Common use of Security Selection Clause in Contracts

Security Selection. NDR begins the security selection process by identifying current market themes that its strategists believe may outperform the broader market over the term of the trust. These themes are picked by NDR macroeconomic and equity strategists from a larger pool of NDR strategists' themes. NDR then employs multiple processes designed to select specific securities that it believes will benefit more than other securities if one or more of the investment themes play out as predicted. NDR's primary method of identifying the relevant securities to represent the theme(s) is by using the industry classification of the individual securities. Since most stocks can be classified by the industry in which they operate, NDR aligns the theme with the relevant industry(s). This selection is made by both qualitative (categorization) and quantitative (correlations of securities with industry(s)) criteria. The sectors/industries that NDR believes may benefit from the investment themes are: o Financials sector, which may experience improved interest margins and an expanded demand for loans in a rising interest rate environment. o Industrials and materials sectors, which may benefit from the proposed federal government policies of increasing spending on infrastructure, deregulation and tax incentives. o Consumer discretionary sector, which may benefit from increased spending by millennials. o Energy sector, which may be well positioned to benefit from global growth and a bull market in oil. Once the favored industries have been identified, NDR reduces the broader universe down to the final recommended 40 securities using the criteria below. NDR analysts utilize fundamental, technical, and/or macroeconomic factors to rank the filtered securities. o Fundamental factors pertain to the economics of the specific business and are typically drawn from the financial statements (i.e., income statement, balance sheet, etc.). Some common factors are, but are not limited to, earnings growth, dividend payout ratio and debt/equity ratio. o Technical factors pertain to the trading of the security in the capital markets. Technical factors are used to evaluate the supply and demand for the security. Some common factors are, but are not limited to, price momentum, mean reversion or level of volume of shares traded.