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Exchange
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12.29.2016 |
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Guggenheim
ETFs Prospectus |
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NYSE
ARCA, Inc.
Ticker
Symbol |
Fund
Name |
YAO |
Guggenheim
China All-Cap ETF |
CQQQ |
Guggenheim
China Technology ETF |
TAN |
Guggenheim
Solar ETF |
CGW |
Guggenheim
S&P Global Water Index ETF |
GHII |
Guggenheim
S&P High Income Infrastructure
ETF |
The
U.S. Securities and Exchange Commission and
the Commodity Futures Trading Commission
have not approved or disapproved these securities, or passed upon the accuracy
or adequacy of this prospectus. Any representation to the contrary is a criminal
offense.
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Sku
# ETF-PROT2COMBO2 |
guggenheiminvestments.com |
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Page |
Summary
Information |
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Guggenheim
China All-Cap ETF |
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Guggenheim
China Technology ETF |
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Guggenheim
Solar ETF |
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Guggenheim
S&P Global Water Index ETF |
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Guggenheim
S&P High Income Infrastructure ETF |
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Additional
Information Regarding Investment Objectives and Strategies |
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Descriptions
of Risks |
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Disclosure of
Portfolio Holdings |
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Investment
Management Services |
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Purchase and
Redemption of Shares |
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How to Buy and
Sell Shares |
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Frequent
Purchases and Redemptions |
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Fund Service
Providers |
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Index
Providers |
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Disclaimers |
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Federal Income
Taxation |
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Tax-Advantaged
Product Structure |
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Other
Information |
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Premium/Discount
Information |
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Total
Return Information |
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Financial
Highlights |
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For
More Information |
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Summary
Information
Guggenheim
China All-Cap ETF (YAO)
INVESTMENT
OBJECTIVE
The
Guggenheim China All-Cap ETF (the "Fund") seeks investment results that
correspond generally to the performance, before the Fund’s fees and expenses, of
an equity index called the AlphaShares China All Cap Index (the “China All-Cap
Index” or the “Index”).
FEES
AND EXPENSES OF THE FUND
This
table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund (“Shares”). Investors purchasing Shares in the secondary
market may be subject to costs (including customary brokerage commissions)
charged by their broker.
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|
Annual
Fund Operating Expenses (expenses
that you pay each year as a percentage of the value of your
investment) |
Management
Fees (comprehensive management fee) |
0.70 |
% |
Other
Expenses |
0.00 |
% |
Total
Annual Fund Operating Expenses |
0.70 |
% |
EXAMPLE
This
Example is intended to help you compare the cost of investing in the Fund with
the cost of investing in other funds. The Example does not take into account
brokerage commissions that you may pay when purchasing or selling
Shares.
The
Example assumes that you invest $10,000 in the Fund for the time periods
indicated and then redeem all of your Shares at the end of those periods. The
Example also assumes that your investment has a 5% return each year and that the
Fund’s operating expenses remain the same. Although your actual costs may be
higher or lower, based on these assumptions your costs would be:
|
|
|
|
|
One
Year |
Three
Years |
Five
Years |
Ten
Years |
$72 |
$278 |
$501 |
$1,144 |
PORTFOLIO
TURNOVER
The
Fund pays transaction costs, such as commissions, when it buys and sells
securities (or “turns over” its portfolio). A higher portfolio turnover rate may
indicate higher transaction costs and may result in higher taxes when Shares are
held in a taxable account. These costs, which are not reflected in annual fund
operating expenses or in the Example, affect the Fund’s performance. During the
most recent fiscal year, the Fund’s portfolio turnover rate was 26%
of
the average value of its portfolio.
PRINCIPAL
INVESTMENT STRATEGIES
The
Fund, using a “passive” or “indexing” investment approach, seeks investment
results that correspond generally to the performance, before the Fund’s fees and
expenses, of the China All-Cap Index. The China All-Cap Index is designed to
measure and monitor the performance of the investable universe of
publicly-traded companies based in mainland China (as classified by the S&P
BMI County Code classification system). The Index was created by AlphaShares,
LLC (“AlphaShares” or the “Index Provider”) and is maintained by Standard &
Poor's. The Index includes equity securities of companies of all categories of
market capitalizations, as defined by AlphaShares (subject to the minimum
capitalization requirements set forth in the China All-Cap Index
methodology).
The
Index may include Hong Kong listed securities, including China H-shares and Red
Chip shares. China H-shares are issued by companies incorporated in mainland
China and listed on the Hong Kong Stock Exchange. Red Chip shares are issued by
companies with controlling Chinese shareholders that are incorporated outside
mainland China and listed on the Hong Kong Stock Exchange. The Index may also
include N-Shares, which are issued by companies based in mainland China and
listed on the NYSE Arca, Inc. (“NYSE Arca”) or NASDAQ Stock Market (“NASDAQ”).
The Index does not include China A-Shares (which are subject to substantial
restrictions on foreign
investment)
or China B-Shares (which offer a generally smaller market and limited
liquidity), each of which trade on the Shanghai Stock Exchange and the Shenzhen
Stock Exchange.
The
Fund will invest at least 80% of its total assets in common stocks, American
depositary receipts (“ADRs”), American depositary shares (“ADSs”), global
depositary receipts (“GDRs”) and international depositary receipts (“IDRs”) that
comprise the Index and depositary receipts or shares representing common stocks
included in the Index (or underlying securities representing ADRs, ADSs, GDRs
and IDRs included in the Index). The depositary receipts included in the Index
may be sponsored or unsponsored. The Fund has adopted a policy that requires the
Fund to provide shareholders with at least 60 days notice prior to any material
change in this policy or the Index. The Board of Trustees (the "Board") of
Claymore Exchange-Traded Fund Trust 2 (the “Trust”) may change the Fund’s
investment strategy and other policies without shareholder approval, except as
otherwise indicated.
The
Fund may invest directly in one or more underlying securities represented by
depositary receipts included in the Index under the following limited
circumstances: (a) when market conditions result in the underlying security
providing improved liquidity relative to the depositary receipt; (b) when a
depositary receipt is trading at a significantly different price than its
underlying security; or (c) the timing of trade execution is improved due to the
local market in which an underlying security is traded being open at different
times than the market in which the security’s corresponding depositary receipt
is traded.
The
Fund generally will invest in all of the securities comprising the Index in
proportion to their weightings in the Index. However, under various
circumstances, it may not be possible or practicable to purchase all of the
securities in the Index in those weightings. In those circumstances, the Fund
may purchase a sample of the securities in the Index in proportions expected by
Guggenheim Funds Investment Advisors, LLC (the "Investment Adviser") to
replicate generally the performance of the In dex
as a whole. There may also be instances when the Investment Adviser may choose
to overweight another security in the Index or purchase (or sell) securities not
in the Index which the Investment Adviser believes are appropriate to substitute
for one or more Index components, in seeking to accurately track the Index, such
as: (i) regulatory requirements possibly affecting the Fund’s ability to hold a
security in the Index, (ii) restrictions or requirements in local markets
possibly rendering it infeasible or inefficient for the Fund to purchase or sell
a security in the Index, or (iii) liquidity concerns possibly affecting the
Fund’s ability to purchase or sell a security in the Index. In
addition, from time to time securities are added to or removed from the Index.
The Fund may sell securities that are represented in the Index or purchase
securities that are not yet represented in the Index in anticipation of their
removal from or addition to the Index pursuant to scheduled reconstitutions and
rebalancings of the Index. The Fund will concentrate its investments (i.e.,
invest 25% or more of its assets) in securities issued by companies whose
principal business activities are in the same industry or group of industries to
the extent the Index is so concentrated. As of August 31, 2016, the financial
and telecommunications sectors each represented a substantial portion of the
Index.
PRINCIPAL
RISKS
Investors
should consider the principal risks associated with investing in the Fund, which
are summarized below. The value of an investment in the Fund will fluctuate, and
you could lose money by investing in the Fund. The Fund may not achieve its
investment objective.
Asset
Class Risk —The
securities in the Fund’s portfolio may underperform the returns of other
securities or indices that track other industries, markets, asset classes or
sectors.
China
Investment Risk —Investing
in securities of Chinese companies involves additional risks, including, but not
limited to: the economy of China differs, often unfavorably, from the U.S.
economy in such respects as structure, general development, government
involvement, wealth distribution, rate of inflation, growth rate, allocation of
resources and capital reinvestment, among others; the central government has
historically exercised substantial control over virtually every sector of the
Chinese economy through administrative regulation and/or state ownership;
actions of the Chinese central and local government authorities continue to have
a substantial effect on economic conditions in China (including both direct and
indirect market stabilization efforts, which may affect valuations of Chinese
issuers); and both interim and permanent market regulations may affect the
ability of certain stockholders to sell Chinese securities when it would
otherwise be advisable. In addition, the Chinese government has from time to
time taken actions that influence the prices at which certain goods may be sold,
encourage companies to invest or concentrate in particular industries, induce
mergers between companies in certain industries and induce private companies to
publicly offer their securities to increase or continue the rate of economic
growth, control the rate of inflation or otherwise regulate economic expansion.
It may do so in the
future
as well, potentially having a significant adverse effect on economic conditions
in China, the economic prospects for, and the market prices and liquidity of,
the securities of Chinese companies and the payments of dividends and interest
by Chinese companies.
Although
the enactment of the Enterprise Income Tax Law, effective January 1, 2008,
provided a 10% withholding tax upon Chinese non-residents with respect to
capital gains, significant uncertainties remain regarding this law. Such
uncertainties may result in capital gains imposed upon the Fund relative to
companies headquartered, managed or listed in China. While the application and
enforcement of this law to the Fund remains subject to clarification, to the
extent that such taxes are imposed on any capital gains of the Fund relative to
companies headquartered, managed or listed in China, the Fund’s net asset value
("NAV") or returns may be adversely impacted.
Concentration
Risk —If
the Index concentrates in an industry or group of industries, the Fund’s
investments will be concentrated accordingly. In such event, the value of the
Fund’s Shares may rise and fall more than the value of shares of a fund that
invests in securities of companies in a broader range of industries.
Depositary
Receipt Risk —The
Fund may hold the securities of non-U.S. companies in the form of depositary
receipts or ADSs. The underlying securities of the depositary receipts or shares
in the Fund’s portfolio are subject to fluctuations in foreign currency exchange
rates that may affect the value of the Fund’s portfolio. In addition, the value
of the securities underlying the depositary receipts or shares may change
materially when the U.S. markets are not open for trading. Investments in the
underlying foreign securities also involve political and economic risks distinct
from those associated with investing in the securities of U.S. issuers.
Equity
Securities Risk —The
prices of equity securities generally fluctuate in value more than fixed-income
investments, may rise or fall rapidly or unpredictably and may reflect real or
perceived changes in the issuing company’s financial condition and changes in
the overall market or economy. A decline in the value of equity securities held
by the Fund will adversely affect the value of your investment in the Fund.
Common stocks generally represent the riskiest investment in a company and
dividend payments (if declared) to preferred stockholders generally rank junior
to payments due to a company's debtholders. The Fund may lose a substantial
part, or even all, of its investment in a company’s stock.
Financial
Sector Risk —The
financial sector can be significantly affected by changes in interest rates,
government regulation, the rate of defaults on corporate, consumer and
government debt, the availability and cost of capital, and the impact of more
stringent capital requirements. The Fund may be adversely affected by
events or developments negatively impacting the financial sector or issuers
within the financial sector.
Foreign
Securities and Currency Risk —Foreign
securities carry unique or additional risks when compared to U.S.
securities, including currency fluctuations, adverse political and economic
developments, unreliable or untimely information, less liquidity and more
volatility, limited legal recourse and higher transactional costs.
Issuer-Specific
Changes Risk —The
value of an individual security or particular type of security can be more
volatile than the market as a whole and can perform differently from the value
of the market as a whole. The value of securities of smaller issuers can be more
volatile than that of larger issuers.
Limited
Exposure Risk —China
A-Shares and China B-Shares are not eligible for inclusion in the Index, even if
they would otherwise qualify under the other criteria set forth in the Index
methodology. China A-Shares are subject to substantial restrictions on foreign
investment, while the China B-Share market generally is smaller and offers less
liquidity than the categories of securities which may be included in the Index.
However, by excluding such shares from the Index, the exposure provided by the
Index (and thus the Fund) to the Chinese presence in the sector may be more
limited than would be the case if the Index included China A-Shares or China
B-Shares.
Market
Price Risk —Shares
are listed for trading on NYSE Arca and are bought and sold in the secondary
market at market prices. The market prices of Shares may fluctuate continuously
during trading hours, in some cases materially, in response to changes in the
NAV and supply and demand for Shares, among other factors. Although it is
expected that the market price of Shares typically will remain closely
correlated to the NAV, the market price will generally differ from the NAV
because of timing reasons, supply and demand imbalances and other factors. As a
result, the trading prices of Shares may deviate significantly from NAV during
certain periods, especially those of market volatility. The Investment Adviser
cannot predict whether Shares will trade above (premium), below
(discount)
or at their NAV. Thus, an investor may pay more than NAV when buying Shares in
the secondary market and receive less than NAV when selling Shares in the
secondary market.
Market
Risk —The
value of, or income generated by, the securities held by the Fund may fluctuate
rapidly and unpredictably as a result of factors affecting individual companies
or changing economic, political, social or financial market conditions
throughout the world. The performance of these investments may underperform the
general securities markets or other types of securities.
Micro-Cap
Company Risk —Micro-cap
stocks involve substantially greater risks of loss and price fluctuations
because their earnings and revenues tend to be less predictable (and some
companies may be experiencing significant losses), and their share prices tend
to be more volatile and their markets less liquid than companies with larger
market capitalizations.
Non-Correlation
Risk —The
Fund’s return may not match the return of the Index for a number of reasons. For
example, the Fund incurs a number of operating expenses not applicable to the
Index, and incurs costs in buying and selling securities, especially when
rebalancing the Fund’s securities holdings to reflect changes in the composition
of the Index. In addition, the performance of the Fund and the Index may vary
due to asset valuation differences and differences between the Fund's portfolio
and the Index resulting from legal restrictions, cash flows or operational
inefficiencies.
Non-Diversification
Risk —The
Fund is considered non-diversified because it may invest a large portion of its
assets in a small number of issuers. As a result, the Fund is more
susceptible to risks associated with those issuers and the Fund may experience
greater losses and volatility than a more diversified portfolio.
Passive
Management Risk —Unlike
many investment companies, the Fund is not “actively” managed. Therefore, it
would not necessarily sell a security because the security’s issuer was in
financial trouble or defaulted on its obligations under the security, or whose
credit rating was downgraded, unless that security is removed from the Index. In
addition, the Fund will not otherwise take defensive positions in declining
markets unless such positions are reflected in the Index.
Regulatory
and Legal Risk —U.S.
and non-U.S. governmental agencies and other regulators may implement additional
regulations and legislators may pass new laws that affect the investments held
by the Fund, the strategies used by the Fund or the level of regulation applying
to the Fund. These may impact the investment strategies, performance, costs and
operations of the Fund.
Risks
of Investing in Hong Kong —
The
Fund’s investments which are listed and traded in Hong Kong may expose the Fund
to certain legal, regulatory, political, currency and economic risks. China is
Hong Kong’s largest trading partner, both in terms of exports and imports. Any
changes in the Chinese economy, trade regulations or currency exchange rates may
have an adverse impact on Hong Kong’s economy.
Small-
and Mid-Capitalization Securities Risk —The
Fund is subject to the risk that small- and mid-capitalization securities may
underperform other segments of the equity market or the equity market as a
whole. Securities of small- and mid-capitalization companies may be more
speculative, volatile and less liquid than securities of larger companies.
Small- and mid-capitalization companies tend to have inexperienced management as
well as limited product and market diversification and financial resources, and
may be more vulnerable to adverse developments than large capitalization
companies.
Telecommunications
Sector Risk —The
telecommunications sector may be affected by extensive government regulation,
industry competition and obsolescence of telecommunications products and
services due to technological advancement. The Fund may be adversely affected by
events or developments negatively impacting the telecommunications sector or
issuers within the telecommunications sector.
PERFORMANCE
INFORMATION
The
following chart and table provide some indication of the risks of investing in
the Fund by showing the Fund’s performance from year to year and average annual
returns for the one and five year and since inception periods compared to those
of the Index and a broad measure of market performance. The Fund’s past
performance (before and after taxes) is not necessarily an indication of how the
Fund will perform in the future. Updated performance information is available at
guggenheiminvestments.com.
Calendar
Year Total Returns as of 12/31
The
Fund’s year-to-date total return was 7.06% as of September 30, 2016.
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Highest
Quarter Return
Q3
2013 14.70% |
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Lowest
Quarter Return
Q3
2011 -26.49% |
Average
Annual Total Returns (for the Periods Ended December 31, 2015)
After-tax
returns shown in the table are calculated using the historical highest
individual federal marginal income tax rates and do not reflect the impact of
any state or local tax. Actual after-tax returns depend on an investor's tax
situation and may differ from those shown. After-tax returns shown are not
relevant to investors who hold Shares through tax-deferred arrangements, such as
401(k) plans or individual retirement accounts ("IRAs").
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1
year |
5
years |
Since
inception
(10/19/2009) |
Returns Before
Taxes |
-6.48% |
0.89% |
2.35% |
Returns After
Taxes on Distributions |
-7.85% |
-0.10% |
1.48% |
Returns After
Taxes on Distributions and Sale of Fund Shares |
-3.67% |
0.27% |
1.44% |
AlphaShares
China All-Cap Index (reflects no deduction for fees, expenses or
taxes) |
-6.85% |
1.26% |
2.57% |
MSCI China
Index (reflects no deduction for fees, expenses or
taxes) |
-7.82% |
0.65% |
1.37% |
MANAGEMENT
OF THE FUND
Guggenheim
Funds Investment Advisors, LLC serves as the investment adviser of the Fund. The
portfolio managers who are currently responsible for the day-to-day management
of the Fund’s portfolio are Michael
P. Byrum, CFA, Senior
Managing
Director and Portfolio Manager, James R. King, CFA, Managing Director and
Portfolio Manager, and Cindy Gao, ETF Analyst. Each portfolio manager
has
managed the Fund’s portfolio since December 2013.
PURCHASE
AND SALE OF FUND SHARES
The
Fund will issue and redeem Shares at NAV only in a large specified number of
Shares called a “Creation Unit” or multiples thereof with
certain large institutional investors .
A Creation Unit consists of 100,000 Shares. Creation Unit transactions are
principally conducted
in exchange for the deposit or delivery of securities specified by the
Fund .
Except
when aggregated in Creation Units, the Shares are not redeemable securities of
the Fund. Individual
Shares of the Fund may only be purchased and sold in secondary market
transactions through brokers and
may not be purchased or redeemed directly with the Fund .
Shares of the Fund are listed for trading on NYSE Arca and, because Shares trade
at market prices rather than NAV, Shares of the Fund may trade at a price
greater than (premium) or less than (discount) NAV.
TAX
INFORMATION
The
Fund’s distributions are taxable and will generally be taxed as ordinary income
or capital gains.
PAYMENTS
TO BROKER-DEALERS AND OTHER FINANCIAL INTERMEDIARIES
If
you purchase Shares of the Fund through a broker-dealer or other financial
intermediary, the Investment Adviser or other related companies may pay the
intermediary for the sale of Shares and related services. These payments may
create a conflict of interest by influencing the broker-dealer or other
intermediary and your salesperson to recommend the Fund over another investment.
Ask your salesperson or visit your financial intermediary’s website for more
information.
Guggenheim
China Technology ETF (CQQQ)
INVESTMENT
OBJECTIVE
The
Guggenheim China Technology ETF (the "Fund") seeks investment results that
correspond generally to the performance, before the Fund’s fees and expenses, of
an equity index called the AlphaShares China Technology Index (the “China
Technology Index” or the “Index”).
FEES
AND EXPENSES OF THE FUND
This
table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund (“Shares”). Investors purchasing Shares in the secondary
market may be subject to costs (including customary brokerage commissions)
charged by their broker.
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|
|
|
Annual
Fund Operating Expenses (expenses
that you pay each year as a percentage of the value of your
investment) |
Management
Fees (comprehensive management fee) |
0.70 |
% |
Other
Expenses |
0.00 |
% |
Total
Annual Fund Operating Expenses |
0.70 |
% |
EXAMPLE
This
Example is intended to help you compare the cost of investing in the Fund with
the cost of investing in other funds. The Example does not take into
account brokerage commissions that you may pay when purchasing or selling
Shares.
The
Example assumes that you invest $10,000 in the Fund for the time periods
indicated and then redeem all of your Shares at the end of those periods.
The Example also assumes that your investment has a 5% return each year and
that the Fund’s operating expenses remain the same. Although your actual
costs may be higher or lower, based on these assumptions your costs would
be:
|
|
|
|
|
One
Year |
Three
Years |
Five
Years |
Ten
Years |
$72 |
$278 |
$501 |
$1,144 |
PORTFOLIO
TURNOVER
The
Fund pays transaction costs, such as commissions, when it buys and sells
securities (or “turns over” its portfolio). A higher portfolio turnover rate may
indicate higher transaction costs and may result in higher taxes when Shares are
held in a taxable account. These costs, which are not reflected in annual fund
operating expenses or in the Example, affect the Fund’s performance. During the
most recent fiscal year, the Fund’s portfolio turnover rate was 48%
of
the average value of its portfolio.
PRINCIPAL
INVESTMENT STRATEGIES
The
Fund, using a “passive” or “indexing” investment approach, seeks investment
results that correspond generally to the performance, before the Fund’s fees and
expenses, of the China Technology Index. The China Technology Index is designed
to measure and monitor the performance of the universe of publicly-traded
companies which are based in mainland China, Hong Kong or Macau (as classified
by the S&P BMI County Code classification system), are in the Information
Technology Sector, as defined by S&P Global Industry Classification Standard
(“GICS”) and are open to foreign investment. The Index was created by
AlphaShares, LLC (“AlphaShares” or the “Index Provider”) and is maintained by
Standard & Poor's. The Index includes equity securities of companies of all
categories of market capitalizations, as defined by AlphaShares (subject to the
minimum capitalization requirements set forth in the China Technology Index
methodology).
The
Index may include Hong Kong listed securities, including China H-shares and Red
Chip shares. China H-shares are issued by companies incorporated in mainland
China and listed on the Hong Kong Stock Exchange. Red Chip shares are issued by
companies with controlling Chinese shareholders that are incorporated outside
mainland China and listed on the Hong Kong Stock Exchange. The Index may also
include N-Shares, which are issued by
companies
based in mainland China and listed on the NYSE Arca, Inc. (“NYSE Arca”) or
NASDAQ Stock Market (“NASDAQ”). The Index does not include China A-Shares (which
are subject to substantial restrictions on foreign investment) or China B-Shares
(which offer a generally smaller market and limited liquidity), each of which
trade on the Shanghai Stock Exchange and the Shenzhen Stock
Exchange.
The
Fund will invest at least 80% of its total assets in common stocks,
American
depositary receipts (“ADRs”), American depositary shares (“ADSs”), global
depositary receipts (“GDRs”) and international depositary receipts (“IDRs”) that
comprise the Index and depositary receipts or shares representing common stocks
included in the Index (or underlying securities representing ADRs, ADSs, GDRs
and IDRs included in the Index). The depositary receipts included in the Index
may be sponsored or unsponsored. The Fund has adopted a policy that requires the
Fund to provide shareholders with at least 60 days notice prior to any material
change in this policy or the Index. The Board of Trustees (the "Board") of
Claymore Exchange-Traded Fund Trust 2 (the "Trust") may change the Fund’s
investment strategy and other policies without shareholder approval, except as
otherwise indicated.
The
Fund may invest directly in one or more underlying securities represented by
depositary receipts included in the Index under the following limited
circumstances: (a) when market conditions result in the underlying security
providing improved liquidity relative to the depositary receipt; (b) when a
depositary receipt is trading at a significantly different price than its
underlying security; or (c) the timing of trade execution is improved due to the
local market in which an underlying security is traded being open at different
times than the market in which the security’s corresponding depositary receipt
is traded.
The
Fund generally will invest in all of the securities comprising the Index in
proportion to their weightings in the Index. However, under various
circumstances, it may not be possible or practicable to purchase all of the
securities in the Index in those weightings. In those circumstances, the Fund
may purchase a sample of the securities in the Index in proportions expected by
Guggenheim Funds Investment Advisors, LLC (the "Investment Adviser") to
replicate generally the performance of the Index as a whole. There
may also be instances when the Investment Adviser may choose to overweight
another security in the Index or purchase (or sell) securities not in the Index
which the Investment Adviser believes are appropriate to substitute for one or
more Index components, in seeking to accurately track the Index, such as: (i)
regulatory requirements possibly affecting the Fund’s ability to hold a security
in the Index, (ii) restrictions or requirements in local markets possibly
rendering it infeasible or inefficient for the Fund to purchase or sell a
security in the Index, or (iii) liquidity concerns possibly affecting the Fund’s
ability to purchase or sell a security in the Index. In
addition, from time to time securities are added to or removed from the Index.
The Fund may sell securities that are represented in the Index or purchase
securities that are not yet represented in the Index in anticipation of their
removal from or addition to the Index pursuant to scheduled reconstitutions and
rebalancings of the Index. The Fund will concentrate its investments (i.e.,
invest 25% or more of its assets) in a securities issued by companies whose
principal business activities are in the same industry or group of industries to
the extent the Index is so concentrated. As of August 31, 2016, the
telecommunications and technology sectors each represented a substantial portion
of the Index.
PRINCIPAL
RISKS
Investors
should consider the principal risks associated with investing in the Fund, which
are summarized below. The value of an investment in the Fund will fluctuate, and
you could lose money by investing in the Fund. The Fund may not achieve its
investment objective.
Asset
Class Risk —The
securities in the Fund’s portfolio may underperform the returns of other
securities or indices that track other industries, markets, asset classes or
sectors.
China
Investment Risk —Investing
in securities of Chinese companies involves additional risks, including, but not
limited to: the economy of China differs, often unfavorably, from the U.S.
economy in such respects as structure, general development, government
involvement, wealth distribution, rate of inflation, growth rate, allocation of
resources and capital reinvestment, among others; the central government has
historically exercised substantial control over virtually every sector of the
Chinese economy through administrative regulation and/or state ownership;
actions of the Chinese central and local government authorities continue to have
a substantial effect on economic conditions in China (including both direct and
indirect market stabilization efforts, which may affect valuations of Chinese
issuers); and both interim and permanent market regulations may affect the
ability of certain stockholders to sell Chinese securities when it would
otherwise be advisable. In addition, the Chinese government has from time to
time taken actions that influence the prices at which certain goods may be sold,
encourage companies to invest or concentrate in particular industries, induce
mergers between companies in certain
industries
and induce private companies to publicly offer their securities to increase or
continue the rate of economic growth, control the rate of inflation or otherwise
regulate economic expansion. It may do so in the future as well, potentially
having a significant adverse effect on economic conditions in China, the
economic prospects for, and the market prices and liquidity of, the securities
of Chinese companies and the payments of dividends and interest by Chinese
companies.
Although
the enactment of the Enterprise Income Tax Law, effective January 1, 2008,
provided a 10% withholding tax upon Chinese non-residents with respect to
capital gains, significant uncertainties remain regarding this law. Such
uncertainties may result in capital gains imposed upon the Fund relative to
companies headquartered, managed or listed in China. While the application and
enforcement of this law to the Fund remains subject to clarification, to the
extent that such taxes are imposed on any capital gains of the Fund relative to
companies headquartered, managed or listed in China, the Fund’s net asset value
("NAV") or returns may be adversely impacted.
Concentration
Risk —If
the Index concentrates in an industry or group of industries, the Fund’s
investments will be concentrated accordingly. In such event, the value of the
Fund’s Shares may rise and fall more than the value of shares of a fund that
invests in securities of companies in a broader range of industries.
Depositary
Receipt Risk —
The
Fund may hold the securities of non-U.S. companies in the form of depositary
receipts or ADSs. The underlying securities of the depositary receipts or shares
in the Fund’s portfolio are subject to fluctuations in foreign currency exchange
rates that may affect the value of the Fund’s portfolio. In addition, the value
of the securities underlying the depositary receipts or shares may change
materially when the U.S. markets are not open for trading. Investments in the
underlying foreign securities also involve political and economic risks distinct
from those associated with investing in the securities of U.S. issuers.
Equity
Securities Risk —
The
prices of equity securities generally fluctuate in value more than fixed-income
investments, may rise or fall rapidly or unpredictably and may reflect real or
perceived changes in the issuing company’s financial condition and changes in
the overall market or economy. A decline in the value of equity securities held
by the Fund will adversely affect the value of your investment in the Fund.
Common stocks generally represent the riskiest investment in a company and
dividend payments (if declared) to preferred stockholders generally rank junior
to payments due to a company's debtholders. The Fund may lose a substantial
part, or even all, of its investment in a company’s stock.
Foreign
Securities and Currency Risk —Foreign
securities carry unique or additional risks when compared to U.S.
securities, including currency fluctuations, adverse political and economic
developments, unreliable or untimely information, less liquidity, limited legal
recourse and higher transactional costs.
Issuer-Specific
Changes Risk —The
value of an individual security or particular type of security can be more
volatile than the market as a whole and can perform differently from the value
of the market as a whole. The value of securities of smaller issuers can be more
volatile than that of larger issuers.
Limited
Exposure Risk —China
A-Shares and China B-Shares are not eligible for inclusion in the Index, even if
they would otherwise qualify under the other criteria set forth in the Index
methodology. China A-Shares are subject to substantial restrictions on foreign
investment, while the China B-Share market generally is smaller and offers less
liquidity than the categories of securities which may be included in the Index.
However, by excluding such shares from the Index, the exposure provided by the
Index (and thus the Fund) to the Chinese presence in the sector may be more
limited than would be the case if the Index included China A-Shares or China
B-Shares.
Market
Price Risk —Shares
are listed for trading on NYSE Arca and are bought and sold in the secondary
market at market prices. The market prices of Shares may fluctuate continuously
during trading hours, in some cases materially, in response to changes in the
NAV and supply and demand for Shares, among other factors. Although it is
expected that the market price of Shares typically will remain closely
correlated to the NAV, the market price will generally differ from the NAV
because of timing reasons, supply and demand imbalances and other factors. As a
result, the trading prices of Shares may deviate significantly from NAV during
certain periods, especially those of market volatility. The Investment Adviser
cannot predict whether Shares will trade above (premium), below (discount) or at
their NAV. Thus, an investor may pay more than NAV when buying Shares in the
secondary market and receive less than NAV when selling Shares in the secondary
market.
Market
Risk —
The
value of, or income generated by, the securities held by the Fund may fluctuate
rapidly and unpredictably as a result of factors affecting individual companies
or changing economic, political, social or financial market conditions
throughout the world. The performance of these investments may underperform the
general securities markets or other types of securities.
Micro-Cap
Company Risk —Micro-cap
stocks involve substantially greater risks of loss and price fluctuations
because their earnings and revenues tend to be less predictable (and some
companies may be experiencing significant losses), and their share prices tend
to be more volatile and their markets less liquid than companies with larger
market capitalizations.
Non-Correlation
Risk —The
Fund’s return may not match the return of the Index for a number of reasons. For
example, the Fund incurs a number of operating expenses not applicable to the
Index, and incurs costs in buying and selling securities, especially when
rebalancing the Fund’s securities holdings to reflect changes in the composition
of the Index. In addition, the performance of the Fund and the Index may vary
due to asset valuation differences and differences between the Fund's portfolio
and the Index resulting from legal restrictions, cash flows or operational
inefficiencies.
Non-Diversification
Risk —The
Fund is considered non-diversified because it may invest a large portion of its
assets in a small number of issuers. As a result, the Fund is more
susceptible to risks associated with those issuers and the Fund may experience
greater losses and volatility than a more diversified portfolio.
Passive
Management Risk —Unlike
many investment companies, the Fund is not “actively” managed. Therefore, it
would not necessarily sell a security because the security’s issuer was in
financial trouble or defaulted on its obligations under the security, or whose
credit rating was downgraded, unless that security is removed from the Index. In
addition, the Fund will not otherwise take defensive positions in declining
markets unless such positions are reflected in the Index.
Regulatory
and Legal Risk —
U.S.
and non-U.S. governmental agencies and other regulators may implement additional
regulations and legislators may pass new laws that affect the investments held
by the Fund, the strategies used by the Fund or the level of regulation applying
to the Fund. These may impact the investment strategies, performance, costs and
operations of the Fund.
Risks
of Investing in Hong Kong —
The
Fund’s investments which are listed and traded in Hong Kong may expose the Fund
to certain legal, regulatory, political, currency and economic risks. China is
Hong Kong’s largest trading partner, both in terms of exports and imports. Any
changes in the Chinese economy, trade regulations or currency exchange rates may
have an adverse impact on Hong Kong’s economy.
Small-
and Mid-Capitalization Securities Risk —The
Fund is subject to the risk that small- and mid-capitalization securities may
underperform other segments of the equity market or the equity market as a
whole. Securities of small- and mid-capitalization companies may be more
speculative, volatile and less liquid than securities of larger companies.
Small- and mid-capitalization companies tend to have inexperienced management as
well as limited product and market diversification and financial resources, and
may be more vulnerable to adverse developments than large capitalization
companies.
Technology
Sector Risk —Stocks
of companies involved in the technology sector may be very volatile. The Fund
may be adversely affected by events or developments negatively impacting the
technology sector or issuers within the technology sector.
Telecommunications
Sector Risk —The
telecommunications sector may be affected by extensive government regulation,
industry competition and obsolescence of telecommunications products and
services due to technological advancement. The Fund may be adversely affected by
events or developments negatively impacting the telecommunications sector or
issuers within the telecommunications sector.
PERFORMANCE
INFORMATION
The
following chart and table provide some indication of the risks of investing in
the Fund by showing the Fund’s performance from year to year and average annual
returns for the one and five year and since inception periods compared to those
of the Index and a broad measure of market performance. The Fund’s past
performance (before
and
after taxes) is not necessarily an indication of how the Fund will perform in
the future. Updated performance information is available at
guggenheiminvestments.com.
Calendar
Year Total Returns as of 12/31
The
Fund’s year-to-date total return was 12.59% as of September 30,
2016.
|
|
|
|
Highest
Quarter Return
Q3
2013 27.24% |
|
Lowest
Quarter Return
Q3
2011 -27.42% |
Average
Annual Total Returns (for the Periods Ended December 31, 2015)
After-tax
returns shown in the table are calculated using the historical highest
individual federal marginal income tax rates and do not reflect the impact of
any state or local tax. Actual after-tax returns depend on an investor's tax
situation and may differ from those shown. After-tax returns shown are not
relevant to investors who hold Shares through tax-deferred arrangements, such as
401(k) plans or individual retirement accounts ("IRAs").
|
|
|
|
|
|
1
year |
5
years |
Since
inception
(12/8/2009) |
Returns Before
Taxes |
6.77% |
7.39% |
7.78% |
Returns After
Taxes on Distributions |
5.97% |
6.72% |
7.20% |
Returns After
Taxes on Distributions and Sale of Fund Shares |
3.83% |
5.46% |
5.87% |
AlphaShares
China Technology Index (reflects no deduction for fees, expenses or
taxes) |
4.26% |
7.09% |
7.67% |
MSCI China
Index (reflects no deduction for fees, expenses or
taxes) |
-7.82% |
0.65% |
1.01% |
MANAGEMENT
OF THE FUND
Guggenheim
Funds Investment Advisors, LLC serves as the investment adviser of the Fund. The
portfolio managers who are currently responsible for the day-to-day management
of the Fund’s portfolio are Michael P. Byrum, CFA, Senior Managing Director and
Portfolio Manager, James R. King, CFA, Managing Director and Portfolio Manager,
and Cindy Gao, ETF Analyst. Messrs. Byrum and King have managed the
Fund’s portfolio since December 2013. Ms. Gao has managed the Fund's portfolio
since December 2014.
PURCHASE
AND SALE OF FUND SHARES
The
Fund will issue and redeem Shares at NAV only in a large specified number of
Shares called a “Creation Unit” or multiples thereof with
certain large institutional investors .
A Creation Unit consists of 50,000 Shares. Creation Unit transactions are
principally conducted
in exchange for the deposit or delivery of securities specified by the
Fund .
Except
when aggregated in Creation Units, the Shares are not redeemable securities of
the Fund. Individual
Shares of the Fund may only be purchased and sold in secondary market
transactions through brokers and
may not be purchased or redeemed directly with the Fund .
Shares of the Fund are listed for trading on NYSE Arca and, because Shares trade
at market prices rather than NAV, Shares of the Fund may trade at a price
greater than (premium) or less than (discount) NAV.
TAX
INFORMATION
The
Fund’s distributions are taxable and will generally be taxed as ordinary income
or capital gains.
PAYMENTS
TO BROKER-DEALERS AND OTHER FINANCIAL INTERMEDIARIES
If
you purchase Shares of the Fund through a broker-dealer or other financial
intermediary, the Investment Adviser or other related companies may pay the
intermediary for the sale of Shares and related services. These payments may
create a conflict of interest by influencing the broker-dealer or other
intermediary and your salesperson to recommend the Fund over another investment.
Ask your salesperson or visit your financial intermediary’s website for more
information.
Guggenheim
Solar ETF (TAN)
INVESTMENT
OBJECTIVE
The
Guggenheim Solar ETF (the "Fund") seeks investment results that correspond
generally to the performance, before the Fund’s fees and expenses, of an equity
index called the MAC Global Solar Energy Index (the “Solar Index” or the
“Index”).
FEES
AND EXPENSES OF THE FUND
This
table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund (“Shares”). Investors purchasing Shares in the secondary
market may be subject to costs (including customary brokerage commissions)
charged by their broker.
|
|
|
|
Annual
Fund Operating Expenses (expenses
that you pay each year
as
a percentage of the value of your investment) |
Management
Fees |
0.50 |
% |
Other
Expenses |
0.38 |
% |
Total
Annual Fund Operating Expenses |
0.88 |
% |
Fee
Waiver and/or Expense Reimbursements1 |
-0.17 |
% |
Total
Annual Fund Operating Expenses After Fee Waiver and/or Expense
Reimbursements |
0.71 |
% |
1 Guggenheim
Funds Investment Advisors, LLC, the Fund's investment adviser (the "Investment
Adviser"), has contractually agreed through December 31, 2019 to waive fees
and/or reimburse expenses to the extent necessary to limit the operating
expenses (excluding interest expenses, a portion of the Fund’s licensing fees,
offering costs, brokerage commissions and other trading expenses, taxes and
extraordinary expenses such as litigation and other expenses not incurred in the
ordinary course of the Fund’s business) ("Operating Expenses") of the Fund to
0.65% of average daily net assets of the Fund. The agreement will expire when it
reaches its termination or when the Investment Adviser ceases to serve as such.
To the extent that the Fund incurs expenses that are excluded from this
limitation, the Fund’s expense ratio will increase.
EXAMPLE
This
Example is intended to help you compare the cost of investing in the Fund with
the cost of investing in other funds. The Example does not take into account
brokerage commissions that you may pay when purchasing or selling
Shares.
The
Example assumes that you invest $10,000 in the Fund for the time periods
indicated and then redeem all of your Shares at the end of those periods. The
Example also assumes that your investment has a 5% return each year and that the
Fund’s operating expenses remain the same. Although your actual costs may be
higher or lower, based on these assumptions your costs would be:
|
|
|
|
|
One
Year |
Three
Years |
Five
Years |
Ten
Years |
$73 |
$281 |
$546 |
$1,304 |
The
above Example reflects applicable contractual expense reimbursement arrangements
for the current duration of the arrangements only.
PORTFOLIO
TURNOVER
The
Fund pays transaction costs, such as commissions, when it buys and sells
securities (or “turns over” its portfolio). A higher portfolio turnover rate may
indicate higher transaction costs and may result in higher taxes when Shares are
held in a taxable account. These costs, which are not reflected in annual fund
operating expenses or in the Example, affect the Fund’s performance. During the
most recent fiscal year, the Fund’s portfolio turnover rate was 53% of the
average value of its portfolio.
PRINCIPAL
INVESTMENT STRATEGIES
The
Fund, using a “passive” or “indexing” investment approach, seeks investment
results that correspond generally to the performance, before the Fund’s fees and
expenses, of the Solar Index. As of November 30, 2016, the Solar Index was
comprised of approximately 22 securities selected based on the relative
importance of solar power within the company’s business model, as determined by
MAC Indexing LLC (“MAC” or the “Index Provider”). The market capitalizations of
securities included in the Index range from approximately $211 million to
approximately $3.2 billion. The Index is designed to track companies within the
following business segments of the solar energy industry: companies that produce
solar power equipment and products for end-users, companies that produce
fabrication products (such as the equipment used by solar cell and module
producers to manufacture solar power equipment) or services (such as companies
specializing in the solar cell manufacturing or the provision of consulting
services to solar cell and module producers) for solar power equipment
producers, companies that supply raw materials or components to solar power
equipment producers or integrators; companies that derive a significant portion
of their business from solar power system sales, distribution, installation,
integration or financing; and companies that specialize in selling electricity
derived from solar power. The Index is comprised of equity securities, including
American depositary receipts (“ADRs”) and global depositary receipts (“GDRs”),
traded in developed markets. The depositary receipts included in the Index may
be sponsored or unsponsored. The Index Provider currently defines developed
markets as the following countries – Australia, Austria, Belgium, Canada,
Denmark, Finland, France, Germany, Hong Kong, Ireland, Italy, Japan, the
Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden,
Switzerland, the United Kingdom and the United States. While the equity
securities comprising the Index are traded in developed markets, the issuers of
such securities may be located in emerging markets. Emerging market countries
are countries that major international financial institutions, such as the World
Bank, generally consider to be less economically mature than developed nations.
Emerging market countries can include every nation in the world except the
United States, Canada, Japan, Australia, New Zealand and most countries located
in Western Europe.
The
Fund will invest at least 90% of its total assets in common stock, ADRs and GDRs
that comprise the Index and depositary receipts representing common stocks
included in the Index (or underlying securities representing ADRs and GDRs
included in the Index). The Fund has adopted a policy that requires the Fund to
provide shareholders with at least 60 days notice prior to any material change
in this policy or the Index. The Board of Trustees (the "Board") of Claymore
Exchange-Traded Fund Trust 2 (the "Trust") may change the Fund’s investment
strategy and other policies without shareholder approval, except as otherwise
indicated.
The
Fund may invest directly in one or more underlying securities represented by the
depositary receipts included in the Index under the following limited
circumstances: (a) when market conditions result in the underlying security
providing improved liquidity relative to the depositary receipt; (b) when a
depositary receipt is trading at a significantly different price than its
underlying security; or (c) the timing of trade execution is improved due to the
local market in which an underlying security is traded being open at different
times than the market in which the security’s corresponding depositary receipt
is traded.
The
Fund generally will invest in all of the securities comprising the Index in
proportion to their weightings in the Index. However, under various
circumstances, it may not be possible or practicable to purchase all of the
securities in the Index in those weightings. In those circumstances, the Fund
may purchase a sample of the securities in the Index in proportions expected by
the Investment Adviser to replicate generally the performance of the Index as a
whole. There
may also be instances when the Investment Adviser may choose to overweight
another security in the Index or purchase (or sell) securities not in the Index
which the Investment Adviser believes are appropriate to substitute for one or
more Index components, in seeking to accurately track the Index, such as: (i)
regulatory requirements possibly affecting the Fund’s ability to hold a security
in the Index, (ii) restrictions or requirements in local markets possibly
rendering it infeasible or inefficient for the Fund to purchase or sell a
security in the Index, or (iii) liquidity concerns possibly affecting the Fund’s
ability to purchase or sell a security in the Index. In
addition, from time to time securities are added to or removed from the Index.
The Fund may sell securities that are represented in the Index or purchase
securities that are not yet represented in the Index in anticipation of their
removal from or addition to the Index pursuant to scheduled reconstitutions and
rebalancings of the Index. The Fund will concentrate its investments (i.e.,
invest
25% or more of its assets) in securities issued by companies whose principal
business activities are in the same industry
or group of industries to the extent the Index is so concentrated. As of August
31, 2016, the energy and industrials sectors each represented a substantial
portion of the Index.
PRINCIPAL
RISKS
Investors
should consider the principal risks associated with investing in the Fund, which
are summarized below. The value of an investment in the Fund will fluctuate, and
you could lose money by investing in the Fund. The Fund may not achieve its
investment objective.
Asset
Class Risk —The
securities in the Fund’s portfolio may underperform the returns of other
securities or indices that track other industries, markets, asset classes or
sectors.
Concentration
Risk —If
the Index concentrates in an industry or group of industries, the Fund’s
investments will be concentrated accordingly. In such event, the value of the
Fund’s Shares may rise and fall more than the value of shares of a fund that
invests in securities of companies in a broader range of industries.
Depositary
Receipt Risk —
The
Fund may hold the securities of non-U.S. companies in the form of depositary
receipts. The underlying securities of the depositary receipts in the Fund’s
portfolio are subject to fluctuations in foreign currency exchange rates that
may affect the value of the Fund’s portfolio. In addition, the value of the
securities underlying the depositary receipts or shares may change materially
when the U.S. markets are not open for trading. Investments in the underlying
foreign securities also involve political and economic risks distinct from those
associated with investing in the securities of U.S. issuers.
Energy
Sector Risk —The
energy sector is often cyclical and highly dependent on commodities prices.
Securities prices for companies in the energy sector may be affected by a
variety of factors, including, among others, worldwide energy prices,
exploration costs, energy conservation efforts, changes in currency exchange
rates, government regulation and market, economic and political risks of the
countries where energy companies are located or do business. The Fund may be
adversely affected by events or developments negatively impacting the energy
sector or commodities issuers within the energy sector.
Equity
Securities Risk —
The
prices of equity securities generally fluctuate in value more than fixed-income
investments, may rise or fall rapidly or unpredictably and may reflect real or
perceived changes in the issuing company’s financial condition and changes in
the overall market or economy. A decline in the value of equity securities held
by the Fund will adversely affect the value of your investment in the Fund.
Common stocks generally represent the riskiest investment in a company and
dividend payments (if declared) to preferred stockholders generally rank junior
to payments due to a company's debtholders. The Fund may lose a substantial
part, or even all, of its investment in a company’s stock.
Foreign
Securities and Currency Risk —Foreign
securities carry unique or additional risks when compared to U.S.
securities, including currency fluctuations, adverse political and economic
developments, unreliable or untimely information, less liquidity, limited legal
recourse and higher transactional costs.
Industrials
Sector Risk —The
industrials sector may be adversely affected by supply and demand for products
and services, product obsolescence, claims for environmental damage and product
liability, imposition of import controls and general economic conditions, among
other factors. The Fund may be adversely affected by events or developments
negatively impacting the industrials sector or issuers within the industrials
sector.
Issuer-Specific
Changes Risk —The
value of an individual security or particular type of security can be more
volatile than the market as a whole and can perform differently from the value
of the market as a whole. The value of securities of smaller issuers can be more
volatile than that of larger issuers.
Market
Price Risk —Shares
are listed for trading on NYSE Arca and are bought and sold in the secondary
market at market prices. The market prices of Shares may fluctuate continuously
during trading hours, in some cases materially, in response to changes in the
net asset value ("NAV") and supply and demand for Shares, among other factors.
Although it is expected that the market price of Shares typically will remain
closely correlated to the NAV, the market price will generally differ from the
NAV because of timing reasons, supply and demand imbalances and other factors.
As a result, the trading prices of Shares may deviate significantly from NAV
during certain periods, especially those of market volatility. The Investment
Adviser cannot predict whether Shares will trade above (premium), below
(discount) or at their NAV. Thus, an investor may pay more than NAV when buying
Shares in the secondary market and receive less than NAV when selling Shares in
the secondary market.
Market
Risk —
The
value of, or income generated by, the securities held by the Fund may fluctuate
rapidly and unpredictably as a result of factors affecting individual companies
or changing economic, political, social or financial market conditions
throughout the world. The performance of these investments may underperform the
general securities markets or other types of securities.
Micro-Cap
Company Risk —Micro-cap
stocks involve substantially greater risks of loss and price fluctuations
because their earnings and revenues tend to be less predictable (and some
companies may be experiencing significant losses), and their share prices tend
to be more volatile and their markets less liquid than companies with larger
market capitalizations.
Non-Correlation
Risk —The
Fund’s return may not match the return of the Index for a number of reasons. For
example, the Fund incurs a number of operating expenses not applicable to the
Index, and incurs costs in buying and selling securities, especially when
rebalancing the Fund’s securities holdings to reflect changes in the composition
of the Index. In addition, the performance of the Fund and the Index may vary
due to asset valuation differences and differences between the Fund's portfolio
and the Index resulting from legal restrictions, cash flows or operational
inefficiencies.
Non-Diversification
Risk —The
Fund is considered non-diversified because it may invest a large portion of its
assets in a small number of issuers. As a result, the Fund is more
susceptible to risks associated with those issuers and the Fund may experience
greater losses and volatility than a more diversified portfolio.
Passive
Management Risk —Unlike
many investment companies, the Fund is not “actively” managed. Therefore, it
would not necessarily sell a security because the security’s issuer was in
financial trouble or defaulted on its obligations under the security, or whose
credit rating was downgraded, unless that security is removed from the Index. In
addition, the Fund will not otherwise take defensive positions in declining
markets unless such positions are reflected in the Index.
Regulatory
and Legal Risk —
U.S.
and non-U.S. governmental agencies and other regulators may implement additional
regulations and legislators may pass new laws that affect the investments held
by the Fund, the strategies used by the Fund or the level of regulation applying
to the Fund. These may impact the investment strategies, performance, costs and
operations of the Fund.
Small-
and Mid-Capitalization Securities Risk —The
Fund is subject to the risk that small- and mid-capitalization securities may
underperform other segments of the equity market or the equity market as a
whole. Securities of small- and mid-capitalization companies may be more
speculative, volatile and less liquid than securities of larger companies.
Small- and mid-capitalization companies tend to have inexperienced management as
well as limited product and market diversification and financial resources, and
may be more vulnerable to adverse developments than large capitalization
companies.
Solar
Energy Company Risk —
The
value of stocks that comprise the energy sector and the prices of energy may
decline. The alternative energy industry can be significantly affected by
obsolescence of existing technology, short product lifecycles, falling prices
and profits, competition from new market entrants and general economic
conditions. This industry can also be significantly affected by fluctuations in
energy prices and supply and demand of alternative energy fuels, energy
conservation, the success of exploration projects, tax incentives, subsidies and
other government regulations and policies. Companies in this industry may be
adversely affected by commodity price volatility, changes in exchange rates,
imposition of import controls, availability of certain inputs and materials
required for production, depletion of resources, technological developments and
labor relations. Recently, the price of oil has declined significantly and
experienced significant volatility, which may materially impact companies
operating in the solar energy sector. Shares of companies involved in the solar
energy sector have historically been more volatile than shares of companies
operating in more established industries.
PERFORMANCE
INFORMATION
The
following chart and table provide some indication of the risks of investing in
the Fund by showing the Fund’s performance from year to year and average annual
returns for the one and five year and since inception periods compared to those
of the Index and a broad measure of market performance. The Fund’s past
performance (before and after taxes) is not necessarily an indication of how the
Fund will perform in the future. Updated performance information is available at
guggenheiminvestments.com.
Calendar
Year Total Returns as of 12/31
The
Fund’s year-to-date
total return was
-34.14% as of September 30, 2016.
|
|
|
|
Highest
Quarter Return
Q2
2013 46.97% |
|
Lowest
Quarter Return
Q3
2011 -54.60% |
Average
Annual Total Returns (for the Periods Ended December 31, 2015)
After-tax
returns shown in the table are calculated using the historical highest
individual federal marginal income tax rates and do not reflect the impact of
any state or local tax. Actual after-tax returns depend on an investor's tax
situation and may differ from those shown. After-tax returns shown are not
relevant to investors who hold Shares through tax-deferred arrangements, such as
401(k) plans or individual retirement accounts ("IRAs").
|
|
|
|
|
|
1
Year |
5
years |
Since
inception
(4/15/2008) |
Return Before
Taxes |
-9.33% |
-12.33% |
-21.67% |
Returns After
Taxes on Distributions |
-9.95% |
-13.69% |
-22.48% |
Returns After
Taxes on Distributions and Sale of Fund Shares |
-5.28% |
-9.30% |
-12.78% |
MAC Global
Solar Energy Index (reflects no deduction for fees, expenses or
taxes) |
-14.62% |
-15.54% |
-23.40% |
MSCI World
Index (reflects no deduction for fees, expenses or
taxes) |
-0.87% |
7.59% |
3.93% |
MANAGEMENT
OF THE FUND
Guggenheim
Funds Investment Advisors, LLC serves
as the investment adviser of the Fund .
The portfolio managers who are currently responsible for the day-to-day
management of the Fund’s portfolio are Michael P. Byrum, CFA, Senior
Managing
Director and Portfolio Manager, James R. King, CFA, Managing Director and
Portfolio Manager, and Cindy Gao, ETF Analyst. Messrs. Byrum and King
have managed the Fund’s portfolio since December 2013. Ms. Gao has managed the
Fund's portfolio since December 2014.
PURCHASE
AND SALE OF FUND SHARES
The
Fund will issue and redeem Shares at NAV only in a large specified number of
Shares called a “Creation Unit” or multiples thereof with
certain large institutional investors .
A Creation Unit consists of 80,000 Shares. Creation Unit transactions are
principally conducted
in exchange for the deposit or delivery of securities specified by the
Fund .
Except
when aggregated in Creation Units, the Shares are not redeemable securities of
the Fund. Individual
Shares of the Fund may only be purchased and sold in secondary market
transactions through brokers and
may not be purchased or redeemed directly with the Fund .
Shares of the Fund are listed for trading on NYSE Arca and, because Shares trade
at market prices rather than NAV, Shares of the Fund may trade at a price
greater than (premium) or less than (discount) NAV.
TAX
INFORMATION
The
Fund’s distributions are taxable and will generally be taxed as ordinary income
or capital gains.
PAYMENTS
TO BROKER-DEALERS AND OTHER FINANCIAL INTERMEDIARIES
If
you purchase Shares of the Fund through a broker-dealer or other financial
intermediary, the Investment Adviser or other related companies may pay the
intermediary for the sale of Shares and related services. These payments may
create a conflict of interest by influencing the broker-dealer or other
intermediary and your salesperson to recommend the Fund over another investment.
Ask your salesperson or visit your financial intermediary’s website for more
information.
Guggenheim
S&P Global Water Index ETF (CGW)
INVESTMENT
OBJECTIVE
The
Guggenheim S&P Global Water Index ETF (the "Fund") seeks investment results
that correspond generally to the performance, before the Fund’s fees and
expenses, of an equity index called the S&P Global Water Index (the “Water
Index” or the “Index”).
FEES
AND EXPENSES OF THE FUND
This
table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund (“Shares”). Investors purchasing Shares in the secondary
market may be subject to costs (including customary brokerage commissions)
charged by their broker.
|
|
|
|
Annual
Fund Operating Expenses (expenses
that you pay each year as a percentage of the value of your
investment) |
Management
Fees |
0.50 |
% |
Other
Expenses |
0.14 |
% |
Total
Annual Fund Operating Expenses |
0.64 |
% |
Fee
Waiver and/or Expense Reimbursements1 |
0.00 |
% |
Total
Annual Fund Operating Expenses After Fee Waiver and/or Expense
Reimbursements |
0.64 |
% |
|
|
1 |
Guggenheim
Funds Investment Advisors, LLC, the Fund's investment adviser (the
"Investment Adviser") has contractually agreed through December 31, 2019
to waive fees and/or reimburse expenses to the extent necessary to limit
the operating expenses (excluding interest expenses, a portion of the
Fund’s licensing fees, brokerage commissions and other trading expenses,
taxes and extraordinary expenses such as litigation and other expenses not
incurred in the ordinary course of the Fund’s business) ("Operating
Expenses") of the Fund to 0.65% of average daily net assets of the Fund.
The agreement will expire when it reaches its termination or when the
Investment Adviser ceases to serve as such. To the extent that the Fund
incurs expenses that are excluded from this limitation, the Fund’s expense
ratio will increase. |
EXAMPLE
This
Example is intended to help you compare the cost of investing in the Fund with
the cost of investing in other funds. The Example does not take into account
brokerage commissions that you may pay when purchasing or selling
Shares.
The
Example assumes that you invest $10,000 in the Fund for the time periods
indicated and then redeem all of your Shares at the end of those periods. The
Example also assumes that your investment has a 5% return each year and that the
Fund’s operating expenses remain the same. Although your actual costs may be
higher or lower, based on these assumptions your costs would be:
|
|
|
|
|
One
Year |
Three
Years |
Five
Years |
Ten
Years |
$65 |
$259 |
$469 |
$1,073 |
The
above Example reflects applicable contractual expense reimbursement arrangements
for the current duration of the arrangements only.
PORTFOLIO
TURNOVER
The
Fund pays transaction costs, such as commissions, when it buys and sells
securities (or “turns over” its portfolio). A higher portfolio turnover rate may
indicate higher transaction costs and may result in higher taxes when Shares are
held in a taxable account. These costs, which are not reflected in annual fund
operating expenses or in the Example, affect the Fund’s performance. During the
most recent fiscal year, the Fund’s portfolio turnover rate was 6% of the
average value of its portfolio.
PRINCIPAL
INVESTMENT STRATEGIES
The
Fund, using a “passive” or “indexing” investment approach, seeks investment
results that correspond generally to the performance, before the Fund’s fees and
expenses, of the Water Index. At each rebalancing the Water Index is comprised
of 50 equity securities selected, based on investment and other criteria, from a
universe of companies listed on global developed market exchanges. Standard
& Poor’s Financial Services LLC, a subsidiary of The McGraw-Hill Companies
("S&P"), generally defines “developed markets” as the capital markets of
those countries with high levels of per capita income and strict market
regulation resulting in greater transparency. Specifically, all or any subset of
the following countries/regions are currently considered to be developed markets
— Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Hong
Kong, Ireland, Israel, Italy, Japan, Luxembourg, the Netherlands, New Zealand,
Norway, Portugal, Singapore, South Korea, Spain, Sweden, Switzerland, the United
Kingdom and the United States. The universe of companies includes all companies
classified by Standard & Poor's Global Industry Classifications as being
associated (in a manner representing a major component of such companies’
business) with the global demand for water, including water utilities,
infrastructure, equipment, instruments and materials. Total market
capitalization and float-adjusted market capitalization of securities in the
Index must be at least $250 million and $100 million, respectively, at the time
of each reconstitution, which includes small-, mid-, and large-capitalization
securities as defined by S&P. The companies in the universe are selected
using criteria as identified by S&P.
The
Fund will invest at least 90% of its total assets in common stock and American
depositary receipts (“ADRs”) that comprise the Index and depositary receipts
representing common stocks included in the Index (or underlying securities
representing ADRs included in the Index). The depositary receipts included in
the Index may be sponsored or unsponsored. The Fund has adopted a policy that
requires the Fund to provide shareholders with at least 60 days notice prior to
any material change in this policy or the Index. The Board of Trustees (the
"Board") of Claymore Exchange-Traded Fund Trust 2 (the "Trust") may change the
Fund’s investment strategy and other policies without shareholder approval,
except as otherwise indicated.
The
Fund may invest directly in one or more underlying securities represented by the
depositary receipts included in the Index under the following limited
circumstances: (a) when market conditions result in the underlying security
providing improved liquidity relative to the depositary receipt; (b) when a
depositary receipt is trading at a significantly different price than its
underlying security; or (c) the timing of trade execution is improved due to the
local market in which an underlying security is traded being open at different
times than the market in which the security’s corresponding depositary receipt
is traded.
The
Fund generally will invest in all of the securities comprising the Index in
proportion to their weightings in the Index. However, under various
circumstances, it may not be possible or practicable to purchase all of the
securities in the Index in those weightings. In those circumstances, the Fund
may purchase a sample of the securities in the Index in proportions expected by
the Investment Adviser to replicate generally the performance of the Index as a
whole. There
may also be instances when the Investment Adviser may choose to overweight
another security in the Index or purchase (or sell) securities not in the Index
which the Investment Adviser believes are appropriate to substitute for one or
more Index components, in seeking to accurately track the Index, such as: (i)
regulatory requirements possibly affecting the Fund’s ability to hold a security
in the Index, (ii) restrictions or requirements in local markets possibly
rendering it infeasible or inefficient for the Fund to purchase or sell a
security in the Index, or (iii) liquidity concerns possibly affecting the Fund’s
ability to purchase or sell a security in the Index. In
addition, from time to time securities are added to or removed from the Index.
The Fund may sell securities that are represented in the Index or purchase
securities that are not yet represented in the Index in anticipation of their
removal from or addition to the Index pursuant to scheduled reconstitutions and
rebalancings of the Index. The Fund will concentrate its investments (i.e.,
invest
25% or more of its assets) in securities issued by companies whose principal
business activities are in the same industry
or group of industries to the extent the Index is so concentrated. As of August
31, 2016, the industrials and utilities sectors each represented a substantial
portion of the Index.
PRINCIPAL
RISKS
Investors
should consider the principal risks associated with investing in the Fund, which
are summarized below. The value of an investment in the Fund will fluctuate, and
you could lose money by investing in the Fund. The Fund may not achieve its
investment objective.
Asset
Class Risk —The
securities in the Fund’s portfolio may underperform the returns of other
securities or indices that track other industries, markets, asset classes or
sectors.
Concentration
Risk —If
the Index concentrates in an industry or group of industries, the Fund’s
investments will be concentrated accordingly. In such event, the value of the
Fund’s Shares may rise and fall more than the value of shares of a fund that
invests in securities of companies in a broader range of industries.
Depositary
Receipt Risk —
The
Fund may hold the securities of non-U.S. companies in the form of depositary
receipts. The underlying securities of the depositary receipts in the Fund’s
portfolio are subject to fluctuations in foreign currency exchange rates that
may affect the value of the Fund’s portfolio. In addition, the value of the
securities underlying the depositary receipts or shares may change materially
when the U.S. markets are not open for trading. Investments in the underlying
foreign securities also involve political and economic risks distinct from those
associated with investing in the securities of U.S. issuers.
Equity
Securities Risk —
The
prices of equity securities generally fluctuate in value more than fixed-income
investments, may rise or fall rapidly or unpredictably and may reflect real or
perceived changes in the issuing company’s financial condition and changes in
the overall market or economy. A decline in the value of equity securities held
by the Fund will adversely affect the value of your investment in the Fund.
Common stocks generally represent the riskiest investment in a company and
dividend payments (if declared) to preferred stockholders generally rank junior
to payments due to a company's debtholders. The Fund may lose a substantial
part, or even all, of its investment in a company’s stock.
Foreign
Securities and Currency Risk —Foreign
securities carry unique or additional risks when compared to U.S.
securities, including currency fluctuations, adverse political and economic
developments, unreliable or untimely information, less liquidity, limited legal
recourse and higher transactional costs.
Industrials
Sector Risk —The
industrials sector may be adversely affected by supply and demand for products
and services, product obsolescence, claims for environmental damage and product
liability, imposition of import controls and general economic conditions, among
other factors. The Fund may be adversely affected by events or developments
negatively impacting the industrials sector or issuers within the industrials
sector.
Issuer-Specific
Changes Risk —The
value of an individual security or particular type of security can be more
volatile than the market as a whole and can perform differently from the value
of the market as a whole. The value of securities of smaller issuers can be more
volatile than that of larger issuers.
Market
Price Risk —Shares
are listed for trading on NYSE Arca and are bought and sold in the secondary
market at market prices. The market prices of Shares may fluctuate continuously
during trading hours, in some cases materially, in response to changes in the
net asset value ("NAV") and supply and demand for Shares, among other factors.
Although it is expected that the market price of Shares typically will remain
closely correlated to the NAV, the market price will generally differ from the
NAV because of timing reasons, supply and demand imbalances and other factors.
As a result, the trading prices of Shares may deviate significantly from NAV
during certain periods, especially those of market volatility. The Investment
Adviser cannot predict whether Shares will trade above (premium), below
(discount) or at their NAV. Thus, an investor may pay more than NAV when buying
Shares in the secondary market and receive less than NAV when selling Shares in
the secondary market.
Market
Risk —
The
value of, or income generated by, the securities held by the Fund may fluctuate
rapidly and unpredictably as a result of factors affecting individual companies
or changing economic, political, social or financial market conditions
throughout the world. The performance of these investments may underperform the
general securities markets or other types of securities.
Non-Correlation
Risk —The
Fund’s return may not match the return of the Index for a number of reasons. For
example, the Fund incurs a number of operating expenses not applicable to the
Index, and incurs costs in buying and selling securities, especially when
rebalancing the Fund’s securities holdings to reflect changes in the composition
of the Index. In addition, the performance of the Fund and the Index may vary
due to asset valuation differences and differences between the Fund's portfolio
and the Index resulting from legal restrictions, cash flows or operational
inefficiencies.
Non-Diversification
Risk —The
Fund is considered non-diversified because it may invest a large portion of its
assets in a small number of issuers. As a result, the Fund is more
susceptible to risks associated with those issuers and the Fund may experience
greater losses and volatility than a more diversified portfolio.
Passive
Management Risk —Unlike
many investment companies, the Fund is not “actively” managed. Therefore, it
would not necessarily sell a security because the security’s issuer was in
financial trouble or defaulted on its obligations under the security, or whose
credit rating was downgraded, unless that security is removed from the Index. In
addition, the Fund will not otherwise take defensive positions in declining
markets unless such positions are reflected in the Index.
Regulatory
and Legal Risk —
U.S.
and non-U.S. governmental agencies and other regulators may implement additional
regulations and legislators may pass new laws that affect the investments held
by the Fund, the strategies used by the Fund or the level of regulation applying
to the Fund. These may impact the investment strategies, performance, costs and
operations of the Fund.
Small-
and Mid-Capitalization Securities Risk —The
Fund is subject to the risk that small- and mid-capitalization securities may
underperform other segments of the equity market or the equity market as a
whole. Securities of small- and mid-capitalization companies may be more
speculative, volatile and less liquid than securities of larger companies.
Small- and mid-capitalization companies tend to have inexperienced management as
well as limited product and market diversification and financial resources, and
may be more vulnerable to adverse developments than large capitalization
companies.
Utilities
Sector Risk —Stock
prices for companies in the utilities sector are affected by supply and demand,
operating costs, government regulation, environmental factors, liabilities for
environmental damage and general civil liabilities and rate caps or rate
changes. Certain utility companies have experienced full or partial deregulation
in recent years. Deregulation may permit certain utility companies to earn more
than their traditional regulated rates of return; however, some deregulated
companies face greater competition and may be forced to defend their core
business and may be less profitable. The Fund may be adversely affected by
events or developments negatively impacting the utilities sector or issuers
within the utilities sector.
Water-Related
Company Risk —
Adverse
developments related to water-related companies may significantly affect the
value of the securities held by the Fund. In particular, water-related companies
can be affected by technological changes, climactic events, environmental
considerations, water conservation, taxes, additional government regulation,
including the increased cost of compliance, inflation, an increase in the cost
of raw materials, an increase in interest rates and changes in consumer
sentiment and spending.
PERFORMANCE
INFORMATION
The
following chart and table provide some indication of the risks of investing in
the Fund by showing the Fund’s performance from year to year and average annual
returns for the one and five year and since inception periods compared to those
of the Index and a broad measure of market performance. The Fund’s past
performance (before and after taxes) is not necessarily an indication of how the
Fund will perform in the future. Updated performance information is available at
guggenheiminvestments.com.
Calendar
Year Total Returns as of 12/31
The
Fund’s year-to-date
total return was
13.49% as of September 30, 2016.
|
|
|
|
Highest
Quarter Return
Q2
2009 28.83% |
|
Lowest
Quarter Return
Q4
2008 -22.60% |
Average
Annual Total Returns (for the
Periods
Ended December 31, 2015)
After-tax
returns shown in the table are calculated using the historical highest
individual federal marginal income tax rates and do not reflect the impact of
any state or local tax. Actual after-tax returns depend on an investor's tax
situation and may differ from those shown. After-tax returns shown are not
relevant to investors who hold Shares through tax-deferred arrangements, such as
401(k) plans or individual retirement accounts ("IRAs").
|
|
|
|
|
|
1
year |
5
Years |
Since
inception
(5/14/2007) |
Returns Before
Taxes |
-1.80% |
7.45% |
3.55% |
Returns After
Taxes on Distributions |
-2.50% |
6.68% |
2.63% |
Returns After
Taxes on Distributions and Sale of Fund Shares |
-1.02% |
5.49% |
2.32% |
S&P Global
Water Index (reflects no deduction for fees, expenses or
taxes) |
-1.50% |
7.79% |
4.07% |
MSCI World
Index (reflects no deduction for fees, expenses or
taxes) |
-0.87% |
7.59% |
2.63% |
Dow Jones
World Utilities Index (reflects no deduction for fees, expenses or
taxes) |
-7.51% |
2.02% |
-2.01% |
MANAGEMENT
OF THE FUND
Guggenheim
Funds Investment Advisors, LLC serves
as the investment adviser of the Fund .
The portfolio managers who are currently responsible for the day-to-day
management of the Fund’s portfolio are Michael
P. Byrum, CFA, Senior
Managing
Director and Portfolio Manager, James R. King, CFA, Managing Director and
Portfolio Manager, and Cindy Gao, ETF Analyst. Each portfolio manager
has
managed
the Fund’s portfolio since December 2013.
PURCHASE
AND SALE OF FUND SHARES
The
Fund will issue and redeem Shares at NAV only in a large specified number of
Shares called a “Creation Unit” or multiples thereof with
certain large institutional investors .
A Creation Unit consists of 80,000 Shares. Creation Unit transactions are
principally conducted
in exchange for the deposit or delivery of securities specified by the
Fund .
Except
when aggregated in Creation Units, the Shares are not redeemable securities of
the Fund. Individual
Shares of the Fund may only be purchased and sold in secondary market
transactions through brokers and
may not be purchased or redeemed directly with the Fund .
Shares of the Fund are listed for trading on NYSE Arca and, because Shares trade
at market prices rather than NAV, Shares of the Fund may trade at a price
greater than (premium) or less than (discount) NAV.
TAX
INFORMATION
The
Fund’s distributions are taxable and will generally be taxed as ordinary income
or capital gains.
PAYMENTS
TO BROKER-DEALERS AND OTHER FINANCIAL INTERMEDIARIES
If
you purchase Shares of the Fund through a broker-dealer or other financial
intermediary, the Investment Adviser or other related companies may pay the
intermediary for the sale of Shares and related services. These payments may
create a conflict of interest by influencing the broker-dealer or other
intermediary and your salesperson to recommend the Fund over another investment.
Ask your salesperson or visit your financial intermediary’s website for more
information.
Guggenheim
S&P High Income Infrastructure ETF (GHII)
INVESTMENT
OBJECTIVE
The
Guggenheim S&P High Income Infrastructure ETF (the "Fund") seeks
investment results that correspond generally to the performance, before the
Fund’s fees and expenses, of an equity index called the S&P High Income
Infrastructure Index (the “Infrastructure Index" or the "Index”).
FEES
AND EXPENSES OF THE FUND
This
table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund (“Shares”). Investors purchasing Shares in the secondary
market may be subject to costs (including customary brokerage commissions)
charged by their broker.
|
|
|
|
Annual
Fund Operating Expenses (expenses
that you pay each year as a percentage of the value of your
investment) |
Management
Fees |
0.45 |
% |
Other
Expenses |
0.00 |
% |
Total
Annual Fund Operating Expenses |
0.45 |
% |
EXAMPLE
This
Example is intended to help you compare the cost of investing in the Fund with
the cost of investing in other funds. The Example does not take into account
brokerage commissions that you may pay when purchasing or selling
Shares.
The
Example assumes that you invest $10,000 in the Fund for the time periods
indicated and then redeem all of your Shares at the end of those periods. The
Example also assumes that your investment has a 5% return each year and that the
Fund’s operating expenses remain the same. Although your actual costs may be
higher or lower, based on these assumptions your costs would be:
|
|
|
|
|
One
Year |
Three
Years |
Five
Years |
Ten
Years |
$46 |
$199 |
$365 |
$847 |
PORTFOLIO
TURNOVER
The
Fund pays transaction costs, such as commissions, when it buys and sells
securities (or “turns over” its portfolio). A higher portfolio turnover rate may
indicate higher transaction costs and may result in higher taxes when Shares are
held in a taxable account. These costs, which are not reflected in annual fund
operating expenses or in the Example, affect the Fund’s performance. During the
most recent fiscal year, the Fund’s portfolio turnover rate was 61% of the
average value of its portfolio.
PRINCIPAL
INVESTMENT STRATEGIES
The
Fund, using a “passive” or “indexing” investment approach, seeks investment
results that correspond generally to the performance, before the Fund’s fees and
expenses, of the Infrastructure Index. The Infrastructure Index is designed to
measure and monitor the performance of 50 high-yielding global equity securities
of companies that engage in various infrastructure-related sub-industries. Index
constituents must meet size, listing and liquidity requirements and also be part
of the S&P Global BMI Index, which is a rules-based index that measures
global stock market performance.
Index
constituents must be equity securities of companies classified in one of the
infrastructure clusters (the “Infrastructure Clusters”) determined by the
S&P Dow Jones Index Group, based on the Global Industry Classification
Standard (“GICS”®) sub-industry classifications as follows:
Energy
Infrastructure Cluster:
Oil
& Gas Storage & Transportation Sub-Industry
Transportation
Infrastructure Cluster:
Airport
Services Sub-Industry
Highway
& Railtracks Sub-Industry
Marine
Ports & Services Sub-Industry
Utilities
Infrastructure Cluster:
Electric
Utilities Sub-Industry
Gas
Utilities Sub-Industry
Multi
Utilities Sub-Industry
Water
Utilities Sub-Industry
Securities
in the Infrastructure Clusters must have a float-adjusted market capitalization
(i.e., a market capitalization that is calculated based on the number of shares
that are readily available in the market rather than all shares outstanding)
greater than $250 million, a three-month average daily value traded of $1
million or higher and be listed on a developed market stock exchange. The top 50
highest-yielding securities that meet these criteria (ranked by 12-month
dividend yield) are selected for inclusion in the Infrastructure
Index.
The
Fund will invest at least 80% of its total assets in common stocks that comprise
the Index and depositary receipts representing common stocks included in the
Index. The Fund has adopted a policy that requires the Fund to provide
shareholders with at least 60 days notice prior to any change in this policy
or a material change to the Index. The Board of Trustees (the “Board”)
of the Claymore Exchange-Traded Fund Trust 2 (the “Trust”) may change the Fund’s
investment strategy and other policies without shareholder approval, except as
otherwise indicated.
The
Fund generally will invest in all of the securities comprising the Index in
proportion to their weightings in the Index. However, under various
circumstances, it may not be possible or practicable to purchase all of the
securities in the Index in those weightings. In those circumstances, the Fund
may purchase a sample of the securities in the Index in proportions expected by
the Investment Adviser to replicate generally the performance of the Index as a
whole. There
may also be instances when the Investment Adviser may choose to overweight
another security in the Index or purchase (or sell) securities not in the Index
which the Investment Adviser believes are appropriate to substitute for one or
more Index components, in seeking to accurately track the Index, such as: (i)
regulatory requirements possibly affecting the Fund’s ability to hold a security
in the Index, (ii) restrictions or requirements in local markets possibly
rendering it infeasible or inefficient for the Fund to purchase or sell a
security in the Index, or (iii) liquidity concerns possibly affecting the Fund’s
ability to purchase or sell a security in the Index. In
addition, from time to time securities are added to or removed from the Index.
The Fund may sell securities that are represented in the Index or purchase
securities that are not yet represented in the Index in anticipation of their
removal from or addition to the Index pursuant to scheduled reconstitutions and
rebalancings of the Index. The Fund will concentrate its investments (i.e.,
invest
25% or more of its assets) in securities issued by companies whose principal
business activities are in the same industry
or group of industries to the extent the Index is so concentrated. As
of August 31, 2016, the utilities, energy and industrials sectors each
represented a substantial portion of the Index.
PRINCIPAL
RISKS
Investors
should consider the principal risks associated with investing in the Fund, which
are summarized below. The value of an investment in the Fund will fluctuate, and
you could lose money by investing in the Fund. The Fund may not achieve its
investment objective.
Asset
Class Risk —The
securities in the Fund’s portfolio may underperform the returns of other
securities or indices that track other industries, markets, asset classes or
sectors.
Concentration
Risk —If
the Index concentrates in an industry or group of industries, the Fund’s
investments will be concentrated accordingly. In such event, the value of the
Fund’s Shares may rise and fall more than the value of shares of a fund that
invests in securities of companies in a broader range of industries.
Depositary
Receipt Risk —
The
Fund may hold the securities of non-U.S. companies in the form of depositary
receipts. The underlying securities of the depositary receipts in the Fund’s
portfolio are subject to fluctuations in foreign currency exchange rates that
may affect the value of the Fund’s portfolio. In addition, the value of the
securities underlying the depositary receipts or shares may change materially
when the U.S. markets are not open
for
trading. Investments in the underlying foreign securities also involve political
and economic risks distinct from those associated with investing in the
securities of U.S. issuers.
Energy
Sector Risk —The
energy sector is often cyclical and highly dependent on commodities prices.
Securities prices for companies in the energy sector may be affected by a
variety of factors, including, among others, worldwide energy prices,
exploration costs, energy conservation efforts, changes in currency exchange
rates, government regulation and market, economic and political risks of the
countries where energy companies are located or do business. The Fund may be
adversely affected by events or developments negatively impacting the energy
sector or commodities issuers within the energy sector.
Equity
Securities Risk —
The
prices of equity securities generally fluctuate in value more than fixed-income
investments, may rise or fall rapidly or unpredictably and may reflect real or
perceived changes in the issuing company’s financial condition and changes in
the overall market or economy. A decline in the value of equity securities held
by the Fund will adversely affect the value of your investment in the Fund.
Common stocks generally represent the riskiest investment in a company and
dividend payments (if declared) to preferred stockholders generally rank junior
to payments due to a company's debtholders. The Fund may lose a substantial
part, or even all, of its investment in a company’s stock.
Foreign
Securities and Currency Risk —Foreign
securities carry unique or additional risks when compared to U.S.
securities, including currency fluctuations, adverse political and economic
developments, unreliable or untimely information, less liquidity, limited legal
recourse and higher transactional costs.
Industrials
Sector Risk —The
industrials sector may be adversely affected by supply and demand for products
and services, product obsolescence, claims for environmental damage and product
liability, imposition of import controls and general economic conditions, among
other factors. The Fund may be adversely affected by events or developments
negatively impacting the industrials sector or issuers within the industrials
sector.
Infrastructure
Risk —
Companies
within one of the Infrastructure Clusters that comprise the Index are subject to
a variety of factors that may adversely affect their business or operations,
including high interest costs in connection with capital construction and
improvement programs, high leverage, costs associated with compliance with and
changes in environmental and other regulations, difficulty in raising capital in
adequate amounts and on reasonable terms in periods of high inflation and
unsettled capital markets or government budgetary constraints that impact
publicly funded projects, the effects of economic slowdown or recession and
surplus capacity, increased competition from other providers of services,
uncertainties concerning the availability of fuel at reasonable prices, the
effects of energy conservation policies and other factors.
Issuer-Specific
Changes Risk —The
value of an individual security or particular type of security can be more
volatile than the market as a whole and can perform differently from the value
of the market as a whole. The value of securities of smaller issuers can be more
volatile than that of larger issuers.
Market
Price Risk —Shares
are listed for trading on NYSE Arca and are bought and sold in the secondary
market at market prices. The market prices of Shares may fluctuate continuously
during trading hours, in some cases materially, in response to changes in the
net asset value ("NAV") and supply and demand for Shares, among other factors.
Although it is expected that the market price of Shares typically will remain
closely correlated to the NAV, the market price will generally differ from the
NAV because of timing reasons, supply and demand imbalances and other factors.
As a result, the trading prices of Shares may deviate significantly from NAV
during certain periods, especially those of market volatility. The Investment
Adviser cannot predict whether Shares will trade above (premium), below
(discount) or at their NAV. Thus, an investor may pay more than NAV when buying
Shares in the secondary market and receive less than NAV when selling Shares in
the secondary market.
Market
Risk —
The
value of, or income generated by, the securities held by the Fund may fluctuate
rapidly and unpredictably as a result of factors affecting individual companies
or changing economic, political, social or financial market conditions
throughout the world. The performance of these investments may underperform the
general securities markets or other types of securities.
Non-Correlation
Risk —The
Fund’s return may not match the return of the Index for a number of reasons. For
example, the Fund incurs a number of operating expenses not applicable to the
Index, and incurs costs in buying and selling securities, especially when
rebalancing the Fund’s securities holdings to reflect changes in the composition
of the Index. In addition, the performance of the Fund and the Index may vary
due to asset valuation
differences
and differences between the Fund's portfolio and the Index resulting from legal
restrictions, cash flows or operational inefficiencies.
Non-Diversification
Risk —The
Fund is considered non-diversified because it may invest a large portion of its
assets in a small number of issuers. As a result, the Fund is more
susceptible to risks associated with those issuers and the Fund may experience
greater losses and volatility than a more diversified portfolio.
Regulatory
and Legal Risk —
U.S.
and non-U.S. governmental agencies and other regulators may implement additional
regulations and legislators may pass new laws that affect the investments held
by the Fund, the strategies used by the Fund or the level of regulation applying
to the Fund. These may impact the investment strategies, performance, costs and
operations of the Fund.
Small-
and Mid-Capitalization Securities Risk —The
Fund is subject to the risk that small- and mid-capitalization securities may
underperform other segments of the equity market or the equity market as a
whole. Securities of small- and mid-capitalization companies may be more
speculative, volatile and less liquid than securities of larger companies.
Small- and mid-capitalization companies tend to have inexperienced management as
well as limited product and market diversification and financial resources, and
may be more vulnerable to adverse developments than large capitalization
companies.
Utilities
Sector Risk —Stock
prices for companies in the utilities sector are affected by supply and demand,
operating costs, government regulation, environmental factors, liabilities for
environmental damage and general civil liabilities and rate caps or rate
changes. Certain utility companies have experienced full or partial deregulation
in recent years. Deregulation may permit certain utility companies to earn more
than their traditional regulated rates of return; however, some deregulated
companies face greater competition and may be forced to defend their core
business and may be less profitable. The Fund may be adversely affected by
events or developments negatively impacting the utilities sector or issuers
within the utilities sector.
PERFORMANCE
INFORMATION
As
of the date of this Prospectus, the Fund has not yet completed a full calendar
year of investment operations. When the Fund has completed a full calendar year
of investment operations, this section will include charts that show annual
total returns, highest and lowest quarterly returns and average annual total
returns (before and after taxes) compared to the Index and a broad measure of
market performance.
MANAGEMENT
OF THE FUND
Guggenheim
Funds Investment Advisors, LLC serves
as the investment adviser of the Fund .
The
portfolio managers who are currently responsible for the day-to-day management
of the Fund’s portfolio are Michael P. Byrum, CFA, Senior
Managing
Director and Portfolio Manager, James R. King, CFA, Managing Director and
Portfolio Manager, and Adrian Bachman, CFA, Vice President and Portfolio
Manager. Each portfolio manager has managed the Fund’s portfolio since the
Fund's inception in February 2015.
PURCHASE
AND SALE OF FUND SHARES
The
Fund will issue and redeem Shares at NAV only in a large specified number of
Shares called a “Creation Unit” or multiples thereof with
certain large institutional investors .
A Creation Unit consists of 50,000 Shares. Creation Unit transactions are
principally conducted
in exchange for the deposit or delivery of securities specified by the
Fund .
Except
when aggregated in Creation Units, the Shares are not redeemable securities of
the Fund. Individual
Shares of the Fund may only be purchased and sold in secondary market
transactions through brokers and
may not be purchased or redeemed directly with the Fund .
Shares of the Fund are listed for trading on NYSE Arca and, because Shares trade
at market prices rather than NAV, Shares of the Fund may trade at a price
greater than (premium) or less than (discount) NAV.
TAX
INFORMATION
The
Fund’s distributions are taxable and will generally be taxed as ordinary income
or capital gains.
PAYMENTS
TO BROKER-DEALERS AND OTHER FINANCIAL INTERMEDIARIES
If
you purchase Shares of the Fund through a broker-dealer or other financial
intermediary, the Investment Adviser or other related companies may pay the
intermediary for the sale of Shares and related services. These payments
may
create a conflict of interest by influencing the broker-dealer or other
intermediary and your salesperson to recommend the Fund over another investment.
Ask your salesperson or visit your financial intermediary’s website for more
information.
Additional
Information Regarding Investment Objectives and Strategies
The
Board may change a Fund's investment objective and strategies at any time
without shareholder approval. A Fund will provide written notice to shareholders
prior to, or concurrent with, any such change as required by applicable law.
Should a Fund with a name suggesting a specific type of investment or industry
change its policy of investing at least 80% of its assets (net assets, plus the
amount of any borrowings for investment purposes) in the type of investment or
industry suggested by its name, the Fund will provide shareholders at least 60
days' notice prior to making the change. As with any investment, there can be no
guarantee a Fund will achieve its investment objective.
The
Funds’ investment policies, limitations and other guidelines typically apply at
the time an investment is made. As a result, a Fund generally may continue to
hold positions that met a particular investment policy or limitation at the time
the investment was made but subsequently do not meet the investment policy or
limitation.
The
Funds are subject to certain investment policy limitations referred to as
“fundamental policies.” The full text of each Fund’s fundamental policies is
included in the Statement of Additional Information ("SAI").
INDEX
METHODOLOGY
AlphaShares
China All Cap Index
The
Index was created by AlphaShares and is designed to measure and monitor the
performance of publicly issued common equity securities of publicly-traded
companies based in mainland China. Proprietary and third-party financial and
economic information and research are utilized to: (1) identify potential Index
constituents and verify that such companies are based in mainland China; and (2)
calculate the number of shares of each potential Index constituent outstanding,
adjusted for free-float, for usage in the modified float-adjusted market
capitalization weighting methodology. To ensure adequate liquidity, constituents
must have a float-adjusted market capitalization of $500 million or greater for
initial inclusion in the Index. A float-adjusted market capitalization of $400
million or greater is required for ongoing inclusion in the Index. The Index is
rebalanced and reconstituted annually. The AlphaShares Index Committee meets
annually to review the Index methodology. Any changes to the methodology will be
publicly disclosed at least 10 business days prior to implementation of the
change.
AlphaShares
China Technology Index
The
Index was created by AlphaShares and is designed to measure and monitor the
performance of publicly issued common equity securities of publicly-traded
companies based in mainland China, Hong Kong or Macau in the GICS Information
Technology Sector. Proprietary and third-party financial and economic
information and research are utilized to: (1) identify potential Index
constituents and verify that such companies are based in mainland China, Hong
Kong or Macau; and (2) calculate the number of shares of each potential Index
constituent outstanding, adjusted for free-float, for usage in the modified
float-adjusted market capitalization weighting methodology. To ensure adequate
liquidity, constituents must have a market capitalization of $200 million or
greater for initial inclusion in the Index. A market capitalization of $150
million or greater at the time of each rebalance is required for ongoing
inclusion in the Index. The Index is rebalanced semi-annually and reconstituted
annually. The AlphaShares Index Committee meets annually to review the Index
methodology. Any changes to the methodology will be publicly disclosed at least
10 business days prior to implementation of the change.
MAC
Global Solar Energy Index
The
Index is designed to track companies within the following business segments of
the solar power industry: solar power equipment producers; suppliers of
materials or services to solar equipment producers; companies that derive a
significant portion of their business, measured by the methodology set forth
below, from solar power system installation, integration or finance; and
companies that specialize in selling electricity derived from solar power. As
defined by the Index Provider, solar power includes two main
categories:
|
|
1. |
Solar
photovoltaic power, which involves the conversion of sunlight into
electricity through the photovoltaic process;
and |
|
|
2. |
Thermal
solar power, which involves using energy from the sun to heat fluids for
purposes of water or space heating or to produce
electricity. |
As
of November 30, 2016, the Index was comprised of approximately 22 securities
selected based upon the relative importance of solar power within the company’s
business model. To determine whether solar power is a major component of a
company’s business, the Index Provider implements the following
methodology.
|
|
1. |
All
global publicly-traded companies with any connection to the solar industry
are identified by company description database searches and bottom-up
industry research of publicly available information and
databases. |
|
|
2. |
Based
on a review of the company’s public filings and company description
companies that are identified through the initial search are put into
groups (the “Exposure Factor”): |
|
|
• |
Pure-Play
Group—Companies that generate in excess of two thirds of their revenue
from solar related business are considered to have their primary business
in the solar industry and are placed in the Pure-Play Group. These are
assigned an Exposure Factor of 1.0. |
|
|
• |
Medium-Play
Group—Companies that operate in multiple industries, but have significant
exposure to the solar industry-defined as generating less than
approximately two thirds but more than approximately one third of their
revenue from solar related business-are placed in the Medium-Play Group.
These are assigned an Exposure Factor of
0.5. |
|
|
• |
Eliminated
Group—Companies with marginal exposure to the solar industry-defined as
generating less than approximately one third of their revenue from solar
related business-are eliminated from consideration as an Index
constituent. |
|
|
3.
|
From
the securities in the Pure-Play Group and Medium-Play Group, securities
eligible for inclusion in the Index that are not existing constituents of
the Index must be listed on a developed market exchange, as defined above,
have a minimum capitalization greater than or equal to $150 million at the
reference date preceding each reconstitution and have a minimum one month
average daily trading of $750,000 at the reference date preceding each
reconstitution. Securities in Pure-Play Group and Medium-Play Group set
that do not meet these criteria are excluded from consideration as an
Index constituent. Securities that are already in the Index are not
subject to the minimum market capitalization and trading value to remain
constituents of the Index. |
S&P
Global Water Index
The
Index is comprised of 50 securities selected based on the relative importance of
the global water industry within the company’s business model. The Index is
designed to have a balanced representation from different segments of the water
industry consisting of the following two clusters: 25 water utilities and
infrastructure companies (water supply, water utilities, waste water treatment,
water, sewer and pipeline construction, water purification, water well drilling,
water testing) and 25 water equipment and materials companies (water treatment
chemicals, water treatment appliances, pumps and pumping equipment, fluid power
pumps and motors, plumbing equipment, plumbing pipes, fluid meters and counting
devices) based upon S&P’s Capital IQ (“CIQ”) business development and
segment breakdown. To determine whether global demand for water is a major
component of a company’s business, the Index Provider implements the following
methodology:
|
|
1. |
All
companies in the CIQ database with the term “water” in their business are
identified. |
|
|
2. |
From
the resulting list, companies not belonging to the two clusters of the
industry set forth earlier in this paragraph are
excluded. |
|
|
3. |
Based
on a review of CIQ business description and industry classification, are
put into three groups: |
|
|
• |
Primary
Set—Companies whose primary businesses are in the water industry. These
are assigned an Exposure Score of 1. |
|
|
• |
Secondary
Set—Companies which operate in multiple industries, but have significant
exposure to the water industry. These are assigned an Exposure Score of
0.5. |
|
|
• |
Eliminated
Set—Companies with marginal exposure to the water industry. These are
assigned an Exposure Score of 0 and eliminated from consideration as Index
constituents. |
To
ensure investability, a developed market listing and a minimum total market
capitalization and float-adjusted market capitalization of at least $250 million
and $100 million, respectively, is required. The Index is rebalanced
semi-annually. A maximum weight in the Index is set to 10% for each
stock.
S&P
High Income Infrastructure Index
The
Index is designed to measure and monitor the performance of 50 high-yielding
global equity securities of companies that engage in various
infrastructure-related sub-industries. Index constituents must meet size,
listing and liquidity requirements and also be part of the S&P Global BMI
Index, which is a rules-based index that measures global stock market
performance. The Index employs a yield-weighted methodology that weights all
constituents by their twelve month dividend yield over the prior twelve months.
The Index was created by the S&P Dow Jones Index Group and is maintained
by S&P Dow Jones Indices, LLC.
INDEX
CONSTRUCTION
AlphaShares
China All Cap Index
Securities
that meet the following criteria will be included in the Index:
|
|
1. |
Chinese
Companies.
Only companies based in mainland China are eligible for inclusion in the
Index. For purposes of the Index, companies are considered to be based in
mainland China if they are so classified under the S&P BMI Country
Code classification system. |
|
|
2. |
Investability.
To ensure adequate investability, only shares open to foreign ownership
that meet the criteria below are eligible for
inclusion: |
|
|
a. |
China
A-shares are not eligible. |
|
|
b. |
China
B-shares are not eligible. |
|
|
c. |
Hong
Kong listed securities including China H-shares and Red Chips are
eligible. |
|
|
d. |
N-Shares
trading in New York and their equivalents trading in other foreign markets
are eligible. |
|
|
3. |
Equity
Securities.
Only publicly issued common equity securities trading on a major exchange
are eligible for inclusion in the Index. Debt or quasi-debt securities,
such as convertible securities, are not eligible for
inclusion. |
|
|
4. |
Depositary
Receipts.
ADRs, ADSs, GDRs and IDRs are eligible for inclusion in the
Index. |
|
|
5. |
Market
Capitalization.
The Index will include equity securities of companies of all
capitalizations, subject to the requirements below. To ensure adequate
liquidity, constituents must have a float-adjusted market
capitalization of $500 million or greater for initial inclusion in the
Index. A float-adjusted market capitalization of $400 million or
greater at the time of each rebalance is required for ongoing inclusion in
the Index. |
|
|
6. |
Weighting
Methodology.
The Index uses a modified float-adjusted market
capitalization weighting methodology to weight individual positions.
At the time of each rebalance, the weight of any one sector (based on
Standard & Poor's Global Industry Classification Standard) cannot be
greater than 35% of the Index and the weight of any one position
cannot be greater than 5.0% of the Index. |
|
|
7. |
Rebalancing.
Except in unusual circumstances (including, but not limited to,
mergers, spin-offs, delisting, tender offers or the acquisition or
bankruptcy of the company), the Index is rebalanced and reconstituted
annually. Initial
public offerings that meet all the eligibility criteria and fall within
the top twenty stocks by capitalization of the Index will be added. Any
addition will be funded on a pro-rata basis from the remainder of the
Index, net of any deletions. A security will be deleted from
the Index immediately due to bankruptcy, acquisition, delisting or merger
of the company by or into another company, spin-offs, tender offers or
other similar corporate actions. At each quarter end, any security which
has been continuously suspended or halted since the prior quarter will be
deleted from the index at zero value. In the case of such deletions,
including any relisting of suspended securities, no replacements will be
made until the annual rebalance. Any proceeds
|
resulting
from the deletions will be invested on a pro-rata basis over the remainder of
the Index, net of any additions.
AlphaShares
China Technology Index
Securities
that meet the following criteria will be included in the Index:
|
|
a. |
Companies
based in mainland China, Hong Kong or Macau are eligible for inclusion in
the Index. For purposes of the Index, companies are considered to be based
in mainland China, Hong Kong or Macau if they are so classified under the
S&P BMI Country Code classification
system. |
|
|
b. |
In
addition to the foregoing criteria, companies based in Hong Kong or Macau
are only eligible for inclusion in the Index if they derive a majority of
their revenue from mainland China, Hong Kong or Macau. If geographic
revenue data is not available for these companies or is inconclusive, they
cannot be included in the Index. |
|
|
2. |
Technology.
Only companies in the GICS Information Technology Sector are eligible for
inclusion in the Index. |
|
|
3. |
Investability.
To ensure adequate investability, only shares open to foreign ownership
that meet the criteria below are eligible for
inclusion: |
|
|
a. |
China
A-shares are not eligible. |
|
|
b. |
China
B-shares are not eligible. |
|
|
c. |
Hong
Kong listed securities including China H-shares and Red Chips are
eligible. |
|
|
d. |
N-Shares
trading in New York and their equivalents trading in other foreign markets
are eligible. |
|
|
4. |
Equity
Securities.
Only publicly issued common equity securities trading on a major
exchange are eligible for inclusion in the Index. Debt or quasi-debt
securities, such as convertible securities, are not eligible for
inclusion. |
|
|
5. |
Depositary
Receipts.
ADRs, ADSs, GDRs and IDRs are eligible for inclusion in the Index if they
meet the other eligibility criteria set forth in this
section. |
|
|
6. |
Market
Capitalization.
The Index will include equity securities of companies of all
categories of market capitalizations, subject to the requirements
below. To ensure adequate liquidity, constituents must have a
float-adjusted market capitalization of $200 million or greater for
initial inclusion in the Index. A float-adjusted market capitalization of
$150 million or greater at the time of each rebalance is required for
ongoing inclusion in the Index. |
|
|
7. |
Target
Weights.
The Index uses a modified float-adjusted market capitalization weighting
methodology to weight individual positions. The Index employs a two-tier
weighting system with the target weight of any one position limited to a
maximum of either 10.0% or 4.0% of the Index at the time of each
rebalance. To determine the target weights, all positions whose float-cap
adjusted weights are over 5% are added together. If the total is greater
than 40%, then the highest weighted position is capped at 10%. The excess
weight is then applied on a pro-rata basis to all the remaining Index
constituents and the process is then repeated, if necessary, with the next
largest stock being capped at 9% (8% and so on) until the 40% is reached.
The 4.0% maximum target weight is then applied to all the remaining Index
constituents. Once set, target weights are free to float due to market
actions. |
|
|
8. |
Rebalancing.
Except in unusual circumstances (including, but not limited to,
delistings, mergers, spin-offs, or the acquisition or bankruptcy of the
company), the Index is rebalanced semi-annually and reconstituted
annually. The AlphaShares Index Committee will meet annually to review the
Index methodology. Any changes to the methodology will be publicly
disclosed at least 10 days prior to the implementation of the change.
Initial public offerings that meet all the eligibility criteria and fall
within the top twenty stocks by capitalization of the Index will be added.
Any addition will be funded on a pro-rata basis from the remainder of the
Index, net of any deletions. A
security will be deleted from the Index immediately due to bankruptcy,
acquisition, delisting or merger of the company by or into another
company, spin-offs, tender offers or other
|
similar
corporate actions. At each quarter end, any security which has been continuously
suspended or halted since the prior quarter will be deleted from the Index at
zero value. In the case of such deletions, including any relisting of suspended
securities, no replacements will be made until the annual rebalance. Any
proceeds resulting from the deletions will be invested on a pro-rata basis over
the remainder of the Index, net of any additions.
MAC
Global Solar Energy Index
|
|
1. |
The
weighting of Index constituents on the rebalancing and reconstitution date
is determined as follows: |
|
|
a. |
The
float-adjusted market capitalization for each security is multiplied by
its Exposure Factor of either 1.0 and 0.5, meaning the market
capitalization for the securities in the Pure-Play Group is taken at full
value and for the Medium-Play Group is reduced by one half. |
|
|
b. |
The
resulting adjusted market capitalizations are used to create a standard
market capitalization weighted index with raw weighting
factors. |
|
|
c. |
If
necessary, the raw weighting factors are modified through a weighting-gap
rebalancing algorithm to ensure that, at the time of rebalancing and
reconstitution, no security in the Index has an individual weighting
greater than 10% and that the aggregate weighting of securities in the
Index with individual weightings of more than 4.5% is no more than 45.0%
of the total Index. The weighting-gap rebalancing algorithm progressively
reduces the weighting gap between adjacent securities, as ranked by their
raw weighting factors, on a proportional basis, until the weighting
parameters specified above are met.
The
Index Provider may reduce the weight of a stock if necessary to ensure
that the effective ownership share of that stock stays within regulatory
and liquidity boundaries. |
|
|
2. |
If
an index constituent is determined to be delisted; under a trading
suspension or halt; illiquid; in bankruptcy proceedings; acquired; or in
extreme legal, regulatory or financial distress, that constituent may be
removed from the index effective immediately and the stock will not be
replaced. A spin-off from an existing Index constituent will automatically
be included in the index if it meets the standard Index criteria, but will
be dropped from the Index as soon as is reasonably practicable if the
spun-off company does not meet the standard Index constituent
criteria. |
|
|
3. |
A
company that recently completed an initial public offering (“IPO”) and
that meets the criteria above can be considered for inclusion as an Index
constituent only at the quarterly Index rebalance and reconstitution, and
only after the security has completed at least one (1) month of trading
history. |
|
|
4. |
Except
in unusual circumstances (including, but not limited to, mergers,
spin-offs, delisting, tender offers or the acquisition or bankruptcy of a
company), the Index will be rebalanced and reconstituted quarterly
on the third Friday of the last month of each calendar quarter, with a
reference date for the data being the first business day of the last month
of the calendar quarter. At the quarterly Index
reconstitution: |
|
|
a. |
securities
may be added or deleted as Index constituents according to the criteria
defined above, |
|
|
b. |
the
Exposure Factor may change based on a shift in a company’s relative
exposure to the solar industry, and |
|
|
c. |
constituent
weightings may be adjusted to reflect a change in the Exposure Factor for
a particular stock, the addition or deletion of Index constituents and/or
the need to meet the specified weighting
requirements. |
S&P
Global Water Index
|
|
1. |
All
companies in S&P’s CIQ industry classification involved in the water
industry are identified by S&P Dow Jones’ Indices and scored
based on relative exposure in the manner set forth above and
classified into one of two clusters. |
|
|
2. |
The
companies are screened for those with a developed market listing and
a total market capitalization and float-adjusted market
capitalization of at least $250 million and $100 million,
respectively.
|
|
|
3. |
25
of the largest companies from each of the following two clusters: water
utilities and infrastructure companies and water equipment and
materials companies, are selected based on a proprietary scoring
metric that defines the relative exposure to the global water
industry.
|
|
|
4. |
The
Index uses a modified market cap weighting methodology. No single stock
may have a weight of more than 10%.
|
|
|
5. |
Companies
that are acquired or delisted are deleted throughout the year. There
are no intra-reconstitution additions.
|
|
|
6. |
The
Index is reconstituted semi-annually effective after the close of business
of the third Fridays of April and October of each year, with a
reference date for the data being the third Friday of the previous
March and September, respectively. |
Guggenheim
S&P High Income Infrastructure ETF
|
|
1. |
Parent
Index and Listing Requirements.
Eligible
securities must be components of the S&P Global BMI Index that are
listed on a developed stock exchange. |
|
|
2. |
Infrastructure
Company Exposure.
Eligible
securities must be equity securities of companies classified in one of the
Infrastructure Clusters. The Infrastructure Clusters are formed based on
the GICS sub-industry classifications as
follows. |
Energy
Cluster:
Oil
& Gas Storage & Transportation Sub-Industry
Transportation
Cluster:
Airport
Services Sub-Industry
Highway
& Railtracks Sub-Industry
Marine
Ports & Services Sub-Industry
Utilities
Cluster:
Electric
Utilities Sub-Industry
Gas
Utilities Sub-Industry
Multi
Utilities Sub-Industry
Water
Utilities Sub-Industry
|
|
3. |
Market
Capitalization.
Securities
must have float adjusted market capitalization of $250 million and above
as of the reference date. |
|
|
4. |
Liquidity.
Securities
must have a three-month average daily value traded of $1 million or higher
as of the reference date. |
|
|
5. |
High
Yield Securities.
The
top 50 highest yielding securities (based on their 12-month dividend yield
over the prior 12 months at the most recent Index rebalancing date) that
meet the requirements described above form the
Index. |
|
|
6. |
Weighting
Methodology.
Index constituents are weighted based on their twelve-month dividend yield
over the prior twelve months. The
maximum weight of a particular security is 5% of the Index and the maximum
weight of each Infrastructure Cluster is 50% of the
Index. |
|
|
7. |
Chinese
Company Exposure.
The
Index may include Hong Kong listed securities, including China H-shares.
China H-shares are issued by companies incorporated in mainland China
and listed on the Hong Kong Stock Exchange. The Index does not
currently include China A-Shares (which are subject to substantial
restrictions on foreign investment) or China B-Shares (which offer a
generally smaller market and limited liquidity), each of which trade on
the Shanghai Stock Exchange and the Shenzhen Stock
Exchange. |
|
|
8. |
Reconstitution
and Rebalance.
S&P
Dow Jones Indices, LLC, the Index Administrator, reconstitutes the Index
on a semi-annual basis. The reference dates are the last trading days of
June and December. Changes are effective after the close of the third
Friday following the reference date. New securities will be added to the
Index if they meet the eligibility requirements described above. Any
additions will be funded on a pro-rata |
basis
from the remainder of the Index, net of deletions. Securities will be deleted
from the Index if they no longer meet the eligibility requirements described
above.
The
Index will be rebalanced semi-annually to accommodate any additions or deletions
to the Index and to enforce the target weights as described above. Once set,
either initially or at a semi-annual rebalance, target weights are free to float
due to market actions.
|
|
9. |
Index
Methodology Changes.
The
Index Committee meets semi-annually to review the methodology. Any changes
to the methodology will be publicly disclosed five days prior to
implementation. All methodology changes, as well as the current
version of the methodology, are available at
www.spdji.com. |
NON-PRINCIPAL
INVESTMENT STRATEGIES
As
non-principal investment strategies, each Fund may invest up to 20% (
10%
with respect to the Guggenheim S&P Global Water Index ETF and Guggenheim
Solar ETF) of
its total assets in securities not included in its respective Index, money
market instruments (including repurchase agreements or money market funds),
convertible securities, structured notes (notes on which the amount of principal
repayment and interest payments are based on the movement of one or more
specified factors, such as the movement of a particular stock or stock index)
and in swaps, options and futures contracts. Swaps, options and futures
contracts (and convertible securities and structured notes) may be used by a
Fund in seeking performance that corresponds generally to its respective Index
(whether by giving exposure to the Index as a whole or to certain specific Index
components in lieu of the Fund holding such Index components directly) and in
managing cash flows, but will not be used for hedging purposes. The Investment
Adviser anticipates that it may take approximately five business days (i.e.,
each day the NYSE Arca is open) for additions and deletions to each Fund’s Index
to be reflected in the portfolio composition of the Fund.
Each
Fund may borrow money from a bank up to a limit of 10% of the value of its
assets, but only for temporary or emergency purposes.
Each
Fund may lend its portfolio securities to brokers, dealers and other financial
institutions desiring to borrow securities to complete transactions and for
other purposes. In connection with such loans, each Fund receives liquid
collateral equal to at least the value of the portfolio securities being lent.
This collateral is marked to market on a daily basis. Each Fund may lend its
portfolio securities in an amount up to 33 1 / 3 % of its total assets.
Securities lending is not a principal investment strategy of the Funds.
Descriptions
of Risks
An
investment or type of security specifically identified in the Prospectus
generally reflects a principal investment. The Funds also may invest in or use
certain other types of investments and investing techniques that are described
in the SAI. An investment or type of security only identified in the SAI
typically is treated as a non-principal investment. Additional information on
the principal risks and certain non-principal risks of the Funds is described
below. Not all of the risks are principal risks for each Fund. The fact that a
particular risk was not indicated as a principal risk for a Fund does not mean
that the Fund is prohibited from investing its assets in securities that give
rise to that risk. It simply means that the risk is not a principal risk for
that Fund. Although the Funds will not generally trade for short-term profits,
circumstances (e.g., a rebalancing of a Fund's Index) may warrant a sale without
regard to the length of time a security was held. A high turnover rate may
increase transaction costs, which decreases the value of investments and may
result in additional taxable gains for Shares held through a taxable
account.
In
addition, investors should note that the Fund reserves the right to cease
operations and liquidate at any time without shareholder approval or to merge or
reorganize itself without shareholder approval unless otherwise required by
applicable law.
Asset
Class Risk —The
securities in a Fund’s portfolio may underperform the returns of other
securities or indices that track other industries, markets, asset classes or
sectors. Different types of securities and indices tend to go through different
performance cycles than the general securities market.
China
Investment Risk (Guggenheim
China All-Cap ETF and Guggenheim China Technology ETF only) —Investing
in securities of Chinese companies involves additional risks, including, but not
limited to: the economy of China differs, often unfavorably, from the U.S.
economy in such respects as structure, general development, government
involvement, wealth distribution, rate of inflation, growth rate, allocation of
resources and capital reinvestment, among others; the central government has
historically exercised substantial control over virtually every sector of the
Chinese economy through administrative regulation and/or state ownership;
actions of the Chinese central and local government authorities continue to have
a substantial effect on economic conditions in China (including both direct and
indirect market stabilization efforts, which may affect valuations of Chinese
issuers); and both interim and permanent market regulations may affect the
ability of certain stockholders to sell Chinese securities when it would
otherwise be advisable. In addition, the Chinese government has from time to
time taken actions that influence the prices at which certain goods may be sold,
encourage companies to invest or concentrate in particular industries, induce
mergers between companies in certain industries and induce private companies to
publicly offer their securities to increase or continue the rate of economic
growth, control the rate of inflation or otherwise regulate economic expansion.
It may do so in the future as well, potentially having a significant adverse
effect on economic conditions in China, the economic prospects for, and the
market prices and liquidity of, the securities of Chinese companies and the
payments of dividends and interest by Chinese companies.
Political
and Economic Risk —The
Chinese economy, which has been in a state of transition from a planned economy
to a more market oriented economy, differs from the economies of most developed
countries in many respects, including the level of government involvement, its
state of development, its growth rate, control of foreign exchange, and
allocation of resources. Although the majority of productive assets in China are
still owned by the Chinese government at various levels, in recent years, the
Chinese government has implemented economic reform measures emphasizing
utilization of market forces in the development of the Chinese economy and a
high level of management autonomy. The Chinese economy has experienced
significant growth in the past 30 years, but growth has been uneven both
geographically and among various sectors of the economy. Economic growth has
also been accompanied by periods of high inflation. The Chinese government has
implemented various measures from time to time to control inflation and restrain
the rate of economic growth.
For
more than 30 years, the Chinese government has carried out economic reforms to
achieve decentralization and utilization of market forces to develop the Chinese
economy. These reforms have resulted in significant economic growth and social
progress. However, there can be no assurance that the Chinese government will
continue to pursue such economic policies or that such policies, if pursued,
will be successful. Any adjustment and modification of those economic policies
may have an adverse impact on the securities market in Chinese as well as the
constituent securities of the Underlying Index. Further, the Chinese government
may from time to time adopt corrective measures to control the growth of the
Chinese economy which may also have an adverse impact on the capital growth and
performance of the Funds.
Political
changes, social instability and adverse diplomatic developments
in China could result in the imposition of additional government
restrictions including expropriation of assets, confiscatory taxes or
nationalization of some or all of the property held by the issuers in the
Underlying Index. The laws, regulations, government policies and political and
economic climate in China may change with little or no advance notice. Any such
change could adversely affect market conditions and the performance of the
Chinese economy and, thus, the value of securities in a Fund’s portfolio.
The
Chinese government continues to be an active participant in many economic
sectors through ownership positions and regulation. The allocation of resources
in China is subject to a high level of government control. The Chinese
government strictly regulates the payment of foreign currency denominated
obligations and sets monetary policy. Through its policies, the government may
provide preferential treatment to particular industries or companies. The
policies set by the government could have a substantial effect on the Chinese
economy and a Fund’s investments.
The
Chinese economy is export-driven and highly reliant on trade. The performance of
the Chinese economy may differ favorably or unfavorably from the U.S. economy in
such respects as growth of gross domestic product, rate of inflation, currency
depreciation, capital reinvestment, resource self-sufficiency and balance of
payments position. Adverse changes to the economic conditions of its primary
trading partners, such as the EU, the United States, Hong Kong, the Association
of South East Asian Nations, and Japan, would adversely affect the Chinese
economy and a Fund’s investments.
In
addition, as much of China’s growth over the past two decades has been a result
of significant investment in substantial export trade, international trade
tensions may arise from time to time which can result in trade tariffs,
embargoes, trade limitations, trade wars and other negative consequences. These
consequences may trigger a significant reduction in international trade, the
oversupply of certain manufactured goods, substantial price reductions of goods
and possible failure of individual companies and/or large segments of China’s
export industry with a potentially severe negative impact to a Fund. Events such
as these are difficult to predict and may or may not occur in the future.
China
has been transitioning to a market economy since the late seventies, and has
only recently opened up to foreign investment and permitted private economic
activity. Under the economic reforms implemented by the Chinese government, the
Chinese economy has experienced tremendous growth, developing into one of the
largest and fastest growing economies in the world. There is no assurance,
however, that the Chinese government will not revert to the economic policy of
central planning that it implemented prior to 1978 or that such growth will be
sustained in the future. Moreover, the current major slowdown in other
significant economies of the world, such as the United States, the EU and
certain Asian countries, may adversely affect economic growth in China. An
economic downturn in China would adversely impact a Fund’s investments.
Inflation
—Economic
growth in China has historically been accompanied by periods of high inflation.
Beginning in 2004, the Chinese government commenced the implementation of
various measures to control inflation, which included the tightening of the
money supply, the raising of interest rates and more stringent control over
certain industries. If these measures are not successful, and if inflation were
to steadily increase, the performance of the Chinese economy and a Fund’s
investments could be adversely affected.
Nationalization
and Expropriation —After
the formation of the Chinese socialist state in 1949, the Chinese government
renounced various debt obligations and nationalized private assets without
providing any form of compensation. There can be no assurance that the Chinese
government will not take similar actions in the future. Accordingly, an
investment in a Fund involves a risk of a total loss.
Hong
Kong Policy —As
part of Hong Kong’s transition from British to Chinese sovereignty in 1997,
China agreed to allow Hong Kong to maintain a high degree of autonomy with
regard to its political, legal and economic systems for a period of at least 50
years. China controls matters that relate to defense and foreign affairs. Under
the agreement, China does not tax Hong Kong, does not limit the exchange of the
Hong Kong dollar for foreign currencies and does not place restrictions on free
trade in Hong Kong. However, there is no guarantee that China will continue to
honor the agreement, and China may change its policies regarding Hong Kong at
any time. Any such change could adversely affect market conditions and the
performance of the Chinese economy and, thus, the value of securities in a
Fund’s portfolio.
Chinese
Securities Markets —The
securities markets in China have a limited operating history and are not as
developed as those in the United States. The markets tend to be smaller in size,
have less liquidity and historically have had greater volatility than markets in
the United States and some other countries. In addition, under normal market
conditions, there is less regulation and monitoring of Chinese securities
markets and the activities of investors, brokers and other participants than in
the United States. Accordingly, issuers of securities in China are not subject
to the same degree of regulation as are U.S. issuers with respect to such
matters as insider trading rules, tender offer regulation, stockholder proxy
requirements and the requirements mandating timely disclosure of information.
During periods of significant market volatility, the Chinese government has,
from time to time, intervened in its domestic securities markets to a greater
degree than would be typical in more developed markets. Stock markets in China
are in the process of change and further development. This may lead to trading
volatility, difficulty in the settlement and recording of transactions and
difficulty in interpreting and applying the relevant regulations.
Available
Disclosure About Chinese Companies —Disclosure
and regulatory standards in emerging market countries, such as China, are in
many respects less stringent than U.S. standards. There is substantially less
publicly available information about Chinese issuers than there is about U.S.
issuers. Therefore, disclosure of certain material information may not be made,
and less information may be available to a Fund and other investors than would
be the case if a Fund’s investments were restricted to securities of U.S.
issuers.
Chinese
issuers are subject to accounting, auditing and financial standards and
requirements that differ, in some cases significantly, from those applicable to
U.S. issuers. In particular, the assets and profits appearing on the financial
statements of a Chinese issuer may not reflect its financial position or results
of operations in the way they would be reflected had such financial statements
been prepared in accordance with U.S. Generally Accepted Accounting
Principles.
Chinese
Corporate and Securities Law —Legal
principles relating to corporate affairs and the validity of corporate
procedures, directors’ fiduciary duties and liabilities and stockholders’ rights
often differ from those that may apply in the United States and other countries.
Chinese laws providing protection to investors, such as laws regarding the
fiduciary duties of officers and directors, are undeveloped and will not provide
investors, such as the Funds, with protection in all situations where protection
would be provided by comparable law in the United States. China lacks a national
set of laws that address all issues that may arise with regard to a foreign
investor such as the Funds. It may therefore be difficult for a Fund to enforce
its rights as an investor under Chinese corporate and securities laws, and it
may be difficult or impossible for a Fund to obtain a judgment in court.
Moreover, as Chinese corporate and securities laws continue to develop, these
developments may adversely affect foreign investors, such as the Funds.
Sanctions
and Embargoes —From
time to time, certain of the companies in which a Fund expects to invest may
operate in, or have dealings with, countries subject to sanctions or embargoes
imposed by the U.S. government and the United Nations and/or countries
identified by the U.S. government as state sponsors of terrorism. A company may
suffer damage to its reputation if it is identified as a company which operates
in, or has dealings with, countries subject to sanctions or embargoes imposed by
the U.S. government and the United Nations and/or countries identified by the
U.S. government as state sponsors of terrorism. As an investor in such
companies, a Fund will be indirectly subject to those risks.
Concentration
Risk —If
a Fund’s Index concentrates in an industry or group of industries, a Fund’s
investments will be concentrated accordingly. In such event, the value of a
Fund’s Shares may rise and fall more than the value of shares of a fund that
invests in securities of companies in a broader range of industries.
Depositary
Receipt Risk —A
Fund may hold the equity securities of non-U.S. companies in the form of one or
more of the following types of depositary receipts: ADRs, ADSs, GDRs and IDRs.
ADRs are negotiable certificates issued by a U.S. financial institution that
represent a specified number of shares in a foreign stock and trade on a U.S.
national securities exchange, such as the New York Stock Exchange. Holders
of certain depositary receipts may have limited voting rights and may not have
the same rights typically afforded to shareholders in the event of a corporate
action and may experience difficulty in receiving company stockholder
communications. A Fund will primarily invest in sponsored ADRs, which are
issued with the support of the issuer of the foreign stock underlying the ADRs
and carry all of the rights of common shares, including voting rights. ADSs are
U.S. dollar-denominated equity share of a foreign-based company available for
purchase on a U.S. national securities exchange. GDRs or IDRs are similar to
ADRs, but may be issued in bearer form and are typically offered for sale
globally and held by a foreign branch of an international bank. The underlying
securities of the depositary receipts in a Fund’s portfolio are usually
denominated or quoted in currencies other than the U.S. Dollar. As a result,
changes in foreign currency exchange rates may affect the value of a Fund’s
portfolio. Generally, when the U.S. Dollar rises in value against a foreign
currency, a security denominated in that currency loses value because the
currency is worth fewer U.S. Dollars. In addition, because the underlying
securities of depositary receipts trade on foreign exchanges at times when the
U.S. markets are not open for trading, the value of the securities underlying
the depositary receipts may change materially at times when the U.S. markets are
not open for trading, regardless of whether there is an active U.S. market for
shares of a Fund. Depositary receipts are generally subject to the same
risks as the foreign securities that they evidence or into which they may be
converted.
Energy
Sector Risk (Guggenheim
Solar ETF and Guggenheim S&P High Income Infrastructure ETF only)
—The
energy sector is often cyclical and highly dependent on commodities prices.
Securities prices for companies in the energy sector may be affected by a
variety of factors related to worldwide energy prices, exploration costs, energy
conservation efforts and production spending. The performance of these companies
and the prices of these securities are subject to changes in currency exchange
rates, government regulation, world events and weather, depletion of natural
resources and economic conditions, as well as market, economic and political
risks of the countries where energy companies are located or do business.
Securities of energy companies may be subject to swift price and supply
fluctuations as a result of these events, which may adversely affect the Fund.
Oil and gas exploration and production can be significantly affected by natural
disasters. Companies in the energy sector may
be
at an increased risk of civil liability and environmental damage claims, and are
also subject to the risk of loss from terrorism.
Equity
Securities Risk —A
Fund may invest in equity securities, which include common stocks (and may
include other equity securities), and the prices of equity securities generally
fluctuate in value more than other investments. The price of equity securities
may rise or fall rapidly or unpredictably and may reflect real or perceived
changes in the issuing company’s financial condition and changes in the overall
market or economy. Price movements in equity securities may result from factors
or events affecting individual issuers, industries or the market as a whole,
such as changes in economic or political conditions. In addition, equity markets
tend to move in cycles that may cause downward price movements over prolonged
periods if time. Common stocks generally represent the riskiest investment in a
company. If the prices of the equity securities held by a Fund fall, the value
of your investment in a Fund will be adversely affected. A Fund may lose a
substantial part, or even all, of its investment in a company’s stock.
Financial
Sector Risk (Guggenheim
China All-Cap ETF only) —The
financial sector can be significantly affected by changes in interest rates,
government regulation, the rate of defaults on corporate, consumer and
government debt, the availability and cost of capital, and the impact of more
stringent capital requirements. Financial services companies are subject
to extensive governmental regulation which may limit both the amounts and types
of loans and other financial commitments they can make, the interest rates and
fees they can charge, the scope of their activities, the prices they can charge
and the amount of capital they must maintain. Profitability is largely dependent
on the availability and cost of capital funds, and can fluctuate significantly
when interest rates change or due to increased competition. The Fund may
be adversely affected by events or developments negatively impacting the
financial sector. For example, events in the financial sector may cause an
unusually high degree of volatility in the financial markets, both domestic and
foreign, and cause certain financial services companies to incur losses.
Foreign
Securities and Currency Risk —Investing
in foreign investments, including investing in foreign securities through
depositary receipts, involves certain special or additional risks, including,
but not limited to: (i) unfavorable changes in currency exchange rates;
(ii) adverse political and economic developments; (iii) unreliable or
untimely information; (iv) limited legal recourse; (v) limited
markets; (vi) higher operational expenses; and (vii) illiquidity.
These investments are subject to additional risks, including: differing
reporting, accounting, and auditing standards; nationalization, expropriation,
or confiscatory taxation; foreign currency fluctuations, currency blockage, or
replacement; potential for default on sovereign debt; or diplomatic
developments, which may include the imposition of economic sanctions or other
measures by the U.S. or other governments and supranational organizations. These
risks may even be higher in underdeveloped or emerging markets. The less
developed a country's securities market is, the greater the level of risks. A
Fund considers a security to be a foreign security if the issuer is organized
under the laws of a foreign country or is a foreign government, or a
sub-division or agency of such government, or the security is traded in markets
outside the United States.
Foreign
investments are normally issued and traded in foreign currencies. As a result,
their values may be affected by changes in the exchange rates between particular
foreign currencies and the U.S. dollar. Foreign investments may be subject to
the risks of seizure by a foreign government, imposition of restrictions on the
exchange or transport of foreign currency, and tax increases. There may also be
less information publicly available about a foreign company than about most U.S.
companies, and foreign companies are usually not subject to accounting, auditing
and financial reporting standards and practices comparable to those in the
United States. The legal remedies for investors in foreign investments may be
more limited than those available in the United States and a Fund may have
limited or no legal recourse with respect to foreign securities. Certain foreign
investments may be less liquid (harder to buy and sell) and more volatile than
domestic investments, which means a Fund may at times be unable to sell its
foreign investments at desirable prices. For the same reason, a Fund may at
times find it difficult to value its foreign investments. Brokerage commissions
and other fees are generally higher for foreign investments than for domestic
investments. The procedures and rules for settling foreign transactions may also
involve delays in payment, delivery or recovery of money or investments. Foreign
withholding taxes may reduce the amount of income available to distribute to
shareholders of a Fund.
Industrials
Sector Risk (
Guggenheim
Solar ETF, Guggenheim S&P Global Water Index ETF and Guggenheim S&P High
Income Infrastructure ETF only) —The
prices of securities of companies in the industrials sector are affected by
supply and demand both for their specific product or service and for industrials
sector products in general, which may be cyclical. The products of manufacturing
companies may face product obsolescence due to rapid
technological
developments and frequent new product introduction. Government regulation, world
events and economic conditions may affect the performance of companies in the
industrials sector. Companies in the industrials sector may be at risk for
environmental damage and product liability claims and may be adversely affected
by changes or trends in commodity prices, imposition of import controls, labor
relations and insurance costs.
Infrastructure
Risk (Guggenheim
S&P High Income Infrastructure ETF only) —
Companies
within one of the Infrastructure Clusters that comprise the Index are subject to
a variety of factors that may adversely affect their business or operations,
including high interest costs in connection with capital construction and
improvement programs, high leverage, costs associated with compliance with and
changes in environmental and other regulations, difficulty in raising capital in
adequate amounts and on reasonable terms in periods of high inflation and
unsettled capital markets or government budgetary constraints that impact
publicly funded projects, the effects of economic slowdown or recession and
surplus capacity, increased competition from other providers of services,
uncertainties concerning the availability of fuel at reasonable prices, the
effects of energy conservation policies and other factors.
Other
factors that may affect the operations of companies within an Infrastructure
Cluster include innovations in technology that could render the way in which a
company delivers a product or service obsolete, significant changes to the
number of ultimate end-users of a company’s products, inexperience with and
potential losses resulting from a developing deregulatory environment, increased
susceptibility to terrorist attacks, risks of environmental damage due to a
company’s operations or an accident, and general changes in market sentiment
towards infrastructure and utilities assets. Companies operating in an
Infrastructure Cluster face operating risks, including the risk of fire,
explosions, leaks, mining and drilling accidents or other catastrophic events.
In addition, natural risks, such as earthquakes, floods, lightning, hurricanes,
tsunamis and wind, are inherent risks in infrastructure company operations.
Issuer-Specific
Changes Risk —The
value of an individual security or particular type of security can be more
volatile than the market as a whole and can perform differently from the value
of the market as a whole. The value of securities of smaller issuers can be more
volatile than that of larger issuers.
Market
Price Risk —Shares
are listed for trading on NYSE Arca and are bought and sold in the secondary
market at market prices. The market prices of Shares may fluctuate continuously
during trading hours, in some cases materially, in response to changes in the
NAV and supply and demand for Shares, among other factors. Although it is
expected that the market price of Shares typically will remain closely
correlated to the NAV, the market price will generally differ from the NAV
because of timing reasons, supply and demand imbalances and other factors. As a
result, the trading prices of Shares may deviate significantly from NAV during
certain periods, especially those of market volatility. The Investment Adviser
cannot predict whether Shares will trade above (premium), below (discount) or at
their NAV. Thus, an investor may pay more than NAV when buying Shares in the
secondary market and receive less than NAV when selling Shares in the secondary
market. Given the fact that Shares can be created and redeemed in Creation
Units, the Investment Adviser believes that large discounts or premiums to the
NAV of Shares should not be sustained in the long-term. However, a Fund may have
a limited number of financial institutions that may act as “Authorized
Participants” or market markers. Only Authorized Participants who have entered
into agreements with a Fund’s distributor may engage in creation or redemption
transactions directly with a Fund (as described under “How to Buy and Sell
Shares”). If some or all of these Authorized Participants exit the business or
are unable to process creation and/or redemption orders, and no other Authorized
Participant is able to create and redeem in either of these cases, Shares may
trade at a discount to NAV like closed-end fund shares (and may even face
delisting). Similar effects may result if market makers exit the business or are
unable to continue making markets in the Shares. Further, while the
creation/redemption feature is designed to make it likely that Shares normally
will trade at prices closely correlated to a Fund’s next calculated NAV,
disruptions to creations and redemptions, including disruptions at market
makers, Authorized Participants or market participants, or during periods of
significant market volatility, among other factors, may result in market prices
that differ significantly from NAV. Although market makers will generally take
advantage of differences between the NAV and the market price of Shares through
arbitrage opportunities, there is no guarantee that they will do so. Further,
the securities held by a Fund may be traded in markets that close at a different
time than the NYSE Arca. Liquidity in those securities may be reduced after the
applicable closing times. Accordingly, during the time when NYSE Arca is open
but after the applicable market closing, fixing or settlement times, bid-ask
spreads and the resulting premium or discount to the Shares' NAV is likely to
widen. In addition, secondary markets may be subject to irregular trading
activity, wide bid-ask spreads and extended trade settlement periods, which
could cause a material decline in the NAV and/or market prices for Shares. The
bid-ask spread is generally larger during periods
of
lower than regular trading volume in Shares or reduced market liquidity and can
increase significantly during periods of market disruption or steep declines,
which may be the time an investor most wants to sell its Shares. A Fund’s
bid-ask spread may also be impacted by the liquidity of the underlying
securities held by a Fund, particularly for newly launched or smaller funds or
in instances of significant volatility of the underlying securities. A Fund’s
investment results are measured based upon the daily NAV of the Shares.
Investors purchasing and selling Shares in the secondary market may not
experience investment results consistent with those experienced by Authorized
Participants creating and redeeming directly with a Fund.
Market
Risk —The
value of, or income generated by, the securities held by a Fund are subject to
the possibility of rapid and unpredictable fluctuation. The value of certain
securities (e.g., equity securities) tends to fluctuate more dramatically over
the shorter term than do the value of other asset classes. These movements may
result from factors affecting individual companies, or from broader influences,
including real or perceived changes in prevailing interest rates, changes in
inflation or expectations about inflation, investor confidence or economic,
political, social or financial market conditions that may be temporary or last
for extended periods. Different sectors, industries and security types may react
differently to such developments and, when the market performs well, there is no
assurance that the securities held by a Fund will increase in value along with
the broader markets. For example, the value of a Fund’s investments in
securities or other instruments may be particularly susceptible to changes in
commodity prices. As a result, a change in commodity prices may adversely affect
the Fund’s investments. Volatility of financial markets can expose a Fund to
greater market risk, possibly resulting in reduced liquidity. Moreover, changing
economic, political, social or financial market conditions in one country or
geographic region could adversely affect the market value of the securities held
by a Fund in a different country or geographic region because of the
increasingly interconnected global economies and financial markets. The
Investment Adviser potentially will be prevented from executing investment
decisions at an advantageous time or price as a result of any domestic or global
market disruptions, particularly disruptions causing heightened market
volatility and reduced market liquidity. Changes or disruptions in market
conditions also may lead to increased regulation of a Fund and the instruments
in which a Fund may invest, which may, in turn, affect the Fund’s ability to
pursue its investment objective and the Fund’s performance. In general, the
securities or other instruments represented in a Fund's Index or in which a Fund
seeks to invest may be unavailable entirely or in the specific quantities sought
by the Fund. As a result, a Fund may need to obtain the desired exposure through
a less advantageous investment or forgo the investment at the time. This may
adversely affect a Fund and increase the Fund's Index tracking error.
Micro-Cap
Company Risk (Guggenheim
China All-Cap ETF, Guggenheim China Technology ETF and Guggenheim Solar ETF
only) —Micro-cap
stocks involve substantially greater risks of loss and price fluctuations
because their earnings and revenues tend to be less predictable (and some
companies may be experiencing significant losses), and their share prices tend
to be more volatile and their markets less liquid than companies with larger
market capitalizations. Micro-cap companies may be newly formed or in the early
stages of development, with limited product lines, markets or financial
resources and may lack management depth. In addition, there may be less public
information available about these companies. The shares of micro-cap companies
tend to trade less frequently than those of larger, more established companies,
which can adversely affect the pricing of these securities and the future
ability to sell these securities. Also, it may take a long time before a Fund
realizes a gain, if any, on an investment in a micro-cap company.
Non-Correlation
Risk —A
Fund’s return may not match the return of its Index for a number of reasons. For
example, a Fund incurs a number of operating expenses not applicable to the
Index, and incurs costs in buying and selling securities, especially when
rebalancing a Fund’s securities holdings to reflect changes in the composition
of the Index. In addition, the performance of a Fund and its Index may vary due
to asset valuation differences and differences between a Fund's portfolio and
the Index resulting from legal restrictions, cash flows or operational
inefficiencies. An Index is not required to apply fair valuation to its
constituents, but a Fund may apply fair valuation to its portfolio securities in
certain situations, which may lead to increased differences between a Fund’s
performance and that of its Index.
Due
to legal and regulatory rules and limitations, a Fund may not be able to invest
in all securities included in its Index. For tax efficiency purposes, a
Fund may sell certain securities to realize losses, causing it to deviate from
the Index.
A
Fund may not be fully invested at times, either as a result of cash flows into a
Fund or reserves of cash held by a Fund to meet redemptions and expenses. If a
Fund utilizes a sampling approach, or otherwise holds investments
other
than those which comprise the Index, its return may not correlate as well with
the return of its Index, as would be the case if it purchased all of the
securities in the Index with the same weightings as its Index.
Non-Diversification
Risk —A
Fund is considered non-diversified because it may invest a large portion of its
assets in a small number of issuers. As a result, a Fund is more
susceptible to risks associated with those issuers and a Fund may experience
greater losses and volatility than a more diversified portfolio.
Passive
Management Risk (All
Funds except Guggenheim S&P High Income Infrastructure ETF) —Unlike
many investment companies, a Fund is not “actively” managed. Therefore, it would
not necessarily sell a security because the security’s issuer was in financial
trouble or defaulted on its obligations under the security, or whose credit
rating was downgraded, unless that security is removed from the Index. In
addition, a Fund will not otherwise take defensive positions in declining
markets unless such positions are reflected in the Index.
Regulatory
and Legal Risk —U.S.
and non-U.S. governmental agencies and other regulators may implement additional
regulations and legislators may pass new laws that affect the investments held
by a Fund, the strategies used by a Fund or the level of regulation applying to
a Fund. These may impact the investment strategies, performance, costs and
operations of a Fund.
Risks
of Investing in Hong Kong (Guggenheim
China All-Cap ETF and Guggenheim China Technology ETF only) —A
Fund’s
investments which are listed and traded in Hong Kong may expose the Fund to
certain legal, regulatory, political, currency and economic risks. China is Hong
Kong’s largest trading partner, both in terms of exports and imports. Any
changes in the Chinese economy, trade regulations or currency exchange rates may
have an adverse impact on Hong Kong’s economy. Hong Kong reverted to Chinese
sovereignty on July 1, 1997 as a Special Administrative Region of the People’s
Republic of China under the principle of “one country, two systems.” Although
China is obligated to maintain the current capitalist economic and social system
of Hong Kong through June 30, 2047, the continuation of economic and social
freedoms enjoyed in Hong Kong is dependent on the government of China. There is
no guarantee that China will continue to honor Hong Kong’s autonomy, and China
may change its policies regarding Hong Kong at any time. Any attempt by China to
tighten its control over Hong Kong’s political, economic or social policies may
result in an adverse effect on Hong Kong’s economy. Hong Kong is located in a
part of the world that has historically been prone to natural disasters such as
earthquakes and flooding and is economically sensitive to environmental events.
Any such event could result in a significant adverse impact on the Hong Kong
economy.
Small-
and Mid-Capitalization Securities Risk —A
Fund may be subject to the risk that small- and mid-capitalization securities
may underperform other segments of the equity market or the equity market as a
whole. Securities of small- and mid-capitalization companies may experience much
more price volatility, greater spreads between their bid and ask prices and
significantly lower trading volumes than securities issued by large, more
established companies. Accordingly, it may be difficult for a Fund to sell
small- and mid-capitalization securities at a desired time or price. Small- and
mid-capitalization companies tend to have inexperienced management as well as
limited product and market diversification and financial resources. Small- and
mid-capitalization companies have more speculative prospects for future growth,
sustained earnings and market share than large companies, and may be more
vulnerable to adverse economic, market or industry developments than large
capitalization companies.
Solar
Energy Company Risk (Guggenheim
Solar ETF only) —
The
value of stocks that comprise the energy sector and the prices of energy may
decline. The alternative energy industry can be significantly affected by
obsolescence of existing technology, short product lifecycles, falling prices
and profits, competition from new market entrants and general economic
conditions. This industry can also be significantly affected by fluctuations in
energy prices and supply and demand of alternative energy fuels, energy
conservation, the success of exploration projects, tax incentives, subsidies and
other government regulations and policies. Companies in this industry may be
adversely affected by commodity price volatility, changes in exchange rates,
imposition of import controls, availability of certain inputs and materials
required for production, depletion of resources, technological developments and
labor relations.
Solar
energy companies are particularly affected by government subsidies and
regulation. If government subsidies and economic incentives for solar power are
reduced or eliminated, the demand for solar energy may decline and cause
corresponding declines in the revenues and profits of solar energy companies.
Existing regulations and policies, and changes to such regulations and policies,
may present technical, regulatory and economic barriers to the purchase and use
of solar power products, thus reducing demand for such products. If solar power
technology
is
not suitable for widespread adoption, or sufficient demand for solar power
products does not develop or takes long periods of time to develop, the revenues
of solar power companies may decline.
Recently,
the price of oil has declined significantly and experienced significant
volatility, which may materially impact companies operating in the solar energy
sector. Shares of companies involved in the solar energy sector have
historically been more volatile than shares of companies operating in more
established industries. Certain valuation methods currently used to value
companies involved in the solar energy sector have not been in widespread use
for a significant period of time. As a result, the use of these valuation
methods may serve to further increase the volatility of certain solar energy
company share prices.
Technology
Sector Risk (
Guggenheim
China Technology ETF only) —Companies
in the rapidly changing field of technology often face unusually high price
volatility, both in terms of gains and losses. The potential for wide variation
in performance is based on the special risks common to these stocks. For
example, products or services that at first appear promising may not prove
commercially successful or may become obsolete quickly. Earnings disappointments
can result in sharp price declines. The level of risk will be increased to the
extent that a Fund has significant exposure to smaller or unseasoned companies
(those with less than a three-year operating history), which may not have
established products or more experienced management. Companies in the technology
sector may also be subject to competition from new market entrants. Such
companies also may be subject to risks relating to research and development
costs and the availability and price of components.
Telecommunications
Sector Risk (Guggenheim
China All-Cap ETF and Guggenheim China Technology ETF only) —
The
telecommunications sector is subject to extensive government regulation. The
costs of complying with governmental regulations, delays or failure to receive
required regulatory approvals or the enactment of new adverse regulatory
requirements may adversely affect the business of the telecommunications
companies. The telecommunications sector can also be significantly affected by
intense competition, including competition with alternative technologies such as
wireless communications, product compatibility, consumer preferences, rapid
obsolescence and research and development of new products. Other risks include
those related to regulatory changes, such as the uncertainties resulting from
such companies’ diversification into new domestic and international businesses,
as well as agreements by any such companies linking future rate increases to
inflation or other factors not directly related to the actual operating profits
of the enterprise.
Utilities
Sector Risk (Guggenheim
S&P Global Water Index ETF and Guggenheim S&P High Income Infrastructure
ETF only) —The
rates that traditional regulated utility companies may charge their customers
generally a re
subject to review and limitation by governmental regulatory commissions.
Although rate changes of a utility usually fluctuate in approximate correlation
with financing costs due to political and regulatory factors, rate changes
ordinarily occur only following a delay after the changes in financing costs.
This factor will tend to favorably affect a regulated utility company’s earnings
and dividends in times of decreasing costs, but conversely, will tend to
adversely affect earnings and dividends when costs are rising. The value of
regulated utility debt securities (and, to a lesser extent, equity securities)
tends to have an inverse relationship to the movement of interest rates. Certain
utility companies have experienced full or partial deregulation in recent years.
These utility companies are frequently more similar to industrial companies in
that they are subject to greater competition and have been permitted by
regulators to diversify outside of their original geographic regions and their
traditional lines of business. These opportunities may permit certain utility
companies to earn more than their traditional regulated rates of return. Some
companies, however, may be forced to defend their core business and may be less
profitable.
Among
the risks that may affect utility companies are the following: risks of
increases in fuel and other operating costs; the high cost of borrowing to
finance capital construction during inflationary periods; restrictions on
operations and increased costs and delays associated with compliance with
environmental and nuclear safety regulations; and the difficulties involved in
obtaining natural gas for resale or fuel for generating electricity at
reasonable prices. Other risks include those related to the construction and
operation of nuclear power plants, the effects of energy conservation and the
effects of regulatory changes.
Water-Related
Company Risk (Guggenheim
S&P Global Water Index ETF only) —
Water-related
companies may be adversely affected by technological changes, climactic events,
environmental considerations, water conservation, taxes, additional government
regulation, including the increased cost of compliance, inflation, an increase
in the cost of raw materials, an increase in interest rates and changes in
consumer sentiment and spending. Companies engaged in the water industry may be
subject to liability for environmental damage, depletion of resources, conflicts
with local communities over water rights and mandated expenditures for safety
and pollution control.
Competition
between water companies and government regulation of water companies, including
regulation of the rates that the companies may charge, both domestically and
internationally, may adversely affect the earnings of the companies in this
industry.
In
addition to the principal risks described previously, there are certain other
non-principal risks applicable to a Funds. The additional risks include the
following:
Derivatives
Risk —Derivatives
may pose risks in addition to and greater than those associated with investing
directly in securities, currencies or other investments, including risks
relating to leverage, imperfect correlations with underlying investments or a
Fund’s other portfolio holdings, high price volatility, lack of availability,
counterparty credit, liquidity, valuation and legal restrictions. Their use is a
highly specialized activity that involves investment techniques and risks
different from those associated with ordinary portfolio securities transactions.
If the Investment Adviser is incorrect about its expectations of market
conditions, the use of derivatives could also result in a loss, which in some
cases may be unlimited. Some of the derivatives in which a Fund invests are
traded (and privately negotiated) in the over-the-counter ("OTC") market. OTC
derivatives are subject to heightened credit, liquidity and valuation risks. For
derivatives traded on an exchange or through a central counterparty, a Fund is
subject to the credit risk of the clearing broker or clearinghouse. Certain
derivatives are subject to mandatory exchange trading and/or clearing. Central
clearing is intended to reduce counterparty credit risk and is intended to
increase liquidity but does not make derivatives transactions risk-free. Certain
risks also are specific to the derivatives in which a Fund invests.
Swap
Agreements Risk —Swap
agreements are contracts among a Fund and a counterparty to exchange the return
of the pre-determined underlying investment (such as the rate of return of the
underlying index). Swap agreements may be negotiated bilaterally and traded OTC
between two parties or, in some instances, must be transacted through a futures
commission merchant and cleared through a clearinghouse that serves as a central
counterparty. Risks associated with the use of swap agreements are different
from those associated with ordinary portfolio securities transactions, due in
part to the fact they could be considered illiquid and many swaps trade on the
OTC market. Swaps are particularly subject to counterparty credit, correlation,
valuation, liquidity and leveraging risks. Certain standardized swaps are
subject to mandatory central clearing. Central clearing is intended to reduce
counterparty credit risk and increase liquidity, but central clearing does not
make swap transactions risk-free.
Futures
Contracts Risk —Futures
contracts are typically exchange-traded contracts that call for the future
delivery of an asset at a certain price and date, or cash settlement of the
terms of the contract. Risks of futures contracts may be caused by an imperfect
correlation between movements in the price of the instruments and the price of
the underlying securities. In addition, there is the risk that a Fund may not be
able to enter into a closing transaction because of an illiquid market.
Exchanges can limit the number of positions that can be held or controlled by a
Fund or the Investment Adviser, thus limiting the ability to implement a Fund’s
strategies. Futures markets are highly volatile and the use of futures may
increase the volatility of a Fund’s NAV. Futures are also subject to leverage
risks and to liquidity risk.
Options
Risk —Options
or options on futures contracts give the holder of the option the right to buy
(or to sell) a position in a security or in a contract to the writer of the
option, at a certain price. They are subject to correlation risk because there
may be an imperfect correlation between the options and the securities markets
that cause a given transaction to fail to achieve its objectives. The successful
use of options depends on the Investment Adviser’s ability to predict correctly
future price fluctuations and the degree of correlation between the options and
securities markets. Exchanges can limit the number of positions that can be held
or controlled by a Fund or the Investment Adviser, thus limiting the ability to
implement a Fund’s strategies. Options are also particularly subject to leverage
risk and can be subject to liquidity risk.
Participation
Notes —Participation
notes are issued by banks or broker-dealers and are designed to offer a return
linked to the performance of a particular underlying equity security or market.
Participation notes can have the characteristics or take the form of various
instruments, including, but not limited to, certificates or warrants. The holder
of a participation note that is linked to a particular underlying security is
entitled to receive any dividends paid in connection with the underlying
security. However, the holder of a participation note generally does not receive
voting rights as it would if it directly owned the underlying security. A Fund
may invest in a participation note as an alternative to investing directly in
the underlying security, in circumstances where the Investment Adviser
determines that investing in the participation note will enable a Fund to track
its Index more efficiently (such as where, in the Investment Adviser’s
determination, the participation note offers greater liquidity than the
underlying
security and/or may reduce a Fund’s tracking error against its Index due to
additional costs involved with holding the underlying security directly).
Participation notes constitute direct, general and unsecured contractual
obligations of the banks or broker-dealers that issue them, which therefore
subject a Fund to counterparty risk, as discussed below.
Investments
in participation notes involve certain risks in addition to those associated
with a direct investment in the underlying foreign companies or foreign
securities markets whose return they seek to replicate. For instance, there can
be no assurance that the trading price of a participation note will equal the
underlying value of the foreign company or foreign securities market that it
seeks to replicate. As the purchaser of a participation note, a Fund is relying
on the creditworthiness of the counterparty issuing the participation note and
has no rights under a participation note against the issuer of the underlying
security. Therefore, if such counterparty were to become insolvent, a Fund would
lose its investment. The risk that a Fund may lose its investments due to the
insolvency of a single counterparty may be amplified to the extent a Fund
purchases participation notes issued by one issuer or a small number of issuers.
Participation notes also include transaction costs in addition to those
applicable to a direct investment in securities. In addition, a Fund’s use of
participation notes may cause a Fund’s performance to deviate from the
performance of the portion of its Index to which a Fund is gaining exposure
through the use of participation notes.
Due
to liquidity and transfer restrictions, the secondary markets on which
participation notes are traded may be less liquid than the markets for other
securities, which may lead to the absence of readily available market quotations
for securities in a Fund’s portfolio. The ability of a Fund to value its
securities becomes more difficult and the judgment in the application of fair
value procedures may play a greater role in the valuation of a Fund’s securities
due to reduced availability of reliable objective pricing data. Consequently,
while such determinations will be made in good faith, it may nevertheless be
more difficult for a Fund to accurately assign a daily value to such
securities.
Trading
Issues —Trading
in Shares on the NYSE Arca may be halted due to market conditions or for reasons
that, in the view of the NYSE Arca, make trading in Shares inadvisable. There
can be no assurance that an active trading market for the Shares will develop or
be maintained. In addition, trading in Shares on the NYSE Arca is subject to
trading halts caused by extraordinary market volatility pursuant to the NYSE
Arca “circuit breaker” rules. If a trading halt or unanticipated early closing
of the NYSE Arca occurs, a shareholder may be unable to purchase or sell Shares
when desired. There can be no assurance that the requirements of the NYSE Arca
necessary to maintain the listing of a Funds will continue to be met or will
remain unchanged or that Shares will trade with any volume, or at all, in any
secondary market. As with other exchange traded securities, Shares may be sold
short and may experience increased volatility and price decreases associated
with such trading activity.
Securities
Lending —Securities
lending involves a risk that the borrower may fail to return the securities or
deliver the proper amount of collateral, which may result in a loss to a Fund.
In the event of bankruptcy of the borrower, a Fund could experience losses or
delays in recovering the loaned securities.
Risks
Relating to Calculation of NAV —A
Fund relies on various sources to calculate its NAV. Therefore, a Fund is
subject to certain operational risks associated with reliance on third party
service providers and data sources. NAV calculation may be impacted by
operational risks arising from factors such as failures in systems and
technology. Such failures may result in delays in the calculation of a Fund’s
NAV and/or the inability to calculate NAV over extended time periods. A Fund may
be unable to recover any losses associated with such failures.
Leverage
—To
the extent that each Fund borrows money in the limited circumstances described
under “Non-Principal Investment Strategies” above, it may be leveraged.
Leveraging generally exaggerates the effect on NAV of any increase or decrease
in the market value of a Fund’s portfolio securities. Borrowing expenses are
excluded from the Fund expenses borne by the Investment Adviser under the
unitary management fee or from applicable fee waivers or expense limitation
agreements.
Investment
in Investment Companies Risk (
Guggenheim
S&P High Income Infrastructure ETF only )—Investing
in other investment companies, including ETFs and closed-end funds, subjects the
Fund to those risks affecting the investment company, including the possibility
that the value of the underlying securities held by the investment company could
decrease or the portfolio becomes illiquid. Moreover, the Fund and its
shareholders will incur its pro rata share of the underlying investment
companies' expenses and the purchase of shares of some investment companies (in
the case of closed-end investment companies) may sometimes require the payment
of substantial premiums above the value of such companies’ portfolio securities
or NAVs. The Fund must continue, at the same
time,
to pay its own management fees and expenses with respect to all of its
investments, including shares of other investment companies. The securities of
other investment companies may also be leveraged and will therefore be subject
to certain leverage risks.
In
addition, the Fund will be subject to those risks affecting the investment
company, including the effects of business and regulatory developments that
affect an underlying investment company or the investment company industry
generally.
An
investment by the Fund in another ETF may be subject to additional risk,
including: the ETF's shares may trade at a discount or premium relative to the
net asset value of the shares; an active trading market may not develop for the
ETF's shares; the listing exchange may halt trading of the ETF's shares; the ETF
may fail to correctly track the referenced asset (if any); and the ETF may hold
troubled securities in the referenced index or basket of investments.
Disclosure
of Portfolio Holdings
A
description of the Trust’s policies and procedures with respect to the
disclosure of the Funds’ portfolio securities is available in the SAI.
Investment
Management Services
INVESTMENT
ADVISER
Guggenheim
Funds Investment Advisors, LLC, an indirect wholly-owned subsidiary of
Guggenheim Partners, LLC ("Guggenheim"), acts as the Funds’ investment adviser
pursuant to an advisory agreement with the Trust (the “Advisory Agreement”). The
Investment Adviser is a Delaware limited liability company with its principal
offices located at 227 West Monroe Street, Chicago, Illinois 60606. Guggenheim
Funds Distributors, LLC (the "Distributor”), an affiliate of the Investment
Adviser, currently offers ETFs, unit investment trusts and closed-end funds.
Guggenheim is a global, diversified financial services firm with approximately
$250 billion in assets under supervision as of September 30, 2016. Guggenheim,
through its affiliates, provides investment management, investment advisory,
insurance, investment banking and capital markets services. Guggenheim
Investments represents the investment management division of Guggenheim. The
firm is headquartered in Chicago and New York with a global network of offices
throughout the United States, Europe and Asia. Pursuant to the Advisory
Agreement, the Investment Adviser manages the investment and reinvestment of the
Funds’ assets and administers the affairs of each Fund to the extent requested
by the Board. The Investment Adviser also acts as investment adviser to
closed-end and open-end management investment companies.
Pursuant
to the Advisory Agreement, each of the following Funds pays the Investment
Adviser an advisory fee for the services and facilities it provides payable on a
monthly basis at the annual rate of the Fund’s average daily net assets set
forth in the chart below.
|
|
|
|
Fund(s) |
Advisory
Fee |
|
Guggenheim
Solar ETF |
0.50 |
% |
Guggenheim
S&P Global Water Index ETF |
0.50 |
% |
Pursuant
to an expense reimbursement agreement (the “Expense Agreement”) entered into
between the Trust and the Investment Adviser with respect to each of the above
listed Funds, the Investment Adviser has agreed through December 31, 2019 to
waive fees and/or reimburse expenses to the extent necessary to limit the
Operating Expenses of each Fund (excluding interest expenses, a portion of the
Fund’s licensing fees, offering costs (up to 0.25% of the average net assets),
brokerage commissions and other trading expenses, taxes and extraordinary
expenses such as litigation and other expenses not incurred in the ordinary
course of each Fund’s business) from exceeding 0.65% of average daily assets per
year (the
“Expense Limitation”) .
The offering costs excluded from the 0.65% Expense Limitation are: (a) legal
fees pertaining to each Fund's Shares offered for sale; (b) SEC and state
registration fees; and (c) initial fees paid to be listed on an exchange. For a
period of five years subsequent to each Fund’s commencement of operations, the
Investment Adviser may recover from each of the Fund the fees waived or expenses
reimbursed during the prior three years if the Fund’s expense ratio, including
the recovered expenses,
falls
below this limitation. To the extent that each Fund incurs expenses that are
excluded from this limitation, the Fund’s expense ratio will increase.
In
addition to advisory fees, each Fund listed above pays all other costs and
expenses of its operations, including service fees, distribution fees, custodian
fees, legal and independent registered public accounting firm fees, the costs of
reports and proxies to shareholders, compensation of Independent Trustees and
all other ordinary business expenses not specifically assumed by the Investment
Adviser.
Pursuant
to the Advisory Agreement, each of the following Funds pays the Investment
Adviser a unitary management fee for the services and facilities it provides,
payable on a monthly basis at the annual rate of the Fund’s average daily net
assets set forth in the chart below:
|
|
|
|
Fund(s) |
Advisory
Fee |
|
Guggenheim
China All-Cap ETF |
0.70 |
% |
Guggenheim
China Technology ETF |
0.70 |
% |
Guggenheim
S&P High Income Infrastructure ETF |
0.45 |
% |
Out
of the unitary management fee, the Investment Adviser pays substantially all
expenses of each of the above listed Funds, including the cost of transfer
agency, custody, fund administration, legal, audit and other services, except
for the fee payments under the Advisory Agreement, distribution fees, if any,
brokerage expenses, taxes, interest, litigation expenses and other extraordinary
expenses (such as expenses relating to a meeting of the applicable Fund’s
shareholders).
The
Investment Adviser’s unitary management fee is designed to pay each Fund’s
expenses and to compensate the Investment Adviser for providing services for
each Fund.
APPROVAL
OF ADVISORY AGREEMENT
A
discussion regarding the basis for the Board’s approval of the continuance of
the Advisory Agreement in 2016 is available in the annual report to shareholders
for the fiscal period ended August 31, 2016.
PORTFOLIO
MANAGERS
The
portfolio managers oversee the day-to-day operations of the Funds. The portfolio
managers of each Fund are as follows:
Guggenheim
China All-Cap ETF —
Michael
P. Byrum ,
James
R. King and
Cindy
Gao are
primarily responsible for the day-to-day management of the Fund.
Guggenheim
China Technology ETF —
Michael
P. Byrum ,
James
R. King and
Cindy
Gao are
primarily responsible for the day-to-day management of the Fund.
Guggenheim
Solar ETF —
Michael
P. Byrum ,
James
R. King and
Cindy
Gao are
primarily responsible for the day-to-day management of the Fund.
Guggenheim
S&P Global Water Index ETF —
Michael
P. Byrum ,
James
R. King and
Cindy
Gao are
primarily responsible for the day-to-day management of the Fund.
Guggenheim
S&P High Income Infrastructure ETF —
Michael
P. Byrum ,
James
R. King and
Adrian
Bachman are
primarily responsible for the day-to-day management of the Fund.
The
biographies of the portfolio managers are as follows:
Mr.
Byrum is a Senior Managing Director and Portfolio Manager of Guggenheim
Investments and joined Guggenheim Investments in 1993. He has ultimate
responsibility for the management of the Funds. In addition to generally
overseeing all aspects of the management of several other funds in the
Guggenheim Investments fund complex, Mr. Byrum reviews the activities of the
portfolio managers of the Funds. During his time at Guggenheim Investments, he
has played a key role in the development of the firm’s investment strategies and
product offerings. As Portfolio Manager, Mr. Byrum was instrumental in the
launch of several funds in the Guggenheim Investments fund complex, including
the NASDAQ-100®, Precious Metals, Government Long Bond 1.2x Strategy, Inverse
Government Long Bond Strategy, Inverse S&P 500 Strategy and Inverse
NASDAQ-100® Strategy Funds, and helped to create the Sector Funds. He was named
Vice President of Guggenheim Investments in 1998, and Executive Vice President
in 2000. Prior to joining Guggenheim Investments, Mr. Byrum worked for Money
Management
Associates, the investment adviser for Rushmore Funds, Inc. He holds a degree in
finance from Miami University of Ohio and is a member of the CFA Institute and
the Washington Society of Investment Analysts.
Mr.
King is a Managing Director and Portfolio Manager of Guggenheim Investments and
rejoined Guggenheim Investments in 2011 as the lead portfolio manager for
exchange-traded products. In the interval between 2008 and 2011, he served as
special consultant to a pair of hedge funds ventures, one focused on long-short
equity and the other on market neutral statistical arbitrage. Prior to that, he
served in a variety of roles for Guggenheim Investments ranging from shareholder
services representative to portfolio manager and director of trading. At the
time of his departure in 2008, he was director of portfolio management,
overseeing a suite of trader-friendly mutual funds with nearly $15 billion in
assets. Mr. King holds a bachelor’s degree in finance from the University of
Maryland, and has earned the Chartered Financial Analyst designation. He has
been quoted in several publications such as The Wall Street Journal, Reuters and
BusinessWeek. He has also been a speaker at several industry events, discussing
ETFs, trading strategies, index construction, and trader-friendly mutual
funds.
Ms.
Gao is ETF Analyst, ETF Portfolio Management of Guggenheim Investments, and
joined Guggenheim Investments in December 2010. Prior to joining Guggenheim
Investments, Ms. Gao served as an analyst at Blue Cross Blue Shield of Illinois
from 2008-2010. Ms. Gao received a M.S. in Accounting from the University of
Illinois at Chicago.
Mr.
Bachman is a Vice President and Portfolio Manager of Guggenheim Investments and
joined Guggenheim Investments in August of 2014. Before joining Guggenheim
Investments, Mr. Bachman spent six years at Arrow Investment Advisors. As
portfolio manager, Mr. Bachman managed the Arrow Dow Jones Global Yield ETF
(GYLD) which provided multi asset class diversified income across five unique
sources including high dividend paying global equities, real estate investment
trusts, MLPs, sovereign debt and high yield corporate bonds. While at Arrow he
also aided in the management of numerous other funds including the Arrow
Alternative Solutions, Arrow DWA Balanced, Arrow DWA Tactical, Arrow Managed
Futures and Arrow Commodity funds. Mr. Bachman was a member of Arrow's
Investment Performance and Best Execution committees. Before joining Arrow Funds
in June of 2008, Mr. Bachman spent eleven years at Rydex Investments in
Rockville, Maryland. As portfolio manager, Mr. Bachman managed Rydex's Sector
Rotation Fund and several sector funds. During the course of his tenure with
Rydex, he also aided in the management of numerous other funds including Rydex's
inverse, leveraged and international funds. Mr. Bachman has a bachelor's degree
in finance and international business from the University of Maryland, College
Park and has earned the Chartered Financial Analyst designation.
The
SAI provides additional information about the portfolio managers’ compensation
structure, other accounts managed by the portfolio managers and the portfolio
managers’ ownership of securities of the Funds..
Purchase
and Redemption of Shares
GENERAL
The
Shares are issued or redeemed by each Fund at NAV per Share only in Creation
Unit size.
Most
investors buy and sell Shares of the Funds in secondary market transactions
through brokers. Shares of the Funds are listed and traded on the secondary
market on the NYSE Arca. Shares can be bought and sold throughout the trading
day like other publicly traded shares. There is no minimum investment. Although
Shares are generally purchased and sold in “round lots” of 100 Shares, brokerage
firms typically permit investors to purchase or sell Shares in smaller “odd
lots,” at no per-Share price differential. When buying or selling Shares through
a broker, you will incur customary brokerage commissions and charges, and you
may pay some or all of the spread between the bid and the offered price in the
secondary market on each leg of a round trip (purchase and sale) transaction.
The Funds trade on the NYSE Arca at prices that may differ to varying degrees
from the daily NAV of the Shares. Given that each Fund’s Shares can be issued
and redeemed in Creation Units, the Investment Adviser believes that large
discounts and premiums to NAV should not be sustained for long. The Funds trade
under the NYSE Arca symbols set forth in the chart below.
|
|
|
Name
of Fund |
NYSE
Arca Ticker Symbol |
Guggenheim
China All-Cap ETF |
YAO |
Guggenheim
China Technology ETF |
CQQQ |
Guggenheim
Solar ETF |
TAN |
Guggenheim
S&P Global Water Index ETF |
CGW |
Guggenheim
S&P High Income Infrastructure ETF |
GHII |
Share
prices are reported in dollars and cents per Share.
Investors
may acquire Shares directly from the Funds, and shareholders may tender their
Shares for redemption directly to the Funds, only in Creation Units of the
applicable number of Shares as set forth in the table below. In certain
circumstances, a Fund may restrict or reject a creation or redemption order, and
notify a shareholder of such restriction or rejection, as described in “Creation
and Redemption of Creation Unit Aggregations” in the SAI and in the Funds’
authorized participant agreement.
|
|
|
Name
of Fund |
Creation
Unit Size |
Guggenheim
China All-Cap ETF |
100,000 |
Guggenheim
China Technology ETF |
50,000 |
Guggenheim
Solar ETF |
80,000 |
Guggenheim
S&P Global Water Index ETF |
80,000 |
Guggenheim
S&P High Income Infrastructure ETF |
50,000 |
BOOK
ENTRY
Shares
are held in book-entry form, which means that no stock certificates are issued.
The Depository Trust Company (“DTC”) or its nominee is the record owner of all
outstanding Shares of each Fund and is recognized as the owner of all Shares for
all purposes. Investors owning Shares are beneficial owners as shown on the
records of DTC or its participants. DTC serves as the securities depository for
all Shares. Participants in DTC include securities brokers and dealers, banks,
trust companies, clearing corporations and other institutions that directly or
indirectly maintain a custodial relationship with DTC. As a beneficial owner of
Shares, you are not entitled to receive physical delivery of stock certificates
or to have Shares registered in your name, and you are not considered a
registered owner of Shares. Therefore, to exercise any right as an owner of
Shares, you must rely upon the procedures of DTC and its participants. These
procedures are the same as those that apply to any other stocks that you may
hold in book entry or “street name” form.
How
to Buy and Sell Shares
PRICING
FUND SHARES
The
trading price of each Fund’s Shares on the NYSE Arca may differ from the Fund’s
daily NAV. The NYSE Arca disseminates the approximate value of Shares of a Fund
every fifteen seconds. This approximate value should not be viewed as a
“real-time” update of the NAV per Share of a Fund because the approximate value
may not be calculated in the same manner as the NAV, which is computed once a
day, generally at the end of the business day. A Fund is not involved in, or
responsible for, the calculation or dissemination of the approximate value and a
Fund does not make any warranty as to its accuracy.
Each
Fund calculates its NAV by:
Taking
the current market value of its total assets;
Subtracting
any liabilities; and
Dividing
that amount by the total number of Shares outstanding.
Each
Fund generally calculates its NAV once each Business Day as of the regularly
scheduled close of normal trading on the NYSE (normally, 4:00 p.m., Eastern
Time). The NYSE is open Monday through Friday, except on observation of the
following holidays: New Year’s Day, Martin Luther King, Jr. Day, President’s
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day
and Christmas Day. If the NYSE has an earlier
closing
time (scheduled or unscheduled), such as on days in advance of holidays
generally observed by the NYSE, a Fund may calculate its NAV as of the earlier
closing time or calculate its NAV as of the normally scheduled close of regular
trading on the NYSE for that day, so long as the Investment Adviser believes
there generally remains an adequate market to obtain reliable and accurate
market quotations. A Fund generally does not calculate its NAV on any
non-Business Day. However, if the NYSE is closed for any other reason on a day
it would normally be open for business, a Fund may calculate its NAV as of the
normally scheduled close of regular trading on the NYSE for that day, so long as
the Investment Adviser believes there generally remains an adequate market to
obtain reliable and accurate market quotations. Each Fund discloses its NAV on a
daily basis. For more information, or to obtain a Fund’s NAV, please call
800.820.0888 or visit the Guggenheim Investments
website-www.guggenheiminvestments.com.
When
calculating the NAV, a Fund will value the portfolio securities and assets of a
Fund for which market quotations are readily available at the current market
price of those securities and assets. With respect to portfolio securities and
assets of a Fund for which market quotations are not readily available, or which
cannot be accurately valued under the Funds’ valuation procedures, the Fund will
fair value those securities and assets.
Equity
securities traded on a domestic securities exchange will usually be valued at
the last sale price on that exchange on the day the valuation is made, provided,
however, that securities listed on NASDAQ will usually be valued at the NASDAQ
Official Closing Price, which may not necessarily represent the last sale price.
If no sale is reported, then an exchange-traded equity security is valued at the
mean of the most recent bid and ask prices on such day.
Debt
securities with a maturity greater than 60 days at the time of purchase will
usually be valued based on pricing services approved by the Board, when
available. Prices obtained from pricing services use various inputs, methods,
models and assumptions, which may include information provided by broker-dealers
and other market makers. Commercial paper and discount notes with a maturity of
60 days or less at the time of purchase are valued at amortized cost, unless it
is deemed that amortized cost does not represent fair value, in which case the
applicable asset will be valued using prices obtained from pricing services. If
prices obtained from pricing services are unavailable, then securities are
generally fair valued. Certain securities may also be valued based on broker
quotations.
For
foreign securities and other assets that are priced in a currency other than
U.S. dollars, a Fund will convert the security or asset from the local currency
into U.S. dollars using the relevant current exchange rate. Foreign securities
may trade in their primary markets on weekends or other days when a Fund does
not price its Shares.
If
market quotations are not readily available, are unreliable, or a significant
event has occurred, securities are priced at fair value as determined in good
faith using methods approved by the Board. For example, market prices may be
unavailable if trading in a particular portfolio security was halted during the
day and did not resume prior to a Fund’s NAV calculation. The Investment Adviser
may view market prices as unreliable when the value of a security has been
materially affected by events occurring after the market closes, but prior to
the time as of which a Fund calculates its NAV.
The
use of fair valuation in pricing a security involves the consideration of a
number of subjective factors and therefore, is susceptible to the unavoidable
risk that the valuation may be higher or lower than the price at which the
security might actually trade if a reliable market price were readily
available.
More
information about the valuation of a Fund's holdings can be found in the SAI and
the Fund's shareholder reports (when available).
CREATION
UNITS
Investors
such as market makers, large investors and institutions who wish to deal in
Creation Units directly with each Fund must have entered into an authorized
participant agreement with the Distributor, or purchase through a dealer that
has entered into such an agreement. Set forth below is a brief description of
the procedures applicable to purchase and redemption of Creation Units. For more
detailed information, see “Creation and Redemption of Creation Unit
Aggregations” in the SAI.
HOW
TO BUY SHARES
In
order to purchase Creation Units of a Fund, an investor must generally deposit a
designated portfolio of equity securities constituting a substantial
replication, or a representation, of the securities included in the Index
(the“Deposit Securities”) and generally make a small cash payment referred to as
the“Cash Component.”For those Authorized Participants (as defined below) that
are not eligible for trading a Deposit Security, custom orders are available.
The list of the names and the amounts of shares of the Deposit Securities is
made available by the Funds’ custodian through the facilities of the National
Securities Clearing Corporation, commonly referred to as NSCC, immediately prior
to the opening of business each day of the NYSE Arca. The Cash Component
represents the difference between the NAV of a Creation Unit and the market
value of the Deposit Securities. In the case of custom orders, cash-in-lieu may
be added to the Cash Component to replace any Deposit Securities that the
Authorized Participant (as defined below) may not be eligible to trade or the
Investment Adviser believes are in the best interests of the Fund not to accept
in kind.
Orders
must be placed by or through a participant of The Depository Trust Company (“DTC
Participant”) that has entered into an agreement with the Trust, the Distributor
and the transfer agent, with respect to purchases and redemptions of Creation
Units (collectively, “Authorized Participant” or “AP”) and must be in proper
form pursuant to the requirements regarding submission and logistics set forth
in such agreement. See “Creation and Redemption of Creation Unit Aggregations”
in the SAI. All standard orders must be placed for one or more whole Creation
Units of Shares of each Fund and must be received by the Distributor in proper
form no later than the close of regular trading on the NYSE Arca (ordinarily
4:00 p.m. Eastern time) (“Closing Time”) in order to receive that day’s closing
NAV per Share. In the case of certain custom orders placed at the request of the
AP and as further described in the SAI, the order must be received by the
Distributor no later than one hour prior to Closing Time in order to receive
that day’s closing NAV per Share. A custom order may be placed by an Authorized
Participant in the event that the Trust permits or requires the substitution of
an amount of cash to be added to the Cash Component to replace any Deposit
Security which may not be available in sufficient quantity for delivery or which
may not be eligible for trading by such Authorized Participant or the investor
for which it is acting or any other relevant reason. See “Creation and
Redemption of Creation Unit Aggregations” in the SAI.
The
following fixed creation transaction fees per transaction for each Fund (the
“Creation Transaction Fee”) set forth in the table below are applicable to each
transaction regardless of the number of Creation Units purchased in the
transaction.
|
|
|
Fund |
Fixed
Creation Transaction Fees |
|
(Per
Transaction) |
Guggenheim
China All-Cap ETF |
$3,000 |
Guggenheim
China Technology ETF |
$500 |
Guggenheim
Solar ETF |
$500 |
Guggenheim
S&P Global Water Index ETF |
$500 |
Guggenheim
S&P High Income Infrastructure ETF |
$1,000 |
An
additional variable charge for cash creations or partial cash creations may also
be imposed to compensate a Fund for the costs associated with buying the
applicable securities. Each Fund may adjust these fees from time to time based
on actual experience.
Each
Fund reserves the right to effect creations in cash. A shareholder may request a
cash creation in lieu of securities, however, the Fund may, in its discretion,
reject any such request. See “Creation and Redemption of Creation Unit
Aggregations” in the SAI. The price for each Creation Unit will equal the daily
NAV per Share times the number of Shares in a Creation Unit plus the fees
described above and, if applicable, any transfer taxes.
Shares
of each Fund may be issued in advance of receipt of all Deposit Securities
subject to various conditions, including a requirement to maintain on deposit
with the Trust cash at least equal to 115% of the market value of the missing
Deposit Securities. See “Creation and Redemption of Creation Unit Aggregations”
in the SAI.
LEGAL
RESTRICTIONS ON TRANSACTIONS IN CERTAIN SECURITIES
An
investor subject to a legal restriction with respect to a particular security
required to be deposited in connection with the purchase of a Creation Unit may,
at a Fund’s discretion, be permitted to deposit an equivalent amount of cash in
substitution for any security which would otherwise be included in the Deposit
Securities
applicable
to the purchase of a Creation Unit. For more details, see “Creation and
Redemption of Creation Unit Aggregations” in the SAI.
REDEMPTION
OF SHARES
Shares
may be redeemed only in Creation Units at their NAV and only on a day the NYSE
Arca is open for business. The Funds’ custodian makes available immediately
prior to the opening of business each day of the NYSE Arca, through the
facilities of the NSCC, the list of the names and the number of shares of each
Fund's portfolio securities that will be applicable that day to redemption
requests in proper form (“Fund Securities”). Fund Securities received on
redemption may not be identical to Deposit Securities, which are applicable to
purchases of Creation Units. Unless cash redemptions or
partial cash redemptions are
available or specified for a Fund, the redemption proceeds consist of the Fund
Securities, plus cash in an amount equal to the difference between the NAV of
Shares being redeemed as next determined after receipt by the transfer agent of
a redemption request in proper form, and the value of the Fund Securities (the
“Cash Redemption Amount”), less the applicable redemption fee and, if
applicable, any transfer taxes. Should the Fund Securities have a value greater
than the NAV of Shares being redeemed, a compensating cash payment to the Trust
equal to the differential, plus the applicable redemption fee and, if
applicable, any transfer taxes will be required to be arranged for, by or on
behalf of the redeeming shareholder. For more details, see “Creation and
Redemption of Creation Unit Aggregations” in the SAI.
An
order to redeem Creation Units of a Fund may only be effected by or through an
Authorized Participant. An order to redeem must be placed for one or more whole
Creation Units and must be received by the transfer agent in proper form no
later than the Closing Time in order to receive that day’s closing NAV per
Share. In the case of certain custom orders, placed at the request of the AP and
as further described in the SAI, the order must be received by the transfer
agent no later than 3:00 p.m. Eastern time.
The
following fixed redemption transaction fees per transaction for each Fund (the
“Redemption Transaction Fee”) set forth in the table below are applicable to
each redemption transaction regardless of the number of Creation Units redeemed
in the transaction.
|
|
|
Fund |
Fixed
Redemption Transaction Fees |
|
(Per
Transaction) |
Guggenheim
China All-Cap ETF |
$3,000 |
Guggenheim
China Technology ETF |
$500 |
Guggenheim
Solar ETF |
$500 |
Guggenheim
S&P Global Water Index ETF |
$500 |
Guggenheim
S&P High Income Infrastructure ETF |
$1,000 |
An
additional variable charge may be imposed for cash redemptions or partial cash
redemptions (to compensate the Funds for the costs associated with selling the
applicable securities). Each Fund may adjust these fees from time to time based
on actual experience. Each Fund reserves the right to effect redemptions
wholly
or partially in
cash. A shareholder may request a cash redemption or partial cash redemption in
lieu of securities, however, each Fund may, in its discretion, reject any such
request. See “Creation and Redemption of Creation Unit Aggregations” in the
SAI.
DISTRIBUTIONS
Dividends
and Capital Gains.
Fund shareholders are entitled to their share of a Fund’s income and net
realized gains on its investments. Each Fund pays out substantially all of its
net earnings to its shareholders as “distributions.”
Each
Fund typically earns income dividends from stocks and may earn interest from
debt securities. These amounts, net of expenses, are passed along to Fund
shareholders as “income dividend distributions.” Each Fund realizes capital
gains or losses whenever it sells securities. Net long-term capital gains are
distributed to shareholders as “capital gain distributions.”
Income
dividends, if any, are distributed to shareholders annually, except for the
Guggenheim S&P High Income Infrastructure ETF, which distributes quarterly.
Net capital gains are distributed at least annually. Dividends may be declared
and paid more frequently to improve Index tracking or to comply with the
distribution requirements of the Internal Revenue Code of 1986, as amended, that
are applicable to regulated investment companies. Some
portion
of each distribution may result in a return of capital. Fund shareholders will
be notified regarding the portion of the distribution that represents a return
of capital.
Distributions
in cash may be reinvested automatically in additional whole Shares only if the
broker through which the Shares were purchased makes such option
available.
DISTRIBUTION
AND SERVICE PLAN
The
Board has adopted a distribution and service plan (the “Plan”) pursuant to Rule
12b-1 under the Investment Company Act of 1940, as amended (the “1940 Act”).
Under the Plan, each Fund is authorized to pay distribution fees in connection
with the sale and distribution of its shares and pay service fees in connection
with the provision of ongoing services to shareholders and the maintenance of
shareholder accounts in an amount up to 0.25% of its average daily net assets
each year.
No
12b-1 fees are currently paid by the Funds, and there are no current plans to
impose these fees. In addition, no such fee may be paid in the future without
further approval by the Board and the Board has adopted a resolution that no
such fee will be paid for at least 12 months from the date of this Prospectus.
However, in the event 12b-1 fees are charged in the future, because these fees
are paid out of a Fund’s assets on an ongoing basis, these fees will increase
the cost of your investment in the Fund. By purchasing shares subject to
distribution fees and service fees, you may pay more over time than you would by
purchasing shares with other types of sales charge arrangements. Long-term
shareholders may pay more than the economic equivalent of the maximum front-end
sales charge permitted by the rules of the Financial Industry Regulatory
Authority (“FINRA”). The net income attributable to the Shares will be reduced
by the amount of distribution fees and service fees and other expenses of the
Funds.
The
Investment Adviser or its affiliates may make payments to broker-dealers, banks
or other financial intermediaries (together, “intermediaries”) related to
marketing activities and presentations, educational training programs, the
support of technology platforms and/or reporting systems, or their making shares
of the Funds and certain other Guggenheim Funds ETFs available to their
customers. Such payments, which may be significant to the intermediary, are not
made by a Fund. Rather, such payments are made by the Investment Adviser or its
affiliates from their own resources, which come directly or indirectly in part
from fees paid by the Guggenheim Funds ETF complex. Payments of this type are
sometimes referred to as revenue-sharing payments. A financial intermediary may
make decisions about which investment options it recommends or makes available,
or the level of services provided, to its customers based on the revenue-sharing
payments it is eligible to receive. Therefore, such payments to an intermediary
create conflicts of interest between the intermediary and its customers and may
cause the intermediary to recommend a Fund or other Guggenheim Funds ETFs over
another investment. More information regarding these payments is contained in
the Funds’ SAI. Please
contact your salesperson or other investment professional for more information
regarding any such payments his or her firm may receive from the Investment
Adviser or its affiliates.
Frequent
Purchases and Redemptions
The
Funds impose no restrictions on the frequency of purchases and redemptions. The
Board evaluated the risks of market timing activities by the Funds’ shareholders
when they considered that no restriction or policy was necessary. The Board
considered that, unlike traditional mutual funds, each Fund issues and redeems
its shares at NAV for a basket of securities intended to mirror that Fund’s
portfolio, plus a small amount of cash, and a Fund’s Shares may be purchased and
sold on the exchange at prevailing market prices. Given this structure, the
Board determined that it is unlikely that (a) market timing would be attempted
by each Fund’s shareholders or (b) any attempts to market time a Fund by its
shareholders would result in negative impact to the Fund or its
shareholders.
Fund
Service Providers
MUFG
Investor Services (US), LLC is
the administrator of the Funds.
The
Bank of New York Mellon is the custodian and fund accounting and transfer agent
for the Funds.
Dechert
LLP serves as legal counsel to the Funds.
Ernst
& Young LLP serves as the Funds’ independent registered public accounting
firm. The independent registered public accounting firm is responsible for
auditing the annual financial statements of the Funds and performs other
audit-related and tax services.
Index
Providers
AlphaShares
is the Index Provider for the Guggenheim China All-Cap ETF and Guggenheim China
Technology ETF. AlphaShares is not affiliated with the Trust, the Investment
Adviser or the Distributor. The Investment Adviser has entered into a license
agreement with AlphaShares to use the Index. Each Fund is entitled to use its
respective Index pursuant to a sub-licensing arrangement with the Investment
Adviser.
Standard
& Poor's, a division of The McGraw Hill Companies, Inc. is the Index
Provider for the Guggenheim S&P Global Water Index ETF and Guggenheim
S&P High Income Infrastructure ETF. Standard & Poor's is not affiliated
with the Trust, the Investment Adviser or the Distributor. The Investment
Adviser has entered into a license agreement with Standard & Poor's to use
the Index. Each Fund is entitled to use its respective Index pursuant to a
sub-licensing arrangement with the Investment Adviser.
MAC
is the Index Provider for the Guggenheim Solar Energy ETF. MAC is not affiliated
with the Trust, the Investment Adviser or the Distributor. The Investment
Adviser has entered into a license agreement with the Index Provider to use the
Index. The Fund is entitled to use the Index pursuant to a sub-licensing
arrangement with the Investment Adviser.
Disclaimers
Guggenheim
China All-Cap ETF and Guggenheim China Technology ETF
“AlphaShares
China All-Cap Index” and “AlphaShares China Technology Index” are registered
trademarks of AlphaShares and have been licensed for use by the Investment
Adviser. The Funds are not sponsored, endorsed, sold or promoted by AlphaShares
and AlphaShares makes no representation regarding the advisability of investing
in Shares of the Funds.
Guggenheim
Solar ETF
The
“MAC Global Solar Energy Index” is a trademark of MAC and has been licensed for
use for certain purposes by the Investment Adviser. The Fund is not sponsored,
endorsed, sold or promoted by MAC and MAC makes no representation regarding the
advisability of investing in Shares of the Fund.
Guggenheim
S&P Global Water Index ETF and Guggenheim S&P High Income Infrastructure
ETF
“Standard
& Poor’s®”, “S&P®”, “S&P Global Water Index” and "S&P High
Income Infrastructure Index" are registered trademarks of S&P and have been
licensed for use by the Investment Adviser. The Funds are not sponsored,
endorsed, sold or promoted by S&P and S&P makes no representation
regarding the advisability of investing in Shares of the Funds.
S&P
does not guarantee the accuracy and/or the completeness of the Indices or any
data included therein, and S&P shall have no liability for any errors,
omissions or interruptions therein. S&P makes no warranty, condition or
representation express or implied, as to results to be obtained by the
Investment Adviser, owners of the Shares of the Funds or any other person or
entity from the use of the Indices or any data included therein. S&P makes
no express or implied warranties, representations or conditions, and expressly
disclaims all warranties or conditions of merchantability or fitness for a
particular purpose or use and any other express or implied warranty or condition
with respect to the Indices or any data included therein. Without limiting any
of the foregoing, in no event shall S&P or have any liability for any
special, punitive, indirect or consequential damages (including lost profits)
resulting from the use of the Indices or any data included therein even if
notified of the possibility of such damages.
The
Funds and their Shares are not sponsored, endorsed, sold or promoted by the
Index Providers and their affiliates. The Index Providers make no representation
or warranty, express or implied, to the shareholders 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 Indices to track general stock
market performance. The Index Providers' only relationship to the Investment
Adviser is the licensing of certain trademarks and trade names of the Index
Providers and of the Indices, which is determined, composed and calculated by
the Index Providers without regard to Investment Adviser or the Funds. The Index
Providers have no obligation to take the needs of the Investment Adviser or the
shareholders of the Funds into consideration in determining, composing or
calculating the Indices. The
Index
Providers are not responsible for and have not participated in the determination
of the prices of the Shares of the Funds or the timing of the issuance or sale
of such Shares or in the determination or calculation of the equation by
which the Shares are to be converted into cash. The Index Providers have no
obligations or liabilities in connection with the administration, marketing, or
trading of the Funds or their Shares.
The
Investment Adviser does not guarantee the accuracy and/or the completeness of
any Index or any data included therein and the Investment Adviser shall have no
liability for any errors, omissions or interruptions therein.
Federal
Income Taxation
As
with any investment, you should consider how your investment in Shares will be
taxed. The tax information in this Prospectus is provided as general
information. You should consult your own tax professional about the tax
consequences of an investment in Shares.
Unless
your investment in Shares is made through a tax-exempt entity or tax-deferred
retirement account, such as an IRA plan, you need to be aware of the possible
tax consequences when:
|
|
• |
Your
Fund makes distributions, |
|
|
• |
You
sell your Shares listed on the NYSE Arca,
and |
|
|
• |
You
purchase or redeem Creation Units. |
TAXES
ON DISTRIBUTIONS
Income
dividends and long-term capital gains, if any, are distributed to shareholders
annually. Each Fund may also pay a special distribution at the end of the
calendar year to comply with federal tax requirements. In general, your
distributions are subject to federal income tax when they are paid, whether you
take them in cash or reinvest them in a Fund. Dividends paid out of a Fund’s
income and net short-term gains, if any, are taxable as ordinary income.
Distributions of net long-term capital gains, if any, in excess of net
short-term capital losses are taxable as long-term capital gains, regardless of
how long you have held the Shares.
Dividends
that are designated as qualified dividend income are eligible for the reduced
maximum rate to individuals of 15% or 20% (depending on whether the individual’s
income exceeds certain threshold amounts) to the extent that a Fund receives
qualified dividend income and subject to certain limitations.
Long-term
capital gains of non-corporate taxpayers are generally taxed at a maximum rate
of either 15% or 20% depending on whether the individual’s income exceeds
certain threshold amounts.
An
additional 3.8% Medicare tax is imposed on certain net investment income
(including ordinary dividends and capital gain distributions received from a
Fund and net gains from redemptions or other taxable dispositions of Fund
shares) of U.S. individuals, estates and trusts to the extent that such person’s
“modified adjusted gross income” (in the case of an individual) or “adjusted
gross income” (in the case of an estate or trust) exceeds certain threshold
amounts.
Distributions
in excess of a Fund’s current and accumulated earnings and profits are treated
as a tax-free return of capital to the extent of your basis in the Shares, and
as capital gain thereafter. A distribution will reduce a Fund’s NAV per Share
and may be taxable to you as ordinary income or capital gain even though, from
an investment standpoint, the distribution may constitute a return of
capital.
If
you are not a citizen or permanent resident of the United States or if you are a
foreign entity, each Fund’s ordinary income dividends (which include
distributions of net short-term capital gains) will generally be subject to a
30% U.S. withholding tax, unless a lower treaty rate applies or unless such
income is effectively connected with a U.S. trade or business. Prospective
investors are urged to consult their tax advisors concerning the applicability
of the U.S. withholding tax.
If
more than 50% of a Fund’s total assets at the end of its taxable year consists
of foreign stock or securities, the Fund may elect to “pass through” to its
investors certain foreign income taxes paid by the Fund, with the result that
each investor will (i) include in gross income, even though not actually
received, the investor’s pro rata share of the Fund’s foreign income taxes, and
(ii) either deduct (in calculating U.S. taxable income) or credit (in
calculating U.S. federal tax), subject to certain limitations, the investor’s
pro rata share of the Fund’s foreign income taxes.
By
law, each Fund must withhold a percentage of your distributions and proceeds if
you have not provided a taxpayer identification number or social security
number. The backup withholding rate for individuals is currently
28%.
TAXES
ON EXCHANGE-LISTED SHARES SALES
Currently,
any capital gain or loss realized upon a sale of Shares is generally treated as
long-term capital gain or loss if the Shares have been held for more than one
year and as short-term capital gain or loss if the Shares have been held for one
year or less. Capital loss realized on the sale or exchange of Shares held for
six months or less will be treated as long-term capital loss to the extent of
any capital gain dividends received by the shareholder. The ability to deduct
capital losses may be limited.
TAXES
ON PURCHASE AND REDEMPTION OF CREATION UNITS
An
Authorized Participant who exchanges equity securities for Creation Units
generally will recognize a gain or a loss. The gain or loss will be equal to the
difference between the market value of the Creation Units at the time and the
exchanger’s aggregate basis in the securities surrendered and the Cash Component
paid. A person who exchanges Creation Units for equity securities will generally
recognize a gain or loss equal to the difference between the exchanger’s basis
in the Creation Units and the aggregate market value of the securities received
and the Cash Redemption Amount. The Internal Revenue Service, however, may
assert that a loss realized upon an exchange of securities for Creation Units
cannot be deducted currently under the rules governing “wash sales” on the basis
that there has been no significant change in economic position. Persons
exchanging securities should consult their own tax advisor with respect to
whether the wash sale rules apply and when a loss might be
deductible.
Under
current federal tax laws, any capital gain or loss realized upon redemption of
Creation Units is generally treated as long-term capital gain or loss if the
Shares have been held for more than one year and as a short-term capital gain or
loss if the Shares have been held for one year or less.
If
you purchase or redeem Creation Units, you will be sent a confirmation statement
showing how many and at what price you purchased or sold Shares.
The
foregoing discussion summarizes some of the possible consequences under current
federal tax law of an investment in a Fund. It is not a substitute for personal
tax advice. You may also be subject to state and local taxation on Fund
distributions and sales of Fund Shares. You are advised to consult your personal
tax advisor about the potential tax consequences of an investment in Fund Shares
under all applicable tax laws.
Tax-Advantaged
Product Structure
Unlike
interests in many conventional mutual funds, the Shares are traded throughout
the day on a national securities exchange, whereas mutual fund interests are
typically only bought and sold at closing NAVs. The Shares have been designed to
be tradable in the secondary market on a national securities exchange on an
intra-day basis, and to be created and redeemed principally in-kind in Creation
Units at each day’s next calculated NAV. These arrangements are designed to
protect ongoing shareholders from adverse effects on the Funds’ portfolios that
could arise from frequent cash creation and redemption transactions. In a
conventional mutual fund, redemptions can have an adverse tax impact on taxable
shareholders because the mutual fund may need to sell portfolio
securities
to obtain cash to meet fund redemptions. These sales may generate taxable gains
for the shareholders of the mutual fund, whereas the Shares’ in-kind redemption
mechanism generally will not lead to a tax event for the Funds or their ongoing
shareholders.
Other
Information
For
purposes of the 1940 Act, each Fund is treated as a registered investment
company. Section 12(d)(1) of the 1940 Act restricts investments by investment
companies in the securities of other investment companies, including shares of
the Funds. R egistered
investment companies are permitted to invest in the Funds beyond the limits set
forth in Section 12(d)(1) subject to certain terms and conditions set forth in
an SEC exemptive order issued to the Trust, including that such investment
companies enter into an agreement with a Fund .
The
Prospectus and SAI, related regulatory filings, and any other Fund
communications or disclosure documents do not purport to create any contractual
obligations between the Funds and shareholders. Each Fund may amend any of
these documents or enter into (or amend) a contract on behalf of each Fund
without shareholder approval except where shareholder approval is specifically
required. Further, shareholders are not intended third-party beneficiaries of
any contracts entered into by (or on behalf of) the Funds, including contracts
with the Investment Adviser or other parties who provide services to the
Funds.
Premium/Discount
Information
Information
about the differences between the daily market price on secondary markets for
Shares and the NAV of each Fund can be found at
www.guggenheiminvestments.com.
Total
Return Information
Information
about the total return of each Fund’s Index in comparison to the total return of
that Fund can be found at www.guggenheiminvestments.com.
Financial
Highlights
The
financial highlights table is intended to help you understand each Fund’s
financial performance for the past five years or since its inception. Certain
information reflects financial results for a single Fund share. The total
returns in the table represent the rate that an investor would have earned (or
lost) on an investment in each Fund (assuming reinvestment of all dividends and
distributions). This information has been derived from the Funds’ financial
statements which have been audited by Ernst & Young LLP, whose report, along
with the Funds’ financial statements, are included in the Funds’ Annual Report,
which is available upon request.
YAO
|
Guggenheim
China All-Cap ETF
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year
Ended August 31, 2016 |
|
Year
Ended August 31, 2015 |
|
Year
Ended
August
31,
2014 |
|
Year
Ended
August
31,
2013 |
|
Year
Ended
August
31,
2012 |
|
Per
Share Data: |
|
|
|
|
|
Net asset
value, beginning of period |
$ |
24.42 |
|
$ |
28.56 |
|
$ |
24.63 |
|
$ |
21.66 |
|
$ |
25.04 |
|
Income from
investment operations: |
|
|
|
|
|
Net
investment income(a) |
0.52 |
|
0.53 |
|
0.62 |
|
0.46 |
|
0.52 |
|
Net gain
(loss) on investments (realized and unrealized) |
2.12 |
|
(4.02 |
) |
3.80 |
|
3.07 |
|
(3.32 |
) |
Total from
investment operations |
2.64 |
|
(3.49 |
) |
4.42 |
|
3.53 |
|
(2.80 |
) |
Less
distributions from: |
|
|
|
|
|
Net investment
income |
(0.87 |
) |
(0.65 |
) |
(0.49 |
) |
(0.56 |
) |
(0.58 |
) |
Total
distributions to shareholders |
(0.87 |
) |
(0.65 |
) |
(0.49 |
) |
(0.56 |
) |
(0.58 |
) |
Net asset
value, end of period |
$ |
26.19 |
|
$ |
24.42 |
|
$ |
28.56 |
|
$ |
24.63 |
|
$ |
21.66 |
|
Market value,
end of period |
$ |
26.23 |
|
$ |
24.13 |
|
$ |
28.52 |
|
$ |
24.49 |
|
$ |
21.76 |
|
Total
Return(b)
Net
asset value |
10.99 |
% |
-12.51 |
% |
18.05 |
% |
16.25 |
% |
-11.71 |
% |
Ratios/Supplemental
Data:
Net
assets, end of period (in thousands) |
$23,574 |
$29,308 |
$54,262 |
$46,804 |
$49,822 |
Ratio to
average net assets of: |
|
|
|
|
|
Net investment
income |
2.17 |
% |
1.84 |
% |
2.35 |
% |
1.92 |
% |
2.25 |
% |
Total
expenses |
0.70 |
% |
0.70 |
% |
0.71 |
% |
0.70 |
% |
0.70 |
% |
Net
expenses |
0.70 |
% |
0.70 |
% |
0.71 |
% |
0.70 |
% |
0.70 |
% |
Portfolio
turnover rate(c) |
26 |
% |
17 |
% |
12 |
% |
16 |
% |
12 |
% |
|
|
(a)
|
Based
on average shares outstanding. |
|
|
(b)
|
Total
investment return is calculated assuming an initial investment made at the
net asset value at the beginning of the period, reinvestment of all
dividends and distribution at net asset value during the period, and
redemption on the last day of the period. Transaction fees are not
reflected in the calculation of total investment return.
|
|
|
(c) |
Portfolio
turnover does not include securities received or delivered from processing
creations or redemptions. |
CQQQ
|
Guggenheim
China Technology ETF
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year
Ended
August
31,
2016 |
|
Year
Ended
August
31,
2015 |
|
Year
Ended
August
31,
2014 |
|
Year
Ended
August
31,
2013 |
|
Year
Ended
August
31,
2012 |
|
Per
Share Data: |
|
|
|
|
|
Net asset
value, beginning of period |
$ |
29.55 |
|
$ |
38.09 |
|
$ |
29.55 |
|
$ |
20.03 |
|
$ |
25.44 |
|
Income from
investment operations: |
|
|
|
|
|
Net
investment income(a) |
0.32 |
|
0.46 |
|
0.43 |
|
0.28 |
|
0.54 |
|
Net gain
(loss) on investments (realized and unrealized) |
10.03 |
|
(8.65 |
) |
8.39 |
|
9.67 |
|
(5.38 |
) |
Total from
investment operations |
10.35 |
|
(8.19 |
) |
8.82 |
|
9.95 |
|
(4.84 |
) |
Less
distributions from: |
|
|
|
|
|
Net investment
income |
(0.64 |
) |
(0.35 |
) |
(0.28 |
) |
(0.43 |
) |
(0.57 |
) |
Total
distributions to shareholders |
(0.64 |
) |
(0.35 |
) |
(0.28 |
) |
(0.43 |
) |
(0.57 |
) |
Net asset
value, end of period |
$ |
39.26 |
|
$ |
29.55 |
|
$ |
38.09 |
|
$ |
29.55 |
|
$ |
20.03 |
|
Market value,
end of period |
$ |
39.08 |
|
$ |
29.31 |
|
$ |
37.88 |
|
$ |
29.59 |
|
$ |
19.96 |
|
Total
Return(b)
Net
asset value |
35.19 |
% |
-21.62 |
% |
29.89 |
% |
50.39 |
% |
-19.10 |
% |
Ratios/Supplemental
Data:
Net
assets, end of period (in thousands) |
$45,153 |
$45,804 |
$78,077 |
$22,164 |
$17,029 |
Ratio to
average net assets of: |
|
|
|
|
|
Net investment
income |
0.94 |
% |
1.20 |
% |
1.22 |
% |
1.16 |
% |
2.38 |
% |
Total
expenses |
0.70 |
% |
0.70 |
% |
0.71 |
% |
0.70 |
% |
0.70 |
% |
Net
expenses |
0.70 |
% |
0.70 |
% |
0.71 |
% |
0.70 |
% |
0.70 |
% |
Portfolio
turnover rate(c) |
48 |
% |
32 |
% |
39 |
% |
26 |
% |
43 |
% |
|
|
(a) |
Based
on average shares outstanding. |
|
|
(b)
|
Total
investment return is calculated assuming an initial investment made at the
net asset value at the beginning of the period, reinvestment of all
dividends and distribution at net asset value during the period, and
redemption on the last day of the period. Transaction fees are not
reflected in the calculation of total investment return.
|
|
|
(c) |
Portfolio
turnover does not include securities received or delivered from processing
creations or redemptions. |
TAN
|
Guggenheim
Solar ETF
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year
Ended August 31, 2016 |
|
Year
Ended August 31, 2015 |
|
Year
Ended
August
31,
2014 |
|
Year
Ended
August
31,
2013 |
|
Year
Ended
August
31,
2012 |
|
Per
Share Data*: |
|
|
|
|
|
Net asset
value, beginning of period |
$ |
29.72 |
|
$ |
43.58 |
|
$ |
27.23 |
|
$ |
16.74 |
|
$ |
54.90 |
|
Income from
investment operations: |
|
|
|
|
|
Net investment
income(a) |
0.80 |
|
0.72 |
|
0.52 |
|
0.56 |
|
1.84 |
|
Net gain
(loss) on investments (realized and unrealized) |
(9.14 |
) |
(13.94 |
) |
16.28 |
|
11.35 |
|
(37.89 |
) |
Total from
investment operations |
(8.34 |
) |
(13.22 |
) |
16.80 |
|
11.91 |
|
(36.05 |
) |
Less
distributions from: |
|
|
|
|
|
Net investment
income |
(0.49 |
) |
(0.64 |
) |
(0.45 |
) |
(1.42 |
) |
(2.11 |
) |
Total
distributions to shareholders |
(0.49 |
) |
(0.64 |
) |
(0.45 |
) |
(1.42 |
) |
(2.11 |
) |
Net asset
value, end of period |
$ |
20.89 |
|
$ |
29.72 |
|
$ |
43.58 |
|
$ |
27.23 |
|
$ |
16.74 |
|
Market value,
end of period |
$ |
20.91 |
|
$ |
29.57 |
|
$ |
43.39 |
|
$ |
27.16 |
|
$ |
16.71 |
|
Total
Return(b)
Net
asset value |
-28.59 |
% |
-30.51 |
% |
62.06 |
% |
77.60 |
% |
-66.93 |
% |
Ratios/Supplemental
Data:
Net
assets, end of period (in thousands) |
$230,754 |
$266,545 |
$429,167 |
$170,150 |
$42,992 |
Ratio to
average net assets of: |
|
|
|
|
|
Net investment
income |
3.26 |
% |
1.83 |
% |
1.28 |
% |
2.71 |
% |
7.07 |
% |
Total
expenses |
0.88 |
% |
0.73 |
% |
0.76 |
% |
0.86 |
% |
1.01 |
% |
Net
expenses |
0.71 |
% |
0.70 |
% |
0.71 |
% |
0.70 |
% |
0.70 |
% |
Portfolio
turnover rate(c) |
53 |
% |
51 |
% |
47 |
% |
68 |
% |
49 |
% |
|
|
* |
Reflects
1 for 10 reverse stock split that occurred on February 15,
2012. |
|
|
(a) |
Based
on average shares outstanding. |
|
|
(b)
|
Total
investment return is calculated assuming an initial investment made at the
net asset value at the beginning of the period, reinvestment of all
dividends and distribution at net asset value during the period, and
redemption on the last day of the period. Transaction fees are not
reflected in the calculation of total investment return.
|
|
|
(c) |
Portfolio
turnover does not include securities received or delivered from processing
creations or redemptions. |
CGW
|
Guggenheim
S&P Global Water Index ETF
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year
Ended August 31, 2016 |
|
Year
Ended August 31, 2015 |
|
Year
Ended
August
31,
2014 |
|
Year
Ended
August
31,
2013 |
|
Year
Ended
August
31,
2012 |
|
Per
Share Data: |
|
|
|
|
|
Net asset
value, beginning of period |
$ |
26.67 |
|
$ |
29.02 |
|
$ |
23.90 |
|
$ |
21.05 |
|
$ |
20.06 |
|
Income from
investment operations: |
|
|
|
|
|
Net investment
income(a) |
0.54 |
|
0.48 |
|
0.51 |
|
0.49 |
|
0.44 |
|
Net gain
(loss) on investments (realized and unrealized) |
3.51 |
|
(2.33 |
) |
5.03 |
|
2.81 |
|
0.96 |
|
Total from
investment operations |
4.05 |
|
(1.85 |
) |
5.54 |
|
3.30 |
|
1.40 |
|
Less
distributions from: |
|
|
|
|
|
Net investment
income |
(0.45 |
) |
(0.50 |
) |
(0.42 |
) |
(0.45 |
) |
(0.41 |
) |
Total
distributions to shareholders |
(0.45 |
) |
(0.50 |
) |
(0.42 |
) |
(0.45 |
) |
(0.41 |
) |
Net asset
value, end of period |
$ |
30.27 |
|
$ |
26.67 |
|
$ |
29.02 |
|
$ |
23.90 |
|
$ |
21.05 |
|
Market value,
end of period |
$ |
30.32 |
|
$ |
26.64 |
|
$ |
29.08 |
|
$ |
23.88 |
|
$ |
20.98 |
|
Total
Return(b)
Net
asset value |
15.40 |
% |
-6.47 |
% |
23.27 |
% |
15.85 |
% |
7.23 |
% |
Ratios/Supplemental
Data:
Net
assets, end of period (in thousands) |
$432,244 |
$346,709 |
$367,914 |
$253,369 |
$199,547 |
Ratio to
average net assets of: |
|
|
|
|
|
Net investment
income |
1.93 |
% |
1.69 |
% |
1.83 |
% |
2.13 |
% |
2.22 |
% |
Total
expenses |
0.64 |
% |
0.64 |
% |
0.65 |
% |
0.71 |
% |
0.76 |
% |
Net
expenses |
0.64 |
% |
0.64 |
% |
0.65 |
% |
0.70 |
% |
0.70 |
% |
Portfolio
turnover rate(c) |
6 |
% |
9 |
% |
7 |
% |
21 |
% |
31 |
% |
|
|
(a) |
Based
on average shares outstanding. |
|
|
(b)
|
Total
investment return is calculated assuming an initial investment made at the
net asset value at the beginning of the period, reinvestment of all
dividends and distribution at net asset value during the period, and
redemption on the last day of the period. Transaction fees are not
reflected in the calculation of total investment return.
|
|
|
(c) |
Portfolio
turnover does not include securities received or delivered from processing
creations or redemptions. |
GHII
|
Guggenheim
S&P High Income Infrastructure ETF
|
|
|
|
|
|
|
|
|
Period
Ended
August
31, 2016 |
|
Period
Ended
August
31, 2015(a) |
|
Per
Share Data: |
|
|
Net asset
value, beginning of period |
$ |
22.87 |
|
$ |
25.05 |
|
Income from
investment operations: |
|
|
Net investment
income(b) |
1.34 |
|
0.71 |
|
Net gain
(loss) on investments (realized and unrealized) |
3.34 |
|
(2.45 |
) |
Total from
investment operations |
4.68 |
|
(1.74 |
) |
Less
distributions from: |
|
|
Net investment
income |
(1.27 |
) |
(0.44 |
) |
Total
distributions to shareholders |
(1.27 |
) |
(0.44 |
) |
Net asset
value, end of period |
$ |
26.28 |
|
$ |
22.87 |
|
Market value,
end of period |
$ |
26.48 |
|
$ |
22.56 |
|
Total
Return(c)
Net
asset value |
21.35 |
% |
-7.02 |
% |
Ratios/Supplemental
Data:
Net
assets, end of period (in thousands) |
$ |
3,943 |
|
$ |
2,287 |
|
Ratio to
average net assets of: |
|
|
Net investment
income |
5.82 |
% |
5.13 |
% |
Total
expenses |
0.45 |
% |
0.45 |
% |
Net
expenses |
0.45 |
% |
0.45 |
% |
Portfolio
turnover rate(d) |
61 |
% |
13 |
% |
|
|
(a) |
Since
commencement of operations: February 11, 2015. Percentage amounts for the
period, except total return and portfolio turnover rate, have been
annualized. |
|
|
(b) |
Based
on average shares outstanding. |
|
|
(c)
|
Total
investment return is calculated assuming an initial investment made at the
net asset value at the beginning of the period, reinvestment of all
dividends and distribution at net asset value during the period, and
redemption on the last day of the period. Transaction fees are not
reflected in the calculation of total investment return.
|
|
|
(d) |
Portfolio
turnover does not include securities received or delivered from processing
creations or redemptions. |
For
More Information
Existing
Shareholders or Prospective Investors
|
|
• |
Visit
guggenheiminvestments.com |
Dealers
|
|
• |
Visit
guggenheiminvestments.com |
|
|
• |
Distributor
Telephone: (800) 820-0888 |
Investment
Adviser
Guggenheim
Funds Investment Advisors, LLC
227
West Monroe Street
Chicago,
Illinois 60606
Distributor
Guggenheim
Funds Distributors, LLC
227
West Monroe Street
Chicago,
Illinois 60606
Custodian
The
Bank of New York Mellon
101
Barclay Street
New
York, New York 10286
Transfer
Agent
The
Bank of New York Mellon
101
Barclay Street
New
York, New York 10286
Legal
Counsel
Dechert
LLP
1095
Avenue of the Americas
New
York, New York 10036
Independent
Registered Public Accounting Firm
Ernst
& Young LLP
155
North Wacker Drive
Chicago,
Illinois 60606
A
Statement of Additional Information dated December 29, 2016, which contains more
details about each Fund, is incorporated by reference in its entirety into this
Prospectus, which means that it is legally part of this Prospectus.
You
will find additional information about each Fund's investments in its annual and
semi-annual reports to shareholders, when available. The annual report will
explain the market conditions and investment strategies affecting each Fund’s
performance during its last fiscal year.
You
can ask questions or obtain a free copy of the Funds’ shareholder reports or the
SAI by calling 800.820.0888. Free copies of the Funds’ shareholder reports and
the SAI are available from our website at guggenheiminvestments.com.
Information
about each Fund, including its reports and the SAI, has been filed with the SEC.
These materials can be reviewed and copied at the SEC’s Public Reference Room in
Washington, DC or on the EDGAR database on the SEC’s internet site
(http://www.sec.gov). Information on the operation of the SEC’s Public Reference
Room may be obtained by calling the SEC at (202) 551-8090. You can also request
copies of these materials, upon payment of a duplicating fee, by electronic
request at the SEC’s e-mail address ([email protected]) or by writing the
Public Reference section of the SEC, 100 F Street NE, Room 1580, Washington, DC
20549.
PROSPECTUS
Distributor
Guggenheim
Funds Distributors, LLC
227
West Monroe Street
Chicago,
Illinois 60606
guggenheiminvestments.com
December
29, 2016
Investment
Company Act File No. 811-21910.