Nasdaq BulletShares Ladder Index Family Methodology

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1 Nasdaq BulletShares Ladder Index Family Methodology Index Description Nasdaq BulletShares Ladder Indexes are modified equal weighted laddered bond ETF indexes that use Guggenheim BulletShares ETFs to track various maturity segments of the investment grade and high yield corporate bond markets. Each BulletShares Ladder Index rebalances over the course of the first six months of the year. Index Calculation The Nasdaq BulletShares Ladder Indexes are modified equal weighted index. The value of the Index equals the aggregate value of the Index share weights, also known as the Index Shares, of each of the Index Securities multiplied by each such security s Last Sale Price 1, and divided by the divisor of the Index. The divisor serves the purpose of scaling such aggregate value to a lower order of magnitude which is more desirable for reporting purposes. The Indexes began on April 10, 2017 at a base value of 1, The formula for index value is as follows: Aggregate Adjusted Market Value/Divisor The formula for the divisor is as follows: (Market Value after Adjustments/Market Value before Adjustments) X Divisor before Adjustments Two versions of the Index are calculated, as shown in Appendix A: The price return index is ordinarily calculated without regard to cash dividends on Index Securities. The total return index reinvests cash dividends on the ex-date. All Indexes reflect extraordinary cash distributions. The Indexes are calculated during the trading day and are disseminated once per second from 09:30:01 to 17:16:00 ET. The closing value of the Index may change up until 17:15:00 ET due to corrections to the Last Sale Price of the Index Securities. Eligibility Index eligibility is limited to specific security types only. The security types eligible for the Index include Guggenheim BulletShares ETFs only. 1 For purposes of this document, Last Sale Price refers to the last regular way trade reported on such security s Index Market. The Index Market is the listing market for which prices are received and used by Nasdaq in the Index calculation and generally will represent the most liquid trading market of the Index Security. If a security does not trade on its Index Market on a given day or the Index Market has not opened for trading, the most recent last sale price from the Index Market (adjusted for corporate actions, if any) is used. For securities where Nasdaq is Index Market, the Last Sale Price may be the Nasdaq Official Closing Price (NOCP) when Nasdaq is closed. 1

2 Eligibility Criteria To be eligible for inclusion in the Nasdaq BulletShares Ladder Indexes, the exchange traded fund must be in the Guggenheim Investment Grade or High Yield BulletShares ETF Family. The Nasdaq BulletShares Ladder Index suite will consist of the following families: Investment Grade BulletShares Investment Grade 3 Year Ladder BulletShares Investment Grade 5 Year Ladder BulletShares Investment Grade 7 Year Ladder High Yield BulletShares High Yield 3 Year Ladder BulletShares High Yield 5 Year Ladder BulletShares High Yield 7 Year Ladder Index Evaluation The Indexes are evaluated annually on the last business day in June. Security deletions are made effective after the close of trading five (5) business days into the month of July. Additionally, if at any time during the year other than the Evaluation, an Index Security no longer meets the Eligibility Criteria, or is otherwise determined to have become ineligible for inclusion in the Index, the security is removed from the Index and is not replaced. In all cases, a security is removed from the Index at its Last Sale Price. If, however, at the time of its removal the Index Security is halted from trading on its primary listing market and an official closing price cannot readily be determined, the Index Security may, in Nasdaq s discretion, be removed at a zero price. The zero price will be applied to the Index Security after the close of the market but prior to the time the official closing value of the Index is disseminated, which is ordinarily 17:16:00 ET. Index Maintenance Outside of the index rebalancing schedule (see Index Rebalancing below) Index Share changes are not made between Index Evaluations. However, changes arising from stock dividends and stock splits are made to the Index on the evening prior to the effective date of such corporate action. In the case of certain spin-offs or rights issuances, the price of the Index Security is adjusted and a corresponding adjustment is made to the Index Shares such that the weight of the Index Security does not change as a result of the action. A special cash dividend announced by the listing exchange, will result in an adjustment to the Last Sale Price of an Index Security prior to market open on the ex-date for the special amount distributed. A corresponding adjustment will be made to the Index Shares of the security such that the weight of the Index Security will not change as a result of the action. A special dividend may also be referred to as extra, extraordinary, non-recurring, one-time, unusual, etc. Ordinarily, whenever there is a change in Index Shares, a change in an Index Security or a change to the price of an Index Security due to spin-offs, rights issuances or special cash dividends as mentioned above, the divisor is adjusted to ensure that there is no discontinuity in the value of the Index which might otherwise be caused by any such change. 2

3 Index Rebalancing The Index employs a modified equal weight methodology as described below. On the last day in June, both the Investment Grade and High Yield Ladders are separately constructed by equally weighting Guggenheim BulletShares ETFs in year (T+1), (T+2), (T+N), where N equals the number of years in the ladder and T is the year in which the evaluation is occurring. June 2016 Evaluation Sample Holdings 3 Year Ladder 5 Year Ladder 7 Year Ladder Beginning from the last business day in January, at the end of each month, until the end of June, roll 1/6 of the current maturity year (next to close/expire) Guggenheim BulletShares ETF to the next ETF in the ladder. Continue to roll proportional weights at each month-end until the June month-end (1/6 for January, 1/5 for February, 1/4 for March, 1/3 for April, 1/2 for May and remaining balance for June see the Roll Schedule below). At the end of June, rebalance the weights for all ETFs in the index to be equal weight and the next to expire ETF will be removed from the index (it will have been fully rolled out of the index at the June month-end). Weights do not change until the following end of January. The reference date for each of these rebalances will occur at the end of each month and are made effective after the close of trading five (5) business days into the following month Roll Schedule Jan 16.67% Feb 20.00% Mar 25.00% Apr 33.33% May 50.00% June % 3

4 3 Year Ladder Example: Guggenheim BulletShares ETF: Initial weight Expiration Year (1/29/2016) % Weight calculation date (after the close) 1/29/2016 2/29/2016 3/31/2016 4/29/2016 5/31/2016 6/30/2016 Shares calculation effective date (after the close) 2/5/2016 3/7/2016 4/7/2016 5/6/2016 6/7/2016 7/8/2016 Guggenheim BulletShares ETF: Expiration Year Weight Weight Weight Weight Weight Weight % 22.22% 16.67% 11.11% 5.56% 0.00% 2017 No change No change No change No change No change 33.33% 2018 No change No change No change No change No change 33.33% % 11.11% 16.67% 22.22% 27.78% 33.33% The example above demonstrates a 5.56% roll per month from the near term maturity (2016) instrument to the latest maturing instrument (2019) given a 3-year ladder. In the instance of the 5-year ladder, the percentage would be 3.33% and in the case of the 7-year ladder, this percentage would be 2.38%. Note that it's possible that the 2016 ETF did not have an official weight of 33.33% at the end of January 2016 (1/29/2016), which marks the weight utilized at the start of the roll (due to market performance from the prior full equal weighting rebalance from June 2015 that went effective on July 8, 2015). Further, the weights that rolled from the Guggenheim BulletShares 2016 ETF into the Guggenheim BulletShares 2019 ETF will most likely not be exactly as illustrated because the performance between the Guggenheim BulletShares 2016 ETF and Guggenheim BulletShares 2019 ETF will have varied in relation to one another as well as with the Guggenheim BulletShares 2017 and Guggenheim BulletShares 2018 ETFs. Overall, the roll from the Guggenheim BulletShares 2016 ETF and the Guggenheim BulletShares 2019 ETF is calculated based on the snapshot weight times the % in the roll schedule for illustrative purposes we assume no change in market prices between month ends but they will of course change. Nasdaq may, from time to time, exercise reasonable discretion as it deems appropriate in order to ensure Index integrity. 4

5 Appendix A Symbol Index Name NQBIG3 Nasdaq BulletShares Investment Grade 3 Year Ladder Index NQBIG3T Nasdaq BulletShares Investment Grade 3 Year Ladder Total Return Index NQBIG5 Nasdaq BulletShares Investment Grade 5 Year Ladder Index NQBIG5T Nasdaq BulletShares Investment Grade 5 Year Ladder Total Return Index NQBIG7 Nasdaq BulletShares Investment Grade 7 Year Ladder Index NQBIG7T Nasdaq BulletShares Investment Grade 7 Year Ladder Total Return Index NQBHY3 Nasdaq BulletShares High Yield 3 Year Ladder Index NQBHY3T Nasdaq BulletShares High Yield 3 Year Ladder Total Return Index NQBHY5 Nasdaq BulletShares High Yield 5 Year Ladder Index NQBHY5T Nasdaq BulletShares High Yield 5 Year Ladder Total Return Index NQBHY7 Nasdaq BulletShares High Yield 7 Year Ladder Index NQBHY7T Nasdaq BulletShares High Yield 7 Year Ladder Total Return Index April