of a particular Fund investment can depend on the terms and conditions of that investment. In particular, there is no
published IRS guidance or case law on how to determine the “issuer” of certain derivatives that the Fund will enter into and the Fund has not received a private letter ruling on this point. Therefore, there is a risk that the Fund will not meet the
Code’s diversification requirements and will not qualify, or will be disqualified, as a RIC. If the Fund does not qualify as a RIC for any taxable year and certain relief provisions are not available, the Fund’s taxable income will be subject to
tax at the Fund level and to a further tax at the shareholder level when such income is distributed.
The Fund also intends to comply with the diversification requirements of Section 817(h) of the Code, and the regulations thereunder, relating to the
tax-deferred status of variable accounts that are based on insurance company separate accounts (referred to as “segregated asset accounts” for federal income tax purposes). These diversification requirements apply in addition to the RIC
diversification requirements discussed above. There also is no published guidance or case law on how to determine the “issuer” of the derivatives referred to above for purposes of the diversification requirements of Section 817(h) of the Code and
the Fund has not received a private letter ruling on this point. If these requirements are not met, or under other circumstances, such as if the Fund does not qualify as a RIC for any taxable year, it is possible that the contract owners (rather
than the insurance company) will be treated for federal income tax purposes as the taxable owners of the assets held by the segregated asset accounts.
420
Clearing Member Default Risk. The Fund will hold FLEX Options through accounts at members of clearing houses (“clearing members”) rather than a bank or a broker. Assets deposited by the Fund with any clearing member as margin for its FLEX Options positions may, in certain circumstances, be used to satisfy losses of other
clients of the Fund’s clearing member where such assets may be held in commingled omnibus accounts. In addition, although clearing members guarantee performance of their clients’ obligations to the clearing house, there is a risk that the assets of
the Fund might not be fully protected in the event of the clearing member’s bankruptcy, as the Fund would be limited to recovering only a pro rata share of all available funds segregated on behalf of the
clearing member’s customers for the relevant account class.
Debt Securities Risk. The prices of debt securities will be affected by changes in interest rates, the
creditworthiness of the issuer and other factors. These risks could affect the value of investments in which the Fund invests, possibly causing the Fund’s NAV to be reduced and fluctuate more than other types of investments. During periods of
falling interest rates, an issuer of a callable bond may repay the security before its stated maturity, and the Fund may have to reinvest the proceeds in securities with lower yields, which would result in a decline in the Fund’s income, or in
securities with greater risks or with other less favorable features. Changing interest rates, including rates that fall below zero, may have unpredictable effects on markets, result in heightened market volatility and detract from the Fund’s
performance to the extent the Fund is exposed to such interest rates. An increase in interest rates will generally cause the value of fixed-income securities held by the Fund to decline, may lead to heightened volatility in the fixed-income
markets and may adversely affect the liquidity of certain fixed-income investments, including those held by the Fund. Risks associated with rising interest rates are heightened given that interest rates in the U.S. are near historic lows.
Adjustable-rate instruments also react to interest rate changes in a similar manner, although generally to a lesser degree (depending, however, on the characteristics of the reset terms, including the index chosen, frequency of reset and reset
caps or floors, among other factors). Interest rate sensitivity is generally more pronounced and less predictable in instruments with uncertain payment or prepayment schedules and also for those with longer maturities.
Foreign Securities and Credit Exposure Risk. U.S. dollar-denominated securities carrying foreign credit exposure
may be affected by unfavorable political, economic or governmental developments that could affect payments of principal and interest. Furthermore, the value of the Fund’s foreign investments (whether direct or indirect) may be adversely affected by
political and social instability in their home countries, by changes in economic or taxation policies in those countries, or by the difficulty in enforcing obligations in those countries. Foreign companies generally may be subject to less stringent
regulations than U.S. companies, including financial reporting requirements and auditing and accounting controls. As a result, there generally is less publicly available information about foreign companies than about U.S. companies. Trading in many
foreign securities may be less liquid and more volatile than U.S. securities due to the size of the market or other factors.
U.S. Government Securities Risk. U.S. Government securities are subject to interest rate risk but generally do
not involve the credit risks associated with investments in other types of debt securities. As a result, the yields available from U.S. Government securities are generally lower than the yields available from other debt securities. U.S. Government
securities are guaranteed only as to the timely payment of interest and the payment of principal when held to maturity. While securities issued or guaranteed by U.S. federal government agencies are backed by the full faith and credit of the U.S.
Department of the Treasury, securities issued by government sponsored entities are solely the obligation of the issuer and generally do not carry any guarantee from the U.S. Government.
ABS Risk. ABS are subject to the general debt securities risks described above. In addition, ABS may be less
liquid than other bonds, and may be more sensitive than other bonds to the market’s perception of issuers and creditworthiness of payees, which may result in the Fund experiencing difficulty selling or valuing these securities. ABS markets have
experienced extraordinary weakness and volatility at various times in recent years, and may decline quickly in the event of a substantial economic or market downturn. Accordingly, these securities may be subject to greater risk of default during
periods of economic downturn than other securities, which could result in possible losses to the Fund.
Issuer Risk. The performance of the Fund depends on the performance of individual securities to which the Fund
has exposure. The Fund may be adversely affected if an issuer of underlying securities held by the Fund is unable or
421
unwilling to repay principal or interest when due. Changes in the financial condition or credit rating of an issuer of those securities may cause the
value of the securities to decline.
Management Risk. The Fund is subject to management risk because it is an actively managed portfolio. Milliman
will apply investment techniques and risk analyses in making investment decisions for the Fund, but there can be no guarantee that the Fund will meet its investment objective and/or the Outcomes. In addition, Milliman does not use defensive
strategies or attempt to reduce the Fund’s exposures to poor performing positions during an Outcome Period. This differs from funds that are managed to seek to outperform a benchmark index. Therefore, in the event of a general market decline, the
Fund’s value may fall more than the value of another fund that does attempt to hedge against such market declines.
Market Risk. The Fund could lose money over short periods due to short-term market movements and over longer
periods during more prolonged market downturns. Assets may decline in value due to factors affecting financial markets generally or particular asset classes or industries represented in the markets. The value of a FLEX Option or other asset may
also decline due to general market conditions, economic trends or events that are not specifically related to the issuer of the security or other asset, or due to factors that affect a particular issuer, country, region, market, industry, sector or
asset class.
Non-Diversification Risk. The Fund may invest a relatively high percentage of its assets in a limited number of
issuers. As a result, the Fund may be more susceptible to a single adverse economic or regulatory occurrence affecting one or more of these issuers, experience increased volatility and be highly invested in certain issuers.
Large Shareholder Risk. At times, the Fund may experience adverse effects when certain large shareholders,
including insurance company separate accounts, redeem large amounts of shares of the Fund. Large redemptions may cause the Fund to sell portfolio holdings at times when it would not otherwise do so and may increase transaction costs and/or result
in an increase to the Fund’s expense ratio. A large redemption could be detrimental to the Fund and its remaining shareholders.
Risks of Investing in ETFs. In addition to the risks associated with the underlying assets held by the ETFs in
which the Fund invests, investments in ETFs are also subject to the following additional risks: (i) only authorized participants may engage in transactions directly with ETFs but none are obligated to do so, which could result in an ETF’s shares
trading at a premium or discount to its NAV or possibly face trading halts or delisting; (ii) certain ETFs seek to track the performance of an underlying index and will not attempt to take defensive positions under any market conditions, including
declining markets, which could result in losses; and (iii) because ETF shares trade on the secondary market, there is not guarantee that an active market will be developed or maintained, which could result in the ETF’s shares trading at a premium
or discount to its NAV. Investments in ETFs may involve duplication of management fees and certain other expenses, as the Fund indirectly bears its proportionate share of any expenses paid by the ETFs in which it invests.
Risks of Investing in Money Market Funds. Money market funds seek to preserve the value of shareholder
investments at $1.00 per share, but shareholders, such as the Fund, may still lose money by investing in such funds. In addition, a money market fund may impose a fee upon the sale of its shares or may temporarily suspend the ability to sell shares
if the fund’s liquidity falls below required minimums because of market conditions or other factors. The credit quality of a money market fund’s holdings can change rapidly in certain markets, and the default of a single holding could have an
adverse impact on the fund’s share price. A money market fund’s share price can also be negatively affected during periods of high redemption pressures, illiquid markets, and/or significant market volatility.
Performance
As of the date of this Prospectus, the Fund has not commenced operations and therefore does not have a performance history. Once available, the Fund’s
performance information will be accessible online at www.[________].com and will provide some indication of the risks of investing in the Fund.
Management
422
Investment Adviser
Milliman Financial Risk Management LLC (“Milliman”) serves as investment adviser to the Fund.
Portfolio Managers
The following persons serve as portfolio managers of the Fund.
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●
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Robert T. Cummings, Principal & Head of Portfolio Management at Milliman.
|
|
●
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Maria Schiopu, Principal & Head of Portfolio Management at Milliman.
|
|
●
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Jeff Greco, Principal & Head of Strategy Research at Milliman.
|
|
●
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Jordan Rosenfeld, Portfolio Manager at Milliman.
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Each portfolio manager is jointly and primarily responsible for the day-to-day management of the Fund’s portfolio and has served in such capacity
since the Fund’s inception in 2021.
Purchase and Sale of Shares
Shares are available as underlying investment options for variable insurance contracts and variable life insurance policies (each, a “variable contract,” and, collectively, the “variable contracts”) issued by insurance companies. These insurance companies are the record owners of the separate accounts
holding the Shares. You do not buy, sell or exchange Shares directly; rather, you choose investment options through your variable contracts. The insurance companies then cause the separate accounts to purchase and redeem Shares according to
the investment options you choose.
Tax Information
The dividends and distributions paid by the Fund to the insurance company separate accounts will consist of ordinary income, capital gains, or some
combination of both. Because Shares must be purchased through separate accounts used to fund variable contracts, such dividends and distributions will be exempt from current taxation by owners of variable contracts (each, a “contract owner,” and, collectively “contract owners”) if left to accumulate within a separate account. Consult the variable contract prospectus for additional tax
information.
Payments to Insurance Companies and Other Financial Intermediaries
If you allocate contract value to the Fund through an insurance company or other financial intermediary, the Fund, Milliman, the Fund’s distributor or
their related companies may pay the insurance company and/or its affiliates or other intermediary for the sale of Shares and related services. These payments may create a conflict of interest by influencing the insurance company or other
intermediary and your salesperson to recommend an indirect investment in the Fund over another investment. The prospectus or other disclosure documents for the variable contracts may contain additional information about these payments, if any.
You may also ask your salesperson or financial intermediary, or visit your financial intermediary’s website, for more information.
423
Fund Summary: Milliman S&P 500 & Russell 2000 1-Year Buffer with Stacker
Cap Fund – Feb
Investment Objective
The Fund seeks to provide exposure to the S&P 500 Index, while providing a buffer against the first 10% of losses associated with S&P 500
Index performance and participating in S&P 500 Index gains up to a declared cap, prior to taking into account any fees or expenses or the performance of any fixed income exposure included in the Fund’s portfolio, over the period from February
1, 2022 through January 31, 2023. The Fund also seeks to provide upside exposure to the Russell 2000 Index up to a declared cap, prior to taking into account any fees or expenses or the performance of any fixed income exposure included in the
Fund’s portfolio, over the same period.
Fees and Expenses of the Fund
This table describes the fees and expenses that you may pay if you buy, hold and sell shares of the Fund (“Shares”).
This table and the example below do not include any fees or sales charges imposed by your variable product. If they were included, the expenses listed below would be higher.
Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment)
|
Class 3
|
|
|
Management Fees
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0.49%
|
|
Distribution and Service (12b-1) Fees
|
0.25%
|
|
Other Expenses(1)
|
0.50%
|
|
Acquired Fund Fees and Expenses(1)
|
[_.__]%
|
|
Total Annual Fund Operating Expenses
|
1.24%
|
|
Fee Waiver and/or Expense Reimbursement(2)(3)
|
(0.25)%
|
|
Total Annual Fund Operating Expenses After Fee Waiver and/or Expense Reimbursement
|
0.99%
|
|
(1)
|
“Other Expenses” and “Acquired Fund Fees and Expenses” are based on estimated amounts for the current fiscal year.
|
|
(2)
|
The Fund’s investment adviser, Milliman Financial Risk Management LLC (“Milliman”), has contractually
agreed to waive advisory fees and/or reimburse expenses to the extent necessary to limit the Fund’s total annual Fund operating expenses (excluding taxes, interest, brokerage fees and commissions, Rule 12b-1 fees, acquired fund fees and
expenses, short-sale dividend expenses, administrative services fees, other expenses that are capitalized in accordance with generally accepted accounting principles, and extraordinary or non-routine expenses not incurred in the
ordinary course of the Fund’s business) to 0.74% of the Fund's average daily net assets (the “Expense Limitation Agreement”) until at least November 1, 2022. During its term, the Expense
Limitation Agreement cannot be terminated or amended to increase the applicable limit without approval of the Board of Trustees of the Trust (the “Board”). Milliman may recoup from the Fund any
advisory fees waived or expenses reimbursed pursuant to the Expense Limitation Agreement for a period of three years from the date on which such waiver or reimbursement occurred; provided, however, that such recoupment shall not be made
if it would cause the Fund’s total annual Fund operating expenses to exceed the lesser of (a) the expense limitation in effect at the time of the reimbursement, or (b) the expense limitation in effect at the time of recoupment, if any.
|
|
(3)
|
In addition to the Expense Limitation Agreement, Milliman has contractually agreed to waive its advisory fees in an amount equal to the Fund’s
acquired fund fees and expenses until at least November 1, 2022 (the “Fee Waiver”). This contract cannot be terminated or modified without the consent of the Board.
|
Example
This example is intended to help you compare the cost of investing in the Fund with the cost of investing in other funds. This example assumes that you
invest $10,000 in the Fund for the time periods indicated and then sell all of your Shares at the end of those periods. This example also assumes that your investment has a 5% return each year and that the Fund’s operating expenses remain at
current levels and that the Expense Limitation Agreement and Fee Waiver remain in place for their contractual periods. Although your actual costs may be higher or lower, your costs, based on these assumptions, would be:
|
1 Year
|
3 Years
|
|
|
Class 3
|
$104
|
$384
|
424
This example does not include any fees or sales charges imposed by your variable product. If they were included, the expenses listed above would be
higher.
Portfolio Turnover
The Fund pays transaction costs, such as commissions, when it purchases and sells securities (or “turns over” its portfolio). A higher portfolio turnover
will cause the Fund to incur additional transaction costs. These costs, which are not reflected in Total Annual Fund Operating Expenses or in the example, may affect the Fund’s performance. Because the Fund has not yet commenced investment
operations, no portfolio turnover information is available at this time.
Principal Investment Strategies
The Fund seeks to achieve its investment objective by transacting in FLexible EXchange® Options (“FLEX Options”)
and by separately maintaining a collateral portfolio (the “Collateral Portfolio”), which is designed primarily to serve as margin or collateral for the Fund’s FLEX Options positions and secondarily to
enhance the Fund’s upside S&P 500 Index and Russell 2000 Index FLEX Options’ exposure (i.e., by utilizing anticipated income to measure the ability to purchase additional FLEX Options). FLEX Options
are exchange-traded options contracts with uniquely customizable terms. In general, an options contract is an agreement between a buyer and seller that gives the purchaser of the option the right to buy or sell a particular asset at a specified
future date at an agreed upon price, commonly known as the “strike price.” The reference assets for the Fund’s FLEX Options positions will include the S&P 500 Index, the Russell 2000 Index (the “Secondary
Index,” and together with the S&P 500 Index, the “Reference Indices,” and, each, a “Reference Index”), and certain exchange-traded funds (“ETFs”), as described further below. The S&P 500 Index is a large-capitalization, market-weighted, U.S. equities index that tracks the price (excluding dividends) of
500 leading companies in leading industries of the U.S. economy. The Secondary Index is [a float-adjusted, market capitalization-weighted index that is designed to measure the performance of the small-capitalization segment of the U.S. equity
market, as defined by FTSE Russell].
The Collateral Portfolio may be invested in short-term fixed-income securities, including corporate bonds and other corporate debt securities,
asset-backed securities (“ABS”), securities issued by the U.S. Government or its agencies and instrumentalities, securities issued by non-U.S. governments or their agencies and instrumentalities, money
market securities and funds, other interest-bearing instruments, cash, ETFs that primarily invest in any of the foregoing instruments, options on ETFs and options box spreads. An options box spread is the combination of different options trades
that have offsetting spreads (e.g., purchases and sales on the same underlying instrument, such as an index or an ETF, but with different strike prices and/or expiration dates) for the purpose of
generating income. The Fund may invest in short-term fixed income securities or other instruments, including through ETFs, of any maturity and credit quality. The Fund will generally invest up to 35% of its net assets in one or more ETFs that
provide exposure to investment grade corporate bonds.
Due to the unique mechanics of the Fund’s strategy, the return an investor can expect to receive from an investment in the Fund has characteristics that
are distinct from the returns of many other investment vehicles. It is important that an investor understand these characteristics before making an investment in the Fund.
In seeking to achieve its investment objective, the Fund seeks to produce pre-determined outcomes (the “Outcomes”)
that are based upon the performance of the Reference Indices over a one-year period (the “Outcome Period”). The initial Outcome Period for the Fund is February 1, 2022 through January 31, 2023. Following the
initial Outcome Period, each subsequent Outcome Period will be a one-year period commencing upon the expiration of the prior Outcome Period. The Fund seeks to achieve the Outcomes by purchasing and writing (selling) FLEX Options to create layers
within the Fund’s portfolio. One layer is designed to produce returns that correlate to those of the S&P 500 Index for the Outcome Period if the S&P 500 Index experiences gains during that time, subject to an upside return cap (the “S&P 500 Index Cap”), as described below. A second layer is designed to produce returns that correlate to any upside market performance of the Secondary Index over the
Outcome Period, subject to an upside return cap (the “Secondary Index Cap,” and, together with the S&P 500 Index Cap, the “Index Caps,” and, each, an “Index Cap”), as described below. A third layer is designed to produce returns that correlate to those of the S&P 500 Index for the Outcome Period that are buffered up to 10% if the S&P 500 Index
experiences losses during that time (the “Buffer”). There is no guarantee that the Fund will be successful in its attempt to produce
425
returns that correlate to those of the S&P 500 Index or the Secondary Index up to the applicable Index Caps or produce buffered
returns against the Fund’s S&P 500 Index exposure.
Milliman Financial Risk Management, LLC (“Milliman”), the investment adviser of the Fund, seeks to establish the
Buffer by writing one put FLEX Option on the S&P 500 Index with a strike price that is 10% lower than the value of the S&P 500 Index at the beginning of the Outcome Period.
Milliman seeks to establish the Index Caps by purchasing long call FLEX Options on each Reference Index with a strike price approximately equal to the
value of the respective Reference Index at the beginning of the Outcome Period. Milliman purchases these FLEX Options with a portion of the Fund’s net assets plus (i) the cash received from writing the put FLEX Option designed to create the
Buffer, (ii) additional cash received by utilizing FLEX Options to create a put spread (the “Put Spread Strategy”) on fixed income securities and/or one or more ETFs that provide exposure to fixed income
securities, and (iii) yield received from the Collateral Portfolio. Milliman seeks to achieve the Put Spread Strategy for the Fund by writing a put FLEX Option on an underlying asset at a strike price at or lower than the underlying asset’s
market price or current value at the beginning of the Outcome Period, and buying a put FLEX Option on the same underlying asset at a lower strike price than the written put FLEX Option.
The Index Caps represent the maximum rate of return in each Reference Index that an investor can achieve from an investment in the Fund over the Outcome
Period. Milliman calculates the Index Caps based upon (i) its evaluation of prevailing market conditions on the first day of the Outcome Period and (ii) the total number of long call FLEX Options on each Reference Index that it is able to purchase
at that time. As of the date of this Prospectus, and assuming current market conditions persist, Milliman expects that the Index Caps will be between the below ranges (both gross and net of Fund fees and expenses). Any fees or expenses imposed by
your variable product, and any other expenses incurred by the Fund, will have the effect of further reducing each Index Cap. In addition, in certain market conditions, the performance of the Collateral Portfolio
and the Put Spread Strategy could cause the Fund to underperform relative to the Reference Indices, which could further limit Fund gains below the Index Caps, notwithstanding any performance of the Reference Indices in excess of the Index Caps.
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Estimated Index Cap Ranges
(As of [___])
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||
|
Prior to Taking into Account Fund Fees and Expenses
|
After Taking into Account Fund Fees and Expenses
|
|
|
S&P 500 Index Cap
|
||
|
Class 3
|
[__]% and [__]%
|
[__]% and [__]%
|
|
Secondary Index Cap
|
||
|
Class 3
|
[__]% and [__]%
|
[__]% and [__]%
|
The Buffer is only operative against the first 10% of losses in the Fund’s S&P 500 Index exposure for the Outcome Period. If the S&P 500 Index
decreases in value by more than 10% during the Outcome Period, the Fund (and therefore investors in Shares) will experience all subsequent losses in the Fund’s S&P 500 Index exposure on a one-to-one basis for the Outcome Period. The Fund
seeks to produce buffered returns against its S&P 500 Index exposure prior to taking into account any fees or expenses or the performance of the Collateral Portfolio or the Put Spread Strategy. The Buffer
is not operative against losses in the Collateral Portfolio or the Put Spread Strategy. If the Collateral Portfolio and/or the Put Spread Strategy experiences losses, it could have the effect of reducing the impact of, or completely
eliminating, the Buffer on the Fund’s S&P 500 Index exposure. In certain market conditions, the performance of the Collateral Portfolio and/or the Put Spread Strategy could cause the Fund to significantly underperform the S&P 500
Index. The following table reflects the Buffer both gross and net of Fund fees and expenses:
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Share Class
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Buffer
(As of [___])
|
|
|
Prior to Taking into Account Fund Fees and Expenses
|
After Taking into Account Fund Fees and Expenses
|
|
|
Class 3
|
10%
|
[__]%
|
426
Because the Fund also seeks to provide only upside exposure to the Secondary Index during the Outcome Period, the Fund’s NAV will not be impacted by any
losses experienced by the Secondary Index when measured from the beginning to the end of the Outcome Period. If the Secondary Index increases in value during the Outcome Period and later decreases in value during the Outcome Period, the Fund’s NAV
will reflect any such decreases until the Secondary Index reaches its initial value (measured as of the first day of the Outcome Period). If the Secondary Index decreases in value over the course of an entire Outcome Period, the Fund’s NAV will not
reflect such losses; therefore, the Fund’s overall performance will be approximately that of the S&P 500 Index for the Outcome Period, subject to the Buffer and the S&P 500 Index Cap.
The definitive Index Caps and Buffer will be set forth on the Fund’s website. The Fund’s website will also provide information relating to the
Outcomes on a daily basis, including the Fund’s position relative to the Index Caps and the Buffer. You may also contact your insurance company or other financial intermediary for more information.
Additionally, the Fund’s net asset value (“NAV”) will not increase or decrease at the same rate as the Reference
Indices because the Fund’s strategy relies upon the performance of the Collateral Portfolio and the Put Spread Strategy, in addition to the value of the Fund’s FLEX Options positions on the Reference Indices. While Milliman anticipates that the
Fund’s NAV will generally move in the same direction as the S&P 500 Index, and correspond to any upside returns of the Secondary Index (meaning that the Fund’s NAV will generally increase if the Reference Indices experience gains or decrease if
the Reference Indices experience losses), the Fund’s NAV may not decrease at the same rate as the Reference Indices (especially when factoring in the performance of the Collateral Portfolio and the Put Spread Strategy) and will not increase at the
same rate as the Reference Indices (especially when factoring in the Index Caps and the performance of the Collateral Portfolio and the Put Spread Strategy). Similarly, the amount of time remaining until the end of the Outcome Period also affects
the impact of the Buffer on the Fund’s NAV, because the Buffer may not be in full effect prior to the end of the Outcome Period.
The FLEX Options utilized in the Fund’s portfolio are each set to expire on the last day of the Outcome Period. The customizable nature of FLEX Options
will allow Milliman to select the strike price at which each FLEX Option will be exercised at the expiration of the FLEX Option term. At the commencement of the Outcome Period, Milliman will specifically select the strike price for each FLEX Option
in a manner designed to achieve the Outcomes when the FLEX Options are exercised on the final day of the Outcome Period, depending on the anticipated performance of the Reference Indices, the Collateral Portfolio and the Put Spread Strategy over
the duration of that Outcome Period.
The hypothetical graphical illustrations provided below are designed to illustrate the Outcomes based upon the
hypothetical performance of the Reference Indices for an investor who holds Shares for the entirety of the Outcome Period. The hypothetical graphical illustrations do not include any fees or expenses
imposed by your variable product or expenses incurred by the Fund, and do not reflect the performance of the Collateral Portfolio or the Put Spread Strategy. Additional hypothetical graphical representations of the Outcomes are provided in
“Additional Information About the Funds and the Risks of Investing.” There is no guarantee that the Fund will be successful in its attempt to achieve the Outcomes for the Outcome Period.
427
The following table contains hypothetical examples designed to illustrate the Outcomes the Fund seeks to
achieve over the Outcome Period, based upon the performance of the Reference Indices from (100)% to 100% after taking into account the Index Caps and the Buffer, but prior to taking into account any fees or
expenses or the performance of the Collateral Portfolio or the Put Spread Strategy. The table is provided for illustrative purposes only and does not provide every possible performance scenario for Shares over
the course of the Outcome Period. There is no guarantee that the Fund will be successful in its attempt to achieve the Outcomes for an Outcome Period. The table is not intended to predict or project the performance of the FLEX Options or the Fund. Investors should not take this information as an
assurance of the expected performance of the Reference Indices or the Fund. Actual Fund performance will vary with fluctuations in the performance of the Collateral Portfolio and the Put Spread Strategy, in addition to the value of the
Fund’s FLEX Options positions on the Reference Indices, during the Outcome Period, among other factors. The performance of the Collateral Portfolio and the Put Spread Strategy
could significantly impact the performance of the Fund, which could prevent the Fund from achieving the Outcomes that it seeks to produce. The table does not reflect any fees or expenses imposed by your variable product or expenses
incurred by the Fund. If it did, the returns shown for the Fund would be lower. Please refer to the Fund’s website, which provides updated information relating to this table on a daily basis throughout the Outcome Period. Please contact your
insurance company or other financial intermediary for more information.
428
|
Index/Fund
|
Hypothetical Performance1
|
|||||||||||
|
S&P 500 Index Price Performance
|
(100)%
|
(50)%
|
(20)%
|
(10)%
|
(5)%
|
0%
|
5%
|
10%
|
15%
|
20%
|
50%
|
100%
|
|
Secondary Index Price Performance
|
(100)%
|
(50)%
|
(20)%
|
(10)%
|
(5)%
|
0%
|
5%
|
10%
|
15%
|
20%
|
50%
|
100%
|
|
Fund Performance at NAV
|
(90)%
|
(40)%
|
(10)%
|
0%2
|
0%2
|
0%
|
10%3
|
14%3
|
14%3
|
14%3
|
14%3
|
14%3
|
| 1 |
Does not take into account any fees or expenses or the performance of the Collateral Portfolio or the Put Spread Strategy.
|
| 2 |
Reflects the impact of the Buffer.
|
| 3 |
Reflects the impact of assumed Index Caps of 7% per index, 14% total.
|
Understanding Outcomes. The Outcomes the Fund seeks to achieve are measured based upon the
Fund’s NAV on the first day of the Outcome Period. The Outcome Period begins on the day Milliman transacts in the FLEX Options on behalf of the Fund, and ends on the day those FLEX Options expire. An investor who
purchases Shares after the commencement of the Outcome Period will likely have purchased Shares at a different NAV than the NAV on the first day of the Outcome Period (the NAV upon which the Outcomes are based) and may experience investment
outcomes very different from those the Fund seeks to achieve, especially when factoring in any fees or expenses or the performance of the Collateral Portfolio and the Put Spread Strategy. An investor who redeems Shares prior to the end of the
Outcome Period may also experience investment outcomes very different from those the Fund seeks to achieve. The Outcomes are designed with the expectation that an investor will hold Shares on the day that Milliman transacts in the FLEX Options on
behalf of the Fund, and on the day those FLEX Options expire. There is no guarantee that the Fund will be successful in its attempt to achieve the Outcomes.
Understanding the Index Caps. Unlike other investment products, the potential returns an
investor can receive from an investment in the Fund are subject to the Index Caps. This means that if one or both of the Reference Indices experience gains for the Outcome Period, an investor in the Fund will only
experience those gains up to the applicable Index Cap. Milliman calculates the Index Caps for each Outcome Period based upon (i) its evaluation of prevailing market conditions on the first day of the Outcome Period and (ii) the total
number of long call FLEX Options on each Reference Index that it is able to purchase at that time. If an investor is considering purchasing Shares during the Outcome Period, and the Fund’s NAV has increased in
value to a level near one or both of the Index Caps, an investor purchasing Shares at that price will have limited to no gains available for the remainder of the Outcome Period, but will remain vulnerable to significant downside risks (with
respect to the S&P 500 Index FLEX Options’ exposure). In certain market conditions, the performance of the Collateral Portfolio and the Put Spread Strategy could cause the Fund to underperform
relative to the Reference Indices, which could further limit Fund gains below the Index Caps, notwithstanding any performance of the Reference Indices in excess of the Index Caps.
Understanding the Buffer. The Buffer that the Fund seeks to provide is only operative
against the first 10% of losses in the Fund’s S&P 500 Index exposure for the Outcome Period. If an investor is considering purchasing Shares during the Outcome Period, and the S&P 500 Index has decreased
in value by an amount equal to or greater than 10%, an investor purchasing Shares at that time will be able to participate in any gains thereafter (up to the Index Caps), but will not benefit from the Buffer that the Fund seeks to offer for the
remainder of the Outcome Period if the losses continue to be equal to or greater than 10% during that period. Conversely, if an investor is considering purchasing Shares during the Outcome Period, and the Fund’s NAV has increased in value, then
an investor may experience losses before implementation of the Buffer that the Fund seeks to provide. While the Fund seeks to produce returns that correlate to those of the S&P 500 Index for the Outcome Period that are buffered up to
10% (prior to taking into account any fees or expenses or the performance of the Collateral Portfolio or the Put Spread Strategy) for investors who hold Shares for the entire Outcome Period, there is no guarantee it will successfully do so. In addition, the Buffer is not operative against losses in the Collateral Portfolio or the Put Spread Strategy. If the Collateral Portfolio and/or the Put Spread Strategy experiences losses, it could have the
effect of reducing the impact of, or completely eliminating, the Buffer on the Fund’s S&P 500 Index exposure. In certain market conditions, the performance of the Collateral Portfolio and/or the Put Spread Strategy could cause the Fund to
significantly underperform the S&P 500 Index. Investors who purchase Shares at the beginning of the Outcome Period may lose their entire
429
investment. Investors who purchase Shares after the Outcome Period has begun may also lose their entire investment. An investment
in the Fund is only appropriate for investors willing to bear those losses.
Fund Rebalance. Milliman implements the Fund’s strategy on an annual basis, seeking to
produce the Outcomes for an Outcome Period. On the last business day of any stated Outcome Period, all of the Fund’s existing FLEX Options, which includes those used to establish the Buffer, the Index Caps and the Put Spread Strategy, will expire
and Milliman will transact in a new set of FLEX Options on the same business day, which will commence a new Outcome Period beginning the following business day. At that same time, Milliman will also evaluate whether to make any adjustments to the
Collateral Portfolio. Accordingly, Shares can be held indefinitely if investors determine to participate in additional Outcome Periods.
Approximately one week prior to the end of each Outcome Period, the Fund will file a prospectus supplement, which will notify existing investors of
(i) the date on which the existing Outcome Period will end; (ii) the date on which the new Outcome Period will commence; and (iii) the anticipated ranges of the Index Caps that will be used for the new Outcome Period. Immediately preceding the
commencement date of the new Outcome Period, the Fund will file a prospectus supplement disclosing the Fund’s final Index Caps (both gross and net of Fund fees and expenses) for the new Outcome Period. This information will also be available
online at www.[___________].com, and on your insurance company’s website. Please contact your insurance company or other financial intermediary for more information.
Fund Classification. The Fund is classified as “non-diversified” under the Investment
Company Act of 1940, as amended (the “1940 Act”).
Principal Risks
You could lose money by investing in the Fund. An investment in the Fund is not a deposit of a bank and is not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other governmental agency. There can be no assurance that the Fund’s investment objectives will be achieved.
Downside Loss Buffer Risk. There can be no guarantee that the Fund will be successful in its strategy to
buffer against S&P 500 Index losses if the S&P 500 Index decreases in value over the Outcome Period. The Fund’s strategy is designed to produce returns that correlate to those of the S&P 500 Index, subject to the S&P 500 Index
Cap, while limiting downside S&P 500 Index losses and providing additional upside exposure to the Secondary Index, subject to the Secondary Index Cap, if Shares are bought on the day on which Milliman transacts in the FLEX Options on behalf
of the Fund and held until those FLEX Options expire at the end of each Outcome Period. The success of the Buffer also depends upon the performance of the Collateral Portfolio and the Put Spread Strategy. If
the Collateral Portfolio and/or the Put Spread Strategy experiences losses, it could have the effect of reducing the impact of, or completely eliminating, the Buffer on the Fund’s S&P 500 Index exposure. In certain market conditions, the
performance of the Collateral Portfolio and/or the Put Spread Strategy could cause the Fund to significantly underperform the S&P 500 Index. Despite the intended Buffer, an investor could lose their entire investment. In the
event an investor purchases Shares after the date on which Milliman transacted in the FLEX Options on behalf of the Fund, or redeems Shares prior to the expiration of those FLEX Options, the Buffer that the Fund seeks to provide may not be
available or fully applicable.
Risk of Capped Upside Returns. The Fund’s strategy is designed to produce returns that correlate to those of the
Reference Indices up to the Index Caps if Shares are bought on the day on which Milliman transacts in the FLEX Options on behalf of the Fund and held until those FLEX Options expire at the end of the Outcome Period, subject to the Index Caps. In
the event that one or both of the Reference Indices experience gains during the Outcome Period, the Fund will only participate in those gains up to the applicable Index Cap. In the event that one or both Reference Indices experience gains in excess
of the applicable Index Cap over the duration of the Outcome Period, the Fund will not participate in those excess gains. Because the Fund’s strategy provides capped exposure to two Reference Indices, the Index Caps may be lower than if the Fund
provided capped exposure to only a single Reference Index. In the event an investor purchases Shares after the date on which the FLEX Options were entered into and the Fund has risen in value to a level near to an Index Cap, there may be little or
no ability for that investor to experience an investment gain on their Shares relating to that Reference Index. In certain market conditions, the performance of the Collateral Portfolio and the Put Spread
Strategy could cause the Fund to
430
underperform relative to the Reference Indices, which could further limit Fund gains below the Index Caps, notwithstanding any
performance of the Reference Indices in excess of the Index Caps. An investor should consider the amount of the Index Caps, and the Fund’s position relative to each Index Cap, before investing in the Fund.
Index Cap Change Risk. Because the Index Caps for each Outcome Period are calculated based upon (i) Milliman’s
evaluation of prevailing market conditions on the first day of the Outcome Period and (ii) the total number of long call FLEX Options on the Reference Indices that Milliman is able to purchase at that time, the Index Caps may rise or fall from one
Outcome Period to the next. Any change in the Index Caps could be significant and they are unlikely to remain the same for consecutive Outcome Periods.
FLEX Options Risk. The Fund will transact in FLEX Options issued and guaranteed for settlement by the OCC. The
Fund bears the risk that the OCC will be unable or unwilling to perform its obligations under the FLEX Options contracts, which could result in significant losses to the Fund. In less liquid markets, terminating a FLEX Option may require the
payment of a premium or acceptance of a discounted price, and may take longer to complete. In addition, a less liquid trading market may adversely impact the value of the Fund’s FLEX Options and therefore the NAV of the Fund. In addition, the value
of the Fund’s FLEX Options positions is not anticipated to increase or decrease at the same rate as the reference asset; and while it is anticipated that they will generally move in the same direction, it is possible that they may move in different
directions. Certain FLEX Options positions may also expire worthless. The use of FLEX Options involves leverage, which can cause the Fund’s portfolio to be more volatile than if the portfolio had not been leveraged. Leverage can significantly
magnify the effect of price movements of the reference asset, disproportionately increasing the Fund’s losses and reducing the Fund’s opportunities for gains when the reference asset changes in unexpected ways. In some instances, such leverage
could result in losses that exceed the original amount invested.
Investment Objective and Outcomes Risk. There is no guarantee that the Fund will be successful in its attempt
to achieve its investment objective and/or the Outcomes, and an investor could lose some or all of their investment in the Fund. Certain circumstances under which the Fund might not achieve its objective and/or the Outcomes include, but are not
limited to (i) if the Fund disposes of FLEX Options, (ii) if the Fund is unable to maintain the proportional relationship based on the number of FLEX Options in the Fund’s portfolio, (iii) significant accrual of Fund expenses in connection with
effecting the Fund’s principal investment strategy, (iv) losses incurred by the Fund’s holdings in the Collateral Portfolio and/or losses resulting from the Put Spread Strategy, or (iv) adverse tax law changes affecting the treatment of FLEX
Options.
Tax Risk. The Fund intends to elect, and to qualify each year, to be treated as a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”). As a RIC, the Fund will not be subject to U.S. federal income tax on the portion
of its net investment income and net capital gain that it distributes to shareholders, provided that it satisfies certain requirements of the Code. To maintain its status as a RIC, the Fund must meet certain income, diversification and
distributions tests. For purposes of the diversification test, the identification of the issuer (or, in some cases, issuers) of a particular Fund investment can depend on the terms and conditions of that investment. In particular, there is no
published IRS guidance or case law on how to determine the “issuer” of certain derivatives that the Fund will enter into and the Fund has not received a private letter ruling on this point. Therefore, there is a risk that the Fund will not meet the
Code’s diversification requirements and will not qualify, or will be disqualified, as a RIC. If the Fund does not qualify as a RIC for any taxable year and certain relief provisions are not available, the Fund’s taxable income will be subject to
tax at the Fund level and to a further tax at the shareholder level when such income is distributed.
The Fund also intends to comply with the diversification requirements of Section 817(h) of the Code, and the regulations thereunder, relating to the
tax-deferred status of variable accounts that are based on insurance company separate accounts (referred to as “segregated asset accounts” for federal income tax purposes). These diversification requirements apply in addition to the RIC
diversification requirements discussed above. There also is no published guidance or case law on how to determine the “issuer” of the derivatives referred to above for purposes of the diversification requirements of Section 817(h) of the Code and
the Fund has not received a private letter ruling on this point. If these requirements are not met, or under other circumstances, such as if the Fund does not qualify as a RIC for any taxable year, it is possible that the contract owners (rather
than the insurance company) will be treated for federal income tax purposes as the taxable owners of the assets held by the segregated asset accounts.
431
Clearing Member Default Risk. The Fund will hold FLEX Options through accounts at members of clearing houses (“clearing members”) rather than a bank or a broker. Assets deposited by the Fund with any clearing member as margin for its FLEX Options positions may, in certain circumstances, be used to satisfy losses of other
clients of the Fund’s clearing member where such assets may be held in commingled omnibus accounts. In addition, although clearing members guarantee performance of their clients’ obligations to the clearing house, there is a risk that the assets of
the Fund might not be fully protected in the event of the clearing member’s bankruptcy, as the Fund would be limited to recovering only a pro rata share of all available funds segregated on behalf of the
clearing member’s customers for the relevant account class.
Debt Securities Risk. The prices of debt securities will be affected by changes in interest rates, the
creditworthiness of the issuer and other factors. These risks could affect the value of investments in which the Fund invests, possibly causing the Fund’s NAV to be reduced and fluctuate more than other types of investments. During periods of
falling interest rates, an issuer of a callable bond may repay the security before its stated maturity, and the Fund may have to reinvest the proceeds in securities with lower yields, which would result in a decline in the Fund’s income, or in
securities with greater risks or with other less favorable features. Changing interest rates, including rates that fall below zero, may have unpredictable effects on markets, result in heightened market volatility and detract from the Fund’s
performance to the extent the Fund is exposed to such interest rates. An increase in interest rates will generally cause the value of fixed-income securities held by the Fund to decline, may lead to heightened volatility in the fixed-income
markets and may adversely affect the liquidity of certain fixed-income investments, including those held by the Fund. Risks associated with rising interest rates are heightened given that interest rates in the U.S. are near historic lows.
Adjustable-rate instruments also react to interest rate changes in a similar manner, although generally to a lesser degree (depending, however, on the characteristics of the reset terms, including the index chosen, frequency of reset and reset
caps or floors, among other factors). Interest rate sensitivity is generally more pronounced and less predictable in instruments with uncertain payment or prepayment schedules and also for those with longer maturities.
Foreign Securities and Credit Exposure Risk. U.S. dollar-denominated securities carrying foreign credit exposure
may be affected by unfavorable political, economic or governmental developments that could affect payments of principal and interest. Furthermore, the value of the Fund’s foreign investments (whether direct or indirect) may be adversely affected by
political and social instability in their home countries, by changes in economic or taxation policies in those countries, or by the difficulty in enforcing obligations in those countries. Foreign companies generally may be subject to less stringent
regulations than U.S. companies, including financial reporting requirements and auditing and accounting controls. As a result, there generally is less publicly available information about foreign companies than about U.S. companies. Trading in many
foreign securities may be less liquid and more volatile than U.S. securities due to the size of the market or other factors.
U.S. Government Securities Risk. U.S. Government securities are subject to interest rate risk but generally do
not involve the credit risks associated with investments in other types of debt securities. As a result, the yields available from U.S. Government securities are generally lower than the yields available from other debt securities. U.S. Government
securities are guaranteed only as to the timely payment of interest and the payment of principal when held to maturity. While securities issued or guaranteed by U.S. federal government agencies are backed by the full faith and credit of the U.S.
Department of the Treasury, securities issued by government sponsored entities are solely the obligation of the issuer and generally do not carry any guarantee from the U.S. Government.
ABS Risk. ABS are subject to the general debt securities risks described above. In addition, ABS may be less
liquid than other bonds, and may be more sensitive than other bonds to the market’s perception of issuers and creditworthiness of payees, which may result in the Fund experiencing difficulty selling or valuing these securities. ABS markets have
experienced extraordinary weakness and volatility at various times in recent years, and may decline quickly in the event of a substantial economic or market downturn. Accordingly, these securities may be subject to greater risk of default during
periods of economic downturn than other securities, which could result in possible losses to the Fund.
Issuer Risk. The performance of the Fund depends on the performance of individual securities to which the Fund
has exposure. The Fund may be adversely affected if an issuer of underlying securities held by the Fund is unable or
432
unwilling to repay principal or interest when due. Changes in the financial condition or credit rating of an issuer of those securities may cause the
value of the securities to decline.
Management Risk. The Fund is subject to management risk because it is an actively managed portfolio. Milliman
will apply investment techniques and risk analyses in making investment decisions for the Fund, but there can be no guarantee that the Fund will meet its investment objective and/or the Outcomes. In addition, Milliman does not use defensive
strategies or attempt to reduce the Fund’s exposures to poor performing positions during an Outcome Period. This differs from funds that are managed to seek to outperform a benchmark index. Therefore, in the event of a general market decline, the
Fund’s value may fall more than the value of another fund that does attempt to hedge against such market declines.
Market Risk. The Fund could lose money over short periods due to short-term market movements and over longer
periods during more prolonged market downturns. Assets may decline in value due to factors affecting financial markets generally or particular asset classes or industries represented in the markets. The value of a FLEX Option or other asset may
also decline due to general market conditions, economic trends or events that are not specifically related to the issuer of the security or other asset, or due to factors that affect a particular issuer, country, region, market, industry, sector or
asset class.
Non-Diversification Risk. The Fund may invest a relatively high percentage of its assets in a limited number of
issuers. As a result, the Fund may be more susceptible to a single adverse economic or regulatory occurrence affecting one or more of these issuers, experience increased volatility and be highly invested in certain issuers.
Large Shareholder Risk. At times, the Fund may experience adverse effects when certain large shareholders,
including insurance company separate accounts, redeem large amounts of shares of the Fund. Large redemptions may cause the Fund to sell portfolio holdings at times when it would not otherwise do so and may increase transaction costs and/or result
in an increase to the Fund’s expense ratio. A large redemption could be detrimental to the Fund and its remaining shareholders.
Risks of Investing in ETFs. In addition to the risks associated with the underlying assets held by the ETFs in
which the Fund invests, investments in ETFs are also subject to the following additional risks: (i) only authorized participants may engage in transactions directly with ETFs but none are obligated to do so, which could result in an ETF’s shares
trading at a premium or discount to its NAV or possibly face trading halts or delisting; (ii) certain ETFs seek to track the performance of an underlying index and will not attempt to take defensive positions under any market conditions, including
declining markets, which could result in losses; and (iii) because ETF shares trade on the secondary market, there is not guarantee that an active market will be developed or maintained, which could result in the ETF’s shares trading at a premium
or discount to its NAV. Investments in ETFs may involve duplication of management fees and certain other expenses, as the Fund indirectly bears its proportionate share of any expenses paid by the ETFs in which it invests.
Risks of Investing in Money Market Funds. Money market funds seek to preserve the value of shareholder
investments at $1.00 per share, but shareholders, such as the Fund, may still lose money by investing in such funds. In addition, a money market fund may impose a fee upon the sale of its shares or may temporarily suspend the ability to sell shares
if the fund’s liquidity falls below required minimums because of market conditions or other factors. The credit quality of a money market fund’s holdings can change rapidly in certain markets, and the default of a single holding could have an
adverse impact on the fund’s share price. A money market fund’s share price can also be negatively affected during periods of high redemption pressures, illiquid markets, and/or significant market volatility.
Performance
As of the date of this Prospectus, the Fund has not commenced operations and therefore does not have a performance history. Once available, the Fund’s
performance information will be accessible online at www.[________].com and will provide some indication of the risks of investing in the Fund.
Management
433
Investment Adviser
Milliman Financial Risk Management LLC (“Milliman”) serves as investment adviser to the Fund.
Portfolio Managers
The following persons serve as portfolio managers of the Fund.
|
●
|
Robert T. Cummings, Principal & Head of Portfolio Management at Milliman.
|
|
●
|
Maria Schiopu, Principal & Head of Portfolio Management at Milliman.
|
|
●
|
Jeff Greco, Principal & Head of Strategy Research at Milliman.
|
|
●
|
Jordan Rosenfeld, Portfolio Manager at Milliman.
|
Each portfolio manager is jointly and primarily responsible for the day-to-day management of the Fund’s portfolio and has served in such capacity since
the Fund’s inception in 2021.
Purchase and Sale of Shares
Shares are available as underlying investment options for variable insurance contracts and variable life insurance policies (each, a “variable contract,” and, collectively, the “variable contracts”) issued by insurance companies. These insurance companies are the record owners of the separate accounts
holding the Shares. You do not buy, sell or exchange Shares directly; rather, you choose investment options through your variable contracts. The insurance companies then cause the separate accounts to purchase and redeem Shares according to
the investment options you choose.
Tax Information
The dividends and distributions paid by the Fund to the insurance company separate accounts will consist of ordinary income, capital gains, or some
combination of both. Because Shares must be purchased through separate accounts used to fund variable contracts, such dividends and distributions will be exempt from current taxation by owners of variable contracts (each, a “contract owner,” and, collectively “contract owners”) if left to accumulate within a separate account. Consult the variable contract prospectus for additional tax
information.
Payments to Insurance Companies and Other Financial Intermediaries
If you allocate contract value to the Fund through an insurance company or other financial intermediary, the Fund, Milliman, the Fund’s distributor or
their related companies may pay the insurance company and/or its affiliates or other intermediary for the sale of Shares and related services. These payments may create a conflict of interest by influencing the insurance company or other
intermediary and your salesperson to recommend an indirect investment in the Fund over another investment. The prospectus or other disclosure documents for the variable contracts may contain additional information about these payments, if any.
You may also ask your salesperson or financial intermediary, or visit your financial intermediary’s website, for more information.
434
Fund Summary: Milliman S&P 500 & Russell 2000 1-Year Buffer with Stacker
Cap Fund – Mar
Investment Objective
The Fund seeks to provide exposure to the S&P 500 Index, while providing a buffer against the first 10% of losses associated with S&P 500
Index performance and participating in S&P 500 Index gains up to a declared cap, prior to taking into account any fees or expenses or the performance of any fixed income exposure included in the Fund’s portfolio, over the period from March 1,
2022 through February 28, 2023. The Fund also seeks to provide upside exposure to the Russell 2000 Index up to a declared cap, prior to taking into account any fees or expenses or the performance of any fixed income exposure included in the
Fund’s portfolio, over the same period.
Fees and Expenses of the Fund
This table describes the fees and expenses that you may pay if you buy, hold and sell shares of the Fund (“Shares”).
This table and the example below do not include any fees or sales charges imposed by your variable product. If they were included, the expenses listed below would be higher.
Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment)
|
Class 3
|
|
|
Management Fees
|
0.49%
|
|
Distribution and Service (12b-1) Fees
|
0.25%
|
|
Other Expenses(1)
|
0.50%
|
|
Acquired Fund Fees and Expenses(1)
|
[_.__]%
|
|
Total Annual Fund Operating Expenses
|
1.24%
|
|
Fee Waiver and/or Expense Reimbursement(2)(3)
|
(0.25)%
|
|
Total Annual Fund Operating Expenses After Fee Waiver and/or Expense Reimbursement
|
0.99%
|
|
(1)
|
“Other Expenses” and “Acquired Fund Fees and Expenses” are based on estimated amounts for the current fiscal year.
|
|
(2)
|
The Fund’s investment adviser, Milliman Financial Risk Management LLC (“Milliman”), has contractually
agreed to waive advisory fees and/or reimburse expenses to the extent necessary to limit the Fund’s total annual Fund operating expenses (excluding taxes, interest, brokerage fees and commissions, Rule 12b-1 fees, acquired fund fees and
expenses, short-sale dividend expenses, administrative services fees, other expenses that are capitalized in accordance with generally accepted accounting principles, and extraordinary or non-routine expenses not incurred in the
ordinary course of the Fund’s business) to 0.74% of the Fund's average daily net assets (the “Expense Limitation Agreement”) until at least November 1, 2022. During its term, the Expense
Limitation Agreement cannot be terminated or amended to increase the applicable limit without approval of the Board of Trustees of the Trust (the “Board”). Milliman may recoup from the Fund any
advisory fees waived or expenses reimbursed pursuant to the Expense Limitation Agreement for a period of three years from the date on which such waiver or reimbursement occurred; provided, however, that such recoupment shall not be made
if it would cause the Fund’s total annual Fund operating expenses to exceed the lesser of (a) the expense limitation in effect at the time of the reimbursement, or (b) the expense limitation in effect at the time of recoupment, if any.
|
|
(3)
|
In addition to the Expense Limitation Agreement, Milliman has contractually agreed to waive its advisory fees in an amount equal to the Fund’s
acquired fund fees and expenses until at least November 1, 2022 (the “Fee Waiver”). This contract cannot be terminated or modified without the consent of the Board.
|
Example
This example is intended to help you compare the cost of investing in the Fund with the cost of investing in other funds. This example assumes that you
invest $10,000 in the Fund for the time periods indicated and then sell all of your Shares at the end of those periods. This example also assumes that your investment has a 5% return each year and that the Fund’s operating expenses remain at
current levels and that the Expense Limitation Agreement and Fee Waiver remain in place for their contractual periods. Although your actual costs may be higher or lower, your costs, based on these assumptions, would be:
|
1 Year
|
3 Years
|
|
|
Class 3
|
$104
|
$384
|
435
This example does not include any fees or sales charges imposed by your variable product. If they were included, the expenses listed above would be
higher.
Portfolio Turnover
The Fund pays transaction costs, such as commissions, when it purchases and sells securities (or “turns over” its portfolio). A higher portfolio turnover
will cause the Fund to incur additional transaction costs. These costs, which are not reflected in Total Annual Fund Operating Expenses or in the example, may affect the Fund’s performance. Because the Fund has not yet commenced investment
operations, no portfolio turnover information is available at this time.
Principal Investment Strategies
The Fund seeks to achieve its investment objective by transacting in FLexible EXchange® Options (“FLEX Options”)
and by separately maintaining a collateral portfolio (the “Collateral Portfolio”), which is designed primarily to serve as margin or collateral for the Fund’s FLEX Options positions and secondarily to
enhance the Fund’s upside S&P 500 Index and Russell 2000 Index FLEX Options’ exposure (i.e., by utilizing anticipated income to measure the ability to purchase additional FLEX Options). FLEX Options
are exchange-traded options contracts with uniquely customizable terms. In general, an options contract is an agreement between a buyer and seller that gives the purchaser of the option the right to buy or sell a particular asset at a specified
future date at an agreed upon price, commonly known as the “strike price.” The reference assets for the Fund’s FLEX Options positions will include the S&P 500 Index, the Russell 2000 Index (the “Secondary
Index,” and together with the S&P 500 Index, the “Reference Indices,” and, each, a “Reference Index”), and certain exchange-traded funds (“ETFs”), as described further below. The S&P 500 Index is a large-capitalization, market-weighted, U.S. equities index that tracks the price (excluding dividends) of
500 leading companies in leading industries of the U.S. economy. The Secondary Index is [a float-adjusted, market capitalization-weighted index that is designed to measure the performance of the small-capitalization segment of the U.S. equity
market, as defined by FTSE Russell].
The Collateral Portfolio may be invested in short-term fixed-income securities, including corporate bonds and other corporate debt securities,
asset-backed securities (“ABS”), securities issued by the U.S. Government or its agencies and instrumentalities, securities issued by non-U.S. governments or their agencies and instrumentalities, money
market securities and funds, other interest-bearing instruments, cash, ETFs that primarily invest in any of the foregoing instruments, options on ETFs and options box spreads. An options box spread is the combination of different options trades
that have offsetting spreads (e.g., purchases and sales on the same underlying instrument, such as an index or an ETF, but with different strike prices and/or expiration dates) for the purpose of
generating income. The Fund may invest in short-term fixed income securities or other instruments, including through ETFs, of any maturity and credit quality. The Fund will generally invest up to 35% of its net assets in one or more ETFs that
provide exposure to investment grade corporate bonds.
Due to the unique mechanics of the Fund’s strategy, the return an investor can expect to receive from an investment in the Fund has characteristics that
are distinct from the returns of many other investment vehicles. It is important that an investor understand these characteristics before making an investment in the Fund.
In seeking to achieve its investment objective, the Fund seeks to produce pre-determined outcomes (the “Outcomes”)
that are based upon the performance of the Reference Indices over a one-year period (the “Outcome Period”). The initial Outcome Period for the Fund is March 1, 2022 through February 28, 2023. Following the
initial Outcome Period, each subsequent Outcome Period will be a one-year period commencing upon the expiration of the prior Outcome Period. The Fund seeks to achieve the Outcomes by purchasing and writing (selling) FLEX Options to create layers
within the Fund’s portfolio. One layer is designed to produce returns that correlate to those of the S&P 500 Index for the Outcome Period if the S&P 500 Index experiences gains during that time, subject to an upside return cap (the “S&P 500 Index Cap”), as described below. A second layer is designed to produce returns that correlate to any upside market performance of the Secondary Index over the
Outcome Period, subject to an upside return cap (the “Secondary Index Cap,” and, together with the S&P 500 Index Cap, the “Index Caps,” and, each, an “Index Cap”), as described below. A third layer is designed to produce returns that correlate to those of the S&P 500 Index for the Outcome Period that are buffered up to 10% if the S&P 500 Index
experiences losses during that time (the “Buffer”). There is no guarantee that the Fund will be successful in its attempt to produce
436
returns that correlate to those of the S&P 500 Index or the Secondary Index up to the applicable Index Caps or produce buffered
returns against the Fund’s S&P 500 Index exposure.
Milliman Financial Risk Management, LLC (“Milliman”), the investment adviser of the Fund, seeks to establish the
Buffer by writing one put FLEX Option on the S&P 500 Index with a strike price that is 10% lower than the value of the S&P 500 Index at the beginning of the Outcome Period.
Milliman seeks to establish the Index Caps by purchasing long call FLEX Options on each Reference Index with a strike price approximately equal to the
value of the respective Reference Index at the beginning of the Outcome Period. Milliman purchases these FLEX Options with a portion of the Fund’s net assets plus (i) the cash received from writing the put FLEX Option designed to create the
Buffer, (ii) additional cash received by utilizing FLEX Options to create a put spread (the “Put Spread Strategy”) on fixed income securities and/or one or more ETFs that provide exposure to fixed income
securities, and (iii) yield received from the Collateral Portfolio. Milliman seeks to achieve the Put Spread Strategy for the Fund by writing a put FLEX Option on an underlying asset at a strike price at or lower than the underlying asset’s
market price or current value at the beginning of the Outcome Period, and buying a put FLEX Option on the same underlying asset at a lower strike price than the written put FLEX Option.
The Index Caps represent the maximum rate of return in each Reference Index that an investor can achieve from an investment in the Fund over the Outcome
Period. Milliman calculates the Index Caps based upon (i) its evaluation of prevailing market conditions on the first day of the Outcome Period and (ii) the total number of long call FLEX Options on each Reference Index that it is able to purchase
at that time. As of the date of this Prospectus, and assuming current market conditions persist, Milliman expects that the Index Caps will be between the below ranges (both gross and net of Fund fees and expenses). Any fees or expenses imposed by
your variable product, and any other expenses incurred by the Fund, will have the effect of further reducing each Index Cap. In addition, in certain market conditions, the performance of the Collateral Portfolio
and the Put Spread Strategy could cause the Fund to underperform relative to the Reference Indices, which could further limit Fund gains below the Index Caps, notwithstanding any performance of the Reference Indices in excess of the Index Caps.
|
Estimated Index Cap Ranges
(As of [___])
|
||
|
Prior to Taking into Account Fund Fees and Expenses
|
After Taking into Account Fund Fees and Expenses
|
|
|
S&P 500 Index Cap
|
||
|
Class 3
|
[__]% and [__]%
|
[__]% and [__]%
|
|
Secondary Index Cap
|
||
|
Class 3
|
[__]% and [__]%
|
[__]% and [__]%
|
The Buffer is only operative against the first 10% of losses in the Fund’s S&P 500 Index exposure for the Outcome Period. If the S&P 500 Index
decreases in value by more than 10% during the Outcome Period, the Fund (and therefore investors in Shares) will experience all subsequent losses in the Fund’s S&P 500 Index exposure on a one-to-one basis for the Outcome Period. The Fund
seeks to produce buffered returns against its S&P 500 Index exposure prior to taking into account any fees or expenses or the performance of the Collateral Portfolio or the Put Spread Strategy. The Buffer
is not operative against losses in the Collateral Portfolio or the Put Spread Strategy. If the Collateral Portfolio and/or the Put Spread Strategy experiences losses, it could have the effect of reducing the impact of, or completely
eliminating, the Buffer on the Fund’s S&P 500 Index exposure. In certain market conditions, the performance of the Collateral Portfolio and/or the Put Spread Strategy could cause the Fund to significantly underperform the S&P 500
Index. The following table reflects the Buffer both gross and net of Fund fees and expenses:
|
Share Class
|
Buffer
(As of [___])
|
|
|
Prior to Taking into Account Fund Fees and Expenses
|
After Taking into Account Fund Fees and Expenses
|
|
|
Class 3
|
10%
|
[__]%
|
437
Because the Fund also seeks to provide only upside exposure to the Secondary Index during the Outcome Period, the Fund’s NAV will not be impacted by any
losses experienced by the Secondary Index when measured from the beginning to the end of the Outcome Period. If the Secondary Index increases in value during the Outcome Period and later decreases in value during the Outcome Period, the Fund’s NAV
will reflect any such decreases until the Secondary Index reaches its initial value (measured as of the first day of the Outcome Period). If the Secondary Index decreases in value over the course of an entire Outcome Period, the Fund’s NAV will not
reflect such losses; therefore, the Fund’s overall performance will be approximately that of the S&P 500 Index for the Outcome Period, subject to the Buffer and the S&P 500 Index Cap.
The definitive Index Caps and Buffer will be set forth on the Fund’s website. The Fund’s website will also provide information relating to the
Outcomes on a daily basis, including the Fund’s position relative to the Index Caps and the Buffer. You may also contact your insurance company or other financial intermediary for more information.
Additionally, the Fund’s net asset value (“NAV”) will not increase or decrease at the same rate as the Reference
Indices because the Fund’s strategy relies upon the performance of the Collateral Portfolio and the Put Spread Strategy, in addition to the value of the Fund’s FLEX Options positions on the Reference Indices. While Milliman anticipates that the
Fund’s NAV will generally move in the same direction as the S&P 500 Index, and correspond to any upside returns of the Secondary Index (meaning that the Fund’s NAV will generally increase if the Reference Indices experience gains or decrease if
the Reference Indices experience losses), the Fund’s NAV may not decrease at the same rate as the Reference Indices (especially when factoring in the performance of the Collateral Portfolio and the Put Spread Strategy) and will not increase at the
same rate as the Reference Indices (especially when factoring in the Index Caps and the performance of the Collateral Portfolio and the Put Spread Strategy). Similarly, the amount of time remaining until the end of the Outcome Period also affects
the impact of the Buffer on the Fund’s NAV, because the Buffer may not be in full effect prior to the end of the Outcome Period.
The FLEX Options utilized in the Fund’s portfolio are each set to expire on the last day of the Outcome Period. The customizable nature of FLEX Options
will allow Milliman to select the strike price at which each FLEX Option will be exercised at the expiration of the FLEX Option term. At the commencement of the Outcome Period, Milliman will specifically select the strike price for each FLEX Option
in a manner designed to achieve the Outcomes when the FLEX Options are exercised on the final day of the Outcome Period, depending on the anticipated performance of the Reference Indices, the Collateral Portfolio and the Put Spread Strategy over
the duration of that Outcome Period.
The hypothetical graphical illustrations provided below are designed to illustrate the Outcomes based upon the
hypothetical performance of the Reference Indices for an investor who holds Shares for the entirety of the Outcome Period. The hypothetical graphical illustrations do not include any fees or expenses
imposed by your variable product or expenses incurred by the Fund, and do not reflect the performance of the Collateral Portfolio or the Put Spread Strategy. Additional hypothetical graphical representations of the Outcomes are provided in
“Additional Information About the Funds and the Risks of Investing.” There is no guarantee that the Fund will be successful in its attempt to achieve the Outcomes for the Outcome Period.
438
The following table contains hypothetical examples designed to illustrate the Outcomes the Fund seeks to
achieve over the Outcome Period, based upon the performance of the Reference Indices from (100)% to 100% after taking into account the Index Caps and the Buffer, but prior to taking into account any fees or
expenses or the performance of the Collateral Portfolio or the Put Spread Strategy. The table is provided for illustrative purposes only and does not provide every possible performance scenario for Shares over
the course of the Outcome Period. There is no guarantee that the Fund will be successful in its attempt to achieve the Outcomes for an Outcome Period. The table is not intended to predict or project the performance of the FLEX Options or the Fund. Investors should not take this information as an
assurance of the expected performance of the Reference Indices or the Fund. Actual Fund performance will vary with fluctuations in the performance of the Collateral Portfolio and the Put Spread Strategy, in addition to the value of the
Fund’s FLEX Options positions on the Reference Indices, during the Outcome Period, among other factors. The performance of the Collateral Portfolio and the Put Spread Strategy
could significantly impact the performance of the Fund, which could prevent the Fund from achieving the Outcomes that it seeks to produce. The table does not reflect any fees or expenses imposed by your variable product or expenses
incurred by the Fund. If it did, the returns shown for the Fund would be lower. Please refer to the Fund’s website, which provides updated information relating to this table on a daily basis throughout the Outcome Period. Please contact your
insurance company or other financial intermediary for more information.
439
|
Index/Fund
|
Hypothetical Performance1
|
|||||||||||
|
S&P 500 Index Price Performance
|
(100)%
|
(50)%
|
(20)%
|
(10)%
|
(5)%
|
0%
|
5%
|
10%
|
15%
|
20%
|
50%
|
100%
|
|
Secondary Index Price Performance
|
(100)%
|
(50)%
|
(20)%
|
(10)%
|
(5)%
|
0%
|
5%
|
10%
|
15%
|
20%
|
50%
|
100%
|
|
Fund Performance at NAV
|
(90)%
|
(40)%
|
(10)%
|
0%2
|
0%2
|
0%
|
10%3
|
14%3
|
14%3
|
14%3
|
14%3
|
14%3
|
| 1 |
Does not take into account any fees or expenses or the performance of the Collateral Portfolio or the Put Spread Strategy.
|
| 2 |
Reflects the impact of the Buffer.
|
| 3 |
Reflects the impact of assumed Index Caps of 7% per index, 14% total.
|
Understanding Outcomes. The Outcomes the Fund seeks to achieve are measured based upon the
Fund’s NAV on the first day of the Outcome Period. The Outcome Period begins on the day Milliman transacts in the FLEX Options on behalf of the Fund, and ends on the day those FLEX Options expire. An investor who
purchases Shares after the commencement of the Outcome Period will likely have purchased Shares at a different NAV than the NAV on the first day of the Outcome Period (the NAV upon which the Outcomes are based) and may experience investment
outcomes very different from those the Fund seeks to achieve, especially when factoring in any fees or expenses or the performance of the Collateral Portfolio and the Put Spread Strategy. An investor who redeems Shares prior to the end of the
Outcome Period may also experience investment outcomes very different from those the Fund seeks to achieve. The Outcomes are designed with the expectation that an investor will hold Shares on the day that Milliman transacts in the FLEX Options on
behalf of the Fund, and on the day those FLEX Options expire. There is no guarantee that the Fund will be successful in its attempt to achieve the Outcomes.
Understanding the Index Caps. Unlike other investment products, the potential returns an
investor can receive from an investment in the Fund are subject to the Index Caps. This means that if one or both of the Reference Indices experience gains for the Outcome Period, an investor in the Fund will only
experience those gains up to the applicable Index Cap. Milliman calculates the Index Caps for each Outcome Period based upon (i) its evaluation of prevailing market conditions on the first day of the Outcome Period and (ii) the total
number of long call FLEX Options on each Reference Index that it is able to purchase at that time. If an investor is considering purchasing Shares during the Outcome Period, and the Fund’s NAV has increased in
value to a level near one or both of the Index Caps, an investor purchasing Shares at that price will have limited to no gains available for the remainder of the Outcome Period, but will remain vulnerable to significant downside risks (with
respect to the S&P 500 Index FLEX Options’ exposure). In certain market conditions, the performance of the Collateral Portfolio and the Put Spread Strategy could cause the Fund to underperform
relative to the Reference Indices, which could further limit Fund gains below the Index Caps, notwithstanding any performance of the Reference Indices in excess of the Index Caps.
Understanding the Buffer. The Buffer that the Fund seeks to provide is only operative
against the first 10% of losses in the Fund’s S&P 500 Index exposure for the Outcome Period. If an investor is considering purchasing Shares during the Outcome Period, and the S&P 500 Index has decreased
in value by an amount equal to or greater than 10%, an investor purchasing Shares at that time will be able to participate in any gains thereafter (up to the Index Caps), but will not benefit from the Buffer that the Fund seeks to offer for the
remainder of the Outcome Period if the losses continue to be equal to or greater than 10% during that period. Conversely, if an investor is considering purchasing Shares during the Outcome Period, and the Fund’s NAV has increased in value, then
an investor may experience losses before implementation of the Buffer that the Fund seeks to provide. While the Fund seeks to produce returns that correlate to those of the S&P 500 Index for the Outcome Period that are buffered up to
10% (prior to taking into account any fees or expenses or the performance of the Collateral Portfolio or the Put Spread Strategy) for investors who hold Shares for the entire Outcome Period, there is no guarantee it will successfully do so. In addition, the Buffer is not operative against losses in the Collateral Portfolio or the Put Spread Strategy. If the Collateral Portfolio and/or the Put Spread Strategy experiences losses, it could have the
effect of reducing the impact of, or completely eliminating, the Buffer on the Fund’s S&P 500 Index exposure. In certain market conditions, the performance of the Collateral Portfolio and/or the Put Spread Strategy could cause the Fund to
significantly underperform the S&P 500 Index. Investors who purchase Shares at the beginning of the Outcome Period may lose their entire
440
investment. Investors who purchase Shares after the Outcome Period has begun may also lose their entire investment. An
investment in the Fund is only appropriate for investors willing to bear those losses.
Fund Rebalance. Milliman implements the Fund’s strategy on an annual basis, seeking to
produce the Outcomes for an Outcome Period. On the last business day of any stated Outcome Period, all of the Fund’s existing FLEX Options, which includes those used to establish the Buffer, the Index Caps and the Put Spread Strategy, will expire
and Milliman will transact in a new set of FLEX Options on the same business day, which will commence a new Outcome Period beginning the following business day. At that same time, Milliman will also evaluate whether to make any adjustments to the
Collateral Portfolio. Accordingly, Shares can be held indefinitely if investors determine to participate in additional Outcome Periods.
Approximately one week prior to the end of each Outcome Period, the Fund will file a prospectus supplement, which will notify existing investors of
(i) the date on which the existing Outcome Period will end; (ii) the date on which the new Outcome Period will commence; and (iii) the anticipated ranges of the Index Caps that will be used for the new Outcome Period. Immediately preceding the
commencement date of the new Outcome Period, the Fund will file a prospectus supplement disclosing the Fund’s final Index Caps (both gross and net of Fund fees and expenses) for the new Outcome Period. This information will also be available
online at www.[___________].com, and on your insurance company’s website. Please contact your insurance company or other financial intermediary for more information.
Fund Classification. The Fund is classified as “non-diversified” under the Investment
Company Act of 1940, as amended (the “1940 Act”).
Principal Risks
You could lose money by investing in the Fund. An investment in the Fund is not a deposit of a bank and is not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other governmental agency. There can be no assurance that the Fund’s investment objectives will be achieved.
Downside Loss Buffer Risk. There can be no guarantee that the Fund will be successful in its strategy to
buffer against S&P 500 Index losses if the S&P 500 Index decreases in value over the Outcome Period. The Fund’s strategy is designed to produce returns that correlate to those of the S&P 500 Index, subject to the S&P 500 Index
Cap, while limiting downside S&P 500 Index losses and providing additional upside exposure to the Secondary Index, subject to the Secondary Index Cap, if Shares are bought on the day on which Milliman transacts in the FLEX Options on behalf
of the Fund and held until those FLEX Options expire at the end of each Outcome Period. The success of the Buffer also depends upon the performance of the Collateral Portfolio and the Put Spread Strategy. If
the Collateral Portfolio and/or the Put Spread Strategy experiences losses, it could have the effect of reducing the impact of, or completely eliminating, the Buffer on the Fund’s S&P 500 Index exposure. In certain market conditions, the
performance of the Collateral Portfolio and/or the Put Spread Strategy could cause the Fund to significantly underperform the S&P 500 Index. Despite the intended Buffer, an investor could lose their entire investment. In the
event an investor purchases Shares after the date on which Milliman transacted in the FLEX Options on behalf of the Fund, or redeems Shares prior to the expiration of those FLEX Options, the Buffer that the Fund seeks to provide may not be
available or fully applicable.
Risk of Capped Upside Returns. The Fund’s strategy is designed to produce returns that correlate to those of the
Reference Indices up to the Index Caps if Shares are bought on the day on which Milliman transacts in the FLEX Options on behalf of the Fund and held until those FLEX Options expire at the end of the Outcome Period, subject to the Index Caps. In
the event that one or both of the Reference Indices experience gains during the Outcome Period, the Fund will only participate in those gains up to the applicable Index Cap. In the event that one or both Reference Indices experience gains in excess
of the applicable Index Cap over the duration of the Outcome Period, the Fund will not participate in those excess gains. Because the Fund’s strategy provides capped exposure to two Reference Indices, the Index Caps may be lower than if the Fund
provided capped exposure to only a single Reference Index. In the event an investor purchases Shares after the date on which the FLEX Options were entered into and the Fund has risen in value to a level near to an Index Cap, there may be little or
no ability for that investor to experience an investment gain on their Shares relating to that Reference Index. In certain market conditions, the performance of the Collateral Portfolio and the Put Spread
Strategy could cause the Fund to
441
underperform relative to the Reference Indices, which could further limit Fund gains below the Index Caps, notwithstanding any
performance of the Reference Indices in excess of the Index Caps. An investor should consider the amount of the Index Caps, and the Fund’s position relative to each Index Cap, before investing in the Fund.
Index Cap Change Risk. Because the Index Caps for each Outcome Period are calculated based upon (i) Milliman’s
evaluation of prevailing market conditions on the first day of the Outcome Period and (ii) the total number of long call FLEX Options on the Reference Indices that Milliman is able to purchase at that time, the Index Caps may rise or fall from one
Outcome Period to the next. Any change in the Index Caps could be significant and they are unlikely to remain the same for consecutive Outcome Periods.
FLEX Options Risk. The Fund will transact in FLEX Options issued and guaranteed for settlement by the OCC. The
Fund bears the risk that the OCC will be unable or unwilling to perform its obligations under the FLEX Options contracts, which could result in significant losses to the Fund. In less liquid markets, terminating a FLEX Option may require the
payment of a premium or acceptance of a discounted price, and may take longer to complete. In addition, a less liquid trading market may adversely impact the value of the Fund’s FLEX Options and therefore the NAV of the Fund. In addition, the value
of the Fund’s FLEX Options positions is not anticipated to increase or decrease at the same rate as the reference asset; and while it is anticipated that they will generally move in the same direction, it is possible that they may move in different
directions. Certain FLEX Options positions may also expire worthless. The use of FLEX Options involves leverage, which can cause the Fund’s portfolio to be more volatile than if the portfolio had not been leveraged. Leverage can significantly
magnify the effect of price movements of the reference asset, disproportionately increasing the Fund’s losses and reducing the Fund’s opportunities for gains when the reference asset changes in unexpected ways. In some instances, such leverage
could result in losses that exceed the original amount invested.
Investment Objective and Outcomes Risk. There is no guarantee that the Fund will be successful in its attempt
to achieve its investment objective and/or the Outcomes, and an investor could lose some or all of their investment in the Fund. Certain circumstances under which the Fund might not achieve its objective and/or the Outcomes include, but are not
limited to (i) if the Fund disposes of FLEX Options, (ii) if the Fund is unable to maintain the proportional relationship based on the number of FLEX Options in the Fund’s portfolio, (iii) significant accrual of Fund expenses in connection with
effecting the Fund’s principal investment strategy, (iv) losses incurred by the Fund’s holdings in the Collateral Portfolio and/or losses resulting from the Put Spread Strategy, or (iv) adverse tax law changes affecting the treatment of FLEX
Options.
Tax Risk. The Fund intends to elect, and to qualify each year, to be treated as a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”). As a RIC, the Fund will not be subject to U.S. federal income tax on the portion
of its net investment income and net capital gain that it distributes to shareholders, provided that it satisfies certain requirements of the Code. To maintain its status as a RIC, the Fund must meet certain income, diversification and
distributions tests. For purposes of the diversification test, the identification of the issuer (or, in some cases, issuers) of a particular Fund investment can depend on the terms and conditions of that investment. In particular, there is no
published IRS guidance or case law on how to determine the “issuer” of certain derivatives that the Fund will enter into and the Fund has not received a private letter ruling on this point. Therefore, there is a risk that the Fund will not meet the
Code’s diversification requirements and will not qualify, or will be disqualified, as a RIC. If the Fund does not qualify as a RIC for any taxable year and certain relief provisions are not available, the Fund’s taxable income will be subject to
tax at the Fund level and to a further tax at the shareholder level when such income is distributed.
The Fund also intends to comply with the diversification requirements of Section 817(h) of the Code, and the regulations thereunder, relating to the
tax-deferred status of variable accounts that are based on insurance company separate accounts (referred to as “segregated asset accounts” for federal income tax purposes). These diversification requirements apply in addition to the RIC
diversification requirements discussed above. There also is no published guidance or case law on how to determine the “issuer” of the derivatives referred to above for purposes of the diversification requirements of Section 817(h) of the Code and
the Fund has not received a private letter ruling on this point. If these requirements are not met, or under other circumstances, such as if the Fund does not qualify as a RIC for any taxable year, it is possible that the contract owners (rather
than the insurance company) will be treated for federal income tax purposes as the taxable owners of the assets held by the segregated asset accounts.
442
Clearing Member Default Risk. The Fund will hold FLEX Options through accounts at members of clearing houses (“clearing members”) rather than a bank or a broker. Assets deposited by the Fund with any clearing member as margin for its FLEX Options positions may, in certain circumstances, be used to satisfy losses of other
clients of the Fund’s clearing member where such assets may be held in commingled omnibus accounts. In addition, although clearing members guarantee performance of their clients’ obligations to the clearing house, there is a risk that the assets of
the Fund might not be fully protected in the event of the clearing member’s bankruptcy, as the Fund would be limited to recovering only a pro rata share of all available funds segregated on behalf of the
clearing member’s customers for the relevant account class.
Debt Securities Risk. The prices of debt securities will be affected by changes in interest rates, the
creditworthiness of the issuer and other factors. These risks could affect the value of investments in which the Fund invests, possibly causing the Fund’s NAV to be reduced and fluctuate more than other types of investments. During periods of
falling interest rates, an issuer of a callable bond may repay the security before its stated maturity, and the Fund may have to reinvest the proceeds in securities with lower yields, which would result in a decline in the Fund’s income, or in
securities with greater risks or with other less favorable features. Changing interest rates, including rates that fall below zero, may have unpredictable effects on markets, result in heightened market volatility and detract from the Fund’s
performance to the extent the Fund is exposed to such interest rates. An increase in interest rates will generally cause the value of fixed-income securities held by the Fund to decline, may lead to heightened volatility in the fixed-income
markets and may adversely affect the liquidity of certain fixed-income investments, including those held by the Fund. Risks associated with rising interest rates are heightened given that interest rates in the U.S. are near historic lows.
Adjustable-rate instruments also react to interest rate changes in a similar manner, although generally to a lesser degree (depending, however, on the characteristics of the reset terms, including the index chosen, frequency of reset and reset
caps or floors, among other factors). Interest rate sensitivity is generally more pronounced and less predictable in instruments with uncertain payment or prepayment schedules and also for those with longer maturities.
Foreign Securities and Credit Exposure Risk. U.S. dollar-denominated securities carrying foreign credit exposure
may be affected by unfavorable political, economic or governmental developments that could affect payments of principal and interest. Furthermore, the value of the Fund’s foreign investments (whether direct or indirect) may be adversely affected by
political and social instability in their home countries, by changes in economic or taxation policies in those countries, or by the difficulty in enforcing obligations in those countries. Foreign companies generally may be subject to less stringent
regulations than U.S. companies, including financial reporting requirements and auditing and accounting controls. As a result, there generally is less publicly available information about foreign companies than about U.S. companies. Trading in many
foreign securities may be less liquid and more volatile than U.S. securities due to the size of the market or other factors.
U.S. Government Securities Risk. U.S. Government securities are subject to interest rate risk but generally do
not involve the credit risks associated with investments in other types of debt securities. As a result, the yields available from U.S. Government securities are generally lower than the yields available from other debt securities. U.S. Government
securities are guaranteed only as to the timely payment of interest and the payment of principal when held to maturity. While securities issued or guaranteed by U.S. federal government agencies are backed by the full faith and credit of the U.S.
Department of the Treasury, securities issued by government sponsored entities are solely the obligation of the issuer and generally do not carry any guarantee from the U.S. Government.
ABS Risk. ABS are subject to the general debt securities risks described above. In addition, ABS may be less
liquid than other bonds, and may be more sensitive than other bonds to the market’s perception of issuers and creditworthiness of payees, which may result in the Fund experiencing difficulty selling or valuing these securities. ABS markets have
experienced extraordinary weakness and volatility at various times in recent years, and may decline quickly in the event of a substantial economic or market downturn. Accordingly, these securities may be subject to greater risk of default during
periods of economic downturn than other securities, which could result in possible losses to the Fund.
Issuer Risk. The performance of the Fund depends on the performance of individual securities to which the Fund
has exposure. The Fund may be adversely affected if an issuer of underlying securities held by the Fund is unable or
443
unwilling to repay principal or interest when due. Changes in the financial condition or credit rating of an issuer of those securities may cause the
value of the securities to decline.
Management Risk. The Fund is subject to management risk because it is an actively managed portfolio. Milliman
will apply investment techniques and risk analyses in making investment decisions for the Fund, but there can be no guarantee that the Fund will meet its investment objective and/or the Outcomes. In addition, Milliman does not use defensive
strategies or attempt to reduce the Fund’s exposures to poor performing positions during an Outcome Period. This differs from funds that are managed to seek to outperform a benchmark index. Therefore, in the event of a general market decline, the
Fund’s value may fall more than the value of another fund that does attempt to hedge against such market declines.
Market Risk. The Fund could lose money over short periods due to short-term market movements and over longer
periods during more prolonged market downturns. Assets may decline in value due to factors affecting financial markets generally or particular asset classes or industries represented in the markets. The value of a FLEX Option or other asset may
also decline due to general market conditions, economic trends or events that are not specifically related to the issuer of the security or other asset, or due to factors that affect a particular issuer, country, region, market, industry, sector or
asset class.
Non-Diversification Risk. The Fund may invest a relatively high percentage of its assets in a limited number of
issuers. As a result, the Fund may be more susceptible to a single adverse economic or regulatory occurrence affecting one or more of these issuers, experience increased volatility and be highly invested in certain issuers.
Large Shareholder Risk. At times, the Fund may experience adverse effects when certain large shareholders,
including insurance company separate accounts, redeem large amounts of shares of the Fund. Large redemptions may cause the Fund to sell portfolio holdings at times when it would not otherwise do so and may increase transaction costs and/or result
in an increase to the Fund’s expense ratio. A large redemption could be detrimental to the Fund and its remaining shareholders.
Risks of Investing in ETFs. In addition to the risks associated with the underlying assets held by the ETFs in
which the Fund invests, investments in ETFs are also subject to the following additional risks: (i) only authorized participants may engage in transactions directly with ETFs but none are obligated to do so, which could result in an ETF’s shares
trading at a premium or discount to its NAV or possibly face trading halts or delisting; (ii) certain ETFs seek to track the performance of an underlying index and will not attempt to take defensive positions under any market conditions, including
declining markets, which could result in losses; and (iii) because ETF shares trade on the secondary market, there is not guarantee that an active market will be developed or maintained, which could result in the ETF’s shares trading at a premium
or discount to its NAV. Investments in ETFs may involve duplication of management fees and certain other expenses, as the Fund indirectly bears its proportionate share of any expenses paid by the ETFs in which it invests.
Risks of Investing in Money Market Funds. Money market funds seek to preserve the value of shareholder
investments at $1.00 per share, but shareholders, such as the Fund, may still lose money by investing in such funds. In addition, a money market fund may impose a fee upon the sale of its shares or may temporarily suspend the ability to sell shares
if the fund’s liquidity falls below required minimums because of market conditions or other factors. The credit quality of a money market fund’s holdings can change rapidly in certain markets, and the default of a single holding could have an
adverse impact on the fund’s share price. A money market fund’s share price can also be negatively affected during periods of high redemption pressures, illiquid markets, and/or significant market volatility.
Performance
As of the date of this Prospectus, the Fund has not commenced operations and therefore does not have a performance history. Once available, the Fund’s
performance information will be accessible online at www.[________].com and will provide some indication of the risks of investing in the Fund.
Management
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Investment Adviser
Milliman Financial Risk Management LLC (“Milliman”) serves as investment adviser to the Fund.
Portfolio Managers
The following persons serve as portfolio managers of the Fund.
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●
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Robert T. Cummings, Principal & Head of Portfolio Management at Milliman.
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●
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Maria Schiopu, Principal & Head of Portfolio Management at Milliman.
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●
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Jeff Greco, Principal & Head of Strategy Research at Milliman.
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●
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Jordan Rosenfeld, Portfolio Manager at Milliman.
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Each portfolio manager is jointly and primarily responsible for the day-to-day management of the Fund’s portfolio and has served in such capacity
since the Fund’s inception in 2021.
Purchase and Sale of Shares
Shares are available as underlying investment options for variable insurance contracts and variable life insurance policies (each, a “variable contract,” and, collectively, the “variable contracts”) issued by insurance companies. These insurance companies are the record owners of the separate accounts
holding the Shares. You do not buy, sell or exchange Shares directly; rather, you choose investment options through your variable contracts. The insurance companies then cause the separate accounts to purchase and redeem Shares according to
the investment options you choose.
Tax Information
The dividends and distributions paid by the Fund to the insurance company separate accounts will consist of ordinary income, capital gains, or some
combination of both. Because Shares must be purchased through separate accounts used to fund variable contracts, such dividends and distributions will be exempt from current taxation by owners of variable contracts (each, a “contract owner,” and, collectively “contract owners”) if left to accumulate within a separate account. Consult the variable contract prospectus for additional tax
information.
Payments to Insurance Companies and Other Financial Intermediaries
If you allocate contract value to the Fund through an insurance company or other financial intermediary, the Fund, Milliman, the Fund’s distributor or
their related companies may pay the insurance company and/or its affiliates or other intermediary for the sale of Shares and related services. These payments may create a conflict of interest by influencing the insurance company or other
intermediary and your salesperson to recommend an indirect investment in the Fund over another investment. The prospectus or other disclosure documents for the variable contracts may contain additional information about these payments, if any.
You may also ask your salesperson or financial intermediary, or visit your financial intermediary’s website, for more information.
445
Fund Summary: Milliman S&P 500 & Russell 2000 1-Year Buffer with Stacker
Cap Fund – Apr
Investment Objective
The Fund seeks to provide exposure to the S&P 500 Index, while providing a buffer against the first 10% of losses associated with S&P 500
Index performance and participating in S&P 500 Index gains up to a declared cap, prior to taking into account any fees or expenses or the performance of any fixed income exposure included in the Fund’s portfolio, over the period from April 1,
2022 through March 31, 2023. The Fund also seeks to provide upside exposure to the Russell 2000 Index up to a declared cap, prior to taking into account any fees or expenses or the performance of any fixed income exposure included in the Fund’s
portfolio, over the same period.
Fees and Expenses of the Fund
This table describes the fees and expenses that you may pay if you buy, hold and sell shares of the Fund (“Shares”).
This table and the example below do not include any fees or sales charges imposed by your variable product. If they were included, the expenses listed below would be higher.
Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment)
|
Class 3
|
|
|
Management Fees
|
0.49%
|
|
Distribution and Service (12b-1) Fees
|
0.25%
|
|
Other Expenses(1)
|
0.50%
|
|
Acquired Fund Fees and Expenses(1)
|
[_.__]%
|
|
Total Annual Fund Operating Expenses
|
1.24%
|
|
Fee Waiver and/or Expense Reimbursement(2)(3)
|
(0.25)%
|
|
Total Annual Fund Operating Expenses After Fee Waiver and/or Expense Reimbursement
|
0.99%
|
|
(1)
|
“Other Expenses” and “Acquired Fund Fees and Expenses” are based on estimated amounts for the current fiscal year.
|
|
(2)
|
The Fund’s investment adviser, Milliman Financial Risk Management LLC (“Milliman”), has contractually
agreed to waive advisory fees and/or reimburse expenses to the extent necessary to limit the Fund’s total annual Fund operating expenses (excluding taxes, interest, brokerage fees and commissions, Rule 12b-1 fees, acquired fund fees and
expenses, short-sale dividend expenses, administrative services fees, other expenses that are capitalized in accordance with generally accepted accounting principles, and extraordinary or non-routine expenses not incurred in the
ordinary course of the Fund’s business) to 0.74% of the Fund's average daily net assets (the “Expense Limitation Agreement”) until at least November 1, 2022. During its term, the Expense
Limitation Agreement cannot be terminated or amended to increase the applicable limit without approval of the Board of Trustees of the Trust (the “Board”). Milliman may recoup from the Fund any
advisory fees waived or expenses reimbursed pursuant to the Expense Limitation Agreement for a period of three years from the date on which such waiver or reimbursement occurred; provided, however, that such recoupment shall not be made
if it would cause the Fund’s total annual Fund operating expenses to exceed the lesser of (a) the expense limitation in effect at the time of the reimbursement, or (b) the expense limitation in effect at the time of recoupment, if any.
|
|
(3)
|
In addition to the Expense Limitation Agreement, Milliman has contractually agreed to waive its advisory fees in an amount equal to the Fund’s
acquired fund fees and expenses until at least November 1, 2022 (the “Fee Waiver”). This contract cannot be terminated or modified without the consent of the Board.
|
Example
This example is intended to help you compare the cost of investing in the Fund with the cost of investing in other funds. This example assumes that you
invest $10,000 in the Fund for the time periods indicated and then sell all of your Shares at the end of those periods. This example also assumes that your investment has a 5% return each year and that the Fund’s operating expenses remain at
current levels and that the Expense Limitation Agreement and Fee Waiver remain in place for their contractual periods. Although your actual costs may be higher or lower, your costs, based on these assumptions, would be:
|
1 Year
|
3 Years
|
|
|
Class 3
|
$104
|
$384
|
446
This example does not include any fees or sales charges imposed by your variable product. If they were included, the expenses listed above would be
higher.
Portfolio Turnover
The Fund pays transaction costs, such as commissions, when it purchases and sells securities (or “turns over” its portfolio). A higher portfolio turnover
will cause the Fund to incur additional transaction costs. These costs, which are not reflected in Total Annual Fund Operating Expenses or in the example, may affect the Fund’s performance. Because the Fund has not yet commenced investment
operations, no portfolio turnover information is available at this time.
Principal Investment Strategies
The Fund seeks to achieve its investment objective by transacting in FLexible EXchange® Options (“FLEX Options”)
and by separately maintaining a collateral portfolio (the “Collateral Portfolio”), which is designed primarily to serve as margin or collateral for the Fund’s FLEX Options positions and secondarily to
enhance the Fund’s upside S&P 500 Index and Russell 2000 Index FLEX Options’ exposure (i.e., by utilizing anticipated income to measure the ability to purchase additional FLEX Options). FLEX Options
are exchange-traded options contracts with uniquely customizable terms. In general, an options contract is an agreement between a buyer and seller that gives the purchaser of the option the right to buy or sell a particular asset at a specified
future date at an agreed upon price, commonly known as the “strike price.” The reference assets for the Fund’s FLEX Options positions will include the S&P 500 Index, the Russell 2000 Index (the “Secondary
Index,” and together with the S&P 500 Index, the “Reference Indices,” and, each, a “Reference Index”), and certain exchange-traded funds (“ETFs”), as described further below. The S&P 500 Index is a large-capitalization, market-weighted, U.S. equities index that tracks the price (excluding dividends) of
500 leading companies in leading industries of the U.S. economy. The Secondary Index is [a float-adjusted, market capitalization-weighted index that is designed to measure the performance of the small-capitalization segment of the U.S. equity
market, as defined by FTSE Russell].
The Collateral Portfolio may be invested in short-term fixed-income securities, including corporate bonds and other corporate debt securities,
asset-backed securities (“ABS”), securities issued by the U.S. Government or its agencies and instrumentalities, securities issued by non-U.S. governments or their agencies and instrumentalities, money
market securities and funds, other interest-bearing instruments, cash, ETFs that primarily invest in any of the foregoing instruments, options on ETFs and options box spreads. An options box spread is the combination of different options trades
that have offsetting spreads (e.g., purchases and sales on the same underlying instrument, such as an index or an ETF, but with different strike prices and/or expiration dates) for the purpose of
generating income. The Fund may invest in short-term fixed income securities or other instruments, including through ETFs, of any maturity and credit quality. The Fund will generally invest up to 35% of its net assets in one or more ETFs that
provide exposure to investment grade corporate bonds.
Due to the unique mechanics of the Fund’s strategy, the return an investor can expect to receive from an investment in the Fund has characteristics that
are distinct from the returns of many other investment vehicles. It is important that an investor understand these characteristics before making an investment in the Fund.
In seeking to achieve its investment objective, the Fund seeks to produce pre-determined outcomes (the “Outcomes”)
that are based upon the performance of the Reference Indices over a one-year period (the “Outcome Period”). The initial Outcome Period for the Fund is April 1, 2022 through March 31, 2023. Following the
initial Outcome Period, each subsequent Outcome Period will be a one-year period commencing upon the expiration of the prior Outcome Period. The Fund seeks to achieve the Outcomes by purchasing and writing (selling) FLEX Options to create layers
within the Fund’s portfolio. One layer is designed to produce returns that correlate to those of the S&P 500 Index for the Outcome Period if the S&P 500 Index experiences gains during that time, subject to an upside return cap (the “S&P 500 Index Cap”), as described below. A second layer is designed to produce returns that correlate to any upside market performance of the Secondary Index over the
Outcome Period, subject to an upside return cap (the “Secondary Index Cap,” and, together with the S&P 500 Index Cap, the “Index Caps,” and, each, an “Index Cap”), as described below. A third layer is designed to produce returns that correlate to those of the S&P 500 Index for the Outcome Period that are buffered up to 10% if the S&P 500 Index
experiences losses during that time (the “Buffer”). There is no guarantee that the Fund will be successful in its attempt to produce
447
returns that correlate to those of the S&P 500 Index or the Secondary Index up to the applicable Index Caps or produce buffered
returns against the Fund’s S&P 500 Index exposure.
Milliman Financial Risk Management, LLC (“Milliman”), the investment adviser of the Fund, seeks to establish the
Buffer by writing one put FLEX Option on the S&P 500 Index with a strike price that is 10% lower than the value of the S&P 500 Index at the beginning of the Outcome Period.
Milliman seeks to establish the Index Caps by purchasing long call FLEX Options on each Reference Index with a strike price approximately equal to the
value of the respective Reference Index at the beginning of the Outcome Period. Milliman purchases these FLEX Options with a portion of the Fund’s net assets plus (i) the cash received from writing the put FLEX Option designed to create the
Buffer, (ii) additional cash received by utilizing FLEX Options to create a put spread (the “Put Spread Strategy”) on fixed income securities and/or one or more ETFs that provide exposure to fixed income
securities, and (iii) yield received from the Collateral Portfolio. Milliman seeks to achieve the Put Spread Strategy for the Fund by writing a put FLEX Option on an underlying asset at a strike price at or lower than the underlying asset’s
market price or current value at the beginning of the Outcome Period, and buying a put FLEX Option on the same underlying asset at a lower strike price than the written put FLEX Option.
The Index Caps represent the maximum rate of return in each Reference Index that an investor can achieve from an investment in the Fund over the Outcome
Period. Milliman calculates the Index Caps based upon (i) its evaluation of prevailing market conditions on the first day of the Outcome Period and (ii) the total number of long call FLEX Options on each Reference Index that it is able to purchase
at that time. As of the date of this Prospectus, and assuming current market conditions persist, Milliman expects that the Index Caps will be between the below ranges (both gross and net of Fund fees and expenses). Any fees or expenses imposed by
your variable product, and any other expenses incurred by the Fund, will have the effect of further reducing each Index Cap. In addition, in certain market conditions, the performance of the Collateral Portfolio
and the Put Spread Strategy could cause the Fund to underperform relative to the Reference Indices, which could further limit Fund gains below the Index Caps, notwithstanding any performance of the Reference Indices in excess of the Index Caps.
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Estimated Index Cap Ranges
(As of [___])
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||
|
Prior to Taking into Account Fund Fees and Expenses
|
After Taking into Account Fund Fees and Expenses
|
|
|
S&P 500 Index Cap
|
||
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Class 3
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[__]% and [__]%
|
[__]% and [__]%
|
|
Secondary Index Cap
|
||
|
Class 3
|
[__]% and [__]%
|
[__]% and [__]%
|
The Buffer is only operative against the first 10% of losses in the Fund’s S&P 500 Index exposure for the Outcome Period. If the S&P 500 Index
decreases in value by more than 10% during the Outcome Period, the Fund (and therefore investors in Shares) will experience all subsequent losses in the Fund’s S&P 500 Index exposure on a one-to-one basis for the Outcome Period. The Fund
seeks to produce buffered returns against its S&P 500 Index exposure prior to taking into account any fees or expenses or the performance of the Collateral Portfolio or the Put Spread Strategy. The Buffer
is not operative against losses in the Collateral Portfolio or the Put Spread Strategy. If the Collateral Portfolio and/or the Put Spread Strategy experiences losses, it could have the effect of reducing the impact of, or completely
eliminating, the Buffer on the Fund’s S&P 500 Index exposure. In certain market conditions, the performance of the Collateral Portfolio and/or the Put Spread Strategy could cause the Fund to significantly underperform the S&P 500
Index. The following table reflects the Buffer both gross and net of Fund fees and expenses:
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Share Class
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Buffer
(As of [___])
|
|
|
Prior to Taking into Account Fund Fees and Expenses
|
After Taking into Account Fund Fees and Expenses
|
|
|
Class 3
|
10%
|
[__]%
|
448
Because the Fund also seeks to provide only upside exposure to the Secondary Index during the Outcome Period, the Fund’s NAV will not be impacted by any
losses experienced by the Secondary Index when measured from the beginning to the end of the Outcome Period. If the Secondary Index increases in value during the Outcome Period and later decreases in value during the Outcome Period, the Fund’s NAV
will reflect any such decreases until the Secondary Index reaches its initial value (measured as of the first day of the Outcome Period). If the Secondary Index decreases in value over the course of an entire Outcome Period, the Fund’s NAV will not
reflect such losses; therefore, the Fund’s overall performance will be approximately that of the S&P 500 Index for the Outcome Period, subject to the Buffer and the S&P 500 Index Cap.
The definitive Index Caps and Buffer will be set forth on the Fund’s website. The Fund’s website will also provide information relating to the
Outcomes on a daily basis, including the Fund’s position relative to the Index Caps and the Buffer. You may also contact your insurance company or other financial intermediary for more information.
Additionally, the Fund’s net asset value (“NAV”) will not increase or decrease at the same rate as the Reference
Indices because the Fund’s strategy relies upon the performance of the Collateral Portfolio and the Put Spread Strategy, in addition to the value of the Fund’s FLEX Options positions on the Reference Indices. While Milliman anticipates that the
Fund’s NAV will generally move in the same direction as the S&P 500 Index, and correspond to any upside returns of the Secondary Index (meaning that the Fund’s NAV will generally increase if the Reference Indices experience gains or decrease if
the Reference Indices experience losses), the Fund’s NAV may not decrease at the same rate as the Reference Indices (especially when factoring in the performance of the Collateral Portfolio and the Put Spread Strategy) and will not increase at the
same rate as the Reference Indices (especially when factoring in the Index Caps and the performance of the Collateral Portfolio and the Put Spread Strategy). Similarly, the amount of time remaining until the end of the Outcome Period also affects
the impact of the Buffer on the Fund’s NAV, because the Buffer may not be in full effect prior to the end of the Outcome Period.
The FLEX Options utilized in the Fund’s portfolio are each set to expire on the last day of the Outcome Period. The customizable nature of FLEX Options
will allow Milliman to select the strike price at which each FLEX Option will be exercised at the expiration of the FLEX Option term. At the commencement of the Outcome Period, Milliman will specifically select the strike price for each FLEX Option
in a manner designed to achieve the Outcomes when the FLEX Options are exercised on the final day of the Outcome Period, depending on the anticipated performance of the Reference Indices, the Collateral Portfolio and the Put Spread Strategy over
the duration of that Outcome Period.
The hypothetical graphical illustrations provided below are designed to illustrate the Outcomes based upon the
hypothetical performance of the Reference Indices for an investor who holds Shares for the entirety of the Outcome Period. The hypothetical graphical illustrations do not include any fees or expenses
imposed by your variable product or expenses incurred by the Fund, and do not reflect the performance of the Collateral Portfolio or the Put Spread Strategy. Additional hypothetical graphical representations of the Outcomes are provided in
“Additional Information About the Funds and the Risks of Investing.” There is no guarantee that the Fund will be successful in its attempt to achieve the Outcomes for the Outcome Period.
449
The following table contains hypothetical examples designed to illustrate the Outcomes the Fund seeks to
achieve over the Outcome Period, based upon the performance of the Reference Indices from (100)% to 100% after taking into account the Index Caps and the Buffer, but prior to taking into account any fees or
expenses or the performance of the Collateral Portfolio or the Put Spread Strategy. The table is provided for illustrative purposes only and does not provide every possible performance scenario for Shares over
the course of the Outcome Period. There is no guarantee that the Fund will be successful in its attempt to achieve the Outcomes for an Outcome Period. The table is not intended to predict or project the performance of the FLEX Options or the Fund. Investors should not take this information as an
assurance of the expected performance of the Reference Indices or the Fund. Actual Fund performance will vary with fluctuations in the performance of the Collateral Portfolio and the Put Spread Strategy, in addition to the value of the
Fund’s FLEX Options positions on the Reference Indices, during the Outcome Period, among other factors. The performance of the Collateral Portfolio and the Put Spread Strategy
could significantly impact the performance of the Fund, which could prevent the Fund from achieving the Outcomes that it seeks to produce. The table does not reflect any fees or expenses imposed by your variable product or expenses
incurred by the Fund. If it did, the returns shown for the Fund would be lower. Please refer to the Fund’s website, which provides updated information relating to this table on a daily basis throughout the Outcome Period. Please contact your
insurance company or other financial intermediary for more information.
450
|
Index/Fund
|
Hypothetical Performance1
|
|||||||||||
|
S&P 500 Index Price Performance
|
(100)%
|
(50)%
|
(20)%
|
(10)%
|
(5)%
|
0%
|
5%
|
10%
|
15%
|
20%
|
50%
|
100%
|
|
Secondary Index Price Performance
|
(100)%
|
(50)%
|
(20)%
|
(10)%
|
(5)%
|
0%
|
5%
|
10%
|
15%
|
20%
|
50%
|
100%
|
|
Fund Performance at NAV
|
(90)%
|
(40)%
|
(10)%
|
0%2
|
0%2
|
0%
|
10%3
|
14%3
|
14%3
|
14%3
|
14%3
|
14%3
|
| 1 |
Does not take into account any fees or expenses or the performance of the Collateral Portfolio or the Put Spread Strategy.
|
| 2 |
Reflects the impact of the Buffer.
|
| 3 |
Reflects the impact of assumed Index Caps of 7% per index, 14% total.
|
Understanding Outcomes. The Outcomes the Fund seeks to achieve are measured based upon the
Fund’s NAV on the first day of the Outcome Period. The Outcome Period begins on the day Milliman transacts in the FLEX Options on behalf of the Fund, and ends on the day those FLEX Options expire. An investor who
purchases Shares after the commencement of the Outcome Period will likely have purchased Shares at a different NAV than the NAV on the first day of the Outcome Period (the NAV upon which the Outcomes are based) and may experience investment
outcomes very different from those the Fund seeks to achieve, especially when factoring in any fees or expenses or the performance of the Collateral Portfolio and the Put Spread Strategy. An investor who redeems Shares prior to the end of the
Outcome Period may also experience investment outcomes very different from those the Fund seeks to achieve. The Outcomes are designed with the expectation that an investor will hold Shares on the day that Milliman transacts in the FLEX Options on
behalf of the Fund, and on the day those FLEX Options expire. There is no guarantee that the Fund will be successful in its attempt to achieve the Outcomes.
Understanding the Index Caps. Unlike other investment products, the potential returns an
investor can receive from an investment in the Fund are subject to the Index Caps. This means that if one or both of the Reference Indices experience gains for the Outcome Period, an investor in the Fund will only
experience those gains up to the applicable Index Cap. Milliman calculates the Index Caps for each Outcome Period based upon (i) its evaluation of prevailing market conditions on the first day of the Outcome Period and (ii) the total
number of long call FLEX Options on each Reference Index that it is able to purchase at that time. If an investor is considering purchasing Shares during the Outcome Period, and the Fund’s NAV has increased in
value to a level near one or both of the Index Caps, an investor purchasing Shares at that price will have limited to no gains available for the remainder of the Outcome Period, but will remain vulnerable to significant downside risks (with
respect to the S&P 500 Index FLEX Options’ exposure). In certain market conditions, the performance of the Collateral Portfolio and the Put Spread Strategy could cause the Fund to underperform
relative to the Reference Indices, which could further limit Fund gains below the Index Caps, notwithstanding any performance of the Reference Indices in excess of the Index Caps.
Understanding the Buffer. The Buffer that the Fund seeks to provide is only operative
against the first 10% of losses in the Fund’s S&P 500 Index exposure for the Outcome Period. If an investor is considering purchasing Shares during the Outcome Period, and the S&P 500 Index has decreased
in value by an amount equal to or greater than 10%, an investor purchasing Shares at that time will be able to participate in any gains thereafter (up to the Index Caps), but will not benefit from the Buffer that the Fund seeks to offer for the
remainder of the Outcome Period if the losses continue to be equal to or greater than 10% during that period. Conversely, if an investor is considering purchasing Shares during the Outcome Period, and the Fund’s NAV has increased in value, then
an investor may experience losses before implementation of the Buffer that the Fund seeks to provide. While the Fund seeks to produce returns that correlate to those of the S&P 500 Index for the Outcome Period that are buffered up to
10% (prior to taking into account any fees or expenses or the performance of the Collateral Portfolio or the Put Spread Strategy) for investors who hold Shares for the entire Outcome Period, there is no guarantee it will successfully do so. In addition, the Buffer is not operative against losses in the Collateral Portfolio or the Put Spread Strategy. If the Collateral Portfolio and/or the Put Spread Strategy experiences losses, it could have the
effect of reducing the impact of, or completely eliminating, the Buffer on the Fund’s S&P 500 Index exposure. In certain market conditions, the performance of the Collateral Portfolio and/or the Put Spread Strategy could cause the Fund to
significantly underperform the S&P 500 Index. Investors who purchase Shares at the beginning of the Outcome Period may lose their entire
451
investment. Investors who purchase Shares after the Outcome Period has begun may also lose their entire investment. An
investment in the Fund is only appropriate for investors willing to bear those losses.
Fund Rebalance. Milliman implements the Fund’s strategy on an annual basis, seeking to
produce the Outcomes for an Outcome Period. On the last business day of any stated Outcome Period, all of the Fund’s existing FLEX Options, which includes those used to establish the Buffer, the Index Caps and the Put Spread Strategy, will expire
and Milliman will transact in a new set of FLEX Options on the same business day, which will commence a new Outcome Period beginning the following business day. At that same time, Milliman will also evaluate whether to make any adjustments to the
Collateral Portfolio. Accordingly, Shares can be held indefinitely if investors determine to participate in additional Outcome Periods.
Approximately one week prior to the end of each Outcome Period, the Fund will file a prospectus supplement, which will notify existing investors of
(i) the date on which the existing Outcome Period will end; (ii) the date on which the new Outcome Period will commence; and (iii) the anticipated ranges of the Index Caps that will be used for the new Outcome Period. Immediately preceding the
commencement date of the new Outcome Period, the Fund will file a prospectus supplement disclosing the Fund’s final Index Caps (both gross and net of Fund fees and expenses) for the new Outcome Period. This information will also be available
online at www.[___________].com, and on your insurance company’s website. Please contact your insurance company or other financial intermediary for more information.
Fund Classification. The Fund is classified as “non-diversified” under the Investment
Company Act of 1940, as amended (the “1940 Act”).
Principal Risks
You could lose money by investing in the Fund. An investment in the Fund is not a deposit of a bank and is not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other governmental agency. There can be no assurance that the Fund’s investment objectives will be achieved.
Downside Loss Buffer Risk. There can be no guarantee that the Fund will be successful in its strategy to
buffer against S&P 500 Index losses if the S&P 500 Index decreases in value over the Outcome Period. The Fund’s strategy is designed to produce returns that correlate to those of the S&P 500 Index, subject to the S&P 500 Index
Cap, while limiting downside S&P 500 Index losses and providing additional upside exposure to the Secondary Index, subject to the Secondary Index Cap, if Shares are bought on the day on which Milliman transacts in the FLEX Options on behalf
of the Fund and held until those FLEX Options expire at the end of each Outcome Period. The success of the Buffer also depends upon the performance of the Collateral Portfolio and the Put Spread Strategy. If
the Collateral Portfolio and/or the Put Spread Strategy experiences losses, it could have the effect of reducing the impact of, or completely eliminating, the Buffer on the Fund’s S&P 500 Index exposure. In certain market conditions, the
performance of the Collateral Portfolio and/or the Put Spread Strategy could cause the Fund to significantly underperform the S&P 500 Index. Despite the intended Buffer, an investor could lose their entire investment. In the
event an investor purchases Shares after the date on which Milliman transacted in the FLEX Options on behalf of the Fund, or redeems Shares prior to the expiration of those FLEX Options, the Buffer that the Fund seeks to provide may not be
available or fully applicable.
Risk of Capped Upside Returns. The Fund’s strategy is designed to produce returns that correlate to those of the
Reference Indices up to the Index Caps if Shares are bought on the day on which Milliman transacts in the FLEX Options on behalf of the Fund and held until those FLEX Options expire at the end of the Outcome Period, subject to the Index Caps. In
the event that one or both of the Reference Indices experience gains during the Outcome Period, the Fund will only participate in those gains up to the applicable Index Cap. In the event that one or both Reference Indices experience gains in excess
of the applicable Index Cap over the duration of the Outcome Period, the Fund will not participate in those excess gains. Because the Fund’s strategy provides capped exposure to two Reference Indices, the Index Caps may be lower than if the Fund
provided capped exposure to only a single Reference Index. In the event an investor purchases Shares after the date on which the FLEX Options were entered into and the Fund has risen in value to a level near to an Index Cap, there may be little or
no ability for that investor to experience an investment gain on their Shares relating to that Reference Index. In certain market conditions, the performance of the Collateral Portfolio and the Put Spread
Strategy could cause the Fund to
452
underperform relative to the Reference Indices, which could further limit Fund gains below the Index Caps, notwithstanding any
performance of the Reference Indices in excess of the Index Caps. An investor should consider the amount of the Index Caps, and the Fund’s position relative to each Index Cap, before investing in the Fund.
Index Cap Change Risk. Because the Index Caps for each Outcome Period are calculated based upon (i) Milliman’s
evaluation of prevailing market conditions on the first day of the Outcome Period and (ii) the total number of long call FLEX Options on the Reference Indices that Milliman is able to purchase at that time, the Index Caps may rise or fall from one
Outcome Period to the next. Any change in the Index Caps could be significant and they are unlikely to remain the same for consecutive Outcome Periods.
FLEX Options Risk. The Fund will transact in FLEX Options issued and guaranteed for settlement by the OCC. The
Fund bears the risk that the OCC will be unable or unwilling to perform its obligations under the FLEX Options contracts, which could result in significant losses to the Fund. In less liquid markets, terminating a FLEX Option may require the
payment of a premium or acceptance of a discounted price, and may take longer to complete. In addition, a less liquid trading market may adversely impact the value of the Fund’s FLEX Options and therefore the NAV of the Fund. In addition, the value
of the Fund’s FLEX Options positions is not anticipated to increase or decrease at the same rate as the reference asset; and while it is anticipated that they will generally move in the same direction, it is possible that they may move in different
directions. Certain FLEX Options positions may also expire worthless. The use of FLEX Options involves leverage, which can cause the Fund’s portfolio to be more volatile than if the portfolio had not been leveraged. Leverage can significantly
magnify the effect of price movements of the reference asset, disproportionately increasing the Fund’s losses and reducing the Fund’s opportunities for gains when the reference asset changes in unexpected ways. In some instances, such leverage
could result in losses that exceed the original amount invested.
Investment Objective and Outcomes Risk. There is no guarantee that the Fund will be successful in its attempt
to achieve its investment objective and/or the Outcomes, and an investor could lose some or all of their investment in the Fund. Certain circumstances under which the Fund might not achieve its objective and/or the Outcomes include, but are not
limited to (i) if the Fund disposes of FLEX Options, (ii) if the Fund is unable to maintain the proportional relationship based on the number of FLEX Options in the Fund’s portfolio, (iii) significant accrual of Fund expenses in connection with
effecting the Fund’s principal investment strategy, (iv) losses incurred by the Fund’s holdings in the Collateral Portfolio and/or losses resulting from the Put Spread Strategy, or (iv) adverse tax law changes affecting the treatment of FLEX
Options.
Tax Risk. The Fund intends to elect, and to qualify each year, to be treated as a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”). As a RIC, the Fund will not be subject to U.S. federal income tax on the portion
of its net investment income and net capital gain that it distributes to shareholders, provided that it satisfies certain requirements of the Code. To maintain its status as a RIC, the Fund must meet certain income, diversification and
distributions tests. For purposes of the diversification test, the identification of the issuer (or, in some cases, issuers) of a particular Fund investment can depend on the terms and conditions of that investment. In particular, there is no
published IRS guidance or case law on how to determine the “issuer” of certain derivatives that the Fund will enter into and the Fund has not received a private letter ruling on this point. Therefore, there is a risk that the Fund will not meet the
Code’s diversification requirements and will not qualify, or will be disqualified, as a RIC. If the Fund does not qualify as a RIC for any taxable year and certain relief provisions are not available, the Fund’s taxable income will be subject to
tax at the Fund level and to a further tax at the shareholder level when such income is distributed.
The Fund also intends to comply with the diversification requirements of Section 817(h) of the Code, and the regulations thereunder, relating to the
tax-deferred status of variable accounts that are based on insurance company separate accounts (referred to as “segregated asset accounts” for federal income tax purposes). These diversification requirements apply in addition to the RIC
diversification requirements discussed above. There also is no published guidance or case law on how to determine the “issuer” of the derivatives referred to above for purposes of the diversification requirements of Section 817(h) of the Code and
the Fund has not received a private letter ruling on this point. If these requirements are not met, or under other circumstances, such as if the Fund does not qualify as a RIC for any taxable year, it is possible that the contract owners (rather
than the insurance company) will be treated for federal income tax purposes as the taxable owners of the assets held by the segregated asset accounts.
453
Clearing Member Default Risk. The Fund will hold FLEX Options through accounts at members of clearing houses (“clearing members”) rather than a bank or a broker. Assets deposited by the Fund with any clearing member as margin for its FLEX Options positions may, in certain circumstances, be used to satisfy losses of other
clients of the Fund’s clearing member where such assets may be held in commingled omnibus accounts. In addition, although clearing members guarantee performance of their clients’ obligations to the clearing house, there is a risk that the assets of
the Fund might not be fully protected in the event of the clearing member’s bankruptcy, as the Fund would be limited to recovering only a pro rata share of all available funds segregated on behalf of the
clearing member’s customers for the relevant account class.
Debt Securities Risk. The prices of debt securities will be affected by changes in interest rates, the
creditworthiness of the issuer and other factors. These risks could affect the value of investments in which the Fund invests, possibly causing the Fund’s NAV to be reduced and fluctuate more than other types of investments. During periods of
falling interest rates, an issuer of a callable bond may repay the security before its stated maturity, and the Fund may have to reinvest the proceeds in securities with lower yields, which would result in a decline in the Fund’s income, or in
securities with greater risks or with other less favorable features. Changing interest rates, including rates that fall below zero, may have unpredictable effects on markets, result in heightened market volatility and detract from the Fund’s
performance to the extent the Fund is exposed to such interest rates. An increase in interest rates will generally cause the value of fixed-income securities held by the Fund to decline, may lead to heightened volatility in the fixed-income
markets and may adversely affect the liquidity of certain fixed-income investments, including those held by the Fund. Risks associated with rising interest rates are heightened given that interest rates in the U.S. are near historic lows.
Adjustable-rate instruments also react to interest rate changes in a similar manner, although generally to a lesser degree (depending, however, on the characteristics of the reset terms, including the index chosen, frequency of reset and reset
caps or floors, among other factors). Interest rate sensitivity is generally more pronounced and less predictable in instruments with uncertain payment or prepayment schedules and also for those with longer maturities.
Foreign Securities and Credit Exposure Risk. U.S. dollar-denominated securities carrying foreign credit exposure
may be affected by unfavorable political, economic or governmental developments that could affect payments of principal and interest. Furthermore, the value of the Fund’s foreign investments (whether direct or indirect) may be adversely affected by
political and social instability in their home countries, by changes in economic or taxation policies in those countries, or by the difficulty in enforcing obligations in those countries. Foreign companies generally may be subject to less stringent
regulations than U.S. companies, including financial reporting requirements and auditing and accounting controls. As a result, there generally is less publicly available information about foreign companies than about U.S. companies. Trading in many
foreign securities may be less liquid and more volatile than U.S. securities due to the size of the market or other factors.
U.S. Government Securities Risk. U.S. Government securities are subject to interest rate risk but generally do
not involve the credit risks associated with investments in other types of debt securities. As a result, the yields available from U.S. Government securities are generally lower than the yields available from other debt securities. U.S. Government
securities are guaranteed only as to the timely payment of interest and the payment of principal when held to maturity. While securities issued or guaranteed by U.S. federal government agencies are backed by the full faith and credit of the U.S.
Department of the Treasury, securities issued by government sponsored entities are solely the obligation of the issuer and generally do not carry any guarantee from the U.S. Government.
ABS Risk. ABS are subject to the general debt securities risks described above. In addition, ABS may be less
liquid than other bonds, and may be more sensitive than other bonds to the market’s perception of issuers and creditworthiness of payees, which may result in the Fund experiencing difficulty selling or valuing these securities. ABS markets have
experienced extraordinary weakness and volatility at various times in recent years, and may decline quickly in the event of a substantial economic or market downturn. Accordingly, these securities may be subject to greater risk of default during
periods of economic downturn than other securities, which could result in possible losses to the Fund.
Issuer Risk. The performance of the Fund depends on the performance of individual securities to which the Fund
has exposure. The Fund may be adversely affected if an issuer of underlying securities held by the Fund is unable or
454
unwilling to repay principal or interest when due. Changes in the financial condition or credit rating of an issuer of those securities may cause the
value of the securities to decline.
Management Risk. The Fund is subject to management risk because it is an actively managed portfolio. Milliman
will apply investment techniques and risk analyses in making investment decisions for the Fund, but there can be no guarantee that the Fund will meet its investment objective and/or the Outcomes. In addition, Milliman does not use defensive
strategies or attempt to reduce the Fund’s exposures to poor performing positions during an Outcome Period. This differs from funds that are managed to seek to outperform a benchmark index. Therefore, in the event of a general market decline, the
Fund’s value may fall more than the value of another fund that does attempt to hedge against such market declines.
Market Risk. The Fund could lose money over short periods due to short-term market movements and over longer
periods during more prolonged market downturns. Assets may decline in value due to factors affecting financial markets generally or particular asset classes or industries represented in the markets. The value of a FLEX Option or other asset may
also decline due to general market conditions, economic trends or events that are not specifically related to the issuer of the security or other asset, or due to factors that affect a particular issuer, country, region, market, industry, sector or
asset class.
Non-Diversification Risk. The Fund may invest a relatively high percentage of its assets in a limited number of
issuers. As a result, the Fund may be more susceptible to a single adverse economic or regulatory occurrence affecting one or more of these issuers, experience increased volatility and be highly invested in certain issuers.
Large Shareholder Risk. At times, the Fund may experience adverse effects when certain large shareholders,
including insurance company separate accounts, redeem large amounts of shares of the Fund. Large redemptions may cause the Fund to sell portfolio holdings at times when it would not otherwise do so and may increase transaction costs and/or result
in an increase to the Fund’s expense ratio. A large redemption could be detrimental to the Fund and its remaining shareholders.
Risks of Investing in ETFs. In addition to the risks associated with the underlying assets held by the ETFs in
which the Fund invests, investments in ETFs are also subject to the following additional risks: (i) only authorized participants may engage in transactions directly with ETFs but none are obligated to do so, which could result in an ETF’s shares
trading at a premium or discount to its NAV or possibly face trading halts or delisting; (ii) certain ETFs seek to track the performance of an underlying index and will not attempt to take defensive positions under any market conditions, including
declining markets, which could result in losses; and (iii) because ETF shares trade on the secondary market, there is not guarantee that an active market will be developed or maintained, which could result in the ETF’s shares trading at a premium
or discount to its NAV. Investments in ETFs may involve duplication of management fees and certain other expenses, as the Fund indirectly bears its proportionate share of any expenses paid by the ETFs in which it invests.
Risks of Investing in Money Market Funds. Money market funds seek to preserve the value of shareholder
investments at $1.00 per share, but shareholders, such as the Fund, may still lose money by investing in such funds. In addition, a money market fund may impose a fee upon the sale of its shares or may temporarily suspend the ability to sell shares
if the fund’s liquidity falls below required minimums because of market conditions or other factors. The credit quality of a money market fund’s holdings can change rapidly in certain markets, and the default of a single holding could have an
adverse impact on the fund’s share price. A money market fund’s share price can also be negatively affected during periods of high redemption pressures, illiquid markets, and/or significant market volatility.
Performance
As of the date of this Prospectus, the Fund has not commenced operations and therefore does not have a performance history. Once available, the Fund’s
performance information will be accessible online at www.[________].com and will provide some indication of the risks of investing in the Fund.
Management
455
Investment Adviser
Milliman Financial Risk Management LLC (“Milliman”) serves as investment adviser to the Fund.
Portfolio Managers
The following persons serve as portfolio managers of the Fund.
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●
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Robert T. Cummings, Principal & Head of Portfolio Management at Milliman.
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●
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Maria Schiopu, Principal & Head of Portfolio Management at Milliman.
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●
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Jeff Greco, Principal & Head of Strategy Research at Milliman.
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●
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Jordan Rosenfeld, Portfolio Manager at Milliman.
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Each portfolio manager is jointly and primarily responsible for the day-to-day management of the Fund’s portfolio and has served in such capacity
since the Fund’s inception in 2021.
Purchase and Sale of Shares
Shares are available as underlying investment options for variable insurance contracts and variable life insurance policies (each, a “variable contract,” and, collectively, the “variable contracts”) issued by insurance companies. These insurance companies are the record owners of the separate accounts
holding the Shares. You do not buy, sell or exchange Shares directly; rather, you choose investment options through your variable contracts. The insurance companies then cause the separate accounts to purchase and redeem Shares according to
the investment options you choose.
Tax Information
The dividends and distributions paid by the Fund to the insurance company separate accounts will consist of ordinary income, capital gains, or some
combination of both. Because Shares must be purchased through separate accounts used to fund variable contracts, such dividends and distributions will be exempt from current taxation by owners of variable contracts (each, a “contract owner,” and, collectively “contract owners”) if left to accumulate within a separate account. Consult the variable contract prospectus for additional tax
information.
Payments to Insurance Companies and Other Financial Intermediaries
If you allocate contract value to the Fund through an insurance company or other financial intermediary, the Fund, Milliman, the Fund’s distributor or
their related companies may pay the insurance company and/or its affiliates or other intermediary for the sale of Shares and related services. These payments may create a conflict of interest by influencing the insurance company or other
intermediary and your salesperson to recommend an indirect investment in the Fund over another investment. The prospectus or other disclosure documents for the variable contracts may contain additional information about these payments, if any.
You may also ask your salesperson or financial intermediary, or visit your financial intermediary’s website, for more information.
456
Fund Summary: Milliman S&P 500 & MSCI EAFE 1-Year Buffer with Stacker Cap
Fund – Sep
Investment Objective
The Fund seeks to provide exposure to the S&P 500 Index, while providing a buffer against the first 10% of losses associated with S&P 500
Index performance and participating in S&P 500 Index gains up to a declared cap, prior to taking into account any fees or expenses or the performance of any fixed income exposure included in the Fund’s portfolio, over the period from
September 1, 2021 through August 31, 2022. The Fund also seeks to provide upside exposure to the MSCI EAFE Index up to a declared cap, prior to taking into account any fees or expenses or the performance of any fixed income exposure included in
the Fund’s portfolio, over the same period.
Fees and Expenses of the Fund
This table describes the fees and expenses that you may pay if you buy, hold and sell shares of the Fund (“Shares”).
This table and the example below do not include any fees or sales charges imposed by your variable product. If they were included, the expenses listed below would be higher.
Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment)
|
Class 3
|
|
|
Management Fees
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0.49%
|
|
Distribution and Service (12b-1) Fees
|
0.25%
|
|
Other Expenses(1)
|
0.50%
|
|
Acquired Fund Fees and Expenses(1)
|
[_.__]%
|
|
Total Annual Fund Operating Expenses
|
1.24%
|
|
Fee Waiver and/or Expense Reimbursement(2)(3)
|
(0.25)%
|
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Total Annual Fund Operating Expenses After Fee Waiver and/or Expense Reimbursement
|
0.99%
|
|
(1)
|
“Other Expenses” and “Acquired Fund Fees and Expenses” are based on estimated amounts for the current fiscal year.
|
|
(2)
|
The Fund’s investment adviser, Milliman Financial Risk Management LLC (“Milliman”), has contractually
agreed to waive advisory fees and/or reimburse expenses to the extent necessary to limit the Fund’s total annual Fund operating expenses (excluding taxes, interest, brokerage fees and commissions, Rule 12b-1 fees, acquired fund fees and
expenses, short-sale dividend expenses, administrative services fees, other expenses that are capitalized in accordance with generally accepted accounting principles, and extraordinary or non-routine expenses not incurred in the
ordinary course of the Fund’s business) to 0.74% of the Fund's average daily net assets (the “Expense Limitation Agreement”) until at least November 1, 2022. During its term, the Expense
Limitation Agreement cannot be terminated or amended to increase the applicable limit without approval of the Board of Trustees of the Trust (the “Board”). Milliman may recoup from the Fund any
advisory fees waived or expenses reimbursed pursuant to the Expense Limitation Agreement for a period of three years from the date on which such waiver or reimbursement occurred; provided, however, that such recoupment shall not be made
if it would cause the Fund’s total annual Fund operating expenses to exceed the lesser of (a) the expense limitation in effect at the time of the reimbursement, or (b) the expense limitation in effect at the time of recoupment, if any.
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|
(3)
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In addition to the Expense Limitation Agreement, Milliman has contractually agreed to waive its advisory fees in an amount equal to the Fund’s
acquired fund fees and expenses until at least November 1, 2022 (the “Fee Waiver”). This contract cannot be terminated or modified without the consent of the Board.
|
Example
This example is intended to help you compare the cost of investing in the Fund with the cost of investing in other funds. This example assumes that you
invest $10,000 in the Fund for the time periods indicated and then sell all of your Shares at the end of those periods. This example also assumes that your investment has a 5% return each year and that the Fund’s operating expenses remain at
current levels and that the Expense Limitation Agreement and Fee Waiver remain in place for their contractual periods. Although your actual costs may be higher or lower, your costs, based on these assumptions, would be:
|
1 Year
|
3 Years
|
|
|
Class 3
|
$104
|
$384
|
457
This example does not include any fees or sales charges imposed by your variable product. If they were included, the expenses listed above would be
higher.
Portfolio Turnover
The Fund pays transaction costs, such as commissions, when it purchases and sells securities (or “turns over” its portfolio). A higher portfolio turnover
will cause the Fund to incur additional transaction costs. These costs, which are not reflected in Total Annual Fund Operating Expenses or in the example, may affect the Fund’s performance. Because the Fund has not yet commenced investment
operations, no portfolio turnover information is available at this time.
Principal Investment Strategies
The Fund seeks to achieve its investment objective by transacting in FLexible EXchange® Options (“FLEX Options”)
and by separately maintaining a collateral portfolio (the “Collateral Portfolio”), which is designed primarily to serve as margin or collateral for the Fund’s FLEX Options positions and secondarily to
enhance the Fund’s upside S&P 500 Index and MSCI EAFE Index FLEX Options’ exposure (i.e., by utilizing anticipated income to measure the ability to purchase additional FLEX Options). FLEX Options are
exchange-traded options contracts with uniquely customizable terms. In general, an options contract is an agreement between a buyer and seller that gives the purchaser of the option the right to buy or sell a particular asset at a specified
future date at an agreed upon price, commonly known as the “strike price.” The reference assets for the Fund’s FLEX Options positions will include the S&P 500 Index, the MSCI EAFE Index (the “Secondary Index,”
and together with the S&P 500 Index, the “Reference Indices,” and, each, a “Reference Index”), and certain exchange-traded funds (“ETFs”), as described further below. The S&P 500 Index is a large-capitalization, market-weighted, U.S. equities index that tracks the price (excluding dividends) of 500 leading companies
in leading industries of the U.S. economy. The Secondary Index is [a float-adjusted, market capitalization-weighted index that is designed to measure the performance of large and mid-capitalization securities across 21 developed markets,
including countries in Europe, Australasia and the Far East, excluding the United States and Canada].
The Collateral Portfolio may be invested in short-term fixed-income securities, including corporate bonds and other corporate debt securities,
asset-backed securities (“ABS”), securities issued by the U.S. Government or its agencies and instrumentalities, securities issued by non-U.S. governments or their agencies and instrumentalities, money
market securities and funds, other interest-bearing instruments, cash, ETFs that primarily invest in any of the foregoing instruments, options on ETFs and options box spreads. An options box spread is the combination of different options trades
that have offsetting spreads (e.g., purchases and sales on the same underlying instrument, such as an index or an ETF, but with different strike prices and/or expiration dates) for the purpose of
generating income. The Fund may invest in short-term fixed income securities or other instruments, including through ETFs, of any maturity and credit quality. The Fund will generally invest up to 35% of its net assets in one or more ETFs that
provide exposure to investment grade corporate bonds.
Due to the unique mechanics of the Fund’s strategy, the return an investor can expect to receive from an investment in the Fund has characteristics that
are distinct from the returns of many other investment vehicles. It is important that an investor understand these characteristics before making an investment in the Fund.
In seeking to achieve its investment objective, the Fund seeks to produce pre-determined outcomes (the “Outcomes”)
that are based upon the performance of the Reference Indices over a one-year period (the “Outcome Period”). The initial Outcome Period for the Fund is September 1, 2021 through August 31, 2022. Following the
initial Outcome Period, each subsequent Outcome Period will be a one-year period commencing upon the expiration of the prior Outcome Period. The Fund seeks to achieve the Outcomes by purchasing and writing (selling) FLEX Options to create layers
within the Fund’s portfolio. One layer is designed to produce returns that correlate to those of the S&P 500 Index for the Outcome Period if the S&P 500 Index experiences gains during that time, subject to an upside return cap (the “S&P 500 Index Cap”), as described below. A second layer is designed to produce returns that correlate to any upside market performance of the Secondary Index over the
Outcome Period, subject to an upside return cap (the “Secondary Index Cap,” and, together with the S&P 500 Index Cap, the “Index Caps,” and, each, an “Index Cap”), as described below. A third layer is designed to produce returns that correlate to those of the S&P 500 Index for the Outcome Period that are buffered up to 10% if the S&P 500 Index
experiences losses during
458
that time (the “Buffer”). There is no guarantee that the Fund will be
successful in its attempt to produce returns that correlate to those of the S&P 500 Index or the Secondary Index up to the applicable Index Caps or produce buffered returns against the Fund’s S&P 500 Index exposure.
Milliman Financial Risk Management, LLC (“Milliman”), the investment adviser of the Fund, seeks to establish the
Buffer by writing one put FLEX Option on the S&P 500 Index with a strike price that is 10% lower than the value of the S&P 500 Index at the beginning of the Outcome Period.
Milliman seeks to establish the Index Caps by purchasing long call FLEX Options on each Reference Index with a strike price approximately equal to the
value of the respective Reference Index at the beginning of the Outcome Period. Milliman purchases these FLEX Options with a portion of the Fund’s net assets plus (i) the cash received from writing the put FLEX Option designed to create the
Buffer, (ii) additional cash received by utilizing FLEX Options to create a put spread (the “Put Spread Strategy”) on fixed income securities and/or one or more ETFs that provide exposure to fixed income
securities, and (iii) yield received from the Collateral Portfolio. Milliman seeks to achieve the Put Spread Strategy for the Fund by writing a put FLEX Option on an underlying asset at a strike price at or lower than the underlying asset’s
market price or current value at the beginning of the Outcome Period, and buying a put FLEX Option on the same underlying asset at a lower strike price than the written put FLEX Option.
The Index Caps represent the maximum rate of return in each Reference Index that an investor can achieve from an investment in the Fund over the Outcome
Period. Milliman calculates the Index Caps based upon (i) its evaluation of prevailing market conditions on the first day of the Outcome Period and (ii) the total number of long call FLEX Options on each Reference Index that it is able to purchase
at that time. As of the date of this Prospectus, and assuming current market conditions persist, Milliman expects that the Index Caps will be between the below ranges (both gross and net of Fund fees and expenses). Any fees or expenses imposed by
your variable product, and any other expenses incurred by the Fund, will have the effect of further reducing each Index Cap. In addition, in certain market conditions, the performance of the Collateral Portfolio
and the Put Spread Strategy could cause the Fund to underperform relative to the Reference Indices, which could further limit Fund gains below the Index Caps, notwithstanding any performance of the Reference Indices in excess of the Index Caps.
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Estimated Index Cap Ranges
(As of [___])
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||
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Prior to Taking into Account Fund Fees and Expenses
|
After Taking into Account Fund Fees and Expenses
|
|
|
S&P 500 Index Cap
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||
|
Class 3
|
[__]% and [__]%
|
[__]% and [__]%
|
|
Secondary Index Cap
|
||
|
Class 3
|
[__]% and [__]%
|
[__]% and [__]%
|
The Buffer is only operative against the first 10% of losses in the Fund’s S&P 500 Index exposure for the Outcome Period. If the S&P 500 Index
decreases in value by more than 10% during the Outcome Period, the Fund (and therefore investors in Shares) will experience all subsequent losses in the Fund’s S&P 500 Index exposure on a one-to-one basis for the Outcome Period. The Fund
seeks to produce buffered returns against its S&P 500 Index exposure prior to taking into account any fees or expenses or the performance of the Collateral Portfolio or the Put Spread Strategy. The Buffer
is not operative against losses in the Collateral Portfolio or the Put Spread Strategy. If the Collateral Portfolio and/or the Put Spread Strategy experiences losses, it could have the effect of reducing the impact of, or completely
eliminating, the Buffer on the Fund’s S&P 500 Index exposure. In certain market conditions, the performance of the Collateral Portfolio and/or the Put Spread Strategy could cause the Fund to significantly underperform the S&P 500
Index. The following table reflects the Buffer both gross and net of Fund fees and expenses:
459
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Share Class
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Buffer
(As of [___])
|
|
|
Prior to Taking into Account Fund Fees and Expenses
|
After Taking into Account Fund Fees and Expenses
|
|
|
Class 3
|
10%
|
[__]%
|
Because the Fund also seeks to provide only upside exposure to the Secondary Index during the Outcome Period, the Fund’s NAV will not be impacted by any
losses experienced by the Secondary Index when measured from the beginning to the end of the Outcome Period. If the Secondary Index increases in value during the Outcome Period and later decreases in value during the Outcome Period, the Fund’s NAV
will reflect any such decreases until the Secondary Index reaches its initial value (measured as of the first day of the Outcome Period). If the Secondary Index decreases in value over the course of an entire Outcome Period, the Fund’s NAV will not
reflect such losses; therefore, the Fund’s overall performance will be approximately that of the S&P 500 Index for the Outcome Period, subject to the Buffer and the S&P 500 Index Cap.
The definitive Index Caps and Buffer will be set forth on the Fund’s website. The Fund’s website will also provide information relating to the
Outcomes on a daily basis, including the Fund’s position relative to the Index Caps and the Buffer. You may also contact your insurance company or other financial intermediary for more information.
Additionally, the Fund’s net asset value (“NAV”) will not increase or decrease at the same rate as the Reference
Indices because the Fund’s strategy relies upon the performance of the Collateral Portfolio and the Put Spread Strategy, in addition to the value of the Fund’s FLEX Options positions on the Reference Indices. While Milliman anticipates that the
Fund’s NAV will generally move in the same direction as the S&P 500 Index, and correspond to any upside returns of the Secondary Index (meaning that the Fund’s NAV will generally increase if the Reference Indices experience gains or decrease if
the Reference Indices experience losses), the Fund’s NAV may not decrease at the same rate as the Reference Indices (especially when factoring in the performance of the Collateral Portfolio and the Put Spread Strategy) and will not increase at the
same rate as the Reference Indices (especially when factoring in the Index Caps and the performance of the Collateral Portfolio and the Put Spread Strategy). Similarly, the amount of time remaining until the end of the Outcome Period also affects
the impact of the Buffer on the Fund’s NAV, because the Buffer may not be in full effect prior to the end of the Outcome Period.
The FLEX Options utilized in the Fund’s portfolio are each set to expire on the last day of the Outcome Period. The customizable nature of FLEX Options
will allow Milliman to select the strike price at which each FLEX Option will be exercised at the expiration of the FLEX Option term. At the commencement of the Outcome Period, Milliman will specifically select the strike price for each FLEX Option
in a manner designed to achieve the Outcomes when the FLEX Options are exercised on the final day of the Outcome Period, depending on the anticipated performance of the Reference Indices, the Collateral Portfolio and the Put Spread Strategy over
the duration of that Outcome Period.
The hypothetical graphical illustrations provided below are designed to illustrate the Outcomes based upon the
hypothetical performance of the Reference Indices for an investor who holds Shares for the entirety of the Outcome Period. The hypothetical graphical illustrations do not include any fees or expenses
imposed by your variable product or expenses incurred by the Fund, and do not reflect the performance of the Collateral Portfolio or the Put Spread Strategy. Additional hypothetical graphical representations of the Outcomes are provided in
“Additional Information About the Funds and the Risks of Investing.” There is no guarantee that the Fund will be successful in its attempt to achieve the Outcomes for the Outcome Period.
460
The following table contains hypothetical examples designed to illustrate the Outcomes the Fund seeks to
achieve over the Outcome Period, based upon the performance of the Reference Indices from (100)% to 100% after taking into account the Index Caps and the Buffer, but prior to taking into account any fees or
expenses or the performance of the Collateral Portfolio or the Put Spread Strategy. The table is provided for illustrative purposes only and does not provide every possible performance scenario for Shares over
the course of the Outcome Period. There is no guarantee that the Fund will be successful in its attempt to achieve the Outcomes for an Outcome Period. The table is not intended to predict or project the performance of the FLEX Options or the Fund. Investors should not take this information as an
assurance of the expected performance of the Reference Indices or the Fund. Actual Fund performance will vary with fluctuations in the performance of the Collateral Portfolio and the Put Spread Strategy, in addition to the value of the
Fund’s FLEX Options positions on the Reference Indices, during the Outcome Period, among other factors. The performance of the Collateral Portfolio and the Put Spread Strategy
could significantly impact the performance of the Fund, which could prevent the Fund from achieving the Outcomes that it seeks to produce. The table does not reflect any fees or expenses imposed by your variable product or expenses
incurred by the Fund. If it did, the returns shown for the Fund would be lower. Please refer to the Fund’s website, which provides updated information relating to this table on a daily basis throughout the Outcome Period. Please contact your
insurance company or other financial intermediary for more information.
461
|
Index/Fund
|
Hypothetical Performance1
|
|||||||||||
|
S&P 500 Index Price Performance
|
(100)%
|
(50)%
|
(20)%
|
(10)%
|
(5)%
|
0%
|
5%
|
10%
|
15%
|
20%
|
50%
|
100%
|
|
Secondary Index Price Performance
|
(100)%
|
(50)%
|
(20)%
|
(10)%
|
(5)%
|
0%
|
5%
|
10%
|
15%
|
20%
|
50%
|
100%
|
|
Fund Performance at NAV
|
(90)%
|
(40)%
|
(10)%
|
0%2
|
0%2
|
0%
|
10%3
|
14%3
|
14%3
|
14%3
|
14%3
|
14%3
|
| 1 |
Does not take into account any fees or expenses or the performance of the Collateral Portfolio or the Put Spread Strategy.
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| 2 |
Reflects the impact of the Buffer.
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| 3 |
Reflects the impact of assumed Index Caps of 7% per index, 14% total.
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Understanding Outcomes. The Outcomes the Fund seeks to achieve are measured based upon the
Fund’s NAV on the first day of the Outcome Period. The Outcome Period begins on the day Milliman transacts in the FLEX Options on behalf of the Fund, and ends on the day those FLEX Options expire. An investor who
purchases Shares after the commencement of the Outcome Period will likely have purchased Shares at a different NAV than the NAV on the first day of the Outcome Period (the NAV upon which the Outcomes are based) and may experience investment
outcomes very different from those the Fund seeks to achieve, especially when factoring in any fees or expenses or the performance of the Collateral Portfolio and the Put Spread Strategy. An investor who redeems Shares prior to the end of the
Outcome Period may also experience investment outcomes very different from those the Fund seeks to achieve. The Outcomes are designed with the expectation that an investor will hold Shares on the day that Milliman transacts in the FLEX Options on
behalf of the Fund, and on the day those FLEX Options expire. There is no guarantee that the Fund will be successful in its attempt to achieve the Outcomes.
Understanding the Index Caps. Unlike other investment products, the potential returns an
investor can receive from an investment in the Fund are subject to the Index Caps. This means that if one or both of the Reference Indices experience gains for the Outcome Period, an investor in the Fund will only
experience those gains up to the applicable Index Cap. Milliman calculates the Index Caps for each Outcome Period based upon (i) its evaluation of prevailing market conditions on the first day of the Outcome Period and (ii) the total
number of long call FLEX Options on each Reference Index that it is able to purchase at that time. If an investor is considering purchasing Shares during the Outcome Period, and the Fund’s NAV has increased in
value to a level near one or both of the Index Caps, an investor purchasing Shares at that price will have limited to no gains available for the remainder of the Outcome Period, but will remain vulnerable to significant downside risks (with
respect to the S&P 500 Index FLEX Options’ exposure). In certain market conditions, the performance of the Collateral Portfolio and the Put Spread Strategy could cause the Fund to underperform
relative to the Reference Indices, which could further limit Fund gains below the Index Caps, notwithstanding any performance of the Reference Indices in excess of the Index Caps.
Understanding the Buffer. The Buffer that the Fund seeks to provide is only operative
against the first 10% of losses in the Fund’s S&P 500 Index exposure for the Outcome Period. If an investor is considering purchasing Shares during the Outcome Period, and the S&P 500 Index has decreased
in value by an amount equal to or greater than 10%, an investor purchasing Shares at that time will be able to participate in any gains thereafter (up to the Index Caps), but will not benefit from the Buffer that the Fund seeks to offer for the
remainder of the Outcome Period if the losses continue to be equal to or greater than 10% during that period. Conversely, if an investor is considering purchasing Shares during the Outcome Period, and the Fund’s NAV has increased in value, then
an investor may experience losses before implementation of the Buffer that the Fund seeks to provide. While the Fund seeks to produce returns that correlate to those of the S&P 500 Index for the Outcome Period that are buffered up to
10% (prior to taking into account any fees or expenses or the performance of the Collateral Portfolio or the Put Spread Strategy) for investors who hold Shares for the entire Outcome Period, there is no guarantee it will successfully do so. In addition, the Buffer is not operative against losses in the Collateral Portfolio or the Put Spread Strategy. If the Collateral Portfolio and/or the Put Spread Strategy experiences losses, it could have the
effect of reducing the impact of, or completely eliminating, the Buffer on the Fund’s S&P 500 Index exposure. In certain market conditions, the performance of the Collateral Portfolio and/or the Put Spread Strategy could cause the Fund to
significantly underperform the S&P 500 Index. Investors who purchase Shares at the beginning of the Outcome Period may lose their entire
462
investment. Investors who purchase Shares after the Outcome Period has begun may also lose their entire investment. An
investment in the Fund is only appropriate for investors willing to bear those losses.
Fund Rebalance. Milliman implements the Fund’s strategy on an annual basis, seeking to
produce the Outcomes for an Outcome Period. On the last business day of any stated Outcome Period, all of the Fund’s existing FLEX Options, which includes those used to establish the Buffer, the Index Caps and the Put Spread Strategy, will expire
and Milliman will transact in a new set of FLEX Options on the same business day, which will commence a new Outcome Period beginning the following business day. At that same time, Milliman will also evaluate whether to make any adjustments to the
Collateral Portfolio. Accordingly, Shares can be held indefinitely if investors determine to participate in additional Outcome Periods.
Approximately one week prior to the end of each Outcome Period, the Fund will file a prospectus supplement, which will notify existing investors of (i)
the date on which the existing Outcome Period will end; (ii) the date on which the new Outcome Period will commence; and (iii) the anticipated ranges of the Index Caps that will be used for the new Outcome Period. Immediately preceding the
commencement date of the new Outcome Period, the Fund will file a prospectus supplement disclosing the Fund’s final Index Caps (both gross and net of Fund fees and expenses) for the new Outcome Period. This information will also be available online
at www.[___________].com, and on your insurance company’s website. Please contact your insurance company or other financial intermediary for more information.
Fund Classification. The Fund is classified as “non-diversified” under the Investment
Company Act of 1940, as amended (the “1940 Act”).
Principal Risks
You could lose money by investing in the Fund. An investment in the Fund is not a deposit of a bank and is not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other governmental agency. There can be no assurance that the Fund’s investment objectives will be achieved.
Downside Loss Buffer Risk. There can be no guarantee that the Fund will be successful in its strategy to
buffer against S&P 500 Index losses if the S&P 500 Index decreases in value over the Outcome Period. The Fund’s strategy is designed to produce returns that correlate to those of the S&P 500 Index, subject to the S&P 500 Index
Cap, while limiting downside S&P 500 Index losses and providing additional upside exposure to the Secondary Index, subject to the Secondary Index Cap, if Shares are bought on the day on which Milliman transacts in the FLEX Options on behalf
of the Fund and held until those FLEX Options expire at the end of each Outcome Period. The success of the Buffer also depends upon the performance of the Collateral Portfolio and the Put Spread Strategy. If
the Collateral Portfolio and/or the Put Spread Strategy experiences losses, it could have the effect of reducing the impact of, or completely eliminating, the Buffer on the Fund’s S&P 500 Index exposure. In certain market conditions, the
performance of the Collateral Portfolio and/or the Put Spread Strategy could cause the Fund to significantly underperform the S&P 500 Index. Despite the intended Buffer, an investor could lose their entire investment. In the
event an investor purchases Shares after the date on which Milliman transacted in the FLEX Options on behalf of the Fund, or redeems Shares prior to the expiration of those FLEX Options, the Buffer that the Fund seeks to provide may not be
available or fully applicable.
Risk of Capped Upside Returns. The Fund’s strategy is designed to produce returns that correlate to those of the
Reference Indices up to the Index Caps if Shares are bought on the day on which Milliman transacts in the FLEX Options on behalf of the Fund and held until those FLEX Options expire at the end of the Outcome Period, subject to the Index Caps. In
the event that one or both of the Reference Indices experience gains during the Outcome Period, the Fund will only participate in those gains up to the applicable Index Cap. In the event that one or both Reference Indices experience gains in excess
of the applicable Index Cap over the duration of the Outcome Period, the Fund will not participate in those excess gains. Because the Fund’s strategy provides capped exposure to two Reference Indices, the Index Caps may be lower than if the Fund
provided capped exposure to only a single Reference Index. In the event an investor purchases Shares after the date on which the FLEX Options were entered into and the Fund has risen in value to a level near to an Index Cap, there may be little or
no ability for that investor to experience an investment gain on their Shares relating to that Reference Index. In certain market conditions, the performance of the Collateral Portfolio and the Put Spread
Strategy could cause the Fund to
463
underperform relative to the Reference Indices, which could further limit Fund gains below the Index Caps, notwithstanding any
performance of the Reference Indices in excess of the Index Caps. An investor should consider the amount of the Index Caps, and the Fund’s position relative to each Index Cap, before investing in the Fund.
Index Cap Change Risk. Because the Index Caps for each Outcome Period are calculated based upon (i) Milliman’s
evaluation of prevailing market conditions on the first day of the Outcome Period and (ii) the total number of long call FLEX Options on the Reference Indices that Milliman is able to purchase at that time, the Index Caps may rise or fall from one
Outcome Period to the next. Any change in the Index Caps could be significant and they are unlikely to remain the same for consecutive Outcome Periods.
FLEX Options Risk. The Fund will transact in FLEX Options issued and guaranteed for settlement by the OCC. The
Fund bears the risk that the OCC will be unable or unwilling to perform its obligations under the FLEX Options contracts, which could result in significant losses to the Fund. In less liquid markets, terminating a FLEX Option may require the
payment of a premium or acceptance of a discounted price, and may take longer to complete. In addition, a less liquid trading market may adversely impact the value of the Fund’s FLEX Options and therefore the NAV of the Fund. In addition, the value
of the Fund’s FLEX Options positions is not anticipated to increase or decrease at the same rate as the reference asset; and while it is anticipated that they will generally move in the same direction, it is possible that they may move in different
directions. Certain FLEX Options positions may also expire worthless. The use of FLEX Options involves leverage, which can cause the Fund’s portfolio to be more volatile than if the portfolio had not been leveraged. Leverage can significantly
magnify the effect of price movements of the reference asset, disproportionately increasing the Fund’s losses and reducing the Fund’s opportunities for gains when the reference asset changes in unexpected ways. In some instances, such leverage
could result in losses that exceed the original amount invested.
Investment Objective and Outcomes Risk. There is no guarantee that the Fund will be successful in its attempt
to achieve its investment objective and/or the Outcomes, and an investor could lose some or all of their investment in the Fund. Certain circumstances under which the Fund might not achieve its objective and/or the Outcomes include, but are not
limited to (i) if the Fund disposes of FLEX Options, (ii) if the Fund is unable to maintain the proportional relationship based on the number of FLEX Options in the Fund’s portfolio, (iii) significant accrual of Fund expenses in connection with
effecting the Fund’s principal investment strategy, (iv) losses incurred by the Fund’s holdings in the Collateral Portfolio and/or losses resulting from the Put Spread Strategy, or (iv) adverse tax law changes affecting the treatment of FLEX
Options.
Tax Risk. The Fund intends to elect, and to qualify each year, to be treated as a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”). As a RIC, the Fund will not be subject to U.S. federal income tax on the portion
of its net investment income and net capital gain that it distributes to shareholders, provided that it satisfies certain requirements of the Code. To maintain its status as a RIC, the Fund must meet certain income, diversification and
distributions tests. For purposes of the diversification test, the identification of the issuer (or, in some cases, issuers) of a particular Fund investment can depend on the terms and conditions of that investment. In particular, there is no
published IRS guidance or case law on how to determine the “issuer” of certain derivatives that the Fund will enter into and the Fund has not received a private letter ruling on this point. Therefore, there is a risk that the Fund will not meet the
Code’s diversification requirements and will not qualify, or will be disqualified, as a RIC. If the Fund does not qualify as a RIC for any taxable year and certain relief provisions are not available, the Fund’s taxable income will be subject to
tax at the Fund level and to a further tax at the shareholder level when such income is distributed.
The Fund also intends to comply with the diversification requirements of Section 817(h) of the Code, and the regulations thereunder, relating to the
tax-deferred status of variable accounts that are based on insurance company separate accounts (referred to as “segregated asset accounts” for federal income tax purposes). These diversification requirements apply in addition to the RIC
diversification requirements discussed above. There also is no published guidance or case law on how to determine the “issuer” of the derivatives referred to above for purposes of the diversification requirements of Section 817(h) of the Code and
the Fund has not received a private letter ruling on this point. If these requirements are not met, or under other circumstances, such as if the Fund does not qualify as a RIC for any taxable year, it is possible that the contract owners (rather
than the insurance company) will be treated for federal income tax purposes as the taxable owners of the assets held by the segregated asset accounts.
464
Clearing Member Default Risk. The Fund will hold FLEX Options through accounts at members of clearing houses (“clearing members”) rather than a bank or a broker. Assets deposited by the Fund with any clearing member as margin for its FLEX Options positions may, in certain circumstances, be used to satisfy losses of other
clients of the Fund’s clearing member where such assets may be held in commingled omnibus accounts. In addition, although clearing members guarantee performance of their clients’ obligations to the clearing house, there is a risk that the assets of
the Fund might not be fully protected in the event of the clearing member’s bankruptcy, as the Fund would be limited to recovering only a pro rata share of all available funds segregated on behalf of the
clearing member’s customers for the relevant account class.
Debt Securities Risk. The prices of debt securities will be affected by changes in interest rates, the
creditworthiness of the issuer and other factors. These risks could affect the value of investments in which the Fund invests, possibly causing the Fund’s NAV to be reduced and fluctuate more than other types of investments. During periods of
falling interest rates, an issuer of a callable bond may repay the security before its stated maturity, and the Fund may have to reinvest the proceeds in securities with lower yields, which would result in a decline in the Fund’s income, or in
securities with greater risks or with other less favorable features. Changing interest rates, including rates that fall below zero, may have unpredictable effects on markets, result in heightened market volatility and detract from the Fund’s
performance to the extent the Fund is exposed to such interest rates. An increase in interest rates will generally cause the value of fixed-income securities held by the Fund to decline, may lead to heightened volatility in the fixed-income
markets and may adversely affect the liquidity of certain fixed-income investments, including those held by the Fund. Risks associated with rising interest rates are heightened given that interest rates in the U.S. are near historic lows.
Adjustable-rate instruments also react to interest rate changes in a similar manner, although generally to a lesser degree (depending, however, on the characteristics of the reset terms, including the index chosen, frequency of reset and reset
caps or floors, among other factors). Interest rate sensitivity is generally more pronounced and less predictable in instruments with uncertain payment or prepayment schedules and also for those with longer maturities.
Foreign Securities and Credit Exposure Risk. U.S. dollar-denominated securities carrying foreign credit exposure
may be affected by unfavorable political, economic or governmental developments that could affect payments of principal and interest. Furthermore, the value of the Fund’s foreign investments (whether direct or indirect) may be adversely affected by
political and social instability in their home countries, by changes in economic or taxation policies in those countries, or by the difficulty in enforcing obligations in those countries. Foreign companies generally may be subject to less stringent
regulations than U.S. companies, including financial reporting requirements and auditing and accounting controls. As a result, there generally is less publicly available information about foreign companies than about U.S. companies. Trading in many
foreign securities may be less liquid and more volatile than U.S. securities due to the size of the market or other factors.
U.S. Government Securities Risk. U.S. Government securities are subject to interest rate risk but generally do
not involve the credit risks associated with investments in other types of debt securities. As a result, the yields available from U.S. Government securities are generally lower than the yields available from other debt securities. U.S. Government
securities are guaranteed only as to the timely payment of interest and the payment of principal when held to maturity. While securities issued or guaranteed by U.S. federal government agencies are backed by the full faith and credit of the U.S.
Department of the Treasury, securities issued by government sponsored entities are solely the obligation of the issuer and generally do not carry any guarantee from the U.S. Government.
ABS Risk. ABS are subject to the general debt securities risks described above. In addition, ABS may be less
liquid than other bonds, and may be more sensitive than other bonds to the market’s perception of issuers and creditworthiness of payees, which may result in the Fund experiencing difficulty selling or valuing these securities. ABS markets have
experienced extraordinary weakness and volatility at various times in recent years, and may decline quickly in the event of a substantial economic or market downturn. Accordingly, these securities may be subject to greater risk of default during
periods of economic downturn than other securities, which could result in possible losses to the Fund.
Issuer Risk. The performance of the Fund depends on the performance of individual securities to which the Fund
has exposure. The Fund may be adversely affected if an issuer of underlying securities held by the Fund is unable or
465
unwilling to repay principal or interest when due. Changes in the financial condition or credit rating of an issuer of those securities may cause the
value of the securities to decline.
Management Risk. The Fund is subject to management risk because it is an actively managed portfolio. Milliman
will apply investment techniques and risk analyses in making investment decisions for the Fund, but there can be no guarantee that the Fund will meet its investment objective and/or the Outcomes. In addition, Milliman does not use defensive
strategies or attempt to reduce the Fund’s exposures to poor performing positions during an Outcome Period. This differs from funds that are managed to seek to outperform a benchmark index. Therefore, in the event of a general market decline, the
Fund’s value may fall more than the value of another fund that does attempt to hedge against such market declines.
Market Risk. The Fund could lose money over short periods due to short-term market movements and over longer
periods during more prolonged market downturns. Assets may decline in value due to factors affecting financial markets generally or particular asset classes or industries represented in the markets. The value of a FLEX Option or other asset may
also decline due to general market conditions, economic trends or events that are not specifically related to the issuer of the security or other asset, or due to factors that affect a particular issuer, country, region, market, industry, sector or
asset class.
Non-Diversification Risk. The Fund may invest a relatively high percentage of its assets in a limited number of
issuers. As a result, the Fund may be more susceptible to a single adverse economic or regulatory occurrence affecting one or more of these issuers, experience increased volatility and be highly invested in certain issuers.
Large Shareholder Risk. At times, the Fund may experience adverse effects when certain large shareholders,
including insurance company separate accounts, redeem large amounts of shares of the Fund. Large redemptions may cause the Fund to sell portfolio holdings at times when it would not otherwise do so and may increase transaction costs and/or result
in an increase to the Fund’s expense ratio. A large redemption could be detrimental to the Fund and its remaining shareholders.
Risks of Investing in ETFs. In addition to the risks associated with the underlying assets held by the ETFs in
which the Fund invests, investments in ETFs are also subject to the following additional risks: (i) only authorized participants may engage in transactions directly with ETFs but none are obligated to do so, which could result in an ETF’s shares
trading at a premium or discount to its NAV or possibly face trading halts or delisting; (ii) certain ETFs seek to track the performance of an underlying index and will not attempt to take defensive positions under any market conditions, including
declining markets, which could result in losses; and (iii) because ETF shares trade on the secondary market, there is not guarantee that an active market will be developed or maintained, which could result in the ETF’s shares trading at a premium
or discount to its NAV. Investments in ETFs may involve duplication of management fees and certain other expenses, as the Fund indirectly bears its proportionate share of any expenses paid by the ETFs in which it invests.
Risks of Investing in Money Market Funds. Money market funds seek to preserve the value of shareholder
investments at $1.00 per share, but shareholders, such as the Fund, may still lose money by investing in such funds. In addition, a money market fund may impose a fee upon the sale of its shares or may temporarily suspend the ability to sell shares
if the fund’s liquidity falls below required minimums because of market conditions or other factors. The credit quality of a money market fund’s holdings can change rapidly in certain markets, and the default of a single holding could have an
adverse impact on the fund’s share price. A money market fund’s share price can also be negatively affected during periods of high redemption pressures, illiquid markets, and/or significant market volatility.
Performance
As of the date of this Prospectus, the Fund has not commenced operations and therefore does not have a performance history. Once available, the Fund’s
performance information will be accessible online at www.[________].com and will provide some indication of the risks of investing in the Fund.
Management
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Investment Adviser
Milliman Financial Risk Management LLC (“Milliman”) serves as investment adviser to the Fund.
Portfolio Managers
The following persons serve as portfolio managers of the Fund.
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Robert T. Cummings, Principal & Head of Portfolio Management at Milliman.
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Maria Schiopu, Principal & Head of Portfolio Management at Milliman.
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●
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Jeff Greco, Principal & Head of Strategy Research at Milliman.
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●
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Jordan Rosenfeld, Portfolio Manager at Milliman.
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Each portfolio manager is jointly and primarily responsible for the day-to-day management of the Fund’s portfolio and has served in such capacity
since the Fund’s inception in 2021.
Purchase and Sale of Shares
Shares are available as underlying investment options for variable insurance contracts and variable life insurance policies (each, a “variable contract,” and, collectively, the “variable contracts”) issued by insurance companies. These insurance companies are the record owners of the separate accounts
holding the Shares. You do not buy, sell or exchange Shares directly; rather, you choose investment options through your variable contracts. The insurance companies then cause the separate accounts to purchase and redeem Shares according to
the investment options you choose.
Tax Information
The dividends and distributions paid by the Fund to the insurance company separate accounts will consist of ordinary income, capital gains, or some
combination of both. Because Shares must be purchased through separate accounts used to fund variable contracts, such dividends and distributions will be exempt from current taxation by owners of variable contracts (each, a “contract owner,” and, collectively “contract owners”) if left to accumulate within a separate account. Consult the variable contract prospectus for additional tax
information.
Payments to Insurance Companies and Other Financial Intermediaries
If you allocate contract value to the Fund through an insurance company or other financial intermediary, the Fund, Milliman, the Fund’s distributor or
their related companies may pay the insurance company and/or its affiliates or other intermediary for the sale of Shares and related services. These payments may create a conflict of interest by influencing the insurance company or other
intermediary and your salesperson to recommend an indirect investment in the Fund over another investment. The prospectus or other disclosure documents for the variable contracts may contain additional information about these payments, if any.
You may also ask your salesperson or financial intermediary, or visit your financial intermediary’s website, for more information.
467
Fund Summary: Milliman S&P 500 & MSCI EAFE 1-Year Buffer with Stacker Cap
Fund – Oct
Investment Objective
The Fund seeks to provide exposure to the S&P 500 Index, while providing a buffer against the first 10% of losses associated with S&P 500
Index performance and participating in S&P 500 Index gains up to a declared cap, prior to taking into account any fees or expenses or the performance of any fixed income exposure included in the Fund’s portfolio, over the period from October
1, 2021 through September 30, 2022. The Fund also seeks to provide upside exposure to the MSCI EAFE Index up to a declared cap, prior to taking into account any fees or expenses or the performance of any fixed income exposure included in the
Fund’s portfolio, over the same period.
Fees and Expenses of the Fund
This table describes the fees and expenses that you may pay if you buy, hold and sell shares of the Fund (“Shares”).
This table and the example below do not include any fees or sales charges imposed by your variable product. If they were included, the expenses listed below would be higher.
Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment)
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Class 3
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Management Fees
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0.49%
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Distribution and Service (12b-1) Fees
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0.25%
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Other Expenses(1)
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0.50%
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Acquired Fund Fees and Expenses(1)
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[_.__]%
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Total Annual Fund Operating Expenses
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1.24%
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Fee Waiver and/or Expense Reimbursement(2)(3)
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(0.25)%
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Total Annual Fund Operating Expenses After Fee Waiver and/or Expense Reimbursement
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0.99%
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(1)
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“Other Expenses” and “Acquired Fund Fees and Expenses” are based on estimated amounts for the current fiscal year.
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(2)
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The Fund’s investment adviser, Milliman Financial Risk Management LLC (“Milliman”), has contractually
agreed to waive advisory fees and/or reimburse expenses to the extent necessary to limit the Fund’s total annual Fund operating expenses (excluding taxes, interest, brokerage fees and commissions, Rule 12b-1 fees, acquired fund fees and
expenses, short-sale dividend expenses, administrative services fees, other expenses that are capitalized in accordance with generally accepted accounting principles, and extraordinary or non-routine expenses not incurred in the
ordinary course of the Fund’s business) to 0.74% of the Fund's average daily net assets (the “Expense Limitation Agreement”) until at least November 1, 2022. During its term, the Expense
Limitation Agreement cannot be terminated or amended to increase the applicable limit without approval of the Board of Trustees of the Trust (the “Board”). Milliman may recoup from the Fund any
advisory fees waived or expenses reimbursed pursuant to the Expense Limitation Agreement for a period of three years from the date on which such waiver or reimbursement occurred; provided, however, that such recoupment shall not be made
if it would cause the Fund’s total annual Fund operating expenses to exceed the lesser of (a) the expense limitation in effect at the time of the reimbursement, or (b) the expense limitation in effect at the time of recoupment, if any.
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(3)
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In addition to the Expense Limitation Agreement, Milliman has contractually agreed to waive its advisory fees in an amount equal to the Fund’s
acquired fund fees and expenses until at least November 1, 2022 (the “Fee Waiver”). This contract cannot be terminated or modified without the consent of the Board.
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Example
This example is intended to help you compare the cost of investing in the Fund with the cost of investing in other funds. This example assumes that you
invest $10,000 in the Fund for the time periods indicated and then sell all of your Shares at the end of those periods. This example also assumes that your investment has a 5% return each year and that the Fund’s operating expenses remain at
current levels and that the Expense Limitation Agreement and Fee Waiver remain in place for their contractual periods. Although your actual costs may be higher or lower, your costs, based on these assumptions, would be:
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1 Year
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3 Years
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Class 3
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$104
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$384
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This example does not include any fees or sales charges imposed by your variable product. If they were included, the expenses listed above would be
higher.
Portfolio Turnover
The Fund pays transaction costs, such as commissions, when it purchases and sells securities (or “turns over” its portfolio). A higher portfolio turnover
will cause the Fund to incur additional transaction costs. These costs, which are not reflected in Total Annual Fund Operating Expenses or in the example, may affect the Fund’s performance. Because the Fund has not yet commenced investment
operations, no portfolio turnover information is available at this time.
Principal Investment Strategies
The Fund seeks to achieve its investment objective by transacting in FLexible EXchange® Options (“FLEX Options”)
and by separately maintaining a collateral portfolio (the “Collateral Portfolio”), which is designed primarily to serve as margin or collateral for the Fund’s FLEX Options positions and secondarily to
enhance the Fund’s upside S&P 500 Index and MSCI EAFE Index FLEX Options’ exposure (i.e., by utilizing anticipated income to measure the ability to purchase additional FLEX Options). FLEX Options are
exchange-traded options contracts with uniquely customizable terms. In general, an options contract is an agreement between a buyer and seller that gives the purchaser of the option the right to buy or sell a particular asset at a specified
future date at an agreed upon price, commonly known as the “strike price.” The reference assets for the Fund’s FLEX Options positions will include the S&P 500 Index, the MSCI EAFE Index (the “Secondary Index,”
and together with the S&P 500 Index, the “Reference Indices,” and, each, a “Reference Index”), and certain exchange-traded funds (“ETFs”), as described further below. The S&P 500 Index is a large-capitalization, market-weighted, U.S. equities index that tracks the price (excluding dividends) of 500 leading companies
in leading industries of the U.S. economy. The Secondary Index is [a float-adjusted, market capitalization-weighted index that is designed to measure the performance of large and mid-capitalization securities across 21 developed markets,
including countries in Europe, Australasia and the Far East, excluding the United States and Canada].
The Collateral Portfolio may be invested in short-term fixed-income securities, including corporate bonds and other corporate debt securities,
asset-backed securities (“ABS”), securities issued by the U.S. Government or its agencies and instrumentalities, securities issued by non-U.S. governments or their agencies and instrumentalities, money
market securities and funds, other interest-bearing instruments, cash, ETFs that primarily invest in any of the foregoing instruments, options on ETFs and options box spreads. An options box spread is the combination of different options trades
that have offsetting spreads (e.g., purchases and sales on the same underlying instrument, such as an index or an ETF, but with different strike prices and/or expiration dates) for the purpose of
generating income. The Fund may invest in short-term fixed income securities or other instruments, including through ETFs, of any maturity and credit quality. The Fund will generally invest up to 35% of its net assets in one or more ETFs that
provide exposure to investment grade corporate bonds.
Due to the unique mechanics of the Fund’s strategy, the return an investor can expect to receive from an investment in the Fund has characteristics that
are distinct from the returns of many other investment vehicles. It is important that an investor understand these characteristics before making an investment in the Fund.
In seeking to achieve its investment objective, the Fund seeks to produce pre-determined outcomes (the “Outcomes”)
that are based upon the performance of the Reference Indices over a one-year period (the “Outcome Period”). The initial Outcome Period for the Fund is October 1, 2021 through September 30, 2022. Following
the initial Outcome Period, each subsequent Outcome Period will be a one-year period commencing upon the expiration of the prior Outcome Period. The Fund seeks to achieve the Outcomes by purchasing and writing (selling) FLEX Options to create
layers within the Fund’s portfolio. One layer is designed to produce returns that correlate to those of the S&P 500 Index for the Outcome Period if the S&P 500 Index experiences gains during that time, subject to an upside return cap (the “S&P 500 Index Cap”), as described below. A second layer is designed to produce returns that correlate to any upside market performance of the Secondary Index over the
Outcome Period, subject to an upside return cap (the “Secondary Index Cap,” and, together with the S&P 500 Index Cap, the “Index Caps,” and, each, an “Index Cap”), as described below. A third layer is designed to produce returns that correlate to those of the S&P 500 Index for the Outcome Period that are buffered up to 10% if the S&P 500 Index
experiences losses during
469
that time (the “Buffer”). There is no guarantee that the Fund will be
successful in its attempt to produce returns that correlate to those of the S&P 500 Index or the Secondary Index up to the applicable Index Caps or produce buffered returns against the Fund’s S&P 500 Index exposure.
Milliman Financial Risk Management, LLC (“Milliman”), the investment adviser of the Fund, seeks to establish the
Buffer by writing one put FLEX Option on the S&P 500 Index with a strike price that is 10% lower than the value of the S&P 500 Index at the beginning of the Outcome Period.
Milliman seeks to establish the Index Caps by purchasing long call FLEX Options on each Reference Index with a strike price approximately equal to the
value of the respective Reference Index at the beginning of the Outcome Period. Milliman purchases these FLEX Options with a portion of the Fund’s net assets plus (i) the cash received from writing the put FLEX Option designed to create the
Buffer, (ii) additional cash received by utilizing FLEX Options to create a put spread (the “Put Spread Strategy”) on fixed income securities and/or one or more ETFs that provide exposure to fixed income
securities, and (iii) yield received from the Collateral Portfolio. Milliman seeks to achieve the Put Spread Strategy for the Fund by writing a put FLEX Option on an underlying asset at a strike price at or lower than the underlying asset’s
market price or current value at the beginning of the Outcome Period, and buying a put FLEX Option on the same underlying asset at a lower strike price than the written put FLEX Option.
The Index Caps represent the maximum rate of return in each Reference Index that an investor can achieve from an investment in the Fund over the Outcome
Period. Milliman calculates the Index Caps based upon (i) its evaluation of prevailing market conditions on the first day of the Outcome Period and (ii) the total number of long call FLEX Options on each Reference Index that it is able to purchase
at that time. As of the date of this Prospectus, and assuming current market conditions persist, Milliman expects that the Index Caps will be between the below ranges (both gross and net of Fund fees and expenses). Any fees or expenses imposed by
your variable product, and any other expenses incurred by the Fund, will have the effect of further reducing each Index Cap. In addition, in certain market conditions, the performance of the Collateral Portfolio
and the Put Spread Strategy could cause the Fund to underperform relative to the Reference Indices, which could further limit Fund gains below the Index Caps, notwithstanding any performance of the Reference Indices in excess of the Index Caps.
|
Estimated Index Cap Ranges
(As of [___])
|
||
|
Prior to Taking into Account Fund Fees and Expenses
|
After Taking into Account Fund Fees and Expenses
|
|
|
S&P 500 Index Cap
|
||
|
Class 3
|
[__]% and [__]%
|
[__]% and [__]%
|
|
Secondary Index Cap
|
||
|
Class 3
|
[__]% and [__]%
|
[__]% and [__]%
|
The Buffer is only operative against the first 10% of losses in the Fund’s S&P 500 Index exposure for the Outcome Period. If the S&P 500 Index
decreases in value by more than 10% during the Outcome Period, the Fund (and therefore investors in Shares) will experience all subsequent losses in the Fund’s S&P 500 Index exposure on a one-to-one basis for the Outcome Period. The Fund
seeks to produce buffered returns against its S&P 500 Index exposure prior to taking into account any fees or expenses or the performance of the Collateral Portfolio or the Put Spread Strategy. The Buffer
is not operative against losses in the Collateral Portfolio or the Put Spread Strategy. If the Collateral Portfolio and/or the Put Spread Strategy experiences losses, it could have the effect of reducing the impact of, or completely
eliminating, the Buffer on the Fund’s S&P 500 Index exposure. In certain market conditions, the performance of the Collateral Portfolio and/or the Put Spread Strategy could cause the Fund to significantly underperform the S&P 500
Index. The following table reflects the Buffer both gross and net of Fund fees and expenses:
470
|
Share Class
|
Buffer
(As of [___])
|
|
|
Prior to Taking into Account Fund Fees and Expenses
|
After Taking into Account Fund Fees and Expenses
|
|
|
Class 3
|
10%
|
[__]%
|
Because the Fund also seeks to provide only upside exposure to the Secondary Index during the Outcome Period, the Fund’s NAV will not be impacted by any
losses experienced by the Secondary Index when measured from the beginning to the end of the Outcome Period. If the Secondary Index increases in value during the Outcome Period and later decreases in value during the Outcome Period, the Fund’s NAV
will reflect any such decreases until the Secondary Index reaches its initial value (measured as of the first day of the Outcome Period). If the Secondary Index decreases in value over the course of an entire Outcome Period, the Fund’s NAV will not
reflect such losses; therefore, the Fund’s overall performance will be approximately that of the S&P 500 Index for the Outcome Period, subject to the Buffer and the S&P 500 Index Cap.
The definitive Index Caps and Buffer will be set forth on the Fund’s website. The Fund’s website will also provide information relating to the
Outcomes on a daily basis, including the Fund’s position relative to the Index Caps and the Buffer. You may also contact your insurance company or other financial intermediary for more information.
Additionally, the Fund’s net asset value (“NAV”) will not increase or decrease at the same rate as the Reference
Indices because the Fund’s strategy relies upon the performance of the Collateral Portfolio and the Put Spread Strategy, in addition to the value of the Fund’s FLEX Options positions on the Reference Indices. While Milliman anticipates that the
Fund’s NAV will generally move in the same direction as the S&P 500 Index, and correspond to any upside returns of the Secondary Index (meaning that the Fund’s NAV will generally increase if the Reference Indices experience gains or decrease if
the Reference Indices experience losses), the Fund’s NAV may not decrease at the same rate as the Reference Indices (especially when factoring in the performance of the Collateral Portfolio and the Put Spread Strategy) and will not increase at the
same rate as the Reference Indices (especially when factoring in the Index Caps and the performance of the Collateral Portfolio and the Put Spread Strategy). Similarly, the amount of time remaining until the end of the Outcome Period also affects
the impact of the Buffer on the Fund’s NAV, because the Buffer may not be in full effect prior to the end of the Outcome Period.
The FLEX Options utilized in the Fund’s portfolio are each set to expire on the last day of the Outcome Period. The customizable nature of FLEX Options
will allow Milliman to select the strike price at which each FLEX Option will be exercised at the expiration of the FLEX Option term. At the commencement of the Outcome Period, Milliman will specifically select the strike price for each FLEX Option
in a manner designed to achieve the Outcomes when the FLEX Options are exercised on the final day of the Outcome Period, depending on the anticipated performance of the Reference Indices, the Collateral Portfolio and the Put Spread Strategy over
the duration of that Outcome Period.
The hypothetical graphical illustrations provided below are designed to illustrate the Outcomes based upon the
hypothetical performance of the Reference Indices for an investor who holds Shares for the entirety of the Outcome Period. The hypothetical graphical illustrations do not include any fees or expenses
imposed by your variable product or expenses incurred by the Fund, and do not reflect the performance of the Collateral Portfolio or the Put Spread Strategy. Additional hypothetical graphical representations of the Outcomes are provided in
“Additional Information About the Funds and the Risks of Investing.” There is no guarantee that the Fund will be successful in its attempt to achieve the Outcomes for the Outcome Period.
471
The following table contains hypothetical examples designed to illustrate the Outcomes the Fund seeks to
achieve over the Outcome Period, based upon the performance of the Reference Indices from (100)% to 100% after taking into account the Index Caps and the Buffer, but prior to taking into account any fees or
expenses or the performance of the Collateral Portfolio or the Put Spread Strategy. The table is provided for illustrative purposes only and does not provide every possible performance scenario for Shares over
the course of the Outcome Period. There is no guarantee that the Fund will be successful in its attempt to achieve the Outcomes for an Outcome Period. The table is not intended to predict or project the performance of the FLEX Options or the Fund. Investors should not take this information as an
assurance of the expected performance of the Reference Indices or the Fund. Actual Fund performance will vary with fluctuations in the performance of the Collateral Portfolio and the Put Spread Strategy, in addition to the value of the
Fund’s FLEX Options positions on the Reference Indices, during the Outcome Period, among other factors. The performance of the Collateral Portfolio and the Put Spread Strategy
could significantly impact the performance of the Fund, which could prevent the Fund from achieving the Outcomes that it seeks to produce. The table does not reflect any fees or expenses imposed by your variable product or expenses
incurred by the Fund. If it did, the returns shown for the Fund would be lower. Please refer to the Fund’s website, which provides updated information relating to this table on a daily basis throughout the Outcome Period. Please contact your
insurance company or other financial intermediary for more information.
472
|
Index/Fund
|
Hypothetical Performance1
|
|||||||||||
|
S&P 500 Index Price Performance
|
(100)%
|
(50)%
|
(20)%
|
(10)%
|
(5)%
|
0%
|
5%
|
10%
|
15%
|
20%
|
50%
|
100%
|
|
Secondary Index Price Performance
|
(100)%
|
(50)%
|
(20)%
|
(10)%
|
(5)%
|
0%
|
5%
|
10%
|
15%
|
20%
|
50%
|
100%
|
|
Fund Performance at NAV
|
(90)%
|
(40)%
|
(10)%
|
0%2
|
0%2
|
0%
|
10%3
|
14%3
|
14%3
|
14%3
|
14%3
|
14%3
|
| 1 |
Does not take into account any fees or expenses or the performance of the Collateral Portfolio or the Put Spread Strategy.
|
| 2 |
Reflects the impact of the Buffer.
|
| 3 |
Reflects the impact of assumed Index Caps of 7% per index, 14% total.
|
Understanding Outcomes. The Outcomes the Fund seeks to achieve are measured based upon the
Fund’s NAV on the first day of the Outcome Period. The Outcome Period begins on the day Milliman transacts in the FLEX Options on behalf of the Fund, and ends on the day those FLEX Options expire. An investor who
purchases Shares after the commencement of the Outcome Period will likely have purchased Shares at a different NAV than the NAV on the first day of the Outcome Period (the NAV upon which the Outcomes are based) and may experience investment
outcomes very different from those the Fund seeks to achieve, especially when factoring in any fees or expenses or the performance of the Collateral Portfolio and the Put Spread Strategy. An investor who redeems Shares prior to the end of the
Outcome Period may also experience investment outcomes very different from those the Fund seeks to achieve. The Outcomes are designed with the expectation that an investor will hold Shares on the day that Milliman transacts in the FLEX Options on
behalf of the Fund, and on the day those FLEX Options expire. There is no guarantee that the Fund will be successful in its attempt to achieve the Outcomes.
Understanding the Index Caps. Unlike other investment products, the potential returns an
investor can receive from an investment in the Fund are subject to the Index Caps. This means that if one or both of the Reference Indices experience gains for the Outcome Period, an investor in the Fund will only
experience those gains up to the applicable Index Cap. Milliman calculates the Index Caps for each Outcome Period based upon (i) its evaluation of prevailing market conditions on the first day of the Outcome Period and (ii) the total
number of long call FLEX Options on each Reference Index that it is able to purchase at that time. If an investor is considering purchasing Shares during the Outcome Period, and the Fund’s NAV has increased in
value to a level near one or both of the Index Caps, an investor purchasing Shares at that price will have limited to no gains available for the remainder of the Outcome Period, but will remain vulnerable to significant downside risks (with
respect to the S&P 500 Index FLEX Options’ exposure). In certain market conditions, the performance of the Collateral Portfolio and the Put Spread Strategy could cause the Fund to underperform
relative to the Reference Indices, which could further limit Fund gains below the Index Caps, notwithstanding any performance of the Reference Indices in excess of the Index Caps.
Understanding the Buffer. The Buffer that the Fund seeks to provide is only operative
against the first 10% of losses in the Fund’s S&P 500 Index exposure for the Outcome Period. If an investor is considering purchasing Shares during the Outcome Period, and the S&P 500 Index has decreased
in value by an amount equal to or greater than 10%, an investor purchasing Shares at that time will be able to participate in any gains thereafter (up to the Index Caps), but will not benefit from the Buffer that the Fund seeks to offer for the
remainder of the Outcome Period if the losses continue to be equal to or greater than 10% during that period. Conversely, if an investor is considering purchasing Shares during the Outcome Period, and the Fund’s NAV has increased in value, then
an investor may experience losses before implementation of the Buffer that the Fund seeks to provide. While the Fund seeks to produce returns that correlate to those of the S&P 500 Index for the Outcome Period that are buffered up to
10% (prior to taking into account any fees or expenses or the performance of the Collateral Portfolio or the Put Spread Strategy) for investors who hold Shares for the entire Outcome Period, there is no guarantee it will successfully do so. In addition, the Buffer is not operative against losses in the Collateral Portfolio or the Put Spread Strategy. If the Collateral Portfolio and/or the Put Spread Strategy experiences losses, it could have the
effect of reducing the impact of, or completely eliminating, the Buffer on the Fund’s S&P 500 Index exposure. In certain market conditions, the performance of the Collateral Portfolio and/or the Put Spread Strategy could cause the Fund to
significantly underperform the S&P 500 Index. Investors who purchase Shares at the beginning of the Outcome Period may lose their entire
473
investment. Investors who purchase Shares after the Outcome Period has begun may also lose their entire investment. An
investment in the Fund is only appropriate for investors willing to bear those losses.
Fund Rebalance. Milliman implements the Fund’s strategy on an annual basis, seeking to
produce the Outcomes for an Outcome Period. On the last business day of any stated Outcome Period, all of the Fund’s existing FLEX Options, which includes those used to establish the Buffer, the Index Caps and the Put Spread Strategy, will expire
and Milliman will transact in a new set of FLEX Options on the same business day, which will commence a new Outcome Period beginning the following business day. At that same time, Milliman will also evaluate whether to make any adjustments to the
Collateral Portfolio. Accordingly, Shares can be held indefinitely if investors determine to participate in additional Outcome Periods.
Approximately one week prior to the end of each Outcome Period, the Fund will file a prospectus supplement, which will notify existing investors of
(i) the date on which the existing Outcome Period will end; (ii) the date on which the new Outcome Period will commence; and (iii) the anticipated ranges of the Index Caps that will be used for the new Outcome Period. Immediately preceding the
commencement date of the new Outcome Period, the Fund will file a prospectus supplement disclosing the Fund’s final Index Caps (both gross and net of Fund fees and expenses) for the new Outcome Period. This information will also be available
online at www.[___________].com, and on your insurance company’s website. Please contact your insurance company or other financial intermediary for more information.
Fund Classification. The Fund is classified as “non-diversified” under the Investment
Company Act of 1940, as amended (the “1940 Act”).
Principal Risks
You could lose money by investing in the Fund. An investment in the Fund is not a deposit of a bank and is not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other governmental agency. There can be no assurance that the Fund’s investment objectives will be achieved.
Downside Loss Buffer Risk. There can be no guarantee that the Fund will be successful in its strategy to
buffer against S&P 500 Index losses if the S&P 500 Index decreases in value over the Outcome Period. The Fund’s strategy is designed to produce returns that correlate to those of the S&P 500 Index, subject to the S&P 500 Index
Cap, while limiting downside S&P 500 Index losses and providing additional upside exposure to the Secondary Index, subject to the Secondary Index Cap, if Shares are bought on the day on which Milliman transacts in the FLEX Options on behalf
of the Fund and held until those FLEX Options expire at the end of each Outcome Period. The success of the Buffer also depends upon the performance of the Collateral Portfolio and the Put Spread Strategy. If
the Collateral Portfolio and/or the Put Spread Strategy experiences losses, it could have the effect of reducing the impact of, or completely eliminating, the Buffer on the Fund’s S&P 500 Index exposure. In certain market conditions, the
performance of the Collateral Portfolio and/or the Put Spread Strategy could cause the Fund to significantly underperform the S&P 500 Index. Despite the intended Buffer, an investor could lose their entire investment. In the
event an investor purchases Shares after the date on which Milliman transacted in the FLEX Options on behalf of the Fund, or redeems Shares prior to the expiration of those FLEX Options, the Buffer that the Fund seeks to provide may not be
available or fully applicable.
Risk of Capped Upside Returns. The Fund’s strategy is designed to produce returns that correlate to those of the
Reference Indices up to the Index Caps if Shares are bought on the day on which Milliman transacts in the FLEX Options on behalf of the Fund and held until those FLEX Options expire at the end of the Outcome Period, subject to the Index Caps. In
the event that one or both of the Reference Indices experience gains during the Outcome Period, the Fund will only participate in those gains up to the applicable Index Cap. In the event that one or both Reference Indices experience gains in excess
of the applicable Index Cap over the duration of the Outcome Period, the Fund will not participate in those excess gains. Because the Fund’s strategy provides capped exposure to two Reference Indices, the Index Caps may be lower than if the Fund
provided capped exposure to only a single Reference Index. In the event an investor purchases Shares after the date on which the FLEX Options were entered into and the Fund has risen in value to a level near to an Index Cap, there may be little or
no ability for that investor to experience an investment gain on their Shares relating to that Reference Index. In certain market conditions, the performance of the Collateral Portfolio and the Put Spread
Strategy could cause the Fund to
474
underperform relative to the Reference Indices, which could further limit Fund gains below the Index Caps, notwithstanding any
performance of the Reference Indices in excess of the Index Caps. An investor should consider the amount of the Index Caps, and the Fund’s position relative to each Index Cap, before investing in the Fund.
Index Cap Change Risk. Because the Index Caps for each Outcome Period are calculated based upon (i) Milliman’s
evaluation of prevailing market conditions on the first day of the Outcome Period and (ii) the total number of long call FLEX Options on the Reference Indices that Milliman is able to purchase at that time, the Index Caps may rise or fall from one
Outcome Period to the next. Any change in the Index Caps could be significant and they are unlikely to remain the same for consecutive Outcome Periods.
FLEX Options Risk. The Fund will transact in FLEX Options issued and guaranteed for settlement by the OCC. The
Fund bears the risk that the OCC will be unable or unwilling to perform its obligations under the FLEX Options contracts, which could result in significant losses to the Fund. In less liquid markets, terminating a FLEX Option may require the
payment of a premium or acceptance of a discounted price, and may take longer to complete. In addition, a less liquid trading market may adversely impact the value of the Fund’s FLEX Options and therefore the NAV of the Fund. In addition, the value
of the Fund’s FLEX Options positions is not anticipated to increase or decrease at the same rate as the reference asset; and while it is anticipated that they will generally move in the same direction, it is possible that they may move in different
directions. Certain FLEX Options positions may also expire worthless. The use of FLEX Options involves leverage, which can cause the Fund’s portfolio to be more volatile than if the portfolio had not been leveraged. Leverage can significantly
magnify the effect of price movements of the reference asset, disproportionately increasing the Fund’s losses and reducing the Fund’s opportunities for gains when the reference asset changes in unexpected ways. In some instances, such leverage
could result in losses that exceed the original amount invested.
Investment Objective and Outcomes Risk. There is no guarantee that the Fund will be successful in its attempt
to achieve its investment objective and/or the Outcomes, and an investor could lose some or all of their investment in the Fund. Certain circumstances under which the Fund might not achieve its objective and/or the Outcomes include, but are not
limited to (i) if the Fund disposes of FLEX Options, (ii) if the Fund is unable to maintain the proportional relationship based on the number of FLEX Options in the Fund’s portfolio, (iii) significant accrual of Fund expenses in connection with
effecting the Fund’s principal investment strategy, (iv) losses incurred by the Fund’s holdings in the Collateral Portfolio and/or losses resulting from the Put Spread Strategy, or (iv) adverse tax law changes affecting the treatment of FLEX
Options.
Tax Risk. The Fund intends to elect, and to qualify each year, to be treated as a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”). As a RIC, the Fund will not be subject to U.S. federal income tax on the portion
of its net investment income and net capital gain that it distributes to shareholders, provided that it satisfies certain requirements of the Code. To maintain its status as a RIC, the Fund must meet certain income, diversification and
distributions tests. For purposes of the diversification test, the identification of the issuer (or, in some cases, issuers) of a particular Fund investment can depend on the terms and conditions of that investment. In particular, there is no
published IRS guidance or case law on how to determine the “issuer” of certain derivatives that the Fund will enter into and the Fund has not received a private letter ruling on this point. Therefore, there is a risk that the Fund will not meet the
Code’s diversification requirements and will not qualify, or will be disqualified, as a RIC. If the Fund does not qualify as a RIC for any taxable year and certain relief provisions are not available, the Fund’s taxable income will be subject to
tax at the Fund level and to a further tax at the shareholder level when such income is distributed.
The Fund also intends to comply with the diversification requirements of Section 817(h) of the Code, and the regulations thereunder, relating to the
tax-deferred status of variable accounts that are based on insurance company separate accounts (referred to as “segregated asset accounts” for federal income tax purposes). These diversification requirements apply in addition to the RIC
diversification requirements discussed above. There also is no published guidance or case law on how to determine the “issuer” of the derivatives referred to above for purposes of the diversification requirements of Section 817(h) of the Code and
the Fund has not received a private letter ruling on this point. If these requirements are not met, or under other circumstances, such as if the Fund does not qualify as a RIC for any taxable year, it is possible that the contract owners (rather
than the insurance company) will be treated for federal income tax purposes as the taxable owners of the assets held by the segregated asset accounts.
475
Clearing Member Default Risk. The Fund will hold FLEX Options through accounts at members of clearing houses (“clearing members”) rather than a bank or a broker. Assets deposited by the Fund with any clearing member as margin for its FLEX Options positions may, in certain circumstances, be used to satisfy losses of other
clients of the Fund’s clearing member where such assets may be held in commingled omnibus accounts. In addition, although clearing members guarantee performance of their clients’ obligations to the clearing house, there is a risk that the assets of
the Fund might not be fully protected in the event of the clearing member’s bankruptcy, as the Fund would be limited to recovering only a pro rata share of all available funds segregated on behalf of the
clearing member’s customers for the relevant account class.
Debt Securities Risk. The prices of debt securities will be affected by changes in interest rates, the
creditworthiness of the issuer and other factors. These risks could affect the value of investments in which the Fund invests, possibly causing the Fund’s NAV to be reduced and fluctuate more than other types of investments. During periods of
falling interest rates, an issuer of a callable bond may repay the security before its stated maturity, and the Fund may have to reinvest the proceeds in securities with lower yields, which would result in a decline in the Fund’s income, or in
securities with greater risks or with other less favorable features. Changing interest rates, including rates that fall below zero, may have unpredictable effects on markets, result in heightened market volatility and detract from the Fund’s
performance to the extent the Fund is exposed to such interest rates. An increase in interest rates will generally cause the value of fixed-income securities held by the Fund to decline, may lead to heightened volatility in the fixed-income
markets and may adversely affect the liquidity of certain fixed-income investments, including those held by the Fund. Risks associated with rising interest rates are heightened given that interest rates in the U.S. are near historic lows.
Adjustable-rate instruments also react to interest rate changes in a similar manner, although generally to a lesser degree (depending, however, on the characteristics of the reset terms, including the index chosen, frequency of reset and reset
caps or floors, among other factors). Interest rate sensitivity is generally more pronounced and less predictable in instruments with uncertain payment or prepayment schedules and also for those with longer maturities.
Foreign Securities and Credit Exposure Risk. U.S. dollar-denominated securities carrying foreign credit exposure
may be affected by unfavorable political, economic or governmental developments that could affect payments of principal and interest. Furthermore, the value of the Fund’s foreign investments (whether direct or indirect) may be adversely affected by
political and social instability in their home countries, by changes in economic or taxation policies in those countries, or by the difficulty in enforcing obligations in those countries. Foreign companies generally may be subject to less stringent
regulations than U.S. companies, including financial reporting requirements and auditing and accounting controls. As a result, there generally is less publicly available information about foreign companies than about U.S. companies. Trading in many
foreign securities may be less liquid and more volatile than U.S. securities due to the size of the market or other factors.
U.S. Government Securities Risk. U.S. Government securities are subject to interest rate risk but generally do
not involve the credit risks associated with investments in other types of debt securities. As a result, the yields available from U.S. Government securities are generally lower than the yields available from other debt securities. U.S. Government
securities are guaranteed only as to the timely payment of interest and the payment of principal when held to maturity. While securities issued or guaranteed by U.S. federal government agencies are backed by the full faith and credit of the U.S.
Department of the Treasury, securities issued by government sponsored entities are solely the obligation of the issuer and generally do not carry any guarantee from the U.S. Government.
ABS Risk. ABS are subject to the general debt securities risks described above. In addition, ABS may be less
liquid than other bonds, and may be more sensitive than other bonds to the market’s perception of issuers and creditworthiness of payees, which may result in the Fund experiencing difficulty selling or valuing these securities. ABS markets have
experienced extraordinary weakness and volatility at various times in recent years, and may decline quickly in the event of a substantial economic or market downturn. Accordingly, these securities may be subject to greater risk of default during
periods of economic downturn than other securities, which could result in possible losses to the Fund.
Issuer Risk. The performance of the Fund depends on the performance of individual securities to which the Fund
has exposure. The Fund may be adversely affected if an issuer of underlying securities held by the Fund is unable or
476
unwilling to repay principal or interest when due. Changes in the financial condition or credit rating of an issuer of those securities may cause the
value of the securities to decline.
Management Risk. The Fund is subject to management risk because it is an actively managed portfolio. Milliman
will apply investment techniques and risk analyses in making investment decisions for the Fund, but there can be no guarantee that the Fund will meet its investment objective and/or the Outcomes. In addition, Milliman does not use defensive
strategies or attempt to reduce the Fund’s exposures to poor performing positions during an Outcome Period. This differs from funds that are managed to seek to outperform a benchmark index. Therefore, in the event of a general market decline, the
Fund’s value may fall more than the value of another fund that does attempt to hedge against such market declines.
Market Risk. The Fund could lose money over short periods due to short-term market movements and over longer
periods during more prolonged market downturns. Assets may decline in value due to factors affecting financial markets generally or particular asset classes or industries represented in the markets. The value of a FLEX Option or other asset may
also decline due to general market conditions, economic trends or events that are not specifically related to the issuer of the security or other asset, or due to factors that affect a particular issuer, country, region, market, industry, sector or
asset class.
Non-Diversification Risk. The Fund may invest a relatively high percentage of its assets in a limited number of
issuers. As a result, the Fund may be more susceptible to a single adverse economic or regulatory occurrence affecting one or more of these issuers, experience increased volatility and be highly invested in certain issuers.
Large Shareholder Risk. At times, the Fund may experience adverse effects when certain large shareholders,
including insurance company separate accounts, redeem large amounts of shares of the Fund. Large redemptions may cause the Fund to sell portfolio holdings at times when it would not otherwise do so and may increase transaction costs and/or result
in an increase to the Fund’s expense ratio. A large redemption could be detrimental to the Fund and its remaining shareholders.
Risks of Investing in ETFs. In addition to the risks associated with the underlying assets held by the ETFs in
which the Fund invests, investments in ETFs are also subject to the following additional risks: (i) only authorized participants may engage in transactions directly with ETFs but none are obligated to do so, which could result in an ETF’s shares
trading at a premium or discount to its NAV or possibly face trading halts or delisting; (ii) certain ETFs seek to track the performance of an underlying index and will not attempt to take defensive positions under any market conditions, including
declining markets, which could result in losses; and (iii) because ETF shares trade on the secondary market, there is not guarantee that an active market will be developed or maintained, which could result in the ETF’s shares trading at a premium
or discount to its NAV. Investments in ETFs may involve duplication of management fees and certain other expenses, as the Fund indirectly bears its proportionate share of any expenses paid by the ETFs in which it invests.
Risks of Investing in Money Market Funds. Money market funds seek to preserve the value of shareholder
investments at $1.00 per share, but shareholders, such as the Fund, may still lose money by investing in such funds. In addition, a money market fund may impose a fee upon the sale of its shares or may temporarily suspend the ability to sell shares
if the fund’s liquidity falls below required minimums because of market conditions or other factors. The credit quality of a money market fund’s holdings can change rapidly in certain markets, and the default of a single holding could have an
adverse impact on the fund’s share price. A money market fund’s share price can also be negatively affected during periods of high redemption pressures, illiquid markets, and/or significant market volatility.
Performance
As of the date of this Prospectus, the Fund has not commenced operations and therefore does not have a performance history. Once available, the Fund’s
performance information will be accessible online at www.[________].com and will provide some indication of the risks of investing in the Fund.
Management
477
Investment Adviser
Milliman Financial Risk Management LLC (“Milliman”) serves as investment adviser to the Fund.
Portfolio Managers
The following persons serve as portfolio managers of the Fund.
|
●
|
Robert T. Cummings, Principal & Head of Portfolio Management at Milliman.
|
|
●
|
Maria Schiopu, Principal & Head of Portfolio Management at Milliman.
|
|
●
|
Jeff Greco, Principal & Head of Strategy Research at Milliman.
|
|
●
|
Jordan Rosenfeld, Portfolio Manager at Milliman.
|
Each portfolio manager is jointly and primarily responsible for the day-to-day management of the Fund’s portfolio and has served in such capacity
since the Fund’s inception in 2021.
Purchase and Sale of Shares
Shares are available as underlying investment options for variable insurance contracts and variable life insurance policies (each, a “variable contract,” and, collectively, the “variable contracts”) issued by insurance companies. These insurance companies are the record owners of the separate accounts
holding the Shares. You do not buy, sell or exchange Shares directly; rather, you choose investment options through your variable contracts. The insurance companies then cause the separate accounts to purchase and redeem Shares according to
the investment options you choose.
Tax Information
The dividends and distributions paid by the Fund to the insurance company separate accounts will consist of ordinary income, capital gains, or some
combination of both. Because Shares must be purchased through separate accounts used to fund variable contracts, such dividends and distributions will be exempt from current taxation by owners of variable contracts (each, a “contract owner,” and, collectively “contract owners”) if left to accumulate within a separate account. Consult the variable contract prospectus for additional tax
information.
Payments to Insurance Companies and Other Financial Intermediaries
If you allocate contract value to the Fund through an insurance company or other financial intermediary, the Fund, Milliman, the Fund’s distributor or
their related companies may pay the insurance company and/or its affiliates or other intermediary for the sale of Shares and related services. These payments may create a conflict of interest by influencing the insurance company or other
intermediary and your salesperson to recommend an indirect investment in the Fund over another investment. The prospectus or other disclosure documents for the variable contracts may contain additional information about these payments, if any.
You may also ask your salesperson or financial intermediary, or visit your financial intermediary’s website, for more information.
478
Fund Summary: Milliman S&P 500 & MSCI EAFE 1-Year Buffer with Stacker Cap
Fund – Nov
Investment Objective
The Fund seeks to provide exposure to the S&P 500 Index, while providing a buffer against the first 10% of losses associated with S&P 500
Index performance and participating in S&P 500 Index gains up to a declared cap, prior to taking into account any fees or expenses or the performance of any fixed income exposure included in the Fund’s portfolio, over the period from November
1, 2021 through October 31, 2022. The Fund also seeks to provide upside exposure to the MSCI EAFE Index up to a declared cap, prior to taking into account any fees or expenses or the performance of any fixed income exposure included in the Fund’s
portfolio, over the same period.
Fees and Expenses of the Fund
This table describes the fees and expenses that you may pay if you buy, hold and sell shares of the Fund (“Shares”).
This table and the example below do not include any fees or sales charges imposed by your variable product. If they were included, the expenses listed below would be higher.
Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment)
|
Class 3
|
|
|
Management Fees
|
0.49%
|
|
Distribution and Service (12b-1) Fees
|
0.25%
|
|
Other Expenses(1)
|
0.50%
|
|
Acquired Fund Fees and Expenses(1)
|
[_.__]%
|
|
Total Annual Fund Operating Expenses
|
1.24%
|
|
Fee Waiver and/or Expense Reimbursement(2)(3)
|
(0.25)%
|
|
Total Annual Fund Operating Expenses After Fee Waiver and/or Expense Reimbursement
|
0.99%
|
|
(1)
|
“Other Expenses” and “Acquired Fund Fees and Expenses” are based on estimated amounts for the current fiscal year.
|
|
(2)
|
The Fund’s investment adviser, Milliman Financial Risk Management LLC (“Milliman”), has contractually
agreed to waive advisory fees and/or reimburse expenses to the extent necessary to limit the Fund’s total annual Fund operating expenses (excluding taxes, interest, brokerage fees and commissions, Rule 12b-1 fees, acquired fund fees and
expenses, short-sale dividend expenses, administrative services fees, other expenses that are capitalized in accordance with generally accepted accounting principles, and extraordinary or non-routine expenses not incurred in the
ordinary course of the Fund’s business) to 0.74% of the Fund's average daily net assets (the “Expense Limitation Agreement”) until at least November 1, 2022. During its term, the Expense
Limitation Agreement cannot be terminated or amended to increase the applicable limit without approval of the Board of Trustees of the Trust (the “Board”). Milliman may recoup from the Fund any
advisory fees waived or expenses reimbursed pursuant to the Expense Limitation Agreement for a period of three years from the date on which such waiver or reimbursement occurred; provided, however, that such recoupment shall not be made
if it would cause the Fund’s total annual Fund operating expenses to exceed the lesser of (a) the expense limitation in effect at the time of the reimbursement, or (b) the expense limitation in effect at the time of recoupment, if any.
|
|
(3)
|
In addition to the Expense Limitation Agreement, Milliman has contractually agreed to waive its advisory fees in an amount equal to the Fund’s
acquired fund fees and expenses until at least November 1, 2022 (the “Fee Waiver”). This contract cannot be terminated or modified without the consent of the Board.
|
Example
This example is intended to help you compare the cost of investing in the Fund with the cost of investing in other funds. This example assumes that you
invest $10,000 in the Fund for the time periods indicated and then sell all of your Shares at the end of those periods. This example also assumes that your investment has a 5% return each year and that the Fund’s operating expenses remain at
current levels and that the Expense Limitation Agreement and Fee Waiver remain in place for their contractual periods. Although your actual costs may be higher or lower, your costs, based on these assumptions, would be:
|
1 Year
|
3 Years
|
|
|
Class 3
|
$104
|
$384
|
479
This example does not include any fees or sales charges imposed by your variable product. If they were included, the expenses listed above would be
higher.
Portfolio Turnover
The Fund pays transaction costs, such as commissions, when it purchases and sells securities (or “turns over” its portfolio). A higher portfolio turnover
will cause the Fund to incur additional transaction costs. These costs, which are not reflected in Total Annual Fund Operating Expenses or in the example, may affect the Fund’s performance. Because the Fund has not yet commenced investment
operations, no portfolio turnover information is available at this time.
Principal Investment Strategies
The Fund seeks to achieve its investment objective by transacting in FLexible EXchange® Options (“FLEX Options”)
and by separately maintaining a collateral portfolio (the “Collateral Portfolio”), which is designed primarily to serve as margin or collateral for the Fund’s FLEX Options positions and secondarily to
enhance the Fund’s upside S&P 500 Index and MSCI EAFE Index FLEX Options’ exposure (i.e., by utilizing anticipated income to measure the ability to purchase additional FLEX Options). FLEX Options are
exchange-traded options contracts with uniquely customizable terms. In general, an options contract is an agreement between a buyer and seller that gives the purchaser of the option the right to buy or sell a particular asset at a specified
future date at an agreed upon price, commonly known as the “strike price.” The reference assets for the Fund’s FLEX Options positions will include the S&P 500 Index, the MSCI EAFE Index (the “Secondary Index,”
and together with the S&P 500 Index, the “Reference Indices,” and, each, a “Reference Index”), and certain exchange-traded funds (“ETFs”), as described further below. The S&P 500 Index is a large-capitalization, market-weighted, U.S. equities index that tracks the price (excluding dividends) of 500 leading companies
in leading industries of the U.S. economy. The Secondary Index is [a float-adjusted, market capitalization-weighted index that is designed to measure the performance of large and mid-capitalization securities across 21 developed markets,
including countries in Europe, Australasia and the Far East, excluding the United States and Canada].
The Collateral Portfolio may be invested in short-term fixed-income securities, including corporate bonds and other corporate debt securities,
asset-backed securities (“ABS”), securities issued by the U.S. Government or its agencies and instrumentalities, securities issued by non-U.S. governments or their agencies and instrumentalities, money
market securities and funds, other interest-bearing instruments, cash, ETFs that primarily invest in any of the foregoing instruments, options on ETFs and options box spreads. An options box spread is the combination of different options trades
that have offsetting spreads (e.g., purchases and sales on the same underlying instrument, such as an index or an ETF, but with different strike prices and/or expiration dates) for the purpose of
generating income. The Fund may invest in short-term fixed income securities or other instruments, including through ETFs, of any maturity and credit quality. The Fund will generally invest up to 35% of its net assets in one or more ETFs that
provide exposure to investment grade corporate bonds.
Due to the unique mechanics of the Fund’s strategy, the return an investor can expect to receive from an investment in the Fund has characteristics that
are distinct from the returns of many other investment vehicles. It is important that an investor understand these characteristics before making an investment in the Fund.
In seeking to achieve its investment objective, the Fund seeks to produce pre-determined outcomes (the “Outcomes”)
that are based upon the performance of the Reference Indices over a one-year period (the “Outcome Period”). The initial Outcome Period for the Fund is November 1, 2021 through October 31, 2022. Following the
initial Outcome Period, each subsequent Outcome Period will be a one-year period commencing upon the expiration of the prior Outcome Period. The Fund seeks to achieve the Outcomes by purchasing and writing (selling) FLEX Options to create layers
within the Fund’s portfolio. One layer is designed to produce returns that correlate to those of the S&P 500 Index for the Outcome Period if the S&P 500 Index experiences gains during that time, subject to an upside return cap (the “S&P 500 Index Cap”), as described below. A second layer is designed to produce returns that correlate to any upside market performance of the Secondary Index over the
Outcome Period, subject to an upside return cap (the “Secondary Index Cap,” and, together with the S&P 500 Index Cap, the “Index Caps,” and, each, an “Index Cap”), as described below. A third layer is designed to produce returns that correlate to those of the S&P 500 Index for the Outcome Period that are buffered up to 10% if the S&P 500 Index
experiences losses during
480
that time (the “Buffer”). There is no guarantee that the Fund will be
successful in its attempt to produce returns that correlate to those of the S&P 500 Index or the Secondary Index up to the applicable Index Caps or produce buffered returns against the Fund’s S&P 500 Index exposure.
Milliman Financial Risk Management, LLC (“Milliman”), the investment adviser of the Fund, seeks to establish the
Buffer by writing one put FLEX Option on the S&P 500 Index with a strike price that is 10% lower than the value of the S&P 500 Index at the beginning of the Outcome Period.
Milliman seeks to establish the Index Caps by purchasing long call FLEX Options on each Reference Index with a strike price approximately equal to the
value of the respective Reference Index at the beginning of the Outcome Period. Milliman purchases these FLEX Options with a portion of the Fund’s net assets plus (i) the cash received from writing the put FLEX Option designed to create the
Buffer, (ii) additional cash received by utilizing FLEX Options to create a put spread (the “Put Spread Strategy”) on fixed income securities and/or one or more ETFs that provide exposure to fixed income
securities, and (iii) yield received from the Collateral Portfolio. Milliman seeks to achieve the Put Spread Strategy for the Fund by writing a put FLEX Option on an underlying asset at a strike price at or lower than the underlying asset’s
market price or current value at the beginning of the Outcome Period, and buying a put FLEX Option on the same underlying asset at a lower strike price than the written put FLEX Option.
The Index Caps represent the maximum rate of return in each Reference Index that an investor can achieve from an investment in the Fund over the Outcome
Period. Milliman calculates the Index Caps based upon (i) its evaluation of prevailing market conditions on the first day of the Outcome Period and (ii) the total number of long call FLEX Options on each Reference Index that it is able to purchase
at that time. As of the date of this Prospectus, and assuming current market conditions persist, Milliman expects that the Index Caps will be between the below ranges (both gross and net of Fund fees and expenses). Any fees or expenses imposed by
your variable product, and any other expenses incurred by the Fund, will have the effect of further reducing each Index Cap. In addition, in certain market conditions, the performance of the Collateral Portfolio
and the Put Spread Strategy could cause the Fund to underperform relative to the Reference Indices, which could further limit Fund gains below the Index Caps, notwithstanding any performance of the Reference Indices in excess of the Index Caps.
|
Estimated Index Cap Ranges
(As of [___])
|
||
|
Prior to Taking into Account Fund Fees and Expenses
|
After Taking into Account Fund Fees and Expenses
|
|
|
S&P 500 Index Cap
|
||
|
Class 3
|
[__]% and [__]%
|
[__]% and [__]%
|
|
Secondary Index Cap
|
||
|
Class 3
|
[__]% and [__]%
|
[__]% and [__]%
|
The Buffer is only operative against the first 10% of losses in the Fund’s S&P 500 Index exposure for the Outcome Period. If the S&P 500 Index
decreases in value by more than 10% during the Outcome Period, the Fund (and therefore investors in Shares) will experience all subsequent losses in the Fund’s S&P 500 Index exposure on a one-to-one basis for the Outcome Period. The Fund
seeks to produce buffered returns against its S&P 500 Index exposure prior to taking into account any fees or expenses or the performance of the Collateral Portfolio or the Put Spread Strategy. The Buffer
is not operative against losses in the Collateral Portfolio or the Put Spread Strategy. If the Collateral Portfolio and/or the Put Spread Strategy experiences losses, it could have the effect of reducing the impact of, or completely
eliminating, the Buffer on the Fund’s S&P 500 Index exposure. In certain market conditions, the performance of the Collateral Portfolio and/or the Put Spread Strategy could cause the Fund to significantly underperform the S&P 500
Index. The following table reflects the Buffer both gross and net of Fund fees and expenses:
481
|
Share Class
|
Buffer
(As of [___])
|
|
|
Prior to Taking into Account Fund Fees and Expenses
|
After Taking into Account Fund Fees and Expenses
|
|
|
Class 3
|
10%
|
[__]%
|
Because the Fund also seeks to provide only upside exposure to the Secondary Index during the Outcome Period, the Fund’s NAV will not be impacted by any
losses experienced by the Secondary Index when measured from the beginning to the end of the Outcome Period. If the Secondary Index increases in value during the Outcome Period and later decreases in value during the Outcome Period, the Fund’s NAV
will reflect any such decreases until the Secondary Index reaches its initial value (measured as of the first day of the Outcome Period). If the Secondary Index decreases in value over the course of an entire Outcome Period, the Fund’s NAV will not
reflect such losses; therefore, the Fund’s overall performance will be approximately that of the S&P 500 Index for the Outcome Period, subject to the Buffer and the S&P 500 Index Cap.
The definitive Index Caps and Buffer will be set forth on the Fund’s website. The Fund’s website will also provide information relating to the
Outcomes on a daily basis, including the Fund’s position relative to the Index Caps and the Buffer. You may also contact your insurance company or other financial intermediary for more information.
Additionally, the Fund’s net asset value (“NAV”) will not increase or decrease at the same rate as the Reference
Indices because the Fund’s strategy relies upon the performance of the Collateral Portfolio and the Put Spread Strategy, in addition to the value of the Fund’s FLEX Options positions on the Reference Indices. While Milliman anticipates that the
Fund’s NAV will generally move in the same direction as the S&P 500 Index, and correspond to any upside returns of the Secondary Index (meaning that the Fund’s NAV will generally increase if the Reference Indices experience gains or decrease if
the Reference Indices experience losses), the Fund’s NAV may not decrease at the same rate as the Reference Indices (especially when factoring in the performance of the Collateral Portfolio and the Put Spread Strategy) and will not increase at the
same rate as the Reference Indices (especially when factoring in the Index Caps and the performance of the Collateral Portfolio and the Put Spread Strategy). Similarly, the amount of time remaining until the end of the Outcome Period also affects
the impact of the Buffer on the Fund’s NAV, because the Buffer may not be in full effect prior to the end of the Outcome Period.
The FLEX Options utilized in the Fund’s portfolio are each set to expire on the last day of the Outcome Period. The customizable nature of FLEX Options
will allow Milliman to select the strike price at which each FLEX Option will be exercised at the expiration of the FLEX Option term. At the commencement of the Outcome Period, Milliman will specifically select the strike price for each FLEX Option
in a manner designed to achieve the Outcomes when the FLEX Options are exercised on the final day of the Outcome Period, depending on the anticipated performance of the Reference Indices, the Collateral Portfolio and the Put Spread Strategy over
the duration of that Outcome Period.
The hypothetical graphical illustrations provided below are designed to illustrate the Outcomes based upon the
hypothetical performance of the Reference Indices for an investor who holds Shares for the entirety of the Outcome Period. The hypothetical graphical illustrations do not include any fees or expenses
imposed by your variable product or expenses incurred by the Fund, and do not reflect the performance of the Collateral Portfolio or the Put Spread Strategy. Additional hypothetical graphical representations of the Outcomes are provided in
“Additional Information About the Funds and the Risks of Investing.” There is no guarantee that the Fund will be successful in its attempt to achieve the Outcomes for the Outcome Period.
482
The following table contains hypothetical examples designed to illustrate the Outcomes the Fund seeks to
achieve over the Outcome Period, based upon the performance of the Reference Indices from (100)% to 100% after taking into account the Index Caps and the Buffer, but prior to taking into account any fees or
expenses or the performance of the Collateral Portfolio or the Put Spread Strategy. The table is provided for illustrative purposes only and does not provide every possible performance scenario for Shares over
the course of the Outcome Period. There is no guarantee that the Fund will be successful in its attempt to achieve the Outcomes for an Outcome Period. The table is not intended to predict or project the performance of the FLEX Options or the Fund. Investors should not take this information as an
assurance of the expected performance of the Reference Indices or the Fund. Actual Fund performance will vary with fluctuations in the performance of the Collateral Portfolio and the Put Spread Strategy, in addition to the value of the
Fund’s FLEX Options positions on the Reference Indices, during the Outcome Period, among other factors. The performance of the Collateral Portfolio and the Put Spread Strategy
could significantly impact the performance of the Fund, which could prevent the Fund from achieving the Outcomes that it seeks to produce. The table does not reflect any fees or expenses imposed by your variable product or expenses
incurred by the Fund. If it did, the returns shown for the Fund would be lower. Please refer to the Fund’s website, which provides updated information relating to this table on a daily basis throughout the Outcome Period. Please contact your
insurance company or other financial intermediary for more information.
483
|
Index/Fund
|
Hypothetical Performance1
|
|||||||||||
|
S&P 500 Index Price Performance
|
(100)%
|
(50)%
|
(20)%
|
(10)%
|
(5)%
|
0%
|
5%
|
10%
|
15%
|
20%
|
50%
|
100%
|
|
Secondary Index Price Performance
|
(100)%
|
(50)%
|
(20)%
|
(10)%
|
(5)%
|
0%
|
5%
|
10%
|
15%
|
20%
|
50%
|
100%
|
|
Fund Performance at NAV
|
(90)%
|
(40)%
|
(10)%
|
0%2
|
0%2
|
0%
|
10%3
|
14%3
|
14%3
|
14%3
|
14%3
|
14%3
|
| 1 |
Does not take into account any fees or expenses or the performance of the Collateral Portfolio or the Put Spread Strategy.
|
| 2 |
Reflects the impact of the Buffer.
|
| 3 |
Reflects the impact of assumed Index Caps of 7% per index, 14% total.
|
Understanding Outcomes. The Outcomes the Fund seeks to achieve are measured based upon the
Fund’s NAV on the first day of the Outcome Period. The Outcome Period begins on the day Milliman transacts in the FLEX Options on behalf of the Fund, and ends on the day those FLEX Options expire. An investor who
purchases Shares after the commencement of the Outcome Period will likely have purchased Shares at a different NAV than the NAV on the first day of the Outcome Period (the NAV upon which the Outcomes are based) and may experience investment
outcomes very different from those the Fund seeks to achieve, especially when factoring in any fees or expenses or the performance of the Collateral Portfolio and the Put Spread Strategy. An investor who redeems Shares prior to the end of the
Outcome Period may also experience investment outcomes very different from those the Fund seeks to achieve. The Outcomes are designed with the expectation that an investor will hold Shares on the day that Milliman transacts in the FLEX Options on
behalf of the Fund, and on the day those FLEX Options expire. There is no guarantee that the Fund will be successful in its attempt to achieve the Outcomes.
Understanding the Index Caps. Unlike other investment products, the potential returns an
investor can receive from an investment in the Fund are subject to the Index Caps. This means that if one or both of the Reference Indices experience gains for the Outcome Period, an investor in the Fund will only
experience those gains up to the applicable Index Cap. Milliman calculates the Index Caps for each Outcome Period based upon (i) its evaluation of prevailing market conditions on the first day of the Outcome Period and (ii) the total
number of long call FLEX Options on each Reference Index that it is able to purchase at that time. If an investor is considering purchasing Shares during the Outcome Period, and the Fund’s NAV has increased in
value to a level near one or both of the Index Caps, an investor purchasing Shares at that price will have limited to no gains available for the remainder of the Outcome Period, but will remain vulnerable to significant downside risks (with
respect to the S&P 500 Index FLEX Options’ exposure). In certain market conditions, the performance of the Collateral Portfolio and the Put Spread Strategy could cause the Fund to underperform
relative to the Reference Indices, which could further limit Fund gains below the Index Caps, notwithstanding any performance of the Reference Indices in excess of the Index Caps.
Understanding the Buffer. The Buffer that the Fund seeks to provide is only operative
against the first 10% of losses in the Fund’s S&P 500 Index exposure for the Outcome Period. If an investor is considering purchasing Shares during the Outcome Period, and the S&P 500 Index has decreased
in value by an amount equal to or greater than 10%, an investor purchasing Shares at that time will be able to participate in any gains thereafter (up to the Index Caps), but will not benefit from the Buffer that the Fund seeks to offer for the
remainder of the Outcome Period if the losses continue to be equal to or greater than 10% during that period. Conversely, if an investor is considering purchasing Shares during the Outcome Period, and the Fund’s NAV has increased in value, then
an investor may experience losses before implementation of the Buffer that the Fund seeks to provide. While the Fund seeks to produce returns that correlate to those of the S&P 500 Index for the Outcome Period that are buffered up to
10% (prior to taking into account any fees or expenses or the performance of the Collateral Portfolio or the Put Spread Strategy) for investors who hold Shares for the entire Outcome Period, there is no guarantee it will successfully do so. In addition, the Buffer is not operative against losses in the Collateral Portfolio or the Put Spread Strategy. If the Collateral Portfolio and/or the Put Spread Strategy experiences losses, it could have the
effect of reducing the impact of, or completely eliminating, the Buffer on the Fund’s S&P 500 Index exposure. In certain market conditions, the performance of the Collateral Portfolio and/or the Put Spread Strategy could cause the Fund to
significantly underperform the S&P 500 Index. Investors who purchase Shares at the beginning of the Outcome Period may lose their entire
484
investment. Investors who purchase Shares after the Outcome Period has begun may also lose their entire investment. An
investment in the Fund is only appropriate for investors willing to bear those losses.
Fund Rebalance. Milliman implements the Fund’s strategy on an annual basis, seeking to
produce the Outcomes for an Outcome Period. On the last business day of any stated Outcome Period, all of the Fund’s existing FLEX Options, which includes those used to establish the Buffer, the Index Caps and the Put Spread Strategy, will expire
and Milliman will transact in a new set of FLEX Options on the same business day, which will commence a new Outcome Period beginning the following business day. At that same time, Milliman will also evaluate whether to make any adjustments to the
Collateral Portfolio. Accordingly, Shares can be held indefinitely if investors determine to participate in additional Outcome Periods.
Approximately one week prior to the end of each Outcome Period, the Fund will file a prospectus supplement, which will notify existing investors of
(i) the date on which the existing Outcome Period will end; (ii) the date on which the new Outcome Period will commence; and (iii) the anticipated ranges of the Index Caps that will be used for the new Outcome Period. Immediately preceding the
commencement date of the new Outcome Period, the Fund will file a prospectus supplement disclosing the Fund’s final Index Caps (both gross and net of Fund fees and expenses) for the new Outcome Period. This information will also be available
online at www.[___________].com, and on your insurance company’s website. Please contact your insurance company or other financial intermediary for more information.
Fund Classification. The Fund is classified as “non-diversified” under the Investment
Company Act of 1940, as amended (the “1940 Act”).
Principal Risks
You could lose money by investing in the Fund. An investment in the Fund is not a deposit of a bank and is not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other governmental agency. There can be no assurance that the Fund’s investment objectives will be achieved.
Downside Loss Buffer Risk. There can be no guarantee that the Fund will be successful in its strategy to
buffer against S&P 500 Index losses if the S&P 500 Index decreases in value over the Outcome Period. The Fund’s strategy is designed to produce returns that correlate to those of the S&P 500 Index, subject to the S&P 500 Index
Cap, while limiting downside S&P 500 Index losses and providing additional upside exposure to the Secondary Index, subject to the Secondary Index Cap, if Shares are bought on the day on which Milliman transacts in the FLEX Options on behalf
of the Fund and held until those FLEX Options expire at the end of each Outcome Period. The success of the Buffer also depends upon the performance of the Collateral Portfolio and the Put Spread Strategy. If
the Collateral Portfolio and/or the Put Spread Strategy experiences losses, it could have the effect of reducing the impact of, or completely eliminating, the Buffer on the Fund’s S&P 500 Index exposure. In certain market conditions, the
performance of the Collateral Portfolio and/or the Put Spread Strategy could cause the Fund to significantly underperform the S&P 500 Index. Despite the intended Buffer, an investor could lose their entire investment. In the
event an investor purchases Shares after the date on which Milliman transacted in the FLEX Options on behalf of the Fund, or redeems Shares prior to the expiration of those FLEX Options, the Buffer that the Fund seeks to provide may not be
available or fully applicable.
Risk of Capped Upside Returns. The Fund’s strategy is designed to produce returns that correlate to those of the
Reference Indices up to the Index Caps if Shares are bought on the day on which Milliman transacts in the FLEX Options on behalf of the Fund and held until those FLEX Options expire at the end of the Outcome Period, subject to the Index Caps. In
the event that one or both of the Reference Indices experience gains during the Outcome Period, the Fund will only participate in those gains up to the applicable Index Cap. In the event that one or both Reference Indices experience gains in excess
of the applicable Index Cap over the duration of the Outcome Period, the Fund will not participate in those excess gains. Because the Fund’s strategy provides capped exposure to two Reference Indices, the Index Caps may be lower than if the Fund
provided capped exposure to only a single Reference Index. In the event an investor purchases Shares after the date on which the FLEX Options were entered into and the Fund has risen in value to a level near to an Index Cap, there may be little or
no ability for that investor to experience an investment gain on their Shares relating to that Reference Index. In certain market conditions, the performance of the Collateral Portfolio and the Put Spread
Strategy could cause the Fund to
485
underperform relative to the Reference Indices, which could further limit Fund gains below the Index Caps, notwithstanding any
performance of the Reference Indices in excess of the Index Caps. An investor should consider the amount of the Index Caps, and the Fund’s position relative to each Index Cap, before investing in the Fund.
Index Cap Change Risk. Because the Index Caps for each Outcome Period are calculated based upon (i) Milliman’s
evaluation of prevailing market conditions on the first day of the Outcome Period and (ii) the total number of long call FLEX Options on the Reference Indices that Milliman is able to purchase at that time, the Index Caps may rise or fall from one
Outcome Period to the next. Any change in the Index Caps could be significant and they are unlikely to remain the same for consecutive Outcome Periods.
FLEX Options Risk. The Fund will transact in FLEX Options issued and guaranteed for settlement by the OCC. The
Fund bears the risk that the OCC will be unable or unwilling to perform its obligations under the FLEX Options contracts, which could result in significant losses to the Fund. In less liquid markets, terminating a FLEX Option may require the
payment of a premium or acceptance of a discounted price, and may take longer to complete. In addition, a less liquid trading market may adversely impact the value of the Fund’s FLEX Options and therefore the NAV of the Fund. In addition, the value
of the Fund’s FLEX Options positions is not anticipated to increase or decrease at the same rate as the reference asset; and while it is anticipated that they will generally move in the same direction, it is possible that they may move in different
directions. Certain FLEX Options positions may also expire worthless. The use of FLEX Options involves leverage, which can cause the Fund’s portfolio to be more volatile than if the portfolio had not been leveraged. Leverage can significantly
magnify the effect of price movements of the reference asset, disproportionately increasing the Fund’s losses and reducing the Fund’s opportunities for gains when the reference asset changes in unexpected ways. In some instances, such leverage
could result in losses that exceed the original amount invested.
Investment Objective and Outcomes Risk. There is no guarantee that the Fund will be successful in its attempt
to achieve its investment objective and/or the Outcomes, and an investor could lose some or all of their investment in the Fund. Certain circumstances under which the Fund might not achieve its objective and/or the Outcomes include, but are not
limited to (i) if the Fund disposes of FLEX Options, (ii) if the Fund is unable to maintain the proportional relationship based on the number of FLEX Options in the Fund’s portfolio, (iii) significant accrual of Fund expenses in connection with
effecting the Fund’s principal investment strategy, (iv) losses incurred by the Fund’s holdings in the Collateral Portfolio and/or losses resulting from the Put Spread Strategy, or (iv) adverse tax law changes affecting the treatment of FLEX
Options.
Tax Risk. The Fund intends to elect, and to qualify each year, to be treated as a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”). As a RIC, the Fund will not be subject to U.S. federal income tax on the portion
of its net investment income and net capital gain that it distributes to shareholders, provided that it satisfies certain requirements of the Code. To maintain its status as a RIC, the Fund must meet certain income, diversification and
distributions tests. For purposes of the diversification test, the identification of the issuer (or, in some cases, issuers) of a particular Fund investment can depend on the terms and conditions of that investment. In particular, there is no
published IRS guidance or case law on how to determine the “issuer” of certain derivatives that the Fund will enter into and the Fund has not received a private letter ruling on this point. Therefore, there is a risk that the Fund will not meet the
Code’s diversification requirements and will not qualify, or will be disqualified, as a RIC. If the Fund does not qualify as a RIC for any taxable year and certain relief provisions are not available, the Fund’s taxable income will be subject to
tax at the Fund level and to a further tax at the shareholder level when such income is distributed.
The Fund also intends to comply with the diversification requirements of Section 817(h) of the Code, and the regulations thereunder, relating to the
tax-deferred status of variable accounts that are based on insurance company separate accounts (referred to as “segregated asset accounts” for federal income tax purposes). These diversification requirements apply in addition to the RIC
diversification requirements discussed above. There also is no published guidance or case law on how to determine the “issuer” of the derivatives referred to above for purposes of the diversification requirements of Section 817(h) of the Code and
the Fund has not received a private letter ruling on this point. If these requirements are not met, or under other circumstances, such as if the Fund does not qualify as a RIC for any taxable year, it is possible that the contract owners (rather
than the insurance company) will be treated for federal income tax purposes as the taxable owners of the assets held by the segregated asset accounts.
486
Clearing Member Default Risk. The Fund will hold FLEX Options through accounts at members of clearing houses (“clearing members”) rather than a bank or a broker. Assets deposited by the Fund with any clearing member as margin for its FLEX Options positions may, in certain circumstances, be used to satisfy losses of other
clients of the Fund’s clearing member where such assets may be held in commingled omnibus accounts. In addition, although clearing members guarantee performance of their clients’ obligations to the clearing house, there is a risk that the assets of
the Fund might not be fully protected in the event of the clearing member’s bankruptcy, as the Fund would be limited to recovering only a pro rata share of all available funds segregated on behalf of the
clearing member’s customers for the relevant account class.
Debt Securities Risk. The prices of debt securities will be affected by changes in interest rates, the
creditworthiness of the issuer and other factors. These risks could affect the value of investments in which the Fund invests, possibly causing the Fund’s NAV to be reduced and fluctuate more than other types of investments. During periods of
falling interest rates, an issuer of a callable bond may repay the security before its stated maturity, and the Fund may have to reinvest the proceeds in securities with lower yields, which would result in a decline in the Fund’s income, or in
securities with greater risks or with other less favorable features. Changing interest rates, including rates that fall below zero, may have unpredictable effects on markets, result in heightened market volatility and detract from the Fund’s
performance to the extent the Fund is exposed to such interest rates. An increase in interest rates will generally cause the value of fixed-income securities held by the Fund to decline, may lead to heightened volatility in the fixed-income
markets and may adversely affect the liquidity of certain fixed-income investments, including those held by the Fund. Risks associated with rising interest rates are heightened given that interest rates in the U.S. are near historic lows.
Adjustable-rate instruments also react to interest rate changes in a similar manner, although generally to a lesser degree (depending, however, on the characteristics of the reset terms, including the index chosen, frequency of reset and reset
caps or floors, among other factors). Interest rate sensitivity is generally more pronounced and less predictable in instruments with uncertain payment or prepayment schedules and also for those with longer maturities.
Foreign Securities and Credit Exposure Risk. U.S. dollar-denominated securities carrying foreign credit exposure
may be affected by unfavorable political, economic or governmental developments that could affect payments of principal and interest. Furthermore, the value of the Fund’s foreign investments (whether direct or indirect) may be adversely affected by
political and social instability in their home countries, by changes in economic or taxation policies in those countries, or by the difficulty in enforcing obligations in those countries. Foreign companies generally may be subject to less stringent
regulations than U.S. companies, including financial reporting requirements and auditing and accounting controls. As a result, there generally is less publicly available information about foreign companies than about U.S. companies. Trading in many
foreign securities may be less liquid and more volatile than U.S. securities due to the size of the market or other factors.
U.S. Government Securities Risk. U.S. Government securities are subject to interest rate risk but generally do
not involve the credit risks associated with investments in other types of debt securities. As a result, the yields available from U.S. Government securities are generally lower than the yields available from other debt securities. U.S. Government
securities are guaranteed only as to the timely payment of interest and the payment of principal when held to maturity. While securities issued or guaranteed by U.S. federal government agencies are backed by the full faith and credit of the U.S.
Department of the Treasury, securities issued by government sponsored entities are solely the obligation of the issuer and generally do not carry any guarantee from the U.S. Government.
ABS Risk. ABS are subject to the general debt securities risks described above. In addition, ABS may be less
liquid than other bonds, and may be more sensitive than other bonds to the market’s perception of issuers and creditworthiness of payees, which may result in the Fund experiencing difficulty selling or valuing these securities. ABS markets have
experienced extraordinary weakness and volatility at various times in recent years, and may decline quickly in the event of a substantial economic or market downturn. Accordingly, these securities may be subject to greater risk of default during
periods of economic downturn than other securities, which could result in possible losses to the Fund.
Issuer Risk. The performance of the Fund depends on the performance of individual securities to which the Fund
has exposure. The Fund may be adversely affected if an issuer of underlying securities held by the Fund is unable or
487
unwilling to repay principal or interest when due. Changes in the financial condition or credit rating of an issuer of those securities may cause the
value of the securities to decline.
Management Risk. The Fund is subject to management risk because it is an actively managed portfolio. Milliman
will apply investment techniques and risk analyses in making investment decisions for the Fund, but there can be no guarantee that the Fund will meet its investment objective and/or the Outcomes. In addition, Milliman does not use defensive
strategies or attempt to reduce the Fund’s exposures to poor performing positions during an Outcome Period. This differs from funds that are managed to seek to outperform a benchmark index. Therefore, in the event of a general market decline, the
Fund’s value may fall more than the value of another fund that does attempt to hedge against such market declines.
Market Risk. The Fund could lose money over short periods due to short-term market movements and over longer
periods during more prolonged market downturns. Assets may decline in value due to factors affecting financial markets generally or particular asset classes or industries represented in the markets. The value of a FLEX Option or other asset may
also decline due to general market conditions, economic trends or events that are not specifically related to the issuer of the security or other asset, or due to factors that affect a particular issuer, country, region, market, industry, sector or
asset class.
Non-Diversification Risk. The Fund may invest a relatively high percentage of its assets in a limited number of
issuers. As a result, the Fund may be more susceptible to a single adverse economic or regulatory occurrence affecting one or more of these issuers, experience increased volatility and be highly invested in certain issuers.
Large Shareholder Risk. At times, the Fund may experience adverse effects when certain large shareholders,
including insurance company separate accounts, redeem large amounts of shares of the Fund. Large redemptions may cause the Fund to sell portfolio holdings at times when it would not otherwise do so and may increase transaction costs and/or result
in an increase to the Fund’s expense ratio. A large redemption could be detrimental to the Fund and its remaining shareholders.
Risks of Investing in ETFs. In addition to the risks associated with the underlying assets held by the ETFs in
which the Fund invests, investments in ETFs are also subject to the following additional risks: (i) only authorized participants may engage in transactions directly with ETFs but none are obligated to do so, which could result in an ETF’s shares
trading at a premium or discount to its NAV or possibly face trading halts or delisting; (ii) certain ETFs seek to track the performance of an underlying index and will not attempt to take defensive positions under any market conditions, including
declining markets, which could result in losses; and (iii) because ETF shares trade on the secondary market, there is not guarantee that an active market will be developed or maintained, which could result in the ETF’s shares trading at a premium
or discount to its NAV. Investments in ETFs may involve duplication of management fees and certain other expenses, as the Fund indirectly bears its proportionate share of any expenses paid by the ETFs in which it invests.
Risks of Investing in Money Market Funds. Money market funds seek to preserve the value of shareholder
investments at $1.00 per share, but shareholders, such as the Fund, may still lose money by investing in such funds. In addition, a money market fund may impose a fee upon the sale of its shares or may temporarily suspend the ability to sell shares
if the fund’s liquidity falls below required minimums because of market conditions or other factors. The credit quality of a money market fund’s holdings can change rapidly in certain markets, and the default of a single holding could have an
adverse impact on the fund’s share price. A money market fund’s share price can also be negatively affected during periods of high redemption pressures, illiquid markets, and/or significant market volatility.
Performance
As of the date of this Prospectus, the Fund has not commenced operations and therefore does not have a performance history. Once available, the Fund’s
performance information will be accessible online at www.[________].com and will provide some indication of the risks of investing in the Fund.
Management
488
Investment Adviser
Milliman Financial Risk Management LLC (“Milliman”) serves as investment adviser to the Fund.
Portfolio Managers
The following persons serve as portfolio managers of the Fund.
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●
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Robert T. Cummings, Principal & Head of Portfolio Management at Milliman.
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●
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Maria Schiopu, Principal & Head of Portfolio Management at Milliman.
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●
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Jeff Greco, Principal & Head of Strategy Research at Milliman.
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●
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Jordan Rosenfeld, Portfolio Manager at Milliman.
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Each portfolio manager is jointly and primarily responsible for the day-to-day management of the Fund’s portfolio and has served in such capacity
since the Fund’s inception in 2021.
Purchase and Sale of Shares
Shares are available as underlying investment options for variable insurance contracts and variable life insurance policies (each, a “variable contract,” and, collectively, the “variable contracts”) issued by insurance companies. These insurance companies are the record owners of the separate accounts
holding the Shares. You do not buy, sell or exchange Shares directly; rather, you choose investment options through your variable contracts. The insurance companies then cause the separate accounts to purchase and redeem Shares according to
the investment options you choose.
Tax Information
The dividends and distributions paid by the Fund to the insurance company separate accounts will consist of ordinary income, capital gains, or some
combination of both. Because Shares must be purchased through separate accounts used to fund variable contracts, such dividends and distributions will be exempt from current taxation by owners of variable contracts (each, a “contract owner,” and, collectively “contract owners”) if left to accumulate within a separate account. Consult the variable contract prospectus for additional tax
information.
Payments to Insurance Companies and Other Financial Intermediaries
If you allocate contract value to the Fund through an insurance company or other financial intermediary, the Fund, Milliman, the Fund’s distributor or
their related companies may pay the insurance company and/or its affiliates or other intermediary for the sale of Shares and related services. These payments may create a conflict of interest by influencing the insurance company or other
intermediary and your salesperson to recommend an indirect investment in the Fund over another investment. The prospectus or other disclosure documents for the variable contracts may contain additional information about these payments, if any.
You may also ask your salesperson or financial intermediary, or visit your financial intermediary’s website, for more information.
489
Fund Summary: Milliman S&P 500 & MSCI EAFE 1-Year Buffer with Stacker Cap
Fund – Dec
Investment Objective
The Fund seeks to provide exposure to the S&P 500 Index, while providing a buffer against the first 10% of losses associated with S&P 500
Index performance and participating in S&P 500 Index gains up to a declared cap, prior to taking into account any fees or expenses or the performance of any fixed income exposure included in the Fund’s portfolio, over the period from December
1, 2021 through November 30, 2022. The Fund also seeks to provide upside exposure to the MSCI EAFE Index up to a declared cap, prior to taking into account any fees or expenses or the performance of any fixed income exposure included in the
Fund’s portfolio, over the same period.
Fees and Expenses of the Fund
This table describes the fees and expenses that you may pay if you buy, hold and sell shares of the Fund (“Shares”).
This table and the example below do not include any fees or sales charges imposed by your variable product. If they were included, the expenses listed below would be higher.
Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment)
|
Class 3
|
|
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Management Fees
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0.49%
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|
Distribution and Service (12b-1) Fees
|
0.25%
|
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Other Expenses(1)
|
0.50%
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Acquired Fund Fees and Expenses(1)
|
[_.__]%
|
|
Total Annual Fund Operating Expenses
|
1.24%
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|
Fee Waiver and/or Expense Reimbursement(2)(3)
|
(0.25)%
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Total Annual Fund Operating Expenses After Fee Waiver and/or Expense Reimbursement
|
0.99%
|
|
(1)
|
“Other Expenses” and “Acquired Fund Fees and Expenses” are based on estimated amounts for the current fiscal year.
|
|
(2)
|
The Fund’s investment adviser, Milliman Financial Risk Management LLC (“Milliman”), has contractually
agreed to waive advisory fees and/or reimburse expenses to the extent necessary to limit the Fund’s total annual Fund operating expenses (excluding taxes, interest, brokerage fees and commissions, Rule 12b-1 fees, acquired fund fees and
expenses, short-sale dividend expenses, administrative services fees, other expenses that are capitalized in accordance with generally accepted accounting principles, and extraordinary or non-routine expenses not incurred in the
ordinary course of the Fund’s business) to 0.74% of the Fund's average daily net assets (the “Expense Limitation Agreement”) until at least November 1, 2022. During its term, the Expense
Limitation Agreement cannot be terminated or amended to increase the applicable limit without approval of the Board of Trustees of the Trust (the “Board”). Milliman may recoup from the Fund any
advisory fees waived or expenses reimbursed pursuant to the Expense Limitation Agreement for a period of three years from the date on which such waiver or reimbursement occurred; provided, however, that such recoupment shall not be made
if it would cause the Fund’s total annual Fund operating expenses to exceed the lesser of (a) the expense limitation in effect at the time of the reimbursement, or (b) the expense limitation in effect at the time of recoupment, if any.
|
|
(3)
|
In addition to the Expense Limitation Agreement, Milliman has contractually agreed to waive its advisory fees in an amount equal to the Fund’s
acquired fund fees and expenses until at least November 1, 2022 (the “Fee Waiver”). This contract cannot be terminated or modified without the consent of the Board.
|
Example
This example is intended to help you compare the cost of investing in the Fund with the cost of investing in other funds. This example assumes that you
invest $10,000 in the Fund for the time periods indicated and then sell all of your Shares at the end of those periods. This example also assumes that your investment has a 5% return each year and that the Fund’s operating expenses remain at
current levels and that the Expense Limitation Agreement and Fee Waiver remain in place for their contractual periods. Although your actual costs may be higher or lower, your costs, based on these assumptions, would be:
|
1 Year
|
3 Years
|
|
|
Class 3
|
$104
|
$384
|
490
This example does not include any fees or sales charges imposed by your variable product. If they were included, the expenses listed above would be
higher.
Portfolio Turnover
The Fund pays transaction costs, such as commissions, when it purchases and sells securities (or “turns over” its portfolio). A higher portfolio turnover
will cause the Fund to incur additional transaction costs. These costs, which are not reflected in Total Annual Fund Operating Expenses or in the example, may affect the Fund’s performance. Because the Fund has not yet commenced investment
operations, no portfolio turnover information is available at this time.
Principal Investment Strategies
The Fund seeks to achieve its investment objective by transacting in FLexible EXchange® Options (“FLEX Options”)
and by separately maintaining a collateral portfolio (the “Collateral Portfolio”), which is designed primarily to serve as margin or collateral for the Fund’s FLEX Options positions and secondarily to
enhance the Fund’s upside S&P 500 Index and MSCI EAFE Index FLEX Options’ exposure (i.e., by utilizing anticipated income to measure the ability to purchase additional FLEX Options). FLEX Options are
exchange-traded options contracts with uniquely customizable terms. In general, an options contract is an agreement between a buyer and seller that gives the purchaser of the option the right to buy or sell a particular asset at a specified
future date at an agreed upon price, commonly known as the “strike price.” The reference assets for the Fund’s FLEX Options positions will include the S&P 500 Index, the MSCI EAFE Index (the “Secondary Index,”
and together with the S&P 500 Index, the “Reference Indices,” and, each, a “Reference Index”), and certain exchange-traded funds (“ETFs”), as described further below. The S&P 500 Index is a large-capitalization, market-weighted, U.S. equities index that tracks the price (excluding dividends) of 500 leading companies
in leading industries of the U.S. economy. The Secondary Index is [a float-adjusted, market capitalization-weighted index that is designed to measure the performance of large and mid-capitalization securities across 21 developed markets,
including countries in Europe, Australasia and the Far East, excluding the United States and Canada].
The Collateral Portfolio may be invested in short-term fixed-income securities, including corporate bonds and other corporate debt securities,
asset-backed securities (“ABS”), securities issued by the U.S. Government or its agencies and instrumentalities, securities issued by non-U.S. governments or their agencies and instrumentalities, money
market securities and funds, other interest-bearing instruments, cash, ETFs that primarily invest in any of the foregoing instruments, options on ETFs and options box spreads. An options box spread is the combination of different options trades
that have offsetting spreads (e.g., purchases and sales on the same underlying instrument, such as an index or an ETF, but with different strike prices and/or expiration dates) for the purpose of
generating income. The Fund may invest in short-term fixed income securities or other instruments, including through ETFs, of any maturity and credit quality. The Fund will generally invest up to 35% of its net assets in one or more ETFs that
provide exposure to investment grade corporate bonds.
Due to the unique mechanics of the Fund’s strategy, the return an investor can expect to receive from an investment in the Fund has characteristics that
are distinct from the returns of many other investment vehicles. It is important that an investor understand these characteristics before making an investment in the Fund.
In seeking to achieve its investment objective, the Fund seeks to produce pre-determined outcomes (the “Outcomes”)
that are based upon the performance of the Reference Indices over a one-year period (the “Outcome Period”). The initial Outcome Period for the Fund is December 1, 2021 through November 30, 2022. Following
the initial Outcome Period, each subsequent Outcome Period will be a one-year period commencing upon the expiration of the prior Outcome Period. The Fund seeks to achieve the Outcomes by purchasing and writing (selling) FLEX Options to create
layers within the Fund’s portfolio. One layer is designed to produce returns that correlate to those of the S&P 500 Index for the Outcome Period if the S&P 500 Index experiences gains during that time, subject to an upside return cap (the “S&P 500 Index Cap”), as described below. A second layer is designed to produce returns that correlate to any upside market performance of the Secondary Index over the
Outcome Period, subject to an upside return cap (the “Secondary Index Cap,” and, together with the S&P 500 Index Cap, the “Index Caps,” and, each, an “Index Cap”), as described below. A third layer is designed to produce returns that correlate to those of the S&P 500 Index for the Outcome Period that are buffered up to 10% if the S&P 500 Index
experiences losses during
491
that time (the “Buffer”). There is no guarantee that the Fund will be
successful in its attempt to produce returns that correlate to those of the S&P 500 Index or the Secondary Index up to the applicable Index Caps or produce buffered returns against the Fund’s S&P 500 Index exposure.
Milliman Financial Risk Management, LLC (“Milliman”), the investment adviser of the Fund, seeks to establish the
Buffer by writing one put FLEX Option on the S&P 500 Index with a strike price that is 10% lower than the value of the S&P 500 Index at the beginning of the Outcome Period.
Milliman seeks to establish the Index Caps by purchasing long call FLEX Options on each Reference Index with a strike price approximately equal to the
value of the respective Reference Index at the beginning of the Outcome Period. Milliman purchases these FLEX Options with a portion of the Fund’s net assets plus (i) the cash received from writing the put FLEX Option designed to create the
Buffer, (ii) additional cash received by utilizing FLEX Options to create a put spread (the “Put Spread Strategy”) on fixed income securities and/or one or more ETFs that provide exposure to fixed income
securities, and (iii) yield received from the Collateral Portfolio. Milliman seeks to achieve the Put Spread Strategy for the Fund by writing a put FLEX Option on an underlying asset at a strike price at or lower than the underlying asset’s
market price or current value at the beginning of the Outcome Period, and buying a put FLEX Option on the same underlying asset at a lower strike price than the written put FLEX Option.
The Index Caps represent the maximum rate of return in each Reference Index that an investor can achieve from an investment in the Fund over the Outcome
Period. Milliman calculates the Index Caps based upon (i) its evaluation of prevailing market conditions on the first day of the Outcome Period and (ii) the total number of long call FLEX Options on each Reference Index that it is able to purchase
at that time. As of the date of this Prospectus, and assuming current market conditions persist, Milliman expects that the Index Caps will be between the below ranges (both gross and net of Fund fees and expenses). Any fees or expenses imposed by
your variable product, and any other expenses incurred by the Fund, will have the effect of further reducing each Index Cap. In addition, in certain market conditions, the performance of the Collateral Portfolio
and the Put Spread Strategy could cause the Fund to underperform relative to the Reference Indices, which could further limit Fund gains below the Index Caps, notwithstanding any performance of the Reference Indices in excess of the Index Caps.
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Estimated Index Cap Ranges
(As of [___])
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||
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Prior to Taking into Account Fund Fees and Expenses
|
After Taking into Account Fund Fees and Expenses
|
|
|
S&P 500 Index Cap
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||
|
Class 3
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[__]% and [__]%
|
[__]% and [__]%
|
|
Secondary Index Cap
|
||
|
Class 3
|
[__]% and [__]%
|
[__]% and [__]%
|
The Buffer is only operative against the first 10% of losses in the Fund’s S&P 500 Index exposure for the Outcome Period. If the S&P 500 Index
decreases in value by more than 10% during the Outcome Period, the Fund (and therefore investors in Shares) will experience all subsequent losses in the Fund’s S&P 500 Index exposure on a one-to-one basis for the Outcome Period. The Fund
seeks to produce buffered returns against its S&P 500 Index exposure prior to taking into account any fees or expenses or the performance of the Collateral Portfolio or the Put Spread Strategy. The Buffer
is not operative against losses in the Collateral Portfolio or the Put Spread Strategy. If the Collateral Portfolio and/or the Put Spread Strategy experiences losses, it could have the effect of reducing the impact of, or completely
eliminating, the Buffer on the Fund’s S&P 500 Index exposure. In certain market conditions, the performance of the Collateral Portfolio and/or the Put Spread Strategy could cause the Fund to significantly underperform the S&P 500
Index. The following table reflects the Buffer both gross and net of Fund fees and expenses:
492
|
Share Class
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Buffer
(As of [___])
|
|
|
Prior to Taking into Account Fund Fees and Expenses
|
After Taking into Account Fund Fees and Expenses
|
|
|
Class 3
|
10%
|
[__]%
|
Because the Fund also seeks to provide only upside exposure to the Secondary Index during the Outcome Period, the Fund’s NAV will not be impacted by any
losses experienced by the Secondary Index when measured from the beginning to the end of the Outcome Period. If the Secondary Index increases in value during the Outcome Period and later decreases in value during the Outcome Period, the Fund’s NAV
will reflect any such decreases until the Secondary Index reaches its initial value (measured as of the first day of the Outcome Period). If the Secondary Index decreases in value over the course of an entire Outcome Period, the Fund’s NAV will not
reflect such losses; therefore, the Fund’s overall performance will be approximately that of the S&P 500 Index for the Outcome Period, subject to the Buffer and the S&P 500 Index Cap.
The definitive Index Caps and Buffer will be set forth on the Fund’s website. The Fund’s website will also provide information relating to the
Outcomes on a daily basis, including the Fund’s position relative to the Index Caps and the Buffer. You may also contact your insurance company or other financial intermediary for more information.
Additionally, the Fund’s net asset value (“NAV”) will not increase or decrease at the same rate as the Reference
Indices because the Fund’s strategy relies upon the performance of the Collateral Portfolio and the Put Spread Strategy, in addition to the value of the Fund’s FLEX Options positions on the Reference Indices. While Milliman anticipates that the
Fund’s NAV will generally move in the same direction as the S&P 500 Index, and correspond to any upside returns of the Secondary Index (meaning that the Fund’s NAV will generally increase if the Reference Indices experience gains or decrease if
the Reference Indices experience losses), the Fund’s NAV may not decrease at the same rate as the Reference Indices (especially when factoring in the performance of the Collateral Portfolio and the Put Spread Strategy) and will not increase at the
same rate as the Reference Indices (especially when factoring in the Index Caps and the performance of the Collateral Portfolio and the Put Spread Strategy). Similarly, the amount of time remaining until the end of the Outcome Period also affects
the impact of the Buffer on the Fund’s NAV, because the Buffer may not be in full effect prior to the end of the Outcome Period.
The FLEX Options utilized in the Fund’s portfolio are each set to expire on the last day of the Outcome Period. The customizable nature of FLEX Options
will allow Milliman to select the strike price at which each FLEX Option will be exercised at the expiration of the FLEX Option term. At the commencement of the Outcome Period, Milliman will specifically select the strike price for each FLEX Option
in a manner designed to achieve the Outcomes when the FLEX Options are exercised on the final day of the Outcome Period, depending on the anticipated performance of the Reference Indices, the Collateral Portfolio and the Put Spread Strategy over
the duration of that Outcome Period.
The hypothetical graphical illustrations provided below are designed to illustrate the Outcomes based upon the
hypothetical performance of the Reference Indices for an investor who holds Shares for the entirety of the Outcome Period. The hypothetical graphical illustrations do not include any fees or expenses
imposed by your variable product or expenses incurred by the Fund, and do not reflect the performance of the Collateral Portfolio or the Put Spread Strategy. Additional hypothetical graphical representations of the Outcomes are provided in
“Additional Information About the Funds and the Risks of Investing.” There is no guarantee that the Fund will be successful in its attempt to achieve the Outcomes for the Outcome Period.
493
The following table contains hypothetical examples designed to illustrate the Outcomes the Fund seeks to
achieve over the Outcome Period, based upon the performance of the Reference Indices from (100)% to 100% after taking into account the Index Caps and the Buffer, but prior to taking into account any fees or
expenses or the performance of the Collateral Portfolio or the Put Spread Strategy. The table is provided for illustrative purposes only and does not provide every possible performance scenario for Shares over
the course of the Outcome Period. There is no guarantee that the Fund will be successful in its attempt to achieve the Outcomes for an Outcome Period. The table is not intended to predict or project the performance of the FLEX Options or the Fund. Investors should not take this information as an
assurance of the expected performance of the Reference Indices or the Fund. Actual Fund performance will vary with fluctuations in the performance of the Collateral Portfolio and the Put Spread Strategy, in addition to the value of the
Fund’s FLEX Options positions on the Reference Indices, during the Outcome Period, among other factors. The performance of the Collateral Portfolio and the Put Spread Strategy
could significantly impact the performance of the Fund, which could prevent the Fund from achieving the Outcomes that it seeks to produce. The table does not reflect any fees or expenses imposed by your variable product or expenses
incurred by the Fund. If it did, the returns shown for the Fund would be lower. Please refer to the Fund’s website, which provides updated information relating to this table on a daily basis throughout the Outcome Period. Please contact your
insurance company or other financial intermediary for more information.
494
|
Index/Fund
|
Hypothetical Performance1
|
|||||||||||
|
S&P 500 Index Price Performance
|
(100)%
|
(50)%
|
(20)%
|
(10)%
|
(5)%
|
0%
|
5%
|
10%
|
15%
|
20%
|
50%
|
100%
|
|
Secondary Index Price Performance
|
(100)%
|
(50)%
|
(20)%
|
(10)%
|
(5)%
|
0%
|
5%
|
10%
|
15%
|
20%
|
50%
|
100%
|
|
Fund Performance at NAV
|
(90)%
|
(40)%
|
(10)%
|
0%2
|
0%2
|
0%
|
10%3
|
14%3
|
14%3
|
14%3
|
14%3
|
14%3
|
| 1 |
Does not take into account any fees or expenses or the performance of the Collateral Portfolio or the Put Spread Strategy.
|
| 2 |
Reflects the impact of the Buffer.
|
| 3 |
Reflects the impact of assumed Index Caps of 7% per index, 14% total.
|
Understanding Outcomes. The Outcomes the Fund seeks to achieve are measured based upon the
Fund’s NAV on the first day of the Outcome Period. The Outcome Period begins on the day Milliman transacts in the FLEX Options on behalf of the Fund, and ends on the day those FLEX Options expire. An investor who
purchases Shares after the commencement of the Outcome Period will likely have purchased Shares at a different NAV than the NAV on the first day of the Outcome Period (the NAV upon which the Outcomes are based) and may experience investment
outcomes very different from those the Fund seeks to achieve, especially when factoring in any fees or expenses or the performance of the Collateral Portfolio and the Put Spread Strategy. An investor who redeems Shares prior to the end of the
Outcome Period may also experience investment outcomes very different from those the Fund seeks to achieve. The Outcomes are designed with the expectation that an investor will hold Shares on the day that Milliman transacts in the FLEX Options on
behalf of the Fund, and on the day those FLEX Options expire. There is no guarantee that the Fund will be successful in its attempt to achieve the Outcomes.
Understanding the Index Caps. Unlike other investment products, the potential returns an
investor can receive from an investment in the Fund are subject to the Index Caps. This means that if one or both of the Reference Indices experience gains for the Outcome Period, an investor in the Fund will only
experience those gains up to the applicable Index Cap. Milliman calculates the Index Caps for each Outcome Period based upon (i) its evaluation of prevailing market conditions on the first day of the Outcome Period and (ii) the total
number of long call FLEX Options on each Reference Index that it is able to purchase at that time. If an investor is considering purchasing Shares during the Outcome Period, and the Fund’s NAV has increased in
value to a level near one or both of the Index Caps, an investor purchasing Shares at that price will have limited to no gains available for the remainder of the Outcome Period, but will remain vulnerable to significant downside risks (with
respect to the S&P 500 Index FLEX Options’ exposure). In certain market conditions, the performance of the Collateral Portfolio and the Put Spread Strategy could cause the Fund to underperform
relative to the Reference Indices, which could further limit Fund gains below the Index Caps, notwithstanding any performance of the Reference Indices in excess of the Index Caps.
Understanding the Buffer. The Buffer that the Fund seeks to provide is only operative
against the first 10% of losses in the Fund’s S&P 500 Index exposure for the Outcome Period. If an investor is considering purchasing Shares during the Outcome Period, and the S&P 500 Index has decreased
in value by an amount equal to or greater than 10%, an investor purchasing Shares at that time will be able to participate in any gains thereafter (up to the Index Caps), but will not benefit from the Buffer that the Fund seeks to offer for the
remainder of the Outcome Period if the losses continue to be equal to or greater than 10% during that period. Conversely, if an investor is considering purchasing Shares during the Outcome Period, and the Fund’s NAV has increased in value, then
an investor may experience losses before implementation of the Buffer that the Fund seeks to provide. While the Fund seeks to produce returns that correlate to those of the S&P 500 Index for the Outcome Period that are buffered up to
10% (prior to taking into account any fees or expenses or the performance of the Collateral Portfolio or the Put Spread Strategy) for investors who hold Shares for the entire Outcome Period, there is no guarantee it will successfully do so. In addition, the Buffer is not operative against losses in the Collateral Portfolio or the Put Spread Strategy. If the Collateral Portfolio and/or the Put Spread Strategy experiences losses, it could have the
effect of reducing the impact of, or completely eliminating, the Buffer on the Fund’s S&P 500 Index exposure. In certain market conditions, the performance of the Collateral Portfolio and/or the Put Spread Strategy could cause the Fund to
significantly underperform the S&P 500 Index. Investors who purchase Shares at the beginning of the Outcome Period may lose their entire
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investment. Investors who purchase Shares after the Outcome Period has begun may also lose their entire investment. An
investment in the Fund is only appropriate for investors willing to bear those losses.
Fund Rebalance. Milliman implements the Fund’s strategy on an annual basis, seeking to
produce the Outcomes for an Outcome Period. On the last business day of any stated Outcome Period, all of the Fund’s existing FLEX Options, which includes those used to establish the Buffer, the Index Caps and the Put Spread Strategy, will expire
and Milliman will transact in a new set of FLEX Options on the same business day, which will commence a new Outcome Period beginning the following business day. At that same time, Milliman will also evaluate whether to make any adjustments to the
Collateral Portfolio. Accordingly, Shares can be held indefinitely if investors determine to participate in additional Outcome Periods.
Approximately one week prior to the end of each Outcome Period, the Fund will file a prospectus supplement, which will notify existing investors of
(i) the date on which the existing Outcome Period will end; (ii) the date on which the new Outcome Period will commence; and (iii) the anticipated ranges of the Index Caps that will be used for the new Outcome Period. Immediately preceding the
commencement date of the new Outcome Period, the Fund will file a prospectus supplement disclosing the Fund’s final Index Caps (both gross and net of Fund fees and expenses) for the new Outcome Period. This information will also be available
online at www.[___________].com, and on your insurance company’s website. Please contact your insurance company or other financial intermediary for more information.
Fund Classification. The Fund is classified as “non-diversified” under the Investment
Company Act of 1940, as amended (the “1940 Act”).
Principal Risks
You could lose money by investing in the Fund. An investment in the Fund is not a deposit of a bank and is not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other governmental agency. There can be no assurance that the Fund’s investment objectives will be achieved.
Downside Loss Buffer Risk. There can be no guarantee that the Fund will be successful in its strategy to
buffer against S&P 500 Index losses if the S&P 500 Index decreases in value over the Outcome Period. The Fund’s strategy is designed to produce returns that correlate to those of the S&P 500 Index, subject to the S&P 500 Index
Cap, while limiting downside S&P 500 Index losses and providing additional upside exposure to the Secondary Index, subject to the Secondary Index Cap, if Shares are bought on the day on which Milliman transacts in the FLEX Options on behalf
of the Fund and held until those FLEX Options expire at the end of each Outcome Period. The success of the Buffer also depends upon the performance of the Collateral Portfolio and the Put Spread Strategy. If
the Collateral Portfolio and/or the Put Spread Strategy experiences losses, it could have the effect of reducing the impact of, or completely eliminating, the Buffer on the Fund’s S&P 500 Index exposure. In certain market conditions, the
performance of the Collateral Portfolio and/or the Put Spread Strategy could cause the Fund to significantly underperform the S&P 500 Index. Despite the intended Buffer, an investor could lose their entire investment. In the
event an investor purchases Shares after the date on which Milliman transacted in the FLEX Options on behalf of the Fund, or redeems Shares prior to the expiration of those FLEX Options, the Buffer that the Fund seeks to provide may not be
available or fully applicable.
Risk of Capped Upside Returns. The Fund’s strategy is designed to produce returns that correlate to those of the
Reference Indices up to the Index Caps if Shares are bought on the day on which Milliman transacts in the FLEX Options on behalf of the Fund and held until those FLEX Options expire at the end of the Outcome Period, subject to the Index Caps. In
the event that one or both of the Reference Indices experience gains during the Outcome Period, the Fund will only participate in those gains up to the applicable Index Cap. In the event that one or both Reference Indices experience gains in excess
of the applicable Index Cap over the duration of the Outcome Period, the Fund will not participate in those excess gains. Because the Fund’s strategy provides capped exposure to two Reference Indices, the Index Caps may be lower than if the Fund
provided capped exposure to only a single Reference Index. In the event an investor purchases Shares after the date on which the FLEX Options were entered into and the Fund has risen in value to a level near to an Index Cap, there may be little or
no ability for that investor to experience an investment gain on their Shares relating to that Reference Index. In certain market conditions, the performance of the Collateral Portfolio and the Put Spread
Strategy could cause the Fund to
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underperform relative to the Reference Indices, which could further limit Fund gains below the Index Caps, notwithstanding any
performance of the Reference Indices in excess of the Index Caps. An investor should consider the amount of the Index Caps, and the Fund’s position relative to each Index Cap, before investing in the Fund.
Index Cap Change Risk. Because the Index Caps for each Outcome Period are calculated based upon (i) Milliman’s
evaluation of prevailing market conditions on the first day of the Outcome Period and (ii) the total number of long call FLEX Options on the Reference Indices that Milliman is able to purchase at that time, the Index Caps may rise or fall from one
Outcome Period to the next. Any change in the Index Caps could be significant and they are unlikely to remain the same for consecutive Outcome Periods.
FLEX Options Risk. The Fund will transact in FLEX Options issued and guaranteed for settlement by the OCC. The
Fund bears the risk that the OCC will be unable or unwilling to perform its obligations under the FLEX Options contracts, which could result in significant losses to the Fund. In less liquid markets, terminating a FLEX Option may require the
payment of a premium or acceptance of a discounted price, and may take longer to complete. In addition, a less liquid trading market may adversely impact the value of the Fund’s FLEX Options and therefore the NAV of the Fund. In addition, the value
of the Fund’s FLEX Options positions is not anticipated to increase or decrease at the same rate as the reference asset; and while it is anticipated that they will generally move in the same direction, it is possible that they may move in different
directions. Certain FLEX Options positions may also expire worthless. The use of FLEX Options involves leverage, which can cause the Fund’s portfolio to be more volatile than if the portfolio had not been leveraged. Leverage can significantly
magnify the effect of price movements of the reference asset, disproportionately increasing the Fund’s losses and reducing the Fund’s opportunities for gains when the reference asset changes in unexpected ways. In some instances, such leverage
could result in losses that exceed the original amount invested.
Investment Objective and Outcomes Risk. There is no guarantee that the Fund will be successful in its attempt
to achieve its investment objective and/or the Outcomes, and an investor could lose some or all of their investment in the Fund. Certain circumstances under which the Fund might not achieve its objective and/or the Outcomes include, but are not
limited to (i) if the Fund disposes of FLEX Options, (ii) if the Fund is unable to maintain the proportional relationship based on the number of FLEX Options in the Fund’s portfolio, (iii) significant accrual of Fund expenses in connection with
effecting the Fund’s principal investment strategy, (iv) losses incurred by the Fund’s holdings in the Collateral Portfolio and/or losses resulting from the Put Spread Strategy, or (iv) adverse tax law changes affecting the treatment of FLEX
Options.
Tax Risk. The Fund intends to elect, and to qualify each year, to be treated as a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”). As a RIC, the Fund will not be subject to U.S. federal income tax on the portion
of its net investment income and net capital gain that it distributes to shareholders, provided that it satisfies certain requirements of the Code. To maintain its status as a RIC, the Fund must meet certain income, diversification and
distributions tests. For purposes of the diversification test, the identification of the issuer (or, in some cases, issuers) of a particular Fund investment can depend on the terms and conditions of that investment. In particular, there is no
published IRS guidance or case law on how to determine the “issuer” of certain derivatives that the Fund will enter into and the Fund has not received a private letter ruling on this point. Therefore, there is a risk that the Fund will not meet the
Code’s diversification requirements and will not qualify, or will be disqualified, as a RIC. If the Fund does not qualify as a RIC for any taxable year and certain relief provisions are not available, the Fund’s taxable income will be subject to
tax at the Fund level and to a further tax at the shareholder level when such income is distributed.
The Fund also intends to comply with the diversification requirements of Section 817(h) of the Code, and the regulations thereunder, relating to the
tax-deferred status of variable accounts that are based on insurance company separate accounts (referred to as “segregated asset accounts” for federal income tax purposes). These diversification requirements apply in addition to the RIC
diversification requirements discussed above. There also is no published guidance or case law on how to determine the “issuer” of the derivatives referred to above for purposes of the diversification requirements of Section 817(h) of the Code and
the Fund has not received a private letter ruling on this point. If these requirements are not met, or under other circumstances, such as if the Fund does not qualify as a RIC for any taxable year, it is possible that the contract owners (rather
than the insurance company) will be treated for federal income tax purposes as the taxable owners of the assets held by the segregated asset accounts.
497
Clearing Member Default Risk. The Fund will hold FLEX Options through accounts at members of clearing houses (“clearing members”) rather than a bank or a broker. Assets deposited by the Fund with any clearing member as margin for its FLEX Options positions may, in certain circumstances, be used to satisfy losses of other
clients of the Fund’s clearing member where such assets may be held in commingled omnibus accounts. In addition, although clearing members guarantee performance of their clients’ obligations to the clearing house, there is a risk that the assets of
the Fund might not be fully protected in the event of the clearing member’s bankruptcy, as the Fund would be limited to recovering only a pro rata share of all available funds segregated on behalf of the
clearing member’s customers for the relevant account class.
Debt Securities Risk. The prices of debt securities will be affected by changes in interest rates, the
creditworthiness of the issuer and other factors. These risks could affect the value of investments in which the Fund invests, possibly causing the Fund’s NAV to be reduced and fluctuate more than other types of investments. During periods of
falling interest rates, an issuer of a callable bond may repay the security before its stated maturity, and the Fund may have to reinvest the proceeds in securities with lower yields, which would result in a decline in the Fund’s income, or in
securities with greater risks or with other less favorable features. Changing interest rates, including rates that fall below zero, may have unpredictable effects on markets, result in heightened market volatility and detract from the Fund’s
performance to the extent the Fund is exposed to such interest rates. An increase in interest rates will generally cause the value of fixed-income securities held by the Fund to decline, may lead to heightened volatility in the fixed-income
markets and may adversely affect the liquidity of certain fixed-income investments, including those held by the Fund. Risks associated with rising interest rates are heightened given that interest rates in the U.S. are near historic lows.
Adjustable-rate instruments also react to interest rate changes in a similar manner, although generally to a lesser degree (depending, however, on the characteristics of the reset terms, including the index chosen, frequency of reset and reset
caps or floors, among other factors). Interest rate sensitivity is generally more pronounced and less predictable in instruments with uncertain payment or prepayment schedules and also for those with longer maturities.
Foreign Securities and Credit Exposure Risk. U.S. dollar-denominated securities carrying foreign credit exposure
may be affected by unfavorable political, economic or governmental developments that could affect payments of principal and interest. Furthermore, the value of the Fund’s foreign investments (whether direct or indirect) may be adversely affected by
political and social instability in their home countries, by changes in economic or taxation policies in those countries, or by the difficulty in enforcing obligations in those countries. Foreign companies generally may be subject to less stringent
regulations than U.S. companies, including financial reporting requirements and auditing and accounting controls. As a result, there generally is less publicly available information about foreign companies than about U.S. companies. Trading in many
foreign securities may be less liquid and more volatile than U.S. securities due to the size of the market or other factors.
U.S. Government Securities Risk. U.S. Government securities are subject to interest rate risk but generally do
not involve the credit risks associated with investments in other types of debt securities. As a result, the yields available from U.S. Government securities are generally lower than the yields available from other debt securities. U.S. Government
securities are guaranteed only as to the timely payment of interest and the payment of principal when held to maturity. While securities issued or guaranteed by U.S. federal government agencies are backed by the full faith and credit of the U.S.
Department of the Treasury, securities issued by government sponsored entities are solely the obligation of the issuer and generally do not carry any guarantee from the U.S. Government.
ABS Risk. ABS are subject to the general debt securities risks described above. In addition, ABS may be less
liquid than other bonds, and may be more sensitive than other bonds to the market’s perception of issuers and creditworthiness of payees, which may result in the Fund experiencing difficulty selling or valuing these securities. ABS markets have
experienced extraordinary weakness and volatility at various times in recent years, and may decline quickly in the event of a substantial economic or market downturn. Accordingly, these securities may be subject to greater risk of default during
periods of economic downturn than other securities, which could result in possible losses to the Fund.
Issuer Risk. The performance of the Fund depends on the performance of individual securities to which the Fund
has exposure. The Fund may be adversely affected if an issuer of underlying securities held by the Fund is unable or
498
unwilling to repay principal or interest when due. Changes in the financial condition or credit rating of an issuer of those securities may cause the
value of the securities to decline.
Management Risk. The Fund is subject to management risk because it is an actively managed portfolio. Milliman
will apply investment techniques and risk analyses in making investment decisions for the Fund, but there can be no guarantee that the Fund will meet its investment objective and/or the Outcomes. In addition, Milliman does not use defensive
strategies or attempt to reduce the Fund’s exposures to poor performing positions during an Outcome Period. This differs from funds that are managed to seek to outperform a benchmark index. Therefore, in the event of a general market decline, the
Fund’s value may fall more than the value of another fund that does attempt to hedge against such market declines.
Market Risk. The Fund could lose money over short periods due to short-term market movements and over longer
periods during more prolonged market downturns. Assets may decline in value due to factors affecting financial markets generally or particular asset classes or industries represented in the markets. The value of a FLEX Option or other asset may
also decline due to general market conditions, economic trends or events that are not specifically related to the issuer of the security or other asset, or due to factors that affect a particular issuer, country, region, market, industry, sector or
asset class.
Non-Diversification Risk. The Fund may invest a relatively high percentage of its assets in a limited number of
issuers. As a result, the Fund may be more susceptible to a single adverse economic or regulatory occurrence affecting one or more of these issuers, experience increased volatility and be highly invested in certain issuers.
Large Shareholder Risk. At times, the Fund may experience adverse effects when certain large shareholders,
including insurance company separate accounts, redeem large amounts of shares of the Fund. Large redemptions may cause the Fund to sell portfolio holdings at times when it would not otherwise do so and may increase transaction costs and/or result
in an increase to the Fund’s expense ratio. A large redemption could be detrimental to the Fund and its remaining shareholders.
Risks of Investing in ETFs. In addition to the risks associated with the underlying assets held by the ETFs in
which the Fund invests, investments in ETFs are also subject to the following additional risks: (i) only authorized participants may engage in transactions directly with ETFs but none are obligated to do so, which could result in an ETF’s shares
trading at a premium or discount to its NAV or possibly face trading halts or delisting; (ii) certain ETFs seek to track the performance of an underlying index and will not attempt to take defensive positions under any market conditions, including
declining markets, which could result in losses; and (iii) because ETF shares trade on the secondary market, there is not guarantee that an active market will be developed or maintained, which could result in the ETF’s shares trading at a premium
or discount to its NAV. Investments in ETFs may involve duplication of management fees and certain other expenses, as the Fund indirectly bears its proportionate share of any expenses paid by the ETFs in which it invests.
Risks of Investing in Money Market Funds. Money market funds seek to preserve the value of shareholder
investments at $1.00 per share, but shareholders, such as the Fund, may still lose money by investing in such funds. In addition, a money market fund may impose a fee upon the sale of its shares or may temporarily suspend the ability to sell shares
if the fund’s liquidity falls below required minimums because of market conditions or other factors. The credit quality of a money market fund’s holdings can change rapidly in certain markets, and the default of a single holding could have an
adverse impact on the fund’s share price. A money market fund’s share price can also be negatively affected during periods of high redemption pressures, illiquid markets, and/or significant market volatility.
Performance
As of the date of this Prospectus, the Fund has not commenced operations and therefore does not have a performance history. Once available, the Fund’s
performance information will be accessible online at www.[________].com and will provide some indication of the risks of investing in the Fund.
Management
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Investment Adviser
Milliman Financial Risk Management LLC (“Milliman”) serves as investment adviser to the Fund.
Portfolio Managers
The following persons serve as portfolio managers of the Fund.
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Robert T. Cummings, Principal & Head of Portfolio Management at Milliman.
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Maria Schiopu, Principal & Head of Portfolio Management at Milliman.
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Jeff Greco, Principal & Head of Strategy Research at Milliman.
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Jordan Rosenfeld, Portfolio Manager at Milliman.
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Each portfolio manager is jointly and primarily responsible for the day-to-day management of the Fund’s portfolio and has served in such capacity
since the Fund’s inception in 2021.
Purchase and Sale of Shares
Shares are available as underlying investment options for variable insurance contracts and variable life insurance policies (each, a “variable contract,” and, collectively, the “variable contracts”) issued by insurance companies. These insurance companies are the record owners of the separate accounts
holding the Shares. You do not buy, sell or exchange Shares directly; rather, you choose investment options through your variable contracts. The insurance companies then cause the separate accounts to purchase and redeem Shares according to
the investment options you choose.
Tax Information
The dividends and distributions paid by the Fund to the insurance company separate accounts will consist of ordinary income, capital gains, or some
combination of both. Because Shares must be purchased through separate accounts used to fund variable contracts, such dividends and distributions will be exempt from current taxation by owners of variable contracts (each, a “contract owner,” and, collectively “contract owners”) if left to accumulate within a separate account. Consult the variable contract prospectus for additional tax
information.
Payments to Insurance Companies and Other Financial Intermediaries
If you allocate contract value to the Fund through an insurance company or other financial intermediary, the Fund, Milliman, the Fund’s distributor or
their related companies may pay the insurance company and/or its affiliates or other intermediary for the sale of Shares and related services. These payments may create a conflict of interest by influencing the insurance company or other
intermediary and your salesperson to recommend an indirect investment in the Fund over another investment. The prospectus or other disclosure documents for the variable contracts may contain additional information about these payments, if any.
You may also ask your salesperson or financial intermediary, or visit your financial intermediary’s website, for more information.
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Fund Summary: Milliman S&P 500 & MSCI EAFE 1-Year Buffer with Stacker Cap
Fund – Jan
Investment Objective
The Fund seeks to provide exposure to the S&P 500 Index, while providing a buffer against the first 10% of losses associated with S&P 500
Index performance and participating in S&P 500 Index gains up to a declared cap, prior to taking into account any fees or expenses or the performance of any fixed income exposure included in the Fund’s portfolio, over the period from January
1, 2022 through December 31, 2022. The Fund also seeks to provide upside exposure to the MSCI EAFE Index up to a declared cap, prior to taking into account any fees or expenses or the performance of any fixed income exposure included in the
Fund’s portfolio, over the same period.
Fees and Expenses of the Fund
This table describes the fees and expenses that you may pay if you buy, hold and sell shares of the Fund (“Shares”).
This table and the example below do not include any fees or sales charges imposed by your variable product. If they were included, the expenses listed below would be higher.
Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment)
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Class 3
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Management Fees
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0.49%
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Distribution and Service (12b-1) Fees
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0.25%
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Other Expenses(1)
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0.50%
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Acquired Fund Fees and Expenses(1)
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[_.__]%
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Total Annual Fund Operating Expenses
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1.24%
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Fee Waiver and/or Expense Reimbursement(2)(3)
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(0.25)%
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Total Annual Fund Operating Expenses After Fee Waiver and/or Expense Reimbursement
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0.99%
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(1)
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“Other Expenses” and “Acquired Fund Fees and Expenses” are based on estimated amounts for the current fiscal year.
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(2)
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The Fund’s investment adviser, Milliman Financial Risk Management LLC (“Milliman”), has contractually
agreed to waive advisory fees and/or reimburse expenses to the extent necessary to limit the Fund’s total annual Fund operating expenses (excluding taxes, interest, brokerage fees and commissions, Rule 12b-1 fees, acquired fund fees and
expenses, short-sale dividend expenses, administrative services fees, other expenses that are capitalized in accordance with generally accepted accounting principles, and extraordinary or non-routine expenses not incurred in the
ordinary course of the Fund’s business) to 0.74% of the Fund's average daily net assets (the “Expense Limitation Agreement”) until at least November 1, 2022. During its term, the Expense
Limitation Agreement cannot be terminated or amended to increase the applicable limit without approval of the Board of Trustees of the Trust (the “Board”). Milliman may recoup from the Fund any
advisory fees waived or expenses reimbursed pursuant to the Expense Limitation Agreement for a period of three years from the date on which such waiver or reimbursement occurred; provided, however, that such recoupment shall not be made
if it would cause the Fund’s total annual Fund operating expenses to exceed the lesser of (a) the expense limitation in effect at the time of the reimbursement, or (b) the expense limitation in effect at the time of recoupment, if any.
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(3)
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In addition to the Expense Limitation Agreement, Milliman has contractually agreed to waive its advisory fees in an amount equal to the Fund’s
acquired fund fees and expenses until at least November 1, 2022 (the “Fee Waiver”). This contract cannot be terminated or modified without the consent of the Board.
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Example
This example is intended to help you compare the cost of investing in the Fund with the cost of investing in other funds. This example assumes that you
invest $10,000 in the Fund for the time periods indicated and then sell all of your Shares at the end of those periods. This example also assumes that your investment has a 5% return each year and that the Fund’s operating expenses remain at
current levels and that the Expense Limitation Agreement and Fee Waiver remain in place for their contractual periods. Although your actual costs may be higher or lower, your costs, based on these assumptions, would be:
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1 Year
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3 Years
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Class 3
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$104
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$384
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This example does not include any fees or sales charges imposed by your variable product. If they were included, the expenses listed above would be
higher.
Portfolio Turnover
The Fund pays transaction costs, such as commissions, when it purchases and sells securities (or “turns over” its portfolio). A higher portfolio turnover
will cause the Fund to incur additional transaction costs. These costs, which are not reflected in Total Annual Fund Operating Expenses or in the example, may affect the Fund’s performance. Because the Fund has not yet commenced investment
operations, no portfolio turnover information is available at this time.
Principal Investment Strategies
The Fund seeks to achieve its investment objective by transacting in FLexible EXchange® Options (“FLEX Options”)
and by separately maintaining a collateral portfolio (the “Collateral Portfolio”), which is designed primarily to serve as margin or collateral for the Fund’s FLEX Options positions and secondarily to
enhance the Fund’s upside S&P 500 Index and MSCI EAFE Index FLEX Options’ exposure (i.e., by utilizing anticipated income to measure the ability to purchase additional FLEX Options). FLEX Options are
exchange-traded options contracts with uniquely customizable terms. In general, an options contract is an agreement between a buyer and seller that gives the purchaser of the option the right to buy or sell a particular asset at a specified
future date at an agreed upon price, commonly known as the “strike price.” The reference assets for the Fund’s FLEX Options positions will include the S&P 500 Index, the MSCI EAFE Index (the “Secondary Index,”
and together with the S&P 500 Index, the “Reference Indices,” and, each, a “Reference Index”), and certain exchange-traded funds (“ETFs”), as described further below. The S&P 500 Index is a large-capitalization, market-weighted, U.S. equities index that tracks the price (excluding dividends) of 500 leading companies
in leading industries of the U.S. economy. The Secondary Index is [a float-adjusted, market capitalization-weighted index that is designed to measure the performance of large and mid-capitalization securities across 21 developed markets,
including countries in Europe, Australasia and the Far East, excluding the United States and Canada].
The Collateral Portfolio may be invested in short-term fixed-income securities, including corporate bonds and other corporate debt securities,
asset-backed securities (“ABS”), securities issued by the U.S. Government or its agencies and instrumentalities, securities issued by non-U.S. governments or their agencies and instrumentalities, money
market securities and funds, other interest-bearing instruments, cash, ETFs that primarily invest in any of the foregoing instruments, options on ETFs and options box spreads. An options box spread is the combination of different options trades
that have offsetting spreads (e.g., purchases and sales on the same underlying instrument, such as an index or an ETF, but with different strike prices and/or expiration dates) for the purpose of
generating income. The Fund may invest in short-term fixed income securities or other instruments, including through ETFs, of any maturity and credit quality. The Fund will generally invest up to 35% of its net assets in one or more ETFs that
provide exposure to investment grade corporate bonds.
Due to the unique mechanics of the Fund’s strategy, the return an investor can expect to receive from an investment in the Fund has characteristics that
are distinct from the returns of many other investment vehicles. It is important that an investor understand these characteristics before making an investment in the Fund.
In seeking to achieve its investment objective, the Fund seeks to produce pre-determined outcomes (the “Outcomes”)
that are based upon the performance of the Reference Indices over a one-year period (the “Outcome Period”). The initial Outcome Period for the Fund is January 1, 2022 through December 31, 2022. Following the
initial Outcome Period, each subsequent Outcome Period will be a one-year period commencing upon the expiration of the prior Outcome Period. The Fund seeks to achieve the Outcomes by purchasing and writing (selling) FLEX Options to create layers
within the Fund’s portfolio. One layer is designed to produce returns that correlate to those of the S&P 500 Index for the Outcome Period if the S&P 500 Index experiences gains during that time, subject to an upside return cap (the “S&P 500 Index Cap”), as described below. A second layer is designed to produce returns that correlate to any upside market performance of the Secondary Index over the
Outcome Period, subject to an upside return cap (the “Secondary Index Cap,” and, together with the S&P 500 Index Cap, the “Index Caps,” and, each, an “Index Cap”), as described below. A third layer is designed to produce returns that correlate to those of the S&P 500 Index for the Outcome Period that are buffered up to 10% if the S&P 500 Index
experiences losses during
502
that time (the “Buffer”). There is no guarantee that the Fund will be
successful in its attempt to produce returns that correlate to those of the S&P 500 Index or the Secondary Index up to the applicable Index Caps or produce buffered returns against the Fund’s S&P 500 Index exposure.
Milliman Financial Risk Management, LLC (“Milliman”), the investment adviser of the Fund, seeks to establish the
Buffer by writing one put FLEX Option on the S&P 500 Index with a strike price that is 10% lower than the value of the S&P 500 Index at the beginning of the Outcome Period.
Milliman seeks to establish the Index Caps by purchasing long call FLEX Options on each Reference Index with a strike price approximately equal to the
value of the respective Reference Index at the beginning of the Outcome Period. Milliman purchases these FLEX Options with a portion of the Fund’s net assets plus (i) the cash received from writing the put FLEX Option designed to create the
Buffer, (ii) additional cash received by utilizing FLEX Options to create a put spread (the “Put Spread Strategy”) on fixed income securities and/or one or more ETFs that provide exposure to fixed income
securities, and (iii) yield received from the Collateral Portfolio. Milliman seeks to achieve the Put Spread Strategy for the Fund by writing a put FLEX Option on an underlying asset at a strike price at or lower than the underlying asset’s
market price or current value at the beginning of the Outcome Period, and buying a put FLEX Option on the same underlying asset at a lower strike price than the written put FLEX Option.
The Index Caps represent the maximum rate of return in each Reference Index that an investor can achieve from an investment in the Fund over the Outcome
Period. Milliman calculates the Index Caps based upon (i) its evaluation of prevailing market conditions on the first day of the Outcome Period and (ii) the total number of long call FLEX Options on each Reference Index that it is able to purchase
at that time. As of the date of this Prospectus, and assuming current market conditions persist, Milliman expects that the Index Caps will be between the below ranges (both gross and net of Fund fees and expenses). Any fees or expenses imposed by
your variable product, and any other expenses incurred by the Fund, will have the effect of further reducing each Index Cap. In addition, in certain market conditions, the performance of the Collateral Portfolio
and the Put Spread Strategy could cause the Fund to underperform relative to the Reference Indices, which could further limit Fund gains below the Index Caps, notwithstanding any performance of the Reference Indices in excess of the Index Caps.
|
Estimated Index Cap Ranges
(As of [___])
|
||
|
Prior to Taking into Account Fund Fees and Expenses
|
After Taking into Account Fund Fees and Expenses
|
|
|
S&P 500 Index Cap
|
||
|
Class 3
|
[__]% and [__]%
|
[__]% and [__]%
|
|
Secondary Index Cap
|
||
|
Class 3
|
[__]% and [__]%
|
[__]% and [__]%
|
The Buffer is only operative against the first 10% of losses in the Fund’s S&P 500 Index exposure for the Outcome Period. If the S&P 500 Index
decreases in value by more than 10% during the Outcome Period, the Fund (and therefore investors in Shares) will experience all subsequent losses in the Fund’s S&P 500 Index exposure on a one-to-one basis for the Outcome Period. The Fund
seeks to produce buffered returns against its S&P 500 Index exposure prior to taking into account any fees or expenses or the performance of the Collateral Portfolio or the Put Spread Strategy. The Buffer
is not operative against losses in the Collateral Portfolio or the Put Spread Strategy. If the Collateral Portfolio and/or the Put Spread Strategy experiences losses, it could have the effect of reducing the impact of, or completely
eliminating, the Buffer on the Fund’s S&P 500 Index exposure. In certain market conditions, the performance of the Collateral Portfolio and/or the Put Spread Strategy could cause the Fund to significantly underperform the S&P 500
Index. The following table reflects the Buffer both gross and net of Fund fees and expenses:
503
|
Share Class
|
Buffer
(As of [___])
|
|
|
Prior to Taking into Account Fund Fees and Expenses
|
After Taking into Account Fund Fees and Expenses
|
|
|
Class 3
|
10%
|
[__]%
|
Because the Fund also seeks to provide only upside exposure to the Secondary Index during the Outcome Period, the Fund’s NAV will not be impacted by any
losses experienced by the Secondary Index when measured from the beginning to the end of the Outcome Period. If the Secondary Index increases in value during the Outcome Period and later decreases in value during the Outcome Period, the Fund’s NAV
will reflect any such decreases until the Secondary Index reaches its initial value (measured as of the first day of the Outcome Period). If the Secondary Index decreases in value over the course of an entire Outcome Period, the Fund’s NAV will not
reflect such losses; therefore, the Fund’s overall performance will be approximately that of the S&P 500 Index for the Outcome Period, subject to the Buffer and the S&P 500 Index Cap.
The definitive Index Caps and Buffer will be set forth on the Fund’s website. The Fund’s website will also provide information relating to the
Outcomes on a daily basis, including the Fund’s position relative to the Index Caps and the Buffer. You may also contact your insurance company or other financial intermediary for more information.
Additionally, the Fund’s net asset value (“NAV”) will not increase or decrease at the same rate as the Reference
Indices because the Fund’s strategy relies upon the performance of the Collateral Portfolio and the Put Spread Strategy, in addition to the value of the Fund’s FLEX Options positions on the Reference Indices. While Milliman anticipates that the
Fund’s NAV will generally move in the same direction as the S&P 500 Index, and correspond to any upside returns of the Secondary Index (meaning that the Fund’s NAV will generally increase if the Reference Indices experience gains or decrease if
the Reference Indices experience losses), the Fund’s NAV may not decrease at the same rate as the Reference Indices (especially when factoring in the performance of the Collateral Portfolio and the Put Spread Strategy) and will not increase at the
same rate as the Reference Indices (especially when factoring in the Index Caps and the performance of the Collateral Portfolio and the Put Spread Strategy). Similarly, the amount of time remaining until the end of the Outcome Period also affects
the impact of the Buffer on the Fund’s NAV, because the Buffer may not be in full effect prior to the end of the Outcome Period.
The FLEX Options utilized in the Fund’s portfolio are each set to expire on the last day of the Outcome Period. The customizable nature of FLEX Options
will allow Milliman to select the strike price at which each FLEX Option will be exercised at the expiration of the FLEX Option term. At the commencement of the Outcome Period, Milliman will specifically select the strike price for each FLEX Option
in a manner designed to achieve the Outcomes when the FLEX Options are exercised on the final day of the Outcome Period, depending on the anticipated performance of the Reference Indices, the Collateral Portfolio and the Put Spread Strategy over
the duration of that Outcome Period.
The hypothetical graphical illustrations provided below are designed to illustrate the Outcomes based upon the
hypothetical performance of the Reference Indices for an investor who holds Shares for the entirety of the Outcome Period. The hypothetical graphical illustrations do not include any fees or expenses
imposed by your variable product or expenses incurred by the Fund, and do not reflect the performance of the Collateral Portfolio or the Put Spread Strategy. Additional hypothetical graphical representations of the Outcomes are provided in
“Additional Information About the Funds and the Risks of Investing.” There is no guarantee that the Fund will be successful in its attempt to achieve the Outcomes for the Outcome Period.
504
The following table contains hypothetical examples designed to illustrate the Outcomes the Fund seeks to
achieve over the Outcome Period, based upon the performance of the Reference Indices from (100)% to 100% after taking into account the Index Caps and the Buffer, but prior to taking into account any fees or
expenses or the performance of the Collateral Portfolio or the Put Spread Strategy. The table is provided for illustrative purposes only and does not provide every possible performance scenario for Shares over
the course of the Outcome Period. There is no guarantee that the Fund will be successful in its attempt to achieve the Outcomes for an Outcome Period. The table is not intended to predict or project the performance of the FLEX Options or the Fund. Investors should not take this information as an
assurance of the expected performance of the Reference Indices or the Fund. Actual Fund performance will vary with fluctuations in the performance of the Collateral Portfolio and the Put Spread Strategy, in addition to the value of the
Fund’s FLEX Options positions on the Reference Indices, during the Outcome Period, among other factors. The performance of the Collateral Portfolio and the Put Spread Strategy
could significantly impact the performance of the Fund, which could prevent the Fund from achieving the Outcomes that it seeks to produce. The table does not reflect any fees or expenses imposed by your variable product or expenses
incurred by the Fund. If it did, the returns shown for the Fund would be lower. Please refer to the Fund’s website, which provides updated information relating to this table on a daily basis throughout the Outcome Period. Please contact your
insurance company or other financial intermediary for more information.
505
|
Index/Fund
|
Hypothetical Performance1
|
|||||||||||
|
S&P 500 Index Price Performance
|
(100)%
|
(50)%
|
(20)%
|
(10)%
|
(5)%
|
0%
|
5%
|
10%
|
15%
|
20%
|
50%
|
100%
|
|
Secondary Index Price Performance
|
(100)%
|
(50)%
|
(20)%
|
(10)%
|
(5)%
|
0%
|
5%
|
10%
|
15%
|
20%
|
50%
|
100%
|
|
Fund Performance at NAV
|
(90)%
|
(40)%
|
(10)%
|
0%2
|
0%2
|
0%
|
10%3
|
14%3
|
14%3
|
14%3
|
14%3
|
14%3
|
| 1 |
Does not take into account any fees or expenses or the performance of the Collateral Portfolio or the Put Spread Strategy.
|
| 2 |
Reflects the impact of the Buffer.
|
| 3 |
Reflects the impact of assumed Index Caps of 7% per index, 14% total.
|
Understanding Outcomes. The Outcomes the Fund seeks to achieve are measured based upon the
Fund’s NAV on the first day of the Outcome Period. The Outcome Period begins on the day Milliman transacts in the FLEX Options on behalf of the Fund, and ends on the day those FLEX Options expire. An investor who
purchases Shares after the commencement of the Outcome Period will likely have purchased Shares at a different NAV than the NAV on the first day of the Outcome Period (the NAV upon which the Outcomes are based) and may experience investment
outcomes very different from those the Fund seeks to achieve, especially when factoring in any fees or expenses or the performance of the Collateral Portfolio and the Put Spread Strategy. An investor who redeems Shares prior to the end of the
Outcome Period may also experience investment outcomes very different from those the Fund seeks to achieve. The Outcomes are designed with the expectation that an investor will hold Shares on the day that Milliman transacts in the FLEX Options on
behalf of the Fund, and on the day those FLEX Options expire. There is no guarantee that the Fund will be successful in its attempt to achieve the Outcomes.
Understanding the Index Caps. Unlike other investment products, the potential returns an
investor can receive from an investment in the Fund are subject to the Index Caps. This means that if one or both of the Reference Indices experience gains for the Outcome Period, an investor in the Fund will only
experience those gains up to the applicable Index Cap. Milliman calculates the Index Caps for each Outcome Period based upon (i) its evaluation of prevailing market conditions on the first day of the Outcome Period and (ii) the total
number of long call FLEX Options on each Reference Index that it is able to purchase at that time. If an investor is considering purchasing Shares during the Outcome Period, and the Fund’s NAV has increased in
value to a level near one or both of the Index Caps, an investor purchasing Shares at that price will have limited to no gains available for the remainder of the Outcome Period, but will remain vulnerable to significant downside risks (with
respect to the S&P 500 Index FLEX Options’ exposure). In certain market conditions, the performance of the Collateral Portfolio and the Put Spread Strategy could cause the Fund to underperform
relative to the Reference Indices, which could further limit Fund gains below the Index Caps, notwithstanding any performance of the Reference Indices in excess of the Index Caps.
Understanding the Buffer. The Buffer that the Fund seeks to provide is only operative
against the first 10% of losses in the Fund’s S&P 500 Index exposure for the Outcome Period. If an investor is considering purchasing Shares during the Outcome Period, and the S&P 500 Index has decreased
in value by an amount equal to or greater than 10%, an investor purchasing Shares at that time will be able to participate in any gains thereafter (up to the Index Caps), but will not benefit from the Buffer that the Fund seeks to offer for the
remainder of the Outcome Period if the losses continue to be equal to or greater than 10% during that period. Conversely, if an investor is considering purchasing Shares during the Outcome Period, and the Fund’s NAV has increased in value, then
an investor may experience losses before implementation of the Buffer that the Fund seeks to provide. While the Fund seeks to produce returns that correlate to those of the S&P 500 Index for the Outcome Period that are buffered up to
10% (prior to taking into account any fees or expenses or the performance of the Collateral Portfolio or the Put Spread Strategy) for investors who hold Shares for the entire Outcome Period, there is no guarantee it will successfully do so. In addition, the Buffer is not operative against losses in the Collateral Portfolio or the Put Spread Strategy. If the Collateral Portfolio and/or the Put Spread Strategy experiences losses, it could have the
effect of reducing the impact of, or completely eliminating, the Buffer on the Fund’s S&P 500 Index exposure. In certain market conditions, the performance of the Collateral Portfolio and/or the Put Spread Strategy could cause the Fund to
significantly underperform the S&P 500 Index. Investors who purchase Shares at the beginning of the Outcome Period may lose their entire
506
investment. Investors who purchase Shares after the Outcome Period has begun may also lose their entire investment. An
investment in the Fund is only appropriate for investors willing to bear those losses.
Fund Rebalance. Milliman implements the Fund’s strategy on an annual basis, seeking to
produce the Outcomes for an Outcome Period. On the last business day of any stated Outcome Period, all of the Fund’s existing FLEX Options, which includes those used to establish the Buffer, the Index Caps and the Put Spread Strategy, will expire
and Milliman will transact in a new set of FLEX Options on the same business day, which will commence a new Outcome Period beginning the following business day. At that same time, Milliman will also evaluate whether to make any adjustments to the
Collateral Portfolio. Accordingly, Shares can be held indefinitely if investors determine to participate in additional Outcome Periods.
Approximately one week prior to the end of each Outcome Period, the Fund will file a prospectus supplement, which will notify existing investors of
(i) the date on which the existing Outcome Period will end; (ii) the date on which the new Outcome Period will commence; and (iii) the anticipated ranges of the Index Caps that will be used for the new Outcome Period. Immediately preceding the
commencement date of the new Outcome Period, the Fund will file a prospectus supplement disclosing the Fund’s final Index Caps (both gross and net of Fund fees and expenses) for the new Outcome Period. This information will also be available
online at www.[___________].com, and on your insurance company’s website. Please contact your insurance company or other financial intermediary for more information.
Fund Classification. The Fund is classified as “non-diversified” under the Investment
Company Act of 1940, as amended (the “1940 Act”).
Principal Risks
You could lose money by investing in the Fund. An investment in the Fund is not a deposit of a bank and is not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other governmental agency. There can be no assurance that the Fund’s investment objectives will be achieved.
Downside Loss Buffer Risk. There can be no guarantee that the Fund will be successful in its strategy to
buffer against S&P 500 Index losses if the S&P 500 Index decreases in value over the Outcome Period. The Fund’s strategy is designed to produce returns that correlate to those of the S&P 500 Index, subject to the S&P 500 Index
Cap, while limiting downside S&P 500 Index losses and providing additional upside exposure to the Secondary Index, subject to the Secondary Index Cap, if Shares are bought on the day on which Milliman transacts in the FLEX Options on behalf
of the Fund and held until those FLEX Options expire at the end of each Outcome Period. The success of the Buffer also depends upon the performance of the Collateral Portfolio and the Put Spread Strategy. If
the Collateral Portfolio and/or the Put Spread Strategy experiences losses, it could have the effect of reducing the impact of, or completely eliminating, the Buffer on the Fund’s S&P 500 Index exposure. In certain market conditions, the
performance of the Collateral Portfolio and/or the Put Spread Strategy could cause the Fund to significantly underperform the S&P 500 Index. Despite the intended Buffer, an investor could lose their entire investment. In the
event an investor purchases Shares after the date on which Milliman transacted in the FLEX Options on behalf of the Fund, or redeems Shares prior to the expiration of those FLEX Options, the Buffer that the Fund seeks to provide may not be
available or fully applicable.
Risk of Capped Upside Returns. The Fund’s strategy is designed to produce returns that correlate to those of the
Reference Indices up to the Index Caps if Shares are bought on the day on which Milliman transacts in the FLEX Options on behalf of the Fund and held until those FLEX Options expire at the end of the Outcome Period, subject to the Index Caps. In
the event that one or both of the Reference Indices experience gains during the Outcome Period, the Fund will only participate in those gains up to the applicable Index Cap. In the event that one or both Reference Indices experience gains in excess
of the applicable Index Cap over the duration of the Outcome Period, the Fund will not participate in those excess gains. Because the Fund’s strategy provides capped exposure to two Reference Indices, the Index Caps may be lower than if the Fund
provided capped exposure to only a single Reference Index. In the event an investor purchases Shares after the date on which the FLEX Options were entered into and the Fund has risen in value to a level near to an Index Cap, there may be little or
no ability for that investor to experience an investment gain on their Shares relating to that Reference Index. In certain market conditions, the performance of the Collateral Portfolio and the Put Spread
Strategy could cause the Fund to
507
underperform relative to the Reference Indices, which could further limit Fund gains below the Index Caps, notwithstanding any
performance of the Reference Indices in excess of the Index Caps. An investor should consider the amount of the Index Caps, and the Fund’s position relative to each Index Cap, before investing in the Fund.
Index Cap Change Risk. Because the Index Caps for each Outcome Period are calculated based upon (i) Milliman’s
evaluation of prevailing market conditions on the first day of the Outcome Period and (ii) the total number of long call FLEX Options on the Reference Indices that Milliman is able to purchase at that time, the Index Caps may rise or fall from one
Outcome Period to the next. Any change in the Index Caps could be significant and they are unlikely to remain the same for consecutive Outcome Periods.
FLEX Options Risk. The Fund will transact in FLEX Options issued and guaranteed for settlement by the OCC. The
Fund bears the risk that the OCC will be unable or unwilling to perform its obligations under the FLEX Options contracts, which could result in significant losses to the Fund. In less liquid markets, terminating a FLEX Option may require the
payment of a premium or acceptance of a discounted price, and may take longer to complete. In addition, a less liquid trading market may adversely impact the value of the Fund’s FLEX Options and therefore the NAV of the Fund. In addition, the value
of the Fund’s FLEX Options positions is not anticipated to increase or decrease at the same rate as the reference asset; and while it is anticipated that they will generally move in the same direction, it is possible that they may move in different
directions. Certain FLEX Options positions may also expire worthless. The use of FLEX Options involves leverage, which can cause the Fund’s portfolio to be more volatile than if the portfolio had not been leveraged. Leverage can significantly
magnify the effect of price movements of the reference asset, disproportionately increasing the Fund’s losses and reducing the Fund’s opportunities for gains when the reference asset changes in unexpected ways. In some instances, such leverage
could result in losses that exceed the original amount invested.
Investment Objective and Outcomes Risk. There is no guarantee that the Fund will be successful in its attempt
to achieve its investment objective and/or the Outcomes, and an investor could lose some or all of their investment in the Fund. Certain circumstances under which the Fund might not achieve its objective and/or the Outcomes include, but are not
limited to (i) if the Fund disposes of FLEX Options, (ii) if the Fund is unable to maintain the proportional relationship based on the number of FLEX Options in the Fund’s portfolio, (iii) significant accrual of Fund expenses in connection with
effecting the Fund’s principal investment strategy, (iv) losses incurred by the Fund’s holdings in the Collateral Portfolio and/or losses resulting from the Put Spread Strategy, or (iv) adverse tax law changes affecting the treatment of FLEX
Options.
Tax Risk. The Fund intends to elect, and to qualify each year, to be treated as a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”). As a RIC, the Fund will not be subject to U.S. federal income tax on the portion
of its net investment income and net capital gain that it distributes to shareholders, provided that it satisfies certain requirements of the Code. To maintain its status as a RIC, the Fund must meet certain income, diversification and
distributions tests. For purposes of the diversification test, the identification of the issuer (or, in some cases, issuers) of a particular Fund investment can depend on the terms and conditions of that investment. In particular, there is no
published IRS guidance or case law on how to determine the “issuer” of certain derivatives that the Fund will enter into and the Fund has not received a private letter ruling on this point. Therefore, there is a risk that the Fund will not meet the
Code’s diversification requirements and will not qualify, or will be disqualified, as a RIC. If the Fund does not qualify as a RIC for any taxable year and certain relief provisions are not available, the Fund’s taxable income will be subject to
tax at the Fund level and to a further tax at the shareholder level when such income is distributed.
The Fund also intends to comply with the diversification requirements of Section 817(h) of the Code, and the regulations thereunder, relating to the
tax-deferred status of variable accounts that are based on insurance company separate accounts (referred to as “segregated asset accounts” for federal income tax purposes). These diversification requirements apply in addition to the RIC
diversification requirements discussed above. There also is no published guidance or case law on how to determine the “issuer” of the derivatives referred to above for purposes of the diversification requirements of Section 817(h) of the Code and
the Fund has not received a private letter ruling on this point. If these requirements are not met, or under other circumstances, such as if the Fund does not qualify as a RIC for any taxable year, it is possible that the contract owners (rather
than the insurance company) will be treated for federal income tax purposes as the taxable owners of the assets held by the segregated asset accounts.
508
Clearing Member Default Risk. The Fund will hold FLEX Options through accounts at members of clearing houses (“clearing members”) rather than a bank or a broker. Assets deposited by the Fund with any clearing member as margin for its FLEX Options positions may, in certain circumstances, be used to satisfy losses of other
clients of the Fund’s clearing member where such assets may be held in commingled omnibus accounts. In addition, although clearing members guarantee performance of their clients’ obligations to the clearing house, there is a risk that the assets of
the Fund might not be fully protected in the event of the clearing member’s bankruptcy, as the Fund would be limited to recovering only a pro rata share of all available funds segregated on behalf of the
clearing member’s customers for the relevant account class.
Debt Securities Risk. The prices of debt securities will be affected by changes in interest rates, the
creditworthiness of the issuer and other factors. These risks could affect the value of investments in which the Fund invests, possibly causing the Fund’s NAV to be reduced and fluctuate more than other types of investments. During periods of
falling interest rates, an issuer of a callable bond may repay the security before its stated maturity, and the Fund may have to reinvest the proceeds in securities with lower yields, which would result in a decline in the Fund’s income, or in
securities with greater risks or with other less favorable features. Changing interest rates, including rates that fall below zero, may have unpredictable effects on markets, result in heightened market volatility and detract from the Fund’s
performance to the extent the Fund is exposed to such interest rates. An increase in interest rates will generally cause the value of fixed-income securities held by the Fund to decline, may lead to heightened volatility in the fixed-income
markets and may adversely affect the liquidity of certain fixed-income investments, including those held by the Fund. Risks associated with rising interest rates are heightened given that interest rates in the U.S. are near historic lows.
Adjustable-rate instruments also react to interest rate changes in a similar manner, although generally to a lesser degree (depending, however, on the characteristics of the reset terms, including the index chosen, frequency of reset and reset
caps or floors, among other factors). Interest rate sensitivity is generally more pronounced and less predictable in instruments with uncertain payment or prepayment schedules and also for those with longer maturities.
Foreign Securities and Credit Exposure Risk. U.S. dollar-denominated securities carrying foreign credit exposure
may be affected by unfavorable political, economic or governmental developments that could affect payments of principal and interest. Furthermore, the value of the Fund’s foreign investments (whether direct or indirect) may be adversely affected by
political and social instability in their home countries, by changes in economic or taxation policies in those countries, or by the difficulty in enforcing obligations in those countries. Foreign companies generally may be subject to less stringent
regulations than U.S. companies, including financial reporting requirements and auditing and accounting controls. As a result, there generally is less publicly available information about foreign companies than about U.S. companies. Trading in many
foreign securities may be less liquid and more volatile than U.S. securities due to the size of the market or other factors.
U.S. Government Securities Risk. U.S. Government securities are subject to interest rate risk but generally do
not involve the credit risks associated with investments in other types of debt securities. As a result, the yields available from U.S. Government securities are generally lower than the yields available from other debt securities. U.S. Government
securities are guaranteed only as to the timely payment of interest and the payment of principal when held to maturity. While securities issued or guaranteed by U.S. federal government agencies are backed by the full faith and credit of the U.S.
Department of the Treasury, securities issued by government sponsored entities are solely the obligation of the issuer and generally do not carry any guarantee from the U.S. Government.
ABS Risk. ABS are subject to the general debt securities risks described above. In addition, ABS may be less
liquid than other bonds, and may be more sensitive than other bonds to the market’s perception of issuers and creditworthiness of payees, which may result in the Fund experiencing difficulty selling or valuing these securities. ABS markets have
experienced extraordinary weakness and volatility at various times in recent years, and may decline quickly in the event of a substantial economic or market downturn. Accordingly, these securities may be subject to greater risk of default during
periods of economic downturn than other securities, which could result in possible losses to the Fund.
Issuer Risk. The performance of the Fund depends on the performance of individual securities to which the Fund
has exposure. The Fund may be adversely affected if an issuer of underlying securities held by the Fund is unable or
509
unwilling to repay principal or interest when due. Changes in the financial condition or credit rating of an issuer of those securities may cause the
value of the securities to decline.
Management Risk. The Fund is subject to management risk because it is an actively managed portfolio. Milliman
will apply investment techniques and risk analyses in making investment decisions for the Fund, but there can be no guarantee that the Fund will meet its investment objective and/or the Outcomes. In addition, Milliman does not use defensive
strategies or attempt to reduce the Fund’s exposures to poor performing positions during an Outcome Period. This differs from funds that are managed to seek to outperform a benchmark index. Therefore, in the event of a general market decline, the
Fund’s value may fall more than the value of another fund that does attempt to hedge against such market declines.
Market Risk. The Fund could lose money over short periods due to short-term market movements and over longer
periods during more prolonged market downturns. Assets may decline in value due to factors affecting financial markets generally or particular asset classes or industries represented in the markets. The value of a FLEX Option or other asset may
also decline due to general market conditions, economic trends or events that are not specifically related to the issuer of the security or other asset, or due to factors that affect a particular issuer, country, region, market, industry, sector or
asset class.
Non-Diversification Risk. The Fund may invest a relatively high percentage of its assets in a limited number of
issuers. As a result, the Fund may be more susceptible to a single adverse economic or regulatory occurrence affecting one or more of these issuers, experience increased volatility and be highly invested in certain issuers.
Large Shareholder Risk. At times, the Fund may experience adverse effects when certain large shareholders,
including insurance company separate accounts, redeem large amounts of shares of the Fund. Large redemptions may cause the Fund to sell portfolio holdings at times when it would not otherwise do so and may increase transaction costs and/or result
in an increase to the Fund’s expense ratio. A large redemption could be detrimental to the Fund and its remaining shareholders.
Risks of Investing in ETFs. In addition to the risks associated with the underlying assets held by the ETFs in
which the Fund invests, investments in ETFs are also subject to the following additional risks: (i) only authorized participants may engage in transactions directly with ETFs but none are obligated to do so, which could result in an ETF’s shares
trading at a premium or discount to its NAV or possibly face trading halts or delisting; (ii) certain ETFs seek to track the performance of an underlying index and will not attempt to take defensive positions under any market conditions, including
declining markets, which could result in losses; and (iii) because ETF shares trade on the secondary market, there is not guarantee that an active market will be developed or maintained, which could result in the ETF’s shares trading at a premium
or discount to its NAV. Investments in ETFs may involve duplication of management fees and certain other expenses, as the Fund indirectly bears its proportionate share of any expenses paid by the ETFs in which it invests.
Risks of Investing in Money Market Funds. Money market funds seek to preserve the value of shareholder
investments at $1.00 per share, but shareholders, such as the Fund, may still lose money by investing in such funds. In addition, a money market fund may impose a fee upon the sale of its shares or may temporarily suspend the ability to sell shares
if the fund’s liquidity falls below required minimums because of market conditions or other factors. The credit quality of a money market fund’s holdings can change rapidly in certain markets, and the default of a single holding could have an
adverse impact on the fund’s share price. A money market fund’s share price can also be negatively affected during periods of high redemption pressures, illiquid markets, and/or significant market volatility.
Performance
As of the date of this Prospectus, the Fund has not commenced operations and therefore does not have a performance history. Once available, the Fund’s
performance information will be accessible online at www.[________].com and will provide some indication of the risks of investing in the Fund.
Management
510
Investment Adviser
Milliman Financial Risk Management LLC (“Milliman”) serves as investment adviser to the Fund.
Portfolio Managers
The following persons serve as portfolio managers of the Fund.
|
●
|
Robert T. Cummings, Principal & Head of Portfolio Management at Milliman.
|
|
●
|
Maria Schiopu, Principal & Head of Portfolio Management at Milliman.
|
|
●
|
Jeff Greco, Principal & Head of Strategy Research at Milliman.
|
|
●
|
Jordan Rosenfeld, Portfolio Manager at Milliman.
|
Each portfolio manager is jointly and primarily responsible for the day-to-day management of the Fund’s portfolio and has served in such capacity
since the Fund’s inception in 2021.
Purchase and Sale of Shares
Shares are available as underlying investment options for variable insurance contracts and variable life insurance policies (each, a “variable contract,” and, collectively, the “variable contracts”) issued by insurance companies. These insurance companies are the record owners of the separate accounts
holding the Shares. You do not buy, sell or exchange Shares directly; rather, you choose investment options through your variable contracts. The insurance companies then cause the separate accounts to purchase and redeem Shares according to
the investment options you choose.
Tax Information
The dividends and distributions paid by the Fund to the insurance company separate accounts will consist of ordinary income, capital gains, or some
combination of both. Because Shares must be purchased through separate accounts used to fund variable contracts, such dividends and distributions will be exempt from current taxation by owners of variable contracts (each, a “contract owner,” and, collectively “contract owners”) if left to accumulate within a separate account. Consult the variable contract prospectus for additional tax
information.
Payments to Insurance Companies and Other Financial Intermediaries
If you allocate contract value to the Fund through an insurance company or other financial intermediary, the Fund, Milliman, the Fund’s distributor or
their related companies may pay the insurance company and/or its affiliates or other intermediary for the sale of Shares and related services. These payments may create a conflict of interest by influencing the insurance company or other
intermediary and your salesperson to recommend an indirect investment in the Fund over another investment. The prospectus or other disclosure documents for the variable contracts may contain additional information about these payments, if any.
You may also ask your salesperson or financial intermediary, or visit your financial intermediary’s website, for more information.
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Fund Summary: Milliman S&P 500 & MSCI EAFE 1-Year Buffer with Stacker Cap
Fund – Feb
Investment Objective
The Fund seeks to provide exposure to the S&P 500 Index, while providing a buffer against the first 10% of losses associated with S&P 500
Index performance and participating in S&P 500 Index gains up to a declared cap, prior to taking into account any fees or expenses or the performance of any fixed income exposure included in the Fund’s portfolio, over the period from February
1, 2022 through January 31, 2023. The Fund also seeks to provide upside exposure to the MSCI EAFE Index up to a declared cap, prior to taking into account any fees or expenses or the performance of any fixed income exposure included in the Fund’s
portfolio, over the same period.
Fees and Expenses of the Fund
This table describes the fees and expenses that you may pay if you buy, hold and sell shares of the Fund (“Shares”).
This table and the example below do not include any fees or sales charges imposed by your variable product. If they were included, the expenses listed below would be higher.
Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment)
|
Class 3
|
|
|
Management Fees
|
0.49%
|
|
Distribution and Service (12b-1) Fees
|
0.25%
|
|
Other Expenses(1)
|
0.50%
|
|
Acquired Fund Fees and Expenses(1)
|
[_.__]%
|
|
Total Annual Fund Operating Expenses
|
1.24%
|
|
Fee Waiver and/or Expense Reimbursement(2)(3)
|
(0.25)%
|
|
Total Annual Fund Operating Expenses After Fee Waiver and/or Expense Reimbursement
|
0.99%
|
|
(1)
|
“Other Expenses” and “Acquired Fund Fees and Expenses” are based on estimated amounts for the current fiscal year.
|
|
(2)
|
The Fund’s investment adviser, Milliman Financial Risk Management LLC (“Milliman”), has contractually
agreed to waive advisory fees and/or reimburse expenses to the extent necessary to limit the Fund’s total annual Fund operating expenses (excluding taxes, interest, brokerage fees and commissions, Rule 12b-1 fees, acquired fund fees and
expenses, short-sale dividend expenses, administrative services fees, other expenses that are capitalized in accordance with generally accepted accounting principles, and extraordinary or non-routine expenses not incurred in the
ordinary course of the Fund’s business) to 0.74% of the Fund's average daily net assets (the “Expense Limitation Agreement”) until at least November 1, 2022. During its term, the Expense
Limitation Agreement cannot be terminated or amended to increase the applicable limit without approval of the Board of Trustees of the Trust (the “Board”). Milliman may recoup from the Fund any
advisory fees waived or expenses reimbursed pursuant to the Expense Limitation Agreement for a period of three years from the date on which such waiver or reimbursement occurred; provided, however, that such recoupment shall not be made
if it would cause the Fund’s total annual Fund operating expenses to exceed the lesser of (a) the expense limitation in effect at the time of the reimbursement, or (b) the expense limitation in effect at the time of recoupment, if any.
|
|
(3)
|
In addition to the Expense Limitation Agreement, Milliman has contractually agreed to waive its advisory fees in an amount equal to the Fund’s
acquired fund fees and expenses until at least November 1, 2022 (the “Fee Waiver”). This contract cannot be terminated or modified without the consent of the Board.
|
Example
This example is intended to help you compare the cost of investing in the Fund with the cost of investing in other funds. This example assumes that you
invest $10,000 in the Fund for the time periods indicated and then sell all of your Shares at the end of those periods. This example also assumes that your investment has a 5% return each year and that the Fund’s operating expenses remain at
current levels and that the Expense Limitation Agreement and Fee Waiver remain in place for their contractual periods. Although your actual costs may be higher or lower, your costs, based on these assumptions, would be:
|
1 Year
|
3 Years
|
|
|
Class 3
|
$104
|
$384
|
512
This example does not include any fees or sales charges imposed by your variable product. If they were included, the expenses listed above would be
higher.
Portfolio Turnover
The Fund pays transaction costs, such as commissions, when it purchases and sells securities (or “turns over” its portfolio). A higher portfolio turnover
will cause the Fund to incur additional transaction costs. These costs, which are not reflected in Total Annual Fund Operating Expenses or in the example, may affect the Fund’s performance. Because the Fund has not yet commenced investment
operations, no portfolio turnover information is available at this time.
Principal Investment Strategies
The Fund seeks to achieve its investment objective by transacting in FLexible EXchange® Options (“FLEX Options”)
and by separately maintaining a collateral portfolio (the “Collateral Portfolio”), which is designed primarily to serve as margin or collateral for the Fund’s FLEX Options positions and secondarily to
enhance the Fund’s upside S&P 500 Index and MSCI EAFE Index FLEX Options’ exposure (i.e., by utilizing anticipated income to measure the ability to purchase additional FLEX Options). FLEX Options are
exchange-traded options contracts with uniquely customizable terms. In general, an options contract is an agreement between a buyer and seller that gives the purchaser of the option the right to buy or sell a particular asset at a specified
future date at an agreed upon price, commonly known as the “strike price.” The reference assets for the Fund’s FLEX Options positions will include the S&P 500 Index, the MSCI EAFE Index (the “Secondary Index,”
and together with the S&P 500 Index, the “Reference Indices,” and, each, a “Reference Index”), and certain exchange-traded funds (“ETFs”), as described further below. The S&P 500 Index is a large-capitalization, market-weighted, U.S. equities index that tracks the price (excluding dividends) of 500 leading companies
in leading industries of the U.S. economy. The Secondary Index is [a float-adjusted, market capitalization-weighted index that is designed to measure the performance of large and mid-capitalization securities across 21 developed markets,
including countries in Europe, Australasia and the Far East, excluding the United States and Canada].
The Collateral Portfolio may be invested in short-term fixed-income securities, including corporate bonds and other corporate debt securities,
asset-backed securities (“ABS”), securities issued by the U.S. Government or its agencies and instrumentalities, securities issued by non-U.S. governments or their agencies and instrumentalities, money
market securities and funds, other interest-bearing instruments, cash, ETFs that primarily invest in any of the foregoing instruments, options on ETFs and options box spreads. An options box spread is the combination of different options trades
that have offsetting spreads (e.g., purchases and sales on the same underlying instrument, such as an index or an ETF, but with different strike prices and/or expiration dates) for the purpose of
generating income. The Fund may invest in short-term fixed income securities or other instruments, including through ETFs, of any maturity and credit quality. The Fund will generally invest up to 35% of its net assets in one or more ETFs that
provide exposure to investment grade corporate bonds.
Due to the unique mechanics of the Fund’s strategy, the return an investor can expect to receive from an investment in the Fund has characteristics that
are distinct from the returns of many other investment vehicles. It is important that an investor understand these characteristics before making an investment in the Fund.
In seeking to achieve its investment objective, the Fund seeks to produce pre-determined outcomes (the “Outcomes”)
that are based upon the performance of the Reference Indices over a one-year period (the “Outcome Period”). The initial Outcome Period for the Fund is February 1, 2022 through January 31, 2023. Following the
initial Outcome Period, each subsequent Outcome Period will be a one-year period commencing upon the expiration of the prior Outcome Period. The Fund seeks to achieve the Outcomes by purchasing and writing (selling) FLEX Options to create layers
within the Fund’s portfolio. One layer is designed to produce returns that correlate to those of the S&P 500 Index for the Outcome Period if the S&P 500 Index experiences gains during that time, subject to an upside return cap (the “S&P 500 Index Cap”), as described below. A second layer is designed to produce returns that correlate to any upside market performance of the Secondary Index over the
Outcome Period, subject to an upside return cap (the “Secondary Index Cap,” and, together with the S&P 500 Index Cap, the “Index Caps,” and, each, an “Index Cap”), as described below. A third layer is designed to produce returns that correlate to those of the S&P 500 Index for the Outcome Period that are buffered up to 10% if the S&P 500 Index
experiences losses during
513
that time (the “Buffer”). There is no guarantee that the Fund will be
successful in its attempt to produce returns that correlate to those of the S&P 500 Index or the Secondary Index up to the applicable Index Caps or produce buffered returns against the Fund’s S&P 500 Index exposure.
Milliman Financial Risk Management, LLC (“Milliman”), the investment adviser of the Fund, seeks to establish the
Buffer by writing one put FLEX Option on the S&P 500 Index with a strike price that is 10% lower than the value of the S&P 500 Index at the beginning of the Outcome Period.
Milliman seeks to establish the Index Caps by purchasing long call FLEX Options on each Reference Index with a strike price approximately equal to the
value of the respective Reference Index at the beginning of the Outcome Period. Milliman purchases these FLEX Options with a portion of the Fund’s net assets plus (i) the cash received from writing the put FLEX Option designed to create the
Buffer, (ii) additional cash received by utilizing FLEX Options to create a put spread (the “Put Spread Strategy”) on fixed income securities and/or one or more ETFs that provide exposure to fixed income
securities, and (iii) yield received from the Collateral Portfolio. Milliman seeks to achieve the Put Spread Strategy for the Fund by writing a put FLEX Option on an underlying asset at a strike price at or lower than the underlying asset’s
market price or current value at the beginning of the Outcome Period, and buying a put FLEX Option on the same underlying asset at a lower strike price than the written put FLEX Option.
The Index Caps represent the maximum rate of return in each Reference Index that an investor can achieve from an investment in the Fund over the Outcome
Period. Milliman calculates the Index Caps based upon (i) its evaluation of prevailing market conditions on the first day of the Outcome Period and (ii) the total number of long call FLEX Options on each Reference Index that it is able to purchase
at that time. As of the date of this Prospectus, and assuming current market conditions persist, Milliman expects that the Index Caps will be between the below ranges (both gross and net of Fund fees and expenses). Any fees or expenses imposed by
your variable product, and any other expenses incurred by the Fund, will have the effect of further reducing each Index Cap. In addition, in certain market conditions, the performance of the Collateral Portfolio
and the Put Spread Strategy could cause the Fund to underperform relative to the Reference Indices, which could further limit Fund gains below the Index Caps, notwithstanding any performance of the Reference Indices in excess of the Index Caps.
|
Estimated Index Cap Ranges
(As of [___])
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||
|
Prior to Taking into Account Fund Fees and Expenses
|
After Taking into Account Fund Fees and Expenses
|
|
|
S&P 500 Index Cap
|
||
|
Class 3
|
[__]% and [__]%
|
[__]% and [__]%
|
|
Secondary Index Cap
|
||
|
Class 3
|
[__]% and [__]%
|
[__]% and [__]%
|
The Buffer is only operative against the first 10% of losses in the Fund’s S&P 500 Index exposure for the Outcome Period. If the S&P 500 Index
decreases in value by more than 10% during the Outcome Period, the Fund (and therefore investors in Shares) will experience all subsequent losses in the Fund’s S&P 500 Index exposure on a one-to-one basis for the Outcome Period. The Fund
seeks to produce buffered returns against its S&P 500 Index exposure prior to taking into account any fees or expenses or the performance of the Collateral Portfolio or the Put Spread Strategy. The Buffer
is not operative against losses in the Collateral Portfolio or the Put Spread Strategy. If the Collateral Portfolio and/or the Put Spread Strategy experiences losses, it could have the effect of reducing the impact of, or completely
eliminating, the Buffer on the Fund’s S&P 500 Index exposure. In certain market conditions, the performance of the Collateral Portfolio and/or the Put Spread Strategy could cause the Fund to significantly underperform the S&P 500
Index. The following table reflects the Buffer both gross and net of Fund fees and expenses:
514
|
Share Class
|
Buffer
(As of [___])
|
|
|
Prior to Taking into Account Fund Fees and Expenses
|
After Taking into Account Fund Fees and Expenses
|
|
|
Class 3
|
10%
|
[__]%
|
Because the Fund also seeks to provide only upside exposure to the Secondary Index during the Outcome Period, the Fund’s NAV will not be impacted by any
losses experienced by the Secondary Index when measured from the beginning to the end of the Outcome Period. If the Secondary Index increases in value during the Outcome Period and later decreases in value during the Outcome Period, the Fund’s NAV
will reflect any such decreases until the Secondary Index reaches its initial value (measured as of the first day of the Outcome Period). If the Secondary Index decreases in value over the course of an entire Outcome Period, the Fund’s NAV will not
reflect such losses; therefore, the Fund’s overall performance will be approximately that of the S&P 500 Index for the Outcome Period, subject to the Buffer and the S&P 500 Index Cap.
The definitive Index Caps and Buffer will be set forth on the Fund’s website. The Fund’s website will also provide information relating to the
Outcomes on a daily basis, including the Fund’s position relative to the Index Caps and the Buffer. You may also contact your insurance company or other financial intermediary for more information.
Additionally, the Fund’s net asset value (“NAV”) will not increase or decrease at the same rate as the Reference
Indices because the Fund’s strategy relies upon the performance of the Collateral Portfolio and the Put Spread Strategy, in addition to the value of the Fund’s FLEX Options positions on the Reference Indices. While Milliman anticipates that the
Fund’s NAV will generally move in the same direction as the S&P 500 Index, and correspond to any upside returns of the Secondary Index (meaning that the Fund’s NAV will generally increase if the Reference Indices experience gains or decrease if
the Reference Indices experience losses), the Fund’s NAV may not decrease at the same rate as the Reference Indices (especially when factoring in the performance of the Collateral Portfolio and the Put Spread Strategy) and will not increase at the
same rate as the Reference Indices (especially when factoring in the Index Caps and the performance of the Collateral Portfolio and the Put Spread Strategy). Similarly, the amount of time remaining until the end of the Outcome Period also affects
the impact of the Buffer on the Fund’s NAV, because the Buffer may not be in full effect prior to the end of the Outcome Period.
The FLEX Options utilized in the Fund’s portfolio are each set to expire on the last day of the Outcome Period. The customizable nature of FLEX Options
will allow Milliman to select the strike price at which each FLEX Option will be exercised at the expiration of the FLEX Option term. At the commencement of the Outcome Period, Milliman will specifically select the strike price for each FLEX Option
in a manner designed to achieve the Outcomes when the FLEX Options are exercised on the final day of the Outcome Period, depending on the anticipated performance of the Reference Indices, the Collateral Portfolio and the Put Spread Strategy over
the duration of that Outcome Period.
The hypothetical graphical illustrations provided below are designed to illustrate the Outcomes based upon the
hypothetical performance of the Reference Indices for an investor who holds Shares for the entirety of the Outcome Period. The hypothetical graphical illustrations do not include any fees or expenses
imposed by your variable product or expenses incurred by the Fund, and do not reflect the performance of the Collateral Portfolio or the Put Spread Strategy. Additional hypothetical graphical representations of the Outcomes are provided in
“Additional Information About the Funds and the Risks of Investing.” There is no guarantee that the Fund will be successful in its attempt to achieve the Outcomes for the Outcome Period.
515
The following table contains hypothetical examples designed to illustrate the Outcomes the Fund seeks to
achieve over the Outcome Period, based upon the performance of the Reference Indices from (100)% to 100% after taking into account the Index Caps and the Buffer, but prior to taking into account any fees or
expenses or the performance of the Collateral Portfolio or the Put Spread Strategy. The table is provided for illustrative purposes only and does not provide every possible performance scenario for Shares over
the course of the Outcome Period. There is no guarantee that the Fund will be successful in its attempt to achieve the Outcomes for an Outcome Period. The table is not intended to predict or project the performance of the FLEX Options or the Fund. Investors should not take this information as an
assurance of the expected performance of the Reference Indices or the Fund. Actual Fund performance will vary with fluctuations in the performance of the Collateral Portfolio and the Put Spread Strategy, in addition to the value of the
Fund’s FLEX Options positions on the Reference Indices, during the Outcome Period, among other factors. The performance of the Collateral Portfolio and the Put Spread Strategy
could significantly impact the performance of the Fund, which could prevent the Fund from achieving the Outcomes that it seeks to produce. The table does not reflect any fees or expenses imposed by your variable product or expenses
incurred by the Fund. If it did, the returns shown for the Fund would be lower. Please refer to the Fund’s website, which provides updated information relating to this table on a daily basis throughout the Outcome Period. Please contact your
insurance company or other financial intermediary for more information.
516
|
Index/Fund
|
Hypothetical Performance1
|
|||||||||||
|
S&P 500 Index Price Performance
|
(100)%
|
(50)%
|
(20)%
|
(10)%
|
(5)%
|
0%
|
5%
|
10%
|
15%
|
20%
|
50%
|
100%
|
|
Secondary Index Price Performance
|
(100)%
|
(50)%
|
(20)%
|
(10)%
|
(5)%
|
0%
|
5%
|
10%
|
15%
|
20%
|
50%
|
100%
|
|
Fund Performance at NAV
|
(90)%
|
(40)%
|
(10)%
|
0%2
|
0%2
|
0%
|
10%3
|
14%3
|
14%3
|
14%3
|
14%3
|
14%3
|
| 1 |
Does not take into account any fees or expenses or the performance of the Collateral Portfolio or the Put Spread Strategy.
|
| 2 |
Reflects the impact of the Buffer.
|
| 3 |
Reflects the impact of assumed Index Caps of 7% per index, 14% total.
|
Understanding Outcomes. The Outcomes the Fund seeks to achieve are measured based upon the
Fund’s NAV on the first day of the Outcome Period. The Outcome Period begins on the day Milliman transacts in the FLEX Options on behalf of the Fund, and ends on the day those FLEX Options expire. An investor who
purchases Shares after the commencement of the Outcome Period will likely have purchased Shares at a different NAV than the NAV on the first day of the Outcome Period (the NAV upon which the Outcomes are based) and may experience investment
outcomes very different from those the Fund seeks to achieve, especially when factoring in any fees or expenses or the performance of the Collateral Portfolio and the Put Spread Strategy. An investor who redeems Shares prior to the end of the
Outcome Period may also experience investment outcomes very different from those the Fund seeks to achieve. The Outcomes are designed with the expectation that an investor will hold Shares on the day that Milliman transacts in the FLEX Options on
behalf of the Fund, and on the day those FLEX Options expire. There is no guarantee that the Fund will be successful in its attempt to achieve the Outcomes.
Understanding the Index Caps. Unlike other investment products, the potential returns an
investor can receive from an investment in the Fund are subject to the Index Caps. This means that if one or both of the Reference Indices experience gains for the Outcome Period, an investor in the Fund will only
experience those gains up to the applicable Index Cap. Milliman calculates the Index Caps for each Outcome Period based upon (i) its evaluation of prevailing market conditions on the first day of the Outcome Period and (ii) the total
number of long call FLEX Options on each Reference Index that it is able to purchase at that time. If an investor is considering purchasing Shares during the Outcome Period, and the Fund’s NAV has increased in
value to a level near one or both of the Index Caps, an investor purchasing Shares at that price will have limited to no gains available for the remainder of the Outcome Period, but will remain vulnerable to significant downside risks (with
respect to the S&P 500 Index FLEX Options’ exposure). In certain market conditions, the performance of the Collateral Portfolio and the Put Spread Strategy could cause the Fund to underperform
relative to the Reference Indices, which could further limit Fund gains below the Index Caps, notwithstanding any performance of the Reference Indices in excess of the Index Caps.
Understanding the Buffer. The Buffer that the Fund seeks to provide is only operative
against the first 10% of losses in the Fund’s S&P 500 Index exposure for the Outcome Period. If an investor is considering purchasing Shares during the Outcome Period, and the S&P 500 Index has decreased
in value by an amount equal to or greater than 10%, an investor purchasing Shares at that time will be able to participate in any gains thereafter (up to the Index Caps), but will not benefit from the Buffer that the Fund seeks to offer for the
remainder of the Outcome Period if the losses continue to be equal to or greater than 10% during that period. Conversely, if an investor is considering purchasing Shares during the Outcome Period, and the Fund’s NAV has increased in value, then
an investor may experience losses before implementation of the Buffer that the Fund seeks to provide. While the Fund seeks to produce returns that correlate to those of the S&P 500 Index for the Outcome Period that are buffered up to
10% (prior to taking into account any fees or expenses or the performance of the Collateral Portfolio or the Put Spread Strategy) for investors who hold Shares for the entire Outcome Period, there is no guarantee it will successfully do so. In addition, the Buffer is not operative against losses in the Collateral Portfolio or the Put Spread Strategy. If the Collateral Portfolio and/or the Put Spread Strategy experiences losses, it could have the
effect of reducing the impact of, or completely eliminating, the Buffer on the Fund’s S&P 500 Index exposure. In certain market conditions, the performance of the Collateral Portfolio and/or the Put Spread Strategy could cause the Fund to
significantly underperform the S&P 500 Index. Investors who purchase Shares at the beginning of the Outcome Period may lose their entire
517
investment. Investors who purchase Shares after the Outcome Period has begun may also lose their entire investment. An
investment in the Fund is only appropriate for investors willing to bear those losses.
Fund Rebalance. Milliman implements the Fund’s strategy on an annual basis, seeking to
produce the Outcomes for an Outcome Period. On the last business day of any stated Outcome Period, all of the Fund’s existing FLEX Options, which includes those used to establish the Buffer, the Index Caps and the Put Spread Strategy, will expire
and Milliman will transact in a new set of FLEX Options on the same business day, which will commence a new Outcome Period beginning the following business day. At that same time, Milliman will also evaluate whether to make any adjustments to the
Collateral Portfolio. Accordingly, Shares can be held indefinitely if investors determine to participate in additional Outcome Periods.
Approximately one week prior to the end of each Outcome Period, the Fund will file a prospectus supplement, which will notify existing investors of
(i) the date on which the existing Outcome Period will end; (ii) the date on which the new Outcome Period will commence; and (iii) the anticipated ranges of the Index Caps that will be used for the new Outcome Period. Immediately preceding the
commencement date of the new Outcome Period, the Fund will file a prospectus supplement disclosing the Fund’s final Index Caps (both gross and net of Fund fees and expenses) for the new Outcome Period. This information will also be available
online at www.[___________].com, and on your insurance company’s website. Please contact your insurance company or other financial intermediary for more information.
Fund Classification. The Fund is classified as “non-diversified” under the Investment
Company Act of 1940, as amended (the “1940 Act”).
Principal Risks
You could lose money by investing in the Fund. An investment in the Fund is not a deposit of a bank and is not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other governmental agency. There can be no assurance that the Fund’s investment objectives will be achieved.
Downside Loss Buffer Risk. There can be no guarantee that the Fund will be successful in its strategy to
buffer against S&P 500 Index losses if the S&P 500 Index decreases in value over the Outcome Period. The Fund’s strategy is designed to produce returns that correlate to those of the S&P 500 Index, subject to the S&P 500 Index
Cap, while limiting downside S&P 500 Index losses and providing additional upside exposure to the Secondary Index, subject to the Secondary Index Cap, if Shares are bought on the day on which Milliman transacts in the FLEX Options on behalf
of the Fund and held until those FLEX Options expire at the end of each Outcome Period. The success of the Buffer also depends upon the performance of the Collateral Portfolio and the Put Spread Strategy. If
the Collateral Portfolio and/or the Put Spread Strategy experiences losses, it could have the effect of reducing the impact of, or completely eliminating, the Buffer on the Fund’s S&P 500 Index exposure. In certain market conditions, the
performance of the Collateral Portfolio and/or the Put Spread Strategy could cause the Fund to significantly underperform the S&P 500 Index. Despite the intended Buffer, an investor could lose their entire investment. In the
event an investor purchases Shares after the date on which Milliman transacted in the FLEX Options on behalf of the Fund, or redeems Shares prior to the expiration of those FLEX Options, the Buffer that the Fund seeks to provide may not be
available or fully applicable.
Risk of Capped Upside Returns. The Fund’s strategy is designed to produce returns that correlate to those of the
Reference Indices up to the Index Caps if Shares are bought on the day on which Milliman transacts in the FLEX Options on behalf of the Fund and held until those FLEX Options expire at the end of the Outcome Period, subject to the Index Caps. In
the event that one or both of the Reference Indices experience gains during the Outcome Period, the Fund will only participate in those gains up to the applicable Index Cap. In the event that one or both Reference Indices experience gains in excess
of the applicable Index Cap over the duration of the Outcome Period, the Fund will not participate in those excess gains. Because the Fund’s strategy provides capped exposure to two Reference Indices, the Index Caps may be lower than if the Fund
provided capped exposure to only a single Reference Index. In the event an investor purchases Shares after the date on which the FLEX Options were entered into and the Fund has risen in value to a level near to an Index Cap, there may be little or
no ability for that investor to experience an investment gain on their Shares relating to that Reference Index. In certain market conditions, the performance of the Collateral Portfolio and the Put Spread
Strategy could cause the Fund to
518
underperform relative to the Reference Indices, which could further limit Fund gains below the Index Caps, notwithstanding any
performance of the Reference Indices in excess of the Index Caps. An investor should consider the amount of the Index Caps, and the Fund’s position relative to each Index Cap, before investing in the Fund.
Index Cap Change Risk. Because the Index Caps for each Outcome Period are calculated based upon (i) Milliman’s
evaluation of prevailing market conditions on the first day of the Outcome Period and (ii) the total number of long call FLEX Options on the Reference Indices that Milliman is able to purchase at that time, the Index Caps may rise or fall from one
Outcome Period to the next. Any change in the Index Caps could be significant and they are unlikely to remain the same for consecutive Outcome Periods.
FLEX Options Risk. The Fund will transact in FLEX Options issued and guaranteed for settlement by the OCC. The
Fund bears the risk that the OCC will be unable or unwilling to perform its obligations under the FLEX Options contracts, which could result in significant losses to the Fund. In less liquid markets, terminating a FLEX Option may require the
payment of a premium or acceptance of a discounted price, and may take longer to complete. In addition, a less liquid trading market may adversely impact the value of the Fund’s FLEX Options and therefore the NAV of the Fund. In addition, the value
of the Fund’s FLEX Options positions is not anticipated to increase or decrease at the same rate as the reference asset; and while it is anticipated that they will generally move in the same direction, it is possible that they may move in different
directions. Certain FLEX Options positions may also expire worthless. The use of FLEX Options involves leverage, which can cause the Fund’s portfolio to be more volatile than if the portfolio had not been leveraged. Leverage can significantly
magnify the effect of price movements of the reference asset, disproportionately increasing the Fund’s losses and reducing the Fund’s opportunities for gains when the reference asset changes in unexpected ways. In some instances, such leverage
could result in losses that exceed the original amount invested.
Investment Objective and Outcomes Risk. There is no guarantee that the Fund will be successful in its attempt
to achieve its investment objective and/or the Outcomes, and an investor could lose some or all of their investment in the Fund. Certain circumstances under which the Fund might not achieve its objective and/or the Outcomes include, but are not
limited to (i) if the Fund disposes of FLEX Options, (ii) if the Fund is unable to maintain the proportional relationship based on the number of FLEX Options in the Fund’s portfolio, (iii) significant accrual of Fund expenses in connection with
effecting the Fund’s principal investment strategy, (iv) losses incurred by the Fund’s holdings in the Collateral Portfolio and/or losses resulting from the Put Spread Strategy, or (iv) adverse tax law changes affecting the treatment of FLEX
Options.
Tax Risk. The Fund intends to elect, and to qualify each year, to be treated as a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”). As a RIC, the Fund will not be subject to U.S. federal income tax on the portion
of its net investment income and net capital gain that it distributes to shareholders, provided that it satisfies certain requirements of the Code. To maintain its status as a RIC, the Fund must meet certain income, diversification and
distributions tests. For purposes of the diversification test, the identification of the issuer (or, in some cases, issuers) of a particular Fund investment can depend on the terms and conditions of that investment. In particular, there is no
published IRS guidance or case law on how to determine the “issuer” of certain derivatives that the Fund will enter into and the Fund has not received a private letter ruling on this point. Therefore, there is a risk that the Fund will not meet the
Code’s diversification requirements and will not qualify, or will be disqualified, as a RIC. If the Fund does not qualify as a RIC for any taxable year and certain relief provisions are not available, the Fund’s taxable income will be subject to
tax at the Fund level and to a further tax at the shareholder level when such income is distributed.
The Fund also intends to comply with the diversification requirements of Section 817(h) of the Code, and the regulations thereunder, relating to the
tax-deferred status of variable accounts that are based on insurance company separate accounts (referred to as “segregated asset accounts” for federal income tax purposes). These diversification requirements apply in addition to the RIC
diversification requirements discussed above. There also is no published guidance or case law on how to determine the “issuer” of the derivatives referred to above for purposes of the diversification requirements of Section 817(h) of the Code and
the Fund has not received a private letter ruling on this point. If these requirements are not met, or under other circumstances, such as if the Fund does not qualify as a RIC for any taxable year, it is possible that the contract owners (rather
than the insurance company) will be treated for federal income tax purposes as the taxable owners of the assets held by the segregated asset accounts.
519
Clearing Member Default Risk. The Fund will hold FLEX Options through accounts at members of clearing houses (“clearing members”) rather than a bank or a broker. Assets deposited by the Fund with any clearing member as margin for its FLEX Options positions may, in certain circumstances, be used to satisfy losses of other
clients of the Fund’s clearing member where such assets may be held in commingled omnibus accounts. In addition, although clearing members guarantee performance of their clients’ obligations to the clearing house, there is a risk that the assets of
the Fund might not be fully protected in the event of the clearing member’s bankruptcy, as the Fund would be limited to recovering only a pro rata share of all available funds segregated on behalf of the
clearing member’s customers for the relevant account class.
Debt Securities Risk. The prices of debt securities will be affected by changes in interest rates, the
creditworthiness of the issuer and other factors. These risks could affect the value of investments in which the Fund invests, possibly causing the Fund’s NAV to be reduced and fluctuate more than other types of investments. During periods of
falling interest rates, an issuer of a callable bond may repay the security before its stated maturity, and the Fund may have to reinvest the proceeds in securities with lower yields, which would result in a decline in the Fund’s income, or in
securities with greater risks or with other less favorable features. Changing interest rates, including rates that fall below zero, may have unpredictable effects on markets, result in heightened market volatility and detract from the Fund’s
performance to the extent the Fund is exposed to such interest rates. An increase in interest rates will generally cause the value of fixed-income securities held by the Fund to decline, may lead to heightened volatility in the fixed-income
markets and may adversely affect the liquidity of certain fixed-income investments, including those held by the Fund. Risks associated with rising interest rates are heightened given that interest rates in the U.S. are near historic lows.
Adjustable-rate instruments also react to interest rate changes in a similar manner, although generally to a lesser degree (depending, however, on the characteristics of the reset terms, including the index chosen, frequency of reset and reset
caps or floors, among other factors). Interest rate sensitivity is generally more pronounced and less predictable in instruments with uncertain payment or prepayment schedules and also for those with longer maturities.
Foreign Securities and Credit Exposure Risk. U.S. dollar-denominated securities carrying foreign credit exposure
may be affected by unfavorable political, economic or governmental developments that could affect payments of principal and interest. Furthermore, the value of the Fund’s foreign investments (whether direct or indirect) may be adversely affected by
political and social instability in their home countries, by changes in economic or taxation policies in those countries, or by the difficulty in enforcing obligations in those countries. Foreign companies generally may be subject to less stringent
regulations than U.S. companies, including financial reporting requirements and auditing and accounting controls. As a result, there generally is less publicly available information about foreign companies than about U.S. companies. Trading in many
foreign securities may be less liquid and more volatile than U.S. securities due to the size of the market or other factors.
U.S. Government Securities Risk. U.S. Government securities are subject to interest rate risk but generally do
not involve the credit risks associated with investments in other types of debt securities. As a result, the yields available from U.S. Government securities are generally lower than the yields available from other debt securities. U.S. Government
securities are guaranteed only as to the timely payment of interest and the payment of principal when held to maturity. While securities issued or guaranteed by U.S. federal government agencies are backed by the full faith and credit of the U.S.
Department of the Treasury, securities issued by government sponsored entities are solely the obligation of the issuer and generally do not carry any guarantee from the U.S. Government.
ABS Risk. ABS are subject to the general debt securities risks described above. In addition, ABS may be less
liquid than other bonds, and may be more sensitive than other bonds to the market’s perception of issuers and creditworthiness of payees, which may result in the Fund experiencing difficulty selling or valuing these securities. ABS markets have
experienced extraordinary weakness and volatility at various times in recent years, and may decline quickly in the event of a substantial economic or market downturn. Accordingly, these securities may be subject to greater risk of default during
periods of economic downturn than other securities, which could result in possible losses to the Fund.
Issuer Risk. The performance of the Fund depends on the performance of individual securities to which the Fund
has exposure. The Fund may be adversely affected if an issuer of underlying securities held by the Fund is unable or
520
unwilling to repay principal or interest when due. Changes in the financial condition or credit rating of an issuer of those securities may cause the
value of the securities to decline.
Management Risk. The Fund is subject to management risk because it is an actively managed portfolio. Milliman
will apply investment techniques and risk analyses in making investment decisions for the Fund, but there can be no guarantee that the Fund will meet its investment objective and/or the Outcomes. In addition, Milliman does not use defensive
strategies or attempt to reduce the Fund’s exposures to poor performing positions during an Outcome Period. This differs from funds that are managed to seek to outperform a benchmark index. Therefore, in the event of a general market decline, the
Fund’s value may fall more than the value of another fund that does attempt to hedge against such market declines.
Market Risk. The Fund could lose money over short periods due to short-term market movements and over longer
periods during more prolonged market downturns. Assets may decline in value due to factors affecting financial markets generally or particular asset classes or industries represented in the markets. The value of a FLEX Option or other asset may
also decline due to general market conditions, economic trends or events that are not specifically related to the issuer of the security or other asset, or due to factors that affect a particular issuer, country, region, market, industry, sector or
asset class.
Non-Diversification Risk. The Fund may invest a relatively high percentage of its assets in a limited number of
issuers. As a result, the Fund may be more susceptible to a single adverse economic or regulatory occurrence affecting one or more of these issuers, experience increased volatility and be highly invested in certain issuers.
Large Shareholder Risk. At times, the Fund may experience adverse effects when certain large shareholders,
including insurance company separate accounts, redeem large amounts of shares of the Fund. Large redemptions may cause the Fund to sell portfolio holdings at times when it would not otherwise do so and may increase transaction costs and/or result
in an increase to the Fund’s expense ratio. A large redemption could be detrimental to the Fund and its remaining shareholders.
Risks of Investing in ETFs. In addition to the risks associated with the underlying assets held by the ETFs in
which the Fund invests, investments in ETFs are also subject to the following additional risks: (i) only authorized participants may engage in transactions directly with ETFs but none are obligated to do so, which could result in an ETF’s shares
trading at a premium or discount to its NAV or possibly face trading halts or delisting; (ii) certain ETFs seek to track the performance of an underlying index and will not attempt to take defensive positions under any market conditions, including
declining markets, which could result in losses; and (iii) because ETF shares trade on the secondary market, there is not guarantee that an active market will be developed or maintained, which could result in the ETF’s shares trading at a premium
or discount to its NAV. Investments in ETFs may involve duplication of management fees and certain other expenses, as the Fund indirectly bears its proportionate share of any expenses paid by the ETFs in which it invests.
Risks of Investing in Money Market Funds. Money market funds seek to preserve the value of shareholder
investments at $1.00 per share, but shareholders, such as the Fund, may still lose money by investing in such funds. In addition, a money market fund may impose a fee upon the sale of its shares or may temporarily suspend the ability to sell shares
if the fund’s liquidity falls below required minimums because of market conditions or other factors. The credit quality of a money market fund’s holdings can change rapidly in certain markets, and the default of a single holding could have an
adverse impact on the fund’s share price. A money market fund’s share price can also be negatively affected during periods of high redemption pressures, illiquid markets, and/or significant market volatility.
Performance
As of the date of this Prospectus, the Fund has not commenced operations and therefore does not have a performance history. Once available, the Fund’s
performance information will be accessible online at www.[________].com and will provide some indication of the risks of investing in the Fund.
Management
521
Investment Adviser
Milliman Financial Risk Management LLC (“Milliman”) serves as investment adviser to the Fund.
Portfolio Managers
The following persons serve as portfolio managers of the Fund.
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●
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Robert T. Cummings, Principal & Head of Portfolio Management at Milliman.
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●
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Maria Schiopu, Principal & Head of Portfolio Management at Milliman.
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●
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Jeff Greco, Principal & Head of Strategy Research at Milliman.
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●
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Jordan Rosenfeld, Portfolio Manager at Milliman.
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Each portfolio manager is jointly and primarily responsible for the day-to-day management of the Fund’s portfolio and has served in such capacity
since the Fund’s inception in 2021.
Purchase and Sale of Shares
Shares are available as underlying investment options for variable insurance contracts and variable life insurance policies (each, a “variable contract,” and, collectively, the “variable contracts”) issued by insurance companies. These insurance companies are the record owners of the separate accounts
holding the Shares. You do not buy, sell or exchange Shares directly; rather, you choose investment options through your variable contracts. The insurance companies then cause the separate accounts to purchase and redeem Shares according to
the investment options you choose.
Tax Information
The dividends and distributions paid by the Fund to the insurance company separate accounts will consist of ordinary income, capital gains, or some
combination of both. Because Shares must be purchased through separate accounts used to fund variable contracts, such dividends and distributions will be exempt from current taxation by owners of variable contracts (each, a “contract owner,” and, collectively “contract owners”) if left to accumulate within a separate account. Consult the variable contract prospectus for additional tax
information.
Payments to Insurance Companies and Other Financial Intermediaries
If you allocate contract value to the Fund through an insurance company or other financial intermediary, the Fund, Milliman, the Fund’s distributor or
their related companies may pay the insurance company and/or its affiliates or other intermediary for the sale of Shares and related services. These payments may create a conflict of interest by influencing the insurance company or other
intermediary and your salesperson to recommend an indirect investment in the Fund over another investment. The prospectus or other disclosure documents for the variable contracts may contain additional information about these payments, if any.
You may also ask your salesperson or financial intermediary, or visit your financial intermediary’s website, for more information.
522
Fund Summary: Milliman S&P 500 & MSCI EAFE 1-Year Buffer with Stacker Cap
Fund – Mar
Investment Objective
The Fund seeks to provide exposure to the S&P 500 Index, while providing a buffer against the first 10% of losses associated with S&P 500
Index performance and participating in S&P 500 Index gains up to a declared cap, prior to taking into account any fees or expenses or the performance of any fixed income exposure included in the Fund’s portfolio, over the period from March 1,
2022 through February 28, 2023. The Fund also seeks to provide upside exposure to the MSCI EAFE Index up to a declared cap, prior to taking into account any fees or expenses or the performance of any fixed income exposure included in the Fund’s
portfolio, over the same period.
Fees and Expenses of the Fund
This table describes the fees and expenses that you may pay if you buy, hold and sell shares of the Fund (“Shares”).
This table and the example below do not include any fees or sales charges imposed by your variable product. If they were included, the expenses listed below would be higher.
Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment)
|
Class 3
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|
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Management Fees
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0.49%
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Distribution and Service (12b-1) Fees
|
0.25%
|
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Other Expenses(1)
|
0.50%
|
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Acquired Fund Fees and Expenses(1)
|
[_.__]%
|
|
Total Annual Fund Operating Expenses
|
1.24%
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|
Fee Waiver and/or Expense Reimbursement(2)(3)
|
(0.25)%
|
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Total Annual Fund Operating Expenses After Fee Waiver and/or Expense Reimbursement
|
0.99%
|
|
(1)
|
“Other Expenses” and “Acquired Fund Fees and Expenses” are based on estimated amounts for the current fiscal year.
|
|
(2)
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The Fund’s investment adviser, Milliman Financial Risk Management LLC (“Milliman”), has contractually
agreed to waive advisory fees and/or reimburse expenses to the extent necessary to limit the Fund’s total annual Fund operating expenses (excluding taxes, interest, brokerage fees and commissions, Rule 12b-1 fees, acquired fund fees and
expenses, short-sale dividend expenses, administrative services fees, other expenses that are capitalized in accordance with generally accepted accounting principles, and extraordinary or non-routine expenses not incurred in the
ordinary course of the Fund’s business) to 0.74% of the Fund's average daily net assets (the “Expense Limitation Agreement”) until at least November 1, 2022. During its term, the Expense
Limitation Agreement cannot be terminated or amended to increase the applicable limit without approval of the Board of Trustees of the Trust (the “Board”). Milliman may recoup from the Fund any
advisory fees waived or expenses reimbursed pursuant to the Expense Limitation Agreement for a period of three years from the date on which such waiver or reimbursement occurred; provided, however, that such recoupment shall not be made
if it would cause the Fund’s total annual Fund operating expenses to exceed the lesser of (a) the expense limitation in effect at the time of the reimbursement, or (b) the expense limitation in effect at the time of recoupment, if any.
|
|
(3)
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In addition to the Expense Limitation Agreement, Milliman has contractually agreed to waive its advisory fees in an amount equal to the Fund’s
acquired fund fees and expenses until at least November 1, 2022 (the “Fee Waiver”). This contract cannot be terminated or modified without the consent of the Board.
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Example
This example is intended to help you compare the cost of investing in the Fund with the cost of investing in other funds. This example assumes that you
invest $10,000 in the Fund for the time periods indicated and then sell all of your Shares at the end of those periods. This example also assumes that your investment has a 5% return each year and that the Fund’s operating expenses remain at
current levels and that the Expense Limitation Agreement and Fee Waiver remain in place for their contractual periods. Although your actual costs may be higher or lower, your costs, based on these assumptions, would be:
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1 Year
|
3 Years
|
|
|
Class 3
|
$104
|
$384
|
523
This example does not include any fees or sales charges imposed by your variable product. If they were included, the expenses listed above would be
higher.
Portfolio Turnover
The Fund pays transaction costs, such as commissions, when it purchases and sells securities (or “turns over” its portfolio). A higher portfolio turnover
will cause the Fund to incur additional transaction costs. These costs, which are not reflected in Total Annual Fund Operating Expenses or in the example, may affect the Fund’s performance. Because the Fund has not yet commenced investment
operations, no portfolio turnover information is available at this time.
Principal Investment Strategies
The Fund seeks to achieve its investment objective by transacting in FLexible EXchange® Options (“FLEX Options”)
and by separately maintaining a collateral portfolio (the “Collateral Portfolio”), which is designed primarily to serve as margin or collateral for the Fund’s FLEX Options positions and secondarily to
enhance the Fund’s upside S&P 500 Index and MSCI EAFE Index FLEX Options’ exposure (i.e., by utilizing anticipated income to measure the ability to purchase additional FLEX Options). FLEX Options are
exchange-traded options contracts with uniquely customizable terms. In general, an options contract is an agreement between a buyer and seller that gives the purchaser of the option the right to buy or sell a particular asset at a specified
future date at an agreed upon price, commonly known as the “strike price.” The reference assets for the Fund’s FLEX Options positions will include the S&P 500 Index, the MSCI EAFE Index (the “Secondary Index,”
and together with the S&P 500 Index, the “Reference Indices,” and, each, a “Reference Index”), and certain exchange-traded funds (“ETFs”), as described further below. The S&P 500 Index is a large-capitalization, market-weighted, U.S. equities index that tracks the price (excluding dividends) of 500 leading companies
in leading industries of the U.S. economy. The Secondary Index is [a float-adjusted, market capitalization-weighted index that is designed to measure the performance of large and mid-capitalization securities across 21 developed markets,
including countries in Europe, Australasia and the Far East, excluding the United States and Canada].
The Collateral Portfolio may be invested in short-term fixed-income securities, including corporate bonds and other corporate debt securities,
asset-backed securities (“ABS”), securities issued by the U.S. Government or its agencies and instrumentalities, securities issued by non-U.S. governments or their agencies and instrumentalities, money
market securities and funds, other interest-bearing instruments, cash, ETFs that primarily invest in any of the foregoing instruments, options on ETFs and options box spreads. An options box spread is the combination of different options trades
that have offsetting spreads (e.g., purchases and sales on the same underlying instrument, such as an index or an ETF, but with different strike prices and/or expiration dates) for the purpose of
generating income. The Fund may invest in short-term fixed income securities or other instruments, including through ETFs, of any maturity and credit quality. The Fund will generally invest up to 35% of its net assets in one or more ETFs that
provide exposure to investment grade corporate bonds.
Due to the unique mechanics of the Fund’s strategy, the return an investor can expect to receive from an investment in the Fund has characteristics that
are distinct from the returns of many other investment vehicles. It is important that an investor understand these characteristics before making an investment in the Fund.
In seeking to achieve its investment objective, the Fund seeks to produce pre-determined outcomes (the “Outcomes”)
that are based upon the performance of the Reference Indices over a one-year period (the “Outcome Period”). The initial Outcome Period for the Fund is March 1, 2022 through February 28, 2023. Following the
initial Outcome Period, each subsequent Outcome Period will be a one-year period commencing upon the expiration of the prior Outcome Period. The Fund seeks to achieve the Outcomes by purchasing and writing (selling) FLEX Options to create layers
within the Fund’s portfolio. One layer is designed to produce returns that correlate to those of the S&P 500 Index for the Outcome Period if the S&P 500 Index experiences gains during that time, subject to an upside return cap (the “S&P 500 Index Cap”), as described below. A second layer is designed to produce returns that correlate to any upside market performance of the Secondary Index over the
Outcome Period, subject to an upside return cap (the “Secondary Index Cap,” and, together with the S&P 500 Index Cap, the “Index Caps,” and, each, an “Index Cap”), as described below. A third layer is designed to produce returns that correlate to those of the S&P 500 Index for the Outcome Period that are buffered up to 10% if the S&P 500 Index
experiences losses during
524
that time (the “Buffer”). There is no guarantee that the Fund will be
successful in its attempt to produce returns that correlate to those of the S&P 500 Index or the Secondary Index up to the applicable Index Caps or produce buffered returns against the Fund’s S&P 500 Index exposure.
Milliman Financial Risk Management, LLC (“Milliman”), the investment adviser of the Fund, seeks to establish the
Buffer by writing one put FLEX Option on the S&P 500 Index with a strike price that is 10% lower than the value of the S&P 500 Index at the beginning of the Outcome Period.
Milliman seeks to establish the Index Caps by purchasing long call FLEX Options on each Reference Index with a strike price approximately equal to the
value of the respective Reference Index at the beginning of the Outcome Period. Milliman purchases these FLEX Options with a portion of the Fund’s net assets plus (i) the cash received from writing the put FLEX Option designed to create the
Buffer, (ii) additional cash received by utilizing FLEX Options to create a put spread (the “Put Spread Strategy”) on fixed income securities and/or one or more ETFs that provide exposure to fixed income
securities, and (iii) yield received from the Collateral Portfolio. Milliman seeks to achieve the Put Spread Strategy for the Fund by writing a put FLEX Option on an underlying asset at a strike price at or lower than the underlying asset’s
market price or current value at the beginning of the Outcome Period, and buying a put FLEX Option on the same underlying asset at a lower strike price than the written put FLEX Option.
The Index Caps represent the maximum rate of return in each Reference Index that an investor can achieve from an investment in the Fund over the Outcome
Period. Milliman calculates the Index Caps based upon (i) its evaluation of prevailing market conditions on the first day of the Outcome Period and (ii) the total number of long call FLEX Options on each Reference Index that it is able to purchase
at that time. As of the date of this Prospectus, and assuming current market conditions persist, Milliman expects that the Index Caps will be between the below ranges (both gross and net of Fund fees and expenses). Any fees or expenses imposed by
your variable product, and any other expenses incurred by the Fund, will have the effect of further reducing each Index Cap. In addition, in certain market conditions, the performance of the Collateral Portfolio
and the Put Spread Strategy could cause the Fund to underperform relative to the Reference Indices, which could further limit Fund gains below the Index Caps, notwithstanding any performance of the Reference Indices in excess of the Index Caps.
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Estimated Index Cap Ranges
(As of [___])
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||
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Prior to Taking into Account Fund Fees and Expenses
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After Taking into Account Fund Fees and Expenses
|
|
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S&P 500 Index Cap
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||
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Class 3
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[__]% and [__]%
|
[__]% and [__]%
|
|
Secondary Index Cap
|
||
|
Class 3
|
[__]% and [__]%
|
[__]% and [__]%
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The Buffer is only operative against the first 10% of losses in the Fund’s S&P 500 Index exposure for the Outcome Period. If the S&P 500 Index
decreases in value by more than 10% during the Outcome Period, the Fund (and therefore investors in Shares) will experience all subsequent losses in the Fund’s S&P 500 Index exposure on a one-to-one basis for the Outcome Period. The Fund
seeks to produce buffered returns against its S&P 500 Index exposure prior to taking into account any fees or expenses or the performance of the Collateral Portfolio or the Put Spread Strategy. The Buffer
is not operative against losses in the Collateral Portfolio or the Put Spread Strategy. If the Collateral Portfolio and/or the Put Spread Strategy experiences losses, it could have the effect of reducing the impact of, or completely
eliminating, the Buffer on the Fund’s S&P 500 Index exposure. In certain market conditions, the performance of the Collateral Portfolio and/or the Put Spread Strategy could cause the Fund to significantly underperform the S&P 500
Index. The following table reflects the Buffer both gross and net of Fund fees and expenses:
525
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Share Class
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Buffer
(As of [___])
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|
|
Prior to Taking into Account Fund Fees and Expenses
|
After Taking into Account Fund Fees and Expenses
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|
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Class 3
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10%
|
[__]%
|
Because the Fund also seeks to provide only upside exposure to the Secondary Index during the Outcome Period, the Fund’s NAV will not be impacted by any
losses experienced by the Secondary Index when measured from the beginning to the end of the Outcome Period. If the Secondary Index increases in value during the Outcome Period and later decreases in value during the Outcome Period, the Fund’s NAV
will reflect any such decreases until the Secondary Index reaches its initial value (measured as of the first day of the Outcome Period). If the Secondary Index decreases in value over the course of an entire Outcome Period, the Fund’s NAV will not
reflect such losses; therefore, the Fund’s overall performance will be approximately that of the S&P 500 Index for the Outcome Period, subject to the Buffer and the S&P 500 Index Cap.
The definitive Index Caps and Buffer will be set forth on the Fund’s website. The Fund’s website will also provide information relating to the
Outcomes on a daily basis, including the Fund’s position relative to the Index Caps and the Buffer. You may also contact your insurance company or other financial intermediary for more information.
Additionally, the Fund’s net asset value (“NAV”) will not increase or decrease at the same rate as the Reference
Indices because the Fund’s strategy relies upon the performance of the Collateral Portfolio and the Put Spread Strategy, in addition to the value of the Fund’s FLEX Options positions on the Reference Indices. While Milliman anticipates that the
Fund’s NAV will generally move in the same direction as the S&P 500 Index, and correspond to any upside returns of the Secondary Index (meaning that the Fund’s NAV will generally increase if the Reference Indices experience gains or decrease if
the Reference Indices experience losses), the Fund’s NAV may not decrease at the same rate as the Reference Indices (especially when factoring in the performance of the Collateral Portfolio and the Put Spread Strategy) and will not increase at the
same rate as the Reference Indices (especially when factoring in the Index Caps and the performance of the Collateral Portfolio and the Put Spread Strategy). Similarly, the amount of time remaining until the end of the Outcome Period also affects
the impact of the Buffer on the Fund’s NAV, because the Buffer may not be in full effect prior to the end of the Outcome Period.
The FLEX Options utilized in the Fund’s portfolio are each set to expire on the last day of the Outcome Period. The customizable nature of FLEX Options
will allow Milliman to select the strike price at which each FLEX Option will be exercised at the expiration of the FLEX Option term. At the commencement of the Outcome Period, Milliman will specifically select the strike price for each FLEX Option
in a manner designed to achieve the Outcomes when the FLEX Options are exercised on the final day of the Outcome Period, depending on the anticipated performance of the Reference Indices, the Collateral Portfolio and the Put Spread Strategy over
the duration of that Outcome Period.
The hypothetical graphical illustrations provided below are designed to illustrate the Outcomes based upon the
hypothetical performance of the Reference Indices for an investor who holds Shares for the entirety of the Outcome Period. The hypothetical graphical illustrations do not include any fees or expenses
imposed by your variable product or expenses incurred by the Fund, and do not reflect the performance of the Collateral Portfolio or the Put Spread Strategy. Additional hypothetical graphical representations of the Outcomes are provided in
“Additional Information About the Funds and the Risks of Investing.” There is no guarantee that the Fund will be successful in its attempt to achieve the Outcomes for the Outcome Period.
526
The following table contains hypothetical examples designed to illustrate the Outcomes the Fund seeks to
achieve over the Outcome Period, based upon the performance of the Reference Indices from (100)% to 100% after taking into account the Index Caps and the Buffer, but prior to taking into account any fees or
expenses or the performance of the Collateral Portfolio or the Put Spread Strategy. The table is provided for illustrative purposes only and does not provide every possible performance scenario for Shares over
the course of the Outcome Period. There is no guarantee that the Fund will be successful in its attempt to achieve the Outcomes for an Outcome Period. The table is not intended to predict or project the performance of the FLEX Options or the Fund. Investors should not take this information as an
assurance of the expected performance of the Reference Indices or the Fund. Actual Fund performance will vary with fluctuations in the performance of the Collateral Portfolio and the Put Spread Strategy, in addition to the value of the
Fund’s FLEX Options positions on the Reference Indices, during the Outcome Period, among other factors. The performance of the Collateral Portfolio and the Put Spread Strategy
could significantly impact the performance of the Fund, which could prevent the Fund from achieving the Outcomes that it seeks to produce. The table does not reflect any fees or expenses imposed by your variable product or expenses
incurred by the Fund. If it did, the returns shown for the Fund would be lower. Please refer to the Fund’s website, which provides updated information relating to this table on a daily basis throughout the Outcome Period. Please contact your
insurance company or other financial intermediary for more information.
527
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Index/Fund
|
Hypothetical Performance1
|
|||||||||||
|
S&P 500 Index Price Performance
|
(100)%
|
(50)%
|
(20)%
|
(10)%
|
(5)%
|
0%
|
5%
|
10%
|
15%
|
20%
|
50%
|
100%
|
|
Secondary Index Price Performance
|
(100)%
|
(50)%
|
(20)%
|
(10)%
|
(5)%
|
0%
|
5%
|
10%
|
15%
|
20%
|
50%
|
100%
|
|
Fund Performance at NAV
|
(90)%
|
(40)%
|
(10)%
|
0%2
|
0%2
|
0%
|
10%3
|
14%3
|
14%3
|
14%3
|
14%3
|
14%3
|
| 1 |
Does not take into account any fees or expenses or the performance of the Collateral Portfolio or the Put Spread Strategy.
|
| 2 |
Reflects the impact of the Buffer.
|
| 3 |
Reflects the impact of assumed Index Caps of 7% per index, 14% total.
|
Understanding Outcomes. The Outcomes the Fund seeks to achieve are measured based upon the
Fund’s NAV on the first day of the Outcome Period. The Outcome Period begins on the day Milliman transacts in the FLEX Options on behalf of the Fund, and ends on the day those FLEX Options expire. An investor who
purchases Shares after the commencement of the Outcome Period will likely have purchased Shares at a different NAV than the NAV on the first day of the Outcome Period (the NAV upon which the Outcomes are based) and may experience investment
outcomes very different from those the Fund seeks to achieve, especially when factoring in any fees or expenses or the performance of the Collateral Portfolio and the Put Spread Strategy. An investor who redeems Shares prior to the end of the
Outcome Period may also experience investment outcomes very different from those the Fund seeks to achieve. The Outcomes are designed with the expectation that an investor will hold Shares on the day that Milliman transacts in the FLEX Options on
behalf of the Fund, and on the day those FLEX Options expire. There is no guarantee that the Fund will be successful in its attempt to achieve the Outcomes.
Understanding the Index Caps. Unlike other investment products, the potential returns an
investor can receive from an investment in the Fund are subject to the Index Caps. This means that if one or both of the Reference Indices experience gains for the Outcome Period, an investor in the Fund will only
experience those gains up to the applicable Index Cap. Milliman calculates the Index Caps for each Outcome Period based upon (i) its evaluation of prevailing market conditions on the first day of the Outcome Period and (ii) the total
number of long call FLEX Options on each Reference Index that it is able to purchase at that time. If an investor is considering purchasing Shares during the Outcome Period, and the Fund’s NAV has increased in
value to a level near one or both of the Index Caps, an investor purchasing Shares at that price will have limited to no gains available for the remainder of the Outcome Period, but will remain vulnerable to significant downside risks (with
respect to the S&P 500 Index FLEX Options’ exposure). In certain market conditions, the performance of the Collateral Portfolio and the Put Spread Strategy could cause the Fund to underperform
relative to the Reference Indices, which could further limit Fund gains below the Index Caps, notwithstanding any performance of the Reference Indices in excess of the Index Caps.
Understanding the Buffer. The Buffer that the Fund seeks to provide is only operative
against the first 10% of losses in the Fund’s S&P 500 Index exposure for the Outcome Period. If an investor is considering purchasing Shares during the Outcome Period, and the S&P 500 Index has decreased
in value by an amount equal to or greater than 10%, an investor purchasing Shares at that time will be able to participate in any gains thereafter (up to the Index Caps), but will not benefit from the Buffer that the Fund seeks to offer for the
remainder of the Outcome Period if the losses continue to be equal to or greater than 10% during that period. Conversely, if an investor is considering purchasing Shares during the Outcome Period, and the Fund’s NAV has increased in value, then
an investor may experience losses before implementation of the Buffer that the Fund seeks to provide. While the Fund seeks to produce returns that correlate to those of the S&P 500 Index for the Outcome Period that are buffered up to
10% (prior to taking into account any fees or expenses or the performance of the Collateral Portfolio or the Put Spread Strategy) for investors who hold Shares for the entire Outcome Period, there is no guarantee it will successfully do so. In addition, the Buffer is not operative against losses in the Collateral Portfolio or the Put Spread Strategy. If the Collateral Portfolio and/or the Put Spread Strategy experiences losses, it could have the
effect of reducing the impact of, or completely eliminating, the Buffer on the Fund’s S&P 500 Index exposure. In certain market conditions, the performance of the Collateral Portfolio and/or the Put Spread Strategy could cause the Fund to
significantly underperform the S&P 500 Index. Investors who purchase Shares at the beginning of the Outcome Period may lose their entire
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investment. Investors who purchase Shares after the Outcome Period has begun may also lose their entire investment. An
investment in the Fund is only appropriate for investors willing to bear those losses.
Fund Rebalance. Milliman implements the Fund’s strategy on an annual basis, seeking to
produce the Outcomes for an Outcome Period. On the last business day of any stated Outcome Period, all of the Fund’s existing FLEX Options, which includes those used to establish the Buffer, the Index Caps and the Put Spread Strategy, will expire
and Milliman will transact in a new set of FLEX Options on the same business day, which will commence a new Outcome Period beginning the following business day. At that same time, Milliman will also evaluate whether to make any adjustments to the
Collateral Portfolio. Accordingly, Shares can be held indefinitely if investors determine to participate in additional Outcome Periods.
Approximately one week prior to the end of each Outcome Period, the Fund will file a prospectus supplement, which will notify existing investors of (i)
the date on which the existing Outcome Period will end; (ii) the date on which the new Outcome Period will commence; and (iii) the anticipated ranges of the Index Caps that will be used for the new Outcome Period. Immediately preceding the
commencement date of the new Outcome Period, the Fund will file a prospectus supplement disclosing the Fund’s final Index Caps (both gross and net of Fund fees and expenses) for the new Outcome Period. This information will also be available online
at www.[___________].com, and on your insurance company’s website. Please contact your insurance company or other financial intermediary for more information.
Fund Classification. The Fund is classified as “non-diversified” under the Investment
Company Act of 1940, as amended (the “1940 Act”).
Principal Risks
You could lose money by investing in the Fund. An investment in the Fund is not a deposit of a bank and is not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other governmental agency. There can be no assurance that the Fund’s investment objectives will be achieved.
Downside Loss Buffer Risk. There can be no guarantee that the Fund will be successful in its strategy to
buffer against S&P 500 Index losses if the S&P 500 Index decreases in value over the Outcome Period. The Fund’s strategy is designed to produce returns that correlate to those of the S&P 500 Index, subject to the S&P 500 Index
Cap, while limiting downside S&P 500 Index losses and providing additional upside exposure to the Secondary Index, subject to the Secondary Index Cap, if Shares are bought on the day on which Milliman transacts in the FLEX Options on behalf
of the Fund and held until those FLEX Options expire at the end of each Outcome Period. The success of the Buffer also depends upon the performance of the Collateral Portfolio and the Put Spread Strategy. If
the Collateral Portfolio and/or the Put Spread Strategy experiences losses, it could have the effect of reducing the impact of, or completely eliminating, the Buffer on the Fund’s S&P 500 Index exposure. In certain market conditions, the
performance of the Collateral Portfolio and/or the Put Spread Strategy could cause the Fund to significantly underperform the S&P 500 Index. Despite the intended Buffer, an investor could lose their entire investment. In the
event an investor purchases Shares after the date on which Milliman transacted in the FLEX Options on behalf of the Fund, or redeems Shares prior to the expiration of those FLEX Options, the Buffer that the Fund seeks to provide may not be
available or fully applicable.
Risk of Capped Upside Returns. The Fund’s strategy is designed to produce returns that correlate to those of the
Reference Indices up to the Index Caps if Shares are bought on the day on which Milliman transacts in the FLEX Options on behalf of the Fund and held until those FLEX Options expire at the end of the Outcome Period, subject to the Index Caps. In
the event that one or both of the Reference Indices experience gains during the Outcome Period, the Fund will only participate in those gains up to the applicable Index Cap. In the event that one or both Reference Indices experience gains in excess
of the applicable Index Cap over the duration of the Outcome Period, the Fund will not participate in those excess gains. Because the Fund’s strategy provides capped exposure to two Reference Indices, the Index Caps may be lower than if the Fund
provided capped exposure to only a single Reference Index. In the event an investor purchases Shares after the date on which the FLEX Options were entered into and the Fund has risen in value to a level near to an Index Cap, there may be little or
no ability for that investor to experience an investment gain on their Shares relating to that Reference Index. In certain market conditions, the performance of the Collateral Portfolio and the Put Spread
Strategy could cause the Fund to
529
underperform relative to the Reference Indices, which could further limit Fund gains below the Index Caps, notwithstanding any
performance of the Reference Indices in excess of the Index Caps. An investor should consider the amount of the Index Caps, and the Fund’s position relative to each Index Cap, before investing in the Fund.
Index Cap Change Risk. Because the Index Caps for each Outcome Period are calculated based upon (i) Milliman’s
evaluation of prevailing market conditions on the first day of the Outcome Period and (ii) the total number of long call FLEX Options on the Reference Indices that Milliman is able to purchase at that time, the Index Caps may rise or fall from one
Outcome Period to the next. Any change in the Index Caps could be significant and they are unlikely to remain the same for consecutive Outcome Periods.
FLEX Options Risk. The Fund will transact in FLEX Options issued and guaranteed for settlement by the OCC. The
Fund bears the risk that the OCC will be unable or unwilling to perform its obligations under the FLEX Options contracts, which could result in significant losses to the Fund. In less liquid markets, terminating a FLEX Option may require the
payment of a premium or acceptance of a discounted price, and may take longer to complete. In addition, a less liquid trading market may adversely impact the value of the Fund’s FLEX Options and therefore the NAV of the Fund. In addition, the value
of the Fund’s FLEX Options positions is not anticipated to increase or decrease at the same rate as the reference asset; and while it is anticipated that they will generally move in the same direction, it is possible that they may move in different
directions. Certain FLEX Options positions may also expire worthless. The use of FLEX Options involves leverage, which can cause the Fund’s portfolio to be more volatile than if the portfolio had not been leveraged. Leverage can significantly
magnify the effect of price movements of the reference asset, disproportionately increasing the Fund’s losses and reducing the Fund’s opportunities for gains when the reference asset changes in unexpected ways. In some instances, such leverage
could result in losses that exceed the original amount invested.
Investment Objective and Outcomes Risk. There is no guarantee that the Fund will be successful in its attempt
to achieve its investment objective and/or the Outcomes, and an investor could lose some or all of their investment in the Fund. Certain circumstances under which the Fund might not achieve its objective and/or the Outcomes include, but are not
limited to (i) if the Fund disposes of FLEX Options, (ii) if the Fund is unable to maintain the proportional relationship based on the number of FLEX Options in the Fund’s portfolio, (iii) significant accrual of Fund expenses in connection with
effecting the Fund’s principal investment strategy, (iv) losses incurred by the Fund’s holdings in the Collateral Portfolio and/or losses resulting from the Put Spread Strategy, or (iv) adverse tax law changes affecting the treatment of FLEX
Options.
Tax Risk. The Fund intends to elect, and to qualify each year, to be treated as a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”). As a RIC, the Fund will not be subject to U.S. federal income tax on the portion
of its net investment income and net capital gain that it distributes to shareholders, provided that it satisfies certain requirements of the Code. To maintain its status as a RIC, the Fund must meet certain income, diversification and
distributions tests. For purposes of the diversification test, the identification of the issuer (or, in some cases, issuers) of a particular Fund investment can depend on the terms and conditions of that investment. In particular, there is no
published IRS guidance or case law on how to determine the “issuer” of certain derivatives that the Fund will enter into and the Fund has not received a private letter ruling on this point. Therefore, there is a risk that the Fund will not meet the
Code’s diversification requirements and will not qualify, or will be disqualified, as a RIC. If the Fund does not qualify as a RIC for any taxable year and certain relief provisions are not available, the Fund’s taxable income will be subject to
tax at the Fund level and to a further tax at the shareholder level when such income is distributed.
The Fund also intends to comply with the diversification requirements of Section 817(h) of the Code, and the regulations thereunder, relating to the
tax-deferred status of variable accounts that are based on insurance company separate accounts (referred to as “segregated asset accounts” for federal income tax purposes). These diversification requirements apply in addition to the RIC
diversification requirements discussed above. There also is no published guidance or case law on how to determine the “issuer” of the derivatives referred to above for purposes of the diversification requirements of Section 817(h) of the Code and
the Fund has not received a private letter ruling on this point. If these requirements are not met, or under other circumstances, such as if the Fund does not qualify as a RIC for any taxable year, it is possible that the contract owners (rather
than the insurance company) will be treated for federal income tax purposes as the taxable owners of the assets held by the segregated asset accounts.
530
Clearing Member Default Risk. The Fund will hold FLEX Options through accounts at members of clearing houses (“clearing members”) rather than a bank or a broker. Assets deposited by the Fund with any clearing member as margin for its FLEX Options positions may, in certain circumstances, be used to satisfy losses of other
clients of the Fund’s clearing member where such assets may be held in commingled omnibus accounts. In addition, although clearing members guarantee performance of their clients’ obligations to the clearing house, there is a risk that the assets of
the Fund might not be fully protected in the event of the clearing member’s bankruptcy, as the Fund would be limited to recovering only a pro rata share of all available funds segregated on behalf of the
clearing member’s customers for the relevant account class.
Debt Securities Risk. The prices of debt securities will be affected by changes in interest rates, the
creditworthiness of the issuer and other factors. These risks could affect the value of investments in which the Fund invests, possibly causing the Fund’s NAV to be reduced and fluctuate more than other types of investments. During periods of
falling interest rates, an issuer of a callable bond may repay the security before its stated maturity, and the Fund may have to reinvest the proceeds in securities with lower yields, which would result in a decline in the Fund’s income, or in
securities with greater risks or with other less favorable features. Changing interest rates, including rates that fall below zero, may have unpredictable effects on markets, result in heightened market volatility and detract from the Fund’s
performance to the extent the Fund is exposed to such interest rates. An increase in interest rates will generally cause the value of fixed-income securities held by the Fund to decline, may lead to heightened volatility in the fixed-income
markets and may adversely affect the liquidity of certain fixed-income investments, including those held by the Fund. Risks associated with rising interest rates are heightened given that interest rates in the U.S. are near historic lows.
Adjustable-rate instruments also react to interest rate changes in a similar manner, although generally to a lesser degree (depending, however, on the characteristics of the reset terms, including the index chosen, frequency of reset and reset
caps or floors, among other factors). Interest rate sensitivity is generally more pronounced and less predictable in instruments with uncertain payment or prepayment schedules and also for those with longer maturities.
Foreign Securities and Credit Exposure Risk. U.S. dollar-denominated securities carrying foreign credit exposure
may be affected by unfavorable political, economic or governmental developments that could affect payments of principal and interest. Furthermore, the value of the Fund’s foreign investments (whether direct or indirect) may be adversely affected by
political and social instability in their home countries, by changes in economic or taxation policies in those countries, or by the difficulty in enforcing obligations in those countries. Foreign companies generally may be subject to less stringent
regulations than U.S. companies, including financial reporting requirements and auditing and accounting controls. As a result, there generally is less publicly available information about foreign companies than about U.S. companies. Trading in many
foreign securities may be less liquid and more volatile than U.S. securities due to the size of the market or other factors.
U.S. Government Securities Risk. U.S. Government securities are subject to interest rate risk but generally do
not involve the credit risks associated with investments in other types of debt securities. As a result, the yields available from U.S. Government securities are generally lower than the yields available from other debt securities. U.S. Government
securities are guaranteed only as to the timely payment of interest and the payment of principal when held to maturity. While securities issued or guaranteed by U.S. federal government agencies are backed by the full faith and credit of the U.S.
Department of the Treasury, securities issued by government sponsored entities are solely the obligation of the issuer and generally do not carry any guarantee from the U.S. Government.
ABS Risk. ABS are subject to the general debt securities risks described above. In addition, ABS may be less
liquid than other bonds, and may be more sensitive than other bonds to the market’s perception of issuers and creditworthiness of payees, which may result in the Fund experiencing difficulty selling or valuing these securities. ABS markets have
experienced extraordinary weakness and volatility at various times in recent years, and may decline quickly in the event of a substantial economic or market downturn. Accordingly, these securities may be subject to greater risk of default during
periods of economic downturn than other securities, which could result in possible losses to the Fund.
Issuer Risk. The performance of the Fund depends on the performance of individual securities to which the Fund
has exposure. The Fund may be adversely affected if an issuer of underlying securities held by the Fund is unable or
531
unwilling to repay principal or interest when due. Changes in the financial condition or credit rating of an issuer of those securities may cause the
value of the securities to decline.
Management Risk. The Fund is subject to management risk because it is an actively managed portfolio. Milliman
will apply investment techniques and risk analyses in making investment decisions for the Fund, but there can be no guarantee that the Fund will meet its investment objective and/or the Outcomes. In addition, Milliman does not use defensive
strategies or attempt to reduce the Fund’s exposures to poor performing positions during an Outcome Period. This differs from funds that are managed to seek to outperform a benchmark index. Therefore, in the event of a general market decline, the
Fund’s value may fall more than the value of another fund that does attempt to hedge against such market declines.
Market Risk. The Fund could lose money over short periods due to short-term market movements and over longer
periods during more prolonged market downturns. Assets may decline in value due to factors affecting financial markets generally or particular asset classes or industries represented in the markets. The value of a FLEX Option or other asset may
also decline due to general market conditions, economic trends or events that are not specifically related to the issuer of the security or other asset, or due to factors that affect a particular issuer, country, region, market, industry, sector or
asset class.
Non-Diversification Risk. The Fund may invest a relatively high percentage of its assets in a limited number of
issuers. As a result, the Fund may be more susceptible to a single adverse economic or regulatory occurrence affecting one or more of these issuers, experience increased volatility and be highly invested in certain issuers.
Large Shareholder Risk. At times, the Fund may experience adverse effects when certain large shareholders,
including insurance company separate accounts, redeem large amounts of shares of the Fund. Large redemptions may cause the Fund to sell portfolio holdings at times when it would not otherwise do so and may increase transaction costs and/or result
in an increase to the Fund’s expense ratio. A large redemption could be detrimental to the Fund and its remaining shareholders.
Risks of Investing in ETFs. In addition to the risks associated with the underlying assets held by the ETFs in
which the Fund invests, investments in ETFs are also subject to the following additional risks: (i) only authorized participants may engage in transactions directly with ETFs but none are obligated to do so, which could result in an ETF’s shares
trading at a premium or discount to its NAV or possibly face trading halts or delisting; (ii) certain ETFs seek to track the performance of an underlying index and will not attempt to take defensive positions under any market conditions, including
declining markets, which could result in losses; and (iii) because ETF shares trade on the secondary market, there is not guarantee that an active market will be developed or maintained, which could result in the ETF’s shares trading at a premium
or discount to its NAV. Investments in ETFs may involve duplication of management fees and certain other expenses, as the Fund indirectly bears its proportionate share of any expenses paid by the ETFs in which it invests.
Risks of Investing in Money Market Funds. Money market funds seek to preserve the value of shareholder
investments at $1.00 per share, but shareholders, such as the Fund, may still lose money by investing in such funds. In addition, a money market fund may impose a fee upon the sale of its shares or may temporarily suspend the ability to sell shares
if the fund’s liquidity falls below required minimums because of market conditions or other factors. The credit quality of a money market fund’s holdings can change rapidly in certain markets, and the default of a single holding could have an
adverse impact on the fund’s share price. A money market fund’s share price can also be negatively affected during periods of high redemption pressures, illiquid markets, and/or significant market volatility.
Performance
As of the date of this Prospectus, the Fund has not commenced operations and therefore does not have a performance history. Once available, the Fund’s
performance information will be accessible online at www.[________].com and will provide some indication of the risks of investing in the Fund.
Management
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Investment Adviser
Milliman Financial Risk Management LLC (“Milliman”) serves as investment adviser to the Fund.
Portfolio Managers
The following persons serve as portfolio managers of the Fund.
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Robert T. Cummings, Principal & Head of Portfolio Management at Milliman.
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Maria Schiopu, Principal & Head of Portfolio Management at Milliman.
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Jeff Greco, Principal & Head of Strategy Research at Milliman.
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Jordan Rosenfeld, Portfolio Manager at Milliman.
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Each portfolio manager is jointly and primarily responsible for the day-to-day management of the Fund’s portfolio and has served in such capacity
since the Fund’s inception in 2021.
Purchase and Sale of Shares
Shares are available as underlying investment options for variable insurance contracts and variable life insurance policies (each, a “variable contract,” and, collectively, the “variable contracts”) issued by insurance companies. These insurance companies are the record owners of the separate accounts
holding the Shares. You do not buy, sell or exchange Shares directly; rather, you choose investment options through your variable contracts. The insurance companies then cause the separate accounts to purchase and redeem Shares according to
the investment options you choose.
Tax Information
The dividends and distributions paid by the Fund to the insurance company separate accounts will consist of ordinary income, capital gains, or some
combination of both. Because Shares must be purchased through separate accounts used to fund variable contracts, such dividends and distributions will be exempt from current taxation by owners of variable contracts (each, a “contract owner,” and, collectively “contract owners”) if left to accumulate within a separate account. Consult the variable contract prospectus for additional tax
information.
Payments to Insurance Companies and Other Financial Intermediaries
If you allocate contract value to the Fund through an insurance company or other financial intermediary, the Fund, Milliman, the Fund’s distributor or
their related companies may pay the insurance company and/or its affiliates or other intermediary for the sale of Shares and related services. These payments may create a conflict of interest by influencing the insurance company or other
intermediary and your salesperson to recommend an indirect investment in the Fund over another investment. The prospectus or other disclosure documents for the variable contracts may contain additional information about these payments, if any.
You may also ask your salesperson or financial intermediary, or visit your financial intermediary’s website, for more information.
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Fund Summary: Milliman S&P 500 & MSCI EAFE 1-Year Buffer with Stacker Cap
Fund – Apr
Investment Objective
The Fund seeks to provide exposure to the S&P 500 Index, while providing a buffer against the first 10% of losses associated with S&P 500
Index performance and participating in S&P 500 Index gains up to a declared cap, prior to taking into account any fees or expenses or the performance of any fixed income exposure included in the Fund’s portfolio, over the period from April 1,
2022 through March 31, 2023. The Fund also seeks to provide upside exposure to the MSCI EAFE Index up to a declared cap, prior to taking into account any fees or expenses or the performance of any fixed income exposure included in the Fund’s
portfolio, over the same period.
Fees and Expenses of the Fund
This table describes the fees and expenses that you may pay if you buy, hold and sell shares of the Fund (“Shares”).
This table and the example below do not include any fees or sales charges imposed by your variable product. If they were included, the expenses listed below would be higher.
Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment)
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Class 3
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Management Fees
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0.49%
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Distribution and Service (12b-1) Fees
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0.25%
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Other Expenses(1)
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0.50%
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Acquired Fund Fees and Expenses(1)
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[_.__]%
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Total Annual Fund Operating Expenses
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1.24%
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Fee Waiver and/or Expense Reimbursement(2)(3)
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(0.25)%
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Total Annual Fund Operating Expenses After Fee Waiver and/or Expense Reimbursement
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0.99%
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(1)
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“Other Expenses” and “Acquired Fund Fees and Expenses” are based on estimated amounts for the current fiscal year.
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(2)
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The Fund’s investment adviser, Milliman Financial Risk Management LLC (“Milliman”), has contractually
agreed to waive advisory fees and/or reimburse expenses to the extent necessary to limit the Fund’s total annual Fund operating expenses (excluding taxes, interest, brokerage fees and commissions, Rule 12b-1 fees, acquired fund fees and
expenses, short-sale dividend expenses, administrative services fees, other expenses that are capitalized in accordance with generally accepted accounting principles, and extraordinary or non-routine expenses not incurred in the
ordinary course of the Fund’s business) to 0.74% of the Fund's average daily net assets (the “Expense Limitation Agreement”) until at least November 1, 2022. During its term, the Expense
Limitation Agreement cannot be terminated or amended to increase the applicable limit without approval of the Board of Trustees of the Trust (the “Board”). Milliman may recoup from the Fund any
advisory fees waived or expenses reimbursed pursuant to the Expense Limitation Agreement for a period of three years from the date on which such waiver or reimbursement occurred; provided, however, that such recoupment shall not be made
if it would cause the Fund’s total annual Fund operating expenses to exceed the lesser of (a) the expense limitation in effect at the time of the reimbursement, or (b) the expense limitation in effect at the time of recoupment, if any.
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(3)
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In addition to the Expense Limitation Agreement, Milliman has contractually agreed to waive its advisory fees in an amount equal to the Fund’s
acquired fund fees and expenses until at least November 1, 2022 (the “Fee Waiver”). This contract cannot be terminated or modified without the consent of the Board.
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Example
This example is intended to help you compare the cost of investing in the Fund with the cost of investing in other funds. This example assumes that you
invest $10,000 in the Fund for the time periods indicated and then sell all of your Shares at the end of those periods. This example also assumes that your investment has a 5% return each year and that the Fund’s operating expenses remain at
current levels and that the Expense Limitation Agreement and Fee Waiver remain in place for their contractual periods. Although your actual costs may be higher or lower, your costs, based on these assumptions, would be:
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1 Year
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3 Years
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Class 3
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$104
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$384
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This example does not include any fees or sales charges imposed by your variable product. If they were included, the expenses listed above would be
higher.
Portfolio Turnover
The Fund pays transaction costs, such as commissions, when it purchases and sells securities (or “turns over” its portfolio). A higher portfolio turnover
will cause the Fund to incur additional transaction costs. These costs, which are not reflected in Total Annual Fund Operating Expenses or in the example, may affect the Fund’s performance. Because the Fund has not yet commenced investment
operations, no portfolio turnover information is available at this time.
Principal Investment Strategies
The Fund seeks to achieve its investment objective by transacting in FLexible EXchange® Options (“FLEX Options”)
and by separately maintaining a collateral portfolio (the “Collateral Portfolio”), which is designed primarily to serve as margin or collateral for the Fund’s FLEX Options positions and secondarily to
enhance the Fund’s upside S&P 500 Index and MSCI EAFE Index FLEX Options’ exposure (i.e., by utilizing anticipated income to measure the ability to purchase additional FLEX Options). FLEX Options are
exchange-traded options contracts with uniquely customizable terms. In general, an options contract is an agreement between a buyer and seller that gives the purchaser of the option the right to buy or sell a particular asset at a specified
future date at an agreed upon price, commonly known as the “strike price.” The reference assets for the Fund’s FLEX Options positions will include the S&P 500 Index, the MSCI EAFE Index (the “Secondary Index,”
and together with the S&P 500 Index, the “Reference Indices,” and, each, a “Reference Index”), and certain exchange-traded funds (“ETFs”), as described further below. The S&P 500 Index is a large-capitalization, market-weighted, U.S. equities index that tracks the price (excluding dividends) of 500 leading companies
in leading industries of the U.S. economy. The Secondary Index is [a float-adjusted, market capitalization-weighted index that is designed to measure the performance of large and mid-capitalization securities across 21 developed markets,
including countries in Europe, Australasia and the Far East, excluding the United States and Canada].
The Collateral Portfolio may be invested in short-term fixed-income securities, including corporate bonds and other corporate debt securities,
asset-backed securities (“ABS”), securities issued by the U.S. Government or its agencies and instrumentalities, securities issued by non-U.S. governments or their agencies and instrumentalities, money
market securities and funds, other interest-bearing instruments, cash, ETFs that primarily invest in any of the foregoing instruments, options on ETFs and options box spreads. An options box spread is the combination of different options trades
that have offsetting spreads (e.g., purchases and sales on the same underlying instrument, such as an index or an ETF, but with different strike prices and/or expiration dates) for the purpose of
generating income. The Fund may invest in short-term fixed income securities or other instruments, including through ETFs, of any maturity and credit quality. The Fund will generally invest up to 35% of its net assets in one or more ETFs that
provide exposure to investment grade corporate bonds.
Due to the unique mechanics of the Fund’s strategy, the return an investor can expect to receive from an investment in the Fund has characteristics that
are distinct from the returns of many other investment vehicles. It is important that an investor understand these characteristics before making an investment in the Fund.
In seeking to achieve its investment objective, the Fund seeks to produce pre-determined outcomes (the “Outcomes”)
that are based upon the performance of the Reference Indices over a one-year period (the “Outcome Period”). The initial Outcome Period for the Fund is April 1, 2022 through March 31, 2023. Following the
initial Outcome Period, each subsequent Outcome Period will be a one-year period commencing upon the expiration of the prior Outcome Period. The Fund seeks to achieve the Outcomes by purchasing and writing (selling) FLEX Options to create layers
within the Fund’s portfolio. One layer is designed to produce returns that correlate to those of the S&P 500 Index for the Outcome Period if the S&P 500 Index experiences gains during that time, subject to an upside return cap (the “S&P 500 Index Cap”), as described below. A second layer is designed to produce returns that correlate to any upside market performance of the Secondary Index over the
Outcome Period, subject to an upside return cap (the “Secondary Index Cap,” and, together with the S&P 500 Index Cap, the “Index Caps,” and, each, an “Index Cap”), as described below. A third layer is designed to produce returns that correlate to those of the S&P 500 Index for the Outcome Period that are buffered up to 10% if the S&P 500 Index
experiences losses during
535
that time (the “Buffer”). There is no guarantee that the Fund will be
successful in its attempt to produce returns that correlate to those of the S&P 500 Index or the Secondary Index up to the applicable Index Caps or produce buffered returns against the Fund’s S&P 500 Index exposure.
Milliman Financial Risk Management, LLC (“Milliman”), the investment adviser of the Fund, seeks to establish the
Buffer by writing one put FLEX Option on the S&P 500 Index with a strike price that is 10% lower than the value of the S&P 500 Index at the beginning of the Outcome Period.
Milliman seeks to establish the Index Caps by purchasing long call FLEX Options on each Reference Index with a strike price approximately equal to the
value of the respective Reference Index at the beginning of the Outcome Period. Milliman purchases these FLEX Options with a portion of the Fund’s net assets plus (i) the cash received from writing the put FLEX Option designed to create the
Buffer, (ii) additional cash received by utilizing FLEX Options to create a put spread (the “Put Spread Strategy”) on fixed income securities and/or one or more ETFs that provide exposure to fixed income
securities, and (iii) yield received from the Collateral Portfolio. Milliman seeks to achieve the Put Spread Strategy for the Fund by writing a put FLEX Option on an underlying asset at a strike price at or lower than the underlying asset’s
market price or current value at the beginning of the Outcome Period, and buying a put FLEX Option on the same underlying asset at a lower strike price than the written put FLEX Option.
The Index Caps represent the maximum rate of return in each Reference Index that an investor can achieve from an investment in the Fund over the Outcome
Period. Milliman calculates the Index Caps based upon (i) its evaluation of prevailing market conditions on the first day of the Outcome Period and (ii) the total number of long call FLEX Options on each Reference Index that it is able to purchase
at that time. As of the date of this Prospectus, and assuming current market conditions persist, Milliman expects that the Index Caps will be between the below ranges (both gross and net of Fund fees and expenses). Any fees or expenses imposed by
your variable product, and any other expenses incurred by the Fund, will have the effect of further reducing each Index Cap. In addition, in certain market conditions, the performance of the Collateral Portfolio
and the Put Spread Strategy could cause the Fund to underperform relative to the Reference Indices, which could further limit Fund gains below the Index Caps, notwithstanding any performance of the Reference Indices in excess of the Index Caps.
|
Estimated Index Cap Ranges
(As of [___])
|
||
|
Prior to Taking into Account Fund Fees and Expenses
|
After Taking into Account Fund Fees and Expenses
|
|
|
S&P 500 Index Cap
|
||
|
Class 3
|
[__]% and [__]%
|
[__]% and [__]%
|
|
Secondary Index Cap
|
||
|
Class 3
|
[__]% and [__]%
|
[__]% and [__]%
|
The Buffer is only operative against the first 10% of losses in the Fund’s S&P 500 Index exposure for the Outcome Period. If the S&P 500 Index
decreases in value by more than 10% during the Outcome Period, the Fund (and therefore investors in Shares) will experience all subsequent losses in the Fund’s S&P 500 Index exposure on a one-to-one basis for the Outcome Period. The Fund
seeks to produce buffered returns against its S&P 500 Index exposure prior to taking into account any fees or expenses or the performance of the Collateral Portfolio or the Put Spread Strategy. The Buffer
is not operative against losses in the Collateral Portfolio or the Put Spread Strategy. If the Collateral Portfolio and/or the Put Spread Strategy experiences losses, it could have the effect of reducing the impact of, or completely
eliminating, the Buffer on the Fund’s S&P 500 Index exposure. In certain market conditions, the performance of the Collateral Portfolio and/or the Put Spread Strategy could cause the Fund to significantly underperform the S&P 500
Index. The following table reflects the Buffer both gross and net of Fund fees and expenses:
536
|
Share Class
|
Buffer
(As of [___])
|
|
|
Prior to Taking into Account Fund Fees and Expenses
|
After Taking into Account Fund Fees and Expenses
|
|
|
Class 3
|
10%
|
[__]%
|
Because the Fund also seeks to provide only upside exposure to the Secondary Index during the Outcome Period, the Fund’s NAV will not be impacted by any
losses experienced by the Secondary Index when measured from the beginning to the end of the Outcome Period. If the Secondary Index increases in value during the Outcome Period and later decreases in value during the Outcome Period, the Fund’s NAV
will reflect any such decreases until the Secondary Index reaches its initial value (measured as of the first day of the Outcome Period). If the Secondary Index decreases in value over the course of an entire Outcome Period, the Fund’s NAV will not
reflect such losses; therefore, the Fund’s overall performance will be approximately that of the S&P 500 Index for the Outcome Period, subject to the Buffer and the S&P 500 Index Cap.
The definitive Index Caps and Buffer will be set forth on the Fund’s website. The Fund’s website will also provide information relating to the
Outcomes on a daily basis, including the Fund’s position relative to the Index Caps and the Buffer. You may also contact your insurance company or other financial intermediary for more information.
Additionally, the Fund’s net asset value (“NAV”) will not increase or decrease at the same rate as the Reference
Indices because the Fund’s strategy relies upon the performance of the Collateral Portfolio and the Put Spread Strategy, in addition to the value of the Fund’s FLEX Options positions on the Reference Indices. While Milliman anticipates that the
Fund’s NAV will generally move in the same direction as the S&P 500 Index, and correspond to any upside returns of the Secondary Index (meaning that the Fund’s NAV will generally increase if the Reference Indices experience gains or decrease if
the Reference Indices experience losses), the Fund’s NAV may not decrease at the same rate as the Reference Indices (especially when factoring in the performance of the Collateral Portfolio and the Put Spread Strategy) and will not increase at the
same rate as the Reference Indices (especially when factoring in the Index Caps and the performance of the Collateral Portfolio and the Put Spread Strategy). Similarly, the amount of time remaining until the end of the Outcome Period also affects
the impact of the Buffer on the Fund’s NAV, because the Buffer may not be in full effect prior to the end of the Outcome Period.
The FLEX Options utilized in the Fund’s portfolio are each set to expire on the last day of the Outcome Period. The customizable nature of FLEX Options
will allow Milliman to select the strike price at which each FLEX Option will be exercised at the expiration of the FLEX Option term. At the commencement of the Outcome Period, Milliman will specifically select the strike price for each FLEX Option
in a manner designed to achieve the Outcomes when the FLEX Options are exercised on the final day of the Outcome Period, depending on the anticipated performance of the Reference Indices, the Collateral Portfolio and the Put Spread Strategy over
the duration of that Outcome Period.
The hypothetical graphical illustrations provided below are designed to illustrate the Outcomes based upon the
hypothetical performance of the Reference Indices for an investor who holds Shares for the entirety of the Outcome Period. The hypothetical graphical illustrations do not include any fees or expenses
imposed by your variable product or expenses incurred by the Fund, and do not reflect the performance of the Collateral Portfolio or the Put Spread Strategy. Additional hypothetical graphical representations of the Outcomes are provided in
“Additional Information About the Funds and the Risks of Investing.” There is no guarantee that the Fund will be successful in its attempt to achieve the Outcomes for the Outcome Period.
537
The following table contains hypothetical examples designed to illustrate the Outcomes the Fund seeks to
achieve over the Outcome Period, based upon the performance of the Reference Indices from (100)% to 100% after taking into account the Index Caps and the Buffer, but prior to taking into account any fees or
expenses or the performance of the Collateral Portfolio or the Put Spread Strategy. The table is provided for illustrative purposes only and does not provide every possible performance scenario for Shares over
the course of the Outcome Period. There is no guarantee that the Fund will be successful in its attempt to achieve the Outcomes for an Outcome Period. The table is not intended to predict or project the performance of the FLEX Options or the Fund. Investors should not take this information as an
assurance of the expected performance of the Reference Indices or the Fund. Actual Fund performance will vary with fluctuations in the performance of the Collateral Portfolio and the Put Spread Strategy, in addition to the value of the
Fund’s FLEX Options positions on the Reference Indices, during the Outcome Period, among other factors. The performance of the Collateral Portfolio and the Put Spread Strategy
could significantly impact the performance of the Fund, which could prevent the Fund from achieving the Outcomes that it seeks to produce. The table does not reflect any fees or expenses imposed by your variable product or expenses
incurred by the Fund. If it did, the returns shown for the Fund would be lower. Please refer to the Fund’s website, which provides updated information relating to this table on a daily basis throughout the Outcome Period. Please contact your
insurance company or other financial intermediary for more information.
538
|
Index/Fund
|
Hypothetical Performance1
|
|||||||||||
|
S&P 500 Index Price Performance
|
(100)%
|
(50)%
|
(20)%
|
(10)%
|
(5)%
|
0%
|
5%
|
10%
|
15%
|
20%
|
50%
|
100%
|
|
Secondary Index Price Performance
|
(100)%
|
(50)%
|
(20)%
|
(10)%
|
(5)%
|
0%
|
5%
|
10%
|
15%
|
20%
|
50%
|
100%
|
|
Fund Performance at NAV
|
(90)%
|
(40)%
|
(10)%
|
0%2
|
0%2
|
0%
|
10%3
|
14%3
|
14%3
|
14%3
|
14%3
|
14%3
|
| 1 |
Does not take into account any fees or expenses or the performance of the Collateral Portfolio or the Put Spread Strategy.
|
| 2 |
Reflects the impact of the Buffer.
|
| 3 |
Reflects the impact of assumed Index Caps of 7% per index, 14% total.
|
Understanding Outcomes. The Outcomes the Fund seeks to achieve are measured based upon the
Fund’s NAV on the first day of the Outcome Period. The Outcome Period begins on the day Milliman transacts in the FLEX Options on behalf of the Fund, and ends on the day those FLEX Options expire. An investor who
purchases Shares after the commencement of the Outcome Period will likely have purchased Shares at a different NAV than the NAV on the first day of the Outcome Period (the NAV upon which the Outcomes are based) and may experience investment
outcomes very different from those the Fund seeks to achieve, especially when factoring in any fees or expenses or the performance of the Collateral Portfolio and the Put Spread Strategy. An investor who redeems Shares prior to the end of the
Outcome Period may also experience investment outcomes very different from those the Fund seeks to achieve. The Outcomes are designed with the expectation that an investor will hold Shares on the day that Milliman transacts in the FLEX Options on
behalf of the Fund, and on the day those FLEX Options expire. There is no guarantee that the Fund will be successful in its attempt to achieve the Outcomes.
Understanding the Index Caps. Unlike other investment products, the potential returns an
investor can receive from an investment in the Fund are subject to the Index Caps. This means that if one or both of the Reference Indices experience gains for the Outcome Period, an investor in the Fund will only
experience those gains up to the applicable Index Cap. Milliman calculates the Index Caps for each Outcome Period based upon (i) its evaluation of prevailing market conditions on the first day of the Outcome Period and (ii) the total
number of long call FLEX Options on each Reference Index that it is able to purchase at that time. If an investor is considering purchasing Shares during the Outcome Period, and the Fund’s NAV has increased in
value to a level near one or both of the Index Caps, an investor purchasing Shares at that price will have limited to no gains available for the remainder of the Outcome Period, but will remain vulnerable to significant downside risks (with
respect to the S&P 500 Index FLEX Options’ exposure). In certain market conditions, the performance of the Collateral Portfolio and the Put Spread Strategy could cause the Fund to underperform
relative to the Reference Indices, which could further limit Fund gains below the Index Caps, notwithstanding any performance of the Reference Indices in excess of the Index Caps.
Understanding the Buffer. The Buffer that the Fund seeks to provide is only operative
against the first 10% of losses in the Fund’s S&P 500 Index exposure for the Outcome Period. If an investor is considering purchasing Shares during the Outcome Period, and the S&P 500 Index has decreased
in value by an amount equal to or greater than 10%, an investor purchasing Shares at that time will be able to participate in any gains thereafter (up to the Index Caps), but will not benefit from the Buffer that the Fund seeks to offer for the
remainder of the Outcome Period if the losses continue to be equal to or greater than 10% during that period. Conversely, if an investor is considering purchasing Shares during the Outcome Period, and the Fund’s NAV has increased in value, then
an investor may experience losses before implementation of the Buffer that the Fund seeks to provide. While the Fund seeks to produce returns that correlate to those of the S&P 500 Index for the Outcome Period that are buffered up to
10% (prior to taking into account any fees or expenses or the performance of the Collateral Portfolio or the Put Spread Strategy) for investors who hold Shares for the entire Outcome Period, there is no guarantee it will successfully do so. In addition, the Buffer is not operative against losses in the Collateral Portfolio or the Put Spread Strategy. If the Collateral Portfolio and/or the Put Spread Strategy experiences losses, it could have the
effect of reducing the impact of, or completely eliminating, the Buffer on the Fund’s S&P 500 Index exposure. In certain market conditions, the performance of the Collateral Portfolio and/or the Put Spread Strategy could cause the Fund to
significantly underperform the S&P 500 Index. Investors who purchase Shares at the beginning of the Outcome Period may lose their entire
539
investment. Investors who purchase Shares after the Outcome Period has begun may also lose their entire investment. An
investment in the Fund is only appropriate for investors willing to bear those losses.
Fund Rebalance. Milliman implements the Fund’s strategy on an annual basis, seeking to
produce the Outcomes for an Outcome Period. On the last business day of any stated Outcome Period, all of the Fund’s existing FLEX Options, which includes those used to establish the Buffer, the Index Caps and the Put Spread Strategy, will expire
and Milliman will transact in a new set of FLEX Options on the same business day, which will commence a new Outcome Period beginning the following business day. At that same time, Milliman will also evaluate whether to make any adjustments to the
Collateral Portfolio. Accordingly, Shares can be held indefinitely if investors determine to participate in additional Outcome Periods.
Approximately one week prior to the end of each Outcome Period, the Fund will file a prospectus supplement, which will notify existing investors of
(i) the date on which the existing Outcome Period will end; (ii) the date on which the new Outcome Period will commence; and (iii) the anticipated ranges of the Index Caps that will be used for the new Outcome Period. Immediately preceding the
commencement date of the new Outcome Period, the Fund will file a prospectus supplement disclosing the Fund’s final Index Caps (both gross and net of Fund fees and expenses) for the new Outcome Period. This information will also be available
online at www.[___________].com, and on your insurance company’s website. Please contact your insurance company or other financial intermediary for more information.
Fund Classification. The Fund is classified as “non-diversified” under the Investment
Company Act of 1940, as amended (the “1940 Act”).
Principal Risks
You could lose money by investing in the Fund. An investment in the Fund is not a deposit of a bank and is not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other governmental agency. There can be no assurance that the Fund’s investment objectives will be achieved.
Downside Loss Buffer Risk. There can be no guarantee that the Fund will be successful in its strategy to
buffer against S&P 500 Index losses if the S&P 500 Index decreases in value over the Outcome Period. The Fund’s strategy is designed to produce returns that correlate to those of the S&P 500 Index, subject to the S&P 500 Index
Cap, while limiting downside S&P 500 Index losses and providing additional upside exposure to the Secondary Index, subject to the Secondary Index Cap, if Shares are bought on the day on which Milliman transacts in the FLEX Options on behalf
of the Fund and held until those FLEX Options expire at the end of each Outcome Period. The success of the Buffer also depends upon the performance of the Collateral Portfolio and the Put Spread Strategy. If
the Collateral Portfolio and/or the Put Spread Strategy experiences losses, it could have the effect of reducing the impact of, or completely eliminating, the Buffer on the Fund’s S&P 500 Index exposure. In certain market conditions, the
performance of the Collateral Portfolio and/or the Put Spread Strategy could cause the Fund to significantly underperform the S&P 500 Index. Despite the intended Buffer, an investor could lose their entire investment. In the
event an investor purchases Shares after the date on which Milliman transacted in the FLEX Options on behalf of the Fund, or redeems Shares prior to the expiration of those FLEX Options, the Buffer that the Fund seeks to provide may not be
available or fully applicable.
Risk of Capped Upside Returns. The Fund’s strategy is designed to produce returns that correlate to those of the
Reference Indices up to the Index Caps if Shares are bought on the day on which Milliman transacts in the FLEX Options on behalf of the Fund and held until those FLEX Options expire at the end of the Outcome Period, subject to the Index Caps. In
the event that one or both of the Reference Indices experience gains during the Outcome Period, the Fund will only participate in those gains up to the applicable Index Cap. In the event that one or both Reference Indices experience gains in excess
of the applicable Index Cap over the duration of the Outcome Period, the Fund will not participate in those excess gains. Because the Fund’s strategy provides capped exposure to two Reference Indices, the Index Caps may be lower than if the Fund
provided capped exposure to only a single Reference Index. In the event an investor purchases Shares after the date on which the FLEX Options were entered into and the Fund has risen in value to a level near to an Index Cap, there may be little or
no ability for that investor to experience an investment gain on their Shares relating to that Reference Index. In certain market conditions, the performance of the Collateral Portfolio and the Put Spread
Strategy could cause the Fund to
540
underperform relative to the Reference Indices, which could further limit Fund gains below the Index Caps, notwithstanding any
performance of the Reference Indices in excess of the Index Caps. An investor should consider the amount of the Index Caps, and the Fund’s position relative to each Index Cap, before investing in the Fund.
Index Cap Change Risk. Because the Index Caps for each Outcome Period are calculated based upon (i) Milliman’s
evaluation of prevailing market conditions on the first day of the Outcome Period and (ii) the total number of long call FLEX Options on the Reference Indices that Milliman is able to purchase at that time, the Index Caps may rise or fall from one
Outcome Period to the next. Any change in the Index Caps could be significant and they are unlikely to remain the same for consecutive Outcome Periods.
FLEX Options Risk. The Fund will transact in FLEX Options issued and guaranteed for settlement by the OCC. The
Fund bears the risk that the OCC will be unable or unwilling to perform its obligations under the FLEX Options contracts, which could result in significant losses to the Fund. In less liquid markets, terminating a FLEX Option may require the
payment of a premium or acceptance of a discounted price, and may take longer to complete. In addition, a less liquid trading market may adversely impact the value of the Fund’s FLEX Options and therefore the NAV of the Fund. In addition, the value
of the Fund’s FLEX Options positions is not anticipated to increase or decrease at the same rate as the reference asset; and while it is anticipated that they will generally move in the same direction, it is possible that they may move in different
directions. Certain FLEX Options positions may also expire worthless. The use of FLEX Options involves leverage, which can cause the Fund’s portfolio to be more volatile than if the portfolio had not been leveraged. Leverage can significantly
magnify the effect of price movements of the reference asset, disproportionately increasing the Fund’s losses and reducing the Fund’s opportunities for gains when the reference asset changes in unexpected ways. In some instances, such leverage
could result in losses that exceed the original amount invested.
Investment Objective and Outcomes Risk. There is no guarantee that the Fund will be successful in its attempt
to achieve its investment objective and/or the Outcomes, and an investor could lose some or all of their investment in the Fund. Certain circumstances under which the Fund might not achieve its objective and/or the Outcomes include, but are not
limited to (i) if the Fund disposes of FLEX Options, (ii) if the Fund is unable to maintain the proportional relationship based on the number of FLEX Options in the Fund’s portfolio, (iii) significant accrual of Fund expenses in connection with
effecting the Fund’s principal investment strategy, (iv) losses incurred by the Fund’s holdings in the Collateral Portfolio and/or losses resulting from the Put Spread Strategy, or (iv) adverse tax law changes affecting the treatment of FLEX
Options.
Tax Risk. The Fund intends to elect, and to qualify each year, to be treated as a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”). As a RIC, the Fund will not be subject to U.S. federal income tax on the portion
of its net investment income and net capital gain that it distributes to shareholders, provided that it satisfies certain requirements of the Code. To maintain its status as a RIC, the Fund must meet certain income, diversification and
distributions tests. For purposes of the diversification test, the identification of the issuer (or, in some cases, issuers) of a particular Fund investment can depend on the terms and conditions of that investment. In particular, there is no
published IRS guidance or case law on how to determine the “issuer” of certain derivatives that the Fund will enter into and the Fund has not received a private letter ruling on this point. Therefore, there is a risk that the Fund will not meet the
Code’s diversification requirements and will not qualify, or will be disqualified, as a RIC. If the Fund does not qualify as a RIC for any taxable year and certain relief provisions are not available, the Fund’s taxable income will be subject to
tax at the Fund level and to a further tax at the shareholder level when such income is distributed.
The Fund also intends to comply with the diversification requirements of Section 817(h) of the Code, and the regulations thereunder, relating to the
tax-deferred status of variable accounts that are based on insurance company separate accounts (referred to as “segregated asset accounts” for federal income tax purposes). These diversification requirements apply in addition to the RIC
diversification requirements discussed above. There also is no published guidance or case law on how to determine the “issuer” of the derivatives referred to above for purposes of the diversification requirements of Section 817(h) of the Code and
the Fund has not received a private letter ruling on this point. If these requirements are not met, or under other circumstances, such as if the Fund does not qualify as a RIC for any taxable year, it is possible that the contract owners (rather
than the insurance company) will be treated for federal income tax purposes as the taxable owners of the assets held by the segregated asset accounts.
541
Clearing Member Default Risk. The Fund will hold FLEX Options through accounts at members of clearing houses (“clearing members”) rather than a bank or a broker. Assets deposited by the Fund with any clearing member as margin for its FLEX Options positions may, in certain circumstances, be used to satisfy losses of other
clients of the Fund’s clearing member where such assets may be held in commingled omnibus accounts. In addition, although clearing members guarantee performance of their clients’ obligations to the clearing house, there is a risk that the assets of
the Fund might not be fully protected in the event of the clearing member’s bankruptcy, as the Fund would be limited to recovering only a pro rata share of all available funds segregated on behalf of the
clearing member’s customers for the relevant account class.
Debt Securities Risk. The prices of debt securities will be affected by changes in interest rates, the
creditworthiness of the issuer and other factors. These risks could affect the value of investments in which the Fund invests, possibly causing the Fund’s NAV to be reduced and fluctuate more than other types of investments. During periods of
falling interest rates, an issuer of a callable bond may repay the security before its stated maturity, and the Fund may have to reinvest the proceeds in securities with lower yields, which would result in a decline in the Fund’s income, or in
securities with greater risks or with other less favorable features. Changing interest rates, including rates that fall below zero, may have unpredictable effects on markets, result in heightened market volatility and detract from the Fund’s
performance to the extent the Fund is exposed to such interest rates. An increase in interest rates will generally cause the value of fixed-income securities held by the Fund to decline, may lead to heightened volatility in the fixed-income
markets and may adversely affect the liquidity of certain fixed-income investments, including those held by the Fund. Risks associated with rising interest rates are heightened given that interest rates in the U.S. are near historic lows.
Adjustable-rate instruments also react to interest rate changes in a similar manner, although generally to a lesser degree (depending, however, on the characteristics of the reset terms, including the index chosen, frequency of reset and reset
caps or floors, among other factors). Interest rate sensitivity is generally more pronounced and less predictable in instruments with uncertain payment or prepayment schedules and also for those with longer maturities.
Foreign Securities and Credit Exposure Risk. U.S. dollar-denominated securities carrying foreign credit exposure
may be affected by unfavorable political, economic or governmental developments that could affect payments of principal and interest. Furthermore, the value of the Fund’s foreign investments (whether direct or indirect) may be adversely affected by
political and social instability in their home countries, by changes in economic or taxation policies in those countries, or by the difficulty in enforcing obligations in those countries. Foreign companies generally may be subject to less stringent
regulations than U.S. companies, including financial reporting requirements and auditing and accounting controls. As a result, there generally is less publicly available information about foreign companies than about U.S. companies. Trading in many
foreign securities may be less liquid and more volatile than U.S. securities due to the size of the market or other factors.
U.S. Government Securities Risk. U.S. Government securities are subject to interest rate risk but generally do
not involve the credit risks associated with investments in other types of debt securities. As a result, the yields available from U.S. Government securities are generally lower than the yields available from other debt securities. U.S. Government
securities are guaranteed only as to the timely payment of interest and the payment of principal when held to maturity. While securities issued or guaranteed by U.S. federal government agencies are backed by the full faith and credit of the U.S.
Department of the Treasury, securities issued by government sponsored entities are solely the obligation of the issuer and generally do not carry any guarantee from the U.S. Government.
ABS Risk. ABS are subject to the general debt securities risks described above. In addition, ABS may be less
liquid than other bonds, and may be more sensitive than other bonds to the market’s perception of issuers and creditworthiness of payees, which may result in the Fund experiencing difficulty selling or valuing these securities. ABS markets have
experienced extraordinary weakness and volatility at various times in recent years, and may decline quickly in the event of a substantial economic or market downturn. Accordingly, these securities may be subject to greater risk of default during
periods of economic downturn than other securities, which could result in possible losses to the Fund.
Issuer Risk. The performance of the Fund depends on the performance of individual securities to which the Fund
has exposure. The Fund may be adversely affected if an issuer of underlying securities held by the Fund is unable or
542
unwilling to repay principal or interest when due. Changes in the financial condition or credit rating of an issuer of those securities may cause the
value of the securities to decline.
Management Risk. The Fund is subject to management risk because it is an actively managed portfolio. Milliman
will apply investment techniques and risk analyses in making investment decisions for the Fund, but there can be no guarantee that the Fund will meet its investment objective and/or the Outcomes. In addition, Milliman does not use defensive
strategies or attempt to reduce the Fund’s exposures to poor performing positions during an Outcome Period. This differs from funds that are managed to seek to outperform a benchmark index. Therefore, in the event of a general market decline, the
Fund’s value may fall more than the value of another fund that does attempt to hedge against such market declines.
Market Risk. The Fund could lose money over short periods due to short-term market movements and over longer
periods during more prolonged market downturns. Assets may decline in value due to factors affecting financial markets generally or particular asset classes or industries represented in the markets. The value of a FLEX Option or other asset may
also decline due to general market conditions, economic trends or events that are not specifically related to the issuer of the security or other asset, or due to factors that affect a particular issuer, country, region, market, industry, sector or
asset class.
Non-Diversification Risk. The Fund may invest a relatively high percentage of its assets in a limited number of
issuers. As a result, the Fund may be more susceptible to a single adverse economic or regulatory occurrence affecting one or more of these issuers, experience increased volatility and be highly invested in certain issuers.
Large Shareholder Risk. At times, the Fund may experience adverse effects when certain large shareholders,
including insurance company separate accounts, redeem large amounts of shares of the Fund. Large redemptions may cause the Fund to sell portfolio holdings at times when it would not otherwise do so and may increase transaction costs and/or result
in an increase to the Fund’s expense ratio. A large redemption could be detrimental to the Fund and its remaining shareholders.
Risks of Investing in ETFs. In addition to the risks associated with the underlying assets held by the ETFs in
which the Fund invests, investments in ETFs are also subject to the following additional risks: (i) only authorized participants may engage in transactions directly with ETFs but none are obligated to do so, which could result in an ETF’s shares
trading at a premium or discount to its NAV or possibly face trading halts or delisting; (ii) certain ETFs seek to track the performance of an underlying index and will not attempt to take defensive positions under any market conditions, including
declining markets, which could result in losses; and (iii) because ETF shares trade on the secondary market, there is not guarantee that an active market will be developed or maintained, which could result in the ETF’s shares trading at a premium
or discount to its NAV. Investments in ETFs may involve duplication of management fees and certain other expenses, as the Fund indirectly bears its proportionate share of any expenses paid by the ETFs in which it invests.
Risks of Investing in Money Market Funds. Money market funds seek to preserve the value of shareholder
investments at $1.00 per share, but shareholders, such as the Fund, may still lose money by investing in such funds. In addition, a money market fund may impose a fee upon the sale of its shares or may temporarily suspend the ability to sell shares
if the fund’s liquidity falls below required minimums because of market conditions or other factors. The credit quality of a money market fund’s holdings can change rapidly in certain markets, and the default of a single holding could have an
adverse impact on the fund’s share price. A money market fund’s share price can also be negatively affected during periods of high redemption pressures, illiquid markets, and/or significant market volatility.
Performance
As of the date of this Prospectus, the Fund has not commenced operations and therefore does not have a performance history. Once available, the Fund’s
performance information will be accessible online at www.[________].com and will provide some indication of the risks of investing in the Fund.
Management
543
Investment Adviser
Milliman Financial Risk Management LLC (“Milliman”) serves as investment adviser to the Fund.
Portfolio Managers
The following persons serve as portfolio managers of the Fund.
|
●
|
Robert T. Cummings, Principal & Head of Portfolio Management at Milliman.
|
|
●
|
Maria Schiopu, Principal & Head of Portfolio Management at Milliman.
|
|
●
|
Jeff Greco, Principal & Head of Strategy Research at Milliman.
|
|
●
|
Jordan Rosenfeld, Portfolio Manager at Milliman.
|
Each portfolio manager is jointly and primarily responsible for the day-to-day management of the Fund’s portfolio and has served in such capacity
since the Fund’s inception in 2021.
Purchase and Sale of Shares
Shares are available as underlying investment options for variable insurance contracts and variable life insurance policies (each, a “variable contract,” and, collectively, the “variable contracts”) issued by insurance companies. These insurance companies are the record owners of the separate accounts
holding the Shares. You do not buy, sell or exchange Shares directly; rather, you choose investment options through your variable contracts. The insurance companies then cause the separate accounts to purchase and redeem Shares according to
the investment options you choose.
Tax Information
The dividends and distributions paid by the Fund to the insurance company separate accounts will consist of ordinary income, capital gains, or some
combination of both. Because Shares must be purchased through separate accounts used to fund variable contracts, such dividends and distributions will be exempt from current taxation by owners of variable contracts (each, a “contract owner,” and, collectively “contract owners”) if left to accumulate within a separate account. Consult the variable contract prospectus for additional tax
information.
Payments to Insurance Companies and Other Financial Intermediaries
If you allocate contract value to the Fund through an insurance company or other financial intermediary, the Fund, Milliman, the Fund’s distributor or
their related companies may pay the insurance company and/or its affiliates or other intermediary for the sale of Shares and related services. These payments may create a conflict of interest by influencing the insurance company or other
intermediary and your salesperson to recommend an indirect investment in the Fund over another investment. The prospectus or other disclosure documents for the variable contracts may contain additional information about these payments, if any.
You may also ask your salesperson or financial intermediary, or visit your financial intermediary’s website, for more information.
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Fund Summary: Milliman S&P 500 6-Year Buffer with Par Up Fund – Oct (I)
Investment Objective
The Fund seeks to provide exposure to the S&P 500 Index, while providing a buffer against the first 20% of losses associated with S&P 500
Index performance and participating in S&P 500 Index gains at a declared rate, prior to taking into account any fees or expenses or the performance of any fixed income exposure included in the Fund’s portfolio, over the period from October 1,
2021 through September 30, 2027.
Fees and Expenses of the Fund
This table describes the fees and expenses that you may pay if you buy, hold and sell shares of the Fund (“Shares”).
This table and the example below do not include any fees or sales charges imposed by your variable product. If they were included, the expenses listed below would be higher.
Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment)
|
Class 3
|
|
|
Management Fees
|
0.49%
|
|
Distribution and Service (12b-1) Fees
|
0.25%
|
|
Other Expenses(1)
|
0.50%
|
|
Acquired Fund Fees and Expenses(1)
|
[_.__]%
|
|
Total Annual Fund Operating Expenses
|
1.24%
|
|
Fee Waiver and/or Expense Reimbursement(2)(3)
|
(0.25)%
|
|
Total Annual Fund Operating Expenses After Fee Waiver and/or Expense Reimbursement
|
0.99%
|
|
(1)
|
“Other Expenses” and “Acquired Fund Fees and Expenses” are based on estimated amounts for the current fiscal year.
|
|
(2)
|
The Fund’s investment adviser, Milliman Financial Risk Management LLC (“Milliman”), has contractually
agreed to waive advisory fees and/or reimburse expenses to the extent necessary to limit the Fund’s total annual Fund operating expenses (excluding taxes, interest, brokerage fees and commissions, Rule 12b-1 fees, acquired fund fees and
expenses, short-sale dividend expenses, administrative services fees, other expenses that are capitalized in accordance with generally accepted accounting principles, and extraordinary or non-routine expenses not incurred in the
ordinary course of the Fund’s business) to 0.74% of the Fund's average daily net assets (the “Expense Limitation Agreement”) until at least November 1, 2022. During its term, the Expense
Limitation Agreement cannot be terminated or amended to increase the applicable limit without approval of the Board of Trustees of the Trust (the “Board”). Milliman may recoup from the Fund any
advisory fees waived or expenses reimbursed pursuant to the Expense Limitation Agreement for a period of three years from the date on which such waiver or reimbursement occurred; provided, however, that such recoupment shall not be made
if it would cause the Fund’s total annual Fund operating expenses to exceed the lesser of (a) the expense limitation in effect at the time of the reimbursement, or (b) the expense limitation in effect at the time of recoupment, if any.
|
|
(3)
|
In addition to the Expense Limitation Agreement, Milliman has contractually agreed to waive its advisory fees in an amount equal to the Fund’s
acquired fund fees and expenses until at least November 1, 2022 (the “Fee Waiver”). This contract cannot be terminated or modified without the consent of the Board.
|
Example
This example is intended to help you compare the cost of investing in the Fund with the cost of investing in other funds. This example assumes that you
invest $10,000 in the Fund for the time periods indicated and then sell all of your Shares at the end of those periods. This example also assumes that your investment has a 5% return each year and that the Fund’s operating expenses remain at
current levels and that the Expense Limitation Agreement and Fee Waiver remain in place for their contractual periods. Although your actual costs may be higher or lower, your costs, based on these assumptions, would be:
|
1 Year
|
3 Years
|
|
|
Class 3
|
$104
|
$384
|
This example does not include any fees or sales charges imposed by your variable product. If they were included, the expenses listed above would be
higher.
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Portfolio Turnover
The Fund pays transaction costs, such as commissions, when it purchases and sells securities (or “turns over” its portfolio). A higher portfolio turnover
will cause the Fund to incur additional transaction costs. These costs, which are not reflected in Total Annual Fund Operating Expenses or in the example, may affect the Fund’s performance. Because the Fund has not yet commenced investment
operations, no portfolio turnover information is available at this time.
Principal Investment Strategies
The Fund seeks to achieve its investment objective by transacting in FLexible EXchange® Options (“FLEX Options”)
and by separately maintaining a collateral portfolio (the “Collateral Portfolio”), which is designed primarily to serve as margin or collateral for the Fund’s FLEX Options positions and secondarily to
enhance the Fund’s upside S&P 500 Index FLEX Options’ exposure (i.e., by utilizing anticipated income to measure the ability to purchase additional FLEX Options). FLEX Options are exchange-traded
options contracts with uniquely customizable terms. In general, an options contract is an agreement between a buyer and seller that gives the purchaser of the option the right to buy or sell a particular asset at a specified future date at an
agreed upon price, commonly known as the “strike price.” The reference assets for the Fund’s FLEX Options positions will include the S&P 500 Index, which is a large-capitalization, market-weighted, U.S. equities index that tracks the price
(excluding dividends) of 500 leading companies in leading industries of the U.S. economy, and certain exchange-traded funds (“ETFs”), as described further below.
The Collateral Portfolio may be invested in short-term fixed-income securities, including corporate bonds and other corporate debt securities,
asset-backed securities (“ABS”), securities issued by the U.S. Government or its agencies and instrumentalities, securities issued by non-U.S. governments or their agencies and instrumentalities, money
market securities and funds, other interest-bearing instruments, cash, ETFs that primarily invest in any of the foregoing instruments, options on ETFs and options box spreads. An options box spread is the combination of different options trades
that have offsetting spreads (e.g., purchases and sales on the same underlying instrument, such as an index or an ETF, but with different strike prices and/or expiration dates) for the purpose of
generating income. The Fund may invest in short-term fixed income securities or other instruments, including through ETFs, of any maturity and credit quality. The Fund will generally invest up to 80% of its net assets in one or more ETFs that
provide exposure to investment grade corporate bonds.
Due to the unique mechanics of the Fund’s strategy, the return an investor can expect to receive from an investment in the Fund has characteristics that
are distinct from the returns of many other investment vehicles. It is important that an investor understand these characteristics before making an investment in the Fund.
In seeking to achieve its investment objective, the Fund seeks to produce pre-determined outcomes (the “Outcomes”)
that are based upon the performance of the S&P 500 Index over a six-year period (the “Outcome Period”). The initial Outcome Period for the Fund is October 1, 2021 through September 30, 2027. Following
the initial Outcome Period, each subsequent Outcome Period will be a six-year period commencing upon the expiration of the prior Outcome Period. The Fund seeks to achieve the Outcomes by purchasing and writing (selling) FLEX Options to create
layers within the Fund’s portfolio. One layer is designed to produce returns that correlate to those of the S&P 500 Index for the Outcome Period at a declared rate (the “Par Up Rate”) if the S&P
500 Index experiences gains during that time, as described below. A separate layer is designed to produce returns that correlate to those of the S&P 500 Index for the Outcome Period that are buffered up
to 20% if the S&P 500 Index experiences losses during that time (the “Buffer”). There is no guarantee that the Fund will be successful in its attempt to produce
returns that correlate to those of the S&P 500 Index at the Par Up Rate or produce buffered returns against the Fund’s S&P 500 Index exposure.
Milliman Financial Risk Management, LLC (“Milliman”), the investment adviser of the Fund, seeks to establish
the Buffer by writing one put FLEX Option on the S&P 500 Index with a strike price that is 20% lower than the value of the S&P 500 Index at the beginning of the Outcome Period.
Milliman seeks to establish the Par Up Rate by purchasing long call FLEX Options on the S&P 500 Index with a strike price approximately equal to
the value of the S&P 500 Index at the beginning of the Outcome Period.
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Milliman purchases these FLEX Options with a portion of the Fund’s net assets plus (i) the cash received from writing the put FLEX Option designed to
create the Buffer, and (ii) yield received from the Collateral Portfolio.
The Par Up Rate is the rate at which the Fund will seek to track any upside market performance of the S&P 500 Index. Milliman calculates the Par
Up Rate based upon (i) its evaluation of prevailing market conditions on the first day of the Outcome Period and (ii) the total number of long call FLEX Options on the S&P 500 Index that it is able to purchase at that time. As of the date of
this Prospectus, and assuming current market conditions persist, Milliman expects that the Par Up Rate will be between the below ranges (both gross and net of Fund fees and expenses). Any fees or expenses imposed by your variable product, and any
other expenses incurred by the Fund, will have the effect of further reducing the Par Up Rate. Once calculated, the Par Up Rate for a particular Outcome Period will not change during that Outcome Period;
however, in certain market conditions, the performance of the Collateral Portfolio could reduce the impact of the Par Up Rate.
|
Share Class
|
Estimated Par Up Rate Ranges
(As of [___])
|
|
|
Prior to Taking into Account Fund Fees and Expenses
|
After Taking into Account Fund Fees and Expenses
|
|
|
Class 3
|
[__]% and [__]%
|
[__]% and [__]%
|
The Buffer is only operative against the first 20% of losses in the Fund’s S&P 500 Index exposure for the Outcome Period. If the S&P 500 Index
decreases in value by more than 20% during the Outcome Period, the Fund (and therefore investors in Shares) will experience all subsequent losses in the Fund’s S&P 500 Index exposure on a one-to-one basis for the Outcome Period. The Fund
seeks to produce buffered returns against its S&P 500 Index exposure prior to taking into account any fees or expenses or the performance of the Collateral Portfolio. The Buffer is not operative against
losses in the Collateral Portfolio. If the Collateral Portfolio experiences losses, it could have the effect of reducing the impact of, or completely eliminating, the Buffer on the Fund’s S&P 500 Index exposure. In certain market
conditions, the performance of the Collateral Portfolio could cause the Fund to significantly underperform the S&P 500 Index. The following table reflects the Buffer both gross and net of Fund fees and expenses:
|
Share Class
|
Buffer
(As of [___])
|
|
|
Prior to Taking into Account Fund Fees and Expenses
|
After Taking into Account Fund Fees and Expenses
|
|
|
Class 3
|
20%
|
[__]%
|
The definitive Par Up Rate and Buffer will be set forth on the Fund’s website. The Fund’s website will also provide information relating to the
Outcomes on a daily basis, including the Fund’s position relative to the Par Up Rate and the Buffer. You may also contact your insurance company or other financial intermediary for more information.
Additionally, the Fund’s net asset value (“NAV”) will not increase or decrease at the same rate as the
S&P 500 Index because the Fund’s strategy relies upon the performance of the Collateral Portfolio, in addition to the value of the Fund’s FLEX Options positions on the S&P 500 Index. While Milliman anticipates that the Fund’s NAV will
generally move in the same direction as the S&P 500 Index (meaning that the Fund’s NAV will generally increase if the S&P 500 Index experiences gains or decrease if the S&P 500 Index experiences losses), the Fund’s NAV may not
decrease at the same rate as the S&P 500 Index (especially when factoring in the performance of the Collateral Portfolio) and will not increase at the same rate as the S&P 500 Index (especially when factoring in the Par Up Rate and the
performance of the Collateral Portfolio). Similarly, the amount of time remaining until the end of the Outcome Period also affects the impact of the Buffer on the Fund’s NAV, because the Buffer may not be in full effect prior to the end of the
Outcome Period.
The FLEX Options utilized in the Fund’s portfolio are each set to expire on the last day of the Outcome Period. The customizable nature of FLEX Options
will allow Milliman to select the strike price at which each FLEX Option will be exercised at the expiration of the FLEX Option term. At the commencement of the Outcome Period, Milliman will specifically select the strike price for each FLEX Option
in a manner designed to achieve the Outcomes when
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the FLEX Options are exercised on the final day of the Outcome Period, depending on the anticipated performance of the S&P 500 Index and the
Collateral Portfolio over the duration of that Outcome Period.
The hypothetical graphical illustrations provided below are designed to illustrate the Outcomes based upon the
hypothetical performance of the S&P 500 Index for an investor who holds Shares for the entirety of the Outcome Period. The hypothetical graphical illustrations do not include any fees or expenses imposed by your variable product or expenses
incurred by the Fund, and do not reflect the performance of the Collateral Portfolio. Additional hypothetical graphical representations of the Outcomes are provided in “Additional Information About the Funds and the Risks of Investing.”
There is no guarantee that the Fund will be successful in its attempt to achieve the Outcomes for the Outcome Period.
The following table contains hypothetical examples designed to illustrate the Outcomes the Fund seeks to
achieve over the Outcome Period, based upon the performance of the S&P 500 Index from (100)% to 100% after taking into account the Par Up Rate and the Buffer, but prior to taking into account any fees or expenses or the performance of the
Collateral Portfolio. The table is provided for illustrative purposes only and does not provide every possible performance scenario for Shares over the course of the Outcome Period. There is no guarantee that the Fund will be successful in its attempt to achieve the Outcomes for an Outcome
Period. The table is not intended to predict or project the performance of the FLEX Options or the Fund. Investors should not take this information as an assurance of the expected performance of the
S&P 500 Index or the Fund. Actual Fund performance will vary with fluctuations in the performance of the Collateral Portfolio, in addition to the value of the Fund’s FLEX Options positions on the S&P 500 Index, during the
Outcome Period, among other factors. The performance of the Collateral Portfolio could significantly impact the performance of the Fund, which could prevent the Fund from
achieving the Outcomes that it seeks to produce. The table does not reflect any fees or expenses imposed by your variable product or expenses incurred by the Fund. If it did, the returns shown for the Fund would be lower. Please refer
to the Fund’s website, which provides updated information relating to this table on a daily basis throughout the Outcome Period. Please contact your insurance company or other financial intermediary for more information.
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|
Index/Fund
|
Hypothetical Performance1
|
|||||||||||
|
S&P 500 Index Price Performance
|
(100)%
|
(50)%
|
(20)%
|
(10)%
|
(5)%
|
0%
|
5%
|
10%
|
15%
|
20%
|
50%
|
100%
|
|
Fund Performance at NAV
|
(80)%
|
(30)%
|
0%2
|
0%2
|
0%2
|
0%
|
6%3
|
12%3
|
18%3
|
24%3
|
60%3
|
120%3
|
| 1 |
Does not take into account any fees or expenses or the performance of the Collateral Portfolio.
|
| 2 |
Reflects the impact of the Buffer.
|
| 3 |
Reflects the impact of an assumed Par Up Rate of 120%.
|
Understanding Outcomes. The Outcomes the Fund seeks to achieve are measured based upon the
Fund’s NAV on the first day of the Outcome Period. The Outcome Period begins on the day Milliman transacts in the FLEX Options on behalf of the Fund, and ends on the day those FLEX Options expire. An
investor who purchases Shares after the commencement of the Outcome Period will likely have purchased Shares at a different NAV than the NAV on the first day of the Outcome Period (the NAV upon which the Outcomes are based) and may experience
investment outcomes very different from those the Fund seeks to achieve, especially when factoring in any fees or expenses or the performance of the Collateral Portfolio. An investor who redeems Shares prior to the end of the Outcome Period may
also experience investment outcomes very different from those the Fund seeks to achieve. The Outcomes are designed with the expectation that an investor will hold Shares on the day that Milliman transacts in the FLEX Options on behalf of the
Fund, and on the day those FLEX Options expire. There is no guarantee that the Fund will be successful in its attempt to achieve the Outcomes.
Understanding the Par Up Rate.
Unlike other investment products, the potential returns an investor can receive from an investment in the Fund are subject to the Par Up Rate. This means that if the S&P 500 Index experiences gains for the
Outcome Period, an investor in the Fund will only experience a percentage of those gains (equal to the Par Up Rate multiplied by the S&P 500 Index gains). Milliman calculates the Par Up Rate for each Outcome Period based upon (i)
its evaluation of prevailing market conditions on the first day of the Outcome Period and (ii) the total number of long call FLEX Options on the S&P 500 Index that it is able to purchase at that time. In
certain market conditions, the performance of the Collateral Portfolio could reduce the impact of the Par Up Rate. An investor should consider the amount and impact of the Par Up Rate, and the Fund’s position relative to it, before investing
in the Fund.
Understanding the Buffer. The Buffer that the Fund seeks to provide is only operative
against the first 20% of losses in the Fund’s S&P 500 Index exposure for the Outcome Period. If an investor is considering purchasing Shares during the Outcome Period, and the S&P 500 Index has decreased
in value by an amount equal to or greater than 20%, an investor purchasing Shares at that time will be able to participate in any gains thereafter, but will not benefit from the Buffer that the Fund seeks to offer for the remainder of the
Outcome Period if the losses continue to be equal to or greater than 20% during that period. Conversely, if an investor is considering purchasing Shares during the Outcome Period, and the Fund’s NAV has increased in value, then an investor may
experience losses before implementation of the Buffer that the Fund seeks to provide. While the Fund seeks to produce returns that correlate to those of the S&P 500 Index for the Outcome Period that are buffered up to 20% (prior to
taking into account any fees or expenses or the performance of the Collateral Portfolio) for investors who hold Shares for the entire Outcome Period, there is no guarantee it will successfully do so. In
addition, the Buffer is not operative against losses in the Collateral Portfolio. If the Collateral Portfolio experiences losses, it could have the effect of reducing the impact of, or completely eliminating, the Buffer on the Fund’s S&P
500 Index exposure. In certain market conditions, the performance of the Collateral Portfolio could cause the Fund to significantly underperform the S&P 500 Index. Investors who purchase Shares at the beginning of the Outcome Period may
lose their entire investment. Investors who purchase Shares after the Outcome Period has begun may also lose their entire investment. An investment in the Fund is only appropriate for investors willing to bear those losses.
Fund Rebalance. Milliman implements the Fund’s strategy every six years, seeking to
produce the Outcomes for an Outcome Period. On the last business day of any stated Outcome Period, all of the Fund’s existing FLEX Options, which includes those used to establish the Buffer and the Par Up Rate, will expire and Milliman will
transact in a
549
new set of FLEX Options on the same business day, which will commence a new Outcome Period beginning the following business day. At that same time,
Milliman will also evaluate whether to make any adjustments to the Collateral Portfolio. Accordingly, Shares can be held indefinitely if investors determine to participate in additional Outcome Periods.
Approximately one week prior to the end of each Outcome Period, the Fund will file a prospectus supplement, which will notify existing investors of
(i) the date on which the existing Outcome Period will end; (ii) the date on which the new Outcome Period will commence; and (iii) the anticipated ranges of the Par Up Rate that will be used for the new Outcome Period. Immediately preceding the
commencement date of the new Outcome Period, the Fund will file a prospectus supplement disclosing the Fund’s final Par Up Rate (both gross and net of Fund fees and expenses) for the new Outcome Period. This information will also be available
online at www.[___________].com, and on your insurance company’s website. Please contact your insurance company or other financial intermediary for more information.
Fund Classification. The Fund is classified as “non-diversified” under the Investment
Company Act of 1940, as amended (the “1940 Act”).
Principal Risks
You could lose money by investing in the Fund. An investment in the Fund is not a deposit of a bank and is not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other governmental agency. There can be no assurance that the Fund’s investment objectives will be achieved.
Downside Loss Buffer Risk. There can be no guarantee that the Fund will be successful in its strategy to
buffer against S&P 500 Index losses if the S&P 500 Index decreases in value over the Outcome Period. The Fund’s strategy is designed to produce returns that correlate to those of the S&P 500 Index at the Par Up Rate, while limiting
downside losses in the Fund’s S&P 500 Index exposure, if Shares are bought on the day on which Milliman transacts in the FLEX Options on behalf of the Fund and held until those FLEX Options expire at the end of each Outcome Period. The
success of the Buffer also depends upon the performance of the Collateral Portfolio. If the Collateral Portfolio experiences losses, it could have the effect of reducing the impact of, or completely
eliminating, the Buffer on the Fund’s S&P 500 Index exposure. In certain market conditions, the performance of the Collateral Portfolio could cause the Fund to significantly underperform the S&P 500 Index. Despite the intended Buffer,
an investor could lose their entire investment. In the event an investor purchases Shares after the date on which Milliman transacted in the FLEX Options on behalf of the Fund, or redeems Shares prior to the expiration of those
FLEX Options, the Buffer that the Fund seeks to provide may not be available or fully applicable.
Risk of the Par Up Rate on Upside Returns. The Fund’s strategy is designed to produce returns that correlate
to those of the S&P 500 Index at the Par Up Rate if Shares are bought on the day on which Milliman transacts in the FLEX Options on behalf of the Fund and held until those FLEX Options expire at the end of the Outcome Period. Accordingly, the
Fund will not fully participate in any gains achieved by the S&P 500 Index. In addition, in the event an investor purchases Shares after the date on which Milliman transacted in the FLEX Options on behalf of the Fund, or redeems Shares prior
to the expiration of those FLEX Options, the returns realized by that investor may not match those that the Fund seeks to achieve pursuant to the Par Up Rate. In certain market conditions, the performance of
the Collateral Portfolio could reduce the impact of the Par Up Rate. An investor should consider the amount and impact of the Par Up Rate, and the Fund’s position relative to it, before investing in the Fund.
Par Up Rate Change Risk. Because the Par Up Rate for each Outcome Period is calculated based upon (i)
Milliman’s evaluation of prevailing market conditions on the first day of the Outcome Period and (ii) the total number of long call FLEX Options on the S&P 500 Index that Milliman is able to purchase at that time, the Par Up Rate may rise or
fall from one Outcome Period to the next. Any change in the Par Up Rate could be significant and it is unlikely to remain the same for consecutive Outcome Periods.
FLEX Options Risk. The Fund will transact in FLEX Options issued and guaranteed for settlement by the OCC. The
Fund bears the risk that the OCC will be unable or unwilling to perform its obligations under the FLEX Options
550
contracts, which could result in significant losses to the Fund. In less liquid markets, terminating a FLEX Option may require the payment of a premium
or acceptance of a discounted price, and may take longer to complete. In addition, a less liquid trading market may adversely impact the value of the Fund’s FLEX Options and therefore the NAV of the Fund. In addition, the value of the Fund’s FLEX
Options positions is not anticipated to increase or decrease at the same rate as the reference asset; and while it is anticipated that they will generally move in the same direction, it is possible that they may move in different directions.
Certain FLEX Options positions may also expire worthless. The use of FLEX Options involves leverage, which can cause the Fund’s portfolio to be more volatile than if the portfolio had not been leveraged. Leverage can significantly magnify the
effect of price movements of the reference asset, disproportionately increasing the Fund’s losses and reducing the Fund’s opportunities for gains when the reference asset changes in unexpected ways. In some instances, such leverage could result in
losses that exceed the original amount invested.
Options Pricing Risk. The Fund transacts in FLEX Options that have an exercise date six years after the
initial transaction date. Because, at times, there might not be market activity for these options, the ability of the Fund to value them becomes more difficult and the judgment of Milliman (employing the fair value procedures adopted by the
Board) may play a greater role in their valuation due to this reduced availability of reliable objective pricing data. Consequently, while such determinations may be made in good faith, including through the use of model-based pricing, it may
nevertheless be more difficult for the Fund to accurately assign a daily value.
Investment Objective and Outcomes Risk. There is no guarantee that the Fund will be successful in its attempt
to achieve its investment objective and/or the Outcomes, and an investor could lose some or all of their investment in the Fund. Certain circumstances under which the Fund might not achieve its objective and/or the Outcomes include, but are not
limited to (i) if the Fund disposes of FLEX Options, (ii) if the Fund is unable to maintain the proportional relationship based on the number of FLEX Options in the Fund’s portfolio, (iii) significant accrual of Fund expenses in connection with
effecting the Fund’s principal investment strategy, (iv) losses incurred by the Fund’s holdings in the Collateral Portfolio, or (iv) adverse tax law changes affecting the treatment of FLEX Options.
Tax Risk. The Fund intends to elect, and to qualify each year, to be treated as a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”). As a RIC, the Fund will not be subject to U.S. federal income tax on the portion
of its net investment income and net capital gain that it distributes to shareholders, provided that it satisfies certain requirements of the Code. To maintain its status as a RIC, the Fund must meet certain income, diversification and
distributions tests. For purposes of the diversification test, the identification of the issuer (or, in some cases, issuers) of a particular Fund investment can depend on the terms and conditions of that investment. In particular, there is no
published IRS guidance or case law on how to determine the “issuer” of certain derivatives that the Fund will enter into and the Fund has not received a private letter ruling on this point. Therefore, there is a risk that the Fund will not meet the
Code’s diversification requirements and will not qualify, or will be disqualified, as a RIC. If the Fund does not qualify as a RIC for any taxable year and certain relief provisions are not available, the Fund’s taxable income will be subject to
tax at the Fund level and to a further tax at the shareholder level when such income is distributed.
The Fund also intends to comply with the diversification requirements of Section 817(h) of the Code, and the regulations thereunder, relating to the
tax-deferred status of variable accounts that are based on insurance company separate accounts (referred to as “segregated asset accounts” for federal income tax purposes). These diversification requirements apply in addition to the RIC
diversification requirements discussed above. There also is no published guidance or case law on how to determine the “issuer” of the derivatives referred to above for purposes of the diversification requirements of Section 817(h) of the Code and
the Fund has not received a private letter ruling on this point. If these requirements are not met, or under other circumstances, such as if the Fund does not qualify as a RIC for any taxable year, it is possible that the contract owners (rather
than the insurance company) will be treated for federal income tax purposes as the taxable owners of the assets held by the segregated asset accounts.
Clearing Member Default Risk. The Fund will hold FLEX Options through accounts at members of clearing houses (“clearing members”) rather than a bank or a broker. Assets deposited by the Fund with any clearing member as margin for its FLEX Options positions may, in certain circumstances, be used to satisfy losses of other
clients of the Fund’s clearing member where such assets may be held in commingled omnibus accounts. In addition, although clearing members guarantee performance of their clients’ obligations to the clearing house, there is a risk that the assets of
the Fund might not be fully protected in the event of the clearing member’s bankruptcy, as the Fund would
551
be limited to recovering only a pro rata share of all available funds segregated on behalf of the clearing
member’s customers for the relevant account class.
Debt Securities Risk. The prices of debt securities will be affected by changes in interest rates, the
creditworthiness of the issuer and other factors. These risks could affect the value of investments in which the Fund invests, possibly causing the Fund’s NAV to be reduced and fluctuate more than other types of investments. During periods of
falling interest rates, an issuer of a callable bond may repay the security before its stated maturity, and the Fund may have to reinvest the proceeds in securities with lower yields, which would result in a decline in the Fund’s income, or in
securities with greater risks or with other less favorable features. Changing interest rates, including rates that fall below zero, may have unpredictable effects on markets, result in heightened market volatility and detract from the Fund’s
performance to the extent the Fund is exposed to such interest rates. An increase in interest rates will generally cause the value of fixed-income securities held by the Fund to decline, may lead to heightened volatility in the fixed-income
markets and may adversely affect the liquidity of certain fixed-income investments, including those held by the Fund. Risks associated with rising interest rates are heightened given that interest rates in the U.S. are near historic lows.
Adjustable-rate instruments also react to interest rate changes in a similar manner, although generally to a lesser degree (depending, however, on the characteristics of the reset terms, including the index chosen, frequency of reset and reset
caps or floors, among other factors). Interest rate sensitivity is generally more pronounced and less predictable in instruments with uncertain payment or prepayment schedules and also for those with longer maturities.
Foreign Securities and Credit Exposure Risk. U.S. dollar-denominated securities carrying foreign credit exposure
may be affected by unfavorable political, economic or governmental developments that could affect payments of principal and interest. Furthermore, the value of the Fund’s foreign investments (whether direct or indirect) may be adversely affected by
political and social instability in their home countries, by changes in economic or taxation policies in those countries, or by the difficulty in enforcing obligations in those countries. Foreign companies generally may be subject to less stringent
regulations than U.S. companies, including financial reporting requirements and auditing and accounting controls. As a result, there generally is less publicly available information about foreign companies than about U.S. companies. Trading in many
foreign securities may be less liquid and more volatile than U.S. securities due to the size of the market or other factors.
U.S. Government Securities Risk. U.S. Government securities are subject to interest rate risk but generally do
not involve the credit risks associated with investments in other types of debt securities. As a result, the yields available from U.S. Government securities are generally lower than the yields available from other debt securities. U.S. Government
securities are guaranteed only as to the timely payment of interest and the payment of principal when held to maturity. While securities issued or guaranteed by U.S. federal government agencies are backed by the full faith and credit of the U.S.
Department of the Treasury, securities issued by government sponsored entities are solely the obligation of the issuer and generally do not carry any guarantee from the U.S. Government.
ABS Risk. ABS are subject to the general debt securities risks described above. In addition, ABS may be less
liquid than other bonds, and may be more sensitive than other bonds to the market’s perception of issuers and creditworthiness of payees, which may result in the Fund experiencing difficulty selling or valuing these securities. ABS markets have
experienced extraordinary weakness and volatility at various times in recent years, and may decline quickly in the event of a substantial economic or market downturn. Accordingly, these securities may be subject to greater risk of default during
periods of economic downturn than other securities, which could result in possible losses to the Fund.
Issuer Risk. The performance of the Fund depends on the performance of individual securities to which the Fund
has exposure. The Fund may be adversely affected if an issuer of underlying securities held by the Fund is unable or unwilling to repay principal or interest when due. Changes in the financial condition or credit rating of an issuer of those
securities may cause the value of the securities to decline.
Management Risk. The Fund is subject to management risk because it is an actively managed portfolio. Milliman
will apply investment techniques and risk analyses in making investment decisions for the Fund, but there can be no guarantee that the Fund will meet its investment objective and/or the Outcomes. In addition, Milliman does not use defensive
strategies or attempt to reduce the Fund’s exposures to poor performing positions during an Outcome Period. This differs from funds that are managed to seek to outperform a benchmark index. Therefore, in the event
552
of a general market decline, the Fund’s value may fall more than the value of another fund that does attempt to hedge against such market declines.
Market Risk. The Fund could lose money over short periods due to short-term market movements and over longer
periods during more prolonged market downturns. Assets may decline in value due to factors affecting financial markets generally or particular asset classes or industries represented in the markets. The value of a FLEX Option or other asset may
also decline due to general market conditions, economic trends or events that are not specifically related to the issuer of the security or other asset, or due to factors that affect a particular issuer, country, region, market, industry, sector or
asset class.
Non-Diversification Risk. The Fund may invest a relatively high percentage of its assets in a limited number of
issuers. As a result, the Fund may be more susceptible to a single adverse economic or regulatory occurrence affecting one or more of these issuers, experience increased volatility and be highly invested in certain issuers.
Large Shareholder Risk. At times, the Fund may experience adverse effects when certain large shareholders,
including insurance company separate accounts, redeem large amounts of shares of the Fund. Large redemptions may cause the Fund to sell portfolio holdings at times when it would not otherwise do so and may increase transaction costs and/or result
in an increase to the Fund’s expense ratio. A large redemption could be detrimental to the Fund and its remaining shareholders.
Risks of Investing in ETFs. In addition to the risks associated with the underlying assets held by the ETFs in
which the Fund invests, investments in ETFs are also subject to the following additional risks: (i) only authorized participants may engage in transactions directly with ETFs but none are obligated to do so, which could result in an ETF’s shares
trading at a premium or discount to its NAV or possibly face trading halts or delisting; (ii) certain ETFs seek to track the performance of an underlying index and will not attempt to take defensive positions under any market conditions, including
declining markets, which could result in losses; and (iii) because ETF shares trade on the secondary market, there is not guarantee that an active market will be developed or maintained, which could result in the ETF’s shares trading at a premium
or discount to its NAV. Investments in ETFs may involve duplication of management fees and certain other expenses, as the Fund indirectly bears its proportionate share of any expenses paid by the ETFs in which it invests.
Risks of Investing in Money Market Funds. Money market funds seek to preserve the value of shareholder
investments at $1.00 per share, but shareholders, such as the Fund, may still lose money by investing in such funds. In addition, a money market fund may impose a fee upon the sale of its shares or may temporarily suspend the ability to sell shares
if the fund’s liquidity falls below required minimums because of market conditions or other factors. The credit quality of a money market fund’s holdings can change rapidly in certain markets, and the default of a single holding could have an
adverse impact on the fund’s share price. A money market fund’s share price can also be negatively affected during periods of high redemption pressures, illiquid markets, and/or significant market volatility.
Performance
As of the date of this Prospectus, the Fund has not commenced operations and therefore does not have a performance history. Once available, the Fund’s
performance information will be accessible online at www.[________].com and will provide some indication of the risks of investing in the Fund.
Management
Investment Adviser
Milliman Financial Risk Management LLC (“Milliman”) serves as investment adviser to the Fund.
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Portfolio Managers
The following persons serve as portfolio managers of the Fund.
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●
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Robert T. Cummings, Principal & Head of Portfolio Management at Milliman.
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●
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Maria Schiopu, Principal & Head of Portfolio Management at Milliman.
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●
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Jeff Greco, Principal & Head of Strategy Research at Milliman.
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|
●
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Jordan Rosenfeld, Portfolio Manager at Milliman.
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Each portfolio manager is jointly and primarily responsible for the day-to-day management of the Fund’s portfolio and has served in such capacity
since the Fund’s inception in 2021.
Purchase and Sale of Shares
Shares are available as underlying investment options for variable insurance contracts and variable life insurance policies (each, a “variable contract,” and, collectively, the “variable contracts”) issued by insurance companies. These insurance companies are the record owners of the separate accounts
holding the Shares. You do not buy, sell or exchange Shares directly; rather, you choose investment options through your variable contracts. The insurance companies then cause the separate accounts to purchase and redeem Shares according to
the investment options you choose.
Tax Information
The dividends and distributions paid by the Fund to the insurance company separate accounts will consist of ordinary income, capital gains, or some
combination of both. Because Shares must be purchased through separate accounts used to fund variable contracts, such dividends and distributions will be exempt from current taxation by owners of variable contracts (each, a “contract owner,” and, collectively “contract owners”) if left to accumulate within a separate account. Consult the variable contract prospectus for additional tax
information.
Payments to Insurance Companies and Other Financial Intermediaries
If you allocate contract value to the Fund through an insurance company or other financial intermediary, the Fund, Milliman, the Fund’s distributor or
their related companies may pay the insurance company and/or its affiliates or other intermediary for the sale of Shares and related services. These payments may create a conflict of interest by influencing the insurance company or other
intermediary and your salesperson to recommend an indirect investment in the Fund over another investment. The prospectus or other disclosure documents for the variable contracts may contain additional information about these payments, if any.
You may also ask your salesperson or financial intermediary, or visit your financial intermediary’s website, for more information.
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Fund Summary: Milliman S&P 500 6-Year Buffer with Par Up Fund – Jan (I)
Investment Objective
The Fund seeks to provide exposure to the S&P 500 Index, while providing a buffer against the first 20% of losses associated with S&P 500
Index performance and participating in S&P 500 Index gains at a declared rate, prior to taking into account any fees or expenses or the performance of any fixed income exposure included in the Fund’s portfolio, over the period from January 1,
2022 through December 31, 2027.
Fees and Expenses of the Fund
This table describes the fees and expenses that you may pay if you buy, hold and sell shares of the Fund (“Shares”).
This table and the example below do not include any fees or sales charges imposed by your variable product. If they were included, the expenses listed below would be higher.
Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment)
|
Class 3
|
|
|
Management Fees
|
0.49%
|
|
Distribution and Service (12b-1) Fees
|
0.25%
|
|
Other Expenses(1)
|
0.50%
|
|
Acquired Fund Fees and Expenses(1)
|
[_.__]%
|
|
Total Annual Fund Operating Expenses
|
1.24%
|
|
Fee Waiver and/or Expense Reimbursement(2)(3)
|
(0.25)%
|
|
Total Annual Fund Operating Expenses After Fee Waiver and/or Expense Reimbursement
|
0.99%
|
|
(1)
|
“Other Expenses” and “Acquired Fund Fees and Expenses” are based on estimated amounts for the current fiscal year.
|
|
(2)
|
The Fund’s investment adviser, Milliman Financial Risk Management LLC (“Milliman”), has contractually agreed to waive advisory fees and/or
reimburse expenses to the extent necessary to limit the Fund’s total annual Fund operating expenses (excluding taxes, interest, brokerage fees and commissions, Rule 12b-1 fees, acquired fund fees and expenses, short-sale dividend
expenses, administrative services fees, other expenses that are capitalized in accordance with generally accepted accounting principles, and extraordinary or non-routine expenses not incurred in the ordinary course of the Fund’s
business) to 0.74% of the Fund's average daily net assets (the “Expense Limitation Agreement”) until at least November 1, 2022. During its term, the Expense Limitation Agreement cannot be
terminated or amended to increase the applicable limit without approval of the Board of Trustees of the Trust (the “Board”). Milliman may recoup from the Fund any advisory fees waived or expenses
reimbursed pursuant to the Expense Limitation Agreement for a period of three years from the date on which such waiver or reimbursement occurred; provided, however, that such recoupment shall not be made if it would cause the Fund’s
total annual Fund operating expenses to exceed the lesser of (a) the expense limitation in effect at the time of the reimbursement, or (b) the expense limitation in effect at the time of recoupment, if any.
|
|
(3)
|
In addition to the Expense Limitation Agreement, Milliman has contractually agreed to waive its advisory fees in an amount equal to the Fund’s acquired fund fees and expenses until at
least November 1, 2022 (the “Fee Waiver”). This contract cannot be terminated or modified without the consent of the Board.
|
Example
This example is intended to help you compare the cost of investing in the Fund with the cost of investing in other funds. This example assumes that you
invest $10,000 in the Fund for the time periods indicated and then sell all of your Shares at the end of those periods. This example also assumes that your investment has a 5% return each year and that the Fund’s operating expenses remain at
current levels and that the Expense Limitation Agreement and Fee Waiver remain in place for their contractual periods. Although your actual costs may be higher or lower, your costs, based on these assumptions, would be:
|
1 Year
|
3 Years
|
|
|
Class 3
|
$104
|
$384
|
This example does not include any fees or sales charges imposed by your variable product. If they were included, the expenses listed above would be
higher.
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Portfolio Turnover
The Fund pays transaction costs, such as commissions, when it purchases and sells securities (or “turns over” its portfolio). A higher portfolio turnover
will cause the Fund to incur additional transaction costs. These costs, which are not reflected in Total Annual Fund Operating Expenses or in the example, may affect the Fund’s performance. Because the Fund has not yet commenced investment
operations, no portfolio turnover information is available at this time.
Principal Investment Strategies
The Fund seeks to achieve its investment objective by transacting in FLexible EXchange® Options (“FLEX Options”)
and by separately maintaining a collateral portfolio (the “Collateral Portfolio”), which is designed primarily to serve as margin or collateral for the Fund’s FLEX Options positions and secondarily to
enhance the Fund’s upside S&P 500 Index FLEX Options’ exposure (i.e., by utilizing anticipated income to measure the ability to purchase additional FLEX Options). FLEX Options are exchange-traded
options contracts with uniquely customizable terms. In general, an options contract is an agreement between a buyer and seller that gives the purchaser of the option the right to buy or sell a particular asset at a specified future date at an
agreed upon price, commonly known as the “strike price.” The reference assets for the Fund’s FLEX Options positions will include the S&P 500 Index, which is a large-capitalization, market-weighted, U.S. equities index that tracks the price
(excluding dividends) of 500 leading companies in leading industries of the U.S. economy, and certain exchange-traded funds (“ETFs”), as described further below.
The Collateral Portfolio may be invested in short-term fixed-income securities, including corporate bonds and other corporate debt securities,
asset-backed securities (“ABS”), securities issued by the U.S. Government or its agencies and instrumentalities, securities issued by non-U.S. governments or their agencies and instrumentalities, money
market securities and funds, other interest-bearing instruments, cash, ETFs that primarily invest in any of the foregoing instruments, options on ETFs and options box spreads. An options box spread is the combination of different options trades
that have offsetting spreads (e.g., purchases and sales on the same underlying instrument, such as an index or an ETF, but with different strike prices and/or expiration dates) for the purpose of
generating income. The Fund may invest in short-term fixed income securities or other instruments, including through ETFs, of any maturity and credit quality. The Fund will generally invest up to 80% of its net assets in one or more ETFs that
provide exposure to investment grade corporate bonds.
Due to the unique mechanics of the Fund’s strategy, the return an investor can expect to receive from an investment in the Fund has characteristics that
are distinct from the returns of many other investment vehicles. It is important that an investor understand these characteristics before making an investment in the Fund.
In seeking to achieve its investment objective, the Fund seeks to produce pre-determined outcomes (the “Outcomes”)
that are based upon the performance of the S&P 500 Index over a six-year period (the “Outcome Period”). The initial Outcome Period for the Fund is January 1, 2022 through December 31, 2027. Following
the initial Outcome Period, each subsequent Outcome Period will be a six-year period commencing upon the expiration of the prior Outcome Period. The Fund seeks to achieve the Outcomes by purchasing and writing (selling) FLEX Options to create
layers within the Fund’s portfolio. One layer is designed to produce returns that correlate to those of the S&P 500 Index for the Outcome Period at a declared rate (the “Par Up Rate”) if the S&P
500 Index experiences gains during that time, as described below. A separate layer is designed to produce returns that correlate to those of the S&P 500 Index for the Outcome Period that are buffered up
to 20% if the S&P 500 Index experiences losses during that time (the “Buffer”). There is no guarantee that the Fund will be successful in its attempt to produce
returns that correlate to those of the S&P 500 Index at the Par Up Rate or produce buffered returns against the Fund’s S&P 500 Index exposure.
Milliman Financial Risk Management, LLC (“Milliman”), the investment adviser of the Fund, seeks to establish
the Buffer by writing one put FLEX Option on the S&P 500 Index with a strike price that is 20% lower than the value of the S&P 500 Index at the beginning of the Outcome Period.
Milliman seeks to establish the Par Up Rate by purchasing long call FLEX Options on the S&P 500 Index with a strike price approximately equal to
the value of the S&P 500 Index at the beginning of the Outcome Period.
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Milliman purchases these FLEX Options with a portion of the Fund’s net assets plus (i) the cash received from writing the put FLEX Option designed to
create the Buffer, and (ii) yield received from the Collateral Portfolio.
The Par Up Rate is the rate at which the Fund will seek to track any upside market performance of the S&P 500 Index. Milliman calculates the Par
Up Rate based upon (i) its evaluation of prevailing market conditions on the first day of the Outcome Period and (ii) the total number of long call FLEX Options on the S&P 500 Index that it is able to purchase at that time. As of the date of
this Prospectus, and assuming current market conditions persist, Milliman expects that the Par Up Rate will be between the below ranges (both gross and net of Fund fees and expenses). Any fees or expenses imposed by your variable product, and any
other expenses incurred by the Fund, will have the effect of further reducing the Par Up Rate. Once calculated, the Par Up Rate for a particular Outcome Period will not change during that Outcome Period;
however, in certain market conditions, the performance of the Collateral Portfolio could reduce the impact of the Par Up Rate.
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Share Class
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Estimated Par Up Rate Ranges
(As of [___])
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|
|
Prior to Taking into Account Fund Fees and Expenses
|
After Taking into Account Fund Fees and Expenses
|
|
|
Class 3
|
[__]% and [__]%
|
[__]% and [__]%
|
The Buffer is only operative against the first 20% of losses in the Fund’s S&P 500 Index exposure for the Outcome Period. If the S&P 500 Index
decreases in value by more than 20% during the Outcome Period, the Fund (and therefore investors in Shares) will experience all subsequent losses in the Fund’s S&P 500 Index exposure on a one-to-one basis for the Outcome Period. The Fund
seeks to produce buffered returns against its S&P 500 Index exposure prior to taking into account any fees or expenses or the performance of the Collateral Portfolio. The Buffer is not operative against
losses in the Collateral Portfolio. If the Collateral Portfolio experiences losses, it could have the effect of reducing the impact of, or completely eliminating, the Buffer on the Fund’s S&P 500 Index exposure. In certain market
conditions, the performance of the Collateral Portfolio could cause the Fund to significantly underperform the S&P 500 Index. The following table reflects the Buffer both gross and net of Fund fees and expenses:
|
Share Class
|
Buffer
(As of [___])
|
|
|
Prior to Taking into Account Fund Fees and Expenses
|
After Taking into Account Fund Fees and Expenses
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|
|
Class 3
|
20%
|
[__]%
|
The definitive Par Up Rate and Buffer will be set forth on the Fund’s website. The Fund’s website will also provide information relating to the
Outcomes on a daily basis, including the Fund’s position relative to the Par Up Rate and the Buffer. You may also contact your insurance company or other financial intermediary for more information.
Additionally, the Fund’s net asset value (“NAV”) will not increase or decrease at the same rate as the
S&P 500 Index because the Fund’s strategy relies upon the performance of the Collateral Portfolio, in addition to the value of the Fund’s FLEX Options positions on the S&P 500 Index. While Milliman anticipates that the Fund’s NAV will
generally move in the same direction as the S&P 500 Index (meaning that the Fund’s NAV will generally increase if the S&P 500 Index experiences gains or decrease if the S&P 500 Index experiences losses), the Fund’s NAV may not
decrease at the same rate as the S&P 500 Index (especially when factoring in the performance of the Collateral Portfolio) and will not increase at the same rate as the S&P 500 Index (especially when factoring in the Par Up Rate and the
performance of the Collateral Portfolio). Similarly, the amount of time remaining until the end of the Outcome Period also affects the impact of the Buffer on the Fund’s NAV, because the Buffer may not be in full effect prior to the end of the
Outcome Period.
The FLEX Options utilized in the Fund’s portfolio are each set to expire on the last day of the Outcome Period. The customizable nature of FLEX
Options will allow Milliman to select the strike price at which each FLEX Option will be exercised at the expiration of the FLEX Option term. At the commencement of the Outcome Period, Milliman will specifically select the strike price for each
FLEX Option in a manner designed to achieve the Outcomes when
557
the FLEX Options are exercised on the final day of the Outcome Period, depending on the anticipated performance of the S&P 500 Index and the
Collateral Portfolio over the duration of that Outcome Period.
The hypothetical graphical illustrations provided below are designed to illustrate the Outcomes based upon the
hypothetical performance of the S&P 500 Index for an investor who holds Shares for the entirety of the Outcome Period. The hypothetical graphical illustrations do not include any fees or expenses imposed by your variable product or expenses
incurred by the Fund, and do not reflect the performance of the Collateral Portfolio. Additional hypothetical graphical representations of the Outcomes are provided in “Additional Information About the Funds and the Risks of Investing.”
There is no guarantee that the Fund will be successful in its attempt to achieve the Outcomes for the Outcome Period.
The following table contains hypothetical examples designed to illustrate the Outcomes the Fund seeks to
achieve over the Outcome Period, based upon the performance of the S&P 500 Index from (100)% to 100% after taking into account the Par Up Rate and the Buffer, but prior to taking into account any fees or expenses or the performance of the
Collateral Portfolio. The table is provided for illustrative purposes only and does not provide every possible performance scenario for Shares over the course of the Outcome Period. There is no guarantee that the Fund will be successful in its attempt to achieve the Outcomes for an Outcome
Period. The table is not intended to predict or project the performance of the FLEX Options or the Fund. Investors should not take this information as an assurance of the expected performance of the
S&P 500 Index or the Fund. Actual Fund performance will vary with fluctuations in the performance of the Collateral Portfolio, in addition to the value of the Fund’s FLEX Options positions on the S&P 500 Index, during the
Outcome Period, among other factors. The performance of the Collateral Portfolio could significantly impact the performance of the Fund, which could prevent the Fund from
achieving the Outcomes that it seeks to produce. The table does not reflect any fees or expenses imposed by your variable product or expenses incurred by the Fund. If it did, the returns shown for the Fund would be lower. Please refer
to the Fund’s website, which provides updated information relating to this table on a daily basis throughout the Outcome Period. Please contact your insurance company or other financial intermediary for more information.
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Index/Fund
|
Hypothetical Performance1
|
|||||||||||
|
S&P 500 Index Price Performance
|
(100)%
|
(50)%
|
(20)%
|
(10)%
|
(5)%
|
0%
|
5%
|
10%
|
15%
|
20%
|
50%
|
100%
|
|
Fund Performance at NAV
|
(80)%
|
(30)%
|
0%2
|
0%2
|
0%2
|
0%
|
6%3
|
12%3
|
18%3
|
24%3
|
60%3
|
120%3
|
| 1 |
Does not take into account any fees or expenses or the performance of the Collateral Portfolio.
|
| 2 |
Reflects the impact of the Buffer.
|
| 3 |
Reflects the impact of an assumed Par Up Rate of 120%.
|
Understanding Outcomes. The Outcomes the Fund seeks to achieve are measured based
upon the Fund’s NAV on the first day of the Outcome Period. The Outcome Period begins on the day Milliman transacts in the FLEX Options on behalf of the Fund, and ends on the day those FLEX Options expire. An
investor who purchases Shares after the commencement of the Outcome Period will likely have purchased Shares at a different NAV than the NAV on the first day of the Outcome Period (the NAV upon which the Outcomes are based) and may experience
investment outcomes very different from those the Fund seeks to achieve, especially when factoring in any fees or expenses or the performance of the Collateral Portfolio. An investor who redeems Shares prior to the end of the Outcome Period may
also experience investment outcomes very different from those the Fund seeks to achieve. The Outcomes are designed with the expectation that an investor will hold Shares on the day that Milliman transacts in the FLEX Options on behalf of the
Fund, and on the day those FLEX Options expire. There is no guarantee that the Fund will be successful in its attempt to achieve the Outcomes.
Understanding the Par Up Rate. Unlike other investment products, the potential returns an
investor can receive from an investment in the Fund are subject to the Par Up Rate. This means that if the S&P 500 Index experiences gains for the Outcome Period, an investor in the Fund will only experience
a percentage of those gains (equal to the Par Up Rate multiplied by the S&P 500 Index gains). Milliman calculates the Par Up Rate for each Outcome Period based upon (i) its evaluation of prevailing market conditions on the first day
of the Outcome Period and (ii) the total number of long call FLEX Options on the S&P 500 Index that it is able to purchase at that time. In certain market conditions, the performance of the Collateral
Portfolio could reduce the impact of the Par Up Rate. An investor should consider the amount and impact of the Par Up Rate, and the Fund’s position relative to it, before investing in the Fund.
Understanding the Buffer. The Buffer that the Fund seeks to provide is only operative
against the first 20% of losses in the Fund’s S&P 500 Index exposure for the Outcome Period. If an investor is considering purchasing Shares during the Outcome Period, and the S&P 500 Index has decreased
in value by an amount equal to or greater than 20%, an investor purchasing Shares at that time will be able to participate in any gains thereafter, but will not benefit from the Buffer that the Fund seeks to offer for the remainder of the
Outcome Period if the losses continue to be equal to or greater than 20% during that period. Conversely, if an investor is considering purchasing Shares during the Outcome Period, and the Fund’s NAV has increased in value, then an investor may
experience losses before implementation of the Buffer that the Fund seeks to provide. While the Fund seeks to produce returns that correlate to those of the S&P 500 Index for the Outcome Period that are buffered up to 20% (prior to
taking into account any fees or expenses or the performance of the Collateral Portfolio) for investors who hold Shares for the entire Outcome Period, there is no guarantee it will successfully do so. In
addition, the Buffer is not operative against losses in the Collateral Portfolio. If the Collateral Portfolio experiences losses, it could have the effect of reducing the impact of, or completely eliminating, the Buffer on the Fund’s S&P
500 Index exposure. In certain market conditions, the performance of the Collateral Portfolio could cause the Fund to significantly underperform the S&P 500 Index. Investors who purchase Shares at the beginning of the Outcome Period may
lose their entire investment. Investors who purchase Shares after the Outcome Period has begun may also lose their entire investment. An investment in the Fund is only appropriate for investors willing to bear those losses.
Fund Rebalance. Milliman implements the Fund’s strategy every six years, seeking to
produce the Outcomes for an Outcome Period. On the last business day of any stated Outcome Period, all of the Fund’s existing FLEX Options, which includes those used to establish the Buffer and the Par Up Rate, will expire and Milliman will
transact in a
559
new set of FLEX Options on the same business day, which will commence a new Outcome Period beginning the following business day. At that same time,
Milliman will also evaluate whether to make any adjustments to the Collateral Portfolio. Accordingly, Shares can be held indefinitely if investors determine to participate in additional Outcome Periods.
Approximately one week prior to the end of each Outcome Period, the Fund will file a prospectus supplement, which will notify existing investors of
(i) the date on which the existing Outcome Period will end; (ii) the date on which the new Outcome Period will commence; and (iii) the anticipated ranges of the Par Up Rate that will be used for the new Outcome Period. Immediately preceding the
commencement date of the new Outcome Period, the Fund will file a prospectus supplement disclosing the Fund’s final Par Up Rate (both gross and net of Fund fees and expenses) for the new Outcome Period. This information will also be available
online at www.[___________].com, and on your insurance company’s website. Please contact your insurance company or other financial intermediary for more information.
Fund Classification. The Fund is classified as “non-diversified” under the Investment
Company Act of 1940, as amended (the “1940 Act”).
Principal Risks
You could lose money by investing in the Fund. An investment in the Fund is not a deposit of a bank and is not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other governmental agency. There can be no assurance that the Fund’s investment objectives will be achieved.
Downside Loss Buffer Risk. There can be no guarantee that the Fund will be successful in its strategy to
buffer against S&P 500 Index losses if the S&P 500 Index decreases in value over the Outcome Period. The Fund’s strategy is designed to produce returns that correlate to those of the S&P 500 Index at the Par Up Rate, while limiting
downside losses in the Fund’s S&P 500 Index exposure, if Shares are bought on the day on which Milliman transacts in the FLEX Options on behalf of the Fund and held until those FLEX Options expire at the end of each Outcome Period. The
success of the Buffer also depends upon the performance of the Collateral Portfolio. If the Collateral Portfolio experiences losses, it could have the effect of reducing the impact of, or completely
eliminating, the Buffer on the Fund’s S&P 500 Index exposure. In certain market conditions, the performance of the Collateral Portfolio could cause the Fund to significantly underperform the S&P 500 Index. Despite the intended Buffer,
an investor could lose their entire investment. In the event an investor purchases Shares after the date on which Milliman transacted in the FLEX Options on behalf of the Fund, or redeems Shares prior to the expiration of those
FLEX Options, the Buffer that the Fund seeks to provide may not be available or fully applicable.
Risk of the Par Up Rate on Upside Returns. The Fund’s strategy is designed to produce returns that correlate
to those of the S&P 500 Index at the Par Up Rate if Shares are bought on the day on which Milliman transacts in the FLEX Options on behalf of the Fund and held until those FLEX Options expire at the end of the Outcome Period. Accordingly, the
Fund will not fully participate in any gains achieved by the S&P 500 Index. In addition, in the event an investor purchases Shares after the date on which Milliman transacted in the FLEX Options on behalf of the Fund, or redeems Shares prior
to the expiration of those FLEX Options, the returns realized by that investor may not match those that the Fund seeks to achieve pursuant to the Par Up Rate. In certain market conditions, the performance of
the Collateral Portfolio could reduce the impact of the Par Up Rate. An investor should consider the amount and impact of the Par Up Rate, and the Fund’s position relative to it, before investing in the Fund.
Par Up Rate Change Risk. Because the Par Up Rate for each Outcome Period is calculated based upon (i)
Milliman’s evaluation of prevailing market conditions on the first day of the Outcome Period and (ii) the total number of long call FLEX Options on the S&P 500 Index that Milliman is able to purchase at that time, the Par Up Rate may rise or
fall from one Outcome Period to the next. Any change in the Par Up Rate could be significant and it is unlikely to remain the same for consecutive Outcome Periods.
FLEX Options Risk. The Fund will transact in FLEX Options issued and guaranteed for settlement by the OCC. The
Fund bears the risk that the OCC will be unable or unwilling to perform its obligations under the FLEX Options
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contracts, which could result in significant losses to the Fund. In less liquid markets, terminating a FLEX Option may require the payment of a premium
or acceptance of a discounted price, and may take longer to complete. In addition, a less liquid trading market may adversely impact the value of the Fund’s FLEX Options and therefore the NAV of the Fund. In addition, the value of the Fund’s FLEX
Options positions is not anticipated to increase or decrease at the same rate as the reference asset; and while it is anticipated that they will generally move in the same direction, it is possible that they may move in different directions.
Certain FLEX Options positions may also expire worthless. The use of FLEX Options involves leverage, which can cause the Fund’s portfolio to be more volatile than if the portfolio had not been leveraged. Leverage can significantly magnify the
effect of price movements of the reference asset, disproportionately increasing the Fund’s losses and reducing the Fund’s opportunities for gains when the reference asset changes in unexpected ways. In some instances, such leverage could result in
losses that exceed the original amount invested.
Options Pricing Risk. The Fund transacts in FLEX Options that have an exercise date six years after the
initial transaction date. Because, at times, there might not be market activity for these options, the ability of the Fund to value them becomes more difficult and the judgment of Milliman (employing the fair value procedures adopted by the
Board) may play a greater role in their valuation due to this reduced availability of reliable objective pricing data. Consequently, while such determinations may be made in good faith, including through the use of model-based pricing, it may
nevertheless be more difficult for the Fund to accurately assign a daily value.
Investment Objective and Outcomes Risk. There is no guarantee that the Fund will be successful in its attempt
to achieve its investment objective and/or the Outcomes, and an investor could lose some or all of their investment in the Fund. Certain circumstances under which the Fund might not achieve its objective and/or the Outcomes include, but are not
limited to (i) if the Fund disposes of FLEX Options, (ii) if the Fund is unable to maintain the proportional relationship based on the number of FLEX Options in the Fund’s portfolio, (iii) significant accrual of Fund expenses in connection with
effecting the Fund’s principal investment strategy, (iv) losses incurred by the Fund’s holdings in the Collateral Portfolio, or (iv) adverse tax law changes affecting the treatment of FLEX Options.
Tax Risk. The Fund intends to elect, and to qualify each year, to be treated as a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”). As a RIC, the Fund will not be subject to U.S. federal income tax on the portion
of its net investment income and net capital gain that it distributes to shareholders, provided that it satisfies certain requirements of the Code. To maintain its status as a RIC, the Fund must meet certain income, diversification and
distributions tests. For purposes of the diversification test, the identification of the issuer (or, in some cases, issuers) of a particular Fund investment can depend on the terms and conditions of that investment. In particular, there is no
published IRS guidance or case law on how to determine the “issuer” of certain derivatives that the Fund will enter into and the Fund has not received a private letter ruling on this point. Therefore, there is a risk that the Fund will not meet the
Code’s diversification requirements and will not qualify, or will be disqualified, as a RIC. If the Fund does not qualify as a RIC for any taxable year and certain relief provisions are not available, the Fund’s taxable income will be subject to
tax at the Fund level and to a further tax at the shareholder level when such income is distributed.
The Fund also intends to comply with the diversification requirements of Section 817(h) of the Code, and the regulations thereunder, relating to the
tax-deferred status of variable accounts that are based on insurance company separate accounts (referred to as “segregated asset accounts” for federal income tax purposes). These diversification requirements apply in addition to the RIC
diversification requirements discussed above. There also is no published guidance or case law on how to determine the “issuer” of the derivatives referred to above for purposes of the diversification requirements of Section 817(h) of the Code and
the Fund has not received a private letter ruling on this point. If these requirements are not met, or under other circumstances, such as if the Fund does not qualify as a RIC for any taxable year, it is possible that the contract owners (rather
than the insurance company) will be treated for federal income tax purposes as the taxable owners of the assets held by the segregated asset accounts.
Clearing Member Default Risk. The Fund will hold FLEX Options through accounts at members of clearing houses (“clearing members”) rather than a bank or a broker. Assets deposited by the Fund with any clearing member as margin for its FLEX Options positions may, in certain circumstances, be used to satisfy losses of other
clients of the Fund’s clearing member where such assets may be held in commingled omnibus accounts. In addition, although clearing members guarantee performance of their clients’ obligations to the clearing house, there is a risk that the assets of
the Fund might not be fully protected in the event of the clearing member’s bankruptcy, as the Fund would
561
be limited to recovering only a pro rata share of all available funds segregated on behalf of the clearing
member’s customers for the relevant account class.
Debt Securities Risk. The prices of debt securities will be affected by changes in interest rates, the
creditworthiness of the issuer and other factors. These risks could affect the value of investments in which the Fund invests, possibly causing the Fund’s NAV to be reduced and fluctuate more than other types of investments. During periods of
falling interest rates, an issuer of a callable bond may repay the security before its stated maturity, and the Fund may have to reinvest the proceeds in securities with lower yields, which would result in a decline in the Fund’s income, or in
securities with greater risks or with other less favorable features. Changing interest rates, including rates that fall below zero, may have unpredictable effects on markets, result in heightened market volatility and detract from the Fund’s
performance to the extent the Fund is exposed to such interest rates. An increase in interest rates will generally cause the value of fixed-income securities held by the Fund to decline, may lead to heightened volatility in the fixed-income
markets and may adversely affect the liquidity of certain fixed-income investments, including those held by the Fund. Risks associated with rising interest rates are heightened given that interest rates in the U.S. are near historic lows.
Adjustable-rate instruments also react to interest rate changes in a similar manner, although generally to a lesser degree (depending, however, on the characteristics of the reset terms, including the index chosen, frequency of reset and reset
caps or floors, among other factors). Interest rate sensitivity is generally more pronounced and less predictable in instruments with uncertain payment or prepayment schedules and also for those with longer maturities.
Foreign Securities and Credit Exposure Risk. U.S. dollar-denominated securities carrying foreign credit exposure
may be affected by unfavorable political, economic or governmental developments that could affect payments of principal and interest. Furthermore, the value of the Fund’s foreign investments (whether direct or indirect) may be adversely affected by
political and social instability in their home countries, by changes in economic or taxation policies in those countries, or by the difficulty in enforcing obligations in those countries. Foreign companies generally may be subject to less stringent
regulations than U.S. companies, including financial reporting requirements and auditing and accounting controls. As a result, there generally is less publicly available information about foreign companies than about U.S. companies. Trading in many
foreign securities may be less liquid and more volatile than U.S. securities due to the size of the market or other factors.
U.S. Government Securities Risk. U.S. Government securities are subject to interest rate risk but generally do
not involve the credit risks associated with investments in other types of debt securities. As a result, the yields available from U.S. Government securities are generally lower than the yields available from other debt securities. U.S. Government
securities are guaranteed only as to the timely payment of interest and the payment of principal when held to maturity. While securities issued or guaranteed by U.S. federal government agencies are backed by the full faith and credit of the U.S.
Department of the Treasury, securities issued by government sponsored entities are solely the obligation of the issuer and generally do not carry any guarantee from the U.S. Government.
ABS Risk. ABS are subject to the general debt securities risks described above. In addition, ABS may be less
liquid than other bonds, and may be more sensitive than other bonds to the market’s perception of issuers and creditworthiness of payees, which may result in the Fund experiencing difficulty selling or valuing these securities. ABS markets have
experienced extraordinary weakness and volatility at various times in recent years, and may decline quickly in the event of a substantial economic or market downturn. Accordingly, these securities may be subject to greater risk of default during
periods of economic downturn than other securities, which could result in possible losses to the Fund.
Issuer Risk. The performance of the Fund depends on the performance of individual securities to which the Fund
has exposure. The Fund may be adversely affected if an issuer of underlying securities held by the Fund is unable or unwilling to repay principal or interest when due. Changes in the financial condition or credit rating of an issuer of those
securities may cause the value of the securities to decline.
Management Risk. The Fund is subject to management risk because it is an actively managed portfolio. Milliman
will apply investment techniques and risk analyses in making investment decisions for the Fund, but there can be no guarantee that the Fund will meet its investment objective and/or the Outcomes. In addition, Milliman does not use defensive
strategies or attempt to reduce the Fund’s exposures to poor performing positions during an Outcome Period. This differs from funds that are managed to seek to outperform a benchmark index. Therefore, in the event
562
of a general market decline, the Fund’s value may fall more than the value of another fund that does attempt to hedge against such market declines.
Market Risk. The Fund could lose money over short periods due to short-term market movements and over longer
periods during more prolonged market downturns. Assets may decline in value due to factors affecting financial markets generally or particular asset classes or industries represented in the markets. The value of a FLEX Option or other asset may
also decline due to general market conditions, economic trends or events that are not specifically related to the issuer of the security or other asset, or due to factors that affect a particular issuer, country, region, market, industry, sector or
asset class.
Non-Diversification Risk. The Fund may invest a relatively high percentage of its assets in a limited number of
issuers. As a result, the Fund may be more susceptible to a single adverse economic or regulatory occurrence affecting one or more of these issuers, experience increased volatility and be highly invested in certain issuers.
Large Shareholder Risk. At times, the Fund may experience adverse effects when certain large shareholders,
including insurance company separate accounts, redeem large amounts of shares of the Fund. Large redemptions may cause the Fund to sell portfolio holdings at times when it would not otherwise do so and may increase transaction costs and/or result
in an increase to the Fund’s expense ratio. A large redemption could be detrimental to the Fund and its remaining shareholders.
Risks of Investing in ETFs. In addition to the risks associated with the underlying assets held by the ETFs in
which the Fund invests, investments in ETFs are also subject to the following additional risks: (i) only authorized participants may engage in transactions directly with ETFs but none are obligated to do so, which could result in an ETF’s shares
trading at a premium or discount to its NAV or possibly face trading halts or delisting; (ii) certain ETFs seek to track the performance of an underlying index and will not attempt to take defensive positions under any market conditions, including
declining markets, which could result in losses; and (iii) because ETF shares trade on the secondary market, there is not guarantee that an active market will be developed or maintained, which could result in the ETF’s shares trading at a premium
or discount to its NAV. Investments in ETFs may involve duplication of management fees and certain other expenses, as the Fund indirectly bears its proportionate share of any expenses paid by the ETFs in which it invests.
Risks of Investing in Money Market Funds. Money market funds seek to preserve the value of shareholder
investments at $1.00 per share, but shareholders, such as the Fund, may still lose money by investing in such funds. In addition, a money market fund may impose a fee upon the sale of its shares or may temporarily suspend the ability to sell shares
if the fund’s liquidity falls below required minimums because of market conditions or other factors. The credit quality of a money market fund’s holdings can change rapidly in certain markets, and the default of a single holding could have an
adverse impact on the fund’s share price. A money market fund’s share price can also be negatively affected during periods of high redemption pressures, illiquid markets, and/or significant market volatility.
Performance
As of the date of this Prospectus, the Fund has not commenced operations and therefore does not have a performance history. Once available, the Fund’s
performance information will be accessible online at www.[________].com and will provide some indication of the risks of investing in the Fund.
Management
Investment Adviser
Milliman Financial Risk Management LLC (“Milliman”) serves as investment adviser to the Fund.
563
Portfolio Managers
The following persons serve as portfolio managers of the Fund.
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●
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Robert T. Cummings, Principal & Head of Portfolio Management at Milliman.
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●
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Maria Schiopu, Principal & Head of Portfolio Management at Milliman.
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●
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Jeff Greco, Principal & Head of Strategy Research at Milliman.
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|
●
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Jordan Rosenfeld, Portfolio Manager at Milliman.
|
Each portfolio manager is jointly and primarily responsible for the day-to-day management of the Fund’s portfolio and has served in such capacity
since the Fund’s inception in 2021.
Purchase and Sale of Shares
Shares are available as underlying investment options for variable insurance contracts and variable life insurance policies (each, a “variable contract,” and, collectively, the “variable contracts”) issued by insurance companies. These insurance companies are the record owners of the separate accounts
holding the Shares. You do not buy, sell or exchange Shares directly; rather, you choose investment options through your variable contracts. The insurance companies then cause the separate accounts to purchase and redeem Shares according to
the investment options you choose.
Tax Information
The dividends and distributions paid by the Fund to the insurance company separate accounts will consist of ordinary income, capital gains, or some
combination of both. Because Shares must be purchased through separate accounts used to fund variable contracts, such dividends and distributions will be exempt from current taxation by owners of variable contracts (each, a “contract owner,” and, collectively “contract owners”) if left to accumulate within a separate account. Consult the variable contract prospectus for additional tax
information.
Payments to Insurance Companies and Other Financial Intermediaries
If you allocate contract value to the Fund through an insurance company or other financial intermediary, the Fund, Milliman, the Fund’s distributor or
their related companies may pay the insurance company and/or its affiliates or other intermediary for the sale of Shares and related services. These payments may create a conflict of interest by influencing the insurance company or other
intermediary and your salesperson to recommend an indirect investment in the Fund over another investment. The prospectus or other disclosure documents for the variable contracts may contain additional information about these payments, if any.
You may also ask your salesperson or financial intermediary, or visit your financial intermediary’s website, for more information.
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Fund Summary: Milliman S&P 500 6-Year Buffer with Par Up Fund – Apr (I)
Investment Objective
The Fund seeks to provide exposure to the S&P 500 Index, while providing a buffer against the first 20% of losses associated with S&P 500
Index performance and participating in S&P 500 Index gains at a declared rate, prior to taking into account any fees or expenses or the performance of any fixed income exposure included in the Fund’s portfolio, over the period from April 1,
2022 through March 31, 2028.
Fees and Expenses of the Fund
This table describes the fees and expenses that you may pay if you buy, hold and sell shares of the Fund (“Shares”).
This table and the example below do not include any fees or sales charges imposed by your variable product. If they were included, the expenses listed below would be higher.
Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment)
|
Class 3
|
|
|
Management Fees
|
0.49%
|
|
Distribution and Service (12b-1) Fees
|
0.25%
|
|
Other Expenses(1)
|
0.50%
|
|
Acquired Fund Fees and Expenses(1)
|
[_.__]%
|
|
Total Annual Fund Operating Expenses
|
1.24%
|
|
Fee Waiver and/or Expense Reimbursement(2)(3)
|
(0.25)%
|
|
Total Annual Fund Operating Expenses After Fee Waiver and/or Expense Reimbursement
|
0.99%
|
|
(1)
|
“Other Expenses” and “Acquired Fund Fees and Expenses” are based on estimated amounts for the current fiscal year.
|
|
(2)
|
The Fund’s investment adviser, Milliman Financial Risk Management LLC (“Milliman”), has contractually
agreed to waive advisory fees and/or reimburse expenses to the extent necessary to limit the Fund’s total annual Fund operating expenses (excluding taxes, interest, brokerage fees and commissions, Rule 12b-1 fees, acquired fund fees and
expenses, short-sale dividend expenses, administrative services fees, other expenses that are capitalized in accordance with generally accepted accounting principles, and extraordinary or non-routine expenses not incurred in the
ordinary course of the Fund’s business) to 0.74% of the Fund's average daily net assets (the “Expense Limitation Agreement”) until at least November 1, 2022. During its term, the Expense
Limitation Agreement cannot be terminated or amended to increase the applicable limit without approval of the Board of Trustees of the Trust (the “Board”). Milliman may recoup from the Fund any
advisory fees waived or expenses reimbursed pursuant to the Expense Limitation Agreement for a period of three years from the date on which such waiver or reimbursement occurred; provided, however, that such recoupment shall not be made
if it would cause the Fund’s total annual Fund operating expenses to exceed the lesser of (a) the expense limitation in effect at the time of the reimbursement, or (b) the expense limitation in effect at the time of recoupment, if any.
|
|
(3)
|
In addition to the Expense Limitation Agreement, Milliman has contractually agreed to waive its advisory fees in an amount equal to the Fund’s
acquired fund fees and expenses until at least November 1, 2022 (the “Fee Waiver”). This contract cannot be terminated or modified without the consent of the Board.
|
Example
This example is intended to help you compare the cost of investing in the Fund with the cost of investing in other funds. This example assumes that you
invest $10,000 in the Fund for the time periods indicated and then sell all of your Shares at the end of those periods. This example also assumes that your investment has a 5% return each year and that the Fund’s operating expenses remain at
current levels and that the Expense Limitation Agreement and Fee Waiver remain in place for their contractual periods. Although your actual costs may be higher or lower, your costs, based on these assumptions, would be:
|
1 Year
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3 Years
|
|
|
Class 3
|
$104
|
$384
|
This example does not include any fees or sales charges imposed by your variable product. If they were included, the expenses listed above would be
higher.
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Portfolio Turnover
The Fund pays transaction costs, such as commissions, when it purchases and sells securities (or “turns over” its portfolio). A higher portfolio turnover
will cause the Fund to incur additional transaction costs. These costs, which are not reflected in Total Annual Fund Operating Expenses or in the example, may affect the Fund’s performance. Because the Fund has not yet commenced investment
operations, no portfolio turnover information is available at this time.
Principal Investment Strategies
The Fund seeks to achieve its investment objective by transacting in FLexible EXchange® Options (“FLEX Options”)
and by separately maintaining a collateral portfolio (the “Collateral Portfolio”), which is designed primarily to serve as margin or collateral for the Fund’s FLEX Options positions and secondarily to
enhance the Fund’s upside S&P 500 Index FLEX Options’ exposure (i.e., by utilizing anticipated income to measure the ability to purchase additional FLEX Options). FLEX Options are exchange-traded
options contracts with uniquely customizable terms. In general, an options contract is an agreement between a buyer and seller that gives the purchaser of the option the right to buy or sell a particular asset at a specified future date at an
agreed upon price, commonly known as the “strike price.” The reference assets for the Fund’s FLEX Options positions will include the S&P 500 Index, which is a large-capitalization, market-weighted, U.S. equities index that tracks the price
(excluding dividends) of 500 leading companies in leading industries of the U.S. economy, and certain exchange-traded funds (“ETFs”), as described further below.
The Collateral Portfolio may be invested in short-term fixed-income securities, including corporate bonds and other corporate debt securities,
asset-backed securities (“ABS”), securities issued by the U.S. Government or its agencies and instrumentalities, securities issued by non-U.S. governments or their agencies and instrumentalities, money
market securities and funds, other interest-bearing instruments, cash, ETFs that primarily invest in any of the foregoing instruments, options on ETFs and options box spreads. An options box spread is the combination of different options trades
that have offsetting spreads (e.g., purchases and sales on the same underlying instrument, such as an index or an ETF, but with different strike prices and/or expiration dates) for the purpose of
generating income. The Fund may invest in short-term fixed income securities or other instruments, including through ETFs, of any maturity and credit quality. The Fund will generally invest up to 80% of its net assets in one or more ETFs that
provide exposure to investment grade corporate bonds.
Due to the unique mechanics of the Fund’s strategy, the return an investor can expect to receive from an investment in the Fund has characteristics that
are distinct from the returns of many other investment vehicles. It is important that an investor understand these characteristics before making an investment in the Fund.
In seeking to achieve its investment objective, the Fund seeks to produce pre-determined outcomes (the “Outcomes”)
that are based upon the performance of the S&P 500 Index over a six-year period (the “Outcome Period”). The initial Outcome Period for the Fund is April 1, 2022 through March 31, 2028. Following the
initial Outcome Period, each subsequent Outcome Period will be a six-year period commencing upon the expiration of the prior Outcome Period. The Fund seeks to achieve the Outcomes by purchasing and writing (selling) FLEX Options to create layers
within the Fund’s portfolio. One layer is designed to produce returns that correlate to those of the S&P 500 Index for the Outcome Period at a declared rate (the “Par Up Rate”) if the S&P 500 Index
experiences gains during that time, as described below. A separate layer is designed to produce returns that correlate to those of the S&P 500 Index for the Outcome Period that are buffered up to 20% if
the S&P 500 Index experiences losses during that time (the “Buffer”). There is no guarantee that the Fund will be successful in its attempt to produce returns that
correlate to those of the S&P 500 Index at the Par Up Rate or produce buffered returns against the Fund’s S&P 500 Index exposure.
Milliman Financial Risk Management, LLC (“Milliman”), the investment adviser of the Fund, seeks to establish
the Buffer by writing one put FLEX Option on the S&P 500 Index with a strike price that is 20% lower than the value of the S&P 500 Index at the beginning of the Outcome Period.
Milliman seeks to establish the Par Up Rate by purchasing long call FLEX Options on the S&P 500 Index with a strike price approximately equal to
the value of the S&P 500 Index at the beginning of the Outcome Period.
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Milliman purchases these FLEX Options with a portion of the Fund’s net assets plus (i) the cash received from writing the put FLEX Option designed to
create the Buffer, and (ii) yield received from the Collateral Portfolio.
The Par Up Rate is the rate at which the Fund will seek to track any upside market performance of the S&P 500 Index. Milliman calculates the Par
Up Rate based upon (i) its evaluation of prevailing market conditions on the first day of the Outcome Period and (ii) the total number of long call FLEX Options on the S&P 500 Index that it is able to purchase at that time. As of the date of
this Prospectus, and assuming current market conditions persist, Milliman expects that the Par Up Rate will be between the below ranges (both gross and net of Fund fees and expenses). Any fees or expenses imposed by your variable product, and any
other expenses incurred by the Fund, will have the effect of further reducing the Par Up Rate. Once calculated, the Par Up Rate for a particular Outcome Period will not change during that Outcome Period;
however, in certain market conditions, the performance of the Collateral Portfolio could reduce the impact of the Par Up Rate.
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Share Class
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Estimated Par Up Rate Ranges
(As of [___])
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|
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Prior to Taking into Account Fund Fees and Expenses
|
After Taking into Account Fund Fees and Expenses
|
|
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Class 3
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[__]% and [__]%
|
[__]% and [__]%
|
The Buffer is only operative against the first 20% of losses in the Fund’s S&P 500 Index exposure for the Outcome Period. If the S&P 500 Index
decreases in value by more than 20% during the Outcome Period, the Fund (and therefore investors in Shares) will experience all subsequent losses in the Fund’s S&P 500 Index exposure on a one-to-one basis for the Outcome Period. The Fund
seeks to produce buffered returns against its S&P 500 Index exposure prior to taking into account any fees or expenses or the performance of the Collateral Portfolio. The Buffer is not operative against
losses in the Collateral Portfolio. If the Collateral Portfolio experiences losses, it could have the effect of reducing the impact of, or completely eliminating, the Buffer on the Fund’s S&P 500 Index exposure. In certain market
conditions, the performance of the Collateral Portfolio could cause the Fund to significantly underperform the S&P 500 Index. The following table reflects the Buffer both gross and net of Fund fees and expenses:
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Share Class
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Buffer
(As of [___])
|
|
|
Prior to Taking into Account Fund Fees and Expenses
|
After Taking into Account Fund Fees and Expenses
|
|
|
Class 3
|
20%
|
[__]%
|
The definitive Par Up Rate and Buffer will be set forth on the Fund’s website. The Fund’s website will also provide information relating to the
Outcomes on a daily basis, including the Fund’s position relative to the Par Up Rate and the Buffer. You may also contact your insurance company or other financial intermediary for more information.
Additionally, the Fund’s net asset value (“NAV”) will not increase or decrease at the same rate as the
S&P 500 Index because the Fund’s strategy relies upon the performance of the Collateral Portfolio, in addition to the value of the Fund’s FLEX Options positions on the S&P 500 Index. While Milliman anticipates that the Fund’s NAV will
generally move in the same direction as the S&P 500 Index (meaning that the Fund’s NAV will generally increase if the S&P 500 Index experiences gains or decrease if the S&P 500 Index experiences losses), the Fund’s NAV may not
decrease at the same rate as the S&P 500 Index (especially when factoring in the performance of the Collateral Portfolio) and will not increase at the same rate as the S&P 500 Index (especially when factoring in the Par Up Rate and the
performance of the Collateral Portfolio). Similarly, the amount of time remaining until the end of the Outcome Period also affects the impact of the Buffer on the Fund’s NAV, because the Buffer may not be in full effect prior to the end of the
Outcome Period.
The FLEX Options utilized in the Fund’s portfolio are each set to expire on the last day of the Outcome Period. The customizable nature of FLEX
Options will allow Milliman to select the strike price at which each FLEX Option will be exercised at the expiration of the FLEX Option term. At the commencement of the Outcome Period, Milliman will specifically select the strike price for each
FLEX Option in a manner designed to achieve the Outcomes when
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the FLEX Options are exercised on the final day of the Outcome Period, depending on the anticipated performance of the S&P 500 Index and the
Collateral Portfolio over the duration of that Outcome Period.
The hypothetical graphical illustrations provided below are designed to illustrate the Outcomes based upon the
hypothetical performance of the S&P 500 Index for an investor who holds Shares for the entirety of the Outcome Period. The hypothetical graphical illustrations do not include any fees or expenses imposed by your variable product or expenses
incurred by the Fund, and do not reflect the performance of the Collateral Portfolio. Additional hypothetical graphical representations of the Outcomes are provided in “Additional Information About the Funds and the Risks of Investing.”
There is no guarantee that the Fund will be successful in its attempt to achieve the Outcomes for the Outcome Period.
The following table contains hypothetical examples designed to illustrate the Outcomes the Fund seeks to
achieve over the Outcome Period, based upon the performance of the S&P 500 Index from (100)% to 100% after taking into account the Par Up Rate and the Buffer, but prior to taking into account any fees or expenses or the performance of the
Collateral Portfolio. The table is provided for illustrative purposes only and does not provide every possible performance scenario for Shares over the course of the Outcome Period. There is no guarantee that the Fund will be successful in its attempt to achieve the Outcomes for an Outcome
Period. The table is not intended to predict or project the performance of the FLEX Options or the Fund. Investors should not take this information as an assurance of the expected performance of the
S&P 500 Index or the Fund. Actual Fund performance will vary with fluctuations in the performance of the Collateral Portfolio, in addition to the value of the Fund’s FLEX Options positions on the S&P 500 Index, during the
Outcome Period, among other factors. The performance of the Collateral Portfolio could significantly impact the performance of the Fund, which could prevent the Fund from
achieving the Outcomes that it seeks to produce. The table does not reflect any fees or expenses imposed by your variable product or expenses incurred by the Fund. If it did, the returns shown for the Fund would be lower. Please refer
to the Fund’s website, which provides updated information relating to this table on a daily basis throughout the Outcome Period. Please contact your insurance company or other financial intermediary for more information.
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Index/Fund
|
Hypothetical Performance1
|
|||||||||||
|
S&P 500 Index Price Performance
|
(100)%
|
(50)%
|
(20)%
|
(10)%
|
(5)%
|
0%
|
5%
|
10%
|
15%
|
20%
|
50%
|
100%
|
|
Fund Performance at NAV
|
(80)%
|
(30)%
|
0%2
|
0%2
|
0%2
|
0%
|
6%3
|
12%3
|
18%3
|
24%3
|
60%3
|
120%3
|
| 1 |
Does not take into account any fees or expenses or the performance of the Collateral Portfolio.
|
| 2 |
Reflects the impact of the Buffer.
|
| 3 |
Reflects the impact of an assumed Par Up Rate of 120%.
|
Understanding Outcomes. The Outcomes the Fund seeks to achieve are measured based upon the
Fund’s NAV on the first day of the Outcome Period. The Outcome Period begins on the day Milliman transacts in the FLEX Options on behalf of the Fund, and ends on the day those FLEX Options expire. An investor who
purchases Shares after the commencement of the Outcome Period will likely have purchased Shares at a different NAV than the NAV on the first day of the Outcome Period (the NAV upon which the Outcomes are based) and may experience investment
outcomes very different from those the Fund seeks to achieve, especially when factoring in any fees or expenses or the performance of the Collateral Portfolio. An investor who redeems Shares prior to the end of the Outcome Period may also
experience investment outcomes very different from those the Fund seeks to achieve. The Outcomes are designed with the expectation that an investor will hold Shares on the day that Milliman transacts in the FLEX Options on behalf of the Fund,
and on the day those FLEX Options expire. There is no guarantee that the Fund will be successful in its attempt to achieve the Outcomes.
Understanding the Par Up Rate. Unlike other investment products, the potential returns an
investor can receive from an investment in the Fund are subject to the Par Up Rate. This means that if the S&P 500 Index experiences gains for the Outcome Period, an investor in the Fund will only experience
a percentage of those gains (equal to the Par Up Rate multiplied by the S&P 500 Index gains). Milliman calculates the Par Up Rate for each Outcome Period based upon (i) its evaluation of prevailing market conditions on the first day
of the Outcome Period and (ii) the total number of long call FLEX Options on the S&P 500 Index that it is able to purchase at that time. In certain market conditions, the performance of the Collateral
Portfolio could reduce the impact of the Par Up Rate. An investor should consider the amount and impact of the Par Up Rate, and the Fund’s position relative to it, before investing in the Fund.
Understanding the Buffer. The Buffer that the Fund seeks to provide is only operative
against the first 20% of losses in the Fund’s S&P 500 Index exposure for the Outcome Period. If an investor is considering purchasing Shares during the Outcome Period, and the S&P 500 Index has decreased
in value by an amount equal to or greater than 20%, an investor purchasing Shares at that time will be able to participate in any gains thereafter, but will not benefit from the Buffer that the Fund seeks to offer for the remainder of the
Outcome Period if the losses continue to be equal to or greater than 20% during that period. Conversely, if an investor is considering purchasing Shares during the Outcome Period, and the Fund’s NAV has increased in value, then an investor may
experience losses before implementation of the Buffer that the Fund seeks to provide. While the Fund seeks to produce returns that correlate to those of the S&P 500 Index for the Outcome Period that are buffered up to 20% (prior to
taking into account any fees or expenses or the performance of the Collateral Portfolio) for investors who hold Shares for the entire Outcome Period, there is no guarantee it will successfully do so. In
addition, the Buffer is not operative against losses in the Collateral Portfolio. If the Collateral Portfolio experiences losses, it could have the effect of reducing the impact of, or completely eliminating, the Buffer on the Fund’s S&P
500 Index exposure. In certain market conditions, the performance of the Collateral Portfolio could cause the Fund to significantly underperform the S&P 500 Index. Investors who purchase Shares at the beginning of the Outcome Period may
lose their entire investment. Investors who purchase Shares after the Outcome Period has begun may also lose their entire investment. An investment in the Fund is only appropriate for investors willing to bear those losses.
Fund Rebalance. Milliman implements the Fund’s strategy every six years, seeking to
produce the Outcomes for an Outcome Period. On the last business day of any stated Outcome Period, all of the Fund’s existing FLEX Options, which includes those used to establish the Buffer and the Par Up Rate, will expire and Milliman will
transact in a
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new set of FLEX Options on the same business day, which will commence a new Outcome Period beginning the following business day. At that same time,
Milliman will also evaluate whether to make any adjustments to the Collateral Portfolio. Accordingly, Shares can be held indefinitely if investors determine to participate in additional Outcome Periods.
Approximately one week prior to the end of each Outcome Period, the Fund will file a prospectus supplement, which will notify existing investors of
(i) the date on which the existing Outcome Period will end; (ii) the date on which the new Outcome Period will commence; and (iii) the anticipated ranges of the Par Up Rate that will be used for the new Outcome Period. Immediately preceding the
commencement date of the new Outcome Period, the Fund will file a prospectus supplement disclosing the Fund’s final Par Up Rate (both gross and net of Fund fees and expenses) for the new Outcome Period. This information will also be available
online at www.[___________].com, and on your insurance company’s website. Please contact your insurance company or other financial intermediary for more information.
Fund Classification. The Fund is classified as “non-diversified” under the Investment
Company Act of 1940, as amended (the “1940 Act”).
Principal Risks
You could lose money by investing in the Fund. An investment in the Fund is not a deposit of a bank and is not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other governmental agency. There can be no assurance that the Fund’s investment objectives will be achieved.
Downside Loss Buffer Risk. There can be no guarantee that the Fund will be successful in its strategy to
buffer against S&P 500 Index losses if the S&P 500 Index decreases in value over the Outcome Period. The Fund’s strategy is designed to produce returns that correlate to those of the S&P 500 Index at the Par Up Rate, while limiting
downside losses in the Fund’s S&P 500 Index exposure, if Shares are bought on the day on which Milliman transacts in the FLEX Options on behalf of the Fund and held until those FLEX Options expire at the end of each Outcome Period. The
success of the Buffer also depends upon the performance of the Collateral Portfolio. If the Collateral Portfolio experiences losses, it could have the effect of reducing the impact of, or completely
eliminating, the Buffer on the Fund’s S&P 500 Index exposure. In certain market conditions, the performance of the Collateral Portfolio could cause the Fund to significantly underperform the S&P 500 Index. Despite the intended Buffer,
an investor could lose their entire investment. In the event an investor purchases Shares after the date on which Milliman transacted in the FLEX Options on behalf of the Fund, or redeems Shares prior to the expiration of those
FLEX Options, the Buffer that the Fund seeks to provide may not be available or fully applicable.
Risk of the Par Up Rate on Upside Returns. The Fund’s strategy is designed to produce returns that correlate
to those of the S&P 500 Index at the Par Up Rate if Shares are bought on the day on which Milliman transacts in the FLEX Options on behalf of the Fund and held until those FLEX Options expire at the end of the Outcome Period. Accordingly, the
Fund will not fully participate in any gains achieved by the S&P 500 Index. In addition, in the event an investor purchases Shares after the date on which Milliman transacted in the FLEX Options on behalf of the Fund, or redeems Shares prior
to the expiration of those FLEX Options, the returns realized by that investor may not match those that the Fund seeks to achieve pursuant to the Par Up Rate. In certain market conditions, the performance of
the Collateral Portfolio could reduce the impact of the Par Up Rate. An investor should consider the amount and impact of the Par Up Rate, and the Fund’s position relative to it, before investing in the Fund.
Par Up Rate Change Risk. Because the Par Up Rate for each Outcome Period is calculated based upon (i)
Milliman’s evaluation of prevailing market conditions on the first day of the Outcome Period and (ii) the total number of long call FLEX Options on the S&P 500 Index that Milliman is able to purchase at that time, the Par Up Rate may rise or
fall from one Outcome Period to the next. Any change in the Par Up Rate could be significant and it is unlikely to remain the same for consecutive Outcome Periods.
FLEX Options Risk. The Fund will transact in FLEX Options issued and guaranteed for settlement by the OCC. The
Fund bears the risk that the OCC will be unable or unwilling to perform its obligations under the FLEX Options
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contracts, which could result in significant losses to the Fund. In less liquid markets, terminating a FLEX Option may require the payment of a premium
or acceptance of a discounted price, and may take longer to complete. In addition, a less liquid trading market may adversely impact the value of the Fund’s FLEX Options and therefore the NAV of the Fund. In addition, the value of the Fund’s FLEX
Options positions is not anticipated to increase or decrease at the same rate as the reference asset; and while it is anticipated that they will generally move in the same direction, it is possible that they may move in different directions.
Certain FLEX Options positions may also expire worthless. The use of FLEX Options involves leverage, which can cause the Fund’s portfolio to be more volatile than if the portfolio had not been leveraged. Leverage can significantly magnify the
effect of price movements of the reference asset, disproportionately increasing the Fund’s losses and reducing the Fund’s opportunities for gains when the reference asset changes in unexpected ways. In some instances, such leverage could result in
losses that exceed the original amount invested.
Options Pricing Risk. The Fund transacts in FLEX Options that have an exercise date six years after the
initial transaction date. Because, at times, there might not be market activity for these options, the ability of the Fund to value them becomes more difficult and the judgment of Milliman (employing the fair value procedures adopted by the
Board) may play a greater role in their valuation due to this reduced availability of reliable objective pricing data. Consequently, while such determinations may be made in good faith, including through the use of model-based pricing, it may
nevertheless be more difficult for the Fund to accurately assign a daily value.
Investment Objective and Outcomes Risk. There is no guarantee that the Fund will be successful in its attempt
to achieve its investment objective and/or the Outcomes, and an investor could lose some or all of their investment in the Fund. Certain circumstances under which the Fund might not achieve its objective and/or the Outcomes include, but are not
limited to (i) if the Fund disposes of FLEX Options, (ii) if the Fund is unable to maintain the proportional relationship based on the number of FLEX Options in the Fund’s portfolio, (iii) significant accrual of Fund expenses in connection with
effecting the Fund’s principal investment strategy, (iv) losses incurred by the Fund’s holdings in the Collateral Portfolio, or (iv) adverse tax law changes affecting the treatment of FLEX Options.
Tax Risk. The Fund intends to elect, and to qualify each year, to be treated as a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”). As a RIC, the Fund will not be subject to U.S. federal income tax on the portion
of its net investment income and net capital gain that it distributes to shareholders, provided that it satisfies certain requirements of the Code. To maintain its status as a RIC, the Fund must meet certain income, diversification and
distributions tests. For purposes of the diversification test, the identification of the issuer (or, in some cases, issuers) of a particular Fund investment can depend on the terms and conditions of that investment. In particular, there is no
published IRS guidance or case law on how to determine the “issuer” of certain derivatives that the Fund will enter into and the Fund has not received a private letter ruling on this point. Therefore, there is a risk that the Fund will not meet the
Code’s diversification requirements and will not qualify, or will be disqualified, as a RIC. If the Fund does not qualify as a RIC for any taxable year and certain relief provisions are not available, the Fund’s taxable income will be subject to
tax at the Fund level and to a further tax at the shareholder level when such income is distributed.
The Fund also intends to comply with the diversification requirements of Section 817(h) of the Code, and the regulations thereunder, relating to the
tax-deferred status of variable accounts that are based on insurance company separate accounts (referred to as “segregated asset accounts” for federal income tax purposes). These diversification requirements apply in addition to the RIC
diversification requirements discussed above. There also is no published guidance or case law on how to determine the “issuer” of the derivatives referred to above for purposes of the diversification requirements of Section 817(h) of the Code and
the Fund has not received a private letter ruling on this point. If these requirements are not met, or under other circumstances, such as if the Fund does not qualify as a RIC for any taxable year, it is possible that the contract owners (rather
than the insurance company) will be treated for federal income tax purposes as the taxable owners of the assets held by the segregated asset accounts.
Clearing Member Default Risk. The Fund will hold FLEX Options through accounts at members of clearing houses (“clearing members”) rather than a bank or a broker. Assets deposited by the Fund with any clearing member as margin for its FLEX Options positions may, in certain circumstances, be used to satisfy losses of other
clients of the Fund’s clearing member where such assets may be held in commingled omnibus accounts. In addition, although clearing members guarantee performance of their clients’ obligations to the clearing house, there is a risk that the assets of
the Fund might not be fully protected in the event of the clearing member’s bankruptcy, as the Fund would
571
be limited to recovering only a pro rata share of all available funds segregated on behalf of the clearing
member’s customers for the relevant account class.
Debt Securities Risk. The prices of debt securities will be affected by changes in interest rates, the
creditworthiness of the issuer and other factors. These risks could affect the value of investments in which the Fund invests, possibly causing the Fund’s NAV to be reduced and fluctuate more than other types of investments. During periods of
falling interest rates, an issuer of a callable bond may repay the security before its stated maturity, and the Fund may have to reinvest the proceeds in securities with lower yields, which would result in a decline in the Fund’s income, or in
securities with greater risks or with other less favorable features. Changing interest rates, including rates that fall below zero, may have unpredictable effects on markets, result in heightened market volatility and detract from the Fund’s
performance to the extent the Fund is exposed to such interest rates. An increase in interest rates will generally cause the value of fixed-income securities held by the Fund to decline, may lead to heightened volatility in the fixed-income
markets and may adversely affect the liquidity of certain fixed-income investments, including those held by the Fund. Risks associated with rising interest rates are heightened given that interest rates in the U.S. are near historic lows.
Adjustable-rate instruments also react to interest rate changes in a similar manner, although generally to a lesser degree (depending, however, on the characteristics of the reset terms, including the index chosen, frequency of reset and reset
caps or floors, among other factors). Interest rate sensitivity is generally more pronounced and less predictable in instruments with uncertain payment or prepayment schedules and also for those with longer maturities.
Foreign Securities and Credit Exposure Risk. U.S. dollar-denominated securities carrying foreign credit exposure
may be affected by unfavorable political, economic or governmental developments that could affect payments of principal and interest. Furthermore, the value of the Fund’s foreign investments (whether direct or indirect) may be adversely affected by
political and social instability in their home countries, by changes in economic or taxation policies in those countries, or by the difficulty in enforcing obligations in those countries. Foreign companies generally may be subject to less stringent
regulations than U.S. companies, including financial reporting requirements and auditing and accounting controls. As a result, there generally is less publicly available information about foreign companies than about U.S. companies. Trading in many
foreign securities may be less liquid and more volatile than U.S. securities due to the size of the market or other factors.
U.S. Government Securities Risk. U.S. Government securities are subject to interest rate risk but generally do
not involve the credit risks associated with investments in other types of debt securities. As a result, the yields available from U.S. Government securities are generally lower than the yields available from other debt securities. U.S. Government
securities are guaranteed only as to the timely payment of interest and the payment of principal when held to maturity. While securities issued or guaranteed by U.S. federal government agencies are backed by the full faith and credit of the U.S.
Department of the Treasury, securities issued by government sponsored entities are solely the obligation of the issuer and generally do not carry any guarantee from the U.S. Government.
ABS Risk. ABS are subject to the general debt securities risks described above. In addition, ABS may be less
liquid than other bonds, and may be more sensitive than other bonds to the market’s perception of issuers and creditworthiness of payees, which may result in the Fund experiencing difficulty selling or valuing these securities. ABS markets have
experienced extraordinary weakness and volatility at various times in recent years, and may decline quickly in the event of a substantial economic or market downturn. Accordingly, these securities may be subject to greater risk of default during
periods of economic downturn than other securities, which could result in possible losses to the Fund.
Issuer Risk. The performance of the Fund depends on the performance of individual securities to which the Fund
has exposure. The Fund may be adversely affected if an issuer of underlying securities held by the Fund is unable or unwilling to repay principal or interest when due. Changes in the financial condition or credit rating of an issuer of those
securities may cause the value of the securities to decline.
Management Risk. The Fund is subject to management risk because it is an actively managed portfolio. Milliman
will apply investment techniques and risk analyses in making investment decisions for the Fund, but there can be no guarantee that the Fund will meet its investment objective and/or the Outcomes. In addition, Milliman does not use defensive
strategies or attempt to reduce the Fund’s exposures to poor performing positions during an Outcome Period. This differs from funds that are managed to seek to outperform a benchmark index. Therefore, in the event
572
of a general market decline, the Fund’s value may fall more than the value of another fund that does attempt to hedge against such market declines.
Market Risk. The Fund could lose money over short periods due to short-term market movements and over longer
periods during more prolonged market downturns. Assets may decline in value due to factors affecting financial markets generally or particular asset classes or industries represented in the markets. The value of a FLEX Option or other asset may
also decline due to general market conditions, economic trends or events that are not specifically related to the issuer of the security or other asset, or due to factors that affect a particular issuer, country, region, market, industry, sector or
asset class.
Non-Diversification Risk. The Fund may invest a relatively high percentage of its assets in a limited number of
issuers. As a result, the Fund may be more susceptible to a single adverse economic or regulatory occurrence affecting one or more of these issuers, experience increased volatility and be highly invested in certain issuers.
Large Shareholder Risk. At times, the Fund may experience adverse effects when certain large shareholders,
including insurance company separate accounts, redeem large amounts of shares of the Fund. Large redemptions may cause the Fund to sell portfolio holdings at times when it would not otherwise do so and may increase transaction costs and/or result
in an increase to the Fund’s expense ratio. A large redemption could be detrimental to the Fund and its remaining shareholders.
Risks of Investing in ETFs. In addition to the risks associated with the underlying assets held by the ETFs in
which the Fund invests, investments in ETFs are also subject to the following additional risks: (i) only authorized participants may engage in transactions directly with ETFs but none are obligated to do so, which could result in an ETF’s shares
trading at a premium or discount to its NAV or possibly face trading halts or delisting; (ii) certain ETFs seek to track the performance of an underlying index and will not attempt to take defensive positions under any market conditions, including
declining markets, which could result in losses; and (iii) because ETF shares trade on the secondary market, there is not guarantee that an active market will be developed or maintained, which could result in the ETF’s shares trading at a premium
or discount to its NAV. Investments in ETFs may involve duplication of management fees and certain other expenses, as the Fund indirectly bears its proportionate share of any expenses paid by the ETFs in which it invests.
Risks of Investing in Money Market Funds. Money market funds seek to preserve the value of shareholder
investments at $1.00 per share, but shareholders, such as the Fund, may still lose money by investing in such funds. In addition, a money market fund may impose a fee upon the sale of its shares or may temporarily suspend the ability to sell shares
if the fund’s liquidity falls below required minimums because of market conditions or other factors. The credit quality of a money market fund’s holdings can change rapidly in certain markets, and the default of a single holding could have an
adverse impact on the fund’s share price. A money market fund’s share price can also be negatively affected during periods of high redemption pressures, illiquid markets, and/or significant market volatility.
Performance
As of the date of this Prospectus, the Fund has not commenced operations and therefore does not have a performance history. Once available, the Fund’s
performance information will be accessible online at www.[________].com and will provide some indication of the risks of investing in the Fund.
Management
Investment Adviser
Milliman Financial Risk Management LLC (“Milliman”) serves as investment adviser to the Fund.
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Portfolio Managers
The following persons serve as portfolio managers of the Fund.
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Robert T. Cummings, Principal & Head of Portfolio Management at Milliman.
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Maria Schiopu, Principal & Head of Portfolio Management at Milliman.
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Jeff Greco, Principal & Head of Strategy Research at Milliman.
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Jordan Rosenfeld, Portfolio Manager at Milliman.
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Each portfolio manager is jointly and primarily responsible for the day-to-day management of the Fund’s portfolio and has served in such capacity
since the Fund’s inception in 2021.
Purchase and Sale of Shares
Shares are available as underlying investment options for variable insurance contracts and variable life insurance policies (each, a “variable contract,” and, collectively, the “variable contracts”) issued by insurance companies. These insurance companies are the record owners of the separate accounts
holding the Shares. You do not buy, sell or exchange Shares directly; rather, you choose investment options through your variable contracts. The insurance companies then cause the separate accounts to purchase and redeem Shares according to
the investment options you choose.
Tax Information
The dividends and distributions paid by the Fund to the insurance company separate accounts will consist of ordinary income, capital gains, or some
combination of both. Because Shares must be purchased through separate accounts used to fund variable contracts, such dividends and distributions will be exempt from current taxation by owners of variable contracts (each, a “contract owner,” and, collectively “contract owners”) if left to accumulate within a separate account. Consult the variable contract prospectus for additional tax
information.
Payments to Insurance Companies and Other Financial Intermediaries
If you allocate contract value to the Fund through an insurance company or other financial intermediary, the Fund, Milliman, the Fund’s distributor or
their related companies may pay the insurance company and/or its affiliates or other intermediary for the sale of Shares and related services. These payments may create a conflict of interest by influencing the insurance company or other
intermediary and your salesperson to recommend an indirect investment in the Fund over another investment. The prospectus or other disclosure documents for the variable contracts may contain additional information about these payments, if any.
You may also ask your salesperson or financial intermediary, or visit your financial intermediary’s website, for more information.
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Fund Summary: Milliman S&P 500 6-Year Par Down with Par Up Fund – Oct (I)
Investment Objective
The Fund seeks to provide exposure to the S&P 500 Index, while limiting losses to 50% of the losses associated with S&P 500 Index performance
and participating in S&P 500 Index gains at a declared rate, prior to taking into account any fees or expenses or the performance of any fixed income exposure included in the Fund’s portfolio, over the period from October 1, 2021 through
September 30, 2027.
Fees and Expenses of the Fund
This table describes the fees and expenses that you may pay if you buy, hold and sell shares of the Fund (“Shares”).
This table and the example below do not include any fees or sales charges imposed by your variable product. If they were included, the expenses listed below would be higher.
Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment)
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Class 3
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Management Fees
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0.49%
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Distribution and Service (12b-1) Fees
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0.25%
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Other Expenses(1)
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0.50%
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Acquired Fund Fees and Expenses(1)
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[_.__]%
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Total Annual Fund Operating Expenses
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1.24%
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Fee Waiver and/or Expense Reimbursement(2)(3)
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(0.25)%
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Total Annual Fund Operating Expenses After Fee Waiver and/or Expense Reimbursement
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0.99%
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(1)
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“Other Expenses” and “Acquired Fund Fees and Expenses” are based on estimated amounts for the current fiscal year.
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(2)
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The Fund’s investment adviser, Milliman Financial Risk Management LLC (“Milliman”), has contractually agreed to waive advisory fees and/or
reimburse expenses to the extent necessary to limit the Fund’s total annual Fund operating expenses (excluding taxes, interest, brokerage fees and commissions, Rule 12b-1 fees, acquired fund fees and expenses, short-sale dividend
expenses, administrative services fees, other expenses that are capitalized in accordance with generally accepted accounting principles, and extraordinary or non-routine expenses not incurred in the ordinary course of the Fund’s
business) to 0.74% of the Fund's average daily net assets (the “Expense Limitation Agreement”) until at least November 1, 2022. During its term, the Expense Limitation Agreement cannot be
terminated or amended to increase the applicable limit without approval of the Board of Trustees of the Trust (the “Board”). Milliman may recoup from the Fund any advisory fees waived or expenses
reimbursed pursuant to the Expense Limitation Agreement for a period of three years from the date on which such waiver or reimbursement occurred; provided, however, that such recoupment shall not be made if it would cause the Fund’s
total annual Fund operating expenses to exceed the lesser of (a) the expense limitation in effect at the time of the reimbursement, or (b) the expense limitation in effect at the time of recoupment, if any.
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(3)
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In addition to the Expense Limitation Agreement, Milliman has contractually agreed to waive its advisory fees in an amount equal to the Fund’s acquired fund fees and expenses until at
least November 1, 2022 (the “Fee Waiver”). This contract cannot be terminated or modified without the consent of the Board.
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Example
This example is intended to help you compare the cost of investing in the Fund with the cost of investing in other funds. This example assumes that you
invest $10,000 in the Fund for the time periods indicated and then sell all of your Shares at the end of those periods. This example also assumes that your investment has a 5% return each year and that the Fund’s operating expenses remain at
current levels and that the Expense Limitation Agreement and Fee Waiver remain in place for their contractual periods. Although your actual costs may be higher or lower, your costs, based on these assumptions, would be:
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1 Year
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3 Years
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Class 3
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$104
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$384
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This example does not include any fees or sales charges imposed by your variable product. If they were included, the expenses listed above would be
higher.
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Portfolio Turnover
The Fund pays transaction costs, such as commissions, when it purchases and sells securities (or “turns over” its portfolio). A higher portfolio turnover
will cause the Fund to incur additional transaction costs. These costs, which are not reflected in Total Annual Fund Operating Expenses or in the example, may affect the Fund’s performance. Because the Fund has not yet commenced investment
operations, no portfolio turnover information is available at this time.
Principal Investment Strategies
The Fund seeks to achieve its investment objective by transacting in FLexible EXchange® Options (“FLEX Options”)
and by separately maintaining a collateral portfolio (the “Collateral Portfolio”), which is designed primarily to serve as margin or collateral for the Fund’s FLEX Options positions and secondarily to
enhance the Fund’s upside S&P 500 Index FLEX Options’ exposure (i.e., by utilizing anticipated income to measure the ability to purchase additional FLEX Options). FLEX Options are exchange-traded
options contracts with uniquely customizable terms. In general, an options contract is an agreement between a buyer and seller that gives the purchaser of the option the right to buy or sell a particular asset at a specified future date at an
agreed upon price, commonly known as the “strike price.” The reference assets for the Fund’s FLEX Options positions will include the S&P 500 Index, which is a large-capitalization, market-weighted, U.S. equities index that tracks the price
(excluding dividends) of 500 leading companies in leading industries of the U.S. economy, and certain exchange-traded funds (“ETFs”), as described further below.
The Collateral Portfolio may be invested in short-term fixed-income securities, including corporate bonds and other corporate debt securities,
asset-backed securities (“ABS”), securities issued by the U.S. Government or its agencies and instrumentalities, securities issued by non-U.S. governments or their agencies and instrumentalities, money
market securities and funds, other interest-bearing instruments, cash, ETFs that primarily invest in any of the foregoing instruments, options on ETFs and options box spreads. An options box spread is the combination of different options trades
that have offsetting spreads (e.g., purchases and sales on the same underlying instrument, such as an index or an ETF, but with different strike prices and/or expiration dates) for the purpose of
generating income. The Fund may invest in short-term fixed income securities or other instruments, including through ETFs, of any maturity and credit quality. The Fund will generally invest up to 80% of its net assets in one or more ETFs that
provide exposure to investment grade corporate bonds.
Due to the unique mechanics of the Fund’s strategy, the return an investor can expect to receive from an investment in the Fund has characteristics that
are distinct from the returns of many other investment vehicles. It is important that an investor understand these characteristics before making an investment in the Fund.
In seeking to achieve its investment objective, the Fund seeks to produce pre-determined outcomes (the “Outcomes”)
that are based upon the performance of the S&P 500 Index over a six-year period (the “Outcome Period”). The initial Outcome Period for the Fund is October 1, 2021 through September 30, 2027. Following
the initial Outcome Period, each subsequent Outcome Period will be a six-year period commencing upon the expiration of the prior Outcome Period. The Fund seeks to achieve the Outcomes by purchasing and writing (selling) FLEX Options to create
layers within the Fund’s portfolio. One layer is designed to produce returns that correlate to those of the S&P 500 Index for the Outcome Period at a declared rate (the “Par Up Rate”) if the S&P
500 Index experiences gains during that time, as described below. A separate layer is designed to limit losses to 50% of the losses experienced by the S&P 500 Index for the Outcome Period (the “Par Down Rate”). There is no guarantee that the Fund will be successful in its attempt to produce returns that correlate to those of the S&P 500 Index at the Par Up
Rate or limit losses that correlate to those of the S&P 500 Index at the Par Down Rate.
Milliman Financial Risk Management, LLC (“Milliman”), the investment adviser of the Fund, seeks to establish the
Par Down Rate by writing 50% of the exposure of one put FLEX Option on the S&P 500 Index with a strike price that is equal to the value of the S&P 500 Index at the beginning of the Outcome Period.
Milliman seeks to establish the Par Up Rate by purchasing long call FLEX Options on the S&P 500 Index with a strike price approximately equal to
the value of the S&P 500 Index at the beginning of the Outcome Period. Milliman purchases these FLEX Options with a portion of the Fund’s net assets plus (i) the cash received from
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writing the put FLEX Option designed to create the Par Down Rate, and (ii) yield received from the Collateral Portfolio.
The Par Up Rate is the rate at which the Fund will seek to track any upside market performance of the S&P 500 Index. Milliman calculates the Par
Up Rate based upon (i) its evaluation of prevailing market conditions on the first day of the Outcome Period and (ii) the total number of long call FLEX Options on the S&P 500 Index that it is able to purchase at that time. As of the date of
this Prospectus, and assuming current market conditions persist, Milliman expects that the Par Up Rate will be between the below ranges (both gross and net of Fund fees and expenses). Any fees or expenses imposed by your variable product, and any
other expenses incurred by the Fund, will have the effect of further reducing the Par Up Rate. Once calculated, the Par Up Rate for a particular Outcome Period will not change during that Outcome Period;
however, in certain market conditions, the performance of the Collateral Portfolio could reduce the impact of the Par Up Rate.
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Share Class
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Estimated Par Up Rate Ranges
(As of [___])
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Prior to Taking into Account Fund Fees and Expenses
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After Taking into Account Fund Fees and Expenses
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Class 3
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[__]% and [__]%
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[__]% and [__]%
|
The Par Down Rate is the rate at which the Fund will seek to track any downside market performance of the S&P 500 Index. The Par Down Rate is
designed to limit losses in the Fund’s S&P 500 Index exposure to 50% for the Outcome Period. The Fund seeks to limit losses against its S&P 500 Index exposure prior to taking into account any fees or expenses or the performance of the
Collateral Portfolio. The Par Down Rate is not operative against losses in the Collateral Portfolio. If the Collateral Portfolio experiences losses, it could have the effect of reducing the impact of, or
completely eliminating, the Par Down Rate on the Fund’s S&P 500 Index exposure. In certain market conditions, the performance of the Collateral Portfolio could cause the Fund to significantly underperform the S&P 500 Index. The
following table reflects the Par Down Rate both gross and net of Fund fees and expenses:
|
Share Class
|
Par Down Rate
(As of [___])
|
|
|
Prior to Taking into Account Fund Fees and Expenses
|
After Taking into Account Fund Fees and Expenses
|
|
|
Class 3
|
50%
|
[__]%
|
The definitive Par Up Rate and Par Down Rate will be set forth on the Fund’s website. The Fund’s website will also provide information relating to the
Outcomes on a daily basis, including the Fund’s position relative to the Par Up Rate and the Par Down Rate. You may also contact your insurance company or other financial intermediary for more information.
Additionally, the Fund’s net asset value (“NAV”) will not increase or decrease at the same rate as the
S&P 500 Index because the Fund’s strategy relies upon the performance of the Collateral Portfolio, in addition to the value of the Fund’s FLEX Options positions on the S&P 500 Index. While Milliman anticipates that the Fund’s NAV will
generally move in the same direction as the S&P 500 Index (meaning that the Fund’s NAV will generally increase if the S&P 500 Index experiences gains or decrease if the S&P 500 Index experiences losses), the Fund’s NAV will not
decrease at the same rate as the S&P 500 Index (especially when factoring in the Par Down Rate and the performance of the Collateral Portfolio) and will not increase at the same rate as the S&P 500 Index (especially when factoring in the
Par Up Rate and the performance of the Collateral Portfolio). Similarly, the amount of time remaining until the end of the Outcome Period also affects the impact of the Par Down Rate on the Fund’s NAV, because the Par Down Rate may not be in full
effect prior to the end of the Outcome Period.
The FLEX Options utilized in the Fund’s portfolio are each set to expire on the last day of the Outcome Period. The customizable nature of FLEX
Options will allow Milliman to select the strike price at which each FLEX Option will be exercised at the expiration of the FLEX Option term. At the commencement of the Outcome Period, Milliman will specifically select the strike price for each
FLEX Option in a manner designed to achieve the Outcomes when
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the FLEX Options are exercised on the final day of the Outcome Period, depending on the anticipated performance of the S&P 500 Index and the
Collateral Portfolio over the duration of that Outcome Period.
The hypothetical graphical illustrations provided below are designed to illustrate the Outcomes based upon the
hypothetical performance of the S&P 500 Index for an investor who holds Shares for the entirety of the Outcome Period. The hypothetical graphical illustrations do not include any fees or expenses imposed by your variable product or expenses
incurred by the Fund, and do not reflect the performance of the Collateral Portfolio. Additional hypothetical graphical representations of the Outcomes are provided in “Additional Information About the Funds and the Risks of Investing.”
There is no guarantee that the Fund will be successful in its attempt to achieve the Outcomes for the Outcome Period.
The following table contains hypothetical examples designed to illustrate the Outcomes the Fund seeks to
achieve over the Outcome Period, based upon the performance of the S&P 500 Index from (100)% to 100% after taking into account the Par Up Rate and the Par Down Rate, but prior to taking into account any fees or expenses or the performance of
the Collateral Portfolio. The table is provided for illustrative purposes only and does not provide every possible performance scenario for Shares over the course of the Outcome Period. There is no guarantee that the Fund will be successful in its attempt to achieve the Outcomes for an Outcome
Period. The table is not intended to predict or project the performance of the FLEX Options or the Fund. Investors should not take this information as an assurance of the expected performance of the
S&P 500 Index or the Fund. Actual Fund performance will vary with fluctuations in the performance of the Collateral Portfolio, in addition to the value of the Fund’s FLEX Options positions on the S&P 500 Index, during the
Outcome Period, among other factors. The performance of the Collateral Portfolio could significantly impact the performance of the Fund, which could prevent the Fund from
achieving the Outcomes that it seeks to produce. The table does not reflect any fees or expenses imposed by your variable product or expenses incurred by the Fund. If it did, the returns shown for the Fund would be lower. Please refer
to the Fund’s website, which provides updated information relating to this table on a daily basis throughout the Outcome Period. Please contact your insurance company or other financial intermediary for more information.
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|
Index/Fund
|
Hypothetical Performance1
|
|||||||||||
|
S&P 500 Index Price Performance
|
(100)%
|
(50)%
|
(20)%
|
(10)%
|
(5)%
|
0%
|
5%
|
10%
|
15%
|
20%
|
50%
|
100%
|
|
Fund Performance at NAV
|
(50)%2
|
(25)%2
|
(10)%2
|
(5)%2
|
(2.5)%2
|
0%
|
6%3
|
12%3
|
18%3
|
24%3
|
60%3
|
120%3
|
| 1 |
Does not take into account any fees or expenses or the performance of the Collateral Portfolio.
|
| 2 |
Reflects the impact of the Par Down Rate.
|
| 3 |
Reflects the impact of an assumed Par Up Rate of 120%.
|
Understanding Outcomes. The Outcomes the Fund seeks to achieve are measured based upon the
Fund’s NAV on the first day of the Outcome Period. The Outcome Period begins on the day Milliman transacts in the FLEX Options on behalf of the Fund, and ends on the day those FLEX Options expire. An investor who
purchases Shares after the commencement of the Outcome Period will likely have purchased Shares at a different NAV than the NAV on the first day of the Outcome Period (the NAV upon which the Outcomes are based) and may experience investment
outcomes very different from those the Fund seeks to achieve, especially when factoring in any fees or expenses or the performance of the Collateral Portfolio. An investor who redeems Shares prior to the end of the Outcome Period may also
experience investment outcomes very different from those the Fund seeks to achieve. The Outcomes are designed with the expectation that an investor will hold Shares on the day that Milliman transacts in the FLEX Options on behalf of the Fund,
and on the day those FLEX Options expire. There is no guarantee that the Fund will be successful in its attempt to achieve the Outcomes.
Understanding the Par Up Rate. Unlike other investment products, the potential returns an
investor can receive from an investment in the Fund are subject to the Par Up Rate. This means that if the S&P 500 Index experiences gains for the Outcome Period, an investor in the Fund will only experience
a percentage of those gains (equal to the Par Up Rate multiplied by the S&P 500 Index gains). Milliman calculates the Par Up Rate for each Outcome Period based upon (i) its evaluation of prevailing market conditions on the first day
of the Outcome Period and (ii) the total number of long call FLEX Options on the S&P 500 Index that it is able to purchase at that time. In certain market conditions, the performance of the Collateral
Portfolio could reduce the impact of the Par Up Rate. An investor should consider the amount and impact of the Par Up Rate, and the Fund’s position relative to it, before investing in the Fund.
Understanding the Par Down Rate. The Par Down Rate is intended to limit losses in the
Fund’s S&P 500 Index exposure to 50% of the losses the S&P 500 Index experiences for the Outcome Period. While the Fund seeks to provide returns that are limited to 50% (prior to taking into account any fees or expenses or the performance
of the Collateral Portfolio) for investors who hold Shares for the entire Outcome Period, there is no guarantee it will successfully do so. In addition, the Par Down Rate is not operative against losses in the
Collateral Portfolio. If the Collateral Portfolio experiences losses, it could have the effect of reducing the impact of, or completely eliminating, the Par Down Rate on the Fund’s S&P 500 Index exposure. In certain market conditions, the
performance of the Collateral Portfolio could cause the Fund to significantly underperform the S&P 500 Index. Investors who purchase Shares at the beginning of the Outcome Period may lose their entire investment. Investors who purchase
Shares after the Outcome Period has begun may also lose their entire investment. An investment in the Fund is only appropriate for investors willing to bear those losses.
Fund Rebalance. Milliman implements the Fund’s strategy every six years, seeking to
produce the Outcomes for an Outcome Period. On the last business day of any stated Outcome Period, all of the Fund’s existing FLEX Options, which includes those used to establish the Par Up Rate and the Par Down Rate, will expire and Milliman
will transact in a new set of FLEX Options on the same business day, which will commence a new Outcome Period beginning the following business day. At that same time, Milliman will also evaluate whether to make any adjustments to the Collateral
Portfolio. Accordingly, Shares can be held indefinitely if investors determine to participate in additional Outcome Periods.
Approximately one week prior to the end of each Outcome Period, the Fund will file a prospectus supplement, which will notify existing investors of
(i) the date on which the existing Outcome Period will end; (ii) the date on
579
which the new Outcome Period will commence; and (iii) the anticipated ranges of the Par Up Rate that will be used for the new Outcome Period.
Immediately preceding the commencement date of the new Outcome Period, the Fund will file a prospectus supplement disclosing the Fund’s final Par Up Rate (both gross and net of Fund fees and expenses) for the new Outcome Period. This information
will also be available online at www.[___________].com, and on your insurance company’s website. Please contact your insurance company or other financial intermediary for more information.
Fund Classification. The Fund is classified as “non-diversified” under the Investment
Company Act of 1940, as amended (the “1940 Act”).
Principal Risks
You could lose money by investing in the Fund. An investment in the Fund is not a deposit of a bank and is not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other governmental agency. There can be no assurance that the Fund’s investment objectives will be achieved.
Downside Loss Par Down Rate Risk. There can be no guarantee that the Fund will be successful in its strategy
to limit losses in the Fund’s S&P 500 Index exposure to 50% of the losses experienced by the S&P 500 Index over the Outcome Period. The success of the Par Down Rate also depends upon the performance of the Collateral Portfolio. If the Collateral Portfolio experiences losses, it could have the effect of reducing the impact of, or completely eliminating, the Par Down Rate on the Fund’s S&P 500 Index exposure. In certain market
conditions, the performance of the Collateral Portfolio could cause the Fund to significantly underperform the S&P 500 Index. Despite the intended Par Down Rate, an investor could lose their entire investment. In the event an
investor purchases Shares after the date on which Milliman transacted in the FLEX Options on behalf of the Fund, or redeems Shares prior to the expiration of those FLEX Options, the Par Down Rate that the Fund seeks to provide may not be
available or fully applicable.
Risk of the Par Up Rate on Upside Returns. The Fund’s strategy is designed to produce returns that correlate
to those of the S&P 500 Index at the Par Up Rate if Shares are bought on the day on which Milliman transacts in the FLEX Options on behalf of the Fund and held until those FLEX Options expire at the end of the Outcome Period. Accordingly, the
Fund will not fully participate in any gains achieved by the S&P 500 Index. In addition, in the event an investor purchases Shares after the date on which Milliman transacted in the FLEX Options on behalf of the Fund, or redeems Shares prior
to the expiration of those FLEX Options, the returns realized by that investor may not match those that the Fund seeks to achieve pursuant to the Par Up Rate. In certain market conditions, the performance of
the Collateral Portfolio could reduce the impact of the Par Up Rate. An investor should consider the amount and impact of the Par Up Rate, and the Fund’s position relative to it, before investing in the Fund.
Par Up Rate Change Risk. Because the Par Up Rate for each Outcome Period is calculated based upon (i)
Milliman’s evaluation of prevailing market conditions on the first day of the Outcome Period and (ii) the total number of long call FLEX Options on the S&P 500 Index that Milliman is able to purchase at that time, the Par Up Rate may rise or
fall from one Outcome Period to the next. Any change in the Par Up Rate could be significant and it is unlikely to remain the same for consecutive Outcome Periods.
FLEX Options Risk. The Fund will transact in FLEX Options issued and guaranteed for settlement by the OCC. The
Fund bears the risk that the OCC will be unable or unwilling to perform its obligations under the FLEX Options contracts, which could result in significant losses to the Fund. In less liquid markets, terminating a FLEX Option may require the
payment of a premium or acceptance of a discounted price, and may take longer to complete. In addition, a less liquid trading market may adversely impact the value of the Fund’s FLEX Options and therefore the NAV of the Fund. In addition, the value
of the Fund’s FLEX Options positions is not anticipated to increase or decrease at the same rate as the reference asset; and while it is anticipated that they will generally move in the same direction, it is possible that they may move in different
directions. Certain FLEX Options positions may also expire worthless. The use of FLEX Options involves leverage, which can cause the Fund’s portfolio to be more volatile than if the portfolio had not been leveraged. Leverage can significantly
magnify the effect of price movements of the reference asset, disproportionately increasing the Fund’s losses and reducing the Fund’s opportunities for gains
580
when the reference asset changes in unexpected ways. In some instances, such leverage could result in losses that exceed the original amount invested.
Options Pricing Risk. The Fund transacts in FLEX Options that have an exercise date six years after the
initial transaction date. Because, at times, there might not be market activity for these options, the ability of the Fund to value them becomes more difficult and the judgment of Milliman (employing the fair value procedures adopted by the
Board) may play a greater role in their valuation due to this reduced availability of reliable objective pricing data. Consequently, while such determinations may be made in good faith, including through the use of model-based pricing, it may
nevertheless be more difficult for the Fund to accurately assign a daily value.
Investment Objective and Outcomes Risk. There is no guarantee that the Fund will be successful in its attempt
to achieve its investment objective and/or the Outcomes, and an investor could lose some or all of their investment in the Fund. Certain circumstances under which the Fund might not achieve its objective and/or the Outcomes include, but are not
limited to (i) if the Fund disposes of FLEX Options, (ii) if the Fund is unable to maintain the proportional relationship based on the number of FLEX Options in the Fund’s portfolio, (iii) significant accrual of Fund expenses in connection with
effecting the Fund’s principal investment strategy, (iv) losses incurred by the Fund’s holdings in the Collateral Portfolio, or (iv) adverse tax law changes affecting the treatment of FLEX Options.
Tax Risk. The Fund intends to elect, and to qualify each year, to be treated as a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”). As a RIC, the Fund will not be subject to U.S. federal income tax on the portion
of its net investment income and net capital gain that it distributes to shareholders, provided that it satisfies certain requirements of the Code. To maintain its status as a RIC, the Fund must meet certain income, diversification and
distributions tests. For purposes of the diversification test, the identification of the issuer (or, in some cases, issuers) of a particular Fund investment can depend on the terms and conditions of that investment. In particular, there is no
published IRS guidance or case law on how to determine the “issuer” of certain derivatives that the Fund will enter into and the Fund has not received a private letter ruling on this point. Therefore, there is a risk that the Fund will not meet the
Code’s diversification requirements and will not qualify, or will be disqualified, as a RIC. If the Fund does not qualify as a RIC for any taxable year and certain relief provisions are not available, the Fund’s taxable income will be subject to
tax at the Fund level and to a further tax at the shareholder level when such income is distributed.
The Fund also intends to comply with the diversification requirements of Section 817(h) of the Code, and the regulations thereunder, relating to the
tax-deferred status of variable accounts that are based on insurance company separate accounts (referred to as “segregated asset accounts” for federal income tax purposes). These diversification requirements apply in addition to the RIC
diversification requirements discussed above. There also is no published guidance or case law on how to determine the “issuer” of the derivatives referred to above for purposes of the diversification requirements of Section 817(h) of the Code and
the Fund has not received a private letter ruling on this point. If these requirements are not met, or under other circumstances, such as if the Fund does not qualify as a RIC for any taxable year, it is possible that the contract owners (rather
than the insurance company) will be treated for federal income tax purposes as the taxable owners of the assets held by the segregated asset accounts.
Clearing Member Default Risk. The Fund will hold FLEX Options through accounts at members of clearing houses (“clearing members”) rather than a bank or a broker. Assets deposited by the Fund with any clearing member as margin for its FLEX Options positions may, in certain circumstances, be used to satisfy losses of other
clients of the Fund’s clearing member where such assets may be held in commingled omnibus accounts. In addition, although clearing members guarantee performance of their clients’ obligations to the clearing house, there is a risk that the assets of
the Fund might not be fully protected in the event of the clearing member’s bankruptcy, as the Fund would be limited to recovering only a pro rata share of all available funds segregated on behalf of the
clearing member’s customers for the relevant account class.
Debt Securities Risk. The prices of debt securities will be affected by changes in interest rates, the
creditworthiness of the issuer and other factors. These risks could affect the value of investments in which the Fund invests, possibly causing the Fund’s NAV to be reduced and fluctuate more than other types of investments. During periods of
falling interest rates, an issuer of a callable bond may repay the security before its stated maturity, and the Fund may have to reinvest the proceeds in securities with lower yields, which would result in a decline in the Fund’s income, or in
securities with greater risks or with other less favorable features. Changing interest rates, including rates that fall
581
below zero, may have unpredictable effects on markets, result in heightened market volatility and detract from the Fund’s performance to the extent
the Fund is exposed to such interest rates. An increase in interest rates will generally cause the value of fixed-income securities held by the Fund to decline, may lead to heightened volatility in the fixed-income markets and may adversely
affect the liquidity of certain fixed-income investments, including those held by the Fund. Risks associated with rising interest rates are heightened given that interest rates in the U.S. are near historic lows. Adjustable-rate instruments also
react to interest rate changes in a similar manner, although generally to a lesser degree (depending, however, on the characteristics of the reset terms, including the index chosen, frequency of reset and reset caps or floors, among other
factors). Interest rate sensitivity is generally more pronounced and less predictable in instruments with uncertain payment or prepayment schedules and also for those with longer maturities.
Foreign Securities and Credit Exposure Risk. U.S. dollar-denominated securities carrying foreign credit exposure
may be affected by unfavorable political, economic or governmental developments that could affect payments of principal and interest. Furthermore, the value of the Fund’s foreign investments (whether direct or indirect) may be adversely affected by
political and social instability in their home countries, by changes in economic or taxation policies in those countries, or by the difficulty in enforcing obligations in those countries. Foreign companies generally may be subject to less stringent
regulations than U.S. companies, including financial reporting requirements and auditing and accounting controls. As a result, there generally is less publicly available information about foreign companies than about U.S. companies. Trading in many
foreign securities may be less liquid and more volatile than U.S. securities due to the size of the market or other factors.
U.S. Government Securities Risk. U.S. Government securities are subject to interest rate risk but generally do
not involve the credit risks associated with investments in other types of debt securities. As a result, the yields available from U.S. Government securities are generally lower than the yields available from other debt securities. U.S. Government
securities are guaranteed only as to the timely payment of interest and the payment of principal when held to maturity. While securities issued or guaranteed by U.S. federal government agencies are backed by the full faith and credit of the U.S.
Department of the Treasury, securities issued by government sponsored entities are solely the obligation of the issuer and generally do not carry any guarantee from the U.S. Government.
ABS Risk. ABS are subject to the general debt securities risks described above. In addition, ABS may be less
liquid than other bonds, and may be more sensitive than other bonds to the market’s perception of issuers and creditworthiness of payees, which may result in the Fund experiencing difficulty selling or valuing these securities. ABS markets have
experienced extraordinary weakness and volatility at various times in recent years, and may decline quickly in the event of a substantial economic or market downturn. Accordingly, these securities may be subject to greater risk of default during
periods of economic downturn than other securities, which could result in possible losses to the Fund.
Issuer Risk. The performance of the Fund depends on the performance of individual securities to which the Fund
has exposure. The Fund may be adversely affected if an issuer of underlying securities held by the Fund is unable or unwilling to repay principal or interest when due. Changes in the financial condition or credit rating of an issuer of those
securities may cause the value of the securities to decline.
Management Risk. The Fund is subject to management risk because it is an actively managed portfolio. Milliman
will apply investment techniques and risk analyses in making investment decisions for the Fund, but there can be no guarantee that the Fund will meet its investment objective and/or the Outcomes. In addition, Milliman does not use defensive
strategies or attempt to reduce the Fund’s exposures to poor performing positions during an Outcome Period. This differs from funds that are managed to seek to outperform a benchmark index. Therefore, in the event of a general market decline, the
Fund’s value may fall more than the value of another fund that does attempt to hedge against such market declines.
Market Risk. The Fund could lose money over short periods due to short-term market movements and over longer
periods during more prolonged market downturns. Assets may decline in value due to factors affecting financial markets generally or particular asset classes or industries represented in the markets. The value of a FLEX Option or other asset may
also decline due to general market conditions, economic trends or events that are not specifically related to the issuer of the security or other asset, or due to factors that affect a particular issuer, country, region, market, industry, sector or
asset class.
582
Non-Diversification Risk. The Fund may invest a relatively high percentage of its assets in a limited number of
issuers. As a result, the Fund may be more susceptible to a single adverse economic or regulatory occurrence affecting one or more of these issuers, experience increased volatility and be highly invested in certain issuers.
Large Shareholder Risk. At times, the Fund may experience adverse effects when certain large shareholders,
including insurance company separate accounts, redeem large amounts of shares of the Fund. Large redemptions may cause the Fund to sell portfolio holdings at times when it would not otherwise do so and may increase transaction costs and/or result
in an increase to the Fund’s expense ratio. A large redemption could be detrimental to the Fund and its remaining shareholders.
Risks of Investing in ETFs. In addition to the risks associated with the underlying assets held by the ETFs in
which the Fund invests, investments in ETFs are also subject to the following additional risks: (i) only authorized participants may engage in transactions directly with ETFs but none are obligated to do so, which could result in an ETF’s shares
trading at a premium or discount to its NAV or possibly face trading halts or delisting; (ii) certain ETFs seek to track the performance of an underlying index and will not attempt to take defensive positions under any market conditions, including
declining markets, which could result in losses; and (iii) because ETF shares trade on the secondary market, there is not guarantee that an active market will be developed or maintained, which could result in the ETF’s shares trading at a premium
or discount to its NAV. Investments in ETFs may involve duplication of management fees and certain other expenses, as the Fund indirectly bears its proportionate share of any expenses paid by the ETFs in which it invests.
Risks of Investing in Money Market Funds. Money market funds seek to preserve the value of shareholder
investments at $1.00 per share, but shareholders, such as the Fund, may still lose money by investing in such funds. In addition, a money market fund may impose a fee upon the sale of its shares or may temporarily suspend the ability to sell shares
if the fund’s liquidity falls below required minimums because of market conditions or other factors. The credit quality of a money market fund’s holdings can change rapidly in certain markets, and the default of a single holding could have an
adverse impact on the fund’s share price. A money market fund’s share price can also be negatively affected during periods of high redemption pressures, illiquid markets, and/or significant market volatility.
Performance
As of the date of this Prospectus, the Fund has not commenced operations and therefore does not have a performance history. Once available, the Fund’s
performance information will be accessible online at www.[________].com and will provide some indication of the risks of investing in the Fund.
Management
Investment Adviser
Milliman Financial Risk Management LLC (“Milliman”) serves as investment adviser to the Fund.
Portfolio Managers
The following persons serve as portfolio managers of the Fund.
|
●
|
Robert T. Cummings, Principal & Head of Portfolio Management at Milliman.
|
|
●
|
Maria Schiopu, Principal & Head of Portfolio Management at Milliman.
|
|
●
|
Jeff Greco, Principal & Head of Strategy Research at Milliman.
|
|
●
|
Jordan Rosenfeld, Portfolio Manager at Milliman.
|
Each portfolio manager is jointly and primarily responsible for the day-to-day management of the Fund’s portfolio and has served in such capacity
since the Fund’s inception in 2021.
583
Purchase and Sale of Shares
Shares are available as underlying investment options for variable insurance contracts and variable life insurance policies (each, a “variable contract,” and, collectively, the “variable contracts”) issued by insurance companies. These insurance companies are the record owners of the separate accounts
holding the Shares. You do not buy, sell or exchange Shares directly; rather, you choose investment options through your variable contracts. The insurance companies then cause the separate accounts to purchase and redeem Shares according to
the investment options you choose.
Tax Information
The dividends and distributions paid by the Fund to the insurance company separate accounts will consist of ordinary income, capital gains, or some
combination of both. Because Shares must be purchased through separate accounts used to fund variable contracts, such dividends and distributions will be exempt from current taxation by owners of variable contracts (each, a “contract owner,” and, collectively “contract owners”) if left to accumulate within a separate account. Consult the variable contract prospectus for additional tax
information.
Payments to Insurance Companies and Other Financial Intermediaries
If you allocate contract value to the Fund through an insurance company or other financial intermediary, the Fund, Milliman, the Fund’s distributor or
their related companies may pay the insurance company and/or its affiliates or other intermediary for the sale of Shares and related services. These payments may create a conflict of interest by influencing the insurance company or other
intermediary and your salesperson to recommend an indirect investment in the Fund over another investment. The prospectus or other disclosure documents for the variable contracts may contain additional information about these payments, if any.
You may also ask your salesperson or financial intermediary, or visit your financial intermediary’s website, for more information.
584
Fund Summary: Milliman S&P 500 6-Year Par Down with Par Up Fund – Jan (I)
Investment Objective
The Fund seeks to provide exposure to the S&P 500 Index, while limiting losses to 50% of the losses associated with S&P 500 Index performance
and participating in S&P 500 Index gains at a declared rate, prior to taking into account any fees or expenses or the performance of any fixed income exposure included in the Fund’s portfolio, over the period from January 1, 2022 through
December 31, 2027.
Fees and Expenses of the Fund
This table describes the fees and expenses that you may pay if you buy, hold and sell shares of the Fund (“Shares”).
This table and the example below do not include any fees or sales charges imposed by your variable product. If they were included, the expenses listed below would be higher.
Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment)
|
Class 3
|
|
|
Management Fees
|
0.49%
|
|
Distribution and Service (12b-1) Fees
|
0.25%
|
|
Other Expenses(1)
|
0.50%
|
|
Acquired Fund Fees and Expenses(1)
|
[_.__]%
|
|
Total Annual Fund Operating Expenses
|
1.24%
|
|
Fee Waiver and/or Expense Reimbursement(2)(3)
|
(0.25)%
|
|
Total Annual Fund Operating Expenses After Fee Waiver and/or Expense Reimbursement
|
0.99%
|
|
(1)
|
“Other Expenses” and “Acquired Fund Fees and Expenses” are based on estimated amounts for the current fiscal year.
|
|
(2)
|
The Fund’s investment adviser, Milliman Financial Risk Management LLC (“Milliman”), has contractually
agreed to waive advisory fees and/or reimburse expenses to the extent necessary to limit the Fund’s total annual Fund operating expenses (excluding taxes, interest, brokerage fees and commissions, Rule 12b-1 fees, acquired fund fees and
expenses, short-sale dividend expenses, administrative services fees, other expenses that are capitalized in accordance with generally accepted accounting principles, and extraordinary or non-routine expenses not incurred in the
ordinary course of the Fund’s business) to 0.74% of the Fund's average daily net assets (the “Expense Limitation Agreement”) until at least November 1, 2022. During its term, the Expense
Limitation Agreement cannot be terminated or amended to increase the applicable limit without approval of the Board of Trustees of the Trust (the “Board”). Milliman may recoup from the Fund any
advisory fees waived or expenses reimbursed pursuant to the Expense Limitation Agreement for a period of three years from the date on which such waiver or reimbursement occurred; provided, however, that such recoupment shall not be made
if it would cause the Fund’s total annual Fund operating expenses to exceed the lesser of (a) the expense limitation in effect at the time of the reimbursement, or (b) the expense limitation in effect at the time of recoupment, if any.
|
|
(3)
|
In addition to the Expense Limitation Agreement, Milliman has contractually agreed to waive its advisory fees in an amount equal to the Fund’s
acquired fund fees and expenses until at least November 1, 2022 (the “Fee Waiver”). This contract cannot be terminated or modified without the consent of the Board.
|
Example
This example is intended to help you compare the cost of investing in the Fund with the cost of investing in other funds. This example assumes that you
invest $10,000 in the Fund for the time periods indicated and then sell all of your Shares at the end of those periods. This example also assumes that your investment has a 5% return each year and that the Fund’s operating expenses remain at
current levels and that the Expense Limitation Agreement and Fee Waiver remain in place for their contractual periods. Although your actual costs may be higher or lower, your costs, based on these assumptions, would be:
|
1 Year
|
3 Years
|
|
|
Class 3
|
$104
|
$384
|
This example does not include any fees or sales charges imposed by your variable product. If they were included, the expenses listed above would be
higher.
585
Portfolio Turnover
The Fund pays transaction costs, such as commissions, when it purchases and sells securities (or “turns over” its portfolio). A higher portfolio turnover
will cause the Fund to incur additional transaction costs. These costs, which are not reflected in Total Annual Fund Operating Expenses or in the example, may affect the Fund’s performance. Because the Fund has not yet commenced investment
operations, no portfolio turnover information is available at this time.
Principal Investment Strategies
The Fund seeks to achieve its investment objective by transacting in FLexible EXchange® Options (“FLEX Options”)
and by separately maintaining a collateral portfolio (the “Collateral Portfolio”), which is designed primarily to serve as margin or collateral for the Fund’s FLEX Options positions and secondarily to
enhance the Fund’s upside S&P 500 Index FLEX Options’ exposure (i.e., by utilizing anticipated income to measure the ability to purchase additional FLEX Options). FLEX Options are exchange-traded
options contracts with uniquely customizable terms. In general, an options contract is an agreement between a buyer and seller that gives the purchaser of the option the right to buy or sell a particular asset at a specified future date at an
agreed upon price, commonly known as the “strike price.” The reference assets for the Fund’s FLEX Options positions will include the S&P 500 Index, which is a large-capitalization, market-weighted, U.S. equities index that tracks the price
(excluding dividends) of 500 leading companies in leading industries of the U.S. economy, and certain exchange-traded funds (“ETFs”), as described further below.
The Collateral Portfolio may be invested in short-term fixed-income securities, including corporate bonds and other corporate debt securities,
asset-backed securities (“ABS”), securities issued by the U.S. Government or its agencies and instrumentalities, securities issued by non-U.S. governments or their agencies and instrumentalities, money
market securities and funds, other interest-bearing instruments, cash, ETFs that primarily invest in any of the foregoing instruments, options on ETFs and options box spreads. An options box spread is the combination of different options trades
that have offsetting spreads (e.g., purchases and sales on the same underlying instrument, such as an index or an ETF, but with different strike prices and/or expiration dates) for the purpose of
generating income. The Fund may invest in short-term fixed income securities or other instruments, including through ETFs, of any maturity and credit quality. The Fund will generally invest up to 80% of its net assets in one or more ETFs that
provide exposure to investment grade corporate bonds.
Due to the unique mechanics of the Fund’s strategy, the return an investor can expect to receive from an investment in the Fund has characteristics that
are distinct from the returns of many other investment vehicles. It is important that an investor understand these characteristics before making an investment in the Fund.
In seeking to achieve its investment objective, the Fund seeks to produce pre-determined outcomes (the “Outcomes”)
that are based upon the performance of the S&P 500 Index over a six-year period (the “Outcome Period”). The initial Outcome Period for the Fund is January 1, 2022 through December 31, 2027. Following
the initial Outcome Period, each subsequent Outcome Period will be a six-year period commencing upon the expiration of the prior Outcome Period. The Fund seeks to achieve the Outcomes by purchasing and writing (selling) FLEX Options to create
layers within the Fund’s portfolio. One layer is designed to produce returns that correlate to those of the S&P 500 Index for the Outcome Period at a declared rate (the “Par Up Rate”) if the S&P
500 Index experiences gains during that time, as described below. A separate layer is designed to limit losses to 50% of the losses experienced by the S&P 500 Index for the Outcome Period (the “Par Down Rate”). There is no guarantee that the Fund will be successful in its attempt to produce returns that correlate to those of the S&P 500 Index at the Par Up Rate or limit losses that correlate to those of the S&P 500 Index at the Par Down Rate.
Milliman Financial Risk Management, LLC (“Milliman”), the investment adviser of the Fund, seeks to establish the
Par Down Rate by writing 50% of the exposure of one put FLEX Option on the S&P 500 Index with a strike price that is equal to the value of the S&P 500 Index at the beginning of the Outcome Period.
Milliman seeks to establish the Par Up Rate by purchasing long call FLEX Options on the S&P 500 Index with a strike price approximately equal to
the value of the S&P 500 Index at the beginning of the Outcome Period. Milliman purchases these FLEX Options with a portion of the Fund’s net assets plus (i) the cash received from
586
writing the put FLEX Option designed to create the Par Down Rate, and (ii) yield received from the Collateral Portfolio.
The Par Up Rate is the rate at which the Fund will seek to track any upside market performance of the S&P 500 Index. Milliman calculates the Par
Up Rate based upon (i) its evaluation of prevailing market conditions on the first day of the Outcome Period and (ii) the total number of long call FLEX Options on the S&P 500 Index that it is able to purchase at that time. As of the date of
this Prospectus, and assuming current market conditions persist, Milliman expects that the Par Up Rate will be between the below ranges (both gross and net of Fund fees and expenses). Any fees or expenses imposed by your variable product, and any
other expenses incurred by the Fund, will have the effect of further reducing the Par Up Rate. Once calculated, the Par Up Rate for a particular Outcome Period will not change during that Outcome Period;
however, in certain market conditions, the performance of the Collateral Portfolio could reduce the impact of the Par Up Rate.
|
Share Class
|
Estimated Par Up Rate Ranges
(As of [___])
|
|
|
Prior to Taking into Account Fund Fees and Expenses
|
After Taking into Account Fund Fees and Expenses
|
|
|
Class 3
|
[__]% and [__]%
|
[__]% and [__]%
|
The Par Down Rate is the rate at which the Fund will seek to track any downside market performance of the S&P 500 Index. The Par Down Rate is
designed to limit losses in the Fund’s S&P 500 Index exposure to 50% for the Outcome Period. The Fund seeks to limit losses against its S&P 500 Index exposure prior to taking into account any fees or expenses or the performance of the
Collateral Portfolio. The Par Down Rate is not operative against losses in the Collateral Portfolio. If the Collateral Portfolio experiences losses, it could have the effect of reducing the impact of, or
completely eliminating, the Par Down Rate on the Fund’s S&P 500 Index exposure. In certain market conditions, the performance of the Collateral Portfolio could cause the Fund to significantly underperform the S&P 500 Index. The
following table reflects the Par Down Rate both gross and net of Fund fees and expenses:
|
Share Class
|
Par Down Rate
(As of [___])
|
|
|
Prior to Taking into Account Fund Fees and Expenses
|
After Taking into Account Fund Fees and Expenses
|
|
|
Class 3
|
50%
|
[__]%
|
The definitive Par Up Rate and Par Down Rate will be set forth on the Fund’s website. The Fund’s website will also provide information relating to the
Outcomes on a daily basis, including the Fund’s position relative to the Par Up Rate and the Par Down Rate. You may also contact your insurance company or other financial intermediary for more information.
Additionally, the Fund’s net asset value (“NAV”) will not increase or decrease at the same rate as the
S&P 500 Index because the Fund’s strategy relies upon the performance of the Collateral Portfolio, in addition to the value of the Fund’s FLEX Options positions on the S&P 500 Index. While Milliman anticipates that the Fund’s NAV will
generally move in the same direction as the S&P 500 Index (meaning that the Fund’s NAV will generally increase if the S&P 500 Index experiences gains or decrease if the S&P 500 Index experiences losses), the Fund’s NAV will not
decrease at the same rate as the S&P 500 Index (especially when factoring in the Par Down Rate and the performance of the Collateral Portfolio) and will not increase at the same rate as the S&P 500 Index (especially when factoring in the
Par Up Rate and the performance of the Collateral Portfolio). Similarly, the amount of time remaining until the end of the Outcome Period also affects the impact of the Par Down Rate on the Fund’s NAV, because the Par Down Rate may not be in full
effect prior to the end of the Outcome Period.
The FLEX Options utilized in the Fund’s portfolio are each set to expire on the last day of the Outcome Period. The customizable nature of FLEX
Options will allow Milliman to select the strike price at which each FLEX Option will be exercised at the expiration of the FLEX Option term. At the commencement of the Outcome Period, Milliman will specifically select the strike price for each
FLEX Option in a manner designed to achieve the Outcomes when
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the FLEX Options are exercised on the final day of the Outcome Period, depending on the anticipated performance of the S&P 500 Index and the
Collateral Portfolio over the duration of that Outcome Period.
The hypothetical graphical illustrations provided below are designed to illustrate the Outcomes based upon the
hypothetical performance of the S&P 500 Index for an investor who holds Shares for the entirety of the Outcome Period. The hypothetical graphical illustrations do not include any fees or expenses imposed by your variable product or expenses
incurred by the Fund, and do not reflect the performance of the Collateral Portfolio. Additional hypothetical graphical representations of the Outcomes are provided in “Additional Information About the Funds and the Risks of Investing.”
There is no guarantee that the Fund will be successful in its attempt to achieve the Outcomes for the Outcome Period.
The following table contains hypothetical examples designed to illustrate the Outcomes the Fund seeks to
achieve over the Outcome Period, based upon the performance of the S&P 500 Index from (100)% to 100% after taking into account the Par Up Rate and the Par Down Rate, but prior to taking into account any fees or expenses or the performance of
the Collateral Portfolio. The table is provided for illustrative purposes only and does not provide every possible performance scenario for Shares over the course of the Outcome Period. There is no guarantee that the Fund will be successful in its attempt to achieve the Outcomes for an Outcome
Period. The table is not intended to predict or project the performance of the FLEX Options or the Fund. Investors should not take this information as an assurance of the expected performance of the
S&P 500 Index or the Fund. Actual Fund performance will vary with fluctuations in the performance of the Collateral Portfolio, in addition to the value of the Fund’s FLEX Options positions on the S&P 500 Index, during the
Outcome Period, among other factors. The performance of the Collateral Portfolio could significantly impact the performance of the Fund, which could prevent the Fund from
achieving the Outcomes that it seeks to produce. The table does not reflect any fees or expenses imposed by your variable product or expenses incurred by the Fund. If it did, the returns shown for the Fund would be lower. Please refer
to the Fund’s website, which provides updated information relating to this table on a daily basis throughout the Outcome Period. Please contact your insurance company or other financial intermediary for more information.
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|
Index/Fund
|
Hypothetical Performance1
|
|||||||||||
|
S&P 500 Index Price Performance
|
(100)%
|
(50)%
|
(20)%
|
(10)%
|
(5)%
|
0%
|
5%
|
10%
|
15%
|
20%
|
50%
|
100%
|
|
Fund Performance at NAV
|
(50)%2
|
(25)%2
|
(10)%2
|
(5)%2
|
(2.5)%2
|
0%
|
6%3
|
12%3
|
18%3
|
24%3
|
60%3
|
120%3
|
| 1 |
Does not take into account any fees or expenses or the performance of the Collateral Portfolio.
|
| 2 |
Reflects the impact of the Par Down Rate.
|
| 3 |
Reflects the impact of an assumed Par Up Rate of 120%.
|
Understanding Outcomes. The Outcomes the Fund seeks to achieve are measured based upon the
Fund’s NAV on the first day of the Outcome Period. The Outcome Period begins on the day Milliman transacts in the FLEX Options on behalf of the Fund, and ends on the day those FLEX Options expire. An investor who
purchases Shares after the commencement of the Outcome Period will likely have purchased Shares at a different NAV than the NAV on the first day of the Outcome Period (the NAV upon which the Outcomes are based) and may experience investment
outcomes very different from those the Fund seeks to achieve, especially when factoring in any fees or expenses or the performance of the Collateral Portfolio. An investor who redeems Shares prior to the end of the Outcome Period may also
experience investment outcomes very different from those the Fund seeks to achieve. The Outcomes are designed with the expectation that an investor will hold Shares on the day that Milliman transacts in the FLEX Options on behalf of the Fund,
and on the day those FLEX Options expire. There is no guarantee that the Fund will be successful in its attempt to achieve the Outcomes.
Understanding the Par Up Rate. Unlike other investment products, the potential returns an
investor can receive from an investment in the Fund are subject to the Par Up Rate. This means that if the S&P 500 Index experiences gains for the Outcome Period, an investor in the Fund will only experience
a percentage of those gains (equal to the Par Up Rate multiplied by the S&P 500 Index gains). Milliman calculates the Par Up Rate for each Outcome Period based upon (i) its evaluation of prevailing market conditions on the first day
of the Outcome Period and (ii) the total number of long call FLEX Options on the S&P 500 Index that it is able to purchase at that time. In certain market conditions, the performance of the Collateral
Portfolio could reduce the impact of the Par Up Rate. An investor should consider the amount and impact of the Par Up Rate, and the Fund’s position relative to it, before investing in the Fund.
Understanding the Par Down Rate. The Par Down Rate is intended to limit losses in the
Fund’s S&P 500 Index exposure to 50% of the losses the S&P 500 Index experiences for the Outcome Period. While the Fund seeks to provide returns that are limited to 50% (prior to taking into account any fees or expenses or the performance
of the Collateral Portfolio) for investors who hold Shares for the entire Outcome Period, there is no guarantee it will successfully do so. In addition, the Par Down Rate is not operative against losses in the
Collateral Portfolio. If the Collateral Portfolio experiences losses, it could have the effect of reducing the impact of, or completely eliminating, the Par Down Rate on the Fund’s S&P 500 Index exposure. In certain market conditions, the
performance of the Collateral Portfolio could cause the Fund to significantly underperform the S&P 500 Index. Investors who purchase Shares at the beginning of the Outcome Period may lose their entire investment. Investors who purchase
Shares after the Outcome Period has begun may also lose their entire investment. An investment in the Fund is only appropriate for investors willing to bear those losses.
Fund Rebalance. Milliman implements the Fund’s strategy every six years, seeking to
produce the Outcomes for an Outcome Period. On the last business day of any stated Outcome Period, all of the Fund’s existing FLEX Options, which includes those used to establish the Par Up Rate and the Par Down Rate, will expire and Milliman
will transact in a new set of FLEX Options on the same business day, which will commence a new Outcome Period beginning the following business day. At that same time, Milliman will also evaluate whether to make any adjustments to the Collateral
Portfolio. Accordingly, Shares can be held indefinitely if investors determine to participate in additional Outcome Periods.
Approximately one week prior to the end of each Outcome Period, the Fund will file a prospectus supplement, which will notify existing investors of
(i) the date on which the existing Outcome Period will end; (ii) the date on
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which the new Outcome Period will commence; and (iii) the anticipated ranges of the Par Up Rate that will be used for the new Outcome Period.
Immediately preceding the commencement date of the new Outcome Period, the Fund will file a prospectus supplement disclosing the Fund’s final Par Up Rate (both gross and net of Fund fees and expenses) for the new Outcome Period. This information
will also be available online at www.[___________].com, and on your insurance company’s website. Please contact your insurance company or other financial intermediary for more information.
Fund Classification. The Fund is classified as “non-diversified” under the Investment
Company Act of 1940, as amended (the “1940 Act”).
Principal Risks
You could lose money by investing in the Fund. An investment in the Fund is not a deposit of a bank and is not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other governmental agency. There can be no assurance that the Fund’s investment objectives will be achieved.
Downside Loss Par Down Rate Risk. There can be no guarantee that the Fund will be successful in its strategy
to limit losses in the Fund’s S&P 500 Index exposure to 50% of the losses experienced by the S&P 500 Index over the Outcome Period. The success of the Par Down Rate also depends upon the performance of the Collateral Portfolio. If the Collateral Portfolio experiences losses, it could have the effect of reducing the impact of, or completely eliminating, the Par Down Rate on the Fund’s S&P 500 Index exposure. In certain market
conditions, the performance of the Collateral Portfolio could cause the Fund to significantly underperform the S&P 500 Index. Despite the intended Par Down Rate, an investor could lose their entire investment. In the event an
investor purchases Shares after the date on which Milliman transacted in the FLEX Options on behalf of the Fund, or redeems Shares prior to the expiration of those FLEX Options, the Par Down Rate that the Fund seeks to provide may not be
available or fully applicable.
Risk of the Par Up Rate on Upside Returns. The Fund’s strategy is designed to produce returns that correlate
to those of the S&P 500 Index at the Par Up Rate if Shares are bought on the day on which Milliman transacts in the FLEX Options on behalf of the Fund and held until those FLEX Options expire at the end of the Outcome Period. Accordingly, the
Fund will not fully participate in any gains achieved by the S&P 500 Index. In addition, in the event an investor purchases Shares after the date on which Milliman transacted in the FLEX Options on behalf of the Fund, or redeems Shares prior
to the expiration of those FLEX Options, the returns realized by that investor may not match those that the Fund seeks to achieve pursuant to the Par Up Rate. In certain market conditions, the performance of
the Collateral Portfolio could reduce the impact of the Par Up Rate. An investor should consider the amount and impact of the Par Up Rate, and the Fund’s position relative to it, before investing in the Fund.
Par Up Rate Change Risk. Because the Par Up Rate for each Outcome Period is calculated based upon (i)
Milliman’s evaluation of prevailing market conditions on the first day of the Outcome Period and (ii) the total number of long call FLEX Options on the S&P 500 Index that Milliman is able to purchase at that time, the Par Up Rate may rise or
fall from one Outcome Period to the next. Any change in the Par Up Rate could be significant and it is unlikely to remain the same for consecutive Outcome Periods.
FLEX Options Risk. The Fund will transact in FLEX Options issued and guaranteed for settlement by the OCC. The
Fund bears the risk that the OCC will be unable or unwilling to perform its obligations under the FLEX Options contracts, which could result in significant losses to the Fund. In less liquid markets, terminating a FLEX Option may require the
payment of a premium or acceptance of a discounted price, and may take longer to complete. In addition, a less liquid trading market may adversely impact the value of the Fund’s FLEX Options and therefore the NAV of the Fund. In addition, the value
of the Fund’s FLEX Options positions is not anticipated to increase or decrease at the same rate as the reference asset; and while it is anticipated that they will generally move in the same direction, it is possible that they may move in different
directions. Certain FLEX Options positions may also expire worthless. The use of FLEX Options involves leverage, which can cause the Fund’s portfolio to be more volatile than if the portfolio had not been leveraged. Leverage can significantly
magnify the effect of price movements of the reference asset, disproportionately increasing the Fund’s losses and reducing the Fund’s opportunities for gains
590
when the reference asset changes in unexpected ways. In some instances, such leverage could result in losses that exceed the original amount invested.
Options Pricing Risk. The Fund transacts in FLEX Options that have an exercise date six years after the
initial transaction date. Because, at times, there might not be market activity for these options, the ability of the Fund to value them becomes more difficult and the judgment of Milliman (employing the fair value procedures adopted by the
Board) may play a greater role in their valuation due to this reduced availability of reliable objective pricing data. Consequently, while such determinations may be made in good faith, including through the use of model-based pricing, it may
nevertheless be more difficult for the Fund to accurately assign a daily value.
Investment Objective and Outcomes Risk. There is no guarantee that the Fund will be successful in its attempt
to achieve its investment objective and/or the Outcomes, and an investor could lose some or all of their investment in the Fund. Certain circumstances under which the Fund might not achieve its objective and/or the Outcomes include, but are not
limited to (i) if the Fund disposes of FLEX Options, (ii) if the Fund is unable to maintain the proportional relationship based on the number of FLEX Options in the Fund’s portfolio, (iii) significant accrual of Fund expenses in connection with
effecting the Fund’s principal investment strategy, (iv) losses incurred by the Fund’s holdings in the Collateral Portfolio, or (iv) adverse tax law changes affecting the treatment of FLEX Options.
Tax Risk. The Fund intends to elect, and to qualify each year, to be treated as a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”). As a RIC, the Fund will not be subject to U.S. federal income tax on the portion
of its net investment income and net capital gain that it distributes to shareholders, provided that it satisfies certain requirements of the Code. To maintain its status as a RIC, the Fund must meet certain income, diversification and
distributions tests. For purposes of the diversification test, the identification of the issuer (or, in some cases, issuers) of a particular Fund investment can depend on the terms and conditions of that investment. In particular, there is no
published IRS guidance or case law on how to determine the “issuer” of certain derivatives that the Fund will enter into and the Fund has not received a private letter ruling on this point. Therefore, there is a risk that the Fund will not meet the
Code’s diversification requirements and will not qualify, or will be disqualified, as a RIC. If the Fund does not qualify as a RIC for any taxable year and certain relief provisions are not available, the Fund’s taxable income will be subject to
tax at the Fund level and to a further tax at the shareholder level when such income is distributed.
The Fund also intends to comply with the diversification requirements of Section 817(h) of the Code, and the regulations thereunder, relating to the
tax-deferred status of variable accounts that are based on insurance company separate accounts (referred to as “segregated asset accounts” for federal income tax purposes). These diversification requirements apply in addition to the RIC
diversification requirements discussed above. There also is no published guidance or case law on how to determine the “issuer” of the derivatives referred to above for purposes of the diversification requirements of Section 817(h) of the Code and
the Fund has not received a private letter ruling on this point. If these requirements are not met, or under other circumstances, such as if the Fund does not qualify as a RIC for any taxable year, it is possible that the contract owners (rather
than the insurance company) will be treated for federal income tax purposes as the taxable owners of the assets held by the segregated asset accounts.
Clearing Member Default Risk. The Fund will hold FLEX Options through accounts at members of clearing houses (“clearing members”) rather than a bank or a broker. Assets deposited by the Fund with any clearing member as margin for its FLEX Options positions may, in certain circumstances, be used to satisfy losses of other
clients of the Fund’s clearing member where such assets may be held in commingled omnibus accounts. In addition, although clearing members guarantee performance of their clients’ obligations to the clearing house, there is a risk that the assets of
the Fund might not be fully protected in the event of the clearing member’s bankruptcy, as the Fund would be limited to recovering only a pro rata share of all available funds segregated on behalf of the
clearing member’s customers for the relevant account class.
Debt Securities Risk. The prices of debt securities will be affected by changes in interest rates, the
creditworthiness of the issuer and other factors. These risks could affect the value of investments in which the Fund invests, possibly causing the Fund’s NAV to be reduced and fluctuate more than other types of investments. During periods of
falling interest rates, an issuer of a callable bond may repay the security before its stated maturity, and the Fund may have to reinvest the proceeds in securities with lower yields, which would result in a decline in the Fund’s income, or in
securities with greater risks or with other less favorable features. Changing interest rates, including rates that fall
591
below zero, may have unpredictable effects on markets, result in heightened market volatility and detract from the Fund’s performance to the extent
the Fund is exposed to such interest rates. An increase in interest rates will generally cause the value of fixed-income securities held by the Fund to decline, may lead to heightened volatility in the fixed-income markets and may adversely
affect the liquidity of certain fixed-income investments, including those held by the Fund. Risks associated with rising interest rates are heightened given that interest rates in the U.S. are near historic lows. Adjustable-rate instruments also
react to interest rate changes in a similar manner, although generally to a lesser degree (depending, however, on the characteristics of the reset terms, including the index chosen, frequency of reset and reset caps or floors, among other
factors). Interest rate sensitivity is generally more pronounced and less predictable in instruments with uncertain payment or prepayment schedules and also for those with longer maturities.
Foreign Securities and Credit Exposure Risk. U.S. dollar-denominated securities carrying foreign credit exposure
may be affected by unfavorable political, economic or governmental developments that could affect payments of principal and interest. Furthermore, the value of the Fund’s foreign investments (whether direct or indirect) may be adversely affected by
political and social instability in their home countries, by changes in economic or taxation policies in those countries, or by the difficulty in enforcing obligations in those countries. Foreign companies generally may be subject to less stringent
regulations than U.S. companies, including financial reporting requirements and auditing and accounting controls. As a result, there generally is less publicly available information about foreign companies than about U.S. companies. Trading in many
foreign securities may be less liquid and more volatile than U.S. securities due to the size of the market or other factors.
U.S. Government Securities Risk. U.S. Government securities are subject to interest rate risk but generally do
not involve the credit risks associated with investments in other types of debt securities. As a result, the yields available from U.S. Government securities are generally lower than the yields available from other debt securities. U.S. Government
securities are guaranteed only as to the timely payment of interest and the payment of principal when held to maturity. While securities issued or guaranteed by U.S. federal government agencies are backed by the full faith and credit of the U.S.
Department of the Treasury, securities issued by government sponsored entities are solely the obligation of the issuer and generally do not carry any guarantee from the U.S. Government.
ABS Risk. ABS are subject to the general debt securities risks described above. In addition, ABS may be less
liquid than other bonds, and may be more sensitive than other bonds to the market’s perception of issuers and creditworthiness of payees, which may result in the Fund experiencing difficulty selling or valuing these securities. ABS markets have
experienced extraordinary weakness and volatility at various times in recent years, and may decline quickly in the event of a substantial economic or market downturn. Accordingly, these securities may be subject to greater risk of default during
periods of economic downturn than other securities, which could result in possible losses to the Fund.
Issuer Risk. The performance of the Fund depends on the performance of individual securities to which the Fund
has exposure. The Fund may be adversely affected if an issuer of underlying securities held by the Fund is unable or unwilling to repay principal or interest when due. Changes in the financial condition or credit rating of an issuer of those
securities may cause the value of the securities to decline.
Management Risk. The Fund is subject to management risk because it is an actively managed portfolio. Milliman
will apply investment techniques and risk analyses in making investment decisions for the Fund, but there can be no guarantee that the Fund will meet its investment objective and/or the Outcomes. In addition, Milliman does not use defensive
strategies or attempt to reduce the Fund’s exposures to poor performing positions during an Outcome Period. This differs from funds that are managed to seek to outperform a benchmark index. Therefore, in the event of a general market decline, the
Fund’s value may fall more than the value of another fund that does attempt to hedge against such market declines.
Market Risk. The Fund could lose money over short periods due to short-term market movements and over longer
periods during more prolonged market downturns. Assets may decline in value due to factors affecting financial markets generally or particular asset classes or industries represented in the markets. The value of a FLEX Option or other asset may
also decline due to general market conditions, economic trends or events that are not specifically related to the issuer of the security or other asset, or due to factors that affect a particular issuer, country, region, market, industry, sector or
asset class.
592
Non-Diversification Risk. The Fund may invest a relatively high percentage of its assets in a limited number of
issuers. As a result, the Fund may be more susceptible to a single adverse economic or regulatory occurrence affecting one or more of these issuers, experience increased volatility and be highly invested in certain issuers.
Large Shareholder Risk. At times, the Fund may experience adverse effects when certain large shareholders,
including insurance company separate accounts, redeem large amounts of shares of the Fund. Large redemptions may cause the Fund to sell portfolio holdings at times when it would not otherwise do so and may increase transaction costs and/or result
in an increase to the Fund’s expense ratio. A large redemption could be detrimental to the Fund and its remaining shareholders.
Risks of Investing in ETFs. In addition to the risks associated with the underlying assets held by the ETFs in
which the Fund invests, investments in ETFs are also subject to the following additional risks: (i) only authorized participants may engage in transactions directly with ETFs but none are obligated to do so, which could result in an ETF’s shares
trading at a premium or discount to its NAV or possibly face trading halts or delisting; (ii) certain ETFs seek to track the performance of an underlying index and will not attempt to take defensive positions under any market conditions, including
declining markets, which could result in losses; and (iii) because ETF shares trade on the secondary market, there is not guarantee that an active market will be developed or maintained, which could result in the ETF’s shares trading at a premium
or discount to its NAV. Investments in ETFs may involve duplication of management fees and certain other expenses, as the Fund indirectly bears its proportionate share of any expenses paid by the ETFs in which it invests.
Risks of Investing in Money Market Funds. Money market funds seek to preserve the value of shareholder
investments at $1.00 per share, but shareholders, such as the Fund, may still lose money by investing in such funds. In addition, a money market fund may impose a fee upon the sale of its shares or may temporarily suspend the ability to sell shares
if the fund’s liquidity falls below required minimums because of market conditions or other factors. The credit quality of a money market fund’s holdings can change rapidly in certain markets, and the default of a single holding could have an
adverse impact on the fund’s share price. A money market fund’s share price can also be negatively affected during periods of high redemption pressures, illiquid markets, and/or significant market volatility.
Performance
As of the date of this Prospectus, the Fund has not commenced operations and therefore does not have a performance history. Once available, the Fund’s
performance information will be accessible online at www.[________].com and will provide some indication of the risks of investing in the Fund.
Management
Investment Adviser
Milliman Financial Risk Management LLC (“Milliman”) serves as investment adviser to the Fund.
Portfolio Managers
The following persons serve as portfolio managers of the Fund.
|
●
|
Robert T. Cummings, Principal & Head of Portfolio Management at Milliman.
|
|
●
|
Maria Schiopu, Principal & Head of Portfolio Management at Milliman.
|
|
●
|
Jeff Greco, Principal & Head of Strategy Research at Milliman.
|
|
●
|
Jordan Rosenfeld, Portfolio Manager at Milliman.
|
Each portfolio manager is jointly and primarily responsible for the day-to-day management of the Fund’s portfolio and has served in such capacity
since the Fund’s inception in 2021.
593
Purchase and Sale of Shares
Shares are available as underlying investment options for variable insurance contracts and variable life insurance policies (each, a “variable contract,” and, collectively, the “variable contracts”) issued by insurance companies. These insurance companies are the record owners of the separate accounts
holding the Shares. You do not buy, sell or exchange Shares directly; rather, you choose investment options through your variable contracts. The insurance companies then cause the separate accounts to purchase and redeem Shares according to
the investment options you choose.
Tax Information
The dividends and distributions paid by the Fund to the insurance company separate accounts will consist of ordinary income, capital gains, or some
combination of both. Because Shares must be purchased through separate accounts used to fund variable contracts, such dividends and distributions will be exempt from current taxation by owners of variable contracts (each, a “contract owner,” and, collectively “contract owners”) if left to accumulate within a separate account. Consult the variable contract prospectus for additional tax
information.
Payments to Insurance Companies and Other Financial Intermediaries
If you allocate contract value to the Fund through an insurance company or other financial intermediary, the Fund, Milliman, the Fund’s distributor or
their related companies may pay the insurance company and/or its affiliates or other intermediary for the sale of Shares and related services. These payments may create a conflict of interest by influencing the insurance company or other
intermediary and your salesperson to recommend an indirect investment in the Fund over another investment. The prospectus or other disclosure documents for the variable contracts may contain additional information about these payments, if any.
You may also ask your salesperson or financial intermediary, or visit your financial intermediary’s website, for more information.
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Fund Summary: Milliman S&P 500 6-Year Par Down with Par Up Fund – Apr (I)
Investment Objective
The Fund seeks to provide exposure to the S&P 500 Index, while limiting losses to 50% of the losses associated with S&P 500 Index performance
and participating in S&P 500 Index gains at a declared rate, prior to taking into account any fees or expenses or the performance of any fixed income exposure included in the Fund’s portfolio, over the period from April 1, 2022 through March
31, 2028.
Fees and Expenses of the Fund
This table describes the fees and expenses that you may pay if you buy, hold and sell shares of the Fund (“Shares”).
This table and the example below do not include any fees or sales charges imposed by your variable product. If they were included, the expenses listed below would be higher.
Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment)
|
Class 3
|
|
|
Management Fees
|
0.49%
|
|
Distribution and Service (12b-1) Fees
|
0.25%
|
|
Other Expenses(1)
|
0.50%
|
|
Acquired Fund Fees and Expenses(1)
|
[_.__]%
|
|
Total Annual Fund Operating Expenses
|
1.24%
|
|
Fee Waiver and/or Expense Reimbursement(2)(3)
|
(0.25)%
|
|
Total Annual Fund Operating Expenses After Fee Waiver and/or Expense Reimbursement
|
0.99%
|
|
(1)
|
“Other Expenses” and “Acquired Fund Fees and Expenses” are based on estimated amounts for the current fiscal year.
|
|
(2)
|
The Fund’s investment adviser, Milliman Financial Risk Management LLC (“Milliman”), has contractually
agreed to waive advisory fees and/or reimburse expenses to the extent necessary to limit the Fund’s total annual Fund operating expenses (excluding taxes, interest, brokerage fees and commissions, Rule 12b-1 fees, acquired fund fees and
expenses, short-sale dividend expenses, administrative services fees, other expenses that are capitalized in accordance with generally accepted accounting principles, and extraordinary or non-routine expenses not incurred in the
ordinary course of the Fund’s business) to 0.74% of the Fund's average daily net assets (the “Expense Limitation Agreement”) until at least November 1, 2022. During its term, the Expense
Limitation Agreement cannot be terminated or amended to increase the applicable limit without approval of the Board of Trustees of the Trust (the “Board”). Milliman may recoup from the Fund any
advisory fees waived or expenses reimbursed pursuant to the Expense Limitation Agreement for a period of three years from the date on which such waiver or reimbursement occurred; provided, however, that such recoupment shall not be made
if it would cause the Fund’s total annual Fund operating expenses to exceed the lesser of (a) the expense limitation in effect at the time of the reimbursement, or (b) the expense limitation in effect at the time of recoupment, if any.
|
|
(3)
|
In addition to the Expense Limitation Agreement, Milliman has contractually agreed to waive its advisory fees in an amount equal to the Fund’s
acquired fund fees and expenses until at least November 1, 2022 (the “Fee Waiver”). This contract cannot be terminated or modified without the consent of the Board.
|
Example
This example is intended to help you compare the cost of investing in the Fund with the cost of investing in other funds. This example assumes that you
invest $10,000 in the Fund for the time periods indicated and then sell all of your Shares at the end of those periods. This example also assumes that your investment has a 5% return each year and that the Fund’s operating expenses remain at
current levels and that the Expense Limitation Agreement and Fee Waiver remain in place for their contractual periods. Although your actual costs may be higher or lower, your costs, based on these assumptions, would be:
|
1 Year
|
3 Years
|
|
|
Class 3
|
$104
|
$384
|
This example does not include any fees or sales charges imposed by your variable product. If they were included, the expenses listed above would be
higher.
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Portfolio Turnover
The Fund pays transaction costs, such as commissions, when it purchases and sells securities (or “turns over” its portfolio). A higher portfolio turnover
will cause the Fund to incur additional transaction costs. These costs, which are not reflected in Total Annual Fund Operating Expenses or in the example, may affect the Fund’s performance. Because the Fund has not yet commenced investment
operations, no portfolio turnover information is available at this time.
Principal Investment Strategies
The Fund seeks to achieve its investment objective by transacting in FLexible EXchange® Options (“FLEX Options”)
and by separately maintaining a collateral portfolio (the “Collateral Portfolio”), which is designed primarily to serve as margin or collateral for the Fund’s FLEX Options positions and secondarily to
enhance the Fund’s upside S&P 500 Index FLEX Options’ exposure (i.e., by utilizing anticipated income to measure the ability to purchase additional FLEX Options). FLEX Options are exchange-traded
options contracts with uniquely customizable terms. In general, an options contract is an agreement between a buyer and seller that gives the purchaser of the option the right to buy or sell a particular asset at a specified future date at an
agreed upon price, commonly known as the “strike price.” The reference assets for the Fund’s FLEX Options positions will include the S&P 500 Index, which is a large-capitalization, market-weighted, U.S. equities index that tracks the price
(excluding dividends) of 500 leading companies in leading industries of the U.S. economy, and certain exchange-traded funds (“ETFs”), as described further below.
The Collateral Portfolio may be invested in short-term fixed-income securities, including corporate bonds and other corporate debt securities,
asset-backed securities (“ABS”), securities issued by the U.S. Government or its agencies and instrumentalities, securities issued by non-U.S. governments or their agencies and instrumentalities, money
market securities and funds, other interest-bearing instruments, cash, ETFs that primarily invest in any of the foregoing instruments, options on ETFs and options box spreads. An options box spread is the combination of different options trades
that have offsetting spreads (e.g., purchases and sales on the same underlying instrument, such as an index or an ETF, but with different strike prices and/or expiration dates) for the purpose of
generating income. The Fund may invest in short-term fixed income securities or other instruments, including through ETFs, of any maturity and credit quality. The Fund will generally invest up to 80% of its net assets in one or more ETFs that
provide exposure to investment grade corporate bonds.
Due to the unique mechanics of the Fund’s strategy, the return an investor can expect to receive from an investment in the Fund has characteristics that
are distinct from the returns of many other investment vehicles. It is important that an investor understand these characteristics before making an investment in the Fund.
In seeking to achieve its investment objective, the Fund seeks to produce pre-determined outcomes (the “Outcomes”)
that are based upon the performance of the S&P 500 Index over a six-year period (the “Outcome Period”). The initial Outcome Period for the Fund is April 1, 2022 through March 31, 2028. Following the
initial Outcome Period, each subsequent Outcome Period will be a six-year period commencing upon the expiration of the prior Outcome Period. The Fund seeks to achieve the Outcomes by purchasing and writing (selling) FLEX Options to create layers
within the Fund’s portfolio. One layer is designed to produce returns that correlate to those of the S&P 500 Index for the Outcome Period at a declared rate (the “Par Up Rate”) if the S&P 500 Index
experiences gains during that time, as described below. A separate layer is designed to limit losses to 50% of the losses experienced by the S&P 500 Index for the Outcome Period (the “Par Down Rate”). There is no guarantee that the Fund will be successful in its attempt to produce returns that correlate to those of the S&P 500 Index at the Par Up
Rate or limit losses that correlate to those of the S&P 500 Index at the Par Down Rate.
Milliman Financial Risk Management, LLC (“Milliman”), the investment adviser of the Fund, seeks to establish the
Par Down Rate by writing 50% of the exposure of one put FLEX Option on the S&P 500 Index with a strike price that is equal to the value of the S&P 500 Index at the beginning of the Outcome Period.
Milliman seeks to establish the Par Up Rate by purchasing long call FLEX Options on the S&P 500 Index with a strike price approximately equal to
the value of the S&P 500 Index at the beginning of the Outcome Period. Milliman purchases these FLEX Options with a portion of the Fund’s net assets plus (i) the cash received from
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writing the put FLEX Option designed to create the Par Down Rate, and (ii) yield received from the Collateral Portfolio.
The Par Up Rate is the rate at which the Fund will seek to track any upside market performance of the S&P 500 Index. Milliman calculates the Par
Up Rate based upon (i) its evaluation of prevailing market conditions on the first day of the Outcome Period and (ii) the total number of long call FLEX Options on the S&P 500 Index that it is able to purchase at that time. As of the date of
this Prospectus, and assuming current market conditions persist, Milliman expects that the Par Up Rate will be between the below ranges (both gross and net of Fund fees and expenses). Any fees or expenses imposed by your variable product, and any
other expenses incurred by the Fund, will have the effect of further reducing the Par Up Rate. Once calculated, the Par Up Rate for a particular Outcome Period will not change during that Outcome Period;
however, in certain market conditions, the performance of the Collateral Portfolio could reduce the impact of the Par Up Rate.
|
Share Class
|
Estimated Par Up Rate Ranges
(As of [___])
|
|
|
Prior to Taking into Account Fund Fees and Expenses
|
After Taking into Account Fund Fees and Expenses
|
|
|
Class 3
|
[__]% and [__]%
|
[__]% and [__]%
|
The Par Down Rate is the rate at which the Fund will seek to track any downside market performance of the S&P 500 Index. The Par Down Rate is
designed to limit losses in the Fund’s S&P 500 Index exposure to 50% for the Outcome Period. The Fund seeks to limit losses against its S&P 500 Index exposure prior to taking into account any fees or expenses or the performance of the
Collateral Portfolio. The Par Down Rate is not operative against losses in the Collateral Portfolio. If the Collateral Portfolio experiences losses, it could have the effect of reducing the impact of, or
completely eliminating, the Par Down Rate on the Fund’s S&P 500 Index exposure. In certain market conditions, the performance of the Collateral Portfolio could cause the Fund to significantly underperform the S&P 500 Index. The
following table reflects the Par Down Rate both gross and net of Fund fees and expenses:
|
Share Class
|
Par Down Rate
(As of [___])
|
|
|
Prior to Taking into Account Fund Fees and Expenses
|
After Taking into Account Fund Fees and Expenses
|
|
|
Class 3
|
50%
|
[__]%
|
The definitive Par Up Rate and Par Down Rate will be set forth on the Fund’s website. The Fund’s website will also provide information relating to the
Outcomes on a daily basis, including the Fund’s position relative to the Par Up Rate and the Par Down Rate. You may also contact your insurance company or other financial intermediary for more information.
Additionally, the Fund’s net asset value (“NAV”) will not increase or decrease at the same rate as the
S&P 500 Index because the Fund’s strategy relies upon the performance of the Collateral Portfolio, in addition to the value of the Fund’s FLEX Options positions on the S&P 500 Index. While Milliman anticipates that the Fund’s NAV will
generally move in the same direction as the S&P 500 Index (meaning that the Fund’s NAV will generally increase if the S&P 500 Index experiences gains or decrease if the S&P 500 Index experiences losses), the Fund’s NAV will not
decrease at the same rate as the S&P 500 Index (especially when factoring in the Par Down Rate and the performance of the Collateral Portfolio) and will not increase at the same rate as the S&P 500 Index (especially when factoring in the
Par Up Rate and the performance of the Collateral Portfolio). Similarly, the amount of time remaining until the end of the Outcome Period also affects the impact of the Par Down Rate on the Fund’s NAV, because the Par Down Rate may not be in full
effect prior to the end of the Outcome Period.
The FLEX Options utilized in the Fund’s portfolio are each set to expire on the last day of the Outcome Period. The customizable nature of FLEX Options
will allow Milliman to select the strike price at which each FLEX Option will be exercised at the expiration of the FLEX Option term. At the commencement of the Outcome Period, Milliman will specifically select the strike price for each FLEX Option
in a manner designed to achieve the Outcomes when
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the FLEX Options are exercised on the final day of the Outcome Period, depending on the anticipated performance of the S&P 500 Index and the
Collateral Portfolio over the duration of that Outcome Period.
The hypothetical graphical illustrations provided below are designed to illustrate the Outcomes based upon the
hypothetical performance of the S&P 500 Index for an investor who holds Shares for the entirety of the Outcome Period. The hypothetical graphical illustrations do not include any fees or expenses imposed by your variable product or expenses
incurred by the Fund, and do not reflect the performance of the Collateral Portfolio. Additional hypothetical graphical representations of the Outcomes are provided in “Additional Information About the Funds and the Risks of Investing.”
There is no guarantee that the Fund will be successful in its attempt to achieve the Outcomes for the Outcome Period.
The following table contains hypothetical examples designed to illustrate the Outcomes the Fund seeks to
achieve over the Outcome Period, based upon the performance of the S&P 500 Index from (100)% to 100% after taking into account the Par Up Rate and the Par Down Rate, but prior to taking into account any fees or expenses or the performance of
the Collateral Portfolio. The table is provided for illustrative purposes only and does not provide every possible performance scenario for Shares over the course of the Outcome Period. There is no guarantee that the Fund will be successful in its attempt to achieve the Outcomes for an Outcome
Period. The table is not intended to predict or project the performance of the FLEX Options or the Fund. Investors should not take this information as an assurance of the expected performance of the
S&P 500 Index or the Fund. Actual Fund performance will vary with fluctuations in the performance of the Collateral Portfolio, in addition to the value of the Fund’s FLEX Options positions on the S&P 500 Index, during the
Outcome Period, among other factors. The performance of the Collateral Portfolio could significantly impact the performance of the Fund, which could prevent the Fund from
achieving the Outcomes that it seeks to produce. The table does not reflect any fees or expenses imposed by your variable product or expenses incurred by the Fund. If it did, the returns shown for the Fund would be lower. Please refer
to the Fund’s website, which provides updated information relating to this table on a daily basis throughout the Outcome Period. Please contact your insurance company or other financial intermediary for more information.
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|
Index/Fund
|
Hypothetical Performance1
|
|||||||||||
|
S&P 500 Index Price Performance
|
(100)%
|
(50)%
|
(20)%
|
(10)%
|
(5)%
|
0%
|
5%
|
10%
|
15%
|
20%
|
50%
|
100%
|
|
Fund Performance at NAV
|
(50)%2
|
(25)%2
|
(10)%2
|
(5)%2
|
(2.5)%2
|
0%
|
6%3
|
12%3
|
18%3
|
24%3
|
60%3
|
120%3
|
| 1 |
Does not take into account any fees or expenses or the performance of the Collateral Portfolio.
|
| 2 |
Reflects the impact of the Par Down Rate.
|
| 3 |
Reflects the impact of an assumed Par Up Rate of 120%.
|
Understanding Outcomes. The Outcomes the Fund seeks to achieve are measured based upon the
Fund’s NAV on the first day of the Outcome Period. The Outcome Period begins on the day Milliman transacts in the FLEX Options on behalf of the Fund, and ends on the day those FLEX Options expire. An investor who
purchases Shares after the commencement of the Outcome Period will likely have purchased Shares at a different NAV than the NAV on the first day of the Outcome Period (the NAV upon which the Outcomes are based) and may experience investment
outcomes very different from those the Fund seeks to achieve, especially when factoring in any fees or expenses or the performance of the Collateral Portfolio. An investor who redeems Shares prior to the end of the Outcome Period may also
experience investment outcomes very different from those the Fund seeks to achieve. The Outcomes are designed with the expectation that an investor will hold Shares on the day that Milliman transacts in the FLEX Options on behalf of the Fund,
and on the day those FLEX Options expire. There is no guarantee that the Fund will be successful in its attempt to achieve the Outcomes.
Understanding the Par Up Rate. Unlike other investment products, the potential returns an
investor can receive from an investment in the Fund are subject to the Par Up Rate. This means that if the S&P 500 Index experiences gains for the Outcome Period, an investor in the Fund will only experience
a percentage of those gains (equal to the Par Up Rate multiplied by the S&P 500 Index gains). Milliman calculates the Par Up Rate for each Outcome Period based upon (i) its evaluation of prevailing market conditions on the first day
of the Outcome Period and (ii) the total number of long call FLEX Options on the S&P 500 Index that it is able to purchase at that time. In certain market conditions, the performance of the Collateral
Portfolio could reduce the impact of the Par Up Rate. An investor should consider the amount and impact of the Par Up Rate, and the Fund’s position relative to it, before investing in the Fund.
Understanding the Par Down Rate. The Par Down Rate is intended to limit losses in the
Fund’s S&P 500 Index exposure to 50% of the losses the S&P 500 Index experiences for the Outcome Period. While the Fund seeks to provide returns that are limited to 50% (prior to taking into account any fees or expenses or the performance
of the Collateral Portfolio) for investors who hold Shares for the entire Outcome Period, there is no guarantee it will successfully do so. In addition, the Par Down Rate is not operative against losses in the
Collateral Portfolio. If the Collateral Portfolio experiences losses, it could have the effect of reducing the impact of, or completely eliminating, the Par Down Rate on the Fund’s S&P 500 Index exposure. In certain market conditions, the
performance of the Collateral Portfolio could cause the Fund to significantly underperform the S&P 500 Index. Investors who purchase Shares at the beginning of the Outcome Period may lose their entire investment. Investors who purchase
Shares after the Outcome Period has begun may also lose their entire investment. An investment in the Fund is only appropriate for investors willing to bear those losses.
Fund Rebalance. Milliman implements the Fund’s strategy every six years, seeking to
produce the Outcomes for an Outcome Period. On the last business day of any stated Outcome Period, all of the Fund’s existing FLEX Options, which includes those used to establish the Par Up Rate and the Par Down Rate, will expire and Milliman
will transact in a new set of FLEX Options on the same business day, which will commence a new Outcome Period beginning the following business day. At that same time, Milliman will also evaluate whether to make any adjustments to the Collateral
Portfolio. Accordingly, Shares can be held indefinitely if investors determine to participate in additional Outcome Periods.
Approximately one week prior to the end of each Outcome Period, the Fund will file a prospectus supplement, which will notify existing investors of
(i) the date on which the existing Outcome Period will end; (ii) the date on
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which the new Outcome Period will commence; and (iii) the anticipated ranges of the Par Up Rate that will be used for the new Outcome Period.
Immediately preceding the commencement date of the new Outcome Period, the Fund will file a prospectus supplement disclosing the Fund’s final Par Up Rate (both gross and net of Fund fees and expenses) for the new Outcome Period. This information
will also be available online at www.[___________].com, and on your insurance company’s website. Please contact your insurance company or other financial intermediary for more information.
Fund Classification. The Fund is classified as “non-diversified” under the Investment
Company Act of 1940, as amended (the “1940 Act”).
Principal Risks
You could lose money by investing in the Fund. An investment in the Fund is not a deposit of a bank and is not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other governmental agency. There can be no assurance that the Fund’s investment objectives will be achieved.
Downside Loss Par Down Rate Risk. There can be no guarantee that the Fund will be successful in its strategy
to limit losses in the Fund’s S&P 500 Index exposure to 50% of the losses experienced by the S&P 500 Index over the Outcome Period. The success of the Par Down Rate also depends upon the performance of the Collateral Portfolio. If the Collateral Portfolio experiences losses, it could have the effect of reducing the impact of, or completely eliminating, the Par Down Rate on the Fund’s S&P 500 Index exposure. In certain market
conditions, the performance of the Collateral Portfolio could cause the Fund to significantly underperform the S&P 500 Index. Despite the intended Par Down Rate, an investor could lose their entire investment. In the event an
investor purchases Shares after the date on which Milliman transacted in the FLEX Options on behalf of the Fund, or redeems Shares prior to the expiration of those FLEX Options, the Par Down Rate that the Fund seeks to provide may not be
available or fully applicable.
Risk of the Par Up Rate on Upside Returns. The Fund’s strategy is designed to produce returns that correlate
to those of the S&P 500 Index at the Par Up Rate if Shares are bought on the day on which Milliman transacts in the FLEX Options on behalf of the Fund and held until those FLEX Options expire at the end of the Outcome Period. Accordingly, the
Fund will not fully participate in any gains achieved by the S&P 500 Index. In addition, in the event an investor purchases Shares after the date on which Milliman transacted in the FLEX Options on behalf of the Fund, or redeems Shares prior
to the expiration of those FLEX Options, the returns realized by that investor may not match those that the Fund seeks to achieve pursuant to the Par Up Rate. In certain market conditions, the performance of
the Collateral Portfolio could reduce the impact of the Par Up Rate. An investor should consider the amount and impact of the Par Up Rate, and the Fund’s position relative to it, before investing in the Fund.
Par Up Rate Change Risk. Because the Par Up Rate for each Outcome Period is calculated based upon (i)
Milliman’s evaluation of prevailing market conditions on the first day of the Outcome Period and (ii) the total number of long call FLEX Options on the S&P 500 Index that Milliman is able to purchase at that time, the Par Up Rate may rise or
fall from one Outcome Period to the next. Any change in the Par Up Rate could be significant and it is unlikely to remain the same for consecutive Outcome Periods.
FLEX Options Risk. The Fund will transact in FLEX Options issued and guaranteed for settlement by the OCC. The
Fund bears the risk that the OCC will be unable or unwilling to perform its obligations under the FLEX Options contracts, which could result in significant losses to the Fund. In less liquid markets, terminating a FLEX Option may require the
payment of a premium or acceptance of a discounted price, and may take longer to complete. In addition, a less liquid trading market may adversely impact the value of the Fund’s FLEX Options and therefore the NAV of the Fund. In addition, the value
of the Fund’s FLEX Options positions is not anticipated to increase or decrease at the same rate as the reference asset; and while it is anticipated that they will generally move in the same direction, it is possible that they may move in different
directions. Certain FLEX Options positions may also expire worthless. The use of FLEX Options involves leverage, which can cause the Fund’s portfolio to be more volatile than if the portfolio had not been leveraged. Leverage can significantly
magnify the effect of price movements of the reference asset, disproportionately increasing the Fund’s losses and reducing the Fund’s opportunities for gains
600
when the reference asset changes in unexpected ways. In some instances, such leverage could result in losses that exceed the original amount invested.
Options Pricing Risk. The Fund transacts in FLEX Options that have an exercise date six years after the
initial transaction date. Because, at times, there might not be market activity for these options, the ability of the Fund to value them becomes more difficult and the judgment of Milliman (employing the fair value procedures adopted by the
Board) may play a greater role in their valuation due to this reduced availability of reliable objective pricing data. Consequently, while such determinations may be made in good faith, including through the use of model-based pricing, it may
nevertheless be more difficult for the Fund to accurately assign a daily value.
Investment Objective and Outcomes Risk. There is no guarantee that the Fund will be successful in its attempt
to achieve its investment objective and/or the Outcomes, and an investor could lose some or all of their investment in the Fund. Certain circumstances under which the Fund might not achieve its objective and/or the Outcomes include, but are not
limited to (i) if the Fund disposes of FLEX Options, (ii) if the Fund is unable to maintain the proportional relationship based on the number of FLEX Options in the Fund’s portfolio, (iii) significant accrual of Fund expenses in connection with
effecting the Fund’s principal investment strategy, (iv) losses incurred by the Fund’s holdings in the Collateral Portfolio, or (iv) adverse tax law changes affecting the treatment of FLEX Options.
Tax Risk. The Fund intends to elect, and to qualify each year, to be treated as a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”). As a RIC, the Fund will not be subject to U.S. federal income tax on the portion
of its net investment income and net capital gain that it distributes to shareholders, provided that it satisfies certain requirements of the Code. To maintain its status as a RIC, the Fund must meet certain income, diversification and
distributions tests. For purposes of the diversification test, the identification of the issuer (or, in some cases, issuers) of a particular Fund investment can depend on the terms and conditions of that investment. In particular, there is no
published IRS guidance or case law on how to determine the “issuer” of certain derivatives that the Fund will enter into and the Fund has not received a private letter ruling on this point. Therefore, there is a risk that the Fund will not meet the
Code’s diversification requirements and will not qualify, or will be disqualified, as a RIC. If the Fund does not qualify as a RIC for any taxable year and certain relief provisions are not available, the Fund’s taxable income will be subject to
tax at the Fund level and to a further tax at the shareholder level when such income is distributed.
The Fund also intends to comply with the diversification requirements of Section 817(h) of the Code, and the regulations thereunder, relating to the
tax-deferred status of variable accounts that are based on insurance company separate accounts (referred to as “segregated asset accounts” for federal income tax purposes). These diversification requirements apply in addition to the RIC
diversification requirements discussed above. There also is no published guidance or case law on how to determine the “issuer” of the derivatives referred to above for purposes of the diversification requirements of Section 817(h) of the Code and
the Fund has not received a private letter ruling on this point. If these requirements are not met, or under other circumstances, such as if the Fund does not qualify as a RIC for any taxable year, it is possible that the contract owners (rather
than the insurance company) will be treated for federal income tax purposes as the taxable owners of the assets held by the segregated asset accounts.
Clearing Member Default Risk. The Fund will hold FLEX Options through accounts at members of clearing houses (“clearing members”) rather than a bank or a broker. Assets deposited by the Fund with any clearing member as margin for its FLEX Options positions may, in certain circumstances, be used to satisfy losses of other
clients of the Fund’s clearing member where such assets may be held in commingled omnibus accounts. In addition, although clearing members guarantee performance of their clients’ obligations to the clearing house, there is a risk that the assets of
the Fund might not be fully protected in the event of the clearing member’s bankruptcy, as the Fund would be limited to recovering only a pro rata share of all available funds segregated on behalf of the
clearing member’s customers for the relevant account class.
Debt Securities Risk. The prices of debt securities will be affected by changes in interest rates, the
creditworthiness of the issuer and other factors. These risks could affect the value of investments in which the Fund invests, possibly causing the Fund’s NAV to be reduced and fluctuate more than other types of investments. During periods of
falling interest rates, an issuer of a callable bond may repay the security before its stated maturity, and the Fund may have to reinvest the proceeds in securities with lower yields, which would result in a decline in the Fund’s income, or in
securities with greater risks or with other less favorable features. Changing interest rates, including rates that fall
601
below zero, may have unpredictable effects on markets, result in heightened market volatility and detract from the Fund’s performance to the extent
the Fund is exposed to such interest rates. An increase in interest rates will generally cause the value of fixed-income securities held by the Fund to decline, may lead to heightened volatility in the fixed-income markets and may adversely
affect the liquidity of certain fixed-income investments, including those held by the Fund. Risks associated with rising interest rates are heightened given that interest rates in the U.S. are near historic lows. Adjustable-rate instruments also
react to interest rate changes in a similar manner, although generally to a lesser degree (depending, however, on the characteristics of the reset terms, including the index chosen, frequency of reset and reset caps or floors, among other
factors). Interest rate sensitivity is generally more pronounced and less predictable in instruments with uncertain payment or prepayment schedules and also for those with longer maturities.
Foreign Securities and Credit Exposure Risk. U.S. dollar-denominated securities carrying foreign credit exposure
may be affected by unfavorable political, economic or governmental developments that could affect payments of principal and interest. Furthermore, the value of the Fund’s foreign investments (whether direct or indirect) may be adversely affected by
political and social instability in their home countries, by changes in economic or taxation policies in those countries, or by the difficulty in enforcing obligations in those countries. Foreign companies generally may be subject to less stringent
regulations than U.S. companies, including financial reporting requirements and auditing and accounting controls. As a result, there generally is less publicly available information about foreign companies than about U.S. companies. Trading in many
foreign securities may be less liquid and more volatile than U.S. securities due to the size of the market or other factors.
U.S. Government Securities Risk. U.S. Government securities are subject to interest rate risk but generally do
not involve the credit risks associated with investments in other types of debt securities. As a result, the yields available from U.S. Government securities are generally lower than the yields available from other debt securities. U.S. Government
securities are guaranteed only as to the timely payment of interest and the payment of principal when held to maturity. While securities issued or guaranteed by U.S. federal government agencies are backed by the full faith and credit of the U.S.
Department of the Treasury, securities issued by government sponsored entities are solely the obligation of the issuer and generally do not carry any guarantee from the U.S. Government.
ABS Risk. ABS are subject to the general debt securities risks described above. In addition, ABS may be less
liquid than other bonds, and may be more sensitive than other bonds to the market’s perception of issuers and creditworthiness of payees, which may result in the Fund experiencing difficulty selling or valuing these securities. ABS markets have
experienced extraordinary weakness and volatility at various times in recent years, and may decline quickly in the event of a substantial economic or market downturn. Accordingly, these securities may be subject to greater risk of default during
periods of economic downturn than other securities, which could result in possible losses to the Fund.
Issuer Risk. The performance of the Fund depends on the performance of individual securities to which the Fund
has exposure. The Fund may be adversely affected if an issuer of underlying securities held by the Fund is unable or unwilling to repay principal or interest when due. Changes in the financial condition or credit rating of an issuer of those
securities may cause the value of the securities to decline.
Management Risk. The Fund is subject to management risk because it is an actively managed portfolio. Milliman
will apply investment techniques and risk analyses in making investment decisions for the Fund, but there can be no guarantee that the Fund will meet its investment objective and/or the Outcomes. In addition, Milliman does not use defensive
strategies or attempt to reduce the Fund’s exposures to poor performing positions during an Outcome Period. This differs from funds that are managed to seek to outperform a benchmark index. Therefore, in the event of a general market decline, the
Fund’s value may fall more than the value of another fund that does attempt to hedge against such market declines.
Market Risk. The Fund could lose money over short periods due to short-term market movements and over longer
periods during more prolonged market downturns. Assets may decline in value due to factors affecting financial markets generally or particular asset classes or industries represented in the markets. The value of a FLEX Option or other asset may
also decline due to general market conditions, economic trends or events that are not specifically related to the issuer of the security or other asset, or due to factors that affect a particular issuer, country, region, market, industry, sector or
asset class.
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Non-Diversification Risk. The Fund may invest a relatively high percentage of its assets in a limited number of
issuers. As a result, the Fund may be more susceptible to a single adverse economic or regulatory occurrence affecting one or more of these issuers, experience increased volatility and be highly invested in certain issuers.
Large Shareholder Risk. At times, the Fund may experience adverse effects when certain large shareholders,
including insurance company separate accounts, redeem large amounts of shares of the Fund. Large redemptions may cause the Fund to sell portfolio holdings at times when it would not otherwise do so and may increase transaction costs and/or result
in an increase to the Fund’s expense ratio. A large redemption could be detrimental to the Fund and its remaining shareholders.
Risks of Investing in ETFs. In addition to the risks associated with the underlying assets held by the ETFs in
which the Fund invests, investments in ETFs are also subject to the following additional risks: (i) only authorized participants may engage in transactions directly with ETFs but none are obligated to do so, which could result in an ETF’s shares
trading at a premium or discount to its NAV or possibly face trading halts or delisting; (ii) certain ETFs seek to track the performance of an underlying index and will not attempt to take defensive positions under any market conditions, including
declining markets, which could result in losses; and (iii) because ETF shares trade on the secondary market, there is not guarantee that an active market will be developed or maintained, which could result in the ETF’s shares trading at a premium
or discount to its NAV. Investments in ETFs may involve duplication of management fees and certain other expenses, as the Fund indirectly bears its proportionate share of any expenses paid by the ETFs in which it invests.
Risks of Investing in Money Market Funds. Money market funds seek to preserve the value of shareholder
investments at $1.00 per share, but shareholders, such as the Fund, may still lose money by investing in such funds. In addition, a money market fund may impose a fee upon the sale of its shares or may temporarily suspend the ability to sell shares
if the fund’s liquidity falls below required minimums because of market conditions or other factors. The credit quality of a money market fund’s holdings can change rapidly in certain markets, and the default of a single holding could have an
adverse impact on the fund’s share price. A money market fund’s share price can also be negatively affected during periods of high redemption pressures, illiquid markets, and/or significant market volatility.
Performance
As of the date of this Prospectus, the Fund has not commenced operations and therefore does not have a performance history. Once available, the Fund’s
performance information will be accessible online at www.[________].com and will provide some indication of the risks of investing in the Fund.
Management
Investment Adviser
Milliman Financial Risk Management LLC (“Milliman”) serves as investment adviser to the Fund.
Portfolio Managers
The following persons serve as portfolio managers of the Fund.
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Robert T. Cummings, Principal & Head of Portfolio Management at Milliman.
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Maria Schiopu, Principal & Head of Portfolio Management at Milliman.
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Jeff Greco, Principal & Head of Strategy Research at Milliman.
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Jordan Rosenfeld, Portfolio Manager at Milliman.
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Each portfolio manager is jointly and primarily responsible for the day-to-day management of the Fund’s portfolio and has served in such capacity
since the Fund’s inception in 2021.
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Purchase and Sale of Shares
Shares are available as underlying investment options for variable insurance contracts and variable life insurance policies (each, a “variable contract,” and, collectively, the “variable contracts”) issued by insurance companies. These insurance companies are the record owners of the separate accounts
holding the Shares. You do not buy, sell or exchange Shares directly; rather, you choose investment options through your variable contracts. The insurance companies then cause the separate accounts to purchase and redeem Shares according to
the investment options you choose.
Tax Information
The dividends and distributions paid by the Fund to the insurance company separate accounts will consist of ordinary income, capital gains, or some
combination of both. Because Shares must be purchased through separate accounts used to fund variable contracts, such dividends and distributions will be exempt from current taxation by owners of variable contracts (each, a “contract owner,” and, collectively “contract owners”) if left to accumulate within a separate account. Consult the variable contract prospectus for additional tax
information.
Payments to Insurance Companies and Other Financial Intermediaries
If you allocate contract value to the Fund through an insurance company or other financial intermediary, the Fund, Milliman, the Fund’s distributor or
their related companies may pay the insurance company and/or its affiliates or other intermediary for the sale of Shares and related services. These payments may create a conflict of interest by influencing the insurance company or other
intermediary and your salesperson to recommend an indirect investment in the Fund over another investment. The prospectus or other disclosure documents for the variable contracts may contain additional information about these payments, if any.
You may also ask your salesperson or financial intermediary, or visit your financial intermediary’s website, for more information.
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Additional Information About the Funds and the Risks of Investing
Additional Information About the Funds’ Investment Objectives
Each Fund seeks to provide exposure to the S&P 500 Index, prior to taking into account any fees or expenses or the performance of any fixed income
exposure included in the Fund’s portfolio, while providing a combination of two of the following “Options Strategies,” which are designed to produce certain pre-determined outcomes (the “Outcomes”), over a six-month, one-year or six-year period (each, an “Outcome Period”), as specified in each Fund’s name:
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Options Strategies
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Description
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1. Buffer Strategy
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Designed to provide a cushion against a specified percentage of losses in the Fund’s S&P 500 Index exposure (the “Buffer”)
if the S&P 500 Index experiences losses during the Outcome Period.
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2. Floor Strategy
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Designed to limit losses in the Fund’s S&P 500 Index exposure to a specified percentage (the “Floor”) if the
S&P 500 Index experiences losses during the Outcome Period.
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3. Par Up Strategy
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Designed to provide participation in the gains of the S&P 500 Index at a declared participation rate (the “Par Up Rate”)
if the S&P 500 Index experiences gains during the Outcome Period.
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4. Par Down Strategy
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Designed to limit losses in the Fund’s S&P 500 Index exposure at a declared participation rate (the “Par Down Rate”)
if the S&P 500 Index experiences losses during the Outcome Period.
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5. Spread Strategy
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Designed to provide participation in the gains of the S&P 500 Index if the S&P 500 Index experiences gains during the Outcome Period that exceed a
declared spread (the “Spread”).
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6. Stacker Cap Strategy
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Designed to provide participation in the gains of the S&P 500 Index up to a declared cap (the “S&P 500 Index Cap”)
if the S&P 500 Index experiences gains during the Outcome Period plus additional gains equal to any upside market performance of a secondary market index (the S&P 500 Index and each secondary
market index is referred to as a “Reference Index,” and, collectively, the “Reference Indices”) up to a declared cap (such cap together with the S&P 500
Index Cap, the “Index Caps,” and, each, an “Index Cap”) if that secondary Reference Index experiences gains during the Outcome Period.
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The specific Options Strategies utilized by the Funds are as follows:
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Milliman S&P 500 6-Month Buffer with Par Up Strategy
FLEX Options Strategies 1 and 3
Milliman S&P 500 6-Month Buffer with Par Up Fund - Jan/Jul
Milliman S&P 500 6-Month Buffer with Par Up Fund - Feb/Aug
Milliman S&P 500 6-Month Buffer with Par Up Fund - Mar/Sep
Milliman S&P 500 6-Month Buffer with Par Up Fund - Apr/Oct
Milliman S&P 500 6-Month Buffer with Par Up Fund - May/Nov
Milliman S&P 500 6-Month Buffer with Par Up Fund - Jun/Dec
Milliman S&P 500 6-Month Par Down with Par Up Strategy
FLEX Options Strategies 3 and 4
Milliman S&P 500 6-Month Par Down with Par Up Fund - Jan/Jul
Milliman S&P 500 6-Month Par Down with Par Up Fund - Feb/Aug
Milliman S&P 500 6-Month Par Down with Par Up Fund - Mar/Sep
Milliman S&P 500 6-Month Par Down with Par Up Fund - Apr/Oct
Milliman S&P 500 6-Month Par Down with Par Up Fund - May/Nov
Milliman S&P 500 6-Month Par Down with Par Up Fund - Jun/Dec
Milliman S&P 500 1-Year Buffer with Spread Strategy
FLEX Options Strategies 1 and 5
Milliman S&P 500 1-Year Buffer with Spread Fund - Jan
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Milliman S&P 500 & Nasdaq 1-Year Buffer with Stacker Cap Strategy
FLEX Options Strategies 1 and 6
Milliman S&P 500 & Nasdaq 1-Year Buffer with Stacker Cap Fund - Jan
Milliman S&P 500 & Nasdaq 1-Year Buffer with Stacker Cap Fund - Feb
Milliman S&P 500 & Nasdaq 1-Year Buffer with Stacker Cap Fund - Mar
Milliman S&P 500 & Nasdaq 1-Year Buffer with Stacker Cap Fund - Apr
Milliman S&P 500 & Nasdaq 1-Year Buffer with Stacker Cap Fund - Sep
Milliman S&P 500 & Nasdaq 1-Year Buffer with Stacker Cap Fund - Oct
Milliman S&P 500 & Nasdaq 1-Year Buffer with Stacker Cap Fund - Nov
Milliman S&P 500 & Nasdaq 1-Year Buffer with Stacker Cap Fund - Dec
Milliman S&P 500 & Russell 2000 1-Year Buffer with Stacker Cap Strategy
FLEX Options Strategies 1 and 6
Milliman S&P 500 & Russell 2000 1-Year Buffer with Stacker Cap Fund - Jan
Milliman S&P 500 & Russell 2000 1-Year Buffer with Stacker Cap Fund - Feb
Milliman S&P 500 & Russell 2000 1-Year Buffer with Stacker Cap Fund - Mar
Milliman S&P 500 & Russell 2000 1-Year Buffer with Stacker Cap Fund - Apr
Milliman S&P 500 & Russell 2000 1-Year Buffer with Stacker Cap Fund - Sep
Milliman S&P 500 & Russell 2000 1-Year Buffer with Stacker Cap Fund - Oct
Milliman S&P 500 & Russell 2000 1-Year Buffer with Stacker Cap Fund - Nov
Milliman S&P 500 & Russell 2000 1-Year Buffer with Stacker Cap Fund - Dec
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Milliman S&P 500 1-Year Buffer with Spread Fund - Feb
Milliman S&P 500 1-Year Buffer with Spread Fund - Mar
Milliman S&P 500 1-Year Buffer with Spread Fund - Apr
Milliman S&P 500 1-Year Buffer with Spread Fund - Sep
Milliman S&P 500 1-Year Buffer with Spread Fund - Oct
Milliman S&P 500 1-Year Buffer with Spread Fund - Nov
Milliman S&P 500 1-Year Buffer with Spread Fund - Dec
Milliman S&P 500 1-Year Floor with Par Up Strategy
FLEX Options Strategies 2 and 3
Milliman S&P 500 1-Year Floor with Par Up Fund - Jan
Milliman S&P 500 1-Year Floor with Par Up Fund - Feb
Milliman S&P 500 1-Year Floor with Par Up Fund - Mar
Milliman S&P 500 1-Year Floor with Par Up Fund - Apr
Milliman S&P 500 1-Year Floor with Par Up Fund - Sep
Milliman S&P 500 1-Year Floor with Par Up Fund - Oct
Milliman S&P 500 1-Year Floor with Par Up Fund - Nov
Milliman S&P 500 1-Year Floor with Par Up Fund - Dec
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Milliman S&P 500 & MSCI EAFE 1-Year Buffer with Stacker Cap Strategy
FLEX Options Strategies 1 and 6
Milliman S&P 500 & MSCI EAFE 1-Year Buffer with Stacker Cap Fund - Jan
Milliman S&P 500 & MSCI EAFE 1-Year Buffer with Stacker Cap Fund - Feb
Milliman S&P 500 & MSCI EAFE 1-Year Buffer with Stacker Cap Fund - Mar
Milliman S&P 500 & MSCI EAFE 1-Year Buffer with Stacker Cap Fund - Apr
Milliman S&P 500 & MSCI EAFE 1-Year Buffer with Stacker Cap Fund - Sep
Milliman S&P 500 & MSCI EAFE 1-Year Buffer with Stacker Cap Fund - Oct
Milliman S&P 500 & MSCI EAFE 1-Year Buffer with Stacker Cap Fund - Nov
Milliman S&P 500 & MSCI EAFE 1-Year Buffer with Stacker Cap Fund - Dec
Milliman S&P 500 6-Year Buffer with Par Up Strategy
FLEX Options Strategies 1 and 3
Milliman S&P 500 6-Year Buffer with Par Up Fund - Jan (I)
Milliman S&P 500 6-Year Buffer with Par Up Fund - Apr (I)
Milliman S&P 500 6-Year Buffer with Par Up Fund - Oct (I)
Milliman S&P 500 6-Year Par Down with Par Up Strategy
FLEX Options Strategies 3 and 4
Milliman S&P 500 6-Year Par Down with Par Up Fund - Jan (I)
Milliman S&P 500 6-Year Par Down with Par Up Fund - Apr (I)
Milliman S&P 500 6-Year Par Down with Par Up Fund - Oct (I)
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Each Fund’s investment objective may be changed without shareholder approval by the Board of Trustees of the Trust (the “Board”) upon 60 days’ notice to shareholders. There is no guarantee that a Fund will be successful in its attempt to achieve its investment objective and/or Outcomes. There also is no
guarantee that a particular Options Strategy will be successful. An investor may lose some or all of their investment in a Fund.
Additional Information About the Reference Indices
The following provides additional information about the S&P 500 Index, which is utilized as a reference asset for the options contracts in all of
the Options Strategies:
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[The S&P 500 Index is a large-cap, market-weighted, U.S. equities index that tracks the price (excluding dividends) of the 500 leading companies in leading industries. The S&P 500 Index is
rebalanced quarterly in March, June, September and December.]
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The following provides additional information about the other Reference Indices that are utilized as reference assets for the options contracts in the
Stacker Cap Strategy:
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[The Nasdaq-100 ® Index includes 100 of the largest domestic and international nonfinancial companies listed on The Nasdaq Stock Market LLC based on market capitalization. Non-financial
companies are those companies that are classified under all Industry Codes except 8000 according to ICB, a product of FTSE International Limited.]
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[The Russell 2000 Index is a float-adjusted, market capitalization-weighted index that is designed to measure the performance of the small-capitalization segment of the U.S. equity market, as defined by
FTSE Russell. The Russell 2000 Index is reconstituted on an annual basis.]
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[The MSCI EAFE Index is a float-adjusted, market capitalization-weighted index that is designed to measure the performance of large and mid-capitalization securities across 21 developed markets, including
countries in Europe, Australasia and the Far East, excluding the United States and Canada. The MSCI EAFE Index is reviewed quarterly, in February, May, August and November, with the objective of reflecting changes in the underlying equity
markets while limiting undue index turnover, and rebalanced semi-annually in May and November.]
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Additional Information About Options
Each Fund seeks to achieve its Outcomes by purchasing and writing (selling) FLEX Options to create layers within its portfolio. There is no guarantee that a Fund will be successful in its attempt to achieve its Outcomes. While the Funds will primarily transact in FLEX Options, each Fund may utilize OTC options if no FLEX Options
are available or appropriate for use in that Fund. FLEX Options are options contracts that trade on an exchange, but provide an investor with the ability to customize key contract terms like strike price, style and expiration date, while
achieving price discovery (i.e., determining market prices) in competitive, transparent auctions markets and avoiding the counterparty exposure of over-the-counter options positions. Like traditional
exchange-traded options, FLEX Options are guaranteed for settlement by the Options Clearing Corporation (“OCC”), a market clearinghouse that guarantees performance by counterparties to certain derivatives
contracts. OTC options are traded and privately negotiated in the OTC market and are subject to counterparty risk of the writer of the options contract. Many counterparties to OTC options are financial institutions, such as banks and
broker-dealers, and their creditworthiness (and ability to pay or perform) may be negatively impacted by factors affecting financial institutions generally.
The options contracts in which the Funds invest are all European style options (i.e., options that are
exercisable only on the expiration date). The FLEX Options are listed on the Chicago Board Options Exchange. The reference assets for each Fund’s options position will be a Reference Index, as described above, or an exchange-traded fund (“ETF”). In implementing the Options Strategies for Funds with six-month and one-year Outcome Periods, Milliman will also utilize various options techniques, including put spread strategies (“Put Spread Strategies”), pursuant to which Milliman will write a put option on fixed income securities and/or one or more ETFs that provides exposure to fixed income securities at a strike price at or lower
than the underlying asset’s market price or current value at the beginning of an Outcome Period, and buy a put option on the same underlying asset at a lower strike price than the written put option. The Put Spread Strategies are designed to
produce additional cash from which Milliman may transact in additional options contracts for Funds with six-month and one-year Outcome Periods.
Additional Information About Other Fund Holdings
The collateral component of the each Fund’s portfolio (the “Collateral Portfolio”) may be invested in
short-term fixed-income securities, including corporate bonds and other corporate debt securities, ABS, securities issued by the U.S. Government or its agencies and instrumentalities, securities issued by non-U.S. governments or their agencies
and instrumentalities, money market securities and funds, other interest-bearing instruments, cash, ETFs that primarily invest in any of the foregoing instruments, and options on ETFs and options box spreads. An options box spread is the
combination of different options trades that have offsetting spreads (e.g., purchases and sales on the same underlying instrument, such as an index or an ETF, but with different strike prices and/or
expiration dates) for the purpose of generating income. The Fund may invest in short-term fixed income securities or other instruments, including through ETFs, of any maturity and credit quality. The Collateral Portfolio is designed primarily to
serve as margin or collateral for the Fund’s options positions and secondarily to enhance the Fund’s upside S&P 500 Index and/or secondary Reference Index options’ exposure (i.e., by utilizing
anticipated income to measure the ability to purchase additional options contracts)
Each Fund with a six-month and one-year Outcome Period will generally invest up to 35% of its net assets, and each Fund with a six-year Outcome Period
will generally invest up to 80% of its net assets, in one or more ETFs that provide exposure to investment grade corporate bonds. Investment grade corporate bonds generally include: (i) bonds rated BBB- or higher by S&P Global Ratings
Services (“S&P”) or Fitch Ratings, Inc. (“Fitch”) or Baa3 or higher by Moody's Investors Service, Inc. (“Moody's”) or
an equivalent rating by another nationally recognized statistical rating organization (“NRSRO”), (ii) comparably rated short term bonds, or (iii) unrated bonds determined by an underlying ETF’s investment
adviser to be of comparable quality, each at the time of purchase.
Additional Information About the Risks of Investing in the Funds
You could lose money by investing in the Funds. An investment in the Funds is not a deposit of a bank and is not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other governmental agency. There can be no assurance that a Fund’s investment objectives and/or the Outcomes will be achieved.
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Options Strategies Risks. The Options Strategies implemented by the Funds are subject to the following risks:
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Buffer Strategy Risk. There can be no guarantee that the Fund will be successful in its strategy to buffer against S&P 500 Index losses if
the S&P 500 Index decreases in value over the Outcome Period. The success of the Buffer also depends upon the performance of the Collateral Portfolio and the Put Spread Strategy. If the
Collateral Portfolio and/or the Put Spread Strategy experiences losses, it could have the effect of reducing the impact of, or completely eliminating, the Buffer on the Fund’s S&P 500 Index exposure. In certain market
conditions, the performance of the Collateral Portfolio and/or the Put Spread Strategy could cause the Fund to significantly underperform the S&P 500 Index. Despite the intended Buffer, an investor could lose their entire
investment. In the event an investor purchases Shares after the date on which Milliman transacted in the options contracts on behalf of the Fund, or redeems Shares prior to the expiration of those options contracts, the
Buffer that the Fund seeks to provide may not be available or fully applicable.
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Floor Strategy Risk. There can be no guarantee that a Fund will be successful in its strategy to limit losses in the Fund’s S&P 500 Index
exposure to a specified floor if the S&P 500 Index decreases in value over the Outcome Period. The success of the Floor also depends upon the performance of the Collateral Portfolio and the Put Spread Strategy. If the Collateral Portfolio and/or the Put Spread Strategy experiences losses, it could have the effect of reducing the impact of, or completely eliminating, the Floor on the Fund’s S&P 500 Index
exposure. In certain market conditions, the performance of the Collateral Portfolio and/or the Put Spread Strategy could cause the Fund to significantly underperform the S&P 500 Index. Despite the intended Floor, an investor
could lose their entire investment. In the event an investor purchases Shares after the date on which Milliman transacted in the options contracts on behalf of the Fund, or redeems Shares prior to the expiration of those
options contracts, the Floor that the Fund seeks to provide may not be available or fully applicable.
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Par Down Strategy Risk. There can be no guarantee that the Fund will be successful in its strategy to limit losses in the Fund’s S&P 500
Index exposure to 50% of the losses experienced by the S&P 500 Index over the Outcome Period. The success of the Par Down Rate also depends upon the performance of the Collateral Portfolio and the Put Spread Strategy. If the Collateral Portfolio and/or the Put Spread Strategy experiences losses, it could have the effect of reducing the impact of, or completely eliminating, the Par Down Rate on the Fund’s S&P 500
Index exposure. In certain market conditions, the performance of the Collateral Portfolio and/or the Put Spread Strategy could cause the Fund to significantly underperform the S&P 500 Index. Despite the intended Par Down Rate,
an investor could lose their entire investment. In the event an investor purchases Shares after the date on which Milliman transacted in the options contracts on behalf of the Fund, or redeems Shares prior to the
expiration of those options contracts, the Par Down Rate that the Fund seeks to provide may not be available or fully applicable.
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Par Up Strategy Risk. The Fund’s strategy is designed to produce returns that correlate to those of the S&P 500 Index at the Par Up Rate if
Shares are bought on the day on which Milliman transacts in the options contracts on behalf of the Fund and held until those options contracts expire at the end of the Outcome Period. Accordingly, the Fund will not fully participate in
any gains achieved by the S&P 500 Index. In addition, in the event an investor purchases Shares after the date on which Milliman transacted in the options contracts on behalf of the Fund, or redeems Shares prior to the expiration of
those options contracts, the returns realized by that investor may not match those that the Fund seeks to achieve pursuant to the Par Up Rate. In certain market conditions, the performance of the
Collateral Portfolio and the Put Spread Strategy could reduce the impact of the Par Up Rate. An investor should consider the amount and impact of the Par Up Rate, and the Fund’s position relative to it, before investing in the Fund.
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Spread Strategy Risk. The Fund’s strategy is designed to produce returns that correlate to those of the S&P 500 Index if Shares are bought
on the day on which Milliman transacts in the options contracts on behalf of the Fund and held until those options contracts expire at the end of the Outcome Period, subject to the Spread. In the event that the S&P 500 Index has
gains that do not exceed the Spread for the Outcome
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Period, the Fund will not participate in those gains. In addition, in the event an investor purchases Shares after the date on which Milliman transacted in the options contracts on behalf of the Fund, or
redeems Shares prior to the expiration of those options contracts, the returns realized by that investor will not match those that the Fund seeks to achieve. In certain market conditions, the
performance of the Collateral Portfolio and the Put Spread Strategy could cause the Fund to underperform relative to the S&P 500 Index, which would require greater upside performance of the S&P 500 Index to generate a total
return of the Fund that exceeds the Spread. An investor should consider the amount and impact of the Spread, and the Fund’s position relative to it, before investing in the Fund.
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Stacker Cap Strategy Risk. The Fund’s strategy is designed to produce returns that correlate to those of the Reference Indices up to the Index
Caps if Shares are bought on the day on which Milliman transacts in the options contracts on behalf of the Fund and held until those options contracts expire at the end of the Outcome Period, subject to the Index Caps. In the event that
one or both of the Reference Indices experience gains during the Outcome Period, the Fund will only participate in those gains up to the applicable Index Cap. In the event that one or both Reference Indices experience gains in excess of
the applicable Index Cap over the duration of the Outcome Period, the Fund will not participate in those excess gains. Because the Fund’s strategy provides capped exposure to two Reference Indices, the Index Caps may be lower than if
the Fund provided capped exposure to only a single Reference Index. In the event an investor purchases Shares after the date on which the options contracts were entered into and the Fund has risen in value to a level near to an Index
Cap, there may be little or no ability for that investor to experience an investment gain on their Shares relating to that Reference Index. In certain market conditions, the performance of the
Collateral Portfolio and the Put Spread Strategy could cause the Fund to underperform relative to the Reference Indices, which could further
limit Fund gains below the Index Caps, notwithstanding any performance of the Reference Indices in excess of the Index Caps. An investor should consider the amount of the Index Caps, and the Fund’s position relative to each Index
Cap, before investing in the Fund.
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Par Up Rate, Spread and Index Cap Change Risk. Because each of the Par Up Rate, Spread or Index Caps, as applicable, for each Outcome Period
is based upon (i) Milliman’s evaluation of prevailing market conditions on the first day of the Outcome Period and (ii) the total number (for the Par Up Rate and Index Caps) or strike price (for the Spread) of long call options
contracts on the applicable Reference Indices that Milliman is able to purchase at that time, the Par Up Rate, Spread or Index Caps, as applicable, may rise or fall from one Outcome Period to the next. Any such change could be
significant, and it is unlikely to remain the same for consecutive Outcome Periods.
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Outcome Period Risk. Each Fund’s investment strategy is designed to deliver returns that provide
exposure to the S&P 500 Index if Shares are bought on the day on which the Fund enters into the options contracts and held until those options contracts expire at the end of the Outcome Period. In the event an investor purchases
Shares after the date on which the options contracts were entered into or redeems Shares prior to the expiration of the options contracts, the returns realized by the investor will not match those that the Fund seeks to achieve. The
Funds do not use defensive strategies or attempt to reduce their exposures to poor performing positions during an Outcome Period. This differs from funds that typically seek to outperform a benchmark index. Therefore, in the event of a
general market decline, a Fund’s value may fall more than the value of another fund that does attempt to hedge against such market declines.
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FLEX Options Risk. Each Fund will transact in FLEX Options issued and guaranteed for settlement by the OCC. A
Fund bears the risk that the OCC will be unable or unwilling to perform its obligations under the FLEX Options contracts. In the unlikely event that the OCC becomes insolvent or is otherwise unable to meet its settlement obligations, a Fund could
suffer significant losses. Additionally, FLEX Options may be less liquid than certain other derivatives, such as non-customized options. In less liquid markets, terminating a FLEX Option may require the payment of a premium or acceptance of a
discounted price, and may take longer to complete. In addition, a less liquid trading market may adversely impact the value of a Fund’s FLEX Options and therefore the NAV of the Fund. FLEX Options are also subject to valuation and leverage risks,
as discussed below.
OTC Options Risk. When a Fund transacts in an OTC option, that Fund is exposed to default by the writer of the
OTC option, who may be unwilling or unable to perform its contractual obligations to the Fund, which could also
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result in significant losses to the Fund. Because OTC options are not guaranteed for settlement by the OCC, they are generally considered to have
greater counterparty risk than FLEX Options. In addition, as is the case with FLEX Options, in less liquid markets, terminating an OTC option may require the payment of a premium or acceptance of a discounted price, and may take longer to
complete. A less liquid trading market may adversely impact the value of a Fund’s OTC options and therefore the NAV of the Fund. In addition, because there can be no assurance that a liquid secondary market will exist for any particular OTC
option at any specific time, a Fund transacting in OTC options may be required to treat some or all of its OTC options as illiquid securities. Although Milliman will generally enter into OTC options only with counterparties that are expected to
be capable of entering into closing transactions, there is no assurance that Milliman will be able to close out an OTC option position for a Fund at a favorable price prior to exercise or expiration of the option. OTC options are also subject to
valuation and leverage risks, as discussed below.
Options Value Correlation Risk. The options contracts held by a Fund generally will be exercisable at the
strike price only on their expiration date. Prior to the expiration date, the value of the options contracts will be determined based upon market quotations or using other recognized pricing methods, consistent with the Trust’s valuation policy.
The value of the options contracts prior to the expiration date will be affected by changes in the value of the applicable reference asset, changes in interest rates, changes in the actual and implied volatility of the reference asset, and the
time remaining until expiration of the options contracts, among other factors. As a result, the value of a Fund’s options positions is not anticipated to increase or decrease at the same rate as the reference asset; and while it is anticipated
that they will generally move in the same direction, it is possible that they may move in different directions. Certain options positions may also expire worthless.
Options Pricing Risk. Funds with six-year Outcome Periods transact in FLEX Options that have an exercise date
six years after the initial transaction date. Because, at times, there might not be market activity for these options, the ability of a Fund to value them becomes more difficult and the judgment of Milliman (employing the fair value procedures
adopted by the Board) may play a greater role in their valuation due to this reduced availability of reliable objective pricing data. Consequently, while such determinations may be made in good faith, including through the use of model-based
pricing, it may nevertheless be more difficult for the Fund to accurately assign a daily value.
Options Leverage Risk. The use of options contracts involves leverage, which can cause a Fund’s portfolio to
be more volatile than if the portfolio had not been leveraged. Leverage can significantly magnify the effect of price movements of the reference asset, disproportionately increasing a Fund’s losses and reducing the Fund’s opportunities for gains
when the reference asset changes in unexpected ways. In some instances, such leverage could result in losses that exceed the original amount invested.
Investment Objective and Outcomes Risk. There is no guarantee that a Fund will be successful in its attempt to
achieve its investment objective and/or the Outcomes, and an investor could lose some or all of their investment in the Fund. Certain circumstances under which a Fund might not achieve its objective and/or the Outcomes include, but are not limited
to (i) if the Fund disposes of options contracts, (ii) if the Fund is unable to maintain the proportional relationship based on the number of options contracts in the Fund’s portfolio, (iii) significant accrual of Fund expenses in connection with
effecting the Fund’s principal investment strategy, (iv) losses incurred by the Fund’s holdings in the Collateral Portfolio and/or losses resulting from the Put Spread Strategy, or (iv) adverse tax law changes affecting the treatment of options
contracts.
Tax Risk. Each Fund intends to elect, and to qualify each year, to be treated as a regulated investment company
(“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”). As a RIC, a Fund will not be subject to U.S. federal income tax on the
portion of its net investment income and net capital gain that it distributes to shareholders, provided that it satisfies certain requirements of the Code. To maintain its status as a RIC, a Fund must meet certain income, diversification and
distributions tests. For purposes of the diversification test, the identification of the issuer (or, in some cases, issuers) of a particular Fund investment can depend on the terms and conditions of that investment. In particular, there is no
published IRS guidance or case law on how to determine the “issuer” of certain derivatives that a Fund will enter into and the Fund has not received a private letter ruling on this point. Therefore, there is a risk that a Fund will not meet the
Code’s diversification requirements and will not qualify, or will be disqualified, as a RIC. If a Fund does not qualify as a RIC for any taxable year and
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certain relief provisions are not available, the Fund’s taxable income will be subject to tax at the Fund level and to a further tax at the shareholder
level when such income is distributed.
Each Fund also intends to comply with the diversification requirements of Section 817(h) of the Code, and the regulations thereunder, relating to the
tax-deferred status of variable accounts that are based on insurance company separate accounts (referred to as “segregated asset accounts” for federal income tax purposes). These diversification requirements apply in addition to the RIC
diversification requirements discussed above. There also is no published guidance or case law on how to determine the “issuer” of the derivatives referred to above for purposes of the diversification requirements of Section 817(h) of the Code and a
Fund has not received a private letter ruling on this point. If these requirements are not met, or under other circumstances, such as if the Fund does not qualify as a RIC for any taxable year, it is possible that the contract owners (rather than
the insurance company) will be treated for federal income tax purposes as the taxable owners of the assets held by the segregated asset accounts.
Clearing Member Default Risk. Transactions in FLEX Options are required to be centrally cleared. In a cleared
transaction, a Fund’s counterparty is a clearing house, such as the OCC, rather than a bank or broker. Since each Fund is not a member of clearing house, and only members of clearing houses (“clearing members”)
can participate directly in a clearing house, each Fund will hold FLEX Options through accounts at clearing members. In FLEX Options positions, a Fund will make payments (including margin payments) to, and receive payments from, a clearing house
through the Fund’s accounts at clearing members. Funds held at a clearing organization in connection with any options contracts may be held in a commingled omnibus account and are not identified to the name of the clearing member’s individual
customers. As a result, assets deposited by a Fund with any clearing member as margin for FLEX Options may, in certain circumstances, be used to satisfy losses of other clients of the Fund’s clearing member. In addition, although clearing members
guarantee performance of their clients’ obligations to the clearing house, there is a risk that the assets of a Fund might not be fully protected in the event of the clearing member’s bankruptcy, as the Fund would be limited to recovering only a pro rata share of all available funds segregated on behalf of the clearing member’s customers for the relevant account class.
Debt Securities Risk. The prices of debt securities will be affected by changes in interest rates, the
creditworthiness of the issuer and other factors, as described further below. These risks could affect the value of investments in which a Fund invests, possibly causing the Fund’s NAV to be reduced and fluctuate more than other types of
investments.
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Call Risk. During periods of falling interest rates, an issuer of a callable bond held by a Fund may
“call” or repay the security before its stated maturity, and the Fund may have to reinvest the proceeds in securities with lower yields, which would result in a decline in the Fund’s income, or in securities with greater risks or with
other less favorable features.
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Credit Risk. Debt issuers and other counterparties may be unable or unwilling to make timely interest
and/or principal payments when due or otherwise honor their obligations. Changes in an issuer’s credit rating or the market’s perception of an issuer’s creditworthiness may also adversely affect the value of a Fund’s investment in that
issuer. The degree of credit risk depends on an issuer’s or counterparty’s financial condition and on the terms of an obligation.
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Interest Rate Risk. During periods of very low or negative interest rates, a Fund may be unable to
maintain positive returns or pay dividends to its shareholders. Changing interest rates, including rates that fall below zero, may have unpredictable effects on markets, result in heightened market volatility and detract from a Fund’s
performance to the extent the Fund is exposed to such interest rates. Additionally, under certain market conditions in which interest rates are low and the market prices for portfolio securities have increased, a Fund may have a very
low, or even negative yield. A low or negative yield would cause a Fund to lose money in certain conditions and over certain time periods. An increase in interest rates will generally cause the value of fixed-income securities held by a
Fund to decline, may lead to heightened volatility in the fixed-income markets and may adversely affect the liquidity of certain fixed-income investments, including those held by the Fund. Risks associated with rising interest rates are
heightened given that interest rates in the U.S. are near historic lows. Adjustable-rate instruments also react to interest rate changes in a similar manner, although generally to a lesser degree (depending, however, on the
characteristics of the reset terms, including the index chosen, frequency of reset and reset caps or floors,
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among other factors). Interest rate sensitivity is generally more pronounced and less predictable in instruments with uncertain payment or prepayment schedules.
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Liquidity Risk. Liquidity risk is the risk that a debt security may be difficult to sell at an advantageous time or price due to limited market
demand (resulting from a downgrade, a decline in price, or adverse conditions within the relevant market).
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Maturity Risk. The value of a Fund’s debt investments is dependent on their maturity. Generally, the longer the maturity of a debt security, the
greater its sensitivity to changes in interest rates.
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Foreign Securities and Credit Exposure Risk. U.S. dollar-denominated securities carrying foreign credit exposure
may be affected by unfavorable political, economic or governmental developments that could affect payments of principal and interest. Furthermore, the value of a Fund’s foreign investments (whether direct or indirect) may be adversely affected by
political and social instability in their home countries, by changes in economic or taxation policies in those countries, or by the difficulty in enforcing obligations in those countries. Foreign companies generally may be subject to less stringent
regulations than U.S. companies, including financial reporting requirements and auditing and accounting controls. As a result, there generally is less publicly available information about foreign companies than about U.S. companies. Trading in many
foreign securities may be less liquid and more volatile than U.S. securities due to the size of the market or other factors.
U.S. Government Securities Risk. U.S. Government securities are subject to interest rate risk but generally do
not involve the credit risks associated with investments in other types of debt securities. As a result, the yields available from U.S. Government securities are generally lower than the yields available from other debt securities. U.S. Government
securities are guaranteed only as to the timely payment of interest and the payment of principal when held to maturity. While securities issued or guaranteed by U.S. federal government agencies (such as Ginnie Mae) are backed by the full faith and
credit of the U.S. Department of the Treasury, securities issued by government sponsored entities (such as Fannie Mae and Freddie Mac) are solely the obligation of the issuer and generally do not carry any guarantee from the U.S. Government.
ABS Risk. ABS are subject to the general debt securities risks described above. In addition, ABS may be less
liquid than other bonds, and may be more sensitive than other bonds to the market’s perception of issuers and creditworthiness of payees, particularly in declining general economic conditions when concern regarding mortgagees’ ability to pay (e.g., the ability of homeowners, commercial mortgagees, consumers with student loans, automobile loans or credit card debtholders to make payments on the underlying loan pools) rises, which may result in the
Fund experiencing difficulty selling or valuing these securities. ABS markets have experienced extraordinary weakness and volatility at various times in recent years, and may decline quickly in the event of a substantial economic or market
downturn. Accordingly, these securities may be subject to greater risk of default during periods of economic downturn than other securities, which could result in possible losses to a Fund. In addition, ABS are subject to risks of the effects of
possible legislation in the area of residential mortgages, credit cards and other loans that may collateralize these securities, any of which may create uncertainty or have other negative effects on the value of these investments.
Geographic Exposure Risk. A natural disaster could occur in a geographic region or country in which the Fund has
exposure, which could adversely affect the economy or the business operations of companies in the specific geographic region or country, causing an adverse impact on the Fund’s performance.
Issuer Risk. The performance of a Fund depends on the performance of individual securities to which the Fund has
exposure. A Fund may be adversely affected if an issuer of underlying securities held by the Fund is unable or unwilling to repay principal or interest when due. Changes in the financial condition or credit rating of an issuer of those securities
may cause the value of the securities to decline.
Management Risk. Each Fund is subject to management risk because it is an actively managed portfolio. Milliman
will apply investment techniques and risk analyses in making investment decisions for a Fund, but there can be no guarantee that the Fund will meet its investment objective and/or the Outcomes. In addition, Milliman does not use defensive
strategies or attempt to reduce a Fund’s exposures to poor performing positions during an Outcome Period. This differs from funds that are managed to seek to outperform a benchmark index. Therefore, in the event
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of a general market decline, a Fund’s value may fall more than the value of another fund that does attempt to hedge against such market declines.
Market Risk. A Fund could lose money over short periods due to short-term market movements and over longer
periods during more prolonged market downturns. Assets may decline in value due to factors affecting financial markets generally or particular asset classes or industries represented in the markets. The value of an options contract or other asset
may also decline due to general market conditions, economic trends or events that are not specifically related to the issuer of the security or other asset, or due to factors that affect a particular issuer or issuers, country, group of
countries, region, market, industry, group of industries, sector or asset class. During a general market downturn, multiple asset classes may be negatively affected. Changes in market conditions and interest rates will not have the same impact on
all types of investments.
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COVID-19 Risk. The current outbreak of the novel strain of coronavirus, COVID-19, has resulted in
instances of market closures and dislocations, extreme volatility, liquidity constraints and increased trading costs. Efforts to contain the spread of COVID-19 have resulted in travel restrictions, closed international borders,
disruptions of healthcare systems, business operations and supply chains, layoffs, lower consumer demand, defaults and other significant economic impacts, all of which have disrupted global economic activity across many industries and may
exacerbate other pre-existing political, social and/or economic risks, locally or globally. The ongoing effects of COVID-19 are unpredictable and may result in significant and prolonged effects on a Fund’s performance.
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Non-Diversification Risk. Each Fund is classified as “non-diversified” under the 1940 Act. As a result, a Fund is
only limited as to the percentage of its assets which may be invested in the securities of any one issuer by the diversification requirements imposed by the Code. Each Fund may invest a relatively high percentage of its assets in a limited number
of issuers. As a result, a Fund may be more susceptible to a single adverse economic or regulatory occurrence affecting one or more of these issuers, experience increased volatility and be highly invested in certain issuers.
Operational Risk. The Funds are exposed to operational risks arising from a number of factors, including, but
not limited to, human error in the calculation of the applicable Par Up Rates, Spreads and Caps, processing and communication errors, errors of a Fund’s service providers, counterparties or other third-parties, including errors relating to the
administration and calculation of a Reference Index, failed or inadequate processes, and technology or systems failures. The Funds and Milliman seek to reduce these operational risks through controls and procedures. However, these measures do not
address every possible risk and may be inadequate to address these risks.
Large Shareholder Risk. At times, a Fund may experience adverse effects when certain large shareholders,
including insurance company separate accounts, redeem large amounts of shares of the Fund. Large redemptions may cause a Fund to sell portfolio holdings at times when it would not otherwise do so. In addition, these transactions may increase a
Fund’s transaction costs and/or result in an increase to the Fund’s expense ratio. When experiencing a large redemption, a Fund may delay payment of the redemption proceeds up to seven days to provide Milliman with time to determine if the Fund can
redeem the request in-kind or to consider other alternatives to lessen the harm to remaining shareholders. Under certain circumstances, however, a Fund may be unable to delay a redemption request or satisfy the redemption in-kind, which could
result in the automatic processing of a large redemption that is detrimental to the Fund and its remaining shareholders.
Additional Risks Applicable to the Underlying ETFs and Money Market Funds. An investment in a Fund is subject to
the risks associated with the underlying ETFs and money market funds (each, an “Underlying Fund,” and, collectively, the “Underlying Funds”) in which it invests,
which include, but are not limited to: (i) the risks associated with the underlying assets held by the Underlying Funds in which the Fund invests; (ii) the risk that such Underlying Fund’s investment strategy may not produce the intended results;
(iii) the risk that securities or other assets held by such Underlying Fund may underperform in comparison to the general securities markets or other asset classes; and (iv) the risk that the Underlying Fund will be concentrated in a particular
issuer, market, industry or sector, and therefore will be especially susceptible to losses due to adverse occurrences affecting that issuer, market, industry or sector. In addition, at times, certain segments of the market represented by certain
Underlying Funds may be out of favor and underperform other segments. A Fund will indirectly pay a proportional share of the expenses of the Underlying Funds in which it invests (including operating expenses and management fees), in
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addition to its fees and expenses. As a result, shareholders will absorb duplicate levels of fees with respect to a Fund’s investments in such other
Underlying Funds.
Investments in ETFs are subject to the following additional risks:
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Authorized Participant Concentration Risk. Only an authorized participant may engage in creation or redemption transactions directly with an ETF,
and none of those authorized participants is obligated to engage in creation and/or redemption transactions. Each ETF has a limited number of institutions that may act as authorized participants on an agency basis (i.e., on behalf of other market participants). To the extent that authorized participants exit the business or are unable or unwilling to proceed with creation or redemption orders with respect to the
ETF, and no other authorized participant is able or willing to step forward to create or redeem, shares of an ETF may be more likely to trade at a premium or discount to NAV and possibly face trading halts or delisting.
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Index-Based ETF Risk. The Funds will invest in ETFs that seek to track the performance of an underlying
index. Therefore, these ETFs will not necessarily buy or sell a security unless that security is added to, or removed from, respectively, its underlying index, and generally will not attempt to take defensive positions under any market
conditions, including declining markets. In addition, there is no guarantee that such ETFs will achieve investment results that have a high degree of correlation to the performance of their respective underlying indexes or that such ETFs
will achieve their investment objectives. Market disruptions and regulatory restrictions could have an adverse effect on an ETF’s ability to adjust its exposure to the required levels in order to track its underlying index. Errors in
index data, index computations or the construction of the underlying index in accordance with its methodology may occur from time to time and may not be identified and corrected by the index provider for a period of time or at all, which
may have an adverse impact on the ETF and its shareholders, such as the Funds. Unusual market conditions may cause the index provider to postpone a scheduled rebalance, which could cause the underlying index to vary from its normal or
expected composition.
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Market Trading Risk. Each ETF faces numerous market trading risks, including the potential lack of an
active market for ETF shares, losses from trading in secondary markets, periods of high volatility and disruptions in the creation/redemption process. Any of these factors, among others, may lead to the ETF’s shares trading at a premium
or discount to its NAV.
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Investments in money market funds are subject to the following additional risks:
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Money Market Fund Risk. Money market funds seek to preserve the value of shareholder investments at $1.00 per share, but shareholders, such as the
Funds, may still lose money by investing in such funds. The share price of a money market fund can fall below the $1.00 share price. A money market fund may impose a fee upon the sale of its shares or may temporarily suspend the ability
to sell shares if the fund’s liquidity falls below required minimums because of market conditions or other factors. A money market fund’s sponsor has no legal obligation to provide financial support to the fund, and the sponsor is not
obligated to enter into support agreements or take other actions to provide financial support to the fund or maintain the fund’s $1.00 share price at any time. The credit quality of a money market fund’s holdings can change rapidly in
certain markets, and the default of a single holding could have an adverse impact on the fund’s share price. A money market fund’s share price can also be negatively affected during periods of high redemption pressures, illiquid markets,
and/or significant market volatility.
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Yield Risk. A money market fund’s yield will vary as the short-term securities in its portfolio mature or are sold and the proceeds are reinvested
in other securities. When interest rates are very low, a money market fund’s expenses could absorb all or a portion of the money market fund’s income and yield. Additionally, inflation may outpace and diminish investment returns over
time.
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Investor Suitability
An investment in Shares may be suitable for you only if all of the following apply to you:
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Each Fund seeks to achieve specified Outcomes, but there is no guarantee that the Outcomes for an Outcome Period will be achieved. You fully understand the risks inherent in an investment in a Fund,
including that you may lose some or all of your investment.
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The Outcomes described in this prospectus are specifically designed to apply only if you hold Shares on the first day of the Outcome Period and continue to hold them on the last day of the Outcome
Period. You therefore desire to invest in a product with a return that depends upon the performance of the S&P 500 Index and any additional Reference Index (for the Stacker Cap Strategy) over a full Outcome Period.
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You are willing to hold Shares for the duration of the Outcome Period or, if you choose to purchase or redeem Shares during the Outcome Period, you understand the associated risks, including that you may
receive a very different return based on the Fund’s value at the time of your purchase or redemption. Investors purchasing Shares of a Fund after the Outcome Period begins can access the Funds’ website at www.[______].com for additional
information regarding possible Outcomes depending upon projected index performance.
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At the end of any particular Outcome Period, the relevant Fund will reset for a new Outcome Period tied to the same Reference Index(es) and with the same downside protection rate (whether a Buffer
Strategy, Floor Strategy or Par Down Strategy), but the potential upside participation rate in the relevant Reference Index(es) (whether a Par Up Strategy, Spread Strategy or Stacker Cap Strategy) may change based on (i) evaluation by
Milliman Financial Risk Management LLC, the Funds’ investment adviser (“Milliman”), of prevailing market conditions on the first day of the Outcome Period, and (ii) the total number (for the Par Up Rate and Index Caps) or strike price
(for the Spread) of long call options contracts on the applicable Reference Index(es) that Milliman is able to purchase at that time (the number of which will depend, in part, upon the expected income from the Collateral Portfolio and
the Put Spread Strategy).
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You can tolerate fluctuations in the value of the NAV of the Shares prior to the end of the Outcome Period that may be similar to, or exceed, the downside fluctuations in the value of the S&P 500 Index
and additional Reference Index (for the Stacker Cap Strategy).
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You understand and accept the risks associated with the Collateral Portfolio and the Put Spread Strategy, including that either or both may (a) cause a Fund not to achieve its investment objective and/or
Outcomes or (b) otherwise negatively impact the Fund’s Options Strategies.
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You understand that the performance of the Collateral Portfolio and/or the Put Spread Strategy could cause a Fund to significantly underperform the S&P 500 Index.
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Investors investing in Funds utilizing the Buffer Strategy only: You are willing to be exposed to
the downside performance of the S&P 500 Index beyond the stated Buffer at a rate of 1% for each 1% decrease in value of the S&P 500 Index.
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Investors investing in Funds utilizing the Floor Strategy only: You are willing to be exposed to
the downside performance of the S&P 500 Index prior to reaching the stated Floor at a rate of 1% for each 1% that the value of the S&P 500 Index decreases.
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Investors investing in Funds utilizing the Par Down Strategy only: You understand and accept that you may experience losses in excess of the Par Down Rate in a
Fund’s S&P 500 Index exposure for the applicable Outcome Period at the time of your investment.
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Investors investing in Funds utilizing the Par Up Strategy only: You understand and accept that
your potential return is limited by the Par Up Rate in effect for the applicable Outcome Period at the time of your investment.
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Investors investing in Funds utilizing the Spread Strategy only: You understand and accept that you will forgo any potential gains if the value of S&P 500
Index does not surpass the declared Spread for the applicable Outcome Period at the time of your investment.
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Investors investing in Funds utilizing the Stacker Cap Strategy only:
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You believe that the value of the S&P 500 and/or additional Reference Index will increase over the term of the Outcome Period and you are willing to give up any gains of the Reference Indices in excess
of the Index Caps.
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You understand and accept that your potential return is limited by the Index Caps and you are willing to forego any gains in excess of the Index Caps.
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You understand that a Fund’s investment strategy is not expected to provide dividends to you.
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You understand and accept the risks associated with the Underlying Funds.
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You are willing to assume counterparty risk with the relevant counterparty to a Fund’s options positions.
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You have visited the relevant Fund’s website and understand the Outcomes available to you based upon the Fund you selected at the time of your purchase.
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Disclosure of Portfolio Holdings
A description of the Funds’ policies and procedures with respect to the disclosure of the Funds’ portfolio holdings information is available in the
Funds’ Statement of Additional Information (“SAI”), which is available at [__________].
Management and Organization
Investment Adviser
Milliman Financial Risk Management LLC (“Milliman”), located at 71 S. Wacker Drive, 31st
Floor, Chicago, IL 60606, serves as investment adviser to each Fund. Milliman is a wholly owned subsidiary of Milliman, Inc. Milliman provides investment advisory, hedging, and consulting services on approximately $150 billion in assets as of
March 31, 2020.
Under the Investment Advisory Agreement (the “Advisory Agreement”) with the Trust,
Milliman manages the Funds in accordance with the policies and procedures established by the Board of Trustees of the Trust (the “Board”), and has agreed to perform, or arrange for the performance of, the
day-to-day management of each Fund’s portfolio. Milliman also pays all expenses incurred by it in connection with its activities under the Advisory Agreement, including, but not limited to, expenses of all necessary investment and management
facilities and investment personnel, including salaries, expenses and fees of any personnel required for it to faithfully perform its duties under the Advisory Agreement, and expenses of administrative facilities, including bookkeeping, clerical
personnel and equipment necessary for the efficient conduct of the Adviser’s duties under the Advisory Agreement. In addition, Milliman pays, out of its legitimate profits, broker-dealers, trust companies, transfer agents and other financial
institutions, including Participating Insurance Companies and/or their affiliates, in exchange for their selling of Shares or for recordkeeping or other shareholder support services, as further described under “Distribution Arrangements” below.
For services provided under the Advisory Agreement, Milliman receives from each Fund an annual fee, paid monthly, equal to 0.49% of the average daily
net assets of each Fund.
Milliman has contractually agreed to waive advisory fees and/or reimburse expenses to the extent necessary to limit each Fund’s
total annual operating expenses (excluding taxes, interest, brokerage fees and commissions, Rule 12b-1 fees, acquired fund fees and expenses, short-sale dividend expenses, administrative services fees, other expenses that are capitalized in
accordance with generally accepted accounting principles, and extraordinary or non-routine expenses not incurred in the ordinary course of the Fund’s business) to 0.74% of the Fund's average daily net assets (the “Expense Limitation Agreement”) until at least November 1, 2022. During its term, the Expense Limitation Agreement with respect to a Fund cannot be terminated or amended to increase the applicable limit without approval of the
Board. Milliman may recoup from a Fund any advisory fees waived or expenses reimbursed pursuant to the applicable Expense Limitation Agreement for a period of three years from the date on which such waiver or reimbursement occurred; provided,
however, that such recoupment shall not be made if it would cause the Fund’s total annual Fund operating expenses to exceed the lesser of (a) the expense limitation in effect at the time of the reimbursement, or (b) the expense limitation in
effect at the time of recoupment, if any.
In addition to the Expense Limitation Agreement, Milliman has contractually agreed to waive its advisory fees in an amount equal to each Fund’s
acquired fund fees and expenses until at least November 1, 2022. This contract cannot be terminated or modified for a Fund without the consent of the Board.
A discussion regarding the basis for the Board approving the Advisory Agreement will be available in the Funds’ next annual or semi-annual report to
shareholders, as applicable.
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Portfolio Managers
The following individuals are jointly and primarily responsible for the day-to-day management of each Fund’s portfolio:
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Robert T. Cummings is Senior Director – Head of Portfolio Management with Milliman. Mr. Cummings has served in this role since 2007. Mr. Cummings has more than 25 years of
experience as a trader and portfolio manager with a primary focus on options.
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Maria Schiopu, CFA, joined Milliman in 2013 and is Senior Director – Head of Portfolio Management with Milliman. Ms. Schiopu holds a B.A. in Mathematics from Northwestern University. She is a Chartered
Financial Analyst® (CFA) Charterholder.
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Jeff Greco, FRM, joined Milliman in 2012 and is Senior Director – Head of Strategy Research with Milliman. Prior to joining Milliman, Mr. Greco was a risk management professional at
Citadel LLC. He also serves as an adjunct professor for the University of Chicago’s Financial Mathematics graduate program. Mr. Greco holds a B.S. and M.S. in mathematics from Carnegie Mellon University and a M.S. in applied
mathematics from the University of Chicago
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Jordan Rosenfeld is a Trader and Risk Manager within Milliman’s Capital Markets Group. He manages hedging and investment strategies for insurance companies, funds, and a number of U.S. equity unit
investment trusts. Mr. Rosenfeld joined Milliman in 2018 and has more than 5 years of experience in capital markets. Prior to joining Milliman, Mr. Rosenfeld was a global macro portfolio manager at Gelber Group with a focus on equity
and interest rate derivatives trading. Mr. Rosenfeld holds a Bachelor of Arts in Mathematics from Northwestern University.
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The SAI provides additional information about the portfolio managers’ compensation, other accounts managed by the portfolio managers, and the portfolio
managers’ ownership of securities in each Fund.
Commodity Exchange Act (“CEA”) Regulation and Exclusions
[With respect to each Fund, Milliman has claimed an exclusion from the definition of “commodity pool operator” (“CPO”)
under the CEA and the rules of the Commodity Futures Trading Commission (“CFTC”) and, therefore, is not subject to CFTC registration or regulation as a CPO. In addition, Milliman is relying upon a related
exclusion from the definition of “commodity trading advisor” (“CTA”) under the CEA and the rules of the CFTC with respect to each Fund. The terms of the CPO exclusion require each Fund, among other things,
to adhere to certain limits on its investments in “commodity interests.” Commodity interests include commodity futures, commodity options and swaps, which in turn include non-deliverable forwards. The Funds are permitted to invest in these
instruments as further described in the Funds’ SAI. However, the Funds are not intended as vehicles for trading in the commodity futures, commodity options or swaps markets. The CFTC has neither reviewed nor approved Milliman’s reliance on these
exclusions, or the Funds, their investment strategies or this Prospectus.]
Additional Information About the Shares
Pricing of Shares
A Fund determines its NAV per share as of close of regular trading on the New York Stock Exchange (the “Exchange”)
(generally 4:00 p.m., Eastern time) on each business day the Exchange is open for regular trading. If the Exchange closes early on a valuation day, a Fund shall determine NAV as of that time. In calculating NAV, each Fund generally values its
investment portfolio at market price.
FLEX Options will be valued at a market-based price provided by the exchange on which the FLEX Option is traded at the official close of that
exchange’s trading date. If the exchange on which the FLEX Option is traded is unable to provide a market price, FLEX Options prices will be provided by a model-pricing provider. OTC options will be valued at the mean of the most recent bid and
asked price, if available, or otherwise at their closing bid price. Otherwise, the value of an options contract will be determined by the Trust’s pricing committee (the “Pricing Committee”) in accordance
with the pricing and valuation procedures adopted by the Board (the “Valuation Procedures”).
Equity securities, including shares of ETFs, listed on any national or foreign exchange (excluding the Nasdaq National Market (“Nasdaq”) and the London Stock Exchange Alternative Investment Market (“AIM”)) will be valued at the last sale price on the exchange on which they are principally
traded, or, for Nasdaq and AIM securities,
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the official closing price. Securities traded on more than one securities exchange are valued at the last sale price or official closing price, as
applicable, at the close of the exchange representing the principal market for such securities.
Fixed income securities will generally be valued using a Pricing Service. Fixed income securities having a remaining maturity of 60 days or less when
purchased will be valued at cost adjusted for amortization of premiums and accretion of discounts, provided the Pricing Committee has determined that the use of amortized cost is an appropriate reflection of fair value given market and issuer
specific conditions existing at the time of the determination.
The Funds’ accounting agent may obtain all market quotations used in valuing securities from a third-party pricing service vendor (a “Pricing Service”). If no quotation can be obtained from a Pricing Service, then the Funds’ account agent will contact the Pricing Committee, which is responsible for establishing the valuation of portfolio
securities and other instruments held by the Fund in accordance with the Valuation Procedures. The Pricing Committee will then attempt to obtain one or more broker quotes for the security or other asset daily and will value the security or other
asset accordingly.
If no quotation is available from either a Pricing Service, or one or more brokers, or if the Pricing Committee has reason to question the reliability
or accuracy of a quotation supplied or the use of amortized cost, the value of any portfolio security or other asset held by a Fund for which reliable market quotations are not readily available will be determined by the Pricing Committee in a
manner that most appropriately reflects fair market value of the security or other asset on the valuation date.
To the extent a Fund invests in shares of one or more mutual funds, including money market funds, the Fund values those shares at their respective NAVs.
For more information about how each Fund’s NAV is determined, please see the section in the SAI entitled “Purchases, Redemptions and Pricing of Shares.”
Purchase and Sale of Shares
Shares of a Fund may be purchased and sold only through variable contracts offered by insurance companies with which the Trust has entered into a
participation agreement (each, a “Participating Insurance Company,” and, collectively, the “Participating Insurance Companies”). These Participating Insurance
Companies are the record owners of the separate accounts holding the Shares. You do not buy, sell or exchange Shares directly; rather, you choose investment options through your variable contract. The Participating Insurance Companies then cause
the separate accounts to purchase and redeem Shares according to the investment options you previously chose.
Each Fund sells and redeems its Shares, without charge, at their NAV next determined after the applicable Fund or its agent receives a purchase or
redemption request in good order. The value of Shares redeemed may be more or less than the original cost. The Funds generally intend to redeem their Shares for cash. Subject to applicable federal law including the 1940 Act, a Fund may also
redeem its Shares wholly or partly in securities or other assets if the Board determines, in its sole discretion, that such payment is advisable in the interest of the remaining shareholders of the applicable Fund. If a redemption is paid wholly
or partly in securities or other assets, the redeeming shareholder would incur transaction costs in disposing of the redemption proceeds.
Each Fund normally pays for Shares redeemed within seven days after the applicable Fund receives the redemption request in good order. However, the Trust
may suspend the right of redemption for any Fund for such periods of time as are permitted under the 1940 Act and under the following unusual circumstances: (a) when the Exchange is closed (other than weekends and holidays) or trading is
restricted; (b) when an emergency exists, making disposal of portfolio securities or other assets, or the valuation of net assets, not reasonably practicable; or (c) during any period when the SEC has by order permitted a suspension of redemption
for the protection of shareholders.
Share Classes
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The Funds currently offer only Class 3 shares, which charge a distribution fee pursuant to a “Rule 12b-1 Plan,” as described further below under
“Distribution Arrangements.”
Frequent Purchases and Redemptions of Shares
Each Fund seeks to discourage excessive short-term trading in Shares (i.e., either frequent exchanges between
Shares or redemptions and repurchases of Shares, in either case, within a short period of time), which may negatively impact long-term Fund performance and disrupt portfolio management strategies by requiring the applicable Fund to maintain
excessive cash and/or liquidate portfolio holdings at disadvantageous times and prices, in addition to incurring increased brokerage and other transaction or administrative costs. In addition, under certain circumstances, the value of Shares held
by long-term investors may be diluted where excessive short-term trading activity is conducted to seek to take advantage of arbitrage opportunities from stale prices for portfolio assets. A Fund may be more or less affected by short-term trading in
Shares depending on various factors, such as the size of the Fund, the amount of assets the Fund typically maintains in cash or cash equivalents, the dollar amount, number and frequency of trades in the Shares and other factors. Funds that invest
in foreign securities or other assets may be at greater risk for excessive short-term trading.
The Board has adopted policies and procedures designed to discourage excessive short-term trading of Shares (the “Market
Timing Policy”). The Board may revise the Market Timing Policies at any time and without prior notice.
It is difficult for the Funds to monitor short-term trading because the insurance company separate accounts that invest in the Funds typically aggregate
the trades of all of their respective contract owners into a single purchase, redemption or exchange transaction. Additionally, most insurance companies combine all of their contract owners’ investments into a single omnibus account in each Fund.
Therefore, the Funds typically cannot identify, and thus cannot successfully prevent, excessive short-term trading by an individual contract owner within that aggregated trade or omnibus account, but, instead, must rely on the insurance company to
monitor its individual contract owner trades to identify excessive short-term traders.
The Trust has therefore entered into agreements with each Participating Insurance Company to help detect and prevent excessive short-term trading.
Under these agreements, a Participating Insurance Company may be required to (i) provide certain identifying and account information regarding contract owners who invest in Shares through the omnibus account; and (ii) restrict further purchases
or exchanges of Shares by a contract owner that a Fund has identified as engaging in excessive short-term trading. Participating Insurance Companies have also agreed to assist the Trust in implementing the Market Timing Policies. Accordingly, if
a Fund detects potential excessive short-term trading activity, the Fund will generally contact the applicable Participating Insurance Company and may ask the Participating Insurance Company to take additional action, if appropriate, based on the
particular circumstances. When a Fund identifies, or it or its agent believes it has identified, excessive short-term trading activity, the Fund may, in its sole discretion, restrict or reject any such purchases or exchanges.
Each insurance company has its own policies and restrictions on excessive short-term trading. Additionally, the terms and restrictions on excessive
short-term trading may vary from one variable contract to another, even among those variable contracts issued by the same insurance company. Therefore, please refer to the prospectus and SAI for your variable contract for specific details about
limitations on transfers and other transactions that your insurance company may impose in seeking to discourage excessive short-term trading.
Distribution and Servicing of Shares
Distribution Plan
The Trust has adopted a Distribution Plan under Rule 12b-1 (“Rule 12b-1 Plan”) of the 1940 Act with respect to
Class 3 shares. The Rule 12b-1 Plan allows the Funds to pay distribution fees to their principal underwriter or to Participating Life Insurance Companies and/or their affiliates, or to any other eligible institution, for distribution activities
related to the indirect marketing of the Funds to the contract owners, and/or for other contract owner services. The Rule 12b-1 Plan provides for a maximum fee equal to an annual rate of 0.25% (expressed as a percentage of average daily net assets
of a Fund). Because each Fund pays these fees out of its assets on an ongoing
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basis, over time these fees will increase the cost of your investment and may cost you more than paying other types of charges.
Payments to Insurance Companies and/or their Affiliates
Marketing Support Services. The Participating Insurance Company that issued your variable
contract and/or their affiliates may receive the Rule 12b-1 Plan fees discussed above. In addition to those payments, Milliman may, from time to time, at its expense and from its own legitimate profits, make cash payments to a Participating
Insurance Company and/or its affiliates as incentives to certain Participating Insurance Companies and/or their affiliates to promote the sale and retention of Shares. Milliman may also make payments to Participating Insurance Companies and/or
their affiliates for marketing support, training and ongoing education for sales personnel about the Funds, financial planning needs of contract owners that allocate contract value to a Fund, marketing and advertising of the Funds, and access to
periodic conferences relating directly or indirectly to the Funds, among other marketing support services. The benefits Milliman receives when making these payments may include, among other things, adding the Funds to the list of underlying
investment options in the Participating Insurance Company’s variable contracts and access to individual members of a Participating Insurance Company’s sales force or its management. Milliman compensates Participating Insurance Companies and/or
their affiliates differently, generally depending upon the level and/or type of services received. The payments Milliman makes may be calculated on sales of Shares (“Sales-Based Payments”), in which case
the total amount of such payments generally does not exceed [___]% of the offering price of all Shares sold through variable contracts during the particular period. Such payments also may be calculated on the average daily net assets of the Funds
attributable to a particular Participating Insurance Company and/or its affiliates (“Asset-Based Payments”), in which case the total amount of such cash payments generally does not exceed [___]% per annum
of those assets during a defined period. Sales-Based Payments primarily create incentives to make sales of Shares and Asset-Based Payments primarily create incentives to retain assets of the Funds in Participating Insurance Company separate
accounts. To the extent Participating Insurance Companies sell more Shares of a Fund or retain Shares of a Fund in their contract owners’ accounts, Milliman may directly or indirectly benefit from the incremental management and other fees paid to
Milliman by the Funds with respect to those assets.
Administrative Support Services. Milliman may make payments to Participating Insurance
Companies and/or their affiliates for certain administrative services provided to the Funds. These services may include, but are not limited to, distributing Fund documents, such as prospectuses and shareholder reports, to existing contract
owners; hosting and maintaining a website to ensure that Fund documents are publicly accessible, free of charge, to existing contract owners; maintaining and preserving records related to the purchase, redemption and other account activity of
contract owners; assisting with proxy solicitations on behalf of the Funds, including soliciting and compiling voting instructions from contract owners; preparing, printing and distributing reports of values to existing contract owners with
respect to their existing contract values allocated to the Funds; receiving and answering correspondence from existing contract owners, including requests for Fund documents, relating to their existing investments in the Funds; and answering
questions from existing contract owners about their current investments in the Funds. The cost of providing the services and the overall package of services provided may vary from one arrangement to another. Milliman does not make an independent
assessment of a Participating Insurance Company’s or its affiliate’s cost of providing such services. Accordingly, a Participating Insurance Company or its affiliate may earn profits on these payments for these services, since the amount of the
payments may exceed the actual costs of providing the services. Milliman pays for these administrative support services out of its own legitimate profits.
Additional Information About these and Other Payments. You can find further details in
the SAI about these payments and the services provided by Participating Insurance Companies and/or their affiliates. In certain cases, these payments could be significant to the Participating Insurance Company or its affiliate. Your insurance
company may charge you additional fees or commissions on your variable contract other than those disclosed in this Prospectus. You may ask your insurance company about any payments it or its affiliates receive from Milliman, or the Funds, as well
as about fees and/or commissions the insurance company charges. The prospectus for your variable contract may also contain additional information about these payments.
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Taxes
The below discussion of “Taxes” is not intended or written to be used as tax advice. Contract owners should consult their own tax
professional about their tax situation.
Dividends and Distributions
Each Fund intends to elect and qualify each year as a regulated investment company under the Internal Revenue Code of 1986, as amended (the “Code”). As a regulated investment company, a Fund generally pays no federal income tax on the income and gains it distributes to the insurance company separate accounts. Each Fund expects to declare and
distribute all of its net investment income, if any, at least annually. Each Fund will distribute net realized capital gains, if any, at least annually. A Fund may distribute such income dividends and capital gains more frequently, if necessary,
in order to reduce or eliminate federal excise or income taxes on the Fund. The amount of any distribution will vary, and there is no guarantee a Fund will pay either an income dividend or a capital gains distribution. Each Fund automatically
reinvests any capital gains and income dividends in additional Shares of the Fund unless the insurance company has requested in writing to receive such dividends and distributions in cash.
Tax Status
To maintain its status as a regulated investment company, a Fund must meet certain income, diversification and distributions tests. For purposes of
the diversification test, the identification of the issuer (or, in some cases, issuers) of a particular Fund investment can depend on the terms and conditions of that investment. In particular, there is no published IRS guidance or case law on
how to determine the “issuer” of certain derivatives that the Fund will enter into. Therefore, there is a risk that the Fund will not meet the Code’s diversification requirements and will not qualify, or will be disqualified, as a regulated
investment company. Each Fund intends to treat options contracts referencing an index as “issued” by the securities underlying the index. This, in turn, would allow the Fund to count the options contracts as automatically diversified investments
under the Code’s diversification requirements. This position is consistent with informal guidance from the IRS but has not be confirmed by published guidance or case law. If the options contracts are not treated as issued by the issuer of the
securities underlying the index for diversification test purposes, there is a risk that the Fund could lose its regulated investment company status.
A Fund’s investments in offsetting positions with respect to the S&P 500 Price Index may be “straddles” for U.S. federal income tax purposes. The
straddle rules may affect the character of gains (or losses) realized by a Fund, and losses realized by the Fund on positions that are part of a straddle may be deferred under the straddle rules, rather than being taken into account in
calculating taxable income for the taxable year in which the losses are realized. In addition, certain carrying charges (including interest expense) associated with positions in a straddle may be required to be capitalized rather than deducted
currently. Certain elections that a Fund may make with respect to its straddle positions may also affect the amount, character and timing of the recognition of gains or losses from the affected positions. The tax consequences of straddle
transactions to a Fund are not entirely clear in all situations under currently available authority. The straddle rules may increase the amount of short-term capital gain realized by a Fund. Because application of the straddle rules may affect
the character of gains or losses, defer losses and/or accelerate the recognition of gains or losses from the affected straddle positions, if a Fund makes a non-liquidating distribution of its short-term capital gain, the amount which must be
distributed to U.S. shareholders as ordinary income may be increased or decreased substantially as compared to a fund that did not engage in such transactions.
Under Section 1256 of the Code, certain types of exchange-traded options, including FLEX Options, are treated as if they were sold (i.e., “marked to market”) at the end of each year. Gain or loss is recognized on this deemed sale. Such treatment could cause a Fund to have taxable income without receiving cash. In order to maintain its RIC qualification, a Fund must distribute at least 90% of its income annually. If the options in which a Fund invests are subject to Section 1256 of the Code and the Fund is unable to distribute marked-to-market gains to its shareholders, the Fund may lose its RIC qualification and be taxed as a regular corporation. On the other hand, positions that are subject to the Section 1256 mark-to-market rules statutorily produce gain or loss that is 60% long-term capital gain and 40% short-term capital gain. In addition, offsetting positions that are both subject to Section 1256 are not subject to the straddle rules discussed above. Thus, positions subject to Section 1256 may force a Fund to make increased distributions, but also increase the amount of long-term capital gain recognized as compared to positions subject to the straddle rules.
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Shares must be purchased through separate accounts used to fund variable insurance contracts. As a result, it is anticipated that any income dividends
or capital gains distributed by a Fund will be exempt from current taxation by contract holders if left to accumulate within a separate account. Withdrawals from such contracts may be subject to ordinary income tax and, if made before age 59 1∕2,
a 10% penalty tax. Investors should ask their own tax advisors for more information on their tax situation, including possible state or local taxes. For more information on taxes, please refer to the accompanying prospectus of the annuity or life
insurance program through which Shares are offered.
Please refer to the SAI for more information regarding the tax treatment of the Funds.
Financial Highlights
Financial information is not provided because the Funds did not commence operations as of the date of this Prospectus.
Disclaimers
Milliman references certain information and data from the sponsors of each Reference Index (each, a “Sponsor”)
pursuant to an agreement between Milliman and each such Sponsor (each, a “Sponsor Agreement”). Milliman sub-contracts its rights under each Sponsor Agreement to the Trust at no charge, so that when each
Fund transacts in options contracts it can reference the applicable Reference Index and/or include the applicable Reference Index in its name, as requested by each Sponsor. Milliman, the Trust and the Funds do not guarantee the accuracy or the
completeness of any Reference Index or any data included therein and Milliman, the Trust and the Funds shall have no liability for any errors, omissions or interruptions therein. Milliman, the Trust and the Funds make no warranty, express or
implied, to investors in Shares, or to any other person or entity, in connection with the reference to one or more Reference Indices or any data included in the Reference Indices. Without limiting any of the foregoing, in no event shall Milliman,
the Trust or any Fund have any liability for any special, punitive, direct, indirect, consequential or any other damages (including lost profits), even if notified of the possibility of such damages related to such references of the Reference
Indices.
In addition, the following disclaimers are required to be disclosed pursuant to the terms of each Sponsor Agreement:
S&P Dow Jones Indices LLC
The “S&P 500” is a product of S&P Dow Jones Indices LLC or its affiliates (“SPDJI”) has been licensed for use by Milliman Financial Risk Management LLC. Standard
& Poor’s® and S&P® are registered trademarks of Standard & Poor’s Financial Services LLC (“S&P”) and Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC (“Dow Jones”). The trademarks have been licensed to SPDJI and have been sublicensed for use for certain purposes by Milliman Financial Risk Management LLC. The Milliman S&P 500 6-Month Buffer with Par Up
Fund - Jan/Jul; Milliman S&P 500 6-Month Buffer with Par Up Fund - Feb/Aug; Milliman S&P 500 6-Month Buffer with Par Up Fund - Mar/Sep; Milliman S&P 500 6-Month Buffer with Par Up Fund - Apr/Oct; Milliman S&P 500 6-Month Buffer
with Par Up Fund - May/Nov; Milliman S&P 500 6-Month Buffer with Par Up Fund - Jun/Dec; Milliman S&P 500 6-Month Par Down with Par Up Fund - Jan/Jul; Milliman S&P 500 6-Month Par Down with Par Up Fund - Feb/Aug; Milliman S&P 500
6-Month Par Down with Par Up Fund - Mar/Sep; Milliman S&P 500 6-Month Par Down with Par Up Fund - Apr/Oct; Milliman S&P 500 6-Month Par Down with Par Up Fund - May/Nov; Milliman S&P 500 6-Month Par Down with Par Up Fund - Jun/Dec;
Milliman S&P 500 1-Year Buffer with Spread Fund – Jan; Milliman S&P 500 1-Year Buffer with Spread Fund – Feb; Milliman S&P 500 1-Year Buffer with Spread Fund – Mar; Milliman S&P 500 1-Year Buffer with Spread Fund – Apr; Milliman
S&P 500 1-Year Buffer with Spread Fund – Sep; Milliman S&P 500 1-Year Buffer with Spread Fund – Oct; Milliman S&P 500 1-Year Buffer with Spread Fund – Nov; Milliman S&P 500 1-Year Buffer with Spread Fund – Dec; Milliman S&P
500 1-Year Floor with Par Up Fund – Jan; Milliman S&P 500 1-Year Floor with Par Up Fund – Feb; Milliman S&P 500 1-Year Floor with Par Up Fund – Mar; Milliman S&P 500 1-Year Floor with Par Up Fund – Apr; Milliman S&P 500 1-Year
Floor with Par Up Fund – Sep; Milliman S&P 500 1-Year Floor with Par Up Fund – Oct; Milliman S&P 500 1-Year Floor with Par Up Fund – Nov; Milliman S&P 500 1-Year Floor with Par Up Fund – Dec; Milliman S&P 500 & Nasdaq 1-Year
Buffer with Stacker Cap Fund – Jan; Milliman S&P 500 & Nasdaq 1-Year Buffer with Stacker Cap Fund – Feb; Milliman S&P 500 & Nasdaq 1-Year Buffer with Stacker Cap Fund – Mar; Milliman S&P 500 & Nasdaq 1-Year Buffer with
Stacker Cap Fund – Apr; Milliman S&P 500 & Nasdaq 1-Year Buffer with Stacker Cap Fund – Sep; Milliman S&P 500 & Nasdaq 1-Year Buffer with Stacker Cap Fund – Oct; Milliman S&P 500 & Nasdaq 1-Year Buffer with Stacker Cap
Fund – Nov; Milliman S&P 500 & Nasdaq 1-Year Buffer with Stacker Cap Fund – Dec; Milliman S&P 500 & Russell 2000 1-Year Buffer with Stacker Cap Fund – Jan; Milliman S&P 500 & Russell 2000 1-Year Buffer with Stacker Cap
Fund – Feb; Milliman S&P 500 & Russell 2000 1-Year Buffer with Stacker Cap Fund – Mar; Milliman S&P 500 & Russell 2000 1-Year Buffer with Stacker Cap Fund – Apr; Milliman S&P 500 & Russell 2000 1-Year Buffer with Stacker
Cap Fund – Sep; Milliman S&P 500 & Russell 2000 1-Year Buffer with Stacker Cap Fund – Oct; Milliman S&P 500 & Russell 2000 1-Year Buffer with Stacker Cap Fund – Nov; Milliman S&P 500 & Russell 2000 1-Year Buffer with
Stacker Cap Fund – Dec; Milliman S&P 500 & MSCI EAFE 1-Year Buffer with Stacker Cap Fund – Jan; Milliman S&P 500 & MSCI EAFE 1-Year Buffer with Stacker Cap Fund – Feb; Milliman S&P 500 & MSCI EAFE 1-Year Buffer with
Stacker Cap Fund – Mar; Milliman S&P 500 & MSCI EAFE 1-Year Buffer with Stacker Cap Fund – Apr; Milliman S&P 500 & MSCI EAFE 1-Year Buffer with Stacker Cap Fund – Sep; Milliman S&P 500 & MSCI EAFE 1-Year Buffer with
Stacker Cap Fund – Oct; Milliman S&P 500 & MSCI EAFE 1-Year Buffer with Stacker Cap Fund – Nov; Milliman S&P 500 & MSCI EAFE 1-Year Buffer with Stacker Cap Fund – Dec; Milliman S&P 500 6-Year Buffer with Par Up Fund - Jan
(I); Milliman S&P 500 6-Year Buffer with Par Up Fund - Apr (I); Milliman S&P 500 6-Year Buffer with Par Up Fund - Oct (I); Milliman S&P 500 6-Year Par Down with Par Up Fund - Jan (I); Milliman S&P 500 6-Year Par Down with Par Up
Fund - Apr (I); and Milliman S&P 500 6-Year Par Down with Par Up Fund - Oct (I) (for purposes of this sub-section, collectively, the “Funds”) are not sponsored, endorsed, sold or promoted by SPDJI,
Dow Jones, S&P, any of their respective affiliates (collectively, “S&P Dow Jones Indices”). The S&P Dow Jones Indices does not make any representation or warranty, express or implied, to the
owners of the Funds or any member of the public regarding the advisability of investing in securities generally or in the Funds particularly or the ability of the S&P 500 to track general market performance. S&P Dow Jones Indices only
relationship to Milliman Financial Risk Management LLC with respect to the S&P 500 is the licensing of the Index and certain trademarks, service marks and/or trade names of S&P Dow Jones Indices and/or its licensors. The S&P 500 is
determined, composed and calculated by S&P Dow Jones Indices without regard to Milliman Financial Risk Management LLC or the Funds. S&P Dow Jones Indices have no obligation to take the needs of Milliman Financial Risk Management LLC or
the owners of the Funds into consideration in determining, composing or calculating the S&P 500. The S&P Dow Jones Indices are not responsible for and have not participated in the
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determination of the prices, and amount of the Funds or the timing of the issuance or sale of the Funds or in the determination or calculation of the equation by which the Funds are to be converted into cash,
surrendered or redeemed, as the case may be. S&P Dow Jones Indices has no obligation or liability in connection with the administration, marketing or trading of the Funds. There is no assurance that investment products based on the S&P
500 will accurately track index performance or provide positive investment returns. S&P Dow Jones Indices LLC is not an investment advisor. Inclusion of a security within an index is not a recommendation by S&P Dow Jones Indices to
buy, sell, or hold such security, nor is it considered to be investment advice.
S&P DOW JONES INDICES DOES NOT GUARANTEE THE ADEQUACY, ACCURACY, TIMELINESS AND/OR THE COMPLETENESS OF THE S&P 500 OR ANY DATA RELATED THERETO OR ANY COMMUNICATION, INCLUDING BUT NOT LIMITED TO, ORAL OR
WRITTEN COMMUNICATION (INCLUDING ELECTRONIC COMMUNICATIONS) WITH RESPECT THERETO. S&P DOW JONES INDICES SHALL NOT BE SUBJECT TO ANY DAMAGES OR LIABILITY FOR ANY ERRORS, OMISSIONS, OR DELAYS THEREIN. S&P DOW JONES INDICES MAKES NO
EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIMS ALL WARRANTIES, OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE OR AS TO RESULTS TO BE OBTAINED BY MILLIMAN FINANCIAL RISK MANAGEMENT LLC, OWNERS OF THE FUNDS, OR ANY OTHER
PERSON OR ENTITY FROM THE USE OF THE S&P 500 OR WITH RESPECT TO ANY DATA RELATED THERETO. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT WHATSOEVER SHALL S&P DOW JONES INDICES BE LIABLE FOR ANY INDIRECT, SPECIAL, INCIDENTAL,
PUNITIVE, OR CONSEQUENTIAL DAMAGES INCLUDING BUT NOT LIMITED TO, LOSS OF PROFITS, TRADING LOSSES, LOST TIME OR GOODWILL, EVEN IF THEY HAVE BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES, WHETHER IN CONTRACT, TORT, STRICT LIABILITY, OR
OTHERWISE. THERE ARE NO THIRD PARTY BENEFICIARIES OF ANY AGREEMENTS OR ARRANGEMENTS BETWEEN S&P DOW JONES INDICES AND MILLIMAN FINANCIAL RISK MANAGEMENT LLC, OTHER THAN THE LICENSORS OF S&P DOW JONES INDICES.
FTSE Russell
Unless otherwise agreed by the parties, there shall be incorporated in any scheme particulars, offering circular, prospectus, or terms and conditions relating to the Licensed Product or Licensed Fund or to any
units or shares or other form of interest in the Licensed Fund or Licensed Product (or any similar documents relating to the Licensed Product or the shares or units in the Licensed Fund or the terms and conditions for any issue or transfer of
any of them), or in any material published by the Licensee which specifically refers to the Licensed Product or the Licensed Fund a statement in the following terms and substantially the same form: the Milliman S&P 500 & Russell 2000
1-Year Buffer with Stacker Cap Fund – Jan; Milliman S&P 500 & Russell 2000 1-Year Buffer with Stacker Cap Fund – Feb; Milliman S&P 500 & Russell 2000 1-Year Buffer with Stacker Cap Fund – Mar; Milliman S&P 500 & Russell
2000 1-Year Buffer with Stacker Cap Fund – Apr; Milliman S&P 500 & Russell 2000 1-Year Buffer with Stacker Cap Fund – Sep; Milliman S&P 500 & Russell 2000 1-Year Buffer with Stacker Cap Fund – Oct; Milliman S&P 500 &
Russell 2000 1-Year Buffer with Stacker Cap Fund – Nov; and Milliman S&P 500 & Russell 2000 1-Year Buffer with Stacker Cap Fund – Dec (for purposes of this sub-section, collectively, the “Funds”)
have been developed solely by Milliman Financial Risk Management LLC. The Funds are not in any way connected to or sponsored, endorsed, sold or promoted by the London Stock Exchange Group plc and its group undertakings (collectively, the “LSE Group”). FTSE Russell is a trading name of certain of the LSE Group companies.
All rights in the Russell 2000 Index (the “Index”) vest in the relevant LSE Group company which owns the Index. “Russell®”, “FTSE Russell®” is/are a trademark(s) of the
relevant LSE Group company and is/are used by any other LSE Group company under license.
The Index is calculated by or on behalf of FTSE International Limited or its affiliate, agent or partner. The LSE Group does not accept any liability whatsoever to any person arising out of (a) the use of,
reliance on or any error in the Index or (b) investment in or operation of the Funds. The LSE Group makes no claim, prediction, warranty or representation either as to the results to be obtained from the Funds or the suitability of the Index
for the purpose to which it is being put by Milliman Financial Risk Management LLC.
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MSCI Inc.
THE MILLIMAN S&P 500 & MSCI EAFE 1-YEAR BUFFER WITH STACKER CAP FUND – JAN; MILLIMAN S&P 500 & MSCI EAFE 1-YEAR BUFFER WITH STACKER CAP FUND – FEB; MILLIMAN S&P 500 & MSCI EAFE 1-YEAR
BUFFER WITH STACKER CAP FUND – MAR; MILLIMAN S&P 500 & MSCI EAFE 1-YEAR BUFFER WITH STACKER CAP FUND – APR; MILLIMAN S&P 500 & MSCI EAFE 1-YEAR BUFFER WITH STACKER CAP FUND – SEP; MILLIMAN S&P 500 & MSCI EAFE 1-YEAR
BUFFER WITH STACKER CAP FUND – OCT; MILLIMAN S&P 500 & MSCI EAFE 1-YEAR BUFFER WITH STACKER CAP FUND – NOV; AND MILLIMAN S&P 500 & MSCI EAFE 1-YEAR BUFFER WITH STACKER CAP FUND – DEC (FOR PURPOSES OF THIS SUB-SECTION,
COLLECTIVELY, THE “FUNDS”) ARE NOT SPONSORED, ENDORSED, SOLD OR PROMOTED BY MSCI INC. (“MSCI”), ANY OF ITS AFFILIATES, ANY OF ITS DIRECT OR INDIRECT
INFORMATION PROVIDERS OR ANY OTHER THIRD PARTY INVOLVED IN, OR RELATED TO, COMPILING, COMPUTING OR CREATING ANY MSCI INDEX (COLLECTIVELY, THE “MSCI PARTIES”). THE MSCI INDEXES ARE THE EXCLUSIVE
PROPERTY OF MSCI. MSCI, THE MARK(S) AND THE INDEX NAMES ARE TRADEMARKS OR SERVICE MARKS OF MSCI OR ITS AFFILIATES AND HAVE BEEN LICENSED FOR USE FOR CERTAIN LIMITED PURPOSES BY MILLIMAN FINANCIAL RISK MANAGEMENT LLC AND NO OTHER USE OF THESE
MARKS IS PERMITTED WITHOUT A LICENSE FROM MSCI OR ITS AFFILIATES. NONE OF THE MSCI PARTIES MAKES ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, TO THE ISSUER OR OWNERS OF THESE FUNDS OR ANY OTHER PERSON OR ENTITY REGARDING THE
ADVISABILITY OF INVESTING IN FINANCIAL PRODUCTS GENERALLY OR IN THESE FUNDS PARTICULARLY OR THE ABILITY OF ANY MSCI INDEX TO TRACK CORRESPONDING STOCK MARKET PERFORMANCE. THE MSCI INDEXES ARE DETERMINED, COMPOSED AND CALCULATED WITHOUT REGARD
TO THESE FUNDS OR THE ISSUER OR OWNERS OF THESE FUNDS OR ANY OTHER PERSON OR ENTITY. NONE OF THE MSCI PARTIES HAS ANY OBLIGATION TO TAKE THE NEEDS OF THE ISSUER OR OWNERS OF THESE FUNDS OR ANY OTHER PERSON OR ENTITY INTO CONSIDERATION IN
DETERMINING, COMPOSING OR CALCULATING THE MSCI INDEXES. NONE OF THE MSCI PARTIES IS RESPONSIBLE FOR OR HAS PARTICIPATED IN THE DETERMINATION OF THE TIMING OF, PRICES AT, OR QUANTITIES OF THESE FUNDS TO BE ISSUED OR IN THE DETERMINATION OR
CALCULATION OF THE EQUATION BY OR THE CONSIDERATION INTO WHICH THESE FUNDS IS REDEEMABLE. FURTHER, NONE OF THE MSCI PARTIES HAS ANY OBLIGATION OR LIABILITY TO THE ISSUER OR OWNERS OF THESE FUNDS OR ANY OTHER PERSON OR ENTITY IN CONNECTION WITH
THE ADMINISTRATION, MARKETING OR OFFERING OF THESE FUNDS.
ALTHOUGH MSCI SHALL OBTAIN INFORMATION FOR INCLUSION IN OR FOR USE IN THE CALCULATION OF THE MSCI INDEXES FROM SOURCES THAT MSCI CONSIDERS RELIABLE, NONE OF THE MSCI PARTIES WARRANTS OR GUARANTEES THE
ORIGINALITY, ACCURACY OR COMPLETENESS OF ANY MSCI INDEX OR ANY DATA INCLUDED THEREIN. NONE OF THE MSCI PARTIES MAKES ANY WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY THE ISSUER OF THESE FUNDS, OWNERS OF THESE FUNDS, OR ANY
OTHER PERSON OR ENTITY, FROM THE USE OF ANY MARKS, MSCI INDEX, ANY MARKS OR ANY DATA INCLUDED THEREIN. NONE OF THE MSCI PARTIES SHALL HAVE ANY LIABILITY FOR ANY ERRORS, OMISSIONS OR INTERRUPTIONS OF OR IN CONNECTION WITH ANY MARKS, MSCI INDEX
OR ANY DATA INCLUDED THEREIN. FURTHER, NONE OF THE MSCI PARTIES MAKES ANY EXPRESS OR IMPLIED WARRANTIES OF ANY KIND, AND THE MSCI PARTIES HEREBY EXPRESSLY DISCLAIM ALL WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE, WITH
RESPECT TO EACH MARK, MSCI INDEX AND ANY DATA INCLUDED THEREIN. WITHOUT LIMITING ANY OF THE FOREGOING AND TO THE MAXIMUM EXTENT PERMITTED BY LAW, IN NO EVENT SHALL ANY OF THE MSCI PARTIES HAVE ANY LIABILITY FOR ANY DIRECT, INDIRECT, SPECIAL,
PUNITIVE, CONSEQUENTIAL OR ANY OTHER DAMAGES (INCLUDING LOST PROFITS), EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES.
No purchaser, seller or holder of this security, product or fund, or any other person or entity, should use or refer to any MSCI trade name, trademark or service mark to sponsor, endorse, market or promote this
security without first contacting MSCI to determine whether MSCI’s permission is required. Under no circumstances may any person or entity claim any affiliation with MSCI without the prior written permission of MSCI.
624
Nasdaq, Inc.
The Milliman S&P 500 & Nasdaq 1-Year Buffer with Stacker Cap Fund – Jan; Milliman S&P 500 & Nasdaq 1-Year Buffer with Stacker Cap Fund – Feb; Milliman S&P 500 & Nasdaq 1-Year Buffer with Stacker Cap Fund – Mar;
Milliman S&P 500 & Nasdaq 1-Year Buffer with Stacker Cap Fund – Apr; Milliman S&P 500 & Nasdaq 1-Year Buffer with Stacker Cap Fund – Sep; Milliman S&P 500 & Nasdaq 1-Year Buffer with Stacker Cap Fund – Oct; Milliman
S&P 500 & Nasdaq 1-Year Buffer with Stacker Cap Fund – Nov; and Milliman S&P 500 & Nasdaq 1-Year Buffer with Stacker Cap Fund – Dec (for purposes of this sub-section, collectively, the “Products”
are not sponsored, endorsed, sold or promoted by Nasdaq, Inc. or its affiliates (Nasdaq, with its affiliates, are referred to as the “Corporations”). The Corporations have not passed on the legality or
suitability of, or the accuracy or adequacy of descriptions and disclosures relating to, the Products. The Corporations make no representation or warranty, express or implied to the owners of the Products or any member of the public regarding
the advisability of investing in securities generally or in the Products particularly, or the ability of the Nasdaq-100 Index to track general stock market performance. The Corporations’ only relationship to Milliman Financial Risk Management
LLC (“Licensee”) is in the licensing of the Nasdaq®, Nasdaq-100 Index, and certain trade names of the Corporations and the use of the Nasdaq-100 Index which is determined, composed and
calculated by Nasdaq without regard to Licensee or the Products. Nasdaq has no obligation to take the needs of the Licensee or the owners of the Products into consideration in determining, composing or calculating the Nasdaq-100 Index. The
Corporations are not responsible for and have not participated in the determination of the timing of, prices at, or quantities of the Products to be issued or in the determination or calculation of the equation by which the Products are to be
converted into cash. The Corporations have no liability in connection with the administration, marketing or trading of the Products.
The Corporations do not guarantee the accuracy and/or uninterrupted calculation of Nasdaq-100 Index or any data included therein. The Corporations make no warranty, express or
implied, as to results to be obtained by Licensee, owners of the product(s), or any other person or entity from the use of the Nasdaq-100 Index or any data included therein. The Corporations make no express or implied warranties, and
expressly disclaim all warranties of merchantability or fitness for a particular purpose or use with respect to the Nasdaq-100 Index ® or any data included therein. Without limiting any of the foregoing, in no event shall the Corporations have any liability for any lost profits or special, incidental, punitive, indirect, or consequential
damages, even if notified of the possibility of such damages.
625
This Prospectus is intended for use in connection with variable contracts. The Funds’ SAI contains more
details about the Funds and is incorporated by reference into this Prospectus (is legally a part of this Prospectus). Once issued, additional information about each Fund’s investments will also be available in the Funds’ annual and semi-annual
reports to shareholders. In a Fund’s annual report, you will find a discussion of the market conditions and investment strategies that significantly affected the Fund’s performance during its last fiscal year.
The Funds’ SAI is available, and the annual and semi-annual reports will be available once issued, without charge, upon request, by:
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calling [_________];
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visiting [_________]; or
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contacting your insurance company or other financial intermediary.
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Reports and other information about the Funds are also available on the EDGAR Database on the SEC’s Internet site at http://www.sec.gov, and copies of
this information may be obtained, after paying a duplicating fee, by electronic request at the following e-mail address: publicinfo@sec.gov.
SEC 1940 Act file number: 811-23710.
The information in this Statement of Additional Information is not complete and may be changed. We may not sell
these securities until the registration statement filed with the Securities and Exchange Commission is effective. This Statement of Additional Information is not an offer to sell these securities and is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
Milliman Variable Insurance Trust
[______], 2021
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Milliman S&P 500 6-Month Buffer with Par Up Strategy
Milliman S&P 500 6-Month Buffer with Par Up Fund - Jan/Jul
Milliman S&P 500 6-Month Buffer with Par Up Fund - Feb/Aug
Milliman S&P 500 6-Month Buffer with Par Up Fund - Mar/Sep
Milliman S&P 500 6-Month Buffer with Par Up Fund - Apr/Oct
Milliman S&P 500 6-Month Buffer with Par Up Fund - May/Nov
Milliman S&P 500 6-Month Buffer with Par Up Fund - Jun/Dec
Milliman S&P 500 6-Month Par Down with Par Up Strategy
Milliman S&P 500 6-Month Par Down with Par Up Fund - Jan/Jul
Milliman S&P 500 6-Month Par Down with Par Up Fund - Feb/Aug
Milliman S&P 500 6-Month Par Down with Par Up Fund - Mar/Sep
Milliman S&P 500 6-Month Par Down with Par Up Fund - Apr/Oct
Milliman S&P 500 6-Month Par Down with Par Up Fund - May/Nov
Milliman S&P 500 6-Month Par Down with Par Up Fund - Jun/Dec
Milliman S&P 500 1-Year Buffer with Spread Strategy
Milliman S&P 500 1-Year Buffer with Spread Fund - Jan
Milliman S&P 500 1-Year Buffer with Spread Fund - Feb
Milliman S&P 500 1-Year Buffer with Spread Fund - Mar
Milliman S&P 500 1-Year Buffer with Spread Fund - Apr
Milliman S&P 500 1-Year Buffer with Spread Fund - Sep
Milliman S&P 500 1-Year Buffer with Spread Fund - Oct
Milliman S&P 500 1-Year Buffer with Spread Fund - Nov
Milliman S&P 500 1-Year Buffer with Spread Fund - Dec
Milliman S&P 500 1-Year Floor with Par Up Strategy
Milliman S&P 500 1-Year Floor with Par Up Fund - Jan
Milliman S&P 500 1-Year Floor with Par Up Fund - Feb
Milliman S&P 500 1-Year Floor with Par Up Fund - Mar
Milliman S&P 500 1-Year Floor with Par Up Fund - Apr
Milliman S&P 500 1-Year Floor with Par Up Fund - Sep
Milliman S&P 500 1-Year Floor with Par Up Fund - Oct
Milliman S&P 500 1-Year Floor with Par Up Fund - Nov
Milliman S&P 500 1-Year Floor with Par Up Fund - Dec
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Milliman S&P 500 & Nasdaq 1-Year Buffer with Stacker Cap Strategy
Milliman S&P 500 & Nasdaq 1-Year Buffer with Stacker Cap Fund - Jan
Milliman S&P 500 & Nasdaq 1-Year Buffer with Stacker Cap Fund - Feb
Milliman S&P 500 & Nasdaq 1-Year Buffer with Stacker Cap Fund - Mar
Milliman S&P 500 & Nasdaq 1-Year Buffer with Stacker Cap Fund - Apr
Milliman S&P 500 & Nasdaq 1-Year Buffer with Stacker Cap Fund - Sep
Milliman S&P 500 & Nasdaq 1-Year Buffer with Stacker Cap Fund - Oct
Milliman S&P 500 & Nasdaq 1-Year Buffer with Stacker Cap Fund - Nov
Milliman S&P 500 & Nasdaq 1-Year Buffer with Stacker Cap Fund - Dec
Milliman S&P 500 & Russell 2000 1-Year Buffer with Stacker Cap Strategy
Milliman S&P 500 & Russell 2000 1-Year Buffer with Stacker Cap Fund - Jan
Milliman S&P 500 & Russell 2000 1-Year Buffer with Stacker Cap Fund - Feb
Milliman S&P 500 & Russell 2000 1-Year Buffer with Stacker Cap Fund - Mar
Milliman S&P 500 & Russell 2000 1-Year Buffer with Stacker Cap Fund - Apr
Milliman S&P 500 & Russell 2000 1-Year Buffer with Stacker Cap Fund - Sep
Milliman S&P 500 & Russell 2000 1-Year Buffer with Stacker Cap Fund - Oct
Milliman S&P 500 & Russell 2000 1-Year Buffer with Stacker Cap Fund - Nov
Milliman S&P 500 & Russell 2000 1-Year Buffer with Stacker Cap Fund - Dec
Milliman S&P 500 & MSCI EAFE 1-Year Buffer with Stacker Cap Strategy
Milliman S&P 500 & MSCI EAFE 1-Year Buffer with Stacker Cap Fund - Jan
Milliman S&P 500 & MSCI EAFE 1-Year Buffer with Stacker Cap Fund - Feb
Milliman S&P 500 & MSCI EAFE 1-Year Buffer with Stacker Cap Fund - Mar
Milliman S&P 500 & MSCI EAFE 1-Year Buffer with Stacker Cap Fund - Apr
Milliman S&P 500 & MSCI EAFE 1-Year Buffer with Stacker Cap Fund - Sep
Milliman S&P 500 & MSCI EAFE 1-Year Buffer with Stacker Cap Fund - Oct
Milliman S&P 500 & MSCI EAFE 1-Year Buffer with Stacker Cap Fund - Nov
Milliman S&P 500 & MSCI EAFE 1-Year Buffer with Stacker Cap Fund - Dec
Milliman S&P 500 6-Year Buffer with Par Up Strategy
Milliman S&P 500 6-Year Buffer with Par Up Fund - Jan (I)
Milliman S&P 500 6-Year Buffer with Par Up Fund - Apr (I)
Milliman S&P 500 6-Year Buffer with Par Up Fund - Oct (I)
Milliman S&P 500 6-Year Par Down with Par Up Strategy
Milliman S&P 500 6-Year Par Down with Par Up Fund - Jan (I)
Milliman S&P 500 6-Year Par Down with Par Up Fund - Apr (I)
Milliman S&P 500 6-Year Par Down with Par Up Fund - Oct (I)
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This Statement of Additional Information (“SAI”) relates only to the series of Milliman
Variable Insurance Trust (the “Trust”) that are listed above (each, a “Fund,” and, collectively, the “Funds”). Each Fund
currently offers only Class 3 shares, and only to insurance company separate accounts funding variable annuity contracts and variable life insurance policies and other qualified investors. You cannot purchase Fund shares directly. Please contact
your insurance company or other financial intermediary regarding how to invest in shares of the Funds.
This SAI is not a prospectus but is incorporated by reference into the Prospectus for the Funds dated [______], 2021 (the “Prospectus”). This SAI contains information in addition to the information set forth in the Prospectus and should be read in conjunction with it. Terms not defined in this SAI have the meanings assigned to them
in the Prospectus.
A copy of the Prospectus or the applicable Fund’s Summary Prospectus may be obtained, without charge, by calling [________], visiting
[________], or writing to the Trust, [________]. Once available, you may also obtain a copy of a Fund’s annual or semi-annual report to shareholders at no charge by request to the Fund at the address or phone number noted above.
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Table of Contents
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Trust History and Fund Classification
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1
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Description of the Funds and their Investments and Risks
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1
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Investment Restrictions
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18
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Portfolio Turnover
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19
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Disclosure of Portfolio Holdings
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19
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Trustees and Executive Officers of the Trust
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20
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Investment Advisory and Other Services
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24
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Distribution and Servicing of Shares
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26
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Brokerage Allocation and Other Practices
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28
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Purchases, Redemptions and Pricing of Shares
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29
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Additional Information Concerning the Trust
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31
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Tax Status
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32
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Other Tax Consequences
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36
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Tax Consequences to Shareholders
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40
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Control Persons and Principal Holders of Securities
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40
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Financial Statements
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40
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Appendix A – Debt Ratings
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A-1
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Appendix B – Proxy Voting Policies
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B-1
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Trust History and Fund Classification
The Trust is an open-end management investment company organized under the laws of the state of Delaware on November 2, 2020. Each
Fund is classified as “non-diversified” for purposes of the Investment Company Act of 1940, as amended (the “1940 Act”), which means each Fund can invest a greater percentage of its assets in a small number
of issuers or any one issuer than a diversified fund can.
Description of the Funds and Their Investments and Risks
Set forth below are descriptions of the various types of securities and other investments in which the Funds may invest, as well as
the investment techniques that Milliman Financial Risk Management LLC (“Milliman”), the Funds’ investment adviser, may use in managing the Funds. Descriptions of the associated risks are also included below.
This section supplements the discussion of principal investment strategies and principal risks contained in the Prospectus, and therefore you should carefully review the Prospectus before making an investment in a Fund.
Each Fund is permitted to invest in any of the below investments, and Milliman may utilize any of the below investment techniques,
with respect to any Fund unless otherwise indicated. Milliman may also invest in other types of investments and use other investment techniques in managing the Funds, including certain investments and investment techniques not described below. Each
Fund’s investments and the investment techniques employed by Milliman with respect to a particular Fund will be subject to the limitations imposed by that Fund’s investment objective, policies and restrictions, as described in the Prospectus and/or
this SAI, as well as the applicable federal securities laws. Any percentage limitations relating to a Fund’s investments that are identified in the Prospectus or this SAI apply at the time of investment, and subsequent changes resulting from market
fluctuations will not require the Fund to sell any portfolio security or other investment.
As described in the Prospectus, the Funds will invest in shares of exchange-traded funds (each, an “Underlying ETF,” and, collectively, the “Underlying ETFs”), to seek to achieve their investment objectives. Accordingly, certain information below applies to the Underlying ETFs (and their
own separate holdings) in which the Funds invest.
Derivatives
General Discussion. Derivatives are financial instruments whose value
depends on, or is derived from, the value of one or more underlying assets, reference rates, indices or other market factors (each, a “reference asset,” and, collectively, “reference assets”). Derivative instruments can provide an efficient means to gain or reduce exposure to the value of a reference asset without actually owning or selling the reference asset. Derivatives include swaps, options
contracts, futures contracts and forward foreign currency contracts, among others. Some derivatives, such as futures contracts and certain types of options contracts, are traded on U.S. commodity and securities exchanges, while other derivatives,
such as many types of swap agreements, are privately negotiated and entered into in the over-the-counter (“OTC”) market.
Milliman intends to use options contracts, primarily FLexible EXchange® Options (“FLEX
Options”), as further described below, to seek to achieve each Fund’s investment objective. While the Funds will primarily transact in FLEX Options, each Fund may utilize OTC options if no FLEX Options are available or appropriate for
use in that Fund. An options contract generally is a contract that gives the purchaser of the option, in return for the premium paid, the right, but not the obligation, to buy from (in the case of a call) or sell to (in the case of a put) the
writer (seller) of the option at the exercise price during the term of the option (for American style options) or on a specified date (for European style options), the reference asset underlying the option (or delivery of a cash settlement
price, in the case of certain options, such as index options and other cash-settled options). Option transactions present the possibility of large amounts of exposure (or leverage), which may result in a Fund’s net asset value (“NAV”) being more sensitive to changes in the value of the option.
The value of an options contract will reflect, among other things, the current market value of the reference asset, the time
remaining until expiration, the relationship of the exercise price to the market price of the reference asset, the price volatility of the reference asset and general market and interest rate conditions. Options contracts may be listed on an
exchange or traded in the OTC markets. Listed options are tri-party contracts (i.e., performance of the obligations of the purchaser and seller are guaranteed by the exchange or clearing corporation) and
have standardized strike prices and expiration dates. OTC options are two-party contracts with negotiated strike prices and expiration dates and differ
1
from exchange-traded options in that OTC options are transacted with dealers directly and not through a clearing corporation.
The FLEX Options in which the Funds invest are customizable options contracts that are listed on U.S. national securities
exchanges and guaranteed for settlement by the Options Clearing Corporation (“OCC”). The OCC guarantees performance by each of the counterparties to the FLEX Options, becoming the buyer for every seller
and the seller for every buyer, with the goal of protecting clearing members and options traders from counterparty risk. Options contracts provide investors with the ability to customize assets and indices referenced by the options, exercise
prices, exercise styles (i.e., American style or European style) and expiration dates, while achieving price discovery (i.e., determining market prices) in
competitive, transparent auctions markets. Each options contract entitles the holder thereof to purchase (for call options) or sell (for put options) the reference asset at the strike price.
The reference assets for the Funds’ options contracts will generally include underlying indices and/or exchange-traded funds (“ETFs,” and, each, an “ETF”), as further described in the Prospectus. As such, the value of each Fund’s options positions will fluctuate with changes in the value of
each applicable underlying index and/or each applicable ETF’s share price (which fluctuates based on the underlying assets held by the ETF). Options contracts on these reference assets will give the holder of the options contract (whether the
Fund, if the Fund is purchasing, or the counterparty, if the Fund is writing) the right to receive an amount of cash upon exercise of the options contract. Receipt of this cash amount will depend upon the applicable underlying index’s value or
ETF’s share price upon which the options contract is based being greater than (in the case of a call) or less than (in the case of put) the exercise price of the options contract.
Because options involve leverage (i.e., that the amount invested may be smaller than the
full economic exposure created by the derivative instrument, such that a Fund could lose more than it invested), federal securities laws, regulations and guidance may require a Fund to earmark assets, to reduce the risks associated with its
options positions, or to otherwise hold instruments that offset the Fund’s current obligations under the options contracts. This process is known as “cover.” A Fund will not enter into any options contract unless it can comply with applicable SEC
guidance regarding cover, and, if SEC guidance so requires, the Fund will earmark cash or liquid assets with a value at least sufficient to cover its current obligations under an options contract or otherwise cover the transaction in accordance
with applicable SEC guidance. If a large portion of a Fund’s assets is used for cover, it could affect portfolio management or the Fund’s ability to meet redemption requests or other current obligations. Leverage may result in a Fund’s NAV being
more sensitive to changes in the value of the reference asset.
Because the options contracts in which the Funds transact are contractually required to settle in cash, each Fund is permitted
to set aside liquid assets in an amount equal to the Fund’s daily mark-to-market (net) obligations (i.e., the Fund’s daily net liabilities), if any, rather than such options’ full notional value. By
setting aside assets equal to only its net obligations under the options contracts, a Fund will have the ability to employ leverage to a greater extent than if the Fund were required to segregate assets equal to the full notional value of such
contracts.
The Funds reserve the right to modify their asset segregation policies in the future to comply with any changes in the positions
articulated from time to time by the SEC or its staff, including to comply with new rule 18f-4 (“Rule 18f-4”) under the 1940 Act (see “General Risks Associated with Derivatives – Risks of Regulation of
Derivatives” below).
Understanding Options Writing. As the writer (seller) of
an option, a Fund may have no control over when the reference asset must be sold (in the case of a call option) or purchased (in the case of a put option), if the option was structured as an American style option, because the option purchaser may
notify the Fund of exercise at any time prior to the expiration date of the option. In addition, if the option is cash-settled instead of deliverable, the Fund is obligated to pay the option purchaser the difference between the exercise price and
the value of the reference asset, instead of selling or purchasing the reference asset, if the option is exercised. Whether or not an option expires unexercised, the writer retains the amount of the premium.
A Fund will generally write a put option at an exercise price that, reduced by the premium received on the
option, reflects the price it is willing to pay for the reference asset. In return for the premium received for writing a put option, the Fund assumes the risk that the price of the reference asset will decline below the exercise price, in which
case the put option may be exercised and the Fund may suffer a loss. In return for the premium received for writing a call option on a reference asset, the Fund foregoes the opportunity for profit from a price increase in the reference asset
2
above the exercise price so long as the option remains open, but retains the risk of loss should the price of
the reference asset decline.
If an option that a Fund has written expires, the Fund will realize a gain in the amount of the premium;
however, such gain may be offset by a decline in the market value of the reference asset during the option period. If a call option is exercised, a Fund will realize a gain or loss from the sale of the reference asset, which will be increased or
offset by the premium received. The obligation imposed upon the writer of an option is terminated upon the expiration of the option, or such earlier time at which a Fund effects a closing purchase transaction by purchasing an option (put or call,
as the case may be) identical to that previously sold. However, once a Fund has received an exercise notice, it cannot effect a closing purchase transaction in order to terminate its obligation under the options contract and must deliver (for a
call) or purchase (for a put) the reference asset at the exercise price (if deliverable) or pay the difference between the exercise price and the value of the reference asset (if cash-settled).
Understanding Options Trading Strategies: Straddles, Spreads and Collars. Each Fund
may enter into straddles, spreads and collars. In “spread” transactions, a Fund buys and writes a put, or buys and writes a call, on the same reference asset with the options having different exercise prices, expiration dates, or both. In
“straddles,” a Fund purchases a put option and a call option, or writes a put option and a call option, on the same reference asset with the same expiration date and typically the same exercise price. When a Fund engages in spread and straddle
transactions, it seeks to profit from differences in the option premiums paid and received, and in the market prices of the related options positions when they are closed out or sold. Because these transactions require a Fund to buy and/or write
more than one option simultaneously, the Fund’s ability to enter into such transactions, and to liquidate its positions when necessary or deemed advisable, may be more limited than if the Fund were to buy or sell a single option. Similarly, costs
incurred by a Fund in connection with these transactions will, in many cases, be greater than if the Fund were to buy or sell a single option. A “collar” position combines a put option purchased by a Fund (the right of the Fund to sell a specific
reference asset within a specified period of time) with a call option that is written by the Fund (the right of the counterparty to buy the same reference asset) in a single instrument. A Fund’s right to sell the reference asset is typically set at
a price that is below the counterparty’s right to buy the reference asset. Thus, the combined position “collars” the performance of the reference asset, providing protection from depreciation below the price specified in the put option, and
allowing for participation in any appreciation up to the price specified by the call option.
General Risks Associated with Derivatives. The use of derivatives,
including options contracts, may involve certain risks, as described below.
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Counterparty Risk. The risk that a counterparty under a derivatives agreement will not live up to its obligations, including because of
the counterparty’s bankruptcy or insolvency. Certain agreements may not contemplate delivery of collateral to support fully a counterparty’s contractual obligation; therefore, a Fund might need to rely on contractual remedies to satisfy a
counterparty’s full obligation. As with any contractual remedy, there is no guarantee that a Fund will be successful in pursuing such remedies, particularly in the event of the counterparty’s bankruptcy. The agreement may allow for
netting of the counterparty’s obligations with respect to a specific transaction, in which case a Fund’s obligation or right will be the net amount owed to or by the counterparty. If a counterparty’s creditworthiness declines, the value
of the derivative would also likely decline, potentially resulting in losses to the applicable Fund.
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Leverage Risk. Leverage exists when a Fund can lose more than it originally invested because it purchases or sells an instrument, or
enters into a transaction, without investing an amount equal to the full economic exposure of the instrument or transaction. Leverage may cause a Fund’s NAV to be more volatile because leverage may exaggerate the effect of any increase or
decrease in the value of the Fund’s portfolio holdings. The use of some derivatives may result in economic leverage, which does not result in the possibility of a Fund incurring obligations beyond its initial investment, but that
nonetheless permits the Fund to gain exposure that is greater than would be the case in an unlevered instrument.
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Liquidity Risk. If a derivative transaction is particularly large or if the relevant market is illiquid, it may not be possible to
initiate a transaction or liquidate a position at an advantageous time or price, which may result in significant losses to a Fund.
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Pricing Risk. The risk that the value of a particular derivative does not move in tandem or as otherwise expected relative to the
corresponding reference asset.
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Risks of Regulation of Derivatives. On October 28, 2020, the SEC adopted Rule 18f-4, which governs the use of derivatives by
registered investment companies. Rule 18f-4 imposes limits on the amount of derivatives a fund can enter into and replaces the asset segregation framework used by funds to comply with Section 18 of the 1940 Act. More specifically, Rule
18f-4 will generally require a fund that enters into derivatives transactions (other than those that qualify as “limited derivatives users”) to: (i) adopt and implement a written derivatives risk management program; (ii) comply with
“value at risk” or “VaR” limitations (which is an estimate of potential losses on an instrument or portfolio over a given time horizon and at a specified confidence level) in lieu of existing asset segregation requirements; and (iii)
comply with new board reporting and oversight, as well as recordkeeping and certain other, requirements. In addition, Rule 18f-4 provides special treatment for reverse repurchase agreements and similar financing transactions and
unfunded commitments. The Funds will be required to comply with Rule 18f-4 starting on August 19, 2022. In addition, the SEC, Commodity Futures Trading Commission (“CFTC”) and the exchanges are
authorized to take extraordinary actions in the event of a market emergency, including, for example, the implementation or reduction of speculative position limits, the implementation of higher margin requirements, the establishment of
daily price limits and the suspension of trading. It is not possible to predict fully the effects of current or future regulation. However, it is possible that developments in government regulation of various types of derivative
instruments, such as speculative position limits on certain types of derivatives, or limits or restrictions on the counterparties with which a Fund engages in derivative transactions, may limit or prevent the Fund from using or limit
the Fund’s use of these instruments effectively as a part of its investment strategy, and could adversely affect the Fund’s ability to achieve its investment objective. New requirements, even if not directly applicable to a Fund, may
increase the cost of the Fund’s investments and the cost of doing business generally.
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Risks Related to Position Limits. Each of the exchanges on which the Funds’ FLEX Options are
traded has established limitations governing the maximum number of call or put FLEX Options on the same underlying asset that may be bought or written by a single investor, whether acting alone or in concert with others (regardless of
whether such FLEX Options are written on the same or different exchanges or are held or written on one or more accounts, or through one or more brokers). Under these limitations, FLEX Options positions of all investment companies
advised by Milliman are combined for purposes of these limits. Pursuant to these limitations, an exchange may order the liquidation of FLEX Options positions and may impose other sanctions or restrictions. These position limits may
restrict the number of FLEX Options that Milliman may buy or sell on behalf of the Funds.
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Commodity Exchange Act (“CEA”) Regulation and Exclusions. With
respect to each Fund, Milliman has claimed an exclusion from the definition of “commodity pool operator” (“CPO”) under the CEA and the rules of the CFTC and, therefore, Milliman is not subject to CFTC
registration or regulation as a CPO with respect to any Fund. In addition, with respect to each Fund, Milliman is relying upon a related exclusion from the definition of “commodity trading advisor” (“CTA”)
under the CEA and the rules of the CFTC.
The terms of the CPO exclusion require each Fund, among other things, to adhere to certain limits on its investments in “commodity
interests.” Commodity interests include commodity futures, commodity options and swaps, which in turn include non-deliverable currency forward contracts. Because Milliman and each Fund intend to comply with the terms of the CPO exclusion, each
Fund may, in the future, need to adjust its investment strategies, consistent with its investment goal, to limit its investments in these types of instruments. The Funds are not intended as vehicles for trading in the commodity futures, commodity
options or swaps markets. The CFTC has neither reviewed nor approved Milliman’s reliance on these exclusions, or the Funds, their investment strategies, the Prospectus or this SAI.
Generally, the exclusion from CPO regulation on which Milliman relies requires each Fund to meet one of the following tests for
its commodity interest positions, other than positions entered into for bona fide hedging purposes (as defined in the rules of the CFTC): either (1) the aggregate initial margin and premiums required to establish the Fund’s positions in commodity
interests may not exceed 5% of the liquidation value of the Fund’s portfolio (after taking into account unrealized profits and unrealized losses on any such positions); or (2) the aggregate net notional value of the Fund’s commodity interest
positions, determined at the time the most recent such position was established, may not exceed 100% of the liquidation value of the Fund’s portfolio (after taking into account unrealized profits and
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unrealized losses on any such positions). In addition to meeting one of these trading limitations, each Fund may not be marketed
as a commodity pool or otherwise as a vehicle for trading in the commodity futures, commodity options or swaps markets. If, in the future, a Fund no longer can satisfy these requirements, Milliman would withdraw its notice claiming an exclusion
from the definition of a CPO with respect to that Fund, and Milliman would be subject to registration and regulation as a CPO with respect to the Fund, in accordance with CFTC rules that apply to CPOs of registered investment companies.
Generally, these rules allow for substituted compliance with CFTC disclosure and shareholder reporting requirements, based on Milliman’s compliance with comparable SEC requirements. However, as a result of CFTC regulation with respect to the
Funds, the Funds may incur additional compliance and other expenses.
Exchange-Traded Funds
General Discussion of ETFs. ETFs are registered investment companies (i)
that issue and redeem their shares only in creation units (i.e., a specified number of shares, such 25,000) to and from, respectively, authorized participants (“APs”)
in exchange for a basket securities, assets or other positions, including cash, and (ii) whose shares are listed on a national securities exchange and trade at market-determined prices. Therefore, a Fund’s purchase of shares of an ETF are generally
subject to the restrictions on investments in other investment companies discussed below.
APs are members or participants of a clearing agency registered with the SEC, which have entered into a written agreement with the
ETF or one of its service providers, that allows the APs to place orders for the purchase and redemption of creation units. Because APs have no obligation to submit creation or redemption orders, however, there is no assurance that APs will
establish, or maintain, an active trading market for an ETF’s shares. In addition, to the extent that an AP exits the business or is unable or unwilling to proceed with creation and/or redemption orders with respect to an ETF, and no other AP is
able or willing to step forward to create or redeem shares of that ETF, the ETF’s shares may be more likely to trade at a premium or discount to NAV and possibly face trading halts and/or delisting. ETF shares are generally purchased and sold by
all other investors, such as the Funds, in the secondary market, which allows investors to purchase and sell ETF shares at their market prices throughout the day. Moreover, trading of an ETF’s shares may be halted if the listing exchange’s
officials deem such action to be appropriate, the shares are delisted from the exchange, or the activation of market-wide “circuit breakers” (which are tied to large decreases in stock prices) halts trading generally. Investments in ETFs involve
the same risks associated with a direct investment in the types of securities, assets or other positions in which the ETFs invest. In addition, when a Fund purchases shares of an ETF, the Fund will indirectly bear its proportionate share of the
advisory fees and other operating expenses of such ETF.
Discussion of the Underlying ETFs. The Underlying ETFs in which the
Funds invest may invest in any of the debt investments described below, and may also use various derivative instruments, such as futures contracts, options contracts and swaps, to achieve their investment objectives. The Underlying ETFs may also
invest in other types of investments and use other investment techniques, including certain investments and investment techniques not described in this SAI.
Restrictions on Investments in Other Investment Companies, including ETFs. The 1940 Act imposes the following restrictions on a Fund’s investments in other investment companies, including ETFs: (i) a Fund may not purchase more than 3% of the total outstanding voting stock of another
investment company; (ii) a Fund may not invest more than 5% of its total assets in securities issued by another investment company; and (iii) a Fund may not invest more than 10% of its total assets in securities issued by other investment
companies. The 1940 Act and related rules provide certain exemptions from these restrictions. Absent a Fund’s reliance on any such exemptions, these limitations may prevent a Fund from allocating its
investments in the manner that Milliman considers optimal, or cause Milliman to select another investment company or other direct investment as an alternative.
In October 2020, the SEC adopted a new rule that will impact the ability of a Fund to invest in, or remain invested in, other
investment companies. The SEC adopted rule 12d1-4 under the 1940 Act (“Rule 12d1-4”) to create a regulatory framework that allows acquiring funds to invest in the securities of acquired funds in excess of
the limitations described above, subject to certain limitations and conditions. Rule 12d1-4 also provides that, prior to acquiring securities of an acquired fund that exceed the limitations described above, an acquiring fund must enter into a fund
of funds investment agreement with the acquired fund as outlined in Rule 12d1-4. Funds that intend to purchase other investment companies in excess of the foregoing limitations must comply with Rule 12d1-4 by January 19, 2022. A
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Fund investment in another investment company may also be limited by other diversification requirements under the 1940 Act and the
Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”).
Debt Investments
Bonds. A bond is an interest-bearing security issued by a U.S. or
non-U.S. company, or U.S. or non-U.S. governmental unit, which is generally used by the issuer to borrow money from investors. The issuer of a bond has a contractual obligation to pay interest at a stated rate on specific dates and to repay
principal (the bond’s face value) periodically or on a specified maturity date. An issuer may have the right to redeem or “call” a bond before maturity, in which case a Fund or an Underlying ETF may have to reinvest the proceeds at lower market
rates. Similarly, a Fund or an Underlying ETF may have to reinvest interest income or payments received when a bond matures, sometimes at a lower market rate. Most bonds bear interest income at a “coupon” rate that is fixed for the life of the
bond.
The value of a fixed-rate bond usually rises when market interest rates fall and falls when market interest rates rise. Accordingly,
a fixed-rate bond’s yield (income as a percent of the bond’s current value) may differ from its coupon rate as its value rises or falls. When an investor purchases a fixed-rate bond at a price that is greater than its face value, the investor is
purchasing the bond at a premium. Conversely, when an investor purchases a fixed-rate bond at a price that is less than its face value, the investor is purchasing the bond at a discount. Fixed-rate bonds that are purchased at a discount pay less
current income than securities with comparable yields that are purchased at face value, with the result that prices for such fixed-rate securities can be more volatile than prices for such securities that are purchased at face value.
Other types of bonds bear interest at an interest rate that is adjusted periodically, which are known as floating or variable rate
bonds. Interest rates on floating or variable rate bonds may be higher or lower than current market rates for fixed-rate bonds of comparable quality with similar maturities. Because of their adjustable interest rates, the values of floating or
variable rate bonds fluctuate much less in response to market interest rate movements than the values of fixed-rate bonds; however, the values of floating rate bonds may decline if their interest rates do not rise as much, or as quickly, as
interest rates in general. A Fund or an Underlying ETF may treat some of these bonds as having a shorter maturity for purposes of calculating the weighted average maturity of its investment portfolio. Generally, prices of higher quality issues tend
to fluctuate less with changes in market interest rates than prices of lower quality issues and prices of longer maturity issues tend to fluctuate more than prices of shorter maturity issues.
Bonds may be senior or subordinated obligations. Senior obligations generally have the first claim on an issuer’s earnings and
assets and, in the event of liquidation, are paid before subordinated obligations. Bonds may be unsecured (backed only by the issuer’s general creditworthiness) or secured (backed by specified collateral).
U.S. Corporate Debt Obligations. U.S. corporate debt obligations
include, among others, bonds, commercial paper, notes, debentures, variable rate demand notes, master notes, funding agreements and other short-term corporate instruments, issued or guaranteed by corporations that are denominated in U.S. dollars.
Commercial paper consists of short-term promissory notes issued by corporations. Commercial paper may be traded in the secondary market after its issuance. Variable rate demand notes are securities with a variable interest which is readjusted on
pre-established dates. Variable rate demand notes are subject to payment of principal and accrued interest (usually within seven days) on a Fund’s or an Underlying ETF’s demand. Master notes are negotiated notes that permit the investment of
fluctuating amounts of money at varying rates of interest pursuant to arrangements with issuers who meet the credit quality criteria of a Fund or an Underlying ETF. The interest rate on a master note may fluctuate based upon changes in specified
interest rates or be reset periodically according to a prescribed formula or may be a set rate. Although there is no secondary market in master notes, if such notes have a demand feature, the payee may demand payment of the principal amount of the
note upon relatively short notice. Funding agreements are agreements between an insurance company and a Fund or an Underlying ETF covering underlying demand notes. Although there is no secondary market in funding agreements, if the underlying notes
have a demand feature, the payee may demand payment of the principal amount of the note upon relatively short notice. Master notes and funding agreements are generally illiquid and therefore subject to a Fund’s or an Underlying ETF’s percentage
limitation for illiquid investments.
U.S. Government Debt Obligations. U.S. Government debt obligations are
obligations issued or guaranteed by the U.S. Government, its agencies and instrumentalities, and include bills, notes and bonds issued by the U.S. Treasury, as well as “stripped” or “zero coupon” U.S. Treasury obligations. U.S. Government debt
obligations may be: (i) supported by the full faith and credit of the U.S. Treasury; (ii) supported by the right of the issuer to borrow from the
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U.S. Treasury; (iii) supported by the discretionary authority of the U.S. Government to purchase the agency’s obligations; or (iv)
supported only by the credit of the instrumentality. There is a risk that the U.S. Government may choose not to provide financial support to U.S. Government-sponsored agencies or instrumentalities if it is not legally obligated to do so. In that
case, if the issuer were to default, a Fund or an Underlying ETF holding securities of such issuer might not be able to recover its investment from the U.S. Government. For example, while the U.S. Government has provided financial support to
Federal National Mortgage Association (“FNMA”) and Federal Home Loan Mortgage Corporation (“FHLMC”), no assurance can be given that the U.S. Government will always do
so, since the U.S. Government is not so obligated by law. There also is no guarantee that the government would support Federal Home Loan Banks. Accordingly, securities of FNMA, FHLMC and Federal Home Loan Banks, and other agencies, may involve a
risk of non-payment of principal and interest. Any downgrade of the credit rating of the securities issued by the U.S. Government may result in a downgrade of securities issued by its agencies or instrumentalities, including government-sponsored
entities.
Money Market Instruments. Money market instruments are generally
short-term investments that may include, but are not limited to: (i) shares of money market funds; (ii) obligations issued or guaranteed by the U.S. Government, its agencies or instrumentalities (including government-sponsored enterprises); (iii)
negotiable certificates of deposit, bankers’ acceptances, fixed-time deposits and other obligations of U.S. and non-U.S. banks (including non-U.S. branches) and similar institutions; (iv) commercial paper rated, at the date of purchase, “Prime-1”
by Moody's Investors Service, Inc. (“Moody's”), “F-1” by Fitch Ratings, Inc. (“Fitch”) or “A-1” by S&P Global Ratings Services (“S&P”),
or if unrated, determined to be of comparable quality by Milliman or, with respect to an Underlying ETF, its investment adviser; (v) non-convertible corporate debt securities (e.g., bonds and debentures)
with remaining maturities at the date of purchase of not more than 397 days and that have been determined to present minimal credit risks, in accordance with the requirements set forth in Rule 2a-7 under the 1940 Act; (vi) repurchase agreements;
and (vii) short-term U.S. dollar-denominated obligations of non-U.S. banks (including U.S. branches) that, in the opinion of Milliman or, with respect to an Underlying ETF, its investment adviser, are of comparable quality to obligations of U.S.
banks that may be purchased by a Fund or an Underlying ETF, respectively.
Inflation-Indexed Bonds. Inflation-indexed bonds are fixed income
securities whose principal value is periodically adjusted according to the rate of inflation. Two structures are common: (i) one commonly used by the U.S. Treasury and some other issuers, which uses a structure that accrues inflation into the
principal value of the bond; and (ii) another most often used by other issuers, which pays out the Consumer Price Index accruals as part of a semiannual coupon. Inflation-indexed securities issued by the U.S. Treasury have maturities of five, 10 or
30 years, although it is possible that securities with other maturities will be issued in the future. The U.S. Treasury securities pay interest on a semi-annual basis, equal to a fixed percentage of the inflation-adjusted principal amount.
If the periodic adjustment rate measuring inflation falls, the principal value of inflation-indexed bonds will be adjusted downward,
and consequently the interest payable on these securities (calculated with respect to a smaller principal amount) will be reduced. Repayment of the original bond principal upon maturity (as adjusted for inflation) is guaranteed in the case of U.S.
Treasury inflation-indexed bonds, even during a period of deflation. However, the current market value of the bonds is not guaranteed and will fluctuate. Certain inflation-related bonds, however, may not provide a similar guarantee. If a guarantee
of principal is not provided, the adjusted principal value of the bond repaid at maturity may be less than the original principal.
The value of inflation-indexed bonds is expected to change in response to changes in real interest rates. Real interest rates in
turn are tied to the relationship between nominal interest rates and the rate of inflation. Therefore, if inflation were to rise at a faster rate than nominal interest rates, real interest rates might decline, leading to an increase in value of
inflation-indexed bonds. In contrast, if nominal interest rates increased at a faster rate than inflation, real interest rates might rise, leading to a decrease in value of inflation-indexed bonds. While these securities are expected to be
protected from long-term inflationary trends, short-term increases in inflation may lead to a decline in value. If interest rates rise due to reasons other than inflation (for example, due to changes in currency exchange rates), investors in these
securities may not be protected to the extent that the increase is not reflected in the bond’s inflation measure.
The periodic adjustment of U.S. inflation-indexed bonds is tied to the Consumer Price Index for Urban Consumers (“CPI-U”), which is calculated monthly by the U.S. Bureau of Labor Statistics. The CPI-U is a measurement of changes in the cost of living, made up of components such as housing, food, transportation and energy.
Inflation-indexed bonds issued by a foreign government are generally adjusted to reflect a comparable inflation index, calculated by that government. There can be no assurance that the CPI-U or any foreign inflation index will accurately measure
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the real rate of inflation in the prices of goods and services. Moreover, there can be no assurance that the rate of inflation in a
foreign country will be correlated to the rate of inflation in the United States.
Any increase in the principal amount of an inflation-indexed bond will be considered taxable ordinary income, even though investors
do not receive their principal until maturity.
Foreign Debt Obligations. Foreign debt obligations include corporate
debt securities of non-U.S. issuers, certain non-U.S. bank obligations and U.S. dollar or foreign currency denominated obligations of non-U.S. governments or their subdivisions, agencies and instrumentalities, international agencies and
supranational entities. Certain obligations or securities of non-U.S. issuers may be deemed to be located in a particular country if: (i) the principal trading market for the security is in such country, (ii) the issuer is organized under the laws
of such country, (iii) the issuer derives at least 50% of its revenues or profits from such country or has at least 50% of its assets situated in such country, or (iv) the issuer is the government of the particular country.
Debt securities issued by foreign governments are often, but not always, supported by the full faith and credit of the foreign
governments, or their subdivisions, agencies or instrumentalities, that issue them. Additionally, the issuer of the debt or the governmental authorities that control repayment of the debt may be unwilling or unable to pay interest or repay
principal when due. Political or economic changes or the balance of trade may affect a country’s willingness or ability to service its debt obligations. Periods of economic uncertainty may result in the volatility of market prices of sovereign
debt obligations, especially debt obligations issued by the governments of developing countries. Foreign government obligations of developing countries, and some structures of emerging market debt securities, both of which are generally below
investment grade, are sometimes referred to as “Brady Bonds.” The failure of a sovereign debtor to implement economic reforms, achieve specified levels of economic performance, or repay principal or interest when due may result in the
cancellation of third-party commitments to lend funds to the sovereign debtor, which may impair the debtor’s ability or willingness to service its debts.
Foreign debt obligations are subject to the following risks:
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Currency Risk. The value in U.S. dollars of a Fund’s or an Underlying ETF’s non-U.S.-dollar-denominated foreign investments will be
affected by changes in currency exchange rates. The U.S. dollar value of a foreign security decreases when the value of the U.S. dollar rises against the foreign currency in which the security is denominated and increases when the value
of the U.S. dollar falls against such currency.
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Political and Economic Risk. The economies of many countries may not be as developed as the U.S. economy and may be subject to
significantly different forces. Political, economic or social instability and development, expropriation or confiscatory taxation, and limitations on the removal of funds or other assets could also adversely affect the value of portfolio
investments. Certain foreign companies may be subject to sanctions, embargoes, or other governmental actions that may impair or otherwise limit the ability to invest in, receive, hold or sell, the securities of such companies. These
factors may affect the value of investments in those companies. In addition, certain companies may operate in, or have dealings with, countries that the U.S. Government has identified as state sponsors of terrorism. As a result, such
companies may be subject to specific constraints or regulations under U.S. law and, additionally, may be subject to negative investor perception, either of which could adversely affect such companies' performance.
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Regulatory Risk. Foreign companies may not be registered with the SEC and are generally not subject to the regulatory controls and
disclosure requirements imposed on U.S. issuers, and, as a consequence, there is generally less publicly available information about foreign securities than is available about U.S. securities. Foreign companies may not be subject to
uniform accounting, auditing or financial reporting standards, corporate governance practices or requirements comparable to those applicable to U.S. companies. Therefore, financial information about foreign companies may be incomplete, or
may not be comparable to the information available on U.S. companies. Income from foreign securities owned by the Funds or Underlying ETFs may be reduced by a withholding tax at the source, which tax would reduce dividend income payable
to Fund shareholders or, in the case of an Underlying ETF, to the applicable Fund. There is generally less government supervision and regulation of securities exchanges, brokers, dealers and listed companies in foreign countries than in
the U.S., thus increasing the risk of delayed settlements of portfolio transactions or loss of certificates for portfolio securities. Foreign markets may also have different clearance and settlement procedures. If a Fund or an Underlying
ETF experiences settlement problems, it may result in temporary
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periods when a portion of the Fund’s or Underlying ETF’s assets are uninvested and could cause the Fund or Underlying ETF to miss attractive
investment opportunities or a potential liability to the Fund or Underlying ETF arising out of the Fund’s or Underlying ETF’s inability to fulfill a contract to sell such securities.
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Foreign Markets Risk. Investing in foreign markets generally involves certain risks not typically associated with investing in the U.S.
The securities markets in many foreign countries will have substantially lower trading volume than securities markets in the U.S. markets. As a result, the securities of some foreign companies may be less liquid and experience more price
volatility than comparable U.S. securities. Obtaining and/or enforcing judgments in foreign countries may be more difficult, and there is generally less government regulation and supervision of foreign stock exchanges, brokers and
issuers, each of which may make it more difficult to enforce contractual obligations. Increased custodian costs, as well as administrative costs (such as the need to use foreign custodians), may also be associated with the maintenance of
assets in foreign jurisdictions. In addition, transaction costs in foreign securities markets are likely to be higher, since brokerage commission rates in foreign countries are likely to be higher than in the U.S.
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Emerging Markets Risk. Investments in emerging markets countries present risks in addition to, or greater than, those
presented by investments in foreign issuers generally. For example, emerging market countries may have less stringent regulatory, disclosure, financial reporting, accounting, auditing and recordkeeping standards than companies in more
developed countries and, as a result, the nature and quality of such information may vary. The taxation systems at the federal, regional and local levels in emerging market countries may also be less transparent and inconsistently
enforced, and subject to sudden change. In addition, emerging market countries may have a higher degree of corruption and fraud than in developed market countries, as well as counterparties and financial institutions with less financial
sophistication, creditworthiness and/or resources. Further, certain emerging market countries have material limitations on Public Company Accounting Oversight Board (“PCAOB”) inspection,
investigation and enforcement capabilities, which hinder the ability to engage in independent oversight or inspection of accounting firms located, or operating, in certain emerging markets; therefore, there is no guarantee that the
quality of financial reporting or the audits conducted by audit firms of emerging market issuers meet PCAOB standards. Because information about companies in emerging markets countries may be less available and reliable, the ability to
conduct adequate due diligence in emerging markets may be limited, which can impede the ability of Milliman or an Underlying ETF’s investment adviser to evaluate such companies.
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Many of the emerging markets countries’ securities markets are relatively small or less
diverse, have low trading volumes, suffer periods of relative illiquidity, and are characterized by significant price volatility. There is also a risk that a future economic or political crisis could lead to price controls, forced mergers of
companies, expropriation or confiscatory taxation, seizure, nationalization, or creation of government monopolies. Further, foreign investments in some emerging markets countries may be made through organizational structures that are necessary to
address restrictions on foreign investments. Because of these structures and for other reasons, there may be limited corporate governance standards and avenues of recourse for investors as compared to investments in U.S. companies. Emerging market
countries may also have less developed legal systems, allowing for enforcement of private property rights and/or redress for injuries to private property, such as bankruptcy. Accordingly, shareholder claims that are common in the U.S. and are
generally viewed as deterring misconduct, including class action securities law and fraud claims, generally are difficult or impossible to pursue as a matter of law or practicality in many emerging markets.
High Yield Debt Obligations. Bonds
rated, or determined to be, below investment grade are commonly referred to as “junk bonds.” Investment grade bonds generally include: (i) securities rated BBB- or higher by S&P or Fitch or Baa3 or higher by Moody's or an equivalent rating by
another nationally recognized statistical rating organization (“NRSRO”), (ii) comparably rated short term securities, or (iii) unrated securities determined by Milliman or an Underlying ETF’s investment
adviser to be of comparable quality, each at the time of purchase. Descriptions of debt securities ratings are found in Appendix A. The analysis of the creditworthiness of junk bond issuers is more complex than that of investment-grade
issuers and the success of an investment adviser in managing these decisions is more dependent upon its own credit analysis than is the case with investment-grade bonds.
The capacity of junk bonds to pay interest and repay principal is considered speculative. While junk bonds may provide an
opportunity for greater income and gains, they are subject to greater risks than higher-rated debt securities.
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The prices of, and yields on, junk bonds may fluctuate to a greater extent than those of higher-rated debt securities. Junk bonds
are generally more sensitive to individual issuer developments, economic conditions and regulatory changes than higher-rated bonds. Issuers of junk bonds are often smaller, less-seasoned companies or companies that are highly leveraged with more
traditional methods of financing unavailable to them. Junk bonds are generally at a higher risk of default because such issues are often unsecured or otherwise subordinated to claims of the issuer’s other creditors. If a junk bond issuer defaults,
a Fund or an Underlying ETF may incur additional expenses to seek recovery. The secondary markets in which junk bonds are traded may be thin and less liquid than the market for higher-rated debt securities and a Fund or an Underlying ETF may have
difficulty selling certain junk bonds at the desired time or price. Less liquidity in secondary trading markets could adversely affect the price at which a Fund or an Underlying ETF could sell a particular junk bond and could cause large
fluctuations in the Fund’s or Underlying ETF’s NAV. The lack of a liquid secondary market may also make it more difficult for a Fund or an Underlying ETF to obtain accurate market quotations in valuing junk bond assets and elements of judgment may
play a greater role in the valuation.
Mortgage-Backed Securities (“MBS”) and Asset-Backed Securities (“ABS”).
MBS are mortgage-related securities issued or guaranteed by the U.S. Government, its agencies or instrumentalities, or issued by non-government entities, such as commercial banks and other private lenders. MBS represent ownership in pools of
mortgage loans assembled for sale to investors by various government agencies such as the Government National Mortgage Association (“Ginnie Mae”) and government-related organizations such as the Federal
National Mortgage Association (“Fannie Mae”) and the Federal Home Loan Mortgage Corporation (“Freddie Mac”), as well as by non-government issuers such as commercial
banks, savings and loan institutions, mortgage bankers and private mortgage insurance companies. Although certain MBS are guaranteed by a third party or otherwise similarly secured, the market value of the security, which may fluctuate, is not so
secured. These securities differ from conventional bonds in that the principal is paid back to the investor as payments are made on the underlying mortgages in the pool. Accordingly, an investor receives monthly scheduled payments of principal and
interest, along with any unscheduled principal prepayments on the underlying mortgages, from the MBS in which it invests. Because these scheduled and unscheduled principal payments must be reinvested at prevailing interest rates, MBS do not provide
an effective means of locking in long-term interest rates for an investor.
In addition, there are a number of important differences among the agencies and instrumentalities of the U.S. Government that issue
MBS, and among the securities they issue. MBS issued by Ginnie Mae include Mortgage Pass-Through Certificates (also known as “Ginnie Maes”), which are guaranteed as to the timely payment of principal and
interest. That guarantee is backed by the full faith and credit of the U.S. Treasury. Ginnie Mae is a corporation wholly owned by the U.S. Government within the Department of Housing and Urban Development. MBS issued by Fannie Mae include
Guaranteed Mortgage Pass-Through Certificates (also known as “Fannie Maes”), which are guaranteed as to the payment of principal and interest by Fannie Mae itself and backed by a line of credit with the U.S.
Treasury. Fannie Mae is a government-sponsored entity (“GSE”) that is wholly owned by public stockholders. MBS issued by Freddie Mac include Mortgage Participation Certificates (also known as “Freddie Macs”) and are guaranteed as to the payment of principal and interest by Freddie Mac itself and backed by a line of credit with the U.S. Treasury. Freddie Mac is a GSE that is wholly owned by public
stockholders.
On September 7, 2008, Fannie Mae and Freddie Mac were placed under the conservatorship of the Federal Housing Finance Agency (“FHFA”) to provide stability in the financial markets, mortgage availability and taxpayer protection by preserving Fannie Mae and Freddie Mac’s assets and property, and putting Fannie Mae and Freddie Mac in a
sound and solvent position. Under the conservatorship, the management of Fannie Mae and Freddie Mac was replaced. Since 2009, both Fannie Mae and Freddie Mac have received significant capital support through U.S. Treasury preferred stock purchases
and Federal Reserve purchases of the entities’ MBS. In February 2011, the Obama Administration produced a report to Congress outlining proposals to wind down Fannie Mae and Freddie Mac and reduce the government’s role in the mortgage market. In
December 2011, Congress enacted the Temporary Payroll Tax Cut Continuation Act of 2011 which, among other provisions, requires that Fannie Mae and Freddie Mac increase their single-family guaranty fees by at least 10 basis points and remit this
increase to the Treasury with respect to all loans acquired by Fannie Mae or Freddie Mac on or after April 1, 2012 and before January 1, 2022. Discussions among policymakers continue, however, as to whether Fannie Mae and Freddie Mac should be
nationalized, privatized, restructured or eliminated altogether. Fannie Mae and Freddie Mac are also the subject of several continuing legal actions and investigations over certain accounting, disclosure or corporate governance matters, which
(along with any resulting financial restatements) may continue to have an adverse effect on the guaranteeing entities.
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ABS are structured like MBS, but, instead of the underlying assets being comprised of mortgage loans or interests in mortgage loans,
the underlying assets may include such items as motor vehicle installment sales contracts or installment loan contracts, leases of various types of real and personal property, or receivables from credit card agreements or from sales of personal
property. Regular payments received on ABS include both interest and principal. ABS typically have no U.S. Government backing. Additionally, the ability of an issuer of ABS to enforce its security interest in the underlying assets may be
limited.
If a Fund or an Underlying ETF purchases an MBS or ABS at a premium, the premium may be lost if there is a decline in the market
value of the security, whether resulting from changes in interest rates or prepayments in the underlying collateral. As with other interest-bearing securities, the prices of such securities are inversely affected by changes in interest rates.
Although the value of MBS and ABS may decline when interest rates rise, the converse is not necessarily true, because, in periods of declining interest rates, the mortgages or other loans underlying the securities are prone to prepayment, thereby
shortening the average life of the security and the period of time over which income at the higher rate is received. When interest rates are rising, the rate of prepayment tends to decrease, thereby lengthening the period of time over which income
at the lower rate is received. For these and other reasons, the average maturity of MBS and ABS may be shortened or lengthened as a result of interest rate fluctuations and, therefore, it is not possible to predict accurately the security’s return.
In addition, while the trading market for short-term MBS and ABS is ordinarily quite liquid, in times of financial stress the trading market for these securities may become restricted. MBS and ABS that are not guaranteed or sponsored by government
entities are generally subject to greater price volatility because of the greater risk of default in adverse market conditions. Where a guarantee is provided by a private guarantor, a Fund or an Underlying ETF is subject to the credit risk of such
guarantor, especially when the guarantor doubles as the originator.
Descriptions of some of the different types of MBS and ABS that may be acquired by the Funds and Underlying ETFs are provided below.
In addition to those shown, other types of mortgage-related and asset-backed investments are, or may become, available for investment by the Funds and Underlying ETFs.
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Commercial MBS (“CMBS”) and Residential MBS (“RMBS”). CMBS and RMBS generally offer a higher rate of interest than U.S. Government
and U.S. Government-related MBS because there are no direct or indirect U.S. Government or agency guarantees of payment. The risk of loss due to default on CMBS and RMBS is historically higher because neither the U.S. Government nor any
agency or instrumentality of the U.S. Government have guaranteed them. CMBS and RMBS whose underlying assets are neither U.S. Government securities nor U.S. Government insured mortgages, to the extent that real properties securing such
assets may be located in the same geographical region, may also be subject to a greater risk of default than other comparable securities in the event of adverse economic, political or business developments that may affect such region and,
ultimately, the ability of property owners to make payments of principal and interest on the underlying mortgages.
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Mortgage Pass-Through Securities. Some MBS, such as U.S. agency mortgage pass-through securities, represent a right to receive
principal and interest payments collected on a pool of mortgages, which are passed through to security holders. In the basic mortgage pass-through structure, mortgages with similar issuer, term and coupon characteristics are collected and
aggregated into a “pool” consisting of multiple mortgage loans. The pool is assigned a CUSIP number and undivided interests in the pool are traded and sold as pass-through securities. The holder of the security is entitled to a pro rata
share of principal and interest payments (including unscheduled prepayments) from the pool of mortgage loans. An investment in a specific pool of mortgage pass-through securities requires an analysis of the specific prepayment risk of
mortgages within the covered pool (since mortgagors typically have the option to prepay their loans). The level of prepayments on a pool of mortgage-pass through securities is difficult to predict and can impact the subsequent cash flows,
value and yield of the mortgage pool. In addition, when trading specific mortgage pools, precise execution, delivery and settlement arrangements must be negotiated for each transaction.
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To-Be-Announced (“TBA”) Securities. A Fund or an Underlying ETF may seek to gain exposure to U.S. agency mortgage pass-through
securities by investing in TBA securities. TBAs refer to a commonly used mechanism for the forward settlement of U.S. agency MBS, and not to a separate type of MBS. TBA transactions generally are conducted in accordance with widely
accepted guidelines that establish commonly observed terms and conditions for execution, settlement, and delivery. In a TBA transaction, the buyer and seller decide on general trade parameters, such as the issuing agency, settlement date,
par amount and price.
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| The actual mortgage pools delivered generally are determined two days prior to the settlement date. A Fund or an Underlying ETF may enter into TBA agreements and “roll over” such agreements prior to the settlement date stipulated in such agreements. This type of TBA transaction is sometimes known as a “TBA roll.” In a TBA roll, a Fund or an Underlying ETF will generally sell the obligation to purchase the pools stipulated in the TBA agreement prior to the stipulated settlement date and will enter into a new TBA agreement for future delivery of pools of MBS. In addition, a Fund or an Underlying ETF may enter into TBA agreements and settle such transactions on the stipulated settlement date by accepting actual receipt or delivery of the pools of MBS stipulated in the TBA agreement. A Fund or an Underlying ETF may invest cash pending settlement of TBA transactions in money market instruments, repurchase agreements, or other high quality, liquid short-term instruments, including money market funds. |
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Collateralized Mortgage Obligations (“CMOs”). CMOs are hybrid instruments with characteristics of both MBS and mortgage
pass-through securities. CMOs are created by dividing the principal and interest payments collected on a pool of mortgages into several revenue streams (“tranches”) with different priority rights
to portions of the underlying mortgage payments. Certain CMO tranches may represent a right to receive interest only, principal only, or an amount that remains after floating-rate tranches are paid (an “inverse
floater”). These securities are frequently referred to as “mortgage derivatives” and may be extremely sensitive to changes in interest rates. Interest rates on inverse floaters, for example, vary inversely with a short-term
floating rate (which may be reset periodically). Interest rates on inverse floaters will decrease when short-term rates increase and will increase when short-term rates decrease. These securities have the effect of providing a degree of
investment leverage. In response to changes in market interest rates or other market conditions, the value of an inverse floater may increase or decrease at a multiple of the increase or decrease in the value of the underlying securities.
If a Fund or an Underlying ETF invests in CMO tranches issued by U.S. Government agencies or sponsored entities and interest rates move in a manner not anticipated by Milliman or an Underlying ETF’s investment adviser, it is possible that
the Fund or Underlying ETF could lose all or substantially all of its investment. Certain CMOs in which a Fund or an Underlying ETF may invest may also provide a degree of investment leverage, which could cause the Fund or Underlying ETF
to lose all or substantially all of its investment.
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Collateralized Debt Obligations (“CDOs”). A CDO is a security backed by a pool of bonds, loans and other debt obligations. CDOs are not
limited to investing in one type of debt and accordingly, a CDO may own corporate bonds, commercial loans, asset-backed securities, residential mortgage-backed securities, commercial mortgage-backed securities, and emerging market debt. A
CDO’s securities are typically divided into several classes, or bond tranches, that have differing levels of investment grade or credit tolerances. Most CDO issues are structured in a way that enables the senior bond classes and mezzanine
classes to receive investment-grade credit ratings. Credit risk is shifted to the most junior class of securities. If any defaults occur in the assets backing a CDO, the senior bond classes are first in line to receive principal and
interest payments, followed by the mezzanine classes and finally by the lowest rated (or non-rated) class, which is known as the equity tranche. In the past, prices of CDO tranches have declined considerably. The drop in prices were
initially triggered by the subprime mortgage crisis. Subprime mortgages make up a significant portion of the mortgage securities that collateralize many CDOs. As floating interest rates and mortgage default rates increased, the rating
agencies that had rated the mortgage securities and CDO transactions backed by such mortgages realized their default assumptions were too low and began to downgrade the credit rating of these transactions. There can be no assurance that
additional losses of equal or greater magnitude will not occur in the future.
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Collateralized Loan Obligations (“CLOs”). CLOs are debt instruments backed solely by a pool of other debt securities. The risks of an
investment in a CLO depend largely on the type of the collateral securities and the class of the CLO in which a Fund or an Underlying ETF invests. Some CLOs have credit ratings but are typically issued in various classes with various
priorities. Normally, CLOs are privately offered and sold (that is, they are not registered under the securities laws) and may be characterized by a Fund or an Underlying ETF as illiquid investments; however, an active dealer market may
exist for CLOs that qualify for Rule 144A transactions. In addition to the normal interest rate, default and other risks of fixed income securities, CLOs carry additional risks, including, without limitation, the possibility that
distributions from collateral securities will not be adequate to make interest or other payments, the quality of the collateral may decline in value or
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default, a Fund or an Underlying ETF may invest in CLOs that are subordinate to other classes, values may be volatile, and disputes with the
issuer may produce unexpected investment results.
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Municipal Securities. Municipal
securities are securities issued in the U.S. market by U.S. states and territories, municipalities and other political subdivisions, agencies, authorities and instrumentalities of states and multi-state agencies or authorities, the interest
payments of which are not subject to U.S. federal income tax. Municipal securities include general obligation bonds and revenue obligation bonds, including industrial development bonds issued pursuant to former U.S. federal tax law.
General obligation bonds are obligations involving the credit of an issuer possessing taxing power and are payable from such
issuer’s general revenues and not from any particular source. Revenue obligation bonds are payable only from the revenues derived from a particular facility or class of facilities or, in some cases, from the proceeds of a special excise or other
specific revenue source. Revenue obligation bonds that are issued to finance a particular project often depend on revenues from that project to make principal and interest payments. Adverse conditions and developments affecting a particular project
can result in lower revenues to the issuer of the municipal securities. Additionally, the market values of revenue obligation bonds may decline in times of higher inflation to the extent that revenues are fixed income streams. In other instances,
the prices that certain revenue obligation bond issuers are able to charge users of their assets may be linked to inflation, whether by government regulation, contractual arrangement or other factors. In this case, changes in the rate of inflation
may affect the issuer’s revenues. Additionally, rising interest rates could result in higher costs of capital for issuers of both general obligation bonds and revenue obligation bonds, which could negatively impact their ability to meet payment
obligations.
The market for municipal bonds may be less liquid than for taxable bonds. This means that it may be harder to buy and sell municipal
securities, especially on short notice, than non-municipal securities. In addition, the municipal securities market is generally characterized as a buy and hold investment strategy. As a result, the accessibility of municipal securities in the
market is generally greater closer to the original date of issue of the securities and lessens as the securities move further away from such issuance date.
Some longer-term municipal securities give the investor the right to “put” or sell the security at par (face value) within a
specified number of days following the investor’s request (usually one to seven days). This demand feature enhances a security’s liquidity by shortening its effective maturity and enables it to trade at a price equal to or very close to par. If a
demand feature terminates prior to being exercised, a Fund or an Underlying ETF would hold the longer-term security, which could experience substantially more volatility.
Municipal securities are subject to credit and market risk. Generally, prices of higher quality issues tend to fluctuate more with
changes in market interest rates than prices of lower quality issues and prices of longer maturity issues tend to fluctuate more than prices of shorter maturity issues.
Prices and yields on municipal securities are dependent on a variety of factors, including general money-market conditions, the
financial condition of the issuer, general conditions of the municipal security market, the size of a particular offering, the maturity of the obligation and the rating of the issue. A number of these factors, including the ratings of particular
issues, are subject to change from time to time. Information about the financial condition of an issuer of municipal securities may not be as extensive as that which is made available by corporations whose securities are publicly traded. As a
result, municipal securities may be more difficult to value than securities of public corporations.
Obligations of issuers of municipal securities are subject to insolvency concerns and, unlike obligations of corporate issuers, may
not be subject to resolution in the event of insolvency or default through a bankruptcy proceeding. The U.S. Congress or state legislatures may seek to extend the time for payment of principal or interest, or both, or to impose other constraints
upon enforcement of such obligations. In addition, municipal securities are subject to the risk that their tax treatment could be changed, thereby affecting the value of outstanding municipal securities. There is also the possibility that as a
result of litigation or other conditions, such as passing of a referendum, the power or ability of issuers to meet their obligations for the payment of interest and principal on their municipal securities may be materially affected or their
obligations may be found to be invalid or unenforceable. Such litigation or conditions may from time to time have the effect of introducing uncertainties in the market for municipal securities or certain segments thereof, or of materially affecting
the credit risk with respect to particular bonds. Adverse economic, business, legal or political developments might affect all or a substantial portion of a Fund’s or an Underlying ETF’s municipal
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securities in the same manner. Additionally, certain municipal securities are issued by entities dependent on revenue from a
particular sector or industry and are thus subject to the specific risks associated with that particular sector or industry.
The types of municipal securities in which the Funds and Underlying ETFs may invest include, but are not limited, to the following:
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Industrial Development Bonds. Industrial
development bonds are generally also revenue obligation bonds and thus are not payable from the issuer’s general revenues. The credit and quality of industrial development bonds are usually related to the credit of the corporate user of
the facilities. Payment of interest on and repayment of principal of such bonds is the responsibility of the corporate user (and/or any guarantor).
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Private Activity Bonds. Private activity bonds are bonds issued by or on behalf of public
authorities to obtain funds to provide privately operated housing facilities, airport, mass transit or port facilities, sewage disposal, solid waste disposal or hazardous waste treatment, or disposal facilities and certain local
facilities for water supply, gas or electricity. Other types of private activity bonds, the proceeds of which are used for the construction, equipment, repair or improvement of privately operated industrial or commercial facilities, may
constitute municipal securities, although the current U.S. federal tax laws place substantial limitations on the size of such issues.
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Municipal Lease Obligations. Municipal lease obligations are issued by state and local
governments or authorities to finance the acquisition of land, equipment and facilities, such as state and municipal vehicles, telecommunications and computer equipment, and other capital assets. Municipal lease obligations may take the
form of a lease, an installment purchase contract or a conditional sales contract. Interest payments on qualifying municipal lease obligations are generally exempt from federal income taxes. Municipal lease obligations are generally
subject to greater risks than general obligation or revenue obligation bonds. State laws set forth requirements that states or municipalities must meet in order to issue municipal obligations, and such obligations may contain a covenant
by the issuer to budget for, appropriate, and make payments due under the obligation. However, certain municipal lease obligations may contain "non-appropriation" clauses, which provide that the issuer is not obligated to make payments on
the obligation in future years unless funds have been appropriated for this purpose each year. If sufficient funds are not appropriated to make the lease payments, the leased property may be repossessed as security for holders of the
municipal lease obligation. In such an event, there is no assurance that the property's private sector or re-leasing value will be enough to make all outstanding payments on the municipal lease obligation or that the payments will
continue to be tax-free. Additionally, it may be difficult to dispose of the underlying capital asset in the event of non-appropriation or other default. Direct investments by a Fund or an Underlying ETF in municipal lease obligations may
be deemed illiquid and therefore subject to the Fund’s or Underlying ETF’s percentage limitations for illiquid investments and the risks of holding illiquid investments.
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Tender Option Bonds. Tender option bonds are synthetic floating rate or variable rate securities
issued when long-term bonds are purchased in the primary or secondary market and then deposited into a trust. Custodial receipts are then issued to investors in these securities evidencing ownership interests in the trust. The remarketing
agent for the trust sets a floating or variable rate on typically a weekly basis. The sponsor of a highly leveraged tender option bond trust generally will retain a liquidity provider to purchase the short-term floating rate interests at
their original purchase price upon the occurrence of certain specified events. However, the liquidity provider may not be required to purchase the floating rate interests upon the occurrence of certain other events, for example, the
downgrading of the municipal bonds owned by the tender option bond trust below investment-grade or certain events that indicate the issuer of the bonds may be entering bankruptcy. The general effect of these provisions is to pass to the
holders of the floating rate interests the most severe credit risks associated with the municipal bonds owned by the tender option bond trust and to leave with the liquidity provider the interest rate risk (subject to a cap) and certain
other risks associated with the municipal bonds. Tender option bonds are synthetic municipal instruments, which means their value and return are derived from underlying securities. As a result, investments in tender option bonds may
expose the Funds or Underlying ETFs to the same risks as investments in derivatives (which also derive their values from underlying assets), as well as risks associated with leverage, especially the risk of increased volatility. To the
extent the Funds or Underlying ETFs invest in tender option bonds, they also are exposed to credit risk associated with the liquidity provider retained by the sponsor of a tender bond option trust.
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Variable Rate Demand Obligations (“VRDOs”). VRDOs are tax-exempt obligations that contain a floating or variable interest rate adjustment
formula and a right of demand on the part of the holder thereof to receive payment of the unpaid principal balance plus accrued interest upon a short notice period not to exceed seven days. There is the possibility that because of default
or insolvency the demand feature of VRDOs may not be honored. The interest rates are adjustable at intervals (ranging from daily to up to one year) to some prevailing market rate for similar investments, such adjustment formula being
calculated to maintain the market rate of the VRDOs at approximately the par value of the VRDOs on the adjustment date. The adjustments typically are based upon the Public Securities Association Index or some other appropriate interest
rate adjustment index. Because of the interest rate adjustment formula, VRDOs are not comparable to fixed-rate securities. During periods of declining interest rates, a Fund’s or an Underlying ETF’s yield on a VRDO will decrease and its
shareholders will forego the opportunity for capital appreciation. During periods of rising interest rates, however, a Fund’s or an Underlying ETF’s yield on a VRDO will increase and its shareholders will have a reduced risk of capital
depreciation.
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Municipal Notes. Municipal notes are shorter-term municipal debt obligations, which provide
interim financing in anticipation of tax collection, receipt of grants, bond sales or revenue receipts. If there is a shortfall in the anticipated proceeds, repayment on a municipal note may be delayed or the note may not be fully repaid,
and a Fund or an Underlying ETF may lose money. Municipal notes are generally unsecured and issued to meet short-term financing needs. The lack of security presents some risk of loss to the Funds and Underlying ETFs since, in the event of
an issuer’s bankruptcy, unsecured creditors are repaid only out of the assets, if any, that remain after secured creditors are repaid.
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Other Investments, Investment Techniques and Risks
Borrowing. The Funds may borrow
money to the extent permitted under the 1940 Act, and the rules thereunder, as such statute and rules may be amended or interpreted from time to time by the SEC or its staff. Such borrowings are typically utilized (i) for temporary or emergency
purposes, (ii) in anticipation of or in response to adverse market conditions, or (iii) for cash management purposes. All borrowings are limited to an amount not exceeding 33 1/3% of a Fund’s total assets (including the amount borrowed) less
liabilities (other than borrowings). Any borrowings that exceed this amount will be reduced within three business days to the extent necessary to comply with the 33 1/3% limitation even if it is not advantageous to sell securities at that time.
Additionally, the Funds are permitted to temporarily carry a negative or overdrawn balance in their account with the Custodian (as defined below). The Trust compensates the Custodian for such overdrafts by paying the Custodian an agreed upon rate.
LIBOR Transition Risk. A Fund or an Underlying ETF
may invest in financial instruments that are tied to the London Interbank Offered Rate (“LIBOR”), Secured Overnight Financing Rate (“SOFR”), Sterling Overnight Index
Average (“SONIA”) or another reference rate. LIBOR is the most common benchmark interest rate index and is used to make adjustments to variable-rate loans and to determine interest rates for a variety of
financial instruments and borrowing arrangements. On July 27, 2017, the head of the United Kingdom's Financial Conduct Authority announced a desire to phase out the use of LIBOR by the end of 2021, and it is currently expected that LIBOR will cease
to be published after that time. Although many LIBOR rates will be phased out at the end of 2021 as originally intended, a selection of widely used USD LIBOR rates will continue to be published until June 2023 in order to assist with the
transition. There remains uncertainty regarding the effect of the LIBOR transition process and therefore any impact of a transition away from LIBOR on a Fund or an Underlying ETF or the instruments in which a Fund or an Underlying ETF invests
cannot yet be determined. There is no assurance that the composition or characteristics of any alternative reference rate will be similar to or produce the same value or economic equivalence as LIBOR or that instruments using an alternative rate
will have the same volume or liquidity. As a result, the transition process might lead to increased volatility and reduced liquidity in markets that currently rely on LIBOR to determine interest rates; a reduction in the value of some LIBOR-based
investments; increased difficulty in borrowing or refinancing and diminished effectiveness of any applicable hedging strategies against instruments whose terms currently include LIBOR; and/or costs incurred in connection with temporary borrowings
and closing out positions and entering into new agreements. Additionally, while some existing LIBOR-based instruments may contemplate a scenario where LIBOR is no longer available or representative by providing a “fallback” rate-setting
methodology, there may be significant uncertainty regarding the effectiveness of any such fallback provisions and there remains uncertainty regarding the willingness and ability of issuers to add alternative rate-setting provisions in certain
existing instruments. Additionally, industry initiatives are currently underway to identify and begin implementation of alternative reference rates, including SOFR
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and SONIA; however, there are challenges to converting certain financial instruments and transactions to a new
reference rate and no global consensus has been reached as to which reference rate should be used. Any effects of the transition away from LIBOR and the adoption of alternative reference rates could result in losses to a Fund or an Underlying ETF
and such losses may occur prior to the discontinuation of LIBOR.
Market Events Risk. Natural or
environmental disasters, such as earthquakes, fires, floods, hurricanes, tsunamis and other severe weather-related phenomena generally, and widespread disease, including pandemics and epidemics, have been and can be highly disruptive to economies
and markets, adversely impacting individual companies, sectors, industries, markets, currencies, interest and inflation rates, credit ratings, investor sentiment, and other factors affecting the value of the Funds' and Underlying ETFs’ investments.
Given the increasing interdependence among global economies and markets, conditions in one country, market, or region are increasingly likely to adversely affect markets, issuers, and/or foreign exchange rates in other countries, including the U.S.
These disruptions could prevent the Funds and Underlying ETFs from executing advantageous investment decisions in a timely manner and negatively impact the Funds' and Underlying ETFs’ ability to achieve their investment objectives. Any such
event(s) could have a significant adverse impact on the value and risk profile of the Funds.
In addition, the current outbreak of the novel strain of coronavirus, COVID-19, has resulted in instances of market closures and
dislocations, extreme volatility, liquidity constraints and increased trading costs. Efforts to contain the spread of COVID-19 have resulted in travel restrictions, closed international borders, disruptions of healthcare systems, business
operations and supply chains, layoffs, lower consumer demand, defaults and other significant economic impacts, all of which have disrupted global economic activity across many industries and may exacerbate other pre-existing political, social and
economic risks, locally or globally. The ongoing effects of COVID-19 are unpredictable and may result in significant and prolonged effects on a Fund's or Underlying ETF’s performance.
Operational and Cyber Security Risk. A Fund, its service providers, and
other market participants depend on complex information technology and communications systems to conduct business functions. These systems are subject to a number of different threats or risks that could adversely affect a Fund and its
shareholders, despite the efforts of a Fund and its service providers to adopt technologies, processes, and practices intended to mitigate these risks. For example, a Fund, and its service providers, may be susceptible to operational and
information security risks resulting from cyber incidents.
In general, cyber incidents can result from deliberate attacks or unintentional events. Cyber-attacks include, but are not limited
to, gaining unauthorized access to digital systems (e.g., through “hacking” or malicious software coding) for purposes of misappropriating assets or sensitive information, corrupting data, or causing
operational disruption. Cyber-attacks also may be carried out in a manner that does not require gaining unauthorized access, such as causing denial-of-service attacks on websites (i.e., efforts to make
network services unavailable to intended users). Cyber security failures or breaches by Milliman or other service providers to the Trust, and the issuers of securities or other assets in which the Funds invest, have the ability to cause disruptions
and impact business operations, potentially resulting in financial losses, interference with a Fund's ability to calculate its NAV, impediments to trading, the inability of a Fund's shareholders to transact business, violations of applicable
privacy and other laws, regulatory fines, penalties, reputational damage, reimbursement or other compensation costs, or additional compliance costs. In addition, substantial costs may be incurred in order to prevent any cyber incidents in the
future. While a Fund and its service providers have established business continuity plans in the event of, and systems designed to reduce the risks associated with, such cyber-attacks, there are inherent limitations in such plans and systems
including the possibility that certain risks have not been identified.
In addition, power or communications outages, acts of God, information technology equipment malfunctions, operational errors, and
inaccuracies within software or data processing systems may also disrupt business operations or impact critical data. Market events also may trigger a volume of transactions that overloads current information technology and communication systems
and processes, impacting the ability to conduct a Fund's operations. The Funds cannot control the cyber security plans and systems put in place by service providers to the Funds and issuers in which the Funds invest. The Funds and their
shareholders could be negatively impacted as a result.
Repurchase Agreements. A repurchase agreement is an instrument under
which the purchaser acquires a security and the seller agrees, at the time of the sale, to repurchase the security at a mutually agreed-upon time and price, thereby determining the yield during the purchaser’s holding period. Repurchase agreements
may be construed to be
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collateralized loans by the purchaser to the seller secured by the securities transferred to the purchaser. If a repurchase
agreement is construed to be a collateralized loan, the underlying securities will not be considered to be owned by a Fund or an Underlying ETF but only to constitute collateral for the seller’s obligation to pay the repurchase price, and, in the
event of a default by the seller, the Fund or Underlying ETF may suffer time delays and incur costs or losses in connection with the disposition of the collateral. In any repurchase transaction, the collateral for a repurchase agreement may
include: (i) cash items; (ii) obligations issued by the U.S. Government or its agencies or instrumentalities; or (iii) obligations that, at the time the repurchase agreement is entered into, are determined to (A) have exceptionally strong capacity
to meet their financial obligations and (B) are sufficiently liquid such that they can be sold at approximately their carrying value in the ordinary course of business within seven days.
Repurchase agreements pose certain risks for Funds and Underlying ETFs that utilize them. Lower quality collateral and collateral
with a longer maturity may be subject to greater price fluctuations than higher quality collateral and collateral with a shorter maturity. If the repurchase agreement counterparty were to default, lower quality collateral may be more difficult to
liquidate than higher quality collateral. Should the counterparty default and the amount of collateral not be sufficient to cover the counterparty’s repurchase obligation, a Fund or an Underlying ETF would likely retain the status of an unsecured
creditor of the counterparty (i.e., the position a Fund or an Underlying ETF would normally be in if it were to hold, pursuant to its investment policies, other unsecured debt securities of the defaulting
counterparty) with respect to the amount of the shortfall. As an unsecured creditor, a Fund or an Underlying ETF would be at risk of losing some or all of the principal and income involved in the transaction.
Reverse Repurchase Agreements. Reverse repurchase agreements involve
the sale of securities with an agreement to repurchase the securities at an agreed-upon price, date and interest payment and have the characteristics of borrowing. Generally, the effect of such transactions is that a Fund or an Underlying ETF can
recover all or most of the cash invested in the portfolio securities involved during the term of the reverse repurchase agreement, while in many cases the Fund or Underlying ETF is able to keep some of the interest income associated with those
securities. Such transactions are advantageous only if a Fund or an Underlying ETF has an opportunity to earn a rate of interest on the cash derived from these transactions that is greater than the interest cost of obtaining the same amount of
cash, and such opportunities may not always be available. The use of reverse repurchase agreements may exaggerate any increase or decrease in the value of a Fund’s or an Underlying ETF’s assets, which would also impact the Fund. The use of
reverse repurchase agreements is a form of leverage, and the proceeds obtained by a Fund or an Underlying ETF through reverse repurchase agreements may be invested in additional securities.
Illiquid Investments and Restricted Securities. Illiquid investments are those that a Fund or Underlying ETF reasonably expects cannot be sold or disposed of in current market conditions in seven calendar days or less without the sale or disposition significantly changing the
market value of the investment. Each Fund and Underlying ETF may invest up to 15% of its net assets in illiquid investments. Because illiquid investments may not be readily marketable, a Fund or an Underlying ETF may not be able to dispose of them
in a timely manner. As a result, a Fund or an Underlying ETF may be forced to hold illiquid investments while their prices depreciate. Depreciation in the price of illiquid investments held by a Fund or an Underlying ETF may cause its NAV to
decline. An investment that is determined to be liquid may subsequently revert to being illiquid if not enough buyer interest exists.
The Funds and Underlying ETFs may also purchase Rule 144A securities sold to institutional investors without registration under the
Securities Act of 1933, as amended (the “Securities Act”), and commercial paper issued in reliance upon the exemption in Section 4(a)(2) of the Securities Act, for which an institutional market has
developed. Institutional investors depend on an efficient institutional market in which the unregistered security can be readily resold or on the issuer’s ability to honor a demand for repayment of the unregistered security. Restricted securities
ordinarily can be sold by a Fund or an Underlying ETF in secondary market transactions to certain qualified investors pursuant to rules established by the SEC, in privately negotiated transactions to a limited number of purchasers or in a public
offering made pursuant to an effective registration statement under the Securities Act. Limitations on the resale of restricted securities may have an adverse effect on their marketability, which may prevent a Fund or an Underlying ETF from
disposing of them promptly at reasonable prices. When registration is required, a Fund or an Underlying ETF may be obligated to pay all or part of the registration expenses and a considerable amount of time may elapse between the decision to sell
and the sale date. If, during such period, adverse market conditions were to develop, a Fund or an Underlying ETF might obtain a less favorable price than the price which prevailed when it decided to sell.
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Investment Restrictions
Fundamental Investment Restrictions
Except as otherwise noted below, each Fund is subject to the following investment restrictions, which are fundamental and cannot be
changed for a Fund without the vote of a majority of the outstanding voting securities of that Fund. The vote of a majority of the outstanding voting securities of a Fund means the vote of (i) 67% or more of the voting securities present at such
meeting, if the holders of more than 50% of the outstanding voting securities of such Fund are present or represented by proxy, or (ii) more than 50% of the outstanding voting securities of such Fund, whichever is less.
Each Fund:
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(1)
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May not borrow money or issue senior securities, except to the extent permitted by the 1940 Act, and the rules thereunder, as such statute
and rules may be amended or interpreted from time to time by the SEC or its staff.
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(2)
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May not purchase or sell physical commodities, except to the extent permitted by the 1940 Act and any other governing statute, and by the
rules and regulations thereunder, and by the SEC or other regulatory agency with authority over the Fund.
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(3)
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May not act as an underwriter of another issuer’s securities; provided, however, that this restriction does not prevent the Fund from
engaging in transactions involving the acquisition, disposition or resale of its portfolio securities or other assets, regardless of whether the Fund may be considered to be an underwriter under the Securities Act.
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May not make investments that will result in the “concentration” (as that term may be defined or interpreted under the 1940 Act, and the
rules thereunder, as such statute and rules may be amended or interpreted from time to time by the SEC or its staff) of its investments in the securities of issuers primarily engaged in the same industry; provided, however, that this
restriction does not limit the Fund's investments in (i) obligations issued or guaranteed by the U.S. Government, its agencies or instrumentalities, or (ii) tax-exempt obligations issued by governments or political subdivisions of
governments.
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(5)
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May not purchase or sell real estate; provided, however, that the Fund may (i) acquire real estate through ownership of securities or
instruments and sell any real estate acquired thereby, (ii) purchase or sell instruments secured by real estate (including interests therein), and (iii) purchase or sell securities issued by entities or investment vehicles that own or
deal in real estate (including interests therein).
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May not lend any of its assets or make any other loan, except as permitted by the 1940 Act, and the rules thereunder, as such statute and
rules may be amended or interpreted from time to time by the SEC or its staff; provided, however, that this restriction does not prevent the Fund from, among other things, purchasing debt obligations, entering into repurchase agreements,
loaning its assets to broker-dealers or institutional investors, or investing in loans, including assignments and participation interests.
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Explanatory Notes
The below notations are not considered to be part of each Fund’s fundamental investment restrictions and may be changed for any Fund
without shareholder approval.
Unless otherwise indicated, all limitations under each Fund’s investment restrictions apply only at the time that a transaction is
undertaken. Any change in the percentage of a Fund's assets invested in certain securities or other instruments resulting from market fluctuations or other changes in the Fund’s total assets will not require the Fund to dispose of an investment
until Milliman determines that it is practicable to sell or close out the investment without undue market or tax consequences.
18
Portfolio Turnover
The portfolio turnover rate for each Fund is calculated by dividing the lesser of purchases or sales of portfolio holdings for the
year by the monthly average value of the portfolio holdings owned during the reporting period, excluding securities whose maturities at the time of purchase were one year or less. The portfolio turnover rate of a Fund may vary greatly from year to
year, as well as within a particular year, and may be affected by cash requirements for redemption of shares and by requirements that enable a Fund to receive favorable tax treatment. High portfolio turnover rates will generally result in higher
brokerage expenses and may increase the volatility of a Fund.
The Funds are newly organized, and, as of the date of this SAI, have not had any portfolio turnover.
Disclosure of Portfolio Holdings
The Board of Trustees of the Trust (the “Board”) has adopted policies and procedures
regarding the disclosure of Fund portfolio holdings information (the “Disclosure Policy”) to protect the interests of Fund shareholders and to address potential conflicts of interest that could arise
between the interests of shareholders and the interests of Milliman or principal underwriter to a Fund, or any affiliated persons of those entities. Subject to the limited exceptions described below, the Trust will not make available to anyone
non-public portfolio holdings information until such time as the information is made available to all shareholders or the general public.
As used in the Disclosure Policy and throughout this SAI, the term “portfolio holdings information”
includes information with respect to the portfolio holdings of the Funds, including holdings that are derivatives, but does not include aggregate, composite or descriptive information that, in the reasonable judgement of the Trust’s Chief
Compliance Officer (“CCO”), does not present risks of dilution, arbitrage, market timing, insider trading or other inappropriate trading to the detriment of a Fund.
Consistent with current law, each Fund releases complete portfolio holdings information each fiscal quarter through regulatory
filings with no more than a 60-day lag.
Exceptions to the Disclosure Policy (to the extent not otherwise permitted pursuant to an exclusion) will be made only when: (1)
the Trust’s CCO (or his or her designee) determines in writing that a Fund has a legitimate business purpose for releasing portfolio holdings information in advance of release to all shareholders or the general public; (2) the recipient is
subject to a duty of confidentiality pursuant to a signed non-disclosure agreement or subject to professional or ethical obligations not to disclose or otherwise improperly use the information, such as would apply to independent registered public
accounting firms or legal counsel; (3) the release of such information would not otherwise violate the antifraud provisions of the federal securities laws or fiduciary duties owed to Fund shareholders; and (4) such disclosures is documented and
reported to the Board on a quarterly basis.
Under the Disclosure Policy, the receipt of compensation by a Fund, Milliman or any affiliate thereof, as consideration for
disclosing non-public portfolio holdings information will not be deemed a legitimate business purpose.
The Funds have ongoing arrangements to distribute information about the Funds’ portfolio holdings information to the Funds’
third-party service providers described herein (e.g., investment advisers, independent registered public accounting firm, administrator, transfer agent and fund accounting agent, custodian and legal
counsel) as well as [____]. These organizations are required to keep such information confidential and are prohibited from trading based on the information, or otherwise using the information, except as necessary to provide services to the Funds.
No compensation or other consideration is received by the Funds, Milliman or any other party in connection with each such ongoing arrangement.
The Disclosure Policy also permits disclosure of portfolio holdings information to insurance companies with which the Trust has
entered into a participation agreement (each, a “Participating Insurance Company,” and, collectively, the “Participating Insurance Companies”), upon request or on a
selective basis, reasonably prior to the scheduled release dates of such information in order to assist the Participating Insurance Companies with posting such information on their websites in compliance with Rule 30e-3 under the 1940 Act. The
Disclosure Policy incorporates the Board’s determination that selectively disclosing portfolio holdings information to facilitate a Participating Insurance Company’s dissemination of the portfolio holdings information on its website is a
legitimate business purpose of the Funds. Participating Insurance Companies that wish to receive such portfolio holdings information in
19
advance of the public release date must sign a non-disclosure agreement requiring them to maintain the confidentiality of the
information until the public release dates and to refrain from using that information to execute transactions on confidential portfolio holdings information. To obtain information about Fund portfolio holdings information, please contact your
insurance company or other financial intermediary.
The Board exercises continuing oversight of the disclosure of each Fund’s portfolio holdings information by overseeing the
implementation and enforcement of the Disclosure Policy and considering reports and recommendations by the Trust’s CCO concerning any material compliance matters that may arise in connection with the Disclosure Policy. The Board reserves the
right to amend the Disclosure Policy at any time without prior notice in its sole discretion.
Trustees and Executive Officers of the Trust
The Board is responsible for the overall management of the Trust, including general supervision and review of the investment
activities of the Trust. The Board, in turn, appoints the officers of the Trust, who are responsible for administering the day-to-day operations of the Trust and its separate series, as applicable. The current Trustees and officers of the Trust,
their years of birth, position with the Trust, term of office with the Trust and length of time served, their principal occupation and other directorships held for the past five years, and the number of funds to which Milliman serves as
investment adviser (the “Fund Complex”) that are overseen by each Trustee are set forth below. The address of each Trustee and officer is 71 South Wacker Drive, 31st Floor, Chicago, IL 60606.
|
Name and Year of Birth
|
|
Position with
the Trust |
|
Term of Office
and Length of Time Served |
|
Principal Occupation
During Past Five Years |
|
Number of
Funds in Fund Complex Overseen by Trustees |
|
Other
Directorships Held During Past Five Years
|
|||
|
Independent Trustees of the Trust1
|
|
|
|
||||||||||
|
Eric Berg
(1958)
|
|
Trustee
|
|
Since July 2021
|
|
Owner of With You in Mind (independent analysis and research firm for insurance, asset management and wealth-management topics) since 2019; Chief Financial Officer of Aviva India from 2018 to 2019;
Investment Banker at Macquarie Capital from 2016 to 2018.
|
|
59
|
|
None
|
|||
|
Nicholas Dalmaso
(1965)
|
|
Lead Independent Trustee
|
|
Since July 2021
|
|
General Counsel of M1 Holdings Inc. and M1 Finance LLC (FINRA registered Broker/Dealer) since 2014; Founder/CEO of Sound Capital Holdings, Sound Capital Distributors (a FINRA registered Broker/Dealer) and Sound Capital Solutions (an
Investment Advisor) since 2020; Chief Compliance Officer of M1 Finance LLC from 2014 to 2019.
|
|
59
|
|
Chair of Destra Capital Management Investment Company Boards (4 portfolios) since 2010; Independent Director of Keno/Kozie Associates (IT Consulting) from 2016 to 2018.
|
|||
20
|
Name and Year of Birth
|
|
Position with
the Trust |
|
Term of Office
and Length of Time Served |
|
Principal Occupation
During Past Five Years |
|
Number of
Funds in Fund Complex Overseen by Trustees |
|
Other
Directorships Held During Past Five Years
|
|||
|
Daniel Ross Hayes
(1957)
|
|
Trustee
|
|
Since July 2021
|
|
Director, Treasurer and Investment Committee Chair of ShoreRivers, Inc. (non-profit clean water advocacy corporation) since 2017.
|
|
59
|
|
None
|
|||
|
Colleen McKenna Tucker
(1970)
|
Trustee |
Since September 2021 |
Executive Director of International Insurance Society (membership organization for the risk and insurance industry) since 2004.
|
59 |
None |
||||||||
|
Interested Trustee of the Trust
|
|
|
|
||||||||||
|
Adam Schenck2
(1981)
|
|
Chair of the Board, President and Interested Trustee
|
|
Since November 2020
|
|
Principal Managing Director – Head of Fund Services of Milliman Financial Risk Management, LLC since 2005.
|
|
59
|
|
None
|
|||
|
Officers of the Trust
|
|
|
|||||||||||
|
Arthur W. Jasion
(1965)
|
|
Treasurer and Principal Financial Officer
|
|
Since July 2021
|
|
Senior Director and Fund Principal Financial Officer of Foreside Management Services, LLC since 2020; Partner, Ernst & Young LLP from 2012 to 2020.
|
|
N/A
|
|
N/A
|
|||
|
Roger Pries
(1965)
|
|
Chief Compliance Officer and Anti-Money Laundering Officer
|
|
Since July 2021
|
|
Fund Chief Compliance Officer of Foreside Fund Officer Services, LLC since 2019; Compliance Officer from 2016 to 2019 and Operational Risk Manager/Vice President from 2007 to 2016 at Citi Fund Services.
|
|
N/A
|
|
N/A
|
|||
|
Ehsan K. Sheikh
(1987)
|
|
Secretary and Chief Legal Officer
|
|
Since July 2021
|
|
Senior Counsel of Milliman Financial Risk Management LLC since 2007, Associate Counsel from 2014 - 2017.
|
|
N/A
|
|
N/A
|
|||
|
1
|
The Trustees of the Trust who are not “interested persons,” as defined under section 2(a)(19) of the 1940 Act, of the Trust (the “Independent Trustees”).
|
|
2
|
Adam Schenck is an “interested person,” as defined by the 1940 Act, of the Trust because of his employment by Milliman.
|
The Board approves financial arrangements and other agreements between the Funds, on the one hand, and Milliman or any of its
affiliated parties, on the other hand. The Independent Trustees meet regularly as a group in executive session and with independent legal counsel. The Board has determined that the efficient conduct of the Board’s affairs makes it desirable to
delegate responsibility for certain specific matters to various committees of the Board (each, a “Committee,” and, together, the “Committees”), as described below.
The Committees meet as often as necessary or appropriate, either in conjunction with regular meetings of the Board or otherwise. The chair, if any, of each Committee is appointed by a majority of the Independent Trustees upon recommendation of
the Committee. Adam Schenck, Interested Trustee, serves as Chairman of the Board. The Board has appointed Nicholas Dalmaso to serve as Lead Independent Trustee. The Lead Independent Trustee has several primary purposes, such as (i) to serve as
the
21
leader of the Independent Trustees; (ii) to communicate regularly with the
other Independent Trustees; and (iii) to communicate regularly with the Chair of the Board, who is an employee of Milliman, investment adviser to the Trust, and other representatives of Milliman.
This structure is reviewed by the Board periodically, and the Board believes it to be appropriate and effective. The Board also
completes an annual self-assessment during which it reviews its leadership and Committee structure, and considers whether its structure remains appropriate in light of the Funds' current operations.
Each Trustee shall hold office for the lifetime of the Trust or until the next meeting of shareholders called for the purpose of
electing Trustees and until the election and qualification of his or her successor or, if sooner, until he or she dies, declines to serve, resigns, retires, is removed or is incapacitated. The Board may fill any vacancy on the Board provided that,
after such appointment, at least two-thirds of the Trustees have been elected by shareholders. Any Trustee may be removed by the Board, with or without cause, by action of a majority of the Trustees then in office, or by a vote of shareholders at
any meeting called for that purpose.
The Officers of the Trust are appointed by the Board, or, to the extent permitted by the Trust’s By-laws, by one or more officers or
agents of the Trust with power to appoint any such subordinate officers, and each shall serve at the pleasure of the Board. Subject to the rights, if any, of an officer under any contract of employment, any officer may be removed from office with
or without cause by the Board, or, to the extent permitted by the Trust’s By-laws, by any officer upon whom such power of removal shall have been conferred by the Board.
Committees of the Board
The Board has two standing committees: the Audit Committee and the Nominating and Governance Committee. The function of each
Committee is oversight. In addition, each Committee may from time-to-time delegate certain of its functions to a subcommittee comprised of members of the Board.
The Audit Committee has the responsibility, among other things, to: (i) oversee the accounting and financial reporting policies
and practices of the Funds, the Funds’ internal control over financial reporting, and as the Committee deems appropriate, the internal controls of certain service providers; (ii) oversee the quality and objectivity of the Funds’ financial
statements and the independent audits thereof; (iii) recommend the appointment of the Funds’ independent registered public accounting firm to the Board for the Board’s selection; (iv) act as a liaison between the Funds’ independent registered
public accounting firm and the full board. The Audit Committee is composed of all of the Independent Trustees, and Mr. Berg serves as chairperson of the Audit Committee.
The responsibilities of the Nominating and Governance Committee, among other things, include to: (i) assist the Board in its
review and oversight of governance matters; (ii) assist the Board with the selection and nomination of candidates to serve on the Board; (iii) periodically review the composition of the Board and the committees’ structures (iv) assist the Board
in evaluating the support provided to the Board and its committees and members by management, counsel and other service providers to the Board; and (v) undertake such other responsibilities as may be delegated to the Committee by the Board. The
Nominating and Governance Committee is composed of all of the Independent Trustees, and Mr. Hayes serves as chairperson of the Audit Committee.
The Nominating and Governance Committee may consider nominations for candidates to serve as Trustees made by Fund shareholders.
Shareholders who wish to recommend a nominee should send nominations to the Secretary of the Trust, which should include the biographical information and qualifications of the proposed nominee. The Committee may request any additional information
deemed reasonably necessary for the Committee to evaluate such nominee.
Board Oversight of Risk Management
The Board’s role is one of oversight, including oversight of each Fund’s risks, rather than day-to-day management. The Board’s
committee structure allows the Board to focus on risk management as part of its broader oversight of the operations of the Funds. While day-to-day risk management of the Funds is Milliman’s responsibility, Trustees receive regular reports from the
Trust’s CCO, Milliman and the Trust’s various service providers regarding investment risks and compliance risks. These reports allow the Board to focus on various risks and their potential impact on the Funds. The Board has discussions with the
Trust’s CCO and Milliman, as well as the portfolio managers, regarding how they
22
monitor and seek to control such risks. Additionally, the Trust’s CCO and other officers of the Funds regularly, and on an ad hoc basis, report to the Board on a variety of risk-related matters.
The Board has retained Milliman as each Fund’s investment adviser. Milliman is responsible for the day-to-day operation of the
Funds. Milliman may delegate the day-to-day management of the investment operations of each of the Funds to one or more sub-advisers. Milliman will be responsible for supervising the services provided by each sub-adviser including risk management
services.
Additionally, the Board meets periodically with the Trust’s CCO who reports to the Trustees regarding the compliance of the Funds
with the federal securities laws and the internal compliance policies and procedures of the Funds. The Board also reviews the CCO’s annual report, including the CCO’ compliance risk assessments for the Funds.
Trustees’ Qualifications and Experience
The Nominating and Governance Committee is responsible for identifying, evaluating and nominating trustee candidates. The Nominating
and Governance Committee reviews the background and the educational, business and professional experience of trustee candidates and the candidates’ expected contributions to the Board. Trustees selected to serve on the Board are expected to possess
relevant skills and experience, time availability and the ability to work well with the other Trustees. A Trustee’s ability to perform his or her duties effectively may have been attained through the Trustee’s executive, business, consulting,
and/or legal positions; experience from service as a director/trustee of other investment companies, public companies, or non-profit entities or other organizations; educational background or professional training or practice; and/or other life
experiences.
The Board believes that each of the Trustees has the ability to review critically, evaluate, question and discuss information
provided to them; to interact effectively with each other, Milliman, other service providers, Trust counsel and the independent registered public accounting firm; and to exercise effective business judgment in the performance of his or her
duties. The following provides a brief summary of the information that led to the conclusion that each Trustee should serve as a Trustee of the Board.
Eric Berg has served as a trustee of the Trust since July 2021. The Board believes that Mr. Berg’s experience as an investment
banker and chief financial officer, as well as his accounting experience, benefits the Funds.
Nicholas Dalmaso has served as a trustee of the Trust since July 2021. The Board believes that Mr. Dalmaso’s experience in the
financial services, investments, banking, and fintech industries benefits the Funds.
Daniel Ross Hayes has served as a trustee of the Trust since July 2021. The Board believes that Mr. Hayes’ experience in the
investment, annuity, life, mutual fund and retirement industries, including his experience as president of a registered investment adviser, benefits the Funds.
Adam Schenck has served as a trustee of the Trust since November 2020. The Board believes that Mr. Schenck’s experience with
Milliman as a Managing Director and Portfolio Manager benefits the Funds.
Colleen McKenna Tucker has served as a trustee of the Trust since September 2021. The Board believes that Ms. Tucker’s
experience in the insurance industry, including in various management positions, benefits the Funds.
References to the qualifications, attributes and skills of Trustees are pursuant to requirements of the SEC, do not constitute
holding out the Board or any Trustee as having any special expertise or experience, and shall not impose any greater responsibility or liability on any such person or on the Board by reason thereof.
Trustee Ownership of Fund Shares
No trustee beneficially owned shares of any Fund as of the calendar year ended December 31, 2020, which is before the inception date
of the Funds.
Trustee Compensation
Independent Trustees shall each receive an annual salary of $15,000 for the entire Fund Complex. The interested trustee does not
receive compensation from the Trust for his service as a Trustee.
All Trustees are reimbursed for expenses in connection with each Board meeting attended, with this reimbursement allocated to the
Trust. The Trust has no pension or retirement plan. No other entity affiliated with the Trust pays any
23
compensation to the Independent Trustees. Set forth below is the estimated rate of compensation to be received by the Independent
Trustees for the fiscal year ending December 31, 2021.
|
Name of Independent Trustee
|
|
Aggregate
Compensation1 From the Fund |
|
|
Pension or Retirement
Benefits Accrued as Part of Portfolio Expenses |
|
Annual Benefits
Upon Retirement |
|
Total
Compensation from Fund and Fund Complex Paid to Trustees |
|
||
|
Eric Berg
|
|
$
|
[]
|
|
|
None
|
|
None
|
|
$
|
[]
|
|
|
Nicholas Dalmaso
|
|
$
|
[]
|
|
|
None
|
|
None
|
|
$
|
[]
|
|
|
Daniel Hayes
|
|
$
|
[]
|
|
|
None
|
|
None
|
|
$
|
[]
|
|
| Colleen McKenna Tucker |
$ | [] |
None | None | $ | [] |
||||||
|
1
|
Aggregate compensation is comprised of all applicable retainers and meeting fees, but does not include reimbursements for Trustee expenses.
|
Codes of Ethics
Federal law requires the Trust, each of its investment advisers (i.e., Milliman with
respect to the Funds) and the Trust’s principal underwriter to adopt codes of ethics, which govern the personal securities transactions of their respective personnel. Accordingly, each such entity has adopted a code of ethics pursuant to which
their respective personnel may invest in securities for their personal accounts (including securities that may be purchased or held by the Trust).
Proxy Voting Guidelines
Federal law requires the Trust and each of its investment advisers (i.e., Milliman with
respect to the Funds) to adopt procedures for voting proxies (the “Proxy Voting Policy”) and to provide a summary or copy of the Proxy Voting Policy used to vote the securities held by each Fund. The Board
has delegated responsibility for decisions regarding proxy voting for securities held by each Fund to Milliman. Information regarding how the Funds voted proxies relating to portfolio securities during the most recent 12-month period ended June
30 are available without charge (i) upon request, by calling [NUMBER], (ii) online at [WEBSITE], or (iii) on the SEC’s website at www.sec.gov. A copy of such Proxy Voting Policy is attached as Appendix B to this SAI.
Investment Advisory and Other Services
Investment Adviser
Milliman Financial Risk Management LLC (“Milliman”), located at 71 S. Wacker Drive, 31st
Floor, Chicago, IL 60606, serves as investment adviser to each Fund. Milliman is a wholly owned subsidiary of Milliman, Inc. Milliman provides investment advisory, hedging, and consulting services on approximately $150 billion in assets as of
March 31, 2021.
Under the Investment Advisory Agreement (the “Advisory Agreement”) with the Trust,
Milliman manages the Funds in accordance with the policies and procedures established by the Board, and has agreed to perform, or arrange for the performance of, the day-to-day management of each Fund’s portfolio. Milliman also pays all expenses
incurred by it in connection with its activities under the Advisory Agreement, including, but not limited to, expenses of all necessary investment and management facilities and investment personnel, including salaries, expenses and fees of any
personnel required for it to faithfully perform its duties under the Advisory Agreement, and expenses of administrative facilities, including bookkeeping, clerical personnel and equipment necessary for the efficient conduct of the Adviser’s
duties under the Advisory Agreement. In addition, Milliman pays, out of its legitimate profits, broker-dealers, trust companies, transfer agents and other financial institutions, including Participating Insurance Companies and/or their
affiliates, in exchange for their selling of shares of the Trust’s series or for recordkeeping or other shareholder support services, as further described under “Distribution and Servicing of Shares” below.
The Advisory Agreement continues in effect for an initial period of no more than two years and, thereafter, shall continue
automatically for successive annual periods; provided, however, that such continuance is specifically approved at least annually by the Trustees, or by vote of a majority of the outstanding voting securities of the Trust, and, in either case, by a
majority of the Trustees who are not parties to the Advisory Agreement or interested persons
24
of any such party. The Advisory Agreement terminates automatically in the event of its “assignment,” as defined under the 1940 Act.
It may be terminated at any time as to a particular Fund, without the payment of any penalty, by vote of a majority of the outstanding voting securities of that Fund, by the Board or by Milliman on not more than 60 days’ written notice. The
Advisory Agreement further provides that Milliman may render similar services to others.
For services provided under the Advisory Agreement, Milliman receives from each Fund an annual fee, paid monthly, equal to 0.49%
of the average daily net assets of each Fund. The Funds are newly organized, and, as of the date of this SAI, have not paid any investment advisory fees.
Milliman has contractually agreed to waive advisory fees and/or reimburse expenses to the extent necessary to limit each Fund’s
total annual operating expenses (excluding taxes, interest, brokerage fees and commissions, Rule 12b-1 fees, acquired fund fees and expenses, short-sale dividend expenses, administrative services fees, other expenses that are capitalized in
accordance with generally accepted accounting principles, and extraordinary or non-routine expenses not incurred in the ordinary course of the Fund’s business) to 0.74% of the Fund's average daily net assets (the “Expense Limitation Agreement”) until at least November 1, 2022. During its term, the Expense Limitation Agreement with respect to a Fund cannot be terminated or amended to increase the applicable limit without approval of the
Board. Milliman may recoup from a Fund any advisory fees waived or expenses reimbursed pursuant to the applicable Expense Limitation Agreement for a period of three years from the date on which such waiver or reimbursement occurred; provided,
however, that such recoupment shall not be made if it would cause the Fund’s total annual Fund operating expenses to exceed the lesser of (a) the expense limitation in effect at the time of the reimbursement, or (b) the expense limitation in
effect at the time of recoupment, if any.
In addition to the Expense Limitation Agreement, Milliman has contractually agreed to waive its advisory fees in an amount equal
to each Fund’s acquired fund fees and expenses until at least November 1, 2022. This contract cannot be terminated or modified for a Fund without the consent of the Board.
Portfolio Managers
The portfolio managers are primarily responsible for the day-to-day management of the Funds. There are currently three portfolio
managers: Robert Cummings, Maria Schiopu and Jordan Rosenfeld. Prior to the date of this SAI, the Funds had not launched and, therefore, none of the portfolio managers beneficially owned any Shares.
The portfolio managers are paid competitive salaries by Milliman. In addition, they may receive bonuses based on qualitative
considerations, such as an individual’s contribution to the organization, and performance reviews in relation to job responsibilities.
The portfolio managers have day‑to‑day management responsibilities with respect to other investments accounts and, accordingly,
may be presented with potential or actual conflicts of interest. The management of other accounts may result in the portfolio manager devoting unequal time and attention to the management of the Funds and/or other accounts.
With respect to securities transactions for the Funds, Milliman determines which broker to use to execute each transaction,
consistent with its duty to seek best execution of the transaction. For buy or sell transactions considered simultaneously for the Funds and other accounts, orders are placed at the same time. Milliman uses its best efforts to ensure that no
client is treated unfairly in relation to any other client over time in the allocation of securities or the order of the execution of transactions. Milliman generally allocates trades on the basis of assets under management so that the securities
positions represent equal exposure as a percentage of total assets of each client. The Funds and client accounts are not generally invested in thinly traded or illiquid securities; therefore, conflicts in fulfilling investment opportunities are
to some extent minimized. If an aggregated trade order is not substantially filled, it will generally be allocated pro rata.
The portfolio managers manage the investment vehicles with the number of accounts and assets, as of August 31, 2021, set forth in
the table below. None of the accounts managed by the portfolio managers pay an advisory fee that is based upon the performance of the account.
25
|
Name
|
Registered Investment Companies
|
Other Pooled Investment Vehicles
|
Other Accounts
|
|||
|
Number of Accounts
|
Total Assets
(in millions)
|
Number of Accounts
|
Total Assets
(in millions)
|
Number of Accounts
|
Total Assets (in millions)
|
|
|
Robert T. Cummings
|
74
|
4,942
|
0
|
0
|
0
|
0
|
|
Maria Schiopu
|
32
|
49,235
|
0
|
0
|
0
|
0
|
|
Jeff Greco
|
19
|
36,733
|
0
|
0
|
0
|
0
|
|
Jordan Rosenfeld
|
5
|
11,535
|
0
|
0
|
0
|
0
|
Transfer Agent and Fund Accounting Agent
U.S. Bancorp Fund Services, LLC d/b/a U.S. Bank Global Fund Services (“Fund Services”),
located at 615 East Michigan Street, Milwaukee, Wisconsin 53202, serves as transfer agent for the Funds pursuant to a transfer agent servicing agreement and as Fund accounting agent pursuant to a fund accounting servicing agreement.
Administrator
Fund Services also serves as the administrator for the Funds pursuant to a fund administration servicing agreement (the “Fund Administration Servicing Agreement”). Under the Fund Administration Servicing Agreement, Fund Services is obligated, on a continuous basis, to provide such administrative services as the Board reasonably
deems necessary for the proper administration of the Trust. Fund Services generally will assist in many aspects of the Trust’s and the Funds’ operations, including accounting, bookkeeping and record keeping services (including, without
limitation, the maintenance of such books and records as are required under the 1940 Act and the rules thereunder, except as maintained by other agents), assisting in preparing reports to shareholders or investors, assisting in the preparation
and filing of tax returns, supplying financial information and supporting data for reports to and filings with the SEC, and supplying supporting documentation for meetings of the Board.
As of the date of this SAI, the Funds have not commenced operations and thus have paid no administrative services fees pursuant to
the Fund Administration Servicing Agreement.
Custodian
U.S. Bank, N.A. (“Custodian”), located at 1555 N. River Center Drive, Suite 302,
Milwaukee, Wisconsin 53212, serves as the Custodian for the Funds pursuant to a custody agreement (the “Custody Agreement”). The Custodian holds each Fund’s assets, among other duties. Under the Custody
Agreement, the Custodian is also authorized to appoint certain foreign custodians for Fund investments outside of the United States.
Legal Counsel
Stradley Ronon Stevens & Young, LLP, 191 North Wacker Drive, Suite 1601, Chicago, IL 60606, serves as the Trust’s legal counsel.
Independent Registered Public Accounting Firm
[______], [___________], serves as the independent registered public accounting firm for the Funds.
Distribution and Servicing of Shares
Foreside Fund Services, LLC (the “Distributor”), Three Canal Plaza, Suite 100, Portland,
ME 04101, serves as underwriter for each Fund in the continuous distribution of its shares pursuant to a Distribution Agreement dated [_____] (the “Distribution Agreement”). Unless otherwise terminated,
the Distribution Agreement will continue for an initial period of two years and from year to year thereafter for successive annual periods, if, as to each Fund, such continuance is approved at least annually by (i) the Board or by the vote of a
majority of the outstanding shares of a particular Fund, and (ii) the vote of a majority of the Trustees of the Trust who are not parties to the Distribution Agreement or interested persons (as defined in the 1940 Act) of any party to the
Distribution Agreement, cast at a meeting called for the purpose of voting on such approval. The Distribution Agreement may be terminated in the event of any assignment, as defined in the 1940 Act.
26
The Distributor, its affiliates and officers have no role in determining the investment policies or which securities are to be
purchased or sold by the Funds. The Distributor is not affiliated with the Trust or Milliman.
Distribution Plan
The Trust has adopted a Distribution Plan under Rule 12b-1 (“Rule 12b-1 Plan”) of the
1940 Act with respect to the Funds’ Class 3 shares. The Rule 12b-1 Plan permits the Funds to pay the Distributor, as the Funds’ principal underwriter, for expenses associated with the distribution of Class 3 shares of the Funds. Under the Rule
12b-1 Plan, the Distributor is paid an annual fee of 0.25% of the average daily net assets of Class 3. All Rule 12b-1 Plan payments received by the Distributor shall be held to be used solely for
distribution-related expenses and shall not be retained as profit by the Distributor. Accordingly, no compensation is payable by the Funds to the Distributor for such distribution services. However, Milliman has entered into an agreement with the
Distributor under which it makes payments to the Distributor in consideration for its services under the Distribution Agreement. The payments made by Milliman to the Distributor do not represent an additional expense to the Funds or their
shareholders.
As of the date of this SAI, the Funds have not commenced operations and thus the Distributor has not received any distribution fees
under the Rule 12b-1 Plan and the Funds have made no expenditures using these fees.
Distribution fees may be paid to the Distributor or to Participating Insurance Companies and/or their affiliates, or to any other
eligible institution, for the provision of (i) distribution activities related to the indirect marketing of the Funds to the owners of variable insurance contracts or variable life insurance policies (each, a “Contract
Owner,” and, collectively, the “Contract Owners”), and/or (ii) other Contract Owner services.
As required by Rule 12b-1, the Rule 12b-1 Plan was approved by the Board, including a majority of the Trustees who are not
interested persons of the Trust and who have no direct or indirect financial interest in the operation of the Rule 12b-1 Plan (the “12b-1 Plan Independent Trustees”). The Rule 12b-1 Plan may be terminated
for Class 3 shares of a Fund by vote of a majority of the 12b-1 Plan Independent Trustees, or by vote of a majority of the outstanding shares of that class. Any change in the Rule 12b-1 Plan that would materially increase the amount to be spent
for distribution requires shareholder approval. The Trustees review quarterly a written report of such costs and the purposes for which such costs have been incurred. The Rule 12b-1 Plan may be amended by vote of the Trustees, including a
majority of the 12b-1 Plan Independent Trustees, cast at a meeting called for that purpose. All agreements with any person relating to the implementation of the Rule 12b-1 Plan may be terminated for any Fund at any time on 60 days’ written notice
without the payment of any penalty, by vote of a majority of the 12b-1 Plan Independent Trustees or by a vote of the majority of the outstanding shares of Class 3 of that Fund. The Rule 12b-1 Plan will continue in effect for successive one-year
periods; provided, however, that each such continuance is specifically approved by the vote of a majority of the Board, and the Rule 12b-1 Plan Independent Trustees, cast at a meeting called for that purpose.
Dealer Compensation
At the request of the Trust, the Distributor may, in its discretion, enter into selling agreements with financial intermediaries as
the Trust may select, so that such intermediaries may sell shares of the Funds. These dealers will be compensated either pursuant to the Funds’ Rule 12b-1 Plan or by Milliman out of its own legitimate profits.
Payments to Participating Insurance Companies and/or their Affiliates
Marketing Support Services. Milliman may, from time to time, at its expense and from its own legitimate profits, make cash payments to Participating Insurance Companies and/or their affiliates as an incentive to promote the sale and retention
of Fund shares and for other marketing support services, as further described in the Prospectus. Such cash payments may be calculated on the average daily net assets of the applicable Fund(s) attributable to that particular Participating
Insurance Company and/or its affiliates (“Asset-Based Payments”), in which case the total amount of such cash payments generally does not exceed [__]% per annum of those assets during a defined period.
Milliman may also make other cash payments to Participating Insurance Companies and/or their affiliates in addition to, or in lieu of, any Asset-Based Payments, in the form of payments for travel expenses; meeting fees; entertainment; transaction
processing and transmission charges; advertising or other promotional expenses; or other expenses as determined in Milliman’s discretion. In certain cases, these other payments could be significant to the Participating Insurance Companies and/or
their affiliates. Generally, commitments to make such payments are terminable upon notice to the Participating Insurance Companies and/or their affiliates.
27
Administrative Support Services. Milliman contracts with
Participating Insurance Companies and/or their affiliates for certain administrative services provided to the Funds, which services are described in the Prospectus. Each Participating Insurance Company and/or its affiliates negotiates the fees to
be paid for the provision of these services. The cost of providing the services and the overall package of services provided may vary from one arrangement to another. Milliman does not make an independent assessment of a Participating Insurance
Company’s or its affiliate’s cost of providing such services. Milliman pays for these administrative support services out of its own legitimate profits.
Payments to Participating Insurance Companies. As of the date of this
SAI, no Participating Insurance Company or affiliate thereof receives payment for marketing support services, and only [______] receives payment for administrative support services. This information is not necessarily current and will change over
time. Certain arrangements may be in the process of being negotiated, and there is a possibility that payments will be made retroactively to Participating Insurance Companies and/or their affiliates, which are not otherwise listed. Accordingly,
please contact your Participating Insurance Company to determine whether it or its affiliates currently may be receiving such payments and to obtain further information regarding any such payments.
Brokerage Allocation and Other Practices
Brokerage Allocation
An investment adviser has a fiduciary duty to engage in brokerage practices that are in the best interests of its clients and to
place the interests of its clients above all other interests in the broker selection process. Accordingly, Milliman has an obligation to seek to obtain the “best execution” for each Fund’s transactions. “Best execution” is defined as the most
favorable execution possible, considering such factors as the broker’s services, research provided, commissions charged, volume discounts offered, execution capability, reliability and responsiveness of the broker-dealer. Milliman may test the
execution quality of the broker-dealer to which Milliman submitted the trade. This may include comparing a sample of executed equity trades and the prices that were in the market at the time of the trade (e.g.,
by comparing it to a third-party pricing source). In selecting a broker for each specific transaction, Milliman uses its best judgment to choose the broker most capable of providing the brokerage services necessary to obtain “best execution.” The
full range and quality of brokerage services available will be considered in making these determinations. Such services may consist of the following: (i) trading capabilities, including execution speed and ability to provide liquidity; (ii)
commissions and/or fees both in aggregate and on a per share basis; (iii) capital strength and stability; (iv) settlement processing; (v) use of technology and other special services; (vi) responsiveness, reliability, and integrity; and, if
applicable, (vii) the nature and value of research provided. Milliman will consider total transaction costs when selecting brokers for trade execution. Total transaction costs include: (i) market impact cost; (ii) lost opportunity to trade cost;
(iii) time-to-market cost; (iv) commissions on agency trades or the spreads on principle trades; and (v) bid-ask spread.
As of the date of this SAI, the Funds have not commenced operations and thus have paid no brokerage commissions.
Soft Dollars
[As a matter of policy, Milliman does not intend to maintain any soft dollar arrangements. Milliman may receive research on the
economy, derivative instruments, flows and conditions from many broker-dealers. This information is commonly distributed by many broker-dealers to many market participants, is not associated with particular transactions, and does not obligate
Milliman to trade with any particular broker-dealer. As these items are made readily available by many broker-dealers to many market participants and they do not affect Milliman’s selection of a particular broker-dealer for a specific
transaction, Milliman does not believe that it has conflicts of interest related to soft dollars in the case of Fund transactions.]
As of the date of this SAI, the Funds have not commenced operations and thus have paid no soft dollar commissions.
Affiliated Brokers
As of the date of this SAI, the Funds have not commenced operations and thus have paid no brokerage commissions to affiliated
broker-dealers.
28
Purchases, Redemptions and Pricing of Shares
Purchases and Redemptions of Shares
Shares of a Fund may not be purchased or redeemed by individual investors directly but may be purchased or redeemed only through
variable annuity contracts or variable life insurance policies (together, “Variable Contracts,” and, each, a “Variable Contract”) offered by Participating Insurance
Companies, or as otherwise described in the Prospectus.
The Funds generally plan to redeem their shares for cash. If, however, conditions exist that make payment of redemption proceeds
wholly in cash unwise or undesirable, a Fund may make payment wholly or partly in securities or other investment instruments, which may not constitute securities as such term is defined in the applicable securities laws. If a redemption is paid
wholly or partly in securities or other assets, a shareholder would incur transaction costs in disposing of the redemption proceeds.
A Fund may delay forwarding redemption proceeds for up to seven days if the investor redeeming shares is engaged in excessive
trading, or if the amount of the redemption request otherwise would be disruptive to efficient portfolio management or would adversely affect the Fund. The Trust may suspend the right of redemption for such periods of time as are permitted under
the 1940 Act and under the following unusual circumstances: (a) when the New York Stock Exchange (the “Exchange”) is closed (other than weekends and holidays) or trading is restricted; (b) when an emergency
exists, making disposal of portfolio securities or other assets, or the valuation of net assets, not reasonably practicable; or (c) during any period when the SEC has by order permitted a suspension of redemption for the protection of shareholders.
Pricing of Shares
The offering price of a Fund’s shares is based on the Fund’s NAV per share. A Fund determines its NAV per share by subtracting
its liabilities (including accrued expenses and dividends payable) from its total assets (the value of the securities the Fund holds plus cash and other assets, including income accrued but not yet received) and dividing the result by the total
number of Fund shares outstanding. A Fund determines its NAV per share as of close of regular trading on the Exchange (generally 4:00 p.m., Eastern time) on each business day the Exchange is open for regular trading. If the Exchange closes early
on a valuation day, a Fund shall determine NAV as of that time.
To the extent that a Fund’s investments are traded in markets that are open when the Exchange is closed, the value of the Funds’
investments may change on days when shares cannot be purchased or redeemed. In addition, each Fund reserves the right to not determine NAV when: (i) a Fund has not received any orders to purchase, sell or exchange shares and (ii) changes in the
value of the Fund’s portfolio do not affect the Fund’s NAV.
Portfolio securities are generally valued utilizing prices provided by independent pricing services. The Board has authorized
each Fund and Fund Services, the Funds’ accounting agent, to use prices provided by certain pricing service vendors (each, a “Pricing Service”) as described below.
Equity Securities and Options. Equity securities and options contracts,
for which accurate and reliable market quotations are readily available, will be valued by Fund Services as described below:
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A.
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Equity securities, including shares of ETFs, listed on any national or foreign exchange (excluding the Nasdaq National Market (“Nasdaq”) and the London Stock Exchange Alternative Investment Market (“AIM”)) will be valued at the last sale price on the exchange on which they are
principally traded, or, for Nasdaq and AIM securities, the official closing price. Securities traded on more than one securities exchange are valued at the last sale price or official closing price, as applicable, at the close of the
exchange representing the principal market for such securities.
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B.
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FLEX Options will be valued at a market-based price provided by the exchange on which the option is traded at the official close of that
exchange’s trading date. If the exchange on which the option is traded is unable to provide a market price, FLEX Options prices will be provided by a model-pricing provider. Otherwise, the value of a FLEX option will be determined by
the Trust’s pricing committee (the “Pricing Committee”) in accordance with the pricing and valuation procedures adopted by the Board (the “Valuation Procedures”).
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29
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C.
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OTC options are valued at the mean of the most recent bid and the asked price, if available, or otherwise at their closing bid price.
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D.
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Redeemable securities issued by mutual funds shall be valued at the mutual fund’s applicable NAV.
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Fund Services will obtain all market quotations used in valuing equity securities from a Pricing Service. If no quotation can be
obtained from a Pricing Service, then Fund Services will contact the Pricing Committee. The Pricing Committee is responsible for establishing valuation of portfolio securities and other instruments held by a Fund in accordance with the Valuation
Procedures. The Pricing Committee will then attempt to obtain one or more broker quotes for the security daily and will value the security accordingly.
If no quotation is available from either a Pricing Service, or one or more brokers, or if the Pricing Committee has reason to
question the reliability or accuracy of a quotation supplied, the Pricing Committee must determine if a “fair value” of such portfolio security or other asset must be provided by the Pricing Committee pursuant to the Valuation Procedures.
Fixed Income Securities. Subject to the special pricing situations
set forth below, fixed income securities will be valued by the Fund Services as follows:
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A.
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Fixed income securities will be valued using a Pricing Service.
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B.
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Fixed income securities having a remaining maturity of 60 days or less when purchased will be valued at cost adjusted for amortization of
premiums and accretion of discounts, provided the Pricing Committee has determined that the use of amortized cost is an appropriate reflection of fair value given market and issuer specific conditions existing at the time of the
determination. Factors that may be considered in determining the appropriateness of the use of amortized cost include, but are not limited to, the following:
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(i)
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the credit conditions in the relevant market and changes thereto;
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(ii)
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the liquidity conditions in the relevant market and changes thereto;
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(iii)
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the interest rate conditions in the relevant market and changes thereto (such as significant changes in interest rates);
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(iv)
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issuer-specific conditions (such as significant credit deterioration); and
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(v)
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any other market-based data the Pricing Committee considers relevant. In this regard, the Pricing Committee may use last-obtained
market-based data to assist it when valuing portfolio securities using amortized cost.
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C.
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Repurchase agreements will be valued as follows: Overnight repurchase agreements will be valued at cost. Term repurchase agreements (i.e., those whose maturity exceeds seven days) will be valued by the Pricing Committee at the average of the bid quotations obtained daily from at least two recognized dealers.
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Fund Services will obtain all pricing data for use in valuing fixed income securities from a Pricing Service, or, if no price is
available from a Pricing Service, then Fund Services will contact the Pricing Committee, which will attempt to obtain one or more broker quotes from the selling dealer or financial institution for the security daily and will value the security
accordingly. If the Pricing Committee has reason to question the accuracy or reliability of a price supplied or the use of the amortized cost methodology, the Pricing Committee must determine if a “fair value” of such portfolio security or other
asset must be provided by the Pricing Committee pursuant to the Valuation Procedures. From time to time, the Pricing Committee will request that Fund Services submit price challenges to a Pricing Service, usually in response to any updated broker
prices received.
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Additional Information Concerning the Trust
Description of Shares
The shares of a Fund represent an interest in that Fund’s securities and other assets and in its profits or losses. Each fractional
share of a class of a Fund has the same rights, in proportion, as a full share of that class of that Fund. The Board may change the designation of any Fund and may increase or decrease the numbers of shares of any Fund but may not decrease the
number of shares of any Fund below the number of shares then outstanding.
Each Fund currently offers one class of shares: Class 3, which is subject to a Rule 12b-1 Plan that is described above.
Except as described below, all classes of shares of the Funds will have identical voting, dividend, liquidation and other rights,
preferences, terms and conditions. If multiple classes are issued, the only differences between classes will be (a) each class may be subject to different expenses specific to that class; (b) each class will have a different identifying designation
or name; and (c) each class will have exclusive voting rights with respect to matters solely affecting that class. Each Fund does not anticipate that there will be any conflicts between the interests of holders of different classes of its shares by
virtue of those classes.
Each issued and outstanding class of a share in a Fund is entitled to participate equally in dividends and other distributions
declared by that class of a Fund and, upon liquidation or dissolution, in the net assets of such Fund remaining after satisfaction of outstanding liabilities. The shares of each Fund, when issued, are fully paid and nonassessable.
The Trust does not hold annual meetings of shareholders; however, certain significant corporate matters, such as the approval of a
new investment advisory agreement or a change in a fundamental investment policy, which require shareholder approval, will be presented to shareholders at a meeting called by the Board for such purpose.
Special meetings of shareholders may be called for any purpose upon receipt by the Trust of a request in writing signed by
shareholders owning not less than 25% of the total combined votes of all shares of the Trust issued and outstanding, as provided in the Amended and Restated Agreement and Declaration of Trust (the “Declaration of Trust”) and By-laws of the Trust.
There normally will be no meeting of the shareholders for the purpose of electing Trustees unless, and until such time as, the Trustees then in office call a shareholders’ meeting for that purpose. To the extent that Section 16(c) of the 1940 Act
applies to a Fund, the Trustees are required to call a meeting of shareholders for the purpose of voting upon the question of removal of any Trustee when requested in writing to do so by the shareholders owning at least 10% of the aggregate
number of votes to which shareholders of that Fund are entitled, as provided in the Declaration of Trust and By-laws of the Trust.
The Declaration of Trust provides that each shareholder, by virtue of having become a shareholder of the Trust, shall be bound by
the terms of the Declaration of Trust. The Declaration of Trust provides a detailed process for the bringing of derivative actions by shareholders for claims other than U.S. federal securities law claims beyond the process otherwise required by
law. This process is intended to permit legitimate inquiries and claims while avoiding the time, expense, distraction, and other harm that can be caused to a Fund or its shareholders as a result of spurious shareholder demands and derivative
actions. Prior to bringing a derivative action, a demand by the complaining shareholder must first be made on the Trustees. The Declaration of Trust details conditions that must be met with respect to the demand. Following receipt of the demand,
the Trustees must be afforded a reasonable amount of time to consider and investigate the demand. The Trustees will be entitled to retain counsel or other advisors in considering the merits of the request and shall require an undertaking by the
shareholders making such request to reimburse the Trust for the expense of any such advisors in the event that the Trustees determine not to bring such action. The Trust’s process for bringing derivative suits may be more restrictive than other
investment companies. The process for derivative actions for the Trust also may make it more expensive for a shareholder to bring a suit than if the shareholder was not required to follow such a process.
The Declaration of Trust also requires that actions by shareholders against the Trust or any Fund, except for actions under the
U.S. federal securities laws to the extent that any such federal securities laws, rules or regulations, do not permit the application of the Declaration of Trust provisions, be brought only in the United States District Court for the Southern
District of New York or, solely with respect to matters relating to the organization or internal affairs of the Trust or as otherwise required by law, in the Court of Chancery of the State of Delaware to the extent there is
31
subject matter jurisdiction in such court for the claims asserted or, if not, then in the Superior Court of the State of Delaware
(collectively, the “Exclusive Jurisdictions”), and that the right to jury trial be irrevocably waived to the fullest extent permitted by law. Other investment companies may not be subject to similar restrictions. In addition, the designation of
Exclusive Jurisdictions may make it more expensive for a shareholder to bring a suit than if the shareholder was permitted to select another jurisdiction. Also, the designation of Exclusive Jurisdictions and the waiver of jury trials limit a
shareholder’s ability to litigate a claim in the jurisdiction and in a manner that may be more convenient and favorable to the shareholder. A court may choose not to enforce these provisions of the Declaration of Trust.
Voting Rights
Each shareholder of the Trust is entitled to one vote for each dollar of NAV of a Fund owned by the shareholder. Matters in which
the interests of all the Funds are substantially identical (such as the election of Trustees) will be voted on by all shareholders without regard to the separate Funds. Matters that affect a particular Fund (such as approval of its investment
advisory agreement or a change in its fundamental investment restrictions) will be voted on separately by that Fund, except that, as to matters affecting the interests of one particular class of a Fund’s shares, the affected shareholders will vote
as a separate class.
To the extent required by law, Contract Owners are entitled to give voting instructions with respect to Fund shares held in the
separate accounts of Participating Insurance Companies. Participating Insurance Companies will vote with respect to the shares in accordance with such instructions unless otherwise legally required or permitted to act with respect to such
instructions.
Tax Status
The following sections are a summary of certain additional tax considerations generally affecting a Fund (sometimes referred to as “the Fund”). Because shares of the Fund are sold only to separate accounts of insurance companies, the tax consequences described below are generally not applicable to Contract Owners.
This “Tax Status” section and the “Other Tax Consequences” and “Tax Consequences to Shareholders” sections are based on the Internal
Revenue Code and applicable regulations in effect on the date of this SAI. Future legislative, regulatory or administrative changes, including provisions of current law that sunset and thereafter no longer apply, or court decisions may
significantly change the tax rules applicable to the Fund and its shareholders. Any of these changes or court decisions may have a retroactive effect.
This is for general information only and not tax advice. For federal income tax
purposes, the insurance company (rather than the Contract Owner) is treated as the owner of the shares of the Fund selected as an investment option. Contract Owner
should consult their own tax advisors for more information on their tax situation, including the possible applicability of federal, state, local and foreign taxes.
Different tax rules may apply depending on how an Underlying ETF in which the Fund invests is organized for federal income tax
purposes. The Fund may invest in Underlying ETFs treated as regulated investment companies for federal income tax purposes. These rules could affect the amount, timing or character of the income distributed to shareholders of the Fund.
Unless otherwise indicated, the discussion below with respect to the Fund includes its pro rata share of the dividends and
distributions paid by an Underlying ETF. In addition, unless otherwise indicated, the tax consequences described below in respect of the Fund's investments apply to any investments made directly by the Fund and to any investments made by an
Underlying ETF that is a regulated investment company.
Taxation of the Fund
The Fund has elected and intends to qualify, or, if newly organized, intends to elect and qualify, each year as a regulated
investment company (sometimes referred to as a “regulated investment company,” “RIC” or “fund”) under Subchapter M of the
Internal Revenue Code. If the Fund so qualifies, the Fund will not be subject to federal income tax on the portion of its investment company taxable income (that is, generally, taxable interest, dividends, net short-term capital gains, and other
taxable ordinary income, net of expenses, without regard to the deduction for dividends
32
paid) and net capital gain (that is, the excess of net long-term capital gains over net short-term capital losses) that it
distributes to shareholders.
In order to qualify for treatment as a regulated investment company, the Fund must satisfy the following requirements:
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•
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Distribution Requirement– the Fund must distribute an amount equal to the sum of at least 90% of its investment company taxable income and 90% of its net tax-exempt income, if any, for
the tax year (including, for purposes of satisfying this distribution requirement, certain distributions made by the Fund after the close of its taxable year that are treated as made during such taxable year).
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•
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Income Requirement– the Fund must derive at least 90% of its gross income from dividends, interest, certain payments with respect to securities loans, and gains from the sale or other
disposition of stock, securities or foreign currencies, or other income (including, but not limited to, gains from options, futures or forward contracts) derived from its business of investing in such stock, securities or currencies and
net income derived from qualified publicly traded partnerships (“QPTPs”).
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|
•
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Asset Diversification Test– the Fund must satisfy the following asset diversification test at the close of each quarter of the Fund’s tax year: (1) at least 50% of the value of the
Fund’s assets must consist of cash and cash items, U.S. government securities, securities of other regulated investment companies, and securities of other issuers (as to which the Fund has not invested more than 5% of the value of the
Fund’s total assets in securities of an issuer and as to which the Fund does not hold more than 10% of the outstanding voting securities of the issuer); and (2) no more than 25% of the value of the Fund’s total assets may be invested in
the securities of any one issuer (other than U.S. government securities or securities of other regulated investment companies) or of two or more issuers which the Fund controls and which are engaged in the same or similar trades or
businesses, or, in the securities of one or more QPTPs.
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In some circumstances, the character and timing of income realized by the Fund for purposes of the Income Requirement or the
identification of the issuer for purposes of the Asset Diversification Test is uncertain under current law with respect to a particular investment, and an adverse determination or future guidance by the Internal Revenue Service (“IRS”) with respect to such type of investment may adversely affect the Fund’s ability to satisfy these requirements. See “Tax Treatment of Portfolio Transactions” below with respect to the application of these
requirements to certain types of investments. In other circumstances, the Fund may be required to sell portfolio holdings in order to meet the Income Requirement, Distribution Requirement, or Asset Diversification Test, which may have a negative
impact on the Fund’s income and performance.
The Fund may use “equalization” (in lieu of making some cash distributions) in determining the portion of its income and gains that
has been distributed. If the Fund uses equalization, it will allocate a portion of its undistributed investment company taxable income and net capital gain to redemptions of Fund shares and will correspondingly reduce the amount of such income and
gains that it distributes in cash. If the IRS determines that the Fund’s allocation is improper and that the Fund has under-distributed its income and gain for any taxable year, the Fund may be liable for federal income and/or excise tax. If, as a
result of such adjustment, the Fund fails to satisfy the Distribution Requirement, the Fund will not qualify that year as a regulated investment company the effect of which is described in the following paragraph.
If for any taxable year the Fund does not qualify as a regulated investment company, all of its taxable income (including its net
capital gain) would be subject to tax at the corporate income tax rate without any deduction for dividends paid to shareholders. Failure to qualify as a regulated investment company would thus have a negative impact on the Fund’s income and
performance. Subject to savings provisions for certain failures to satisfy the Income Requirement or Asset Diversification Test, which, in general, are limited to those due to reasonable cause and not willful neglect, it is possible that the Fund
will not qualify as a regulated investment company in any given tax year. Even if such savings provisions apply, the Fund may be subject to a monetary sanction of $50,000 or more. Moreover, the Board reserves the right not to maintain the
qualification of the Fund as a regulated investment company if it determines such a course of action to be beneficial to shareholders.
Capital Loss Carryovers. The capital losses of the Fund, if any, do not flow through to
shareholders. Rather, the Fund may use its capital losses, subject to applicable limitations, to offset its capital gains without being required to pay taxes on or distribute to shareholders such gains that are offset by the losses. If the Fund has
a “net capital loss” (that is, capital losses in excess of capital gains), the excess (if any) of the Fund's net short-term capital losses over its net
33
long-term capital gains is treated as a short-term capital loss arising on the first day of the Fund's next taxable year, and the
excess (if any) of the Fund's net long-term capital losses over its net short-term capital gains is treated as a long-term capital loss arising on the first day of the Fund's next taxable year. Any such net capital losses of the Fund that are not
used to offset capital gains may be carried forward indefinitely to reduce any future capital gains realized by the Fund in succeeding taxable years. The amount of capital losses that can be carried forward and used in any single year is subject to
an annual limitation if there is a more than 50% “change in ownership” of the Fund. An ownership change generally results when shareholders owning 5% or more of the Fund increase their aggregate holdings by more than 50% over a three-year look-back
period. An ownership change could result in capital loss carryovers being used at a slower rate, thereby reducing the Fund’s ability to offset capital gains with those losses. An increase in the amount of taxable gains distributed to the Fund’s
shareholders could result from an ownership change. The Fund undertakes no obligation to avoid or prevent an ownership change, which can occur in the normal course of shareholder purchases and redemptions or as a result of engaging in a tax-free
reorganization with another fund. Moreover, because of circumstances beyond the Fund’s control, there can be no assurance that the Fund will not experience, or has not already experienced, an ownership change. Additionally, if the Fund engages in a
tax-free reorganization with another Fund, the effect of these and other rules not discussed herein may be to disallow or postpone the use by the Fund of its capital loss carryovers (including any current year losses and built-in losses when
realized) to offset its own gains or those of the other Fund, or vice versa, thereby reducing the tax benefits Fund shareholders would otherwise have enjoyed from use of such capital loss carryovers.
Deferral of Late Year Losses. The Fund may elect to treat part or all of any “qualified
late year loss” as if it had been incurred in the succeeding taxable year in determining the Fund’s taxable income, net capital gain, net short-term capital gain, and earnings and profits. The effect of this election is to treat any such “qualified
late year loss” as if it had been incurred in the succeeding taxable year in characterizing Fund distributions for any calendar year (see “Taxation of Fund Distributions— Distributions of Capital Gains” below). A “qualified late year loss”
includes:
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(i)
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any net capital loss incurred after October 31 of the current taxable year, or, if there is no such loss, any net long-term capital loss or any net short-term capital loss incurred
after October 31 of the current taxable year (“post-October capital losses”), and
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(ii)
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the sum of (1) the excess, if any, of (a) specified losses incurred after October 31 of the current taxable year, over (b) specified gains incurred after October 31 of the current
taxable year and (2) the excess, if any, of (a) ordinary losses incurred after December 31 of the current taxable year, over (b) the ordinary income incurred after December 31 of the current taxable year.
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The terms “specified losses” and “specified gains” mean ordinary losses and gains from the sale, exchange, or other disposition of
property (including the termination of a position with respect to such property), foreign currency losses and gains, and losses and gains resulting from holding stock in a passive foreign investment company (“PFIC”)
for which a mark-to-market election is in effect. The terms “ordinary losses” and “ordinary income” mean other ordinary losses and income that are not described in the preceding sentence. Since the Fund has a fiscal year ending in December, the
amount of qualified late-year losses (if any) is computed without regard to any items of ordinary income or losses that are incurred after December 31 of the taxable year.
Undistributed Capital Gains. The Fund may retain or distribute to shareholders its net
capital gain for each taxable year. The Fund currently intends to distribute net capital gains. If the Fund elects to retain its net capital gain, the Fund will be taxed thereon (except to the extent of any available capital loss carryovers) at the
corporate income tax rate. If the Fund elects to retain its net capital gain, it is expected that the Fund also will elect to have shareholders treated as if each received a distribution of its pro rata share of such gain, with the result that each
shareholder will be required to report its pro rata share of such gain on its tax return as long-term capital gain, will receive a refundable tax credit for its pro rata share of tax paid by the Fund on the gain, and will increase the tax basis for
its shares by an amount equal to the deemed distribution less the tax credit.
Excise Tax Distribution Requirements. To avoid a 4% non-deductible excise tax, the Fund
must distribute by December 31 of each year an amount equal to at least: (1) 98% of its ordinary income for the calendar year, (2) 98.2% of capital gain net income (that is, the excess of the gains from sales or exchanges of capital assets over the
losses from such sales or exchanges) for the one-year period ended on October 31 of such calendar year (or, at the election of a regulated investment company having a taxable year ending November 30 or December 31, for its taxable year), and (3)
any prior year undistributed ordinary income and capital gain net income. Federal excise taxes will not apply to the Fund in a given calendar year, however, if all of its shareholders (other than certain “permitted
shareholders”)
34
at all times during the calendar year are segregated asset accounts of life insurance companies where the shares are held in
connection with variable products. For purposes of determining whether the Fund qualifies for this exemption, any shares attributable to an investment in the Fund made in connection with organization of the Fund is disregarded as long as the
investment does not exceed $250,000. Permitted shareholders include other RICs eligible for the exemption (e.g., insurance dedicated fund-of-funds). If the Fund fails to qualify for the exemption, the Fund
intends to declare and pay these distributions in December (or to pay them in January, in which case shareholders must treat them as received in December) to avoid any material liability for federal excise tax, but can give no assurances that its
distributions will be sufficient to eliminate all taxes. In addition, under certain circumstances, temporary timing or permanent differences in the realization of income and expense for book and tax purposes can result in the Fund having to pay an
excise tax.
Foreign Income Tax. Investment income received by the Fund from sources within foreign
countries may be subject to foreign income tax withheld at the source and the amount of tax withheld generally will be treated as an expense of the Fund. The United States has entered into tax treaties with many foreign countries which entitle the
Fund to a reduced rate of, or exemption from, tax on such income. Some countries require the filing of a tax reclaim or other forms to receive the benefit of the reduced tax rate; whether or when the Fund will receive the tax reclaim is within the
control of the individual country. Information required on these forms may not be available, such as shareholder information; therefore, the Fund may not receive the reduced treaty rates or potential reclaims. Other countries have conflicting and
changing instructions and restrictive timing requirements which may cause the Fund not to receive the reduced treaty rates or potential reclaims. Other countries may subject capital gains realized by the Fund on sale or disposition of securities of
that country to taxation. It is impossible to determine the effective rate of foreign tax in advance since the amount of the Fund’s assets to be invested in various countries is not known. Under certain circumstances, the Fund may elect to pass
through foreign taxes paid by the Fund to shareholders, although it reserves the right not to do so.
Special Rules Applicable to Variable Contracts
The Fund intends to comply with the diversification requirements of Section 817(h) of the Internal Revenue Code and the regulations
thereunder relating to the tax-deferred status of variable accounts that are based on insurance company separate accounts (referred to as “segregated asset accounts” for federal income tax purposes). If
these requirements are not met, or under other limited circumstances, it is possible that the Contract Owners (rather than the insurance company) will be treated for federal income tax purposes as the taxable owners of the assets held by the
segregated asset accounts. The Fund intends to comply with these diversification requirements.
Section 817(h) of the Internal Revenue Code generally requires a Variable Contract (other than a pension plan contract) that is
based on a segregated asset account to be adequately diversified. To satisfy these diversification requirements, as of the end of each calendar quarter or within 30 days thereafter, the Fund must either (a) satisfy the Asset Diversification Test
and have no more than 55% of the total value of its assets in cash and cash equivalents, government securities and securities of other regulated investment companies; or (b) have no more than 55% of its total assets represented by any one
investment, no more than 70% by any two investments, no more than 80% by any three investments, and no more than 90% by any four investments. For the purposes of clause (b), all securities of the same issuer are considered a single investment, each
agency or instrumentality of the U.S. government is treated as a separate issuer of securities, and a particular foreign government and its agencies, instrumentalities and political subdivisions all will be considered the same issuer of securities.
Section 817(h) of the Internal Revenue Code provides a look-through rule for purposes of testing the diversification of a segregated
asset account that invests in a regulated investment company such as the Fund. Treasury Regulations Section 1.817-5(f)(1) provides, in part, that if the look-through rule applies, a beneficial interest in an investment company (including a
regulated investment company) shall not be treated as a single investment of a segregated asset account; instead, a pro rata portion of each asset of the investment company shall be treated as an asset of the segregated asset account. Treasury
Regulations Section 1.817-5(f)(2) provides (except as otherwise permitted) that the look-through rule shall apply to an investment company only if–
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•
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All the beneficial interests in the investment company are held by one or more segregated asset accounts of one or more insurance companies; and
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•
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Public access to such investment company is available exclusively through the purchase of a Variable Contract.
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As provided in their offering documents, all the beneficial interests in the Fund are held by one or more segregated asset accounts
of one or more insurance companies (except as otherwise permitted), and public access to the Fund (and any corresponding regulated investment company such as a fund-of-funds that invests in the Fund) is available solely through the purchase of a
Variable Contract (such a fund is sometimes referred to as a “closed fund”). Under the look-through rule of Section 817(h) of the Internal Revenue Code and Treasury Regulations Section 1.817-5(f), a pro rata
portion of each asset of the Fund, including a pro rata portion of each asset of any Underlying ETF that is a closed fund in which the Funds invest, is treated as an asset of the investing segregated asset account for purposes of determining
whether the segregated asset account is adequately diversified. See also, Revenue Ruling 2005-7.
For a Variable Contract to qualify for tax deferral, assets in the segregated asset accounts supporting the contract must be
considered to be owned by the insurance company and not by the Contract Owner. Accordingly, a Contract Owner should not have an impermissible level of control over the Fund’s investment in any particular asset so as to avoid the prohibition on
investor control. If the Contract Owner were considered the owner of the segregated asset account, income and gains produced by the underlying assets would be included currently in the Contract Owner’s gross income with the Variable Contract being
characterized as a mere “wrapper.” The Treasury Department has issued rulings addressing the circumstances in which a Contract Owner's control of the investments of the segregated asset account may cause the
Contract Owner, rather than the insurance company, to be treated as the owner of the assets held by the segregated asset account, and is likely to issue additional rulings in the future. It is not known what standards will be set forth in any such
rulings or when, if at all, these rulings may be issued.
The IRS may consider several factors in determining whether a Contract Owner has an impermissible level of investor control over a
segregated asset account. One factor the IRS considers when a segregated asset account invests in one or more RICs is whether a RIC's investment strategies are sufficiently broad to prevent a Contract Owner from being deemed to be making particular
investment decisions through its investment in the segregated asset account. Current IRS guidance indicates that typical RIC investment strategies, even those with a specific sector or geographical focus, are generally considered sufficiently broad
to prevent a Contract Owner from being deemed to be making particular investment decisions through its investment in a segregated asset account. The relationship between the Fund and the Variable Contracts is designed to satisfy the current
expressed view of the IRS on this subject, such that the investor control doctrine should not apply. However, because of some uncertainty with respect to this subject and because the IRS may issue further guidance on this subject, the Fund reserves
the right to make such changes as are deemed necessary or appropriate to reduce the risk that a Variable Contract might be subject to current taxation because of investor control.
Another factor that the IRS examines concerns actions of Contract Owners. Under the IRS pronouncements, a Contract Owner may not
select or control particular investments, other than choosing among broad investment choices such as selecting a particular fund. A Contract Owner thus may not select or direct the purchase or sale of a particular investment of the Fund. All
investment decisions concerning the Fund must be made by the portfolio managers in their sole and absolute discretion, and not by a Contract Owner. Furthermore, under the IRS pronouncements, a Contract Owner may not communicate directly or
indirectly with such portfolio managers or any related investment officers concerning the selection, quality, or rate of return of any specific investment or group of investments held by the Fund.
The IRS and the Treasury Department may in the future provide further guidance as to what they deem to constitute an impermissible
level of “investor control” over a segregated asset account’s investments in funds such as the Fund, and such guidance could affect the treatment of the Fund, including retroactively. In the event that
additional rules or regulations are adopted, there can be no assurance that the Fund will be able to operate as currently described, or that the Fund will not have to change its investment objectives or investment policies. The Fund’s investment
objective and investment policies may be modified as necessary to prevent any such prospective rules and regulations from causing Contract Owners to be considered the owners of the shares of the Fund.
Other Tax Consequences
Taxation of Fund Distributions
The Fund anticipates distributing substantially all of its investment company taxable income and net capital gain for each taxable
year.
36
Distributions of Net Investment Income. The Fund receives ordinary income generally in the
form of dividends and/or interest on its investments. The Fund also may recognize ordinary income from other sources, including, but not limited to, certain gains on foreign currency-related transactions. This income, less expenses incurred in the
operation of the Fund, constitutes the Fund’s net investment income from which dividends may be paid to the separate account. In the case of a Fund whose strategy includes investing in stocks of corporations, a portion of the income dividends paid
to the separate account may be qualified dividends eligible for the corporate dividends-received deduction. See the discussion below under the heading, “Dividends-Received Deduction for Corporations.”
Distributions of Capital Gains. The Fund may derive capital gain and loss in connection
with sales or other dispositions of its portfolio securities. Distributions derived from the excess of net short-term capital gain over net long-term capital loss will be distributable as ordinary income. Distributions paid from the excess of net
long-term capital gain over net short-term capital loss will be distributable as long-term capital gain. Any net short-term or long-term capital gain realized by the Fund (net of any capital loss carryovers) generally will be distributed once each
year and may be distributed more frequently, if necessary, in order to reduce or eliminate federal excise or income taxes on the Fund.
Returns of Capital. Distributions by the Fund that are not paid from earnings and profits
will be treated as a return of capital to the extent of (and in reduction of) the shareholder's tax basis in its shares; any excess will be treated as gain from the sale of its shares. Thus, the portion of a distribution that constitutes a return
of capital will decrease the shareholder’s tax basis in its Fund shares (but not below zero), and will result in an increase in the amount of gain (or decrease in the amount of loss) that will be recognized by the shareholder for tax purposes on
the later sale of such Fund shares. Return of capital distributions can occur for a number of reasons including, among others, the Fund over-estimates the income to be received from certain investments such as those classified as partnerships or
equity real estate investment trusts.
Dividends-Received Deduction for Corporations. For corporate shareholders, a portion of the
dividends paid by the Fund may qualify for the dividends-received deduction. The availability of the dividends-received deduction is subject to certain holding period and debt financing restrictions imposed under the Internal Revenue Code on the
corporation claiming the deduction. Income derived by the Fund from investments in derivatives, fixed income and foreign securities generally is not eligible for this treatment.
Pass-Through of Foreign Tax Credits. If more than 50% of the Fund’s total assets at the end
of a fiscal year is invested in foreign securities, the Fund may elect to pass through to the Fund’s shareholders their pro rata share of foreign taxes paid by the Fund. If this election is made, the Fund may report more taxable income than it
actually distributes. The shareholders will then be entitled either to deduct their share of these taxes in computing their taxable income or to claim a foreign tax credit for these taxes against their U.S. federal income tax (subject to
limitations for certain shareholders). Shareholders may be unable to claim a credit for the full amount of their proportionate shares of the foreign income tax paid by the Fund due to certain limitations that may apply. The Fund reserves the right
not to pass through to its shareholders the amount of foreign income taxes paid by the Fund. Additionally, any foreign tax withheld on payments made “in lieu of” dividends or interest will not qualify for the pass through of foreign tax credits to
shareholders.
Tax Credit Bonds. If the Fund holds, directly or indirectly, one or more “tax credit bonds”
(including build America bonds, clean renewable energy bonds and qualified tax credit bonds) on one or more applicable dates during a taxable year, the Fund may elect to permit its shareholders to claim a tax credit on their income tax returns
equal to each shareholder’s proportionate share of tax credits from the applicable bonds that otherwise would be allowed to the Fund. In such a case, shareholders must include in gross income (as interest) their proportionate share of the income
attributable to their proportionate share of those offsetting tax credits. A shareholder’s ability to claim a tax credit associated with one or more tax credit bonds may be subject to certain limitations imposed by the Internal Revenue Code. (Under
the TCJA, the build America bonds, clean renewable energy bonds and certain other qualified bonds may no longer be issued after December 31, 2017.) Even if the Fund is eligible to pass through tax credits to shareholders, the Fund may choose not to
do so.
Consent Dividends. The Fund may utilize the consent dividend provisions of section 565 of
the Internal Revenue Code to make distributions. Provided that all shareholders agree in a consent filed with the income tax return of the Fund to treat as a dividend the amount specified in the consent, the amount will be considered a distribution
just as any other distribution paid in money and reinvested back into the Fund.
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Reportable Transactions. Under Treasury regulations, if a shareholder recognizes a loss
with respect to the Fund’s shares of $2 million or more for an individual shareholder or $10 million or more for a corporate shareholder (or certain greater amounts over a combination of years), the shareholder must file with the IRS a disclosure
statement on Form 8886. The fact that a loss is reportable under these regulations does not affect the legal determination of whether the taxpayer’s treatment of the loss is proper. Shareholders should consult their tax advisors to determine the
applicability of these regulations in light of their individual circumstances.
Tax Treatment of Portfolio Transactions
Set forth below is a general description of the tax treatment of certain types of securities, investment techniques and transactions
that may apply to a Fund and, in turn, affect the amount, character and timing of dividends and distributions payable by the Fund to its shareholders. This section should be read in conjunction with the discussion above under “Additional
Information on Portfolio Instruments, Strategies and Investment Policies” for a detailed description of the various types of securities and investment techniques that apply to the Fund.
In General. In general, gain or loss recognized by a Fund on the sale or other disposition
of portfolio investments will be a capital gain or loss. Such capital gain and loss may be long-term or short-term depending, in general, upon the length of time a particular investment position is maintained and, in some cases, upon the nature of
the transaction. Property held for more than one year generally will be eligible for long-term capital gain or loss treatment. The application of certain rules described below may serve to alter the manner in which the holding period for a security
is determined or may otherwise affect the characterization as long-term or short-term, and also the timing of the realization and/or character, of certain gains or losses.
Certain Fixed Income Investments. Gain recognized on the disposition of a debt obligation
purchased by a Fund at a market discount (generally, at a price less than its principal amount) will be treated as ordinary income to the extent of the portion of the market discount that accrued during the period of time the Fund held the debt
obligation unless the Fund made a current inclusion election to accrue market discount into income as it accrues. If a Fund purchases a debt obligation (such as a zero coupon security or pay-in-kind security) that was originally issued at a
discount, the Fund generally is required to include in gross income each year the portion of the original issue discount that accrues during such year. Therefore, a Fund's investment in such securities may cause the Fund to recognize income and
make distributions to shareholders before it receives any cash payments on the securities. To generate cash to satisfy those distribution requirements, a Fund may have to sell portfolio securities that it otherwise might have continued to hold or
to use cash flows from other sources such as the sale of Fund shares.
Options, futures, forward contracts, swap agreements and hedging transactions. In general,
option premiums received by a fund are not immediately included in the income of the fund. Instead, the premiums are recognized when the option contract expires, the option is exercised by the holder, or the fund transfers or otherwise terminates
the option (e.g., through a closing transaction). If an option written by a fund is exercised and the fund sells or delivers the underlying stock, the fund generally will recognize capital gain or loss equal
to (a) the sum of the strike price and the option premium received by the fund minus (b) the fund’s basis in the stock. Such gain or loss generally will be short-term or long-term depending upon the holding period of the underlying stock. If
securities are purchased by a fund pursuant to the exercise of a put option written by it, the fund generally will subtract the premium received from its cost basis in the securities purchased. The gain or loss with respect to any termination of a
fund’s obligation under an option other than through the exercise of the option and related sale or delivery of the underlying stock generally will be short-term gain or loss depending on whether the premium income received by the fund is greater
or less than the amount paid by the fund (if any) in terminating the transaction. Thus, for example, if an option written by a fund expires unexercised, the fund generally will recognize short-term gain equal to the premium received.
The tax treatment of certain futures contracts entered into by a fund as well as listed non-equity options written or purchased by
the fund on U.S. exchanges (including options on futures contracts, broad-based equity indices and debt securities) may be governed by section 1256 of the Internal Revenue Code (“section 1256 contracts”).
Gains or losses on section 1256 contracts generally are considered 60% long-term and 40% short-term capital gains or losses (“60/40”), although certain foreign currency gains and losses from such contracts
may be treated as ordinary in character. Also, any section 1256 contracts held by a fund at the end of each taxable year (and, for purposes of the 4% excise tax, on certain other dates as prescribed under the Internal Revenue Code) are “marked to
market” with the result that unrealized gains or losses are treated as though they were realized and the resulting gain or loss is treated as ordinary or 60/40 gain or loss, as applicable. Section 1256 contracts do not include any interest rate
swap, currency
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swap, basis swap, interest rate cap, interest rate floor, commodity swap, equity swap, equity index swap, credit default swap, or
similar agreement.
In addition to the special rules described above in respect of options and futures transactions, a fund’s transactions in other
derivative instruments (including options, forward contracts and swap agreements) as well as its other hedging, short sale, or similar transactions, may be subject to one or more special tax rules (including the constructive sale, notional
principal contract, straddle, wash sale and short sale rules). These rules may affect whether gains and losses recognized by a fund are treated as ordinary or capital or as short-term or long-term, accelerate the recognition of income or gains to
the fund, defer losses to the fund, and cause adjustments in the holding periods of the fund’s securities. These rules, therefore, could affect the amount, timing and/or character of distributions to shareholders. Moreover, because the tax rules
applicable to derivative instruments are in some cases uncertain under current law, an adverse determination or future guidance by the IRS with respect to these rules (which determination or guidance could be retroactive) may affect whether a fund
has made sufficient distributions, and otherwise satisfied the relevant requirements, to maintain its qualification as a regulated investment company and avoid a fund-level tax.
Certain of a fund’s investments in derivatives and foreign currency-denominated instruments, and the fund’s transactions in foreign
currencies and hedging activities, may produce a difference between its book income and its taxable income. If a fund’s book income is less than the sum of its taxable income and net tax-exempt income (if any), the fund could be required to make
distributions exceeding book income to qualify as a regulated investment company. If a fund’s book income exceeds the sum of its taxable income and net tax-exempt income (if any), the distribution of any such excess will be treated as (i) a
dividend to the extent of the fund’s remaining earnings and profits (including current earnings and profits arising from tax- exempt income, reduced by related deductions), (ii) thereafter, as a return of capital to the extent of the recipient’s
basis in the shares, and (iii) thereafter, as gain from the sale or exchange of a capital asset.
Foreign Currency Transactions. A Fund’s transactions in foreign currencies, foreign
currency-denominated debt obligations and certain foreign currency options, futures contracts and forward contracts (and similar instruments) may give rise to ordinary income or loss to the extent such income or loss results from fluctuations in
the value of the foreign currency concerned. This treatment could increase or decrease a Fund's ordinary income distributions to shareholders, and may cause some or all of the Fund’s previously distributed income to be classified as a return of
capital. In certain cases, a Fund may make an election to treat such gain or loss as capital.
Investments in Convertible Securities. Convertible debt is ordinarily treated as a “single
property” consisting of a pure debt interest until conversion, after which the investment becomes an equity interest. If the security is issued at a premium (i.e., for cash in excess of the face amount
payable on retirement), the creditor-holder may amortize the premium over the life of the bond. If the security is issued for cash at a price below its face amount, the creditor-holder must accrue original issue discount in income over the life of
the debt. The creditor-holder's exercise of the conversion privilege is treated as a nontaxable event. Mandatorily convertible debt (e.g., an exchange-traded note or ETN issued in the form of an unsecured
obligation that pays a return based on the performance of a specified market index, exchange currency, or commodity) is often, but not always, treated as a contract to buy or sell the reference property rather than debt. Similarly, convertible
preferred stock with a mandatory conversion feature is ordinarily, but not always, treated as equity rather than debt.
Dividends received generally are eligible for the corporate dividends-received deduction. In general, conversion of preferred stock
for common stock of the same corporation is tax-free. Conversion of preferred stock for cash is a taxable redemption. Any redemption premium for preferred stock that is redeemable by the issuing company might be required to be amortized under
original issue discount principles.
Investments in Securities of Uncertain Tax Character. A Fund may invest in securities the
U.S. federal income tax treatment of which may not be clear or may be subject to recharacterization by the IRS. To the extent the tax treatment of such securities or the income from such securities differs from the tax treatment expected by a Fund,
it could affect the timing or character of income recognized by the Fund, requiring the Fund to purchase or sell securities, or otherwise change its portfolio, in order to comply with the tax rules applicable to regulated investment companies under
the Internal Revenue Code.
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Effect of Future Legislation; Local Tax Considerations
The foregoing general discussion of U.S. federal income tax consequences is based on the Internal Revenue Code and the regulations
issued thereunder as in effect on the date of this SAI. Future legislative or administrative changes, including provisions of current law that sunset and thereafter no longer apply, or court decisions may significantly change the conclusions
expressed herein, and any such changes or decisions may have a retroactive effect with respect to the transactions contemplated herein. Rules of state and local taxation of ordinary income and capital gain dividends may differ from the rules for
U.S. federal income taxation described above. Distributions may also be subject to additional state, local and foreign taxes depending on each shareholder’s particular situation. Non-U.S. shareholders may be subject to U.S. tax rules that differ
significantly from those summarized above. Shareholders are urged to consult their tax advisors as to the consequences of these and other state and local tax rules affecting investment in the Fund.
Tax Consequences to Shareholders
Since shareholders of the Fund will be the insurance company separate accounts, no discussion is included herein concerning federal
income tax consequences for the holders of the contracts. For information concerning the federal income tax consequences to any such holder, see the prospectus relating to the applicable contract.
Control Persons and Principal Holders of Securities
Because the Funds are available as investments for Variable Contracts offered by certain Participating Insurance Companies, the
Participating Insurance Companies could be deemed to control the voting securities of each Fund (i.e., by owning more than 25% of a Fund’s shares). However, a Participating Insurance Company would exercise
voting rights attributable to any shares of each Fund that it owns (directly or indirectly) in accordance with, and in proportion to, voting instructions timely received from Contract Owners. In addition, a Participating Insurance Company is
expected to vote shares attributable to Variable Contracts as to which no voting instructions are received from Contract Owners in the same proportion (for, against or abstain) as those for which timely instructions are received. As a result, a
small number of Contract Owners could determine whether Fund proposals are approved.
As of the date of this SAI, the only Participating Insurance Company is [___________]. The Funds may sell their shares to other
Participating Insurance Companies from time to time.
Since the Funds have not yet commenced operations, no shareholder owns 5% or more of the outstanding shares of a Fund.
Prior to the date of this SAI, the Funds had not yet commenced operations. Accordingly, as of the date of this SAI, the Trustees
and Officers of the Trust as a group owned beneficially less than 1% of the shares of any class of the Funds.
Financial Statements
[To be provided]
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APPENDIX A
Debt Ratings
Debt Ratings
This Appendix includes a description of the factors underlying the debt ratings of Moody's, S&P and Fitch. The descriptions
relate to general long-term and short-term obligations of an issuer. A rating is generally assigned to a debt security at the time of issuance by a credit rating agency designated as an NRSRO by the SEC, such as Moody's, S&P and Fitch. While
NRSROs may from time to time revise such ratings, they undertake no obligation to do so, and the ratings given to instruments at issuance do not necessarily represent ratings that would be given to those instruments on a particular subsequent date.
Moody’s Ratings
Long-Term Obligations
Aaa: Obligations rated Aaa are judged to be of the highest quality, subject to the lowest
level of credit risk.
Aa: Obligations rated Aa are judged to be of high quality and are subject to very low credit
risk.
A: Obligations rated A are judged to be upper-medium grade and are subject to low credit
risk.
Baa: Obligations rated Baa are judged to be medium-grade and subject to moderate credit risk
and as such may possess certain speculative characteristics.
Ba: Obligations rated Ba are judged to be speculative and are subject to substantial credit
risk.
B: Obligations rated B are considered speculative and are subject to high credit risk.
Caa: Obligations rated Caa are judged to be speculative, of poor standing and are subject to
very high credit risk.
Ca: Obligations rated Ca are highly speculative and are likely in, or very near, default,
with some prospect of recovery of principal and interest.
C: Obligations rated C are the lowest rated and are typically in default, with little
prospect for recovery of principal or interest.
Note: Moody's appends numerical modifiers 1, 2 and 3 in each generic rating classification
from Aa through Caa. The modifier 1 indicates that the obligation ranks in the higher end of its generic rating category; the modifier 2 indicates a mid-range ranking; and the modifier 3 indicates a ranking in the lower end of that generic rating
category.
Absence of Rating: Where no rating has been assigned or where a rating has been withdrawn,
it may be for reasons unrelated to the creditworthiness of the issue.
Should no rating be assigned, the reason may be one of the following:
1. An application was not received or accepted.
2. The issue or issuer belongs to a group of securities or entities that are not rated as a matter of policy.
3. There is a lack of essential data pertaining to the issue or issuer.
4. The issue was privately placed, in which case the rating is not published in Moody’s publications.
Withdrawal may occur if new and material circumstances arise, the effects of which preclude satisfactory analysis; if there is no
longer available reasonable up-to-date data to permit a judgment to be formed; if a bond is called for redemption; or for other reasons.
A-1
Short-Term Obligations
Moody’s short-term debt ratings are opinions of the ability of issuers to honor short-term financial obligations, generally with an
original maturity not exceeding thirteen months.
Moody's employs the following designations to indicate the relative repayment ability of rated issuers:
P-1: Issuers (or supporting institutions) rated Prime-1 have a superior ability to repay
short-term debt obligations.
P-2: Issuers (or supporting institutions) rated Prime-2 have a strong ability to repay
short-term debt obligations.
P-3: Issuers (or supporting institutions) rated Prime-3 have an acceptable ability to repay
short-term obligations.
NP: Issuers (or supporting institutions) rated Not Prime do not fall within any of the Prime
rating categories.
US Municipal Short-Term Debt Obligations
There are three rating categories for short-term municipal obligations that are considered investment grade and are designated as
Municipal Investment Grade (MIG). In addition, those short-term obligations that are of speculative quality are designated SG, or speculative grade. MIG ratings expire at the maturity of the obligation.
MIG 1: This designation denotes superior credit quality. Excellent protection is afforded by
established cash flows, highly reliable liquidity support, or demonstrated broad-based access to the market for refinancing.
MIG 2: This designation denotes strong credit quality. Margins of protection are ample,
although not as large as in the preceding group.
MIG 3: This designation denotes acceptable credit quality. Liquidity and cash-flow
protection may be narrow, and market access for refinancing is likely to be less well-established.
SG: This designation denotes speculative-grade credit quality. Debt instruments in this
category may lack sufficient margins of protection.
S&P Ratings
Long-Term Obligations
AAA: An obligation rated AAA has the highest rating assigned by S&P. The obligor’s
capacity to meet its financial commitment on the obligation is extremely strong.
AA: An obligation rated AA differs from the highest-rated obligations only to a small
degree. The obligor’s capacity to meet its financial commitment is very strong.
A: An obligation rated A is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than obligations in higher-rated categories. However, the obligor’s capacity to meet its financial commitment on the obligation is still strong.
BBB: An obligation rated BBB exhibits adequate protection parameters. However, adverse
economic conditions or changing circumstances are more likely to lead to a weakened capacity of the obligor to meet its financial commitment on the obligation.
BB; B; CCC; CC; and C: Obligations rated BB, B, CCC, CC, and C are regarded as having
significant speculative characteristics. BB indicates the least degree of speculation and C the highest. While such obligations will likely have some quality and protective characteristics, these may be outweighed by large uncertainties or major
exposures to adverse conditions.
A-2
BB: An obligation rated BB is less vulnerable to nonpayment than other speculative issues.
However, it faces major ongoing uncertainties or exposure to adverse business, financial, or economic conditions which could lead to the obligor’s inadequate capacity to meet its financial commitment on the obligation.
B: An obligation rated B is more vulnerable to nonpayment than obligations rated BB, but the
obligor currently has the capacity to meet its financial commitment on the obligation. Adverse business, financial, or economic conditions will likely impair the obligor’s capacity or willingness to meet its financial commitment on the obligation.
CCC: An obligation rated CCC is currently vulnerable to nonpayment, and is dependent upon
favorable business, financial, and economic conditions for the obligor to meet its financial commitment on the obligation. In the event of adverse business, financial, or economic conditions, the obligor is not likely to have the capacity to meet
its financial commitment on the obligation.
CC: An obligation rated CC is currently highly vulnerable to nonpayment. The CC rating is
used when a default has not yet occurred, but S&P expects default to be a virtual certainty, regardless of the anticipated time to default.
C: An obligation rated C is currently highly vulnerable to nonpayment, and the obligation is
expected to have lower relative seniority or lower ultimate recovery compared to obligations that are rated higher.
D: An obligation rated D is in default or in breach of an imputed promise. For non-hybrid
capital instruments, the D rating category is used when payments on an obligation are not made on the date due, unless S&P believes that such payments will be made within five business days in the absence of a stated grace period or within the
earlier of the stated grace period or 30 calendar days. The D rating also will be used upon the filing of a bankruptcy petition or the taking of similar action and where default on an obligation is a virtual certainty, for example due to automatic
stay provisions. An obligation's rating is lowered to D if it is subject to a distressed exchange offer.
NR: NR indicates no rating has been requested, or that there is insufficient information on
which to base a rating, or that S&P does not rate a particular obligation as a matter of policy.
Note: The ratings from AA to CCC may be modified by the addition of a plus (+) or minus (-)
sign to show relative standing within the major rating categories.
Short-Term Obligations
A-1: A short-term obligation rated A-1 is rated in the highest category by S&P. The
obligor's capacity to meet its financial commitment on the obligation is strong. Within this category, certain obligations are designated with a plus sign (+). This indicates that the obligor's capacity to meet its financial commitment on these
obligations is extremely strong.
A-2: A short-term obligation rated A-2 is somewhat more susceptible to the adverse effects
of changes in circumstances and economic conditions than obligations in higher rating categories. However, the obligor's capacity to meet its financial commitment on the obligation is satisfactory.
A-3: A short-term obligation rated A-3 exhibits adequate protection parameters. However,
adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity of the obligor to meet its financial commitment on the obligation.
B: A short-term obligation rated B is regarded as vulnerable and has significant speculative
characteristics. The obligor currently has the capacity to meet its financial commitments; however, it faces major ongoing uncertainties which could lead to the obligor's inadequate capacity to meet its financial commitments.
C: A short-term obligation rated C is currently vulnerable to nonpayment and is dependent
upon favorable business, financial, and economic conditions for the obligor to meet its financial commitment on the obligation.
D: A short-term obligation rated D is in default or in breach of an imputed promise. For
non-hybrid capital instruments, the D rating category is used when payments on an obligation are not made on the date due, unless S&P believes that such payments will be made within any stated grace period. However, any stated grace period
longer than five business days will be treated as five business days. The D rating also will be used upon the filing of a bankruptcy petition or
A-3
the taking of a similar action and where default on an obligation is a virtual certainty, for example due to automatic stay
provisions. An obligation's rating is lowered to D if it is subject to a distressed exchange offer.
Municipal Short-Term Obligations
An S&P U.S. municipal note rating reflects S&P opinion about the liquidity factors and market access risks unique to the
notes. Notes due in three years or less will likely receive a note rating. Notes with an original maturity of more than three years will most likely receive a long-term debt rating.
SP-1: Strong capacity to pay principal and interest. An issue determined to possess a very
strong capacity to pay debt service is given a plus (+) designation.
SP-2: Satisfactory capacity to pay principal and interest, with some vulnerability to
adverse financial and economic changes over the term of the notes.
SP-3: Speculative capacity to pay principal and interest.
Fitch Ratings
Long-Term Obligations
AAA: Highest credit quality. AAA ratings denote the lowest expectation of credit risk. They
are assigned only in cases of exceptionally strong capacity for payment of financial commitments. This capacity is highly unlikely to be adversely affected by foreseeable events.
AA: Very high credit quality. AA ratings denote expectations of very low credit risk. They
indicate very strong capacity for payment of financial commitments. This capacity is not significantly vulnerable to foreseeable events.
A: High credit quality. A ratings denote expectations of low credit risk. The capacity for
payment of financial commitments is considered strong. This capacity may, nevertheless, be more vulnerable to adverse business or economic conditions than is the case for higher ratings.
BBB: Good credit quality. BBB ratings indicate that expectations of credit risk are
currently low. The capacity for payment of financial commitments is considered adequate but adverse business or economic conditions are more likely to impair this capacity.
BB: Speculative. BB ratings indicate an elevated vulnerability to credit risk, particularly
in the event of adverse changes in business or economic conditions over time; however, business or financial alternatives may be available to allow financial commitments to be met.
B: Highly speculative. B ratings indicate that material credit risk is present.
CCC: Substantial credit risk. CCC ratings indicate that substantial credit risk is present.
CC: Very high levels of credit risk. CC ratings indicate very high levels of credit risk.
C: Exceptionally high levels of credit risk. C indicates exceptionally high levels of credit
risk.
Defaulted obligations typically are not assigned RD or D ratings, but are instead rated in the B to C rating categories, depending
upon their recovery prospects and other relevant characteristics. This approach better aligns obligations that have comparable overall expected loss but varying vulnerability to default and loss.
Note: The modifiers “+” or “-” may be appended to a rating to denote relative status within major rating
categories. Such suffixes are not added to the AAA obligation rating category, or to corporate finance obligation ratings in the categories below CCC.
The subscript 'emr' is appended to a rating to denote embedded market risk which is beyond the scope of the
rating. The designation is intended to make clear that the rating solely addresses the counterparty risk of the issuing bank. It
A-4
is not meant to indicate any limitation in the analysis of the counterparty risk, which in all other respects
follows published Fitch criteria for analyzing the issuing financial institution. Fitch does not rate these instruments where the principal is to any degree subject to market risk.
Short-Term Obligations (Corporate and Public Finance)
A short-term issuer or obligation rating is based in all cases on the short-term vulnerability to default of the rated entity or
security stream and relates to the capacity to meet financial obligations in accordance with the documentation governing the relevant obligation. Short-Term Ratings are assigned to obligations whose initial maturity is viewed as “short-term” based
on market convention. Typically, this means up to 13 months for corporate, sovereign, and structured obligations, and up to 36 months for obligations in U.S. public finance markets.
F1: Highest short-term credit quality. Indicates the strongest intrinsic capacity for timely
payment of financial commitments; may have an added “+” to denote any exceptionally strong credit feature.
F2: Good short-term credit quality. Good intrinsic capacity for timely payment of financial
commitments.
F3: Fair short-term credit quality. The intrinsic capacity for timely payment of financial
commitments is adequate.
B: Speculative short-term credit quality. Minimal capacity for timely payment of financial
commitments, plus heightened vulnerability to near term adverse changes in financial and economic conditions.
C: High short-term default risk. Default is a real possibility.
RD: Restricted default. Indicates an entity that has defaulted on one or more of its
financial commitments, although it continues to meet other financial obligations. Typically applicable to entity ratings only.
D: Default. Indicates a broad-based default event for an entity, or the default of a
short-term obligation.
A-5
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Last approved January 2, 2020
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APPENDIX B
PROXY VOTING POLICY
MILLIMAN FINANCIAL RISK MANAGEMENT LLC
POLICY
Milliman Financial Risk Management LLC (“Milliman FRM”), as a matter of policy and as a fiduciary, has responsibility for voting proxies for portfolio
securities consistent with the best economic interests of Investment Companies for which it is the primary investment adviser or a sub-adviser to whom proxy voting has been delegated by the client’s fund board. Milliman FRM maintains written
policies and procedures as to the handling, research, voting and reporting of proxy voting and makes appropriate disclosures about its proxy policies and practices. Milliman FRM’s policy and practice includes the responsibility to monitor
corporate actions, receive and vote client proxies and disclose any potential conflicts of interest as well as making information available to clients about the voting of proxies for their portfolio securities and maintaining relevant and
required records.
RESPONSIBILITY
Milliman FRM’s Chief Compliance Officer and Compliance team are responsible for the implementation and monitoring of this proxy voting policy, practices,
disclosures and record keeping, including outlining the voting guidelines in these procedures.
Milliman FRM employs a third party proxy advisory firm (a “Proxy Adviser”) to effectuate voting and the receipt of records related to voting, and employs
policies and procedures in order to evaluate the services of the Proxy Adviser. Milliman FRM’s CCO and Proxy Committee are responsible for developing and overseeing “Proxy Voting Guidelines” where applicable, including oversight of the Proxy
Adviser.
DISCLOSURE
Milliman FRM will provide conspicuously displayed information in its Form ADV Part 2A summarizing this proxy voting policy and procedures.
PROCEDURES
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1.
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Principals.
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a.
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Principles. Milliman FRM’s primary purpose is to vote proxies in the best interests of Investment
Companies for which it is the primary adviser and will generally vote for, against, consider on a case-by-case basis, or abstain from voting as indicated below. Milliman FRM may utilize
independent research reports to inform its proxy voting.
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b.
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Proxy Committee. Milliman FRM’s Proxy Committee meets at least quarterly. Among other duties, the Committee:
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i.
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Reviews voting activity during the previous quarter,
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ii.
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Reviews timely voting issues which may be relevant to clients, and
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B-1
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Last approved January 2, 2020
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iii.
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Performs diligence and oversight of the Proxy Adviser to ensure the information and advice received results in proxy voting that is in the best interest of Milliman FRM’s clients,
including:
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1.
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evaluating any Proxy Adviser in advance of retention;
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2.
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evaluating the process for addressing potential factual errors, incompleteness or methodological weakness in the Proxy Adviser’s analysis;
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3.
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Adopting policies for evaluating the Proxy Adviser’s services; and
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4.
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Determining when to exercise proxy voting opportunities.
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2.
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Circumstances.
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i.
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Milliman FRM is Primary Investment Adviser
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1.
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Where Milliman FRM serves as the primary investment adviser to the Investment Company, Milliman FRM’s Proxy Committee will utilize the
Proxy Voting Guidelines.
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ii.
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Milliman FRM is Sub-adviser, and Investment Company retains voting rights
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1.
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Where Milliman serves as a sub-adviser to the Investment Company and the Investment Company has retained the right to vote its own proxies, Milliman FRM will
not be obligated to take any action with respect to proxy voting.
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iii.
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Milliman FRM is Sub-adviser, and Investment Company delegates voting rights
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1.
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Where Milliman FRM serves as a sub-adviser to the Investment Company and the Investment Company has delegated proxy voting responsibility to Milliman FRM,
Milliman FRM will utilize the Proxy Voting Guidelines.
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iv.
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Milliman is Primary Investment Adviser or Sub-Adviser to Mutual Funds of Funds
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1.
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Milliman FRM serves as investment adviser to certain investment companies which invest in other investment companies that are not affiliated (“Underlying
Funds”) and are required by the Investment Company Act of 1940, as amended (the “1940 Act”) Act to handle proxies received from Underlying Funds in a certain manner. Notwithstanding the guidelines provided in these procedures, it is
the policy of Milliman FRM to vote all proxies received from the Underlying Funds in the same proportion that all shares of the Underlying Funds are voted, or in accordance with instructions received from fund shareholders, pursuant
to Section 12(d)(1)(F) of the 1940 Act.
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3.
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Obtaining More Information. Investment Companies for which Milliman FRM is the primary adviser may obtain a record of Milliman FRM’s proxy voting,
free of charge, by calling its main office at (312) 726-0677.
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B-2
The information in this Prospectus is not complete and may be changed. We may not sell these securities until the
registration statement filed with the Securities and Exchange Commission is effective. This Prospectus is not an offer to sell these securities and is not soliciting an offer to buy these securities in any state where the offer or sale is not
permitted.
Milliman Money Market Fund
Prospectus
[______], 2021
This Prospectus relates only to the Milliman Money Market Fund (the “Fund”), which is a series of Milliman
Variable Insurance Trust (the “Trust”). The Fund currently offers only Class 3 shares, and only to insurance company separate accounts funding variable annuity contracts and variable life insurance policies
and other qualified investors. You cannot purchase Fund shares (“Shares”) directly. Please contact your insurance company or other financial intermediary regarding how to invest in Shares.
The Securities and Exchange Commission has not approved or disapproved these securities or passed upon the adequacy of this Prospectus. Any representation
to the contrary is a criminal offense.
| Table of Contents | Page |
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Fund Summary
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1
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Additional Information About the Fund and the Risks of Investing
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5
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Disclosure of Portfolio Holdings
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9
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Management and Organization
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9
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Additional Information About the Shares
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10
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Distribution and Servicing of Shares
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12
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Taxes
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13
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Financial Highlights
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14
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ii
Fund Summary: Milliman Money Market Fund
Investment Objective
The Fund seeks to maximize current income to the extent consistent with the preservation of capital and the maintenance of liquidity by investing exclusively in high quality
money market instruments.
Fees and Expenses of the Fund
This table describes the fees and expenses that you may pay if you buy, hold and sell shares of the Fund (“Shares”).
This table and the example below do not include any fees or sales charges imposed by your variable product. If they were included, the expenses listed below would be higher.
Annual Fund Operating Expenses(1)
(expenses that you pay each year as a percentage of the value of your investment)
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Class 3
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Management Fees
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0.19%
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Distribution and Service (12b-1) Fees
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0.25%
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Other Expenses(2)
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0.04%
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Total Annual Fund Operating Expenses
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0.48%
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Fee Waiver and Expense Limitation(3)(4)
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(0.05)%
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Total Annual Fund Operating Expenses After Expense Limitation
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0.43%
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(1)
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The fees and expenses shown in the table above and the example below include the fees and expenses of both the Fund and the [_] Government Money
Market Fund (the “Portfolio,” which is a series of the [_] Variable Insurance Trust (“Portfolio Trust”)), into which the Fund currently invests.
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(2)
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“Other Expenses” are based on estimated amounts for the current fiscal year.
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(3)
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Milliman Financial Risk Management LLC, investment adviser to the Fund (“Milliman”), has contractually agreed to waive its management fee, which
is equal to 0.03% of the Fund’s average daily net assets, until at least November 1, 2022 (the “Fee Waiver”). This contract cannot be terminated or modified without the consent of the Fund’s Board
of Trustees.
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(4)
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The investment adviser to the Portfolio has agreed to reduce or limit “Other Expenses” (excluding acquired fund fees and expenses, transfer
agency fees and expenses, taxes, interest, brokerage fees, expenses of shareholder meetings, litigation and indemnification, and extraordinary expenses) equal on an annualized basis to 0.004% of the Portfolio’s average daily net assets
through at least April 30, 2022 (the “Expense Limitation Agreement”), and prior to such date the Portfolio’s investment adviser (the “Portfolio Adviser”)
may not terminate the arrangement without the approval of the Board of Trustees of the Portfolio Trust (the “Portfolio Board”).
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Example
This example is intended to help you compare the cost of investing in the Fund with the cost of investing in other funds. This example assumes that you
invest $10,000 in the Fund for the time periods indicated and then sell all of your Shares at the end of those periods. This example also assumes that your investment has a 5% return each year and that the Fund’s operating expenses remain at
current levels and that the Fee Waiver and Expense Limitation Agreement remain in place for their contractual periods. Although your actual costs may be higher or lower, your costs, based on these assumptions, would be:
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1 Year
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3 Years
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Class 3
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$45
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$154
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This example does not include any fees or sales charges imposed by your variable product. If they were included, the expenses listed above would be higher.
Principal Investment Strategies
The Fund pursues its investment objective by investing all of its investable assets in the Portfolio, which is a series of the Portfolio Trust. All
investments are made at the Portfolio level. This structure is sometimes called a “master/feeder” structure. As a result, the Fund’s investment results will correspond directly to the investment
1
results of the Portfolio. The Portfolio has the same investment objective and substantially similar investment policies as the Fund and, therefore, is
subject generally to the same risks as the Fund. Like the Fund, the Portfolio is a “government money market fund” that values its securities using the amortized cost method and seeks to maintain a stable net asset value (“NAV”) of $1.00 per share.
The Portfolio seeks to achieve its investment objective by investing only in “government securities,” as such term is defined or interpreted under the
Investment Company Act of 1940, as amended (the “1940 Act”), and repurchase agreements collateralized by such securities. “Government securities” generally are securities issued or guaranteed by the United
States or certain U.S. government agencies or instrumentalities (“U.S. Government Securities”).
The Portfolio intends to be a “government money market fund,” as such term is defined in or interpreted under Rule 2a-7 under the 1940 Act (“Rule 2a-7”). “Government money market funds” are money market funds that invest at least 99.5% of their total assets in cash, U.S. Government Securities, and/or repurchase agreements that are collateralized
fully by cash or U.S. Government Securities. “Government money market funds” are exempt from requirements that permit money market funds to impose a “liquidity fee” and/or “redemption gate” that temporarily restricts redemptions.
Under Rule 2a-7, the Portfolio may invest only in U.S. dollar-denominated securities that meet certain risk-limiting conditions relating to portfolio
quality, maturity and liquidity.
Principal Risks
You could lose money by investing in the Fund. Although the Fund seeks to preserve the value of an investment at $1.00 per share, it cannot guarantee it
will do so. An investment in the Fund is not a deposit of a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other governmental agency. The Fund’s sponsor has no legal obligation to provide financial support
to the Fund and you should not expect that the sponsor will provide financial support to the Fund at any time. The Fund should not be relied upon as a complete investment program. There can be no assurance that the Fund’s investment objective will
be achieved. The following is a summary description of the principal risks of investing in the Fund (and consequently, the Portfolio).
Interest Rate Risk. When interest rates increase, the Portfolio’s yield will tend to be lower than prevailing
market rates, and the market value of its investments will generally decline. The risks associated with changing interest rates may have unpredictable effects on the markets and the Portfolio’s investments. A low or negative interest rate
environment poses additional risks to the Portfolio, because low or negative yields on its portfolio holdings may have an adverse impact on the Portfolio’s (and consequently the Fund’s) ability to provide a positive yield to its shareholders, pay
expenses out of current income, or maintain a stable NAV or minimize the volatility of its NAV per share and/or achieve its investment objective. Fluctuations in interest rates may also affect the liquidity of the Portfolio’s investments.
Credit/Default Risk. An issuer or guarantor of a
security held by the Portfolio, or a bank or other financial institution that has entered into a repurchase agreement with the Portfolio, may default on its obligation to pay interest and repay principal or default on any other obligation.
Additionally, the credit quality of securities may deteriorate rapidly, which may impair the Portfolio’s liquidity and cause significant deterioration in the Portfolio’s (and consequently the Fund’s) NAV.
Liquidity Risk. The Portfolio may make investments that are illiquid or
that may become less liquid in response to market developments or adverse investor perceptions. Illiquid investments may be more difficult to value. The liquidity of portfolio securities can deteriorate rapidly due to credit events affecting
issuers or guarantors, such as a credit rating downgrade, or due to general market conditions or a lack of willing buyers. An inability to sell one or more portfolio positions, or selling such positions at an unfavorable time and/or under
unfavorable conditions, can adversely affect the Portfolio’s (and consequently the Fund’s) ability to maintain a stable $1.00 share price. Liquidity risk may also refer to the risk that the Portfolio (and consequently the Fund) will not be able to
pay redemption proceeds within the allowable time period because of unusual market conditions, an unusually high volume of redemption requests, or other reasons. Liquidity risk may be the result of, among other things, the reduced number and
capacity of traditional market participants to make a market in fixed income securities or the lack of an active market. The potential for liquidity risk may be magnified by a rising interest rate environment or
2
other circumstances where investor redemptions from money market and other fixed income mutual funds may be higher than normal, potentially causing
increased supply in the market due to selling activity.
Management Risk. A strategy used by the Portfolio Adviser may fail to produce the intended results.
Additionally, legislative, regulatory or tax developments may adversely affect management of the Portfolio and, therefore, each of the Portfolio’s and Fund’s ability to achieve its investment objective.
Market Risk. The Portfolio could lose money over short periods due to short-term market movements and over
longer periods during more prolonged market downturns. Assets may decline in value due to factors affecting financial markets generally or particular asset classes or industries represented in the markets. The value of a security or other asset may
also decline due to general market conditions, economic trends or events that are not specifically related to the issuer of the security or other asset, or due to factors that affect a particular issuer, country, region, market, industry, sector or
asset class.
Stable NAV Risk. The Portfolio (and consequently the
Fund) may not be able to maintain a stable $1.00 share price at all times. If any money market fund that intends to maintain a stable NAV fails to do so (or if there is a perceived threat of such a failure), other money market funds, including the
Portfolio and the Fund, could be subject to increased redemption activity, which could adversely affect its NAV. Neither the Fund nor its shareholders should rely on or expect the Portfolio Adviser or an affiliate to purchase distressed assets from
the Portfolio, make capital infusions into the Portfolio, enter into capital support agreements with the Portfolio or take other actions to help the Portfolio (and consequently the Fund) maintain a stable $1.00 share price.
Tax Diversification Risk. The Portfolio intends to
meet the diversification requirements that are applicable to insurance company separate accounts under Subchapter L of the Internal Revenue Code of 1986, as amended (the “Code”) (the “Diversification Requirements”). To satisfy the Diversification Requirements applicable to variable annuity contracts, the value of the assets of the Portfolio invested in securities issued by the U.S. government
must remain below specified thresholds. For these purposes, each U.S. government agency or instrumentality is treated as a separate issuer.
Operating as a “government money market fund,” as such term is defined in or interpreted under Rule 2a-7 under the 1940 Act, may make it difficult for
the Portfolio to meet the Diversification Requirements. This difficulty may be exacerbated by the potential increase in demand for the types of securities in which the Portfolio invests as a result of changes to the rules that govern Securities and
Exchange Commission (“SEC”) registered money market funds. A failure to satisfy the Diversification Requirements could have significant adverse tax consequences for variable annuity contract owners whose
contract values are determined by investment in the Fund, which invests all of its investable assts in the Portfolio.
U.S. Government Securities Risk. U.S. Government securities are subject to interest rate risk but generally do not
involve the credit risks associated with investments in other types of debt securities. As a result, the yields available from U.S. Government securities are generally lower than the yields available from other debt securities. U.S. Government
securities are guaranteed only as to the timely payment of interest and the payment of principal when held to maturity. While securities issued or guaranteed by U.S. federal government agencies are backed by the full faith and credit of the U.S.
Department of the Treasury, securities issued by government sponsored entities are solely the obligation of the issuer and generally do not carry any guarantee from the U.S. Government.
Repurchase Agreement Risk. If the seller of a repurchase agreement defaults or otherwise does not fulfill its
obligations, the Portfolio may incur delays and losses arising from selling the underlying securities, enforcing its rights, or declining collateral value.
Large Shareholder Transactions Risk. The Portfolio
may experience adverse effects when certain large shareholders purchase or redeem large amounts of shares of the Portfolio. Such large shareholder redemptions, which may occur rapidly or unexpectedly, may cause the Portfolio to sell portfolio
securities at times when it would not otherwise do so, which may negatively impact the Portfolio’s (and consequently the Fund’s) NAV and liquidity. Similarly, large Portfolio share purchases may adversely affect the Portfolio’s (and consequently
the Fund’s) performance to the extent that the Portfolio is delayed in investing new cash or otherwise maintains a larger cash position than it ordinarily would. These transactions may also increase transaction costs. In addition, a large
3
redemption could result in the Portfolio’s current expenses being allocated over a smaller asset base, leading to an increase in the Portfolio’s (and
consequently the Fund’s) expense ratio.
Performance
As of the date of this Prospectus, the Fund has not commenced operations and therefore does not have a performance history. Once available, the Fund’s
performance information will be accessible on the Fund’s website at www.[________].com and will provide some indication of the risks of investing in the Fund.
Management
Milliman Financial Risk Management LLC (“Milliman”) serves as investment adviser to the Fund.
Purchase and Sale of Shares
Shares are available as underlying investment options for variable insurance contracts and variable life insurance policies (each, a “variable contract,” and, collectively, the “variable contracts”) issued by insurance companies. These insurance companies are the record owners of the separate accounts
holding the Shares. You do not buy, sell or exchange Shares directly; rather, you choose investment options through your variable contracts. The insurance companies then cause the separate accounts to purchase and redeem Shares according to
the investment options you choose.
Tax Information
The dividends and distributions paid by the Fund to the insurance company separate accounts primarily will consist of ordinary income. Because Shares must
be purchased through separate accounts used to fund variable contracts, such dividends and distributions will be exempt from current taxation by owners of variable contracts (each, a “contract owner,” and,
collectively “contract owners”) if left to accumulate within a separate account. Consult the variable contract prospectus for additional tax information.
Payments to Insurance Companies and Other Financial Intermediaries
If you allocate contract value to a Fund through an insurance company or other financial intermediary, the Fund, Milliman, the Fund’s distributor or their
related companies may pay the insurance company and/or its affiliates or other intermediary for the sale of Shares and related services. These payments may create a conflict of interest by influencing the insurance company or other intermediary and
your salesperson to recommend an indirect investment in the Fund over another investment. The prospectus or other disclosure documents for the variable contracts may contain additional information about these payments, if any. You may also ask your
salesperson or financial intermediary, or visit your financial intermediary’s website, for more information.
4
Additional Information About the Fund and the Risks of Investing
Additional Information About the Fund’s Investment Objective
The Fund seeks to maximize current income to the extent consistent with the preservation of capital and the maintenance of liquidity by investing
exclusively in high quality money market instruments. The Fund’s investment objective may be changed by the Board without shareholder approval.
Additional Information About the Fund’s Principal Investment Strategies
The Fund is a “feeder” fund that pursues its investment objective by investing all of its investable assets in the Portfolio. The Portfolio has the same
investment objective and substantially similar investment policies as the Fund and, therefore, is subject generally to the same risks as the Fund. Like the Fund, the Portfolio is a “government money market fund”, as defined by Rule 2a-7, that
values its securities using the amortized cost method and seeks to maintain a stable NAV of $1.00 per share.
The Portfolio seeks to achieve its investment objective by investing only in U.S. Government Securities and repurchase agreements collateralized by such
securities. The Portfolio intends to be a “government money market fund,” as such term is defined in or interpreted under Rule 2a-7 under the 1940 Act. “Government money market funds” are money market funds that invest at least 99.5% of their total
assets in cash, U.S. Government Securities, and/or repurchase agreements that are collateralized fully. “Government money market funds” are exempt from requirements that permit money market funds to impose a “liquidity fee” and/or “redemption
gate.”
In order to maintain a rating from a rating organization, the Portfolio may be subject to additional investment restrictions.
Under normal circumstances, the cash position of the Portfolio will not exceed 20% of the Portfolio’s net assets plus any borrowings for investment
purposes (measured at the time of investment).
Under unusual circumstances, including adverse market conditions or the prevailing interest rate environment, or when the Portfolio Adviser believes
there is an insufficient supply of appropriate money market instruments in which to invest, or in the case of unusually large cash inflows or redemptions, the Portfolio may hold uninvested cash in lieu of such instruments. Cash assets are not
income-generating and, as a result, the Portfolio’s current yield may be adversely affected during periods when such positions are held. Cash position may also subject the Portfolio to additional risks and costs, such as increased exposure to the
custodian bank holding the assets and any fees imposed for large cash balances.
The Portfolio will use the amortized cost method of valuation, as permitted by Rule 2a-7 under the 1940 Act, to seek to maintain a stable NAV of $1.00
per share. Under Rule 2a-7, the Portfolio may invest only in U.S. dollar-denominated securities that are either (i) U.S. Government Securities, (ii) issued by other investment companies that are money market funds, or (iii) determined by the
Portfolio Adviser to present minimal credit risks to the Portfolio. Permissible investments of the Portfolio must also meet certain risk-limiting conditions relating to portfolio maturity, diversification, and liquidity, as follows:
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●
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Maximum Remaining Maturity of Portfolio Investments: 13 months (as determined pursuant to Rule 2a-7) at the time of purchase.
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●
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Dollar-Weighted Average Portfolio Maturity: Not more than 60 days (as determined pursuant to Rule 2a-7).
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●
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Dollar-Weighted Average Portfolio Life: Not more than 120 days (as determined pursuant to Rule 2a-7).
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●
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Portfolio Diversification: In accordance with Rule 2a-7, the Portfolio may not invest more than 5% of the value of its total assets at the time of purchase in the
securities of any single issuer and certain affiliates of that issuer. However, the Portfolio may invest up to 25% of the value of its total assets in the securities of a single issuer for up to three business days. These limitations do
not apply to cash, certain repurchase
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5
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agreements, U.S. Government Securities or securities of other investment companies that are money market funds.
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●
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Portfolio Liquidity: The Portfolio is required to maintain a sufficient degree of liquidity necessary to meet reasonably foreseeable redemption requests. In
addition, the Portfolio must hold at least 10% of its total assets in “daily liquid assets” and 30% of its total assets in “weekly liquid assets.” For these purposes, daily and weekly liquid assets are calculated as of the end of each
business day. Daily liquid assets generally include: (a) cash; (b) direct obligations of the U.S. Government; (c) securities that will mature or are subject to a demand feature that is exercisable and payable within one business day; or
(d) amounts receivable and due unconditionally within one business day on pending sales of portfolio securities. Weekly liquid assets generally include: (a) cash; (b) direct obligations of the U.S. Government; (c) certain U.S. Government
agency discount notes with remaining maturities of 60 days or less; (d) securities that will mature or are subject to a demand feature that is exercisable and payable within five business days; or (e) amounts receivable and due
unconditionally within five business days on pending sales of portfolio securities. In addition, the Portfolio may not acquire an illiquid security if, after the purchase, more than 5% of the Portfolio’s total assets would consist of
illiquid assets.
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Additional Information About the Risks of Investing in the Fund
You could lose money by investing in the Fund. Although the Fund seeks to preserve the value an investment at $1.00 per share, it cannot guarantee it
will do so. An investment in the Fund is not a deposit of a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other governmental agency. The Fund’s sponsor has no legal obligation to provide financial support
to the Fund and you should not expect that the sponsor will provide financial support to the Fund at any time. The principal risks of the Fund, and therefore the Portfolio, are discussed in the Summary section of the Prospectus. The following
section provides additional information on the risks that apply to the Portfolio, and consequently the Fund, which may result in a loss of your investment. There can be no assurance that the Fund’s investment objective will be achieved. The risks
of investing in the Fund (and consequently, the Portfolio) are presented below.
Interest Rate Risk. During periods of rising interest rates, the Portfolio’s yield (and the market value of its
investments) will tend to be lower than prevailing market rates; in periods of falling interest rates, the Portfolio’s yield will tend to be higher. The risks associated with changing interest rates may have unpredictable effects on the markets and
the Portfolio’s investments. A low interest rate environment poses additional risks to the Portfolio, which are heightened in a very low or negative interest rate environment. Low or negative interest rates may continue for the foreseeable future.
Low or negative yields on the Portfolio’s portfolio holdings may have an adverse impact on the Portfolio’s (and consequently the Fund’s) ability to provide a positive yield to its shareholders, pay expenses out of current income, or, at times,
maintain a stable $1.00 share price or minimize the volatility of its NAV per share, as applicable, and/or achieve its investment objective. A wide variety of market factors can cause interest rates to rise or fall, including central bank monetary
policy, inflationary or deflationary pressures and changes in general market and economic conditions. Fluctuations in interest rates may also affect the liquidity of the Portfolio’s investments. Interest rates in the United States are currently at
historically low levels. Certain countries have experienced negative interest rates on certain fixed-income instruments. Changing interest rates, including rates that fall below zero, may have unpredictable effects on markets, may result in
heightened market volatility and may detract from Portfolio performance to the extent the Portfolio is exposed to such interest rates and/or volatility.
Credit/Default Risk. An issuer or guarantor of a security or instrument held by the Portfolio, or a bank or
other financial institution that has entered into a repurchase agreement with the Portfolio may default on its obligation to pay interest and repay principal or default on any other obligation. Even if such an entity does not default on a payment,
an instrument’s value may decline if the market believes that the entity has become less able or willing to make timely payments. The credit quality of the Portfolio’s securities or instruments may meet the Portfolio’s credit quality requirements
at the time of purchase but then deteriorate thereafter, and such a deterioration can occur rapidly. In certain instances, the downgrading or default of a single holding or guarantor of the Portfolio’s holdings may impair the Portfolio’s liquidity
and have the potential to cause significant deterioration in the Portfolio’s (and consequently the Fund’s) NAV.
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Liquidity Risk. The Portfolio may make investments that are illiquid or that may become less liquid in
response to market developments or adverse investor perceptions. While the Portfolio endeavors to maintain a high level of liquidity in its portfolio, the liquidity of portfolio securities can deteriorate rapidly due to credit events affecting
issuers or guarantors, such as a credit rating downgrade, or due to general market conditions and a lack of willing buyers. When there is no willing buyer and investments cannot be readily sold at the desired time or price, the Portfolio may have
to accept a lower price or may not be able to sell the instrument at all. An inability to sell one or more portfolio positions can adversely affect the Portfolio’s (and consequently the Fund’s) ability to maintain a stable $1.00 share price or
increase the volatility of its NAV per share, as applicable, or prevent the Portfolio from being able to take advantage of other investment opportunities. Investments that are illiquid or that trade in lower volumes may be more difficult to value.
To the extent that the traditional dealer counterparties that engage in fixed income trading do not maintain inventories of bonds (which provide an
important indication of their ability to “make markets”) that keep pace with the growth of the bond markets over time, relatively low levels of dealer inventories could lead to decreased liquidity and increased volatility in the fixed income
markets. Additionally, market participants other than the Portfolio may attempt to sell fixed income holdings at the same time as the Portfolio, which could cause downward pricing pressure and contribute to illiquidity.
Liquidity risk may also refer to the risk that the Portfolio (and consequently the Fund) will not be able to pay redemption proceeds within the
allowable time period because of unusual market conditions, an unusually high volume of redemption requests, or other reasons. While both the Portfolio and the Fund reserve the right to meet redemption requests through in-kind distributions, the
Portfolio and/or the Fund may instead choose to raise cash to meet redemption requests through sales of portfolio securities or permissible borrowings. If either the Portfolio or the Fund is forced to sell securities at an unfavorable time and/or
under unfavorable conditions, such sales may adversely affect the Portfolio’s or the Fund’s ability to maintain a stable $1.00 share price or minimize the volatility of its NAV per share, as applicable.
Management Risk. A strategy used by the Portfolio Adviser may fail to produce the intended results.
Additionally, legislative, regulatory or tax developments may adversely affect management of the Portfolio and, therefore, each of the Portfolio’s and Fund’s ability to achieve its investment objective.
Market Risk. The Portfolio could lose money over short periods due to short-term market movements and over longer
periods during more prolonged market downturns. Assets may decline in value due to factors affecting financial markets generally or particular asset classes or industries represented in the markets. The value of a security or other asset may also
decline due to general market conditions, economic trends or events that are not specifically related to the issuer of the security or other asset, or due to factors that affect a particular issuer or issuers, country, group of countries, region,
market, industry, group of industries, sector or asset class. During a general market downturn, multiple asset classes may be negatively affected. Changes in market conditions and interest rates will not have the same impact on all types of
investments.
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COVID-19 Risk. The current outbreak of the novel strain of coronavirus, COVID-19, has resulted in instances
of market closures and dislocations, extreme volatility, liquidity constraints and increased trading costs. Efforts to contain the spread of COVID-19 have resulted in travel restrictions, closed international borders, disruptions of
healthcare systems, business operations and supply chains, layoffs, lower consumer demand, defaults and other significant economic impacts, all of which have disrupted global economic activity across many industries and may exacerbate other
pre-existing political, social and/or economic risks, locally or globally. The ongoing effects of COVID-19 are unpredictable and may result in significant and prolonged effects on the Portfolio’s, and consequently the Fund’s, performance.
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Stable NAV Risk. The Portfolio (and consequently the Fund) may not be able to maintain a stable $1.00 share
price at all times. If any money market fund that intends to maintain a stable NAV fails to do so (or if there is a perceived threat of such a failure), other such money market funds, including the Portfolio and the Fund, could be subject to
increased redemption activity, which could adversely affect its NAV. The Portfolio may, among other things, reduce or withhold any income and/or gains generated from its investments to the extent necessary to maintain a stable $1.00 share price.
Neither the Fund nor its shareholders should rely on or expect the Portfolio Adviser or an affiliate to purchase distressed assets from the Portfolio, make capital infusions into the Portfolio,
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enter into capital support agreements with the Portfolio or take other actions to help the Portfolio (and consequently the Fund) maintain a stable $1.00
share price.
Tax Diversification Risk. The Portfolio intends to
meet the diversification requirements that are applicable to insurance company separate accounts under Subchapter L of the Code (the “Diversification Requirements”). To satisfy the Diversification
Requirements applicable to variable annuity contracts, the value of the assets of the Portfolio invested in securities issued by the U.S. government must remain below specified thresholds. For these purposes, each U.S. government agency or
instrumentality is treated as a separate issuer.
Operating as a “government money market fund,” as such term is defined in or interpreted under Rule 2a-7 under the 1940 Act, may make it difficult for
the Portfolio to meet the Diversification Requirements. This difficulty may be exacerbated by the potential increase in demand for the types of securities in which the Portfolio invests as a result of changes to the rules that govern SEC registered
money market funds. A failure to satisfy the Diversification Requirements could have significant adverse tax consequences for variable annuity contract owners whose contract values are determined by investment in the Fund, which invests all of its
investable assts in the Portfolio. Guidance published by the Internal Revenue Service provides a safe harbor pursuant to which certain insurance company separate accounts will be deemed to satisfy the Diversification Requirements where such
accounts invest in a “government money market fund” under Rule 2a-7 and certain other requirements are satisfied.
U.S. Government Securities Risk. U.S. Government securities are subject to interest rate risk but generally do
not involve the credit risks associated with investments in other types of debt securities. As a result, the yields available from U.S. Government securities are generally lower than the yields available from other debt securities. U.S. Government
securities are guaranteed only as to the timely payment of interest and the payment of principal when held to maturity. While securities issued or guaranteed by U.S. federal government agencies (such as Ginnie Mae) are backed by the full faith and
credit of the U.S. Department of the Treasury, securities issued by government sponsored entities (such as Fannie Mae and Freddie Mac) are solely the obligation of the issuer and generally do not carry any guarantee from the U.S. Government. In
addition, although U.S. Government securities generally have less credit risk, they are not completely free of credit risk. There is the risk that the US Government may default on payments on certain US Government securities, including those held
by the Portfolio, which could have a material negative impact on the U.S. economy and on the Portfolio and the Fund.
Repurchase Agreement Risk. If the seller of a repurchase agreement defaults or otherwise does not fulfill its
obligations, the Portfolio may incur delays and losses arising from selling the underlying securities, enforcing its rights, or declining collateral value. The Portfolio will not enter into a repurchase agreement that will cause more than 5% of its
total assets to be subject to repurchase agreements maturing in more than seven calendar days. Subject to the portfolio requirements of Rule 2a-7, there is no limit on the amount of the Portfolio’s assets that may be subject to repurchase agreements
of seven days or less.
Floating and Variable Rate Obligations Risk. Floating rate and variable rate obligations are debt instruments
issued by companies or other entities with interest rates that reset periodically (typically, daily, monthly, quarterly, or semi-annually) in response to changes in the market rate of interest on which the interest rate is based. For floating and
variable rate obligations, there may be a lag between an actual change in the underlying interest rate benchmark and the reset time for an interest payment of such an obligation, which could harm or benefit the Portfolio, depending on the interest
rate environment or other circumstances. In a rising interest rate environment, for example, a floating or variable rate obligation that does not reset immediately would prevent the Portfolio from taking full advantage of rising interest rates in a
timely manner. However, in a declining interest rate environment, the Portfolio may benefit from a lag due to an obligation’s interest rate payment not being immediately impacted by a decline in interest rates. A
floating rate or variable rate obligation may meet the required credit quality standards by reason of being backed by a letter of credit or guarantee issued by a bank that meets those quality standards, subject to certain conditions in Rule 2a-7.
Certain floating and variable rate obligations have an interest rate floor feature, which prevents the interest rate payable by the security from
dropping below a specified level as compared to a reference interest rate (the “reference rate”), such as the London Inter-bank Offered Rate (“LIBOR”). Such a floor protects the Portfolio from losses
resulting from a decrease in the reference rate below the specified level. However, if the reference rate is
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below the floor, there will be a lag between a rise in the reference rate and a rise in the interest rate payable by the obligation, and the Portfolio
may not benefit from increasing interest rates for a significant amount of time.
It is currently anticipated that LIBOR will be discontinued by the end of 2021 and will cease to be published after that time. Although many LIBOR rates
will be phased out at the end of 2021 as originally intended, a selection of widely used USD LIBOR rates will continue to be published until June 2023 in order to assist with the transition. The unavailability or replacement of LIBOR may affect the
value, liquidity or return on certain Portfolio investments and may result in costs incurred in connection with closing out positions and entering into new trades. Any pricing adjustments to the Portfolio’s investments resulting from a substitute
reference rate may adversely affect the Portfolio’s (and consequently the Fund’s) performance and/or NAV.
Large Shareholder Transactions Risk. The Portfolio
may experience adverse effects when certain large shareholders purchase or redeem large amounts of shares of the Portfolio. Such large shareholder redemptions, which may occur rapidly or unexpectedly, may cause the Portfolio to sell portfolio
securities at times when it would not otherwise do so, which may negatively impact the Portfolio’s NAV and liquidity. Similarly, large Portfolio share purchases may adversely affect the Portfolio’s (and consequently the Fund’s) performance to the
extent that the Portfolio is delayed in investing new cash or otherwise maintains a larger cash position than it ordinarily would. These transactions may also increase transaction costs. In addition, a large redemption could result in the
Portfolio’s current expenses being allocated over a smaller asset base, leading to an increase in the Portfolio’s (and consequently the Fund’s) expense ratio.
Disclosure of Portfolio Holdings
A description of the Fund’s policies and procedures with respect to the disclosure of the Fund’s portfolio holdings information is available in the Fund’s
Statement of Additional Information (“SAI”), which is available at [__________].
Management and Organization
Information Concerning the Master/Feeder Structure
The Fund operates as a “feeder” fund by investing all of its assets in the Portfolio, which has the same investment objective and substantially similar
investment policies as the Fund. The Portfolio may accept investments from other feeder funds. Certain actions involving other feeder funds, such as a substantial withdrawal, could affect the Portfolio and, therefore, the Fund.
Feeder funds, including the Fund, bear the Portfolio’s expenses in proportion to the amount of assets a feeder fund invests in the Portfolio.
The Fund may withdraw its assets from the Portfolio at any time and will do so if the Board believes it to be in the best interest of the Fund’s
shareholders. If the Fund withdraws its investment in the Portfolio, it either will invest directly in securities in accordance with the investment policies described in this Prospectus and the SAI, or will invest in another pooled investment vehicle
that has the same investment objective and substantially similar investment policies as the Fund. In connection with the withdrawal of its interest in the Portfolio, the Fund could receive securities and other investments from the Portfolio instead
of cash. This could cause the Fund to incur certain expenses.
Investment Adviser
Milliman Financial Risk Management LLC (“Milliman”), located at 71 S. Wacker Drive, 31st
Floor, Chicago, IL 60606, serves as investment adviser to the Fund. Milliman is a wholly owned subsidiary of Milliman, Inc. Milliman provides investment advisory, edging, and consulting services on approximately $150 billion in assets as of March
31, 2020.
Under the Investment Advisory Agreement (the “Advisory Agreement”) with the Trust, Milliman manages the Fund in accordance with the
policies and procedures established by the Board of Trustees of the Trust (the “Board”), and
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has agreed to perform, or arrange for the performance of, the day-to-day management of the Fund’s portfolio. Milliman also pays all
expenses incurred by it in connection with its activities under the Advisory Agreement, including, but not limited to, expenses of all necessary investment and management facilities and investment personnel, including salaries, expenses and fees of
any personnel required for it to faithfully perform its duties under the Advisory Agreement, and expenses of administrative facilities, including bookkeeping, clerical personnel and equipment necessary for the efficient conduct of the Adviser’s
duties under the Advisory Agreement. In addition, Milliman pays, out of its legitimate profits, broker-dealers, trust companies, transfer agents and other financial institutions, including Participating Insurance Companies and/or their affiliates,
in exchange for their selling of Shares or for recordkeeping or other shareholder support services, as further described under “Distribution Arrangements” below.
For services provided under the Advisory Agreement, Milliman receives from the Fund an annual fee, paid monthly, equal to 0.03% of the average daily net
assets of the Fund. However, Milliman has contractually agreed to waive its management fee until at least November 1, 2022. This contract cannot be terminated or modified without the consent of the Board.
A discussion regarding the basis for the Board approving the Advisory Agreement will be available in the Fund’s next annual or semi-annual report to
shareholders, as applicable.
Portfolio Adviser
The Portfolio Adviser serves as investment adviser to the Portfolio. The Portfolio Adviser provides day-to-day advice regarding the Portfolio’s
portfolio transactions. The Portfolio Adviser makes the investment decisions for the Portfolio and places purchase and sale orders for the Portfolio’s portfolio transactions in U.S. and foreign markets.
As compensation for its services and its assumption of certain expenses, the Portfolio Adviser is entitled to a fee, computed daily and payable monthly,
at the annual rate of 0.16% of the Portfolio’s average daily net assets.
The Portfolio Adviser may waive a portion of its management fees, including fees earned as the Portfolio Adviser to any of the affiliated funds in which
the Portfolio invests, from time to time, and may discontinue or modify any such waivers in the future, consistent with the terms of any fee waiver arrangements that may be in place.
The Portfolio Adviser has agreed to reduce or limit “Other Expenses” (excluding acquired fund fees and expenses, transfer agency fees and expenses,
taxes, interest, brokerage fees, expenses of shareholder meetings, litigation and indemnification, and extraordinary expenses) to 0.004% of the Portfolio’s average daily net assets through at least April 30, 2022, and prior to such date the
Portfolio Adviser may not terminate the arrangement without the approval of the Portfolio Board. The expense limitation may be modified or terminated by the Portfolio Adviser at its discretion and without shareholder approval after such date,
although the Portfolio Adviser does not presently intend to do so. The Portfolio’s “Other Expenses” may be further reduced by any custody and transfer agency fee credits received by the Portfolio.
Additional Information About the Shares
Pricing of Shares
The Fund determines its NAV per share as of the close of regular trading on the New York Stock Exchange (the “Exchange”)
(generally 4:00 p.m., Eastern time) on each business day the Exchange is open for regular trading. If the Exchange closes early on a valuation day, the Fund shall determine NAV as of that time. The NAV per share of the Fund is calculated by
dividing the value of the Fund’s total assets, less its liabilities (including accrued expenses), by the number of shares outstanding. Because the Fund currently invests all of its investable assets in the Portfolio, its assets consist primarily of
an interest in the Portfolio. The value of this interest will depend on the value of the assets of the Portfolio and its liabilities and expenses.
Investments in the Portfolio are valued based on a shareholder’s proportionate ownership interest (rounded to the nearest hundredth of a percent) in the
Portfolio’s aggregate net assets (i.e., the value of its total assets, including the securities held by the Portfolio plus any cash or other assets, including interest and dividends accrued but not yet
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received, less total liabilities, including accrued expenses) as next determined after an order is received in proper form by the Portfolio. The value
of the Portfolio’s net assets is generally determined as of 4:00 p.m., Eastern time. The Portfolio’s shares may also be priced periodically throughout the day by the Portfolio’s fund accounting agent. The Portfolio’s shares will be priced on any
day the Exchange is open, including days on which the Federal Reserve Bank is closed for local holidays (i.e., Columbus Day and Veterans Day). The Portfolio’s shares will generally not be priced on any day
the Exchange is closed, although the Portfolio’s shares may be priced on days when the Exchange is closed if the Securities Industry and Financial Markets Association (“SIFMA”) recommends that the bond
markets remain open for all or part of the day. On any business day when the SIFMA recommends that the bond markets close early, the Portfolio reserves the right to close at or prior to the SIFMA recommended closing time. If the Portfolio does so,
it will cease granting same business day credit for purchase and redemption orders received after the Portfolio’s closing time and credit will be given to the next business day.
In calculating the Portfolio’s NAV, the Portfolio’s investments are valued using the “amortized cost” method of valuation, meaning that the calculation is
based on a valuation of the assets held by the Portfolio at cost, with an adjustment for any discount or premium on a security at the time of purchase. While this method provides certainty in valuation, it may result in periods during which the
value, as determined by amortized cost, is higher or lower than the price that the Portfolio would receive if the security were sold.
The use of amortized cost valuation by the Portfolio, together with the Portfolio’s policy of declaring daily dividends, is designed to permit the
Portfolio (and consequently the Fund) to maintain an NAV per share of $1.00. However, neither the Portfolio nor the Fund guarantees that a constant NAV of $1.00 per share can be maintained.
Purchase and Sale of Shares
Shares may be purchased and sold only through variable contracts offered by insurance companies with which the Trust has entered into a participation
agreement (each, a “Participating Insurance Company,” and, collectively, the “Participating Insurance Companies”). These Participating Insurance Companies are the
record owners of the separate accounts holding the Shares. You do not buy, sell or exchange Shares directly; rather, you choose investment options through your variable contract. The Participating Insurance Companies then cause the separate
accounts to purchase and redeem Shares according to the investment options you previously chose.
The Fund sells and redeems its Shares, without charge, at their NAV next determined after the Fund or its agent receives a purchase or redemption
request in good order. The value of Shares redeemed may be more or less than the original cost. The Fund generally intends to redeem its Shares for cash. Subject to applicable federal law including the 1940 Act, the Fund may also redeem its Shares
wholly or partly in securities or other assets if the Board determines, in its sole discretion, that such payment is advisable in the interest of the remaining shareholders of the Fund. If a redemption is paid wholly or partly in securities or
other assets, the redeeming shareholder would incur transaction costs in disposing of the redemption proceeds.
Orders received by the Fund are only processed on business days. Redemption proceeds paid by wire transfer will normally be wired in federal funds on
the business day on which the Fund receives actual notice of the redemption order but may be paid up to two business days after receipt of actual notice of the order. However, the Fund may postpone the right of redemption for such periods of time
as are permitted under the 1940 Act and under the following unusual circumstances: (a) when the Exchange is closed (other than weekends and holidays) or trading is restricted; (b) when an emergency exists, making disposal of portfolio securities or
other assets, or the valuation of net assets, not reasonably practicable; or (c) during any period when the SEC has by order permitted a suspension of redemption for the protection of shareholders.
Share Classes
The Fund currently offer only Class 3 shares, which charge a distribution fee pursuant to a “Rule 12b-1 Plan,” as described further below under
“Distribution Arrangements.”
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Frequent Purchases and Redemptions of Shares
Frequent purchases and redemptions of Shares may cause the Fund to incur increased administrative costs. Nonetheless, the Board has not adopted any
policies and procedures that would limit frequent purchases and redemptions of Shares. The Board does not believe that it is appropriate to adopt any such policies and procedures primarily for the following reasons:
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The Fund is offered to investors as a cash management vehicle, in which investors should be able to purchase and redeem shares regularly and frequently.
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As a money market fund, the Fund is intended to provide liquidity, and any policy diminishing the Fund’s liquidity would be detrimental to its continuing operations.
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The Fund’s portfolio securities are valued on the basis of amortized cost, and the Fund seeks to maintain a constant NAV. As a result, the Fund is subject to price arbitrage opportunities.
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Because the Fund seeks to maintain a constant NAV, investors are more likely to expect to receive the amount they originally invested in the Fund upon redemption than other mutual funds. Imposition of
redemption fees would run contrary to investor expectations.
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Although the Board has not adopted specific policies and procedures regarding frequent purchases and redemptions of Shares, the Fund reserves the right
at any time to reject or cancel any purchase order (or any part thereof), including, for example, if the Fund determines that such purchase order may disrupt the Fund’s operation or performance.
Each insurance company also has its own policies and restrictions on excessive short-term trading. Additionally, the terms and restrictions on excessive
short-term trading may vary from one variable contract to another, even among those variable contracts issued by the same insurance company. Therefore, please refer to the prospectus and SAI for your variable contract for specific details about
limitations on transfers and other transactions that your insurance company may impose in seeking to discourage excessive short-term trading.
Liquidity Fees and Redemption Gates
The Portfolio, and therefore the Fund, is not subject to the requirements in Rule 2a-7 related to liquidity fees or redemption gates. Please note, however, that the Portfolio Board reserves the ability to subject the Portfolio, and consequently the Fund, to a liquidity fee and/or redemption gate in the future, after providing prior notice to
shareholders.
Distribution and Servicing of Shares
Distribution Plan
The Fund has adopted a Distribution Plan under Rule 12b-1 (“Rule 12b-1 Plan”) of the 1940 Act with respect to
Class 3 shares. The Rule 12b-1 Plan allows the Fund to pay distribution fees to its principal underwriter or to Participating Life Insurance Companies and/or their affiliates, or to any other eligible institution, for distribution activities
related to the indirect marketing of the Fund to the contract owners, and/or for other contract owner services. The Rule 12b-1 Plan provides for a maximum fee equal to an annual rate of 0.25% (expressed as a percentage of average daily net assets
of the Fund). Because the Fund pays these fees out of its assets on an ongoing basis, over time these fees will increase the cost of your investment and may cost you more than paying other types of charges.
Payments to Insurance Companies and/or their Affiliates
Marketing Support Services. The Participating Insurance Company that issued your variable
contract and/or their affiliates may receive the Rule 12b-1 Plan fees discussed above. In addition to those payments, Milliman may, from time to time, at its expense and from its own legitimate profits, make cash payments to a Participating
Insurance Company and/or its affiliates as incentives to certain Participating Insurance Companies and/or their affiliates to promote the sale and retention of Shares. Milliman may also make payments to Participating Insurance Companies and/or
their affiliates for marketing support, training and ongoing education for sales personnel about the Funds,
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financial planning needs of contract owners that allocate contract value to a Fund, marketing and advertising of the Funds, and access to periodic
conferences relating directly or indirectly to the Funds, among other marketing support services. The benefits Milliman receives when making these payments may include, among other things, adding the Funds to the list of underlying investment
options in the Participating Insurance Company’s variable contracts and access to individual members of a Participating Insurance Company’s sales force or its management. Milliman compensates Participating Insurance Companies and/or their
affiliates differently, generally depending upon the level and/or type of services received. The payments Milliman makes may be calculated on sales of Shares (“Sales-Based Payments”), in which case the total
amount of such payments generally does not exceed [___]% of the offering price of all Shares sold through variable contracts during the particular period. Such payments also may be calculated on the average daily net assets of the Funds
attributable to a particular Participating Insurance Company and/or its affiliates (“Asset-Based Payments”), in which case the total amount of such cash payments generally does not exceed [___]% per annum of
those assets during a defined period. Sales-Based Payments primarily create incentives to make sales of Shares and Asset-Based Payments primarily create incentives to retain assets of the Funds in Participating Insurance Company separate accounts.
To the extent Participating Insurance Companies sell more Shares of a Fund or retain Shares of a Fund in their contract owners’ accounts, Milliman may directly or indirectly benefit from the incremental management and other fees paid to Milliman by
the Funds with respect to those assets.
Administrative Support Services. Milliman may make payments to Participating Insurance
Companies and/or their affiliates for certain administrative services provided to the Funds. These services may include, but are not limited to, distributing Fund documents, such as prospectuses and shareholder reports, to existing contract owners;
hosting and maintaining a website to ensure that Fund documents are publicly accessible, free of charge, to existing contract owners; maintaining and preserving records related to the purchase, redemption and other account activity of contract
owners; assisting with proxy solicitations on behalf of the Funds, including soliciting and compiling voting instructions from contract owners; preparing, printing and distributing reports of values to existing contract owners with respect to their
existing contract values allocated to the Funds; receiving and answering correspondence from existing contract owners, including requests for Fund documents, relating to their existing investments in the Funds; and answering questions from existing
contract owners about their current investments in the Funds. The cost of providing the services and the overall package of services provided may vary from one arrangement to another. Milliman does not make an independent assessment of a
Participating Insurance Company’s or its affiliate’s cost of providing such services. Accordingly, a Participating Insurance Company or its affiliate may earn profits on these payments for these services, since the amount of the payments may exceed
the actual costs of providing the services. Milliman pays for these administrative support services out of its own legitimate profits.
Additional Information About these and Other Payments. You can find further details in the
SAI about these payments and the services provided by Participating Insurance Companies and/or their affiliates. In certain cases, these payments could be significant to the Participating Insurance Company or its affiliate. Your insurance company
may charge you additional fees or commissions on your variable contract other than those disclosed in this Prospectus. You may ask your insurance company about any payments it or its affiliates receive from Milliman, or the Funds, as well as about
fees and/or commissions the insurance company charges. The prospectus for your variable contract may also contain additional information about these payments.
Taxes
The below discussion of “Taxes” is not intended or written to be used as tax advice. Contract owners should consult their own tax
professional about their tax situation.
Dividends and Distributions
The Fund intends to elect and qualify each year as a regulated investment company under the Internal Revenue Code of 1986, as amended. As a regulated
investment company, the Fund generally pays no federal income tax on the income and gains it distributes to the insurance company separate accounts.
All or substantially all of the Fund’s net investment income will be declared as a dividend daily. Dividends will normally be declared daily as of 4:00
p.m., Eastern time, as a dividend and distributed monthly. Distributions will be reinvested as of the last calendar day of each month. Cash distributions normally will be paid on or about the first
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business day of each month. Net short-term capital gains, if any, will be distributed in accordance with federal income tax requirements and may be
reflected in the Fund’s daily distributions. Net short-term capital gains may at times represent a significant component of the Fund’s daily distributions (e.g., during periods of extremely low interest
rates).
The Fund will distribute net realized capital gains, if any, at least annually. The Fund may distribute such income dividends and capital gains more
frequently, if necessary, in order to reduce or eliminate federal excise or income taxes on the Fund. The amount of any distribution will vary, and there is no guarantee a Fund will pay either an income dividend or a capital gains distribution.
Tax Status
Shares must be purchased through separate accounts used to fund variable insurance contracts. As a result, it is anticipated that any income dividends
or capital gains distributed by a Fund will be exempt from current taxation by contract holders if left to accumulate within a separate account. Withdrawals from such contracts may be subject to ordinary income tax and, if made before age 59 1∕2, a
10% penalty tax. Investors should ask their own tax advisors for more information on their tax situation, including possible state or local taxes. For more information on taxes, please refer to the accompanying prospectus of the annuity or life
insurance program through which Shares are offered. Please refer to the SAI for more information regarding the tax treatment of the Fund.
Financial Highlights
Financial information is not provided because the Fund did not commence operations as of the date of this Prospectus.
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This Prospectus is intended for use in connection with variable contracts. The Fund’s SAI contains more
details about the Fund and is incorporated by reference into this Prospectus (is legally a part of this Prospectus). Once issued, additional information about the Fund’s investments will also be available in the Fund’s annual and semi-annual
reports to shareholders.
The Fund’s SAI is available, and the annual and semi-annual reports will be available once issued, without charge, upon request, by:
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calling [_________];
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visiting [_________]; or
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contacting your insurance company or other financial intermediary.
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Reports and other information about the Fund is also available on the EDGAR Database on the SEC’s Internet site at http://www.sec.gov, and copies of this
information may be obtained, after paying a duplicating fee, by electronic request at the following e-mail address: publicinfo@sec.gov.
SEC 1940 Act file number: 811-23710.
The information in this Statement of Additional Information is not complete and may be changed. We may not sell
these securities until the registration statement filed with the Securities and Exchange Commission is effective. This Statement of Additional Information is not an offer to sell these securities and is not soliciting an offer to buy these securities
in any state where the offer or sale is not permitted.
Milliman Money Market Fund
[______], 2021
This Statement of Additional Information (“SAI”) relates only to the Milliman Money Market
Fund (the “Fund”), which is a series of Milliman Variable Insurance Trust (the “Trust”). The Fund currently offers only Class 3 shares, and only to insurance company
separate accounts funding variable annuity contracts and variable life insurance policies and other qualified investors. You cannot purchase Fund shares directly. Please contact your insurance company or other financial intermediary regarding how
to invest in shares of the Fund.
This SAI is not a prospectus but is incorporated by reference into the Prospectus for the Fund dated [______], 2021 (the “Prospectus”). This SAI contains information in addition to the information set forth in the Prospectus and should be read in conjunction with it. Terms not defined in this SAI have the meanings assigned to them in
the Prospectus.
A copy of the Prospectus or the Fund’s Summary Prospectus may be obtained, without charge, by calling [________], visiting [________], or
writing to the Trust, [________]. Once available, you may also obtain a copy of the Fund’s annual or semi-annual report to shareholders at no charge by request to the Fund at the address or phone number noted above.
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Table of Contents
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Page
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Trust History and Fund Classification
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1
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Description of the Fund and Its Investments and Risks
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1
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Investment Restrictions
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8
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Disclosure of Portfolio Holdings
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9
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Trustees and Executive Officers of the Trust
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10
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Investment Advisory and Other Services
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15
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Distribution and Servicing of Shares
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16
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Brokerage Allocation and Other Practices
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18
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Purchases, Redemptions and Pricing of Shares
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19
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Additional Information Concerning the Trust
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21
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Tax Status
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22
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Other Tax Consequences
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26
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Tax Consequences to Shareholders
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28
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Control Persons and Principal Holders of Securities
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28
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Financial Statements
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28
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Appendix A – Debt Ratings
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A-1
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Appendix B – Proxy Voting Policies
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B-1
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Trust History and Fund Classification
The Trust is an open-end management investment company organized under the laws of the state of Delaware on November 2, 2020. The
Fund pursues its investment objective by investing all of its investable assets in the [_] Government Money Market Fund (the “Portfolio”), which is a series of the [_] Variable Insurance Trust (“Portfolio Trust”). Each of the Fund and the Portfolio is classified as “diversified” for purposes of the Investment Company Act of 1940, as amended (the “1940 Act”), and
each operates as a Government Money Market Fund, as defined by Rule 2a-7 under the 1940 Act (“Rule 2a-7”).
Description of the Fund and Its Investments and Risks
As stated above, the Fund pursues its investment objective by investing all of its investable assets in the Portfolio. This
structure is sometimes called a “master/feeder” structure. As a result, the Fund’s investment results will correspond directly to the investment results of the Portfolio. The Portfolio has the same investment objective and substantially similar
investment policies as the Fund and, therefore, is subject generally to the same risks as the Fund.
The fundamental policies of the Portfolio cannot be changed without approval by the holders of a majority (as defined in the 1940 Act)
of the Portfolio’s outstanding interests. Whenever the Fund, as an interest holder of the Portfolio, is requested to vote on any matter submitted to interest holders of the Portfolio, the Fund will either hold a meeting of its shareholders to
consider such matters and cast its votes in proportion to the votes received from its shareholders (shares for which the Fund receives no voting instructions will be voted in the same proportion as the votes received from the other Fund shareholders)
or cast its votes, as an interest holder of the Portfolio, in proportion to the votes received by the Portfolio from all other interest holders of the Portfolio.
Certain policies of the Portfolio that are non-fundamental may be changed by vote of a majority of the Board of Trustees of Portfolio
Trust (the “Portfolio Board”) without interest holder approval. If the Portfolio’s investment objective or fundamental or non-fundamental policies are changed, the Fund may elect to change its objective or
policies to correspond to those of the Portfolio. The Fund may redeem its interests from the Portfolio only if the Board determines that such action is in the best interests of the Fund and its shareholders, or for any other reason. Prior to such
redemption, the Board would consider alternatives, including whether to invest directly in securities in accordance with the investment policies described in the Prospectus and this SAI, or invest in another pooled investment vehicle that has the
same investment objective and substantially similar investment policies as the Fund. In the latter case, the Fund’s inability to find a substitute pooled investment vehicle could adversely affect an investor’s investment in the Fund.
Set forth below are descriptions of the various types of securities and other investments in which the Fund may invest through the
Portfolio. This section supplements the discussion of principal investment strategies and principal risks contained in the Prospectus and, therefore, you should carefully review the Prospectus before making an investment in the Fund.
Rule 2a-7 Requirements
As permitted by Rule 2a-7 under the 1940 Act, each of the Fund and the Portfolio seeks to maintain a stable price of $1.00 per
share by using the amortized cost method to value portfolio securities and rounding the share value to the nearest cent. Each of the Fund and Portfolio “floats” the net asset value (“NAV”) of its shares by
valuing assets at market value and rounding its current NAV per share to a minimum of the fourth decimal place. Rule 2a-7 imposes requirements as to the diversification and liquidity of the Fund and Portfolio, quality of portfolio securities,
maturity of the Fund and Portfolio and of individual securities. The discussion of investments in this SAI is qualified by Rule 2a-7 limitations. As a U.S. “Government Money Market Fund” under Rule 2a-7, each of the Fund and Portfolio: (1) is
permitted to use the amortized cost method of valuation to seek to maintain a $1.00 share price; (2) must invest at least 99.5% of its total assets in cash, government securities and/or repurchase agreements that are “collateralized fully” (i.e., backed by cash or government securities); and (3) is not subject to a liquidity fee and/or a redemption gate on fund redemptions which might apply to other types of funds in the future should certain
triggering events specified in Rule 2a-7 occur. Although the Portfolio, and therefore the Fund, is not subject to the requirements in Rule 2a-7 related to liquidity fees or redemption gates, the Portfolio Board reserves the ability to subject the
Portfolio, and
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consequently the Fund, to a liquidity fee and/or redemption gate in the future, after providing prior notice to shareholders.
Debt Investments
U.S. Government Securities. The Portfolio may invest
in U.S. Government Securities, which are obligations issued or guaranteed by the U.S. Government, its agencies, instrumentalities or sponsored enterprises. Some U.S. Government Securities (such as U.S. Treasury bills, notes and bonds, which differ
only in their interest rates, maturities and times of issuance) are supported by the full faith and credit of the United States. Others, such as obligations issued or guaranteed by U.S. government agencies, instrumentalities or sponsored
enterprises, are supported either by (i) the right of the issuer to borrow from the U.S. Treasury, (ii) the discretionary authority of the U.S. Government to purchase certain obligations of the issuer or (iii) the credit of the issuer. The U.S.
Government is under no legal obligation, in general, to purchase the obligations of its agencies, instrumentalities or sponsored enterprises. No assurance can be given that the U.S. Government will provide financial support to U.S. government
agencies, instrumentalities or sponsored enterprises in the future, and the U.S. Government may be unable to pay debts when due.
U.S. Government Securities include (to the extent consistent with the 1940 Act) securities for which the payment
of principal and interest is backed by an irrevocable letter of credit issued by the U.S. Government, or its agencies, instrumentalities or sponsored enterprises. U.S. Government Securities may also include (to the extent consistent with the 1940
Act) participations in loans made to foreign governments or their agencies that are guaranteed as to principal and interest by the U.S. Government or its agencies, instrumentalities or sponsored enterprises. The secondary market for certain of
these participations is extremely limited. These and other factors discussed in the section below, entitled “Illiquid Investments,” may impact the liquidity of investments in these participations.
The Portfolio may also purchase U.S. Government Securities in private placements and may also invest in
separately traded principal and interest components of securities guaranteed or issued by the U.S. Treasury that are traded independently under the separate trading of registered interest and principal of securities program (“STRIPS”).
The Portfolio may invest in Treasury inflation-protected securities (“IPS”),
which are securities whose principal value is periodically adjusted according to the rate of inflation. The interest rate on IPS is fixed at issuance, but over the life of the bond this interest may be paid on an increasing or decreasing principal
value that has been adjusted for inflation. Although repayment of the greater of the adjusted or original bond principal upon maturity is guaranteed, the market value of IPS is not guaranteed, and will fluctuate.
The values of IPS generally fluctuate in response to changes in real interest rates, which are in turn tied to
the relationship between nominal interest rates and the rate of inflation. If inflation were to rise at a faster rate than nominal interest rates, real interest rates will decline, leading to an increase in the value of IPS. In contrast, if nominal
interest rates were to increase at a faster rate than inflation, real interest rates will rise, leading to a decrease in the value of IPS. If inflation is lower than expected during the period the Portfolio holds IPS, the Portfolio may earn less on
the IPS than on a conventional bond. If interest rates rise due to reasons other than inflation (for example, due to changes in the currency exchange rates), investors in IPS may not be protected to the extent that the increase is not reflected in
the bonds’ inflation measure. There can be no assurance that the inflation index for IPS will accurately measure the real rate of inflation in the prices of goods and services.
The U.S. Treasury utilizes the CPIU as the measurement of inflation, while other issuers of IPS may use different
indices as the measure of inflation. Any increase in principal value of IPS caused by an increase in the consumer price index is taxable in the year the increase occurs, even though a fund holding IPS will not receive cash representing the increase
at that time. As a result, the Portfolio could be required at times to liquidate other investments, including when it is not advantageous to do so, in order to satisfy its distribution requirements as a regulated investment company.
If the Portfolio invests in IPS, it will be required to treat as original issue discount any increase in the
principal amount of the securities that occurs during the course of its taxable year. If the Portfolio purchases such IPS that are issued in
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stripped form either as stripped bonds or coupons, it will be treated as if it had purchased a newly issued debt
instrument having original issue discount.
Because the Portfolio is required to distribute substantially all of its net investment income (including accrued
original issue discount), the Portfolio’s investment in either zero coupon bonds or IPS may require the Portfolio to distribute to shareholders an amount greater than the total cash income it actually receives. Accordingly, in order to make the
required distributions, the Portfolio may be required to borrow or liquidate securities.
Floating-Rate and Variable-Rate Obligations. The
Portfolio may purchase floating-rate and variable-rate demand notes and bonds, which are obligations ordinarily having stated maturities in excess of thirteen months, but which permit the holder to demand payment of principal at any time, or at
specified intervals not exceeding 397 days, as defined in accordance with Rule 2a-7 and the 1940 Act. The interest rates payable on certain debt securities in which the Portfolio may invest are not fixed and may fluctuate based upon changes in
market rates. Variable and floating rate obligations are debt instruments issued by companies or other entities with interest rates that reset periodically (typically, daily, monthly, quarterly, or semi-annually) in response to changes in the
market rate of interest on which the interest rate is based. Moreover, such obligations may fluctuate in value in response to interest rate changes if there is a delay between changes in market interest rates and the interest reset date for the
obligation, or for other reasons. The value of these obligations is generally more stable than that of a fixed rate obligation in response to changes in interest rate levels, but they may decline in value if their interest rates do not rise as
much, or as quickly, as interest rates in general. Conversely, floating rate securities will not generally increase in value if interest rates decline.
Variable-rate demand notes including master demand notes are demand obligations that permit the Portfolio to invest
fluctuating amounts, which may change daily without penalty, pursuant to direct arrangements between the Portfolio, as lender, and the borrower. The interest rates on these notes fluctuate from time to time. The issuer of such obligations ordinarily
has a corresponding right, after a given period, to prepay in its discretion the outstanding principal amount of the obligations plus accrued interest upon a specified number of days’ notice to the holders of such obligations. The interest rate on a
floating-rate demand obligation is based on a known lending rate, such as a bank’s prime rate, and is adjusted automatically each time such rate is adjusted. The interest rate on a variable-rate demand obligation is adjusted automatically at
specified intervals. Frequently, such obligations are secured by letters of credit or other credit support arrangements provided by banks.
These obligations are direct lending arrangements between the lender and borrower. There may not be an established
secondary market for these obligations, although they are redeemable at face value. Accordingly, where these obligations are not secured by letters of credit or other credit support arrangements, the Portfolio’s right to redeem is dependent on the
ability of the borrower to pay principal and interest on demand. Such obligations frequently are not rated by credit rating agencies. The Portfolio’s investment adviser (“Portfolio Adviser”) considers on an
ongoing basis the creditworthiness of the issuers of the floating-rate and variable-rate demand obligations in the Portfolio’s portfolio.
Medium-Term Notes. The Portfolio may invest in
medium-term notes that have remaining maturities that are consistent with the conditions of Rule 2a-7. Medium-term notes are a form of corporate debt financing. They are often issued on a regular or continuous basis without the requirement to produce
a new set of legal documentation at the time of each issuance. Medium-term notes have maturities that range widely based on the needs of the issuer; although they most often mature between nine months and 10 years, they may have longer maturities.
Unrated Investments. If permitted by its investment strategies, the
Portfolio may purchase instruments that are not rated if, in the opinion of Portfolio Adviser, such obligations are of an investment quality that is comparable to other investments that are permitted for purchase by the Portfolio, and they are
purchased in accordance with the Portfolio’s procedures adopted by the Portfolio Board in accordance with Rule 2a-7 under the 1940 Act. Descriptions of debt securities ratings are found in Appendix A. After purchase by the Portfolio, a
security may cease to be rated or its rating may be reduced. If a portfolio security ceases to be an eligible security under Rule 2a-7 (e.g., no longer presents minimal credit risks in the determination of
Portfolio Adviser), or there is a default with respect to the portfolio security (other than an immaterial default unrelated to the financial condition of the issuer), or an event of insolvency occurs with respect to the issuer of a portfolio
security or the provider of any demand feature or guarantee, the Portfolio shall dispose of such security as soon as practicable consistent with achieving an orderly disposition of the security, unless the Portfolio Board finds that the disposal of
such security would not be in the Portfolio’s best interests.
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Temporary Investments
Under normal circumstances, the cash positions of the Portfolio will not exceed 20% of the Portfolio’s net assets plus any
borrowings for investment purposes (measured at the time of investment). Under unusual circumstances, including adverse market conditions or the prevailing interest rate environment, or when the Portfolio Adviser believes there is an insufficient
supply of appropriate money market instruments in which to invest, or in the case of unusually large cash inflows or redemptions, the Portfolio may hold uninvested cash in lieu of appropriate money market instruments. Cash assets are not
income-generating and, as a result, the Portfolio’s (and consequently the Fund’s) current yield may be adversely affected during periods when such positions are held. Cash positions may also subject the Portfolio to additional risks and costs,
such as increased exposure to the custodian bank holding the assets and any fees imposed for large cash balances.
Other Investments, Investment Techniques and Risks
Borrowing. The Fund may borrow
money to the extent permitted under the 1940 Act, and the rules thereunder, as such statute and rules may be amended or interpreted from time to time by the U.S. Securities and Exchange Commission (“SEC”) or
its staff. Such borrowings are typically utilized (i) for temporary or emergency purposes, (ii) in anticipation of or in response to adverse market conditions, or (iii) for cash management purposes. All borrowings are limited to an amount not
exceeding 33 1/3% of the Fund’s total assets (including the amount borrowed) less liabilities (other than borrowings). Any borrowings that exceed this amount will be reduced within three business days to the extent necessary to comply with the 33
1/3% limitation even if it is not advantageous to sell securities at that time. Additionally, the Fund is permitted to temporarily carry a negative or overdrawn balance in their account with the Custodian (as defined below). The Trust compensates the
Custodian for such overdrafts by paying the Custodian an agreed upon rate.
When-Issued Purchases and Forward Commitments. The Portfolio may purchase securities on a when-issued basis, including TBA (“To Be Announced”) securities, or purchase or sell securities on a forward commitment basis
beyond the customary settlement time. TBA securities, which are usually mortgage-backed securities, are purchased on a forward commitment basis with an approximate principal amount and no defined maturity date. These transactions involve a
commitment by the Portfolio to purchase or sell securities at a future date. The price of the underlying securities (usually expressed in terms of yield) and the date when the securities will be delivered and paid for (the settlement date) are
fixed at the time the transaction is negotiated. In addition, recently finalized rules of the Financial Industry Regulatory Authority (“FINRA”) include mandatory margin requirements that require the
Portfolio to post collateral in connection with its TBA transactions. There is no similar requirement applicable to the Portfolio’s TBA counterparties. The required collateralization of TBA trades could increase the cost of TBA transactions to the
Portfolio and impose added operations complexity. When-issued purchases and forward commitment transactions are negotiated directly with the other party, and such commitments are not traded on exchanges. The Portfolio will generally purchase
securities on a when-issued basis or purchase or sell securities on a forward commitment basis only with the intention of completing the transaction and actually purchasing or selling the securities. If deemed advisable as a matter of investment
strategy, however, the Portfolio may dispose of or negotiate a commitment after entering into it. The Portfolio may also sell securities it has committed to purchase before those securities are delivered to the Portfolio on the settlement date. The
Portfolio may realize a capital gain or loss in connection with these transactions. For purposes of determining the Portfolio’s duration, the maturity of when-issued or forward commitment securities will be calculated from the commitment date. The
Portfolio is generally required to identify on its books cash and liquid assets in an amount sufficient to meet the purchase price unless the Portfolio’s obligations are otherwise covered. Alternatively, the Portfolio may enter into offsetting
contracts for the forward sale of other securities that it owns. Securities purchased or sold on a when-issued or forward commitment basis involve a risk of loss if the value of the security to be purchased declines prior to the settlement date or
if the value of the security to be sold increases prior to the settlement date.
Illiquid Investments. Under Rule 2a-7, the Fund and the Portfolio must
hold securities that are sufficiently liquid to meet reasonably foreseeable shareholder redemptions in light of the Fund’s and Portfolio’s obligations under section 22(e) of the 1940 Act (which forbids the suspension of the right of redemption, or
postponement of the date of payment or satisfaction upon redemption for more than seven days after the tender of such security for redemption, subject to specified exemptions) and any commitments the Fund or Portfolio has made to shareholders. In
addition, the Fund and the Portfolio may not acquire an illiquid security if, immediately after the acquisition, the Fund or Portfolio, as
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applicable, would have invested more than 5% of its total assets in illiquid securities. The Fund and Portfolio may not acquire any
security other than a Daily Liquid Asset (cash, Government Securities, other securities that will mature or are subject to a demand feature that is exercisable and payable within one business day and amounts receivable and unconditionally due within
one business day on pending sales of portfolio securities) if, immediately after the acquisition the Fund or Portfolio, as applicable, would have invested less than 10% of its total assets in Daily Liquid Assets. The Fund and Portfolio may not
acquire any security other than a Weekly Liquid Asset (cash, direct obligations of the U.S. Government, Government Securities issued by a person controlled or supervised by and acting as an instrumentality of the U.S. Government pursuant to authority
granted by the Congress that are issued at a discount to the principal amount to be repaid at maturity and have a remaining maturity of 60 calendar days or less, securities that will mature or are subject to a demand feature that is exercisable and
payable within 5 business days and amounts receivable and unconditionally due within 5 business days on pending sales of portfolio securities) if, immediately after the acquisition, the Fund or Portfolio, as applicable, would have invested less than
30% of its total assets in Weekly Liquid Assets.
For purposes of the Fund’s and Portfolio’s 5% limitation, an illiquid security means a security that cannot be sold or disposed of in
the ordinary course of business within seven calendar days at approximately the value ascribed to it by the Fund or Portfolio, as applicable, as determined pursuant to the 1940 Act and applicable rules and regulations thereunder. Limitations on the
resale of restricted investments may have an adverse effect on their marketability, which may prevent the Fund or Portfolio from disposing of them promptly at reasonable prices. The Fund or the Portfolio, as applicable, may have to bear the expense
of registering such securities for resale, and the risk of substantial delays in effecting such registrations. The Fund’s or Portfolio’s difficulty valuing and selling restricted securities or illiquid investments may result in a loss or be costly to
the Fund or Portfolio, as applicable. If a substantial market develops for a restricted security or illiquid investment held by the Fund or the Portfolio, it may be treated as a liquid investment, in accordance with procedures and guidelines adopted
by the Board on behalf of the Fund or the Portfolio Board on behalf of the Portfolio, as applicable.
Investment Company Securities. The Portfolio may invest in shares of open-end investment companies, including investment companies that are affiliated with the Portfolio and Portfolio Adviser, that invest exclusively in high-quality, short-term securities to the
extent permitted under the 1940 Act, including the rules, regulations and exemptive orders obtained thereunder; provided, however, that the Portfolio, if it has knowledge that its beneficial interests are purchased by another investment company
investor pursuant to Section 12(d)(1)(G) of the 1940 Act, will not acquire any securities of registered open-end management investment companies or registered unit investment trusts in reliance on Section 12(d)(1)(F) or 12(d)(1)(G) of the 1940 Act.
Other investment companies in which the Portfolio invests can be expected to charge fees for operating expenses, such as investment advisory and administration fees, that would be in addition to those charged by the Portfolio.
LIBOR Transition Risk. The Portfolio may invest in
financial instruments that are tied to the London Interbank Offered Rate (“LIBOR”), Secured Overnight Financing Rate (“SOFR”), Sterling Overnight Index Average (“SONIA”) or another reference rate. LIBOR is the most common benchmark interest rate index and is used to make adjustments to variable-rate loans and to determine interest rates for a variety of financial
instruments and borrowing arrangements. On July 27, 2017, the head of the United Kingdom's Financial Conduct Authority announced a desire to phase out the use of LIBOR by the end of 2021, and it is currently expected that LIBOR will cease to be
published after that time. Although many LIBOR rates will be phased out at the end of 2021 as originally intended, a selection of widely used USD LIBOR rates will continue to be published until June 2023 in order to assist with the transition. There
remains uncertainty regarding the effect of the LIBOR transition process and therefore any impact of a transition away from LIBOR on the Portfolio or the instruments in which the Portfolio invests cannot yet be determined. There is no assurance that
the composition or characteristics of any alternative reference rate will be similar to or produce the same value or economic equivalence as LIBOR or that instruments using an alternative rate will have the same volume or liquidity. As a result, the
transition process might lead to increased volatility and reduced liquidity in markets that currently rely on LIBOR to determine interest rates; a reduction in the value of some LIBOR-based investments; increased difficulty in borrowing or
refinancing and diminished effectiveness of any applicable hedging strategies against instruments whose terms currently include LIBOR; and/or costs incurred in connection with temporary borrowings and closing out positions and entering into new
agreements. Additionally, while some existing LIBOR-based instruments may contemplate a scenario where LIBOR is no longer available or representative by providing a “fallback” rate-setting methodology, there may be significant uncertainty regarding
the effectiveness of any such fallback provisions and there remains uncertainty regarding the willingness and ability of issuers to add alternative
5
rate-setting provisions in certain existing instruments. Additionally, industry initiatives are currently underway
to identify and begin implementation of alternative reference rates, including SOFR and SONIA; however, there are challenges to converting certain financial instruments and transactions to a new reference rate and no global consensus has been reached
as to which reference rate should be used. Any effects of the transition away from LIBOR and the adoption of alternative reference rates could result in losses to the Portfolio (and therefore the Fund) and such losses may occur prior to the
discontinuation of LIBOR.
Market Events Risk. Natural or
environmental disasters, such as earthquakes, fires, floods, hurricanes, tsunamis and other severe weather-related phenomena generally, and widespread disease, including pandemics and epidemics, have been and can be highly disruptive to economies and
markets, adversely impacting individual companies, sectors, industries, markets, currencies, interest and inflation rates, credit ratings, investor sentiment, and other factors affecting the value of the Portfolio's investments. Given the increasing
interdependence among global economies and markets, conditions in one country, market, or region are increasingly likely to adversely affect markets, issuers, and/or foreign exchange rates in other countries, including the U.S. These disruptions
could prevent the Portfolio from executing advantageous investment decisions in a timely manner and negatively impact the Portfolio's (and therefore the Fund’s) ability to achieve its investment objective. Any such event(s) could have a significant
adverse impact on the value and risk profile of the Portfolio.
In addition, the current outbreak of the novel strain of coronavirus, COVID-19, has resulted in instances of market closures and
dislocations, extreme volatility, liquidity constraints and increased trading costs. Efforts to contain the spread of COVID-19 have resulted in travel restrictions, closed international borders, disruptions of healthcare systems, business operations
and supply chains, layoffs, lower consumer demand, defaults and other significant economic impacts, all of which have disrupted global economic activity across many industries and may exacerbate other pre-existing political, social and economic
risks, locally or globally. The ongoing effects of COVID-19 are unpredictable and may result in significant and prolonged effects on the Portfolio's (and therefore the Fund’s) performance.
Operational and Cyber Security Risk. The Fund, its service providers, and
other market participants depend on complex information technology and communications systems to conduct business functions. These systems are subject to a number of different threats or risks that could adversely affect the Fund and its
shareholders, despite the efforts of the Fund and its service providers to adopt technologies, processes, and practices intended to mitigate these risks. For example, the Fund, and its service providers, may be susceptible to operational and
information security risks resulting from cyber incidents.
In general, cyber incidents can result from deliberate attacks or unintentional events. Cyber-attacks include, but are not limited to,
gaining unauthorized access to digital systems (e.g., through “hacking” or malicious software coding) for purposes of misappropriating assets or sensitive information, corrupting data, or causing operational
disruption. Cyber-attacks also may be carried out in a manner that does not require gaining unauthorized access, such as causing denial-of-service attacks on websites (i.e., efforts to make network services
unavailable to intended users). Cyber security failures or breaches by Milliman Financial Risk Management LLC (“Milliman”), investment adviser to the Fund, or other service providers to the Trust, Portfolio
Adviser and the issuers of securities or other assets in which the Portfolio invests, have the ability to cause disruptions and impact business operations, potentially resulting in financial losses, interference with the Fund's ability to calculate
its NAV, impediments to trading, the inability of the Fund's shareholders to transact business, violations of applicable privacy and other laws, regulatory fines, penalties, reputational damage, reimbursement or other compensation costs, or
additional compliance costs. In addition, substantial costs may be incurred in order to prevent any cyber incidents in the future. While the Fund and its service providers have established business continuity plans in the event of, and systems
designed to reduce the risks associated with, such cyber-attacks, there are inherent limitations in such plans and systems including the possibility that certain risks have not been identified.
In addition, power or communications outages, acts of God, information technology equipment malfunctions, operational errors, and
inaccuracies within software or data processing systems may also disrupt business operations or impact critical data. Market events also may trigger a volume of transactions that overloads current information technology and communication systems and
processes, impacting the ability to conduct the Fund's operations. The Fund cannot control the cyber security plans and systems put in place by service providers to the Fund and issuers in which the Fund invests. The Fund and its shareholders could
be negatively impacted as a result.
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Portfolio Maturity. Dollar-weighted average maturity is derived by
multiplying the value of each investment by the time remaining to its maturity, adding these calculations, and then dividing the total by the value of the Portfolio’s portfolio. An obligation’s maturity is typically determined on a stated final
maturity basis, although there are some exceptions. For example, if an issuer of an instrument takes advantage of a maturity-shortening device, such as a call, refunding, or redemption provision, the date on which the instrument is expected to be
called, refunded, or redeemed may be considered to be its maturity date. There is no guarantee that the expected call, refund or redemption will occur, and the Portfolio’s average maturity may lengthen beyond the Portfolio Adviser’s expectations
should the expected call refund or redemption not occur. Similarly, in calculating its dollar-weighted average maturity, the Portfolio may determine the maturity of a variable or floating rate obligation according to the interest rate reset date,
or the date principal can be recovered on demand, rather than the date of ultimate maturity.
Repurchase Agreements. The Portfolio may enter into
repurchase agreements with counterparties approved by the Portfolio Adviser pursuant to procedures approved by the Portfolio Board that furnish collateral at least equal in value or market price to the amount of their repurchase obligations.
Repurchase agreements involving obligations other than U.S. Government Securities may be subject to special risks and may not have the benefit of certain protections in the event of the counterparty’s insolvency. A repurchase agreement is an
arrangement under which the Portfolio purchases securities and the seller agrees to repurchase the securities within a particular time and at a specified price. Custody of the securities is maintained by the Portfolio’s custodian (or subcustodian).
The repurchase price may be higher than the purchase price, the difference being income to the Portfolio, or the purchase and repurchase prices may be the same, with interest at a stated rate due to the Portfolio together with the repurchase price
on repurchase. In either case, the income to the Portfolio is unrelated to the interest rate on the security subject to the repurchase agreement.
For purposes of the 1940 Act and generally for tax purposes, a repurchase agreement is deemed to be a loan from
the Portfolio to the seller of the security. For other purposes, it is not always clear whether a court would consider the security purchased by the Portfolio subject to a repurchase agreement as being owned by the Portfolio or as being collateral
for a loan by the Portfolio to the seller.
In the event of commencement of bankruptcy or insolvency proceedings with respect to the seller of the security
before repurchase of the security under a repurchase agreement, the Portfolio may encounter delay and incur costs before being able to sell the security. Such a delay may involve loss of interest or a decline in price of the security. If the court
characterizes the transaction as a loan and the Portfolio has not perfected a security interest in the security, the Portfolio may be required to return the security to the seller’s estate and be treated as an unsecured creditor of the seller. As
an unsecured creditor, the Portfolio would be at risk of losing some or all of the principal and interest involved in the transaction. To minimize this risk, the Portfolio utilizes custodians and subcustodians that the Portfolio Adviser believes
follow customary securities industry practice with respect to repurchase agreements, and the Portfolio Adviser analyzes the creditworthiness of the obligor, in this case the seller of the securities. But because of the legal uncertainties, this
risk, like others associated with repurchase agreements, cannot be eliminated.
Apart from the risk of bankruptcy or insolvency proceedings, there is also the risk that the seller may fail to
repurchase the security. However, if the market value of the security subject to the repurchase agreement becomes less than the repurchase price (including accrued interest), the Portfolio will direct the seller of the security to deliver
additional securities so that the market value of all securities subject to the repurchase agreement equals or exceeds the repurchase price.
The Portfolio may not invest in repurchase agreements maturing in more than seven days if, as a result thereof,
more than 5% of its total assets measured using the amortized cost method of valuation would be invested in such investments and other securities which are not readily marketable. Certain repurchase agreements which provide for settlement in more
than seven days can be liquidated before the nominal fixed term on seven days or less notice.
In addition, the Portfolio, together with other registered investment companies having advisory agreements with the Portfolio
Adviser or its affiliates, may transfer uninvested cash balances into a single joint account, the daily aggregate balance of which will be invested in one or more repurchase agreements.
7
Investment Restrictions
Fundamental Investment Restrictions
Except as otherwise noted below, the Fund is subject to the following investment restrictions, which are fundamental and cannot be
changed without the vote of a majority of the outstanding voting securities of the Fund. The vote of a majority of the outstanding voting securities of the Fund means the vote of (i) 67% or more of the voting securities present at such meeting, if
the holders of more than 50% of the outstanding voting securities of the Fund are present or represented by proxy, or (ii) more than 50% of the outstanding voting securities of the Fund, whichever is less.
The Fund may not:
|
(1)
|
Purchase the securities of any issuer (other than securities issued or guaranteed by the U.S. Government or any of its agencies or
instrumentalities, municipal securities or securities issued or guaranteed by domestic banks, including U.S. branches for foreign banks and foreign branches of U.S. banks) if, as a result, more than 25% of the Fund’s total assets would be
invested in the securities of companies whose principal business activities are in the same industry.
|
|
(2)
|
Except to the extent permitted by Rule 2a-7 promulgated under the 1940 Act, or any successor rule thereto, purchase the securities of any
issuer (other than securities issued or guaranteed by the U.S. Government or any of its agencies or instrumentalities, or securities of other investment companies) if, as a result, (i) more than 5% of the Fund’s total assets would be
invested in the securities of that issuer, or (ii) the Fund would hold more than 10% of the outstanding voting securities of that issuer.
|
|
(3)
|
Borrow money or issue senior securities, except to the extent permitted by the 1940 Act, and the rules thereunder, as such statute and rules
may be amended or interpreted from time to time by the SEC or its staff.
|
|
(4)
|
Purchase or sell physical commodities, except to the extent permitted by the 1940 Act and any other governing statute, and by the rules and
regulations thereunder, and by the SEC or other regulatory agency with authority over the Fund.
|
|
(5)
|
Make investments that will result in the “concentration” (as that term may be defined or interpreted under the 1940 Act, and the rules
thereunder, as such statute and rules may be amended or interpreted from time to time by the SEC or its staff) of its investments in the securities of issuers primarily engaged in the same industry; provided, however, that this restriction
does not limit the Fund's investments in (i) obligations issued or guaranteed by the U.S. Government, its agencies or instrumentalities, (ii) tax-exempt obligations issued by governments or political subdivisions of governments, or (iii)
bank instruments. In complying with this restriction, the Fund will not consider a bank-issued guaranty or financial guaranty insurance as a separate security.
|
|
(6)
|
Purchase or sell real estate; provided, however, that the Fund may (i) acquire real estate through ownership of securities or instruments and
sell any real estate acquired thereby, (ii) purchase or sell instruments secured by real estate (including interests therein), and (iii) purchase or sell securities issued by entities or investment vehicles that own or deal in real estate
(including interests therein).
|
|
(7)
|
Lend any of its assets or make any other loan, except as permitted by the 1940 Act, and the rules thereunder, as such statute and rules may be
amended or interpreted from time to time by the SEC or its staff; provided, however, that this restriction does not prevent the Fund from, among other things, purchasing debt obligations, entering into repurchase agreements, loaning its
assets to broker-dealers or institutional investors, or investing in loans, including assignments and participation interests.
|
Explanatory Notes
The below notations are not considered to be part of the Fund’s fundamental investment restrictions and may be changed by the Fund
without shareholder approval.
8
With respect to paragraph (2) above, Rule 2a-7 generally requires that a money market fund may not invest in the securities of any
issuer if, as a result, more than 5% of the money market fund’s total assets would be invested in that issuer; provided that, the money market fund may invest up to 25% of its total assets in securities of a single issuer for up to three business
days after acquisition. Certain securities are not subject to this diversification requirement. These include: Government Securities; certain repurchase agreements; and shares of certain money market funds. Rule 2a-7 imposes a separate
diversification test upon the acquisition of a guarantee or demand feature, which is, in summary, a right to sell a security at a price equal to its approximate amortized cost plus accrued interest. Government Security generally means any security
issued or guaranteed as to principal or interest by the U.S. Government or certain of its agencies or instrumentalities; or any certificate of deposit for any of the foregoing. For purposes of the diversification requirements set forth in paragraph
(2) above, with respect to issuers of municipal securities, each state (including the District of Columbia and Puerto Rico), territory and possession of the United States, each political subdivision, agency, instrumentality, and authority thereof,
and each multi-state agency of which a state is a member is a separate “issuer.” When the assets and revenues of an agency, authority, instrumentality, or other political subdivision are separate from the government creating the subdivision and the
security is backed only by assets and revenues of the subdivision, such subdivision would be deemed to be the sole issuer. Similarly, in the case of an industrial development bond or private activity bond, if such bond is backed only by the assets
and revenues of the non-governmental user, then such non-governmental user would be deemed to be the sole issuer.
Unless otherwise indicated, all limitations under the Fund’s investment restrictions apply only at the time that a transaction is
undertaken. Any change in the percentage of the Fund's assets invested in certain securities or other instruments resulting from market fluctuations or other changes in the Fund’s total assets will not require the Fund to dispose of an investment
until Milliman determines that it is practicable to sell or close out the investment without undue market or tax consequences.
The investment limitations described in paragraphs (1) and (5) above do not prohibit the Fund from investing all or substantially all
of its assets in the shares of one or more registered, open-end investment companies, such as the Portfolio. In applying the investment limitations, the Fund will look through to the security holdings of the Portfolio. The investment limitations of
the Portfolio are similar to those of the Fund.
Disclosure of Portfolio Holdings
The Board of Trustees of the Trust (the “Board”) has adopted policies and procedures
regarding the disclosure of Fund portfolio holdings information (the “Disclosure Policy”) to protect the interests of Fund shareholders and to address potential conflicts of interest that could arise between
the interests of shareholders and the interests of Milliman or principal underwriter to the Fund, or any affiliated persons of those entities. Subject to the limited exceptions described below, the Trust will not make available to anyone non-public
portfolio holdings information until such time as the information is made available to all shareholders or the general public.
As used in the Disclosure Policy and throughout this SAI, the term “portfolio holdings
information” includes information with respect to the portfolio holdings of the Fund, but does not include aggregate, composite or descriptive information that, in the reasonable judgement of the Trust’s Chief Compliance Officer (“CCO”), does not present risks of dilution, arbitrage, market timing, insider trading or other inappropriate trading to the detriment of the Fund.
Consistent with current law, the Fund releases complete portfolio holdings information each fiscal quarter through regulatory
filings with no more than a 60-day lag.
Exceptions to the Disclosure Policy (to the extent not otherwise permitted pursuant to an exclusion) will be made only when: (1)
the Trust’s CCO (or his or her designee) determines in writing that the Fund has a legitimate business purpose for releasing portfolio holdings information in advance of release to all shareholders or the general public; (2) the recipient is
subject to a duty of confidentiality pursuant to a signed non-disclosure agreement or subject to professional or ethical obligations not to disclose or otherwise improperly use the information, such as would apply to independent registered public
accounting firms or legal counsel; (3) the release of such information would not otherwise violate the antifraud provisions of the federal securities laws or fiduciary duties owed to Fund shareholders; and (4) such disclosures is documented and
reported to the Board on a quarterly basis.
9
Under the Disclosure Policy, the receipt of compensation by the Fund, Milliman or any affiliate thereof, as consideration for
disclosing non-public portfolio holdings information will not be deemed a legitimate business purpose.
The Fund has ongoing arrangements to distribute information about the Fund’s portfolio holdings information to the Fund’s
third-party service providers described herein (e.g., investment advisers, independent registered public accounting firm, administrator, transfer agent and fund accounting agent, custodian and legal counsel)
as well as [____]. These organizations are required to keep such information confidential and are prohibited from trading based on the information, or otherwise using the information, except as necessary to provide services to the Funds. No
compensation or other consideration is received by the Funds, Milliman or any other party in connection with each such ongoing arrangement.
The Disclosure Policy also permits disclosure of portfolio holdings information to insurance companies with which the Trust has
entered into a participation agreement (each, a “Participating Insurance Company,” and, collectively, the “Participating Insurance Companies”), upon request or on a
selective basis, reasonably prior to the scheduled release dates of such information in order to assist the Participating Insurance Companies with posting such information on their websites in compliance with Rule 30e-3 under the 1940 Act. The
Disclosure Policy incorporates the Board’s determination that selectively disclosing portfolio holdings information to facilitate a Participating Insurance Company’s dissemination of the portfolio holdings information on its website is a legitimate
business purpose of the Funds. Participating Insurance Companies that wish to receive such portfolio holdings information in advance of the public release date must sign a non-disclosure agreement requiring them to maintain the confidentiality of
the information until the public release dates and to refrain from using that information to execute transactions on confidential portfolio holdings information. To obtain information about Fund portfolio holdings information, please contact your
insurance company or other financial intermediary.
The Board exercises continuing oversight of the disclosure of each Fund’s portfolio holdings information by overseeing the
implementation and enforcement of the Disclosure Policy and considering reports and recommendations by the Trust’s CCO concerning any material compliance matters that may arise in connection with the Disclosure Policy. The Board reserves the right
to amend the Disclosure Policy at any time without prior notice in its sole discretion.
Trustees and Executive Officers of the Trust
The Board is responsible for the overall management of the Trust, including general supervision and review of the investment
activities of the Trust. The Board, in turn, appoints the officers of the Trust, who are responsible for administering the day-to-day operations of the Trust and its separate series, as applicable. The current Trustees and officers of the Trust,
their years of birth, position with the Trust, term of office with the Trust and length of time served, their principal occupation and other directorships held for the past five years, and the number of funds to which Milliman serves as investment
adviser (the “Fund Complex”) that are overseen by each Trustee are set forth below. The address of each Trustee and officer is 71 South Wacker Drive, 31st Floor, Chicago, IL 60606.
10
|
Name and Year of Birth
|
|
Position with
the Trust |
|
Term of Office
and Length of Time Served |
|
Principal Occupation
During Past Five Years |
|
Number of
Funds in Fund Complex Overseen by Trustees |
|
Other
Directorships Held During Past Five Years
|
|||
|
Independent Trustees of the Trust1
|
|
|
|
||||||||||
|
Eric Berg
(1958)
|
|
Trustee
|
|
Since July 2021
|
|
Owner of With You in Mind (independent analysis and research firm for insurance, asset management and wealth-management topics) since 2019; Chief Financial Officer of Aviva India from 2018 to 2019;
Investment Banker at Macquarie Capital from 2016 to 2018.
|
|
59
|
|
None
|
|||
|
Nicholas Dalmaso
(1965)
|
|
Lead Independent Trustee
|
|
Since July 2021
|
|
General Counsel of M1 Holdings Inc. and M1 Finance LLC (FINRA registered Broker/Dealer) since 2014; Founder/CEO of Sound Capital Holdings, Sound Capital Distributors (a FINRA registered Broker/Dealer) and Sound Capital Solutions (an
Investment Advisor) since 2020; Chief Compliance Officer of M1 Finance LLC from 2014 to 2019.
|
|
59
|
|
Chair of Destra Capital Management Investment Company Boards (4 portfolios) since 2010; Independent Director of Keno/Kozie Associates (IT Consulting) from 2016 to 2018.
|
|||
|
Daniel Ross Hayes
(1957)
|
|
Trustee
|
|
Since July 2021
|
|
Director, Treasurer and Investment Committee Chair of ShoreRivers, Inc. (non-profit clean water advocacy corporation) since 2017.
|
|
59
|
|
None
|
|||
|
Colleen McKenna Tucker
(1970)
|
Trustee | Since September 2021 |
Executive Director of International Insurance Society (membership organization for the risk and insurance industry) since 2004.
|
59 | None | ||||||||
|
Interested Trustee of the Trust
|
|
|
|
||||||||||
|
Adam Schenck2
(1981)
|
|
Chair of the Board, President and Interested Trustee
|
|
Since November 2020
|
|
Principal Managing Director – Head of Fund Services of Milliman Financial Risk Management LLC since 2005.
|
|
59
|
|
None
|
|||
|
Officers of the Trust
|
|
|
|
||||||||||
|
Arthur W. Jasion
(1965)
|
|
Treasurer and Principal Financial Officer
|
|
Since July 2021
|
|
Senior Director and Fund Principal Financial Officer of Foreside Management Services, LLC since 2020; Partner, Ernst & Young LLP from 2012 to 2020.
|
|
N/A
|
|
N/A
|
|||
11
|
Name and Year of Birth
|
|
Position with
the Trust |
|
Term of Office
and Length of Time Served |
|
Principal Occupation
During Past Five Years |
|
Number of
Funds in Fund Complex Overseen by Trustees |
|
Other
Directorships Held During Past Five Years
|
|||
|
Roger Pries
(1965)
|
|
Chief Compliance Officer and Anti-Money Laundering Officer
|
|
Since July 2021
|
|
Fund Chief Compliance Officer of Foreside Fund Officer Services, LLC since 2019; Compliance Officer from 2016 to 2019 and Operational Risk Manager/Vice President from 2007 to 2016 at Citi Fund Services.
|
|
N/A
|
|
N/A
|
|||
|
Ehsan K. Sheikh
(1987)
|
|
Secretary and Chief Legal Officer
|
|
Since July 2021
|
|
Senior Counsel of Milliman Financial Risk Management LLC since 2017, Associate Counsel from 2014 to 2017.
|
|
N/A
|
|
N/A
|
|||
|
1
|
The Trustees of the Trust who are not “interested persons,” as defined under section 2(a)(19) of the 1940 Act, of the Trust (the “Independent Trustees”).
|
|
2
|
Adam Schenck is an “interested person,” as defined by the 1940 Act, of the Trust because of his employment by Milliman.
|
Board Leadership Structure
The Board approves financial arrangements and other agreements between the Fund, on the one hand, and Milliman or any
of its affiliated parties, on the other hand. The Independent Trustees meet regularly as a group in executive session and with independent legal counsel. The Board has determined that the efficient conduct of the Board’s affairs makes it
desirable to delegate responsibility for certain specific matters to various committees of the Board (each, a “Committee,” and, together, the “Committees”), as described below. The Committees meet as often as necessary or appropriate, either in conjunction with regular meetings of the Board or otherwise.
The chair, if any, of each Committee is appointed by a majority of the Independent Trustees upon recommendation of the Committee. Adam Schenck, Interested Trustee, serves as Chairman of the Board. The Board has appointed Nicholas Dalmaso to serve
as Lead Independent Trustee. The Lead Independent Trustee has several primary purposes, such as (i) to serve as the leader of the Independent Trustees; (ii) to communicate regularly with the other
Independent Trustees; and (iii) to communicate regularly with the Chair of the Board, who is an employee of Milliman, and other representatives of Milliman.
This structure is reviewed by the Board periodically, and the Board believes it to be appropriate and effective. The Board also
completes an annual self-assessment during which it reviews its leadership and Committee structure, and considers whether its structure remains appropriate in light of the Fund’s current operations.
Each Trustee shall hold office for the lifetime of the Trust or until the next meeting of shareholders called for the purpose of
electing Trustees and until the election and qualification of his or her successor or, if sooner, until he or she dies, declines to serve, resigns, retires, is removed or is incapacitated. The Board may fill any vacancy on the Board provided that,
after such appointment, at least two-thirds of the Trustees have been elected by shareholders. Any Trustee may be removed by the Board, with or without cause, by action of a majority of the Trustees then in office, or by a vote of shareholders at any
meeting called for that purpose.
The Officers of the Trust are appointed by the Board, or, to the extent permitted by the Trust’s By-laws, by one or more officers or
agents of the Trust with power to appoint any such subordinate officers, and each shall serve at the pleasure of the Board. Subject to the rights, if any, of an officer under any contract of employment, any officer may be removed from office with or
without cause by the Board, or, to the extent permitted by the Trust’s By-laws, by any officer upon whom such power of removal shall have been conferred by the Board.
12
Committees of the Board
The Board has two standing committees: the Audit Committee and the Nominating and Governance Committee. The function of each
Committee is oversight. In addition, each Committee may from time-to-time delegate certain of its functions to a subcommittee comprised of members of the Board.
The Audit Committee has the responsibility, among other things, to: (i) oversee the accounting and financial reporting policies
and practices of the Fund, the Fund’s internal control over financial reporting, and as the Committee deems appropriate, the internal controls of certain service providers; (ii) oversee the quality and objectivity of the Fund’s financial statements
and the independent audits thereof; (iii) recommend the appointment of the Fund’s independent registered public accounting firm to the Board for the Board’s selection; (iv) act as a liaison between the Fund’s independent registered public
accounting firm and the full board. The Audit Committee is composed of all of the Independent Trustees, and Mr. Berg serves as chairperson of the Audit Committee.
The responsibilities of the Nominating and Governance Committee, among other things, include to: (i) assist the Board in its review
and oversight of governance matters; (ii) assist the Board with the selection and nomination of candidates to serve on the Board; (iii) periodically review the composition of the Board and the committees’ structures; (iv) assist the Board in
evaluating the support provided to the Board and its committees and members by management, counsel and other service providers to the Board; and (v) undertake such other responsibilities as may be delegated to the Committee by the Board. The
Nominating and Governance Committee is composed of all of the Independent Trustees, and Mr. Hayes serves as chairperson of the Audit Committee.
The Nominating and Governance Committee may consider nominations for candidates to serve as Trustees made by Fund shareholders.
Shareholders who wish to recommend a nominee should send nominations to the Secretary of the Trust, which should include the biographical information and qualifications of the proposed nominee. The Committee may request any additional information
deemed reasonably necessary for the Committee to evaluate such nominee.
Board Oversight of Risk Management
The Board’s role is one of oversight, including oversight of the Fund’s risks, rather than day-to-day management. The Board’s
committee structure allows the Board to focus on risk management as part of its broader oversight of the operations of the Fund. While day-to-day risk management of the Fund is Milliman’s responsibility, Trustees receive regular reports from the
Trust’s CCO, Milliman and the Trust’s various service providers regarding investment risks and compliance risks. These reports allow the Board to focus on various risks and their potential impact on the Fund. The Board has discussions with the
Trust’s CCO and Milliman, as well as the portfolio managers, regarding how they monitor and seek to control such risks. Additionally, the Trust’s CCO and other officers of the Fund regularly, and on an ad hoc
basis, report to the Board on a variety of risk-related matters.
The Board has retained Milliman as the Fund’s investment adviser. Milliman is responsible for the day-to-day operation of the Fund.
Milliman may delegate the day-to-day management of the investment operations of the Fund to one or more sub-advisers. Milliman will be responsible for supervising the services provided by each sub-adviser including risk management services.
Additionally, the Board meets periodically with the Trust’s CCO who reports to the Trustees regarding the compliance of the Fund
with the federal securities laws and the internal compliance policies and procedures of the Fund. The Board also reviews the CCO’s annual report, including the CCO’ compliance risk assessments for the Fund.
Trustees’ Qualifications and Experience
The Nominating and Governance Committee is responsible for identifying, evaluating and nominating trustee candidates. The
Nominating and Governance Committee reviews the background and the educational, business and professional experience of trustee candidates and the candidates’ expected contributions to the Board. Trustees selected to serve on the Board are expected
to possess relevant skills and experience, time availability and the ability to work well with the other Trustees. A Trustee’s ability to perform his or her duties effectively may have been attained through the Trustee’s executive, business,
consulting, and/or legal positions; experience from service as a director/trustee of other investment companies, public companies, or non-profit entities or other organizations; educational background or professional training or practice; and/or
other life experiences.
13
The Board believes that each of the Trustees has the ability to review critically, evaluate, question and discuss information
provided to them; to interact effectively with each other, Milliman, other service providers, Trust counsel and the independent registered public accounting firm; and to exercise effective business judgment in the performance of his or her duties.
The following provides a brief summary of the information that led to the conclusion that each Trustee should serve as a Trustee of the Board.
Eric Berg has served as a trustee of the Trust since July 2021. The Board believes that Mr. Berg’s experience as an investment
banker and chief financial officer, as well as his accounting experience, benefits the Fund.
Nicholas Dalmaso has served as a trustee of the Trust since July 2021. The Board believes that Mr. Dalmaso’s experience in the
financial services, investments, banking, and fintech industries benefits the Fund.
Daniel Ross Hayes has served as a trustee of the Trust since July 2021. The Board believes that Mr. Hayes’ experience in the
investment, annuity, life, mutual fund and retirement industries, including his experience as president of a registered investment adviser, benefits the Fund.
Adam Schenck has served as a trustee of the Trust since November 2020. The Board believes that Mr. Schenck’s experience with
Milliman as a Managing Director and Portfolio Manager benefits the Fund.
Colleen McKenna Tucker has served as a trustee of the Trust since September 2021. The Board believes that Ms. Tucker’s experience
in the insurance industry, including in various management positions, benefits the Funds.
References to the qualifications, attributes and skills of Trustees are pursuant to requirements of the SEC, do not constitute holding
out the Board or any Trustee as having any special expertise or experience, and shall not impose any greater responsibility or liability on any such person or on the Board by reason thereof.
Trustee Ownership of Fund Shares
No trustee beneficially owned shares of the Fund as of the calendar year ended December 31, 2020, which is before the inception date
of the Fund.
Trustee Compensation
Independent Trustees shall each receive an annual salary of $15,000 for the entire Fund Complex. The interested trustee does not
receive compensation from the Trust for his service as a Trustee.
All Trustees are reimbursed for expenses in connection with each Board meeting attended, with this reimbursement allocated to the
Trust. The Trust has no pension or retirement plan. No other entity affiliated with the Trust pays any compensation to the Independent Trustees. Set forth below is the estimated rate of compensation to be received by the Independent Trustees for
the fiscal year ending December 31, 2021.
|
Name of Independent Trustee
|
|
Aggregate
Compensation1 From the Fund |
|
|
Pension or Retirement
Benefits Accrued as Part of Portfolio Expenses |
|
Annual Benefits
Upon Retirement |
|
Total
Compensation from Fund and Fund Complex Paid to Trustees |
|
||
|
Eric Berg
|
|
$
|
[]
|
|
|
None
|
|
None
|
|
$
|
[]
|
|
|
Nicholas Dalmaso
|
|
$
|
[]
|
|
|
None
|
|
None
|
|
$
|
[]
|
|
|
Daniel Hayes
|
|
$
|
[]
|
|
|
None
|
|
None
|
|
$
|
[]
|
|
| Colleen McKenna Tucker |
$ | [] | None |
None |
$ | [] | ||||||
|
1
|
Aggregate compensation is comprised of all applicable retainers and meeting fees, but does not include reimbursements for Trustee expenses.
|
Codes of Ethics
Federal law requires the Trust, each of its investment advisers (i.e., Milliman with respect
to the Fund) and the Trust’s principal underwriter to adopt codes of ethics, which govern the personal securities transactions of their respective personnel. Accordingly, each such entity has adopted a code of ethics pursuant to which their
respective personnel may invest in securities for their personal accounts (including securities that may be purchased or held by the Trust).
14
Proxy Voting Guidelines
Federal law requires the Trust and each of its investment advisers (i.e., Milliman with
respect to the Fund) to adopt procedures for voting proxies (the “Proxy Voting Policy”) and to provide a summary or copy of the Proxy Voting Policy used to vote the securities held by the Fund. The Board has
delegated responsibility for decisions regarding proxy voting for securities held by the Fund to Milliman. Information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 are
available without charge (i) upon request, by calling [NUMBER], (ii) online at [WEBSITE], or (iii) on the SEC’s website at www.sec.gov. A copy of such Proxy Voting Policy is attached as Appendix B to this SAI.
Investment Advisory and Other Services
Investment Adviser
Milliman Financial Risk Management LLC (“Milliman”), located at 71 S. Wacker Drive, 31st
Floor, Chicago, IL 60606, serves as investment adviser to the Fund. Milliman is a wholly owned subsidiary of Milliman, Inc. Milliman provides investment advisory, hedging, and consulting services on approximately $150 billion in assets as of March
31, 2021.
Under the Investment Advisory Agreement (the “Advisory Agreement”) with the Trust,
Milliman manages the Fund in accordance with the policies and procedures established by the Board, and has agreed to perform, or arrange for the performance of, the day-to-day management of the Fund’s portfolio. Milliman also pays all expenses
incurred by it in connection with its activities under the Advisory Agreement, including, but not limited to, expenses of all necessary investment and management facilities and investment personnel, including salaries, expenses and fees of any
personnel required for it to faithfully perform its duties under the Advisory Agreement, and expenses of administrative facilities, including bookkeeping, clerical personnel and equipment necessary for the efficient conduct of the Adviser’s duties
under the Advisory Agreement. In addition, Milliman pays, out of its legitimate profits, broker-dealers, trust companies, transfer agents and other financial institutions, including Participating Insurance Companies and/or their affiliates, in
exchange for their selling of shares of the Trust’s series or for recordkeeping or other shareholder support services, as further described under “Distribution and Servicing of Shares” below.
The Advisory Agreement continues in effect for an initial period of no more than two years and, thereafter, shall continue
automatically for successive annual periods; provided, however, that such continuance is specifically approved at least annually by the Trustees, or by vote of a majority of the outstanding voting securities of the Trust, and, in either case, by a
majority of the Trustees who are not parties to the Advisory Agreement or interested persons of any such party. The Advisory Agreement terminates automatically in the event of its “assignment,” as defined under the 1940 Act. It may be terminated at
any time, without the payment of any penalty, by vote of a majority of the outstanding voting securities of the Fund, by the Board or by Milliman on not more than 60 days’ written notice. The Advisory Agreement further provides that Milliman may
render similar services to others.
For services provided under the Advisory Agreement, Milliman receives from the Fund an annual fee, paid monthly, equal to 0.03% of
the average daily net assets of the Fund. However, Milliman has contractually agreed to waive its management fee until at least November 1, 2022. This contract cannot be terminated or modified without the consent of the Board.
The Fund is newly organized, and, as of the date of this SAI, has not paid any investment advisory fees.
Portfolio Adviser
The Portfolio Adviser serves as investment adviser to the Portfolio. The Portfolio Adviser provides day-to-day advice regarding the Portfolio’s
portfolio transactions. The Portfolio Adviser makes the investment decisions for the Portfolio and places purchase and sale orders for the Portfolio’s portfolio transactions in U.S. and foreign markets.
As compensation for its services and its assumption of certain expenses, the Portfolio Adviser is entitled to a fee, computed daily and payable monthly,
at the annual rate of 0.16% of the Portfolio’s average daily net assets.
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The Portfolio Adviser may waive a portion of its management fees, including fees earned as the Portfolio Adviser to any of the affiliated funds in which
the Portfolio invests, from time to time, and may discontinue or modify any such waivers in the future, consistent with the terms of any fee waiver arrangements that may be in place.
The Portfolio Adviser has agreed to reduce or limit “Other Expenses” (excluding acquired fund fees and expenses, transfer agency fees and expenses,
taxes, interest, brokerage fees, expenses of shareholder meetings, litigation and indemnification, and extraordinary expenses) to 0.004% of the Portfolio’s average daily net assets through at least April 30, 2022, and prior to such date the
Portfolio Adviser may not terminate the arrangement without the approval of the Portfolio Board. The expense limitation may be modified or terminated by the Portfolio Adviser at its discretion and without shareholder approval after such date,
although the Portfolio Adviser does not presently intend to do so. The Portfolio’s “Other Expenses” may be further reduced by any custody and transfer agency fee credits received by the Portfolio.
Transfer Agent and Fund Accounting Agent
U.S. Bancorp Fund Services, LLC d/b/a U.S. Bank Global Fund Services (“Fund Services”),
located at 615 East Michigan Street, Milwaukee, Wisconsin 53202, serves as transfer agent for the Fund pursuant to a transfer agent servicing agreement and as Fund accounting agent pursuant to a fund accounting servicing agreement.
Administrator
Fund Services also serves as the administrator for the Fund pursuant to a fund administration servicing agreement (the “Fund Administration Servicing Agreement”). Under the Fund Administration Servicing Agreement, Fund Services is obligated, on a continuous basis, to provide such administrative services as the Board reasonably
deems necessary for the proper administration of the Trust. Fund Services generally will assist in many aspects of the Trust’s and the Fund’s operations, including accounting, bookkeeping and record keeping services (including, without limitation,
the maintenance of such books and records as are required under the 1940 Act and the rules thereunder, except as maintained by other agents), assisting in preparing reports to shareholders or investors, assisting in the preparation and filing of
tax returns, supplying financial information and supporting data for reports to and filings with the SEC, and supplying supporting documentation for meetings of the Board.
As of the date of this SAI, the Fund has not commenced operations and thus have paid no administrative services fees pursuant to
the Fund Administration Servicing Agreement.
Custodian
U.S. Bank, N.A. (“Custodian”), located at 1555 N. River Center Drive, Suite 302,
Milwaukee, Wisconsin 53212, serves as the Custodian for the Fund pursuant to a custody agreement (the “Custody Agreement”). The Custodian holds the Fund’s assets, among other duties. Under the Custody
Agreement, the Custodian is also authorized to appoint certain foreign custodians for Fund investments outside of the United States.
Legal Counsel
Stradley Ronon Stevens & Young, LLP, 191 North Wacker Drive, Suite 1601, Chicago, IL 60606, serves as the Trust’s legal counsel.
Independent Registered Public Accounting Firm
[______], [___________], serves as the independent registered public accounting firm for the Fund.
Distribution and Servicing of Shares
Foreside Fund Services, LLC (the “Distributor”), Three Canal Plaza, Suite 100, Portland,
ME 04101, serves as underwriter for the Fund in the continuous distribution of its shares pursuant to a Distribution Agreement dated [_____] (the “Distribution Agreement”). Unless otherwise terminated, the
Distribution Agreement will continue for an initial period of two years and from year to year thereafter for successive annual periods, if, as to the Fund, such continuance is approved at least annually by (i) the Board or by the vote of a majority
of the outstanding shares of a
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particular Fund, and (ii) the vote of a majority of the Trustees of the Trust who are not parties to the Distribution Agreement or
interested persons (as defined in the 1940 Act) of any party to the Distribution Agreement, cast at a meeting called for the purpose of voting on such approval. The Distribution Agreement may be terminated in the event of any assignment, as defined
in the 1940 Act.
The Distributor, its affiliates and officers have no role in determining the investment policies or which securities are to be
purchased or sold by the Fund. The Distributor is not affiliated with the Trust or Milliman.
Distribution Plan
The Trust has adopted a Distribution Plan under Rule 12b-1 (“Rule 12b-1 Plan”) of the 1940
Act with respect to the Fund’s Class 3 shares. The Rule 12b-1 Plan permits the Fund to pay the Distributor, as the Fund’s principal underwriter, for expenses associated with the distribution of Class 3 shares of the Fund. Under the Rule 12b-1 Plan,
the Distributor is paid an annual fee of 0.25% of the average daily net assets of Class 3. All Rule 12b-1 Plan payments received by the Distributor shall be held to be used solely for distribution-related
expenses and shall not be retained as profit by the Distributor. Accordingly, no compensation is payable by the Fund to the Distributor for such distribution services. However, Milliman has entered into an agreement with the Distributor under which
it makes payments to the Distributor in consideration for its services under the Distribution Agreement. The payments made by Milliman to the Distributor do not represent an additional expense to the Fund or their shareholders.
As of the date of this SAI, the Fund has not commenced operations and thus the Distributor has not received any distribution fees
under the Rule 12b-1 Plan and the Fund has made no expenditures using these fees.
Distribution fees may be paid to the Distributor or to Participating Insurance Companies and/or their affiliates, or to any other
eligible institution, for the provision of (i) distribution activities related to the indirect marketing of the Fund to the owners of variable insurance contracts or variable life insurance policies (each, a “Contract
Owner,” and, collectively, the “Contract Owners”), and/or (ii) other Contract Owner services.
As required by Rule 12b-1, the Rule 12b-1 Plan was approved by the Board, including a majority of the Trustees who are not
interested persons of the Trust and who have no direct or indirect financial interest in the operation of the Rule 12b-1 Plan (the “12b-1 Plan Independent Trustees”). The Rule 12b-1 Plan may be terminated
for Class 3 shares of the Fund by vote of a majority of the 12b-1 Plan Independent Trustees, or by vote of a majority of the outstanding shares of that class. Any change in the Rule 12b-1 Plan that would materially increase the amount to be spent
for distribution requires shareholder approval. The Trustees review quarterly a written report of such costs and the purposes for which such costs have been incurred. The Rule 12b-1 Plan may be amended by vote of the Trustees, including a majority
of the 12b-1 Plan Independent Trustees, cast at a meeting called for that purpose. All agreements with any person relating to the implementation of the Rule 12b-1 Plan may be terminated at any time on 60 days’ written notice without the payment of
any penalty, by vote of a majority of the 12b-1 Plan Independent Trustees or by a vote of the majority of the outstanding shares of Class 3 of the Fund. The Rule 12b-1 Plan will continue in effect for successive one-year periods; provided, however,
that each such continuance is specifically approved by the vote of a majority of the Board, and the Rule 12b-1 Plan Independent Trustees, cast at a meeting called for that purpose.
Dealer Compensation
At the request of the Trust, the Distributor may, in its discretion, enter into selling agreements with financial intermediaries as
the Trust may select, so that such intermediaries may sell shares of the Fund. These dealers will be compensated either pursuant to the Fund’s Rule 12b-1 Plan or by Milliman out of its own legitimate profits.
Payments to Participating Insurance Companies and/or their Affiliates
Marketing Support Services. Milliman may, from time to time, at its expense and from its own legitimate profits, make cash payments to Participating Insurance Companies and/or their affiliates as an incentive to promote the sale and retention of Fund shares
and for other marketing support services, as further described in the Prospectus. Such cash payments may be calculated on the average daily net assets of the Fund attributable to that particular Participating Insurance Company and/or its affiliates
(“Asset-Based Payments”), in which case the total amount of such cash payments generally does not exceed [__]% per annum of those assets during a defined period. Milliman may also make other cash payments to
Participating Insurance Companies and/or their affiliates in addition to, or in lieu of, any
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Asset-Based Payments, in the form of payments for travel expenses; meeting fees; entertainment; transaction processing and
transmission charges; advertising or other promotional expenses; or other expenses as determined in Milliman’s discretion. In certain cases, these other payments could be significant to the Participating Insurance Companies and/or their affiliates.
Generally, commitments to make such payments are terminable upon notice to the Participating Insurance Companies and/or their affiliates.
Administrative Support Services. Milliman contracts with Participating
Insurance Companies and/or their affiliates for certain administrative services provided to the Fund, which services are described in the Prospectus. Each Participating Insurance Company and/or its affiliates negotiates the fees to be paid for the
provision of these services. The cost of providing the services and the overall package of services provided may vary from one arrangement to another. Milliman does not make an independent assessment of a Participating Insurance Company’s or its
affiliate’s cost of providing such services. Milliman pays for these administrative support services out of its own legitimate profits.
Payments to Participating Insurance Companies. As of the date of this
SAI, no Participating Insurance Company or affiliate thereof receives payment for marketing support services, and only [______] receives payment for administrative support services. This information is not necessarily current and will change over
time. Certain arrangements may be in the process of being negotiated, and there is a possibility that payments will be made retroactively to Participating Insurance Companies and/or their affiliates, which are not otherwise listed. Accordingly,
please contact your Participating Insurance Company to determine whether it or its affiliates currently may be receiving such payments and to obtain further information regarding any such payments.
Brokerage Allocation and Other Practices
The Portfolio Adviser is responsible for decisions to buy and sell securities for the Portfolio, the selection of brokers and
dealers to effect the transactions and the negotiation of brokerage commissions, if any. Purchases and sales of securities may be executed internally by a broker-dealer, effected on an agency basis in a block transaction, or routed to competing
market centers for execution. The compensation paid to the broker for providing execution services generally is negotiated and reflected in either a commission or a “net” price. Executions provided on a net price basis, with dealers acting as
principal for their own accounts without a stated commission, usually include a profit to the dealer.
In underwritten offerings, securities are purchased at a fixed price which includes an amount of compensation to the underwriter,
generally referred to as the underwriter’s concession or discount. On occasion, certain money market instruments may be purchased directly from an issuer, in which case no commissions or discounts are paid.
In placing orders for portfolio securities or other financial instruments of the Portfolio, the Portfolio Adviser is generally
required to give primary consideration to obtaining the most favorable execution and net price available. This means that the Portfolio Adviser will seek to execute each transaction at a price and commission, if any, which provides the most
favorable total cost or proceeds reasonably attainable in the circumstances. As permitted by Section 28(e) of the Securities Exchange Act of 1934 (“Section 28(e)”), the Portfolio may pay a broker who provides brokerage and research services to the
Portfolio an amount of disclosed commission in excess of the commission which another broker would have charged for effecting that transaction. Such practice is subject to a good faith determination by the Portfolio Board that such commission is
reasonable in light of the services provided and to such policies as the Portfolio Board may adopt from time to time. While the Portfolio Adviser generally seeks reasonably competitive spreads or commissions, the Portfolio will not necessarily be
paying the lowest spread or commission available. Within the framework of this policy, the Portfolio Adviser will consider research and investment services provided by brokers or dealers who effect or are parties to portfolio transactions of the
Portfolio, the Portfolio Adviser and its affiliates, or their other clients. Such research and investment services are those which brokerage houses customarily provide to institutional investors and include research reports on particular industries
and companies; economic surveys and analyses; recommendations as to specific securities; research products including quotation equipment and computer related programs; advice concerning the value of securities, the advisability of investing in,
purchasing or selling securities and the availability of securities or the purchasers or sellers of securities; analyses and reports concerning issuers, industries, securities, economic factors and trends, portfolio strategy and performance of
accounts; services relating to effecting securities transactions and functions incidental thereto (such as clearance and settlement); and
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other lawful and appropriate assistance to the Portfolio Adviser in the performance of its decision-making responsibilities.
Such services are used by the Portfolio Adviser in connection with all of its investment activities, and some of such services
obtained in connection with the execution of transactions for the Portfolio may be used in managing other investment accounts. Conversely, brokers furnishing such services may be selected for the execution of transactions of such other accounts,
whose aggregate assets may be larger than those of the Portfolio’s, and the services furnished by such brokers may be used by the Portfolio Adviser in providing management services for the Portfolio. The Portfolio Adviser may also participate in
so-called “commission sharing arrangements” and “client commission arrangements” under which the Portfolio Adviser may execute transactions through a broker-dealer and request that the broker-dealer allocate a portion of the commissions or
commission credits to another firm that provides research to the Portfolio Adviser. The Portfolio Adviser excludes from use under these arrangements those products and services that are not fully eligible under applicable law and regulatory
interpretations – even as to the portion that would be eligible if accounted for separately.
The research services received as part of commission sharing and client commission arrangements will comply with Section 28(e) and
may be subject to different legal requirements in the jurisdictions in which the Portfolio Adviser does business. Participating in commission sharing and client commission arrangements may enable the Portfolio Adviser to consolidate payments for
research through one or more channels using accumulated client commissions or credits from transactions executed through a particular broker-dealer to obtain research provided by other firms. Such arrangements also help to ensure the continued
receipt of research services while facilitating best execution in the trading process. The Portfolio Adviser believes such research services are useful in their investment decision-making process by, among other things, ensuring access to a variety
of high-quality research, access to individual analysts and availability of resources that the Portfolio Adviser might not be provided access to absent such arrangements.
On occasions when the Portfolio Adviser deems the purchase or sale of a security or other financial instrument to be in the best
interest of the Portfolio as well as its other customers (including any other fund or other investment company or advisory account for which the Portfolio Adviser acts as investment adviser or sub-investment adviser), the Portfolio Adviser, to the
extent permitted by applicable laws and regulations, may aggregate the securities to be sold or purchased for the Portfolio with those to be sold or purchased for such other customers in order to obtain the best net price and most favorable
execution under the circumstances. In such event, allocation of the securities so purchased or sold, as well as the expenses incurred in the transaction, will be made by the Portfolio Adviser in the manner it considers to be equitable and
consistent with its fiduciary obligations to the Portfolio and such other customers. In some instances, this procedure may adversely affect the price and size of the position obtainable for the Portfolio.
The Portfolio may participate in a commission recapture program. Under the program, participating broker-dealers rebate a
percentage of commissions earned as portfolio transactions from which they were generated. The rebated commissions are expected to be treated as realized capital gains of the Portfolio.
Subject to the above considerations, the Portfolio Adviser may use an affiliate as a broker for the Portfolio. In order for an
affiliate, acting as agent, to effect any portfolio transactions for the Portfolio, the commissions, fees or other remuneration received by the affiliate must be reasonable and fair compared to the commissions, fees or other remuneration received
by other brokers in connection with comparable transactions involving similar securities or futures contracts. Furthermore, the Portfolio Board has adopted procedures which are reasonably designed to provide that any commissions, fees or other
remuneration paid to an affiliate are consistent with the foregoing standard. Brokerage transactions with an affiliate are also subject to such fiduciary standards as may be imposed upon the affiliate by applicable law .
Purchases, Redemptions and Pricing of Shares
Purchases and Redemptions of Shares
Shares may not be purchased or redeemed by individual investors directly but may be purchased or redeemed only through variable
annuity contracts or variable life insurance policies (together, “Variable Contracts,” and, each, a “Variable Contract”) offered by Participating Insurance Companies,
or as otherwise described in the Prospectus.
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The Fund generally intends to redeem its Shares for cash. Subject to applicable federal law including the 1940 Act, the Fund may
also redeem its Shares wholly or partly in securities or other assets if the Board determines, in its sole discretion, that such payment is advisable in the interest of the remaining shareholders of the Fund. If a redemption is paid wholly or
partly in securities or other assets, the redeeming shareholder would incur transaction costs in disposing of the redemption proceeds.
Orders received by the Fund are only processed on business days. Redemption proceeds paid by wire transfer will normally be wired in federal funds on
the business day on which the Fund receives actual notice of the redemption order but may be paid up to two business days after receipt of actual notice of the order. However, the Fund may postpone the right of redemption for such periods of time
as are permitted under the 1940 Act and under the following unusual circumstances: (a) when the New York Stock Exchange (the “Exchange”) is closed (other than weekends and holidays) or trading is restricted;
(b) when an emergency exists, making disposal of portfolio securities or other assets, or the valuation of net assets, not reasonably practicable; or (c) during any period when the SEC has by order permitted a suspension of redemption for the
protection of shareholders.
Pricing of Shares
The Prospectus describes the days on which the NAV per share of the Fund are computed for purposes of purchases and redemptions of
Shares by investors and also sets forth the times as of which such computations are made.
Investments in the Portfolio are valued based on a shareholder’s proportionate ownership interest (rounded to the nearest hundredth
of a percent) in the Portfolio’s aggregate net assets (i.e., the value of its total assets, including the securities held by the Portfolio plus any cash or other assets, including interest and dividends
accrued but not yet received, less total liabilities, including accrued expenses) as next determined after an order is received in proper form by the Portfolio. The value of the Portfolio’s net assets is generally determined as of 4:00 p.m.,
Eastern time. The Portfolio’s shares may also be priced periodically throughout the day by the Portfolio’s fund accounting agent. The Portfolio’s shares will be priced on any day the Exchange is open, including days on which the Federal Reserve
Bank is closed for local holidays (i.e., Columbus Day and Veterans Day). The Portfolio’s shares will generally not be priced on any day the Exchange is closed, although the Portfolio’s shares may be priced
on days when the Exchange is closed if the Securities Industry and Financial Markets Association (“SIFMA”) recommends that the bond markets remain open for all or part of the day. On any business day when
the SIFMA recommends that the bond markets close early, the Portfolio reserves the right to close at or prior to the SIFMA recommended closing time. If the Portfolio does so, it will cease granting same business day credit for purchase and
redemption orders received after the Portfolio’s closing time and credit will be given to the next business day.
The Fund and the Portfolio use the amortized cost method of valuation to determine the value of their portfolio securities in
accordance with the provisions of Rule 2a-7. This method involves valuing a security at cost on the date of acquisition and thereafter assuming a constant accretion of a discount or amortization of a premium to maturity, regardless of the impact of
fluctuating interest rates and other factors on the market value of the instrument. While this method provides certainty in valuation, it may result in periods during which value, as determined by amortized cost, is higher or lower than the price
the Portfolio or the Fund would receive if it sold the instrument. During such periods, the yield to an investor in the Fund (and consequently the Portfolio) may differ somewhat from that obtained in a similar investment company which uses
available market quotations to value all of its portfolio securities. During periods of declining interest rates, the quoted yield on Shares may tend to be higher than a like computation made by a fund with identical investments utilizing a method
of valuation based upon market prices and estimates of market prices for all of its portfolio instruments. Thus, if the use of amortized cost resulted in a lower aggregate portfolio value on a particular day, a prospective investor in the Fund (and
consequently the Portfolio) would be able to obtain a somewhat higher yield if he or she purchased shares of the Fund on that day, than would result from investment in a fund utilizing solely market values, and existing investors in the Fund would
receive less investment income. The converse would apply in a period of rising interest rates.
Pursuant to Rule 2a-7 under the 1940 Act, the Portfolio Board is required to establish procedures designed to stabilize, to the
extent reasonably possible, the Portfolio’s price per share as computed for the purpose of sales and redemptions at $1.00. Such procedures must include review of the Portfolio’s holdings by the Portfolio Board at such intervals as the Portfolio
Board deems appropriate, to determine whether the Portfolio’s NAV per share as determined by using
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available market quotations (or an appropriate substitute which reflects current market conditions) deviates from $1.00 per share
based on amortized cost. The extent of any deviation will be examined by the Portfolio Board. If such deviation exceeds 1/2 of 1%, the Portfolio Board will promptly consider what action, if any, will be initiated. In the event the Portfolio Board
determines that a deviation exists that may result in material dilution or other unfair results to shareholders, the Portfolio Board will take such corrective action as it regards as necessary and appropriate, such action may
include redeeming shares in-kind, selling portfolio securities prior to maturity, reducing or withholding dividends, shortening the average portfolio maturity, reducing the number of outstanding shares without monetary consideration, and utilizing
a NAV per share as determined by using available market quotations.
Additional Information Concerning the Trust
Description of Shares
The shares of the Fund represent an interest in the Fund’s securities and other assets and in its profits or losses. Each fractional
share of a class of the Fund has the same rights, in proportion, as a full share of that class of the Fund. The Board may change the designation of the Fund and may increase or decrease the numbers of shares of the Fund but may not decrease the
number of shares of the Fund below the number of shares then outstanding.
The Fund currently offers one class of shares: Class 3, which is subject to a Rule 12b-1 Plan that is described above.
Except as described below, all classes of shares of the Fund will have identical voting, dividend, liquidation and other rights,
preferences, terms and conditions. If multiple classes are issued, the only differences between classes will be (a) each class may be subject to different expenses specific to that class; (b) each class will have a different identifying designation
or name; and (c) each class will have exclusive voting rights with respect to matters solely affecting that class. The Fund does not anticipate that there will be any conflicts between the interests of holders of different classes of its shares by
virtue of those classes.
Each issued and outstanding class of a share in the Fund is entitled to participate equally in dividends and other distributions
declared by that class of the Fund and, upon liquidation or dissolution, in the net assets of the Fund remaining after satisfaction of outstanding liabilities. The shares of the Fund, when issued, are fully paid and nonassessable.
The Trust does not hold annual meetings of shareholders; however, certain significant corporate matters, such as the approval of a new
investment advisory agreement or a change in a fundamental investment policy, which require shareholder approval, will be presented to shareholders at a meeting called by the Board for such purpose.
Special meetings of shareholders may be called for any purpose upon receipt by the Trust of a request in writing signed by
shareholders owning not less than 25% of the total combined votes of all shares of the Trust issued and outstanding, as provided in the Amended and Restated Agreement and Declaration of Trust (the “Declaration of Trust”) and By-laws of the Trust.
There normally will be no meeting of the shareholders for the purpose of electing Trustees unless, and until such time as, the Trustees then in office call a shareholders’ meeting for that purpose. To the extent that Section 16(c) of the 1940 Act
applies to the Fund, the Trustees are required to call a meeting of shareholders for the purpose of voting upon the question of removal of any Trustee when requested in writing to do so by the shareholders owning at least 10% of the aggregate
number of votes to which shareholders of the Fund are entitled, as provided in the Declaration of Trust and By-laws of the Trust.
The Declaration of Trust provides that each shareholder, by virtue of having become a shareholder of the Trust, shall be bound by
the terms of the Declaration of Trust. The Declaration of Trust provides a detailed process for the bringing of derivative actions by shareholders for claims other than U.S. federal securities law claims beyond the process otherwise required by
law. This process is intended to permit legitimate inquiries and claims while avoiding the time, expense, distraction, and other harm that can be caused to the Fund or its shareholders as a result of spurious shareholder demands and derivative
actions. Prior to bringing a derivative action, a demand by the complaining shareholder must first be made on the Trustees. The Declaration of Trust details conditions that must be met with respect to the demand. Following receipt of the demand,
the Trustees must be afforded a reasonable amount of time to consider and investigate the demand. The Trustees will be entitled to retain counsel or other advisors in considering the merits of the request and shall require an undertaking by the
shareholders making such request to reimburse the Trust for the expense of any such advisors in the event that the Trustees determine not to bring such action. The Trust’s
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process for bringing derivative suits may be more restrictive than other investment companies. The process for derivative actions
for the Trust also may make it more expensive for a shareholder to bring a suit than if the shareholder was not required to follow such a process.
The Declaration of Trust also requires that actions by shareholders against the Trust or the Fund, except for actions under the
U.S. federal securities laws to the extent that any such federal securities laws, rules or regulations, do not permit the application of the Declaration of Trust provisions, be brought only in the United States District Court for the Southern
District of New York or, solely with respect to matters relating to the organization or internal affairs of the Trust or as otherwise required by law, in the Court of Chancery of the State of Delaware to the extent there is subject matter
jurisdiction in such court for the claims asserted or, if not, then in the Superior Court of the State of Delaware (collectively, the “Exclusive Jurisdictions”), and that the right to jury trial be
irrevocably waived to the fullest extent permitted by law. Other investment companies may not be subject to similar restrictions. In addition, the designation of Exclusive Jurisdictions may make it more expensive for a shareholder to bring a suit
than if the shareholder was permitted to select another jurisdiction. Also, the designation of Exclusive Jurisdictions and the waiver of jury trials limit a shareholder’s ability to litigate a claim in the jurisdiction and in a manner that may be
more convenient and favorable to the shareholder. A court may choose not to enforce these provisions of the Declaration of Trust.
Voting Rights
Each shareholder of the Trust is entitled to one vote for each dollar of NAV of a fund owned by the shareholder. Matters in which the
interests of all shares of the Trust are substantially identical (such as the election of Trustees) will be voted on by all shareholders without regard to the separate funds. Matters that affect a particular fund (such as approval of its investment
advisory agreement or a change in its fundamental investment restrictions) will be voted on separately by that fund, except that, as to matters affecting the interests of one particular class of a fund’s shares, the affected shareholders will vote as
a separate class.
To the extent required by law, Contract Owners are entitled to give voting instructions with respect to Fund shares held in the
separate accounts of Participating Insurance Companies. Participating Insurance Companies will vote with respect to the shares in accordance with such instructions unless otherwise legally required or permitted to act with respect to such
instructions.
Tax Status
The following sections are a summary of certain additional tax considerations generally affecting the Fund. Because shares of the Fund
are sold only to separate accounts of insurance companies, the tax consequences described below are generally not applicable to Contract Owners.
This “Tax Status” section and the “Other Tax Consequences” and “Tax Consequences to Shareholders” sections are based on the Internal
Revenue Code and applicable regulations in effect on the date of this SAI. Future legislative, regulatory or administrative changes, including provisions of current law that sunset and thereafter no longer apply, or court decisions may significantly
change the tax rules applicable to the Fund and its shareholders. Any of these changes or court decisions may have a retroactive effect.
This is for general information only and not tax advice. For federal income tax
purposes, the insurance company (rather than the Contract Owner) is treated as the owner of the shares of the Fund selected as an investment option. Contract Owner should
consult their own tax advisors for more information on their tax situation, including the possible applicability of federal, state, local and foreign taxes.
Different tax rules may apply depending on how the Portfolio in which the Fund invests is organized for federal income tax purposes.
The Portfolio is treated as a regulated investment company for federal income tax purposes. These rules could affect the amount, timing or character of the income distributed to shareholders of the Fund.
Unless otherwise indicated, the discussion below with respect to the Fund includes its pro rata share of the dividends and
distributions paid by the Portfolio. In addition, unless otherwise indicated, the tax consequences described below in respect of the Fund's investments apply to any investments made directly by the Fund and to any investments made by the Portfolio.
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Taxation of the Fund
The Fund has elected and intends to qualify, or, if newly organized, intends to elect and qualify, each year as a regulated investment
company (sometimes referred to as a “regulated investment company,” “RIC” or “fund”) under Subchapter M of the Internal Revenue
Code. If the Fund so qualifies, the Fund will not be subject to federal income tax on the portion of its investment company taxable income (that is, generally, taxable interest, dividends, net short-term capital gains, and other taxable ordinary
income, net of expenses, without regard to the deduction for dividends paid) and net capital gain (that is, the excess of net long-term capital gains over net short-term capital losses) that it distributes to shareholders.
In order to qualify for treatment as a regulated investment company, the Fund must satisfy the following requirements:
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Distribution Requirement– the Fund must distribute an amount equal to the sum of at least 90% of its investment company taxable income and 90% of its net tax-exempt income, if any, for
the tax year (including, for purposes of satisfying this distribution requirement, certain distributions made by the Fund after the close of its taxable year that are treated as made during such taxable year).
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Income Requirement– the Fund must derive at least 90% of its gross income from dividends, interest, certain payments with respect to securities loans, and gains from the sale or other
disposition of stock, securities or foreign currencies, or other income (including, but not limited to, gains from options, futures or forward contracts) derived from its business of investing in such stock, securities or currencies and net
income derived from QPTPs.
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Asset Diversification Test– the Fund must satisfy the following asset diversification test at the close of each quarter of the Fund’s tax year: (1) at least 50% of the value of the Fund’s
assets must consist of cash and cash items, U.S. government securities, securities of other regulated investment companies, and securities of other issuers (as to which the Fund has not invested more than 5% of the value of the Fund’s total
assets in securities of an issuer and as to which the Fund does not hold more than 10% of the outstanding voting securities of the issuer); and (2) no more than 25% of the value of the Fund’s total assets may be invested in the securities
of any one issuer (other than U.S. government securities or securities of other regulated investment companies) or of two or more issuers which the Fund controls and which are engaged in the same or similar trades or businesses, or, in the
securities of one or more QPTPs.
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In some circumstances, the character and timing of income realized by the Fund for purposes of the Income Requirement or the
identification of the issuer for purposes of the Asset Diversification Test is uncertain under current law with respect to a particular investment, and an adverse determination or future guidance by the Internal Revenue Service (“IRS”) with respect to such type of investment may adversely affect the Fund’s ability to satisfy these requirements. See “Tax Treatment of Portfolio Transactions” below with respect to the application of these
requirements to certain types of investments. In other circumstances, the Fund may be required to sell portfolio holdings in order to meet the Income Requirement, Distribution Requirement, or Asset Diversification Test, which may have a negative
impact on the Fund’s income and performance.
The Fund may use “equalization” (in lieu of making some cash distributions) in determining the portion of its income and gains that
has been distributed. If the Fund uses equalization, it will allocate a portion of its undistributed investment company taxable income and net capital gain to redemptions of Fund shares and will correspondingly reduce the amount of such income and
gains that it distributes in cash. If the IRS determines that the Fund’s allocation is improper and that the Fund has under-distributed its income and gain for any taxable year, the Fund may be liable for federal income and/or excise tax. If, as a
result of such adjustment, the Fund fails to satisfy the Distribution Requirement, the Fund will not qualify that year as a regulated investment company the effect of which is described in the following paragraph.
If for any taxable year the Fund does not qualify as a regulated investment company, all of its taxable income (including its net
capital gain) would be subject to tax at the corporate income tax rate without any deduction for dividends paid to shareholders. Failure to qualify as a regulated investment company would thus have a negative impact on the Fund’s income and
performance. Subject to savings provisions for certain failures to satisfy the Income Requirement or Asset Diversification Test, which, in general, are limited to those due to reasonable cause and not willful neglect, it is possible that the Fund
will not qualify as a regulated investment company in any given tax year. Even if such savings provisions apply, the Fund may be subject to a monetary sanction of $50,000 or more. Moreover,
23
the Board reserves the right not to maintain the qualification of the Fund as a regulated investment company if it determines such a
course of action to be beneficial to shareholders.
Capital Loss Carryovers. The capital losses of the Fund, if any, do not flow through to
shareholders. Rather, the Fund may use its capital losses, subject to applicable limitations, to offset its capital gains without being required to pay taxes on or distribute to shareholders such gains that are offset by the losses. If the Fund has a
“net capital loss” (that is, capital losses in excess of capital gains), the excess (if any) of the Fund's net short-term capital losses over its net long-term capital gains is treated as a short-term capital loss arising on the first day of the
Fund's next taxable year, and the excess (if any) of the Fund's net long-term capital losses over its net short-term capital gains is treated as a long-term capital loss arising on the first day of the Fund's next taxable year. Any such net capital
losses of the Fund that are not used to offset capital gains may be carried forward indefinitely to reduce any future capital gains realized by the Fund in succeeding taxable years. The amount of capital losses that can be carried forward and used in
any single year is subject to an annual limitation if there is a more than 50% “change in ownership” of the Fund. An ownership change generally results when shareholders owning 5% or more of the Fund increase their aggregate holdings by more than 50%
over a three-year look-back period. An ownership change could result in capital loss carryovers being used at a slower rate, thereby reducing the Fund’s ability to offset capital gains with those losses. An increase in the amount of taxable gains
distributed to the Fund’s shareholders could result from an ownership change. The Fund undertakes no obligation to avoid or prevent an ownership change, which can occur in the normal course of shareholder purchases and redemptions or as a result of
engaging in a tax-free reorganization with another fund. Moreover, because of circumstances beyond the Fund’s control, there can be no assurance that the Fund will not experience, or has not already experienced, an ownership change. Additionally, if
the Fund engages in a tax-free reorganization with another Fund, the effect of these and other rules not discussed herein may be to disallow or postpone the use by the Fund of its capital loss carryovers (including any current year losses and
built-in losses when realized) to offset its own gains or those of the other Fund, or vice versa, thereby reducing the tax benefits Fund shareholders would otherwise have enjoyed from use of such capital loss carryovers.
Deferral of Late Year Losses. The Fund may elect to treat part or all of any “qualified late
year loss” as if it had been incurred in the succeeding taxable year in determining the Fund’s taxable income, net capital gain, net short-term capital gain, and earnings and profits. The effect of this election is to treat any such “qualified late
year loss” as if it had been incurred in the succeeding taxable year in characterizing Fund distributions for any calendar year (see “Taxation of Fund Distributions— Distributions of Capital Gains” below). A “qualified late year loss” includes:
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(i)
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any net capital loss incurred after October 31 of the current taxable year, or, if there is no such loss, any net long-term capital loss or any net short-term capital loss incurred after
October 31 of the current taxable year (“post-October capital losses”), and
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(ii)
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the sum of (1) the excess, if any, of (a) specified losses incurred after October 31 of the current taxable year, over (b) specified gains incurred after October 31 of the current taxable
year and (2) the excess, if any, of (a) ordinary losses incurred after December 31 of the current taxable year, over (b) the ordinary income incurred after December 31 of the current taxable year.
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The terms “specified losses” and “specified gains” mean ordinary losses and gains from the sale, exchange, or other disposition of
property (including the termination of a position with respect to such property), foreign currency losses and gains, and losses and gains resulting from holding stock in a passive foreign investment company (“PFIC”)
for which a mark-to-market election is in effect. The terms “ordinary losses” and “ordinary income” mean other ordinary losses and income that are not described in the preceding sentence. Since the Fund has a fiscal year ending in December, the
amount of qualified late-year losses (if any) is computed without regard to any items of ordinary income or losses that are incurred after December 31 of the taxable year.
Undistributed Capital Gains. The Fund may retain or distribute to shareholders its net
capital gain for each taxable year. The Fund currently intends to distribute net capital gains. If the Fund elects to retain its net capital gain, the Fund will be taxed thereon (except to the extent of any available capital loss carryovers) at the
corporate income tax rate. If the Fund elects to retain its net capital gain, it is expected that the Fund also will elect to have shareholders treated as if each received a distribution of its pro rata share of such gain, with the result that each
shareholder will be required to report its pro rata share of such gain on its tax return as long-term capital gain, will receive a refundable tax credit for its pro rata share of tax paid by the Fund on the gain, and will increase the tax basis for
its shares by an amount equal to the deemed distribution less the tax credit.
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Excise Tax Distribution Requirements. To avoid a 4% non-deductible excise tax, the Fund must
distribute by December 31 of each year an amount equal to at least: (1) 98% of its ordinary income for the calendar year, (2) 98.2% of capital gain net income (that is, the excess of the gains from sales or exchanges of capital assets over the losses
from such sales or exchanges) for the one-year period ended on October 31 of such calendar year (or, at the election of a regulated investment company having a taxable year ending November 30 or December 31, for its taxable year), and (3) any prior
year undistributed ordinary income and capital gain net income. Federal excise taxes will not apply to the Fund in a given calendar year, however, if all of its shareholders (other than certain “permitted
shareholders”) at all times during the calendar year are segregated asset accounts of life insurance companies where the shares are held in connection with variable products. For purposes of determining whether the Fund qualifies for this
exemption, any shares attributable to an investment in the Fund made in connection with organization of the Fund is disregarded as long as the investment does not exceed $250,000. Permitted shareholders include other RICs eligible for the exemption (e.g., insurance dedicated fund-of-funds). If the Fund fails to qualify for the exemption, the Fund intends to declare and pay these distributions in December (or to pay them in January, in which case shareholders
must treat them as received in December) to avoid any material liability for federal excise tax, but can give no assurances that its distributions will be sufficient to eliminate all taxes. In addition, under certain circumstances, temporary timing
or permanent differences in the realization of income and expense for book and tax purposes can result in the Fund having to pay an excise tax.
Special Rules Applicable to Variable Contracts
The Fund and the Portfolio intend to comply with the diversification requirements of Section 817(h) of the Internal Revenue Code
and the regulations thereunder relating to the tax-deferred status of variable accounts that are based on insurance company separate accounts (referred to as “segregated asset accounts” for federal income
tax purposes). If these requirements are not met, or under other limited circumstances, it is possible that the Contract Owners (rather than the insurance company) will be treated for federal income tax purposes as the taxable owners of the assets
held by the segregated asset accounts. The Fund intends to comply with these diversification requirements.
Section 817(h) of the Internal Revenue Code generally requires a Variable Contract (other than a pension plan contract) that is based
on a segregated asset account to be adequately diversified. To satisfy these diversification requirements, as of the end of each calendar quarter or within 30 days thereafter, the Fund must either (a) satisfy the Asset Diversification Test and have
no more than 55% of the total value of its assets in cash and cash equivalents, government securities and securities of other regulated investment companies; or (b) have no more than 55% of its total assets represented by any one investment, no more
than 70% by any two investments, no more than 80% by any three investments, and no more than 90% by any four investments. For the purposes of clause (b), all securities of the same issuer are considered a single investment, each agency or
instrumentality of the U.S. government is treated as a separate issuer of securities, and a particular foreign government and its agencies, instrumentalities and political subdivisions all will be considered the same issuer of securities.
Section 817(h) of the Internal Revenue Code provides a look-through rule for purposes of testing the diversification of a segregated
asset account that invests in a regulated investment company such as the Fund. Treasury Regulations Section 1.817-5(f)(1) provides, in part, that if the look-through rule applies, a beneficial interest in an investment company (including a regulated
investment company) shall not be treated as a single investment of a segregated asset account; instead, a pro rata portion of each asset of the investment company shall be treated as an asset of the segregated asset account. Treasury Regulations
Section 1.817-5(f)(2) provides (except as otherwise permitted) that the look-through rule shall apply to an investment company only if–
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•
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All the beneficial interests in the investment company are held by one or more segregated asset accounts of one or more insurance companies; and
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•
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Public access to such investment company is available exclusively through the purchase of a Variable Contract.
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As provided in their offering documents, all the beneficial interests in the Fund are held by one or more segregated asset accounts of
one or more insurance companies (except as otherwise permitted), and public access to the Fund (and any corresponding regulated investment company such as a fund-of-funds that invests in the Fund) is available solely through the purchase of a
Variable Contract (such a fund is sometimes referred to as a “closed fund”). Under the look-through rule of Section 817(h) of the Internal Revenue Code and Treasury Regulations Section 1.817-5(f), a pro rata
portion of each asset of the Fund, including a pro rata portion of each asset of any underlying fund that is a
25
closed fund in which the Funds invest, is treated as an asset of the investing segregated asset account for purposes of determining
whether the segregated asset account is adequately diversified. See also, Revenue Ruling 2005-7.
For a Variable Contract to qualify for tax deferral, assets in the segregated asset accounts supporting the contract must be
considered to be owned by the insurance company and not by the Contract Owner. Accordingly, a Contract Owner should not have an impermissible level of control over the Fund’s investment in any particular asset so as to avoid the prohibition on
investor control. If the Contract Owner were considered the owner of the segregated asset account, income and gains produced by the underlying assets would be included currently in the Contract Owner’s gross income with the Variable Contract being
characterized as a mere “wrapper.” The Treasury Department has issued rulings addressing the circumstances in which a Contract Owner's control of the investments of the segregated asset account may cause the
Contract Owner, rather than the insurance company, to be treated as the owner of the assets held by the segregated asset account, and is likely to issue additional rulings in the future. It is not known what standards will be set forth in any such
rulings or when, if at all, these rulings may be issued.
The IRS may consider several factors in determining whether a Contract Owner has an impermissible level of investor control over a
segregated asset account. One factor the IRS considers when a segregated asset account invests in one or more RICs is whether a RIC's investment strategies are sufficiently broad to prevent a Contract Owner from being deemed to be making particular
investment decisions through its investment in the segregated asset account. Current IRS guidance indicates that typical RIC investment strategies, even those with a specific sector or geographical focus, are generally considered sufficiently broad
to prevent a Contract Owner from being deemed to be making particular investment decisions through its investment in a segregated asset account. The relationship between the Fund and the Variable Contracts is designed to satisfy the current expressed
view of the IRS on this subject, such that the investor control doctrine should not apply. However, because of some uncertainty with respect to this subject and because the IRS may issue further guidance on this subject, the Fund reserves the right
to make such changes as are deemed necessary or appropriate to reduce the risk that a Variable Contract might be subject to current taxation because of investor control.
Another factor that the IRS examines concerns actions of Contract Owners. Under the IRS pronouncements, a Contract Owner may not
select or control particular investments, other than choosing among broad investment choices such as selecting a particular fund. A Contract Owner thus may not select or direct the purchase or sale of a particular investment of the Fund. All
investment decisions concerning the Fund must be made by the portfolio managers in their sole and absolute discretion, and not by a Contract Owner. Furthermore, under the IRS pronouncements, a Contract Owner may not communicate directly or indirectly
with such portfolio managers or any related investment officers concerning the selection, quality, or rate of return of any specific investment or group of investments held by the Fund.
The IRS and the Treasury Department may in the future provide further guidance as to what they deem to constitute an impermissible
level of “investor control” over a segregated asset account’s investments in funds such as the Fund, and such guidance could affect the treatment of the Fund, including retroactively. In the event that
additional rules or regulations are adopted, there can be no assurance that the Fund will be able to operate as currently described, or that the Fund will not have to change its investment objectives or investment policies. The Fund’s investment
objective and investment policies may be modified as necessary to prevent any such prospective rules and regulations from causing Contract Owners to be considered the owners of the shares of the Fund.
Other Tax Consequences
Taxation of Fund Distributions
The Fund anticipates distributing substantially all of its investment company taxable income and net capital gain for each taxable
year.
Maintaining a $1.00 share price. Gains and losses on the sale of portfolio securities and
unrealized appreciation or depreciation in the value of these securities may require the Fund to adjust its dividends to maintain its $1 share price. This procedure may result in under- or over-distribution by the Fund of its net investment income.
This in turn may result in return of capital distributions, the effect of which is described below.
26
Distributions of Net Investment Income. The Fund receives ordinary income generally in the
form of interest on its investments. This income, less expenses incurred in the operation of the Fund, constitutes the Fund’s net investment income from which dividends may be paid to the separate account.
Distributions of Capital Gains. The Fund may derive capital gain and loss in connection with
sales or other dispositions of its portfolio securities. Distributions derived from the excess of net short-term capital gain over net long-term capital loss will be distributable as ordinary income. Distributions paid from the excess of net
long-term capital gain over net short-term capital loss will be distributable as long-term capital gain. Any net short-term or long-term capital gain realized by the Fund (net of any capital loss carryovers) generally will be distributed once each
year and may be distributed more frequently, if necessary, in order to reduce or eliminate federal excise or income taxes on the Fund.
Returns of Capital. Distributions by the Fund that are not paid from earnings and profits
will be treated as a return of capital to the extent of (and in reduction of) the shareholder's tax basis in its shares; any excess will be treated as gain from the sale of its shares. Thus, the portion of a distribution that constitutes a return of
capital will decrease the shareholder’s tax basis in its Fund shares (but not below zero), and will result in an increase in the amount of gain (or decrease in the amount of loss) that will be recognized by the shareholder for tax purposes on the
later sale of such Fund shares. Return of capital distributions can occur for a number of reasons including, among others, the Fund over-estimates the income to be received from certain investments such as those classified as partnerships or equity
real estate investment trusts .
Tax Credit Bonds. If the Fund holds, directly or indirectly, one or more “tax credit bonds”
(including build America bonds, clean renewable energy bonds and qualified tax credit bonds) on one or more applicable dates during a taxable year, the Fund may elect to permit its shareholders to claim a tax credit on their income tax returns equal
to each shareholder’s proportionate share of tax credits from the applicable bonds that otherwise would be allowed to the Fund. In such a case, shareholders must include in gross income (as interest) their proportionate share of the income
attributable to their proportionate share of those offsetting tax credits. A shareholder’s ability to claim a tax credit associated with one or more tax credit bonds may be subject to certain limitations imposed by the Internal Revenue Code. (Under
the TCJA, the build America bonds, clean renewable energy bonds and certain other qualified bonds may no longer be issued after December 31, 2017.) Even if the Fund is eligible to pass through tax credits to shareholders, the Fund may choose not to
do so.
Consent Dividends. The Fund may utilize the consent dividend provisions of section 565 of the
Internal Revenue Code to make distributions. Provided that all shareholders agree in a consent filed with the income tax return of the Fund to treat as a dividend the amount specified in the consent, the amount will be considered a distribution just
as any other distribution paid in money and reinvested back into the Fund.
Reportable Transactions. Under Treasury regulations, if a shareholder recognizes a loss with
respect to the Fund’s shares of $2 million or more for an individual shareholder or $10 million or more for a corporate shareholder (or certain greater amounts over a combination of years), the shareholder must file with the IRS a disclosure
statement on Form 8886. The fact that a loss is reportable under these regulations does not affect the legal determination of whether the taxpayer’s treatment of the loss is proper. Shareholders should consult their tax advisors to determine the
applicability of these regulations in light of their individual circumstances.
Effect of Future Legislation; Local Tax Considerations
The foregoing general discussion of U.S. federal income tax consequences is based on the Internal Revenue Code and the regulations
issued thereunder as in effect on the date of this SAI. Future legislative or administrative changes, including provisions of current law that sunset and thereafter no longer apply, or court decisions may significantly change the conclusions
expressed herein, and any such changes or decisions may have a retroactive effect with respect to the transactions contemplated herein. Rules of state and local taxation of ordinary income and capital gain dividends may differ from the rules for U.S.
federal income taxation described above. Distributions may also be subject to additional state, local and foreign taxes depending on each shareholder’s particular situation. Non-U.S. shareholders may be subject to U.S. tax rules that differ
significantly from those summarized above. Shareholders are urged to consult their tax advisors as to the consequences of these and other state and local tax rules affecting investment in the Fund.
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Tax Consequences to Shareholders
Since shareholders of the Fund will be the insurance company separate accounts, no discussion is included herein concerning federal
income tax consequences for the holders of the contracts. For information concerning the federal income tax consequences to any such holder, see the prospectus relating to the applicable contract.
Control Persons and Principal Holders of Securities
Because the Fund is available as an investment for Variable Contracts offered by certain Participating Insurance Companies, the
Participating Insurance Companies could be deemed to control the voting securities of the Fund (i.e., by owning more than 25% of the Fund’s shares). However, a Participating Insurance Company would exercise
voting rights attributable to any shares of the Fund that it owns (directly or indirectly) in accordance with, and in proportion to, voting instructions timely received from Contract Owners. In addition, a Participating Insurance Company is expected
to vote shares attributable to Variable Contracts as to which no voting instructions are received from Contract Owners in the same proportion (for, against or abstain) as those for which timely instructions are received. As a result, a small number
of Contract Owners could determine whether Fund proposals are approved.
As of the date of this SAI, the only Participating Insurance Company is [___________]. The Fund may sell its shares to other
Participating Insurance Companies from time to time.
Since the Fund has not yet commenced operations, no shareholder owns 5% or more of the outstanding shares of the Fund.
Prior to the date of this SAI, the Fund had not yet commenced operations. Accordingly, as of the date of this SAI, the Trustees
and Officers of the Trust as a group owned beneficially less than 1% of the shares of any class of the Fund.
Financial Statements
[Seed financial statements of the Trust and those of the master fund to be provided]
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APPENDIX A
Debt Ratings
Debt Ratings
This Appendix includes a description of the factors underlying the debt ratings of Moody's, S&P and Fitch. The descriptions relate
to general long-term and short-term obligations of an issuer. A rating is generally assigned to a debt security at the time of issuance by a credit rating agency designated as an NRSRO by the SEC, such as Moody's, S&P and Fitch. While NRSROs may
from time to time revise such ratings, they undertake no obligation to do so, and the ratings given to instruments at issuance do not necessarily represent ratings that would be given to those instruments on a particular subsequent date.
Moody’s Ratings
Long-Term Obligations
Aaa: Obligations rated Aaa are judged to be of the highest quality, subject to the lowest
level of credit risk.
Aa: Obligations rated Aa are judged to be of high quality and are subject to very low credit
risk.
A: Obligations rated A are judged to be upper-medium grade and are subject to low credit risk.
Baa: Obligations rated Baa are judged to be medium-grade and subject to moderate credit risk
and as such may possess certain speculative characteristics.
Ba: Obligations rated Ba are judged to be speculative and are subject to substantial credit
risk.
B: Obligations rated B are considered speculative and are subject to high credit risk.
Caa: Obligations rated Caa are judged to be speculative, of poor standing and are subject to
very high credit risk.
Ca: Obligations rated Ca are highly speculative and are likely in, or very near, default, with
some prospect of recovery of principal and interest.
C: Obligations rated C are the lowest rated and are typically in default, with little prospect
for recovery of principal or interest.
Note: Moody's appends numerical modifiers 1, 2 and 3 in each generic rating classification
from Aa through Caa. The modifier 1 indicates that the obligation ranks in the higher end of its generic rating category; the modifier 2 indicates a mid-range ranking; and the modifier 3 indicates a ranking in the lower end of that generic rating
category.
Absence of Rating: Where no rating has been assigned or where a rating has been withdrawn, it
may be for reasons unrelated to the creditworthiness of the issue.
Should no rating be assigned, the reason may be one of the following:
1. An application was not received or accepted.
2. The issue or issuer belongs to a group of securities or entities that are not rated as a matter of policy.
3. There is a lack of essential data pertaining to the issue or issuer.
4. The issue was privately placed, in which case the rating is not published in Moody’s publications.
Withdrawal may occur if new and material circumstances arise, the effects of which preclude satisfactory analysis; if there is no
longer available reasonable up-to-date data to permit a judgment to be formed; if a bond is called for redemption; or for other reasons.
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Short-Term Obligations
Moody’s short-term debt ratings are opinions of the ability of issuers to honor short-term financial obligations, generally with an
original maturity not exceeding thirteen months.
Moody's employs the following designations to indicate the relative repayment ability of rated issuers:
P-1: Issuers (or supporting institutions) rated Prime-1 have a superior ability to repay
short-term debt obligations.
P-2: Issuers (or supporting institutions) rated Prime-2 have a strong ability to repay
short-term debt obligations.
P-3: Issuers (or supporting institutions) rated Prime-3 have an acceptable ability to repay
short-term obligations.
NP: Issuers (or supporting institutions) rated Not Prime do not fall within any of the Prime
rating categories.
US Municipal Short-Term Debt Obligations
There are three rating categories for short-term municipal obligations that are considered investment grade and are designated as
Municipal Investment Grade (MIG). In addition, those short-term obligations that are of speculative quality are designated SG, or speculative grade. MIG ratings expire at the maturity of the obligation.
MIG 1: This designation denotes superior credit quality. Excellent protection is afforded by
established cash flows, highly reliable liquidity support, or demonstrated broad-based access to the market for refinancing.
MIG 2: This designation denotes strong credit quality. Margins of protection are ample,
although not as large as in the preceding group.
MIG 3: This designation denotes acceptable credit quality. Liquidity and cash-flow protection
may be narrow, and market access for refinancing is likely to be less well-established.
SG: This designation denotes speculative-grade credit quality. Debt instruments in this
category may lack sufficient margins of protection.
S&P Ratings
Long-Term Obligations
AAA: An obligation rated AAA has the highest rating assigned by S&P. The obligor’s
capacity to meet its financial commitment on the obligation is extremely strong.
AA: An obligation rated AA differs from the highest-rated obligations only to a small degree.
The obligor’s capacity to meet its financial commitment is very strong.
A: An obligation rated A is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than obligations in higher-rated categories. However, the obligor’s capacity to meet its financial commitment on the obligation is still strong.
BBB: An obligation rated BBB exhibits adequate protection parameters. However, adverse
economic conditions or changing circumstances are more likely to lead to a weakened capacity of the obligor to meet its financial commitment on the obligation.
BB; B; CCC; CC; and C: Obligations rated BB, B, CCC, CC, and C are regarded as having
significant speculative characteristics. BB indicates the least degree of speculation and C the highest. While such obligations will likely have some quality and protective characteristics, these may be outweighed by large uncertainties or major
exposures to adverse conditions.
A-2
BB: An obligation rated BB is less vulnerable to nonpayment than other speculative issues.
However, it faces major ongoing uncertainties or exposure to adverse business, financial, or economic conditions which could lead to the obligor’s inadequate capacity to meet its financial commitment on the obligation.
B: An obligation rated B is more vulnerable to nonpayment than obligations rated BB, but the
obligor currently has the capacity to meet its financial commitment on the obligation. Adverse business, financial, or economic conditions will likely impair the obligor’s capacity or willingness to meet its financial commitment on the obligation.
CCC: An obligation rated CCC is currently vulnerable to nonpayment, and is dependent upon
favorable business, financial, and economic conditions for the obligor to meet its financial commitment on the obligation. In the event of adverse business, financial, or economic conditions, the obligor is not likely to have the capacity to meet its
financial commitment on the obligation.
CC: An obligation rated CC is currently highly vulnerable to nonpayment. The CC rating is used
when a default has not yet occurred, but S&P expects default to be a virtual certainty, regardless of the anticipated time to default.
C: An obligation rated C is currently highly vulnerable to nonpayment, and the obligation is
expected to have lower relative seniority or lower ultimate recovery compared to obligations that are rated higher.
D: An obligation rated D is in default or in breach of an imputed promise. For non-hybrid
capital instruments, the D rating category is used when payments on an obligation are not made on the date due, unless S&P believes that such payments will be made within five business days in the absence of a stated grace period or within the
earlier of the stated grace period or 30 calendar days. The D rating also will be used upon the filing of a bankruptcy petition or the taking of similar action and where default on an obligation is a virtual certainty, for example due to automatic
stay provisions. An obligation's rating is lowered to D if it is subject to a distressed exchange offer.
NR: NR indicates no rating has been requested, or that there is insufficient information on
which to base a rating, or that S&P does not rate a particular obligation as a matter of policy.
Note: The ratings from AA to CCC may be modified by the addition of a plus (+) or minus (-)
sign to show relative standing within the major rating categories.
Short-Term Obligations
A-1: A short-term obligation rated A-1 is rated in the highest category by S&P. The
obligor's capacity to meet its financial commitment on the obligation is strong. Within this category, certain obligations are designated with a plus sign (+). This indicates that the obligor's capacity to meet its financial commitment on these
obligations is extremely strong.
A-2: A short-term obligation rated A-2 is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than obligations in higher rating categories. However, the obligor's capacity to meet its financial commitment on the obligation is satisfactory.
A-3: A short-term obligation rated A-3 exhibits adequate protection parameters. However,
adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity of the obligor to meet its financial commitment on the obligation.
B: A short-term obligation rated B is regarded as vulnerable and has significant speculative
characteristics. The obligor currently has the capacity to meet its financial commitments; however, it faces major ongoing uncertainties which could lead to the obligor's inadequate capacity to meet its financial commitments.
C: A short-term obligation rated C is currently vulnerable to nonpayment and is dependent upon
favorable business, financial, and economic conditions for the obligor to meet its financial commitment on the obligation.
D: A short-term obligation rated D is in default or in breach of an imputed promise. For
non-hybrid capital instruments, the D rating category is used when payments on an obligation are not made on the date due, unless S&P believes that such payments will be made within any stated grace period. However, any stated grace period longer
than five business days will be treated as five business days. The D rating also will be used upon the filing of a bankruptcy petition or
A-3
the taking of a similar action and where default on an obligation is a virtual certainty, for example due to automatic stay
provisions. An obligation's rating is lowered to D if it is subject to a distressed exchange offer.
Municipal Short-Term Obligations
An S&P U.S. municipal note rating reflects S&P opinion about the liquidity factors and market access risks unique to the
notes. Notes due in three years or less will likely receive a note rating. Notes with an original maturity of more than three years will most likely receive a long-term debt rating.
SP-1: Strong capacity to pay principal and interest. An issue determined to possess a very
strong capacity to pay debt service is given a plus (+) designation.
SP-2: Satisfactory capacity to pay principal and interest, with some vulnerability to adverse
financial and economic changes over the term of the notes.
SP-3: Speculative capacity to pay principal and interest.
Fitch Ratings
Long-Term Obligations
AAA: Highest credit quality. AAA ratings denote the lowest expectation of credit risk. They
are assigned only in cases of exceptionally strong capacity for payment of financial commitments. This capacity is highly unlikely to be adversely affected by foreseeable events.
AA: Very high credit quality. AA ratings denote expectations of very low credit risk. They
indicate very strong capacity for payment of financial commitments. This capacity is not significantly vulnerable to foreseeable events.
A: High credit quality. A ratings denote expectations of low credit risk. The capacity for
payment of financial commitments is considered strong. This capacity may, nevertheless, be more vulnerable to adverse business or economic conditions than is the case for higher ratings.
BBB: Good credit quality. BBB ratings indicate that expectations of credit risk are currently
low. The capacity for payment of financial commitments is considered adequate but adverse business or economic conditions are more likely to impair this capacity.
BB: Speculative. BB ratings indicate an elevated vulnerability to credit risk, particularly in
the event of adverse changes in business or economic conditions over time; however, business or financial alternatives may be available to allow financial commitments to be met.
B: Highly speculative. B ratings indicate that material credit risk is present.
CCC: Substantial credit risk. CCC ratings indicate that substantial credit risk is present.
CC: Very high levels of credit risk. CC ratings indicate very high levels of credit risk.
C: Exceptionally high levels of credit risk. C indicates exceptionally high levels of credit
risk.
Defaulted obligations typically are not assigned RD or D ratings, but are instead rated in the B to C rating categories, depending
upon their recovery prospects and other relevant characteristics. This approach better aligns obligations that have comparable overall expected loss but varying vulnerability to default and loss.
Note: The modifiers “+” or “-” may be appended to a rating to denote relative status within major rating
categories. Such suffixes are not added to the AAA obligation rating category, or to corporate finance obligation ratings in the categories below CCC.
The subscript 'emr' is appended to a rating to denote embedded market risk which is beyond the scope of the
rating. The designation is intended to make clear that the rating solely addresses the counterparty risk of the issuing bank. It
A-4
is not meant to indicate any limitation in the analysis of the counterparty risk, which in all other respects
follows published Fitch criteria for analyzing the issuing financial institution. Fitch does not rate these instruments where the principal is to any degree subject to market risk.
Short-Term Obligations (Corporate and Public Finance)
A short-term issuer or obligation rating is based in all cases on the short-term vulnerability to default of the rated entity or
security stream and relates to the capacity to meet financial obligations in accordance with the documentation governing the relevant obligation. Short-Term Ratings are assigned to obligations whose initial maturity is viewed as “short-term” based on
market convention. Typically, this means up to 13 months for corporate, sovereign, and structured obligations, and up to 36 months for obligations in U.S. public finance markets.
F1: Highest short-term credit quality. Indicates the strongest intrinsic capacity for timely
payment of financial commitments; may have an added “+” to denote any exceptionally strong credit feature.
F2: Good short-term credit quality. Good intrinsic capacity for timely payment of financial
commitments.
F3: Fair short-term credit quality. The intrinsic capacity for timely payment of financial
commitments is adequate.
B: Speculative short-term credit quality. Minimal capacity for timely payment of financial
commitments, plus heightened vulnerability to near term adverse changes in financial and economic conditions.
C: High short-term default risk. Default is a real possibility.
RD: Restricted default. Indicates an entity that has defaulted on one or more of its financial
commitments, although it continues to meet other financial obligations. Typically applicable to entity ratings only.
D: Default. Indicates a broad-based default event for an entity, or the default of a
short-term obligation.
A-5
|
|
Last approved January 2, 2020
|
APPENDIX B
PROXY VOTING POLICY
MILLIMAN FINANCIAL RISK MANAGEMENT LLC
POLICY
Milliman Financial Risk Management LLC (“Milliman FRM”), as a matter of policy and as a fiduciary, has responsibility for voting proxies for portfolio
securities consistent with the best economic interests of Investment Companies for which it is the primary investment adviser or a sub-adviser to whom proxy voting has been delegated by the client’s fund board. Milliman FRM maintains written
policies and procedures as to the handling, research, voting and reporting of proxy voting and makes appropriate disclosures about its proxy policies and practices. Milliman FRM’s policy and practice includes the responsibility to monitor
corporate actions, receive and vote client proxies and disclose any potential conflicts of interest as well as making information available to clients about the voting of proxies for their portfolio securities and maintaining relevant and
required records.
RESPONSIBILITY
Milliman FRM’s Chief Compliance Officer and Compliance team are responsible for the implementation and monitoring of this proxy voting policy, practices,
disclosures and record keeping, including outlining the voting guidelines in these procedures.
Milliman FRM employs a third party proxy advisory firm (a “Proxy Adviser”) to effectuate voting and the receipt of records related to voting, and employs
policies and procedures in order to evaluate the services of the Proxy Adviser. Milliman FRM’s CCO and Proxy Committee are responsible for developing and overseeing “Proxy Voting Guidelines” where applicable, including oversight of the Proxy
Adviser.
DISCLOSURE
Milliman FRM will provide conspicuously displayed information in its Form ADV Part 2A summarizing this proxy voting policy and procedures.
PROCEDURES
|
1.
|
Principals.
|
|
a.
|
Principles. Milliman FRM’s primary purpose is to vote proxies in the best interests of Investment
Companies for which it is the primary adviser and will generally vote for, against, consider on a case-by-case basis, or abstain from voting as indicated below. Milliman FRM may utilize
independent research reports to inform its proxy voting.
|
|
b.
|
Proxy Committee. Milliman FRM’s Proxy Committee meets at least quarterly. Among other duties, the Committee:
|
|
i.
|
Reviews voting activity during the previous quarter,
|
|
ii.
|
Reviews timely voting issues which may be relevant to clients, and
|
B-1
|
|
Last approved January 2, 2020
|
|
iii.
|
Performs diligence and oversight of the Proxy Adviser to ensure the information and advice received results in proxy voting that is in the best interest of Milliman FRM’s clients,
including:
|
|
1.
|
evaluating any Proxy Adviser in advance of retention;
|
|
2.
|
evaluating the process for addressing potential factual errors, incompleteness or methodological weakness in the Proxy Adviser’s analysis;
|
|
3.
|
Adopting policies for evaluating the Proxy Adviser’s services; and
|
|
4.
|
Determining when to exercise proxy voting opportunities.
|
|
2.
|
Circumstances.
|
|
i.
|
Milliman FRM is Primary Investment Adviser
|
|
1.
|
Where Milliman FRM serves as the primary investment adviser to the Investment Company, Milliman FRM’s Proxy Committee will utilize the
Proxy Voting Guidelines.
|
|
ii.
|
Milliman FRM is Sub-adviser, and Investment Company retains voting rights
|
|
1.
|
Where Milliman serves as a sub-adviser to the Investment Company and the Investment Company has retained the right to vote its own proxies, Milliman FRM will
not be obligated to take any action with respect to proxy voting.
|
|
iii.
|
Milliman FRM is Sub-adviser, and Investment Company delegates voting rights
|
|
1.
|
Where Milliman FRM serves as a sub-adviser to the Investment Company and the Investment Company has delegated proxy voting responsibility to Milliman FRM,
Milliman FRM will utilize the Proxy Voting Guidelines.
|
|
iv.
|
Milliman is Primary Investment Adviser or Sub-Adviser to Mutual Funds of Funds
|
|
1.
|
Milliman FRM serves as investment adviser to certain investment companies which invest in other investment companies that are not affiliated (“Underlying
Funds”) and are required by the Investment Company Act of 1940, as amended (the “1940 Act”) Act to handle proxies received from Underlying Funds in a certain manner. Notwithstanding the guidelines provided in these procedures, it is the
policy of Milliman FRM to vote all proxies received from the Underlying Funds in the same proportion that all shares of the Underlying Funds are voted, or in accordance with instructions received from fund shareholders, pursuant to
Section 12(d)(1)(F) of the 1940 Act.
|
|
3.
|
Obtaining More Information. Investment Companies for which Milliman FRM is the primary adviser may obtain a record of Milliman FRM’s proxy voting, free
of charge, by calling its main office at (312) 726-0677.
|
B-2
MILLIMAN VARIABLE INSURANCE TRUST
File Nos. 811-23710 & 333-257356
PART C
Other Information
Item 28. Exhibits.
The following exhibits are filed herewith, except as noted:
|
(a)
|
Agreement and Declaration of Trust
|
||
|
(i)
|
Certificate of Trust dated November 2, 2020, incorporated by reference to the
Registrant’s Initial Registration Statement on Form N-1A, as filed on June 24, 2021
|
||
|
(ii)
|
Certificate of Amendment to the Certificate of Trust dated January 25, 2021,
incorporated by reference to the Registrant’s Initial Registration Statement on Form N-1A, as filed on June 24, 2021
|
||
|
(iii)
|
Agreement and Declaration of Trust dated November 2, 2020, incorporated by
reference to the Registrant’s Initial Registration Statement on Form N-1A, as filed on June 24, 2021
|
||
|
(b)
|
By-laws
|
||
|
(i)
|
By-Laws effective as of November 2, 2020, incorporated by reference to the
Registrant’s Initial Registration Statement on Form N-1A, as filed on June 24, 2021
|
||
|
(c)
|
Instruments Defining Rights of Security Holders
|
||
|
(i)
|
Agreement and Declaration of Trust
|
||
|
(a)
|
Article III, Shares
|
||
|
(b)
|
Article IV, The Board of Trustees
|
||
|
(c)
|
Article V, Shareholders’ Voting Powers and Meetings
|
||
|
(d)
|
Article VI, Net Asset Value, Distributions and Redemptions
|
||
|
(e)
|
Article VII, Compensation and Limitation of Liability of Trustees
|
||
|
(f)
|
Article VIII, Miscellaneous
|
||
|
(ii)
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By-Laws
|
||
|
(a)
|
Article II, Shareholders
|
||
|
(b)
|
Article VI, Execution of Instruments, Voting of Securities
|
||
|
(c)
|
Article VIII, Amendments
|
||
|
(iii)
|
Part B, Statement of Additional Information – Item 22
|
||
|
(d)
|
Investment Advisory Contracts
|
||
|
(i)
|
|||
|
(ii)
|
|||
|
(e)
|
Underwriting Contracts
|
||
|
(i)
|
Distribution Agreement
|
||
|
(f)
|
Bonus or Profit Sharing Contracts
|
||
|
Not Applicable
|
|||
|
(g)
|
Custodian Agreements
|
||
|
(i)
|
|||
|
(h)
|
Other Material Contracts
|
||
|
(i)
|
Fund Administration Agreement
|
||
|
(ii)
|
Fund Accounting Agreement
|
||
|
(iii)
|
Transfer Agent Agreement
|
||
|
(iv)
|
Fund PFO/Treasurer Agreement
|
||
|
(v)
|
Fund CCO and AMLO Agreement
|
||
|
(iv)
|
Expense Limitation Agreement
|
||
|
(i)
|
Legal Opinion
|
||
|
(i)
|
Opinion and consent of counsel
|
||
|
To be filed by amendment
|
|||
|
(j)
|
Other Opinions
|
||
|
(i)
|
Consent of Independent Registered Public Accounting Firm
|
||
|
To be filed by amendment
|
|||
|
(k)
|
Omitted Financial Statements
|
||
|
Not Applicable.
|
|||
|
(l)
|
Initial Capital Agreements
|
||
|
(i)
|
To be filed by amendment
|
||
|
(m)
|
Rule 12b-1 Plan
|
||
|
(i)
|
|||
|
(n)
|
Rule 18f-3 Plan
|
||
|
(i)
|
To be filed by amendment
|
||
|
(p)
|
Code of Ethics
|
||
|
(i)
|
Code of Ethics
|
||
|
To be filed by amendment
|
|||
|
(q)
|
Power of Attorney
|
||
|
(i)
|
|||
Item 29. Persons Controlled by or Under Common Control with the Fund
None
Item 30. Indemnification
The Agreement and Declaration of Trust (the “Declaration”) provides that, subject to certain exceptions described below, every person who is, or has
been, a Trustee or an officer or employee of the Trust or is or was serving at the request of the Trust as a trustee, director, officer, employee or agent of another organization in which the Trust has any interest as a shareholder, creditor or
otherwise (“Covered Person”) shall be indemnified by the Trust and each series of the Trust to the fullest extent permitted by law against liability and against all expenses reasonably incurred or paid by him or her in connection with any claim,
action, suit or proceeding in which he or she becomes involved as a party or otherwise by virtue of his or her being or having been a Covered Person and against amounts paid or incurred by him or her in the settlement thereof.
To the extent required under the Investment Company Act of 1940, as amended (“1940 Act”), but only to such extent, no indemnification shall be provided
under the Declaration to a Covered Person: (i) who shall have been adjudicated by a court or body before which the proceeding was brought (A) to be liable to the Trust or its shareholders by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his or her office or (B) not to have acted in good faith in the reasonable belief that his or her action was in the best interest of the Trust; or (ii) in the event of a
settlement, if there has been a determination that such Covered Person engaged in willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his or her office: (A) by the court or other body
approving the settlement; (B) by at least a majority of those Trustees who are neither “Interested Persons” of the Trust, as defined under the 1940 Act, nor are parties to the matter based upon a review of readily available facts (as opposed to a
full trial-type inquiry); or (C) by written opinion of independent
legal counsel based upon a review of readily available facts (as opposed to a full trial-type inquiry).
Insofar as indemnification for liabilities arising under the Securities Act of 1933, as amended (“1933 Act”), may be permitted to Trustees, officers and
controlling persons of the Trust pursuant to the foregoing provisions, or otherwise, the Trust has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the 1933 Act
and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Trust of expenses incurred or paid by a Trustee, officer or controlling person of the Trust in the successful
defense of any action, suit or proceeding) is asserted by such Trustee, officer or controlling person in connection with securities being registered, the Trust may be required, unless in the opinion of its counsel the matter has been settled by
controlling precedent, to submit to a court or appropriate jurisdiction the question whether such indemnification is against public policy as expressed in the 1933 Act and will be governed by the final adjudication of such issue.
Item 31. Business and Other Connections of the Investment Adviser
This information is included in Form ADV filed with the SEC by Milliman Financial Risk Management LLC (Registration No. 801-73056) and is incorporated by reference herein.
Item 32. Principal Underwriters
To be completed by amendment
Item 33. Location of Accounts and Records
To be completed by amendment
Item 34. Management Services
There are no management-related service contracts not discussed in Part A or Part B.
Item 35. Undertakings
Not Applicable
|
SIGNATURE
|
|||||||||
|
Pursuant to the requirements of the Securities Act of 1933 and the Investment Company Act of 1940, the Registrant has duly caused this Registration Statement to
be signed on its behalf by the undersigned, thereunto duly authorized in the City of Chicago and the State of Illinois, on the 20th day of September, 2021.
|
|||||||||
|
MILLIMAN VARIABLE INSURANCE TRUST
|
|||||||||
|
(Registrant)
|
|||||||||
|
By:
|
/s/ Adam Schenck
|
||||||||
| Adam Schenck, Trustee |
|||||||||
|
|
|||||||||
|
Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed below by the following person in the
capacities and on the dates indicated:
|
|||||||||
|
Signature
|
Title
|
Date
|
|||||||
|
/s/ Adam Schenck
|
|||||||||
|
Adam Schenck
|
President and Trustee
|
September 20, 2021
|
|||||||
|
/s/Arthur W. Jasion
|
|||||||||
|
Arthur W. Jasion
|
Treasurer and Principal Financial Officer
|
September 20, 2021
|
|||||||
|
/s/ Eric Berg*
|
|||||||||
|
Eric Berg
|
Trustee
|
September 20, 2021
|
|||||||
|
/s/ Nicholas Dalmaso*
|
|||||||||
|
Nicholas Dalmaso
|
Trustee
|
September 20, 2021
|
|||||||
|
/s/ Daniel Ross Hayes*
|
|||||||||
|
Daniel Ross Hayes
|
Trustee
|
September 20, 2021
|
|||||||
| /s/ Colleen McKenna Tucker* |
|||||||||
| Colleen McKenna Tucker |
Trustee | September 20, 2021 |
|||||||
| *By: /s/ Adam Schenck |
|||||||||
| Adam Schenck | September 20, 2021 |
||||||||
| Attorney-in-Fact | |||||||||
|
*Adam Schenck signs this Registration Statement pursuant to the powers of attorney filed
herewith.
|
|||||||||
|
SIGNATURE
|
|||||||||
|
[MASTER FUND] consents to the filing of this Registration Statement of Milliman
Variable Insurance Trust, which is signed on its behalf by the undersigned, thereunto duly authorized, in the City of [ ], the State of [ ], as of this 20th day of September, 2021
|
|||||||||
|
[MASTER FUND NAME]
|
|||||||||
|
([MASTER FUND])
|
|||||||||
|
By:
|
|
||||||||
|
|
|||||||||
|
The undersigned Trustees and principal officers of [MASTER FUND] consent to the filing of this Registration Statement of Milliman Variable Insurance Trust on the dates indicated. |
|||||||||
|
Signature
|
Title
|
Date
|
|||||||
|
|
|||||||||
|
|
Trustee
|
[_________]
|
|||||||
MILLIMAN VARIABLE INSURANCE TRUST
REGISTRATION STATEMENT
EXHIBITS INDEX
The following exhibits are attached:
|
EXHIBIT NO.
|
DESCRIPTION
|
|
EX-99.(a)(i)
|
|
|
EX-99.(a)(ii)
|
|
|
EX-99.(e)(i)
|
|
|
EX-99.(g)(i)
|
|
|
EX-99.(h)(i)
|
|
|
EX-99.(h)(ii)
|
|
|
EX-99.(h)(iii)
|
|
|
EX-99.(h)(iv)
|
|
|
EX-99.(h)(v)
|
|
|
EX-99.(h)(vi)
|
|
|
EX-99.(m)(i)
|
|
| EX-99.(q)(i) | Powers of Attorney |