SELECTION CRITERIA
The Trust’s portfolio is constructed and the securities are selected approximately 12 business days prior to the initial date of deposit (the “Inception Date”) using the methodology described below.
In constructing the Trust portfolio, 50 securities will be selected based on the following fundamentally-based quantitative criteria:
- Begin with all companies listed in the Dow Jones U.S. Top-Cap Growth Total Stock Index, which is a combination of the Dow Jones U.S. Large-Cap Growth Total Stock Index and the Dow Jones U.S. Mid-Cap Growth Total Stock Market Index.
- Exclude companies with a price per share of less than $5 and more than $500.
- Exclude companies with a 30-day average daily traded value of less than $1 million.
- Exclude companies with an indicated dividend yield of 0. Indicated dividend yield is a company’s most recently announced dividend, annualized based on dividend frequency and divided by market price (abnormal or special dividends are not included).
- Exclude 10% of the companies with the lowest indicated dividend yield.
- Select the 50 companies according to the Required Business Performance® (“RBP®”) methodology described below that have the highest probability percentage.
- Weight the Trust portfolio by dividing a company’s RBP® percentage score by the RBP® percentage score for the 50 selected companies, subject to a 5% cap for each individual security on the day the strategy generates the final portfolio. Please note that due to the fluctuating nature of security prices, the weighting of an individual security in the Trust may be greater than 5% of the portfolio after the portfolio selection date.
Required Business Performance®
RBP® seeks to measure the performance that is implied in the price of a company’s stock. To determine the RBP® probability for a given company, the company’s required revenue (revenue that the company is required to generate over the next twelve months) is calculated through a ten-year forward discounted free cash flow (“FCF”) model. The ten-year forward FCF model includes the perpetuity growth rate, capital expenditures, operating margins and potentially scaling forward growth rates. With this required forward FCF and historical company performance from the past twelve quarters, a distribution curve is fit to the data and derives an RBP® probability (expressed as a percentage from 0 to 100%).
Please be aware that there is no assurance that the past performance measures on which the RBP® Methodology relies will be repeated in the future or any assurance that Transparent Value will be able to successfully execute the strategy.
Transparent Value, LLC
Transparent Value was established in 2003 with a dedicated vision: the pursuit of delivering sustainable investment returns across global equity markets by introducing a new way to measure the equity value of publicly traded companies.
Transparent Value calculates the Required Business Performance® probabilities used in the Dow Jones RBP IndexesSM and licenses the RBP® probabilities exclusively to Dow Jones IndexesSM for the construction of domestic and global indexes.
Since 2003, Transparent Value has grown into a financial services firm with subsidiaries, including Transparent Value Advisors LLC, a U.S. registered adviser and Transparent Value Pvt., Ltd., its Indian knowledge center. Claymore will pay Transparent Value a fee for its assistance in the selection of the Trust portfolio. Transparent Value is an affiliate of the Sponsor.
RISKS AND OTHER CONSIDERATIONS
As with all investments, you may lose some or all of your investment in the Trust. No assurance can be given that the Trust’s investment objective will be achieved. The Trust also might not perform as well as you expect. This can happen for reasons such as these:
- Securities prices can be volatile. The value of your investment may fall over time. Market value fluctuates in response to various factors. These can include stock market movements, purchases or sales of securities by the Trust, government policies, litigation, and changes in interest rates, inflation, the financial condition of the securities’ issuer or even perceptions of the issuer. Units of the Trust are not deposits of any bank and are not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.
- Due to the current state of the economy, the value of the securities held by the Trust may be subject to steep declines or increased volatility due to changes in performance or perception of the issuers. Starting in December 2007, economic activity declined across all sectors of the economy, and the United States experienced increased unemployment. The economic crisis affected the global economy with European and Asian markets also suffering historic losses. Although the latest economic data suggests slightly increased activity in the U.S. economy, unemployment remains high. Extraordinary steps have been taken by the governments of several leading countries to combat the economic crisis; however, the impact of these measures is not yet fully known and cannot be predicted.
- Share prices or dividend rates on the securities in the Trust may decline during the life of the Trust. There is no guarantee that the issuers of the securities will declare dividends in the future and, if declared, whether they will remain at current levels or increase over time.
- The Trust includes securities of companies in the consumer products sector. General risks of companies in the consumer products sector include cyclicality of revenues and earnings, economic recession, currency fluctuations, changing consumer tastes, extensive competition, product liability litigation and increased government regulation. A weak economy and its effect on consumer spending would adversely affect companies in the consumer products sector.
- The Trust includes REITs. REITs may concentrate their investments in specific geographic areas or in specific property types, such as, hotels, shopping malls, residential complexes and office buildings. The value of the REITs and other real estate securities and the ability of such securities to distribute income may be adversely affected by several factors, including: rising interest rates; changes in the global and local economic climate and real estate conditions; perceptions of prospective tenants of the safety, convenience and attractiveness of the properties; the ability of the owner to provide adequate management, maintenance and insurance; increased competition from new properties; the impact of present or future environmental legislation and compliance with environmental laws; changes in real estate taxes and other operating expenses; adverse changes in governmental rules and fiscal policies; adverse changes in zoning laws; declines in the value of real estate; the downturn in the subprime mortgage lending market and the real estate markets in the United States; and other factors beyond the control of the issuer of the security.
- The Trust invests in securities issued by small-capitalization and mid-capitalization companies. These securities customarily involve more investment risk than securities of larger capitalization companies. Small-capitalization and mid-capitalization companies may have limited product lines, markets or financial resources and may be more vulnerable to adverse general market or economic developments.
- Inflation may lead to a decrease in the value of assets or income from investments.
- The Sponsor does not actively manage the portfolio. The Trust will generally hold, and may continue to buy, the same securities even though a security’s outlook, market value or yield may have changed.
Please see the Trust prospectus for more complete risk information.
Unit Investment Trusts (“UITs”) are fixed and not actively managed. An investment in this fixed portfolio should be made with an understanding of the risks involved with owning various types of investments. Industry predictions may not materialize and securities selected for the Trust may not participate in overall industry growth, if any. Units, when redeemed, may be worth more or less than their original purchase price.
This UIT is part of a long-term strategy. Consult an attorney or tax advisor regarding tax consequences associated with an investment from one series to the next, if available. Investors should consult their tax advisor to determine tax consequences associated with the purchase or sale of units. Guggenheim Funds Distributors, Inc. does not offer tax advice.