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Exchange
Traded Funds |
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12.29.2014 |
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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 |
CGW |
Guggenheim
S&P Global Water Index ETF |
TAN |
Guggenheim
Solar 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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TABLE
OF CONTENTS |
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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
S&P Global Water Index ETF |
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Guggenheim
Solar ETF |
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Additional
Information About the Funds’ Principal Investment
Strategies |
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and
Principal Investment Risks |
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Non-Principal
Investment Strategies |
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Non-Principal
Risk Considerations |
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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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Financial
Highlights |
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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.
|
|
|
|
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 |
% |
Distribution
and service (12b-1) fees |
0.00 |
% |
Other
expenses |
0.01 |
% |
Total
annual Fund operating expenses |
0.71 |
% |
Example
This
Example is intended to help you compare the cost of investing in the Fund with
the costs 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:
|
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|
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|
One
Year |
Three
Years |
Five
Years |
Ten
Years |
$73 |
$281 |
$507 |
$1,155 |
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 12%
of
the average value of its portfolio.
Principal
Investment Strategies
The
Fund, using a “passive”
or “indexing” investment approach, seeks to replicate, before the Fund’s fees
and expenses, the performance of the China All-Cap Index (Index Ticker:
ACNACTR). 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
Administrator”). 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 stock, 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, such as: (i) regulatory requirements which may affect the Fund’s
ability to hold a security included in the Index, (ii) restrictions or
requirements in local markets which may render it infeasible or inefficient for
the Fund to purchase or sell a security included in the Index or (iii) liquidity
concerns that may affect the Fund’s ability to purchase or sell a security
included in the Index, in which 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. 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., hold 25% or more
of its assets) in a particular industry or group of industries to the extent the
Index is so concentrated. As of September 30, 2014, the financial services
sector represented a substantial portion of the Index.
Principal
Investment Risks
Investors
should consider the following risk factors and special considerations associated
with investing in the Fund, which may cause you to lose money. The Fund’s Shares
will change in value, and you could lose money by investing in the Fund. The
Fund may not achieve its investment objective. An investment in the Fund has not
been guaranteed, sponsored, recommended, or approved by the United States, or
any agency, instrumentality or officer of the United States, has not been
insured by the Federal Deposit Insurance Corporation (FDIC) and is not
guaranteed by and is not otherwise an obligation of any bank or insured
depository institution.
Equity
Risk.
The value of the equity securities held by the Fund may fall due to general
market and economic conditions, perceptions regarding the industries in which
the issuers of securities held by the Fund participate, or factors relating to
specific companies in which the Fund invests. For example, an adverse event,
such as an unfavorable earnings report, may depress the value of equity
securities of an issuer held by the Fund; the price of common stock of an issuer
may be particularly sensitive to general movements in the stock market; or a
drop in the stock market may depress the price of most or all of the common
stocks and other equity securities held by the Fund. In addition, common stock
of an issuer in the Fund’s portfolio may decline in price if the issuer fails to
make anticipated dividend payments because the issuer of the security
experiences a decline in its financial condition. Common stock is subordinated
to preferred stocks, bonds and other debt instruments in a company’s capital
structure, in terms of priority to corporate income, and therefore will be
subject to greater dividend risk than preferred stocks or debt instruments of
such issuers. In addition, while broad market measures of common stocks have
historically generated higher average returns than fixed income securities,
common stocks have also experienced significantly more volatility in those
returns.
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; and actions of the Chinese central and local government authorities
continue to have a substantial effect on economic conditions in China. 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.
Risk
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. 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.
Foreign
Investment Risk.
The Fund’s investments in non-U.S. issuers may involve unique risks compared to
investing in securities of U.S. issuers, including less market liquidity,
generally greater market volatility than U.S. securities and less complete
financial information than for U.S. issuers. In addition, adverse political,
economic or social developments could undermine the value of the Fund’s
investments or prevent the Fund from realizing the full value of its
investments. Financial reporting standards for companies based in foreign
markets differ from those in the United States. Finally, the value of the
currency of the country in which the Fund has invested could decline relative to
the value of the U.S. dollar, which may affect the value of the investment to
U.S. investors. The
Fund
will not enter into transactions to hedge against declines in the value of the
Fund’s assets that are denominated in a foreign currency.
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. Investing in foreign countries,
particularly emerging market countries, entails the risk that news and events
unique to a country or region will affect those markets and their issuers.
Countries with emerging markets may have relatively unstable governments, may
present the risks of nationalization of businesses, restrictions on foreign
ownership and prohibitions on the repatriation of assets. The economies of
emerging markets countries also may be based on only a few industries, making
them more vulnerable to changes in local or global trade conditions and more
sensitive to debt burdens or inflation rates. Local securities markets may trade
a small number of securities and may be unable to respond effectively to
increases in trading volume, potentially making prompt liquidation of holdings
difficult or impossible at times. In addition, the enforcement of systems of
taxation at federal, regional and local levels in emerging market countries may
be inconsistent, and subject to sudden change.
Financial
Services Sector Risk. The
financial services sector is subject to extensive government regulation, can be
subject to relatively rapid change due to increasingly blurred distinctions
between service segments, and can be significantly affected by availability and
cost of capital funds, changes in interest rates, the rate of corporate and
consumer debt defaults, and price competition. Companies in the financial
services sector may be subject to extensive government regulation that affects
the scope of their activities, the prices they can charge and the amount of
capital they must maintain. The profitability of companies in the financial
services sector may be adversely affected by increases in interest rates, by
loan losses, which usually increase in economic downturns, and by credit rating
downgrades. In addition, the financial services sector is undergoing numerous
changes, including continuing consolidations, development of new products and
structures and changes to its regulatory framework. Furthermore, some companies
in the financial services sector perceived as benefiting from government
intervention in the past may be subject to future government-imposed
restrictions on their businesses or face increased government involvement in
their operations. Increased government involvement in the financial services
sector, including measures such as taking ownership positions in financial
institutions, could result in a dilution of the Fund’s investments in financial
institutions. Developments since 2007 in the credit markets may cause companies
operating in the financial services sector to incur large losses, experience
declines in the value of their assets and even cease operations .
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.
Depositary
Receipt Risk.
The Fund may hold the securities of non-U.S. companies in the form of ADRs, 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. Sponsored ADRs 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. GDRs and 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 issuers of certain depositary
receipts, particularly unsponsored or unregistered depositary receipts, are
under no obligation to distribute shareholder communications to the holders of
such receipts, or to pass through to them any voting rights with respect to the
deposited securities. Issuers of unsponsored depositary receipts are not
contractually obligated to disclose material information in the U.S. and,
therefore, such information may not correlate to the market value of the
unsponsored depositary receipt. The underlying securities of the ADRs, GDRs and
IDRs in the 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 the Fund’s portfolio. In addition, because the
underlying securities of ADRs, GDRs and IDRs trade on foreign exchanges at times
when the U.S. markets are not open for trading, the value of the securities
underlying the ADRs, GDRs and IDRs 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 the Fund.
Small
and Medium-Sized Company Risk.
Investing in securities of small and medium-sized companies involves greater
risk than is customarily associated with investing in larger, more established
companies. Securities of these companies present additional risks because their
earnings are less predictable and they are more likely than larger companies to
have narrower product lines, markets or financial resources. These companies’
securities may be more volatile and less liquid than those of larger, more
established companies. These securities may have returns that vary, sometimes
significantly, from the overall stock market.
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. 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
the Fund realizes a gain, if any, on an investment in a micro-cap
company.
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.
The
Fund may not be fully invested at times, either as a result of cash flows into
the Fund or reserves of cash held by the Fund to meet redemptions and expenses.
If the 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 the Index, as would be the case if it purchased all of the
securities in the Index with the same weightings as the Index.
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.
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 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.
Non-Diversified
Fund Risk.
The Fund is considered non-diversified and can invest a greater portion of
assets in securities of individual issuers than a diversified fund. Even though
no single security weight may exceed 5.0% of the Index at the time of each
annual rebalance, changes in the market value of the Index’s constituent
securities may result in the Fund being invested in the securities of individual
issuers (and making additional such investments in the case of creations of
additional Creation Units) in greater proportions. As a result, changes in the
market value of a single investment could cause greater fluctuations in share
price than would occur in a diversified fund.
Fund
Performance
The
chart and table below provide some indication of the risks of investing in the
Fund by showing changes in the Fund’s performance from year to year and by
showing how the Fund’s average annual returns for one year and since inception
compare with 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 for the Fund is available at guggenheiminvestments.com.
Calendar
Year Total Return as of 12/31
The
Fund commenced operations on October 19, 2009. The Fund’s year-to-date
total return was
-0.15%
as
of September 30,
2014 .
During
the periods shown in the chart above, the Fund’s highest
and
lowest
calendar
quarter returns were 14.70%
and
-26.49%
,
respectively, for the quarters ended September 30,
2013 and
September 30,
2011 .
All
after-tax returns are calculated using the historical highest individual federal
marginal income tax rates and do not reflect the impact of any state or local
tax. Your own actual after-tax returns will depend on your tax situation and may
differ from what is shown here. After-tax returns are not relevant to investors
who hold Shares in tax-deferred accounts such as individual retirement accounts
(IRAs) or employee-sponsored retirement plans.
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Since |
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Average
Annual Total Returns for the |
|
inception |
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Periods
Ended December 31, 2013 |
1
year |
|
10/19/2009 |
|
Returns
Before Taxes |
8.97 |
% |
3.84 |
% |
Returns
After Taxes on Distributions |
8.13 |
% |
3.14 |
% |
Returns
After Taxes on Distributions and Sale of Fund Shares |
5.08 |
% |
2.67 |
% |
AlphaShares
China All-Cap Index |
|
|
(reflects
no deduction for fees, expenses or taxes) |
9.69 |
% |
4.60 |
% |
MSCI
China Index |
|
|
(reflects
no deduction for fees, expenses or taxes) |
3.64 |
% |
2.58 |
% |
Management
Investment
Adviser.
Guggenheim Funds Investment Advisors, LLC.
Portfolio
Managers.
The portfolio managers who are currently responsible for the day-to-day
management of the Fund’s portfolio are Michael P. Byrum, CFA, James R. King,
CFA, and Cindy Gao. Mr. Byrum, Senior Vice President, Mr. King, Portfolio
Manager, and Ms. Gao, ETF Analyst, have managed the Fund’s portfolio since
December 2013.
Purchase
and Sale of Shares
The
Fund will issue and redeem Shares at net asset value (“NAV”) only in a large
specified number of Shares called a “Creation Unit” or multiples thereof. A
Creation Unit consists of 100,000 Shares. The Fund generally issues and redeems
Creation Units principally in-kind.
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. 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 or less than 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 (such as a bank), the Investment Adviser or other related companies
may pay the intermediary for marketing activities and presentations, educational
training programs, the support of technology platforms and/or reporting systems
or other services related to the sale or promotion of the Fund. 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.
|
|
|
|
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 |
% |
Distribution
and service (12b-1) fees |
0.00 |
% |
Other
expenses |
0.01 |
% |
Total
annual Fund operating expenses |
0.71 |
% |
Example
This
Example is intended to help you compare the cost of investing in the Fund with
the costs 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 |
$507 |
$1,155 |
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 39%
of
the average value of its portfolio.
Principal
Investment Strategies
The
Fund, using a “passive” or “indexing” investment approach, seeks to replicate,
before the Fund’s fees and expenses, the performance of the China Technology
Index (Index Ticker: ACNIT). 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 Administrator”). 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 stock, 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, such as: (i) regulatory requirements which may affect the Fund’s
ability to hold a security included in the Index, (ii) restrictions or
requirements in local markets which may render it infeasible or inefficient for
the Fund to purchase or sell a security included in the Index or (iii) liquidity
concerns that may affect the Fund’s ability to purchase or sell a security
included in the Index, in which 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. 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., hold 25% or more
of its assets) in a particular industry or group of industries to the extent the
Index is so concentrated. As of September 30, 2014, the information technology
sector represented a substantial portion of the Index.
Principal
Investment Risks
Investors
should consider the following risk factors and special considerations associated
with investing in the Fund, which may cause you to lose money. The Fund’s Shares
will change in value, and you could lose money by investing in the Fund. The
Fund may not achieve its investment objective. An investment in the Fund has not
been guaranteed, sponsored, recommended, or approved by the United States, or
any agency, instrumentality or officer of the United States, has not been
insured by the Federal Deposit Insurance Corporation (FDIC) and is not
guaranteed by and is not otherwise an obligation of any bank or insured
depository institution.
Equity
Risk.
The value of the equity securities held by the Fund may fall due to general
market and economic conditions, perceptions regarding the industries in which
the issuers of securities held by the Fund participate, or factors relating to
specific companies in which the Fund invests. For example, an adverse event,
such as an unfavorable earnings report, may depress the value of equity
securities of an issuer held by the Fund; the price of common stock of an issuer
may be particularly sensitive to general movements in the stock market; or a
drop in the stock market may depress the price of most or all of the common
stocks and other equity securities held by the Fund. In addition, common stock
of an issuer in the Fund’s portfolio may decline in price if the issuer fails to
make anticipated dividend payments because the issuer of the security
experiences a decline in its financial condition. Common stock is subordinated
to preferred stocks, bonds and other debt instruments in a company’s capital
structure, in terms of priority to corporate income, and therefore will be
subject to greater dividend risk than preferred stocks or debt instruments of
such issuers. In addition, while broad market measures of common stocks have
historically generated higher average returns than fixed income securities,
common stocks have also experienced significantly more volatility in those
returns.
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; and actions of the Chinese central and local government authorities
continue to have a substantial effect on economic conditions in China. 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.
Risk
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. 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.
Foreign
Investment Risk.
The Fund’s investments in non-U.S. issuers may involve unique risks compared to
investing in securities of U.S. issuers, including less market liquidity,
generally greater market volatility than U.S. securities and less complete
financial information than for U.S. issuers. In addition, adverse political,
economic or social developments could undermine the value of the Fund’s
investments or prevent the Fund from realizing the full value of its
investments. Financial reporting standards for companies based in foreign
markets differ from those in the United States. Finally, the value of the
currency of the country in which the Fund has invested could decline relative to
the value of the U.S. dollar, which may affect the value of the investment to
U.S. investors. The
Fund
will not enter into transactions to hedge against declines in the value of the
Fund’s assets that are denominated in a foreign currency.
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. Investing in foreign countries,
particularly emerging market countries, entails the risk that news and events
unique to a country or region will affect those markets and their issuers.
Countries with emerging markets may have relatively unstable governments, may
present the risks of nationalization of businesses, restrictions on foreign
ownership and prohibitions on the repatriation of assets. The economies of
emerging markets countries also may be based on only a few industries, making
them more vulnerable to changes in local or global trade conditions and more
sensitive to debt burdens or inflation rates. Local securities markets may trade
a small number of securities and may be unable to respond effectively to
increases in trading volume, potentially making prompt liquidation of holdings
difficult or impossible at times. In addition, the enforcement of systems of
taxation at federal, regional and local levels in emerging market countries may
be inconsistent, and subject to sudden change.
Depositary
Receipt Risk.
The Fund may hold the securities of non-U.S. companies in the form of ADRs, 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. Sponsored ADRs 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. GDRs and 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 issuers of certain depositary
receipts, particularly unsponsored or unregistered depositary receipts, are
under no obligation to distribute shareholder communications to the holders of
such receipts, or to pass through to them any voting rights with respect to the
deposited securities. Issuers of unsponsored depositary receipts are not
contractually obligated to disclose material information in the U.S. and,
therefore, such information may not correlate to the market value of the
unsponsored depositary receipt. The underlying securities of the ADRs, GDRs and
IDRs in the 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 the Fund’s portfolio. In addition, because the
underlying securities of ADRs, GDRs and IDRs trade on foreign exchanges at times
when the U.S. markets are not open for trading, the value of the securities
underlying the ADRs, GDRs and IDRs 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 the Fund.
Information
Technology Sector Risk.
Competitive
pressures may have a significant effect on the financial condition of companies
in the information technology sector. Also, many of the products and services
offered by information technology companies are subject to the risks of short
product cycles and rapid obsolescence. Companies in the information technology
sector also may 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. As product cycles shorten
and manufacturing capacity increases, these companies could become increasingly
subject to aggressive pricing, which hampers profitability. Other risks include
those related to regulatory changes, such as the possible adverse effects on
profits of recent increased competition among telecommunications companies and
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.
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.
Small
and Medium-Sized Company Risk.
Investing in securities of small and medium-sized companies involves greater
risk than is customarily associated with investing in larger, more established
companies. Securities of these companies present additional risks because their
earnings are less predictable and they are more likely than larger companies to
have narrower product lines, markets or financial resources. These companies’
securities may be
more
volatile and less liquid than those of larger, more established companies. These
securities may have returns that vary, sometimes significantly, from the overall
stock market.
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. 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
the Fund realizes a gain, if any, on an investment in a micro-cap
company.
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.
The
Fund may not be fully invested at times, either as a result of cash flows into
the Fund or reserves of cash held by the Fund to meet redemptions and expenses.
If the 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 the Index, as would be the case if it purchased all of the
securities in the Index with the same weightings as the Index.
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.
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 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.
Non-Diversified
Fund Risk.
The Fund is considered non-diversified and can invest a greater portion of
assets in securities of individual issuers than a diversified fund. As a result,
changes in the market value of a single investment could cause greater
fluctuations in share price than would occur in a diversified fund.
Fund
Performance
The
chart and table below provide some indication of the risks of investing in the
Fund by showing changes in the Fund’s performance from year to year and by
showing how the Fund’s average annual returns for one year and since inception
compare with 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 for the Fund is available at
guggenheiminvestments.com.
Calendar
Year Total Return as of 12/31
The
Fund commenced operations on December 8, 2009. The Fund’s year-to-date
total return was
3.51%
as
of September 30,
2014 .
During
the periods shown in the chart above, the Fund’s highest
and
lowest
calendar
quarter returns were 27.24%
and
-27.42%
,
respectively, for the quarters ended September 30,
2013 and
September 30,
2011 .
All
after-tax returns are calculated using the historical highest individual federal
marginal income tax rates and do not reflect the impact of any state or local
tax. Your own actual after-tax returns will depend on your tax situation and may
differ from what is shown here. After-tax returns are not relevant to investors
who hold Shares in tax-deferred accounts such as individual retirement accounts
(IRAs) or employee-sponsored retirement plans.
|
|
|
|
|
|
|
|
Since |
|
Average
Annual Total Returns for the |
|
inception |
|
Periods
Ended December 31, 2013 |
1
year |
|
12/8/2009 |
|
Returns
Before Taxes |
59.68 |
% |
10.00 |
% |
Returns
After Taxes on Distributions |
59.13 |
% |
9.42 |
% |
Returns
After Taxes on Distributions and Sale of Fund Shares |
33.78 |
% |
7.55 |
% |
AlphaShares
China Technology Index |
|
|
(reflects
no deduction for fees, expenses or taxes) |
60.84 |
% |
10.34 |
% |
MSCI
China Index |
|
|
(reflects
no deduction for fees, expenses or taxes) |
3.64 |
% |
1.39 |
% |
Management
Investment
Adviser.
Guggenheim Funds Investment Advisors, LLC.
Portfolio
Managers. The
portfolio managers who are currently responsible for the day-to-day management
of the Fund’s portfolio are Michael P. Byrum, CFA, Senior Vice President, James
R. King, CFA, 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 Shares
The
Fund will issue and redeem Shares at net asset value (“NAV”) only in a large
specified number of Shares called a “Creation Unit” or multiples thereof. A
Creation Unit consists of 50,000 Shares. The Fund generally issues and redeems
Creation Units principally in-kind.
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. 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 or less than 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 (such as a bank), the Investment Adviser or other related companies
may pay the intermediary for marketing activities and presentations, educational
training programs, the support of technology platforms and/or reporting systems
or other services related to the sale or promotion of the Fund. 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 |
% |
Distribution
and service (12b-1) fees |
0.00 |
% |
Other
expenses |
0.15 |
% |
Total
annual Fund operating expenses |
0.65 |
% |
Expense
reimbursements(1) |
0.00 |
% |
Total
annual Fund operating expenses after expense
reimbursements |
0.65 |
% |
1 Guggenheim
Funds Investment Advisors, LLC (the "Investment Adviser") has contractually
agreed to reimburse Fund expenses to the extent necessary to prevent the
operating expenses of the Fund (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) from exceeding 0.65% of average net
assets per year (the“Expense Cap”), at least until December 31, 2017, and prior
to such date the Investment Adviser may not terminate the arrangement without
the approval of the Board of Trustees (the "Board") of Claymore Exchange-Traded
Fund Trust 2 (the "Trust"). To the extent the Fund incurs expenses that are
excluded from the Expense Cap, the Fund’s expense ratio will exceed the Expense
Cap.
Example
This
Example is intended to help you compare the cost of investing in the Fund with
the costs of investing in other funds. The Example does not take into account
brokerage commissions that you 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 |
$66 |
$262 |
$474 |
$1,085 |
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 7%
of
the average value of its portfolio.
Principal
Investment Strategies
The
Fund, using a “passive” or “indexing” investment approach, seeks to replicate,
before the Fund’s fees and expenses, the performance of the Water Index (Index
Ticker: SPGTAQTR). 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, Greece, 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 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, such as: (i) regulatory requirements which
may affect the Fund’s ability to hold a security included in the Index, (ii)
restrictions or requirements in local markets which may render it infeasible or
inefficient for the Fund to purchase or sell a security included in the Index or
(iii) liquidity concerns that may affect the Fund’s ability to purchase or sell
a security included in the Index, in which 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. 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., hold
25% or more of its assets) in a particular industry or group of industries to
the extent the Index is so concentrated. As of September 30, 2014, the
industrials and utilities sectors each represented a substantial portion of the
Index.
Principal
Investment Risks
Investors
should consider the following risk factors and special considerations associated
with investing in the Fund, which may cause you to lose money. The Fund’s Shares
will change in value, and you could lose money by investing in the Fund. The
Fund may not achieve its investment objective. An investment in the Fund has not
been guaranteed, sponsored, recommended, or approved by the United States, or
any agency, instrumentality or officer of the United States, has not been
insured by the Federal Deposit Insurance Corporation (FDIC) and is not
guaranteed by and is not otherwise an obligation of any bank or insured
depository institution.
Equity
Risk. The
value of the equity securities held by the Fund may fall due to general market
and economic conditions, perceptions regarding the industries in which the
issuers of securities held by the Fund participate, or factors relating to
specific companies in which the Fund invests. For example, an adverse event,
such as an unfavorable earnings report, may depress the value of equity
securities of an issuer held by the Fund; the price of common stock of an issuer
may be particularly sensitive to general movements in the stock market; or a
drop in the stock market may depress the price of most or all of the common
stocks and other equity securities held by the Fund. In addition, common stock
of an issuer in the Fund’s portfolio may decline in price if the issuer fails to
make anticipated dividend payments because the issuer of the security
experiences a decline in its financial condition. Common stock is subordinated
to preferred stocks, bonds and other debt instruments in a company’s capital
structure, in terms of priority to corporate income, and therefore will be
subject to greater dividend risk than preferred stocks or debt instruments of
such issuers. In addition, while broad market measures of common stocks have
historically generated higher average returns than fixed income securities,
common stocks have also experienced significantly more volatility in those
returns.
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, government regulation and
fluctuations of price and supply.
Industrials
Sector Risk. The
stock prices 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. 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.
Utilities
Sector Risk.
The rates that traditional regulated utility companies may charge their
customers generally are 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.
Foreign
Investment Risk.
The Fund’s investments in non-U.S. issuers may involve unique risks compared to
investing in securities of U.S. issuers, including less market liquidity,
generally greater market volatility than U.S.
securities
and less complete financial information than for U.S. issuers. In addition,
adverse political, economic or social developments could undermine the value of
the Fund’s investments or prevent the Fund from realizing the full value of its
investments. Financial reporting standards for companies based in foreign
markets differ from those in the United States. Finally, the value of the
currency of the country in which the Fund has invested could decline relative to
the value of the U.S. dollar, which may affect the value of the investment to
U.S. investors. The Fund will not enter into transactions to hedge against
declines in the value of the Fund’s assets that are denominated in a foreign
currency.
Depositary
Receipt Risk.
The Fund may hold the securities of non-U.S. companies in the form of ADRs. 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. Sponsored
ADRs 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.
The underlying issuers of certain depositary receipts, particularly unsponsored
or unregistered depositary receipts, are under no obligation to distribute
shareholder communications to the holders of such receipts, or to pass through
to them any voting rights with respect to the deposited securities. Issuers of
unsponsored depositary receipts are not contractually obligated to disclose
material information in the U.S. and, therefore, such information may not
correlate to the market value of the unsponsored depositary receipt. The
underlying securities of the ADRs in the 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 the Fund’s
portfolio. In addition, because the underlying securities of ADRs trade on
foreign exchanges at times when the U.S. markets are not open for trading, the
value of the securities underlying the ADRs 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 the Fund.
Small
and Medium-Sized Company Risk.
Investing in securities of small and medium-sized companies involves greater
risk than is customarily associated with investing in larger, more established
companies. Securities of these companies present additional risks because their
earnings are less predictable and they are more likely than larger companies to
have narrower product lines, markets or financial resources. These companies’
securities may be more volatile and less liquid than those of larger, more
established companies. These securities may have returns that vary, sometimes
significantly, from the overall stock market.
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.
The
Fund may not be fully invested at times, either as a result of cash flows into
the Fund or reserves of cash held by the Fund to meet redemptions and expenses.
If the 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 the Index, as would be the case if it purchased all of the
securities in the Index with the same weightings as the Index.
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.
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 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.
Non-Diversified
Fund Risk.
The Fund is considered non-diversified and can invest a greater portion of
assets in securities of individual issuers than a diversified fund. As a result,
changes in the market value of a single investment could cause greater
fluctuations in share price than would occur in a diversified fund.
Fund
Performance
The
chart and table below provide some indication of the risks of investing in the
Fund by showing changes in the Fund’s performance from year to year and by
showing how the Fund’s average annual returns for one year, five years and since
inception compare with those of the Index and broad measures 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 for the Fund is available at
guggenheiminvestments.com.
Calendar
Year Total Return as of 12/31
The
Fund commenced operations on May 14, 2007. The Fund’s year-to-date
total return was
0.25%
as
of September 30,
2014 .
During
the periods represented in the chart above, the Fund’s highest
and
lowest
calendar
quarter returns were 28.83%
and
-22.60%
,
respectively, for the quarters ended June 30,
2009 and
December 31,
2008 .
All
after-tax returns are calculated using the historical highest individual federal
marginal income tax rates and do not reflect the impact of any state or local
tax. Your own actual after-tax returns will depend on your tax situation and may
differ from what is shown here. After-tax returns are not relevant to investors
who hold Shares in tax-deferred accounts such as individual retirement accounts
(IRAs) or employee-sponsored retirement plans.
|
|
|
|
|
|
|
|
|
|
|
Since |
|
Average
Annual Total Returns for the |
|
|
inception |
|
Periods
Ended December 31, 2013 |
1
year |
|
5
Years |
|
5/14/2007 |
|
Returns
Before Taxes |
26.19 |
% |
16.24 |
% |
4.33 |
% |
Returns
After Taxes on Distributions |
25.36 |
% |
15.51 |
% |
3.36 |
% |
Returns
After Taxes on Distributions and Sale of Fund
Shares |
14.82 |
% |
12.78 |
% |
2.88 |
% |
S&P
Global Water Index |
|
|
|
(reflects
no deduction for fees, expenses or taxes) |
26.70 |
% |
16.65 |
% |
4.92 |
% |
MSCI
World Index |
|
|
|
(reflects
no deduction for fees, expenses or taxes) |
26.68 |
% |
15.02 |
% |
2.81 |
% |
Dow
Jones World Utilities Index |
|
|
|
(reflects
no deduction for fees, expenses or taxes) |
12.34 |
% |
1.61 |
% |
-3.37 |
% |
Management
Investment
Adviser.
Guggenheim Funds Investment Advisors, LLC.
Portfolio
Managers.
The portfolio managers who are currently responsible for the day-to-day
management of the Fund’s portfolio are Michael P. Byrum, CFA, James R. King,
CFA, and Cindy Gao. Mr. Byrum, Senior Vice President, Mr. King, Portfolio
Manager, and Ms. Gao, ETF Analyst, have managed the Fund’s portfolio since
December 2013.
Purchase
and Sale of Shares
The
Fund will issue and redeem Shares at net asset value (“NAV”) only in a large
specified number of Shares called a “Creation Unit” or multiples thereof. A
Creation Unit consists of 80,000 Shares. The Fund generally issues and redeems
Creation Units principally in-kind.
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. Shares of the Fund are listed for trading on NYSE
Arca, Inc. (“NYSE Arca”) and because Shares trade at market prices rather than
NAV, Shares of the Fund may trade at a price greater than or less than
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 (such as a bank), the Investment Adviser or other related companies
may pay the intermediary for marketing activities and presentations, educational
training programs, the support of technology platforms and/or reporting systems
or other services related to the sale or promotion of the Fund. 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 |
% |
Distribution
and service (12b-1) fees |
0.00 |
% |
Other
expenses |
0.26 |
% |
Total
annual Fund operating expenses |
0.76 |
% |
Expense
reimbursements(1) |
0.05 |
% |
Total
annual Fund operating expenses after expense
reimbursements |
0.71 |
% |
1 Guggenheim
Funds Investment Advisors, LLC (the "Investment Adviser") has contractually
agreed to reimburse Fund expenses to the extent necessary to prevent the
operating expenses of the Fund (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) from exceeding 0.65%
of average net assets per year (the“Expense Cap”), at least until December 31,
2017, and prior to such date the Investment Adviser may not terminate the
arrangement without the approval of the Board of Trustees (the "Board") of
Claymore Exchange-Traded Fund Trust 2 (the "Trust"). For a period of five years
subsequent to the Fund’s commencement of operations, the Investment Adviser may
recover from the Fund expenses reimbursed during the prior three years if the
Fund’s expense ratio, including the recovered expenses, falls below the Expense
Cap. To the extent the Fund incurs expenses that are excluded from the Expense
Cap, the Fund’s expense ratio will exceed the Expense Cap.
Example
This
Example is intended to help you compare the cost of investing in the Fund with
the costs 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 |
$518 |
$1,199 |
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 47%
of
the average value of its portfolio.
Principal
Investment Strategies
The
Fund, using a “passive” or “indexing” investment approach, seeks to replicate,
before the Fund’s fees and expenses, the performance of the Solar Index (Index
Ticker: SUNIDX). As of November 30, 2014, the Solar Index was comprised of
approximately 27 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 $111.5 million to approximately
$14.6 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 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, such as: (i) regulatory requirements which
may affect the Fund’s ability to hold a security included in the Index, (ii)
restrictions or requirements in local markets which may render it infeasible or
inefficient for the Fund to purchase or sell a security included in the Index or
(iii) liquidity concerns that may affect the Fund’s ability to purchase or sell
a security included in the Index, in which 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. 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., hold
25% or more of its assets) in a particular industry or group of industries to
the extent the Index is so concentrated. As of September 30, 2014, the
information technology sector represented a substantial portion of the
Index.
Principal
Investment Risks
Investors
should consider the following risk factors and special considerations associated
with investing in the Fund, which may cause you to lose money. The Fund’s Shares
will change in value, and you could lose money by investing in the Fund. The
Fund may not achieve its investment objective. An investment in the Fund has not
been guaranteed, sponsored, recommended, or approved by the United States, or
any agency, instrumentality or officer of the United States, has not been
insured by the Federal Deposit Insurance Corporation (FDIC) and is not
guaranteed by and is not otherwise an obligation of any bank or insured
depository institution.
Equity
Risk.
The value of the equity securities held by the Fund may fall due to general
market and economic conditions, perceptions regarding the industries in which
the issuers of securities held by the Fund participate, or factors relating to
specific companies in which the Fund invests. For example, an adverse event,
such as an unfavorable earnings report, may depress the value of equity
securities of an issuer held by the Fund; the price of common stock of an issuer
may be particularly sensitive to general movements in the stock market; or a
drop in the stock market may depress the price of most or all of the common
stocks and other equity securities held by the Fund. In addition, common stock
of an issuer in the Fund’s portfolio may decline in price if the issuer fails to
make anticipated dividend payments because the issuer of the security
experiences a decline in its financial condition. Common stock is subordinated
to preferred stocks, bonds and other debt instruments in a company’s capital
structure, in terms of priority to corporate income, and therefore will be
subject to greater dividend risk than preferred stocks or debt instruments of
such issuers. In addition, while broad market measures of common stocks have
historically generated higher average returns than fixed income securities,
common stocks have also experienced significantly more volatility in those
returns.
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 could be
adversely affected by commodity price volatility, imposition of import controls,
increased competition, 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.
In
addition, solar energy companies have experienced an industry-wide shortage of
polysilicon, which may place constraints on the revenue growth of solar energy
companies and decrease such companies’ productivity. Solar energy companies may
not be able to secure an adequate and cost-effective supply of solar wafers,
cells or reclaimable silicon.
Information
Technology Sector Risk.
Competitive
pressures may have a significant effect on the financial condition of companies
in the information technology sector. Also, many of the products and services
offered by information technology companies are subject to the risks of short
product cycles and rapid obsolescence. Companies in the information technology
sector also may 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. As product cycles shorten
and manufacturing capacity increases, these companies could become increasingly
subject to aggressive pricing, which hampers profitability. Other risks include
those related to regulatory changes, such as the possible adverse effects on
profits of recent increased competition among telecommunications companies and
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.
Foreign
Investment Risk.
The Fund’s investments in non-U.S. issuers may involve unique risks compared to
investing in securities of U.S. issuers, including less market liquidity,
generally greater market volatility than U.S. securities and less complete
financial information than for U.S. issuers. In addition, adverse political,
economic or social developments could undermine the value of the Fund’s
investments or prevent the Fund from realizing the full value of its
investments. Financial reporting standards for companies based in foreign
markets differ from those in the United States. Finally, the value of the
currency of the country in which the Fund has invested could decline relative to
the value of the U.S. dollar, which may affect the value of the investment to
U.S. investors. The Fund will not enter into transactions to hedge against
declines in the value of the Fund’s assets that are denominated in a foreign
currency.
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. Investing in foreign countries,
particularly emerging market countries, entails the risk that news and events
unique to a country or region will affect those markets and their issuers.
Countries with emerging markets may have relatively unstable governments, may
present the risks of nationalization of businesses, restrictions on foreign
ownership and prohibitions on the repatriation of assets. The economies of
emerging markets countries also may be based on only a few industries, making
them more vulnerable to changes in local or global trade conditions and more
sensitive to debt burdens or inflation rates. Local securities markets may trade
a small number of securities and may be unable to respond effectively to
increases in trading volume, potentially making prompt liquidation of holdings
difficult or impossible at times. In addition, the enforcement of systems of
taxation at federal, regional and local levels in emerging market countries may
be inconsistent, and subject to sudden change.
Depositary
Receipt Risk.
The Fund may hold the securities of non-U.S. companies in the form of ADRs and
GDRs. 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.
Sponsored ADRs 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. GDRs 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 issuers of certain depositary receipts,
particularly unsponsored or unregistered depositary receipts, are under no
obligation to distribute shareholder communications to the holders of such
receipts, or to pass through to them any voting rights with respect to the
deposited securities. Issuers of unsponsored depositary receipts are not
contractually obligated to disclose material information in the U.S. and,
therefore, such information may not correlate to the market value of the
unsponsored depositary receipt. The underlying securities of the ADRs and GDRs
in the 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 the Fund’s portfolio. In addition, because the
underlying securities of ADRs and GDRs trade on foreign exchanges at times when
the U.S. markets are not open for trading, the value of the securities
underlying the ADRs and GDRs 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 the Fund.
Small
and Medium-Sized Company Risk.
Investing in securities of small and medium-sized companies involves greater
risk than is customarily associated with investing in larger, more established
companies. Securities of these companies present additional risks because their
earnings are less predictable and they are more likely than larger companies to
have narrower product lines, markets or financial resources. These companies’
securities may be more volatile and less liquid than those of larger, more
established companies. These securities may have returns that vary, sometimes
significantly, from the overall stock market.
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. 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
the Fund realizes a gain, if any, on an investment in a micro-cap
company.
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.
The
Fund may not be fully invested at times, either as a result of cash flows into
the Fund or reserves of cash held by the Fund to meet redemptions and expenses.
If the 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 the Index, as would be the case if it purchased all of the
securities in the Index with the same weightings as the Index.
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.
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 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.
Issuer-Specific
Changes.
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.
Non-Diversified
Fund Risk.
The Fund is considered non-diversified and can invest a greater portion of
assets in securities of individual issuers than a diversified fund. Even though
no single security weight may exceed 4.5% of the Index at the time of each
quarterly rebalance, changes in the market value of the Index’s constituent
securities may result in the Fund being invested in the securities of individual
issuers (and making additional such investments in the case of creations of
additional Creation Units) in greater proportions. As a result, changes in the
market value of a single investment could cause greater fluctuations in share
price than would occur in a diversified fund.
Fund
Performance
The
chart and table below provide some indication of the risks of investing in the
Fund by showing changes in the Fund’s performance from year to year and by
showing how the Fund’s average annual returns for one year and since inception
compare with 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 for the Fund is available at guggenheiminvestments.com.
Calendar
Year Total Return as of 12/31
The
Fund commenced operations on April 15, 2008. The Fund’s year-to-date
total return was
15.91%
as
of September 30,
2014 .
During
the periods shown in the chart above, the Fund’s highest
and
lowest
calendar
quarter returns were 46.97%
and
-54.60%
,
respectively, for the quarters ended June 30,
2013 and
September 30,
2011 .
All
after-tax returns are calculated using the historical highest individual federal
marginal income tax rates and do not reflect the impact of any state or local
tax. Your own actual after-tax returns will depend on your tax situation and may
differ from what is shown here. After-tax
returns are not relevant to investors who hold Shares in tax-deferred accounts
such as individual retirement accounts (IRAs) or employee-sponsored retirement
plans.
|
|
|
|
|
|
|
|
|
|
|
Since |
|
Average
Annual Total Returns for the |
|
|
inception |
|
Periods
Ended December 31, 2013 |
1
Year |
|
5
years |
|
4/15/2008 |
|
Return
Before Taxes |
129.86 |
% |
-12.89 |
% |
-26.75 |
% |
Returns
After Taxes on Distributions |
128.60 |
% |
-14.00 |
% |
-27.58 |
% |
Returns
After Taxes on Distributions and Sale of Fund Shares |
73.50 |
% |
-9.58 |
% |
-16.32 |
% |
MAC
Global Solar Energy Index |
|
|
|
(reflects
no deduction for fees, expenses or taxes) |
126.59 |
% |
-14.62 |
% |
-27.62 |
% |
MSCI
World Index |
|
|
|
(reflects
no deduction for fees, expenses or taxes) |
26.68 |
% |
15.02 |
% |
4.68 |
% |
Management
Investment
Adviser.
Guggenheim Funds Investment Advisors, LLC.
Portfolio
Managers. The
portfolio managers who are currently responsible for the day-to-day management
of the Fund’s portfolio are Michael P. Byrum, CFA, Senior Vice President, James
R. King, CFA, 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 Shares
The
Fund will issue and redeem Shares at net asset value (“NAV”) only in a large
specified number of Shares called a “Creation Unit” or multiples thereof. A
Creation Unit consists of 80,000 Shares. The Fund generally issues and redeems
Creation Units principally in-kind.
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. Shares of the Fund are listed for trading on NYSE
Arca, Inc. (“NYSE Arca”) and because Shares trade at market prices rather than
NAV, Shares of the Fund may trade at a price greater than or less than
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 (such as a bank), the Investment Adviser or other related companies
may pay the intermediary for marketing activities and presentations, educational
training programs, the support of technology platforms and/or reporting systems
or other services related to the sale or promotion of the Fund. 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 About the Funds’ Principal Investment Strategies and Principal
Investment Risks
Investment
Objective
Each
Fund’s investment objective is non-fundamental and may be changed by the
Board without
shareholder approval.
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.
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.
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, 2014
,
the Index was comprised of approximately 27
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 by company description database searches and bottom-up industry 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
for inclusion in the Index that are not existing constituents of the Index
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
each reconstitution and have a minimum 1 month average daily trading of $2
million at the reference date preceding each reconstitution. Securities in
Pure-Play Group and Medium-Play Group set that do not meet these criteria
are from consideration as an Index constituent. Securities that are
already in Index are not subject to the minimum market capitalization and
trading value to remain constituents of the
Index. |
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.
|
S&P
Global Water Index
|
|
• |
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. |
|
|
• |
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. |
|
|
• |
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. |
|
|
• |
The
Index uses a modified market cap weighting methodology. No single stock
may have a weight of more than 10%. |
|
|
• |
Companies
that are acquired or delisted are deleted throughout the year. There
are no intra-reconstitution
additions. |
|
|
• |
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. |
MAC
Global Solar Energy Index
|
|
1. |
The
weighting of Index constituents on the rebalancing and reconstitution date
is determined as follows: |
|
|
a. |
The
full 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 20% 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. |
|
|
2. |
Any
company in the Index that is acquired or delisted is removed from the
Index at the time the event becomes effective, and will not be
replaced. If a security is considered to be illiquid, or if a company has
filed for bankruptcy, the security will be deleted from the Index
immediately and will not be replaced. Any spin-off from an existing Index
constituent may be included in the Index at the time of the
spin-off. |
|
|
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 diversification
requirements. |
Additional
Information about Risks of Investing in China (Guggenheim China All-Cap ETF and
Guggenheim China Technology ETF only)
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 China 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 European Union, 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 European
Union 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 the Funds 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.
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 the Funds 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 the Funds expect 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, the Funds will be indirectly subject to those risks.
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 underlying
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), participation notes and in swaps, options and futures contracts. Swaps,
options and futures contracts (and convertible securities, structured notes and
participation notes) may be used by a Fund in seeking performance that
corresponds to its respective underlying Index (whether by gaining 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 Funds will not invest in money market
instruments as part of a temporary defensive strategy to protect against
potential stock market declines. The Investment Adviser anticipates that it may
take approximately five business days (i.e., each day the NYSE 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.
The
Funds may lend their 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, the Fund receives liquid
collateral equal to at least 102% of 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 assets. Securities lending is not a principal investment strategy of
the Funds.
The
policies described herein constitute non-fundamental policies that may be
changed by the Board without
shareholder approval. Certain fundamental and other non-fundamental policies of
the Funds are set forth in the Statement of Additional Information under
“Investment Restrictions.”
Non-Principal
Risk Considerations
In
addition to the principal risks described previously, there are certain
non-principal risks related to investing in the Funds.
Derivatives
Risk.
A derivative is a financial contract, whose value depends on, or is derived
from, the value of an underlying asset such as a security or index. A Fund may
invest in certain types of “over-the-counter” derivatives contracts, including
futures, options and swaps. Compared to conventional securities, derivatives can
be more sensitive to changes in interest rates or to sudden fluctuations in
market prices and thus a Fund’s losses may be greater if it invests in
derivatives. Specific risks relating to a
Fund’s
investments in derivatives are set forth below:
Futures
Risk.
While a Fund may benefit from the use of futures, unanticipated changes in
interest rates, securities prices or currency exchange rates may result in
poorer overall performance than if the Fund had not entered into any futures
contracts. Because perfect correlation between a futures position and an Index
position that is intended to be simulated is impossible to achieve, the desired
protection may not be obtained and a Fund may be exposed to additional risk of
loss. The loss incurred by a Fund in entering into futures contracts is
potentially unlimited and may exceed the amount invested. Even a well-conceived
futures transaction may be unsuccessful due to market events. Futures markets
are highly volatile and the use of futures may increase the volatility of a
Fund’s NAV. As a result of the low margin deposits normally required in futures
trading, a relatively small price movement in a futures contract may result in
substantial losses to a Fund. Futures contracts may be illiquid, and exchanges
may limit fluctuations in futures contract prices during a single day. Foreign
exchanges may not provide the same protection as U.S. exchanges.
Options
Risk.
The buyer of an American option acquires the right to buy (a call option) or
sell (a put option) a certain quantity of a security (the underlying security)
or instrument at a certain price up to a specified point in time. The buyer of a
European option acquires the right to buy (a European call option) or sell (a
European put option) a certain quantity of a security (the underlying security)
or instrument at a certain price only on the option expiration date. The seller
or writer of the option is obligated to sell (a call option) or buy (a put
option) the underlying security. All options written (sold) by a Fund will be
covered. When writing (selling) call options on securities or a securities
index, a Fund may cover its positions by owning the underlying security or
securities on which the option is written or by owning a call option on the
underlying security (or, in the case of options on a securities index, by owning
securities whose price changes are expected to be equal to those of the
securities in the index). Alternatively, a Fund may cover its positions by
maintaining, in a segregated account, cash or liquid securities equal in value
to the exercise price of the call options written by the Fund. When a Fund
writes (sells) an option, if the underlying securities do not increase or
decrease to a price level that would make the exercise of the option profitable
to the holder thereof, the option generally will expire without being exercised
and the Fund will realize as profit the premium received for such option. When a
covered call option which a Fund writes (sells) is exercised, the Fund will be
required to sell the underlying securities to the option holder at the strike
price, and will not participate in any increase in the price of such securities
above the strike price. When a covered put option which a Fund writes (sells) is
exercised, the Fund will be required to purchase the underlying securities at a
price in excess of the market value of such securities. A decision as to
whether, when and how to use options involves the exercise of skill and judgment
and even a well conceived option transaction may be unsuccessful because of
market behavior or unexpected events. The prices of options can be highly
volatile and the use of options can lower total returns. There may be an
imperfect correlation between the movement in prices of options and the
securities underlying them. There may not be a liquid secondary market for
options.
Swaps
Risk.
An over-the-counter swap is a two-party contract that generally obligates one
party to pay the positive return and the other party to pay the negative return
on a specified reference security, basket of securities, security index or index
component. Swaps can involve greater risks than direct investment in securities,
because swaps may be leveraged and are subject to counterparty risk (e.g., the
risk of a counterparty’s defaulting on the obligation or bankruptcy), credit
risk and pricing risk (i.e., swaps may be difficult to value). Swaps may also be
considered illiquid. It may not be possible for a Fund to liquidate a swap
position at an advantageous time or price, which may result in significant
losses. The swaps market is subject to extensive regulation under the Dodd–Frank
Wall Street Reform and Consumer Protection Act and certain SEC and CFTC rules
promulgated thereunder. It is possible that developments in the swaps market,
including new and additional government regulation, could result in higher Fund
costs and expenses and could adversely affect a Fund’s ability, among other
things, to terminate existing swap agreements or to realize amounts to be
received under such agreements.
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 the 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 the 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 the 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 the Fund’s performance to deviate from the
performance of the portion of its Index to which the 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 the 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.
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 shares of a Fund. There can
be no assurance that the requirements of the NYSE Arca necessary to maintain the
listing of the Funds will continue to be met or will remain
unchanged.
Fluctuation
of NAV.
The NAV of a Fund’s Shares will generally fluctuate with changes in the market
value of the Fund’s holdings. The market prices of the Shares will generally
fluctuate in accordance with changes in NAV as well as the relative supply of
and demand for the Shares on the NYSE Arca. The Investment Adviser cannot
predict
whether
the Shares will trade below, at or above their NAV. Price differences may be
due, in large part, to the fact that supply and demand forces at work in the
secondary trading market for the Shares will be closely related to, but not
identical to, the same forces influencing the prices of the securities of the
Index trading individually or in the aggregate at any point in
time.
However,
given that the Shares can be purchased and redeemed in Creation Units (unlike
shares of many closed-end funds, which frequently trade at appreciable discounts
from, and sometimes premiums to, their NAV), the Investment Adviser believes
that large discounts or premiums to the NAV of the Shares should not be
sustained for long.
Securities
Lending.
Although a Fund will receive collateral in connection with all loans of its
securities holdings, the Fund would be exposed to a risk of loss should a
borrower default on its obligation to return the borrowed securities (e.g., the
loaned securities may have appreciated beyond the value of the collateral held
by the Fund). In addition, the Fund will bear the risk of loss of any cash
collateral that it invests.
Leverage.
To the extent that a Fund borrows money in the limited circumstances described
above under “Non-Principal Investment Strategies,” it may be leveraged.
Leveraging generally exaggerates the effect on NAV of any increase or decrease
in the market value of the Fund’s portfolio securities.
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 Funds’
Statement of Additional Information.
Investment
Management Services
Investment
Adviser
Guggenheim
Funds Investment Advisors, LLC (the “Investment Adviser”), a wholly-owned
subsidiary of Guggenheim Funds Services, LLC, (“Guggenheim Funds Services”),
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 exchange-traded funds,
unit investment trusts and closed-end funds. Guggenheim Funds Services is a
subsidiary of Guggenheim Partners, LLC (“Guggenheim”), a global, diversified
financial services firm with more than $186 billion in assets under supervision
as of June 30, 2014. 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 Fund’s assets and administers the affairs of
the 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 |
Fee |
Guggenheim
S&P Global Water Index ETF |
0.50% |
Guggenheim
Solar ETF |
0.50% |
Pursuant
to an expense reimbursement agreement (the “Expense Agreement”) entered into
between the Trust and the Investment Adviser, the Investment Adviser has agreed
to pay Fund expenses to the extent necessary to prevent the operating expenses
of each of the above listed Funds (excluding interest expenses, a portion of the
Fund’s licensing fees, offering costs (up to 0.25% of the average net assets of
the Guggenheim Solar ETF), 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 Cap”), at least until
December 31, 2017
,
and prior to such date the Investment Adviser may not terminate the arrangement
without the approval of the Board
.
The offering costs excluded from the 0.65% Expense Cap 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 Funds expenses reimbursed during
the prior three years if the Fund’s expense ratio, including the recovered
expenses, falls below the Expense Cap. To the extent the Fund incurs expenses
that are excluded from the Expense Cap, 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 |
Fee |
Guggenheim
China All-Cap ETF |
0.70% |
Guggenheim
China Technology ETF |
0.70% |
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 2014 is available in the annual report to shareholders
dated August 31, 2014.
Portfolio
Managers
The
Portfolio Managers who are currently responsible for the day-to-day management
of Guggenheim China All-Cap ETF and Guggenheim S&P Global Water Index ETF’s
portfolios are Michael P. Byrum, CFA, James R. King, CFA, and Cindy
Gao. Mr. Byrum, Mr. King and Ms. Gao have managed those Funds’
portfolios since December 2013. The Portfolio Managers who are currently
responsible for the day-to-day management of Guggenheim China Technology ETF and
Guggenheim Solar ETF’s portfolios are Michael P. Byrum, CFA, James R. King, CFA,
and Cindy Gao. Messrs. Byrum and King have managed those Funds' portfolios since
December 2013. Ms. Gao has managed those Funds' portfolios since December
2014.
Mr.
Byrum is a Senior Vice President 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 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 an ETF Analyst in 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.
The
Statement of Additional Information 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 the Funds at net asset value 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
S&P Global Water Index ETF |
CGW |
Guggenheim
Solar ETF |
TAN |
Each
Fund may liquidate and terminate at any time without shareholder
approval.
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 Statement of Additional
Information and in the Funds’ authorized participant agreement.
|
|
|
Fund |
Creation
Unit Size |
Guggenheim
China All-Cap ETF |
100,000 |
Guggenheim
China Technology ETF |
50,000 |
Guggenheim
S&P Global Water Index ETF |
80,000 |
Guggenheim
Solar ETF |
80,000 |
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 the Funds 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 net asset value and can be affected by market forces of supply and demand,
economic conditions and other factors.
The
NYSE Arca disseminates the approximate value of Shares of the Funds every
fifteen seconds. The approximate value calculations are based on local closing
prices and may not reflect events that occur subsequent to the local market’s
close. As a result, premiums and discounts between the approximate value and the
market price could be affected. This approximate value should not be viewed as a
“real-time” update of the NAV per Share of the Funds 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. The Funds are not involved
in, or responsible for, the calculation or dissemination of the approximate
value and the Funds do not make any warranty as to its accuracy.
The
net asset value per Share for each Fund is determined once daily as of the close
of the NYSE, usually 4:00 p.m. Eastern time, each day the NYSE is open for
trading. Shares will not be priced on regular national holidays or other days on
which the NYSE is closed. NAV per Share is determined by dividing the value of
each Fund’s portfolio securities, cash and other assets (including accrued
interest), less all liabilities (including accrued expenses), by the total
number of shares outstanding.
Equity
securities are valued at the last reported sale price on the principal exchange
or on the principal OTC market on which such securities are traded, as of the
close of regular trading on the NYSE on the day the securities are being valued
or, if there are no sales, at the mean of the most recent bid and asked prices.
Equity securities that are traded primarily on the NASDAQ Stock Market are
valued at the NASDAQ Official Closing Price.
Debt
securities are valued using information from financial intermediaries or a
third-party pricing service, and such values are set at the mean between the
last available bid and ask prices for such securities or, if such prices are not
available, at prices for securities of comparable maturity, quality, and type,
or other equivalent indications of value. Short-term securities for which market
quotations are not readily available are valued at amortized cost, which
approximates market value.
Securities
for which market quotations are not readily available or are deemed unreliable,
including restricted securities, are valued by the Investment Adviser using a
method that the Investment Adviser believes accurately reflects fair value,
pursuant to policies adopted by the Board and
subject to the ultimate supervision of the Board
.
Securities will be valued at fair value when market quotations are not readily
available or are deemed unreliable, such as when a security’s value or a
meaningful portion of a Fund’s portfolio is believed to have been materially
affected
by a significant event. Such events may include a natural disaster, an economic
event like a bankruptcy filing, a trading halt in a security, an unscheduled
early market close or a substantial fluctuation in domestic and foreign markets
that has occurred between the close of the principal exchange and the NYSE. In
such a case, the value for a security is likely to be different from the last
quoted market price. In addition, due to the subjective and variable nature of
fair market value pricing, it is possible that the value determined for a
particular asset may be materially different from the value realized upon such
asset’s sale.
Trading
in securities on many foreign securities exchanges and over-the-counter markets
is normally completed before the close of business on each U.S. business day. In
addition, securities trading in a particular country or countries may not take
place on all U.S. business days or may take place on days that are not U.S.
business days. Changes in valuations on certain securities may occur at times or
on days on which a Fund’s net asset value is not calculated and on which the
Funds do not effect sales, redemptions and exchanges of their
Shares.
Creation
Units
Investors
such as market makers, large investors and institutions who wish to deal in
Creation Units directly with the Funds 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 Statement of Additional Information.
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 net asset value 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.
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 Statement of Additional Information. 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 Statement of
Additional Information, 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 Statement of Additional Information.
The
following fixed creation transaction fees per transaction for the Funds (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
S&P Global Water Index ETF |
$500 |
Guggenheim
Solar ETF |
$500 |
An
additional variable charge for cash creations or partial cash creations may also
be imposed to compensate the Funds for the costs associated with buying the
applicable securities. The Funds may adjust these fees from time to time based
on actual experience.
The
Funds reserve 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 Statement of
Additional Information. 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 Statement of Additional Information.
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 Statement of
Additional Information.
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 numbers of shares of the
Funds’ 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 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 Statement of Additional
Information.
An
order to redeem Creation Units of the 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 custom orders, placed at the request of the AP and as
further described in the Statement of Additional Information, 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
S&P Global Water Index ETF |
$500 |
Guggenheim
Solar ETF |
$500 |
An
additional variable charge for cash redemptions or partial cash redemptions may
also be imposed to compensate the Funds for the costs associated with selling
the applicable securities. The Funds may adjust these fees from time to time
based on actual experience.
The
Funds reserve the right to effect redemptions in cash. A shareholder may request
a cash redemption or partial cash redemption in lieu of securities, however, a
Fund may, in its discretion, reject any such request. See “Creation and
Redemption of Creation Unit Aggregations” in the Statement of Additional
Information.
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. 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. 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
Rydex
Fund Services, LLC, an affiliate of the Investment Adviser, is the administrator
of the Funds.
The
Bank of New York Mellon (“BNY 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 each Fund’s 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. 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. The Fund is entitled to use the 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
“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.
“Standard
& Poor’s®”, “S&P®” and “S&P Global Water Index” are registered
trademarks of Standard & Poor's Financial Services LLC ("S&P") and have
been licensed for use by the Investment Adviser. The Fund is not sponsored,
endorsed, sold or promoted by S&P and S&P makes no representation
regarding the advisability of investing in Shares of the Fund.
S&P
does not guarantee the accuracy and/or the completeness of the Index 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 Fund or any other person or entity from the use of
the Index 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 Index 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 Index or any data included therein even if notified of the
possibility of such damages.
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.
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 net asset value
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 intends to 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 net asset values. 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. Registered 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.
Financial
Highlights
The
financial highlights table is intended to help you understand each Fund’s
financial performance 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,
2014 |
|
Year
Ended
August
31,
2013 |
|
Year
Ended
August
31,
2012 |
|
Year
Ended
August
31,
2011 |
|
Period
Ended
August
31,
2010(a) |
|
Per
Share Data: |
|
|
|
|
|
Net
asset value, beginning of period |
$ |
24.63 |
|
$ |
21.66 |
|
$ |
25.04 |
|
$ |
24.56 |
|
$ |
24.82 |
|
Income
from investment operations: |
|
|
|
|
|
Net
investment income(b) |
0.62 |
|
0.46 |
|
0.52 |
|
0.41 |
|
0.22 |
|
Net
gain (loss) on investments (realized and unrealized) |
3.80 |
|
3.07 |
|
(3.32 |
) |
0.35 |
|
(0.48 |
) |
Total
from investment operations |
4.42 |
|
3.53 |
|
(2.80 |
) |
0.76 |
|
(0.26 |
) |
Less
distributions from: |
|
|
|
|
|
Net
investment income |
(0.49 |
) |
(0.56 |
) |
(0.58 |
) |
(0.28 |
) |
— |
|
Total
distributions to shareholders |
(0.49 |
) |
(0.56 |
) |
(0.58 |
) |
(0.28 |
) |
— |
|
Net
asset value, end of period |
$ |
28.56 |
|
$ |
24.63 |
|
$ |
21.66 |
|
$ |
25.04 |
|
$ |
24.56 |
|
Market
Value, end of period |
$ |
28.52 |
|
$ |
24.49 |
|
$ |
21.76 |
|
$ |
25.07 |
|
$ |
24.55 |
|
Total
Return(c) |
|
|
|
|
|
Net
asset value |
18.05 |
% |
16.25 |
% |
(11.71 |
)% |
3.01 |
% |
(1.05 |
)% |
Ratios/Supplemental
Data: |
|
|
|
|
|
Net
assets, end of period (in thousands) |
$ |
54,262 |
|
$ |
46,804 |
|
$ |
49,822 |
|
$ |
72,607 |
|
$ |
61,402 |
|
Ratio
to average net assets of: |
|
|
|
|
|
Net
investment income |
2.35 |
% |
1.92 |
% |
2.25 |
% |
1.50 |
% |
1.02 |
% |
Total
expenses |
0.71 |
% |
0.70 |
% |
0.70 |
% |
0.70 |
% |
0.70 |
% |
Net
expenses |
0.71 |
% |
0.70 |
% |
0.70 |
% |
0.70 |
% |
0.70 |
% |
Portfolio
turnover rate(d) |
12 |
% |
16 |
% |
12 |
% |
16 |
% |
11 |
% |
|
|
(a) |
Since
commencement of operations: October 19, 2009. 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. |
CQQQ
|
Guggenheim
China Technology ETF
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year
Ended
August
31,
2014 |
|
Year
Ended
August
31,
2013 |
|
Year
Ended
August
31,
2012 |
|
Year
Ended
August
31,
2011 |
|
Period
Ended
August
31,
2010(a) |
|
Per
Share Data: |
|
|
|
|
|
Net
asset value, beginning of period |
$ |
29.55 |
|
$ |
20.03 |
|
$ |
25.44 |
|
$ |
24.36 |
|
$ |
25.06 |
|
Income
from investment operations: |
|
|
|
|
|
Net
investment income(b) |
0.43 |
|
0.28 |
|
0.54 |
|
0.31 |
|
0.08 |
|
Net
gain (loss) on investments (realized and unrealized) |
8.39 |
|
9.67 |
|
(5.38 |
) |
0.90 |
|
(0.78 |
) |
Total
from investment operations |
8.82 |
|
9.95 |
|
(4.84 |
) |
1.21 |
|
(0.70 |
) |
Less
distributions from: |
|
|
|
|
|
Net
investment income |
(0.28 |
) |
(0.43 |
) |
(0.57 |
) |
(0.13 |
) |
— |
|
Total
distributions to shareholders |
(0.28 |
) |
(0.43 |
) |
(0.57 |
) |
(0.13 |
) |
— |
|
Net
asset value, end of period |
$ |
38.09 |
|
$ |
29.55 |
|
$ |
20.03 |
|
$ |
25.44 |
|
$ |
24.36 |
|
Market
Value, end of period |
$ |
37.88 |
|
$ |
29.59 |
|
$ |
19.96 |
|
$ |
25.57 |
|
$ |
24.40 |
|
Total
Return(c) |
|
|
|
|
|
Net
asset value |
29.89 |
% |
50.39 |
% |
(19.10 |
)% |
4.94 |
% |
(2.79 |
)% |
Ratios/Supplemental
Data: |
|
|
|
|
|
Net
assets, end of period (in thousands) |
$ |
78,077 |
|
$ |
22,164 |
|
$ |
17,029 |
|
$ |
31,805 |
|
$ |
19,491 |
|
Ratio
to average net assets of: |
|
|
|
|
|
Net
investment income |
1.22 |
% |
1.16 |
% |
2.38 |
% |
1.09 |
% |
0.43 |
% |
Total
expenses |
0.71 |
% |
0.70 |
% |
0.70 |
% |
0.70 |
% |
0.70 |
% |
Net
expenses |
0.71 |
% |
0.70 |
% |
0.70 |
% |
0.70 |
% |
0.70 |
% |
Portfolio
turnover rate(d) |
39 |
% |
26 |
% |
43 |
% |
28 |
% |
11 |
% |
|
|
(a) |
Since
commencement of operations: December 8, 2009. 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. |
CGW
|
Guggenheim
S&P Global Water Index ETF
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year
Ended
August
31,
2014 |
|
Year
Ended
August
31,
2013 |
|
Year
Ended
August
31,
2012 |
|
Year
Ended
August
31,
2011 |
|
Year
Ended
August
31,
2010 |
|
Per
Share Data: |
|
|
|
|
|
Net
asset value, beginning of period |
$ |
23.90 |
|
$ |
21.05 |
|
$ |
20.06 |
|
$ |
17.11 |
|
$ |
16.88 |
|
Income
from investment operations: |
|
|
|
|
|
Net
investment income(a) |
0.51 |
|
0.49 |
|
0.44 |
|
0.38 |
|
0.36 |
|
Net
gain on investments (realized and unrealized) |
5.03 |
|
2.81 |
|
0.96 |
|
2.99 |
|
0.07 |
|
Total
from investment operations |
5.54 |
|
3.30 |
|
1.40 |
|
3.37 |
|
0.43 |
|
Less
distributions from: |
|
|
|
|
|
Net
investment income |
(0.42 |
) |
(0.45 |
) |
(0.41 |
) |
(0.42 |
) |
(0.20 |
) |
Total
distributions to shareholders |
(0.42 |
) |
(0.45 |
) |
(0.41 |
) |
(0.42 |
) |
(0.20 |
) |
Net
asset value, end of period |
$ |
29.02 |
|
$ |
23.90 |
|
$ |
21.05 |
|
$ |
20.06 |
|
$ |
17.11 |
|
Market
Value, end of period |
$ |
29.08 |
|
$ |
23.88 |
|
$ |
20.98 |
|
$ |
19.99 |
|
$ |
16.99 |
|
Total
Return(b) |
|
|
|
|
|
Net
asset value |
23.27 |
% |
15.85 |
% |
7.23 |
% |
19.60 |
% |
2.46 |
% |
Ratios/Supplemental
Data: |
|
|
|
|
|
Net
assets, end of period (in thousands) |
$ |
367,914 |
|
$ |
253,369 |
|
$ |
199,547 |
|
$ |
214,190 |
|
$ |
192,289 |
|
Ratio
to average net assets of: |
|
|
|
|
|
Net
investment income |
1.83 |
% |
2.13 |
% |
2.22 |
% |
1.85 |
% |
2.02 |
% |
Total
expenses |
0.65 |
% |
0.71 |
% |
0.76 |
% |
0.78 |
% |
0.77 |
% |
Net
expenses |
0.65 |
% |
0.70 |
% |
0.70 |
% |
0.70 |
% |
0.70 |
% |
Portfolio
turnover rate(c) |
7 |
% |
21 |
% |
31 |
% |
8 |
% |
17 |
% |
|
|
(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,
2014 |
|
Year
Ended
August
31,
2013 |
|
Year
Ended
August
31,
2012 |
|
Year
Ended
August
31,
2011 |
|
Year
Ended
August
31,
2010 |
|
Per
Share Data*: |
|
|
|
|
|
Net
asset value, beginning of period |
$ |
27.23 |
|
$ |
16.74 |
|
$ |
54.90 |
|
$ |
73.30 |
|
$ |
86.00 |
|
Income
from investment operations: |
|
|
|
|
|
Net
investment income (loss)(a) |
0.52 |
|
0.56 |
|
1.84 |
|
1.80 |
|
(0.10 |
) |
Net
gain (loss) on investments (realized and unrealized) |
16.28 |
|
11.35 |
|
(37.89 |
) |
(19.90 |
) |
(12.60 |
) |
Total
from investment operations |
16.80 |
|
11.91 |
|
(36.05 |
) |
(18.10 |
) |
(12.70 |
) |
Less
distributions from: |
|
|
|
|
|
Net
investment income |
(0.45 |
) |
(1.42 |
) |
(2.11 |
) |
(0.30 |
) |
— |
|
Total
distributions to shareholders |
(0.45 |
) |
(1.42 |
) |
(2.11 |
) |
(0.30 |
) |
— |
|
Net
asset value, end of period |
$ |
43.58 |
|
$ |
27.23 |
|
$ |
16.74 |
|
$ |
54.90 |
|
$ |
73.30 |
|
Market
Value, end of period |
$ |
43.39 |
|
$ |
27.16 |
|
$ |
16.71 |
|
$ |
54.60 |
|
$ |
72.90 |
|
Total
Return(b) |
|
|
|
|
|
Net
asset value |
62.06 |
% |
77.60 |
% |
(66.93 |
)% |
(24.81 |
)% |
(14.77 |
)% |
Ratios/Supplemental
Data: |
|
|
|
|
|
Net
assets, end of period (in thousands) |
$ |
429,167 |
|
$ |
170,150 |
|
$ |
42,992 |
|
$116,473 |
$147,688 |
Ratio
to average net assets of: |
|
|
|
|
|
Net
investment income |
1.28 |
% |
2.71 |
% |
7.07 |
% |
2.40 |
% |
(0.09 |
)% |
Total
expenses |
0.76 |
% |
0.86 |
% |
1.01 |
% |
0.88 |
% |
0.88 |
% |
Net
expenses |
0.71 |
% |
0.70 |
% |
0.70 |
% |
0.70 |
% |
0.66 |
% |
Portfolio
turnover rate(c) |
47 |
% |
68 |
% |
49 |
% |
38 |
% |
17 |
% |
|
|
* |
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. |
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.
For
More Information
Existing
Shareholders or Prospective Investors
|
|
• |
Visit
guggenheiminvestments.com |
Dealers
|
|
• |
Visit
guggenheiminvestments.com |
|
|
• |
Distributor
Telephone: (800) 345-7999 |
|
|
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, 2014, which contains more
details about the Funds, 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
Statement of Additional Information by calling 800.820.0888. Free copies of the
Funds’ shareholder reports and the Statement of Additional Information are
available from our website at guggenheiminvestments.com.
Information
about each Fund, including its reports and the Statement of Additional
Information, has been filed with the SEC. It 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, 2014 |
|
Investment
Company Act File No.
811-21910. |