Rydex CurrencyShares ® Currency as an Asset Class This presentation is provided for informational purposes only. The contents are neither designed nor intended and should not be considered as, or relied upon as, investment, legal, tax or accounting advice or as a recommendation of any specific security or strategy. Investors should have a thorough understanding of the risks, as well as potential benefits, of the products and strategies referenced throughout this presentation and consult their financial advisor before deciding what, if any, course of action to take for their own particular situation. 1 Filed Pursuant To Rule 433 Registration Nos. 333-163068, 333-164343, 333-175503, 333- 174640, 333-175502, 333-173158, 333-159961, 333-150687, 333-159964 and 333-176370 |
Rydex | SGI Overview Focused on delivering alpha and beta solutions 276 employees with 46 investment professionals ~$26 billion in assets under management, with $9.2 billion in Exchange Traded Products as of 06.30.11 A subsidiary of Guggenheim SBC Holdings, LLC, a special purpose entity managed by an affiliate of Guggenheim Partners, LLC Who we are We innovate – with numerous industry firsts – First Equal Weight ETF [RSP in 2003] – First Currency ETPs [CurrencyShares, 2006] – First Equal Weight S&P Sector ETFs [2006] – First Managed Futures Mutual Fund [2007] We educate – providing education that empowers advisors to deliver innovative, competitive solutions to their clients What we do |
Rydex: Current Exchange Traded Products US Value US Growth US Core US Sectors Global-Int’l Equity/Currency ETPs Pure Style S&P 400 Pure Style S&P 400 Russell Top 50 Australian Dollar British Pound Pure Style S&P 500 Pure Style S&P 500 S&P 500 2X Canadian Dollar Mexican Peso Pure Style S&P 600 Pure Style S&P 600 S&P 500 Inverse 2X Euro Swedish Krona Swiss Franc Russian Ruble Japanese Yen Chinese Renminbi EQUAL EW S&P 500 EW Consumer Discretionary EW MSCI ACWI WEIGHT EW S&P 400 MidCap EW Consumer Staples EW MSCI EAFE ETFs EW S&P 600 SmallCap EW Energy EW MSCI Emerging Markets EW Russell 1000 EW Financials EW Russell MidCap EW Health Care EW Russell 2000 EW Industrials EW Materials EW Technology EW Utilities |
4 Rydex|SGI: A History of Innovation RSP First Equal Weight ETF 4/24/2003 XLG Differentiated Mega-Cap Exposure 5/4/2005 FXE First Currency ETF in U.S. 12/5/2005 Pure Style ETFs: 3/1/2006 Domestic Equal Weight Global/Int’l Equal Weight 2003 2007 2005 2009 2010 2004 2006 2008 2011 First Managed Futures Mutual Fund 3/2/2007 Read a fund’s prospectus and summary prospectus (if available) carefully before investing. It contains the fund’s investment objectives, risks, charges, expenses and other information, which should be considered carefully before investing. Obtain a prospectus and summary prospectus (if available) at www.rydex-sgi.com or call 800.820.0888. |
Currency in the News |
An Overview of Currency The currency market is the world’s largest and most liquid market, with average daily turnover of roughly $4 trillion* Many hedge funds and institutions have used currency investing as a means of hedging certain portfolio exposures against currency risks and opportunistically trading across currencies Many foreign currencies have historically shown a low correlation to U.S. equity and fixed-income markets Currency investing offers a variety of trading strategies * Source: Bank of International Settlements, April 2010 |
• Interest rates • Inflation / deflation • International trade • Commodity prices • Economic stability • Geopolitical risk Factors that Impact Currency |
Currency Fluctuates Significantly Over Time Source: Bloomberg, currency spot rates. Past performance is no guarantee of future results. |
US Dollar Index® S&P 500® Index Barclays Capital U.S. Aggregate Bond Index US Dollar Index® 1.00 S&P 500® Index -0.57 1.00 Barclays Capital U.S. Aggregate Bond Index -0.43 0.16 1.00 Source data: FactSet. Past performance is no guarantee of future results. Index returns do not reflect fees, expenses or transaction costs. You cannot invest directly in an index. See important definitions on slide 19. Correlation (7/1/2006 through 6/30/2011) Correlation Many currencies have historically offered a low correlation to other asset classes like stocks and bonds, which in turn helps lower portfolio risk and boost overall returns. |
Source: Bloomberg Performance displayed is past performance and no guarantee of future results. For the examples above, stocks are represented by the S&P 500 Index, bonds are represented by Barclays Capital Aggregated Bond Index, international developed equities are represented by the MSCI EAFE Index, emerging market equities are represented by MSCI EM Index and currency is represented by the US Dollar Index. The referenced indices are not available for direct investment and do not reflect the effects of transaction costs, fees or expenses. The 60/40 portfolio is comprised of 60% U.S. stocks and 40% U.S. bonds; the international portfolio is comprised of 40% U.S. stocks, 15% international developed equities, 5% emerging market equities and 40% U.S. bonds. The international with currency portfolio is comprised of 40% U.S. stocks, 10% international developed, 5% emerging market equities, 10% Australian dollar and 35% U.S. bonds. Portfolio Basket Cumulative Return: 5 Years Ending 6/30/2011 -25% -20% -15% -10% -5% 0% 5% 10% 15% 20% 25% 30% 35% Jun-06 Dec-06 Jun-07 Dec-07 Jun-08 Dec-08 Jun-09 Dec-09 Jun-10 Dec-10 Jun-11 60/40 International Int. With Currency Potential Impact of Adding Currency to A Portfolio |
A Convenient Way to Access Currencies: CurrencyShares® For many years, hedge funds and institutions have used currencies as a way of hedging the dollar through seeking currency exposure through the Forex market, which could be challenging for advisors and individuals to utilize. Now, advisors and investors have a potentially efficient way of hedging dollar exposure, and taking advantage of investment opportunities in the currency markets. Rydex CurrencyShares ® offer a convenient, cost-effective way to gain exposure to ten currencies. |
Potential CurrencyShares® Uses Provide an efficient means of gaining exposure to a currency Can be used as a tool for currency hedging Can be used as part of a tactical trading strategy, individually and collectively Currency trading is used by hedge funds and institutions to hedge foreign exchange, and to take positions, long and short, in currencies based on expectations Investors can be long the highest-yielding currency, and short the lowest- yielding currency (i.e., the “carry-trade”) |
The Role of Currencies Diversifying Cash Just as investors diversify their international stock and bond portfolios to reduce risk, investors can also diversify their cash allocations. Alpha (or Opportunistic) Strategies i.e. popular carry trade, where investors seek to profit on the interest rate differential between two currencies. A simple version of the trade can be achieved by purchasing a high-yielding currency and shorting a low-yielding one. Speculation Investors can make calls on the future value of any given pair of currencies. For example, an investor who believes the U.S. dollar will weaken compared to the euro may choose to go long the Euro, while an investor who thinks the euro is relatively overvalued may choose to short the trust instead. International Hedging Buying international stocks and bonds inherently introduces some exposure to fluctuating currency values, which can significantly impact returns for U.S. investors. A currency alpha strategy is an opportunistic strategy is which investors seek to profit from a currency market move, as opposed to a hedging strategy in which an investor is attempting to reduce risk. Currency investing is subject to several risks. Several factors may affect the price of foreign currency relative to the U.S. dollar including: national debt levels and trade deficits, domestic and foreign inflation rates and investors' expectations concerning inflation rates, domestic and foreign interest rates and investors' expectations concerning interest rates, investment and trading activities of mutual funds, hedge funds and currency funds; and global or regional political, economic or financial events and situations. When the price of the currency declines, an investor will be adversely affected. Short selling involves increased risk and costs, including paying more for a security than it received from its sale and the risk of unlimited losses. |
Rydex CurrencyShares® Rydex CurrencyShares ® offers investors ten ETPs. These ETPs offer a convenient, cost-effective way to gain exposure to foreign currencies. Rydex CurrencyShares ® ETPs are grantor trusts, and they hold actual foreign currency deposits as their sole asset. Each CurrencyShares ® ETP has a deposit account denominated in each of the ten currencies. Interest earned*, if any, accrues daily. Any interest, after trust expenses are paid; distributed to shareholders monthly. Ten CurrencyShares ® • CurrencyShares ® Australian Dollar Trust FXA • CurrencyShares ® British Pound Sterling Trust FXB • CurrencyShares ® Canadian Dollar Trust FXC • CurrencyShares ® Chinese Renminbi Trust FXCH • CurrencyShares ® Euro Trust FXE • CurrencyShares ® Japanese Yen Trust FXY • CurrencyShares ® Mexican Peso Trust FXM • CurrencyShares ® Russian Ruble Trust FXRU FXRU • CurrencyShares ® Swedish Krona Trust FXS • CurrencyShares ® Swiss Franc Trust FXF *Such interest is not expected to form a significant part of the shareholders' investment return. |
Benefits of Currency in an ETP Format Accessibility Access the currency markets through a traditional brokerage account. Shares are bought and sold on the NYSE Arca just like other exchange listed securities. Actual Currency Holdings The foreign currencies are deposited in segregated depository accounts at J.P. Morgan Chase Bank N.A. (London). Exchange- Traded CurrencyShares are bought and sold on the NYSE Arca, providing an efficient means of incorporating tactical strategies or hedging exposures. CurrencyShares are eligible for margin. Liquidity CurrencyShares are liquid. They can be purchased in the secondary market. Shares of each Trust can be created or redeemed in baskets of 50,000 units by Authorized Participants (APs). Choice With nine different products covering the world’s major currencies, investors can easily customize their trades to meet their investment objectives. Transparency CurrencyShares® are grantor trusts, and they hold actual foreign currency deposits as their sole asset as opposed to money market debt instruments or derivatives contracts. The assets of each Trust back the shares. The Trust does not hold or employ derivatives. |
CurrencyShares Process • AP delivers currency to Trustee (principal plus three days of accrued interest) which, in exchange, provides for the delivery of capital shares of the Trust to the AP’s DTC account • Depository account is comprised of two separate accounts: one for principal and the other for interest in order for the grantor trust to remain an entirely passive structure • At month end, total accrued interest is withdrawn from the interest account, trust expenses are satisfied and any interest in excess of the amount required to cover Trust expenses is distributed on a pro-rata basis to shareholders • All accounting takes place in native currency to nullify the FX impact |
CurrencyShares® ¹ Partial year returns are cumulative, not annualized. Performance results are short-term and may not provide an adequate basis for evaluating the performance potential of the fund over varying market conditions or economic cycles. Performance displayed represents past performance, which is no guarantee of future results. Investment returns and principal value will fluctuate so that when shares are redeemed, they may be worth more or less than original cost. Total returns reflect the reinvestment of all dividends. Current performance may be lower or higher than the performance data quoted. For up- to-date performance, including performance current to the most recent month-end, visit our web site at www.currencyshares.com. The NAV and Market Close Performance may differ. A major reason for the difference is that timing discrepancies can exist between the NAV, which is calculated using the WM/Reuters Closing Spot Rate, and Market Close, which is calculated using Closing Price (last trade). The WM/Reuters Closing Spot Rate is the exchange rate of the U.S. dollar and the applicable foreign currency as determined by WM/Reuters as of 4:00 PM London Time. Prior to 11/13/2008 NAV for each CurrencyShares Trust except the CurrecyShares Russian Ruble Trust, was calculated using the Noon Buying Rate, as determined by the Federal Reserve Bank of New York. For additional information please see each trust's prospectus. Performance (as of 6/30/2011) |
CurrencyShares® are subject to a number of risks and may not be suitable for all investors. The value of the shares of each CurrencyShares Trust relates directly to the value of the foreign currency held by the particular Trust. This creates a concentration risk associated with fluctuations in the price of the applicable foreign currency. Accordingly, a decline in the price of that currency will have an adverse effect on the value of the shares of the particular CurrencyShares Trust. Factors that may have the effect of causing a decline in the price of a foreign currency include national debt levels and trade deficits, domestic and foreign interest rates, investment and trading activities of institutions and global or regional political, economic or financial events and situations. Shares of each CurrencyShares Trust can be bought and sold through a broker; as such, investors may be required to pay brokerage commissions in connection with a purchase or sale. There can be no assurance that an active trading market for the shares will develop or be maintained. The risks associated with each of the CurrencyShares Trusts are not identical because of differences in the economies underlying each CurrencyShares Trust, as well as other considerations. Read the prospectus for more complete information on each risk. CurrencyShares ® Risks |
U.S. Dollar Index Indicates the general international value of the U.S. Dollar. The USDX does this by averaging the exchange rates between the U.S. dollar and six major world currencies: the euro, yen, British pound, Canadian dollar, Swedish krona and Swiss franc. S&P 500 - An unmanaged capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries. Barclays Capital U.S. Aggregate Bond Index (Bonds) An unmanaged index composed of securities from the Barclays Capital/Corporate Bond Index, Mortgage-Backed Securities Index and the Asset-Backed Securities Index. Total return comprises price appreciation/depreciation and income as a percentage of the original investment. Indices are rebalanced monthly by market capitalization. Correlation. This is a measurement of how closely the performance of two assets match each other - the measure of correlation ranges from positive one (1) to negative one (-1). For example: If the value of two assets always moves in the same direction, they are said to be "highly correlated," and they have a correlation of positive one (1). If their values always move in opposite directions, they are said to have a "negative correlation" or "inverse correlation," and have a correlation of negative one (-1). If there is no consistent mathematical relationship between the value of the two assets, then the correlation coefficient is 0. Important Disclosure |
Important Disclosure The CurrencyShares Trusts are not an investment companies registered under the Investment Company Act of 1940 or a commodity pools for purposes of the Commodity Exchange Act. Each of the CurrencyShares ® Australian Dollar Trust, CurrencyShares ® British Pound Sterling Trust, CurrencyShares ® Canadian Dollar Trust, CurrencyShares ® Chinese Renminbi Trust, CurrencyShares ® Euro Trust, CurrencyShares ® Japanese Yen Trust, CurrencyShares ® Mexican Peso Trust, CurrencyShares ® Russian Ruble Trust, CurrencyShares ® Swedish Krona Trust and CurrencyShares ® Swiss Franc Trust (each a “Trust” and collectively, the “Trusts”) has filed a registration statement (including a prospectus) with the SEC for the offerings to which this communication relates. Before you invest in the shares of a Trust, you should read the prospectus in the registration statement and other documents the Trust has filed with the SEC for more complete information about the Trust and its offering. This information must be accompanied by a current CurrencyShares ® Chinese Renminbi Trust, CurrencyShares ® Mexican Peso Trust, CurrencyShares ® Russian Ruble Trust and CurrencyShares ® Swedish Krona Trust prospectus. For the remaining CurrencyShares Trusts, you may get these documents for free by visiting EDGAR on the SEC web site at www.sec.gov. Alternatively, the Trusts and any offering participant will arrange to send you any Trust prospectus if you request it by calling toll-free 800.820.0888. The prospectus for each Trust is also available by accessing the issuer’s web site at www.currencyshares.com. CurrencyShares ® is a registered trademark of Rydex Holdings, LLC. Rydex Specialized Products, LLC, d/b/a Rydex|SGI, is the sponsor of each of the CurrencyShares Trusts. Rydex Distributors, Inc., an affiliate of Rydex|SGI, is the distributor of each of the CurrencyShares Trusts and Rydex|SGI Funds. Contact us: 800.820.0888 or visit www.currencyshares.com |