INDEX METHODOLOGY

As of the date of this prospectus, the Index consists of 25 companies in the airline industry. The Index Provider defines the airline industry as companies that are identified as being in the airline industry by recognized company classification systems (defined as systems that are developed and maintained by industry organizations that classify companies into predefined categories based upon business activities, source of reviews, and other such company metrics), and that derive at least 50% of their revenue from passenger airline operations based on the company’s public filings.

INDEX CONSTRUCTION

Arca applies the following criteria to each company included in the universe of potential Index constituents in constructing the Index:

1. All publicly-traded companies (whether located in developed markets or emerging markets) classified as being in the passenger airline industry by a recognized classification system are identified as described above.
2. Companies that are so identified are evaluated (via a review of the company’s public filings) to determine whether they generate at least 50% of their revenue from passenger airline operations. Companies that are not identified as being in the passenger airline industry and that do not generate a majority of their revenue from passenger airline operations are excluded from consideration as an Index constituent.
3. The remaining securities are evaluated to ensure that they are listed on a U.S. national exchange or an international exchange that provides “last sale reporting,” defined below (which may include exchanges in developed or emerging markets), have a minimum market capitalization greater than or equal to $100 million at the reference date preceding each reconstitution and have a 100-day average daily trading value of not less than $1 million at the reference date preceding each reconstitution. Securities that meet these requirements are included as an Index constituent while securities that do not meet these exchange, liquidity and market capitalization criteria are excluded from the Index. “Last sale reporting” is a requirement that securities transactions be reported (usually including the number of shares and the price at which the transaction was executed), generally to a central reporting facility, within a specified period of time following the completion of the transaction.
4. A modified equal-dollar weighting methodology is applied to determine the weightings of Index constituents. The weighting is modified based on the liquidity and size of the components within Index. The Index is divided into four weighting groups based on domicile and liquidity. Weighting is first split between domestically domiciled airlines and internationally domiciled airlines, with 70% going to domestic and 30% to international. The top three Index components in each of these two categories, ranked by 100-day average trading dollar value and market capitalization, are each weighted 15% for domestic airlines and 4.5% for international airlines. The remaining aggregate Index weight, 25% for domestic and 16.5% for international, is equally applied amongst the remaining Index components within each domicile group.
5. The Index is reconstituted and rebalanced quarterly, except in the event of certain corporate actions such as the payment of a dividend, other than an ordinary cash dividend, stock distribution, stock split, reverse stock split, rights offering, or a distribution, reorganization, recapitalization, or some such similar event with respect to a component stock. When the Index is adjusted between quarterly reviews for such events, the number of shares of the relevant security will be adjusted to the nearest whole share to maintain the component’s relative weight in the Index at the level immediately prior to the corporate action. The Index may also be adjusted between quarterly reviews in the event of a merger, consolidation, dissolution, or liquidation of an issuer of a component stock. In the event that a replacement is needed for an Index constituent prior to the next quarterly rebalance, the replacement constituent will be added at the weight of the constituent that is being removed from the Index, rounded to the nearest whole share.

RISKS AND OTHER CONSIDERATIONS

Investors should consider the following risk factors and special considerations associated with investing in the Fund, which may cause you to lose money.

Investment Risk. An investment in the Fund is subject to investment risk, including the possible loss of the entire principal amount that you invest.

Equity Risk. A principal risk of investing in the Fund is equity risk, which is the risk that the value of the securities held by the Fund will fall due to general market and economic conditions, perceptions regarding the industries in which the issuers of securities held by the Fund participate, or factors relating to specific companies in which the Fund invests. For example, an adverse event, such as an unfavorable earnings report, may depress the value of equity securities of an issuer held by the Fund; the price of common stock of an issuer may be particularly sensitive to general movements in the stock market; or a drop in the stock market may depress the price of most or all of the common stocks and other equity securities held by the Fund. In addition, common stock of an issuer in the Fund’s portfolio may decline in price if the issuer fails to make anticipated dividend payments because, among other reasons, the issuer of the security experiences a decline in its financial condition. Common stock is subordinated to preferred stocks, bonds and other debt instruments in a company’s capital structure, in terms of priority to corporate income, and therefore will be subject to greater dividend risk than preferred stocks or debt instruments of such issuers. In addition, while broad market measures of common stocks have historically generated higher average returns than fixed income securities, common stocks have also experienced significantly more volatility in those returns.

Airline Industry Risk. Companies in the airline industry may be adversely affected by a downturn in economic conditions that can result in decreased demand for air travel. Due to the discretionary nature of business and leisure travel spending, airline industry revenues are heavily influenced by the condition of the U.S. economy and economies in other regions of the world. Airline companies may also be significantly affected by changes in fuel prices, which may be very volatile. Due to the competitive nature of the airline industry, airline companies may not be able to pass on increased fuel prices to customers by increasing fares. The airline industry may also be significantly affected by changes in labor relations and insurance costs. The trend in the United States has been to deregulate the transportation industry, which could have a favorable long-term effect, but future government decisions could adversely affect companies in the airline industry.

Foreign Investment Risk. The Fund’s investments in non-U.S. issuers may involve unique risks compared to investing in securities of U.S. issuers, including, among others, greater market volatility than U.S. securities and less complete financial information than for U.S. issuers. In addition, adverse political, economic or social developments could undermine the value of the Fund’s investments or prevent the Fund from realizing the full value of its investments. Financial reporting standards for companies based in foreign markets differ from those in the United States. Finally, the value of the currency of the country in which the Fund has invested could decline relative to the value of the U.S. dollar, which may affect the value of the investment to U.S. investors. In addition, the underlying issuers of certain depositary receipts, particularly unsponsored or unregistered depositary receipts, are under no obligation to distribute shareholder communications to the holders of such receipts, or to pass through to them any voting rights with respect to the deposited securities.

Emerging market countries are countries that major international financial institutions, such as the World Bank, generally consider to be less economically mature than developed nations. Emerging market countries can include every nation in the world except the United States, Canada, Japan, Australia, New Zealand and most countries located in Western Europe. Investing in foreign countries, particularly emerging market countries, entails the risk that news and events unique to a country or region will affect those markets and their issuers. Countries with emerging markets may have relatively unstable governments, may present the risks of nationalization of businesses, restrictions on foreign ownership and prohibitions on the repatriation of assets. The economies of emerging markets countries also may be based on only a few industries, making them more vulnerable to changes in local or global trade conditions and more sensitive to debt burdens or inflation rates. Local securities markets may trade a small number of securities and may be unable to respond effectively to increases in trading volume, potentially making prompt liquidation of holdings difficult or impossible at times.

Small and Medium-Sized Company Risk. Investing in securities of small and medium-sized companies involves greater risk than is customarily associated with investing in more established companies. These companies’ securities may be more volatile and less liquid than those of more established companies. These securities may have returns that vary, sometimes significantly, from the overall stock market.

Non-Correlation Risk. The Fund’s return may not match the return of the Index for a number of reasons. For example, the Fund incurs a number of operating expenses not applicable to the Index, and incurs costs in buying and selling securities, especially when rebalancing the Fund’s securities holdings to reflect changes in the composition of the Index.

The Fund may not be fully invested at times, either as a result of cash flows into the Fund or reserves of cash held by the Fund to meet redemptions and expenses. If the Fund utilizes a sampling approach or futures or other derivative positions, its return may not correlate as well with the return on the Index, as would be the case if it purchased all of the securities in the Index with the same weightings as the Index.

Replication Management Risk. Unlike many investment companies, the Fund is not “actively” managed. Therefore, it would not necessarily sell a security because the security issuer was in financial trouble unless that security is removed from the Index.

Issuer-Specific Changes. The value of an individual security or particular type of security can be more volatile than the market as a whole and can perform differently from the value of the market as a whole. The value of securities of smaller issuers can be more volatile than that of larger issuers.

Non-Diversified Fund Risk. The Fund is considered non-diversified and can invest a greater portion of assets in securities of individual issuers than a diversified fund. As a result, changes in the market value of a single investment could cause greater fluctuations in share price than would occur in a diversified fund.

Claymore ETFs are listed on the NYSE Arca, depending on the ETF listing, the same way as shares of a publicly-traded company. Claymore ETFs can be purchased through most brokerage accounts. They can be bought and sold throughout the day on the NYSE Arca, depending on the ETF listing, during normal trading hours. FAA issues and redeems shares at NAV only in large blocks of 50,000 shares (each block of 50,000 shares is called a “Creation Unit”) or multiples thereof. Only broker-dealers or large institutional investors with creation and redemption agreements, called Authorized Participants (“APs”), can purchase or redeem these Creation Units.

Investors buying or selling ETF shares on the secondary market may incur brokerage costs and other transactional fees. Shares of ETFs may fluctuate in price due to daily changes in trading volume. At times, shares may not have a high volume of trading. Except when aggregated in Creation Units, Shares are not redeemable securities of the Fund.

“NYSE Arca Global Airline Index^SM” is a service mark of the NYSE Group, Inc. (“NYSE”) and Archipelago Holdings, Inc. (“Archipelago”) and has been licensed for use by Claymore Advisors, LLC. The Fund is not sponsored, endorsed, sold or promoted by NYSE or Archipelago. Neither NYSE nor Archipelago makes any representation or warranty regarding the Fund or the ability of the NYSE Arca Global Airline Index to track general stock market performance.

Neither NYSE nor Archipelago makes any express or implied warranties, and herby expressly disclaims all warranties of merchantability or fitness for a particular purpose with respect to the NYSE Arca Global Airline Index or any data included therein. In no event shall NYSE or Archipelago have any liability for any special, punitive, indirect, or consequential damages (including lost profits), even if notified of the possibility of such damages.

The Investment Adviser does not guarantee the accuracy and/or the completeness of the Index or any data included therein, and the Investment Adviser shall have no liability for any errors, omissions or interruptions therein. The Investment Adviser makes no warranty, condition or representation express or implied, as to results to be obtained by the Fund, owners of the Shares of the Fund or any other person or entity from the use of the Index or any data included therein. The Investment Adviser makes no express or implied warranties, representations or conditions, and expressly disclaims all warranties or conditions of merchantability or fitness for a particular purpose or use and any other express or implied warranty or condition with respect to the Index or any data included therein. Without limiting any of the foregoing, in no event shall the Investment Adviser have any liability for any special, punitive, direct, indirect or consequential damages (including lost profits) arising out of matters relating to the use of the Index or any data included therein even if notified of the possibility of such damages.