tv smid-cap directional allocation summary - february 28th, 2015

FactsheetTransparent Value SMID-Cap Directional Allocation Total Return Index

1

Introduction

Performance Statistics

9.87%

18.20%

16.39%

8.55%

316.89%

1163.62%

899.28%

246.80%

Transparent Value SMID-Cap Directional Allocation Total Return Index

Transparent Value SMID-Cap Aggressive Total Return Index

Transparent Value SMID-Cap Market Total Return Index

Transparent Value SMID-Cap Defensive Total Return Index

Dow Jones U.S. Small-Cap Total Stock Market Total Return Index

28.84%

19.79%

17.07%

20.51%

0.28

0.83

0.85

0.33

18.29%

11.69%

10.18%

13.62%

-55.84%

-47.69%

-47.63%

-54.35%

0.54

1.56

1.61

0.63

1.33%

9.66%

7.84%

0.00%

12.55%

8.88%

10.59%

0.00%

0.11

1.09

0.74

0.00

137.70%

103.90%

83.97%

100.00%

120.60%

75.16%

61.57%

100.00%

0.11%

10.21%

9.76%

0.00%

1.30

0.87

0.71

1.00

0.93

0.90

0.86

1.00

18.38% 1191.67% 15.45% 1.07 8.59% -22.36% 2.14 9.83% 13.11% 0.75 83.37% 54.07% 12.88% 0.58 0.77 60.99%

51.65%

62.64%

59.89%

100.00%

Annualized Return

Cumulative Return

Standard Deviation

Sharpe Ratio

Downside Deviation

Maximum Drawdown

Sortino Ratio

Excess Return

Tracking Error

Information Ratio

Up Capture

Down Capture Alpha Beta Correlation

Batting Average

Comparison Period: December 31, 1999 to February 28, 2015*

The Transparent Value SMID-Cap Directional Allocation Index (“Index”) allocates among the three Transparent Value SMID-Cap Directional Indexes (the “SMID-Cap Directional Indexes”) - the Transparent Value SMID-Cap Market Index (with components that have betas close to one), the Transparent Value SMID-Cap Aggressive Index (with components that have betas higher than one) and the Transparent Value SMID-Cap Defensive Index (with components that have betas lower than one) - and cash. The allocation system used in the Index’s methodology uses three primary signals: economic condition, consumer sentiment and market momentum. The index’s primary economic indicators in conjunction with a secondary set of RBP® index signals are used collectively to anticipate broader market moves. This then determines underlying index equity exposure, rebalanced quarterly or monthly if required.

The Index is part of the Transparent Value Indexes —a family of quantitative strategy indexes offered by Transparent Value using rules-based, published analytics supplied by Transparent Value LLC® (Transparent Value). Components of the Transparent Value Indexes are selected based on their RBP® probabilities. Number of components in the Transparent Value SMID-Cap Directional Allocation Index varies from 100 to 200 and/or Cash.

RBP®, which stands for Required Business Performance®, is calculated by taking a reverse discounted cash flow approach to determine the future business performance required by a company to support its current stock price. RBP® probabilities measure the likelihood that a company can deliver the required business performance identified by applying the methodology over specified time periods.


2

Performance Statistics

Comparison Period Ending: February 28, 2015*

Short-Term Performance Statistics Long-Term Performance Statistics( Annualized )

Calendar Year Return


Transparent Value SMID-Cap Aggres-sive Total Return Index




2014 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999

Comparison Period: December 31, 1999 to February 28, 2015*

3.17%

2.03%

5.11%

7.53%

6.39%

49.41%

46.66%

51.36%

45.91%

39.63%

18.28%

28.81%

20.77%

15.70%

18.30%

1.13%

-9.00%

5.37%

5.81%

-2.91%

26.32%

44.20%

23.45%

17.96%

28.61%

31.24%

66.64%

57.16%

52.38%

41.93%

0.00%

-37.89%

-32.02%

-31.29%

-37.76%

12.19%

9.46%

8.85%

2.60%

1.90%

19.31%

20.35%

17.57%

13.69%

16.98%

11.75%

8.18%

12.18%

8.07%

7.37%

23.49%

18.97%

27.33%

28.06%

19.46%

46.32%

58.25%

52.06%

40.27%

49.02%

-4.56%

-28.95%

-2.93%

1.94%

-18.98%

29.05% 22.29% -

8.59% -26.37% 51.09%

31.95% 28.04% 24.88%

29.50% 36.05% 9.49%

3.13% -9.08% 29.25%






7.13%

8.52%

7.13%

4.82%

6.21%

3.59%

5.24%

3.15%

4.07%

5.21%

3.86%

3.31%

5.59%

8.01%

5.18%

7.62%

7.21%

9.65%

10.69%

6.92%

3.81%

4.50%

3.81%

3.59%

3.36%

18.89%

18.54%

20.98%

19.74%

17.98%

18.72%

20.62%

20.64%

18.16%

17.42%

17.93%

16.55%

17.05%

15.13%

11.87%

16.85%

14.65%

14.81%

11.87%

10.06%

18.38%

9.87%

18.20%

16.39%

8.55%

(12/31/99)1-Month 3-Month 6-Month 1-Year YTD 3-Year 5-Year 7-Year 10-YearAvail. Hist.


Symbols Quick Facts

3

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

18.0%

20.0%

5.0% 10.0% 15.0% 20.0% 25.0%

Annu

alize

d Re

turn

Annualized Risk

TV SMID-Cap Directional Allocation DJ US SMALL TSM

Risk/Return

Total Return

USD

Suggested Symbol DRSDAL

Bloomberg DRSDAL

Bridge

Reuters DRSDAL

Thomson

Telekurs

Component Number NA

Weighting Weights are allocated equally to those underlying indices selected to receive an allocation

Dividend Treatment Total return calculated with gross dividends reinvested

Calculation Frequency Total Return: Every 15 seconds during U.S. trading hours

Review Frequency Quarterly in March, June, September and December

Base Value/Base Date 1000 as of December 31, 1999

First Value Date Available daily back to December 31, 1999

Initial Publication Date April 28, 2014 - Represents date of live calculated Index Performance

0

100

200

300

400

500

600

700

800

900

1000

1100

1200

1300

1400

12/9

9

6/00

12/0

0

6/01

12/0

1

6/02

12/0

2

6/03

12/0

3

6/04

12/0

4

6/05

12/0

5

6/06

12/0

6

6/07

12/0

7

6/08

12/0

8

6/09

12/0

9

6/10

12/1

0

6/11

12/1

1

6/12

12/1

2

6/13

12/1

3

6/14

12/1

4

Perfo

rman

ce($

)

TV SMID-Cap Directional Allocation [1291.67] DJ US SMALL TSM [346.80]

Cumulative Performance

Comparison Period: December 31, 1999 to February 28, 2015* Comparison Period: December 31, 1999 to February 28, 2015*


Contact Us

Transparent Value, LLC330 Madison Avenue, 10th Floor, New York, NY 10017Phone: 1-888-727-6885 Website: www.transparentvalue.comNo part of this document may be circulated,

quoted or reproduced for distribution without prior written approval from Transparent Value, LLC.

© 2015 Transparent Value, LLC. All rights reserved.

4





April 28, 2014

April 09, 2014

April 09, 2014

April 09, 2014

http://www.rbpinstitute.com/indexes/index-performance.aspx




Dow Jones U.S. Small-Cap Total Stock Market Total Return Index February 28, 2005 http://www.djindexes.com/totalstockmarket/

Transparent Value SMID-Cap Directional Allocation Total Return Index,Transparent Value SMID-Cap Aggressive Total Return Index,Transparent Value SMID-Cap Market Total Return Index and Transparent Value SMID-Cap Defensive Total Return Index (the "Indexes") are the property of Transparent Value, which has contracted with S&P Dow Jones Indices LLC or its affiliate ("S&PDJI") to maintain and calculate the Indexes. The Dow Jones U.S. Small-Cap Total Stock Market Total Return Index is the property of S&PDJI and/or their third party licensors and has been licensed by S&PDJI for use by Transparent Value in connection with the Indexes. S&PDJI shall have no liability for any errors or omissions in calculating the Indexes.

Source: Transparent Value, LLC.

Important Disclosures :*Each of the above-listed Indexes was first published as of the applicable initial publication date set forth in the table above. To the extent this document includes information for the index for the period prior to its initial publication date, such information is back-tested (i.e., calculations of how the index might have performed during that time period if the index had existed). And the comparisons, assertions and conclusions regarding the performance of the index during such time period are based on back-testing. Back-tested information is purely hypothetical and is provided in this document solely for informational purposes. Back-tested performance does not represent actual performance, and should not be interpreted as an indication of actual performance. Past performance is not indicative of future results. For additional resources, please visit the Analytics & Research section of the rpbinstitute.com Indexes website: www.rbpinstitute.com

Information as of February 28, 2015

Disclaimers

Initial Publication Date*

Information with respect to each index may be found at the respective URLs listed below

ID16079

1

Introduction

The Transparent Value SMID-Cap Directional Allocation Index is part of the Transparent Value Index Series—a family of quantitative strategy indexes offered by Transparent Value, LLC® using rules-based, published analytics supplied by Transparent Value LLC® (Transparent Value). Components of the Transparent Value indexes are selected in part based on their RBP® probabilities.

RBP®, which stands for Required Business Performance®, is calculated by taking a reverse discounted cash flow approach to determine the future business performance required by a company to support its current stock price. RBP® probabilities measure the likelihood that a company can deliver the required business performance identified by applying the methodology over specified time periods. Additional documentation describing the RBP® methodology and quantitative evaluation process is available at www.rbpinstitute.com.

The Transparent Value SMID-Cap Directional Allocation Index is constructed as an index of indexes, reallocating weights among the Transparent Value SMID-Cap Aggressive Index, the Transparent Value SMID-Cap Defensive Index, the Transparent Value SMID-Cap Market Index and a cash component (earns 0% return) using a moving average crossover system that accounts for three primary signals: economic condition, consumer sentiment and market momentum.

Index Universe

The Transparent Value SMID-Cap Directional Allocation IndexSM takes an index-of-indexes approach. The selection universe comprises component stocks of Transparent Value SMID-Cap Directional IndexesSM and a cash component (earns 0% return). The allocations are determined by the moving average crossover system at the time of the rebalance. For information on the creation and maintenance of the underlying indexes, please see the Guide to the Transparent Value SMID-Cap Directional IndexesSM, available on the RBP Institute Website at www.rbpinstitute.com.

Index Construction and Rebalancing

The index methodology uses the following indicators as inputs:

Primary Indicators:

— 12-month simple moving average (SMA) of The Conference Board® Consumer Confidence Index® (CCI)*. (Positive if the index is above the moving average; negative otherwise)

— 6-month SMA of The Conference Board Leading Economic Index® (LEI)*. (Positive if the index is above the moving average; negative otherwise)

— 250-day SMA of the Dow Jones U.S. Large Cap Total Stock Market IndexSM (DWLT). (Positive if the index is above the moving average; negative otherwise)

Secondary Indicators:

— 250-day SMA of Transparent Value SMID-Cap Directional Indexes. (Positive if the index is above the moving average; negative otherwise)

METHODOLOGYTRANSPARENT VALUE SMID-CAP

DIRECTIONAL ALLOCATION INDEX

2

METHODOLOGY TRANSPARENT VALUE SMID-CAP DIRECTIONAL ALLOCATION INDEX

Component Selection and Holdings

At each snapshot day, moving averages for the index and each of the underlying indexes are calculated. Reallocations are made when the following conditions are met:

— In the event that all three primary indicators are positive (above their respective moving average):

— The Transparent Value SMID-Cap Aggressive Index receives an allocation if it is above its moving average.

— The Transparent Value SMID-Cap Market Index receives an allocation if either of the following is true:

• It is above its moving average and the Transparent Value SMID-Cap Aggressive IndexSM is above its moving average.

• The Transparent Value SMID-Cap Aggressive Index is below its moving average.

— In the event that two of three primary indicators are positive:

— The Transparent Value SMID-Cap Market Index receives an allocation.

— In the event that one of three primary indicators is positive:

— The Transparent Value SMID-Cap Market Index receives an allocation if it is above its moving average.

— The Transparent Value SMID-Cap Defensive Index receives an allocation.

— In the event that the three primary indicators are negative, current LEI is less than the one-month-prior LEI, and the two-month- prior LEI is less than the three-month-prior LEI:

— Cash receives an allocation if all primary signals are negative and at least one of the primary signals was positive at the previous scheduled or unscheduled rebalance.

— If the above conditions are not met, the Transparent Value SMID-Cap Defensive IndexSM receives an allocation if it is above its own moving average.

— Cash receives allocation if:

• The Transparent Value SMID-Cap Defensive Index is below its own moving average.

• The Transparent Value SMID-Cap Defensive Index is above its own moving average, but was below its ownmoving average at the previous rebalance.

— In the event that the three primary indicators are negative and either the current LEI is higher than the one-month-prior LEI, or the two-month-prior LEI is higher than the three-month-prior LEI:

— The Transparent Value SMID-Cap Defensive Index receives an allocation.

Review Frequency

The index is rebalanced quarterly, after the close of third Friday of March, June, September and December.

The index also is rebalanced after the close of any Friday if LEI moves above or below its moving average on the snapshot day, which occurs three business days prior to the rebalance day.

Weighting

The Transparent Value SMID-Cap Directional Allocation Index allocates weights to the underlying indexes equally based on the number of underlying indexes selected to receive an allocation at the time of the rebalance.

The underlying Transparent Value SMID-Cap Directional Indexes are weighted by RBP® probability scores.

3


For more information on the Transparent Value SMID-Cap Directional Allocation Index, email [email protected] or call 1-855-883-8637. Learn more at www.rbpinstitute.com or visit us at www.transparentvalue.com

Historical Data Availability

Back-tested theoretical index values are available daily back to December 31, 1999, the date at which the base value of the index is set at 1000. The index was first published on April 28, 2014. All estimated daily historical closing prices prior to that date are based on back-testing (i.e., calculations of how the index might have performed in the past if it had existed). Back-tested performance information is purely hypothetical and is solely for informational purposes. Back-tested performance does not represent actual performance, and should not be interpreted as an indication of actual performance. Past performance is not indicative of future results.

Estimated back-tested historical data represents calculations of how the index might have performed in the past if it had existed. Back-tested performance information is purely hypothetical and is solely for informational purposes. Back-tested performance does not represent actual performance, and should not be interpreted as an indication of actual performance. Past performance is not indicative of future results. Index performance is not the same as fund performance as it does not reflect management and other fees.

PERFORMANCE DISCLOSURE

The Transparent Value SMID-Cap Directional Allocation Index (the “Index”) was first calculated on April 28, 2014, at the market close. All information presented prior to this date is back-tested. Back-tested performance is not actual performance, but is hypothetical. The back-test calculations are based on the same methodology that was in effect when the index was officially launched. Complete index methodology details are available at www.rbpinstitute.com.

Past performance of the Index is not an indication of future results. Prospective application of the methodology used to construct the Index may not result in performance commensurate with the back-test returns shown. The back-test period does not necessarily correspond to the entire available history of the Index. Please refer to the methodology paper for the Index, available at www.rbpinstitute.com for more details about the index, including the manner in which it is rebalanced, the timing of such rebalancing, criteria for additions and deletions, as well as all index calculations. It is not possible to invest directly in an Index.

Another limitation of back-tested hypothetical information is that generally the back-tested calculation is prepared with the benefit of hindsight. Back-tested data reflect the application of the index methodology and selection of index constituents in hindsight. No hypothetical record can completely account for the impact of financial risk in actual trading. For example, there are numerous factors related to the equities (or fixed income, or commodities) markets in general which cannot be, and have not been accounted for in the preparation of the index information set forth, all of which can affect actual performance.

The Index returns shown do not represent the results of actual trading of investible assets/securities. S&P Dow Jones Indices LLC maintains the Index and calculates the Index levels and performance shown or discussed, but does not manage actual assets. Index returns do not reflect payment of any sales charges or fees an investor may pay to purchase the securities underlying the Index or investment funds that are intended to track the performance of the Index. The imposition of these fees and charges would cause actual and back-tested performance of the securities/fund to be lower than the Index performance shown. As a simple example, if an index returned 10% on a US $100,000 investment for a 12-month period (or US$ 10,000) and an actual asset-based fee of 1.5% was imposed at the end of the period on the investment plus accrued interest (or US$ 1,650), the net return would be 8.35% (or US$ 8,350) for the year. Over 3 years, an annual 1.5% fee taken at year end with an assumed 10% return per year would result in a cumulative gross return of 33.10%, a total fee of US$ 5,375, and a cumulative net return of 27.2% (or US$ 27,200).

DISCLAIMER

“Transparent Value SMID-Cap Directional Allocation Index (the “Index”)” is the property of Transparent Value, LLC, which has contracted with S&P Dow Jones Indices LLC or its affiliate (“S&PDJI”) to maintain and calculate the Index. The “Dow Jones U.S. Mid-Cap Total Stock Market Total Return Index” and the “Dow Jones U.S. Small-Cap Total Stock Market Total Return Index” are the properties of S&PDJI and/or their third party licensors and has been licensed by S&PDJI for use by Transparent Value, LLC in connection with the Index. S&PDJI shall have no liability for any errors or omissions in calculating the Index.

An index is unmanaged, not subject to fees and not available for direct investment.

Transparent Value®, RBP®, Required Business Performance®, and the Transparent Value logo are registered trademarks of Transparent Value, LLC or one of its subsidiaries. “See the market clearly” is a trademark of Transparent Value, LLC and its affiliates. Other featured words or symbols used to identify the source of goods and services may be the trademarks of their respective owners. No claim is made that RBP can, in and of itself, be used to determine which securities to buy or sell, or when to buy or sell them. Transparent Value, LLC (“Transparent Value”) is a subsidiary of Guggenheim Partners, LLC.

This material is intended to inform you of products and services offered by Transparent Value and not an offer to buy or sell, or a solicitation of an offer to buy or sell, any security or fund interest.

No assurance can be given that the investment objectives described herein will be achieved. The views expressed in this presentation are the views of Transparent Value and are subject to change without notice based on market and other conditions. The opinions expressed may differ from those of other entities affiliated with Transparent Value that use different investment philosophies. The views and strategies described herein may not be suitable for all investors. This material is distributed with the understanding that it is not rendering accounting, legal or tax advice. Please consult your legal or tax advisor concerning such matters.

Indices do not represent actual trading. Accordingly, these models should not be relied upon to make predictions of actual future account performance. Transparent Value has no obligation to provide recipients hereof with updates or changes to such data. Past performance of indices of asset classes does not represent actual returns or volatility of actual accounts or investment managers, and should not be viewed as indicative of future results. Returns are unaudited. Results do not reflect the investment of dividends or other earnings. The figures for the index do not reflect the reinvestment of dividends and do not reflect the deduction of fees or expenses which would reduce returns. Investors cannot invest direct in the index.

Redistribution, reproduction and/or photocopying in whole or in part are prohibited without written permission.


Contact Us

Transparent Value, LLC330 Madison Avenue, 10th Floor, New York, NY 10017Phone: 1-888-727-6885 Website: www.transparentvalue.com

© 2014 Transparent Value, LLC. All rights reserved. No part of this document may be circulated, quoted or reproduced for distribution without prior written approval from Transparent Value, LLC.

Introduction

The Transparent Value SMID-Cap Aggressive Index, Transparent Value SMID-Cap Market Index and Transparent Value SMID-Cap Defensive Index are part of the Transparent Value SMID-Cap Directional Indexes—a family of quantitative strategy indexes offered by Transparent Value Indexes using rules-based, published analytics supplied by Transparent Value, LLC® (Transparent Value). Components of the Transparent Value indexes are selected in part based on their RBP® probabilities.

RBP®, which stands for Required Business Performance®, is calculated by taking a reverse discounted cash flow approach to determine the future business performance required by a company to support its current stock price. RBP® probabilities measure the likelihood that a company can deliver the required business performance identified by applying the methodology over specified time periods. Additional documentation describing the RBP® methodology and quantitative evaluation process is available at www.rbpinstitute.com.

Index Universe

The index universe includes the components in the Dow Jones U.S. Mid-Cap Total Stock Market Index and the Dow Jones U.S. Small-Cap Total Stock Market Index that pass liquidity screens and have RBP® probabilities.

Index Composition

Eligibility Screens

Stocks are selected for the Transparent Value SMID-Cap Directional IndexesSM starting with their respective index universes based on the following steps:

For a stock to be eligible for selection to the index, it must pass the following liquidity screens:

• Stocks require an RBP® Probability.

• Stocks with free float of less than 50% are deemed ineligible.

• Stocks with a price of $3 or less for two consecutive quarters are deemed ineligible.

• Stocks with a six-month average daily trading volume of less than 250,000 shares for two consecutive quarters are deemed ineligible.

• Stocks with a six-month average daily trading value of less than $5 million for two consecutive quarters are deemed ineligible.

Stock Selection

Transparent Value SMID-Cap Aggressive Index

1. The stocks from the liquid index universe with beta values greater than one are eligible.

a) All eligible components are ranked in descending order by ROE and the 200 top-ranked stocks are selected.

b) All eligible components are re-ranked in descending order by FCF yield and the 200 top-ranked stocks are selected.

METHODOLOGYTRANSPARENT VALUE SMID-CAP AGGRESSIVE INDEXTRANSPARENT VALUE SMID-CAP MARKET INDEXTRANSPARENT VALUE SMID-CAP DEFENSIVE INDEX

1

METHODOLOGY TRANSPARENT VALUE SMID-CAP DIRECTIONAL INDEXES

c) All eligible components are re-ranked in descending order by asset growth and the bottom-ranked 200 stocks are selected.

d) The selected stocks from a), b), and c) are de-duplicated and combined to create the final selection pool.

2. For each of the three factors, extreme values above 97.5% and below 2.5% by component count are normalized to the cut-off values at 97.5% and 2.5%.

3. Each stock is assigned a Z-score for each factor.

4. Z-scores above and below 2/-2 are normalized to 2/-2.

5. Multiply Z-scores of asset growth by -1 to account for inverse relationship of the factor.

6. Z-scores for 3 factors are summed and divided by 3 to give the average Z-score.

7. Components ranked in the top 200 of average Z-scores remain eligible for selection and then sorted by RBP® probability.

8. The top 100 companies by RBP® probability are selected for the Transparent Value SMID-Cap Aggressive Index.

Transparent Value SMID-Cap Market Index

1. The 400 stocks from the liquid index universe with beta values closest to one are eligible.











8. The top 100 companies by RBP® probability are selected for the Transparent Value SMID-Cap Market Index.

Transparent Value SMID-Cap Defensive Index

1. The stocks from the liquid index universe with beta values less than one are eligible.











8. The top 100 companies by RBP® probability are selected for the Transparent Value SMID-Cap Defensive Index.

2

For more information on the Transparent Value SMID-Cap Directional Indexes, email [email protected] or call 1-855-883-8637. Learn more at www.rbpinstitute.com or visit us at www.transparentvalue.com


Buffer

To limit unnecessary turnover, a buffer rule combining RBP® probabilities and average Z-scores is used. Current components of Transparent Value SMID-Cap Directional Indexes would stay in the indexes if the following condition is satisfied at quarterly review:

1. Stock’s average Z-score ranked in top 200 of respective group (aggressive, market or defensive) and RBP® probability greater than the bottom 20% of respective group (aggressive, market, defensive).

A 25-stock buffer is used for each of the factors.

In addition, at the time of September rebalance only, components of the existing Transparent Value SMID-Cap Directional IndexesSM must pass the appropriate beta screen before buffer rules apply.

Weighting

Constituent stocks are weighted by RBP® probabilities.

Review Frequency

The Transparent Value SMID-Cap Directional Indexes are rebalanced quarterly after the close of third Friday of March, June, September and December. In addition, the indexes are reviewed on an ongoing basis to account for corporate actions such as mergers and de-listings.

Data Availability

Calculation of the indexes began on April 9, 2014. Real index history is available daily from this date forward. Back-tested estimated historical data have been calculated daily back to December 31, 1998, the date at which the index base values are set at 1000.

3


The Transparent Value SMID-Cap Directional Indexes (the “Indexes”) were first calculated on April 9, 2014, at the market close. All information presented prior to this date is back-tested. Back-tested performance is not actual performance, but is hypothetical. The back-test calculations are based on the same methodology that was in effect when the indexes were officially launched. Complete index methodology details are available at www.rbpinstitute.com.

Past performance of the Indexes is not an indication of future results. Prospective application of the methodology used to construct the Index may not result in performance commensurate with the back-test returns shown. The back-test period does not necessarily correspond to the entire available history of the Index. Please refer to the methodology paper for the Index, available at www.rbpinstitute.com for more details about the index, including the manner in which it is rebalanced, the timing of such rebalancing, criteria for additions and deletions, as well as all index calculations. It is not possible to invest directly in an Indexes.


The Index returns shown do not represent the results of actual trading of investible assets/securities. S&P Dow Jones Indexes LLC maintains the Index and calculates the Index levels and performance shown or discussed, but does not manage actual assets. Index returns do not reflect payment of any sales charges or fees an investor may pay to purchase the securities underlying the Index or investment funds that are intended to track the performance of the Index. The imposition of these fees and charges would cause actual and back-tested performance of the securities/fund to be lower than the Index performance shown. As a simple example, if an index returned 10% on a US $100,000 investment for a 12-month period (or US$ 10,000) and an actual asset-based fee of 1.5% was imposed at the end of the period on the investment plus accrued interest (or US$ 1,650), the net return would be 8.35% (or US$ 8,350) for the year. Over 3 years, an annual 1.5% fee taken at year end with an assumed 10% return per year would result in a cumulative gross return of 33.10%, a total fee of US$ 5,375, and a cumulative net return of 27.2% (or US$ 27,200).

DISCLAIMER

“The Transparent Value SMID-Cap Aggressive Index”, “The Transparent Value SMID-Cap Market Index” and “The Transparent Value SMID-Cap Defensive Index” (the Indexes) are the properties of Transparent Value, LLC, which has contracted with S&P Dow Jones Indexes LLC or its affiliate (“S&PDJI”) to maintain and calculate the Index. The “Dow Jones U.S. Mid-Cap Total Stock Market Index” and the “Dow Jones U.S. Small-Cap Total Stock Market Index” are the properties of S&PDJI and/or their third party licensors and has been licensed by S&PDJI for use by Transparent Value, LLC in connection with the Index. S&PDJI shall have no liability for any errors or omissions in calculating the Indexes.





Indexes do not represent actual trading. Accordingly, these models should not be relied upon to make predictions of actual future account performance. Transparent Value has no obligation to provide recipients hereof with updates or changes to such data. Past performance of indexes of asset classes does not represent actual returns or volatility of actual accounts or investment managers, and should not be viewed as indicative of future results. Returns are unaudited. Results do not reflect the investment of dividends or other earnings. The figures for the index do not reflect the reinvestment of dividends and do not reflect the deduction of fees or expenses which would reduce returns. Investors cannot invest direct in the index.



Contact Us


© 2014 Transparent Value, LLC. All rights reserved. No part of this document may be circulated, quoted or reproduced for distribution without prior written approval from Transparent Value, LLC.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Guide to the

Transparent Value SMID-Cap Directional Allocation IndexSM

Guide to the Transparent Value SMID-Cap Directional Allocation IndexSM

2.

01. Introduction ....................................3

02. Index Attributes ..............................32.1 Base Dates and Values................................... ...32.2 Index Calculation................................... ............3 2.2.1 Index Formula................................... .....3 2.2.2 Input Data................................... ...........3 2.2.3 Stock Prices................................... ........3 2.2.4 Computational Precision......................... 3 2.2.5 Dissemination.................................... .....3

03. Index Construction Methodology ..43.1 Index Universe............................. ......................43.2 Index Composition.................. ...........................4 3.2.1 Indicators..... ..........................................4 3.2.2 Component Selection and Holdings..... ..4 3.3 Rebalancing.................. .....................................53.4 Snapshot Day. ...................................................53.5 Weighting............................................ ..............5

04. Calculations ...................................5

Contents


3.

01. IntroductionThe Transparent Value SMID-Cap Directional Allocation IndexSM is

part of the Transparent Value IndexSM family—a series of quantitative

strategy indexes offered by Transparent Value LLC® using rules-based

published analytics. The Transparent Value IndexesSM are designed to

measure the performance of investment strategies based on the criteria

established by Transparent Value LLC for the valuation of publicly

traded companies. The Transparent Value index methodology aims to

address two questions: (1) What is the Required Business Performance

(RBP®) needed to sustain the company’s stock price, and (2) What is

the probability that management will deliver this performance?

The Transparent Value SMID-Cap Directional Allocation IndexSM is

unique from other indexes in the Transparent Value IndexSM family

in that its methodology accounts for a moving average crossover

system, which reallocates the weights of the underlying Transparent

Value SMID-Cap Directional IndexesSM and cash component

at each rebalance. Currently included in the series are the U.S.

indexes listed below.

The Transparent Value SMID-Cap Directional Allocation IndexSM

reallocates weights among the Transparent Value SMID-Cap Market

IndexSM, the Transparent Value SMID-Cap Aggressive IndexSM,

the Transparent Value SMID-Cap Defensive IndexSM and a cash

component (earns 0 % return).

02. Index Attributes2.1 Base Dates and Base Values

The Transparent Value SMID-Cap Directional Allocation IndexSM has a

base date of December 31, 1999 and a base value of 1000.

2.2 Index Calculation

2.2.1 Index Formula


is calculated using an index-of-indexes approach. The underlying

Transparent Value SMID-Cap Directional IndexesSM are

weighted by RBP® probability scores.

2.2.2 Input Data

— Real-time prices are provided by Reuters.

— Corporate actions of the underlying indexes are researched by

S&P Dow Jones Indices staff using news services, regulatory filings

and information provided by the companies themselves.

2.2.3 Stock Prices

Intraday index values for the Transparent Value SMID-Cap Directional

Allocation IndexSM are computed using each security’s last-traded

price on its primary exchange. End-of-day index values are calculated

using each component’s primary-exchange closing price. If trading in a

stock is suspended while the market is open, the last-traded price for

that stock is used for all subsequent index computations until trading

resumes. If trading is suspended before the opening, the stock’s last

adjusted closing price is used to calculate the index. The adjusted

closing price reflects the ex-distribution effects on a share’s price of

corporate actions such as spinoffs, stock splits or returns of capital

implemented after the close of trading on their ex-dates.

2.2.4 Computational Precision

Index values are available with six decimal precision (note: index

values displayed by vendors are rounded to two decimal places).

Additional precision for index levels may be maintained internally for

index adjustment purposes.

2.2.5 Dissemination

The total-return version of the Transparent Value SMID-Cap

Directional Allocation IndexSM is disseminated via data vendors

every 15 seconds during U.S. stock exchange trading hours.

Index licensees also may access data on index values and index

constituents through end-of-day dissemination via the S&P Dow

Jones Indices FTP site. For a list of indexes and vendor codes

please visit the link below and select indexes for more information:

www.rbpinstitute.com

03. Index Construction Methodology3.1 Index Universe

The Transparent Value SMID-Cap Directional Allocation IndexSM takes

an index-of-indexes approach. The selection universe comprises

component stocks of Transparent Value SMID-Cap Directional

IndexesSM and a cash component. The allocations are determined by

the moving average crossover system at the time of the rebalance.

For information on the creation and maintenance of the underlying

indexes, please see the Rulebook to the Transparent Value SMID-Cap

Directional IndexesSM, on our website at www.rbpinstitute.com.

Transparent Value LLC calculates the RBP® probability for each

company in the index universe and the probability that each

company can deliver that performance.


4.

3.2 Index Composition

At each rebalance, index allocation and weights are determined

by a moving average crossover system based on primary and

secondary indicators.

3.2.1 Indicators

Primary Indicators:

• 12-month simple moving average (SMA) of The Conference

Board® Consumer Confidence Index® (CCI)*. (Positive if the

index is above the moving average; negative otherwise)

• 6-month SMA of The Conference Board Leading Economic

Index® (LEI)*. (Positive if the index is above the moving

average; negative otherwise)

• 250-day SMA of the Dow Jones US Large Cap Total Stock

Market Index (DWLT). (Positive if the index is above the

moving average; negative otherwise)

Secondary Indicators:

• 250-day SMA of Transparent Value SMID-Cap Directional

IndexesSM. (Positive if the index is above the moving average;

negative otherwise)

3.2.2 Component Selection and Holdings

At each snapshot day, moving averages for the index and each of the

underlying indexes are calculated. Reallocations are made when the

following conditions are met:

• In the event that all three primary indicators are positive

(above their respective moving average):

— The Transparent Value SMID-Cap Aggressive IndexSM

receives an allocation if it is above its moving average.

— The Transparent Value SMID-Cap Market IndexSM

receives an allocation if either of the following is true:

• It is above its moving average and the Transparent

Value SMID-Cap Aggressive IndexSM is above its

moving average.

• The Transparent Value SMID-Cap Aggressive IndexSM is

below its moving average.

• In the event that two of three primary indicators are positive:

— The Transparent Value SMID-Cap Market Index

receives an allocation.

• In the event that one of three primary indicators is positive:

— The Transparent Value SMID-Cap Market IndexSM

receives an allocation if it is above its moving average.

— The Transparent Value SMID-Cap Defensive IndexSM


• In the event that the three primary indicators are negative,

current LEI is less than the one-month-prior LEI, and the

two-month-prior LEI is less than the three-month-prior LEI:

— Cash receives an allocation if all primary signals are negative

and at least one of the primary signals was positive at the

previous scheduled or unscheduled rebalance.

— If the above conditions are not met, the Transparent Value

SMID-Cap Defensive IndexSM receives an allocation if it

is above its own moving average.

— Cash receives allocation if:

• The Transparent Value SMID-Cap Defensive IndexSM is

below its own moving average.

• The Transparent Value SMID-Cap Defensive IndexSM is

above its own moving average, but was below its own

moving average at the previous rebalance.

• In the event that the three primary indicators are negative and

either the current LEI is higher than the one-month-prior LEI,

or the two-month-prior LEI is higher than the three-month-

prior LEI:

— The Transparent Value SMID-Cap Defensive IndexSM


3.3 Rebalancing

The index is rebalanced quarterly, after the close of third Friday of

March, June, September and December.

The index also is rebalanced after the close of any Friday if LEI moves

above or below its moving average on the snapshot day.

3.4 Snapshot day

The snapshot day is always three business days prior to the rebalance

day.

3.5 Weighting


allocates weights to the underlying indexes equally based on the

number of underlying indexes selected to receive an allocation at the

time of the rebalance.


5.

The underlying Transparent Value SMID-Cap Directional IndexesSM are

RBP®-probability-weighted.

04. Calculations The return of each index is calculated daily by multiplying the returns of

the underlying indexes by the weighting assigned to the corresponding

components and then summing the weighted returns.

For more information on the Transparent Value SMID-Cap Directional Allocation IndexSM, email [email protected] or call 1-855-883-8637. Learn more at www.transparentvalue.com or visit our RBP Institute at www.rbpinstitute.com.


The Transparent Value SMID-Cap Directional Allocation Index (the “Index”) was first calculated on April 28, 2014, at the market close. All information presented prior to this date is back-tested. Back-tested performance is not actual performance, but is hypothetical. The back-test calculations are based on the same methodology that was in effect when the index was officially launched. Complete index methodology details are available at www.rbpinstitute.com.




DISCLAIMER

“Transparent Value SMID-Cap Directional Allocation Total Return Index, (the "Index") is the property of Transparent Value, which has contracted with S&P Dow Jones Indices LLC or its affiliate ("S&PDJI") to maintain and calculate the Indexes. The "Dow Jones U.S. Mid-Cap Total Stock Market Total Return Index" and the "Dow Jones U.S. Small-Cap Total Stock Market Total Return Index" are the properties of S&PDJI and/or their third party licensors and has been licensed by S&PDJI for use by Transparent Value in connection with the Indexes. S&PDJI shall have no liability for any errors or omissions in calculating the Indexes.








Contact Us


© 2014 Transparent Value, LLC. All rights reserved. No part of this document may be circulated, quoted or reproduced for distribution without prior written approval from Transparent Value, LLC. RULE-RBP-DAI-061812

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Guide to the

Transparent Value SMID-Cap Directional IndexesSM

Guide to the Transparent Value SMID-Cap Directional IndexesSM

2.

01. Introduction ....................................3

02. Index Attributes ..............................32.1 Base Dates and Values ................................. ..32.2 Index Calculation ............................................ .3

2.2.1 Index Formula.........................................3 2.2.2 Input Data...............................................3 2.2.3 Stock Prices............................................3 2.2.4 Computational Precision..........................3 2.2.5 Dissemination..........................................3

03. Index Construction Methodology ..33.1 Index Universe ................................................33.2 Stock Selection ...............................................43.3 Weighting ........................................................5

04. Ongoing Review ............................54.1 Shares and Float .............................................54.2 Selection Lists .................................................54.3 Ongoing Maintenance Due to Corporate Actions ...........................................6 4.3.1 Spinoffs ..................................................6 4.3.2 Adjustments for Corporate Actions ........64.4 Composition Reviews ......................................6

05. Calculations and Adjustments .......65.1 Index Formula .................................................6

06. Data Correction Policy ...................76.1 Intraday Corrections ........................................76.2 Index-Related Data and Divisor Corrections ....7

07. Methodology Changes ...................7

Contents


3.

01. Introduction The Transparent Value SMID-Cap Directional IndexSM is part of the

Transparent Value IndexSM family—a series of quantitative strategy

indexes offered by Transparent Value LLC® using rules-based

published analytics. The RBP® index methodology aims to address

two questions: (1) What is the Required Business Performance

(RBP®) needed to sustain the company’s stock price, and (2) what is

the probability that management will deliver this performance?

The Transparent Value SMID-Cap Directional IndexesSM are unique

from other indexes in the Transparent Value Index family in that they

incorporate “beta” value, company fundamental factors and RBP®

probabilities as selection criteria with the aim of mitigating systemic

and behavioral volatility. For more information concerning the method

of calculating the beta, company fundamental factors, see Section 3.2.

The Transparent Value SMID-Cap Directional IndexSM currently

includes the indexes listed below. This rulebook describes the

methodology for these indexes.

— Transparent Value SMID-Cap Aggressive IndexSM consists of

100 companies measured to have a beta factor greater than

one, highest average fundamental values and highest RBP®

probability.

— Transparent Value SMID-Cap Market IndexSM consists of 100

companies measured to have a beta factor closest to one,

highest average fundamental values and highest RBP® probability.

— Transparent Value SMID-Cap Defensive IndexSM consists of 100

companies measured to have a beta factor less than one,

highest average fundamental values and highest RBP® probability.

02. Index Attributes2.1 Base Dates and Base Values

Each of the Transparent Value SMID-Cap Directional IndexesSM has a

base date of December 31, 1998, and a base value of 1000.

2.2 Index Calculation

2.2.1 Index Formula

The Transparent Value SMID-Cap Directional IndexesSM are

calculated using a Laspeyres formula. A detailed explanation of the

formula is provided in section 5.1 – Index Formula.

2.2.2 Input Data

— Real-time prices of the index components are provided by

Reuters.

— Corporate actions of the index components are researched

by S&P Dow Jones Indices staff using news services, regulatory

filingsandinformationprovidedbythecompaniesthemselves.

2.2.3 Stock Prices

Intraday index values for the Transparent Value SMID-Cap Directional

IndexesSM are computed using each component’s last-traded price

on its primary exchange. End of day index values are calculated

using each component’s primary-exchange closing price. If trading

in a stock is suspended while the market is open, the last-traded

price for that stock is used for all subsequent index computations

until trading resumes. If trading is suspended before the opening, the

stock’s last adjusted closing price is used to calculate the index. The

adjustedclosingpricereflectstheex-distributioneffectsonashare’s

price of corporate actions such as spinoffs, stock splits or returns of

capital implemented after the close of trading on their ex-dates.

2.2.4 Computational Precision

Index values are rounded to two decimal places and divisors are

rounded to integers. Values derived by the index calculation engine

from a corporate action used for the divisor adjustments and index

computations are rounded to seven decimal places.

2.2.5 Dissemination

Both the price-return and total-return versions of the Transparent

Value SMID-Cap Directional IndexesSM are disseminated via data

vendors every 15 seconds during U.S. stock exchange trading

hours. Index licensees also may access data on index values

and index constituents through end-of-day dissemination via

the S&P Dow Jones Indices FTP site. For a list of indexes and

vendor codes please visit the link below and select indexes for

more information:

www.rbpinstitute.com

03. Index Construction Methodology3.1 Index Universe

The selection universe for the Transparent Value SMID-Cap

Directional IndexesSM includes all common stocks in the Dow

Jones U.S. Mid-Cap Total Stock Market IndexSM and the Dow

Jones U.S. Small-Cap Total Stock Market IndexSM that pass

liquidity screens and have RBP® probability at the time of its

review. For information on the creation and maintenance of the

Dow Jones U.S. Mid-Cap Total Stock Market IndexSM and the

Dow Jones U.S. Small-Cap Total Stock Market IndexSM, please

see Guide to the Dow Jones U.S. Total Stock Market IndexesSM

available on the Dow Jones IndexesSM Website at

www.djindexes.com/totalstockmarket.


4.

3.2 Stock Selection

Stocks are selected for the Transparent Value SMID-Cap Directional

IndexesSM starting with their respective index universe based on the

following steps:

For a stock to be eligible for selection to the index, it must pass the

following liquidity screens:

— Stocks require an RBP® probability.

— Stockswithfreefloatoflessthan50%aredeemedineligible.

— Stocks with a price of $3 or less for two consecutive

quarters are deemed ineligible.

— Stocks with a six-month average daily trading volume of

less than 250,000 shares for two consecutive quarters are

deemed ineligible.

— Stocks with a six-month average daily trading value of less than

$5 million for two consecutive quarters are deemed ineligible.

Transparent Value calculates the Required Business Performance®

for each company in the index universe and the probability that

each company can deliver that performance. S&P Dow Jones

Indices calculates a 12 month beta value for each stock in the

index universe.

ThefollowingisthedefinitionofBeta:

Betai = Beta of stock i with respect to the Dow Jones U.S.

Small-Cap Total Stock Market IndexSM =

where:

Rit is the total one-day return for stock i on day t

Rt is the total one-day return for the Dow Jones U.S. Small-Cap

Total Stock Market IndexSM on day t, and

t=allbusinessdaysinthe12monthspriortotheendofthefirstbusiness date of the rebalancing month.

Before the component selection process begins, all of the

following data availability criteria must be met:

— All stocks eligible for selection require an RBP® probability.

— Daily total return for each stock must be available for 12

monthspriortotheendofthefirstbusinessdateofthe

rebalancing month to calculate beta values.

— All stocks eligible for selection must have ROE (Trailing

12-month net income / book value), FCF Yield (Trailing

12-monthfreecashflow/fullmarketcap),AssetGrowth

(current total asset / prior year total assets) values for

calculation of Z-scores.

The following steps are taken for component selection for the

Transparent Value SMID-Cap Market IndexSM. Components must

have 12-month beta, RBP® probability, ROE, FCF Yield, and Asset

Growth available to be eligible.

1. The 400 stocks from the liquid index universe with beta values

closest to one are eligible.

a) All eligible components are ranked in descending order by

ROE and the 200 top-ranked stocks are selected.

b) All eligible components are re-ranked in descending order

by FCF yield and the 200 top-ranked stocks are selected.

c) All eligible components are re-ranked in descending order

by asset growth and the bottom-ranked 200 stocks are

selected.

d) The selected stocks from a), b), and c) are de-duplicated

andcombinedtocreatethefinalselectionpool.

2. Foreachofthethreefactors,extremevaluesabove97.5%and

below2.5%bycomponentcountarenormalizedtothecut-off

valuesat97.5%and2.5%.


4. Z-scoresaboveandbelow2/-2arenormalizedto2/-2.

5. Multiply Z-scores of asset growth by -1 to account for inverse

relationship of the factor.

6. Z-scores for 3 factors are summed and divided by 3 to give the

average Z-score.

7. Components ranked in the top 200 of average Z-scores remain

eligible for selection and then sorted by RBP® probability.

8. The top 100 companies by RBP® probability are selected for the

Transparent Value SMID-Cap Market Index.


Transparent Value SMID-Cap Aggressive Index. Components must



1. The stocks from the liquid index universe with beta values

greater than one are eligible




by FCF yield and the 200 top- ranked stocks are selected.



selected.



Covariance (Rit , Rt )

Variance(Rt )


5.









average Z-score.



8. The top 100 companies by RBP® probability are selected for

the Transparent Value SMID-Cap Aggressive Index.


Transparent Value SMID-Cap Defensive Index. Components must



1. The stocks from the liquid index universe with beta values less

than one are eligible.




by FCF yield and the 200 top-ranked stocks are selected.



selected.











average Z-score.



8. The top 100 companies by RBP® probability are selected for

the Transparent Value SMID-Cap Defensive Index.

To limit unnecessary turnover, a buffer rule combining RBP®

probabilities and average Z-scores is used. Current components

of Transparent Value U.S. SMID-Cap Directional Indexes would

stayintheindexesifthefollowingconditionissatisfiedatquarterly

review:

1. Average Z-scores ranked in top 200 of the group and RBP®

probabilitiesgreaterthanthebottom20%ofrespectivegroups.

A 25-stock buffer is used for each of the factors.

In addition, at the time of September rebalance only, components

of the existing Transparent Value SMID-Cap Directional IndexesSM

must pass the appropriate beta screen before buffer rules apply.

3.3 Weighting

The Transparent Value SMID-Cap Directional IndexesSM are

weighted based on the RBP® probability.

04. Ongoing Review4.1 Shares and Float

Because the Transparent Value SMID-Cap Directional IndexesSM are

RBP®probabilityweighted,freefloatfactorsandsharesoutstanding

changes do not affect the calculation of the indexes.

Stock offerings and stock buybacks also do not affect the indexes.

At each quarterly index rebalancing each component is weighted

according to its RBP® probability. A theoretical dollar amount is

allocated to each component security according to its weight,

resultinginafixednumberofsharesoutstandingofeachstockin

the index. Shares outstanding totals for individual companies are

not rounded to whole numbers, but are carried as full and fractional

shares.

4.2 Watch Lists

Any component removed from the Dow Jones U.S. Mid-Cap Total Stock Market IndexSM and Dow Jones U.S. Small-Cap Total Stock

Market IndexSM will be removed from the Transparent Value SMID-

Cap Directional IndexesSM at the same time it is removed from the Dow Jones U.S. Total Stock Market IndexesSM. Watch lists

are updated monthly for each of the Transparent Value SMID-Cap Directional IndexesSM. If a company is removed from one of the

indexes, it will be replaced by the noncomponent with the highest

probability on the watch list. The replacement company will be

added to the index at the same weight as the stock it replaces. The

new component’s weightwillberebalancedtoreflecttheactual

RBP® probability weight at the next quarterly index review.


6.

t+1

4.3 Ongoing Maintenance Due to Corporate Actions4.3.1 Spinoffs

If an index constituent splits or spins off a portion of its business to

form one or more new companies, all of the companies involved

in the spinoff will be immediately evaluated for the Transparent

Value SMID-Cap Directional IndexesSM, as long as they qualify for

membership in the Dow Jones U.S. Mid-Cap Total Stock Market

IndexSM or Dow Jones U.S. Small-Cap Total Stock Market IndexSM.

However, because the Transparent Value SMID-Cap Directional

IndexesSMmusthavefixedcomponentsatalltimes,onlyoneofthe

companies involved in the spinoff may remain in the index. In almost

all cases, the parent will remain; however, in cases where the spinoff

is far larger and more associated with the company’s leading lines

of business than the parent is, Transparent Value Indexes may

retain the spinoff and remove the parent from the indexes. Each

involvedcompanywillremaininthesamesizeindexasthepre-

spinoffparentuntilthenextsemiannualsizereview.Proceedsfrom

the sale of the removed company will be reinvested in shares of

the surviving index component, keeping the component’s weight

unchanged in the index.

4.3.2 Adjustments for Corporate Actions

All price adjustments due to corporate actions are applied in

accordance with the methodology for the Dow Jones U.S. Total

Stock Market IndexSM. However, the RBP® weight factors are

adjusted for all price adjustments except for regular cash dividends.

The complete description of these adjustments can be found in

the rulebook to the Dow Jones U.S. Total Stock Market IndexesSM.

Replacements are made when a component is deleted due to

mergers, takeovers or bankruptcies.

4.4 Composition Reviews

The index composition is reviewed on a quarterly basis. For

each composition review, Transparent Value takes a snapshot

of the common stock components of the Dow Jones U.S.

Mid-Cap Total Stock Market IndexSM and the Dow Jones U.S.

Small-Cap Total Stock Market IndexSMonthefirstbusinessday

of March, June, September and December. Transparent Value

calculates Required Business Performance® and the probability

weights for each company.

For each index, the components are rebalanced on a quarterly

basis and changes are implemented after the close of trading on

the third Friday of March, June, September and December. All

review changes, including additions, deletions and new component

weightsareannouncedfivebusinessdayspriortothethirdFriday

of March, June, September and December. Between review

periods, a component’s actual weight in the index is determined by

its market performance.

05. Calculations and Adjustments5.1 Index Formula

The indexes are calculated using a Laspeyres formula.

The indexes are computed as follows:

Theabove-mentionedformulacanbesimplifiedas:

Divisor is calculated as:

n = the number of stocks in the index.

pi,t = the close price of stock l at time (t).

P1,0 = the close price of the stock l at the base date.

qi,t = the number of shares held for component i at time (t).

qi,0 = the number of shares held for component i at the base date.

Ct = the adjustment factor for the base date market capitalization.

Mt = the market capitalization of the index at time (t).

Bt = the adjusted base date market capitalization of the index at

time (t).

On the rebalance date, the index shares for each constituent are

recalculated so that every component would be RBP® probability

weighted within the index portfolio. The following formula is used to

calculate index shares on rebalance date:

Divisor Adjustment

The following formula will be used for divisor adjustment:

Dt = Divisor at time (t)

Dt+1 = Divisor at time (t+1)

Pi,t = stock close price of component i at time (t).

qi,t = stock close price of component i at time (t).

MCt+1 = add new components’ market capitalization and

adjusted market capitalization.


7.

For more information on the Transparent Value SMID-Cap Directional IndexesSM, email [email protected] or call 1-855-883-8637. Learn more at www.rbpinstitute.com or visit the Transparent Value website at www.transparentvalue.com.

06. Data Correction PolicyTo maintain a high standard of data integrity, a series of procedures

have been implemented to ensure accuracy, timeliness and

consistency. Input prices are monitored using a variety of

computerizedrange-checkwarningsystemsforbothticker-plant

and real-time index systems. Fault tolerant methods are employed

in the collection of market and corporate action data. Various

verificationandaudittasksareperformedtoensurethequalityof

the real-time data feeds and related market data.

While efforts are made to ensure the accuracy of the information

used for the index calculation, an index error may occur due to

incorrect or missing data, including trading prices, exchange rates,

shares outstanding and corporate actions, due to operational errors

or other reasons.

6.1 Intraday Corrections

Corrections will be made for bad prices and incorrect or

missing corporate actions as soon as reasonably possible

after detection. Since the indexes are calculated on a real-time

basis,anincorrectindexvaluetickwillnotbefixedretroactively.

Incorrect daily high/low index values will be corrected as soon

as reasonably practicable.

6.2 Index-Related Data and Divisor Corrections

Incorrect pricing and corporate action data for individual issues in the

database will be corrected upon detection. In addition, an incorrect

divisorofanindex,ifdiscoveredwithinfivedaysofitsoccurrence,

willalwaysbefixedonthedayitisdiscoveredtopreventanerror

from being carried forward. If a divisor error is discovered more

thanfivedaysafteroccurrence,anyadjustmentwilldependupon

howsignificanttheerroris,howfarbacktheerroroccurredandthe

feasibility of performing the adjustment.

07. Methodology ChangesTransparent Value, L.L.C. reserves the right to modify the index

methodology at any time.



The Transparent Value SMID-Cap Directional Indexes (the “Indexes”) were first calculated on April 9, 2014, at the market close. All information presented prior to this date is back-tested. Back-tested performance is not actual performance, but is hypothetical. The back-test calculations are based on the same methodology that was in effect when the index was officially launched. Complete index methodology details are available at www.rbpinstitute.com.




DISCLAIMER

“The Transparent Value SMID-Cap Aggressive Index”, “The Transparent Value SMID-Cap Market Index” and “The Transparent Value SMID-Cap Defensive Index” ("the Indexes") are the properties of Transparent Value, L.L.C, which has contracted with S&P Dow Jones Indices LLC or its affiliate (“S&PDJI”) to maintain and calculate the Indexes. The “Dow Jones U.S. Mid-Cap Total Stock Market Index and Dow Jones U.S. Small-Cap Total Stock Market Index” are the properties of S&PDJI and/or their third party licensors and has been licensed by S&PDJI for use by Transparent Value, LLC in connection with the Indexes. S&PDJI shall have no liability for any errors or omissions in calculating the Indexes.







Contact Us


© 2014 Transparent Value, LLC. All rights reserved. No part of this document may be circulated, quoted or reproduced for distribution without prior written approval from Transparent Value, LLC. RULE-GEN-662-112211

tv smid-cap directional allocation summary - february 28th, 2015

Documents

transparent value indexes

required business performance

future business performance

allocation system

market momentum

number of components

rbp probabilities

broader market moves