Frequently Asked Questions

What are exchange-traded funds (ETFs)?

ETFs are investment funds with shares that trade throughout the day on stock exchanges during normal trading hours. ETFs combine the advantages of investing in index funds, including diversification and low costs, coupled with the liquidity and flexibility of investing in individual stocks. ETFs are a rapidly-growing investment vehicle that allow investors to participate in various indexes in a single investment.

How do ETFs work?

ETFs share many of the characteristics of individual securities and traditional mutual funds, but they operate differently, giving them certain advantages over other investment solutions. With traditional mutual funds, an individual investor usually buys or redeems shares directly with the fund company. When shareholders redeem shares, the fund manager may have to sell securities to meet those redemptions, possibly incurring capital gains that will eventually be passed on to the fund's shareholders. ETFs, on the other hand, are traded like individual stocks. Investors buy and sell shares on a stock exchange through a broker or brokerage account during normal operating hours. Authorized participants engage in "in-kind" transactions with the fund itself, trading baskets of securities for very large blocks of shares called "creation baskets." These transactions, which result in the creation or redemption of ETF shares, occur at net asset value (NAV). Market trades by individual investors occur at market prices rather than NAV. There is little or no need to keep cash on hand that would require the fund to purchase or sell portfolio securities, pay brokerage commissions, and possibly realize capital gains. This keeps costs down and limits the distribution of capital gains to shareholders.

The NAV of a Fund's Units will generally fluctuate with changes in the market value of the Fund's holdings. The market prices of the Shares will generally fluctuate in accordance with changes in NAV as well as the relative supply of and demand for the Shares on the TSX. The Investment Adviser cannot predict whether the Shares will trade below, at or above their NAV. Price differences may be due, in large part, to the fact that supply and demand forces at work in the secondary trading market for the Shares will be closely related to, but not identical to, the same forces influencing the prices of the stocks of the Index trading individually or in the aggregate at any point in time. However, given that the Shares can be purchased and redeemed in Creation Units (unlike shares of many closed-end funds, which frequently trade at appreciable discounts from, and sometimes premiums to, their NAV), the Investment Adviser believes that large discounts or premiums to the NAV of the Shares should not be sustained.

How is the trading price of an ETF determined?

The trading price of an ETF is expected to be approximately equal to the trading value of the underlying securities held in the fund plus any undistributed net income. The ETF's market value will trade during the day based on supply and demand, but generally are expected to trade at or close to the fund's NAV.

What are the advantages of Claymore ETFs?

The benefits of investing in ETFs are:

• Buy and sell at any time during the trading day.
• Diversification offers potentially lower risk than individual securities.
• Ability to have exposure to a portfolio of stocks or bonds.
• No redemption fees when units are sold on the exchange. Customary brokerage commissions and other transactional fees may apply.
• Visible underlying index/security. Easy-to-track investment.
• Flexibility to buy on margin or sell short.
• Relatively cost-efficient.
• Tax efficient, with potential for relatively low capital gains tax liabilities.

How are Claymore ETFs different from traditional mutual funds?

The following chart illustrates the difference between Claymore ETFs and traditional mutual funds:

Can Claymore ETFs be redeemed through Claymore?

It is possible to redeem Claymore ETFs directly from a fund. See the individual Claymore ETFs fund prospectuses for details. However, because investors will generally be able to sell Claymore ETFs at the market price on the exchange through a registered broker or dealer, subject only to customary brokerage commissions, investors are advised to consult their brokers, dealers or investment advisors before redeeming Claymore ETFs.

Do Claymore ETFs charge redemption fees?

There are no redemption fees when Claymore ETFs are sold on the exchange. Only customary brokerage fees and other transactional fees apply. When Claymore ETFs are redeemed directly from a fund certain discounts or fees apply. See the individual Claymore ETFs fund prospectuses for details. Because investors will generally be able to sell Claymore ETFs at the market price on the exchange through a registered broker or dealer, subject only to customary brokerage commissions, investors are advised to consult their brokers, dealers or investment advisors before redeeming Claymore ETFs.

What is the minimum I can invest in Claymore ETFs?

There is no minimum investment. As with a typical stock transaction, your broker will likely require you to purchase in a board lot, which is 100 shares.

What are the costs/estimated annual operating expenses of Claymore ETFs?

The expected annual operating expenses for each Claymore ETF is capped. Therefore, regardless of size, investors are charged a flat fee for management and operation of the fund. See individual fund details for each fund’s expense cap.

What is the difference between Common Class and Advisor Class Units?

The ETF offers two classes of units called the Common Unit and Advisor Class Unit. The only difference between the two classes of units is the service fee component for the management fees payable on the Advisor Class Unit. The Common Unit has been designed to be purchased by institutional and individual investors. The Advisor Class Unit (denoted by “.A” on the ticker) has been designed only for clients who are advised by a registered investment advisor and purchased through an advisor.

Who can sell Claymore ETFs?

Only fully registered full-service or discount brokers are eligible to sell Claymore ETFs.

Who should consider investing in Claymore ETFs?

Claymore ETFs may be appropriate for investors seeking a relatively low-cost investment that features a portfolio that is composed of a variety of securities designed to track a particular index, sector or industry. It is important to remember all ETFs have a different objective, and before investing you should read the prospectus to get information on the risks associated with the fund and the index it tracks.

Are Claymore ETFs eligible for registered accounts?

Yes, Claymore ETFs can be held in all register accounts including RRSP, RRIF, RESP & TSFA.

Am I able to set up a regular investment plan for Claymore ETFs?

As of February 2009, the following investment plans are available of all Claymore ETFs: Distribution Reinvestment Plan (“DRIP”), a Pre‐Authorized Cash Contribution Plan (“PACC Plan”), and a Systematic Withdrawal Plan (“SWP”). Please click here, for more information.

Will Claymore ETFs pay a distribution?

Claymore ETFs may pay cash dividends on a quarterly basis that represent accumulated dividends on the stocks held, less fees and expenses of the Funds. In December if the total income or capital gains earned by the fund exceeds the cash distributed the balance will be distributed in additional units. Additional units will be immediately consolidated after the distribution.

How liquid are Claymore ETFs?

The liquidity of an ETF is a reflection of its trading volume and of the liquidity of the underlying stocks in the constituent index. Claymore ETFs are traded on the stock exchange which provides individual investors a liquid market for their shares.

What is the difference between the market bid and the ask prices?

The bid price is the highest price a buyer is willing to pay for a security, and the ask price is the lowest price at which a seller is prepared to sell a security at any given point in time.

What is the difference between "Distribution Yield" and "Yield to Maturity"?

The yield to maturity (YTM) is the total return anticipated of the underlying bonds if held to maturity, where the distribution yield is the bond coupon/interest payable by the bonds held within the portfolio (less fees and expenses of the fund). The calculation of "Yield to Maturity" takes into account the market price of the bonds within the portfolio, as well as their par value, coupon interest rate, and time to maturity. The distribution yield is calculated based on the interest payable by the bonds but can also include capital gains distributions, return of principal etc… The distribution yield may be more or less than what the fund has actually earned in the period is not an accurate measure of the lifetime performance of an investment.

Can I short Claymore ETFs?

Yes. Claymore ETFs may be sold short subject to the terms of your individual brokerage account.

Can Claymore ETFs be bought on margin?

Yes. Claymore ETFs can be purchased on margin through your brokerage account. They are generally subject to the same terms that apply to common stock. Check with your broker for details specific to your account..

Will Claymore ETFs experience high portfolio turnover?

Not usually. Claymore ETFs track various indices and are not "actively managed"; therefore, they generally do not have frequent or large changes to the portfolio composition. Occasionally, changes such as an alteration in the underlying benchmark index or new developments in the structure or status (such as a takeover or merger) of an individual company could result in the company's removal from the benchmark index. Either event would likely result in minimal turnover in the portfolio.

How frequently are Claymore ETFs Portfolios Adjusted?

Adjustments to Claymore ETFs are directly related to adjustments in the fund's underlying index. See the individual fund prospectus for rebalance rules for each Claymore ETF.

Where can I find Claymore ETFs listed in the newspaper?

Investors can find Claymore ETFs listed in the financial section of many newspapers under the heading "Toronto Stock Exchange." They are also listed under "Exchange Traded Funds" in the financial section of the Globe & Mail and National Post.

Can non-residents invest in Claymore ETFs?

Generally, persons that are not residents of Canada may invest. However, they may be subject to limitations imposed by their brokers. Their individual holdings of Claymore ETFs will be monitored as a non-resident and they are prohibited from holding more than 50% of the outstanding units at any time. Non residence may also be subject to withholding tax on distribution paid buy the ETF.

Who is responsible for the management and administration of the Claymore ETFs?

Claymore Investments, Inc., a registered as a Exempt Market Dealer, a Portfolio Manager and an Investment Fund Manager, and will be the trustee and manager of the Claymore ETFs and will be responsible for the administration of the Claymore ETFs.