The Dow Jones Value RBP Dividend Focus Portfolio, Series 11 (“Trust”) seeks to provide total return primarily through capital appreciation and current dividend income by investing in a portfolio of common stocks.
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’s investment strategy uses a quantitative selection process developed by Transparent Value, LLC (“Transparent Value”), an affiliate of the Sponsor, to help the Sponsor determine the constituents of the portfolio.
See “Investment Policies” in Part B of the prospectus for additional information.
The Trust’s portfolio is constructed and the securities are selected approximately seven 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 Value Total Stock Index, which is a combination of the Dow Jones U.S. Large-Cap Value Total Stock Index and the Dow Jones U.S. Mid-Cap Value 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 zero. 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 20% of the companies with the lowest indicated dividend yield.
• Select the 100 companies according to the Required Business Performance® (“RBP®”) methodology described below that have the highest probability percentage.
• Select the top 50 companies by indicated dividend yield and weight the portfolio by indicated dividend yield, subject to a 5% cap for each individual security on the day the strategy generates the final portfolio. (A company’s weight in the portfolio is derived by dividing the indicated dividend yield of each company by the sum of all indicated dividend yields for the 50 selected companies). 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%).
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. Guggenheim Funds 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. Standard & Poor’s Rating Services 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 issued by companies in the financial sector. The Trust is concentrated in the financial sector. As a result, the factors that impact the financial sector will likely have a greater affect on this Trust than a more broadly diversified Trust. Some of the risks associated with the financial sector are listed below. Companies in the financial sector include banks, insurance companies and investment firms. The profitability of companies in the financial sector is largely dependent upon the availability and cost of capital which may fluctuate significantly in response to changes in interest rates and general economic developments. Financial sector companies are especially subject to the adverse effects of economic recession, decreases in the availability of capital, volatile interest rates, portfolio concentrations in geographic markets and in commercial and residential real estate loans, and competition from new entrants in their fields of business. Negative developments initially relating to the subprime mortgage market and subsequently spreading to other parts of the economy, have adversely affected credit and capital markets worldwide and significantly impacted financial sector companies.
• The Trust includes real estate investment trusts (“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 about the safety, convenience and attractiveness of the properties; the ability of the owner to provide adequate management, maintenance and insurance; the cost of complying with the Americans with Disability Act; 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 market in the United States; and other factors beyond the control of the issuer of the security.
• The Trust invests in U.S.-listed foreign securities. The Trust’s investment in U.S.-listed foreign securities presents additional risk. 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 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.
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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