Principal Investment Strategy
The Trust seeks to provide an inflation-hedged
approach to investing in international markets,
while seeking dividend income. The Trust’s
strategy aims to invest in companies from the
commodity-rich nations of Australia, Brazil and
Canada that have the potential to benefit from the
growth potential of emerging markets worldwide.
Because of the natural resources possessed by
Australia, Brazil and Canada, companies in these countries may be able to benefit from a rise in
global per capita demand for commodities. The
strategy seeks to select high yielding mature
companies from commodity-rich Australia, Brazil
and Canada. However, there can be no assurance
that securities contained in the Trust will benefit
from the growth potential of emerging market
countries or that the Trust will achieve its
investment objective.
The Sponsor, with the assistance of
Guggenheim Partners Investment Management, LLC
("GPIM"), an affiliate of Guggenheim Partners,
LLC, has selected the securities to be included in
the Trust’s portfolio. The sponsor and GPIM
believe that companies that distribute significant
dividends on a consistent basis generally
demonstrate strong financial strength and
positive performance relative to their peers.
See “Investment Policies” in Part B of the
prospectus for more information.
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Selection Criteria
The Trust’s portfolio is constructed and the
securities were selected six business days prior
to the initial date of deposit (the “Inception
Date”) using the Security Selection Rules
outlined below. Security Selection Rules: In constructing the Trust’s portfolio, 30
securities were selected based on the following
rules-based criteria: - Initial Universe: Start with an initial
universe of securities that include all
Australia, Brazil or Canada domiciled
companies which meet the following
criteria:
Security must be a common share or
depositary receipt.
- Security may not be a real estate
investment fund, investment fund,
exchange-traded fund, trust or
limited partnership.
- Market capitalization greater than
$200 million.
- Minimum 30-day average daily
dollar trading volume greater than
$1 million. U.S.-traded American
Depositary Receipts (“ADRs”) do
not have to meet this liquidity
minimum as long as the underlying
foreign local shares do meet the
minimum criteria.
- For companies with multiple
listings, only one security is
included. Preference is given to a
U.S.-traded ADR security, if
available, or to the most liquid
security if the company is only
traded on non-U.S. exchanges.
- Rank on Fundamentals: Rank every
company identified in the initial universe
against other companies in the same
sector along each of the following
reported financial metrics. The ranking
uses a scale of 1 through 10 (1
representing the highest scoring 10% in
the sector and 10 representing the lowest
scoring 10% in the sector):
- Return on assets calculated as
operating income divided by total
assets.
- Earnings before interest and taxes
divided by enterprise value.
Sales per share growth by trailing
year-over-year growth.
- Define Sub-Universe: Reduce the initial
universe of securities to a sub-universe
that meets the following requirements:
- Exclude the lowest ranked 25% of
securities determined by the average
of the three financial rankings
described in step 2.
- Exclude the 20% of the initial
universe with the lowest trailing six
month total return.
- Minimum one year of trading history
for the company.
- Exclude securities not listed on a
major U.S. (New York Stock
Exchange or NASDAQ Stock
Market), Australian or Canadian
exchange.
- Exclude securities that have pending
cash-only merger and acquisition or
other corporate action events which
will lead to delisting the security
from the qualifying exchanges above.
- Selection: Select from the sub-universe
the top dividend yielding securities
domiciled from each of the three
countries, with the 30 total securities
equally weighted as of the selection date.
Selections must adhere to following
portfolio limits:
- Ten securities per country. In the
event any country has less than ten
qualifying names in the sub-universe,
then substitute securities are selected
from the other countries equally.
- Maximum 20% weight in any sector
as of the selection date.
Maximum one-third of the portfolio
in small-capitalization companies
(less than $1 billion USD) as of the
selection date.
- Minimum one-third of the portfolio
in large-capitalization companies
(greater than $5 billion USD) as of
the selection date.
Please note that due to the fluctuating nature
of security prices, the weighting of an individual
security or sector in the Trust portfolio may
change after the portfolio selection date.
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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 most countries experienced
increased unemployment. The economic
crisis affected the global economy with
European and Asian markets also
suffering historic losses. Standard &
Poor’s Rating Services recently lowered
its long-term sovereign credit rating on
the United States to “AA+” from “AAA,”
which could lead to increased interest
rates and volatility. 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 securities issued by
companies involved with the
production of certain commodities.
Commodity companies include those
companies involved in the production of
building materials, aluminum, nonferrous
metals, precious metals and steel
and other commodities, as well as
companies that explore for, produce,
refine, distribute or sell petroleum, gas
products and other commodities. General
risks of commodity companies include
price and supply fluctuations, excess
capacity, economic recession,
government regulations and overall
capital spending rates. Exposure to
commodities markets may subject the
Trust to greater volatility than other
investments. Certain commodities may
be produced in a limited number of
countries and may be controlled by a
small number of producers.
- The Trust invests in foreign securities
and ADRs. The Trust’s investment in
foreign securities and ADRs presents
additional risk. ADRs are issued by a bank or trust company to evidence
ownership of underlying securities
issued by foreign corporations.
Securities of foreign issuers present
risks beyond those of domestic
securities. More specifically, foreign
risk is the risk that foreign securities
will be more volatile than U.S.
securities due to such factors as
adverse economic, currency, political,
social or regulatory developments in a
country, including government seizure
of assets, excessive taxation,
limitations on the use or transfer of
assets, the lack of liquidity or
regulatory controls with respect to
certain industries or differing legal
and/or accounting standards.
- The Trust includes securities issued by
companies headquartered or
incorporated in Australia, Brazil and
Canada. As a result, political,
economic or social developments in
these countries may have a significant
impact on the securities included in the
Trust. See “Investment Risks” for
additional information concerning the
risks associated with an investment in
securities issued by companies located
in these countries.
- The Trust includes securities issued by
companies headquartered or
incorporated in countries considered
to be emerging markets. The
performance of the securities included
in the Trust may be dependent, in part,
on the growth or decline of emerging
market countries. Emerging markets are
generally defined as countries with low
per capita income in the initial stages of
their industrialization cycles. Risks of
investing in developing or emerging
countries include the possibility of investment and trading limitations,
liquidity concerns, delays and
disruptions in settlement transactions,
political uncertainties and dependence
on international trade and development
assistance. Companies headquartered in
emerging market countries may be
exposed to greater volatility and market
risk. In addition, the economies of
emerging market countries may be
extremely volatile and subject to
increased risks.
- The Trust includes securities whose
value may be dependent on currency
exchange rates. The U.S. dollar value of
these securities may vary with
fluctuations in foreign exchange rates.
Most foreign currencies have fluctuated
widely in value against the U.S. dollar
for various economic and political
reasons such as the activity level of
large international commercial banks,
various central banks, speculators,
hedge funds and other buyers and sellers
of foreign currencies.
- The Trust invests in securities issued by
small-capitalization and mid-capitalization
companies. These
securities customarily involve more
investment risk than securities of large-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, when
creating additional units, continue to
buy, the same securities even though a
security’s outlook, market value or
yield may have changed.
See “Investment Risks” in Part A of the
prospectus and “Risk Factors” in Part B of the
prospectus for additional information.
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