FUND SUMMARY
The Claymore Advantaged High Yield Bond ETF(the “Fund”) seeks to provide a return based on the price and performance, before fees and expenses, of the Barclays Capital U.S. High-Yield Very Liquid Index (“the Index”). The Fund obtains a tax-efficient exposure to the constituent securities of the index through entering into a forward agreement with a Canadian Chartered Bank.
The ETF provides suitable investors of different sizes with the opportunity to gain exposure to a well diversified U.S. high yield bond portfolio, on a Canadian dollar hedged basis.
Important Advantages Over Traditional Bond Investments:
The high-yield or "below investment-grade" segment of the bond market is comprised of all securities rated BB or lower by Standard & Poor’s® (S&P), and Ba or lower by Moody’s Investors Service® (Moody’s), and BB or lower by Fitch Ratings® (Fitch). High yield bonds typically offer higher interest rates than Treasuries or high-grade corporate bonds and have the potential for capital appreciation in the event of a rating upgrade, an economic recovery or improved performance at the issuing company.
Index Rules
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Float – Minimum outstanding par value of at least US$600 million.
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Quality – Each constituent must be rated high-yield (Ba1/BB+/BB+ or below) using the middle rating of Moody’s, S&P, and Fitch, respectively.
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Maturity – The bonds included in the portfolio will have a maturity of at least one year.
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Seniority of Debt – Senior and subordinated issued are included.
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Coupon – Fixed-rate. Original issue zero coupon bonds, step-up coupons, and coupons that change according to a predetermined schedule are also included.
- Market of Issue – Each constituent must be SEC-registered, fully taxable issue or SEC 144A securities (with and without Registration Rights).
- Large Issue Constraint - Barclays Capital provides a rules-based methodology for issue inclusion where only the largest issue, based on amount outstanding, of each issuer will be included.
| ELIGIBLE | NON-ELIGIBLE |
| • Fixed-rate bullet, puttable and callable bonds | • Non-corporate bonds |
| • SEC Rules 144A securities | • Bonds with equity-type features (e.g. warrants, convertibility) |
| • Original issue zeros | • Floating-rate issues |
| | • Eurobonds |
| | • Emerging market bonds |
BENEFITS OF USING THE FORWARD STRUCTURE
The Fund utilizes a Forward Agreement structure with TD Global Finance, a member of TD Financial Group in order to provide exposure to the portfolio of the Barclays Capital U.S. High-Yield Very Liquid Index™ on a tax-efficient basis. Amounts equivalent to the income generated by the index (interest income) will paid to Unitholders of the ETF primarily as return of capital distributions and distributions of capital gains. The Forward Agreement structure also reduces the instances where capital gains may be realized as a result of any scheduled rebalancing of the Barclays Capital U.S. High-Yield Very Liquid IndexTM.
The above diagram is for illustrative purposes only. The forward agreement structure is used to achieve the exposure to the Barclays Capital U.S. High-Yield Very Liquid IndexTM portfolio.
THE CASE FOR HIGH YIELD BONDS
High Yield Bonds are an important global asset class to be considered in the construction of a well-balanced investment portfolio. The diversification benefits of High Yield Bonds is the main reason for their importance in global asset allocation decision making. High Yield Bonds have low correlation to other asset classes including investment grade bonds and equities which provides opportunity for enhanced returns of a well-balanced portfolio.
Barclays Capital U.S. High-Yield Very Liquid Index
The Claymore Advantaged High Yield Bond ETF has been designed to track the Barclays Capital U.S. High-Yield Very Liquid IndexTM.
The Index covers the USD-denominated, non-investment grade, fixed-rate, taxable corporate bond market. Securities are classified as high-yield if the middle rating of Moody’s, Fitch, and S&P is Ba1/BB+/BB+ or below. The index excludes Emerging Markets debt.
| ASSET CLASS | 5-Year | 10-Year | 15-Year | Inception |
| Canadian Bonds1 | 0.18 | 0.12 | 0.19 | 0.19 |
| Canadian Equity2 | 0.68 | 0.60 | 0.57 | 0.57 |
| US Equity3 | 0.44 | 0.41 | 0.41 | 0.41 |
| International Equity4 | 0.58 | 0.49 | 0.44 | 0.44 |
| Emerging Markets Equity5 | 0.64 | 0.59 | 0.53 | 0.52 |
| Commodity6 | 0.16 | 0.04 | 0.05 | 0.05 |
Source: PC Bond & Bloomberg 1The DEX Universe Bond Index is a broad measure of the Canadian investment-grade fixed income market. 2The S&P/TSX Composite Index is a capitalization weighted index of the largest (by market capitalization) and most liquid stocks listed on the TSX. 3The Standard & Poor’s 500 Index is a capitalization weighted index of 500 stocks designed to measure the performance of the broad US economy. 4The MSCI EAFE Index is a free float-adjusted market capitalization index that is designed to measure the performance of developed markets, excluding US & Canada. 5The MSCI Emerging Markets Index is a free float-adjusted market capitalization index that is designed to measure equity market performance of emerging markets. 6The S&P GSCI® is a composite index of commodity sector returns representing an unleveraged, long-only investment in commodity futures that is broadly diversified across the spectrum of commodities.