INDEX METHODOLOGY

The Index is designed to represent the traditional investment grade fixed income securities, investment grade fixed income securities with less than one year until maturity and equity securities in the United States capital markets. The Index includes: common stock equity securities from the 2,000 largest actively traded United States corporations based upon market capitalization of common stock, micro-term U.S. treasury fixed income securities, micro-term U.S. federal agency and other government sponsored entities fixed income securities, short-term investment grade U.S. corporate fixed income securities, commercial paper, bankers acceptances, large time deposits, U.S. federal agency discount notes; long-term U.S. treasury fixed income securities, long-term U.S. federal agency and other government sponsored entities fixed income securities, long-term investment grade U.S. corporate fixed income securities and long-term mortgage-backed securities. The Index may also include U.S. registered, dollar-denominated bonds of foreign corporations, governments, agencies and supra-national agencies.

The CPMKTS^SM family of indexes is designed to measure the major components of the U.S. investment grade fixed income securities and the common stocks in the capital markets. This family includes the Index and the following additional indexes: CPMKTE – The Capital Markets Equity Index, which is designed to be a long-term measure of the U.S. common stock markets; CPMKTB – The Capital Markets Bond Index, which is designed to be a longterm measure of the long term U.S. investment grade fixed income markets; and CPMKTL – The Capital Markets Liquidity Index, which is designed to be a long-term measure of the U.S. investment grade short-term fixed income and money markets. CPMKTS – The Capital Markets Index is designed to be a long-term measure of the U.S. investment grade capital markets as represented by the CPMKTB, CPMKTE, and CPMKTL indexes.

INDEX CONSTRUCTION

1. The equity securities in the Index are reconstituted quarterly. The equity Index constituents are determined on the fifth business day before the start of the quarter based on the market capitalization of common stock, finalized on the last calendar day of the quarter and go into effect on the first day of the new quarter.
2. Potential equity Index constituents include all common stock equity securities from United States corporations that are headquartered in the United States and trade on major United States stock exchanges. Limited partnerships, ETFs, American depositary receipts and closed-end funds are not eligible for inclusion in the Index.
3. On the last calendar day before the start of the quarter, if any of the selected equity Index constituents are no longer actively traded, they are replaced with the next eligible security with the largest market capitalization that is not a member of the Index, based upon the market capitalization from the fifth business day before the start of the quarter.
4. The weight of each equity Index constituent is set based upon a modified market capitalization determined on the last day before the start of the month. The market value is modified based upon regularly published statistics from the Federal Reserve Board.
5. The fixed income and money market Index constituents are reconstituted monthly. The fixed income and money market Index constituents are determined based on closing data on the fifth business day before the start of the month. Fixed income and money market Index constituents are finalized on the last calendar day before the start of the month and go into effect on the first day of the new month.
6. Money market instruments that are potential Index constituents include 90 day bankers acceptances, 90 day certificate of deposit, 180 day certificate of deposit, 30 day commercial paper, 60 day commercial paper, 90 day commercial paper, 30 day United States federal agency discount notes, 60 day United States federal agency discount notes, and 90 day United States federal agency discount notes.
7. All U.S. Treasury fixed income securities are selected as Index constituents. United States Treasury Inflation-Protected Securities (“TIPS”) are not included.
8. A selection of micro-term and long-term United States federal agency and government sponsored entities fixed income securities are selected as Index constituents using a rules-based methodology. The Index methodology is designed to select representative issues from each of the five largest agencies and government sponsored entities: Federal National Mortgage Association (“FNMA”), Federal Home Loan Banks (“FHLB”), Federal Home Loan Mortgage Corporation (“FHLMC”), Federal Farm Credit Banks (“FFCB”), and the SLM Corporation (“SLMA”), as well as fixed income issues from other federal agencies. Securities are selected to ensure a diversity of duration by selecting securities in each of the following maturity ranges: zero to three months, three to six months, six to nine months, nine months to one year, one to two and a half years, two and a half to four years, four to six years, six to eight years, eight to twelve years, twelve to twenty years, and greater than twenty years. Securities are selected from each maturity range such that each range is represented by total assets proportional to the relative market value of each maturity range.
9. A selection of micro-term and long-term investment grade United States corporate fixed income securities are selected as Index constituents using a proprietary rules-based methodology. The methodology is designed to select securities ensuring a diversity of industry, duration, and rating. Seven industry classifications are represented: consumer goods, consumer services, manufacturing and wholesale trade, mining and construction, transportation and utilities, financial and insurance, and business services. Ratings from the three major rating agencies are employed to assign securities to one of four investment grade tiers based upon a rules-based methodology. To ensure a diversity of duration, securities are selected in each of the following maturity ranges: zero to three months, three to six months, six to nine months, nine months to one year, one to two and a half years, two and a half to four years, four to six years, six to eight years, eight to twelve years, twelve to twenty years, and greater than twenty years. Securities are selected from each maturity range such that each range is represented by total assets proportional to the relative market value of each maturity range.
10. Using a rules-based methodology, long-term mortgage pass-through securities (“MBS”) issued by U.S. federal agencies are selected which have a fixed rate coupon, maturity date greater than 1 year from the start of the month, and which currently trade in “TBA transactions.” “TBA transactions” are purchases or sales of MBS for future settlement at an agreed-upon date. TBA transactions aid in the liquidity and pricing efficiency of MBS because they enable different MBS with similar characteristics to be traded interchangeably according to commonly observed settlement and delivery conventions. Eligible pools are grouped into generic securities (“Mortgage Generic”) based on the agency’s program, current coupon and production year. The programs considered are 5 year balloons, 7 year balloons, 15 year fixed and 30 year fixed rates taken from the FHLMC, FNMA and GNMA programs. Coupon values are designed to represent a majority of the market and the range of allowable values is updated monthly.
11. The weights of each of the fixed income and money market Index constituents are set based upon modified market value on the last day before the start of the month. The market value is modified based upon regularly published statistics from the Federal Reserve Board and the Federal Deposit Insurance Corporation.

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.

Asset Class Risk. The bonds in the Fund’s portfolio may underperform the returns of other bonds or indexes that track other industries, markets, asset classes or sectors. Different types of bonds and indexes tend to go through different performance cycles than the general bond market.

Call Risk/Prepayment Risk. During periods of falling interest rates, an issuer of a callable bond may exercise its right to pay principal on an obligation earlier than expected. This may result in the Fund’s having to reinvest proceeds at lower interest rates, resulting in a decline in the Fund’s income.

Credit/Default Risk. Credit risk is the risk that issuers or guarantors of debt instruments or the counterparty to a derivatives contract, repurchase agreement or loan of portfolio securities is unable or unwilling to make timely interest and/or principal payments or otherwise honor its obligations. Debt instruments are subject to varying degrees of credit risk, which may be reflected in credit ratings. Securities issued by the U.S. government have limited credit risk. However, securities issued by certain U.S. government agencies are not necessarily backed by the full faith and credit of the U.S. government. Credit rating downgrades and defaults (failure to make interest or principal payment) may potentially reduce the Fund’s income and share price.

Derivatives Risk. A derivative is a financial contract, whose value depends on, or is derived from, the value of and underlying asset such as a security or index. The Fund may invest in certain types of derivatives contracts, including futures, options and swaps. Compared to conventional securities, derivatives can be more sensitive to changes in interest rates or to sudden fluctuations in market prices and thus the Fund’s losses may be greater if it invests in derivatives than if it invests in conventional securities.

Extension Risk. Extension risk is the risk that an issuer will exercise its right to pay principal on an obligation later than expected. This may happen when there is a rise in interest rates. Under these circumstances, the value of the obligation will decrease and the Fund’s performance may suffer from its inability to invest in higher yielding securities.

Foreign Issuers Risk. The Fund may invest in U.S. registered, dollar-denominated bonds of foreign corporations, governments, agencies and supra-national agencies which have different risks than investing in U.S. companies. These include difference in accounting, auditing and financial reporting standards, the possibility of expropriation or confiscatory taxation, adverse changes in investment or exchange control regulations, political instability which could affect U.S. investments in foreign countries, and potential restrictions of the flow of international capital. Foreign companies may be subject to less governmental regulation than U.S. issuers. Moreover, individual foreign economies may differ favorably or unfavorably from the U.S. economy in such respects as growth of gross domestic product, rate of inflation, capital investment, resource self- sufficiency and balance of payment options.

Income Risk. Income risk is the risk that falling interest rates will cause the Fund’s income to decline.

Interest Rate Risk. As interest rates rise, the value of fixed-income securities held by the Fund are likely to decrease. Securities with longer durations tend to be more sensitive to interest rate changes, making them more volatile than securities with shorter durations.

Liquidity Risk. Liquidity risk exists when particular investments are difficult to purchase or sell. If the Fund invests in illiquid securities or securities that become illiquid, Fund returns may be reduced because the Fund may be unable to sell the illiquid securities at an advantageous time or price.

Mortgage-Backed Securities Risk. The Fund may invest in mortgage-backed securities issued by FNMA, GNMA or FHLMC. Mortgage-backed securities are subject to prepayment risk and extension risk (see explanations above) and may react differently to changes in interest rates than other bonds, which may significantly reduce their value. There is also risk associated with the roll market for mortgage-backed securities. First, the value and safety of the roll depends entirely upon the counterparty’s ability to redeliver the security at the termination of the roll. Therefore, the counterparty to a roll must meet the same credit criteria as any existing repurchase counterparty. Second, the security which is redelivered at the end of the roll period must be substantially the same as the initial security, i.e., must have the same coupon, be issued by the same agency and be of the same type, have the same original stated term to maturity, be priced to result in similar market yields and be “good delivery.” Within these parameters, however, the actual pools that are redelivered could be less desirable than those originally rolled, especially with respect to prepayment characteristics.

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’ 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.

Finance Services Sector Risk. The financial services industries are subject to extensive government regulation, can be subject to relatively rapid change due to increasingly blurred distinctions between service segments, and can be significantly affected by availability and cost of capital funds, changes in interest rates, the rate of corporate and consumer debt defaults, and price competition.

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. Since the Index constituents may vary on a monthly basis, the Fund’s costs associated with rebalancing may be greater than those incurred by other exchange-traded funds that track indices whose composition changes less frequently.

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’s issuer was in financial trouble unless that security is removed from the Index.

Sampling Risk. The Fund’s use of a representative sampling approach will result in its holding a smaller number of securities than are in the Index. As a result, an adverse development respecting an issuer of securities held by the Fund could result in a greater decline in net asset value than would be the case if the Fund held all of the securities in 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. The Fund issues and redeems shares at NAV only in large blocks of 200,000 shares (each block of 200,000 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 Fund and its Shares are not sponsored, endorsed, sold or promoted by Dorchester Capital Management LLC (“Licensor”) and its affiliates. Licensor 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. The Licensor’s only relationship to Claymore Advisors, LLC (“Licensee”) is the licensing of certain trademarks and trade names of Dorchester Capital Management LLC and of the Index, which is determined, composed and calculated by Licensor without regard to Licensee or the Fund. Licensor has no obligation to take the needs of the Licensee or the shareholders of the Fund into consideration in determining, composing or calculating the Index. Licensor shall not be liable to any person for any error in the Index nor shall it be under any obligation to advise any person of any error therein.