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European Capital Strength & Hedged Currency Portfolio Series 2

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Investment Objective

The European Capital Strength & Hedged Currency Portfolio, Series 2 ("Trust") seeks to provide total return through capital appreciation and current income.

Principal Investment Strategy

Selection Criteria

Risks and Other Considerations

Portfolio Information

Deposit Information

Inception Date 7/23/2015
Non-Reoffered Date 10/22/2015
Mandatory Maturity Date 10/24/2016
Ticker Symbol CECSBX
Trust Structure RIC
Inception Unit Price $10.0000
Maturity Price (as of 10/24/16) $9.0253

Past performance is no guarantee of future results. Investment returns and principal value will fluctuate with changes in market conditions. Investors' units, when redeemed, may be worth more or less than their original cost.

This information does not constitute an offer to sell or a solicitation of any offer to buy: nor shall there be any sale of these securities in any state where the offer, solicitation, or sale is not permitted.


Principal Investment Strategy

The Trust seeks to provide to investors exposure to European equities and exchange traded funds (“ETFs”) designed to deliver a hedged currency strategy. Accordingly, under normal circumstances, the Trust will invest at least 80% of the value of its assets in equity securities of European companies and in ETFs that hedge some of the foreign currency risk generally associated with international investing. For purposes of this 80% test, European companies will be defined as those with a European home country designation by the Russell Global Index Methodology.

The Trust invests approximately 50% of the portfolio in common stocks, which may include American Depositary Receipts, of European companies that the Sponsor believes have strong valuations, returns on capital and balance sheets. To determine whether a company has an attractive valuation, the Sponsor compares valuation metrics against the selected company’s peer group. Strong returns on capital are evidenced by the company’s return on capital compared to the selected company’s peer group. Companies with strong balance sheets are typically those entities that are less levered than their peers. The Trust’s investment process is designed to favor strong cash flow generating companies that trade at reasonable multiples of their excess profits. However, there can be no assurance that the Trust's investment strategy will identify companies that will perform well in the future.

The ETFs, which will represent approximately 50% of the portfolio, will invest in both currency strategies designed to benefit from a strengthening U.S. dollar as well as European equity ETFs, which employ a hedge against currency risk. However, there can be no assurance that any security held by the Trust will meet the Trust’s objective.

As a result of this strategy, the Trust invests significantly in the consumer products sector.

Selection Criteria

European Equities

Approximately 50% of the Trust portfolio will constitute common stocks selected by the Sponsor using the methodology described below: 

• Begin with the largest 30% of companies, as measured by market capitalization, with home country designations by the Russell Global Index Methodology in developed Western European countries. The Trust may invest in companies of all market capitalizations.

• Focus on companies which have demonstrated several years of consistently higher return on equity, and which have debt leverage levels lower than the broader developed European equity market and their industry peers.

• Filter out “value traps,” which are those companies with the worst fundamentals in their sector, as determined by the Sponsor, or with steep market declines that imply a turn in fundamentals.

Hedging ETFs

Approximately 50% of the Trust portfolio will constitute ETFs selected by the Sponsor using the methodology discussed below: 

• Start with the entire universe of ETFs traded on major U.S. exchange.

• Select ETFs designed to benefit from a strengthening U.S. dollar currency as a means to offset foreign currency fluctuations or are constructed as a European equity portfolio with a European currency hedge overlay.

• ETFs selected for inclusion in the final portfolio must have a minimum market capitalization of $100 million. The Trust does not have a market capitalization policy for the equities held by the ETFs. 

Russell Global Index Methodology

The Trust utilizes the Russell Global Index Methodology to determine a security’s home country designation. The Russell Global Index Methodology initially looks at the country of incorporation, the stated country of headquarters and what countries the security trades in. If these three match, then that country is designated as the home country. If any of these three criteria do not match, then the Russell Global Index Methodology compares the primary location of the company’s assets (averaged for the last two years) against three home country indicators (the “HCIs”), which are 1) the country of incorporation; 2) the country of headquarters; and 3) the country of the most liquid exchange, as defined by 2-year average daily dollar trading volume. If the primary location of the company’s assets matches with any of the three HCIs, then that country is designated as the home country. If the primary location of a company’s assets cannot be determined, then the Russell Global Index Methodology compares the primary location of the company’s revenues (averaged for the last two years) against the three HCIs. If the primary location of the company’s revenues matches with any of the three HCIs, then that country is designated as the home country. If the Russell Global Index Methodology cannot determine the  home country using the company’s assets or revenue, the country of headquarters is generally assigned as the home country.

Exchange-Traded Funds

ETFs are investment pools that hold securities. ETFs provide an efficient and relatively simple way to invest in that they offer investors the opportunity to buy and sell an entire basket of securities with a single transaction throughout the trading day. ETFs are often built like an index fund, but trade like a stock on an exchange. ETFs generally offer advantages similar to those found in index funds such as low operating costs, performance designed to track an index, the potential for high tax efficiency and consistent investment strategies. Unlike conventional mutual funds, ETFs normally issue and redeem shares on a continuous basis at their net asset value in large specified blocks of shares, known as “creation units.” Market makers, large investors and institutions deal in creation units. The Trust will buy shares of the ETF on the exchanges and will incur brokerage costs. 

Future Trusts

The Sponsor may create future Trusts that follow the same general investment strategy. One such Trust is expected to be available approximately three months after the Trust’s initial date of deposit (the “Inception Date”) and upon the Trust’s termination. If these future Trusts are available, you may be able to reinvest into one of the Trusts at a reduced sales charge. Each Trust is designed to be part of a longer term strategy.

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.

Share prices or dividend rates on the securities in the Trust may decline during the life of the Trust. There is no guarantee that share prices of the securities in the Trust will not decline and 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 invests in shares of ETFs. ETFs are investment pools that hold other securities. The ETFs in the Trust may be passively-managed index funds that seek to replicate the performance or composition of a recognized securities index. ETFs are subject to various risks, including management’s ability to meet the fund’s investment a discount from their net asset value in the secondary market. This risk is separate and distinct from the risk that the net asset value of the ETF shares may decrease. The amount of such discount from net asset value is subject to change from time to time in response to various factors. The underlying ETF has management and operating expenses. Consequently, you will bear not only your share of your Trust’s expenses, but also the expenses of the underlying ETFs. By investing in ETFs, the Trust incurs greater expenses than you would incur if you invested directly in the ETFs.

The ETFs are subject to annual fees and expenses, including a management fee. Unitholders of the Trust will bear these fees in addition to the fees and expenses of the Trust. See “Fees and Expenses” for additional information.

The Trust is subject to an ETF’s index correlation risk. To the extent that an underlying ETF is an index tracking ETF, index correlation risk is the risk that the performance of an ETF will vary from the actual performance of the fund’s target index, known as “tracking error.” This can happen due to fund expenses, transaction costs, market impact, corporate actions (such as mergers and spin-offs) and timing variances.

An ETF or an issuer of securities held by an ETF may be unwilling or unable to make principal payments and/or to declare distributions in the future or may reduce the level of distributions declared. This may result in a reduction in the value of your units.

The financial condition of an ETF or an issuer of securities held by an ETF may worsen, resulting in a reduction in the value of your units. This may occur at any point in time, including during the primary offering period.

The Trust invests in ADRs, New York Registry Shares and foreign securities listed on a foreign exchange and certain ETFs held by the Trust may invest in ADRs, U.S.- listed foreign securities and foreign securities listed on a foreign exchange. Investment in ADRs, U.S.- listed foreign securities and foreign securities listed on a foreign exchange 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 invests in and certain ETFs held by the Trust may invest in 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 and certain ETFs held by the Trust attempt to reduce the impact of changes in the value of other currencies against the U.S. dollar. These strategies may not be successful in pursuit of their goal. The Trust’s or an ETF’s exposure to other currencies will not be fully hedged at all times. Currency exchange rates can be very volatile and can change quickly and unpredictably. Therefore, the value of an investment in the Trust and an ETF may also go up or down quickly and unpredictably and investors may lose money. In addition, significant differences between U.S. dollar interest rates and foreign currency interest rates may impact the effectiveness of a currency hedging strategy.

Certain ETFs held by the Trust may invest in derivatives. Derivatives are financial instruments that derive their performance from an underlying reference asset, such as a commodity, index, interest rate or inflation rate. The return on a derivative instrument may not correlate with the return of its underlying reference asset. Derivatives can be volatile and may be less liquid than other securities. As a result, the value of an investment in the ETFs may change quickly and without warning. In addition, there are risks associated with an ETF’s use of forward currency contracts and futures contracts. With respect to forward currency contracts, these risks include but are not limited to the risk that the counterparty will default on its obligations. With respect to futures contracts, these risks include but are not limited to: (i) the success of an ETF’s adviser’s and sub-adviser’s ability to predict movements in the prices of individual currencies or securities, fluctuations in markets and movements in interest rates; (ii) an imperfect or no correlation between the changes in market value of the currencies or securities and the prices of futures contracts; and (iii) no guarantee that an active market will exist for the contracts at any particular time.

The Trust is concentrated in securities issued by European companies. As a result, political, economic or social developments in Europe may have a significant impact on the securities included in the Trust. Specifically, a significant number of countries in Europe are member states in the European Union, and the member states no longer control their own monetary policies by directing independent interest rates for their currencies. In these member states, the authority to direct monetary policies, including money supply and official interest rates for the euro, is exercised by the European Central Bank. Furthermore, the European sovereign debt crisis and the related austerity measures in certain countries have had, and continue to have, a significant negative impact on the economies of certain European countries and their future economic outlooks.

The Trust invests significantly in the consumer products sector. As a result, the factors that impact the consumer products sector will likely have a greater effect on this Trust than on a more broadly diversified Trust. 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 invests in securities issued by mid-capitalization companies and certain ETFs held by the Trust may invest in securities issued by small-capitalization and mid-capitalization companies. These securities customarily involve more investment risk than securities of large-capitalization companies. Smallcapitalization 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.

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.

Inflation may lead to a decrease in the value of assets or income from investments.

See “Investment Risks” in Part A of the prospectus and “Risk Factors” in Part B of the prospectus for additional information.

Please see the Trust prospectus for more complete risk information.

Unit Investment Trusts are fixed, not actively managed and should be considered as part of a long-term strategy. Investors should consider their ability to invest in successive portfolios, if available, at the applicable sales charge. UITs are subject to annual fund operating expenses in addition to the sales charge. Investors should consult an attorney or tax advisor regarding tax consequences associated with an investment from one series to the next, if available, and with the purchase or sale of units. Guggenheim Funds Distributors, LLC does not offer tax advice.




Read a prospectus and summary prospectus (if available) carefully before investing. It contains the investment objective, risks charges, expenses and the other information, which should be considered carefully before investing. To obtain a prospectus and summary prospectus (if available) click here or call 800.820.0888.

Investing involves risk, including the possible loss of principal.

Guggenheim Investments represents the following affiliated investment management businesses of Guggenheim Partners, LLC: Guggenheim Partners Investment Management, LLC, Security Investors, LLC, Guggenheim Funds Distributors, LLC, Guggenheim Funds Investment Advisors, LLC, Guggenheim Partners Advisors, LLC, Guggenheim Corporate Funding, LLC, Guggenheim Partners Europe Limited, Guggenheim Partners Fund Management (Europe) Limited, Guggenheim Partners Japan Limited, GS GAMMA Advisors, LLC, and Guggenheim Partners India Management. Securities offered through Guggenheim Funds Distributors, LLC.

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