Mutual Funds

Overview

The family of indexes jointly created by Dow Jones and Transparent Value, which underpins the mutual funds, were launched in May 2009. The mutual funds are designed to fuse fundamental research with a consistent quantitative approach to security selection and portfolio construction in an effort to generate attractive risk-adjusted returns, even during a difficult market environment.

The end result is a mutual fund that provides investors with a hybrid investment strategy combining the benefits of passive investing, transparency and rules, with the alpha generating capability potential of fundamental analysis generally associated with active portfolio management. This seeks to minimize the errors that can result from inconsistency and emotion inherent in a purely qualitative investment process and aims to avoid the “black box” mindset of the purely quantitative strategies. Of course, no investment strategy can guarantee investment returns and the RBP^® probabilities can not guarantee the profit or performance of the Transparent Value Funds.

Transparent Value calculates the Required Business Performance^® probabilities used in the Dow Jones RBP Indexes^SM and licenses the RBP^® probabilities exclusively to Dow Jones RBP Indexes^SM for the construction of domestic and global indexes that are used in our mutual funds.

The following family of Dow Jones RBP Indexes^SM is the basis of the Transparent Value Funds.

Mutual Funds

DOW JONES RBP INDEXES^SM	TRANSPARENT VALUE FUNDS
Dow Jones RBP U.S. Large-Cap Aggressive Index	Transparent Value Dow Jones RBP U.S. Large-Cap Aggressive Index Fund
Dow Jones RBP U.S. Large-Cap Defensive Index	Transparent Value Dow Jones RBP U.S. Large-Cap Defensive Index Fund
Dow Jones RBP U.S. Large-Cap Market Index	Transparent Value Dow Jones RBP U.S. Large-Cap Market Index Fund

Alpha – coefficient measuring the portion of an investment’s return arising from specific (non-market) risk.

The funds seek to track a quantitative strategy index and, as a result, the funds may have a lower return.

Portfolio Characteristics

Index Construction and Rebalancing

Using the funds

RBP^®

Required Business Performance^® (RBP^®) is not only the revenue necessary to support a given stock price for a given company; it also aims to tell us at the most granular level how many iPods^® Apple has to sell, or how many stores Starbucks has to open, or how many packages FedEx has to ship to support the price of its stock.

RBP^® probability

Measures the likelihood that management can deliver the required business performance necessary to support the price of its stock.

RBP^® methodology

A reverse discounted free cash flow (DCF) analysis utilizing a company’s current stock price, its income statement, balance sheet and cash flow statements to determine what the current price of its stock implies about future free cash flow (FCF) and RBP^®.

Discounted Cash Flow (DCF) analysis is a means to value a company by projecting the cash flows it will generate in the future and discounting them by the appropriate cost of capital, or interest rate, to determine the present value of those cash flows.

Free Cash Flow (FCF) is the amount of cash generated by a company from its normal operations which is available for distribution to investors, after taking into account any necessary investment.

RBP^® analysis platform

The Transparent Value decision support tool is an interactive database which consists of Required Business Performance^® (RBP^®) values and RBP^® probabilities for more than 2,000 global stocks that are used to construct the Dow Jones RBP^® Family of Indexes.

RBP^® snapshot

Provides updated company-specific RBP^® information on a quarterly basis. The RBP^® Snapshot consists of the RBP^® probability and RBP^® values for a particular company.