Melvin specializes in clean energy equity research and index development. Below is a description of how the companies in the index are selected. For a list of companies in the index, please see the fund profile.

Index Methodology

The Index is designed to track companies within the following business segments of the solar power industry: solar power equipment producers; suppliers of materials or services to solar equipment producers; companies that derive a significant portion of their business, measured by the methodology set forth below, from solar power system installation, integration or finance; and companies that specialize in selling electricity derived from solar power. As defined by the Index Provider, solar power includes two main categories:

1. Solar photovoltaic power, which involves the conversion of sunlight into electricity through the photovoltaic process; and

2. Thermal solar power, which involves using energy from the sun to heat fluids for purposes of water or space heating or to produce electricity.

The Index is currently comprised of approximately 25 stocks selected based upon the relative importance of solar power within the company’s business model.To determine whether solar power is a major component of a company’s
business, the Index Provider implements the following methodology.

1. All global publicly-traded companies with any connection to the solar industry are identified by company description database searches and bottom-up industry research of publicly available information and databases.

2. Based on a review of the company’s public filings and company description information, companies that are identified through the initial search are put into three groups (the “Exposure Factor”):

• Pure-Play Group—Companies that generate in excess of two thirds of their revenue from solar related business are considered to have their primary business in the solar industry and are placed in the Pure-Play Group.These are assigned an Exposure Factor of 1.0.
• Medium-Play Group—Companies that operate in multiple industries, but have significant exposure to the solar industry-defined as generating less than approximately two thirds but more than approximately one third of their
  revenue from solar related business, are placed in the Medium-Play Group.These are assigned an Exposure Factor of 0.5.
• Eliminated Group—Companies with marginal exposure to the solar industry defined as generating less than approximately one third of their revenue from solar related business, are eliminated from consideration as an Index constituent.

3. From the securities in the Pure-Play Group and Medium-Play Group, securities eligible for inclusion in the Index must be listed on a developed market exchange, as defined above, have a minimum market capitalization greater than or equal to $250 million at the reference date preceding each reconstitution and have a minimum monthly trading value of $150 million at the reference date preceding each reconstitution. Securities in the Primary and Secondary set that do not meet these criteria are excluded from consideration as an Index constituent.

The Index is constructed as follows:

• Index constituents are selected using the methodology described above.
• The weighting of Index constituents on the rebalancing and reconstitution date is determined as follows:
  • The full market capitalization for each stock is multiplied by its Exposure Factor of either 1.0 and 0.5, meaning the market capitalization for the stocks in the Pure-Play Group is taken at full value and for the Medium-Play Group is reduced by one half.
  • The resulting adjusted market capitalizations are used to create a standard market capitalization weighted index with raw weighting factors.
  • If necessary, the raw weighting factors are modified through a weighting-gap rebalancing algorithm to ensure that, at the time of rebalancing and reconstitution, no stock in the Index has an individual weighting greater than 20% and that the aggregate weighting of stocks in the Index with individual weightings of more than 4.5% is no more than 45.0% of the total Index. The weighting-gap rebalancing algorithm progressively reduces the weighting gap between adjacent stocks, as ranked by their raw weighting factors, on a proportional basis, until the weighting parameters specified above are met.
• Any company in the Index that is acquired or delisted is removed from the Index at the time the event becomes effective, and will not be replaced. If a stock is considered to be illiquid, or if a company has filed for bankruptcy, the stock will be deleted from the Index immediately and will not be replaced. Any spin-off from an existing Index constituent will automatically be included in the Index. Continued inclusion in the Index is dependent upon whether the spun-off company meets the standard Index criteria at the time of the next quarterly reconstitution.
• A company that recently completed an initial public offering (“IPO”) and that meets the criteria above can be considered for inclusion as an Index constituent only at the quarterly Index rebalance and reconstitution, and only after the stock has completed at least six (6) months of trading history.
• The Index will be rebalanced and reconstituted quarterly on the third Friday of the last month of each calendar quarter, with a reference date for the data being the first business day of the last month of the calendar quarter. At the quarterly Index reconstitution:
  • stocks may be added or deleted as Index constituents according to the criteria defined above,
  • the Exposure Factor may change based on a shift in a company’s relative exposure to the solar industry, and
  • constituent weightings may be adjusted to reflect a change in the Exposure Factor for a particular stock, the addition or deletion of Index constituents and/or the need to meet the specified diversification requirements.

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.

Solar Energy Industry Risk. Prices of energy (including traditional sources of energy such as oil, gas, or electricity) or alternative energy may decline. The alternative energy industry can be significantly affected by obsolescence of existing technology, short product lifecycles, falling prices and profits, competition from new market entrants and general economic conditions. This industry can also be significantly affected by fluctuations in energy prices and supply and demand of alternative energy fuels, energy conservation, the success of exploration projects and tax and other government regulations and policies. Companies in this industry could be adversely affected by commodity price volatility, imposition of import controls, increased competition, depletion of resources, technological developments and labor relations. The solar energy industry has experienced an industry-wide shortage of polysilicon, which may place constraints on the revenue growth of solar energy companies and decrease such companies’ productivity. Solar energy companies may not be able to secure an adequate and cost-effective supply of solar wafers, cells or reclaimable silicon. If government subsidies and economic incentives for solar power are reduced or eliminated, the demand for solar energy may decline and cause corresponding declines in the revenues and profits of solar energy companies. Existing regulations and policies, and changes to such regulations and policies, may present technical, regulatory and economic barriers to the purchase and use of solar power products, thus reducing demand for such products. If solar power technology is not suitable for widespread adoption, or sufficient demand for solar power products does not develop or takes long periods of time to develop, the revenues of solar power companies may decline.

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

Micro-Cap Company Risk. Micro-cap stocks involve substantially greater risks of loss and price fluctuations because their earnings and revenues tend to be less predictable (and some companies may be experiencing significant losses), and their share prices tend to be more volatile and their markets less liquid than companies with larger market capitalizations. Micro-cap companies may be newly formed or in the early stages of development, with limited product lines, markets or financial resources and may lack management depth. In addition, there may be less public information available about these companies.The shares of micro-cap companies tend to trade less frequently than those of larger, more established companies, which can adversely affect the pricing of these securities and the future ability to sell these securities. Also, it may take a long time before the Fund realizes a gain, if any, on an investment in a micro-cap company.

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 stocks 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 stock because the stock’s issuer was in financial trouble unless that stock 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 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 AMEX or 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 AMEX or NYSE Arca, depending on the ETF listing, during normal trading hours. TAN issues and redeems shares at NAV only in large blocks of 80,000 shares (each block of 80,000 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.

The Claymore/MAC Global Solar Energy Index ETF and its Shares are not sponsored, endorsed, sold or promoted by MAC and its affiliates. MAC makes no representation or warranty, express or implied, to the shareholders of the Fund or any member of the public regarding the advisability of investing in securities generally or in the Fund particularly or the ability of the Index to track general stock market performance. MAC’s only relationship to the Investment Adviser is the licensing of certain trademarks and trade names of MAC and of the Index, which is determined, composed and calculated by MAC without regard to Investment Adviser or the Fund. MAC has no obligation to take the needs of the Investment Adviser or the shareholders of the Fund into consideration in determining, composing or calculating the Index. MAC is not responsible for and has not participated in the determination of the prices of the Shares of the Fund or the timing of the issuance or sale of such Shares or in the determination or calculation of the equation by which the Shares are to be converted into cash. MAC has no obligation or liability in connection with the administration, marketing, or trading of the Fund or its Shares.

The information on this website is intended for U.S. residents only. The information provided does not constitute a solicitation of an offer to buy, or an offer to sell securities in any jurisdiction to any person to whom it is not lawful to make such an offer. All rights reserved. Market information used on this website is obtained from non-proprietary market sources. While we believe this information to be accurate, Claymore Securities, Inc. and its affiliates cannot attest to the validity of information culled from other sources. The Claymore logos and "Claymore Securities, Inc." are protected under various U.S. Trademark Registrations.

Copyright © 2008 Claymore Securities, Inc.

NOT FDIC-INSURED | NOT BANK-GUARANTEED | MAY LOSE VALUE