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Guggenheim Funds

DEF – Guggenheim Defensive Equity ETF

 
DEF

Fund Summary

The Guggenheim Defensive Equity ETF (NYSE Arca: DEF), seeks investment results that correspond generally to the performance, before the Fund’s fees and expenses, of an equity index called the Sabrient Defensive Equity Index (the “Defensive Equity Index” or “Index”). The Fund will invest at least 90% of its total assets in common stock, American depositary receipts ("ADRs") and master limited partnerships ("MLPs") that comprise the Index and depositary receipts representing common stocks included in the Index (or underlying securities representing ADRs included in the Index). Guggenheim Funds Investment Advisors, LLC (the “Investment Adviser”) seeks a correlation over time of 0.95 or better between the Fund’s performance and the performance of the Index. A figure of 1.00 would represent perfect correlation.

The Fund, using a low cost “passive” or “indexing” investment approach, seeks to replicate, before fees and expenses, the performance of the Defensive Equity Index. The Index is comprised of approximately 100 securities selected, based on investment and other criteria, from a broad universe of U.S.-traded stocks, including MLPs, and ADRs. The depositary receipts included in the Index may be sponsored or unsponsored. The universe of potential Index constituents includes approximately 1,000 listed companies, generally with market capitalizations in excess of $1 billion.

Top Fund Holdings

View All Holdings as of 5/16/12
COCA-COLA FEMSA S.A. SP ADR 1.08 %
DARDEN RESTAURAN 1.07 %
PEPSICO INC/NC 1.06 %
HJ HEINZ CO 1.05 %
NEXTERA ENERGY INC 1.05 %
WISCONSIN ENERGY 1.04 %
HERSHEY CO/THE 1.04 %
THE JM SMUCKER CO 1.04 %
BROWN-FORMAN CORP 1.04 %
KIMBERLY-CLARK 1.04 %

TOP FUND SECTORS

as of 3/31/12

SECTOR WEIGHTING
Utilities 23.08 %
Consumer Staples 22.28 %
Energy 18.31 %
Consumer Discretionary 9.57 %
Financials 7.67 %
Health Care 7.00 %
Telecommunication Services 6.76 %
Materials 2.31 %
Information Technology 2.05 %
Industrials 0.97 %

All data is provided by Guggenheim Funds Distributors, LLC, or Morningstar. Data is subject to change on a daily basis and represents a percentage of the Fund’s holdings, excluding cash. The securities mentioned are provided for informational purposes only and should not be deemed as a recommendation to buy or sell.

*Morningstar category is based on the underlying securities of the ETF and not the objective. The Morningstar Rating™ is provided for those exchange-traded funds (“ETFs”) with at least a three-year history. Ratings are based on the ETF’s Morningstar Risk-Adjusted Return measure which accounts for variation in monthly performance, placing more emphasis on downward variations and rewarding consistent performance. An ETF’s risk-adjusted return includes a brokerage commission estimate. This estimate is intended to reflect what an average investor would pay when buying or selling an ETF. PLEASE NOTE, this estimate is subject to change and the actual brokerage commission an investor pays may be higher or lower than this estimate. Morningstar compares each ETF’s risk-adjusted return to the open-end mutual fund rating breakpoints for that category. Consistent with the open-end mutual fund ratings, the top 10% of ETFs in each category receive 5 stars, the next 22.5% receive 4 stars, the next 35% receive 3 stars, the next 22.5% receive 2 stars and the bottom 10% receive 1 star. The overall rating for an ETF is based on a weighted average of the time-period ratings (e.g., the ETF’s 3-, 5-, and 10-year rating). The determination of an ETF’s rating does not affect the retail open end mutual fund data published by Morningstar. Past performance is no guarantee of future results.

Overall Morningstar RatingTM Quick Tip

as of 3/31/12

Among Large Value Funds

This Fund was rated 5 stars for 3 years, 5 stars for 5 years, and 5 stars Overall out of , , and Large Value funds, respectively.

Morningstar category is based on the underlying securities of the ETF and not the objective. The Morningstar Rating™ is provided for those exchange-traded funds (“ETFs”) with at least a three-year history. Ratings are based on the ETF’s Morningstar Risk-Adjusted Return measure which accounts for variation in monthly performance, placing more emphasis on downward variations and rewarding consistent performance. An ETF’s risk-adjusted return includes a brokerage commission estimate. This estimate is intended to reflect what an average investor would pay when buying or selling an ETF. PLEASE NOTE, this estimate is subject to change and the actual brokerage commission an investor pays may be higher or lower than this estimate. Morningstar compares each ETF’s risk-adjusted return to the open-end mutual fund rating breakpoints for that category. Consistent with the open-end mutual fund ratings, the top 10% of ETFs in each category receive 5 stars, the next 22.5% receive 4 stars, the next 35% receive 3 stars, the next 22.5% receive 2 stars and the bottom 10% receive 1 star. The overall rating for an ETF is based on a weighted average of the time-period ratings (e.g., the ETF’s 3, 5, and 10 year rating). The determination of an ETF’s rating does not affect the retail open end mutual fund data published by Morningstar. Past performance is no guarantee of future results.

Fund Profile

Symbol DEF
Exchange NYSE Arca
NAV Symbol (IIV) DEFIV
CUSIP 18383M878
Fund Inception Date 12/15/06
Distribution Schedule (if any) Annually
Expense Cap 0.60 %
Fiscal Year-End 8/31
Investment Adviser Guggenheim Funds Investment Advisors, LLC
Sabrient Defensive Equity IndexSBRDETR
Index Provider Sabrient
Index Constituent List NYSE Arca
Per the prospectus dated 12/31/10, the Fund’s total annual operating expense ratio, gross of any fee waivers or expense reimbursements, is 1.42%. There is a contractual fee waiver currently in place for this Fund through December 31, 2013 to the extent necessary to keep Fund operating expenses from exceeding 0.60% of average net assets per year. However, some expenses fall outside of this expense cap and therefore net operating expenses were 0.65%. Without this expense cap, actual returns would be lower.

Fund Statistics

as of 5/16/12 Price History
  MARKET PRICE NAV
Close $27.77 $27.78
Change ($0.04) $0.00
52-Week High $28.60 $28.61
52-Week Low $23.34 $23.02
Bid/Ask Midpoint $27.79
Bid/Ask Premium (Discount) 0.02 %
Volume 65,744
Shares Outstanding 2,650,000
Total Managed Assets $73,627,157

Figures are based on market close.

Fund Characteristics

as of 3/31/12

Number of Securities100
Average Market Capitalization $30.2 Bil
Price/Earnings (P/E) 18.2 x
Price/Book (P/B) 2.2 x
Beta 0.58
Alpha 8.76
Standard Deviation (Fund / S&P 500 Index) 10.46/16.23

P/E Ratio is a harmonic weighted average and is equal to a security’s market capitalization divided by its after-tax earnings over the most recent 12-month period.

P/B Ratio is a harmonic weighted average and is equal to a security’s market capitalization divided by its book value.

Alpha is a statistical measurement that depicts the performance difference between a fund's return and an underlying performance benchmark, given a fund’s level of volatility, measured by beta. The benchmark will always reflect an alpha of 0.00%. A positive alpha indicates a fund has performed better than its beta would predict in the stated period.

Beta is the measure of a fund's sensitivity to the Index. By definition, the beta of the Index is 1.00. Any fund with a higher beta is more volatile than the Index. Likewise, any portfolio with a lower beta will be less volatile than the index in the stated period.

Standard deviation is a measure of historical volatility that indicates the degree to which an investment’s returns fluctuate around its average return. Generally, a higher standard deviation indicates a more risky investment.

Average Market Capitalization is the geometric mean of the market capitalizations for all the securities in a fund’s portfolio.

CURRENT
DISTRIBUTION tip

View Distribution History
Ex-Date 12/23/11
Record Date 12/28/11
Payable Date 12/30/11
Distribution per Share $0.375000
To the extent the Current Distribution is comprised of something other than Income, such as Return of Capital, please refer to the applicable Rule 19a-1 Notice found on the Fund's website under the Literature section. If the Current Distribution is comprised solely from Income, a Rule 19a-1 Notice will not be produced and posted.

Past performance is not a guarantee of future results.

INDEX METHODOLOGY

The Index methodology is published at www.sabrient.com. The Index selection methodology is designed to identify companies with potentially superior risk/return profiles, as determined by Sabrient Systems LLC (“Sabrient” or the “Index Provider”), during periods of weakness in the markets and/or the American economy overall. The Index is designed to actively represent a group of securities that reflect occurrences such as low relative valuations, conservative accounting, dividend payments and a history of outperformance during bearish market periods. The Index constituents represent a “defensive” portfolio with the potential to outperform broad market benchmark indices on a risk-adjusted basis during periods of market weakness, while still providing the potential for positive returns during strong market periods.

The Index constituent selection methodology was developed by Sabrient as an effective, quantitative approach to selecting securities in a diversified portfolio from a broad universe of companies. The Index constituent selection methodology evaluates and selects securities from the qualified universe of companies using a proprietary, 100% rules-based methodology developed by Sabrient.

The Index constituent selection methodology utilizes multi-factor proprietary selection rules to seek to identify those securities that offer the greatest potential from a risk/return perspective during weak market periods. The approach is specifically designed to enhance investment applications and investability. The constituent selection process and portfolio rebalance are repeated once per quarter.

INDEX CONSTRUCTION

  1. Potential Index constituents include all equities trading on major U.S. exchanges.
  2. The Defensive Equity Index is comprised of approximately the 100 highest-ranking securities chosen from a subset of eligible companies using a 100% rules-based quantitative ranking methodology. To prevent undue industry sector concentration, limits have been placed on the number of securities in the Index that may share a particular sector or industry classification under the Standard & Poor’s Global Industry Classification System.
  3. Each security is ranked based on the composite scoring of a handful of specially-targeted factors, and is sorted from highest to lowest. The constituent selection methodology was developed by Sabrient as an effective, quantitative approach designed to identify those companies that offer the greatest potential for maintaining value during difficult market conditions and thus providing the investor with a defensive portfolio.
  4. The 100 highest-ranking companies are chosen and given a modified equal weighting in the portfolio.
  5. The constituent selection process and portfolio rebalance are repeated once per quarter.

RISKS AND OTHER CONSIDERATIONS

Investors should consider the following risk factors and special considerations associated with investing in the fund, which may cause you to lose money, including the entire principal amount that you invest.

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.

Foreign Investment Risk: The fund’s investments in non-U.S. issuers, although generally limited to ADRs, 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.

Small and Medium-Sized Company Risk: Investing in securities of these companies involves greater risk as their securities may be more volatile and less liquid than investing in more established companies. These securities may have returns that vary, sometimes significantly, from the overall stock market.

Utilities Sector Risk: Companies in the utilities sector may be adversely affected by changes in economic, political, and regulatory or deregulatory changes, and other occurrences associated with the utilities industry. This concentration may present more risks than investing in securities that are more broadly diversified over numerous sectors of the economy.

MLP Risk: Investments in securities of MLPs involve risks that differ from an investment in common stock. Holders of the units of MLPs have more limited control and limited rights to vote on matters affecting the partnership. There are also certain tax risks associated with an investment in units of MLPs.

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. In addition the fund is subject to Non-Correlation Risk, Replication Management Risk, and Issuer Specific Changes.

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.

As with any investment, you should consider how your investment will be taxed. The tax information contained in the prospectus is provided as general information. Investors should consult their own tax professional about the tax consequences of an investment as Guggenheim Funds Distributors, LLC, does not offer tax advice.

The Fund will issue and redeem Shares at 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, 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.

Investors buying or selling ETF shares on the secondary market may incur brokerage costs and other transactional fees. Shares of ETFs may fluctuate in price due to daily changes in trading volume. At times, shares may not have a high volume of trading.

The product is not sponsored, endorsed, sold or promoted by Sabrient. Sabrient makes no representation or warranty, express or implied, regarding the advisability of investing in securities generally or in the product particularly or the ability of the Index to track general market performance. Sabrient’s only relationship to Guggenheim Funds Investment Advisors, LLC is the licensing of the Index which is determined, composed and calculated by Sabrient without regard to Guggenheim Funds Investment Advisors, LLC or the product. Sabrient has no obligation to take the needs of Guggenheim Funds Investment Advisors, LLC or the owners of the product into consideration in determining or calculating the Index. Sabrient shall not be liable to any person for any error in the Index nor shall it be under any obligation to advise any person of any error therein.

© 2012 Morningstar, Inc. All Rights Reserved. The information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. Past performance is no guarantee of future results.

Guggenheim Funds Investment Advisors, LLC, an affiliate of Guggenheim Funds Distributors, LLC, serves as the investment adviser.

 

 

Investors should carefully consider the investment objectives and policies, risk considerations, charges and ongoing expenses of any investment product before investing. The prospectus contains this and other relevant information. Please read the prospectus carefully before you invest. To obtain a prospectus, please contact a securities representative or Guggenheim Funds Distributors, LLC, 2455 Corporate West Drive, Lisle, Illinois 60532, 800-345-7999, or download one by accessing the Literature section of this web site.

NOT FDIC INSURED | NOT BANK GUARANTEED | MAY LOSE VALUE