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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 333-256687
Guggenheim Active Allocation Fund
(Exact name of registrant as specified in charter)
227 West Monroe Street, Chicago, IL 60606
(Address of principal executive offices) (Zip code)
Amy J. Lee
227 West Monroe Street, Chicago, IL 60606
(Name and address of agent for service)
Registrant's telephone number, including area
code: (312) 827-0100
Date of fiscal year end: May 31
Date of reporting period: June 1, 2023 - May
31, 2024
Item 1. Reports to Stockholders.
The registrant's annual report transmitted to shareholders pursuant
to Rule 30e-1 under the Investment Company Act of 1940, as amended (the “Investment Company Act”), is as follows:
![](https://www.sec.gov/Archives/edgar/data/1864208/000182126824000181/image_005.jpg)
Guggenheim
Funds Annual Report
Guggenheim
Active Allocation Fund
GuggenheimInvestments.com |
CEF-GUG-AR-0524 |
GUGGENHEIMINVESTMENTS.COM/GUG
...YOUR
PATH TO THE LATEST, MOST UP-TO-DATE INFORMATION ABOUT GUGGENHEIM ACTIVE ALLOCATION FUND
The shareholder
report you are reading right now is just the beginning of the story.
Online at
guggenheiminvestments.com/gug, you will find:
| | Daily,
weekly and monthly data on share prices, net asset values, distributions, dividends and more |
| | Portfolio
overviews and performance analyses |
| | Announcements,
press releases and special notices |
| | Fund
and adviser contact information |
Guggenheim
Partners Investment Management, LLC and Guggenheim Funds Investment Advisors, LLC are continually updating and expanding shareholder
information services on the Funds website in an ongoing effort to provide you with the most current information about how your Funds
assets are managed and the results of our efforts. It is just one more small way we are working to keep you better informed about your
investment in the Fund.
|
|
DEAR
SHAREHOLDER (Unaudited) |
May
31, 2024 |
We thank
you for your investment in the Guggenheim Active Allocation Fund (the Fund). This report covers the Funds performance
for the 12-month period ended May 31, 2024 (the Reporting Period).
To learn
more about the Funds performance and investment strategy, we encourage you to read the Economic and Market Overview and the Managements
Discussion of Fund Performance, which begin on page 5. There you will find information on Guggenheims investment philosophy, views
on the economy and market environment, and information about the factors that impacted the Funds performance during the Reporting
Period.
The Funds
investment objective is to maximize total return through a combination of current income and capital appreciation. The Fund seeks to
achieve its investment objective by investing in a wide range of both fixed-income and other debt instruments selected from a variety
of sectors and credit qualities. The Fund may also invest in common stocks and other equity investments that the Funds sub-adviser
believes offer attractive yield and/or capital appreciation potential. The Fund uses tactical asset allocation models to determine the
optimal allocation of its assets between fixed-income and equity securities.
All Fund
returns citedwhether based on net asset value (NAV) or market priceassume the reinvestment of all distributions.
For the Reporting Period, the Fund provided a total return based on market price of 21.87% and a total return based on NAV of 13.85%.
At the end of the Reporting Period, the Funds market price of $15.02 per share represented a discount of 8.86% to its NAV of
$16.48 per share.
Past performance
is not a guarantee of future results. All NAV returns include the deduction of management fees, operating expenses, and all other Fund
expenses. The market price of the Funds shares fluctuates from time to time, and it may be higher or lower than the Funds
NAV.
During the
Reporting Period, the Fund paid a monthly distribution of $0.118750 per share. The most recent distribution represents an annualized
distribution rate of 9.49% based on the Funds closing market price of $15.02 per share at the end of the Reporting Period.
The Funds
distribution rate is not constant and the amount of distributions, when declared by the Funds Board of Trustees, is subject to
change. There is no guarantee of any future distribution or that the current returns and distribution rate will be maintained. Please
see the Distributions to Shareholders & Annualized Distribution Rate table on page 15, and Note 2(f) on page 74 for more information
on distributions for the period.
We encourage
shareholders to consider the opportunity to reinvest their distributions from the Fund through the Dividend Reinvestment Plan (DRIP),
which is described on page 197 of this report. When shares trade at a discount to NAV, the DRIP takes advantage of the discount by reinvesting
the monthly dividend distribution in common shares of the Fund purchased in the market at a price less than NAV.
GUG l
GUGGENHEIM ACTIVE ALLOCATION FUND ANNUAL REPORT l 3
|
|
DEAR
SHAREHOLDER (Unaudited) continued |
May
31, 2024 |
Conversely,
when the market price of the Funds common shares is at a premium above NAV, the DRIP reinvests participants dividends in
newly issued common shares at the greater of NAV per share or 95% of the market price per share. The DRIP provides a cost-effective means
to accumulate additional shares and enjoy the benefits of compounding returns over time. The DRIP effectively provides an income averaging
technique for shareholders to accumulate a larger number of Fund shares when the market price is depressed than when the price is higher.
We appreciate
your investment and look forward to serving your investment needs in the future. For the most up-to-date information on your investment,
please visit the Funds website at guggenheiminvestments.com/gug.
Sincerely,
Guggenheim Funds Investment Advisors,
LLC
Guggenheim Active Allocation Fund
June 30, 2024
4 l
GUG l GUGGENHEIM ACTIVE ALLOCATION FUND ANNUAL REPORT
|
|
ECONOMIC
AND MARKET OVERVIEW (Unaudited) |
May
31, 2024 |
In recent
quarters, the U.S. economy has demonstrated continued strength as fiscal spending helped defy predictions of a U.S. Federal Reserve (the
Fed) induced recession. Inflation continues to gradually recede, albeit in fits and starts, leaving the Fed on hold to preserve
its monetary policy optionality for now. Our economic outlook has continued to improve as the aggregate economy has not responded to
rate hikes in the usual ways, even as higher rates weighed on some sectors and reinforced our outlook for increasing bifurcation across
the economy and markets. While factors like fiscal stimulus and immigration have helped prop up the economy, we do not believe they will
support the economic cycle indefinitely. Our base case is for a benign slowdown in real gross domestic product (GDP) growth
although we view risks to this forecast as tilted to the downside, particularly relative to the improved expectations of the market.
Optimistic
expectations built into market pricing are the driving force behind the recent easing in financial conditions. The Feds own financial
conditions gauge suggests little headwind to growth from broad financial conditions. But most of the easing has been driven by narrow
gains in equity valuations, leaving the economy vulnerable to a pullback in risk sentiment.
Optimism
can also be seen in forecasts of accelerating corporate earnings growth, with the S&P 500 earnings per share expected to grow 12%
this year after just 2% growth in 2023. While our baseline view is also relatively constructive on the economy, and anticipated Fed easing
later this year is expected to help support the growth outlook, we still view risks as skewed to the downside. Signs of economic bifurcation
and more cautious consumers may weigh on growth more than currently anticipated, particularly if softening in labor market indicators
continues.
However,
even as slower growth or shifts in sentiment create some potential for spread widening, all-in yields remain attractive on a historical
basis and are still near decade plus highs. In addition, the Feds attention to downside risks suggests to us that any substantial
shift in conditions could be met with expectations of greater monetary policy easing and could create a favorable environment for active
fixed-income investors.
The opinions
and forecasts expressed may not actually come to pass. This information is subject to change at any time, based on market and other conditions,
and should not be construed as a recommendation of any specific security or strategy.
GUG l
GUGGENHEIM ACTIVE ALLOCATION FUND ANNUAL REPORT l 5
|
|
MANAGEMENTS
DISCUSSION OF FUND PERFORMANCE (Unaudited) |
May
31, 2024 |
MANAGEMENT
TEAM
Guggenheim
Funds Investment Advisors, LLC serves as the investment adviser to Guggenheim Active Allocation Fund (Fund). The Fund is
managed by a team of seasoned professionals at Guggenheim Partners Investment Management, LLC (GPIM).
This team
includes Anne B. Walsh, CFA, JD, Managing Partner, Chief Investment Officer of GPIM and Portfolio Manager; Steven H. Brown, CFA, Chief
Investment Officer, Fixed Income, Senior Managing Director, and Portfolio Manager; Adam J. Bloch, Managing Director and Portfolio Manager;
and Evan L. Serdensky, Managing Director and Portfolio Manager.
Discuss
the Funds return and return of comparative Indices
All Fund
returns citedwhether based on net asset value (NAV) or market priceassume the reinvestment of all distributions.
For the Reporting Period, the Fund provided a total return based on market price of 21.87% and a total return based on NAV of 13.85%.
At the end of the Reporting Period, the Funds market price of $15.02 per share represented a discount of 8.86% to its NAV of
$16.48 per share. At the beginning of the Reporting Period, the Funds market price of $13.61 per share represented a discount
of 13.86% to its NAV of $15.80 per share.
Past performance
is not a guarantee of future results. All NAV returns include the deduction of management fees, operating expenses, and all other Fund
expenses. The market value of the Funds shares fluctuates from time to time and maybe higher or lower than the Funds NAV.
Please refer
to the graphs and tables included within the Fund Summary beginning on page 12 for additional information about the Funds performance.
The returns
for the Reporting Period of indices tracking performance of the asset classes to which the Fund allocates the largest of its investments
were:
|
|
Index* |
Total
Return |
Bloomberg U.S. Aggregate Bond
Index |
1.31% |
Bloomberg U.S. Corporate Bond
Index |
4.40% |
Credit Suisse Leveraged Loan
Index |
13.22% |
ICE Bank of America Asset Backed
Security Master BBB-AA Index |
7.07% |
NASDAQ 100 Index |
31.12% |
Russell 2000 Index |
20.12% |
Standard & Poors 500
(S&P 500) Index |
28.19% |
*See page 10 for Index definitions |
|
6 l
GUG l GUGGENHEIM ACTIVE ALLOCATION FUND ANNUAL REPORT
|
|
MANAGEMENTS
DISCUSSION OF FUND PERFORMANCE (Unaudited) |
May
31, 2024 |
Discuss
the Funds distributions
During the
Reporting Period, the Fund paid a monthly distribution of $0.118750 per share. The most recent distribution represents an annualized
distribution rate of 9.49% based on the Funds closing market price of $15.02 per share at the end of the Reporting Period.
The distributions
paid consisted of (i) investment company taxable income taxed as ordinary income, which includes, among other things, short-term capital
gain and income from certain hedging and interest rate transactions and (ii) return of capital.
There is
no guarantee of any future distribution or that the current returns and distribution rate will be maintained. The Funds distribution
rate is not constant and the amount of distributions, when declared by the Funds Board of Trustees, is subject to change.
Please see
the Distributions to Shareholders & Annualized Distribution Rate table on page 15, and Note 2(f) on page 74 for more information
on distributions for the period.
|
|
Payable
Date |
Amount |
June 30, 2023 |
$0.118750 |
July 31, 2023 |
$0.118750 |
August 31, 2023 |
$0.118750 |
September 29, 2023 |
$0.118750 |
October 31, 2023 |
$0.118750 |
November 30, 2023 |
$0.118750 |
December 29, 2023 |
$0.118750 |
January 31, 2024 |
$0.118750 |
February 29, 2024 |
$0.118750 |
March 29, 2024 |
$0.118750 |
April 30, 2024 |
$0.118750 |
May 31, 2024 |
$0.118750 |
Total |
$1.425000 |
What factors
contributed or detracted from the Funds Performance during the Reporting Period?
During the
Reporting Period, the Fund saw positive performance from income, credit spread tightening, and equities. Earned income contributed the
most to performance as the Fund continued to prioritize higher-quality credits with attractive income/yield profiles. Credit spreads
also added to overall performance, particularly below-investment-grade corporate credit, as bank loans and high yield corporates saw
spreads tighten. Additionally, the Funds equity exposure contributed to overall performance given the strong performance of the
equity market over the Reporting Period. Duration was the sole thematic detractor to the Fund. Duration detracted from performance as
the yield curve
GUG l
GUGGENHEIM ACTIVE ALLOCATION FUND ANNUAL REPORT l 7
|
|
MANAGEMENTS
DISCUSSION OF FUND PERFORMANCE (Unaudited) |
May
31, 2024 |
bear steepened,
meaning yields at the long end of the curve rose higher than those at the front end, with yields on 2-year and 10-year Treasurys finishing
47 basis points and 86 basis points higher, respectively.
Discuss
the Funds Use of Leverage
At the end
of the Reporting Period, the Funds leverage was approximately 23% of Managed Assets, compared with approximately 27% at the beginning
of the Reporting Period.
The Fund
currently employs financial leverage through reverse repurchase agreements with ten counterparties.
One purpose
of leverage is to fund the purchase of additional securities that may provide increased income and potentially greater appreciation to
common shareholders than could be achieved from an unlevered portfolio. Leverage may result in greater NAV volatility and entails more
downside risk than an unleveraged portfolio.
Given positive
total returns over the Reporting Period, the Funds use of leverage benefited performance.
Investments
in Investment Funds (as defined in the Additional Information Regarding the Fund section, which begins on page 110) frequently expose
the Fund to an additional layer of financial leverage and the associated risks, such as the magnified effect of any losses.
How did
the Fund use derivatives during the Reporting Period?
The Fund
used a variety of derivatives during the Reporting Period, both to gain market exposure, as well as to hedge certain risks. Derivatives
used for hedging mostly detracted from performance. Derivatives used for hedging include call writing, which detracted from performance
as equities rose over the period. Foreign currency forwards used to hedge non-USD exposures slightly detracted from overall performance.
The Fund continued to utilize credit default swaps to hedge broader credit markets, which also detracted from performance given the strong
credit market performance during the Reporting Period. On the rates front, the Fund continued to hold curve caps and interest rate swaps
to hedge against moves lower in the yield curve; those positions were detractors during the Reporting Period. Derivatives used to obtain
general index exposure, conversely, such as total return swaps to gain long equity exposure, exhibited positive performance.
How was
the Fund positioned at the end of the Reporting Period?
The Reporting
Period exhibited a period of unprecedented volatility that has left a wide range of possible outcomes going forward. We believe the next
major policy moves are likely to provide strong tailwinds for fixed income. We continue to expect elevated volatility in the economy
and markets, as well as a policy response to these conditions. This argues for the importance of diversification in asset allocation
and within portfolios. The heightened probability of an economic slowdown over the next 6-12 months, as indicated by our models continues
to guide our more defensive and conservative positioning within
8 l
GUG l GUGGENHEIM ACTIVE ALLOCATION FUND ANNUAL REPORT
|
|
MANAGEMENTS
DISCUSSION OF FUND PERFORMANCE (Unaudited) |
May
31, 2024 |
the Fund,
prioritizing quality (which takes multiple forms, including focusing on industry market leaders, more conservatively positioned balance
sheets, stronger credit stipulations, and more creditor-friendly structures) and industries that may be more resilient to economic downturns.
Though the
recent tightening of credit spreads has likely pulled forward some of the expected future total return potential of parts of fixed income,
we still view the go-forward valuation proposition of fixed income as attractive at current levels and sourceable income levels in high-quality
credit as historically high relative to recent history. High-quality issuers in both the high yield and bank loan markets remain areas
of focus within the Fund as well as certain subsectors of structured credit like commercial asset-backed securities that continue to
present opportunities to source loss-remote assets at attractive valuations.
GUG l
GUGGENHEIM ACTIVE ALLOCATION FUND ANNUAL REPORT l 9
|
|
MANAGEMENTS
DISCUSSION OF FUND PERFORMANCE (Unaudited) |
May
31, 2024 |
Index
Definitions
Indices are
unmanaged and reflect no expenses. It is not possible to invest directly in an index.
The Bloomberg
U.S. Aggregate Bond Index is a broad-based flagship benchmark that measures the investment grade, U.S. dollar-denominated, fixed-rate
taxable bond market, including U.S. Treasuries, government-related and corporate securities, mortgage-backed securities or MBS
(agency fixed-rate and hybrid adjustable-rate mortgage, or ARM, pass-throughs), ABS, and commercial mortgage-backed securities
(CMBS) (agency and non-agency).
The Bloomberg
U.S. Corporate Bond Index is a broad-based benchmark that measures the investment grade, fixed-rate, taxable corporate bond market.
It includes U.S. dollar-denominated securities publicly issued by U.S. and non-U.S. industrial, utility and financial issuers that meet
specified maturity, liquidity, and quality requirements.
The Credit
Suisse Leveraged Loan Index is an index designed to mirror the investable universe of the U.S.-dollar-denominated leveraged loan
market.
The ICE
Bank of America Asset Backed Security Master BBB-AA Index is a subset of the ICE Bank of America U.S. Fixed Rate Asset Backed Securities
Index including all securities rated AA1 through BBB3, inclusive.
The NASDAQ-100
Index includes 100 of the largest domestic and international non-financial securities listed on The Nasdaq Stock Market based on
market capitalization. The Index reflects companies across major industry groups including computer hardware and software, telecommunications,
retail/ wholesale trade and biotechnology. It does not contain securities of financial companies including investment companies.
The Russell
2000 Index measures the performance of the small-cap segment of the U.S. equity universe.
The Standard
& Poors 500 (S&P 500) Index is a capitalization-weighted index of 500 stocks designed to measure the performance
of the broad economy, representing all major industries and is considered a representation of the U.S. stock market.
10 l
GUG l GUGGENHEIM ACTIVE ALLOCATION FUND ANNUAL REPORT
|
|
MANAGEMENTS
DISCUSSION OF FUND PERFORMANCE (Unaudited) |
May
31, 2024 |
Risks
and Other Considerations
The views
expressed in this report reflect those of the portfolio managers only through the report period as stated on the cover. These views are
subject to change at any time, based on market and other conditions and should not be construed as a recommendation of any kind. The
material may also include forward looking statements that involve risk and uncertainty, and there is no guarantee that any predictions
will come to pass.
There can
be no assurance that the Fund will achieve its investment objective. The NAV of the Fund will fluctuate with the value of the underlying
securities. Risk is inherent in all investing, including the loss of your entire principal. Therefore, before investing you should consider
the risks carefully. The Fund is subject to various risk factors. Certain of these risk factors are described in the Additional Information
Regarding the Fund section, which begins on page 110. Please see the Funds Prospectus, Statement of Additional Information (SAI)
and guggenheiminvestments.com/gug for a more detailed description of the risks of investing in the Fund. Shareholders may access the
Funds Prospectus and SAI on the EDGAR Database on the Securities and Exchange Commissions website at www.sec.gov.
This
material is not intended as a recommendation or as investment advice of any kind, including in connection with rollovers, transfers,
and distributions. Such material is not provided in a fiduciary capacity, may not be relied upon for or in connection with the making
of investment decisions, and does not constitute a solicitation of an offer to buy or sell securities. All content has been provided for
informational or educational purposes only and is not intended to be and should not be construed as legal or tax advice and/or a legal
opinion. Always consult a financial, tax and/or legal professional regarding your specific situation.
GUG l
GUGGENHEIM ACTIVE ALLOCATION FUND ANNUAL REPORT l 11
|
|
FUND
SUMMARY (Unaudited) |
May
31, 2024 |
|
|
Fund
Statistics |
|
Market Price |
$15.02 |
Net Asset Value |
$16.48 |
Discount to NAV |
-8.86% |
Net
Assets ($000) |
$543,444 |
Cumulative
Fund Performance*
![](https://www.sec.gov/Archives/edgar/data/1864208/000182126824000181/image_006.jpg)
*The performance
data above represents past performance that is not predictive of future results. The investment return and principal value of an investment
in the Fund will fluctuate so that an investors shares, when sold, may be worth more of less than their original cost. Returns
are historical and include changes in principal and reinvested dividends and capital gains and do not reflect the effect of taxes. The
Bloomberg U.S. Aggregate Bond Index is an unmanaged index and, unlike the Fund, has no management fees or operating expenses to reduce
its reported return. The Fund does not seek to achieve performance that is comparative to an index.
AVERAGE
ANNUAL TOTAL RETURNS FOR THE
PERIOD
ENDED MAY 31, 2024
|
|
|
|
|
Since Inception |
|
One |
(annualized) |
|
Year |
(11/23/21) |
Guggenheim Active Allocation
Fund |
|
|
NAV |
13.85% |
0.34% |
Market |
21.87% |
(2.35)% |
Bloomberg
U.S. Aggregate Bond Index |
1.31% |
(3.10)% |
Performance
data quoted represents past performance, which is no guarantee of future results and current performance may be lower or higher than
the figures shown. All NAV returns include the deduction of management fees, operating expenses and all other Fund expenses. The deduction
of taxes that a shareholder would pay on Fund distributions or the sale of Fund shares is not reflected in the total returns. For the
most recent month-end performance figures, please visit guggenheiminvestments.com/gug. The investment return and principal value of an
investment will fluctuate with changes in market conditions and other factors so that an investors shares, when sold, may be worth
more or less than their original cost.
12 l
GUG l GUGGENHEIM ACTIVE ALLOCATION FUND ANNUAL REPORT
|
|
FUND
SUMMARY (Unaudited) continued |
May
31, 2024 |
Since inception
returns assume a purchase of the Fund at the initial share price of $20.00 per share for share price returns or initial net asset
value (NAV) of $20.00 per share for NAV returns.
The referenced
index is unmanaged and not available for direct investment. Index performance does not reflect transaction costs, fees or expenses.
|
|
Portfolio
Breakdown |
%
of Net Assets |
Investments |
|
Corporate Bonds |
52.3% |
Senior Floating Rate Interests |
37.8% |
Asset-Backed Securities |
20.3% |
Preferred Stocks |
6.4% |
Collateralized Mortgage Obligations |
5.0% |
Common Stocks |
4.3% |
Closed-End Mutual Funds |
2.3% |
U.S. Government Securities |
1.2% |
Mutual Funds |
1.1% |
Other |
1.3% |
Total
Investments |
132.0% |
Other
Assets & Liabilities, net |
(32.0%) |
Net
Assets |
100.0% |
GUG l
GUGGENHEIM ACTIVE ALLOCATION FUND ANNUAL REPORT l 13
|
|
FUND
SUMMARY (Unaudited) continued |
May
31, 2024 |
|
|
Ten
Largest Holdings |
%
of Net Assets |
CIFC Funding Ltd., 12.58% |
1.6% |
Madison Park Funding LIII Ltd.,
11.33% |
1.4% |
Hotwire Funding LLC, 4.46% |
1.3% |
Guggenheim Risk Managed Real
Estate Fund Institutional Class |
1.1% |
NuStar Logistics, LP, 6.38% |
1.1% |
Lyons Magnus, 12.08% |
1.1% |
LaserAway Intermediate Holdings
II LLC, 11.33% |
1.0% |
American Bath Group LLC, 9.18% |
1.0% |
Gibson Brands, Inc., 10.58% |
1.0% |
Pelican
Products, Inc., 9.81% |
1.0% |
Top
Ten Total |
11.6% |
Ten
Largest Holdings excludes any temporary cash or derivative investments.
Portfolio
breakdown and holdings are subject to change daily. For more information, please visit guggenheiminvestments.com/gug. The above summaries
are provided for informational purposes only and should not be viewed as recommendations. Past performance does not guarantee future
results.
|
|
Portfolio
Composition by Quality Rating1 |
|
|
% of Total |
Rating |
Investments |
Fixed Income Instruments |
|
AAA |
0.9% |
AA |
2.4% |
A |
3.9% |
BBB |
7.9% |
BB |
25.4% |
B |
35.0% |
CCC |
4.2% |
NR2 |
8.9% |
Other
Instruments |
11.4% |
Total
Investments |
100.0% |
1 | | Source:
BlackRock Solutions. Credit quality ratings are measured on a scale that generally ranges
from AAA (highest) to D (lowest). All securities except for those labeled NR
have been rated by Moodys, Standard & Poors (S&P), or Fitch,
each of which is a Nationally Recognized Statistical Rating Organization (NRSRO).
For purposes of this presentation, when ratings are available from more than one agency,
the highest rating is used. Guggenheim Investments has converted Moodys and Fitch ratings
to the equivalent S&P rating. Security ratings are determined at the time of purchase
and may change thereafter. |
2 | | NR
(not rated) securities do not necessarily indicate low credit quality. |
14 l
GUG l GUGGENHEIM ACTIVE ALLOCATION FUND ANNUAL REPORT
|
|
FUND
SUMMARY (Unaudited) continued |
May
31, 2024 |
![](https://www.sec.gov/Archives/edgar/data/1864208/000182126824000181/image_007.jpg)
![](https://www.sec.gov/Archives/edgar/data/1864208/000182126824000181/image_008.jpg)
All or
a portion of the above distributions is characterized as a return of capital. For the year ended May 31, 2024, 63.8% of the distributions
were characterized as ordinary income, and 36.2% of the distributions were characterized as return of capital. The final determination
of the tax character of the distributions paid by the Fund in 2024 will be reported to shareholders in January 2025.
GUG l
GUGGENHEIM ACTIVE ALLOCATION FUND ANNUAL REPORT l 15
|
|
SCHEDULE
OF INVESTMENTS |
May
31, 2024 |
|
|
|
|
Shares |
Value |
COMMON
STOCKS 4.3% |
|
|
Financial 1.2% |
|
|
BlackRock,
Inc. Class A |
735 |
$ 567,442 |
T. Rowe Price
Group, Inc. |
3,987 |
469,788 |
Invesco Ltd. |
29,197 |
458,685 |
Simon Property
Group, Inc. REIT |
1,966 |
297,475 |
Citigroup,
Inc. |
4,721 |
294,165 |
Lincoln National
Corp. |
8,597 |
283,615 |
Nasdaq, Inc. |
4,653 |
274,667 |
Capital One
Financial Corp. |
1,965 |
270,443 |
CBRE Group,
Inc. Class A* |
2,920 |
257,164 |
Bank of America
Corp. |
6,340 |
253,537 |
State Street
Corp. |
3,115 |
235,463 |
Charles Schwab
Corp. |
3,186 |
233,470 |
Franklin Resources,
Inc. |
9,379 |
221,344 |
Essex Property
Trust, Inc. REIT |
761 |
197,700 |
Citizens Financial
Group, Inc. |
5,454 |
192,472 |
Truist Financial
Corp. |
4,474 |
168,893 |
Alexandria
Real Estate Equities, Inc. REIT |
1,357 |
161,483 |
KeyCorp |
11,155 |
160,297 |
Healthpeak
Properties, Inc. REIT |
7,889 |
156,991 |
Vornado Realty
Trust REIT |
5,532 |
135,645 |
STAG Industrial,
Inc. REIT |
2,043 |
71,628 |
Synchrony
Financial |
1,194 |
52,297 |
Terreno Realty
Corp. REIT |
863 |
48,829 |
Glacier Bancorp,
Inc. |
1,288 |
48,145 |
First Financial
Bankshares, Inc. |
1,517 |
45,480 |
Moelis &
Co. Class A |
714 |
40,420 |
Essential
Properties Realty Trust, Inc. REIT |
1,411 |
37,787 |
Macerich Co.
REIT |
2,498 |
37,770 |
National Storage
affiliates Trust REIT |
949 |
34,714 |
WSFS Financial
Corp. |
760 |
33,486 |
Valley National
Bancorp |
4,679 |
33,361 |
Walker &
Dunlop, Inc. |
341 |
32,733 |
Innovative
Industrial Properties, Inc. REIT |
292 |
31,472 |
Artisan Partners
Asset Management, Inc. Class A |
687 |
30,249 |
Hannon Armstrong
Sustainable Infrastructure Capital, Inc. |
896 |
29,828 |
Broadstone
Net Lease, Inc. REIT |
1,850 |
28,397 |
LXP Industrial
Trust REIT |
3,282 |
27,897 |
Outfront Media,
Inc. REIT |
1,700 |
24,565 |
Pacific Premier
Bancorp, Inc. |
1,095 |
24,353 |
Triumph Financial,
Inc.* |
281 |
20,878 |
Cohen &
Steers, Inc. |
291 |
20,454 |
Newmark Group,
Inc. Class A |
1,942 |
20,216 |
Stewart Information
Services Corp. |
313 |
19,816 |
Virtus Investment
Partners, Inc. |
85 |
19,430 |
Baldwin Insurance
Group, Inc. Class A* |
559 |
18,827 |
See notes
to financial statements.
16 l
GUG l GUGGENHEIM ACTIVE ALLOCATION FUND ANNUAL REPORT
|
|
SCHEDULE
OF INVESTMENTS continued |
May
31, 2024 |
|
|
|
|
Shares |
Value |
COMMON
STOCKS 4.3% (continued) |
|
|
Financial 1.2% (continued) |
|
|
Pathward Financial,
Inc. |
345 |
$ 18,392 |
Cannae Holdings,
Inc. |
994 |
18,071 |
Goosehead
Insurance, Inc. Class A* |
211 |
13,610 |
Trupanion,
Inc.* |
446 |
13,322 |
Live Oak Bancshares,
Inc. |
376 |
12,964 |
Hilltop Holdings,
Inc. |
362 |
11,074 |
Chimera Investment
Corp. REIT |
917 |
10,912 |
LendingClub
Corp.* |
1,171 |
10,445 |
Bank of NT
Butterfield & Son Ltd. |
294 |
10,017 |
Brandywine
Realty Trust REIT |
1,990 |
9,174 |
eXp World
Holdings, Inc. |
736 |
8,251 |
Redfin Corp.* |
1,216 |
7,831 |
MFA Financial,
Inc. REIT |
649 |
6,944 |
Safehold,
Inc. REIT |
335 |
6,456 |
LendingTree,
Inc.* |
136 |
5,847 |
Veritex Holdings,
Inc. |
278 |
5,671 |
Centerspace
REIT |
83 |
5,666 |
Piedmont Office Realty Trust, Inc. Class A REIT |
727 |
5,300 |
Signature
Bank* |
1,846 |
4,523 |
Redwood Trust,
Inc. REIT |
675 |
4,280 |
Brightsphere
Investment Group, Inc. |
189 |
4,190 |
ConnectOne
Bancorp, Inc. |
218 |
4,063 |
Capitol Federal
Financial, Inc. |
762 |
3,939 |
Plymouth Industrial
REIT, Inc. |
182 |
3,797 |
Uniti Group,
Inc. REIT |
1,153 |
3,643 |
Eagle Bancorp,
Inc. |
185 |
3,336 |
Community
Healthcare Trust, Inc. REIT |
141 |
3,308 |
Global Medical
REIT, Inc. |
351 |
3,261 |
Central Pacific
Financial Corp. |
160 |
3,245 |
World Acceptance
Corp.* |
24 |
3,084 |
TPG RE Finance
Trust, Inc. REIT |
358 |
3,072 |
First Bancshares,
Inc. |
120 |
3,042 |
Ready Capital
Corp. REIT |
355 |
2,946 |
B Riley Financial,
Inc. |
118 |
2,827 |
Metrocity
Bankshares, Inc. |
113 |
2,785 |
Anywhere Real
Estate, Inc.* |
675 |
2,747 |
GCM Grosvenor,
Inc. Class A |
258 |
2,593 |
Diamond Hill
Investment Group, Inc. |
17 |
2,551 |
Oppenheimer
Holdings, Inc. Class A |
55 |
2,512 |
Business First
Bancshares, Inc. |
114 |
2,445 |
HomeTrust
Bancshares, Inc. |
87 |
2,402 |
Metropolitan
Bank Holding Corp.* |
57 |
2,397 |
Northfield
Bancorp, Inc. |
258 |
2,286 |
One Liberty
Properties, Inc. REIT |
95 |
2,230 |
ARMOUR Residential
REIT, Inc. |
103 |
1,992 |
See
notes to financial statements. |
|
|
GUG l GUGGENHEIM ACTIVE
ALLOCATION FUND ANNUAL REPORT l 17 |
|
|
SCHEDULE
OF INVESTMENTS continued |
May
31, 2024 |
|
|
|
|
Shares |
Value |
COMMON
STOCKS 4.3% (continued) |
|
|
Financial 1.2% (continued) |
|
|
Southern Missouri
Bancorp, Inc. |
45 |
$ 1,895 |
Sierra Bancorp |
83 |
1,745 |
Alerus Financial
Corp. |
89 |
1,721 |
Invesco Mortgage
Capital, Inc. REIT |
183 |
1,699 |
First Foundation,
Inc. |
284 |
1,681 |
West BanCorp,
Inc. |
95 |
1,645 |
Waterstone
Financial, Inc. |
128 |
1,549 |
Blue Foundry
Bancorp* |
167 |
1,535 |
RBB Bancorp |
83 |
1,525 |
Industrial
Logistics Properties Trust REIT |
380 |
1,433 |
Enterprise
Bancorp, Inc. |
55 |
1,383 |
Hingham Institution
For Savings |
8 |
1,367 |
Orchid Island
Capital, Inc. REIT |
158 |
1,343 |
Investors
Title Co. |
7 |
1,289 |
Civista Bancshares,
Inc. |
88 |
1,261 |
City Office
REIT, Inc. |
254 |
1,252 |
Regional Management
Corp. |
44 |
1,210 |
Southern First
Bancshares, Inc.* |
44 |
1,209 |
Franklin Street
Properties Corp. REIT |
595 |
1,178 |
Seritage Growth
Properties Class A* |
222 |
1,168 |
Legacy Housing
Corp.* |
47 |
1,092 |
HomeStreet,
Inc.* |
114 |
1,041 |
Maiden Holdings
Ltd.* |
414 |
882 |
eHealth, Inc.* |
145 |
858 |
Citizens,
Inc.* |
297 |
846 |
Star Holdings* |
60 |
774 |
GAMCO Investors,
Inc. Class A |
30 |
753 |
Atlanticus
Holdings Corp.* |
28 |
720 |
Pioneer Bancorp,
Inc.* |
69 |
690 |
Office Properties
Income Trust REIT |
281 |
643 |
Douglas Elliman,
Inc.* |
450 |
513 |
Lemonade,
Inc.* |
30 |
495 |
Great Ajax
Corp. REIT |
129 |
437 |
Oportun Financial
Corp.* |
124 |
419 |
Endo Luxembourg
Finance Co I SARL / Endo US, Inc.*, |
1,750,000 |
175 |
Silvergate
Capital Corp. Class A* |
327 |
170 |
SouthState
Corp. |
2 |
124 |
Ashford Hospitality
Trust, Inc. REIT* |
101 |
118 |
Rafael Holdings,
Inc. Class B* |
60 |
92 |
Fathom Holdings,
Inc.* |
36 |
66 |
Finance of
America Companies, Inc. Class A* |
106 |
61 |
SVB Financial
Group* |
1,156 |
58 |
First Republic
Bank* |
1,594 |
40 |
Pershing Square
Tontine Holdings, Ltd. Class A*,,1 |
329,700 |
33 |
Curo
Group Holdings Corp.* |
125 |
7 |
Total
Financial |
|
6,427,409 |
|
See
notes to financial statements. |
18 l GUG l GUGGENHEIM
ACTIVE ALLOCATION FUND ANNUAL REPORT |
|
|
SCHEDULE
OF INVESTMENTS continued |
May
31, 2024 |
|
|
|
|
Shares |
Value |
COMMON
STOCKS 4.3% (continued) |
|
|
Consumer, Cyclical
0.9% |
|
|
Bath &
Body Works, Inc. |
10,922 |
$ 567,289 |
Tesla, Inc.* |
2,487 |
442,885 |
Aptiv plc* |
4,627 |
385,244 |
Caesars Entertainment,
Inc.* |
8,165 |
290,347 |
General Motors
Co. |
6,159 |
277,093 |
Penn Entertainment,
Inc.* |
15,035 |
263,112 |
Best Buy Company,
Inc. |
2,703 |
229,268 |
Carnival Corp.* |
14,515 |
218,886 |
Pool Corp. |
578 |
210,132 |
NIKE, Inc.
Class B |
2,085 |
198,179 |
Ford Motor
Co. |
15,940 |
193,352 |
Target Corp. |
1,235 |
192,858 |
CarMax, Inc.* |
2,577 |
181,060 |
Whirlpool
Corp. |
1,379 |
128,288 |
Crocs, Inc.* |
683 |
106,302 |
Advance Auto
Parts, Inc. |
1,253 |
88,512 |
Macys,
Inc. |
3,538 |
68,920 |
Signet Jewelers
Ltd. |
620 |
67,884 |
Under Armour,
Inc. Class C* |
9,303 |
64,749 |
VF Corp. |
4,779 |
63,465 |
Under Armour,
Inc. Class A* |
8,161 |
58,678 |
Steven Madden
Ltd. |
944 |
41,961 |
Boot Barn
Holdings, Inc.* |
342 |
40,674 |
Goodyear Tire
& Rubber Co.* |
3,229 |
39,749 |
American Eagle
Outfitters, Inc. |
1,778 |
39,063 |
LCI Industries |
289 |
31,755 |
LGI Homes,
Inc.* |
252 |
24,192 |
MillerKnoll,
Inc. |
872 |
24,050 |
Dana, Inc. |
1,698 |
23,874 |
Sonos, Inc.* |
1,488 |
23,510 |
Fox Factory
Holding Corp.* |
493 |
22,984 |
Topgolf Callaway
Brands Corp.* |
1,357 |
21,237 |
Gentherm,
Inc.* |
390 |
21,037 |
Papa Johns
International, Inc. |
387 |
17,980 |
Sally Beauty
Holdings, Inc.* |
1,288 |
15,688 |
National Vision
Holdings, Inc.* |
969 |
14,622 |
Cracker Barrel
Old Country Store, Inc. |
278 |
13,561 |
Wolverine
World Wide, Inc. |
954 |
12,993 |
Vista Outdoor,
Inc.* |
330 |
11,510 |
Lions Gate
Entertainment Corp. Class B* |
1,385 |
10,692 |
Cheesecake
Factory, Inc. |
270 |
10,389 |
Camping World
Holdings, Inc. Class A |
489 |
9,829 |
Hibbett, Inc. |
80 |
6,926 |
AMC Entertainment
Holdings, Inc. Class A* |
1,286 |
5,570 |
Rush Street
Interactive, Inc.* |
616 |
5,513 |
|
|
See
notes to financial statements. |
|
|
GUG l GUGGENHEIM ACTIVE
ALLOCATION FUND ANNUAL REPORT l 19 |
|
|
SCHEDULE
OF INVESTMENTS continued |
May
31, 2024 |
|
|
|
|
Shares |
Value |
COMMON
STOCKS 4.3% (continued) |
|
|
Consumer, Cyclical
0.9% (continued) |
|
|
Shyft Group,
Inc. |
406 |
$ 5,144 |
Allegiant
Travel Co. Class A |
90 |
4,788 |
Malibu Boats,
Inc. Class A* |
121 |
4,654 |
Shoe Carnival,
Inc. |
105 |
3,964 |
Sleep Number
Corp.* |
260 |
3,931 |
Standard Motor
Products, Inc. |
124 |
3,808 |
MarineMax,
Inc.* |
123 |
3,503 |
Douglas Dynamics,
Inc. |
134 |
3,331 |
iRobot Corp.* |
315 |
3,027 |
Lions Gate
Entertainment Corp. Class A* |
341 |
2,834 |
Dennys
Corp.* |
362 |
2,643 |
Movado Group,
Inc. |
91 |
2,411 |
Ballys
Corp.* |
191 |
2,321 |
Zumiez, Inc.* |
114 |
2,141 |
Lovesac Co.* |
76 |
2,136 |
Sun Country
Airlines Holdings, Inc.* |
187 |
1,980 |
Childrens
Place, Inc.* |
161 |
1,972 |
Sweetgreen,
Inc. Class A* |
60 |
1,845 |
GrowGeneration
Corp.* |
647 |
1,637 |
OneWater Marine,
Inc. Class A* |
61 |
1,576 |
Marcus Corp. |
136 |
1,449 |
Superior Group
of Companies, Inc. |
69 |
1,414 |
Nikola Corp.* |
2,697 |
1,381 |
Portillos,
Inc. Class A* |
136 |
1,363 |
Cooper-Standard
Holdings, Inc.* |
100 |
1,320 |
Vera Bradley,
Inc.* |
155 |
1,265 |
Big Lots,
Inc.* |
354 |
1,232 |
El Pollo Loco
Holdings, Inc.* |
113 |
1,207 |
Citi Trends,
Inc.* |
47 |
1,148 |
Johnson Outdoors,
Inc. Class A |
31 |
1,128 |
Snap One Holdings
Corp.* |
100 |
1,072 |
Hyliion Holdings
Corp.* |
698 |
1,033 |
Sportsmans
Warehouse Holdings, Inc.* |
259 |
987 |
Universal
Electronics, Inc.* |
74 |
845 |
Lifetime Brands,
Inc. |
75 |
808 |
Aeva Technologies,
Inc.* |
246 |
794 |
Tillys,
Inc. Class A* |
135 |
779 |
Cato Corp.
Class A |
117 |
702 |
Torrid Holdings,
Inc.* |
103 |
691 |
American Outdoor
Brands, Inc.* |
84 |
685 |
ONE Group
Hospitality, Inc.* |
123 |
640 |
EVI Industries,
Inc. |
27 |
566 |
PetMed Express,
Inc.* |
118 |
503 |
Tupperware
Brands Corp.* |
286 |
497 |
Traeger, Inc.* |
177 |
459 |
Noodles &
Co.* |
242 |
455 |
|
See
notes to financial statements. |
20 l GUG l GUGGENHEIM
ACTIVE ALLOCATION FUND ANNUAL REPORT |
|
|
SCHEDULE
OF INVESTMENTS continued |
May
31, 2024 |
|
|
|
|
Shares |
Value |
COMMON
STOCKS 4.3% (continued) |
|
|
Consumer, Cyclical
0.9% (continued) |
|
|
Purple Innovation,
Inc.* |
343 |
$ 429 |
Big 5 Sporting
Goods Corp. |
123 |
427 |
Conns,
Inc.* |
106 |
379 |
Fossil Group,
Inc.* |
284 |
341 |
GAN Ltd.* |
239 |
323 |
PLBY Group,
Inc.* |
337 |
309 |
LL Flooring
Holdings, Inc.* |
170 |
289 |
Duluth Holdings,
Inc. Class B* |
72 |
284 |
Mesa Air Group,
Inc.* |
204 |
249 |
Liberty TripAdvisor
Holdings, Inc. Class A* |
434 |
230 |
Kirklands,
Inc.* |
74 |
183 |
Workhorse
Group, Inc.* |
875 |
171 |
Lazydays Holdings,
Inc.* |
44 |
157 |
Container
Store Group, Inc.* |
189 |
127 |
Canoo, Inc.* |
55 |
124 |
Barnes &
Noble Education, Inc.* |
263 |
118 |
Fisker, Inc.* |
1,915 |
105 |
Nu Ride, Inc.
Class A* |
60 |
99 |
Regis Corp.* |
12 |
51 |
Rite Aid Corp.* |
328 |
39 |
Aterian, Inc.* |
12 |
32 |
Ideanomics,
Inc.* |
22 |
22 |
F45 Training
Holdings, Inc.* |
176 |
18 |
Arcimoto,
Inc.* |
9 |
1 |
EBET, Inc.* |
2 |
1 |
BowFlex, Inc.* |
179 |
1 |
Shift
Technologies, Inc.* |
102 |
|
Total
Consumer, Cyclical |
|
4,874,440 |
Consumer,
Non-cyclical 0.7% |
|
|
Bio-Techne
Corp. |
5,648 |
435,969 |
PayPal Holdings,
Inc.* |
5,816 |
366,350 |
Align Technology,
Inc.* |
1,380 |
354,950 |
Moderna, Inc.* |
1,850 |
263,717 |
IDEXX Laboratories,
Inc.* |
513 |
254,935 |
Zoetis, Inc. |
1,380 |
233,993 |
Charles River
Laboratories International, Inc.* |
985 |
205,314 |
Illumina,
Inc.* |
1,645 |
171,541 |
Robert Half,
Inc. |
2,350 |
150,940 |
MarketAxess
Holdings, Inc. |
746 |
148,402 |
Dentsply Sirona,
Inc. |
5,242 |
146,828 |
Bio-Rad Laboratories,
Inc. Class A* |
482 |
138,267 |
Endo, Inc.*, |
2,219 |
61,948 |
Avis Budget
Group, Inc. |
484 |
55,045 |
TriNet Group,
Inc. |
474 |
49,282 |
Herc Holdings,
Inc. |
292 |
42,360 |
|
|
See
notes to financial statements. |
|
|
GUG l GUGGENHEIM ACTIVE
ALLOCATION FUND ANNUAL REPORT l 21 |
SCHEDULE
OF INVESTMENTS continued |
May
31, 2024 |
|
|
|
|
Shares |
Value |
COMMON
STOCKS 4.3% (continued) |
|
|
Consumer, Non-cyclical
0.7% (continued) |
|
|
Korn Ferry |
630 |
$ 41,542 |
LivaNova plc* |
625 |
38,169 |
Alarm.com
Holdings, Inc.* |
552 |
36,106 |
Helen of Troy
Ltd.* |
281 |
30,033 |
Arrowhead
Pharmaceuticals, Inc.* |
1,200 |
27,540 |
Twist Bioscience
Corp.* |
633 |
26,523 |
CONMED Corp. |
339 |
25,913 |
Upbound Group,
Inc. |
773 |
25,370 |
PROG Holdings,
Inc. |
663 |
25,055 |
LiveRamp Holdings,
Inc.* |
775 |
24,250 |
Marathon Digital
Holdings, Inc.* |
1,115 |
21,765 |
Progyny, Inc.* |
754 |
20,320 |
Denali Therapeutics,
Inc.* |
1,062 |
19,711 |
Astrana Health,
Inc.* |
442 |
18,312 |
NeoGenomics,
Inc.* |
1,325 |
18,166 |
Arvinas, Inc.* |
548 |
18,161 |
Intellia Therapeutics,
Inc.* |
814 |
17,403 |
Cimpress plc* |
205 |
16,915 |
Omnicell,
Inc.* |
513 |
16,719 |
Neogen Corp.* |
1,258 |
16,543 |
Veracyte,
Inc.* |
791 |
16,413 |
Ligand Pharmaceuticals,
Inc. Class B* |
177 |
15,054 |
Protagonist
Therapeutics, Inc.* |
524 |
14,751 |
Beam Therapeutics,
Inc.* |
596 |
14,197 |
SpringWorks
Therapeutics, Inc.* |
342 |
14,179 |
Kymera Therapeutics,
Inc.* |
403 |
12,940 |
Owens &
Minor, Inc.* |
718 |
12,515 |
Riot Platforms,
Inc.* |
1,226 |
11,941 |
AtriCure,
Inc.* |
525 |
11,834 |
Deluxe Corp. |
503 |
11,433 |
Recursion
Pharmaceuticals, Inc. Class A* |
1,343 |
11,120 |
Cassava Sciences,
Inc.* |
448 |
9,869 |
Arcus Biosciences,
Inc.* |
526 |
7,927 |
Sana Biotechnology,
Inc.* |
1,029 |
7,718 |
CareDx, Inc.* |
593 |
7,715 |
Coursera,
Inc.* |
851 |
6,468 |
Nurix Therapeutics,
Inc.* |
373 |
5,875 |
Community
Health Systems, Inc.* |
1,457 |
5,770 |
Quanterix
Corp.* |
361 |
5,765 |
Nuvation Bio,
Inc.* |
1,852 |
5,741 |
Avid Bioservices,
Inc.* |
708 |
5,728 |
First Advantage
Corp. |
320 |
5,139 |
Zentalis Pharmaceuticals,
Inc.* |
428 |
5,085 |
Fulgent Genetics,
Inc.* |
246 |
5,080 |
Repay Holdings
Corp.* |
507 |
4,938 |
Monro, Inc. |
194 |
4,588 |
|
See
notes to financial statements. |
22 l GUG l GUGGENHEIM
ACTIVE ALLOCATION FUND ANNUAL REPORT |
|
|
SCHEDULE
OF INVESTMENTS continued |
May
31, 2024 |
|
|
|
|
Shares |
Value |
COMMON
STOCKS 4.3% (continued) |
|
|
Consumer, Non-cyclical
0.7% (continued) |
|
|
Accolade,
Inc.* |
601 |
$ 4,255 |
Viad Corp.* |
120 |
4,194 |
Editas Medicine,
Inc.* |
801 |
4,165 |
Heron Therapeutics,
Inc.* |
1,100 |
4,070 |
Pacific Biosciences
of California, Inc.* |
2,271 |
4,065 |
ModivCare,
Inc.* |
145 |
3,961 |
Heidrick &
Struggles International, Inc. |
115 |
3,942 |
Ocugen, Inc.* |
2,201 |
3,808 |
Nevro Corp.* |
405 |
3,787 |
OmniAb, Inc.* |
867 |
3,763 |
Atrion Corp. |
8 |
3,682 |
B&G Foods,
Inc. |
375 |
3,577 |
Fate Therapeutics,
Inc.* |
948 |
3,489 |
Varex Imaging
Corp.* |
224 |
3,461 |
Alector, Inc.* |
695 |
3,419 |
Surmodics,
Inc.* |
80 |
3,365 |
USANA Health
Sciences, Inc.* |
70 |
3,332 |
OPKO Health,
Inc.* |
2,343 |
3,210 |
Green Dot
Corp. Class A* |
313 |
3,102 |
Scholar Rock
Holding Corp.* |
330 |
3,099 |
Castle Biosciences,
Inc.* |
124 |
2,884 |
Enanta Pharmaceuticals,
Inc.* |
230 |
2,868 |
Turning Point
Brands, Inc. |
86 |
2,822 |
Mission Produce,
Inc.* |
220 |
2,607 |
Travere Therapeutics,
Inc.* |
348 |
2,582 |
Custom Truck
One Source, Inc.* |
540 |
2,576 |
OrthoPediatrics
Corp.* |
80 |
2,526 |
MaxCyte, Inc.* |
563 |
2,522 |
Joint Corp.* |
165 |
2,477 |
Carriage Services,
Inc. Class A |
90 |
2,420 |
C4 Therapeutics,
Inc.* |
460 |
2,300 |
Beauty Health
Co.* |
1,022 |
2,259 |
Senseonics
Holdings, Inc.* |
5,152 |
2,215 |
TrueBlue,
Inc.* |
205 |
2,214 |
Anika Therapeutics,
Inc.* |
86 |
2,206 |
Sutro Biopharma,
Inc.* |
517 |
2,184 |
Willdan Group,
Inc.* |
66 |
2,144 |
Inovio Pharmaceuticals,
Inc.* |
205 |
2,077 |
Allogene Therapeutics,
Inc.* |
811 |
2,027 |
OraSure Technologies,
Inc.* |
426 |
2,015 |
iTeos Therapeutics,
Inc.* |
120 |
2,009 |
Cerus Corp.* |
986 |
1,765 |
European Wax
Center, Inc. Class A* |
150 |
1,698 |
Vanda Pharmaceuticals,
Inc.* |
326 |
1,666 |
Generation
Bio Co.* |
522 |
1,660 |
Stoke Therapeutics,
Inc.* |
113 |
1,652 |
|
|
See
notes to financial statements. |
|
|
GUG l GUGGENHEIM ACTIVE
ALLOCATION FUND ANNUAL REPORT l 23 |
|
|
SCHEDULE
OF INVESTMENTS continued |
May
31, 2024 |
|
|
|
|
Shares |
Value |
COMMON
STOCKS 4.3% (continued) |
|
|
Consumer, Non-cyclical
0.7% (continued) |
|
|
Emergent BioSolutions,
Inc.* |
287 |
$ 1,636 |
Aarons
Company, Inc. |
183 |
1,552 |
Coherus Biosciences,
Inc.* |
806 |
1,467 |
Olema Pharmaceuticals,
Inc.* |
150 |
1,452 |
AngioDynamics,
Inc.* |
220 |
1,388 |
Utah Medical
Products, Inc. |
20 |
1,366 |
Honest Company,
Inc.* |
495 |
1,331 |
BioLife Solutions,
Inc.* |
61 |
1,310 |
Kodiak Sciences,
Inc.* |
399 |
1,269 |
Absci Corp.* |
287 |
1,208 |
Akebia Therapeutics,
Inc.* |
1,039 |
1,164 |
Phathom Pharmaceuticals,
Inc.* |
120 |
1,130 |
Pulmonx Corp.* |
155 |
1,124 |
ALX Oncology
Holdings, Inc.* |
105 |
1,116 |
Mind Medicine
MindMed, Inc.* |
125 |
1,100 |
Bioventus,
Inc. Class A* |
164 |
1,097 |
Orthofix Medical,
Inc.* |
78 |
1,071 |
Whole Earth
Brands, Inc.* |
222 |
1,068 |
Organogenesis
Holdings, Inc.* |
379 |
1,042 |
WW International,
Inc.* |
627 |
1,041 |
Rigel Pharmaceuticals,
Inc.* |
1,018 |
995 |
Accuray, Inc.* |
550 |
973 |
Inogen, Inc.* |
116 |
963 |
Pulse Biosciences,
Inc.* |
83 |
959 |
Replimune
Group, Inc.* |
177 |
933 |
American Well
Corp. Class A* |
2,183 |
932 |
Annexon, Inc.* |
185 |
894 |
Seer, Inc.* |
495 |
891 |
MeiraGTx Holdings
plc* |
177 |
867 |
Erasca, Inc.* |
335 |
844 |
Zevra Therapeutics,
Inc.* |
172 |
800 |
Sangamo Therapeutics,
Inc.* |
1,415 |
799 |
Werewolf Therapeutics,
Inc.* |
153 |
791 |
Precigen,
Inc.* |
565 |
791 |
InfuSystem
Holdings, Inc.* |
108 |
771 |
ChromaDex
Corp.* |
279 |
770 |
HF Foods Group,
Inc.* |
217 |
766 |
Lineage Cell
Therapeutics, Inc.* |
747 |
747 |
Harvard Bioscience,
Inc.* |
234 |
742 |
Udemy, Inc.* |
81 |
716 |
Lexicon Pharmaceuticals,
Inc.* |
408 |
694 |
CytomX Therapeutics,
Inc.* |
386 |
656 |
XBiotech,
Inc.* |
90 |
653 |
Tenaya Therapeutics,
Inc.* |
153 |
644 |
Cartesian
Therapeutics, Inc.* |
18 |
625 |
Aveanna Healthcare
Holdings, Inc.* |
235 |
613 |
|
See
notes to financial statements. |
24 l GUG l GUGGENHEIM
ACTIVE ALLOCATION FUND ANNUAL REPORT |
|
|
SCHEDULE
OF INVESTMENTS continued |
May
31, 2024 |
|
|
|
|
Shares |
Value |
COMMON
STOCKS 4.3% (continued) |
|
|
Consumer, Non-cyclical
0.7% (continued) |
|
|
Vaxart, Inc.* |
715 |
$ 583 |
2seventy bio,
Inc.* |
135 |
571 |
Praxis Precision
Medicines, Inc.* |
12 |
570 |
Stereotaxis,
Inc.* |
295 |
569 |
Atara Biotherapeutics,
Inc.* |
1,012 |
568 |
Scilex Holding
Co.* |
491 |
530 |
Allakos, Inc.* |
417 |
521 |
Athira Pharma,
Inc.* |
192 |
503 |
Oramed Pharmaceuticals,
Inc.* |
212 |
462 |
Taysha Gene
Therapies, Inc.* |
133 |
456 |
Applied Therapeutics,
Inc.* |
105 |
449 |
Chimerix,
Inc.* |
435 |
421 |
Seres Therapeutics,
Inc.* |
414 |
414 |
Inozyme Pharma,
Inc.* |
85 |
410 |
IGM Biosciences,
Inc.* |
48 |
400 |
Neurogene,
Inc.* |
10 |
376 |
Bluebird Bio,
Inc.* |
402 |
363 |
Greenwich
Lifesciences, Inc.* |
24 |
356 |
Beyondspring,
Inc.* |
133 |
350 |
Verastem,
Inc.* |
85 |
337 |
LENZ Therapeutics,
Inc. |
22 |
336 |
Spyre Therapeutics,
Inc.* |
10 |
335 |
Avrobio, Inc.* |
225 |
333 |
Q32 Bio, Inc.* |
13 |
332 |
Instil Bio,
Inc.* |
31 |
331 |
Eliem Therapeutics,
Inc.* |
41 |
316 |
Marinus Pharmaceuticals,
Inc.* |
220 |
312 |
Asensus Surgical,
Inc.* |
1,394 |
309 |
Adaptimmune
Therapeutics plc ADR* |
273 |
308 |
Apyx Medical
Corp.* |
185 |
305 |
Affmed N.V.* |
69 |
300 |
Cue Biopharma,
Inc.* |
183 |
298 |
Century Therapeutics,
Inc.* |
96 |
285 |
Ikena Oncology,
Inc.* |
161 |
285 |
PMV Pharmaceuticals,
Inc.* |
156 |
284 |
Personalis,
Inc.* |
214 |
278 |
Curis, Inc.* |
25 |
259 |
CEL-SCI Corp.* |
214 |
259 |
Passage Bio,
Inc.* |
220 |
251 |
Prelude Therapeutics,
Inc.* |
64 |
246 |
2U, Inc.* |
857 |
239 |
Dianthus Therapeutics,
Inc.* |
11 |
238 |
Pyxis Oncology,
Inc.* |
62 |
232 |
Durect Corp.* |
134 |
229 |
Ginkgo Bioworks
Holdings, Inc.* |
428 |
226 |
CytoSorbents
Corp.* |
245 |
221 |
See
notes to financial statements. |
|
|
GUG l GUGGENHEIM ACTIVE
ALLOCATION FUND ANNUAL REPORT l 25 |
|
|
SCHEDULE
OF INVESTMENTS continued |
May
31, 2024 |
|
|
|
|
Shares |
Value |
COMMON
STOCKS 4.3% (continued) |
|
|
Consumer, Non-cyclical
0.7% (continued) |
|
|
Spero Therapeutics,
Inc.* |
144 |
$ 204 |
Gritstone
bio, Inc.* |
249 |
193 |
Solid Biosciences,
Inc.* |
23 |
190 |
Inotiv, Inc.* |
99 |
185 |
Kronos Bio,
Inc.* |
231 |
182 |
Syros Pharmaceuticals,
Inc.* |
34 |
173 |
Assertio Holdings,
Inc.* |
173 |
172 |
Cara Therapeutics,
Inc.* |
264 |
171 |
Tourmaline
Bio, Inc. |
12 |
171 |
AirSculpt
Technologies, Inc.* |
38 |
156 |
Korro Bio,
Inc.* |
3 |
154 |
Vor BioPharma,
Inc.* |
113 |
153 |
Kezar Life
Sciences, Inc.* |
219 |
152 |
Vistagen Therapeutics,
Inc.* |
38 |
147 |
BioAtla, Inc.* |
92 |
139 |
Allovir, Inc.* |
175 |
132 |
Oncternal
Therapeutics, Inc.* |
13 |
120 |
Exagen, Inc.* |
61 |
119 |
Precision
BioSciences, Inc.* |
9 |
116 |
Retractable
Technologies, Inc.* |
103 |
108 |
Biodesix,
Inc.* |
75 |
107 |
Bolt Biotherapeutics,
Inc.* |
136 |
103 |
TherapeuticsMD,
Inc.* |
46 |
102 |
Laird Superfood,
Inc.* |
37 |
101 |
Quince Therapeutics,
Inc.* |
118 |
98 |
Elicio Therapeutics,
Inc.* |
12 |
95 |
MEI Pharma,
Inc. |
33 |
94 |
Sensei Biotherapeutics,
Inc.* |
124 |
92 |
Hookipa Pharma,
Inc.* |
114 |
91 |
Singular Genomics
Systems, Inc.* |
244 |
89 |
Carisma Therapeutics,
Inc.* |
59 |
78 |
Aligos Therapeutics,
Inc.* |
125 |
74 |
Alpha Teknova,
Inc.* |
41 |
72 |
Aspira Womens
Health, Inc.* |
28 |
69 |
Rapid Micro
Biosystems, Inc. Class A* |
86 |
69 |
Vincerx Pharma,
Inc.* |
95 |
60 |
NanoString
Technologies, Inc.* |
532 |
53 |
Talis Biomedical
Corp.* |
6 |
53 |
Zevia PBC
Class A* |
61 |
52 |
Fortress Biotech,
Inc.* |
28 |
51 |
Oncocyte Corp.* |
17 |
47 |
Xilio Therapeutics,
Inc.* |
43 |
46 |
DermTech,
Inc.* |
144 |
45 |
PAVmed, Inc.* |
29 |
41 |
KALA BIO,
Inc.* |
6 |
40 |
Forte Biosciences,
Inc.* |
67 |
40 |
|
See
notes to financial statements. |
26 l GUG l GUGGENHEIM
ACTIVE ALLOCATION FUND ANNUAL REPORT |
|
|
SCHEDULE
OF INVESTMENTS continued |
May
31, 2024 |
|
|
|
|
Shares |
Value |
COMMON
STOCKS 4.3% (continued) |
|
|
Consumer, Non-cyclical
0.7% (continued) |
|
|
Sorrento Therapeutics,
Inc.* |
3,481 |
$ 39 |
Lucid Diagnostics,
Inc.* |
39 |
35 |
Rubius Therapeutics,
Inc.*, |
547 |
31 |
AquaBounty
Technologies, Inc.* |
16 |
28 |
Cyclo Therapeutics,
Inc.* |
19 |
24 |
VBI Vaccines,
Inc.* |
37 |
23 |
Accelerate
Diagnostics, Inc.* |
19 |
23 |
Molecular
Templates, Inc.* |
14 |
17 |
Eterna Therapeutics,
Inc.* |
8 |
15 |
Trevena, Inc.* |
38 |
15 |
Atreca, Inc.
Class A* |
154 |
14 |
Portage Biotech,
Inc.* |
29 |
14 |
Vapotherm,
Inc.* |
16 |
12 |
GT Biopharma,
Inc.* |
3 |
11 |
MiNK Therapeutics,
Inc.* |
11 |
11 |
Telesis Bio,
Inc.* |
3 |
11 |
SQZ Biotechnologies
Co.* |
135 |
6 |
Cue Health,
Inc.* |
85 |
6 |
Mustang Bio,
Inc.* |
28 |
6 |
Acutus Medical,
Inc.* |
113 |
5 |
iBio, Inc.* |
2 |
5 |
22nd Century
Group, Inc.* |
4 |
3 |
Seelos Therapeutics,
Inc.* |
2 |
2 |
Ontrak, Inc.* |
9 |
2 |
Tonix Pharmaceuticals
Holding Corp.* |
13 |
2 |
Invitae Corp.* |
2,340 |
2 |
Finch Therapeutics
Group, Inc.* |
1 |
1 |
Ampio Pharmaceuticals,
Inc.* |
4 |
1 |
Athersys,
Inc.* |
49 |
|
Humanigen,
Inc.* |
284 |
|
Tattooed Chef,
Inc.* |
281 |
|
Codiak Biosciences,
Inc.*, |
94 |
|
Infinity Pharmaceuticals,
Inc.* |
521 |
|
Ligand Pharmaceuticals,
Inc.* |
67 |
|
Ligand Pharmaceuticals,
Inc.* |
67 |
|
9 Meters Biopharma,
Inc.* |
67 |
|
ViewRay,
Inc.* |
837 |
|
Total
Consumer, Non-cyclical |
|
4,003,941 |
Technology
0.7% |
|
|
ANSYS, Inc.* |
2,023 |
641,940 |
Qorvo, Inc.* |
5,008 |
492,737 |
Skyworks Solutions,
Inc. |
4,710 |
436,429 |
Zebra Technologies
Corp. Class A* |
1,317 |
411,352 |
IPG Photonics
Corp.* |
4,423 |
383,607 |
Paycom Software,
Inc. |
1,974 |
286,862 |
|
|
See
notes to financial statements. |
|
|
GUG l GUGGENHEIM ACTIVE
ALLOCATION FUND ANNUAL REPORT l 27 |
|
|
SCHEDULE
OF INVESTMENTS continued |
May
31, 2024 |
|
|
|
|
Shares |
Value |
COMMON
STOCKS 4.3% (continued) |
|
|
Technology 0.7% (continued) |
|
|
Seagate Technology
Holdings plc |
2,826 |
$ 263,496 |
Dayforce,
Inc.* |
4,165 |
206,001 |
Silicon Laboratories,
Inc.* |
444 |
56,020 |
ASGN, Inc.* |
596 |
55,970 |
Varonis Systems,
Inc.* |
1,250 |
53,700 |
Power Integrations,
Inc. |
691 |
52,523 |
Synaptics,
Inc.* |
463 |
43,388 |
Envestnet,
Inc.* |
635 |
41,599 |
Workiva, Inc.* |
501 |
38,562 |
Diodes, Inc.* |
510 |
37,806 |
BlackLine,
Inc.* |
633 |
30,207 |
Semtech Corp.* |
756 |
29,401 |
Ultra Clean
Holdings, Inc.* |
521 |
24,164 |
Ambarella,
Inc.* |
412 |
24,003 |
Rapid7, Inc.* |
659 |
23,816 |
SiTime Corp.* |
188 |
22,902 |
DigitalOcean
Holdings, Inc.* |
593 |
21,971 |
JFrog Ltd.* |
632 |
20,331 |
PagerDuty,
Inc.* |
967 |
18,344 |
Sprout Social,
Inc. Class A* |
530 |
17,304 |
MaxLinear,
Inc. Class A* |
829 |
14,731 |
Zuora, Inc.
Class A* |
1,333 |
13,530 |
Appian Corp.
Class A* |
461 |
13,088 |
Asana, Inc.
Class A* |
853 |
11,132 |
Phreesia,
Inc.* |
584 |
11,049 |
PAR Technology
Corp.* |
147 |
6,559 |
Sapiens International
Corporation N.V. |
184 |
6,168 |
Pitney Bowes,
Inc. |
1,031 |
5,588 |
Bandwidth,
Inc. Class A* |
275 |
5,536 |
3D Systems
Corp.* |
1,453 |
5,115 |
Grid Dynamics
Holdings, Inc.* |
530 |
5,035 |
BigCommerce
Holdings, Inc.* |
567 |
4,672 |
Health Catalyst,
Inc.* |
609 |
4,038 |
8x8, Inc.* |
1,327 |
3,623 |
Mitek Systems,
Inc.* |
255 |
3,200 |
CEVA, Inc.* |
132 |
2,629 |
Domo, Inc.
Class B* |
330 |
2,198 |
Outset Medical,
Inc.* |
548 |
2,044 |
Digital Turbine,
Inc.* |
1,060 |
2,003 |
American Software,
Inc. Class A |
187 |
1,919 |
Corsair Gaming,
Inc.* |
163 |
1,889 |
Porch Group,
Inc.* |
894 |
1,877 |
Unisys Corp.* |
384 |
1,647 |
Cerence, Inc.* |
454 |
1,562 |
AvidXchange
Holdings, Inc.* |
147 |
1,557 |
Ouster, Inc.* |
112 |
1,308 |
|
See
notes to financial statements. |
28 l GUG l GUGGENHEIM
ACTIVE ALLOCATION FUND ANNUAL REPORT |
|
|
SCHEDULE
OF INVESTMENTS continued |
May
31, 2024 |
|
|
|
|
Shares |
Value |
COMMON
STOCKS 4.3% (continued) |
|
|
Technology 0.7% (continued) |
|
|
Desktop Metal,
Inc. Class A* |
2,196 |
$ 1,238 |
Enfusion,
Inc. Class A* |
126 |
1,186 |
Telos Corp.* |
238 |
1,078 |
ON24, Inc.* |
161 |
956 |
TTEC Holdings,
Inc. |
108 |
678 |
Rackspace
Technology, Inc.* |
324 |
635 |
CoreCard Corp.* |
43 |
600 |
Outbrain,
Inc.* |
127 |
583 |
LivePerson,
Inc.* |
775 |
532 |
Brightcove,
Inc.* |
242 |
506 |
Atomera, Inc.* |
120 |
499 |
Veritone,
Inc.* |
169 |
499 |
CS Disco,
Inc.* |
84 |
491 |
Upland Software,
Inc.* |
172 |
473 |
Vuzix Corp.* |
349 |
468 |
SecureWorks
Corp. Class A* |
58 |
338 |
Forian, Inc.* |
112 |
290 |
Arteris, Inc.* |
29 |
237 |
iCAD, Inc.* |
130 |
189 |
DarioHealth
Corp.* |
80 |
114 |
Smith Micro
Software, Inc.* |
34 |
73 |
Meta Materials,
Inc.* |
12 |
47 |
EMCORE Corp.* |
22 |
18 |
Ryvyl, Inc.* |
11 |
16 |
NantHealth,
Inc.* |
10 |
11 |
Society
Pass, Inc.* |
1 |
2 |
Total
Technology |
|
3,879,889 |
Communications
0.4% |
|
|
Expedia Group,
Inc.* |
2,988 |
337,226 |
Etsy, Inc.* |
4,899 |
310,940 |
eBay, Inc. |
5,107 |
276,902 |
F5, Inc.* |
1,315 |
222,196 |
Walt Disney
Co. |
1,941 |
201,689 |
Match Group,
Inc.* |
5,697 |
174,499 |
Charter Communications,
Inc. Class A* |
457 |
131,214 |
Warner Bros
Discovery, Inc.* |
10,664 |
87,871 |
EchoStar Corp.
Class A* |
3,204 |
61,517 |
Q2 Holdings,
Inc.* |
638 |
38,803 |
Ziff Davis,
Inc.* |
508 |
29,266 |
Perficient,
Inc.* |
380 |
28,177 |
Cargurus,
Inc.* |
1,120 |
27,115 |
DigitalBridge
Group, Inc. |
1,417 |
19,328 |
Magnite, Inc.* |
1,523 |
18,794 |
Upwork, Inc.* |
1,378 |
14,565 |
Shutterstock,
Inc. |
274 |
11,133 |
TechTarget,
Inc.* |
305 |
9,217 |
|
|
See
notes to financial statements. |
|
|
GUG l GUGGENHEIM ACTIVE
ALLOCATION FUND ANNUAL REPORT l 29 |
|
|
SCHEDULE
OF INVESTMENTS continued |
May
31, 2024 |
|
|
|
|
Shares |
Value |
COMMON
STOCKS 4.3% (continued) |
|
|
Communications 0.4%
(continued) |
|
|
Liberty Latin
America Ltd. Class C* |
906 |
$ 8,218 |
Revolve Group,
Inc.* |
420 |
8,014 |
Open Lending
Corp. Class A* |
1,223 |
7,913 |
Beyond, Inc.* |
504 |
7,625 |
Infinera Corp.* |
1,081 |
6,183 |
Clear Channel
Outdoor Holdings, Inc.* |
4,259 |
6,133 |
RealReal,
Inc.* |
940 |
4,051 |
IDT Corp.
Class B |
85 |
3,445 |
Cardlytics,
Inc.* |
382 |
3,346 |
Gannett Company,
Inc.* |
838 |
3,151 |
1-800-Flowers.com,
Inc. Class A* |
317 |
3,069 |
Liquidity
Services, Inc.* |
135 |
2,647 |
OptimizeRx
Corp.* |
205 |
2,472 |
Stitch Fix,
Inc. Class A* |
949 |
2,344 |
NETGEAR, Inc.* |
169 |
2,334 |
Anterix, Inc.* |
68 |
2,288 |
Eventbrite,
Inc. Class A* |
448 |
2,231 |
Groupon, Inc.* |
140 |
2,216 |
Liberty Latin
America Ltd. Class A* |
237 |
2,150 |
Thryv Holdings,
Inc.* |
90 |
1,896 |
Boston Omaha
Corp. Class A* |
118 |
1,724 |
Advantage
Solutions, Inc.* |
455 |
1,565 |
Tucows, Inc.
Class A* |
58 |
1,317 |
Ribbon Communications,
Inc.* |
419 |
1,316 |
iHeartMedia,
Inc. Class A* |
1,313 |
1,215 |
Lands
End, Inc.* |
85 |
1,215 |
Ooma, Inc.* |
130 |
1,123 |
EW Scripps
Co. Class A* |
335 |
911 |
Entravision
Communications Corp. Class A |
358 |
773 |
1stdibs.com,
Inc.* |
106 |
571 |
Inseego Corp.* |
49 |
473 |
Telesat Corp.* |
41 |
464 |
CarParts.com,
Inc.* |
291 |
343 |
comScore,
Inc.* |
20 |
275 |
Cambium Networks
Corp.* |
63 |
202 |
National CineMedia,
Inc.* |
35 |
194 |
CuriosityStream,
Inc. |
155 |
161 |
Fluent, Inc.* |
43 |
159 |
Solo Brands,
Inc. Class A* |
71 |
138 |
VirnetX Holding
Corp.* |
18 |
74 |
aka Brands
Holding Corp.* |
4 |
68 |
CalAmp Corp.* |
9 |
24 |
Audacy, Inc.* |
23 |
4 |
Digital Media
Solutions, Inc. Class A* |
1 |
1 |
HyreCar,
Inc.* |
104 |
|
Total
Communications |
|
2,096,488 |
|
See
notes to financial statements. |
30 l GUG l GUGGENHEIM
ACTIVE ALLOCATION FUND ANNUAL REPORT |
|
|
SCHEDULE
OF INVESTMENTS continued |
May
31, 2024 |
|
|
|
|
Shares |
Value |
COMMON
STOCKS 4.3% (continued) |
|
|
Industrial 0.4% |
|
|
Johnson Controls
International plc |
4,227 |
$ 303,963 |
Generac Holdings,
Inc.* |
2,048 |
301,486 |
Mohawk Industries,
Inc.* |
2,047 |
249,591 |
Keysight Technologies,
Inc.* |
1,753 |
242,755 |
Fortune Brands
Innovations, Inc. |
3,048 |
213,543 |
Ball Corp. |
2,988 |
207,457 |
Stanley Black
& Decker, Inc. |
1,746 |
152,199 |
Exponent,
Inc. |
606 |
57,643 |
Zurn Elkay
Water Solutions Corp. |
1,417 |
44,366 |
John Bean
Technologies Corp. |
366 |
34,964 |
Kennametal,
Inc. |
980 |
25,235 |
Helios Technologies,
Inc. |
378 |
18,930 |
Montrose Environmental
Group, Inc.* |
305 |
14,338 |
Ichor Holdings
Ltd.* |
331 |
12,575 |
Vicor Corp.* |
247 |
8,643 |
Aspen Aerogels,
Inc.* |
263 |
7,869 |
TriMas Corp. |
253 |
6,735 |
nLight, Inc.* |
509 |
6,694 |
Columbus McKinnon
Corp. |
163 |
6,373 |
Triumph Group,
Inc.* |
373 |
5,263 |
CryoPort,
Inc.* |
476 |
4,893 |
Smith &
Wesson Brands, Inc. |
285 |
4,779 |
Gorman-Rupp
Co. |
135 |
4,663 |
Astec Industries,
Inc. |
133 |
4,321 |
Enviri Corp.* |
459 |
4,062 |
FARO Technologies,
Inc.* |
212 |
3,971 |
GrafTech International
Ltd.* |
2,345 |
3,869 |
Ranpak Holdings
Corp.* |
447 |
2,789 |
Mesa Laboratories,
Inc. |
29 |
2,775 |
Manitowoc
Company, Inc.* |
204 |
2,536 |
Yellow Corp.* |
300 |
2,250 |
Luxfer Holdings
plc |
164 |
2,020 |
Turtle Beach
Corp.* |
90 |
1,492 |
AMMO, Inc.* |
515 |
1,391 |
Blink Charging
Co.* |
428 |
1,331 |
GoPro, Inc.
Class A* |
755 |
1,148 |
Standard BioTools,
Inc.* |
454 |
1,126 |
Pure Cycle
Corp.* |
114 |
1,061 |
Latham Group,
Inc.* |
240 |
926 |
Caesarstone
Ltd.* |
134 |
801 |
Identiv, Inc.* |
127 |
552 |
Comtech Telecommunications
Corp.* |
152 |
379 |
Kopin Corp.* |
462 |
370 |
Hydrofarm
Holdings Group, Inc.* |
465 |
368 |
INNOVATE Corp.* |
282 |
172 |
Akoustis Technologies,
Inc.* |
287 |
62 |
|
|
See
notes to financial statements. |
|
|
GUG l GUGGENHEIM ACTIVE
ALLOCATION FUND ANNUAL REPORT l 31 |
|
|
SCHEDULE
OF INVESTMENTS continued |
May
31, 2024 |
|
|
|
|
Shares |
Value |
COMMON
STOCKS 4.3% (continued) |
|
|
Industrial 0.4% (continued) |
|
|
AgEagle Aerial
Systems, Inc.* |
20 |
$ 14 |
View,
Inc.*, |
9 |
1 |
Total
Industrial |
|
1,974,744 |
Basic Materials
0.0% |
|
|
Balchem Corp. |
377 |
57,907 |
Quaker Chemical
Corp. |
157 |
28,472 |
Tronox Holdings
plc Class A |
1,344 |
26,625 |
Energy Fuels,
Inc.* |
900 |
6,300 |
Novagold Resources,
Inc.* |
1,390 |
5,462 |
Centrus Energy
Corp. Class A* |
57 |
2,829 |
Radius Recycling,
Inc. Class A |
154 |
2,635 |
Compass Minerals
International, Inc. |
200 |
2,592 |
Mativ Holdings,
Inc. |
136 |
2,440 |
Codexis, Inc.* |
706 |
2,386 |
Danimer Scientific,
Inc.* |
1,055 |
823 |
Unifi, Inc.* |
81 |
531 |
Glatfelter
Corp.* |
261 |
423 |
Amyris,
Inc.* |
2,060 |
41 |
Total
Basic Materials |
|
139,466 |
Utilities
0.0% |
|
|
Ameresco,
Inc. Class A* |
362 |
13,220 |
Middlesex
Water Co. |
101 |
5,442 |
Global Water
Resources, Inc. |
75 |
969 |
Via Renewables,
Inc.* |
15 |
160 |
Stronghold
Digital Mining, Inc. Class A* |
4 |
12 |
Total
Utilities |
|
19,803 |
Energy
0.0% |
|
|
Sunnova Energy
International, Inc.* |
1,009 |
5,267 |
SunPower Corp.
Class A* |
937 |
3,130 |
National Energy
Services Reunited Corp.* |
226 |
2,237 |
Stem, Inc.* |
1,328 |
1,766 |
DMC Global,
Inc.* |
111 |
1,442 |
Gevo, Inc.* |
1,167 |
798 |
Aemetis, Inc.* |
161 |
556 |
Beam Global* |
52 |
303 |
Spruce Power
Holding Corp.* |
78 |
266 |
Eos
Energy Enterprises, Inc.* |
259 |
184 |
Total
Energy |
|
15,949 |
Pharmaceuticals
0.0% |
|
|
Cyteir
Therapeutics, Inc.*, |
99 |
298 |
Total Common
Stocks |
|
|
(Cost
$44,351,839) |
|
23,432,427 |
|
See
notes to financial statements. |
32 l GUG l GUGGENHEIM
ACTIVE ALLOCATION FUND ANNUAL REPORT |
|
|
SCHEDULE
OF INVESTMENTS continued |
May
31, 2024 |
|
|
|
|
Shares |
Value |
PREFERRED
STOCKS 6.4% |
|
|
Financial 5.9% |
|
|
Markel Group,
Inc. |
|
|
6.00% |
5,000,000 |
$ 4,961,325 |
Goldman Sachs
Group, Inc. |
|
|
3.80% |
5,000,000 |
4,689,562 |
Citigroup,
Inc. |
|
|
4.15% |
5,000,000 |
4,628,889 |
Bank of New
York Mellon Corp. |
|
|
3.75% |
5,000,000 |
4,589,665 |
Wells Fargo
& Co. |
|
|
4.38% |
139,386 |
2,678,999 |
4.75% |
61,250 |
1,250,725 |
3.90% |
400,000 |
378,041 |
Bank of America
Corp. |
|
|
4.38% |
1,781,500 |
4,087,429 |
Selective
Insurance Group, Inc. |
|
|
4.60% |
85,536 |
1,563,598 |
Public Storage |
|
|
4.10% |
58,000 |
1,066,620 |
Lincoln National
Corp. |
|
|
9.25% |
750,000 |
807,984 |
Jackson Financial,
Inc. |
|
|
8.00% |
26,000 |
694,200 |
RenaissanceRe
Holdings Ltd. |
|
|
4.20% |
38,000 |
667,660 |
Reinsurance
Group of America, Inc. |
|
|
7.13% due
10/15/52 |
1,100 |
28,721 |
First Republic
Bank |
|
|
4.50%*, |
200,000 |
6,000 |
Total
Financial |
|
32,099,418 |
Government
0.5% |
|
|
CoBank ACB |
|
|
4.25% |
3,000,000 |
2,570,065 |
Total Preferred
Stocks |
|
|
(Cost
$44,070,679) |
|
34,669,483 |
WARRANTS
0.0% |
|
|
Pershing Square
Holdings, Ltd. |
|
|
Expiring
12/31/49*,,1 |
82,425 |
8 |
Cassava Sciences
Inc |
|
|
Expiring
11/15/24* |
179 |
6 |
Danimer Scientific,
Inc. |
|
|
Expiring
07/15/25* |
352 |
|
Total Warrants |
|
|
(Cost
$0) |
|
14 |
|
|
See
notes to financial statements. |
|
|
GUG l GUGGENHEIM ACTIVE
ALLOCATION FUND ANNUAL REPORT l 33 |
SCHEDULE
OF INVESTMENTS continued |
May
31, 2024 |
|
|
|
|
Shares |
Value |
RIGHTS
0.0% |
|
|
Consumer, Non-cyclical
0.0% |
|
|
Homology Medicines,
Inc. |
|
|
Expires 06/30/26 |
249 |
$ 24,900 |
Neurogene,
Inc. |
|
|
Expires 06/30/29 |
41 |
4,100 |
XOMA Corp. |
|
|
Expires 04/04/25 |
153 |
38 |
AbbVie Inc |
|
|
Expires 03/31/29 |
2 |
|
Korro Bio,
Inc. |
|
|
Expires 12/31/26 |
191 |
|
Cartesian
Therapeutics, Inc. |
|
|
Expires 09/15/24 |
542 |
|
Pulse Biosciences,
Inc. |
|
|
Expires 06/13/24 |
83 |
|
Assertio Holdings,
Inc. |
|
|
Expires 12/31/25 |
971 |
|
Carisma Therapeutics,
Inc. |
|
|
Expires 03/31/27 |
1,182 |
|
Coherus Biosciences,
Inc. |
208 |
|
Epizyme, Inc. |
|
|
Expires
01/01/28 |
793 |
|
Disc Medicine,
Inc. |
130 |
|
Jounce Therapeutics,
Inc. |
|
|
Expires 05/05/25 |
196 |
|
Eli Lilly
& Co. |
|
|
Expires 12/31/31 |
6 |
|
Magnenta Therapeutics,
Inc. |
178 |
|
Radius Health,
Inc. |
|
|
Expires
12/31/25 |
558 |
|
Total
Consumer, Non-cyclical |
|
29,038 |
Consumer,
Cyclical 0.0% |
|
|
Barnes &
Noble Education, Inc. |
|
|
Expires
01/31/25 |
263 |
966 |
Financial
0.0% |
|
|
Gurnet Point
Capital LLC |
|
|
Expires
12/31/26 |
285 |
|
Total Rights |
|
|
(Cost
$1,036) |
|
30,004 |
MUTUAL
FUND 1.1% |
|
|
Guggenheim
Risk Managed Real Estate Fund Institutional Class3 |
194,840 |
6,006,923 |
Total Mutual
Fund |
|
|
(Cost
$7,445,915) |
|
6,006,923 |
|
See
notes to financial statements. |
34 l GUG l GUGGENHEIM
ACTIVE ALLOCATION FUND ANNUAL REPORT |
|
|
SCHEDULE
OF INVESTMENTS continued |
May
31, 2024 |
|
|
|
|
Shares |
Value |
CLOSED-END
MUTUAL FUNDS 2.3% |
|
|
BlackRock
Credit Allocation Income Trust |
290,333 |
$ 3,074,626 |
Eaton Vance
Limited Duration Income Fund |
309,597 |
3,037,147 |
Western Asset
High Income Opportunity Fund, Inc. |
765,344 |
2,877,693 |
BlackRock
Debt Strategies Fund, Inc. |
154,689 |
1,695,391 |
Blackstone
Strategic Credit Fund |
91,382 |
1,083,791 |
Ares
Dynamic Credit Allocation Fund, Inc. |
51,928 |
753,995 |
Total Closed-End
Mutual Funds |
|
|
(Cost
$15,866,239) |
|
12,522,643 |
MONEY MARKET
FUNDS 0.7% |
|
|
Dreyfus Treasury
Securities Cash Management Fund Institutional Shares, 5.19%4 |
3,782,644 |
3,782,644 |
Dreyfus
Treasury Obligations Cash Management Fund Institutional Shares, 5.19%4 |
55,017 |
55,017 |
Total Money
Market Funds |
|
|
(Cost
$3,837,661) |
|
3,837,661 |
|
Face |
|
|
Amount~ |
|
CORPORATE
BONDS 52.3% |
|
|
Financial
12.0% |
|
|
United Wholesale
Mortgage LLC |
|
|
5.50% due
04/15/295,6 |
4,300,000 |
4,037,700 |
Jefferies Finance
LLC / JFIN Company-Issuer Corp. |
|
|
5.00%
due 08/15/285,6 |
3,810,000 |
3,502,606 |
Liberty Mutual
Group, Inc. |
|
|
4.30%
due 02/01/616 |
5,250,000 |
3,155,081 |
FS KKR Capital
Corp. |
|
|
3.25% due
07/15/275 |
3,300,000 |
2,994,408 |
OneMain Finance
Corp. |
|
|
4.00% due
09/15/305 |
3,300,000 |
2,804,524 |
Kennedy-Wilson,
Inc. |
|
|
5.00% due
03/01/31 |
3,500,000 |
2,784,433 |
Iron Mountain,
Inc. |
|
|
5.25% due
07/15/305,6 |
2,940,000 |
2,748,898 |
Jane Street
Group / JSG Finance, Inc. |
|
|
7.13%
due 04/30/315,6 |
2,700,000 |
2,748,827 |
Encore Capital
Group, Inc. |
|
|
8.50%
due 05/15/306 |
1,950,000 |
1,952,054 |
9.25% due
04/01/296 |
750,000 |
780,521 |
GLP Capital
Limited Partnership / GLP Financing II, Inc. |
|
|
3.25% due
01/15/32 |
3,250,000 |
2,697,027 |
Accident Fund
Insurance Company of America |
|
|
8.50% due
08/01/325,6 |
2,550,000 |
2,486,157 |
Global Atlantic
Finance Co. |
|
|
3.13%
due 06/15/315,6 |
1,750,000 |
1,447,802 |
4.70%
due 10/15/512,5,6 |
900,000 |
814,159 |
Corebridge Financial, Inc. |
|
|
6.88%
due 12/15/522 |
1,950,000 |
1,962,224 |
|
|
See
notes to financial statements. |
|
|
GUG l GUGGENHEIM ACTIVE
ALLOCATION FUND ANNUAL REPORT l 35 |
|
|
SCHEDULE
OF INVESTMENTS continued |
May
31, 2024 |
|
|
|
|
Face |
|
|
Amount~ |
Value |
CORPORATE
BONDS 52.3% (continued) |
|
|
Financial
12.0% (continued) |
|
|
Hunt Companies,
Inc. |
|
|
5.25% due
04/15/295,6 |
1,850,000 |
$ 1,643,646 |
Starwood Property
Trust, Inc. |
|
|
4.38%
due 01/15/275,6 |
1,700,000 |
1,592,960 |
Atlantic Marine
Corporations Communities LLC |
|
|
5.38%
due 02/15/48 |
2,033,206 |
1,592,889 |
Rocket Mortgage
LLC / Rocket Mortgage Company-Issuer, Inc. |
|
|
4.00%
due 10/15/335,6 |
1,800,000 |
1,494,454 |
3.88%
due 03/01/316 |
100,000 |
86,437 |
Cushman &
Wakefield US Borrower LLC |
|
|
6.75% due
05/15/285,6 |
1,500,000 |
1,491,574 |
Iron Mountain
Information Management Services, Inc. |
|
|
5.00%
due 07/15/325,6 |
1,600,000 |
1,442,057 |
Prudential
Financial, Inc. |
|
|
5.13%
due 03/01/522,5 |
1,550,000 |
1,439,564 |
Sherwood Financing
plc |
|
|
4.50%
due 11/15/26 |
EUR 1,500,000 |
1,408,203 |
AmFam Holdings,
Inc. |
|
|
3.83%
due 03/11/516 |
2,300,000 |
1,355,140 |
Jones Deslauriers
Insurance Management, Inc. |
|
|
8.50% due
03/15/306 |
750,000 |
789,358 |
10.50% due
12/15/306 |
500,000 |
538,105 |
UBS AG NY |
|
|
7.95%
due 01/09/255 |
1,300,000 |
1,316,431 |
NatWest Group
plc |
|
|
7.47% due
11/10/262,5 |
1,250,000 |
1,280,182 |
Standard Chartered
plc |
|
|
7.78%
due 11/16/252,5,6 |
1,150,000 |
1,159,859 |
Ares Finance Company IV LLC |
|
|
3.65%
due 02/01/525,6 |
1,650,000 |
1,135,010 |
PennyMac Financial
Services, Inc. |
|
|
7.13%
due 11/15/306 |
800,000 |
789,667 |
7.88% due
12/15/295,6 |
300,000 |
307,154 |
Toronto-Dominion
Bank |
|
|
8.13%
due 10/31/822 |
1,050,000 |
1,088,260 |
KKR Group
Finance Company X LLC |
|
|
3.25% due
12/15/515,6 |
1,600,000 |
1,068,862 |
PHM Group
Holding Oy |
|
|
4.75%
due 06/18/266 |
EUR 1,000,000 |
1,044,434 |
Bank of Nova
Scotia |
|
|
8.63% due
10/27/822,5 |
750,000 |
782,991 |
Nationstar
Mortgage Holdings, Inc. |
|
|
5.00%
due 02/01/266 |
790,000 |
775,111 |
Kane Bidco
Ltd. |
|
|
5.00% due
02/15/27 |
EUR 700,000 |
742,012 |
|
See
notes to financial statements. |
36 l GUG l GUGGENHEIM
ACTIVE ALLOCATION FUND ANNUAL REPORT |
|
|
SCHEDULE
OF INVESTMENTS continued |
May
31, 2024 |
|
|
|
|
Face |
|
|
Amount~ |
Value |
CORPORATE
BONDS 52.3% (continued) |
|
|
Financial 12.0% (continued) |
|
|
MidCap Funding
XLVI Trust |
|
|
8.82%
(1 Month Term SOFR + 3.50%, Rate Floor: 0.00%) due 04/15/27◊, |
600,000 |
$ 600,000 |
Swiss Re Finance
Luxembourg S.A. |
|
|
5.00% due
04/02/492,6 |
600,000 |
576,216 |
Ryan Specialty LLC |
|
|
4.38%
due 02/01/306 |
450,000 |
415,165 |
USI, Inc. |
|
|
7.50%
due 01/15/326 |
350,000 |
351,308 |
Alliant Holdings
Intermediate LLC / Alliant Holdings Company-Issuer |
|
|
7.00%
due 01/15/316 |
150,000 |
150,392 |
Total
Financial |
|
65,373,862 |
Consumer,
Non-cyclical 8.3% |
|
|
DaVita, Inc. |
|
|
4.63%
due 06/01/305,6 |
5,200,000 |
4,658,588 |
US Foods, Inc. |
|
|
4.63%
due 06/01/305,6 |
4,250,000 |
3,902,690 |
Upbound Group, Inc. |
|
|
6.38%
due 02/15/296 |
3,412,000 |
3,290,097 |
BCP V Modular
Services Finance II plc |
|
|
4.75%
due 11/30/28 |
EUR 3,000,000 |
3,012,695 |
ADT Security
Corp. |
|
|
4.88%
due 07/15/325,6 |
3,300,000 |
2,978,080 |
Cheplapharm Arzneimittel GmbH |
|
|
5.50%
due 01/15/285,6 |
3,125,000 |
2,914,063 |
Carriage Services, Inc. |
|
|
4.25%
due 05/15/295,6 |
3,150,000 |
2,793,384 |
Bausch Health Companies, Inc. |
|
|
4.88%
due 06/01/286 |
3,300,000 |
2,417,250 |
TreeHouse
Foods, Inc. |
|
|
4.00%
due 09/01/285 |
2,000,000 |
1,781,000 |
Sothebys/Bidfair
Holdings, Inc. |
|
|
5.88%
due 06/01/295,6 |
2,200,000 |
1,721,111 |
Medline Borrower, LP |
|
|
5.25%
due 10/01/295,6 |
1,750,000 |
1,649,683 |
Post Holdings, Inc. |
|
|
5.50%
due 12/15/295,6 |
1,700,000 |
1,619,235 |
Reynolds American, Inc. |
|
|
5.70%
due 08/15/355 |
1,550,000 |
1,520,084 |
Castor S.p.A. |
|
|
9.19%
(3 Month EURIBOR + 5.25%, Rate Floor: 5.25%) due 02/15/29◊,6 |
EUR 1,400,000 |
1,489,475 |
Champions
Financing, Inc. |
|
|
8.75% due
02/15/295,6 |
1,330,000 |
1,367,325 |
CPI CG, Inc. |
|
|
8.63%
due 03/15/266 |
1,344,000 |
1,350,256 |
|
|
See
notes to financial statements. |
|
|
GUG l GUGGENHEIM ACTIVE
ALLOCATION FUND ANNUAL REPORT l 37 |
|
|
SCHEDULE
OF INVESTMENTS continued |
May
31, 2024 |
|
|
|
|
Face |
|
|
Amount~ |
Value |
CORPORATE
BONDS 52.3% (continued) |
|
|
Consumer, Non-cyclical
8.3% (continued) |
|
|
JBS USA LUX
S.A. / JBS USA Food Company / JBS USA Finance, Inc. |
|
|
4.38%
due 02/02/525 |
1,750,000 |
$ 1,296,166 |
Legends Hospitality
Holding Company LLC / Legends Hospitality Co-Issuer, Inc. |
|
|
5.00%
due 02/01/266 |
1,075,000 |
1,064,296 |
AZ Battery
Property LLC |
|
|
6.73%
due 02/20/46 |
980,000 |
963,863 |
Neogen Food
Safety Corp. |
|
|
8.63%
due 07/20/305,6 |
900,000 |
961,570 |
WW International, Inc. |
|
|
4.50%
due 04/15/296 |
1,750,000 |
735,000 |
Verisure Holding
AB |
|
|
5.50%
due 05/15/306 |
EUR 650,000 |
714,238 |
Catalent Pharma
Solutions, Inc. |
|
|
3.13%
due 02/15/296 |
300,000 |
286,183 |
APi Group
DE, Inc. |
|
|
4.75%
due 10/15/296 |
250,000 |
229,283 |
Williams Scotsman,
Inc. |
|
|
7.38%
due 10/01/315,6 |
150,000 |
154,041 |
Darling Ingredients, Inc. |
|
|
6.00%
due 06/15/306 |
150,000 |
146,626 |
HealthEquity,
Inc. |
|
|
4.50%
due 10/01/296 |
75,000 |
68,703 |
Total
Consumer, Non-cyclical |
|
45,084,985 |
Communications
7.8% |
|
|
CCO Holdings
LLC / CCO Holdings Capital Corp. |
|
|
4.50%
due 06/01/335,6 |
6,500,000 |
5,015,955 |
Altice France S.A. |
|
|
5.13%
due 01/15/295,6 |
5,260,000 |
3,553,761 |
5.13%
due 07/15/296 |
2,000,000 |
1,341,314 |
British Telecommunications
plc |
|
|
4.88%
due 11/23/812,6 |
5,000,000 |
4,484,876 |
Level 3 Financing, Inc. |
|
|
4.00%
due 04/15/316 |
6,100,000 |
3,331,820 |
11.00%
due 11/15/296 |
1,008,430 |
1,033,816 |
Ziggo Bond
Company BV |
|
|
5.13%
due 02/28/305,6 |
4,361,000 |
3,724,718 |
Vodafone Group plc |
|
|
5.13%
due 06/04/812 |
4,750,000 |
3,493,126 |
McGraw-Hill
Education, Inc. |
|
|
5.75%
due 08/01/285,6 |
1,800,000 |
1,679,458 |
8.00%
due 08/01/296 |
1,700,000 |
1,584,875 |
Vmed O2 UK
Financing I plc |
|
|
4.25%
due 01/31/315,6 |
3,250,000 |
2,675,359 |
Zayo Group Holdings, Inc. |
|
|
4.00%
due 03/01/275,6 |
3,250,000 |
2,534,312 |
|
See
notes to financial statements. |
38 l GUG l GUGGENHEIM
ACTIVE ALLOCATION FUND ANNUAL REPORT |
SCHEDULE
OF INVESTMENTS continued |
May
31, 2024 |
|
|
|
|
Face |
|
|
Amount~ |
Value |
CORPORATE
BONDS 52.3% (continued) |
|
|
Communications 7.8%
(continued) |
|
|
LCPR Senior
Secured Financing DAC |
|
|
6.75%
due 10/15/276 |
1,750,000 |
$ 1,657,609 |
5.13%
due 07/15/295,6 |
445,000 |
373,562 |
Rogers Communications, Inc. |
|
|
5.25%
due 03/15/822,6 |
1,600,000 |
1,539,323 |
CSC Holdings LLC |
|
|
11.25%
due 05/15/286 |
1,000,000 |
806,880 |
4.50%
due 11/15/316 |
300,000 |
183,504 |
6.50%
due 02/01/296 |
100,000 |
67,662 |
Ciena Corp. |
|
|
4.00%
due 01/31/306 |
850,000 |
761,310 |
Sunrise FinCo
I BV |
|
|
4.88%
due 07/15/315,6 |
750,000 |
669,450 |
Cogent Communications Group,
Inc. |
|
|
7.00%
due 06/15/275,6 |
500,000 |
497,657 |
VZ Secured Financing BV |
|
|
5.00%
due 01/15/325,6 |
500,000 |
424,339 |
AMC Networks, Inc. |
|
|
10.25%
due 01/15/296 |
350,000 |
349,213 |
Outfront Media
Capital LLC / Outfront Media Capital Corp. |
|
|
4.25%
due 01/15/296 |
325,000 |
293,425 |
Total
Communications |
|
42,077,324 |
Consumer,
Cyclical 6.4% |
|
|
1011778 BC
ULC / New Red Finance, Inc. |
|
|
4.00%
due 10/15/305,6 |
4,500,000 |
3,915,644 |
Station Casinos LLC |
|
|
4.63%
due 12/01/315,6 |
3,250,000 |
2,846,147 |
Penn Entertainment, Inc. |
|
|
4.13%
due 07/01/295,6 |
3,350,000 |
2,795,742 |
Suburban Propane Partners Limited
Partnership/Suburban Energy Finance Corp. |
|
|
5.00%
due 06/01/316 |
2,200,000 |
1,974,329 |
Air Canada |
|
|
4.63%
due 08/15/296 |
CAD 2,750,000 |
1,931,771 |
Aramark Services,
Inc. |
|
|
5.00%
due 02/01/285,6 |
2,000,000 |
1,912,202 |
Wabash National Corp. |
|
|
4.50%
due 10/15/286 |
1,750,000 |
1,579,367 |
Scientific
Games Holdings Limited Partnership/Scientific Games US FinCo, Inc. |
|
|
6.63%
due 03/01/306 |
1,600,000 |
1,515,608 |
CD&R Smokey
Buyer, Inc. |
|
|
6.75%
due 07/15/255,6 |
1,500,000 |
1,488,095 |
Fertitta Entertainment LLC /
Fertitta Entertainment Finance Company, Inc. |
|
|
4.63%
due 01/15/296 |
1,650,000 |
1,484,262 |
|
|
See
notes to financial statements. |
|
|
GUG l GUGGENHEIM ACTIVE
ALLOCATION FUND ANNUAL REPORT l 39 |
SCHEDULE
OF INVESTMENTS continued |
May
31, 2024 |
|
|
|
|
Face |
|
|
Amount~ |
Value |
CORPORATE
BONDS 52.3% (continued) |
|
|
Consumer, Cyclical
6.4% (continued) |
|
|
Crocs, Inc. |
|
|
4.25%
due 03/15/295,6 |
1,625,000 |
$ 1,483,282 |
Boyne USA, Inc. |
|
|
4.75%
due 05/15/295,6 |
1,600,000 |
1,477,679 |
Deuce FinCo plc |
|
|
5.50%
due 06/15/27 |
GBP 1,200,000 |
1,447,607 |
Allwyn Entertainment Financing
UK plc |
|
|
7.88%
due 04/30/296 |
1,400,000 |
1,427,773 |
Steelcase,
Inc. |
|
|
5.13%
due 01/18/295 |
1,450,000 |
1,369,834 |
Hawaiian Brand
Intellectual Property Ltd. / HawaiianMiles Loyalty Ltd. |
|
|
5.75%
due 01/20/266 |
1,400,000 |
1,290,947 |
Ontario Gaming
GTA, LP |
|
|
8.00%
due 08/01/305,6 |
1,250,000 |
1,281,469 |
Evergreen Acqco 1 Limited Partnership
/ TVI, Inc. |
|
|
9.75%
due 04/26/285,6 |
1,057,000 |
1,120,840 |
Ritchie Bros Holdings, Inc. |
|
|
7.75%
due 03/15/315,6 |
650,000 |
678,469 |
Hanesbrands, Inc. |
|
|
9.00%
due 02/15/315,6 |
550,000 |
561,479 |
4.88%
due 05/15/266 |
100,000 |
97,009 |
Tempur Sealy
International, Inc. |
|
|
3.88%
due 10/15/316 |
600,000 |
504,044 |
ONE Hotels
GmbH |
|
|
7.75%
due 04/02/316 |
EUR 250,000 |
277,680 |
Wolverine
World Wide, Inc. |
|
|
4.00%
due 08/15/296 |
300,000 |
249,846 |
JB Poindexter
& Company, Inc. |
|
|
8.75%
due 12/15/316 |
140,000 |
143,394 |
Total
Consumer, Cyclical |
|
34,854,519 |
Energy
5.4% |
|
|
NuStar Logistics,
LP |
|
|
6.38%
due 10/01/30 |
6,000,000 |
5,981,810 |
Occidental
Petroleum Corp. |
|
|
7.95%
due 06/15/39 |
3,190,000 |
3,658,059 |
ITT Holdings
LLC |
|
|
6.50%
due 08/01/295,6 |
3,750,000 |
3,432,399 |
Global Partners Limited Partnership
/ GLP Finance Corp. |
|
|
7.00%
due 08/01/275 |
2,400,000 |
2,408,374 |
6.88%
due 01/15/29 |
675,000 |
664,605 |
CVR Energy,
Inc. |
|
|
5.75%
due 02/15/285,6 |
3,300,000 |
3,045,667 |
Venture Global LNG, Inc. |
|
|
9.88%
due 02/01/325,6 |
2,550,000 |
2,734,353 |
|
See
notes to financial statements. |
40 l GUG l GUGGENHEIM
ACTIVE ALLOCATION FUND ANNUAL REPORT |
SCHEDULE
OF INVESTMENTS continued |
May
31, 2024 |
|
|
|
|
Face |
|
|
Amount~ |
Value |
CORPORATE
BONDS 52.3% (continued) |
|
|
Energy
5.4% (continued) |
|
|
Valero Energy
Corp. |
|
|
4.00% due
06/01/525 |
3,350,000 |
$ 2,465,223 |
TransMontaigne
Partners Limited Partnership / TLP Finance Corp. |
|
|
6.13% due
02/15/26 |
1,750,000 |
1,667,715 |
Buckeye Partners,
LP |
|
|
5.85% due
11/15/435 |
1,650,000 |
1,408,260 |
EnLink Midstream
LLC |
|
|
6.50% due
09/01/305,6 |
975,000 |
995,975 |
BP Capital
Markets plc |
|
|
4.88%2,5,7 |
500,000 |
471,754 |
Energy Transfer,
LP |
|
|
5.75% due
04/01/25 |
150,000 |
149,906 |
5.63% due
05/01/276 |
125,000 |
124,613 |
Viper Energy,
Inc. |
|
|
7.38%
due 11/01/316 |
250,000 |
258,226 |
Total
Energy |
|
29,466,939 |
Industrial
5.4% |
|
|
Standard Industries,
Inc. |
|
|
4.38% due
07/15/306 |
2,400,000 |
2,141,715 |
3.38% due
01/15/315,6 |
1,000,000 |
834,340 |
New Enterprise
Stone & Lime Company, Inc. |
|
|
9.75%
due 07/15/286 |
2,300,000 |
2,354,675 |
5.25% due
07/15/286 |
450,000 |
422,992 |
TK Elevator
US Newco, Inc. |
|
|
5.25% due
07/15/275,6 |
2,630,000 |
2,537,253 |
Enviri Corp. |
|
|
5.75%
due 07/31/275,6 |
2,625,000 |
2,488,816 |
MIWD Holdco
II LLC / MIWD Finance Corp. |
|
|
5.50%
due 02/01/305,6 |
2,600,000 |
2,369,780 |
GrafTech Finance,
Inc. |
|
|
4.63%
due 12/15/286 |
3,200,000 |
2,072,235 |
Pactiv Evergreen
Group Issuer Incorporated/Pactiv Evergreen Group Issuer LLC |
|
|
4.00% due
10/15/275,6 |
2,150,000 |
2,006,580 |
Clearwater
Paper Corp. |
|
|
4.75%
due 08/15/285,6 |
1,609,000 |
1,500,697 |
Builders FirstSource,
Inc. |
|
|
6.38%
due 06/15/326 |
1,500,000 |
1,494,433 |
Victoria plc |
|
|
3.63% due
08/05/26 |
EUR 1,600,000 |
1,436,667 |
Calderys Financing
LLC |
|
|
11.25% due
06/01/285,6 |
1,250,000 |
1,332,835 |
Great Lakes Dredge & Dock
Corp. |
|
|
5.25%
due 06/01/296 |
1,450,000 |
1,283,936 |
|
|
See
notes to financial statements. |
|
|
GUG l GUGGENHEIM ACTIVE
ALLOCATION FUND ANNUAL REPORT l 41 |
SCHEDULE
OF INVESTMENTS continued |
May
31, 2024 |
|
|
|
|
Face |
|
|
Amount~ |
Value |
CORPORATE
BONDS 52.3% (continued) |
|
|
Industrial 5.4% (continued) |
|
|
Mauser Packaging
Solutions Holding Co. |
|
|
7.88%
due 04/15/276 |
700,000 |
$ 713,202 |
9.25%
due 04/15/276 |
350,000 |
348,558 |
Waste Pro
USA, Inc. |
|
|
5.50%
due 02/15/266 |
1,050,000 |
1,033,921 |
Artera Services
LLC |
|
|
8.50%
due 02/15/316 |
800,000 |
817,424 |
AmeriTex HoldCo
Intermediate LLC |
|
|
10.25%
due 10/15/286 |
650,000 |
681,247 |
SCIL IV LLC
/ SCIL USA Holdings LLC |
|
|
9.50%
due 07/15/28 |
EUR 550,000 |
646,769 |
Worldpay US,
Inc. |
|
|
8.50%
due 01/15/31 |
GBP 250,000 |
341,709 |
TVL Finance
plc |
|
|
9.36%
(3 Month EURIBOR + 5.50%, Rate Floor: 5.50%) due 04/28/28◊ |
EUR
300,000 |
327,148 |
Total
Industrial |
|
29,186,932 |
Basic Materials
3.8% |
|
|
Kaiser Aluminum
Corp. |
|
|
4.50%
due 06/01/315,6 |
4,350,000 |
3,848,793 |
SK Invictus Intermediate II
SARL |
|
|
5.00%
due 10/30/295,6 |
4,250,000 |
3,771,610 |
Ingevity Corp. |
|
|
3.88%
due 11/01/286 |
2,900,000 |
2,609,980 |
SCIL IV LLC
/ SCIL USA Holdings LLC |
|
|
5.38%
due 11/01/266 |
2,250,000 |
2,163,206 |
Compass Minerals
International, Inc. |
|
|
6.75%
due 12/01/275,6 |
1,943,000 |
1,856,936 |
Illuminate Buyer LLC / Illuminate
Holdings IV, Inc. |
|
|
9.00%
due 07/01/286 |
1,850,000 |
1,851,328 |
Carpenter
Technology Corp. |
|
|
7.63%
due 03/15/30 |
1,600,000 |
1,640,990 |
6.38%
due 07/15/285 |
200,000 |
199,680 |
Anglo American
Capital plc |
|
|
5.63%
due 04/01/306 |
1,050,000 |
1,052,707 |
International
Flavors & Fragrances, Inc. |
|
|
1.23%
due 10/01/255,6 |
710,000 |
668,708 |
Arsenal AIC Parent LLC |
|
|
8.00%
due 10/01/305,6 |
550,000 |
572,076 |
WR Grace Holdings LLC |
|
|
4.88%
due 06/15/275,6 |
250,000 |
240,079 |
Total
Basic Materials |
|
20,476,093 |
Technology
3.0% |
|
|
Dun &
Bradstreet Corp. |
|
|
5.00%
due 12/15/296 |
3,300,000 |
3,068,886 |
|
See
notes to financial statements. |
42 l GUG l GUGGENHEIM
ACTIVE ALLOCATION FUND ANNUAL REPORT |
SCHEDULE
OF INVESTMENTS continued |
May
31, 2024 |
|
|
|
|
Face |
|
|
Amount~ |
Value |
CORPORATE
BONDS 52.3% (continued) |
|
|
Technology 3.0% (continued) |
|
|
NCR Voyix
Corp. |
|
|
5.25%
due 10/01/305,6 |
3,250,000 |
$ 2,948,228 |
AthenaHealth Group, Inc. |
|
|
6.50%
due 02/15/305,6 |
3,200,000 |
2,903,482 |
CDW LLC / CDW Finance Corp. |
|
|
3.57%
due 12/01/31 |
1,900,000 |
1,640,849 |
Cloud Software Group, Inc. |
|
|
6.50%
due 03/31/295,6 |
1,660,000 |
1,574,358 |
Broadcom, Inc. |
|
|
3.19%
due 11/15/365,6 |
1,750,000 |
1,373,552 |
Central Parent Incorporated
/ CDK Global, Inc. |
|
|
7.25%
due 06/15/296 |
1,350,000 |
1,357,272 |
Dye &
Durham Ltd. |
|
|
8.63%
due 04/15/296 |
880,000 |
890,989 |
Capstone Borrower,
Inc. |
|
|
8.00%
due 06/15/305,6 |
650,000 |
660,271 |
Total
Technology |
|
16,417,887 |
Utilities
0.2% |
|
|
Terraform
Global Operating, LP |
|
|
6.13%
due 03/01/266 |
1,150,000 |
1,133,537 |
Total Corporate
Bonds |
|
|
(Cost
$313,654,174) |
|
284,072,078 |
SENIOR
FLOATING RATE INTERESTS,◊ 37.8% |
|
|
Consumer,
Non-cyclical 11.3% |
|
|
Lyons Magnus |
|
|
12.08%
(3 Month Term SOFR + 2.50%, Rate Floor: 2.50%) |
|
|
(in-kind
rate was 4.25%) due 05/10/278 |
6,033,320 |
5,706,495 |
LaserAway
Intermediate Holdings II LLC |
|
|
11.33% (3
Month Term SOFR + 5.75%, Rate Floor: 6.50%) due 10/14/27 |
5,620,625 |
5,587,857 |
Gibson Brands,
Inc. |
|
|
10.58% (3
Month Term SOFR + 5.00%, Rate Floor: 5.75%) due 08/11/28 |
5,620,625 |
5,384,559 |
National Mentor
Holdings, Inc. |
|
|
9.18% (3
Month Term SOFR + 3.75%, Rate Floor: 4.50%) due 03/02/28 |
5,200,105 |
4,989,501 |
9.16% (3
Month Term SOFR + 3.75%, Rate Floor: 4.50%) due 03/02/28 |
168,375 |
161,556 |
Kronos Acquisition
Holdings, Inc. |
|
|
11.49% (3
Month Term SOFR + 6.00%, Rate Floor: 7.00%) due 12/22/26 |
3,225,750 |
3,233,814 |
Triton Water
Holdings, Inc. |
|
|
8.81% (3
Month Term SOFR + 3.25%, Rate Floor: 3.75%) due 03/31/28 |
2,924,820 |
2,919,175 |
Blue Ribbon
LLC |
|
|
11.57% (3
Month Term SOFR + 6.00%, Rate Floor: 6.75%) due 05/08/28 |
3,544,304 |
2,800,000 |
Florida Food
Products LLC |
|
|
10.44% (1
Month Term SOFR + 5.00%, Rate Floor: 5.75%) due 10/18/28 |
3,185,000 |
2,759,006 |
|
|
See
notes to financial statements. |
|
|
GUG l GUGGENHEIM ACTIVE
ALLOCATION FUND ANNUAL REPORT l 43 |
SCHEDULE
OF INVESTMENTS continued |
May
31, 2024 |
|
|
|
|
Face |
|
|
Amount~ |
Value |
SENIOR FLOATING RATE INTERESTS,◊
37.8% (continued) |
|
|
Consumer,
Non-cyclical 11.3% (continued) |
|
|
Womens Care Holdings,
Inc. |
|
|
9.93%
(3 Month Term SOFR + 4.50%, Rate Floor: 5.25%) due 01/17/28 |
2,924,812 |
$ 2,692,055 |
Southern Veterinary Partners
LLC |
|
|
9.08%
(1 Month Term SOFR + 3.75%, Rate Floor: 4.75%) due 10/05/27 |
2,250,521 |
2,251,939 |
HAH Group Holding Co. LLC |
|
|
10.43%
(1 Month Term SOFR + 5.00%, Rate Floor: 6.00%) due 10/29/27 |
1,891,459 |
1,896,187 |
PetIQ LLC |
|
|
9.69%
(1 Month Term SOFR + 4.25%, Rate Floor: 4.75%) due 04/13/28 |
1,902,843 |
1,890,950 |
Mission Veterinary Partners |
|
|
9.44%
(1 Month Term SOFR + 4.00%, Rate Floor: 4.75%) due 04/27/28 |
1,657,500 |
1,656,257 |
PlayCore |
|
|
9.83%
(1 Month Term SOFR + 4.50%, Rate Floor: 5.50%) due 02/14/30 |
1,600,000 |
1,608,000 |
Pimente Investissement S.A.S. |
|
|
7.58%
(3 Month EURIBOR + 3.68%, Rate Floor: 3.68%) due 12/29/28 |
EUR 1,350,000 |
1,454,224 |
Curriculum Associates LLC |
|
|
10.17%
(1 Month Term SOFR + 4.75%, Rate Floor: 4.75%) due 01/27/27 |
1,400,000 |
1,394,462 |
Celeste Bidco B.V. |
|
|
due 07/02/29 |
EUR 1,250,000 |
1,361,613 |
VC GB Holdings I Corp. |
|
|
8.57%
(3 Month Term SOFR + 3.00%, Rate Floor: 3.50%) due 07/21/28 |
1,350,000 |
1,350,000 |
AI Aqua Merger Sub, Inc. |
|
|
9.58%
(1 Month Term SOFR + 4.25%, Rate Floor: 4.75%) due 07/30/28 |
1,250,000 |
1,256,562 |
Dhanani Group, Inc. |
|
|
11.42%
(1 Month Term SOFR + 6.00%, Rate Floor: 7.00%) due 06/10/27 |
1,113,409 |
1,102,275 |
AI Monet (Luxembourg) Parentco
SARL |
|
|
8.43%
(3 Month EURIBOR + 4.50%, Rate Floor: 4.50%) due 02/07/31 |
EUR 1,000,000 |
1,088,238 |
Artisan Newco B.V. |
|
|
8.12%
(1 Month EURIBOR + 4.25%, Rate Floor: 4.25%) due 02/12/29 |
EUR 1,000,000 |
1,087,446 |
Nidda Healthcare Holding GmbH |
|
|
7.32%
(3 Month EURIBOR + 3.50%, Rate Floor: 3.50%) due 08/21/26 |
EUR 1,000,000 |
1,083,854 |
Chefs Warehouse, Inc. |
|
|
9.33%
(1 Month Term SOFR + 4.00%, Rate Floor: 4.50%) due 08/23/29 |
1,025,417 |
1,027,980 |
Weber-Stephen Products LLC |
|
|
8.69%
(1 Month Term SOFR + 3.25%, Rate Floor: 4.00%) due 10/29/27 |
1,027,285 |
956,022 |
Outcomes Group Holdings, Inc. |
|
|
9.59%
(3 Month Term SOFR + 4.25%, Rate Floor: 4.25%) due 04/01/31 |
700,000 |
703,794 |
IVI America LLC |
|
|
due 03/15/31 |
650,000 |
652,034 |
Financiere Mendel |
|
|
9.57%
(3 Month Term SOFR + 4.25%, Rate Floor: 4.25%) due 11/08/30 |
500,000 |
502,000 |
Grifols Worldwide Operations
USA, Inc. |
|
|
7.46%
(3 Month Term SOFR + 2.00%, Rate Floor: 3.00%) due 11/15/27 |
298,442 |
296,093 |
Elanco Animal Health, Inc. |
|
|
7.16%
(1 Month Term SOFR + 1.75%, Rate Floor: 1.75%) due 08/02/27 |
278,789 |
278,380 |
|
See
notes to financial statements. |
44 l GUG l GUGGENHEIM
ACTIVE ALLOCATION FUND ANNUAL REPORT |
SCHEDULE
OF INVESTMENTS continued |
May
31, 2024 |
|
|
|
|
Face |
|
|
Amount~ |
Value |
SENIOR FLOATING RATE INTERESTS,◊
37.8% (continued) |
|
|
Consumer,
Non-cyclical 11.3% (continued) |
|
|
TGP Holdings LLC |
|
|
8.68%
(1 Month Term SOFR + 3.25%, Rate Floor: 4.00%) due 06/29/28 |
188,345 |
$ 179,634 |
Bombardier Recreational Products,
Inc. |
|
|
8.08%
(1 Month Term SOFR + 2.75%, Rate Floor: 2.75%) due 01/22/31 |
24,663 |
24,718 |
Total
Consumer, Non-cyclical |
|
61,336,680 |
Consumer, Cyclical
8.9% |
|
|
Pacific Bells LLC |
|
|
10.06% (3
Month Term SOFR + 4.50%, Rate Floor: 5.00%) due 11/10/28 |
4,887,629 |
4,886,114 |
Secretariat
Advisors LLC |
|
|
10.32% (3
Month Term SOFR + 5.01%, Rate Floor: 5.76%) due 12/29/28 |
4,307,000 |
4,285,464 |
First Brands Group LLC |
|
|
10.59%
(3 Month Term SOFR + 5.00%, Rate Floor: 6.00%) due 03/30/27 |
3,218,313 |
3,180,949 |
Cordobes Holdco SL |
|
|
8.36%
(1 Month EURIBOR + 4.50%, Rate Floor: 4.50%) due 02/02/29 |
EUR 2,400,000 |
2,523,880 |
BRE/Everbright M6 Borrower LLC |
|
|
10.43%
(1 Month Term SOFR + 5.00%, Rate Floor: 5.75%) due 09/09/26 |
2,352,000 |
2,356,116 |
Breitling Financing SARL |
|
|
7.79%
(6 Month EURIBOR + 3.90%, Rate Floor: 3.90%) due 10/25/28 |
EUR 2,000,000 |
2,163,628 |
FR Refuel LLC |
|
|
10.19%
(1 Month Term SOFR + 4.75%, Rate Floor: 5.50%) due 11/08/28 |
1,952,083 |
1,924,032 |
MB2 Dental Solutions, LLC |
|
|
11.32%
(1 Month Term SOFR + 6.00%, Rate Floor: 6.75%) due 01/29/31 |
1,898,307 |
1,894,442 |
The Facilities Group |
|
|
11.19%
(3 Month Term SOFR + 5.75%, Rate Floor: 6.75%) due 11/30/27 |
1,852,287 |
1,818,874 |
NFM & J LLC |
|
|
11.18%
(3 Month Term SOFR + 5.75%, Rate Floor: 6.75%) due 11/30/27 |
1,822,279 |
1,789,407 |
Alexander Mann |
|
|
11.41%
(1 Month SOFR + 6.00%, Rate Floor: 6.00%) due 06/29/27 |
1,791,000 |
1,739,509 |
Fertitta Entertainment LLC |
|
|
9.07%
(1 Month Term SOFR + 3.75%, Rate Floor: 4.25%) due 01/29/29 |
1,666,000 |
1,670,232 |
Albion Financing 3 SARL |
|
|
9.15%
(3 Month EURIBOR + 5.25%, Rate Floor: 5.25%) due 08/17/26 |
EUR 1,300,000 |
1,421,170 |
RealTruck Group, Inc. |
|
|
10.44%
(1 Month Term SOFR + 5.00%, Rate Floor: 5.75%) due 01/31/28 |
1,400,000 |
1,399,132 |
QSRP Finco B.V. |
|
|
due 05/29/31 |
EUR 1,300,000 |
1,396,484 |
ImageFIRST Holdings LLC |
|
|
9.58%
(3 Month Term SOFR + 4.25%, Rate Floor: 5.00%) due 04/27/28 |
1,376,550 |
1,376,550 |
BIFM CA Buyer, Inc. |
|
|
9.58%
(1 Month Term SOFR + 4.25%, Rate Floor: 4.75%) due 05/31/28 |
1,350,000 |
1,356,750 |
Casper Bidco SAS (B&B Hotels) |
|
|
8.06%
(1 Month EURIBOR + 4.25%, Rate Floor: 4.25%) due 02/21/31 |
EUR 1,200,000 |
1,307,695 |
Shaw Development LLC |
|
|
11.33%
(1 Month Term SOFR + 6.00%, Rate Floor: 6.00%) due 10/30/29 |
1,206,383 |
1,184,611 |
|
|
See
notes to financial statements. |
|
|
GUG l GUGGENHEIM ACTIVE
ALLOCATION FUND ANNUAL REPORT l 45 |
SCHEDULE
OF INVESTMENTS continued |
May
31, 2024 |
|
|
|
|
|
|
Face |
|
|
|
Amount~ |
Value |
SENIOR FLOATING RATE INTERESTS,◊
37.8% (continued) |
|
|
|
Consumer,
Cyclical 8.9% (continued) |
|
|
|
One Hotels GmbH |
|
|
|
8.41%
(3 Month EURIBOR + 4.50%, Rate Floor: 4.50%) due 04/30/31 |
EUR 1,000,000 |
$ 1,090,766 |
Entain Holdings (Gibraltar)
Ltd. |
|
|
|
due 06/30/28 |
EUR 1,000,000 |
1,088,965 |
Alterra Mountain Co. |
|
|
|
due 05/31/30 |
|
1,050,000 |
1,057,224 |
Normec 1 B.V. |
|
|
|
7.92%
(3 Month EURIBOR + 4.00%, Rate Floor: 4.00%) due 03/27/31 |
EUR 849,624 |
923,975 |
Thevelia US LLC |
|
|
|
9.06%
(3 Month Term SOFR + 3.75%, Rate Floor: 4.25%) due 06/01/29 |
|
907,725 |
912,745 |
BCPE Empire Holdings, Inc. |
|
|
|
9.33%
(1 Month Term SOFR + 4.00%, Rate Floor: 4.50%) due 12/11/28 |
|
700,000 |
700,791 |
Caesars Entertainment, Inc. |
|
|
|
8.10%
(3 Month Term SOFR + 2.75%, Rate Floor: 3.25%) due 01/24/31 |
|
450,000 |
450,702 |
8.10%
(3 Month Term SOFR + 2.75%, Rate Floor: 3.25%) due 02/06/30 |
|
198,000 |
198,412 |
Zephyr Bidco Ltd. |
|
|
|
10.70%
(1 Month GBP SONIA + 5.50%, Rate Floor: 5.50%) due 07/31/28 |
GBP 500,000 |
639,951 |
CNT Holdings I Corp. |
|
|
|
8.83%
(3 Month Term SOFR + 3.50%, Rate Floor: 4.25%) due 11/08/27 |
|
423,938 |
425,705 |
Congruex Group LLC |
|
|
|
11.23%
(3 Month Term SOFR + 5.75%, Rate Floor: 6.50%) due 05/03/29 |
|
442,125 |
415,598 |
Orion Group |
|
|
|
11.82%
(3 Month Term SOFR + 6.25%, Rate Floor: 7.25%) due 03/19/27 |
|
212,174 |
207,333 |
11.81% (3
Month Term SOFR + 6.36%, Rate Floor: 7.36%) due 03/19/27 |
|
138,365 |
135,209 |
American Tire Distributors,
Inc. |
|
|
|
11.84%
(3 Month Term SOFR + 6.25%, Rate Floor: 7.00%) due 10/20/28 |
|
441,000 |
330,437 |
CCRR Parent, Inc. |
|
|
|
9.69%
(3 Month Term SOFR + 3.86%, Rate Floor: 4.61%) due 03/06/28 |
|
223,233 |
197,003 |
MB2 Dental Solutions, LLC |
|
|
|
13.50%
(Commercial Prime Lending Rate + 5.00%, Rate Floor: 5.75%) due 01/29/31 |
18,200 |
16,025 |
Total
Consumer, Cyclical |
|
|
48,465,880 |
Industrial 7.6% |
|
|
|
American Bath Group LLC |
|
|
|
9.18%
(1 Month Term SOFR + 3.75%, Rate Floor: 4.25%) due 11/23/27 |
|
5,609,311 |
5,561,407 |
Pelican Products, Inc. |
|
|
|
9.81%
(3 Month Term SOFR + 4.25%, Rate Floor: 4.75%) due 12/29/28 |
|
5,620,625 |
5,166,984 |
Merlin Buyer, Inc. |
|
|
|
9.33%
(1 Month Term SOFR + 4.00%, Rate Floor: 4.50%) due 12/14/28 |
|
3,234,000 |
3,213,787 |
ASP Dream Acquisiton Co. LLC |
|
|
|
9.43%
(1 Month Term SOFR + 4.00%, Rate Floor: 4.75%) due 12/15/28 |
|
3,185,000 |
3,185,000 |
Icebox Holdco III, Inc. |
|
|
|
9.32%
(3 Month Term SOFR + 3.75%, Rate Floor: 4.25%) due 12/22/28 |
|
3,138,722 |
3,141,515 |
Rinchem Company LLC |
|
|
|
9.66%
(3 Month Term SOFR + 4.25%, Rate Floor: 4.75%) due 03/02/29 |
|
3,144,000 |
2,672,903 |
|
See
notes to financial statements. |
46 l GUG l GUGGENHEIM
ACTIVE ALLOCATION FUND ANNUAL REPORT |
SCHEDULE
OF INVESTMENTS continued |
May
31, 2024 |
|
|
|
|
Face |
|
|
Amount~ |
Value |
SENIOR FLOATING RATE INTERESTS,◊
37.8% (continued) |
|
|
Industrial 7.6% (continued) |
|
|
Arcline FM Holdings LLC |
|
|
10.32%
(3 Month Term SOFR + 4.75%, Rate Floor: 5.50%) due 06/23/28 |
2,193,750 |
$ 2,205,903 |
Geo Parent Corp. |
|
|
10.50%
(6 Month Term SOFR + 5.25%, Rate Floor: 5.25%) due 12/19/28 |
1,500,000 |
1,500,000 |
Fugue Finance LLC |
|
|
9.10%
(3 Month Term SOFR + 3.75%, Rate Floor: 4.25%) due 02/13/31 |
1,400,000 |
1,411,816 |
Michael Baker International
LLC |
|
|
due 12/01/28 |
1,400,000 |
1,403,500 |
Inspired Finco Holdings Ltd. |
|
|
7.77%
(1 Month EURIBOR + 4.00%, Rate Floor: 4.00%) due 02/17/31 |
EUR 891,521 |
971,358 |
due 02/20/31 |
EUR 358,479 |
390,581 |
Boluda Towage S.L. |
|
|
due 01/22/30 |
EUR 1,250,000 |
1,358,602 |
Foundation Building Materials
Holding Company LLC |
|
|
9.33%
(3 Month Term SOFR + 4.00%, Rate Floor: 4.00%) due 01/29/31 |
1,350,000 |
1,355,832 |
CPM Holdings, Inc. |
|
|
9.81%
(1 Month Term SOFR + 4.50%, Rate Floor: 5.00%) due 09/22/28 |
1,346,625 |
1,346,059 |
Weener Plastics Group BV |
|
|
8.42%
(3 Month EURIBOR + 4.50%, Rate Floor: 4.50%) due 11/30/28 |
EUR 1,000,000 |
1,090,267 |
Dispatch Terra Acquisition LLC |
|
|
9.70%
(3 Month Term SOFR + 4.25%, Rate Floor: 5.00%) due 03/27/28 |
1,184,809 |
1,043,059 |
Anchor Packaging LLC |
|
|
9.08%
(1 Month Term SOFR + 3.75%, Rate Floor: 3.75%) due 07/30/29 |
800,000 |
802,856 |
Atlantic Aviation |
|
|
8.83%
(1 Month Term SOFR + 3.50%, Rate Floor: 4.00%) due 09/22/28 |
790,030 |
792,598 |
Artera Services LLC |
|
|
9.81%
(3 Month Term SOFR + 4.50%, Rate Floor: 4.50%) due 02/06/31 |
550,000 |
554,010 |
Service Logic Acquisition, Inc. |
|
|
9.59%
(3 Month Term SOFR + 4.00%, Rate Floor: 4.75%) due 10/29/27 |
548,586 |
552,700 |
DXP Enterprises, Inc. |
|
|
10.16%
(6 Month Term SOFR + 4.75%, Rate Floor: 5.75%) due 10/05/30 |
497,500 |
499,988 |
Integrated Power Services Holdings,
Inc. |
|
|
9.92%
(1 Month Term SOFR + 4.50%, Rate Floor: 5.25%) due 11/22/28 |
182,038 |
181,583 |
9.94% (1
Month Term SOFR + 4.50%, Rate Floor: 5.25%) due 11/22/28 |
169,811 |
168,962 |
Aegion Corp. |
|
|
9.58% (1
Month Term SOFR + 4.25%, Rate Floor: 5.00%) due 05/17/28 |
249,375 |
250,934 |
LTI Holdings,
Inc. |
|
|
8.94% (1
Month Term SOFR + 3.50%, Rate Floor: 3.50%) due 09/08/25 |
172,266 |
169,418 |
Patriot Container
Corp. (Wastequip) |
|
|
9.18% (1
Month Term SOFR + 3.75%, Rate Floor: 4.75%) due 03/20/25 |
149,206 |
143,478 |
White Cap
Supply Holdings LLC |
|
|
9.08%
(1 Month Term SOFR + 3.75%, Rate Floor: 4.25%) due 10/19/27 |
98,241 |
98,631 |
Total
Industrial |
|
41,233,731 |
|
|
See
notes to financial statements. |
|
|
GUG l GUGGENHEIM ACTIVE
ALLOCATION FUND ANNUAL REPORT l 47 |
SCHEDULE
OF INVESTMENTS continued |
May
31, 2024 |
|
|
|
|
Face |
|
|
Amount~ |
Value |
SENIOR FLOATING RATE INTERESTS,◊
37.8% (continued) |
|
|
Technology
4.9% |
|
|
Visma AS |
|
|
due 12/05/28 |
EUR 2,500,000 |
$ 2,671,984 |
Avalara, Inc. |
|
|
12.56%
(3 Month Term SOFR + 7.25%, Rate Floor: 8.00%) due 10/19/28 |
2,636,364 |
2,608,689 |
Datix Bidco Ltd. |
|
|
10.70%
(1 Month GBP SONIA + 5.50%, Rate Floor: 5.50%) due 04/30/31 |
GBP 1,304,000 |
1,648,631 |
10.82% (1
Month Term SOFR + 5.50%, Rate Floor: 6.00%) due 04/30/31 |
370,000 |
367,039 |
Precise Midco BV |
|
|
7.44%
(3 Month EURIBOR + 3.50%, Rate Floor: 3.50%) due 05/13/26 |
EUR 830,769 |
904,340 |
7.94%
(3 Month EURIBOR + 4.50%, Rate Floor: 4.50%) due 10/16/30 |
EUR 669,231 |
730,813 |
Apttus Corp. |
|
|
9.44%
(1 Month Term SOFR + 4.00%, Rate Floor: 4.75%) due 05/08/28 |
1,379,797 |
1,382,101 |
Modena Buyer LLC |
|
|
due 04/17/31 |
1,400,000 |
1,369,662 |
Blackhawk Network Holdings,
Inc. |
|
|
10.33%
(1 Month Term SOFR + 5.00%, Rate Floor: 6.00%) due 02/23/29 |
1,350,000 |
1,354,725 |
Wrench Group LLC |
|
|
9.57%
(3 Month Term SOFR + 4.00%, Rate Floor: 5.00%) due 10/30/28 |
1,350,000 |
1,352,255 |
Bock Capital B.V. |
|
|
7.40%
(3 Month EURIBOR + 3.50%, Rate Floor: 3.50%) due 06/29/28 |
EUR 1,200,000 |
1,286,823 |
Finastra |
|
|
12.46%
(6 Month Term SOFR + 7.25%, Rate Floor: 8.25%) due 09/13/29 |
1,200,000 |
1,190,489 |
Xerox Corp. |
|
|
9.33%
(1 Month Term SOFR + 4.00%, Rate Floor: 4.50%) due 11/19/29 |
1,185,000 |
1,184,704 |
Central Parent LLC |
|
|
8.58%
(1 Month Term SOFR + 3.25%, Rate Floor: 3.25%) due 07/06/29 |
1,100,000 |
1,108,437 |
Concorde Lux |
|
|
7.85%
(6 Month EURIBOR + 4.00%, Rate Floor: 4.00%) due 03/01/28 |
EUR 1,000,000 |
1,085,612 |
Team.Blue Finco SARL |
|
|
due 03/30/28 |
EUR 1,000,000 |
1,074,392 |
isolved, Inc. |
|
|
8.83%
(1 Month Term SOFR + 3.50%, Rate Floor: 3.50%) due 10/15/30 |
847,875 |
850,529 |
Project Ruby Ultimate Parent
Corp. |
|
|
8.94%
(1 Month Term SOFR + 3.50%, Rate Floor: 3.50%) due 03/10/28 |
800,000 |
803,664 |
Atlas CC Acquisition Corp. |
|
|
9.86%
(3 Month Term SOFR + 4.25%, Rate Floor: 5.00%) due 05/25/28 |
884,091 |
755,234 |
Waystar Technologies Inc. |
|
|
9.33%
(1 Month Term SOFR + 4.00%, Rate Floor: 4.00%) due 10/31/29 |
675,000 |
676,053 |
Alteryx, Inc. |
|
|
7.75%
(1 Month Term SOFR + 6.50%, Rate Floor: 7.25%) due 03/19/31 |
600,000 |
595,500 |
Azalea TopCo |
|
|
8.83%
(1 Month Term SOFR + 3.50%, Rate Floor: 3.50%) due 04/23/31 |
550,000 |
551,722 |
CoreLogic, Inc. |
|
|
8.94%
(1 Month Term SOFR + 3.50%, Rate Floor: 4.00%) due 06/02/28 |
491,184 |
483,816 |
|
See
notes to financial statements. |
48 l GUG l GUGGENHEIM
ACTIVE ALLOCATION FUND ANNUAL REPORT |
SCHEDULE
OF INVESTMENTS continued |
May
31, 2024 |
|
|
|
|
Face |
|
|
Amount~ |
Value |
SENIOR FLOATING RATE INTERESTS,◊
37.8% (continued) |
|
|
Technology
4.9% (continued) |
|
|
Alteryx, Inc. |
|
|
11.83%
(1 Month Term SOFR + 6.50%, Rate Floor: 7.25%) due 03/19/31 |
412,500 |
$ 412,500 |
Precise Midco B.V. |
|
|
due
10/16/30 |
EUR
170,000 |
184,897 |
Total
Technology |
|
26,634,611 |
Financial 3.4% |
|
|
Eisner Advisory Group |
|
|
9.33%
(1 Month Term SOFR + 4.00%, Rate Floor: 4.50%) due 02/22/31 |
2,750,000 |
2,775,217 |
HighTower Holding LLC |
|
|
9.59%
(3 Month Term SOFR + 4.00%, Rate Floor: 4.75%) due 04/21/28 |
2,760,982 |
2,774,787 |
Kestra Advisor Services Holdings
A, Inc. |
|
|
9.33%
(1 Month Term SOFR + 4.00%, Rate Floor: 4.00%) due 03/18/31 |
1,450,000 |
1,457,613 |
Howden Group Holdings Ltd. |
|
|
7.81%
(1 Month EURIBOR + 4.00%, Rate Floor: 4.00%) due 03/03/31 |
EUR 1,250,000 |
1,361,911 |
AqGen Island Holdings, Inc. |
|
|
8.94%
(1 Month Term SOFR + 3.50%, Rate Floor: 4.00%) due 08/02/28 |
1,346,468 |
1,346,468 |
Tegra118 Wealth Solutions, Inc. |
|
|
9.33%
(3 Month Term SOFR + 4.00%, Rate Floor: 4.00%) due 02/18/27 |
1,246,762 |
1,189,099 |
Aretec Group, Inc. |
|
|
9.92%
(3 Month Term SOFR + 4.60%, Rate Floor: 4.60%) due 08/09/30 |
1,094,486 |
1,099,444 |
Global Blue Acquisition B.V. |
|
|
8.87%
(1 Month EURIBOR + 5.00%, Rate Floor: 5.00%) due 11/13/30 |
EUR 1,000,000 |
1,092,079 |
Navacord Inc. |
|
|
8.83%
(3 Month Term SOFR + 3.50%, Rate Floor: 3.50%) due 03/15/30 |
1,047,375 |
1,047,595 |
Franchise Group, Inc. |
|
|
10.34%
(6 Month Term SOFR + 4.75%, Rate Floor: 5.50%) due 03/10/26 |
1,336,500 |
1,019,081 |
Osaic Holdings, Inc. |
|
|
9.33%
(1 Month Term SOFR + 4.00%, Rate Floor: 4.00%) due 08/17/28 |
900,000 |
906,849 |
Ardonagh Midco 3 plc |
|
|
10.04%
(6 Month Term SOFR + 4.75%, Rate Floor: 4.75%) due 02/16/31 |
915,663 |
902,419 |
Apex Group Treasury LLC |
|
|
10.32%
(3 Month Term SOFR + 5.00%, Rate Floor: 5.50%) due 07/27/28 |
543,125 |
544,483 |
Asurion LLC |
|
|
9.68%
(1 Month Term SOFR + 4.25%, Rate Floor: 4.25%) due 08/20/28 |
495,000 |
490,877 |
Claros Mortgage Trust, Inc. |
|
|
9.92%
(1 Month Term SOFR + 4.50%, Rate Floor: 5.00%) due 08/10/26 |
342,020 |
315,941 |
Higginbotham Insurance Agency,
Inc. |
|
|
10.08%
(1 Month Term SOFR + 4.75%, Rate Floor: 5.75%) due 11/25/28 |
25,263 |
25,048 |
Total
Financial |
|
18,348,911 |
Basic Materials 1.0% |
|
|
NIC Acquisition Corp. |
|
|
9.32%
(3 Month Term SOFR + 3.75%, Rate Floor: 4.50%) due 12/29/27 |
3,058,042 |
2,567,226 |
|
|
See
notes to financial statements. |
|
|
GUG l GUGGENHEIM ACTIVE
ALLOCATION FUND ANNUAL REPORT l 49 |
SCHEDULE
OF INVESTMENTS continued |
May
31, 2024 |
|
|
|
|
Face |
|
|
Amount~ |
Value |
SENIOR
FLOATING RATE INTERESTS,◊ 37.8% (continued) |
|
|
Basic Materials
1.0% (continued) |
|
|
Pregis TopCo
Corp. |
|
|
9.08% (1
Month Term SOFR + 3.75%, Rate Floor: 4.75%) due 07/31/26 |
1,196,875 |
$ 1,200,083 |
Barentz Midco
B.V. |
|
|
9.57% (3
Month Term SOFR +4.00%, Rate Floor: 4.00%) due 03/29/31 |
1,000,000 |
1,007,500 |
LTI Holdings,
Inc. |
|
|
10.19% (1
Month Term SOFR + 4.75%, Rate Floor: 4.75%) due 07/24/26 |
490,422 |
482,762 |
Arsenal AIC
Parent LLC |
|
|
9.08%
(1 Month Term SOFR + 3.75%, Rate Floor: 3.75%) due 08/19/30 |
298,502 |
300,803 |
Total
Basic Materials |
|
5,558,374 |
Energy
0.4% |
|
|
BANGL LLC |
|
|
9.80%
(3 Month Term SOFR + 4.50%, Rate Floor: 4.50%) due 02/01/29 |
2,195,500 |
2,209,903 |
Communications
0.3% |
|
|
Simon &
Schuster |
|
|
9.33% (3
Month Term SOFR + 4.00%, Rate Floor: 4.00%) due 10/30/30 |
900,000 |
894,096 |
Cengage Learning,
Inc. |
|
|
9.54% (6
Month Term SOFR + 4.25%, Rate Floor: 5.25%) due 03/24/31 |
550,000 |
552,359 |
McGraw Hill
LLC |
|
|
10.19%
(1 Month Term SOFR + 4.75%, Rate Floor: 5.25%) due 07/28/28 |
390,977 |
391,744 |
Total
Communications |
|
1,838,199 |
Total Senior
Floating Rate Interests |
|
|
(Cost
$208,755,670) |
|
205,626,289 |
ASSET-BACKED
SECURITIES 20.3% |
|
|
Collateralized Loan Obligations
10.4% |
|
|
CIFC Funding
Ltd. |
|
|
2021-4RA
DR, 12.58% (3 Month Term SOFR + 7.26%, |
|
|
Rate Floor:
7.00%) due 01/17/35◊,6 |
9,000,000 |
8,918,665 |
2022-3A E,
12.60% (3 Month Term SOFR + 7.27%, |
|
|
Rate Floor:
7.27%) due 04/21/35◊,6 |
1,000,000 |
1,004,928 |
Madison Park
Funding LIII Ltd. |
|
|
2022-53A
E, 11.33% (3 Month Term SOFR + 6.00%, |
|
|
Rate Floor:
6.00%) due 04/21/35◊,6 |
7,500,000 |
7,496,404 |
Boyce Park
CLO Ltd. |
|
|
2022-1A E,
11.58% (3 Month Term SOFR + 6.25%, |
|
|
Rate Floor:
6.25%) due 04/21/35◊,6 |
4,000,000 |
4,007,243 |
Palmer Square
Loan Funding Ltd. |
|
|
2022-1A D,
10.33% (3 Month Term SOFR + 5.00%, |
|
|
Rate Floor:
5.00%) due 04/15/30◊,6 |
3,500,000 |
3,453,279 |
ABPCI Direct
Lending Fund IX LLC |
|
|
2021-9A BR,
8.09% (3 Month Term SOFR + 2.76%, |
|
|
Rate Floor:
2.50%) due 11/18/31◊,6 |
3,500,000 |
3,419,485 |
|
See
notes to financial statements. |
50 l GUG l GUGGENHEIM
ACTIVE ALLOCATION FUND ANNUAL REPORT |
SCHEDULE
OF INVESTMENTS continued |
May
31, 2024 |
|
|
|
|
Face |
|
|
Amount~ |
Value |
ASSET-BACKED
SECURITIES 20.3% (continued) |
|
|
Collateralized Loan Obligations
10.4% (continued) |
|
|
ACRES Commercial
Realty Ltd. |
|
|
2021-FL2
D, 8.54% (1 Month Term SOFR + 3.21%, |
|
|
Rate Floor:
3.21%) due 01/15/37◊,6 |
3,250,000 |
$ 3,026,406 |
Fontainbleau
Vegas |
|
|
10.97% (1
Month Term SOFR + 5.65%, Rate Floor: 1.00%) due 01/31/26◊, |
2,500,000 |
2,500,000 |
Carlyle Global
Market Strategies |
|
|
2022-1A E,
12.68% (3 Month Term SOFR + 7.35%, |
|
|
Rate Floor:
7.35%) due 04/15/35◊,6 |
2,250,000 |
2,253,156 |
Cerberus Loan
Funding XLIV LLC |
|
|
2024-5A C,
9.30% (3 Month Term SOFR + 4.20%, |
|
|
Rate Floor:
4.20%) due 01/15/36◊,6 |
2,050,000 |
2,061,228 |
Cerberus Loan
Funding XLII LLC |
|
|
2023-3A C,
9.48% (3 Month Term SOFR + 4.15%, |
|
|
Rate Floor:
4.15%) due 09/13/35◊,6 |
2,000,000 |
2,002,282 |
Neuberger
Berman Loan Advisers CLO 47 Ltd. |
|
|
2022-47A
E, 11.58% (3 Month Term SOFR + 6.25%, |
|
|
Rate Floor:
6.25%) due 04/14/35◊,6 |
1,750,000 |
1,754,766 |
Owl Rock CLO
I LLC |
|
|
2024-1A C,
9.58% (3 Month Term SOFR + 4.25%, |
|
|
Rate Floor:
4.25%) due 02/20/36◊,6 |
1,550,000 |
1,555,654 |
Cerberus Loan
Funding XLV LLC |
|
|
2024-1A D,
10.32% (3 Month Term SOFR + 5.00%, |
|
|
Rate Floor:
5.00%) due 04/15/36◊,6 |
1,500,000 |
1,499,812 |
Voya CLO Ltd. |
|
|
2022-1A SUB,
due 04/20/356,9 |
1,750,000 |
1,308,475 |
GoldentTree
Loan Management US CLO 1 Ltd. |
|
|
2024-9A DR,
8.68% (3 Month Term SOFR + 3.35%, |
|
|
Rate Floor:
3.35%) due 04/20/37◊,6 |
1,150,000 |
1,161,765 |
Cerberus Loan
Funding XL LLC |
|
|
2023-1A D,
11.73% (3 Month Term SOFR + 6.40%, |
|
|
Rate Floor:
6.40%) due 03/22/35◊,6 |
1,000,000 |
1,009,451 |
Carlyle US
CLO Ltd. |
|
|
2022-4A DR,
11.93% (3 Month Term SOFR + 6.60%, |
|
|
Rate Floor:
6.60%) due 04/15/35◊,6 |
1,000,000 |
1,004,337 |
Golub Capital
Partners CLO 46M Ltd. |
|
|
2024-46A
CR, 8.37% (3 Month Term SOFR + 3.05%, |
|
|
Rate Floor:
3.05%) due 04/20/37◊,6 |
1,000,000 |
999,919 |
Cerberus Loan
Funding XLVI, LP |
|
|
2024-2A D,
10.26% (3 Month Term SOFR + 4.95%, |
|
|
Rate Floor:
4.95%) due 07/15/36◊,6 |
1,000,000 |
999,840 |
FS Rialto
Issuer LLC |
|
|
2022-FL6
C, 9.55% (1 Month Term SOFR + 4.23%, |
|
|
Rate Floor:
4.23%) due 08/17/37◊,6 |
1,000,000 |
996,780 |
LCCM Trust |
|
|
2021-FL2
C, 7.58% (1 Month Term SOFR + 2.26%, |
|
|
Rate Floor:
2.26%) due 12/13/38◊,6 |
1,000,000 |
932,214 |
|
|
See
notes to financial statements. |
|
|
GUG l GUGGENHEIM ACTIVE
ALLOCATION FUND ANNUAL REPORT l 51 |
SCHEDULE
OF INVESTMENTS continued |
May
31, 2024 |
|
|
|
|
Face |
|
|
Amount~ |
Value |
ASSET-BACKED
SECURITIES 20.3% (continued) |
|
|
Collateralized Loan Obligations
10.4% (continued) |
|
|
KREF Ltd. |
|
|
2021-FL2
AS, 6.74% (1 Month Term SOFR + 1.41%, |
|
|
Rate Floor:
1.30%) due 02/15/39◊,6 |
950,000 |
$ 915,501 |
Owl Rock CLO
XVI |
|
|
2024-16A
C, 8.62% (3 Month Term SOFR + 3.30%, |
|
|
Rate Floor:
3.30%) due 04/20/36◊,6 |
850,000 |
856,666 |
Cerberus Loan
Funding XLVII LLC |
|
|
2024-3A D,
due 07/15/36◊,6 |
800,000 |
801,050 |
Madison Park
Funding LVIII Ltd. |
|
|
2024-58A
D, 8.97% (3 Month Term SOFR + 3.65%, |
|
|
Rate
Floor: 3.65%) due 04/25/37◊,6 |
550,000 |
569,642 |
Total
Collateralized Loan Obligations |
|
56,508,948 |
Transport-Aircraft
3.4% |
|
|
GAIA Aviation
Ltd. |
|
|
2019-1, 3.97%
due 12/15/446,10 |
3,353,264 |
3,051,621 |
2019-1, 5.19%
due 12/15/446,10 |
750,994 |
664,731 |
AASET Trust |
|
|
2021-1A,
2.95% due 11/16/416 |
842,234 |
769,099 |
2021-2A,
2.80% due 01/15/476 |
786,762 |
694,207 |
2020-1A,
3.35% due 01/16/406 |
699,307 |
643,336 |
2021-2A,
3.54% due 01/15/476 |
552,865 |
481,723 |
2019-1, 3.84%
due 05/15/396 |
268,508 |
236,290 |
JOL Air Ltd. |
|
|
2019-1, 3.97%
due 04/15/446 |
3,012,824 |
2,802,017 |
KDAC Aviation
Finance Ltd. |
|
|
2017-1A,
4.21% due 12/15/426 |
2,412,658 |
2,168,736 |
Start Ltd. |
|
|
2018-1, 4.09%
due 05/15/436 |
1,345,325 |
1,265,486 |
2018-1, 5.32%
due 05/15/436 |
1,009,709 |
898,751 |
Labrador Aviation
Finance Ltd. |
|
|
2016-1A,
4.30% due 01/15/426 |
1,480,500 |
1,355,102 |
Project Silver |
|
|
2019-1, 3.97%
due 07/15/446 |
1,503,450 |
1,323,202 |
Sapphire Aviation
Finance I Ltd. |
|
|
2018-1A,
4.25% due 03/15/406 |
817,725 |
775,988 |
Start II Ltd. |
|
|
2019-1, 4.09%
due 03/15/446 |
649,872 |
617,404 |
Castlelake
Aircraft Securitization Trust |
|
|
2019-1A,
3.97% due 04/15/396 |
379,409 |
341,557 |
2018-1,
4.13% due 06/15/436 |
214,352 |
199,028 |
Total
Transport-Aircraft |
|
18,288,278 |
Financial
2.5% |
|
|
Thunderbird
A |
|
|
5.50% due
03/01/37 |
5,525,000 |
5,024,762 |
|
See
notes to financial statements. |
52 l GUG l GUGGENHEIM
ACTIVE ALLOCATION FUND ANNUAL REPORT |
SCHEDULE
OF INVESTMENTS continued |
May
31, 2024 |
|
|
|
|
Face |
|
|
Amount~ |
Value |
ASSET-BACKED
SECURITIES 20.3% (continued) |
|
|
Financial 2.5% (continued) |
|
|
Lightning
A |
|
|
5.50% due
03/01/37 |
5,525,000 |
$ 5,024,762 |
Ceamer Finance
LLC |
|
|
6.92% due
11/15/37 |
2,457,136 |
2,365,904 |
Thunderbird
B |
|
|
7.50% due
03/01/37 |
715,000 |
658,005 |
Lightning
B |
|
|
7.50%
due 03/01/37 |
715,000 |
658,005 |
Total
Financial |
|
13,731,438 |
Infrastructure
2.5% |
|
|
Hotwire Funding
LLC |
|
|
2021-1, 4.46%
due 11/20/516 |
7,700,000 |
6,930,877 |
VB-S1 Issuer
LLC - VBTEL |
|
|
2022-1A,
5.27% due 02/15/526 |
5,000,000 |
4,522,184 |
Blue Stream
Issuer LLC |
|
|
2023-1A,
6.90% due 05/20/536 |
1,000,000 |
977,018 |
Vault DI Issuer
LLC |
|
|
2021-1A,
2.80% due 07/15/466 |
650,000 |
572,939 |
Aligned Data
Centers Issuer LLC |
|
|
2021-1A,
2.48% due 08/15/466 |
400,000 |
360,826 |
Total
Infrastructure |
|
13,363,844 |
Net Lease
0.7% |
|
|
CARS-DB4,
LP |
|
|
2020-1A,
4.95% due 02/15/506 |
1,450,000 |
1,235,091 |
2020-1A,
4.52% due 02/15/506 |
1,000,000 |
915,509 |
CARS-DB7,
LP |
|
|
2023-1A,
6.50% due 09/15/536 |
1,041,250 |
1,030,841 |
SVC ABS LLC |
|
|
2023-1A,
5.55% due 02/20/536 |
996,875 |
931,454 |
Total
Net Lease |
|
4,112,895 |
Single
Family Residence 0.5% |
|
|
FirstKey Homes
Trust |
|
|
2020-SFR2,
4.50% due 10/19/376 |
1,100,000 |
1,048,273 |
2020-SFR2,
4.00% due 10/19/376 |
1,100,000 |
1,045,960 |
2020-SFR2,
3.37% due 10/19/376 |
700,000 |
661,963 |
Total
Single Family Residence |
|
2,756,196 |
Whole Business
0.2% |
|
|
Applebees
Funding LLC / IHOP Funding LLC |
|
|
2019-1A,
4.72% due 06/05/496 |
990,000 |
950,536 |
|
|
See
notes to financial statements. |
|
|
GUG l GUGGENHEIM ACTIVE
ALLOCATION FUND ANNUAL REPORT l 53 |
SCHEDULE
OF INVESTMENTS continued |
May
31, 2024 |
|
|
|
|
Face |
|
|
Amount~ |
Value |
ASSET-BACKED
SECURITIES 20.3% (continued) |
|
|
Insurance 0.1% |
|
|
CHEST |
|
|
7.13%
due 03/15/43 |
475,000 |
$
478,627 |
Total Asset-Backed
Securities |
|
|
(Cost
$112,849,828) |
|
110,190,762 |
COLLATERALIZED
MORTGAGE OBLIGATIONS 5.0% |
|
|
Government
Agency 2.6% |
|
|
Fannie Mae |
|
|
4.00% due
06/01/525 |
3,203,835 |
2,941,245 |
5.00% due
08/01/535 |
1,991,658 |
1,919,165 |
4.00% due
07/01/525 |
1,814,969 |
1,677,789 |
4.00% due
05/01/525 |
1,533,658 |
1,401,435 |
5.00% due
09/01/525 |
730,433 |
704,457 |
5.00% due
06/01/535 |
674,261 |
649,398 |
Freddie Mac |
|
|
4.00% due
06/01/525 |
2,286,044 |
2,097,418 |
5.00% due
09/01/525 |
1,931,939 |
1,863,161 |
4.00%
due 05/01/525 |
1,059,060 |
966,580 |
Total
Government Agency |
|
14,220,648 |
Residential
Mortgage-Backed Securities 1.7% |
|
|
Top Pressure
Recovery Turbines |
|
|
7.51% due
11/01/69 |
2,050,000 |
2,048,975 |
Finance of
America HECM Buyout |
|
|
2022-HB2,
6.00% (WAC) due 08/01/32◊,6 |
1,450,000 |
1,418,496 |
Carrington
Mortgage Loan Trust Series |
|
|
2006-NC5,
5.59% (1 Month Term SOFR + 0.26%, Rate Cap/Floor: 14.50%/0.15%) |
|
|
due 01/25/37◊ |
1,376,731 |
1,178,612 |
LSTAR Securities
Investment Ltd. |
|
|
2024-1, 8.43%
(30 Day Average SOFR + 3.10%, Rate Floor: 3.10%) due 01/01/29◊,6 |
1,173,238 |
1,163,799 |
GCAT Trust |
|
|
2022-NQM5,
5.71% due 08/25/676,10 |
687,397 |
676,070 |
CFMT LLC |
|
|
2022-HB9,
3.25% (WAC) due 09/25/37◊,11 |
700,000 |
627,796 |
PRPM LLC |
|
|
2023-1, 6.88%
(WAC) due 02/25/28◊,6 |
510,160 |
510,860 |
Saluda Grade
Alternative Mortgage Trust |
|
|
2023-FIG4,
7.12% (WAC) due 11/25/53◊,6 |
416,834 |
420,216 |
OBX Trust |
|
|
2022-NQM8,
6.10% due 09/25/626,10 |
413,720 |
408,870 |
Citigroup
Mortgage Loan Trust |
|
|
2022-A, 6.17%
due 09/25/626,10 |
388,015 |
387,230 |
CSMC Trust |
|
|
2020-RPL5,
4.68% (WAC) due 08/25/60◊,6 |
265,398 |
264,129 |
Total
Residential Mortgage-Backed Securities |
|
9,105,053 |
|
See
notes to financial statements. |
54 l GUG l GUGGENHEIM
ACTIVE ALLOCATION FUND ANNUAL REPORT |
SCHEDULE
OF INVESTMENTS continued |
May
31, 2024 |
|
|
|
|
Face |
|
|
Amount~ |
Value |
COLLATERALIZED MORTGAGE OBLIGATIONS
5.0% (continued) |
|
|
Commercial
Mortgage-Backed Securities 0.7% |
|
|
BX Trust |
|
|
2024-VLT4,
due 07/15/29◊,6 |
1,650,000 |
$ 1,645,875 |
2023-DELC,
8.66% (1 Month Term SOFR + 3.34%, Rate Floor: 3.34%) |
|
|
due 05/15/38◊,6 |
1,000,000 |
1,006,250 |
BX Commercial
Mortgage Trust |
|
|
2021-VOLT,
7.43% (1 Month Term SOFR + 2.11%, Rate Floor: 2.00%) |
|
|
due
09/15/36◊,6 |
1,250,000 |
1,239,063 |
Total
Commercial Mortgage-Backed Securities |
|
3,891,188 |
Total Collateralized Mortgage
Obligations |
|
|
(Cost
$27,983,164) |
|
27,216,889 |
U.S.
GOVERNMENT SECURITIES 1.2% |
|
|
U.S. Treasury
Bonds |
|
|
due 08/15/515,12,13 |
12,650,000 |
3,641,757 |
due 05/15/445,12,13 |
1,910,000 |
748,037 |
due 11/15/4412,13 |
1,910,000 |
729,719 |
due 02/15/4612,13 |
1,920,000 |
692,187 |
U.S. Treasury
Notes |
|
|
4.13%
due 11/15/32 |
903,000 |
879,367 |
Total U.S.
Government Securities |
|
|
(Cost
$9,071,900) |
|
6,691,067 |
CONVERTIBLE
BONDS 0.3% |
|
|
Consumer, Non-cyclical
0.2% |
|
|
Block, Inc. |
|
|
due
05/01/2612 |
1,090,000 |
968,663 |
Communications
0.1% |
|
|
Cable One,
Inc. |
|
|
due
03/15/2612 |
450,000 |
388,800 |
Total Convertible
Bonds |
|
|
(Cost
$1,401,528) |
|
1,357,463 |
FOREIGN
GOVERNMENT DEBT 0.2% |
|
|
Panama Government
International Bond |
|
|
4.50%
due 01/19/63 |
1,700,000 |
1,065,163 |
Total Foreign
Government Debt |
|
|
(Cost
$1,689,600) |
|
1,065,163 |
|
|
See
notes to financial statements. |
|
|
GUG l GUGGENHEIM ACTIVE
ALLOCATION FUND ANNUAL REPORT l 55 |
SCHEDULE
OF INVESTMENTS continued |
May
31, 2024 |
|
|
|
|
|
|
|
|
Contracts |
Value |
LISTED OPTIONS PURCHASED
0.1% |
|
|
|
|
Put Options on: |
|
|
|
|
Equity Options |
|
|
|
|
SPDR S&P Regional Banking
ETF |
|
|
|
|
Expiring
December 2024 with strike price of $42.00 (Notional Value $8,797,885) |
1,801 |
$ 297,165 |
SPDR S&P Regional Banking
ETF |
|
|
|
|
Expiring
January 2025 with strike price of $43.00 (Notional Value $7,244,455) |
1,483 |
260,266 |
Total Listed Options Purchased |
|
|
|
|
(Cost
$1,006,119) |
|
|
|
557,431 |
|
|
|
Notional |
|
|
|
|
Value~ |
|
OTC OPTIONS PURCHASED
0.0% |
|
|
|
|
Call Options on: |
|
|
|
|
Interest Rate Options |
|
|
|
|
Goldman Sachs International
10Y-2Y SOFR CMS CAP |
|
|
|
Expiring
June 2024 with strike price of $0.10 |
|
15,700,000 |
16 |
Morgan Stanley Capital
Services LLC 10Y-2Y SOFR CMS CAP |
|
|
|
Expiring
June 2024 with strike price of $0.10 |
|
14,900,000 |
15 |
Barclays Bank plc |
|
|
|
|
10Y-2Y
SOFR CMS CAP Expiring June 2024 with strike price of $0.10 |
14,750,000 |
15 |
Bank of America, N.A. 10Y-2Y
SOFR CMS CAP |
|
|
|
|
Expiring
June 2024 with strike price of $0.10 |
|
7,400,000 |
7 |
Total
Interest Rate Options |
|
|
|
53 |
|
|
|
Contracts |
|
Put Options on: |
|
|
|
|
Equity Options |
|
|
|
|
Goldman Sachs International
SPDR S&P Regional Banking ETF |
|
|
|
Expiring
December 2024 with strike price of $42.00 (Notional Value $2,911,460) |
596 |
98,340 |
Total
Equity Options |
|
|
|
98,340 |
Total OTC Options Purchased |
|
|
|
|
(Cost
$417,470) |
|
|
|
98,393 |
Total Investments
132.0% |
|
|
|
|
(Cost
$792,402,822) |
|
|
|
$
717,374,690 |
Other
Assets & Liabilities, net (32.0)% |
|
|
|
(173,931,074) |
Total Net Assets 100.0% |
|
|
|
$ 543,443,616 |
Futures Contracts |
|
|
|
|
|
|
|
|
Value and |
|
Number of |
|
|
Unrealized |
Description |
Contracts |
Expiration
Date |
Notional
Amount |
Depreciation** |
Commodity Futures Contracts
Purchased |
|
|
|
|
Gold 100 oz. Futures Contracts |
23 |
Aug 2024 |
$5,401,090 |
$(58,583) |
|
See
notes to financial statements. |
56 l GUG l GUGGENHEIM
ACTIVE ALLOCATION FUND ANNUAL REPORT |
SCHEDULE
OF INVESTMENTS continued |
May
31, 2024 |
Centrally Cleared Credit Default Swap Agreements Protection Purchased††
|
|
|
|
|
|
|
|
Upfront |
|
|
|
|
Protection |
|
|
|
|
Premiums |
|
|
|
|
Premium |
Payment |
Maturity |
Notional |
|
Paid |
Unrealized |
Counterparty
Exchange Index |
Rate |
Frequency |
Date |
Amount |
Value |
(Received) |
Depreciation** |
J.P. Morgan |
|
|
|
|
|
|
|
|
Securities |
|
|
|
|
|
|
|
|
LLC |
ICE |
ITRAXX.EUR.41.V1 |
1.00% |
Quarterly |
06/20/29 |
EUR
5,250,000 |
$(125,348) |
$(122,907) |
$(2,441) |
Centrally
Cleared Interest Rate Swap Agreements††
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Upfront |
|
|
Floating |
Floating |
|
|
|
|
|
Premiums |
|
|
Rate |
Rate |
Fixed |
Payment |
Maturity |
Notional |
|
Paid |
Unrealized |
Counterparty
Exchange |
Type |
Index |
Rate |
Frequency |
Date |
Amount |
Value
(Received) |
Depreciation** |
J.P. Morgan |
|
|
|
|
|
|
|
|
|
Securities
LLC CME |
Pay |
U.S.
Secured 2.78% |
Annually |
07/18/27 |
$53,800,000 |
$(2,703,984) |
$307 |
$(2,704,291) |
|
|
Overnight |
|
|
|
|
|
|
|
|
|
Financing |
|
|
|
|
|
|
|
|
|
Rate |
|
|
|
|
|
|
|
Total Return Swap Agreements
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value and |
|
|
|
Financing |
Payment |
Maturity |
|
Notional |
Unrealized |
Counterparty |
Index |
Type |
Rate |
Frequency |
Date |
Units |
Amount |
Appreciation |
OTC Equity Index Swap Agreements |
|
|
|
|
|
Bank of |
SPDR S&P |
Pay |
5.97% (Federal
Funds |
At Maturity |
06/02/25 |
21,500 |
$11,338,455 |
$573,001 |
America,
N.A. |
500 ETF Trust |
|
Rate + 0.64%) |
|
|
|
|
|
|
|
|
|
|
|
|
OTC Interest
Rate Swap Agreements |
|
|
|
|
|
|
Goldman Sachs Goldman Sachs |
|
Pay |
6.33% (Federal
Funds |
At Maturity |
04/11/25 |
3,000,000 |
4,458,900 |
61,881 |
International |
Swaption Forward |
Rate +
1.00%) |
|
|
|
|
|
|
Volatility
Index |
|
|
|
|
|
|
Forward Foreign Currency Exchange Contracts††
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized |
|
|
|
|
Contract |
Settlement |
Appreciation |
Counterparty |
Currency |
Type |
Quantity |
Amount |
Date |
(Depreciation) |
JPMorgan |
|
|
|
|
|
|
Chase Bank,
N.A. |
EUR |
Buy |
10,000 |
10,887 USD |
06/17/24 |
$ (30) |
JPMorgan |
|
|
|
|
|
|
Chase Bank,
N.A. |
EUR |
Sell |
2,200,000 |
2,385,850 USD |
06/17/24 |
(2,725) |
Morgan Stanley |
|
|
|
|
|
|
Capital
Services LLC |
CAD |
Sell |
2,669,000 |
1,956,431 USD |
06/17/24 |
(3,443) |
Bank of America, N.A. |
GBP |
Sell |
3,241,000 |
4,081,054 USD |
06/17/24 |
(49,840) |
Barclays
Bank plc |
EUR |
Sell |
28,832,000 |
31,236,932
USD |
06/17/24 |
(66,424) |
|
|
|
|
|
|
$(122,462) |
~ | | The face amount is denominated
in U.S. dollars unless otherwise indicated. |
* | | Non-income producing security. |
** | | Includes cumulative appreciation
(depreciation). Variation margin is reported within the Statement of Assets and Liabilities. |
| | Value determined based on Level
1 inputs, unless otherwise noted See Note 6. |
|
|
See
notes to financial statements. |
|
|
GUG l GUGGENHEIM ACTIVE
ALLOCATION FUND ANNUAL REPORT l 57 |
|
|
SCHEDULE
OF INVESTMENTS continued |
May
31, 2024 |
†† | | Value
determined based on Level 2 inputs, unless otherwise noted See Note 6. |
††† | | Value determined
based on Level 3 inputs See Note 6. |
◊ | | Variable rate security. Rate indicated
is the rate effective at May 31, 2024. In some instances, the effective rate is limited by a minimum rate floor or a maximum rate cap
established by the issuer. The settlement status of a position may also impact the effective rate indicated. In some cases, a position
may be unsettled at period end and may not have a stated effective rate. In instances where multiple underlying reference rates and spread
amounts are shown, the effective rate is based on a weighted average. |
1 | | Special Purpose Acquisition Company
(SPAC). |
2 | | Security has a fixed rate coupon
which will convert to a floating or variable rate coupon on a future date. |
4 | | Rate indicated is the 7-day yield
as of May 31, 2024. |
5 | | All or a portion of these securities
have been physically segregated in connection with borrowings, options, reverse repurchase agreements and unfunded loan commitments.
As of May 31, 2024, the total value of segregated securities was $214,818,835. |
6 | | Security is a 144A or Section
4(a)(2) security. These securities have been determined to be liquid under guidelines established by the Board of Trustees. The total
market value of 144A or Section 4(a) (2) securities is $323,206,592 (cost $348,076,342), or 59.5% of total net assets. |
8 | | Payment-in-kind security. |
9 | | Security has no stated coupon.
However, it is expected to receive residual cash flow payments on defined deal dates. |
10 | | Security is a step up/down bond.
The coupon increases or decreases at regular intervals until the bond reaches full maturity. Rate indicated is the rate at May 31, 2024.
See table below for additional step information for each security. |
11 | | Security is a 144A or Section
4(a)(2) security. These securities have been determined to be illiquid and restricted under guidelines established by the Board of Trustees.
The total market value of 144A or Section 4(a)(2) illiquid and restricted securities is $627,796 (cost $625,990), or 0.1% of
total net assets See Note 12. |
12 | | Zero coupon rate security. |
13 | | Security is a principal-only strip. |
|
|
ADR |
American Depositary
Receipt |
CAD |
Canadian Dollar |
CME |
Chicago Mercantile
Exchange |
CMS |
Constant Maturity
Swap |
EUR |
Euro |
EURIBOR |
European Interbank Offered Rate |
GBP |
British Pound |
ICE |
Intercontinental Exchange |
ITRAXX.EUR.41.V1 |
iTraxx Europe Series 41 Index Version 1 |
plc |
Public Limited Company |
REIT |
Real Estate Investment
Trust |
SARL |
Société
à Responsabilité Limitée |
SOFR |
Secured Overnight
Financing Rate |
SONIA |
Sterling Overnight Index Average |
WAC |
Weighted Average Coupon |
See Sector
Classification in Other Information section.
See notes
to financial statements.
58 l GUG l
GUGGENHEIM ACTIVE ALLOCATION FUND ANNUAL REPORT
|
|
SCHEDULE
OF INVESTMENTS continued |
May
31, 2024 |
The following
table summarizes the inputs used to value the Funds investments at May 31, 2024 (See Note 6 in the Notes to Financial Statements):
|
|
|
|
|
|
|
Level 2 |
Level 3 |
|
|
|
Significant |
Significant |
|
|
Level 1 |
Observable |
Unobservable |
|
Investments
in Securities (Assets) |
Quoted
Prices |
Inputs |
Inputs |
Total |
Common Stocks |
$ 23,369,941 |
$ 62,278 |
$ 208 |
$ 23,432,427 |
Preferred
Stocks |
|
34,663,483 |
6,000 |
34,669,483 |
Warrants |
6 |
|
8 |
14 |
Rights |
30,004 |
|
* |
30,004 |
Mutual Funds |
6,006,923 |
|
|
6,006,923 |
Closed-End
Mutual Funds |
12,522,643 |
|
|
12,522,643 |
Money Market
Funds |
3,837,661 |
|
|
3,837,661 |
Corporate
Bonds |
|
282,508,215 |
1,563,863 |
284,072,078 |
Senior Floating
Rate Interests |
|
179,571,794 |
26,054,495 |
205,626,289 |
Asset-Backed
Securities |
|
93,480,697 |
16,710,065 |
110,190,762 |
Collateralized
Mortgage Obligations |
|
27,216,889 |
|
27,216,889 |
U.S. Government
Securities |
|
6,691,067 |
|
6,691,067 |
Convertible
Bonds |
|
1,357,463 |
|
1,357,463 |
Foreign Government
Debt |
|
1,065,163 |
|
1,065,163 |
Options Purchased |
557,431 |
98,393 |
|
655,824 |
Equity Index Swap Agreements** |
|
573,001 |
|
573,001 |
Interest
Rate Swap Agreements** |
|
61,881 |
|
61,881 |
Total
Assets |
$
46,324,609 |
$
627,350,324 |
$
44,334,639 |
$
718,009,572 |
|
|
Level 2 |
Level 3 |
|
|
|
Significant |
Significant |
|
|
Level 1 |
Observable |
Unobservable |
|
Investments
in Securities (Liabilities) |
Quoted
Prices |
Inputs |
Inputs |
Total |
Commodity
Futures Contracts** |
$ 58,583 |
$ |
$ |
$ 58,583 |
Credit Default
Swap Agreements** |
|
2,441 |
|
2,441 |
Interest Rate
Swap Agreements** |
|
2,704,291 |
|
2,704,291 |
Forward Foreign
Currency |
|
|
|
|
Exchange Contracts** |
|
122,462 |
|
122,462 |
Unfunded
Loan Commitments (Note 11) |
|
|
45,652 |
45,652 |
Total
Liabilities |
$
58,583 |
$
2,829,194 |
$
45,652 |
$
2,933,429 |
* Includes
securities with a market value of $0.
** This derivative
is reported as unrealized appreciation/depreciation at period end.
Please refer
to the detailed Schedule of Investments for a breakdown of investments by industry category.
The Fund
may hold assets and/or liabilities in which the fair value approximates the carrying amount for financial statement purposes. As of
the period end, reverse repurchase agreements of $166,375,625 are categorized as Level 2 within the disclosure hierarchy See
Note 7.
|
|
See
notes to financial statements. |
|
|
GUG l GUGGENHEIM ACTIVE
ALLOCATION FUND ANNUAL REPORT l 59 |
|
|
SCHEDULE
OF INVESTMENTS continued |
May
31, 2024 |
The following
is a summary of significant unobservable inputs used in the fair valuation of assets and liabilities categorized within Level 3 of the
fair value hierarchy.
|
|
|
|
|
|
|
Ending Balance |
Valuation |
Unobservable |
Input |
Weighted |
Category |
at
May 31, 2024 |
Technique |
Inputs |
Range |
Average* |
Assets: |
|
|
|
|
|
Asset-Backed Securities |
$14,344,161 |
Yield Analysis |
Yield |
2.0%-9.2% |
6.8% |
Asset-Backed Securities |
2,365,904 |
Option adjusted spread off prior |
Broker Quote |
|
|
|
|
month end broker quote |
|
|
|
Common Stocks |
208 |
Model Price |
Liquidation Value |
|
|
Corporate Bonds |
963,863 |
Option adjusted spread off prior |
Broker Quote |
|
|
|
|
month end broker quote |
|
|
|
Corporate Bonds |
600,000 |
Third Party
Pricing |
Broker Quote |
|
|
Preferred Stocks |
6,000 |
Third Party
Pricing |
Vendor Price |
|
|
Senior Floating Rate Interests |
9,819,461 |
Yield Analysis |
Yield |
10.2%-12.8% |
11.9% |
Senior Floating Rate Interests |
9,006,497 |
Third Party
Pricing |
Broker Quote |
|
|
Senior Floating Rate Interests |
7,228,537 |
Model Price |
Purchase Price |
|
|
Warrants |
8 |
Model
Price |
Liquidation
Value |
|
|
Total
Assets |
$44,334,639 |
|
|
|
|
Liabilities: |
|
|
|
|
|
Unfunded
Loan Commitments |
$45,652 |
Model
Price |
Purchase
Price |
|
|
*
Inputs are weighted by the fair value of the instruments.
Significant
changes in a quote, yield, or liquidation value would generally result in significant changes in the fair value of the security. Any
remaining Level 3 securities held by the Fund and excluded from the table above, were not considered material to the Fund.
The Funds
fair valuation leveling guidelines classify a single daily broker quote, or a vendor price based on a single daily or monthly broker
quote, as Level 3, if such a quote or price cannot be supported with other available market information.
Transfers
between Level 2 and Level 3 may occur as markets fluctuate and/or the availability of data used in an investments valuation changes.
For the year ended May 31, 2024, the Fund had securities with a total value of $2,806,000 transfer into Level 3 from Level 2 due
to a lack of observable inputs and had securities with a total value of $10,639,507 transfer out of Level 3 into Level 2 due to the
availability of current and reliable market-based data provided by a third-party pricing service which utilizes significant observable
inputs.
See notes
to financial statements.
60 l GUG l
GUGGENHEIM ACTIVE ALLOCATION FUND ANNUAL REPORT
|
|
SCHEDULE
OF INVESTMENTS continued |
May
31, 2024 |
Summary
of Fair Value Level 3 Activity
Following
is a reconciliation of Level assets for which significant unobservable inputs were used to determine fair value for the period ended
May 31, 2024.
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets |
|
|
|
Liabilities |
|
|
|
Senior |
|
|
|
|
Floating |
|
|
|
|
Unfunded |
|
Asset-Backed |
Corporate |
Rate |
|
Common |
Preferred |
|
Loan |
|
Securities |
Bonds |
Interests |
Warrants |
Stocks |
Stocks |
Total
Assets |
Commitments |
Beginning Balance |
$13,522,526 |
$ |
$26,680,624 |
$ |
$80 |
$ |
$40,203,230 |
$(7,057) |
Purchases/(Receipts) |
5,028,960 |
1,579,100 |
8,549,631 |
|
17,500 |
|
15,175,191 |
(97,506) |
(Sales, maturities and |
|
|
|
|
|
|
|
|
paydowns)/Fundings |
(300,388) |
|
(2,483,792) |
|
|
|
(2,784,180) |
17,990 |
Amortization of |
|
|
|
|
|
|
|
|
premiums/discounts |
4,399 |
28 |
85,624 |
|
|
|
90,051 |
15,151 |
Corporate actions |
|
|
|
|
|
|
|
|
Total realized gains (losses) |
|
|
|
|
|
|
|
|
included
in earnings |
|
|
121,668 |
|
|
|
121,668 |
(943) |
Total change in unrealized |
|
|
|
|
|
|
|
|
appreciation
(depreciation) |
|
|
|
|
|
|
|
|
included
in earnings |
(568,414) |
(15,265) |
(36,771) |
8 |
(17,372) |
|
(637,814) |
26,713 |
Transfers into Level 3 |
|
|
2,800,000 |
|
|
6,000 |
2,806,000 |
|
Transfers
out of Level 3 |
(977,018) |
|
(9,662,489) |
|
|
|
(10,639,507) |
|
Ending
Balance |
$16,710,065 |
$1,563,863 |
$26,054,495 |
$8 |
$208 |
$6,000 |
$44,334,639 |
$(45,652) |
Net change in unrealized |
|
|
|
|
|
|
|
|
appreciation
(depreciation) |
|
|
|
|
|
|
|
|
for investments
in Level 3 |
|
|
|
|
|
|
|
|
securities
still held at |
|
|
|
|
|
|
|
|
May
31, 2024 |
$(578,451) |
$(15,265) |
$
194,267 |
$8 |
$(17,372) |
$ |
$(416,813) |
$23,246 |
Step Coupon
Bonds
The following
table discloses additional information related to step coupon bonds held by the Fund. Certain securities are subject to multiple rate
changes prior to maturity. For those securities, a range of rates and corresponding dates have been provided. Rates for all step coupon
bonds held by the Fund are scheduled to increase, except GAIA Aviation Ltd. which are scheduled to decrease.
|
|
|
|
|
|
Coupon |
|
|
|
|
Rate at Next |
Next Rate |
Future |
Future |
Name |
Reset
Date |
Reset
Date |
Reset
Rate |
Reset
Date |
Citigroup Mortgage Loan Trust
2022-A, |
|
|
|
|
6.17% due
09/25/62 |
9.17% |
09/25/25 |
10.17% |
09/25/26 |
GAIA Aviation Ltd. 2019-1, 3.97% |
|
|
|
|
due 12/15/44 |
2.00% |
10/15/26 |
|
|
GAIA Aviation Ltd. 2019-1, 5.19% |
|
|
|
|
due 12/15/44 |
2.00% |
10/15/26 |
|
|
GCAT Trust 2022-NQM5, 5.71% |
|
|
|
|
due 08/25/67 |
6.71% |
10/01/26 |
|
|
OBX Trust 2022-NQM8, 6.10% |
|
|
|
|
due 09/25/62 |
7.10% |
10/01/26 |
|
|
|
|
See
notes to financial statements. |
|
|
GUG l GUGGENHEIM ACTIVE
ALLOCATION FUND ANNUAL REPORT l 61 |
|
|
SCHEDULE
OF INVESTMENTS continued |
May
31, 2024 |
Affiliated
Transactions
Investments
representing 5% or more of the outstanding voting shares of a company, or control of or by, or common control under Guggenheim Investments,
result in that company being considered an affiliated issuer.
Transactions
during the year ended May 31, 2024, in which the company is an affiliated issuer, were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in |
|
|
|
|
|
|
|
Realized |
Unrealized |
|
|
|
|
Value |
|
|
Gain |
Appreciation |
Value |
Shares |
Investment |
Security
Name |
05/31/23 |
Additions |
Reductions |
(Loss) |
(Depreciation) |
05/31/24 |
05/31/24 |
Income |
Mutual Fund |
|
|
|
|
|
|
|
|
Guggenheim Risk |
|
|
|
|
|
|
|
|
Managed
Real |
|
|
|
|
|
|
|
|
Estate
Fund |
|
|
|
|
|
|
|
|
Institutional |
|
|
|
|
|
|
|
|
Class |
$5,539,837 |
$179,460 |
$ |
$ |
$287,626 |
$6,006,923 |
194,840 |
$179,461 |
62 l GUG
l GUGGENHEIM ACTIVE ALLOCATION FUND ANNUAL REPORT
|
|
STATEMENT
OF ASSETS AND LIABILITIES |
May
31, 2024 |
ASSETS: |
|
Investments in unaffiliated issuers,
at value (cost $784,956,907) |
$ 711,367,767 |
Investments in affiliated issuers,
at value (cost $7,445,915) |
6,006,923 |
Foreign currency, at value |
177,505 |
Segregated cash due from broker |
2,658,156 |
Unrealized appreciation on OTC
swap agreements |
634,882 |
Due from adviser |
3,771 |
Unamortized upfront premiums
paid on interest rate swap agreements |
307 |
Prepaid expenses |
10,766 |
Receivables: |
|
Interest |
8,160,282 |
Investments
sold |
1,425,496 |
Dividends |
122,363 |
Variation
margin on credit default swap agreements |
851 |
Total
assets |
730,569,069 |
LIABILITIES: |
|
Reverse repurchase agreements
(Note 7) |
166,375,625 |
Unfunded loan commitments, at
value (Note 11) (commitment fees received $102,873) |
45,652 |
Unamortized upfront premiums
received on credit default swap agreements |
122,907 |
Unrealized depreciation on forward
foreign currency exchange contracts |
122,462 |
Interest due on borrowings |
42,625 |
Segregated cash due to broker |
446,968 |
Due to custodian |
3,816 |
Payable for: |
|
Investments
purchased |
17,703,204 |
Variation
margin on interest rate swap agreements |
1,163,507 |
Investment
advisory fees |
728,509 |
Variation
margin on futures contracts |
41,860 |
Swap settlement |
62,625 |
Professional
fees |
128,677 |
Protection
fees on credit default swap agreements |
11,551 |
Other
liabilities |
125,465 |
Total
liabilities |
187,125,453 |
NET
ASSETS |
$
543,443,616 |
NET ASSETS CONSIST OF: |
|
Common stock, $0.01 par
value per share; unlimited number of shares |
|
authorized,
32,980,083 shares issued and outstanding |
$ 329,801 |
Additional paid-in capital |
631,445,267 |
Total
distributable earnings (loss) |
(88,331,452) |
NET
ASSETS |
543,443,616 |
Shares
outstanding ($0.01 par value with unlimited amount authorized) |
32,980,083 |
Net
asset value |
$
16.48 |
|
|
See
notes to financial statements. |
|
|
GUG l GUGGENHEIM ACTIVE
ALLOCATION FUND ANNUAL REPORT l 63 |
|
|
STATEMENT
OF OPERATIONS |
May
31, 2024 |
For the Year Ended May 31, 2024 |
|
|
|
INVESTMENT INCOME: |
|
Interest from securities of
unaffiliated issuers (net of foreign withholdings tax $586) |
$ 48,008,092 |
Dividends from securities of
unaffiliated issuers (net of foreign withholdings tax $91) |
2,410,690 |
Dividends
from securities of affiliated issuers |
179,461 |
Total
investment income |
50,598,243 |
EXPENSES: |
|
Interest expense |
8,657,782 |
Investment advisory fees |
8,518,728 |
Professional fees |
409,023 |
Administration fees |
142,225 |
Fund accounting fees |
136,436 |
Trustees fees and expenses* |
82,699 |
Printing fees |
68,068 |
Registration and filing fees |
46,032 |
Insurance |
32,134 |
Transfer agent fees |
23,058 |
Custodian fees |
17,851 |
Miscellaneous |
16,806 |
Total
expenses |
18,150,842 |
Less: |
|
Expenses
waived by adviser |
(43,651) |
Net
expenses |
18,107,191 |
Net
investment income |
32,491,052 |
NET REALIZED AND UNREALIZED
GAIN (LOSS): |
|
Net realized gain (loss) on: |
|
Investments
in unaffiliated issuers |
(8,685,756) |
Swap agreements |
(2,511,949) |
Futures
contracts |
(99,304) |
Options
purchased |
(233,409) |
Options
written |
(2,407,631) |
Forward
foreign currency exchange contracts |
436,558 |
Foreign
currency transactions |
(116,881) |
Net
realized loss |
(13,618,372) |
Net change in unrealized appreciation
(depreciation) on: |
|
Investments
in unaffiliated issuers |
50,497,694 |
Investments
in affiliated issuers |
287,626 |
Swap agreements |
80,822 |
Futures
contracts |
(58,583) |
Options
purchased |
(628,518) |
Options
written |
642,065 |
Forward
foreign currency exchange contracts |
(437,587) |
Foreign
currency translations |
(31,325) |
Net
change in unrealized appreciation (depreciation) |
50,352,194 |
Net
realized and unrealized gain |
36,733,822 |
Net
increase in net assets resulting from operations |
69,224,874 |
* Relates
to Trustees not deemed interested persons within the meaning of Section 2(a)(19) of the 1940 Act.
See notes
to financial statements.
64 l GUG
l GUGGENHEIM ACTIVE ALLOCATION FUND ANNUAL REPORT
|
|
STATEMENTS
OF CHANGES IN NET ASSETS |
May
31, 2024 |
|
Year Ended |
Year Ended |
|
May
31, 2024 |
May
31, 2023 |
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS: |
|
|
Net investment income |
$ 32,491,052 |
$ 26,140,913 |
Net realized loss on investments |
(13,618,372) |
(1,008,866) |
Net change in unrealized appreciation
(depreciation) |
|
|
on
investments |
50,352,194 |
(32,248,518) |
Net
increase (decrease) in net assets resulting from operations |
69,224,874 |
(7,116,471) |
DISTRIBUTIONS: |
|
|
Distributions to shareholders |
(29,980,324) |
(36,375,254) |
Return
of capital |
(17,016,294) |
(10,621,364) |
Total
distributions |
(46,996,618) |
(46,996,618) |
SHAREHOLDER TRANSACTIONS: |
|
|
Capital
contribution from adviser |
|
5,119 |
Net
increase in net assets resulting from shareholder transactions |
|
5,119 |
Net increase (decrease) in net
assets |
22,228,256 |
(54,107,970) |
NET ASSETS: |
|
|
Beginning
of period |
521,215,360 |
575,323,330 |
End
of period |
$
543,443,616 |
$
521,215,360 |
See notes
to financial statements.
GUG l
GUGGENHEIM ACTIVE ALLOCATION FUND ANNUAL REPORT l 65
|
|
STATEMENT
OF CASH FLOWS |
May
31, 2024 |
For the
Year Ended May 31, 2024 |
|
Cash Flows from Operating
Activities: |
|
Net
increase in net assets resulting from operations |
$
69,224,874 |
Adjustments to Reconcile
Net Increase in Net Assets Resulting from Operations to |
|
Net
Cash Provided by Operating and Investing Activities: |
|
Net change
in unrealized (appreciation) depreciation on investments |
(50,785,320) |
Net change
in unrealized (appreciation) depreciation on options purchased |
628,518 |
Net change
in unrealized (appreciation) depreciation on options written |
(642,065) |
Net change
in unrealized (appreciation) depreciation on swap agreements |
(235,882) |
Net change
in unrealized (appreciation) depreciation on forward foreign |
|
currency exchange contracts |
437,587 |
Net realized
loss on investments |
8,685,756 |
Net realized
gain on options purchased |
233,409 |
Net realized
gain on options written |
2,407,631 |
Purchase
of long-term investments |
(178,006,830) |
Proceeds
from sale of long-term investments |
213,782,667 |
Net sales
of short-term investments |
1,232,341 |
Net accretion
of bond discount and amortization of bond premium |
(2,721,171) |
Corporate
actions and other payments |
689,459 |
Premiums
received on options written |
15,069,739 |
Cost of
closing options written |
(18,927,200) |
Commitment
fees received and repayments of unfunded commitments |
79,522 |
Decrease
in unamortized upfront premiums paid on credit default swap agreements |
1,698,923 |
Decrease
in unamortized upfront premiums paid on interest rate swap agreements |
99 |
Increase
in interest receivable |
(488,180) |
Decrease
in dividends receivable |
50,180 |
Increase
in investments sold receivable |
(1,067,785) |
Decrease
in protection fees on credit default swap agreements receivable |
147,490 |
Increase
in due from adviser |
(3,771) |
Increase
in variation margin on credit default swap agreements receivable |
(851) |
Decrease
in prepaid expenses |
2,173 |
Decrease
in tax reclaims receivable |
468 |
Increase
in investments purchased payable |
16,660,265 |
Decrease
in interest due on borrowings |
(63,809) |
Increase
in professional fees payable |
38,953 |
Increase
in swap settlement payable |
62,625 |
Decrease
in unamortized upfront premiums received on credit default swap agreements |
(75,870) |
Decrease
in segregated cash due to broker |
(153,032) |
Increase
in due to custodian |
3,816 |
Decrease
in investment advisory fees payable |
(14,605) |
Decrease
in variation margin on credit default swap agreements payable |
(26,901) |
Increase
in variation margin on interest rate swap agreements payable |
846,317 |
Increase
in protection fees on credit default swap agreements payable |
11,551 |
Decrease
in trustees fees and expenses payable* |
(11,187) |
Increase
in variation margin on futures contracts payable |
41,860 |
Decrease
in other liabilities |
(252,944) |
Net
Cash Provided by Operating and Investing Activities |
$
78,558,820 |
|
See
notes to financial statements. |
66 l GUG l GUGGENHEIM
ACTIVE ALLOCATION FUND ANNUAL REPORT |
|
|
STATEMENT
OF CASH FLOWS continued |
May
31, 2024 |
Cash Flows From Financing
Activities: |
|
Distributions
to common shareholders |
$ (46,996,618) |
Proceeds
from borrowings |
1,000,000 |
Payments
made on borrowings |
(22,800,000) |
Proceeds
from reverse repurchase agreements |
892,259,575 |
Payments
made on reverse repurchase agreements |
(900,586,768) |
Net
Cash Used in Financing Activities |
(77,123,811) |
Net
increase in cash |
1,435,009 |
Cash at Beginning of Year
(including foreign currency)** |
1,400,652 |
Cash
at End of Year (including foreign currency)*** |
$
2,835,661 |
Supplemental Disclosure of
Cash Flow Information: |
|
Cash
paid during the year for interest |
$
11,351,513 |
* | | Relates to Trustees not deemed interested
persons within the meaning of Section 2(a)(19) of the 1940 Act. |
** | | Includes $963,301 of segregated
cash for swap agreements with broker and $108,848 of foreign currency. |
*** | | Includes $2,658,156 of segregated
cash for derivatives with broker and $177,505 of foreign currency. |
GUG l
GUGGENHEIM ACTIVE ALLOCATION FUND ANNUAL REPORT l 67
FINANCIAL
HIGHLIGHTS |
May
31, 2024 |
|
|
|
|
|
Year Ended |
Year Ended |
Period Ended |
|
May
31, 2024 |
May
31, 2023 |
May
31, 2022(a) |
Per Share
Data: |
|
|
|
Net
asset value, beginning of period |
$
15.80 |
$
17.44 |
$
20.00 |
Income from
investment operations: |
|
|
|
Net investment
income(b) |
0.99 |
0.79 |
0.28 |
Net
gain (loss) on investments (realized and unrealized) |
1.12 |
(1.00) |
(2.36) |
Total
from investment operations |
2.11 |
(0.21) |
(2.08) |
Less distributions from: |
|
|
|
Net investment income |
(0.91) |
(0.87) |
(0.48) |
Capital gains |
|
(0.24) |
|
Return
of capital |
(0.52) |
(0.32) |
|
Total
distributions to shareholders |
(1.43) |
(1.43) |
(0.48) |
Net
asset value, end of period |
$
16.48 |
$
15.80 |
$
17.44 |
Market
value, end of period |
$
15.02 |
$
13.61 |
$
15.94 |
Total Return(c) |
|
|
|
Net asset
value |
13.85% |
(1.01)%(h) |
(10.51)% |
Market value |
21.87% |
(5.71)% |
(18.03)% |
Ratios/Supplemental
Data: |
|
|
|
Net
assets, end of period (in thousands) |
$
543,444 |
$
521,215 |
$
575,323 |
Ratio to average
net assets of: |
|
|
|
Net investment
income, including interest expense |
6.09% |
4.94% |
2.90%(f) |
Total
expenses, including interest expense(d)(e) |
3.40% |
3.45% |
1.93%(f) |
Portfolio
turnover rate |
26% |
21% |
29% |
68 l GUG
l GUGGENHEIM ACTIVE ALLOCATION FUND ANNUAL REPORT
|
|
FINANCIAL
HIGHLIGHTS continued |
May
31, 2024 |
|
|
|
|
|
Year Ended |
Year Ended |
Period Ended |
|
May
31, 2024 |
May
31, 2023 |
May
31, 2022(a) |
Senior Indebtness |
|
|
|
Total borrowing outstanding
(in thousands)(i) |
$ 166,376 |
$ 196,503 |
$ 66,000 |
Asset Coverage
per $1,000 of indebtness(g) |
$ 4,266 |
$ 3,652 |
$ 9,717 |
(a) | | Since commencement of operations:
November 23, 2021. Percentage amounts for the period, except total return and portfolio turnover rate, have been annualized. |
(b) | | Based on average shares outstanding. |
(c) | | Total investment return is calculated
assuming a purchase of a common share at the beginning of the period and a sale on the last day of the period reported either at net
asset value (NAV) or market price per share. Dividends and distributions are assumed to be reinvested at NAV for NAV returns
or the prices obtained under the Funds Dividend Reinvestment Plan for market value returns. Total returns do not reflect brokerage
commissions. A return calculated for a period of less than one year is not annualized. |
(d) | | The ratio of total expenses to average
net assets applicable to common shares do not reflect fees and expenses incurred indirectly by the Fund as a result of its investment
in shares of other investment companies. If these fees were included in the expense ratio, the expense ratio would increase by 0.10%,
0.08% and 0.07% for the years ended May 31, 2024, May 31, 2023 and the period ended May 31, 2022, respectively. |
(e) | | Excluding interest expense, the operating
expense ratio for the years ended May 31, 2024, May 31, 2023 and the period ended May 31, 2022 would be: |
|
|
|
2024 |
2023 |
2022(f) |
1.77% |
1.88% |
1.74% |
(g) | | Calculated by subtracting the Funds
total liabilities (not including the borrowings) from the Funds total assets and dividing by the borrowings. Effective August 19,
2022, the Funds obligations under reverse repurchase agreement transactions are treated as senior securities representing indebtedness
for purposes of the 1940 Act. Accordingly, for the years ended May 31, 2024 and May 31, 2023, Asset Coverage is calculated by subtracting
the Funds total liabilities (not including the borrowings or reverse repurchase agreements) from the Funds total assets and
dividing by the sum of the borrowings and reverse repurchase agreements. |
(h) | | The net increase from the payment
by the Adviser totaling $5,119 relating to an operational issue contributed less than 0.01% to total return at net asset value for
the year ended May 31, 2023. |
(i) | | Effective August 19, 2022, the Funds
obligations under reverse repurchase agreement transactions are treated as senior securities representing indebtedness for purposes of
the 1940 Act. |
GUG l
GUGGENHEIM ACTIVE ALLOCATION FUND ANNUAL REPORT l 69
|
|
NOTES
TO FINANCIAL STATEMENTS |
May
31, 2024 |
Note 1
Organization
Guggenheim
Active Allocation Fund (the Fund) was organized as a Delaware statutory trust on May 20, 2021 and commenced investment operations
on November 23, 2021. The Fund is registered as a diversified, closed-end management investment company under the Investment Company
Act of 1940, as amended (the 1940 Act).
The Funds
investment objective is to maximize total return through a combination of current income and capital appreciation. There can be no assurance
that the Fund will achieve its investment objective. The Funds investment objective is considered non-fundamental and may be changed
without shareholder approval. The Fund will provide shareholders with 60 days prior written notice of any change in its investment
objective.
Note 2
Significant Accounting Policies
The Fund
operates as an investment company and, accordingly, follows the investment company accounting and reporting guidance of the Financial
Accounting Standards Board (FASB) Accounting Standards Codification Topic 946 Financial Services Investment Companies.
The following
significant accounting policies are in conformity with U.S. generally accepted accounting principles (U.S. GAAP) and are
consistently followed by the Fund. This requires management to make estimates and assumptions that affect the reported amount of assets
and liabilities, contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from these estimates. All time references are based on Eastern Time.
(a) Valuation
of Investments
The Board
of Trustees of the Fund (the Board) adopted policies and procedures for the valuation of the Funds investments (the
Fund Valuation Procedures). The U.S. Securities and Exchange Commission (the SEC) adopted Rule 2a-5 under the
1940 Act (Rule 2a-5) which establishes requirements for determining fair value in good faith. Rule 2a-5 also defines readily
available market quotations for purposes of the 1940 Act and establishes requirements for determining whether a fund must fair
value a security in good faith.
Pursuant
to Rule 2a-5, the Board has designated Guggenheim Funds Investment Advisors, LLC (GFIA or the Adviser) as the
valuation designee to perform fair valuation determinations for the Fund with respect to all Fund investments and other assets. As the
Funds valuation designee pursuant to Rule 2a-5, the Adviser has adopted separate procedures (the Valuation Designee Procedures
and together with the Fund Valuation Procedures, the Valuation Procedures) reasonably designed to prevent violations of the
requirements of Rule 2a-5 and Rule 31a-4. The Adviser, in its role as valuation designee, utilizes the assistance of a valuation committee,
consisting of representatives from Guggenheims investment management, fund administration, legal and compliance departments (the
Valuation Committee), in determining the fair value of the Funds securities and other assets.
Valuations
of the Funds securities and other assets are supplied primarily by pricing service providers appointed pursuant to the processes
set forth in the Valuation Procedures. The Adviser, with the assistance of the Valuation Committee, convenes monthly, or more frequently
as needed, to review the valuation of all assets which have been fair valued. The Adviser, consistent with the
70 l GUG
l GUGGENHEIM ACTIVE ALLOCATION FUND ANNUAL REPORT
|
|
NOTES
TO FINANCIAL STATEMENTS continued |
May
31, 2024 |
monitoring
and review responsibilities set forth in the Valuation Procedures, regularly reviews the appropriateness of the inputs, methods, models
and assumptions employed by the pricing service provider.
If the pricing
service provider cannot or does not provide a valuation for a particular investment or such valuation is deemed unreliable, such investment
is fair valued by the Adviser.
Equity securities
listed or traded on a recognized U.S. securities exchange or the Nasdaq Stock Market (NASDAQ) will generally be valued on
the basis of the last sale price on the primary U.S. exchange or market on which the security is listed or traded; provided, however,
that securities listed on NASDAQ will be valued at the NASDAQ official closing price, which may not necessarily represent the last sale
price.
Open-end
investment companies are valued at their net asset value (NAV) as of the close of business, on the valuation date. Exchange-traded
funds and closed-end investment companies are generally valued at the last quoted sale price.
U.S. Government
securities are valued by pricing service providers, using the last traded fill price, or at the reported bid price at the close of business.
Generally,
trading in foreign securities markets is substantially completed each day at various times prior to the close of the New York Stock Exchange
(NYSE). The values of foreign securities are determined as of the close of such foreign markets or the close of the NYSE,
if earlier. All investments quoted in foreign currencies are valued in U.S. dollars on the basis of the foreign currency exchange rates
prevailing at the close of U.S. business at 4:00 p.m. Investments in foreign securities may involve risks not present in domestic investments.
The Adviser will determine the current value of such foreign securities by taking into consideration certain factors which may include
the following factors, among others: the value of the securities traded on other foreign markets, American Depositary Receipts (ADRs)
trading, closed-end fund trading, foreign currency exchange activity, and the trading prices of financial products that are tied to foreign
securities. In addition, under the Valuation Procedures, the Adviser is authorized to use prices and other information supplied by a
pricing service provider in valuing foreign securities.
Commercial
paper and discount notes with a maturity of greater than 60 days at acquisition are valued at prices that reflect broker-dealer supplied
valuations or are obtained from pricing service providers, which may consider the trade activity, treasury spreads, yields or price of
bonds of comparable quality, coupon, maturity, and type, as well as prices quoted by dealers who make markets in such securities. Commercial
paper and discount notes with a maturity of 60 days or less at acquisition are valued at amortized cost, unless the Adviser concludes
that amortized cost does not represent the fair value of the applicable asset in which case it will be valued using an independent pricing
service provider.
Typically,
loans are valued using information provided by a pricing service provider which uses broker quotes, among other inputs. If the pricing
service provider cannot or does not provide a valuation for a particular loan, or such valuation is deemed unreliable, such investment
is valued based on a quote from a broker-dealer or is fair valued by the Adviser.
Exchange-traded
options are valued at the mean of the bid and ask prices on the principal exchange on which they are traded.
GUG l
GUGGENHEIM ACTIVE ALLOCATION FUND ANNUAL REPORT l 71
|
|
NOTES
TO FINANCIAL STATEMENTS continued |
May
31, 2024 |
Futures contracts
are valued on the basis of the last sale price as of 4:00 p.m. on the valuation date. In the event that the exchange for a specific futures
contract closes earlier than 4:00 p.m., the futures contract is valued at the official settlement price of the exchange. However, the underlying
securities from which the futures contract value is derived are monitored until 4:00 p.m. to determine if fair valuation would provide
a more accurate valuation.
Interest
rate swap agreements entered into by the Fund are valued on the basis of the last sale price on the primary exchange on which the swap
is traded. Other swap agreements entered into by the Fund are generally valued using an evaluated price provided by a pricing service
provider.
Forward foreign
currency exchange contracts are valued daily based on the applicable exchange rate of the underlying currency.
Investments
for which market quotations are not readily available are fair valued as determined in good faith by the Adviser. Valuations in accordance
with these methods are intended to reflect each securitys (or assets or liabilitys) fair value. Each such
determination is based on a consideration of all relevant factors, which are likely to vary from one pricing context to another. Examples
of such factors may include, but are not limited to: market prices; sale prices; broker quotes; and models which derive prices based
on inputs such as prices of securities with comparable maturities and characteristics, or based on inputs such as anticipated cash flows
or collateral, spread over U.S. Treasury securities, and other information analysis. In connection with futures contracts and other derivative
instruments, such factors may include obtaining information as to how (a) these contracts and other derivative instruments trade in the
futures or other derivative markets, respectively, and (b) the securities underlying these contracts and other derivative instruments
trade in the cash market.
(b) Investment
Transactions and Investment Income
Investment
transactions are accounted for on the trade date. Realized gains and losses on investments are determined on the identified cost basis.
Dividend income is recorded net of applicable withholding taxes on the ex-dividend date and interest income is recorded on an accrual
basis. Dividend income from Real Estate Investment Trusts (REITs) is recorded based on the income included in the distributions
received from the REIT investments using published REIT classifications, including some management estimates when actual amounts are
not available. Distributions received in excess of this estimated amount are recorded as a reduction of the cost of investments or reclassified
to capital gains. The actual amounts of income, return of capital, and capital gains are only determined by each REIT after its fiscal
year-end, and may differ from the estimated amounts. Discounts or premiums on debt securities purchased are accreted or amortized to interest
income using the effective interest method. Interest income also includes paydown gains and losses on mortgage-backed and asset-backed
securities, and senior and subordinated loans. Amendment fees are earned as compensation for evaluating and accepting changes to the
original loan agreement.
The Fund
may receive other income from investments in senior loan interests, including amendment fees, consent fees and commitment fees. For funded
loans, these fees are recorded as income when received by the Fund and included in interest income on the Funds Statement of Operations.
For unfunded loans, commitment fees are included in realized gain on investments on the Funds Statement of Operations at the end
of the commitment period.
72 l GUG
l GUGGENHEIM ACTIVE ALLOCATION FUND ANNUAL REPORT
NOTES
TO FINANCIAL STATEMENTS continued |
May
31, 2024 |
Income from
residual collateralized loan obligations is recognized using the effective interest method. At the time of purchase, management estimates
the future expected cash flows and determines the effective yield and estimated maturity date based on the estimated cash flows. Subsequent
to the purchase, the estimated cash flows are updated periodically and a revised yield is calculated prospectively.
(c) Senior
Floating Rate Interests and Loan Investments
Senior floating
rate interests in which the Fund invests generally pay interest rates which are periodically adjusted by reference to a base short-term
floating rate, plus a premium. These base lending rates are generally (i) the lending rate offered by one or more major European banks,
(ii) the prime rate offered by one or more major United States banks, or (iii) the banks certificate of deposit rate. Senior floating
rate interests often require prepayments from excess cash flows or permit the borrower to repay at its election. The rate at which the
borrower repays cannot be predicted with accuracy. As a result, the actual remaining maturity may be substantially less than the stated
maturities disclosed in the Funds Schedule of Investments.
The Fund
invests in loans and other similar debt obligations (obligations). A portion of the Funds investments in these obligations
is sometimes referred to as covenant lite loans or obligations (covenant lite obligations), which are obligations
that lack covenants or possess fewer or less restrictive covenants or constraints on borrowers than certain other types of obligations.
The Fund may also obtain exposure to covenant lite obligations through investment in securitization vehicles and other structured products.
Many loans and other similar debt obligations have not featured traditional covenants, which are intended to protect lenders and investors
by (i) imposing certain restrictions or other limitations on a borrowers operations or assets or (ii) providing certain rights
to lenders. The Fund may have fewer rights with respect to covenant lite obligations, including fewer protections against the possibility
of default and fewer remedies in the event of default. As a result, investments in (or exposure to) covenant lite obligations are subject
to more risk than investments in (or exposure to) certain other types of obligations. The Fund is subject to other risks associated with
investments in (or exposure to) obligations, including that obligations may not be considered securities under the federal
securities laws and, as a result, the Fund may not be entitled to rely on the anti-fraud protections under the federal securities laws
and instead may have to resort to state law and direct claims.
(d) Currency
Translations
The accounting
records of the Fund are maintained in U.S. dollars. All assets and liabilities initially expressed in foreign currencies are converted
into U.S. dollars at prevailing exchange rates. Purchases and sales of investment securities, dividend and interest income, and certain
expenses are translated at the rates of exchange prevailing on the respective dates of such transactions. Changes in the relationship
of these foreign currencies to the U.S. dollar can significantly affect the value of the investments and earnings of the Fund. Foreign
investments may also subject the Fund to foreign government exchange restrictions, expropriation, taxation, or other political, social,
geopolitical or economic developments, all of which could affect the market and/or credit risk of the investments.
The Fund
does not isolate that portion of the results of operations resulting from changes in the foreign exchange rates on investments from the
fluctuations arising from changes in the market prices of securities held. Such fluctuations are included with the net realized gain
or loss and unrealized appreciation or depreciation on investments.
GUG l
GUGGENHEIM ACTIVE ALLOCATION FUND ANNUAL REPORT l 73
NOTES
TO FINANCIAL STATEMENTS continued |
May
31, 2024 |
Reported
net realized foreign exchange gains and losses arise from sales of foreign currencies and currency gains or losses realized between the
trade and settlement dates on investment transactions. Net unrealized appreciation and depreciation arise from changes in the fair values
of assets and liabilities other than investments in securities at the fiscal period end, resulting from changes in exchange rates.
(e) Forward
Foreign Currency Exchange Contracts
The change
in value of a forward foreign currency exchange contract is recorded as unrealized appreciation or depreciation until the contract is
closed. When the contract is closed, the Fund records a realized gain or loss equal to the difference between the value at the time the
contract was opened and the value at the time it was closed.
(f) Distributions
to Shareholders
The Fund
intends to declare and pay monthly distributions to common shareholders. The Fund expects that distributions will generally consist of
(i) investment company taxable income taxed as ordinary income, which includes, among other things, short-term capital gain and income
from certain hedging and interest rate transactions, (ii) long-term capital gain and (iii) return of capital. Any net realized long-term
capital gains are distributed annually to common shareholders. To the extent distributions exceed the amount of the Funds earnings
and profit available for distribution, the excess will be deemed a return of capital. A return of capital is generally not taxable and
would reduce the shareholders tax basis in its shares, which would reduce the loss (or increase the gain) on a subsequent taxable
disposition by such shareholder of the shares, until such shareholders basis reaches zero at which point subsequent return of capital
distributions would constitute taxable capital gain to such shareholder. Shareholders receiving a return of capital may be under the
impression that they are receiving net investment income or profit when they are not.
Distributions
to shareholders are recorded on the ex-dividend date. The amount and timing of distributions are determined in accordance with U.S. federal
income tax regulations, which may differ from U.S. GAAP.
(g) Restricted
Cash
A
portion of cash on hand relates to collateral received by the Fund for swap agreements, options contracts and futures contracts.
This amount is presented on the Funds Statement of Assets and Liabilities as Segregated cash due from broker. At May 31, 2024,
there was $2,658,156 of segregated cash due from broker.
(h) U.S.
Government and Agency Obligations
Certain U.S.
Government and Agency Obligations are traded on a discount basis; the interest rates shown on the Schedule of Investments reflect the
effective rates paid at the time of purchase by the Fund. Other securities bear interest at the rates shown, payable at fixed dates through
maturity.
(i) Swap
Agreements
Swap agreements
are marked-to-market daily and the change, if any, is recorded as unrealized appreciation or depreciation. Payments received or made
as a result of an agreement or termination of an agreement are recognized as realized gains or losses.
74 l GUG
l GUGGENHEIM ACTIVE ALLOCATION FUND ANNUAL REPORT
NOTES
TO FINANCIAL STATEMENTS continued |
May
31, 2024 |
Upon entering
into certain centrally-cleared swap transactions, the Fund is required to deposit with its clearing broker an amount of cash or securities
as an initial margin. Subsequent variation margin receipts or payments are received or made by the Fund depending on fluctuations in
the fair value of the reference asset or obligation and are recorded by the Fund as unrealized appreciation or depreciation. When the
contract is closed, the Fund records a realized gain or loss equal to the difference between the value of the contract at the time it
was opened and the value at the time it was closed.
Upfront payments
received or made by the Fund on credit default swap agreements and interest rate swap agreements are amortized over the expected life
of the agreement. Periodic payments received or paid by the Fund are recorded as realized gains or losses. Payments received or made
as a result of a credit event or termination of the contract are recognized, net of a proportional amount of the upfront payment, as
realized gains or losses.
(j) Options
Upon the
purchase of an option, the premium paid is recorded as an investment, the value of which is marked-to-market daily. If a purchased option
expires, the Fund realizes a loss in the amount of the cost of the option. When the Fund enters into a closing sale transaction, it realizes
a gain or loss depending on whether the proceeds from the closing sale transaction are greater or less than the cost of the option. If
the Fund exercises a put option, it realizes a gain or loss from the sale of the underlying security and the proceeds from such sale
will be decreased by the premium originally paid. When the Fund exercises a call option, the cost of the security purchased by the Fund
upon exercise increases by the premium originally paid.
When the
Fund writes (sells) an option, an amount equal to the premium received is entered in that Funds accounting records as an asset
and equivalent liability. The amount of the liability is subsequently marked-to-market to reflect the current value of the option written.
When a written option expires, or if the Fund enters into a closing purchase transaction, it realizes a gain (or loss if the cost of
a closing purchase transaction exceeds the premium received when the option was sold).
(k) Futures
Contracts
To purchase
or sell a futures contract, the Fund deposits and maintains as collateral such initial margin as required by the exchange on which the
transaction is affected. Each day, the Fund agrees to receive from or pay to the broker an amount of cash equal to the daily fluctuation
in value of the contract. Such receipts or payments are known as variation margin and are recorded by the Fund as unrealized appreciation
or depreciation. When the position is closed, the Fund records a realized gain or loss equal to the difference between the value of the
contract at the time it was opened and the value at the time it was closed.
(l) Indemnifications
Under the
Funds organizational documents, its Trustees and officers are indemnified against certain liabilities arising out of the performance
of their duties to the Fund. In addition, throughout the normal course of business the Fund enters into contracts that contain a variety
of representations and warranties which provide general indemnifications. The Funds maximum exposure under these arrangements is
unknown, as this would involve future claims that may be made against the Fund and/or its affiliates that have not yet occurred. However,
based on experience, the Fund expects the risk of loss to be remote.
GUG l
GUGGENHEIM ACTIVE ALLOCATION FUND ANNUAL REPORT l 75
|
|
NOTES
TO FINANCIAL STATEMENTS continued |
May
31, 2024 |
(m) Special
Purpose Acquisition Companies
The Fund
may acquire an interest in a special purpose acquisition company (SPAC) in an initial public offering or a secondary market
transaction. SPAC investments carry many of the same risks as investments in initial public offering securities, such as erratic price
movements, greater risk of loss, lack of information about the issuer, limited operating and little public or no trading history, and
higher transaction costs. An investment in a SPAC is typically subject to a higher risk of dilution by additional later offerings of interests
in the SPAC or by other investors exercising existing rights to purchase shares of the SPAC and interests in SPACs may be illiquid and/or
be subject to restrictions on resale. A SPAC is a publicly traded company that raises investment capital for the purpose of acquiring
the equity securities of one or more existing companies (or interests therein) via merger, combination, acquisition or other similar
transactions. Unless and until an acquisition is completed, a SPAC generally invests its assets (less a portion retained to cover expenses)
in U.S. government securities, money market securities and cash and does not typically pay dividends in respect of its common stock.
SPAC investments are also subject to the risk that a significant portion of the funds raised by the SPAC may be expended during the search
for a target acquisition or merger and that the SPAC may have limited time in which to conduct due diligence on potential business combination
targets. Because SPACs are in essence blank check companies without operating history or ongoing business other than seeking acquisitions,
the value of their securities is particularly dependent on the ability of the entitys management to identify and complete a profitable
acquisition. Among other conflicts of interest, the economic interests of the management, directors, officers and related parties of a
SPAC can differ from the economic interests of public shareholders, which may lead to conflicts as they evaluate, negotiate and recommend
business combination transactions to shareholders. This risk may become more acute as the deadline for the completion of a business combination
nears. There is no guarantee that the SPACs in which the Fund invests will complete an acquisition or that any acquisitions that are
completed will be profitable.
Note 3
Derivatives
As part of
its investment strategy, the Fund utilizes a variety of derivative instruments. These investments involve, to varying degrees, elements
of market risk and risks in excess of amounts recognized on the Funds Statement of Assets and Liabilities. Valuation and accounting
treatment of these instruments can be found under Significant Accounting Policies in Note 2 of these Notes to Financial Statements.
Derivatives
are instruments whose values depend on, or are derived from, in whole or in part, the value of one or more other assets, such as securities,
currencies, commodities or indices. Derivative instruments may be used for investment purposes (including to maintain cash reserves while
maintaining exposure to certain other assets), for risk management (hedging) purposes, for diversification purposes, to change the duration
of the Fund, for leverage purposes, to facilitate trading, to reduce transaction costs and to pursue higher investment returns. Derivative
instruments may also be used to seek to mitigate certain investment risks, such as foreign currency exchange rate risk, interest rate
risk and credit risk. U.S. GAAP requires disclosures to enable investors to better understand how and why the Fund uses derivative instruments,
how these derivative instruments are accounted for and their effects on the Funds financial position and results of operations.
The Fund
utilized derivatives for the following purposes:
Duration:
the use of an instrument to manage the interest rate risk of a portfolio.
76 l GUG
l GUGGENHEIM ACTIVE ALLOCATION FUND ANNUAL REPORT
|
|
NOTES
TO FINANCIAL STATEMENTS continued |
May
31, 2024 |
Hedge:
an investment made in order to reduce the risk of adverse price movements in a security, by taking an offsetting position to protect against
broad market moves.
Income:
the use of any instrument that distributes cash flows typically based upon some rate of interest.
Index Exposure: the use of an
instrument to obtain exposure to a listed or other type of index.
Liquidity: the ability to buy or sell exposure with little price/market
impact.
Speculation:
the use of an instrument to express macro-economic and other investment views.
Options
Purchased and Written
A call option
on a security gives the purchaser of the option the right to buy, and the writer of a call option the obligation to sell, the underlying
security. The purchaser of a put option has the right to sell, and the writer of the put option the obligation to buy, the underlying
security at any time during the option period. The risk associated with purchasing options is limited to the premium originally paid.
The following
table represents the Funds use and volume of call/put options purchased on a monthly basis:
|
Average
Notional Amount |
Use |
Call |
Put |
Duration, Hedge |
$79,125,000 |
$9,757,043 |
The risk
in writing a call option is that the Fund may incur a loss if the market price of the underlying security increases and the option is
exercised. The risk in writing a put option is that the Fund may incur a loss if the market price of the underlying security decreases
and the option is exercised. In addition, there may be an imperfect correlation between the movement in prices of options and the underlying
securities where the Fund may not be able to enter into a closing transaction because of an illiquid secondary market; or, for over-the-counter
(OTC) options, the Fund may be at risk because of the counterpartys inability to perform.
The following
table represents the Funds use and volume of call/pit options written on a monthly basis:
|
Average
Notional Amount |
|
Call |
Put |
Hedge, Income |
$11,583,010 |
$ |
Futures
Contracts
A futures
contract is an agreement to purchase (long) or sell (short) an agreed amount of securities or other instruments at a set price for delivery
at a future date. There are significant risks associated with the Funds use of futures contracts, including (i) there may be an
imperfect or no correlation between the changes in market value of the underlying asset and the prices of futures contracts; (ii) there
may not be a liquid secondary market for a futures contract; (iii) trading restrictions or limitations may be imposed by an exchange;
and (iv) government regulations may restrict trading in futures contracts. When investing in futures, there is minimal counterparty credit
risk to the Fund because futures are exchange-traded and the exchanges clearinghouse, as counterparty to all exchange-traded futures,
guarantees against default. Cash deposits are shown as segregated cash
GUG l
GUGGENHEIM ACTIVE ALLOCATION FUND ANNUAL REPORT l 77
|
|
NOTES
TO FINANCIAL STATEMENTS continued |
May
31, 2024 |
due to or
from broker on the Funds Statement of Assets and Liabilities; securities held as collateral are noted on the Funds Schedule
of Investments.
The following
table represents the Funds use and volume of futures on a monthly basis:
|
Average
Notional Amount |
Use |
Long |
Short |
Index exposure, Speculation |
$891,269 |
$ |
Swap Agreements
A swap is
an agreement that obligates two parties to exchange a series of cash flows at specified intervals based upon or calculated by reference
to changes in specified prices or rates for a specified amount of an underlying asset. When utilizing OTC swaps, the Fund bears the risk
of loss of the amount expected to be received under a swap agreement in the event of the default or bankruptcy of a swap agreement counterparty
or if the underlying asset declines in value. Certain standardized swaps are subject to mandatory central clearing and are executed on
a multi-lateral or other trade facility platform, such as a registered exchange. There is limited counterparty credit risk with respect
to centrally-cleared swaps as the transaction is facilitated through a central clearinghouse, much like exchange-traded futures contracts.
If the Fund utilizes centrally-cleared swaps, the exchange bears the risk of loss resulting from a counterparty not being able to pay.
There is no guarantee that the Fund or an underlying fund could eliminate its exposure under an outstanding swap agreement by entering
into an offsetting swap agreement with the same or another party.
Total return
and custom basket swaps involve commitments where single or multiple cash flows are exchanged based on the price of an underlying reference
asset (such as an index or custom basket of securities) for a fixed or variable interest rate. Total return and custom basket swaps will
usually be computed based on the current value of the reference asset as of the close of regular trading on the NYSE or other exchange,
with the swap value being adjusted to include dividends accrued, financing charges and/or interest associated with the swap agreement.
When utilizing total return or custom basket swaps, the Fund bears the risk of loss of the amount expected to be received under a swap
agreement in the event of the default or bankruptcy of a swap agreement counterparty or if the underlying reference asset declines in
value.
The following
table represents the Funds use and volume of total return swaps on a monthly basis:
|
Average
Notional Amount |
Use |
Long |
Short |
Hedge, Speculation, Income |
$2,926,945 |
$ |
Interest
rate swaps involve the exchange by the Fund with another party for its respective commitment to pay or receive a fixed or variable interest
rate on a notional amount of principal. Interest rate swaps are generally centrally-cleared, but central clearing does not make interest
rate swap transactions risk free.
The following
table represents the Funds use and volume of interest rate swaps on a monthly basis:
|
Average
Notional Amount |
|
Pay |
Receive |
Use |
Floating
Rate |
Floating
Rate |
Hedge, Speculation, Income |
$53,800,000 |
$ |
78 l GUG
l GUGGENHEIM ACTIVE ALLOCATION FUND ANNUAL REPORT
|
|
NOTES
TO FINANCIAL STATEMENTS continued |
May
31, 2024 |
Credit default
swaps are instruments which allow for the full or partial transfer of third party credit risk, with respect to a particular entity or
entities, from one counterparty to the other. The Fund enters into credit default swaps as a seller or buyer
of protection primarily to gain or reduce exposure to the investment grade and/or high yield bond market. A seller of credit default
swaps is selling credit protection or assuming credit risk with respect to the underlying entity or entities. The buyer in a credit default
swap is obligated to pay the seller a periodic stream of payments over the term of the contract provided that no event of default on
an underlying reference obligation has occurred. If a credit event occurs, as defined under the terms of the swap agreement, the seller
will either (i) pay to the buyer of protection an amount equal to the notional amount of the swap and take delivery of the referenced
obligation or underlying securities comprising the referenced index or (ii) pay a net settlement amount in the form of cash or securities
equal to the notional amount of the swap less the recovery value of the referenced obligation or underlying securities comprising the
referenced index. The notional amount reflects the maximum potential amount the seller of credit protection could be required to pay
to the buyer if a credit event occurs. The seller of protection receives periodic premium payments from the buyer and may also receive
or pay an upfront premium adjustment to the stated periodic payments. In the event a credit default occurs on a credit default swap referencing
an index, a factor adjustment will take place and the buyer of protection will receive a payment reflecting the par less the default
recovery rate of the defaulted index component based on its weighting in the index. If no default occurs, the counterparty will pay the
stream of payments and have no further obligations to the Fund if it is selling the credit protection. If the Fund utilizes centrally
cleared credit default swaps, the exchange bears the risk of loss resulting from a counterparty not being able to pay. For OTC credit
default swaps, the Fund bears the risk of loss of the amount expected to be received under a swap agreement in the event of the default
or bankruptcy of a swap agreement counterparty, or in the case of a credit default swap in which the Fund is selling credit protection,
the default of a third-party issuer.
The quoted
market prices and resulting market values for credit default swap agreements on securities and credit indices serve as an indicator of
the current status of the payment/performance risk and represent the likelihood of an expected liability (or profit) for the credit derivative
had the notional amount of the swap agreement been closed/sold as of the period end. Increasing market values, in absolute terms when
compared to the notional amount of the swap, represent a deterioration of the referenced entitys credit soundness and a greater
likelihood or risk of default or other credit event occurring as defined under the terms of the agreement.
The following
table represents the Funds use and volume of credit default swaps on a monthly basis:
|
Average
Notional Amount |
|
Protection |
Protection |
Use |
Sold |
Purchased |
Hedge, Speculation, Income |
$7,350,000 |
$25,685,000 |
Forward
Foreign Currency Exchange Contracts
A forward
foreign currency exchange contract is an agreement between two parties to exchange two designated currencies at a specific time in the
future. Certain types of contracts may be cash settled, in an amount equal to the change in exchange rates during the term of the contract.
The contracts can be used to hedge or manage exposure to foreign currency risks with portfolio investments or to gain exposure to foreign
currencies.
GUG l
GUGGENHEIM ACTIVE ALLOCATION FUND ANNUAL REPORT l 79
|
|
NOTES
TO FINANCIAL STATEMENTS continued |
May
31, 2024 |
The market
value of a forward foreign currency exchange contract changes with fluctuations in foreign currency exchange rates. Furthermore, the
Fund may be exposed to risk if the counterparties cannot meet the contract terms or if the currency value changes unfavorably as compared
to the U.S. dollar.
The following
table represents the Funds use and volume of forward foreign currency exchange contracts on a monthly basis:
|
Average
Value |
Use |
Purchased |
Sold |
Hedge |
$302,483 |
$29,802,845 |
Derivative
Investment Holdings Categorized by Risk Exposure
The following
is a summary of the location of derivative investments on the Funds Statement of Assets and Liabilities as of May 31, 2024:
Derivative
Investment Type |
Asset
Derivatives |
Liability
Derivatives |
Equity/Interest
Rate option contracts |
Investments
in unaffiliated issuers, at value |
|
Commodity
futures contracts |
|
Variation
margin on futures |
|
|
contracts |
Currency forward
contracts |
|
Unrealized
depreciation on |
|
|
forward foreign
currency |
|
|
exchange
contracts |
Equity/Credit/Interest
rate swap |
Unamortized
upfront premiums paid on |
Unamortized
upfront premiums |
agreements |
interest
rate swap agreements |
received on
credit default |
|
Unrealized
appreciation on OTC |
swap agreements |
|
swap agreements |
|
|
Variation
margin on credit default |
Variation
margin on interest |
|
swap
agreements |
rate
swap agreements |
The following
tables set forth the fair value of the Funds derivative investments categorized by primary risk exposure at May 31, 2024:
|
|
Asset
Derivative Investments Value |
|
|
|
Swaps |
|
|
Options |
Options |
Forward |
|
Swaps |
Interest |
Futures |
Swaps |
Purchased |
Purchased |
Foreign |
|
Equity |
Rate |
Commodity |
Credit |
Equity |
Interest |
Currency |
Total Value at |
Risk* |
Risk* |
Risk* |
Risk* |
Risk |
Rate
Risk |
Exchange
Risk |
May
31, 2024 |
$573,001 |
$61,881 |
$ |
$ |
$655,771 |
$53 |
$ |
$1,290,706 |
|
|
Liability
Derivative Investments Value |
|
|
|
Swaps |
|
|
Options |
Forward |
|
Swaps |
Interest |
Futures |
Swaps |
Purchased |
Foreign |
|
Equity |
Rate |
Commodity |
Credit |
Equity |
Currency |
Total Value at |
Risk* |
Risk* |
Risk* |
Risk* |
Risk |
Exchange
Risk |
May
31, 2024 |
$ |
$2,704,291 |
$58,583 |
$2,441 |
$ |
$122,462 |
$2,887,777 |
* | | Includes cumulative appreciation
(depreciation) of OTC and centrally-cleared derivatives contracts as reported on the Funds Schedule of Investments. For centrally-cleared
derivatives, variation margin is reported with the Funds Statement of Assets and Liabilities. |
80 l GUG
l GUGGENHEIM ACTIVE ALLOCATION FUND ANNUAL REPORT
|
|
NOTES
TO FINANCIAL STATEMENTS continued |
May
31, 2024 |
The following
is a summary of the location of derivative investments on the Funds Statement of Operations for the year ended May 31, 2024:
Derivative
Investment Type |
Location
of Gain (Loss) on Derivatives |
Equity futures contracts |
Net realized
gain (loss) on futures contracts |
Equity/Interest rate/ |
Net realized
gain (loss) on swap agreements |
Credit swap contracts |
Net change
in unrealized appreciation (depreciation) on swap agreements |
Currency forward contracts |
Net realized
gain (loss) on forward foreign currency exchange contracts |
|
Net change
in unrealized appreciation( depreciation) on forward foreign currency |
|
exchange
contracts |
Equity/Interest rate |
Net realized
gain (loss) on options purchased |
options contracts |
Net change
in unrealized appreciation (depreciation) on options purchased |
|
Net realized gain (loss) on options written |
|
Net
change in unrealized appreciation (depreciation) on options written |
The following
is a summary of the Funds realized gain (loss) and change in unrealized appreciation (depreciation) on derivative investments recognized
on the Funds Statement of Operations categorized by primary risk exposure for the year ended May 31, 2024:
Realized
Gain(Loss) on Derivative Investments Recognized on the Statement of Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forward |
|
|
Swaps |
|
|
Options |
Options |
Options |
Foreign |
|
Swaps |
Interest |
Futures |
Swaps |
Written |
Purchased |
Purchased |
Currency |
|
Equity |
Rate |
Commodity |
Credit |
Equity |
Equity |
Interest |
Exchange |
|
Risk |
Risk |
Risk |
Risk |
Risk |
Risk |
Rate
Risk |
Risk |
Total |
$197,091 |
$(1,458,328) |
$(99,304) |
$(1,250,712) |
$(2,407,631) |
$(20,989) |
$(212,420) |
$436,558 |
$(4,815,735) |
Change
in Unrealized Appreciation(Depreciation) on Derivative Investments Recognized on the Statement of Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forward |
|
|
Swaps |
|
|
Options |
Options |
Options |
Foreign |
|
Swaps |
Interest |
Futures |
Swaps |
Written |
Purchased |
Purchased |
Currency |
|
Equity |
Rate |
Commodity |
Credit |
Equity |
Equity |
Interest |
Exchange |
|
Risk |
Risk |
Risk |
Risk |
Risk |
Risk |
Rate
Risk |
Risk |
Total |
$174,001 |
$(894,123) |
$(58,583) |
$800,944 |
$642,065 |
$(529,267) |
$(99,251) |
$(437,587) |
$(401,801) |
In conjunction
with the use of derivative instruments, the Fund is required to maintain collateral in various forms. Depending on the financial instrument
utilized and the broker involved, the Fund uses margin deposits at the broker, cash and/or securities segregated at the custodian bank,
discount notes or repurchase agreements allocated to the Fund as collateral.
The Fund
has established counterparty credit guidelines and enters into transactions only with financial institutions rated/identified as investment
grade or better. The Fund monitors the counterparty credit risk.
Foreign
Investments
There are
several risks associated with exposure to foreign currencies, foreign issuers and emerging markets. The Funds indirect and direct
exposure to foreign currencies subjects the Fund to the risk that those currencies will decline in value relative to the U.S. dollar,
or in the case of short positions, that the U.S. dollar will decline in value relative to the currency being hedged. Currency
GUG l
GUGGENHEIM ACTIVE ALLOCATION FUND ANNUAL REPORT l 81
|
|
NOTES
TO FINANCIAL STATEMENTS continued |
May
31, 2024 |
rates in
foreign countries may fluctuate significantly over short periods of time for a number of reasons, including changes in interest rates
and the imposition of currency controls or other political developments in the U.S. or abroad. In addition, the Fund may incur transaction
costs in connection with conversions between various currencies. The Fund may, but is not obligated to, engage in currency hedging transactions,
which generally involve buying currency forward, options or futures contracts. However, not all currency risks may be effectively hedged,
and in some cases the costs of hedging techniques may outweigh expected benefits. In such instances, the value of securities denominated
in foreign currencies can change significantly when foreign currencies strengthen or weaken relative to the U.S. dollar.
The Fund
may invest in securities of foreign companies directly, or in financial instruments, such as ADRs and exchange-traded funds, which are
indirectly linked to the performance of foreign issuers. Foreign markets can be more volatile than the U.S. market due to increased risks
of adverse issuer, political, regulatory, market, or economic developments and can perform differently from the U.S. market. Investing
in securities of foreign companies directly, or in financial instruments that are indirectly linked to the performance of foreign issuers,
may involve risks not typically associated with investing in U.S. issuers. The value of securities denominated in foreign currencies,
and of dividends from such securities, can change significantly when foreign currencies strengthen or weaken relative to the U.S. dollar.
Foreign securities markets generally have less trading volume and less liquidity than U.S. markets, and prices in some foreign markets
may fluctuate more than those of securities traded on U.S. markets. Many foreign countries lack accounting and disclosure standards comparable
to those that apply to U.S. companies, and it may be more difficult to obtain reliable information regarding a foreign issuers financial
condition and operations. Transaction costs and costs associated with custody services are generally higher for foreign securities than
they are for U.S. securities. Some foreign governments levy withholding taxes against dividend and interest income. Although in some
countries portions of these taxes are recoverable, the non-recovered portion will reduce the income received by the Fund.
Note 4
Offsetting
In the normal
course of business, the Fund enters into transactions subject to enforceable master netting arrangements or other similar arrangements.
Generally, the right to offset in those agreements allows the Fund to counteract the exposure to a specific counterparty with collateral
received from or delivered to that counterparty based on the terms of the arrangements. These arrangements provide for the right to liquidate
upon the occurrence of an event of default, credit event upon merger or additional termination event.
In order
to better define its contractual rights and to secure rights that will help the Fund mitigate its counterparty risk, the Fund may enter
into an International Swaps and Derivatives Association, Inc. Master Agreement (ISDA Master Agreement) or similar agreement
with its derivative contract counterparties. An ISDA Master Agreement is a bilateral agreement between the Fund and a counterparty that
governs OTC derivatives, including foreign exchange contracts, and typically contains, among other things, collateral posting terms and
netting provisions in the event of a default and/or termination event. The provisions of the ISDA Master Agreement typically permit a
single net payment in the event of a default (close-out netting) or similar event, including the bankruptcy or insolvency of the counterparty.
82 l
GUG l GUGGENHEIM ACTIVE ALLOCATION FUND ANNUAL REPORT
|
|
NOTES
TO FINANCIAL STATEMENTS continued |
May
31, 2024 |
For derivatives
traded under an ISDA Master Agreement, the collateral requirements are typically calculated by netting the mark-to-market amount for
each transaction under such agreement and comparing that amount to the value of any collateral currently pledged by the Fund and the
counterparty. For financial reporting purposes, cash collateral that has been pledged to cover obligations of the Fund and cash collateral
received from the counterparty, if any, are reported separately on the Funds Statement of Assets and Liabilities as segregated
cash due to or due from broker/receivable for variation margin, or payable for swap settlement/variation margin. Generally, the amount
of collateral due from or to a counterparty must exceed a minimum transfer amount threshold (e.g., $300,000) before a transfer is
required to be made. To the extent amounts due to the Fund from its counterparties are not fully collateralized, contractually or otherwise,
the Fund bears the risk of loss from counterparty nonperformance. The Fund attempts to mitigate counterparty risk by only entering into
agreements with counterparties that it believes to be of good standing and by monitoring the financial stability of those counterparties.
For financial
reporting purposes, the Fund does not offset derivative assets and derivative liabilities that are subject to netting arrangements in
the Funds Statement of Assets and Liabilities.
The following
tables present derivative financial instruments and secured financing transactions that are subject to enforceable netting arrangements:
|
|
|
Net Amount |
|
|
|
|
|
Gross Amounts |
of Assets |
Gross Amounts
Not |
|
|
Gross |
Offset in the |
Presented on the |
Offset in the
Statement |
|
|
Amounts of |
Statement of |
Statement of |
of
Assets and Liabilities |
|
|
Recognized |
Assets and |
Assets and |
Financial |
Cash Collateral |
Net |
Instrument |
Assets1 |
Liabilities |
Liabilities |
Instruments |
Received |
Amount |
Swap equity agreements |
$573,001 |
$ |
$573,001 |
$ (49,840) |
$ |
$523,161 |
Interest Rate |
|
|
|
|
|
|
Swap Agreements |
61,881 |
|
61,881 |
|
|
61,881 |
Options Purchased |
|
|
|
|
|
|
Contracts |
98,393 |
|
98,393 |
(30) |
|
98,363 |
|
|
|
Net Amount |
|
|
|
|
|
Gross Amounts |
of Liabilities |
Gross Amounts
Not |
|
|
Gross |
Offset in the |
Presented on the |
Offset in the
Statement |
|
|
Amounts of |
Statement of |
Statement of |
of
Assets and Liabilities |
|
|
Recognized |
Assets and |
Assets and |
Financial |
Cash Collateral |
Net |
Instrument |
Liabilities |
Liabilities |
Liabilities |
Instruments |
Pledged |
Amount |
Forward foreign |
|
|
|
|
|
|
currency
exchange |
|
|
|
|
|
|
contracts |
$ 122,462 |
$ |
$ 122,462 |
$ (49,870) |
$ |
$ 72,592 |
Reverse Repurchase |
|
|
|
|
|
|
Agreements |
166,375,625 |
|
166,375,625 |
(166,375,625) |
|
|
1 Exchange-traded
or centrally-cleared derivatives are excluded from these reported amounts.
GUG l
GUGGENHEIM ACTIVE ALLOCATION FUND ANNUAL REPORT l 83
|
|
NOTES
TO FINANCIAL STATEMENTS continued |
May
31, 2024 |
The Fund
has the right to offset deposits against any related derivative liabilities outstanding with each counterparty with the exception of
exchange-traded or centrally-cleared derivatives. The following table presents deposits held by others in connection with derivative
investments as of May 31, 2024.
Counterparty |
Asset
Type |
Cash
Pledged |
Cash
Received |
Canadian Imperial |
|
|
|
Bank of Commerce |
Reverse repurchase agreements |
$ |
$ 182,000 |
Citigroup |
Reverse repurchase agreements |
|
1,114 |
Goldman Sachs International |
Options |
270,000 |
|
Goldman Sachs International |
Reverse repurchase agreements |
|
263,854 |
J.P. Morgan Securities LLC |
Credit default swap agreements |
1,393,156 |
|
J.P. Morgan Securities LLC |
Futures contracts |
240,000 |
|
J.P.
Morgan Securities LLC |
Interest
rate swap agreements |
755,000 |
|
|
|
$2,658,156 |
$446,968 |
Note 5
Fees and Other Transactions with Affiliates
Pursuant
to an Investment Advisory Agreement between the Fund and the Adviser, the Adviser furnishes office facilities and equipment, and provides
administrative services on behalf of the Fund, and oversees the activities of Guggenheim Partners Investment Management, LLC (GPIM
or the Sub-Adviser). The Adviser provides all services through the medium of any directors, officers or employees of the Adviser
or its affiliates as the Adviser deems appropriate in order to fulfill its obligations. As compensation for these services, the Fund pays
the Adviser a fee, payable monthly, at an annual rate equal to 1.25% of the Funds average daily Managed Assets (as defined in this
report).
Pursuant
to an Investment Sub-Advisory Agreement among the Fund, the Adviser and GPIM, GPIM under the oversight and supervision of the Board and
the Adviser, manages the investment of the assets of the Fund in accordance with its investment objective and policies, places orders
to purchase and sell securities on behalf of the Fund, and, at the request of the Adviser, consults with the Adviser as to the overall
management of the assets of the Fund and its investment policies and practices. As compensation for its services, the Adviser pays GPIM
a fee, payable monthly, at an annual rate equal to 0.625% of the Funds average daily Managed Assets.
For purposes
of calculating the fees payable under the foregoing agreements, Managed Assets means the total assets of the Fund, including
the assets attributable to the proceeds from financial leverage, including the issuance of senior securities represented by indebtedness
(including through borrowing from financial institutions or issuance of debt securities, including notes or commercial paper), the issuance
of preferred shares, the effective leverage of certain portfolio transactions such as reverse repurchase agreements, dollar rolls and
inverse floating rate securities, or any other form of financial leverage, minus liabilities, other than liabilities related to any financial
leverage.
If the Fund
invests in a fund that is advised by the Adviser or an adviser affiliated with the Adviser, the Funds Adviser has agreed to waive
Fund fees to the extent necessary to offset the proportionate share of any management fee paid by the Fund with respect to its investment
in such fund. Fee waivers will be calculated at the investment fund level without regard to any expense cap, if any, in effect for the
84 l GUG
l GUGGENHEIM ACTIVE ALLOCATION FUND ANNUAL REPORT
|
|
NOTES
TO FINANCIAL STATEMENTS continued |
May
31, 2024 |
investment
fund. Fees waived under this arrangement are not subject to reimbursement. For the year ended May 31, 2024, the Adviser waived fees in
the amount of $43,651 related to investments by the Fund in such funds.
Certain officers and trustees of the Fund may also be officers, directors and/or employees of the Adviser or GPIM. The Fund does not compensate its
officers who are officers, directors and/or employees of the aforementioned firms.
GFIA pays
operating expenses on behalf of the Fund, such as audit and accounting related services, legal services, custody, printing and mailing,
among others, on a pass-through basis.
MUFG Investor
Services (US), LLC (MUIS) acts as the Funds administrator and accounting agent. As administrator and accounting agent,
MUIS maintains the books and records of the Funds securities and cash. The Bank of New York Mellon Corp. (BNY) acts
as the Funds custodian. As custodian, BNY is responsible for the custody of the Funds assets. For providing the aforementioned
services, MUIS and BNY are entitled to receive a monthly fee equal to an annual percentage of the Funds average daily Managed Assets
and certain out of pocket expenses.
Note 6
Fair Value Measurement
In accordance
with U.S. GAAP, fair value is defined as the price that the Fund would receive to sell an investment or pay to transfer a liability in
an orderly transaction between market participants at the measurement date. U.S. GAAP establishes a three-tier fair value hierarchy based
on the types of inputs used to value assets and liabilities and requires corresponding disclosure. The hierarchy and the corresponding
inputs are summarized below:
Level 1 unadjusted quoted prices in active markets for identical assets or liabilities.
Level 2
significant other observable inputs (for example quoted prices for securities that are similar based on characteristics such as interest
rates, prepayment speeds, credit risk, etc.).
Level 3
significant unobservable inputs based on the best information available under the circumstances, to the extent observable inputs are
not available, which may include assumptions.
Rule 2a-5
sets forth a definition of readily available market quotations, which is consistent with the definition of a Level 1 input
under U.S. GAAP. Rule 2a-5 provides that a market quotation is readily available only when that quotation is a quoted price (unadjusted)
in active markets for identical investments that the Fund can access at the measurement date, provided that a quotation will not be readily
available if it is not reliable.
Securities for which market quotations are not readily available must be valued at fair value
as determined in good faith. Accordingly, any security priced using inputs other than Level 1 inputs will be subject to fair value requirements.
The types of inputs available depend on a variety of factors, such as the type of security and the characteristics of the markets in
which it trades, if any. Fair valuation determinations that rely on fewer or no observable inputs require greater judgment. Accordingly,
fair value determinations for Level 3 securities require the greatest amount of judgment.
GUG l
GUGGENHEIM ACTIVE ALLOCATION FUND ANNUAL REPORT l 85
|
|
NOTES
TO FINANCIAL STATEMENTS continued |
May
31, 2024 |
Pricing service
providers are used to value a majority of the Funds investments. When values are not available from a pricing service provider,
they will be determined using a variety of sources and techniques, including: market prices; broker quotes; and models which derive prices
based on inputs such as prices of securities with comparable maturities and characteristics or based on inputs such as anticipated cash
flows or collateral, spread over U.S. Treasury securities, and other information and analysis. A significant portion of the Funds
assets and liabilities are categorized as Level 2, as indicated in this report.
Quotes from
broker-dealers, adjusted for fluctuations in criteria such as credit spreads and interest rates, may also be used to value the Funds
assets and liabilities, i.e. prices provided by a broker-dealer or other market participant who has not committed to trade at that price.
Although quotes are typically received from established market participants, the Fund may not have the transparency to view the underlying
inputs which support the market quotations. Significant changes in a quote would generally result in significant changes in the fair
value of the security.
Certain fixed
income securities are valued by obtaining a monthly quote from a broker-dealer, adjusted for fluctuations in criteria such as credit
spreads and interest rates.
Certain loans
and other securities are valued using a single daily broker quote or a price from a pricing service provider based on a single daily
or monthly broker quote.
The inputs
or methodologies selected and applied for valuing securities or other assets are not necessarily an indication of the risk associated
with investing in those securities. The suitability, appropriateness and accuracy of the techniques, methodologies and sources employed
to determine fair valuation are periodically reviewed and subject to change.
Note 7
Reverse Repurchase Agreements
The Fund
may enter into reverse repurchase agreements as part of its financial leverage strategy. Under a reverse repurchase agreement, the Fund
temporarily transfers possession of a portfolio instrument to another party, such as a bank or broker-dealer, in return for cash. At
the same time, the Fund agrees to repurchase the instrument at an agreed upon time and price, which reflects an interest payment. Such
agreements have the economic effect of borrowings. The Fund may enter into such agreements to invest the cash acquired at a rate higher
than the cost of the agreement, which would increase earned income. When the Fund enters into a reverse repurchase agreement, any fluctuations
in the market value of either the instruments transferred to another party or the instruments in which the proceeds may be invested would
affect the market value of the Funds assets. As a result, such transactions may increase fluctuations in the market value of the
Funds assets. For the year ended May 31, 2024, the average daily balance for which reverse repurchase agreements were outstanding
amounted to $137,783,488. The weighted average interest rate was 5.48%. As of May 31, 2024, there was $166,375,625 (inclusive
of interest payable) in reverse repurchase agreements outstanding.
86 l GUG
l GUGGENHEIM ACTIVE ALLOCATION FUND ANNUAL REPORT
|
|
NOTES
TO FINANCIAL STATEMENTS continued |
May
31, 2024 |
As of May
31, 2024, the Fund had outstanding reverse repurchase agreements with various counterparties. Details of the reverse repurchase agreements
by counterparty are as follows:
|
|
|
|
Counterparty |
Interest
Rates |
Maturity
Date |
Face
Value |
Barclays Capital, Inc. |
5.05% - 5.60%* |
Open Maturity |
$ 8,502,049 |
BMO Capital Markets Corp. |
5.60%* |
Open Maturity |
2,466,422 |
BofA Securities, Inc. |
5.60% - 5.70%* |
Open Maturity |
2,390,870 |
Canadian Imperial Bank of Commerce |
5.55% - 5.62%* |
Open Maturity |
14,017,749 |
Citigroup Global Markets, Inc. |
5.49%* |
Open Maturity |
13,842,411 |
Goldman Sachs & Co. LLC |
1.00% - 5.55%* |
Open Maturity |
14,573,243 |
J.P. Morgan Securities LLC |
5.49%* |
Open Maturity |
4,784,002 |
RBC Capital Markets LLC |
5.50% - 5.65%* |
Open Maturity |
8,075,349 |
Societe Generale |
5.67% - 5.76% |
06/21/24 |
31,973,639 |
Societe Generale |
5.54% - 5.62%* |
Open Maturity |
26,489,391 |
TD Securities (USA) LLC |
5.68% |
06/21/24 |
34,135,315 |
TD
Securities (USA) LLC |
5.66%* |
Open
Maturity |
5,125,185 |
Total |
|
|
$
166,375,625 |
* The rate
is adjusted periodically by the counterparty, subject to approval by the Adviser, and is not based upon a set of reference rate and spread.
Rate indicated is the rate effective at May 31, 2024.
The following
is a summary of the remaining contractual maturities of the reverse repurchase agreements outstanding as of May 31, 2024, aggregated
by asset class of the related collateral pledged by the Fund:
|
|
|
Greater than |
Overnight and |
|
Asset
Type |
Up
to 30 days |
31-90
days |
90
days |
continuous |
Total |
Corporate Bonds |
$ 66,108,954 |
$ |
$ |
$ 81,640,258 |
$ 147,749,212 |
Federal Agency Notes |
|
|
|
4,784,002 |
4,784,002 |
Mortgage-Backed
Securities |
|
|
|
13,842,411 |
13,842,411 |
Gross amount of recognized |
|
|
|
|
|
liabilities for reverse |
|
|
|
|
|
repurchase
agreements |
$
66,108,954 |
$
|
$
|
$
100,266,671 |
$
166,375,625 |
Note 8
Borrowings
The Fund
has entered into an $165,000,000 credit facility agreement with an approved lender whereby the lender has agreed to provide secured
financing to the Fund and the Fund will provide pledged collateral to the lender. Under the most recent amended terms, the interest rate
on the amount borrowed is based on SOFR plus 0.75%, 0.80%, or 0.85%, depending on the eligible security types pledged as related collateral,
and an unused commitment fee of 0.30% is charged on the difference between the amount available to borrow under the credit facility agreement
and the actual amount borrowed. As of May 31, 2024, there was no outstanding balance in connection with the Funds credit facility.
The average daily amount for which borrowings on the credit facility were outstanding during the year ended May 31, 2024 was $22,726,829
with a related average interest rate of 6.07%. The maximum amount outstanding during the period was $23,800,000. As of May 31, 2024,
the total value of securities segregated and pledged as collateral in connection with borrowings was $14,219,786.
GUG l
GUGGENHEIM ACTIVE ALLOCATION FUND ANNUAL REPORT l 87
|
|
NOTES
TO FINANCIAL STATEMENTS continued |
May
31, 2024 |
The credit
facility agreement governing the loan facility includes usual and customary covenants. These covenants impose on the Fund asset coverage
requirements, collateral requirements, investment strategy requirements, and certain financial obligations. These covenants place limits
or restrictions on the Funds ability to (i) enter into additional indebtedness with a party other than the counterparty, (ii) change
its fundamental investment policy, or (iii) pledge to any other party, other than to the counterparty, securities owned or held by the
Fund over which the counterparty has a lien. In addition, the Fund is required to deliver financial information to the counterparty within
established deadlines, maintain an asset coverage ratio (as defined in Section 18(g) of the 1940 Act) greater than 300%, comply with
the rules of the stock exchange on which its shares are listed, and maintain its classification as a closed-end management investment
company as defined in the 1940 Act.
There is
no guarantee that the Funds leverage strategy will be successful. The Funds use of leverage may cause the Funds NAV
and market price of common shares to be more volatile and can magnify the effect of any losses.
Note 9
Federal Income Tax Information
The Fund
intends to comply with the provisions of Subchapter M of the Internal Revenue Code of 1986, as amended (the Internal Revenue Code),
applicable to regulated investment companies and will distribute substantially all taxable net investment income and capital gains sufficient to relieve the Fund from all, or substantially all, federal income, excise and state income taxes. Therefore, no provision for
federal or state income tax or federal excise tax is required.
Tax positions
taken or expected to be taken in the course of preparing the Funds tax returns are evaluated to determine whether the tax positions
are more-likely-than-not of being sustained by the applicable tax authority. Tax positions not deemed to meet the more-likely-than-not
threshold would be recorded as a tax benefit or expense in the current year. Management has analyzed the Funds tax positions taken,
or to be taken, on U.S. federal income tax returns for all open tax years, and has concluded that no provision for income tax is required
in the Funds financial statements. The Funds U.S. federal income tax returns are subject to examination by the Internal Revenue
Service (IRS) for a period of three years after they are filed.
The tax character
of distributions paid during the year ended May 31, 2024 was as follows:
|
Long-Term |
|
|
Ordinary
Income |
Capital
Gain |
Return
of Capital |
Total
Distributions |
$29,980,324 |
$ |
$17,016,294 |
$46,996,618 |
The tax character
of distributions paid during the year ended May 31, 2023 was as follows:
|
Long-Term |
|
|
Ordinary
Income |
Capital
Gain |
Return
of Capital |
Total
Distributions |
$28,392,578 |
$7,982,676 |
$10,621,364 |
$46,996,618 |
Note: For
U.S. federal income tax purposes, short-term capital gain distributions are treated as ordinary income distributions.
88 l GUG
l GUGGENHEIM ACTIVE ALLOCATION FUND ANNUAL REPORT
|
|
NOTES
TO FINANCIAL STATEMENTS continued |
May
31, 2024 |
The tax components
of distributable earnings/(loss) as of May 31, 2024 were as follows:
Undistributed |
Undistributed |
Net Unrealized |
Accumulated |
|
Ordinary |
Long-Term |
Appreciation |
Capital and |
|
Income |
Capital
Gain |
(Depreciation) |
Other
Losses |
Total |
$ |
$ |
$(77,233,557) |
$(11,097,895) |
$(88,331,452) |
For U.S.
federal income tax purposes, capital loss carryforwards represent realized losses of the Fund that may be carried forward and applied
against future capital gains. The Fund is permitted to carry forward capital losses for an unlimited period and such capital loss carryforwards
retain their character as either short-term or long-term capital losses. As of May 31, 2024, capital loss carryforwards for the Fund
were as follows:
|
Unlimited |
|
|
|
|
Total |
|
|
|
Capital Loss |
|
Short-Term |
Long-Term |
Carryforward |
|
$ |
$(11,097,895) |
$(11,097,895) |
Net investment
income and net realized gains (losses) may differ for financial statement and tax purposes because of temporary or permanent book/tax
differences. These differences are primarily due to investments in real estate investment trusts and swap agreements, foreign currency
gains and losses, losses deferred due to wash sales, paydown reclasses, debt to equity adjustments, return of capital distributions received,
and the mark-to-market, recharacterization, or disposition of certain Passive Foreign Investment Companies (PFICs). Additional
differences may result from the mark-to-market of certain derivatives. To the extent these differences are permanent and would
require a reclassification between Paid in Capital and Total Distributable Earnings (Loss), such reclassifications are made in the period
that the differences arise. These reclassifications have no effect on net assets or NAV per share.
The following
adjustments were made on the Statement of Assets and Liabilities as of May 31, 2024 for permanent book/tax differences:
|
Total Distributable |
Paid
in Capital |
Earnings/(Loss) |
$(138,417) |
$138,417 |
At May 31,
2024, the cost of investments for U.S. federal income tax purposes, the aggregate gross unrealized appreciation for all investments for
which there was an excess of value over tax cost and the aggregate gross unrealized depreciation for all investments for which there
was an excess of tax cost over value, were as follows:
|
|
|
Net Tax |
|
|
|
Unrealized |
|
Tax Unrealized |
Tax Unrealized |
Appreciation |
Tax
Cost |
Appreciation |
Depreciation |
(Depreciation) |
$792,559,179 |
$5,372,755 |
$(82,629,094) |
$(77,256,339) |
GUG l
GUGGENHEIM ACTIVE ALLOCATION FUND ANNUAL REPORT l 89
|
|
NOTES
TO FINANCIAL STATEMENTS continued |
May
31, 2024 |
Note 10
Securities Transactions
For the year
ended May 31, 2024, the cost of purchases and proceeds from sales of investment securities, excluding government securities, short-term
investments and derivatives, were as follows:
Purchases |
Sales |
$178,006,830 |
$213,782,667 |
The Fund
is permitted to purchase or sell securities from or to certain affiliated funds under specified conditions outlined in procedures adopted
by the Board. The procedures have been designed to ensure that any purchase or sale of securities by the Fund from or to another fund
or portfolio that is or could be considered an affiliate by virtue of having a common investment adviser (or affiliated investment advisers),
common Trustees and/or common officers complies with Rule 17a-7 of the 1940 Act. Further, as defined under these procedures, each transaction
is effected at the current market price. For the year ended May 31, 2024, the Fund did not engage in purchases and sales of securities,
pursuant to Rule 17a-7 of the 1940 Act.
Note 11
Unfunded Loan Commitments
Pursuant
to the terms of certain loan agreements, the Fund held unfunded loan commitments as of May 31, 2024. The Fund is obligated to fund these
loan commitments at the borrowers discretion. As of May 31, 2024, the total amount segregated in connection with unfunded loan
commitments and reverse repurchase agreements was $187,244,528.
The unfunded
loan commitments as of May 31, 2024, were as follows:
Borrower |
Maturity
Date |
Face
Amount* |
Value |
Alteryx, Inc. |
02/08/31 |
$487,500 |
$ 2,531 |
Ardonagh Midco 3 plc |
02/16/31 |
84,337 |
1,265 |
Avalara, Inc. |
10/19/28 |
263,636 |
2,768 |
Datix Bidco Ltd. |
04/30/31 |
390,000 |
|
Finastra USA, Inc. |
09/13/29 |
120,000 |
|
Higginbotham Insurance Agency,
Inc. |
11/25/28 |
274,737 |
2,747 |
Integrated Power Services Holdings,
Inc. |
11/22/28 |
1,448,151 |
3,620 |
Lightning A |
03/01/37 |
2,975,000 |
|
Lightning B |
03/01/37 |
385,000 |
|
MB2 Dental Solutions, LLC |
01/29/31 |
1,163,493 |
28,436 |
Normec 1 B.V. |
03/27/31 |
EUR 150,376 |
|
Orion Group |
03/19/27 |
213,913 |
4,285 |
RLDatix |
04/30/30 |
332,500 |
|
Shaw Development LLC |
10/30/29 |
143,617 |
|
Thunderbird A |
03/01/37 |
2,975,000 |
|
Thunderbird
B |
03/01/37 |
385,000 |
|
|
|
|
$
45,652 |
* The face
amount is denominated in U.S. dollars unless otherwise indicated.
90 l GUG
l GUGGENHEIM ACTIVE ALLOCATION FUND ANNUAL REPORT
|
|
NOTES
TO FINANCIAL STATEMENTS continued |
May
31, 2024 |
Note 12
Restricted Securities
The securities
below are considered illiquid and restricted under guidelines established by the Board:
Restricted
Securities |
Acquisition
Date |
Cost |
Value |
CFMT LLC |
09/23/22 |
$625,990 |
$627,796 |
2022-HB9,
3.25% (WAC) |
|
|
|
due 09/25/371 |
|
|
|
1 | | Variable rate security. Rate indicated
is the rate effective at May 31, 2024. In some instances, the effective rate is limited by a minimum rate floor or a maximum rate cap
established by the issuer. The settlement status of a position may also impact the effective rate indicated. In some cases, a position
may be unsettled at period end and may not have a stated effective rate. In instances where multiple underlying reference rates and spread
amounts are shown, the effective rate is based on a weighted average. |
Note 13
Capital Common Shares
The Fund
has an unlimited amount of common shares, $0.01 par value, authorized and 32,980,083 shares issued and outstanding.
Transactions
in common shares were as follows:
|
Year Ended |
Year Ended |
|
May
31, 2024 |
May
31, 2023 |
Beginning
shares |
32,980,083 |
32,980,083 |
Ending
shares |
32,980,083 |
32,980,083 |
Note 14
Market Risks
The value
of, or income generated by, the investments held by the Fund are subject to the possibility of rapid and unpredictable fluctuation, and
loss that may result from various factors. These factors include, among others, developments affecting individual companies, issuers or
particular industries or from broader influences, including real or perceived changes in prevailing interest rates (which may change
at any time based on changes in monetary policies and various market and other economic conditions), changes in inflation rates or expectations
about inflation rates, adverse investor confidence or sentiment, changing economic, political (including geopolitical), social or financial
market conditions, increased instability or general uncertainty, environmental or man-made disasters, governmental actions, public health
emergencies (such as the spread of infectious diseases, pandemics and epidemics), debt crises, actual or threatened wars or other armed
conflicts (such as the escalated conflict in the Middle East and the ongoing Russia-Ukraine conflict and its collateral economic and
other effects, including, but not limited to, sanctions and other international trade barriers) or ratings downgrades, and other similar
types of events, each of which may be temporary or last for extended periods. Different sectors, industries and security types may react
differently to such developments. Moreover, changing economic, political, geopolitical, social, financial market or other conditions in
one country or geographic region could adversely affect the value, yield and return of the investments held by the Fund in a different
country, geographic region, economy, and market because of the increasingly interconnected global economies and financial markets. The
duration and extent of the foregoing types of factors or conditions are highly uncertain and difficult to predict and have in the past,
and may in the future, cause volatility and distress in economies and financial markets or other adverse circumstances, which may negatively
affect the value of the Funds investments and performance of the Fund.
GUG l
GUGGENHEIM ACTIVE ALLOCATION FUND ANNUAL REPORT l 91
|
|
NOTES
TO FINANCIAL STATEMENTS continued |
May
31, 2024 |
Note 15
Subsequent Events
The Fund
evaluated subsequent events through the date the financial statements are issued and determined there were no material events that would
require adjustment to or disclosure in the Funds financial statements.
92 l GUG
l GUGGENHEIM ACTIVE ALLOCATION FUND ANNUAL REPORT
|
|
REPORT OF INDEPENDENT REGISTERED |
|
PUBLIC
ACCOUNTING FIRM |
May
31, 2024 |
To the Shareholders
and Board of Trustees of Guggenheim Active Allocation Fund
Opinion
on the Financial Statements
We have audited
the accompanying statement of assets and liabilities of Guggenheim Active Allocation Fund (the Fund), including the schedule
of investments, as of May 31, 2024, and the related statements of operations and cash flows for the year then ended, the statement of
changes in net assets for each of the two years in the period ended May 31, 2024 and the financial highlights for each of the two years
in the period ended May 31, 2024 and the period from November 23, 2021 (commencement of operations) through May 31, 2022, and the related
notes (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in
all material respects, the financial position of Guggenheim Active Allocation Fund at May 31, 2024, the results of its operations and
its cash flows for the year then ended, the changes in its net assets for each of the two years in the period ended May 31, 2024 and
its financial highlights for each of the two years in the period ended May 31, 2024 and the period from November 23, 2021 (commencement
of operations) through May 31, 2022, in conformity with U.S. generally accepted accounting principles.
Basis
for Opinion
These financial
statements are the responsibility of the Funds management. Our responsibility is to express an opinion on the Funds financial
statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United
States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities
laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted
our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Fund is not required
to have, nor were we engaged to perform, an audit of the Funds internal control over financial reporting. As part of our audit,
we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion
on the effectiveness of the Funds internal control over financial reporting. Accordingly, we express no such opinion.
Our audit
included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud,
and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts
and disclosures in the financial statements. Our procedures included confirmation of securities owned as of May 31, 2024, by correspondence
with the custodian, brokers and paying agents; when replies were not received from brokers or paying agents, we performed other auditing
procedures.
GUG l
GUGGENHEIM ACTIVE ALLOCATION FUND ANNUAL REPORT l 93
|
|
REPORT OF INDEPENDENT REGISTERED |
|
PUBLIC
ACCOUNTING FIRM continued |
May
31, 2024 |
Our audit
also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall
presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.
![](https://www.sec.gov/Archives/edgar/data/1864208/000182126824000181/image_009.jpg)
We have served
as the auditor of one or more Guggenheim investment companies since 1979.
Tysons, Virginia
July 26, 2024
94 l GUG
l GUGGENHEIM ACTIVE ALLOCATION FUND ANNUAL REPORT
|
|
OTHER
INFORMATION (Unaudited) |
May
31, 2024 |
Federal
Income Tax Information
This information
is being provided as required by the Internal Revenue Code. Amounts shown may differ from those elsewhere in the report because of differences in tax and financial reporting practice.
In January
2025, shareholders will be advised on IRS Form 1099 DIV or substitute 1099 DIV as to the federal tax status of the distributions received
by shareholders in the calendar year 2024.
The Funds
investment income (dividend income plus short-term capital gains, if any) qualifies as follows:
Of the taxable
ordinary income distributions paid during the fiscal year ended May 31, 2024, the Fund had the corresponding percentages qualify for
the reduced tax rate pursuant to the Jobs and Growth Tax Relief and Reconciliation Act of 2003 or for the dividends received deduction
for corporations. See the qualified dividend income and dividend received deduction columns, respectively, in the table below.
Additionally,
of the taxable ordinary income distributions paid during the fiscal year ended May 31, 2024, the Fund had the corresponding percentage
qualify as interest related dividends as permitted by IRC Section 871(k)(1) . See the qualified interest income column in the table below.
Qualified |
Dividend |
Qualified |
Dividend |
Received |
Interest |
Income |
Deduction |
Income |
3.18% |
2.99% |
75.47% |
Results
of Shareholder Votes
The Annual
Meeting of Shareholders of the Fund was held of April 4, 2024. Shareholders voted on the election of Trustees. With regards to the election
of following Trustees by shareholders of the Fund:
|
#
of Shares in Favor |
#
of Shares Against |
#
of Shares Abstain |
Thomas
F. Lydon, Jr. |
26,725,340 |
295,113 |
346,562 |
Ronald
A. Nyberg |
26,658,131 |
290,321 |
418,563 |
The other
Trustees of the Fund not up for election in 2024 are Sandra G. Sponem, Ronald E. Toupin, Jr., Randall C. Barnes, Angela Brock-Kyle and
Amy J. Lee.
GUG l
GUGGENHEIM ACTIVE ALLOCATION FUND ANNUAL REPORT l 95
|
|
OTHER
INFORMATION (Unaudited) continued |
May
31, 2024 |
Delaware
Statutory Trust Act-Control Share Acquisition
Under Delaware
law applicable to the Fund as of August 1, 2022, if a shareholder acquires direct or indirect ownership or power to direct the voting
of shares of the Fund in an amount that equals or exceeds certain percentage thresholds specified under Delaware law (beginning at 10%
or more of shares of the Fund), the shareholders ability to vote certain of these shares may be limited.
Sector
Classification
Information
in the Schedule of Investments is categorized by sectors using sector-level classifications used by Bloomberg Industry Classification
System, a widely recognized industry classification system provider. In the Funds registration statement, the Fund has investment
policies relating to concentration in specific industries. For purposes of these investment policies, the Fund usually classifies industries
based on industry-level classifications used by widely recognized industry classification system providers such as Bloomberg Industry
Classification System, Global Industry Classification Standards and Barclays Global Classification Scheme.
96 l GUG
l GUGGENHEIM ACTIVE ALLOCATION FUND ANNUAL REPORT
|
|
OTHER
INFORMATION (Unaudited) continued |
May
31, 2024 |
Trustees
The Trustees
of the Guggenheim Active Allocation Fund and their principal occupations during the past five years:
|
|
|
|
|
|
|
Position(s) |
Term of
Office |
|
Number
of |
|
|
Held |
and
Length |
|
Portfolios in |
|
Name, Address* |
with |
of Time |
Principal
Occupation(s) |
Fund
Complex |
Other
Directorships |
and
Year of Birth |
Trust |
Served** |
During
Past 5 Years |
Overseen |
Held
by Trustees*** |
Independent
Trustees: |
|
|
|
|
Randall C. Barnes |
Trustee and |
Since 2021 |
Current:
Private Investor (2001-present). |
153 |
Current: Advent
Convertible and Income |
(1951) |
Chair of the |
|
|
|
Fund (2005-present);
Purpose Investments |
|
Valuation |
|
Former:
Senior Vice President and Treasurer, PepsiCo, Inc. (1993-1997); |
|
Funds (2013-present). |
|
Oversight |
|
President,
Pizza Hut International (1991-1993); Senior Vice President, |
|
|
|
Committee |
|
Strategic
Planning and New Business Development, PepsiCo, Inc. |
|
Former: Guggenheim
Energy & Income |
|
|
|
(1987-1990). |
|
Fund (2015-2023);
Fiduciary/Claymore |
|
|
|
|
|
Energy Infrastructure
Fund (2004-2022); |
|
|
|
|
|
Guggenheim
Enhanced Equity Income Fund |
|
|
|
|
|
(2005-2021);
Guggenheim Credit Allocation |
|
|
|
|
|
Fund
(2013-2021). |
Angela
Brock-Kyle |
Trustee |
Since 2021 |
Current: Founder and Chief Executive Officer, B.O.A.R.D.S. (consulting |
152 |
Current: Bowhead
Insurance GP, LLC |
(1959) |
|
|
firm) (2013-present);
Director, Mutual Fund Directors Forum (2022-present). |
|
(2020-present);
Hunt Companies, Inc. |
|
|
|
|
|
(2019-present). |
|
|
|
Former:
Senior Leader, TIAA (financial services firm) (1987-2012). |
|
|
|
|
|
|
|
Former: Guggenheim
Energy & Income |
|
|
|
|
|
Fund (2019-2023); Fiduciary/Claymore |
|
|
|
|
|
Energy Infrastructure Fund (2019-2022); |
|
|
|
|
|
Guggenheim Enhanced Equity Income
Fund |
|
|
|
|
|
(2019-2021); Guggenheim Credit
Allocation |
|
|
|
|
|
Fund (2019-2021); Infinity Property
& |
|
|
|
|
|
Casualty
Corp. (2014-2018). |
GUG l
GUGGENHEIM ACTIVE ALLOCATION FUND ANNUAL REPORT l 97
|
|
OTHER
INFORMATION (Unaudited) continued |
May
31, 2024 |
|
|
|
|
|
|
|
Position(s) |
Term of
Office |
|
Number
of |
|
|
Held |
and Length |
|
Portfolios in |
|
Name, Address* |
with |
of Time |
Principal
Occupation(s) |
Fund
Complex |
Other
Directorships |
and
Year of Birth |
Trust |
Served** |
During
Past 5 Years |
Overseen |
Held
by Trustees*** |
Independent
Trustees continued: |
|
|
|
|
Thomas F. Lydon, Jr. |
Trustee and |
Since 2021 |
Current:
President, Global Trends Investments (registered investment |
152 |
Current:
US Global Investors, Inc. (GROW) |
(1960) |
Chair of the |
|
adviser) (1996-present); Chief Executive Officer, Lydon Media (2016-present). |
|
(1995-present);
The 2023 ETF Series Trust |
|
Contracts |
|
|
|
(4) (2023-present);
The 2023 ETF Series |
|
Review |
|
Former:
Vice Chairman, VettaFi, a wholly owned subsidiary of The TMX Group |
Trust II
(1) (2023-present). |
|
Committee |
|
(financial
advisor content, research, index and digital distribution provider) |
|
|
|
|
|
(2022-2024);
Chief Executive Officer, ETF Flows, LLC (financial advisor |
|
Former:
Guggenheim Energy & Income |
|
|
|
education
and research provider) (2019-2023); Director, GDX Index |
|
Fund (2019-2023);
Fiduciary/Claymore |
|
|
|
Partners,
LLC (index provider) (2021-2023). |
|
Energy
Infrastructure Fund (2019-2022); |
|
|
|
|
|
Guggenheim
Enhanced Equity Income Fund |
|
|
|
|
|
(2019-2021);
Guggenheim Credit Allocation |
|
|
|
|
|
Fund (2019-2021);
Harvest Volatility Edge |
|
|
|
|
|
Trust
(3) (2017-2019). |
Ronald
A. Nyberg |
Trustee and |
Since 2021 |
Current: Of Counsel (formerly Partner), Momkus LLP (law firm)
(2016-present). |
153 |
Current:
Advent Convertible and Income |
(1953) |
Chair of the |
|
|
|
Fund (2003-present);
PPM Funds (2) |
|
Nominating
and |
Former:
Partner, Nyberg & Cassioppi, LLC (law firm) (2000-2016); Executive |
|
(2018-present);
Endeavor Health |
|
Governance |
|
Vice President,
General Counsel, and Corporate Secretary, Van Kampen |
|
(2012-present). |
|
Committee |
|
Investments
(1982-1999). |
|
|
|
|
|
|
|
Former:
Guggenheim Energy & Income |
|
|
|
|
|
Fund (2015-2023);
Fiduciary/Claymore |
|
|
|
|
|
Energy
Infrastructure Fund (2004-2022); |
|
|
|
|
|
Guggenheim
Enhanced Equity Income Fund |
|
|
|
|
|
(2005-2021);
Guggenheim Credit Allocation |
|
|
|
|
|
Fund (2013-2021);
Western Asset Inflation- |
|
|
|
|
|
Linked
Opportunities & Income Fund |
|
|
|
|
|
(2004-2020);
Western Asset Inflation-Linked |
|
|
|
|
|
Income
Fund (2003-2020). |
98 l GUG
l GUGGENHEIM ACTIVE ALLOCATION FUND ANNUAL REPORT
|
|
OTHER
INFORMATION (Unaudited) continued |
May
31, 2024 |
|
|
|
|
|
|
|
Position(s) |
Term of
Office |
|
Number
of |
|
|
Held |
and Length |
|
Portfolios in |
|
Name, Address* |
with |
of Time |
Principal
Occupation(s) |
Fund
Complex |
Other
Directorships |
and
Year of Birth |
Trust |
Served** |
During
Past 5 Years |
Overseen |
Held
by Trustees*** |
Independent
Trustees continued: |
|
|
|
|
Sandra G. Sponem |
Trustee and |
Since 2021 |
Current: Retired. |
152 |
Current: SPDR
Series Trust (81) |
(1958) |
Chair of the |
|
|
|
(2018-present);
SPDR Index Shares Funds |
|
Audit |
|
Former: Senior
Vice President and Chief Financial Officer, M.A. |
|
(30) (2018-present);
SSGA Active Trust (14) |
|
Committee |
|
Mortenson-Companies,
Inc. (construction and real estate development |
|
(2018-present). |
|
|
|
company) (2007-2017). |
|
|
|
|
|
|
|
Former: Guggenheim
Energy & Income |
|
|
|
|
|
Fund (2019-2023); Fiduciary/Claymore |
|
|
|
|
|
Energy Infrastructure Fund (2019-2022); |
|
|
|
|
|
Guggenheim Enhanced Equity Income
Fund |
|
|
|
|
|
(2019-2021); Guggenheim Credit
Allocation |
|
|
|
|
|
Fund (2019-2021); SSGA Master
Trust (1) |
|
|
|
|
|
(2018-2020). |
Ronald
E. Toupin, Jr. |
Trustee, Chair |
Since 2021 |
Current: Portfolio
Consultant (2010-present); Member, Governing Council, |
152 |
Former:
Guggenheim Energy & Income |
(1958) |
of the Board |
|
Independent
Directors Council (2013-present); Governor, Board of Governors, |
Fund (2015-2023);
Fiduciary/Claymore |
|
and Chair
of the |
|
Investment
Company Institute (2018-present). |
|
Energy Infrastructure
Fund (2004-2022); |
|
Executive |
|
|
|
Guggenheim
Enhanced Equity Income |
|
Committee |
|
Former: Member,
Executive Committee, Independent Directors Council |
|
Fund (2005-2021);
Guggenheim Credit |
|
|
|
(2016-2018);
Vice President, Manager and Portfolio Manager, Nuveen Asset |
|
Allocation
Fund (2013-2021); Western Asset |
|
|
|
Management
(1998-1999); Vice President, Nuveen Investment Advisory Corp. |
|
Inflation-Linked
Opportunities & Income |
|
|
|
(1992-1999);
Vice President and Manager, Nuveen Unit Investment Trusts |
|
Fund (2004-2020);
Western Asset Inflation- |
|
|
|
(1991-1999);
and Assistant Vice President and Portfolio Manager, Nuveen Unit |
Linked Income
Fund (2003-2020). |
|
|
|
Investment
Trusts (1988-1999), each of John Nuveen & Co., Inc. (registered |
|
|
|
|
|
broker
dealer) (1982-1999). |
|
|
GUG l
GUGGENHEIM ACTIVE ALLOCATION FUND ANNUAL REPORT l 99
|
|
OTHER
INFORMATION (Unaudited) continued |
May
31, 2024 |
|
|
|
|
|
|
|
Position(s) |
Term of
Office |
|
Number
of |
|
|
Held |
and Length |
|
Portfolios in |
|
Name, Address* |
with |
of Time |
Principal Occupation(s) |
Fund
Complex |
Other
Directorships |
and
Year of Birth |
Trust |
Served** |
During
Past 5 Years |
Overseen |
Held
by Trustees*** |
Interested
Trustee: |
|
|
|
|
|
Amy J. Lee**** |
Trustee, Vice |
Since 2021 |
Current: Interested
Trustee, certain other funds in the Fund Complex |
152 |
Former: Guggenheim
Energy & Income |
(1961) |
President
and |
|
(2018-present);
Chief Legal Officer, certain other funds in the Fund Complex |
|
Fund (2018-2023);
Fiduciary/Claymore |
|
Chief Legal |
|
(2014-present);
Vice President, certain other funds in the Fund Complex |
|
Energy Infrastructure
Fund (2018-2022); |
|
Officer |
|
(2007-present);
Senior Managing Director, Guggenheim Investments |
|
Guggenheim
Enhanced Equity Income Fund |
|
|
|
(2012-present). |
|
(2018-2021);
Guggenheim Credit Allocation |
|
|
|
|
|
Fund (2018-2021). |
|
|
|
Former: President
and/or Chief Executive Officer, certain other funds in the |
|
|
|
|
|
Fund Complex
(2017-2019); Vice President, Associate General Counsel and |
|
|
|
|
|
Assistant
Secretary, Security Benefit Life Insurance Company and Security |
|
|
|
|
|
Benefit
Corporation (2004-2012). |
|
|
* | | The business address of each Trustee
is c/o Guggenheim Investments, 227 West Monroe Street, Chicago, Illinois 60606. |
** | | Each Trustee elected shall hold
office until his or her successor shall have been elected and shall have qualified. After a Trustees initial term, each Trustee
is expected to serve a two year term concurrent with the class of Trustees for which he or she serves. |
- Mr.
Barnes and Ms. Brock-Kyle are Class I Trustees. Class I Trustees are expected to stand for re-election at the date of the Funds
annual meeting of Shareholders for the fiscal year ended May 31, 2026.
- Messrs.
Nyberg and Lydon, Jr. are Class II Trustees. Class II Trustees are expected to stand for re-election at the date of the Funds annual
meeting of Shareholders for the fiscal year ended May 31, 2027.
- Mr.
Toupin Jr. and Mses. Lee and Sponem are Class III Trustees. Class III Trustees are expected to stand for re-election at the date of the
Funds annual meeting of Shareholders for the fiscal year ended May 31, 2025.
*** | | Each Trustee also serves on the
Boards of Trustees of Guggenheim Funds Trust, Guggenheim Variable Funds Trust, Guggenheim Strategy Funds Trust, Guggen -heim Taxable
Municipal Bond & Investment Grade Debt Trust, Guggenheim Strategic Opportunities Fund, Rydex Series Funds, Rydex Dynamic Funds, Rydex
Variable Trust and Transparent Value Trust. Messrs. Barnes and Nyberg also serve on the Board of Trustees of Advent Convertible &
Income Fund. |
**** | | This Trustee is deemed to be an
interested person of the Fund under the 1940 Act by reason of her position with the Funds Adviser and/or the parent
of the Adviser. |
100 l GUG
l GUGGENHEIM ACTIVE ALLOCATION FUND ANNUAL REPORT
|
|
OTHER
INFORMATION (Unaudited) continued |
May
31, 2024 |
Officers
The Officers
of the Guggenheim Active Allocation Fund and their principal occupations during the past five years:
|
|
|
|
|
Position(s) |
|
|
|
Held |
Term of Office |
|
Name, Address* |
with |
and
Length of |
Principal Occupation(s) |
and
Year of Birth |
Trust |
Time
Served** |
During
Past Five Years |
Brian E. Binder |
President |
Since 2021 |
Current:
President, Mutual Funds Boards, Guggenheim Investments (2022-present); President and Chief Executive Officer, certain other funds |
(1972) |
and Chief |
|
in the
Fund Complex (2018-present); President, Mutual Funds Boards, Guggenheim Funds Investment Advisors, LLC and, Security Investors, |
|
Executive |
|
LLC (2018-present);
Board Member, Guggenheim Partners Investment Funds plc (2022-present); Board Member, Guggenheim Global |
|
Officer |
|
Investments
plc (2022-present); Board Member, Guggenheim Partners Fund Management (Europe) Limited (2018-present). |
|
|
|
Former:
Senior Managing Director and Chief Administrative Officer, Guggenheim Investments (2018-2022); Managing Director and President, |
|
|
|
Deutsche
Funds, and Head of US Product, Trading and Fund Administration, Deutsche Asset Management (2013-2018); Managing Director, |
|
|
|
Chairman
of North American Executive Committee and Head of Business Management and Consulting, Invesco Ltd. (2010-2012). |
Joanna
M. Catalucci |
Chief |
Since 2021 |
Current:
Chief Compliance officer, certain other funds in the Fund Complex (2012-present); Senior Managing Director, Guggenheim |
(1966) |
Compliance |
|
Investments
(2014-present). |
|
Officer |
|
|
|
|
|
Former:
AML Officer, certain other funds in the Fund Complex (2016-2017); Chief Compliance Officer and Secretary, certain other funds in
the |
|
|
|
Fund Complex
(2008-2012); Senior Vice President and Chief Compliance officer, Security Investor, LLC and certain affiliates (2010-2012); Chief |
|
|
|
Compliance
officer and Senior Vice President, Rydex Advisors, LLC and certain affiliates (2010-2011). |
James M.
Howley |
Chief |
Since 2022 |
Current:
Managing Director, Guggenheim Investments (2004-present); Chief Financial Officer, Chief Accounting Officer, and Treasurer, certain |
(1972) |
Financial |
|
other funds
in the Fund Complex (2022-present). |
|
Officer, Chief |
|
|
|
Accounting |
|
Former:
Assistant Treasurer, certain other funds in the Fund Complex (2006-2022); Manager, Mutual Fund Administration of Van Kampen |
|
Officer and |
|
Investments,
Inc. (1996-2004). |
|
Treasurer |
|
|
Mark E.
Mathiasen |
Secretary |
Since 2021 |
Current:
Secretary, certain other funds in the Fund Complex (2007-present); Managing Director, Guggenheim Investments (2007-present). |
(1978) |
|
|
|
Glenn McWhinnie |
Assistant |
Since 2021 |
Current:
Vice President, Guggenheim Investments (2009-present); Assistant Treasurer, certain other funds in the Fund Complex (2016-present). |
(1969) |
Treasurer |
|
|
Michael
P. Megaris |
Assistant |
Since 2021 |
Current:
Assistant Secretary, certain other funds in the Fund Complex (2014-present); Managing Director, Guggenheim Investments |
(1984) |
Secretary |
|
(2012-present). |
GUG
l GUGGENHEIM ACTIVE ALLOCATION FUND ANNUAL REPORT l 101
OTHER
INFORMATION (Unaudited) continued |
May
31, 2024 |
|
|
|
|
|
Position(s) |
|
|
|
Held |
Term of Office |
|
Name, Address* |
with |
and
Length of |
Principal Occupation(s) |
and
Year of Birth |
Trust |
Time
Served** |
During
Past Five Years |
Kimberly J. Scott |
Assistant |
Since 2021 |
Current:
Director, Guggenheim Investments (2012-present); Assistant Treasurer, certain other funds in the Fund Complex (2012-present). |
(1974) |
Treasurer |
|
|
|
|
|
Former:
Financial Reporting Manager, Invesco, Ltd. (2010-2011); Vice President/Assistant Treasurer, Mutual Fund Administration for Van |
|
|
|
Kampen
Investments, Inc./Morgan Stanley Investment Management (2009-2010); Manager of Mutual Fund Administration, Van Kampen |
|
|
|
Investments,
Inc./Morgan Stanley Investment Management (2005-2009). |
Jon Szafran |
Assistant |
Since 2021 |
Current:
Director, Guggenheim Investments (2017-present); Assistant Treasurer, certain other funds in the Fund Complex (2017-present). |
(1989) |
Treasurer |
|
|
|
|
|
Former:
Assistant Treasurer of Henderson Global Funds and Manager of US Fund Administration, Henderson Global Investors (North America) |
|
|
|
Inc. (HGINA),
(2017); Senior Analyst of US Fund Administration, HGINA (20142017); Senior Associate of Fund Administration, Cortland |
|
|
|
Capital
Market Services, LLC (2013-2014); Experienced Associate, PricewaterhouseCoopers LLP (2012-2013). |
* The
business address of each officer is c/o Guggenheim Investments, 227 West Monroe Street, Chicago, Illinois 60606.
** Each
officer serves an indefinite term, until his or her successor is duly elected and qualified.
102 l GUG
l GUGGENHEIM ACTIVE ALLOCATION FUND ANNUAL REPORT
REPORT OF THE GUGGENHEIM
ACTIVE ALLOCATION |
|
FUND
(GUG) BOARD OF TRUSTEES |
May
31, 2024 |
The Board
of Trustees of Guggenheim Active Allocation Fund (the Fund), including the Independent Trustees, unanimously approved the
renewal of the investment management agreement (the Investment Advisory Agreement) between the Fund and Guggenheim Funds
Investment Advisors, LLC (GFIA or the Adviser) and the investment sub-advisory agreement by and among the Fund,
the Adviser and Guggenheim Partners Investment Management, LLC (GPIM or the Sub-Adviser) (the Sub-Advisory
Agreement and together with the Investment Advisory Agreement, the Agreements).
GFIA and
GPIM are each an indirect subsidiary of Guggenheim Partners, LLC, a privately-held, global investment and advisory firm (Guggenheim
Partners). Guggenheim Partners, GFIA, GPIM and their affiliates may be referred to herein collectively as Guggenheim.
Guggenheim Investments refers to the global asset management and investment advisory division of Guggenheim Partners and
includes GFIA, GPIM, Security Investors, LLC and other affiliated investment management businesses of Guggenheim Partners.
At meetings
held in person on April 16, 2024 (the April Meeting) and on May 20-21, 2024 (the May Meeting), the Contracts
Review Committee of the Board (the Committee), consisting solely of the Independent Trustees, met separately from Guggenheim
to consider the proposed renewal of the Agreements. As part of its review process, the Committee was represented by independent legal
counsel to the Independent Trustees (Independent Legal Counsel), from whom the Independent Trustees received separate legal
advice and with whom they met separately. Independent Legal Counsel reviewed and discussed with the Committee various key aspects of
the Trustees legal responsibilities relating to the proposed renewal of the Agreements and other principal contracts. The Committee
took into account various materials received from Guggenheim and Independent Legal Counsel. The Committee also considered the variety
of written materials, reports and oral presentations the Board received throughout the year regarding performance and operating results
of the Fund, and other information relevant to its evaluation of the Agreements.
In connection
with the contract review process, FUSE Research Network LLC (FUSE), an independent, third-party research provider, was engaged
to prepare advisory contract renewal reports designed specifically to help the Board fulfill its advisory contract renewal responsibilities.
The objective of the FUSE reports is to present the subject funds relative position regarding fees, expenses and total return performance,
with comparisons to a peer group of funds identified by Guggenheim, based on a methodology reviewed by the Board.
In addition,
Guggenheim provided materials and data in response to formal requests for information sent by Independent Legal Counsel on behalf of
the Committee. Guggenheim also made a presentation at the April Meeting. Throughout the process, the Committee asked questions of management
and requested certain additional information, which Guggenheim provided (collectively with the foregoing reports and materials, the Contract
Review Materials). The Committee considered the Contract Review Materials in the context of its accumulated experience governing
the Fund and other funds in the Guggenheim fund complex and weighed the factors and standards discussed with Independent Legal Counsel.
Following
an analysis and discussion of relevant factors, including those identified below, and in the exercise of its business judgment, the Committee
concluded that it was in the best interest of the Fund to recommend that the Board approve the renewal of the Agreements for an additional
annual
GUG l
GUGGENHEIM ACTIVE ALLOCATION FUND ANNUAL REPORT l 103
REPORT OF THE GUGGENHEIM
ACTIVE ALLOCATION |
|
FUND
(GUG) BOARD OF TRUSTEES continued |
May
31, 2024 |
term. Following
its review of the Committees recommendation, the Board approved the renewal of the Agreements for the Fund for a one-year period
ending August 1, 2025 at a meeting held on May 20-21, 2024 (the May Board Meeting and together with the May Meeting, the
May Meetings) and determined to adopt the Committees considerations and conclusions, which follow.
Investment
Advisory Agreement
Nature,
Extent and Quality of Services Provided by the Adviser: With respect to the nature, extent and quality of services currently provided
by the Adviser, the Committee noted that, although the Adviser delegated certain portfolio management responsibilities to the Sub-Adviser,
as affiliated companies, both the Adviser and the Sub-Adviser are part of the Guggenheim organization. Further, the Committee took into
account Guggenheims explanation that investment advisory-related services are provided by many Guggenheim employees under different
related legal entities and thus, the services provided by the Adviser on the one hand and the Sub-Adviser on the other, as well as the
risks assumed by each party, cannot be ascribed to distinct legal entities.1 As a result, in evaluating the services provided
to the Fund, the Committee did not separately consider the contributions under the Investment Advisory Agreement and the Sub-Advisory
Agreement.
The Committee
also considered the secondary market support services provided by Guggenheim to the Fund and noted the materials describing the activities
of Guggenheims dedicated Closed-End Fund Team, including with respect to communication with financial advisors, data dissemination
and relationship management. In addition, the Committee considered the qualifications, experience and skills of key personnel performing
services for the Fund, including those personnel providing compliance and risk oversight, as well as the supervisors and reporting lines
for such personnel. The Committee also considered other information, including Guggenheims resources and related efforts to retain,
attract and motivate capable personnel to serve the Fund. In evaluating Guggenheims resources and capabilities, the Committee considered
Guggenheims commitment to focusing on, and investing resources in support of, funds in the Guggenheim fund complex, including the
Fund. The Committee also considered the acceptability of the terms of the Investment Advisory Agreement, including the scope of services
required to be performed by the Adviser.
The Committees
review of the services provided by Guggenheim to the Fund included consideration of Guggenheims investment processes and resulting
performance, portfolio oversight and risk management, and the related regular quarterly reports and presentations received by the Board.
The Committee considered the Funds limited term structure, pursuant to which the Fund intends to dissolve after the expiration
of the term, currently expected in November 2033. The Committee took into account the risks borne by Guggenheim in sponsoring and providing
services to the Fund, including regulatory, operational, legal and entrepreneurial risks. The Committee considered the resources dedicated
by Guggenheim to compliance functions and the reporting made to the Board by Guggenheim compliance personnel regarding Guggenheims
adherence to regulatory requirements. The Committee also considered the regular reports the Board receives from the Funds Chief
Compliance Officer regarding compliance policies and procedures established pursuant to Rule 38a-1 under the Investment Company Act of
1940, as amended. In connection with the Committees evaluation of the overall package of services provided by Guggenheim, the Committee
1 | | Consequently, except where the context
indicates otherwise, references to Adviser or Sub-Adviser should be understood as referring to Guggenheim Investments
generally and the services it provides under the Agreements. |
104 l GUG
l GUGGENHEIM ACTIVE ALLOCATION FUND ANNUAL REPORT
|
|
REPORT OF THE GUGGENHEIM
ACTIVE ALLOCATION |
|
FUND
(GUG) BOARD OF TRUSTEES continued |
May
31, 2024 |
considered
Guggenheims administrative services, including its role in supervising, monitoring, coordinating and evaluating the various services
provided by the fund administrator, custodian and other service providers to the Fund. The Committee evaluated the Office of Chief Financial
Officer (the OCFO), which oversees the fund administration, accounting and transfer agency services provided to funds in the
Guggenheim fund complex, including the OCFOs resources, personnel and services provided.
With respect
to Guggenheims resources and the ability of the Adviser to carry out its responsibilities under the Investment Advisory Agreement,
the Chief Financial Officer of Guggenheim Investments reviewed with the Committee financial information concerning the holding company
for Guggenheim Investments, Guggenheim Partners Investment Management Holdings, LLC (GPIMH), and the various entities comprising
Guggenheim Investments, and provided the audited consolidated financial statements of GPIMH. (Thereafter, the Committee received the
audited consolidated financial statements of GPIM.)
Based on the foregoing, and based on other information received (both oral and written)
at the April Meeting and the May Meetings, as well as other considerations, including the Committees knowledge of how the Adviser
performs its duties obtained through Board meetings, discussions and reports throughout the year, the Committee concluded that the Adviser
and its personnel were qualified to serve the Fund in such capacity and may reasonably be expected to continue to provide a high quality
of services under the Investment Advisory Agreement with respect to the Fund.
Investment
Performance: The Committee received data showing, among other things, the Funds total return on a net asset value (NAV)
and market price basis for the one-year and three-month periods ended December 31, 2023, as well as total return based on NAV since inception.
The Committee also received certain performance information as of March 31, 2024. The Committee compared the Funds performance
to a peer group of closed-end funds identified by Guggenheim (the peer group) and, for NAV returns, performance versus the
Funds benchmark for the same time periods. The Committee noted that, in light of the term structure of the Fund, the Advisers
peer group selection methodology for the Fund starts with the entire U.S.-listed taxable closed-end fund universe, including only term
funds, but excludes funds: (i) that are generally not levered; (ii) that generally invest primarily in one asset class, sector or country;
(iii) that generally invest less than 50% in fixed income/credit securities; (iv) that generally invest primarily outside the U.S.; and
(v) that generally invest primarily in investment grade securities. The Committee noted that the peer group consists of 4 other multi-sector
bond funds. The Committee also considered that the peer group is consistent with the peer group used for purposes of the Funds
quarterly performance reporting. In assessing the Funds performance, the Committee considered that the Board receives regular reporting
from Guggenheim regarding performance and evaluates performance throughout the year.
The Committee
observed that, on a NAV basis, the returns of the Fund ranked in the 25th percentile of its peer group for the one-year period ended
December 31, 2023.
In addition,
the Committee took into account Guggenheims belief that there is no single optimal performance metric, nor is there a single optimal
time period over which to evaluate performance and that a thorough understanding of performance comes from analyzing measures of returns,
risk and risk-adjusted returns, as well as evaluating strategies both relative to their market benchmarks
GUG l
GUGGENHEIM ACTIVE ALLOCATION FUND ANNUAL REPORT l 105
|
|
REPORT OF THE GUGGENHEIM
ACTIVE ALLOCATION |
|
FUND
(GUG) BOARD OF TRUSTEES continued |
May
31, 2024 |
and to peer
groups of competing strategies. Thus, the Committee also reviewed and considered the additional performance and risk metrics provided
by Guggenheim for the since-inception and one-year periods ended December 31, 2023, including the Funds standard deviation, tracking
error, beta, Sharpe ratio, information ratio and alpha compared to the benchmark, with the Funds risk metrics ranked against its
peer group. In assessing the foregoing, the Committee considered that, as of December 31, 2023, the Funds performance has exceeded
the benchmark and ranked in the top quartile of its peer group since inception and for the one-year time period. The Committee also noted
Guggenheims statement indicating that, as of December 31, 2023, on a risk-adjusted basis, the Fund has outperformed its peer group
across each relevant metric, except with respect to Sharpe ratio for which the Fund performed in-line with its peer group for the one-year
time period.
The Committee
also considered the Funds structure and form of leverage, and, among other information related to leverage, the cost of the leverage
and the aggregate leverage outstanding as of December 31, 2023, as well as net yield on leverage assets and net impact on common assets
due to leverage for the one-year period ended December 31, 2023 and annualized for the since-inception period ended December 31, 2023,
noting the relatively short time period during which to judge the benefits of leverage.
Based on
the foregoing, and based on other information received (both oral and written) at the April Meeting and the May Meetings, as well as
other considerations, the Committee concluded that the Funds performance was acceptable.
Comparative
Fees, Costs of Services Provided and the Benefits Realized by the Adviser from Its Relationship with the Fund: The Committee compared
the Funds contractual advisory fee (which includes the sub-advisory fee paid to the Sub-Adviser) as a percentage of average managed
assets for the latest fiscal year,2 and the Funds net effective management fee3 and total net expense ratio,
in each case as a percentage of average net assets for the latest fiscal year, to the peer group and noted the Funds percentile
rankings in this regard. The Committee also reviewed the average and median advisory fees (based on average net assets) and expense ratios,
including expense ratio components (e.g., transfer agency fees, administration fees and other operating expenses), of the peer group.
In addition, the Committee considered information regarding Guggenheims process for evaluating the competitiveness of the Funds
fees and expenses, noting Guggenheims statement that evaluations seek to incorporate a variety of factors with a general focus
on ensuring fees and expenses: (i) are competitive; (ii) give consideration to resource support requirements; and (iii) ensure the Fund
is able to deliver on shareholder return expectations.
The Committee
observed that the Funds contractual advisory fee based on average managed assets and net effective management fee based on average
net assets each rank at the median of its peer group, and that the total net expense ratio (excluding interest expense) based on average
net assets ranks in the third quartile (75th percentile) of its peer group.
2 | | Contractual advisory fee rankings
represent the percentile ranking of the Funds contractual advisory fee relative to peers assuming that the contractual advisory
fee for each fund in the peer group is calculated on the basis of the Funds average managed assets. |
3 | | The net effective management
fee for the Fund represents the combined effective advisory fee and administration fee as a percentage of average net assets for
the latest fiscal year, after any waivers and/or reimbursements. |
106 l GUG
l GUGGENHEIM ACTIVE ALLOCATION FUND ANNUAL REPORT
|
|
REPORT OF THE GUGGENHEIM
ACTIVE ALLOCATION |
|
FUND
(GUG) BOARD OF TRUSTEES continued |
May
31, 2024 |
As part of
its evaluation of the Funds advisory fee, the Committee considered how such fee compared to the advisory fee charged by Guggenheim
to one or more other clients that it manages pursuant to similar investment strategies, noting that, in certain instances, Guggenheim
charges a lower advisory fee to such other clients. In this connection, the Committee considered, among other things, Guggenheims
representations about the significant differences between managing registered funds as compared to other types of accounts and differences
between managing a closed-end fund as compared to an open-end fund. The Committee also considered Guggenheims explanation that
lower fees are charged in certain instances due to various other factors, including the scope of contract, type of investors, fee structure,
applicable legal, governance and capital structures, tax status and historical pricing reasons. In addition, the Committee took into
account Guggenheims discussion of the regulatory, operational, legal and entrepreneurial risks involved with the Fund as compared
to other types of accounts. The Committee concluded that the information it received demonstrated that the aggregate services provided
to, and the specific circumstances of, the Fund were sufficiently different from the services provided to, or the specific circumstances
of, other clients with similar investment strategies and/or that the risks borne by Guggenheim were sufficiently greater than those associated
with managing other clients with similar investment strategies to support the difference in fees.
With respect
to the costs of services provided and benefits realized by Guggenheim Investments from its relationship with the Fund, the Committee
reviewed a profitability analysis and data from management setting forth the average assets under management for the twelve months ended
December 31, 2023, gross revenues received, and expenses incurred directly or through allocations, by Guggenheim Investments, earnings
and the operating margin/profitability rate, including variance information relative to the foregoing amounts as of December 31, 2022
and December 31, 2021. In addition, the Chief Financial Officer of Guggenheim Investments reviewed with, and addressed questions from,
the Committee concerning the expense allocation methodology employed in producing the profitability analysis. In the course of its review
of Guggenheim Investments profitability, the Committee took into account the methods used by Guggenheim Investments to determine
expenses and profit and the representation by the Chief Financial Officer of Guggenheim Investments that such methods provided a reasonable
basis for determining the profitability of the Adviser with respect to the Fund. The Committee considered all of the foregoing, among
other things, in evaluating the costs of services provided, the profitability to Guggenheim Investments and the profitability rates presented.
The Committee
also considered other benefits available to the Adviser because of its relationship with the Fund and noted Guggenheims statement
that it does not believe the Adviser derives any such fall-out benefits. In this regard, the Committee noted Guggenheims
statement that, although it does not consider such benefits to be fall-out benefits, the Adviser may benefit from certain economies of
scale and synergies, such as enhanced visibility of the Adviser, enhanced leverage in fee negotiations and other synergies arising from
offering a broad spectrum of products, including the Fund.
Based on
the foregoing, and based on other information received (both oral and written) at the April Meeting and the May Meetings, as well as
other considerations, the Committee concluded that the comparative fees and the benefits realized by the Adviser from its relationship
with the Fund
GUG l
GUGGENHEIM ACTIVE ALLOCATION FUND ANNUAL REPORT l 107
|
|
REPORT OF THE GUGGENHEIM
ACTIVE ALLOCATION |
|
FUND
(GUG) BOARD OF TRUSTEES continued |
May
31, 2024 |
were appropriate
and that the Advisers profitability from its relationship with the Fund was not unreasonable.
Economies
of Scale: The Committee received and considered information regarding whether there have been economies of scale with respect to
the management of the Fund as the Funds assets grow, whether the Fund has appropriately benefited from any economies of scale,
and whether there is potential for realization of any further economies of scale. The Committee considered whether economies of scale
in the provision of services to the Fund were being passed along to and shared with the shareholders. The Committee considered that advisory
fee breakpoints generally are not relevant given the structural nature of closed-end funds, which, though able to conduct additional
share offerings periodically, do not continuously offer new shares and thus, do not experience daily inflows and outflows of capital. In
addition, the Committee took into account Guggenheims belief that given the relative size of the Fund, breakpoints are not appropriate
at this time. The Committee considered that to the extent the Funds assets increase over time (whether through additional periodic
offerings or internal growth from asset appreciation), the Fund and its shareholders should realize economies of scale as certain expenses,
such as Fund fixed costs, become a smaller percentage of overall assets.
Based on
the foregoing, and based on other information received (both oral and written) at the April Meeting and the May Meetings, as well as
other considerations, the Committee concluded that the Funds advisory fee was reasonable.
Sub-Advisory
Agreement
Nature,
Extent and Quality of Services Provided by the Sub-Adviser: As noted above, because both the Adviser and the Sub-Adviser for the
Fund GFIA and GPIM, respectively are part of Guggenheim Investments and the services provided by the Adviser on the one hand
and the Sub-Adviser on the other cannot be ascribed to distinct legal entities, the Committee did not separately evaluate the services
provided under the Investment Advisory Agreement and the Sub-Advisory Agreement. Therefore, the Committee considered the qualifications,
experience and skills of the Funds portfolio management team in connection with the Committees evaluation of Guggenheims
investment professionals under the Investment Advisory Agreement. With respect to Guggenheims resources and the Sub-Advisers
ability to carry out its responsibilities under the Sub-Advisory Agreement, as noted above, the Committee considered the financial condition
of GPIMH and the various entities comprising Guggenheim Investments. The Committee also considered the acceptability of the terms of
the Sub-Advisory Agreement, including the scope of services required to be performed by the Sub-Adviser.
Investment
Performance: The Committee considered the returns of the Fund under its evaluation of the Investment Advisory Agreement.
Comparative
Fees, Costs of Services Provided and the Benefits Realized by the Sub-Adviser from Its Relationship with the Fund: The Committee
considered that the Sub-Advisory Agreement is with an affiliate of the Adviser, that the Adviser compensates the Sub-Adviser from its own
fees so that the sub-advisory fee rate for the Fund does not impact the fees paid by the Fund and that the Sub-Advisers revenues
were included in the calculation of Guggenheim Investments profitability. Given its conclusion of the reasonableness of the advisory
fee, the Committee concluded that the sub-advisory fee rate for the Fund was reasonable.
108 l GUG
l GUGGENHEIM ACTIVE ALLOCATION FUND ANNUAL REPORT
|
|
REPORT OF THE GUGGENHEIM
ACTIVE ALLOCATION |
|
FUND
(GUG) BOARD OF TRUSTEES continued |
May
31, 2024 |
Economies
of Scale: The Committee recognized that, because the Sub-Advisers fees are paid by the Adviser and not the Fund, the analysis
of economies of scale was more appropriate in the context of the Committees consideration of the Investment Advisory Agreement,
which was separately considered. (See Investment Advisory Agreement Economies of Scale above.)
Overall
Conclusions
The Committee
concluded that the investment advisory fees are fair and reasonable in light of the extent and quality of the services provided and other
benefits received and that the renewal of the Agreements is in the best interest of the Fund. In reaching this conclusion, no single
factor was determinative or conclusive and each Committee member, in the exercise of their informed business judgment, may afford different
weights to different factors.
Following
its review of the Committees analysis and determinations, the Board adopted the considerations and conclusions of the Committee
and determined to approve the renewal of the Agreements.
GUG l
GUGGENHEIM ACTIVE ALLOCATION FUND ANNUAL REPORT l 109
|
|
ADDITIONAL
INFORMATION REGARDING THE FUND (Unaudited) |
May
31, 2024 |
CHANGES
OCCURRING DURING THE FISCAL YEAR ENDED MAY 31, 2024
The following
information in this annual report is a summary of certain changes during the most recent fiscal year. This information may not reflect
all of the changes that have occurred since you purchased shares of the Fund.
INVESTMENT
OBJECTIVE
The Funds
investment objective is to maximize total return through a combination of current income and capital appreciation. There can be no assurance
that the Funds investment objective will be achieved. The Funds investment objective is considered non-fundamental and may
be changed by the Board without the approval of the holders of the Funds common shares of beneficial interest (Common Shares).
The Fund will provide holders of Common Shares (Common Shareholders) with 60 days prior written notice of any change
in its investment objective.
PRINCIPAL
INVESTMENT STRATEGIES
The Fund
will pursue both a tactical asset allocation strategy, dynamically allocating across asset classes, and a relative value-based investment
strategy, utilizing quantitative and qualitative analysis to seek to identify securities with attractive relative value and risk/reward
characteristics. GPIM seeks to combine a credit-managed fixed-income portfolio with a diversified pool of alternative investments and
equity strategies.
GPIMs
process for determining optimal asset allocation weightings between asset classes utilizes models developed by its Macroeconomic and
Investment Research Team. GPIMs process for determining whether to buy or sell a security is a collaborative effort between various
groups including: (i) economic research, which focuses on key economic themes and trends, regional and country-specific analysis, and
assessments of event-risk and policy impacts on asset prices; (ii) the Portfolio Construction Group, which utilizes proprietary portfolio
construction and risk modeling tools to determine allocation of assets among a variety of sectors; (iii) Sector Specialists, who are
responsible for identifying investment opportunities in particular securities within these sectors, including the structuring of certain
securities directly with the issuers or with investment banks and dealers involved in the origination of such securities; and (iv) portfolio
managers, who determine which securities best fit the Fund based on the Funds investment objective and top-down sector allocations.
In managing the Fund, GPIM uses a process for selecting securities for purchase and sale that is based on intensive credit research and
involves extensive due diligence on each issuer, region and sector.
The Fund
uses tactical asset allocation models to determine the optimal allocation of its assets between Income Securities (defined below) and
Common Equity Securities (defined below).
The Fund
may invest in below-investment grade securities (e.g., securities rated below Baa3 by Moodys Investors Service, Inc., (Moodys),
below BBB- by any other nationally recognized statistical rating organization or, if unrated, determined by GPIM to be of comparable
quality). Below-investment grade securities are commonly referred to as high-yield or junk bonds and are considered
speculative with respect to the issuers capacity to pay interest and repay principal. The Funds investments in below-investment
grade securities may include distressed and defaulted securities.
Under normal
market conditions, the Fund will not invest more than:
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| | 50% of its total assets in Common
Equity Securities; |
| | 30% of its total assets in Investment
Funds (defined below); and |
| | 30% of its total assets in issuers
located outside the United States. |
In addition,
the Fund will not invest more than:
| | 25% of its total assets in securities,
including structured instruments, such as mortgage-backed securities (MBS) and commercial mortgage-backed securities (CMBS),
rated CCC or below (or, if unrated, determined to be of comparable credit quality by GPIM) at the time of investment; |
| | 15% of its total assets in securities
issued by CLOs, including up to 5% of total assets in equity securities issued by CLOs; and |
| | 15% of its total assets in (i) direct
investments in commodities and (ii) issuers engaged in energy and natural resource businesses. |
Unless otherwise
required by applicable law, regulation or stated herein, percentage limitations described above are as of the time of investment by the
Fund and could thereafter be exceeded as a result of market value fluctuations of the Funds portfolio.
The percentage
of the Funds total assets allocated to any category of investment may at any given time be significantly less than the maximum
percentage permitted pursuant to the above referenced investment policies.
Unless otherwise
stated, the Funds investment policies are considered non-fundamental and may be changed by the Board without Common Shareholder
approval.
PORTFOLIO
COMPOSITION
The Fund
will seek to achieve its investment objective by investing in:
Income
Securities. The Fund may invest in a wide range of both fixed-income and other debt instruments (Income Securities) selected
from a variety of sectors and credit qualities. The Fund may invest in Income Securities of any credit quality, including, Income Securities
rated below-investment grade (commonly referred to as high-yield or junk bonds), which are considered speculative
with respect to the issuers capacity to pay interest and repay principal. The sectors and types of Income Securities in which the
Fund may invest, include, but are not limited to:
| | Government and agency securities; |
| | Loans and loan participations (including
senior secured floating rate loans, second lien secured floating rate loans, and other types of secured and unsecured loans
with fixed and variable interest rates) (collectively, Loans); |
| | Structured finance investments (described
below); |
| | Mezzanine and preferred securities;
and |
Common
Equity Securities and Covered Call Option Strategy. The Fund may invest in common stocks, limited liability company interests, trust
certificates and other equity investments
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(Common
Equity Securities) that GPIM believes offer attractive yield and/or capital appreciation potential. As part of its Common Equity
Securities strategy, the Fund may also opportunistically employ a strategy of writing (selling) covered call options (Covered Call
Option Strategy) and may, from time to time, buy put options or sell covered put options on individual Common Equity Securities
and, to a lesser extent, pursue a strategy that includes the sale (writing) of both covered call options and put options on indices of
securities and sectors of securities. This Covered Call Option Strategy is intended to generate current gains from option premiums as
a means to enhance distributions payable to the Common Shareholders.
Structured
Finance Investments. The Fund may invest in structured finance investments, which are Income Securities and Common Equity Securities
typically issued by special purpose vehicles that hold income-producing securities (e.g., mortgage loans, consumer debt payment
obligations and other receivables) and other financial assets. Structured finance investments are tailored, or packaged, to meet certain
financial goals of investors. Typically, these investments provide investors with capital protection, income generation and/or the opportunity
to generate capital growth. GPIM believes that structured finance investments may provide attractive risk-adjusted
returns, frequent sector rotation opportunities and prospects for adding value through security selection. For purposes of the Funds
investment policies, structured finance investments are not deemed to be private investment funds (as discussed below). Structured
finance investments primarily include (among others):
Mortgage-Related Securities. Mortgage-related
securities are a form of derivative collateralized by pools of commercial or residential mortgages. Pools of mortgage loans are assembled
as securities for sale to investors by various governmental, government-related and private organizations. These securities may include
complex instruments such as collateralized mortgage obligations, real estate investment trusts (REITs) (including debt and
preferred stock issued by REITs), and other real estate-related securities. The mortgage-related securities in which the Fund may invest
include those with fixed, floating or variable interest rates, those with interest rates that change based on multiples of changes in
a specified index of interest rates, and those with interest rates that change inversely to changes in interest rates, as well as those
that do not bear interest. The Fund may invest in residential and commercial mortgage-related securities issued by governmental entities
and private issuers, including subordinated mortgage-related securities. The underlying assets of certain mortgage-related securities
may be subject to prepayments, which shorten the weighted average maturity and may lower the return of such securities, and extension,
which lengthens expected maturity as payments on principal may occur at a slower rate or later than expected.
Asset-Backed Securities. Asset-backed
securities (ABS) are a form of structured debt obligation.
ABS are
payment claims that are securitized in the form of negotiable paper that is issued by a financing company (generally called a
special purpose vehicle). Collateral assets are brought into a pool according to specific diversification rules. A special purpose
vehicle is founded for the purpose of securitizing these payment claims and the assets of the special purpose vehicle are the
diversified pool of collateral assets. The special purpose vehicle issues marketable securities that are intended to represent a
lower level of risk than an underlying collateral asset individually, due to the diversification in the pool. The redemption of the
securities issued by the special purpose vehicle takes place out of the cash flow generated by the collected assets. A special
purpose vehicle may issue multiple securities with different priorities to the cash flows generated and the collateral
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assets. The
collateral for ABS may include, among other assets, home equity loans, automobile and credit card receivables, boat loans, computer leases,
airplane leases, mobile home loans, recreational vehicle loans and hospital account receivables. The Fund may invest in these and other
types of ABS that may be developed in the future. There is the possibility that recoveries on the underlying collateral may not, in some
cases, be available or may be insufficient to support payments on these securities.
Collateralized Debt Obligations. A
collateralized debt obligation (CDO) is an asset-backed security whose underlying collateral is typically a portfolio of
bonds, bank loans, other structured finance securities and/or synthetic instruments. Where the underlying collateral is a portfolio of
bonds, a CDO is referred to as a collateralized bond obligation (CBO). Where the underlying collateral is a portfolio of
bank loans, a CDO is referred to as a collateralized loan obligation (CLO). Investors in CBOs and CLOs bear the credit risk
of the underlying collateral. Multiple tranches of securities are issued by the CLO, offering investors various maturity and credit risk
characteristics. Tranches are categorized as senior, mezzanine and subordinated/equity, according to their degree of risk. If there are
defaults or the CLOs collateral otherwise underperforms, scheduled payments to senior tranches take precedence over those of mezzanine
tranches, and scheduled payments to mezzanine tranches take precedence over those to subordinated/equity tranches. This prioritization
of the cash flows from a pool of securities among the several tranches of the CLO is a key feature of the CLO structure. If there are
funds remaining after each tranche of debt receives its contractual interest rate and the CLO meets or exceeds required collateral coverage
levels (or other similar covenants), the remaining funds may be paid to the subordinated (or residual) tranche (often referred to as
the equity tranche). CLOs are subject to the same risk of prepayment and extension described with respect to certain mortgage-related
and ABS.
The Fund
may invest in senior, rated tranches as well as mezzanine and subordinated tranches of CLOs. Investment in the subordinated tranche is
subject to special risks. The subordinated tranche does not receive ratings and is considered the riskiest portion of the capital structure
of a CLO because it bears the bulk of defaults from the loans in the CLO and serves to protect the other, more senior tranches from default
in all but the most severe circumstances.
Risk-Linked Securities. Risk-linked
securities (RLS) are a form of derivative issued by insurance companies and insurance-related special purpose vehicles that
apply securitization techniques to catastrophic property and casualty damages. RLS are typically debt obligations for which the return
of principal and the payment of interest are contingent on the non-occurrence of a pre-defined trigger event. Depending on
the specific terms and structure of the RLS, this trigger could be the result of a hurricane, earthquake or some other catastrophic event.
Real Property
Asset Companies. The Fund may invest in Income Securities and Common Equity Securities issued by companies that own, produce, refine,
process, transport and market real property assets, such as real estate and the natural resources upon or within real estate
(Real Property Asset Companies).
Personal
Property Asset Companies. The Fund may invest in Income Securities and Common Equity Securities issued by companies that seek to
profit primarily from the ownership, rental, leasing, financing or disposition of personal (as opposed to real) property assets (Personal
Property Asset Companies). Personal (as opposed to real) property includes any tangible, movable property
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or asset.
The Fund will typically seek to invest in Income Securities and Common Equity Securities of Personal Property Asset Companies the investment
performance of which is not expected to be highly correlated with traditional market indexes because the personal property asset held
by such company is non-correlated with traditional debt or equity markets. Such personal property assets include special situation transportation
assets (e.g., railcars, airplanes and ships) and collectibles (e.g., antiques, wine and fine art).
Private
Securities. The Fund may invest in privately issued Income Securities and Common Equity Securities of both public and private companies
(Private Securities). Private Securities have additional risk considerations in addition to those of comparable public securities,
including the availability of financial information about the issuer and valuation and liquidity issues.
Investment
Funds. As an alternative to holding investments directly, the Fund may also obtain investment exposure to Income Securities and Common
Equity Securities by investing in other investment companies, including registered investment companies, private investment funds and/
or other pooled investment vehicles (collectively, Investment Funds), which may be managed by the Adviser, GPIM and/or their
affiliates. The Fund may invest up to 30% of its total assets in Investment Funds that primarily hold (directly or indirectly) investments
in which the Fund may invest directly. The 1940 Act generally limits a registered investment companys investments in other registered
investment companies to 10% of its total assets. However, pursuant to exemptions set forth in the 1940 Act and rules and regulations
promulgated under the 1940 Act, the Fund may invest in excess of this and other applicable limitations provided that the conditions of
such exemptions are met. The Fund will invest in private investment funds, commonly referred to as hedge funds, or private
equity funds (including single asset continuation funds) only to the extent permitted by applicable rules, regulations
and interpretations of the Securities and Exchange Commission (SEC) and the NYSE. The Fund may invest up to the lower of
10% of its total assets or 15% of its net assets, measured at the time of investment, in private investment funds that provide exposure
to Common Equity Securities of private companies (i.e., exposure to private equity investments). Investments in other Investment
Funds involve operating expenses and fees at the Investment Fund level that are in addition to the expenses and fees borne by the Fund
and are borne indirectly by holders of the Common Shares.
The Fund
may also invest in a wide range of alternative investments. In addition to engaging in options (as described above), alternative investments
include, but are not limited to:
Synthetic Investments. As an alternative to holding investments directly, the Fund may also obtain
investment exposure to Income Securities and Common Equity Securities through the use of customized derivative instruments (including,
but not limited to, swaps, options, forwards, notional principal contracts or other financial instruments) to seek to replicate, modify
or replace the economic attributes associated with an investment in Income Securities and Common Equity Securities (including interests
in Investment Funds).
Derivatives
Transactions. The Fund may purchase and sell derivative instruments (which derive their value by reference to another instrument,
asset or index) for investment purposes, such as obtaining investment exposure to an investment category; risk management purposes, such
as hedging against fluctuations in asset prices or interest rates; diversification purposes; to change the duration of the Fund; or for
leverage purposes. GPIM seeks to limit exposure to any single
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counterparty
when engaging in derivatives transactions. The Fund has not adopted a maximum percentage limit with respect to derivative investments;
however, the use of derivative investments is subject to the limits imposed by the 1940 Act.
USE OF
LEVERAGE
The Fund
may seek to enhance the level of its current distributions by utilizing financial leverage through the issuance of preferred shares (Preferred
Shares) and through borrowings from certain financial institutions or the issuance of commercial paper or other forms of debt (Borrowings),
or through a combination of the foregoing (collectively Financial Leverage). The Fund currently intends to use Financial
Leverage through Borrowings from certain financial institutions. The Fund has no present intention to issue Preferred Shares.
The Fund
currently employs Financial Leverage through a committed facility provided to the Fund by BNP Paribas. Although Financial Leverage may
create an opportunity for increased return for shareholders, it also results in additional risks and can magnify the effect of any losses.
There is no assurance that the strategy will be successful. Financial Leverage may cause greater changes in the Funds net asset
value (NAV) and returns than if leverage had not been used.
The Funds
borrowings under the committed facility provided to the Fund by BNP Paribas are collateralized by portfolio assets, which are maintained
by the Fund in a separate account with the Funds custodian for the benefit of the lender, which collateral exceeds the amount borrowed.
Securities deposited in the collateral account may be rehypothecated by the lender subject to the terms and conditions of the facility
agreements. In the event of a default by the Fund under its committed facility, the lender has the right to sell such collateral assets
to satisfy the Funds obligation to the lender. The committed facility agreement includes usual and customary covenants. These covenants
impose on the Fund asset coverage requirements, collateral requirements, investment strategy requirements, and certain financial obligations.
These covenants place limits or restrictions on the Funds ability to (i) enter into additional indebtedness with a party other
than BNP Paribas, (ii) change its fundamental investment policy, or (iii) pledge to any other party, other than to the counterparty,
securities owned or held by the Fund over which the counterparty has a lien. In addition, the Fund is required to deliver financial information
to the counterparty within established deadlines, maintain an asset coverage ratio (as defined in Section 18(g) of the 1940 Act) greater
than 300%, comply with the rules of the stock exchange on which its shares are listed, and maintain its classification as a closed-end
management investment company as defined in the 1940 Act.
The Fund
may utilize Financial Leverage up to the limits imposed by the 1940 Act.
The Fund
also is permitted to enter into reverse repurchase agreements, dollar rolls or similar transactions, and derivatives transactions with
leverage embedded in them (collectively leveraged transactions), to the maximum extent permitted by the SEC and/or SEC staff
rules, guidance or positions. The Funds total leverage from Financial Leverage and leveraged transactions may vary significantly
over time based on GPIMs assessment of market and economic conditions, available investment opportunities and cost of Financial
Leverage and leveraged transactions.
Although
the use of Financial Leverage and leveraged transactions by the Fund may create an opportunity for increased total return for the Common
Shares, it also results in additional risks and
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can magnify
the effect of any losses. Financial Leverage and the use of leveraged transactions involve risks and special considerations for shareholders,
including the likelihood of greater volatility of NAV and market price of, and dividends on, the Common Shares. To the extent the Fund
increases its amount of Financial Leverage and leveraged transactions outstanding, it will be more exposed to these risks. The cost of
Financial Leverage and leveraged transactions, including the portion of the investment advisory fee attributable to the assets purchased
with the proceeds of Financial Leverage and leveraged transactions, is borne by holders of the Common Shares. To the extent the Fund
increases its amount of Financial Leverage and leveraged transactions outstanding, the Funds annual expenses as a percentage of
net assets attributable to Common Shares will increase. Under the 1940 Act, the Fund may not utilize Borrowings if, immediately after
incurring such Borrowing, the Fund would have asset coverage (as defined in the 1940 Act) of less than 300% (i.e., for every dollar
of Borrowings outstanding, the Fund is required to have at least three dollars of assets). Under the 1940 Act, the Fund may not issue
Preferred Shares if, immediately after issuance, the Fund would have asset coverage (as defined in the 1940 Act) of less than 200% (i.e.,
for every dollar of Borrowing plus Preferred Shares outstanding, the Fund is required to have at least two dollars of assets). The Fund
may also borrow in excess of such limit for temporary purposes such as the settlement of transactions.
In addition,
the Fund may engage in certain derivatives transactions that have economic characteristics similar to leverage. Subject to Rule 18f-4,
the Funds obligations under such transactions will not be considered indebtedness for purposes of the 1940 Act, but the Funds
use of such transactions may be limited by the applicable requirements of the SEC.
So long as
the net rate of return on the Funds investments purchased with the proceeds of Financial Leverage and leveraged transactions exceeds
the cost of such Financial Leverage and leveraged transactions, such excess amounts will be available to pay higher distributions to
holders of the Common Shares. In connection with the Funds use of Financial Leverage, the Fund may seek to hedge the interest rate
risks associated with the Financial Leverage through interest rate swaps, caps or other derivatives transactions. There can be no assurance
that the Funds Financial Leverage and leveraged transactions strategy will be successful during any period during which it is employed.
The costs associated with the issuance of Financial Leverage and leveraged transactions will be borne by Common Shareholders, which will
result in a reduction of NAV of Common Shares. The fee paid to the Adviser will be calculated on the basis of the Funds Managed
Assets (as defined above), including proceeds from Financial Leverage, so the fees paid to the Adviser will be higher when Financial
Leverage is utilized. Common Shareholders bear the portion of the investment advisory fee attributable to the assets purchased with the
proceeds of Financial Leverage, which means that Common Shareholders effectively bear the entire advisory fee. For all purposes other
than the Funds advisory and sub-advisory arrangements, Managed Assets means the total assets of the Fund, including
the assets attributable to the proceeds from Financial Leverage, including the issuance of senior securities represented by indebtedness
(including through borrowing from financial institutions or issuance of debt securities, including notes or commercial paper), the issuance
of Preferred Shares or any other form of Financial Leverage, in addition to the effective leverage of these types of portfolio transactions
such as reverse repurchase agreements, dollar rolls and inverse floating rate securities, minus liabilities, other than liabilities related
to any Financial Leverage or the effective leverage of these types of portfolio transactions.
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Investments
in Investment Funds frequently expose the Fund to an additional layer of Financial Leverage and, thus, increase the Funds exposure
to leverage risk.
TEMPORARY
INVESTMENTS
At any time
when a temporary posture is believed by GPIM to be warranted (a temporary period), the Fund may, without limitation, hold
cash or invest its assets in money market instruments and repurchase agreements in respect of those instruments. The Fund may not achieve
its investment objective during a temporary period or be able to sustain its historical distribution levels.
PRINCIPAL
RISKS OF THE FUND
Investment
in the Fund involves special risk considerations, which are summarized below. The Fund is designed as a long-term investment and not
as a trading vehicle. The Fund is not intended to be a complete investment program. The Funds performance and the value of its
investments will vary in response to changes in interest rates, inflation and other market and economic factors, among others.
The fact
that a particular risk below is not specifically identified as being heightened under current conditions does not mean that the risk
is not greater than under normal conditions.
Limited
Term Risk
In accordance
with the Funds Amended and Restated Agreement and Declaration of Trust, dated February 29, 2024 (the Agreement and Declaration
of Trust), the Fund intends to dissolve as of the first business day following the twelfth anniversary of the effective date of
the Funds initial registration statement, November 23, 2033 (the Dissolution Date); provided that the Board of Trustees
of the Fund (the Board or Board of Trustees, and the members thereof, the Trustees) may, by a vote
of a majority of the Board and seventy-five percent (75%) of the members of the Board, who either (i) have been a member of the Board
for a period of at least thirty-six months (or since the commencement of the Funds operations, if fewer than thirty-six months)
or (ii) were nominated to serve as a member of the Board, or designated as a Continuing Trustee, by a majority of the Continuing Trustees
then members of the Board (the Continuing Trustees), without shareholder approval (a Board Action Vote), extend
the Dissolution Date for one period up to two years (which date shall then become the Dissolution Date). In determining whether to extend
the Dissolution Date, the Board may consider whatever factors it deems appropriate to its analysis including, among other factors, the
inability to sell the Funds assets in a time frame consistent with dissolution due to lack of market liquidity or other circumstances.
Additionally, the Board may consider whether market conditions are such that it is reasonable to believe that, with an extension, the
Funds remaining assets will appreciate and generate capital appreciation and income in an amount that, in the aggregate, is meaningful
relative to the cost and expense of continuing the operation of the Fund. Each holder of Common Shares would be paid a pro rata portion
of the Funds net assets upon dissolution of the Fund. If the Dissolution Date is not extended, the Fund could miss any market appreciation
that occurs after the Funds dissolution. Conversely, if the Dissolution Date is extended, after which market conditions deteriorate,
the Fund may experience losses.
Beginning
one year before the Dissolution Date (the Wind-Down Period), the Fund may begin liquidating all or a portion of the Funds
portfolio, and may deviate from its investment policies
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and may not
achieve its investment objective. During the Wind-Down Period (or in anticipation of an Eligible Tender Offer, as defined below), the
Funds portfolio composition may change as more of its portfolio holdings are called or sold and portfolio holdings are disposed
of in anticipation of liquidation.
As of a date
within the 6-18 months preceding the Dissolution Date (as may be extended as described above), the Board may, by a Board Action Vote
without shareholder approval, cause the Fund to conduct a tender offer to all Common Shareholders to purchase all outstanding Common Shares
of the Fund at a price equal to the NAV per Common Share on the expiration date of the tender offer (an Eligible Tender Offer).
In accordance with the Agreement and Declaration of Trust, in an Eligible Tender Offer, the Fund will offer to purchase all Common Shares
held by each Common Shareholder; provided that if the payment for properly tendered Common Shares would result in the Fund having net
assets totaling less than $200 million (the Dissolution Threshold), the Eligible Tender Offer will be canceled, no Common
Shares will be repurchased pursuant to the Eligible Tender Offer and the Fund will dissolve as scheduled (provided that if the Eligible
Tender Offer was made prior to the Dissolution Date, the Board may approve an extension of the Dissolution Date).
Unless the
limited term provision of the Agreement and Declaration of Trust is amended by shareholders in accordance with the Agreement and Declaration
of Trust, or unless the Fund completes an Eligible Tender Offer and converts to perpetual existence, the Fund will dissolve on or about
the Dissolution Date. The Fund is not a so called target date or life cycle fund whose asset allocation becomes
more conservative over time as its target date, often associated with retirement, approaches. In addition, the Fund is not a target
term fund and thus does not seek to return its initial public offering price per Common Share upon dissolution. As the assets of
the Fund will be liquidated in connection with its dissolution, the Fund may be required to sell portfolio securities or liquidate positions
when it otherwise would not, including at times when market conditions are not favorable, which may cause the Fund to lose money. In
addition, as the Fund approaches the Dissolution Date, the Fund may invest the liquidation proceeds of sold, matured or called securities
or liquidated positions in money market mutual funds, cash, cash equivalents, securities issued or guaranteed by the U.S. government
or its instrumentalities or agencies, high quality, short-term money market instruments, short-term debt securities, certificates of
deposit, bankers acceptances and other bank obligations, commercial paper or other liquid debt securities, which may adversely
affect the Funds investment performance.
Rather than
reinvesting proceeds received from sales of or payments received in respect of portfolio securities and positions, the Fund may distribute
such proceeds in one or more liquidating distributions prior to the final dissolution, which may cause the Funds fixed expenses
to increase when expressed as a percentage of net assets attributable to Common Shares, or the Fund may invest the proceeds in lower
yielding securities or hold the proceeds in cash or cash equivalents, which may adversely affect the performance of the Fund. The final
distribution of net assets upon dissolution may be more than, equal to or less than the Funds initial share price of $20.00
per Common Share. Because the Fund may adopt a plan of liquidation and make liquidating distributions in advance of the Dissolution Date,
the total value of the Funds assets returned to Common Shareholders upon dissolution will be impacted by decisions of the Board
and the Adviser regarding the timing of adopting a plan of liquidation and making liquidating distributions. This may result in Common
Shareholders receiving liquidating distributions with a value more or less than the
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value that
would have been received if the Fund had liquidated all of its assets on the Dissolution Date, or any other potential date for liquidation
referenced herein, and distributed the proceeds thereof to shareholders.
If the Fund
conducts an Eligible Tender Offer, the Fund anticipates that funds to pay the aggregate purchase price of shares accepted for purchase
pursuant to the tender offer will be first derived from any cash on hand and then from the proceeds from the sale of portfolio investments
held by the Fund. The risks related to the disposition of investments in connection with the Funds dissolution also would be present
in connection with the disposition of investments in connection with an Eligible Tender Offer. It is likely that during the pendency of
a tender offer, and possibly for a time thereafter, the Fund will hold a greater than normal percentage of its total assets in cash and
cash equivalents, which may impede the Funds ability to achieve its investment objective and decrease returns to shareholders.
The tax effect of any such dispositions of portfolio investments will depend on the difference between the price at which the investments
are sold and the tax basis of the Fund in the investments.
Any capital
gains recognized on such dispositions, as reduced by any capital losses the Fund realizes in the year of such dispositions and by any
available capital loss carryforwards, will generally be distributed to shareholders as capital gain dividends (to the extent of net long-term
capital gains over net short-term capital losses) or ordinary dividends (to the extent of net short-term capital gains over net long-term
capital losses) during or with respect to such year, and such distributions will generally be taxable to Common Shareholders. In addition,
the Funds purchase of tendered Common Shares pursuant to an Eligible Tender Offer will generally have tax consequences for tendering
Common Shareholders and may have tax consequences for non-tendering Common Shareholders.
The purchase
of Common Shares by the Fund pursuant to an Eligible Tender Offer will have the effect of increasing the proportionate interest in the
Fund of non-tendering Common Shareholders. All Common Shareholders remaining after an Eligible Tender Offer will be subject to any increased
risks associated with the reduction in the Funds assets resulting from payment for any tendered Common Shares, such as greater
volatility due to decreased diversification and proportionately higher expenses. The reduced assets of the Fund as a result of an Eligible
Tender Offer may result in less investment flexibility for the Fund and may have an adverse effect on the Funds investment performance.
Such reduction in the Funds assets may also cause Common Shares of the Fund to become thinly traded or otherwise negatively impact
secondary trading of Common Shares. A reduction in assets, and the corresponding increase in the Funds expense ratio, could result
in lower returns and put the Fund at a disadvantage relative to its peers and potentially cause the Common Shares to trade at a wider
discount to NAV than they otherwise would. Furthermore, the portfolio of the Fund following an Eligible Tender Offer could be significantly
different and, therefore, Common Shareholders retaining an investment in the Fund could be subject to greater risk. For example, the Fund
may be required to sell its more liquid, higher quality portfolio investments to purchase Common Shares that are tendered in an Eligible
Tender Offer, which would leave a less liquid, lower quality portfolio for remaining shareholders. The prospects of an Eligible Tender
Offer may attract arbitrageurs who would purchase the Common Shares prior to the tender offer for the sole purpose of tendering those shares
which could have the effect of exacerbating the risks described herein for shareholders retaining an investment in the Fund following
an Eligible Tender Offer.
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The Fund
is not required to conduct an Eligible Tender Offer. If the Fund conducts an Eligible Tender Offer, there can be no assurance that
the payment for tendered Common Shares would not result in the Fund having aggregate net assets below the Dissolution Threshold, in
which case the Eligible Tender Offer will be canceled, no Common Shares will be repurchased pursuant to the Eligible Tender Offer
and the Fund will liquidate on the Dissolution Date (subject to possible extensions). Following the completion of an Eligible Tender
Offer in which the payment for tendered Common Shares would result in the Fund having aggregate net assets greater than or equal to
the Dissolution Threshold, the Board may, by a Board Action Vote, amend the Agreement and Declaration of Trust to eliminate the
Dissolution Date without shareholder approval and provide for the Funds perpetual existence. Thereafter, the Fund will have a
perpetual existence. There is no guarantee that the Board will eliminate the Dissolution Date following the completion of an
Eligible Tender Offer so that the Fund will have a perpetual existence. The Adviser may have a conflict of interest in recommending
to the Board that the Dissolution Date be eliminated and the Fund have a perpetual existence. The Fund is not required to conduct
additional tender offers following an Eligible Tender Offer and conversion to perpetual existence. Therefore, remaining Common
Shareholders may not have another opportunity to participate in a tender offer. Shares of closed-end management investment companies
frequently trade at a discount from their NAV, and as a result remaining Common Shareholders may only be able to sell their shares
at a discount to NAV.
Although
it is anticipated that the Fund will have distributed substantially all of its net assets to shareholders as soon as practicable after
the Dissolution Date, assets for which no market exists or assets trading at depressed prices, if any, may be placed in a liquidating
trust. Assets placed in a liquidating trust may be held for an indefinite period of time, potentially several years or longer, until
they can be sold or pay out all of their cash flows. During such time, the shareholders will continue to be exposed to the risks associated
with the Fund and the value of their interest in the liquidating trust will fluctuate with the value of the liquidating trusts
remaining assets.
Additionally,
the tax treatment of the liquidating trust will generally differ from the tax treatment of the Fund. To the extent the costs associated
with a liquidating trust exceed the value of the remaining assets, the liquidating trust trustees may determine to dispose of the remaining
assets in a manner of their choosing. The Fund cannot predict the amount, if any, of assets that will be required to be placed in a liquidating
trust or how long it will take to sell or otherwise dispose of such assets.
Not a
Complete Investment Program
An investment
in the Common Shares of the Fund should not be considered a complete investment program. The Fund is intended for long-term investors
seeking current income and capital appreciation. An investment in the Fund is not meant to provide a vehicle for those who wish to play
short-term swings in the market. Each Common Shareholder should take into account the Funds investment objective as well as the
Common Shareholders other investments when considering an investment in the Fund. Before making an investment decision, a prospective
investor should consider (i) the suitability of this investment with respect to his or her investment objectives and personal situation
and (ii) factors such as his or her personal net worth, income, age, risk tolerance and liquidity needs.
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Investment
and Market Risk
An investment
in the Common Shares is subject to investment risk, including the possible loss of the entire principal amount that you invest. During
periods of adverse economic, financial, market, geopolitical, labor and public health conditions, the risks associated with an investment
in Common Shares may be heightened.
An investment
in the Common Shares represents an indirect investment in the securities owned by the Fund. The value of, or income generated by, the
investments held by the Fund are subject to the possibility of rapid and unpredictable fluctuation, and loss. These fluctuations may
occur frequently and in large amounts. These movements may result from factors affecting individual companies or issuers or particular
industries, or from broader influences, including real or perceived changes in prevailing interest rates, changes in inflation rates
or expectations about inflation rates, adverse investor confidence or sentiment, changing economic, political (including geopolitical),
social or financial market conditions, tariffs and trade disruptions, recession, changes in currency rates, increased instability or general
uncertainty, extreme weather, natural/environmental or man-made disasters, cyber attacks, terrorism, governmental or quasi-governmental
actions, public health emergencies (such as the spread of infectious diseases, pandemics and epidemics), debt crises, actual or threatened
wars or other armed conflicts (such as the escalated conflict in the Middle East and the ongoing Russia-Ukraine conflict and its risk
of expansion or collateral economic and other effects) or ratings downgrades, and other similar types of events, each of which may be
temporary or last for extended periods. For example, the risks of a borrowers default or bankruptcy or non-payment of scheduled
interest or principal payments from senior floating rate interests held by the Fund are especially acute under these conditions. Furthermore,
interest rates may change and bond yields may fall as a result of types of events, including responses by governmental entities to such
events, which would magnify the Funds fixed-income instruments susceptibility to interest rate risk and diminish their yield
and performance. Moreover, the Funds investments in ABS are subject to many of the same risks that are applicable to investments
in securities generally, including interest rate risk, credit risk, foreign currency risk, below-investment grade securities risk, leverage
risk, prepayment and extension risks and regulatory risk, which would be elevated under the foregoing circumstances.
Moreover,
changing economic, political, social, geopolitical, or financial market or other conditions in one country or geographic region could
adversely affect the value, yield and return of the investments held by the Fund in a different country or geographic region and economies,
markets and issuers generally because of the increasingly interconnected global economies and financial markets. As a result, there is
an increased risk that geopolitical and other events will disrupt economies and markets globally. For example, local or regional armed
conflicts have led to significant sanctions by the United States, Europe and other countries against certain countries (as well as persons
and companies connected with certain countries) and led to indirect adverse regional and global market, economic and other effects. It
is difficult to accurately predict or foresee when events or conditions affecting the U.S. or global financial markets, economies, and issuers
may occur, the effects of such events or conditions, potential escalations or expansions of these events, possible retaliations in response
to sanctions or similar actions and the duration or ultimate impact of those events. There is an increased likelihood that these types
of events or conditions can, sometimes rapidly and unpredictably, result in a variety of adverse developments and circumstances, such
as reduced liquidity, supply chain disruptions and market volatility, as well as increased general
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uncertainty
and broad ramifications for markets, economies, issuers, businesses in many sectors and societies globally. In addition, adverse changes
in one sector or industry or with respect to a particular company could negatively impact companies in other sectors or industries or
increase market volatility as a result of the interconnected nature of economies and markets and thus negatively affect the Funds
performance. For example, developments in the banking or financial services sectors (or one or more companies operating in these sectors)
could adversely impact a wide range of companies and issuers. These types of adverse developments could negatively affect the Funds
performance or operations.
Different
sectors, industries and security types may react differently to such developments and, when the market performs well, there is no assurance
that the Funds investments will increase in value along with the broader markets and the Funds investments may underperform
general securities markets or other investments. Periods of market stress and volatility of financial markets, including potentially
extreme stress and volatility caused by the events described above or similar circumstances, can expose the Fund to greater market risk
than normal, possibly resulting in greatly reduced liquidity, increased volatility and valuation risks and longer than usual trade settlement
periods. The fewer the number of issuers in which the Fund invests and/or the greater the use of leverage, the greater the potential
volatility in the Funds portfolio. GPIM potentially could be prevented from considering, managing and executing investment decisions
at an advantageous time or price or at all as a result of any domestic or global market or other disruptions, particularly disruptions
causing heightened market volatility and reduced market liquidity, which have also resulted in impediments to the normal functioning
of workforces, including personnel and systems of the Funds service providers and market intermediaries. The Funds investments
may decline in value or otherwise be adversely affected due to general market conditions that are not specifically related to a particular
issuer, such as real or perceived economic conditions, changes in interest or currency rates or changes in investor sentiment or market
outlook generally.
The domestic
political environment, as well as political and diplomatic events within the United States and abroad, such as the U.S. budget and deficit
reduction plan and foreign policy tensions with foreign nations, including embargoes, tariffs, sanctions and other similar developments,
have in the past resulted, and may in the future result, in developments that present additional risks to the Funds investments
and operations. For example, additional and/or prolonged U.S. federal government shutdowns or foreign policy tensions may affect investor
and consumer confidence and may adversely impact financial markets and the broader economy, perhaps suddenly and to a significant degree.
Any market, economic and other disruption could also prevent the Fund from executing its investment strategies and processes in a timely
manner. Changes or disruptions in market conditions also may lead to increased regulation of the Fund and the instruments in which the
Fund may invest, which may, in turn, affect the Funds ability to pursue its investment objective and the Funds performance.
At any point
in time, your Common Shares may be worth less than your original investment, even after including the reinvestment of Fund dividends
and distributions.
Management
Risk
The Fund
is subject to management risk because it has an actively managed portfolio. GPIM will apply investment techniques and risk analysis in
making investment decisions for the Fund, but there can be no guarantee that these will produce the desired results. The Funds
allocation of its
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investments
across various asset classes and sectors may vary significantly over time based on GPIMs analysis and judgment. As a result, the
particular risks most relevant to an investment in the Fund, as well as the overall risk profile of the Funds portfolio, may vary
over time. The ability of the Fund to achieve its investment objective depends, in part, on GPIMs investment decisions and the
ability of GPIM to allocate effectively the Funds assets among multiple investment strategies, Investment Funds and investments
and asset classes. There can be no assurance that the actual allocations will be effective in achieving the Funds investment objective
or that an investment strategy or Investment Fund or investment will achieve its particular investment objective.
Income
Risk
The income
investors receive from the Fund is based primarily or in part on the interest it earns from its investments in Income Securities, which
can vary widely over the short- and long-term. If prevailing market interest rates drop, investors income from the Fund could drop
as well. The Funds income could also be affected adversely when prevailing short-term interest rates increase and the Fund is utilizing
leverage, although this risk may be mitigated to the extent the Fund invests in floating-rate obligations, or when an issuer defaults,
among other adverse developments.
Dividend
Risk
Dividends
on common stock and other Common Equity Securities which the Fund may hold are not fixed but are declared at the discretion of an issuers
board of directors. There is no guarantee that the issuers of the Common Equity Securities in which the Fund invests will declare dividends
in the future or that, if declared, they will remain at current levels or increase over time. Therefore, there is the possibility that
such companies could reduce or eliminate the payment of dividends in the future or the anticipated acceleration of dividends could not
occur as a result of, among other things, a sharp change in interest rates or an economic downturn. Changes in the dividend policies
of companies and capital resources available for these companies dividend payments may adversely affect the Fund. Depending upon
market conditions, dividend-paying stocks that meet the Funds investment criteria may not be widely available and/or may be highly
concentrated in only a few market sectors. These circumstances may result from issuer-specific events, adverse economic or market developments,
or legislative or regulatory changes or other developments that limit an issuers ability to declare and pay dividends, which would
affect the Funds performance and ability to generate income. The dividend income from the Funds investments in Common Equity
Securities will be influenced by both general economic activity and issuer-specific factors. In the event of adverse changes in economic
conditions or adverse events effecting a specific industry or issuer, the issuers of the Common Equity Securities held by the Fund may
reduce the dividends paid on such securities (or not declare or pay dividends on such securities).
Income
Securities Risk
In addition to the risks discussed
above, Income Securities (notably the value and income of such investments), including high-yield bonds, are subject to certain risks,
including:
Issuer Risk The value
of Income Securities may decline for a number of reasons which directly relate to the issuer, such as management performance, the issuers
overall level of debt, reduced demand for the issuers goods and services, historical and projected earnings and the value of its
assets.
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Spread
Risk
Spread risk
is the risk that the market price can change due to broad based movements in spreads. The difference (or spread) between the
yield of a security and the yield of a benchmark measures the additional interest paid. As the spread on a security widens (or increases),
the price (or value) of the security falls. Spread widening may occur, among other reasons, as a result of market concerns over the stability
of the market, excess supply, general credit concerns in other markets, security- or market-specific credit concerns, or general reductions
in risk tolerance.
Credit
Risk
The Fund
could lose money if the issuer or guarantor of a debt instrument, a counterparty to a derivatives transaction or other transaction (such
as a repurchase agreement or a loan of portfolio securities or other instruments) or other obligor to the Fund is unable or unwilling,
or perceived (whether by market participants, rating agencies, pricing services or otherwise) to be unable or unwilling, to pay interest
or repay principal on time or defaults or otherwise fails to meet its obligations. This risk is heightened in market environments where
interest rates are changing, notably when rates are rising or when refinancing obligations becomes more challenging. If an issuer fails
to pay interest, the Funds income would likely be reduced, and if an issuer fails to repay principal, the value of the instrument
and income generated by the instrument likely would fall and the Fund could lose money, including potentially the entire value of the
investment. This risk is especially acute with respect to below investment grade debt instruments (commonly referred to as high-yield
or junk bonds) and unrated high risk debt instruments, whose issuers are particularly susceptible to fail to meet principal
or interest obligations.
Also, the
issuer, guarantor or counterparty may suffer adverse changes in its financial condition, the value of its assets, prospective earnings,
demands for its goods and services or be adversely affected by economic, political or social conditions that could lower the credit quality
(or the markets perception of the credit quality) of the issuer or instrument, guarantor or counterparty, leading to greater volatility
in the price of the instrument and in shares of the Fund. Although credit quality rating may not accurately reflect the true credit risk
of an instrument, credit quality (and credit risks) may change over time and a change in the credit quality rating of an instrument or
an issuer can have a rapid, adverse effect on the instruments value, price volatility and liquidity and make it more difficult for
the Fund to sell at an advantageous price or time. The risk of the occurrence of these types of events is heightened in market environments
where interest rates are changing, notably when rates are rising. In addition, under adverse market or economic conditions, an increasing
number of issuers may be unprofitable, have little cash on hand and/or are unable to pay the interest owed on their debt obligations
and the number of such issuers may increase if demand for their goods and services falls, borrowing costs rise due to governmental action
or inaction or other reasons.
The degree
of credit risk depends on the particular instrument, the adequacy or lack of collateral or credit enhancements and the financial condition
of the issuer, guarantor (including the guarantor of the collateral or credit enhancements, if any) or counterparty, which are often
reflected in its credit quality and may change over time. A credit quality rating is a measure of the issuers expected ability
to make all required interest and principal payments in a timely manner. An issuer with the highest credit rating has a very strong capacity
with respect to making all payments. An issuer with the second-highest credit rating has a strong capacity to make all payments, but
the degree
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of safety
is somewhat less. An issuer with the lowest credit quality rating may be in default or have extremely poor prospects of making timely
payment of interest and principal. Credit ratings assigned by rating agencies are based on a number of factors and subjective judgments
and therefore do not necessarily represent an issuers actual financial condition or the volatility and liquidity of the security.
Although higher-rated securities generally present lower credit risk as compared to lower-rated or unrated securities, an issuer with
a high credit rating may in fact be exposed to heightened levels of credit or liquidity risk. Credit ratings (or average credit risk
of the portfolio) may not be an accurate assessment of liquidity or credit risk and do not reflect market risk.
If an issuer,
guarantor or counterparty declares bankruptcy or is declared bankrupt, the Fund would be adversely affected in its ability to receive
principal or interest owed or otherwise to enforce the financial obligations of the other party. The Fund may be subject to increased
costs associated with the bankruptcy process and experience losses as a result of the deterioration of the financial condition of the
issuer, guarantor or counterparty. The risks to the Fund related to such bankruptcies are elevated during periods of adverse markets,
economic and similar developments.
Interest
Rate Risk
Fixed-income
and other debt instruments are subject to the possibility that interest rates could change (or are expected to change). Changes in interest
rates (or the expectation of such changes), including changes in reference rates used in fixed-income and other debt instruments (such
as Term SOFR), may adversely affect the Funds investments in these instruments, such as the value or liquidity of, and income generated
by, the investments or increase risks associated with such investments, such as credit or default risks. In addition, changes in interest
rates, including rates that fall below zero, can have unpredictable effects on markets and can adversely affect the Funds yield,
income and performance. Generally, when interest rates increase, the values of fixed-income and other debt instruments decline and when
interest rates decrease, the values of fixed-income and other debt instruments rise. Changes in interest rates also adversely affect the
yield generated by certain Income Securities or result in the issuance of lower yielding Income Securities.
The impact
of interest rate changes on a fixed-income or other debt instrument depends on several factors, notably the instruments duration.
The value of a debt instrument with a longer duration will generally be more sensitive to interest rate changes than a similar instrument
with a shorter duration. Similarly, the longer the average duration (whether positive or negative) of these instruments held by the Fund
or to which the Fund is exposed (i.e., the longer the average portfolio duration of the Fund), the more the Funds NAV will
likely fluctuate in response to interest rate changes. Duration is a measure used to determine the sensitivity of a securitys price
to changes in interest rates that incorporates a securitys yield, coupon, final maturity and call features, among other characteristics.
For example, the NAV per share of a bond fund with an average duration of eight years would be expected to fall approximately 8% if interest
rates rose by one percentage point.
However,
measures such as duration may not accurately reflect the true interest rate sensitivity of instruments held by the Fund and, in turn,
the Funds susceptibility to changes in interest rates. Certain fixed-income and debt instruments are subject to the risk that the
issuer may exercise its right to redeem (or call) the instrument earlier than anticipated. Although an issuer may call an instrument
for a variety of reasons, if an issuer does so during a time of declining interest rates, the Fund might have to reinvest the proceeds
in an investment offering a lower yield or other less favorable features, and therefore might not benefit from any increase in value as
a result of declining
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interest
rates. Interest only or principal only securities and inverse floaters are particularly sensitive to changes in interest rates, which
may impact the income generated by the security, its value and other features of the security.
Instruments
with variable or floating interest rates generally are less sensitive to interest rate changes, but may decline in value if their interest
rates do not rise as much or as fast as interest rates in general. Conversely, in a decreasing interest rate environment, these instruments
will generally not increase in value and the Funds investment in instruments with floating interest rates may prevent the Fund
from taking full advantage of decreasing interest rates in a timely manner. In addition, the income received from such instruments will
likely be adversely affected by a decrease in interest rates.
Adjustable-rate
securities also react to interest rate changes in a similar manner as fixed-rate securities but generally to a lesser degree depending
on the characteristics of the security, in particular its reset terms (i.e., the index chosen, frequency of reset and reset caps
or floors). During periods of rising interest rates, because changes in interest rates on adjustable-rate securities may lag behind changes
in market rates, the value of such securities may decline until their interest rates reset to market rates. These securities also may
be subject to limits on the maximum increase in interest rates. During periods of declining interest rates, because the interest rates
on adjustable-rate securities generally reset downward, their market value is unlikely to rise to the same extent as the value of comparable
fixed rate securities. These securities may not be subject to limits on downward adjustments of interest rates.
During periods
of rising interest rates, issuers of debt instruments or ABS may pay principal later or more slowly than expected, which may reduce the
value of the Funds investment in such securities and may prevent the Fund from receiving higher interest rates on proceeds reinvested
in other instruments. During periods of falling interest rates, issuers of debt securities or ABS may pay off debts more quickly or earlier
than expected, which will cause the Fund to be unable to recoup the full amount of its initial investment and/or cause the Fund to reinvest
proceeds or matured, traded or called securities in lower-yielding securities, thereby reducing the Funds yield or otherwise adversely
impacting the Fund.
Certain debt
instruments, such as instruments with a negative duration or inverse instruments, are also subject to interest rate risk, although such
instruments generally react differently to changes in interest rates than instruments with positive durations. The Funds investments
in these instruments also may be adversely affected by changes in interest rates. For example, the values of instruments with negative
durations, such as inverse floaters, generally decrease if interest rates decline. Certain fixed-income and debt instruments, including
inverse floaters, interest only securities and principal only securities are especially sensitive to interest rate changes, which may
affect the income flows these securities generate as well as their values.
The U.S.
Federal Reserve (Federal Reserve) has increased interest rates at significant levels over recent periods. It is difficult to
predict how long, and whether, the Federal Reserves current stance on interest rates will persist and the impact these actions
will have on the economy and the Funds investments and the markets where they trade. Such actions may have unforeseen consequences
and materially affect economic and market conditions, the Funds investments and the Funds
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performance.
The Federal Reserves monetary policy is subject to change at any time and potentially frequently based on a variety of market and
economic conditions.
The Funds
use of leverage will tend to increase the Funds interest rate risk. The Fund may utilize certain strategies, including taking positions
in futures or interest rate swaps, for the purpose of seeking to reduce the interest rate sensitivity of credit securities held by the
Fund or any leverage being employed by the Fund and seeking to decrease the Funds exposure to interest rate risk. The Fund is not
required to hedge its exposure to interest rate risk and may choose not to do so. In addition, there is no assurance that any attempts
by the Fund to seek to reduce interest rate risk will be successful or that any hedges that the Fund may establish will perfectly correlate
with movements in interest rates.
Current
Fixed-Income and Debt Market Conditions
Fixed-income
and debt market conditions are highly unpredictable and some parts of the market are subject to dislocations. In response to the inflation
rates in recent periods, governmental authorities have implemented significant fiscal and monetary policy changes, including increasing
interest rates and implementation of quantitative tightening. These actions present heightened risks, particularly to fixed-income and
debt instruments, and such risks could be even further heightened if these actions are ineffective in achieving their desired outcomes
or are quickly reversed. It is difficult to accurately predict changes in the Federal Reserves monetary policies and the effect of
any such changes or policies. Certain economic conditions and market environments will expose fixed-income and debt instruments to heightened
volatility and reduced liquidity, which can impact the Funds investments and may negatively impact the Funds characteristics,
which in turn would impact performance. To the extent the Fund invests in derivatives tied to fixed-income or related markets, the Fund
can be more substantially exposed to these risks than if it did not invest in such derivatives. The liquidity levels of the Funds
portfolio may also be affected and the Fund could be required to sell holdings at disadvantageous times or prices.
Corporate
Bond Risk
Corporate
bonds are debt obligations issued by corporations and other business entities. Corporate bonds may be either secured or unsecured. Collateral
used for secured debt includes real property, machinery, equipment, accounts receivable, stocks, bonds or notes. If a bond is unsecured,
it is known as a debenture. Bondholders, as creditors, have a prior legal claim over common and preferred stockholders as to both income
and assets of the corporation for the principal and interest due them and may have a prior claim over other creditors if liens or mortgages
are involved. Interest on corporate bonds may be fixed or floating, or the bonds may be zero coupons. Interest on corporate bonds is
typically paid semi-annually and is fully taxable to the bondholder. Corporate bonds contain elements of both interest-rate risk and
credit risk and are subject to the risks associated with Income Securities, among other risks. The market value of a corporate bond generally
is expected to rise and fall inversely with interest rates and be affected by the credit rating of the corporation, the corporations
performance and perceptions of the corporation in the marketplace. Depending on the nature of the seniority provisions, a senior corporate
bond may be junior to other credit securities of the issuer.
The market
value of a corporate bond may be affected by factors directly related to the issuer, such as investors perceptions of the creditworthiness
of the issuer, the issuers financial performance,
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perceptions
of the issuer in the marketplace, performance of management of the issuer, the issuers capital structure and use of financial leverage
and demand for the issuers goods and services. There is a risk that the issuers of corporate bonds may not be able to meet their
obligations on interest or principal payments at the time called for by an instrument or at all. Corporate bonds of below investment
grade quality are often high risk and have speculative characteristics and may be particularly susceptible to adverse issuer-specific
and other developments.
Reinvestment
Risk
Reinvestment
risk is the risk that income from the Funds portfolio will decline if the Fund invests the proceeds from matured, traded or called
Income Securities at interest rates that are below the Fund portfolios current earnings rate. A decline in income could affect the
Common Shares market price or the overall return of the Fund. These or similar conditions may also occur in the future.
Extension
Risk
Certain debt
instruments, including mortgage- and other ABS, are subject to the risk that payments on principal may occur at a slower rate or later
than expected. In this event, the expected maturity could lengthen as short or intermediate-term instruments become longer-term instruments,
which would make the investment more sensitive to changes in interest rates. The likelihood that payments on principal will occur at
a slower rate or later than expected is heightened in market environments where interest rates are higher or rising. In addition, the
Funds investment may sharply decrease in value and the Funds income from the investment may quickly decline. These types
of instruments are particularly subject to extension risk, and offer less potential for gains, during periods of rising interest rates.
In addition, the Fund may be delayed in its ability to reinvest income or proceeds from these instruments in potentially higher yielding
investments, which would adversely affect the Fund to the extent its investments are in lower interest rate debt instruments. Thus, changes
in interest rates may cause volatility in the value of and income received from these types of debt instruments.
Prepayment
Risk
Certain debt
instruments, including loans and mortgage- and other ABS, are subject to the risk that payments on principal may occur more quickly or
earlier than expected (or an investment is converted or redeemed prior to maturity). These types of instruments are particularly subject
to prepayment risk, and offer less potential for gains, during periods of declining interest rates. For example, an issuer may exercise
its right to redeem outstanding debt securities prior to their maturity (known as a call) or otherwise pay principal earlier
than expected for a number of reasons (e.g., declining interest rates, changes in credit spreads and improvements in the issuers
credit quality). If an issuer calls or prepays a security in which the Fund has invested, the Fund may not recoup the full
amount of its initial investment and may be required to reinvest in generally lower-yielding securities, securities with greater credit
risks or securities with other, less favorable features or terms than the security in which the Fund initially invested, thus potentially
reducing the Funds yield. Income Securities frequently have call features that allow the issuer to repurchase the security prior
to its stated maturity. Loans and mortgage- and other ABS are particularly subject to prepayment risk, and offer less potential for gains,
during periods of declining interest rates (or narrower spreads) as issuers of higher interest rate debt instruments pay off debts earlier
than expected. In addition, the Fund may lose any premiums paid to acquire the investment. Other
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factors,
such as excess cash flows, may also contribute to prepayment risk. Thus, changes in interest rates may cause volatility in the value
of and income received from these types of debt instruments.
Variable
or floating rate investments may be less vulnerable to prepayment risk. Most floating rate loans and fixed-income securities allow for
prepayment of principal without penalty. Accordingly, the potential for the value of a floating rate loan or security to increase in
response to interest rate declines is limited. Corporate loans or fixed-income securities purchased to replace a prepaid corporate loan
or security may have lower yields than the yield on the prepaid corporate loan or security.
Liquidity
Risk
The Fund
may invest without limitation in Income Securities for which there is no readily available trading market or which are unregistered,
restricted or otherwise illiquid, including certain high-yield securities. The Fund invests in privately issued securities of both public
and private companies, which may be illiquid. For example, Common Equity Securities of private companies (including when held through
an Investment Fund) are usually highly illiquid, and the Fund is usually able to sell such securities only in private transactions with
another investor or group of investors, and there can be no assurance that the Fund will be able to successfully arrange such transactions
if and when it desires or that it will obtain favorable values upon the sale. Securities of below investment grade quality tend to be
less liquid than investment grade debt securities, and securities of financially distressed or bankrupt issuers may be particularly illiquid.
Loans typically are not registered with the SEC and are not listed on any securities exchange and may at times be illiquid. Loan investments
through participations and assignments are typically illiquid. Structured finance securities are typically privately offered and sold,
and thus are not registered under the securities laws. As a result, investments in structured finance securities may be characterized
by the Fund as illiquid securities; however, an active dealer market may exist which would allow such securities to be considered liquid
in some circumstances. The securities and obligations of foreign issuers, particular issuers in emerging markets, may be more likely
to experience periods of illiquidity. Derivative instruments, particularly privately-negotiated or OTC derivatives, may be illiquid,
although can be no assurance that a liquid market will exist when the Fund seeks to close out an exchange-traded derivative position.
The Fund
may not be able to readily dispose of illiquid securities and obligations at prices that approximate those at which the Fund could sell
such assets and obligations if they were more widely traded and, as a result of such illiquidity, the Fund may have to sell other investments
or engage in borrowing transactions if necessary to raise cash to meet its obligations. As a result, the Fund may be unable to achieve
its desired level of exposure to certain issuers, asset classes or sectors. The capacity of market makers of fixed-income and other debt
instruments has not kept pace with the consistent growth in these markets over the past decades, which has led to reduced levels in the
capacity of these market makers to engage in trading and provide liquidity to markets. In addition, limited liquidity could affect the
market price of investments, thereby adversely affecting the Funds NAV and ability to make distributions. Dislocations in certain
parts of markets have in the past and may in the future result in reduced liquidity for certain investments. Liquidity of financial markets
may also be affected by government intervention and political, social, public health, economic or market developments (including rapid
interest rate changes). Liquidity risk is heightened in a changing interest rate environment, particularly for fixed-income and other
debt instruments.
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Valuation
of Certain Income Securities Risk
GPIM may
use the fair value method to value investments if market quotations for them are not readily available or are deemed unreliable, or if
events occurring after the close of a securities market and before the Fund values its assets would materially affect net asset value.
Because the secondary markets for certain investments may be limited, they may be particularly difficult to value. Where market quotations
are not readily available, valuation may require more research than for more liquid investments. In addition, elements of judgment may
play a greater role in valuation in such cases than for investments with a more active secondary market because there is less reliable
objective data available. A security that is fair valued may be valued at a price higher or lower than the value determined by other
funds using their own fair valuation procedures. Prices obtained by the Fund upon the sales of such securities may not equal the value
at which the Fund carried the investment on its books, which would adversely affect the net asset value of the Fund.
Duration
and Maturity Risk
The Fund
has noffset policy regarding portfolio maturity or duration. Holding long duration and long maturity investments will expose the Fund
to certain magnified risks. These risks include interest rate risk, credit risk and liquidity risks as discussed above. Generally speaking,
the longer the duration of the Funds portfolio, the more exposure the Fund will have to interest rate risk described above.
Below-Investment
Grade Securities Risk
The Fund
may invest in Income Securities rated below-investment grade or, if unrated, determined by GPIM to be of comparable credit quality, which
are commonly referred to as high-yield or junk bonds. The Fund will not invest more than 25% of its total assets
in securities rated CCC or below (or, if unrated, determined to be of comparable credit quality by GPIM) at the time of investment. Investment
in securities of below-investment grade quality involves substantial risk of loss, the risk of which is particularly acute under adverse
economic conditions. Income Securities of below-investment grade quality are predominantly speculative with respect to the issuers
continuing capacity to pay interest and repay principal when due and therefore involve a greater risk of default or decline in market
value or income due to adverse economic and issuer-specific developments compared to investment grade bonds. Securities of below-investment
grade quality are often issued by companies without long track records of earnings or sales or by companies with lesser credit profiles
and may be more volatile than higher-rated securities of similar maturity.
Securities
of below-investment grade quality generally involve a greater risk of default or decline in market value or income due to adverse economic
and issuer-specific developments, such as operating results and outlook and to real or perceived adverse economic and competitive industry
conditions. Generally, the risks associated with below-investment grade securities are heightened during times of weakening economic
conditions or rising interest rates (particularly for issuers that are highly leveraged). If the Fund is unable to sell an investment
at its desired time, the Fund may miss other investment opportunities while it holds investments it would prefer to sell, which could
adversely affect the Funds performance. In addition, the liquidity of any Fund investment may change significantly over time as
a result of market, economic, trading, issuer-specific and other factors. Accordingly, the performance of the Fund and a shareholders
investment in the Fund may be adversely affected if an issuer is unable to pay interest and repay principal, either on time or at all.
Issuers of below-investment grade securities are not perceived to be as strong financially as those with higher credit ratings. These
issuers are more vulnerable to financial setbacks and
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recessions
and other adverse economic developments than more creditworthy issuers, which may impair their ability to make interest and principal
payments. Income Securities of below-investment grade quality display increased price sensitivity to changing interest rates and to a
deteriorating economic environment. The market values, total return and yield for securities of below-investment grade quality tend to
be more volatile than the market values, total return and yield for higher quality bonds. Securities of below-investment grade quality
tend to be less liquid than investment grade debt securities and therefore more difficult to value accurately and sell at an advantageous
price or time and may involve greater transactions costs and wider bid/ask spreads, than higher-quality securities. Additionally, issuers
of below-investment grade securities may have the right to call or redeem the issue prior to its maturity, which could result
in the Fund having to reinvest in other below-investment grade or other securities at a lower interest rate or with other less favorable
terms. This may be more likely during a declining interest rate environment. To the extent that a secondary market does exist for certain
below-investment grade securities, the market for them may be subject to irregular trading activity, wide bid/ask spreads and extended
trade settlement periods. Because of the substantial risks associated with investments in below-investment grade securities, you could
have an increased risk of losing money on your investment in Common Shares, both in the short-term and the long-term. To the extent that
the Fund invests in securities that have not been rated by a nationally recognized statistical rating organization, the Funds ability
to achieve its investment objective will be more dependent on GPIMs credit analysis than would be the case when the Fund invests
in rated securities.
Investment
in lower-medium and lower-rated debt securities may involve greater investment risk and the success of such investment is highly dependent
on GPIMs credit analysis. The value of securities of below-investment grade quality is particularly vulnerable to changes in interest
rates and a real or perceived economic downturn or higher interest rates could cause a decline in prices of such securities by lessening
the ability of issuers to make principal and interest payments. These securities may not be listed on an exchange and are often thinly
traded or subject to irregular trading and can be more difficult to sell and value accurately than higher-quality securities because there
tends to be less public information available about these securities. Because objective pricing data may be less available, judgment
may play a greater role in the valuation process. In addition, the entire below investment grade market can experience sudden and sharp
price swings due to a variety of factors, including changes in economic forecasts, stock market activity, large or sustained sales by
major investors, a high-profile default, or a change in the markets perception regarding below-investment grade securities. Adverse
conditions could make it difficult at times for the Fund to sell certain securities or could result in lower prices than those used in
calculating the Funds NAV. During periods of deteriorating economic conditions, such as recessions or periods of rising unemployment,
or changing interest rates (notably increases), below-investment grade securities are particularly susceptible to credit and default
risk as delinquencies, non-payment rates and losses could increase, and such increases could be sudden and significant. An economic downturn
or individual corporate developments could adversely affect the market for these investments and reduce the Funds ability to sell
these investments at an advantageous time or price. These or similar types of developments could cause below-investment grade securities
to lose significant market value, including before a default occurs.
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Structured
Finance Investments Risk
The Funds
structured finance investments may include residential and commercial mortgage-related and other ABS issued by governmental entities
and private issuers. While traditional fixed-income securities typically pay a fixed rate of interest until maturity, when the entire
principal amount is due, these investments represent an interest in a pool of residential or commercial real estate or assets such as
automobile loans, credit card receivables or student loans that have been securitized and provide for monthly or other periodic payments
of interest and principal to the holder based from the cash flow of these assets. Holders of structured finance investments bear risks
of the underlying investments, index or reference obligation and are subject to counterparty and other risks. The Fund may have the right
to receive payments only from the structured product, and generally does not have direct rights against the issuer or the entity that
sold the assets to be securitized. While certain structured finance investments enable the investor to acquire interests in a pool of
securities without the brokerage and other expenses associated with directly holding the same securities, investors in structured finance
investments generally pay their share of the structured products administrative and other expenses. Although it is difficult to accurately
predict whether the prices of indices and securities underlying structured finance investments will rise or fall, these prices (and,
therefore, the prices of structured finance investments) will be influenced by the same types of political, economic and other events
that affect issuers of securities and capital markets generally. If the issuer of a structured product uses shorter term financing to
purchase longer term securities, the issuer may be forced to sell its securities at below market prices if it experiences difficulty in
obtaining short-term financing, which may adversely affect the value of the structured finance investment owned by the Fund.
The Fund
may invest in structured finance products collateralized by low grade or defaulted loans or securities. Investments in such structured
finance products are subject to the risks associated with below-investment grade securities. Such securities are characterized by high
risk. It is likely that an economic recession could severely disrupt the market for such securities and may have an adverse impact on
the value of such securities.
The Fund
may invest in senior and subordinated classes issued by structured finance vehicles. The payment of cash flows from the underlying assets
to senior classes take precedence over those of subordinated classes, and therefore subordinated classes are subject to greater risk.
Furthermore, the leveraged nature of subordinated classes may magnify the adverse impact on such class of changes in the value of the
assets, changes in the distributions on the assets, defaults and recoveries on the assets, capital gains and losses on the assets, prepayment
on assets and availability, price and interest rates of assets.
Structured
finance securities may be thinly traded or have a limited trading market. Structured finance securities are typically privately offered
and sold, and thus are not registered under the securities laws. As a result, investments in structured finance securities may be characterized
by the Fund as illiquid securities; however, an active dealer market may exist which would allow such securities to be considered liquid
in some circumstances.
Structured
finance securities, such as mortgage-backed securities, issued by non-governmental issuers are not guaranteed as to principal or interest
by the U.S. government or a government sponsored enterprise and are typically subject to greater risk than those issued by such governmental
entities. For example, privately issued mortgage-backed securities are not subject to the same underwriting requirements for underlying
mortgages as those issued by governmental
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entities
and, as a result, mortgage loans underlying such privately issued securities typically have less favorable underwriting characteristics
(such as credit risk and collateral) and a wider range in terms (such as interest rate, term and borrower characteristics).
Asset-Backed
Securities Risk
The Fund
may invest in ABS issued by legal entities that are sponsored by banks, investment banks, other financial institutions or companies,
asset management firms or funds and are specifically created for the purpose of issuing such ABS. Investors in ABS receive payments that
are part interest and part return of principal or certain ABS may be interest-only securities or principal-only securities. These payments
typically depend upon the cash flows generated by an underlying pool of assets and vary based on the rate at which the underlying obligors
pay off their liabilities under the underlying assets. The pooled assets provide cash flow to the issuer, which then makes interest and
principal payments to investors. As a result, these investments involve the risk, among other risks, that the borrower may default on
its obligations backing the ABS and, thus, the value of and interest generated by such investment will decline.
Investments
in ABS are subject to many of the same risks that are applicable to investments in certain other types of securities, including currency
risk, geographic emphasis risk, high yield and unrated securities risk, leverage risk, prepayment and extension risk and regulatory risk.
ABS are particularly subject to interest rate, market and credit risks and the risk that non-payment on underlying assets will result
in a decline in the value of the ABS. Compared to other fixed income investments with similar maturity and credit profile, ABS generally
increase in value to a lesser extent when interest rates decline and generally decline in value to a similar or greater extent when interest
rates rise. ABS are also subject to liquidity and valuation risk and, therefore, may be difficult to value accurately or sell at an advantageous
time or price and involve greater transaction costs and wider bid/ask spreads than certain other instruments. In addition, the assets
or collateral underlying an ABS may be insufficient or unavailable in the event of a default and enforcing rights with respect to these
assets or collateral may be difficult and costly.
While traditional
fixed-income securities typically pay a fixed rate of interest until maturity, when the entire principal amount is due, an ABS represents
an interest in a pool of assets, such as automobile loans, credit card receivables, unsecured consumer loans or student loans, that has
been securitized and provides for monthly payments of interest, at a fixed or floating rate, and principal from the cash flow of these
assets. This pool of assets (and any related assets of the issuing entity) is the only source of payment for the ABS. The ability of
an ABS issuer to make payments on the ABS, and the timing of such payments, is therefore dependent on collections on these underlying
assets. The recoveries on the underlying collateral may not, in some cases, be sufficient to support payments on these securities, or may
be unavailable in the event of a default and enforcing rights with respect to these assets or collateral may be difficult and costly, which
may result in losses to investors in an ABS.
Generally,
obligors may prepay the underlying assets in full or in part at any time, subjecting the Fund to prepayment risk related to the ABS it
holds. While the expected repayment streams on ABS are determined by the contractual amortization schedules for the underlying assets,
an investors yield to maturity on an ABS is uncertain and may be reduced by the rate and speed of prepayments of the underlying
assets, which may be influenced by a variety of economic, social and other factors. Any prepayments, repurchases, purchases or liquidations
of the underlying assets could shorten the average life of the ABS to an extent that cannot be fully predicted. Some ABS may be structured
to
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include a
period of rapid amortization triggered by events such as a significant rise in the default rate of the underlying collateral, a sharp
drop in the credit enhancement level because of credit losses on the underlying assets, a specified regulatory event or the bankruptcy
of the originator. A rapid amortization event will cause any revolving period to end earlier than expected and all collections on the
underlying assets will be used to pay principal to investors earlier than expected. In general, the senior most securities will be paid
prior to any payments being made on the subordinated securities, and if such payments are made earlier than expected, the Funds
yield on such ABS may be negatively affected.
In addition,
investments in ABS entail additional risks relating to the underlying pools of assets, including credit risk, default risk (such as a
borrowers default on its obligation and the default, failure or inadequacy or unavailability of a guarantee, if any, underlying
the ABS intended to protect investors in the event of default) and prepayment and extension risk with respect to the underlying pool
or individual assets represented in the pool. The underlying assets of an ABS may include, without limitation, residential or commercial
mortgages, motor vehicle installment sales or installment loan contracts, leases of various types of real, personal and other property,
receivable from credit card agreements and automobile finance agreements, student loans, consumer loans, and income from other income
streams, such as income from business loans. Moreover, additional risks relating to investments in ABS may arise principally because
of the type of ABS in which the Fund invests, with such risks primarily associated with the particular assets collateralizing the ABS
(such as their type or nature), the structure of such ABS, or the tranche or priority of the ABS held by the Fund (with junior or equity
tranches generally carrying higher levels of risk).
Mortgage-Backed
Securities Risk
Mortgage-Backed
Securities (MBS) represent an interest in a pool of mortgages. MBS are subject to certain risks, such as: credit risk associated
with the performance of the underlying mortgage properties and of the borrowers owning these properties; risks associated with their
structure and execution (including the collateral, the process by which principal and interest payments are allocated and distributed
to investors and how credit losses affect the return to investors in such MBS); risks associated with the servicer of the underlying mortgages;
adverse changes in economic conditions and circumstances, which are more likely to have an adverse impact on MBS secured by loans on
certain types of commercial properties than on those secured by loans on residential properties; prepayment and extension risks associated
with the underlying assets of certain MBS, which can shorten the weighted average maturity and lower the return of the MBS, or lengthen
the expected maturity, respectively, leading to significant fluctuations in the value of the MBS; loss of all or part of the premium,
if any, paid; and decline in the market value of the security, whether resulting from changes in interest rates, prepayments on the underlying
mortgage collateral or perceptions of the credit risk associated with the underlying mortgage collateral.
The value
of MBS may be substantially dependent on the servicing of the underlying pool of mortgages. In addition, the Funds level of investment
in MBS of a particular type or in MBS issued or guaranteed by affiliated obligors, serviced by the same servicer or backed by underlying
collateral located in a specific geographic region, may subject the Fund to additional risk.
When market
interest rates decline, more mortgages are refinanced and the securities are paid off earlier than expected. Prepayments may also occur
on a scheduled basis or due to foreclosure.
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When market
interest rates increase, the market values of MBS decline. At the same time, however, mortgage refinancings and prepayments slow, which
lengthens the effective maturities of these securities. As a result, the negative effect of the rate increase on the market value of MBS
is usually more pronounced than it is for other types of debt securities. In addition, due to instability in the credit markets, the
market for some MBS has at times experienced reduced liquidity and greater volatility with respect to the value of such securities, making
it more difficult to value such securities. The Fund may invest in sub-prime mortgages or MBS that are backed by sub-prime mortgages or
defaulted or nonperforming loans.
Additional
risks relating to investments in MBS may arise principally because of the type of MBS in which the Fund invests, with such risks primarily
associated with the particular assets collateralizing the MBS and the structure of such MBS. For example, collateralized mortgage obligations
(CMOs), which are MBS that are typically collateralized by mortgage loans or mortgage pass-through securities and multi-class
pass-through securities, are commonly structured as equity interests in a trust composed of mortgage loans or other MBS. CMOs are usually
issued in multiple classes, often referred to as tranches, with each tranche having a specific fixed or floating coupon rate
and stated maturity or final distribution date. Under the traditional CMO structure, the cash flows generated by the mortgages or mortgage
pass-through securities in the collateral pool are used to first pay interest and then pay principal to the holders of the CMOs. Subject
to the provisions of individual CMO issues, the cash flow generated by the underlying collateral (to the extent it exceeds the amount
required to pay the stated interest) is used to retire the bonds. As a result of these and other structural characteristics of CMOs,
CMOs may have complex or highly variable prepayment terms, such as companion classes, interest only or principal only payments, inverse
floaters and residuals. These investments generally entail greater market, prepayment and liquidity risks than other MBS, and may be
more volatile or less liquid than other MBS. CMOs are further subject to certain risks specific to these securities. For example, the
average life of CMOs is typically determined using mathematical models that incorporate prepayment and other assumptions that involve
estimates of future economic and market conditions, which may prove to be incorrect, particularly in periods of heightened market volatility.
Further, the average weighted life of certain CMOs may not accurately reflect the price volatility of such securities, resulting in price
fluctuations greater than what would be expected from interest rate movements alone.
Non-agency
MBS (i.e., MBS issued by commercial banks, savings and loans institutions, mortgage bankers, private mortgage insurance companies and
other non-governmental issuers) are subject to the risk that the value of such securities will decline because, among other things, the
securities are not guaranteed as to principal or interest by the U.S. government or a government sponsored enterprise. Non-agency MBS
are not subject to the same underwriting requirements for underlying mortgages as agency MBS and, as a result, mortgage loans underlying
non-agency MBS typically have less favorable underwriting characteristics (such as credit and default risk and collateral) and a wider
range in terms (such as interest rate, term and borrower characteristics) than agency MBS. Non-agency residential mortgage-backed securities
often are issued in the form of several different tranches. Depending on their respective seniority, individual tranches are subject to
increased (and sometimes different) credit, prepayment and liquidity and valuation risks as compared to other tranches. These securities
are often subject to greater credit, prepayment and liquidity and valuation risks than agency MBS. In addition, these
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securities
may be less readily marketable as the market for these securities is typically smaller and less liquid than the market for agency MBS,
thus these securities may be subject to greater price fluctuation than agency MBS, especially during periods of weakness or perceived
weakness in the mortgage and real estate sectors.
Moreover,
the relationship between prepayments and interest rates may give some high-yielding MBS less potential for growth in value than conventional
bonds with comparable maturities. In addition, during periods of falling interest rates, the rate of prepayment tends to increase. During
such periods, the reinvestment of prepayment proceeds by the Fund will generally be at lower interest rates than the interest rates that
were carried by the obligations that have been prepaid. Because of these and other reasons, MBSs total return and maturity may
be difficult to predict precisely. To the extent that the Fund purchases MBS at a premium, prepayments (which may be made without penalty)
may result in loss of the Funds principal investment to the extent of premium paid.
The general
effects of inflation on the U.S. economy can be wide ranging, as evidenced by rising interest rates, wages, and costs of consumer goods
and necessities. The long-term effects of inflation on the general economy and on any individual mortgagor are unclear, and in certain
cases, rising inflation may affect a mortgagors ability to repay its related mortgage loan, thereby reducing the amount received
by the holders of MBS with respect to such mortgage loan. Additionally, increased rates of inflation, as recently experienced, may negatively
affect the value of certain MBS in the secondary market. In addition, during periods of declining economic conditions, losses on mortgages
underlying MBS generally increase. MBS generally are classified as either CMBS or residential mortgage-backed securities (RMBS),
each of which are subject to certain specific risks. CMBS and RMBS are also subject to risks similar to those associated with investing
in real estate, which are described under Real Estate Risks below.
In addition,
MBS, such as commercial and residential MBS, are subject to the risks of ABS generally and are particularly sensitive to changes in interest
rates and developments in the commercial or residential real estate markets. For example, changing interest rates tend to adjust the
duration of fixed-rate mortgage-backed securities. As a result, a changing interest rate environment can cause the prices of mortgage-backed
securities to be increasingly volatile and increase the risk that payments on principal may occur more quickly (or earlier) or slower
(or later) than expected, each of which may adversely affect the Funds holdings of mortgage-backed securities. For example, a rising
interest rate environment will cause the average life of these securities to extend, which may lock in a below-market interest rate,
increase the securitys duration and increase sensitivity to further interest rate changes. This may negatively affect the Funds
returns because the value of the security decreases when principal payments are made later than expected. In addition, because principal
payments are made later than expected, the Fund may be prevented from investing proceeds it would otherwise have received at a given
time at the higher prevailing interest rates. Rising interest rates generally result in a decline in the value of mortgage-backed securities,
such as MBS. In addition, in general, a decline of housing values and other economic developments (such as a rise in unemployment rates
or a slowdown in the overall economy) may cause delinquencies or non-payment in mortgages (particularly sub-prime and non-prime mortgages)
underlying MBS, which would likely adversely impact the ability
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of the issuer
to make principal and/or interest payments timely or at all to holders of MBS and negatively affect the Funds investments in such
MBS.
Commercial
Mortgage-Backed Securities Risk
CMBS are
collateralized by one or more commercial mortgage loans. Banks and other lending institutions typically group the loans into pools and
interests in these pools are then sold to investors, allowing the lender to have more money available to loan to other commercial real
estate owners. Commercial mortgage loans may be secured by office properties, retail properties, hotels, mixed use properties or multi-family
apartment buildings. The value of, and income generated by, investments in CMBS are subject to the risks of ABS generally and the commercial
real estate markets and the real estate securing the underlying mortgage.
CMBS are
subject to particular risks, such as those associated with lack of standardized terms, shorter maturities than residential mortgage loans
and payment of all or substantially all of the principal only at maturity rather than regular amortization of principal. In addition,
commercial lending generally is viewed as exposing the lender to a greater risk of loss than residential lending. Commercial lending
typically involves larger loans to single borrowers or groups of related borrowers than residential mortgage loans. In addition, the
repayment of loans secured by income producing properties typically is dependent upon the successful operation of the related real estate
project and the cash flow generated therefrom. Net operating income of an income-producing property can be affected by, among other things:
tenant mix, success of tenant businesses, property management decisions, property location and condition, competition from comparable
types of properties, changes in laws that increase operating expense or limit rents that may be charged, any need to address environmental
contamination at the property, the occurrence of any uninsured casualty at the property, changes in national, regional or local economic
conditions and/or specific industry segments, declines in regional or local or other real estate values, declines in regional or local
rental or occupancy rates, increases in interest rates, real estate tax rates and other operating expenses, change in governmental rules,
regulations and fiscal policies, including environmental legislation, acts of God, terrorism, social unrest and civil disturbances.
Consequently,
adverse changes in economic conditions and circumstances are more likely to have an adverse impact on MBS secured by loans on commercial
properties than on those secured by loans on residential properties. Economic downturns, rises in unemployment, tightening lending standards
and increased interest and lending rates, developments adverse to the commercial real estate markets, and other developments that limit
or reduce demand for commercial retail and office spaces (including continued or expanded remote working arrangement) as well as increased
maintenance or tenant improvement costs and costs to convert properties for other uses adversely impact these investments. For example,
economic decline in the businesses operated by the tenants of office or retail properties may increase the likelihood that the tenants
may be unable to pay their rent or that properties may be unable to attract or retain tenants at all or on favorable terms for the commercial
real estate owners, resulting in vacancies (potentially for extended periods) and losses. These developments could also result from,
among other things, population shifts and other demographic changes, changing tastes and preferences as well as cultural, technological,
working or economic and market developments. In addition, changing interest rate environments and associated changes in lending standards
and higher
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refinancing
rates may adversely affect the commercial real estate and CMBS markets. Moreover, other types of events, domestic or international, may
affect general economic conditions and financial markets, such as pandemics, armed conflicts, energy supply or price disruptions, natural
disasters and man-made disasters, which may have a significant effect on the underlying commercial mortgage loans and real estate. In
addition, adverse developments in the local, regional and national economies affect consumer spending and can have a significant effect
on the success of a retail space. Further, increased competition in the market of a retail property through the addition of competing
properties nearby can adversely impact the success of a retail property, even if the local, regional and national economies are doing
well. Retail properties are also subject to conditions that could negatively affect the retail sector, such as increased unemployment,
increased federal income and payroll taxes, increased health care costs, increased state and local taxes, increased real estate taxes,
industry slowdowns, lack of availability of consumer credit, weak income growth, increased levels of consumer debt, poor housing market
conditions, adverse weather conditions, natural disasters, plant closings, and other factors. Similarly, local real estate conditions,
such as an oversupply of, or a reduction in demand for, retail space or retail goods, and the supply and creditworthiness of current
and prospective tenants may negatively impact those retail properties. The occurrence of any of the foregoing or similar developments
would likely increase the risks associated with these investments, such as the default risk for the properties and loans underlying the
CMBS investments, and adversely impact the value of, and income generated by, these investments and the underlying properties or loans.
These developments could also result in reduced liquidity for CMBS. CMBS are also subject to the risk that the value of, and income generated
by, such securities will decline because, among other things, the securities are not issued or guaranteed as to principal or interest
by the U.S. government or a government sponsored enterprise and, thus, would be subject to similar risks as non-agency MBS. CMBS often
are issued in the form of several different tranches. Depending on their respective seniority, individual tranches are subject to increased
(and sometimes different) credit, prepayment and liquidity and valuation risks as compared to other tranches. CMBS are often subject to
credit, default, prepayment and liquidity and valuation risks and may experience greater price volatility than other types of ABS or
MBS.
Additional
risks may be presented by the type and use of a particular commercial property. Special risks are presented by hospitals, nursing homes,
hospitality properties and certain other property types. Commercial property values and net operating income are subject to volatility,
which may result in net operating income becoming insufficient to cover debt service on the related mortgage loan. The exercise of remedies
and successful realization of liquidation proceeds relating to CMBS may be highly dependent on the performance of the servicer or special
servicer. There may be a limited number of special servicers available, particularly those that do not have conflicts of interest.
Residential
Mortgage-Backed Securities Risk
Home mortgage
loans are typically grouped together into pools by banks and other lending institutions, and interests in these pools are then sold to
investors, allowing the bank or other lending institution to have more money available to loan to home buyers. RMBS are particularly
subject to the credit risk of the borrower. Credit-related risk on RMBS primarily arises from losses due to delinquencies and defaults
by the borrowers in payments on the underlying mortgage
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loans and
breaches by originators and servicers of their obligations under the underlying documentation pursuant to which the RMBS are issued.
RMBS are also subject to the risks of MBS generally and the residential real estate markets. The rate of delinquencies and defaults on
residential mortgage loans and the aggregate amount of the resulting losses will be affected by a number of factors, including general
economic conditions, particularly those in the area where the related mortgaged property is located, the level of the borrowers
equity in the mortgaged property and the individual financial circumstances of the borrower. The risk of non-payment is greater for RMBS
that are backed by loans that were originated under weak underwriting standards, including loans made to borrowers with limited means
to make repayment. RMBS are also subject to risks associated with the actions of mortgage lenders in the marketplace. Such lenders may
adjust their loan programs and underwriting standards, which may reduce the availability of mortgage credit to prospective mortgagors.
This may result in limited financing alternatives for mortgagors seeking to refinance their existing loans, which may in turn result
in higher rates of delinquencies, defaults and losses on mortgages. If a residential mortgage loan is in default, foreclosure on the
related residential property may be a lengthy and difficult process involving significant legal and other expenses. The net proceeds obtained
by the holder on a residential mortgage loan following the foreclosure on the related property may be less than the total amount that
remains due on the loan. The prospect of incurring a loss upon the foreclosure of the related property may lead the holder of the residential
mortgage loan to restructure the residential mortgage loan or otherwise delay the foreclosure process.
Income from
and values of RMBS also may be greatly affected by demographic trends, such as population shifts or changing tastes and values, or increasing
vacancies or declining rents or property values resulting from legal, cultural, technological, global or local economic developments,
as well as reduced demand for properties.
Sub-Prime
Mortgage Market Risk
Loans made
to lower quality borrowers, including those of sub-prime quality, may be underlying assets for an asset-backed security. Loans to such
borrowers involve a higher degree of credit and default risk. As a result, values of ABS backed by lower quality loans are more likely
than others to suffer significant declines due to defaults, delays or the perceived risk of defaults or delays.
The residential
mortgage market in the United States has at times experienced difficulties that may adversely affect the performance and market value of
certain mortgages and MBS. Delinquencies and losses on residential mortgage loans (especially sub-prime and second-lien mortgage loans)
generally have increased at times and may again increase, and a decline in or flattening of housing values (as has been experienced at
times and may again be experienced in many housing markets) may exacerbate such delinquencies and losses. Borrowers with adjustable rate
mortgage loans are more sensitive to changes in interest rates, which affect their monthly mortgage payments, and may be unable to secure
replacement mortgages at comparably low interest rates. Also, a number of residential mortgage loan originators have at times experienced
serious financial difficulties or bankruptcy. Largely due to the foregoing, reduced investor demand for mortgage loans and MBS and increased
investor yield requirements has at times caused limited liquidity in the secondary market for certain MBS, which can adversely affect
the market value of MBS. It is possible that such limited liquidity in such secondary markets could occur again or worsen. If the economy
of the United States deteriorates,
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the incidence
of mortgage foreclosures, especially sub-prime mortgages, may increase, which may adversely affect the value of any MBS owned by the Fund.
Any increase
in prevailing market interest rates may result in increased payments for borrowers who have adjustable rate mortgages. Moreover, with
respect to hybrid mortgage loans after their initial fixed rate period, interest-only products or products having a lower rate, and with
respect to mortgage loans with a negative amortization feature which reach their negative amortization cap, borrowers may experience
a substantial increase in their monthly payment even without an increase in prevailing market interest rates. Increases in payments for
borrowers may result in increased rates of delinquencies and defaults on residential mortgage loans underlying the RMBS.
The significance
of the mortgage crisis and loan defaults in residential mortgage loan sectors led to the enactment of numerous pieces of legislation
relating to the mortgage and housing markets. These actions, along with future legislation or regulation, may have significant impacts
on the mortgage market generally and may result in a reduction of available transactional opportunities for the Fund or an increase in
the cost associated with such transactions and may adversely impact the value of RMBS.
During the
mortgage crisis, a number of originators and servicers of residential and commercial mortgage loans, including some of the largest originators
and servicers in the residential and commercial mortgage loan market, experienced serious financial difficulties. These or similar difficulties
may occur in the future and affect the performance of RMBS and CMBS, particularly non-agency RMBS and CMBS. There can be no assurance
that originators and servicers of mortgage loans will not continue to experience serious financial difficulties or experience such difficulties
in the future, including becoming subject to bankruptcy or insolvency proceedings, or that underwriting procedures and policies and protections
against fraud will be sufficient in the future to prevent such financial difficulties or significant levels of default or delinquency on
mortgage loans.
CLO, CDO
and CBO Risk
The Fund
may invest in CDOs, CBOs and CLOs. A CDO is an ABS whose underlying collateral is typically a portfolio of other structured finance debt
securities or synthetic instruments issued by another ABS vehicle. A CBO is an ABS whose underlying collateral is a portfolio of bonds.
A CLO is an ABS whose underlying collateral is a portfolio of bank loans.
In addition
to the general risks (such as interest rate risk, prepayment risk, extension risk, market risk, credit risk and liquidity and valuation
risk) associated with credit or debt securities discussed herein, CLOs, CDOs and CBOs are subject to additional risks due to their complex
structure and highly leveraged nature. Additionally, the Funds investment in CLOs, CDOs and CBOs will provide it with indirect
exposure to the underlying collateral; this indirect investment structure presents certain risks to the Fund. For example, the Funds
interest in CLO securities may be less liquid than the loans held by the CLO; thus, it may be more difficult for the Fund to dispose of
CLO securities than it would be for the Fund to dispose of loans if it held such loans directly. Additionally, CLOs, CDOs and CBOs normally
charge management fees and administrative expenses, which fees and expenses would be borne by the Fund.
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CLOs, CDOs
and CBOs are subject to risks associated with the involvement of multiple transaction parties related to the underlying collateral and
disruptions that may occur as a result of the restructuring or insolvency of the underlying obligors, which are generally corporate obligors.
Unlike a consumer obligor that is generally obligated to make payments on the collateral backing an ABS, the obligor on the collateral
backing a CLO, a CDO or a CBO may have more effective defenses or resources to cause a delay in payment or restructure the underlying
obligation. If an obligor is permitted to restructure its obligations, distributions from collateral securities may not be adequate to
make interest or other payments.
The performance
of CLOs, CDOs and CBOs depends primarily upon the quality of the underlying assets and the level of credit support or enhancement in
the structure and the relative priority of the interest in the issuer of the CLO, CDO or CBO purchased by the Fund. In general, CLOs,
CDOs and CBOs are actively managed by an asset manager that is responsible for evaluating and acquiring the assets that will collateralize
the CLO, CDO or CBO. The asset manager may have difficulty in identifying assets that satisfy the eligibility criteria for the assets and
may be restricted from trading the collateral. These criteria, restrictions and requirements, while reducing the overall risk to the
Fund, may limit the ability of GPIM to maximize returns on the CLOs, CDOs and CBOs if an opportunity is identified by the collateral
manager. In addition, other parties involved in CLOs, CDOs and CBOs, such as credit enhancement providers and investors in senior obligations
of the CLO, CDO or CBO may have the right to control the activities and discretion of GPIM in a manner that is adverse to the interests
of the Fund. A CLO, CDO or CBO generally includes provisions that alter the priority of payments if performance metrics related to the
underlying collateral, such as interest coverage and minimum overcollateralization, are not met.
These provisions
may cause delays in payments on the securities or an increase in prepayments depending on the relative priority of the securities owned
by the Fund. The failure of a CLO, CDO or CBO to make timely payments on a particular tranche may have an adverse effect on the liquidity
and market value of such tranche.
Payments
to holders of CLOs, CDOs and CBOs may be subject to deferral. If cashflows generated by the underlying assets are insufficient to make
all current and, if applicable, deferred payments on the CLOs, CDOs and CBOs, no other assets will be available for payment of the deficiency
and, following realization of the underlying assets, the obligations of the issuer to pay such deficiency will be extinguished.
Securities
issued by CLOs, CDOs and CBOs may experience substantial losses due to defaults or sales of underlying assets at a loss (due to a decline
in market value of such assets or otherwise). The value of securities issued by CLOs, CDOs and CBOs also may decrease because of, among
other developments, changes in market value; changes in the markets perception of the creditworthiness of the servicer of the assets,
the originator of an asset in the pool, or the financial institution or fund providing credit support or enhancement; loan performance
and prices; broader market sentiment, including expectations regarding future loan defaults, liquidity conditions and supply and demand
for structured products.
The Fund
may invest in any portion of the capital structure of CLOs (including the subordinated, residual and deep mezzanine debt tranches). As
a result, the CLOs in which the Fund invests may have issued and sold debt tranches that will rank senior to the tranches in which the
Fund invests.
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By their
terms, such more senior tranches may entitle the holders to receive payment of interest or principal on or before the dates on which
the Fund is entitled to receive payments with respect to the tranches in which the Fund invests. Also, in the event of insolvency, liquidation,
dissolution, reorganization or bankruptcy of a CLO, holders of more senior tranches would typically be entitled to receive payment in
full before the Fund receives any distribution. After repaying such senior creditors, such CLO may not have any remaining assets to use
for repaying its obligation to the Fund. In the case of tranches ranking equally with the tranches in which the Fund invests, the Fund
would have to share on an equal basis any distributions with other creditors holding such securities in the event of an insolvency, liquidation,
dissolution, reorganization or bankruptcy of the relevant CLO. Therefore, the Fund may not receive back the full amount of its investment
in a CLO.
CLO securities
carry additional risks due to the complex structure and highly leveraged nature of a CLO. CLO issues classes or tranches
that vary in risk or yield. The most senior tranches have the lowest yield but the lowest level of risk relative to other tranches, as
they are senior in priority to the more junior tranches with respect to payments made by the CLO. Conversely, the most subordinated tranches
have the highest potential yield relative to other tranches but also the highest level of risk relative to the other tranches, as they
are the lowest in the priority of payments. Thus, losses on underlying assets are borne first by the holders of the most subordinate
tranche, followed by the second-most subordinated tranche, and so forth. A CLO may experience substantial losses attributable to loan
defaults or sales of underlying assets at a loss (due to a decline in market value of such assets or otherwise). The Funds investment
in a CLO may decrease in market value because of, among other developments, (i) loan defaults or credit impairment; (ii) losses that
exceed the subordinate tranches; (iii) an event of default occurring under a CLO, which could lead to acceleration and/or liquidation
of the assets at a loss; (iv) market anticipation of defaults; (v) investor aversion to CLO securities as a class; and (vi) poor performance
of the CLOs manager. These risks may be magnified depending on the tranche of CLO securities in which the Fund invests. For example,
investments in a junior tranche of CLO securities will likely be more sensitive to loan defaults or credit impairment than investments
in more senior tranches. Senior tranches are also subject to the risk that junior tranches may disappear, eliminating the protection
such junior tranches normally provide more senior tranches.
Investments
in CLOs, CDOs and CBOs expose the Fund to financial leverage and, thus expose the Fund to the risks associated with financial leverage
(such as higher risk of volatility and magnified financial losses). CLOs, CDOs and CBOs are generally privately offered and sold and are
not registered under securities laws and may be illiquid. Further, the complex nature of CLOs, CDOs and CBOs may lead to disputes with
the issuer or other investors and/or unexpected investment results. CLOs, CDOs and CBOs are also subject to the risk that distributions
from the underlying collateral may be inadequate to make interest or other payments and that the underlying collateral may default or
decline in value or quality and may be subject to risks associated with investments in high yield, below investment grade and unrated
securities. The risks associated with these investments depend in part on the types of collateral underlying the CLO, CDO or CBO and
the class or tranche in which the Fund invests, with certain classes or tranches being subject to heightened risks.
CLO Subordinated
Notes Risk
The Fund
may invest in any portion of the capital structure of CLOs (including the subordinated, residual and deep mezzanine debt tranches). The
most senior tranches have the lowest yield but
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the lowest
level of risk relative to other tranches, as they are senior in priority to the more junior tranches with respect to payments made by
the CLO. Conversely, the most subordinated tranches have the highest potential yield relative to other tranches but also the highest
level of risk relative to the other tranches, as they are the lowest in the priority of payments. Thus, losses on underlying assets are
borne first by the holders of the most subordinate tranche, followed by the second-most subordinated tranche, and so forth. A CLO may
experience substantial losses attributable to loan defaults or sales of underlying assets at a loss (due to a decline in market value
of such assets or otherwise). The Funds investment in a CLO may decrease in market value because of, among other developments,
(i) loan defaults or credit impairment; (ii) losses that exceed the subordinate tranches; (iii) an event of default occurring under a
CLO, which could lead to acceleration and/or liquidation of the assets at a loss; (iv) market anticipation of defaults; (v) investor
aversion to CLO securities as a class; and (vi) poor performance of the CLOs manager. These risks may be magnified depending on
the tranche of CLO securities in which the Fund invests. For example, investments in a junior tranche of CLO securities will likely be
more sensitive to loan defaults or credit impairment than investments in more senior tranches. Senior tranches are also subject to the
risk that junior tranches may disappear, eliminating the protection such junior tranches normally provide more senior tranches. In addition,
the subordinated tranche does not receive ratings and is considered the riskiest portion of the capital structure of a CLO. The subordinated
tranche is junior in priority of payment to the more senior tranches of the CLO and is subject to certain payment restrictions. As a
result, the subordinated tranche bears the bulk of defaults from the loans in the CLO. In addition, the subordinated tranche generally
has only limited voting rights and generally does not benefit from any creditors rights or ability to exercise remedies under the
indenture governing the CLO notes. Certain mezzanine tranches in which the Fund may invest may also be subject to certain risks similar
to risks associated with investment in the subordinated tranche.
The subordinated
tranche is unsecured and ranks behind all of the secured creditors, known or unknown, of the CLO issuer, including the holders of the
secured notes it has issued. Consequently, to the extent that the value of the issuers portfolio of loan investments has been reduced
as a result of conditions in the credit markets, defaulted loans, capital gains and losses on the underlying assets, prepayment or changes
in interest rates, the value of the subordinated tranche realized at redemption could be reduced. If a CLO breaches certain tests set
forth in the CLOs indenture, excess cash flow that would otherwise be available for distribution to the subordinated tranche investors
is diverted to prepay CLO debt investors in order of seniority until such time as the covenant breach is cured. If the covenant breach
is not or cannot be cured, the subordinated tranche investors (and potentially other investors in lower priority rated tranches) may
experience a partial or total loss of their investment. Accordingly, the subordinated tranche may not be paid in full and may be more
vulnerable to loss, including up to 100% loss. At the time of issuance, the subordinated tranche of a CLO is typically under-collateralized
in that the liabilities of a CLO at inception exceed its total assets.
The leveraged
nature of subordinated notes may magnify the adverse impact on the subordinated notes of changes in the market value of the investments
held by the issuer, changes in the distributions on those investments, defaults and recoveries on those investments, capital gains and
losses on those investments, prepayments on those investments and availability, prices and interest rates of those investments.
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Subordinated
notes are not guaranteed by another party. There can be no assurance that distributions on the assets held by the CLO will be sufficient
to make any distributions or that the yield on the subordinated notes will meet the Funds expectations. Investments in the subordinated
tranche of a CLO are generally less liquid than CLO debt tranches and subject to extensive transfer restrictions, and there may be no
market for subordinated notes. Therefore, the Fund may be required to hold subordinated notes for an indefinite period of time or until
their stated maturity. Certain mezzanine tranches in which the Fund may invest may also be subject to certain risks similar to risks
associated with investment in the subordinated tranche.
Risks
Associated with Risk-Linked Securities
RLS are a
form of derivative issued by insurance companies and insurance-related special purpose vehicles that apply securitization techniques
to catastrophic property and casualty damages. Unlike other insurable low-severity, high-probability events (such as auto collision coverage),
the insurance risk of which can be diversified by writing large numbers of similar policies, the holders of a typical RLS are exposed
to the risks from high-severity, low-probability events such as that posed by major earthquakes or hurricanes. RLS represent a method
of reinsurance, by which insurance companies transfer their own portfolio risk to other reinsurance companies and, in the case of RLS,
to the capital markets. A typical RLS provides for income and return of capital similar to other fixed-income investments, but involves
full or partial default (or loss) if losses resulting from a certain catastrophe exceeded a predetermined amount. In essence, investors
invest funds in RLS and if a catastrophe occurs that triggers the RLS, investors may lose some or all of the capital invested.
In the case of an event, the funds are paid to the bond sponsoran insurer, reinsurer or corporationto cover losses. In return,
the bond sponsors pay interest to investors for this catastrophe protection. RLS can be structured to pay-off on three types of variablesinsurance-industry
catastrophe loss indices, insure-specific catastrophe losses and parametric indices based on the physical characteristics of catastrophic
events. Such variables are difficult to predict or model, and the risk and potential return profiles of RLS may be difficult to assess. No
active trading market may exist for certain RLS, which may impair the ability of the Fund to realize full value in the event of the need
to liquidate such assets.
Risks
Associated with Structured Notes
Investments
in structured notes involve risks associated with the issuer of the note and the reference instrument. Where the Funds investments
in structured notes are based upon the movement of one or more factors, including currency exchange rates, interest rates, referenced
bonds and stock indices, depending on the factor used and the use of multipliers or deflators, changes in interest rates and movement
of the factor may cause significant price fluctuations. Additionally, changes in the reference instrument or security may cause the interest
rate on the structured note to be reduced to zero, and any further changes in the reference instrument may then reduce the principal
amount payable on maturity. Structured notes may be less liquid than other types of securities and more volatile than the reference instrument
or security underlying the note.
Senior
Loans Risk
The Fund
may invest in senior secured floating rate Loans made to corporations and other nongovernmental entities and issuers (Senior Loans).
Senior Loans typically hold the most senior position in the capital structure of the issuing entity, are typically secured with specific
collateral and typically have a claim on the assets of the borrower, including stock owned by the borrower in
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its subsidiaries,
that is senior to that held by junior lien creditors, subordinated debt holders and stockholders of the borrower. The Funds investments
in Senior Loans are typically below-investment grade and are considered speculative because of the credit risk of the applicable issuer.
There is
less readily-available, reliable information about most Senior Loans than is the case for many other types of securities. In addition,
there is rarely a minimum rating or other independent evaluation of a borrower or its securities, and GPIM relies primarily on its own
evaluation of a borrowers credit quality rather than on any available independent sources. As a result, the Fund is particularly
dependent on the analytical abilities of GPIM with respect to investments in Senior Loans. GPIMs judgment about the credit quality
of a borrower may be wrong.
The risks
associated with Senior Loans of below-investment grade quality are similar to the risks of other lower grade Income Securities, although
Senior Loans are typically senior in payment priority and secured on a senior priority basis, in contrast to subordinated and unsecured
Income Securities.
Senior Loans
higher priority has historically resulted in generally higher recoveries in the event of a corporate reorganization. In addition, because
their interest payments are typically adjusted for changes in short-term interest rates, investments in Senior Loans generally have less
interest rate risk than certain other lower grade Income Securities, which may have fixed interest rates. The Funds investments
in Senior Loans are typically below-investment grade and are considered speculative because of the credit risk of their issuers. Such
companies are more likely to default on their payments of interest and principal owed to the Fund, and such defaults could reduce the
Funds NAV and income distributions. Further, transactions in Senior Loans typically settle on a delayed basis and may take longer
than seven days toffsettle. As a result, the Fund may receive the proceeds from a sale of a Senior Loan on a delayed basis which may affect the Funds ability to repay debt, to pay dividends, to pay expenses, or to take advantage of new investment opportunities. An
economic downturn generally leads to a higher non-payment rate, and a Senior Loan may lose significant value before a default occurs.
Moreover, any specific collateral used to secure a Senior Loan may decline in value or become illiquid, which would adversely affect the
Senior Loans value.
Economic
and other events (whether real or perceived) can reduce the demand for certain Senior Loans or Senior Loans generally, which may reduce
market prices of the Senior Loans and cause the Funds NAV per share to fall or otherwise adversely impact the Funds investments
in Senior Loans. The frequency and magnitude of such changes cannot be predicted. Loans and other debt instruments are also subject to
the risk of price declines due to increases in prevailing interest rates, although floating-rate debt instruments are substantially less
exposed to this risk than fixed-rate debt instruments. Interest rate changes may also increase prepayments of debt obligations and require
the Fund to invest assets at lower yields. During periods of deteriorating economic conditions, such as recessions or periods of rising
unemployment, or changing interest rates (notably increases), delinquencies and losses generally increase, sometimes dramatically, with
respect to obligations under such loans. An economic downturn or individual corporate developments could adversely affect the market for
these instruments and reduce the Funds ability to sell these instruments at an advantageous time or price. An economic downturn
would generally lead to a higher non-payment rate, and a Senior Loan may lose significant market value before a default occurs.
No active
trading market may exist for certain Senior Loans, which may impair the ability of the Fund to realize full value in the event of the
need to liquidate such assets and normally make it more
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difficult to
value Senior Loans (particularly those that are illiquid). Adverse market conditions may impair the liquidity of some actively traded
Senior Loans, meaning that the Fund may not be able to sell them quickly at a desirable price. To the extent that a secondary market
does exist for certain Senior Loans, the market may be subject to irregular trading activity, wide bid/ask spreads and extended trade
settlement periods.
Although
the Senior Loans in which the Fund will invest generally will be secured by specific collateral, there can be no assurance that liquidation
of such collateral would satisfy the borrowers obligation in the event of non-payment of scheduled interest or principal or that
such collateral could be readily liquidated. In the event of the bankruptcy of a borrower, the Fund could experience delays or limitations
with respect to its ability to realize the benefits of the collateral securing a Senior Loan. If the terms of a Senior Loan do not require
the borrower to pledge additional collateral in the event of a decline in the value of the already pledged collateral, the Fund will
be exposed to the risk that the value of the collateral will not at all times equal or exceed the amount of the borrowers obligations
under the Senior Loans. To the extent that a Senior Loan is collateralized by stock in the borrower or its subsidiaries, such stock may
lose all of its value in the event of the bankruptcy of the borrower. Such Senior Loans involve a greater risk of loss or illiquidity.
Some Senior Loans are subject to the risk that a court, pursuant to fraudulent conveyance or other similar laws, could subordinate or
otherwise adversely affect the priority of the Senior Loans to presently existing or future indebtedness of the borrower or could take
other action detrimental to lenders, including the Fund. Such court action could under certain circumstances include invalidation of
Senior Loans.
Senior Loans
are subject to legislative risk. If legislation or state or federal regulations impose additional requirements or restrictions on the
ability of financial institutions to make loans, the availability of Senior Loans for investment by the Fund may be adversely affected.
In addition, such requirements or restrictions could reduce or eliminate sources of financing for certain borrowers. This could increase
the risk of default. If legislation or federal or state regulations require financial institutions to increase their capital requirements
in order to make or hold certain debt investments, this may cause financial institutions to dispose of Senior Loans that are considered
highly levered transactions. Such sales could result in prices that, in the opinion of the Adviser, do not represent fair value. If the
Fund attempts to sell a Senior Loan at a time when a financial institution is engaging in such a sale, the price the Fund could receive
for the Senior Loan may be adversely affected.
The Funds
investments in Senior Loans may be subject to lender liability risk. Lender liability refers to a variety of legal theories generally
founded on the premise that a lender has violated a duty of good faith, commercial reasonableness and fair dealing or a similar duty
owed to the borrower or has assumed an excessive degree of control over the borrower resulting in the creation of a fiduciary duty owed
to the borrower or its other creditors or shareholders. Because of the nature of its investments, the Fund may be subject to allegations
of lender liability. In addition, under common law principles that in some cases form the basis for lender liability claims, a court
may elect to subordinate the claim of an offending lender or bondholder (or group of offending lenders or bondholders) to the claims of
a disadvantaged creditor (or group of creditors).
Economic
exposure to Senior Loans through the use of derivatives transactions may involve greater risks than if the Fund had invested in the Senior
Loan interest directly during a primary distribution or through assignments or participations in a loan acquired in secondary markets
since, in addition to the risks described above, derivatives transactions to gain exposure to Senior Loans may be
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subject to
leverage risk and greater illiquidity risk, counterparty risk, valuation risk and other risks associated with derivatives discussed herein.
Second
Lien Loans Risk
The Fund
may invest in second lien secured floating rate Loans made by public and private corporations and other non-governmental
entities and issuers for a variety of purposes (Second Lien Loans). Second Lien Loans are typically second in right of payment
and/or second in right of priority with respect to collateral remedies to one or more Senior Loans of the related borrower. Second Lien
Loans are subject to the same risks associated with investment in Senior Loans and other lower grade Income Securities. However, Second
Lien Loans are second in right of payment and/or second in right of priority with respect to collateral remedies to Senior Loans and
therefore are subject to the additional risk that the cash flow of the borrower and/or the value of any property securing the Loan may
be insufficient to meet scheduled payments or otherwise be available to repay the Loan after giving effect to payments in respect of a Senior
Loan, including payments made with the proceeds of any property securing the Loan and any senior secured obligations of the borrower.
Second Lien Loans are expected to have greater price volatility and exposure to losses upon default than Senior Loans and may be less
liquid. There is also a possibility that originators will not be able to sell participations in Second Lien Loans, which would create
greater credit risk exposure.
Subordinated
Secured Loans Risk
Subordinated
secured Loans generally are subject to similar risks as those associated with investment in Senior Loans, Second Lien Loans and below-investment
grade securities. However, such loans may rank lower in right of payment than any outstanding Senior Loans, Second Lien Loans or other
debt instruments with higher priority of the borrower and therefore are subject to additional risk that the cash flow of the borrower
and any property securing the loan may be insufficient to meet scheduled payments and repayment of principal in the event of default or
bankruptcy after giving effect to the higher-ranking secured obligations of the borrower. Subordinated secured Loans are expected to have
greater price volatility than Senior Loans and Second Lien Loans and may be less liquid.
Unsecured
Loans Risk
Unsecured
Loans generally are subject to similar risks as those associated with investment in Senior Loans, Second Lien Loans, subordinated secured
Loans and below-investment grade securities. However, because unsecured Loans have lower priority in right of payment to any higher-ranking
obligations of the borrower and are not backed by a security interest in any specific collateral, they are subject to additional risk
that the cash flow of the borrower and available assets may be insufficient to meet scheduled payments and repayment of principal after
giving effect to any higher-ranking obligations of the borrower. Unsecured Loans are expected to have greater price volatility than Senior
Loans, Second Lien Loans and subordinated secured Loans and may be less liquid.
Loans
and Loan Participations and Assignments Risk
The Fund
may invest in loans directly or through participations or assignments. The Fund may purchase Loans on a direct assignment basis from
a participant in the original syndicate of lenders or from subsequent assignees of such interests. The Fund may also purchase, without
limitation, participations in Loans. The purchaser of an assignment typically succeeds to all the rights and
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obligations
of the assigning institution and becomes a lender under the credit agreement with respect to the debt obligation; however, the purchasers
rights can be more restricted than those of the assigning institution, and, in any event, the Fund may not be able to unilaterally enforce
all rights and remedies under the loan and with regard to any associated collateral. The Funds interest in a particular loan and/or
in particular collateral securing a loan may be subordinate to the interests of other creditors of the obligor, which leads to the risk
of subordination to other creditors. A participation typically results in a contractual relationship only with the institution participating
out the interest, not with the borrower. In purchasing participations, the Fund generally will have no right to enforce compliance by
the borrower with the terms of the loan agreement against the borrower, and the Fund may not directly benefit from the collateral supporting
the debt obligation in which it has purchased the participation. As a result, the Fund will be exposed to the credit risk of both the
borrower and the institution selling the participation. Further, in purchasing participations in lending syndicates, the Fund may not
be able to conduct the same due diligence on the borrower with respect to a Loan that the Fund would otherwise conduct. In addition,
as a holder of the participations, the Fund may not have voting rights or inspection rights that the Fund would otherwise have if it
were investing directly in the Loan, which may result in the Fund being exposed to greater credit or fraud risk with respect to the borrower
or the Loan. Lenders selling a participation and other persons inter-positioned between the lender and the Fund with respect to a participation
will likely conduct their principal business activities in the banking, finance and financial services industries. Because the Fund may
invest in participations, the Fund may be more susceptible to economic, political or regulatory occurrences affecting such industries.
Loans are
especially vulnerable to the financial health, or perceived financial health, of the borrower but are also particularly susceptible to
economic and market sentiment such that changes in these conditions or the occurrence of other economic or market events may reduce the
demand for loans, increase the risks associated with such investments and cause their value to decline rapidly and unpredictably. Many
loans and loan interests are subject to legal or contractual restrictions on transfer, resale or assignment that may limit the ability
of the Fund to sell its interest in a loan at an advantageous time or price. The resale, or secondary, market for loans is currently
growing, but may become more limited or more difficult to access, and such changes may be sudden and unpredictable. Transactions in loans
are often subject to long settlement periods (in excess of the standard T+1 days settlement cycle for most securities and often longer
than seven days). As a result, sale proceeds potentially will not be available to the Fund to make additional investments or to use proceeds
to meet its current obligations. The Fund thus is subject to the risk of selling other investments at disadvantageous times or prices
or taking other actions necessary to raise cash to meet its obligations such as borrowing from a bank or holding additional cash, particularly
during periods of unusual market or economic conditions or financial stress. Investments in loans can also be difficult to value accurately
because of, among other factors, limited public information regarding the loan or the borrowers. Risks associated with investments in
loans are increased if the loans are secured by a single asset. Loans may offer a fixed rate or floating rate of interest. Loans may decline
in value if their interest rates do not rise as much or as fast as interest rates in general. For example, the interest rates on floating
rate loans typically adjust only periodically and therefore the interest rate payable under such loans may significantly trail market
interest rates.
The Fund
invests in or is exposed to loans and other similar debt obligations that are sometimes referred to as covenant-lite loans
or obligations (covenant-lite obligations), which are loans
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or other
similar debt obligations that lack financial maintenance covenants or possess fewer or contingent financial maintenance covenants and
other financial protections for lenders and investors. Exposure may also be obtained to covenant-lite obligations through investment
in securitization vehicles and other structured products. Many new, restructured or reissued loans and similar debt obligations may not
feature traditional financial maintenance covenants, which are intended to protect lenders and investors by imposing certain restrictions
and other limitations on a borrowers operations or assets by providing certain information and consent rights to lenders. Covenant-lite
obligations may carry more risk than traditional loans as they allow borrowers to engage in activities that would otherwise be difficult
or impossible under an agreement that is not covenant-lite. The Fund may have fewer rights with respect to covenant-lite obligations,
including fewer protections against the possibility of default and fewer remedies in the event of default as the lender may not have
the opportunity to negotiate with the borrower prior to default. As a result, investments in (or exposure to) covenant-lite obligations
are subject to more risk than investments in (or exposure to) certain other types of obligations. In the event of default, covenant-lite
obligations may exhibit diminished recovery values as the lender may not have the opportunity to negotiate with the borrower prior to
default. The Fund may have a greater risk of loss on investments (or exposure to) in covenant-lite obligations as compared to investments
in traditional loans. In addition, the Fund may receive less or less frequent financial reporting from a borrower under a covenant-lite
obligation, which may result in more limited access to financial information, difficulty evaluating the borrowers financial performance
over time and delays in exercising rights and remedies in the event of a significant financial decline. As a result, investments in or
exposure to covenant-lite obligations are generally subject to more risk than investments that contain traditional financial maintenance
covenants and financial reporting requirements.
In certain
circumstances, the Adviser or its affiliates (including on behalf of clients other than the Fund) or the Fund may be in possession of material
non-public information about a borrower as a result of its ownership of a loan and/or corporate debt security of a borrower. Because
U.S. laws and regulations generally prohibit trading in securities of issuers while in possession of material, non-¬public information,
the Fund might be unable (potentially for a substantial period of time) to trade securities or other instruments issued by the borrower
when it would otherwise be advantageous to do so and, as such, could incur a loss. In circumstances when the Adviser, GPIM or the Fund
determines to avoid or to not receive non-public information about a borrower for loan investments being considered for acquisition by
the Fund or held by the Fund, the Fund may be disadvantaged relative to other investors that do receive such information, and the Fund
may not be able to take advantage of other investment opportunities that it may otherwise have. The Adviser or its affiliates may participate
in the primary and secondary market for loans or other transactions with possible borrowers. As a result, the Fund may be legally restricted
from acquiring some loans and from participating in a restructuring of a loan or other similar instrument. Further, if the Fund, in combination
with other accounts managed by the Adviser or its affiliates, acquires a large portion of a loan, the Funds valuation of its interests
in the loan and the Funds ability to dispose of the loan at favorable times or prices may be adversely affected.
The Fund
is subject to other risks associated with investments in (or exposure to) loans and other similar obligations, including that such loans
or obligations may not be considered securities under federal securities law and, as a result, the Fund may not be entitled
to rely on the anti-fraud
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protections
under the federal securities laws and instead may have to resort to state law and direct claims.
Unfunded
Commitments Risk
Certain of
the loan participations or assignments acquired by the Fund may involve unfunded commitments of the lenders, revolving credit facilities,
delayed draw credit facilities or other investments under which a borrower may from time to time borrow and repay amounts up to the maximum
amount of the facility. In such cases, the Fund would have an obligation to advance its portion of such additional borrowings upon the
terms specified in the loan documentation. Such an obligation may have the effect of requiring the Fund to increase its investment in
a company at a time when it might not be desirable to do so (including at a time when the companys financial condition makes it
unlikely that such amounts will be repaid). These commitments are generally subject to the borrowers meeting certain criteria such as
compliance with covenants and certain operational metrics. The terms of the borrowings and financings subject to commitment are comparable
to the terms of other loans and related investments in the Funds portfolio.
Mezzanine
Investments Risk
The Fund
may invest in certain lower grade securities known as Mezzanine Investments, which are subordinated debt securities that
are generally issued in private placements in connection with an equity security (e.g., with attached warrants) or may be convertible
into equity securities. Mezzanine Investments are subject to the same risks associated with investment in Senior Loans, Second Lien Loans
and other lower grade Income Securities. However, Mezzanine Investments may rank lower in right of payment than any outstanding Senior
Loans and Second Lien Loans of the borrower, or may be unsecured (i.e., not backed by a security interest in any specific collateral)
and are subject to the additional risk that the cash flow of the borrower and available assets may be insufficient to meet scheduled payments
after giving effect to any higher-ranking obligations of the borrower. Mezzanine Investments are expected to have greater price volatility
and exposure to losses upon default than Senior Loans and Second Lien Loans and may be less liquid.
Distressed
and Defaulted Securities Risk
Investments
in the securities of financially distressed issuers involve substantial risks. These securities may present a substantial risk of default
or may be in default at the time of investment. The Fund may incur additional expenses to the extent it is required to seek recovery
upon a default in the payment of principal or interest on its portfolio holdings. In any reorganization or liquidation proceeding relating
to a portfolio company, the Fund may lose its entire investment or may be required to accept cash or securities with a value less than
its original investment. Among the risks inherent in investments in a troubled entity is the fact that it frequently may be difficult to
obtain information as to the true financial condition of such issuer. GPIMs judgment about the credit quality of the issuer and
the relative value and liquidity of its securities may prove to be wrong.
Convertible
Securities Risk
Convertible
securities, debt or preferred equity securities convertible into, or exchangeable for, equity securities, are generally preferred stocks
and other securities, including fixed-income securities and warrants that are convertible into or exercisable for common stock. Convertible
securities generally participate in the appreciation or depreciation of the underlying stock into which they
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are convertible,
but to a lesser degree and are subject to the risks associated with debt and equity securities, including interest rate, market and issuer
risks. For example, if market interest rates rise, the value of a convertible security usually falls. Certain convertible securities
may combine higher or lower current income with options and other features. Warrants are options to buy a stated number of shares of
common stock at a specified price anytime during the life of the warrants (generally, two or more years). Convertible securities may
be lower-rated securities subject to greater levels of credit risk. A convertible security may be converted before it would otherwise
be most appropriate, which may have an adverse effect on the Funds ability to achieve its investment objective.
Synthetic
convertible securities have economic characteristics similar to those of a traditional convertible security due to the combination of
separate securities that possess the two principal characteristics of a traditional convertible security, i.e., an income-producing
security (income-producing component) and the right to acquire an equity security (convertible component). The
income-producing component is achieved by investing in non-convertible, income-producing securities such as bonds, preferred stocks and
money market instruments, which may be represented by derivative instruments.
The convertible
component is achieved by investing in securities or instruments such as warrants or options to buy common stock at a certain exercise
price, or options on a stock index. A simple example of a synthetic convertible security is the combination of a traditional corporate
bond with a warrant to purchase equity securities of the issuer of the bond. The income-producing and convertible components of a synthetic
convertible security may be issued separately by different issuers and at different times.
Preferred
Securities/Preferred Stock Risk
The Fund
may invest in preferred stock, which represents the senior residual interest in the assets of an issuer after meeting all claims, with
priority to corporate income and liquidation payments over the issuers common stock, to the extent proceeds are available after
paying any more senior creditors. As such, preferred stock is inherently riskier than the bonds and other debt instruments of the issuer,
but less risky than its common stock. Preferred stocks may pay fixed or adjustable rates of return. Preferred stock is subject to issuer-specific
and market risks applicable generally to equity securities. Certain preferred stocks contain provisions that allow an issuer under certain
conditions to skip (in the case of non-cumulative preferred stocks) or defer (in the case of cumulative preferred
stocks) dividend payments. Preferred stocks often contain provisions that allow for redemption in the event of certain tax or legal changes
or at the issuers call. Preferred stocks typically do not provide any voting rights, except in cases when dividends are in arrears
beyond a certain time period. There is no assurance that dividends on preferred stocks in which the Fund invests will be declared or
otherwise made payable. If the Fund owns preferred stock that is deferring its distributions, the Fund may be required to report income
for U.S. federal income tax purposes while it is not receiving cash payments corresponding to such income. When interest rates fall below
the rate payable on an issue of preferred stock or for other reasons, the issuer may redeem the preferred stock, generally after an initial
period of call protection in which the stock is not redeemable. Preferred stocks may be significantly less liquid than many other securities,
such as U.S. government securities, corporate debt and common stock. Preferred stock has properties of both an equity and a debt instrument
and is generally considered a hybrid instrument.
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Foreign
Securities Risk
The Fund
may invest up to 30% of its total assets in issuers located outside the United States. Investing in foreign issuers may involve heightened
risks and certain risks not typically associated with investing in securities of U.S. issuers due to increased exposure to foreign economic,
political (including geopolitical), market and legal developments, including favorable or unfavorable changes in currency exchange rates,
exchange control regulations (including currency blockage), expropriation or nationalization of assets, imposition of withholding taxes
on payments, and possible difficulty in obtaining and enforcing judgments against foreign entities. Furthermore, issuers of foreign securities
and obligations are subject to different, often less comprehensive, accounting, reporting and disclosure requirements than domestic issuers,
and may be subject to less extensive and transparent accounting, auditing, recordkeeping, financial reporting and other requirements
which limit the quality and availability of financial information. The securities and obligations of some foreign companies and foreign
markets are less liquid and at times more volatile than comparable U.S. securities, obligations and markets. In addition, such investments
are subject to other adverse diplomatic or geopolitical developments, which may include the imposition of economic or trade sanctions
or other measures by the U.S. or other governments and supranational organizations, changes in trade policies, or conflicts that may
render the holdings illiquid or even worthless. These risks may be more pronounced to the extent that the Fund invests a significant
amount of its assets in companies located in one region and to the extent that the Fund invests in securities of issuers in emerging
markets. The Fund may also invest in U.S. dollar-denominated Income Securities of foreign issuers, which are subject to many of the risks
described above regarding Income Securities of foreign issuers denominated in foreign currencies. These risks are heightened under adverse
economic, market, geopolitical and other conditions.
Investments
in the securities of foreign issuers involve certain considerations and risks not ordinarily associated with investments in securities
of domestic issuers. Investments in foreign securities are generally denominated in foreign currency. As a result, changes in the value
of those currencies compared to the U.S. dollar may affect (positively or negatively) the value of the Funds investments. In addition,
fluctuations in currency exchange fees and restrictions on costs associated with the exchange of currencies may adversely affect the value
of the Funds investments. The values of foreign currencies may be affected by changes in the exchange rates between particular foreign
currencies and the U.S. dollar or by unfavorable currency regulations imposed by foreign governments. If the Fund invests in securities
issued by foreign issuers, the Fund may be subject to these risks even if the investment is denominated in U.S. dollars. Foreign companies
are not generally subject to uniform accounting, auditing and financial standards and requirements comparable to those applicable to
U.S. companies. Foreign securities exchanges, brokers and listed companies may be subject to less government supervision and regulation
that exists in the United States.
Dividend
and interest income may be subject to withholding and other foreign taxes, which may adversely affect the net return on such investments.
There may be difficulty in obtaining or enforcing a court judgment abroad. The governments of certain countries may prohibit or impose
substantial restrictions on foreign investments in their capital markets or in certain industries. In addition, it may be difficult to
effect repatriation of capital invested in certain countries. With respect to certain countries, there are risks of expropriation, confiscatory
taxation, political or social instability or diplomatic developments that could affect assets of the Fund held in foreign countries.
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Economic
sanctions or other similar measures may be, and have been, imposed against certain countries, organizations, companies, entities and/or
individuals. Economic sanctions and other similar governmental actions or developments could, among other things, effectively restrict
or eliminate the Funds ability to purchase or sell certain foreign securities or groups of foreign securities, and thus may make
the Funds investments in such securities less liquid, less valuable or more difficult to value. In addition, as a result of economic
sanctions and other similar governmental actions or developments, the Fund may be forced to sell or otherwise dispose of foreign investments
at inopportune times or prices. The type and severity of sanctions and other similar measures, including counter sanctions and other
retaliatory actions, such as those that have been impacted against Russia and other countries and that may further be imposed could vary
broadly in scope, and their impact is difficult to accurately predict. For example, the imposition of sanctions and other similar measures
likely would, among other things, cause a decline in the value and/or liquidity of securities issued by the sanctioned country or companies
located in or economically tied to the sanctioned country and increase market volatility and disruption in the sanctioned country and
throughout the world. Sanctions and other similar measures could significantly delay or prevent the settlement of securities transactions
or their valuation, and significantly impact the Funds liquidity and performance. Sanctions and other similar measures may be in
place for a substantial period of time and enacted with limited advance notice.
There may
be less publicly available information about a foreign company than a U.S. company. Foreign securities markets may have substantially
less volume than U.S. securities markets and some foreign company securities are less liquid than securities of otherwise comparable
U.S. companies. Foreign markets may be more volatile than U.S. markets and offer less protection to investors. Foreign markets also have
different clearance and settlement procedures that could cause the Fund to encounter difficulties in purchasing and selling securities on
such markets and may result in the Fund missing attractive investment opportunities or experiencing a loss. In addition, a portfolio
that includes foreign securities can expect to have a higher expense ratio because of the increased transaction costs on non-U.S. securities
markets and the increased costs of maintaining the custody of foreign securities. Similar foreign investment risks may apply to futures
contracts and other derivative instruments in which the Fund invests that trade on foreign exchanges. The value of derivative and other
instruments denominated in or that pay revenues in foreign currencies may fluctuate based on changes in the value of those currencies
relative to the U.S. dollar, and a decline in applicable foreign exchange rates could reduce the value of such instruments held by the
Fund. Foreign settlement procedures also may involve additional risks.
American
depositary receipts (ADRs) are receipts issued by United States banks or trust companies in respect of securities of foreign
issuers held on deposit for use in the United States securities markets. While ADRs may not necessarily be denominated in the same currency
as the securities into which they may be converted, many of the risks associated with foreign securities may also apply to ADRs. In addition,
the underlying issuers of certain depositary receipts, particularly unsponsored or unregistered depositary receipts, are under no obligation
to distribute shareholder communications to the holders of such receipts, or to pass through to them any voting rights with respect to
the deposited securities.
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Emerging
Markets Risk
As noted
above, the Fund may invest up to 30% of its total assets in issuers located outside the United States, which may include issuers which
are located in countries considered to be emerging markets, and investments in such securities are considered speculative. Investing
in securities in emerging countries generally entails greater risks than investing in securities in developed countries. Securities issued
by governments or issuers in emerging market countries are more likely to have greater exposure to the risks of investing in foreign
securities and are subject to risks in addition to the risks associated with investing in foreign securities. These risks are elevated
at times based on adverse conditions, including macroeconomic, geopolitical and global health conditions, and these risks include: (i)
less social, political and economic stability (including the lack or inadequacy of the ability to remedy natural or man-made disasters,
such as pandemics or climate change) and potentially more volatile currency exchange rates, currency blockage or transfer restrictions
and currency devaluation; (ii) the small size of and lack of development of the markets for such securities, limited access to investments
in the event of market closures (including due to local holidays), potentially low or nonexistent volume of trading, and less established
financial market operations, which may result in a lack of liquidity, greater price volatility, higher brokerage and other transaction
costs and delay in settlements or otherwise less developed settlement systems, and/ or a higher risk of failed trades or other trading
issues; (iii) national policies (including sanctions programs or tariffs) which may restrict the Funds investment opportunities,
including restrictions on investment in issuers or industries deemed sensitive to national interests, and trade barriers; (iv) foreign
taxation; (v) the absence of developed legal systems, including structures governing private or foreign investment or allowing for judicial
redress (such as limits on rights and remedies available to the Fund or impediments to bringing litigation or enforcing judgments) for
investment losses and injury to private property or otherwise less developed legal systems; (vi) expropriation and nationalization of
private properties; (vii) lower levels of government regulation, which could lead to market manipulation or disruption, and less extensive
and transparent accounting, auditing, recordkeeping, financial reporting and other requirements and standards, which limit the quality,
reliability and availability of financial information and limited information about issuers and securities as well as increased difficulty
in valuation of securities in emerging markets; (viii) high rates of inflation for prolonged periods and rapid interest rate changes;
(ix) dependence on a few key trading partners and heightened sensitivity to adverse political (including geopolitical) or social events
and conditions affecting the global economy and the region where an emerging market is located compared to developed market securities,
which can change suddenly and significantly, and periods of economic, social or political instability; and (x) particular sensitivity
to global economic conditions, including adverse effects stemming from recessions, depressions or other economic crises, or armed conflicts
and other hostilities, or reliance on international or other forms of aid, including trade, taxation and development policies. Furthermore,
foreign investors may be required to register the proceeds of sales and future economic or political crises could lead to price controls,
forced mergers, expropriation or confiscatory taxation, seizure, nationalization or creation of government monopolies. The currencies
of emerging market countries may experience significant declines against the U.S. dollar, and devaluation may occur subsequent to investments
in these currencies by the Fund. Inflation and rapid fluctuations in inflation rates have had, and may continue to have, negative effects
on the economies and securities markets of certain emerging market countries.
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To the extent
that the economy of an emerging market is particularly dependent on one or a few commodities or industries, any adverse events affecting
those particular commodities or industries will likely negatively impact the profitability of issuers economically tied to that emerging
market. In addition, government actions with respect to financial markets and economies in emerging markets or assets and foreign ownership
of emerging market companies could adversely affect trading conditions for, and the values of, emerging market securities or otherwise
negatively impact investments in such securities. Sovereign debt of emerging countries may be in default or present a greater risk of
default, the risk of which is heightened in market environments where interest rates are changing, notably when rates are rising. These
risks are heightened for investments in frontier markets.
GPIM has
broad discretion to identify countries that it considers to qualify as emerging markets. In determining whether a country
is an emerging market, GPIM may take into account specific or general factors that GPIM deems to be relevant, including interest rates,
inflation rates, exchange rates, monetary and fiscal policies, trade and current account balances and/or legal, social and political
developments, as well as whether the country is considered to be emerging or developing by supranational organizations such as the World
Bank, the United Nations or other similar entities. Emerging market countries generally will include countries with low gross national
product per capita and the potential for rapid economic growth and are likely to be located in Africa, Asia, the Middle East, Eastern
and Central Europe and Central and South America. In addition, the impact of the economic and public health situation in emerging market
countries may be greater due to their generally less established healthcare systems and capabilities with respect to fiscal and monetary
policies, which may exacerbate other pre-existing political, social and economic risks.
Foreign
Currency Risk
The value
of securities denominated or quoted in foreign currencies may be adversely affected by fluctuations in the relative currency exchange
rates and by exchange control regulations. The Funds investment performance may be negatively affected by a devaluation of a currency
in which the Funds investments are denominated or quoted. Further, the Funds investment performance may be significantly
affected, either positively or negatively, by currency exchange rates because the U.S. dollar value of securities denominated or quoted
in another currency will increase or decrease in response to changes in the value of such currency in relation to the U.S. dollar. Finally,
the Funds distributions are paid in U.S. dollars, and to the extent the Funds assets are denominated in currencies other
than the U.S. dollar, there is a risk that the value of any distribution from such assets may decrease if the currency in which such
assets or distributions are denominated falls in relation to the value of the U.S. dollar. The Fund currently intends to seek to hedge
its exposures to foreign currencies but may, at the discretion of GPIM, at any time limit or eliminate foreign currency hedging activity.
To the extent the Fund does not hedge (or is unsuccessful in seeking to hedge) its foreign currency risk, the value of the Funds
assets and income could be adversely affected by currency exchange rate movements. The Fund may also use foreign currency transactions
to facilitate portfolio management and to seek to earn income or enhance total return.
Sovereign
Debt Risk
Investments
in sovereign debt securities, such as foreign government debt or foreign treasury bills, involve special risks in addition to those associated
with foreign investment, including the availability of sufficient foreign exchange on the date a payment is due, the relative size of the
debt service burden to the economy as a whole, the government debtors policy towards the International
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Monetary
Fund or international lenders, the political constraints to which the debtor may be subject and other political, social and other local,
regional and global considerations. Periods of economic and political uncertainty may result in the illiquidity and increased price volatility
of sovereign debt securities held by the Fund. The governmental authority that controls the repayment of sovereign debt may be unwilling
or unable to repay the principal and/or interest when due in accordance with the terms of such securities due to the extent of its foreign
reserves. If an issuer of sovereign debt defaults on payments of principal and/or interest, the Fund may have limited or no legal recourse
against the issuer and/or guarantor. In certain cases, remedies must be pursued in the courts of the defaulting party itself. For example,
there may be no bankruptcy or similar proceedings through which all or part of the sovereign debt that a governmental entity has not
repaid may be collected. There can be no assurance that the holders of commercial bank loans to the same sovereign entity may not contest
payments to the holders of sovereign debt in the event of default under commercial bank loan agreements.
Certain issuers
of sovereign debt may be dependent on disbursements from foreign governments, multilateral agencies and others abroad to reduce principal
and interest arrearages on their debt. Such disbursements may be conditioned upon a debtors implementation of economic reforms
and/ or economic performance and the timely service of such debtors obligations. A failure on the part of the debtor to implement
such reforms, achieve such levels of economic performance or repay principal or interest when due may result in the cancellation of such
third parties commitments to lend funds to the debtor, which may impair the debtors ability to service its debts on a timely
basis. Foreign investment in certain sovereign debt is restricted or controlled to varying degrees, including requiring governmental
approval for the repatriation of income, capital or proceeds of sales by foreign investors.
These restrictions
or controls may at times limit or preclude foreign investment in certain sovereign debt and increase the costs and expenses of the Fund.
As a holder
of sovereign debt, the Fund may be requested to participate in the restructuring of such sovereign indebtedness, including the rescheduling
of payments and the extension of further loans to debtors, which may adversely affect the Fund. There can be no assurance that such restructuring
will result in the repayment of all or part of the debt. Sovereign debt risk is greater for issuers in emerging markets than issuers
in developed countries and certain emerging market countries have at times declared moratoria on the payment of principal and interest
on external debt. Certain emerging market countries have at times experienced difficulty in servicing their sovereign debt on a timely
basis, which has led to defaults and the restructuring of certain indebtedness.
The Fund
may also invest in securities or other obligations issued or backed by supranational organizations, which are international organizations
that are designated or supported by government entities or banking institutions typically to promote economic reconstruction or development.
These obligations are subject to the risk that the government(s) on whose support the organization depends may be unable or unwilling
to provide the necessary support. With respect to both sovereign and supranational obligations, the Fund may have little recourse against
the foreign government or supranational organization that issues or backs the obligation in the event of default. These obligations may
be denominated in foreign currencies and the prices of these obligations may be more volatile than corporate debt obligations.
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Common
Equity Securities Risk
The Fund
may invest up to 50% of its total assets in Common Equity Securities. An adverse event, such as an unfavorable earnings report or other
corporate development, may depress the value of a particular common stock held by the Fund. Also, the prices of equity securities are
sensitive to general movements in the stock market, so a drop in the stock market may depress the prices of equity securities to which
the Fund has exposure. Common Equity Securities prices fluctuate for a number of reasons, including changes in investors
perceptions of the financial condition of an issuer, the general condition of the relevant stock market and the economy overall, and
broader domestic and international political and economic events. The prices of Common Equity Securities may also decline due to factors
which affect a particular industry or industries, such as labor shortages or increased production and other costs and competitive conditions
within an industry. The value of a particular common stock held by the Fund may decline for a number of other reasons which directly
relate to the issuer, such as management performance, financial leverage, the issuers historical and prospective earnings, the
value of its assets and reduced demand for its goods and services. In addition, common stock prices may be particularly sensitive to
rising interest rates, as the cost of capital rises and borrowing costs increase. At times, stock markets can be volatile and stock prices
can change substantially and suddenly. While broad market measures of Common Equity Securities have historically generated higher average
returns than most Income Securities, Common Equity Securities have also experienced significantly more volatility in those returns. Common
Equity Securities in which the Fund may invest are structurally subordinated to preferred stock, bonds and other debt instruments in
a companys capital structure in terms of priority to corporate income and are therefore inherently riskier than preferred stock
or debt instruments of such issuers. Dividends on Common Equity Securities which the Fund may hold are not fixed but are declared at
the discretion of the issuers board of directors. There is no guarantee that the issuers of the Common Equity Securities in which
the Fund invests will declare dividends in the future or that, if declared, they will remain at current levels or increase over time.
Equity securities have experienced heightened volatility over certain periods and, therefore, the Funds investments in equity securities
are subject to heightened risks related to volatility and would likely also be subject to such risks in adverse market, economic, geopolitical
and public health conditions in the future.
New Issues
Risk
New
Issues are initial public offerings (IPOs) of U.S. equity securities. There is no assurance that the Fund will have
access to profitable IPOs, and therefore investors should not rely on any potential gains from IPOs as an indication of future performance
of the Fund. The investment performance of the Fund during periods when it is unable to invest significantly or at all in IPOs may be
lower than during periods when the Fund is able to do so. Securities issued in IPOs are subject to many of the same risks as investing
in companies with smaller market capitalizations. Securities issued in IPOs have no trading history, and information about the companies
may be available for very limited periods. In addition, some companies in IPOs are involved in relatively new industries or lines of
business, which may not be widely understood by investors. Some of these companies may be undercapitalized or regarded as developmental
stage companies, without revenues or operating income, or the near-term prospects of achieving them. Further, the prices of securities
sold in IPOs may be highly volatile or may decline shortly after the IPO. When an IPO is brought to the market, availability may be limited
and the Fund may not be able to buy any shares at the offering price, or, if it is able to buy shares, it may not be able to buy as many
shares at the offering price as it would
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like. The
limited number of shares available for trading in some IPOs may make it more difficult for the Fund to buy or sell significant amounts
of shares. As a result, the Funds investments in such securities are subject to considerable risk.
Risks
Associated with the Funds Covered Call Option Strategy and Put Options
The ability
of the Fund to achieve its investment objective is partially dependent on the successful implementation of its Covered Call Option Strategy.
There are significant differences between the securities and options markets that could result in an imperfect correlation between these
markets, causing a given transaction not to achieve its objectives. A decision as to whether, when and how to use options involves the
exercise of skills and judgment, and even a well-conceived transaction may be unsuccessful to some degree because of market behavior
or unexpected events.
The Fund
may write call options on individual securities, securities indices, ETFs and baskets of securities. The buyer of an option acquires
the right, but not the obligation, to buy (a call option) or sell (a put option) a certain quantity of a security (the underlying security)
or instrument, including a futures contract or swap, at a certain price up to a specified point in time or on expiration, depending on
the terms. The seller or writer of an option is obligated to sell (a call option) or buy (a put option) the underlying instrument upon
exercise of the option. A call option is covered if the Fund owns the security or instrument underlying the call or has an
absolute right to acquire the security or instrument without additional cash consideration (or, if additional cash consideration is required,
cash or assets determined to be liquid by GPIM in such amount are designated or earmarked on the Funds books and records). A call
option is also covered if the Fund holds a call on the same security as the call written where the exercise price of the call held is
(i) equal to or less than the exercise price of the call written, or (ii) greater than the exercise price of the call written, provided
the difference is maintained by the Fund in designated assets determined to be liquid by GPIM as described above. As a seller of covered
call options, the Fund faces the risk that it will forgo the opportunity to profit from increases in the market value of the security
or instrument covering the call option during an options life. As the Fund writes covered calls over more of its portfolio, its
ability to benefit from capital appreciation becomes more limited. For certain types of options, the writer of the option will have no
control over the time when it may be required to fulfill its obligation under the option.
There can
be no assurance that a liquid market will exist if and when the Fund seeks to close out an option position. Once an option writer has
received an exercise notice, it cannot effect a closing purchase transaction in order to terminate its obligation under the option and
must deliver the underlying security or instrument at the exercise price.
The Fund
may purchase and write exchange-listed and OTC options. Options written by the Fund with respect to non-U.S. securities, indices or sectors
and other instruments generally will be OTC options. OTC options differ from exchange-listed options in several respects. They are transacted
directly with the dealers and not with a clearing corporation, and therefore entail the risk of non-performance by the dealer. OTC options
are available for a greater variety of securities and for a wider range of expiration dates and exercise prices than are available for
exchange-traded options. Because OTC options are not traded on an exchange, pricing is done normally by reference to information from
a market maker. OTC options are subject to heightened counterparty, credit, liquidity and valuation risks. The Funds ability to
terminate OTC options is more limited than with exchange-traded options and may involve the risk that broker-dealers participating in
such
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transactions
will not fulfill their obligations. The hours of trading for options may not conform to the hours during which the underlying securities
are traded. The Funds options transactions will be subject to limitations established by each of the exchanges, boards of trade
or other trading facilities on which such options are traded.
The Fund
may also purchase put options and write covered put options. A put option written by the Fund on a security is covered if
the Fund designates or earmarks assets determined to be liquid by GPIM equal to the exercise price. A put option is also covered if the
Fund holds a put on the same security as the put written where the exercise price of the put held is (i) equal to or greater than the
exercise price of the put written, or (ii) less than the exercise price of the put written, provided the difference is maintained by the
Fund in designated or earmarked assets determined to be liquid by GPIM. As a seller of covered put options, the Fund bears the risk of
loss if the value of the underlying security or instrument declines below the exercise price minus the put premium. If the option is
exercised, the Fund could incur a loss if it is required to purchase the security or instrument underlying the put option at a price
greater than the market price of the security or instrument at the time of exercise plus the put premium the Fund received when it wrote
the option. The Funds potential gain in writing a covered put option is limited to distributions earned on the liquid assets securing
the put option plus the premium received from the purchaser of the put option; however, the Fund risks a loss equal to the entire exercise
price of the option minus the put premium.
Risks
of Real Property Asset Companies
The Fund
may invest in Income Securities and Common Equity Securities issued by Real Property Asset Companies.
Real Estate
Risks. Because of the Funds ability to make indirect investments in real estate and in the securities of companies in the real
estate industry, it is subject to risks associated with the direct ownership of real estate and the real estate market generally, such
as the possible decline in the value of (or income generated by) the real estate, variations in rental income, fluctuations in occupancy
levels and demand for properties or real estate-related services, and changes in the availability or terms of mortgages and other financing
that may render the sale or refinancing of properties difficult or unattractive. Real estate values or income generated by real estate
may be affected by many additional factors and risks, including, but not limited to: losses from casualty or condemnation; changes in
national, state and local economic conditions and real estate market conditions (such as an oversupply of real estate for rent or sale
or vacancies, potentially for extended periods); changes in real estate values and rental income, rising interest rates (which could
result in higher costs of capital); changes in building, environmental, zoning and other regulations and related costs; possible environmental
liabilities; regulatory limitations on rents; increased property taxes and operating expenses; the attractiveness, type and location
of the property; reduced demand for commercial and office space as well as increased maintenance or tenant improvement costs or other costs
to convert properties for other uses; default risk and credit quality of tenants and borrowers, the financial condition of tenants, buyers
and sellers, and the inability to re-lease space on attractive terms or to obtain mortgage financing on a timely basis at all; overbuilding
and intense competition, including for real estate and related services and technology; construction delays and the supply of real estate
generally; extended vacancies of properties due to economic conditions and tenant bankruptcies; and catastrophic events (such as public
health emergencies, earthquakes, hurricanes and terrorist acts) and other public crises and relief responses thereto. Investments in
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real estate
companies and companies related to the real estate industry are also subject to risks associated with the management skill, insurance
coverage and credit worthiness of the issuer. Real estate companies tend to have micro-, small- or mid-capitalization, making their securities
more volatile and less liquid than those of companies with larger-capitalizations, and may be subject to heightened cash flow sensitivity.
In addition, the real estate industry has historically been cyclical and particularly sensitive to economic downturns and other events
that limit demand for real estate, which would adversely impact the value of real estate investments.
Real estate
income and values and the real estate market also may be greatly affected by demographic trends, such as population shifts or changing
tastes, preferences (such as remote work arrangements) and values, or increasing vacancies or declining rents or property values resulting
from legal, cultural, technological, global or local economic developments, as well as reduced demand for properties. If the Funds
real estate-related investments are concentrated in one geographic area or in one property type, the Fund will be particularly subject
to the risks associated with that area or property type or related real estate conditions. Similarly, real estate industry companies
whose underlying properties are concentrated in a particular industry or geographic region are also particularly subject to risks affecting
such industries and regions or related real estate conditions.
The value
or price of real estate company securities may drop because of, among other adverse events, defaults by tenants and the failure of borrowers
to repay their loans and the inability to obtain financing either on favorable terms or at all. Changing interest rates and credit quality
requirements will also affect real estate companies, including their cash flow and their ability to meet capital needs. If real estate
properties do not generate sufficient income to meet operating expenses, including, where applicable, debt service, ground lease payments,
tenant improvements, third-party leasing commissions and other capital expenditures, the income and ability (or perceived ability) of
a real estate company to make payments of interest and principal on their loans will be adversely affected, which, as a result, may adversely
affect the Fund. Many real estate companies, and companies operating in the real estate industry, utilize leverage, which increases investment
risk and could adversely affect a companys operations and market value in periods of rising interest rates.
Energy
Companies Risk
Energy Companies are subject to certain
risks, including, but not limited to, the following:
Catastrophic Event Risk Energy
companies are subject to many dangers inherent in the production, exploration, management, transportation, processing and distribution
of natural gas, natural gas liquids, crude oil, refined petroleum and petroleum products and other hydrocarbons. These dangers include
leaks, fires, explosions, damage to facilities and equipment resulting from natural disasters, inadvertent damage to facilities and equipment,
cyber-attacks and terrorist acts. These dangers give rise to risks of substantial losses as a result of loss or destruction of commodity
reserves; damage to or destruction of property, facilities and equipment; pollution and environmental damage; and personal injury or
loss of life and could adversely affect such companies financial conditions and ability to pay distributions to shareholders.
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Energy
Commodity Price Risk
Energy companies
may be adversely affected by fluctuations in the prices of energy commodities, which can be volatile at times, and by the levels of supply
and demand for energy commodities.
Energy
Sector Regulatory Risk
Energy companies
are subject to significant regulation of nearly every aspect of their operations by federal, state and local governmental agencies. Stricter
laws or regulations or stricter enforcement policies with respect to existing regulations would likely increase the costs of regulatory
compliance and could have an adverse effect on the financial performance of energy companies.
Industry-Specific
Risk
The energy
sector involves a number of industry-specific risks including cyclical industry risk, fracturing risk, independent contractor risk, and
oil price volatility risk. The energy industry is cyclical and from time to time may experience a shortage of drilling rigs, equipment,
supplies, or qualified personnel, or due to significant demand, such services may not be available on commercially reasonable terms.
Independent contractors are typically used in operations in the energy industry and there is a risk that such contractors will not operate
in accordance with its own safety standards or other policies. In addition, pipeline companies are subject to the demand for natural
gas, natural gas liquids, crude oil or refined products in the markets they serve, changes in the availability of products for gathering,
transportation, processing or sale. In addition, the further adoption of renewable energies may adversely impact other types of energy
companies or the prices of other types of energy sources.
Natural
Resources and Commodities Risks
Because of the Funds ability
to invest in and/or obtain exposure to natural resources and physical commodities, and in Real Property Asset Companies engaged in oil
and gas exploration and production, gold and other precious metals, steel and iron ore production, energy services, forest products,
chemicals, coal, alternative energy sources and environmental services, as well as related transportation companies and equipment manufacturers,
the Fund is subject to special risks associated with such investment, which include (among others):
Supply and Demand Risk A
decrease in the production of a physical commodity or a decrease in the volume of such commodity available for transportation, mining,
processing, storage or distribution may adversely impact the financial performance of an energy, natural resources, basic materials or
an associated company that devotes a portion of its business to that commodity. Production declines and volume decreases could be caused
by various factors, including catastrophic events affecting production, depletion of resources, labor difficulties, environmental proceedings,
increased regulations, equipment failures and unexpected maintenance problems, import supply disruption, governmental expropriation,
political upheaval or conflicts, supply chain disruptions or increased competition from alternative energy sources or commodity prices.
Alternatively, a sustained decline in demand for such commodities could also adversely affect the financial performance of energy, natural
resources, basic materials or associated companies. Factors that could lead to a decline in demand include economic recession or other
adverse economic conditions, higher taxes on commodities or increased governmental regulations, increases in fuel economy, consumer shifts
to the use of alternative commodities or fuel sources, changes in commodity prices, or weather.
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Depletion
and Exploration Risk
Many energy,
natural resources, basic materials and associated companies are engaged in the production of one or more physical commodities or are
engaged in transporting, storing, distributing and processing these items on behalf of shippers. To maintain or grow their revenues,
these companies or their customers need to maintain or expand their reserves through exploration of new sources of supply, through the
development of existing sources, through acquisitions or through long-term contracts to acquire reserves. The financial performance of
energy, natural resources, basic materials and associated companies may be adversely affected if they, or the companies to whom they provide
the service, are unable to cost-effectively acquire additional reserves sufficient to replace the natural decline.
Operational
and Geological Risk
Energy, natural
resources, basic materials companies and associated companies are subject to specific operational and geological risks in addition to
normal business and management risks. Some examples of operational risks include mine rock falls, underground explosions and pit wall
failures. Geological risk would include faulting of the ore body and misinterpretation of geotechnical data.
Regulatory
Risk
Energy, natural
resources, basic materials and associated companies are subject to significant federal, state and local government regulation in virtually
every aspect of their operations, including how facilities are constructed, maintained and operated, environmental and safety controls,
and the prices they may charge for the products and services they provide. Various governmental authorities have the power to enforce
compliance with these regulations and the permits issued under them, and violators are subject to administrative, civil and criminal
penalties, including civil fines, injunctions or both. Stricter laws, regulations or enforcement policies could be enacted in the future
which would likely increase compliance costs and may adversely affect the operations and financial performance of energy, natural resources
and basic materials companies.
Commodity
Pricing Risk
The operations
and financial performance of energy, natural resources and basic materials companies may be directly affected by commodity prices, especially
those energy, natural resources, basic materials and associated companies that own the underlying commodity. Commodity prices fluctuate
for several reasons, including changes in market and economic conditions, the impact of weather on demand, levels of domestic production
and imported commodities, energy conservation, domestic and foreign governmental regulation and taxation, the availability of local,
intrastate and interstate transportation systems, governmental expropriation and political upheaval and conflicts. Volatility of commodity
prices, which may lead to a reduction in production or supply, may also negatively impact the performance of energy, natural resources,
basic materials and associated companies that are solely involved in the transportation, processing, storing, distribution or marketing
of commodities. Volatility of commodity prices may also make it more difficult for energy, natural resources, basic materials and associated
companies to raise capital to the extent the market perceives that their performance may be directly or indirectly tied to commodity
prices.
Precious
Metals Pricing Risk
The Fund
may invest in companies that have a material exposure to precious metals, such as gold, silver and platinum and precious metals related
instruments and securities. The price of precious metals can fluctuate widely and is affected by numerous factors, including: global or
regional
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political,
economic or financial events and situations; investors expectations with respect to the future rates of inflation and movements
in world equity, financial and property markets; global supply and demand for specific precious metals, which is influenced by such factors
as mine production and net forward selling activities by precious metals producers, central bank purchases and sales, jewelry demand
and the supply of recycled jewelry, net investment demand and industrial demand, net of recycling; interest rates and currency exchange
rates, particularly the strength of and confidence in the U.S. dollar; and investment and trading activities of hedge funds, commodity
funds and other speculators. The Fund does not intend to hold physical precious metals.
These commodities
risks may be incurred indirectly through the Subsidiary, as discussed below.
Risks
of Personal Property Asset Companies
The Fund
may invest in Income Securities and Common Equity Securities issued by Personal Property Asset Companies. Personal (as opposed to real)
property includes any tangible, movable property or asset. The Fund will typically seek to invest in Income Securities and Common Equity
Securities of Personal Property Asset Companies that are associated with personal property assets with investment performance that is
not highly correlated with traditional market indexes, such as special situation transportation assets (e.g., railcars, airplanes
and ships) and collectibles (e.g., antiques, wine and fine art).
Special
Situation Transportation Assets Risks
The risks
of special situation transportation assets include (among others):
Cyclicality of Supply and Demand for Transportation Assets Risk
The transportation
asset leasing and sales industry has periodically experienced cycles of oversupply and undersupply of railcars, aircraft and ships. The
oversupply of a specific type of transportation asset in the market is likely to depress the values of that type of transportation asset.
The supply and demand of transportation assets is affected by various cyclical factors, including: (i) passenger and cargo demand; (ii)
commercial demand for certain types of transportation assets, (iii) fuel costs and general economic conditions affecting lessees
operations; (iv) government regulation, including operating restrictions; (v) interest rates; (vi) the availability of credit; (vii)
manufacturer production level; (viii) retirement and obsolescence of certain classes of transportation assets; (ix) re-introduction into
service of transportation assets previously in storage; and (x) traffic control infrastructure constraints.
Risk of
Decline in Value of Transportation Assets and Rental Values
In addition
to factors linked to the railway, aviation and shipping industries, other factors that may affect the value of transportation assets,
and thus of the Personal Property Asset Companies in which the Fund invests, include (among others): (i) manufacturers merging or exiting
the industry or ceasing to produce specific types of transportation asset; (ii) the particular maintenance and operating history of the
transportation assets; (iii) the number of operators using that type of transportation asset; (iv) whether the railcar, aircraft or ship
is subject to a lease; (v) any regulatory and legal requirements that must be satisfied before the transportation asset can be operated,
sold or re-¬leased, (vi) compatibility of parts and layout of the transportation asset among operators of particular asset; and
(vii) any renegotiation of a lease on less favorable terms.
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Technological
Risks
The availability
for sale or lease of new, technologically advanced transportation assets and the imposition of stringent noise, emissions or environmental
regulations may make certain types of transportation assets less desirable in the marketplace and therefore may adversely affect the owners
ability to lease or sell such transportation assets. Consequently, the owner will have to lease or sell many of the transportation assets
close to the end of their useful economic life. The owners ability to manage these technological risks by modifying or selling
transportation assets will likely be limited.
Risks
Relating to Leases of Transportation Assets
Owner/lessors
of transportation assets will typically require lessees of assets to maintain customary and appropriate insurance. There can be no assurance
that the lessees insurance will cover all types of claims that may be asserted against the owner, which could adversely affect the
value of the Funds investment in the Personal Property Asset Company owning such transportation asset. Personal Property Asset
Companies are subject to credit risk of the lessees ability to the provisions of the lease of the transportation asset and supply
chain disruptions. The Personal Property Asset Company needs to release or sell transportation assets as the current leases expire in
order to continue to generate revenues. The ability to re-lease or sell transportation assets depends on general market and competitive
conditions. Some of the competitors of the Personal Property Asset Company may have greater access to financial resources and may have
greater operational flexibility. If the Personal Property Asset Company is not able to re-lease a transportation asset, it may need to
attempt to sell the aircraft to provide funds for its investors, including the Fund.
Collectible
Assets Risks
The risks
of collectible assets include (among others):
Valuation of Collectible Assets Risk
The market
for collectible assets as a financial investment is developing. Collectible assets are typically bought and sold through auction houses,
and estimates of prices of collectible assets at auction are imprecise. Accordingly, collectible assets are difficult to value.
Liquidity
of Collectible Assets Risk
There are
relatively few auction houses in comparison to brokers and dealers of traditional financial assets. The ability to sell collectible assets
is dependent on the demand for particular classes of collectible assets, which demand has been volatile and erratic in the past. There
is no assurance that collectible assets can be sold within a particular timeframe or at the price at which such collectible assets are
valued, which may impair the ability of the Fund to realize full value of Personal Property Asset Companies in the event of the need
to liquidate such assets.
Authenticity
of Collectible Assets Risk
The value
of collectible assets often depends on its rarity or scarcity, or of its attribution as the product of a particular artisan. Collectible
Assets are subject to forgery and to the inabilities to assess the authenticity of the collectible asset, which may significantly impair
the value of the collectible asset.
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High Transaction
and Related Costs Risk
Collectible
assets are typically bought and sold through auction houses, which typically charge commissions to the purchaser and to the seller which
may exceed 20% of the sale price of the collectible asset. In addition, holding collectible assets entails storage and insurance costs,
which may be substantial.
Investment
in the Subsidiary Risk
The Fund
may also invest in commodities (such as precious metals), commodity-linked notes and other commodity-linked derivative instruments, such
as swaps, options, or forward contracts based on the value of commodities or commodities indices and commodity futures, by investing
a portion of the Funds total assets in a wholly-owned subsidiary, which would be organized as a limited company under the laws
of the Cayman Islands (the Subsidiary). The Subsidiary would primarily obtain its commodities exposure by investing in commodities,
commodity-linked notes, and commodity-linked derivative instruments. The Subsidiarys investments in such instruments would be subject
to limits on leverage imposed by the 1940 Act. The Fund must maintain no more than 25% of its total assets in the Subsidiary at the end
of every quarter of its taxable year.
The Funds
investment in the Subsidiary would be expected to provide the Fund with exposure to the global commodities markets, subject to the limitations
of the federal tax requirements and the limits on leverage imposed by the 1940 Act. The Subsidiary may invest in commodity futures, option
and swap contracts, fixed-income securities, foreign securities, pooled investment vehicles, including those that are not registered
pursuant to the 1940 Act, and other investments intended to serve as margin or collateral for the Subsidiarys positions. Investments
in derivatives may make the Subsidiary subject to regulation as a commodity pool. The Commodity Futures Trading Commission (CFTC)
has not passed upon the merits of an investment in the Fund or the Subsidiary, nor has the CFTC passed on the adequacy of this shareholder
report. GPIM will consider whether it is more advantageous for the Fund to invest directly in commodity-linked financial instruments,
such as commodity-linked structured notes, or if the desired exposure can be achieved more efficiently by investing in the Subsidiary,
which would, in turn, purchase and hold commodity-linked financial instruments, such as futures contracts, swaps or options. As a result,
the level of the Funds investment in the Subsidiary may vary based on GPIMs use of different commodity-linked financial instruments.
To the extent
the Subsidiary invests in commodity-linked derivative instruments, it will comply with requirements that are applicable to the Funds
transactions in derivatives under the 1940 Act. Similarly, to the extent they are applicable to the investment activities of the Subsidiary,
the Subsidiary will be subject to the same fundamental and certain other investment restrictions and will follow the same compliance
policies and procedures as the Fund. The Subsidiary would be managed by the Adviser and sub-advised by GPIM and overseen by its own board
of directors that would be responsible for overseeing the operations of the Subsidiary. However, because the Fund would the sole shareholder
in the Subsidiary, the Board would have direct oversight over the Funds investments in the Subsidiary and indirect oversight over
the Subsidiarys operations and investment activities (i.e., the Board has oversight responsibility for the investment activities
of the Fund, including its investment in the Subsidiary).
The Fund
may invest in the Subsidiary in order to gain exposure to commodities markets. The Subsidiary would not be a registered investment company
under the 1940 Act. Because the
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Subsidiary
would not be directly subject to all of the investment protections of the 1940 Act, the Fund may not have all of the protections offered
to shareholders of registered investment companies. The Fund would be exposed to the risks of the Subsidiary, which would be exposed
to the risks of investing in the commodities markets and other investments made by the Subsidiary. The Subsidiary is also subject to
these risks. Changes in the laws of the United States and/or the Cayman Islands, under which the Fund is and the Subsidiary would be
organized, respectively, could result in the inability of the Fund, the Subsidiary, or both, to operate as intended, which could result
in losses to the Fund.
In order
to qualify for favorable tax treatment as a regulated investment company (RIC) under the Internal Revenue Code of 1986, as
amended (the Code), the Fund must derive at least 90% of its gross annual income from qualifying sources under Subchapter
M of the Code. Generally, income derived from direct and certain indirect investments in commodities is not considered qualifying income.
However, historically, the IRS has issued private letter rulings (PLRs) in which the IRS specifically concluded that income
from certain commodity-linked notes and from investments in a subsidiary is qualifying income. These PLRs did not require a RIC to receive
any distributions attributable to any gross income recognized from such subsidiaries in order for such gross income to be considered
qualifying gross income. The IRS has indicated that no further PLRs will be issued in this area. The Fund has not received such a PLR,
and is unable to rely on PLRs issued to other taxpayers.
Moreover,
the IRS and the Treasury Department finalized Treasury regulations that generally treat the Funds income inclusion with respect
to the Subsidiary as qualifying income if there is a distribution out of the earnings and profits of the Subsidiary that is attributable
to such inclusion or if the income is related to the Funds business of investing in securities. Based on the foregoing, the Fund
may seek to gain exposure to the commodity markets through the Subsidiary. Any net realized gains earned by the Subsidiary is a given
year will generate ordinary taxable income to the Fund, and net realized losses earned by the Subsidiary in a given year will not generate
any recognizable losses for the Fund and will not carryforward to future years. The tax treatment of investments in commodities through
the Subsidiary may be adversely affected by future legislation, Treasury regulations and/ or guidance issued by the IRS that could affect
the character, timing and/or amount of the Funds taxable income or any gains and distributions made by the Fund and whether income
derived from the Funds investments in the Subsidiary is considered qualifying income. If the Fund does not meet the qualifying
income test, it may be able to cure such a failure. However, if the Fund attempts to cure the failure of the qualifying income test,
significant taxes may be incurred by the Fund and its shareholders.
Private
Securities Risk
The Fund
may invest directly or indirectly in privately issued securities (Income Securities and Common Equity Securities) of both public and
private companies. Private Securities have additional risk considerations relative to investments in comparable public investments. Whenever
the Fund invests in companies that do not publicly report financial and other material information, it assumes a greater degree of investment
risk and reliance upon GPIMs ability to obtain and evaluate applicable information concerning such companies creditworthiness
and other investment considerations, which information cannot be independently verified. The Fund also depends on the expertise, skills
and network of business contacts of GPIM to evaluate, negotiate, structure, execute
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and monitor
the Private Securities. Private Securities are often illiquid. Because there is often no readily available trading market for Private
Securities, the Fund will not be able to readily dispose of such investments at prices that approximate those at which the Fund could
sell them if they were more widely traded. Subscriptions to purchase Private Securities are typically subject to restrictions or delays.
Private Securities are also more difficult to value. Valuation will require more research, and elements of judgment will play a greater
role in the valuation of Private Securities as compared to public securities because there is less reliable objective data available.
In addition
to the risks discussed above, investments in Common Equity Securities of private issuers (often called private equity investments) are
subject to certain risks (whether made directly or through Investment Funds), including:
| | Limited Operating History. Private
equity investments may have limited operating histories, and the information GPIM will obtain about such investments may be limited and,
in many cases, cannot be independently verified. As such, GPIMs ability to evaluate past performance of a private equity investment
or to validate its investment strategies will be limited. Moreover, even to the extent a private equity investment has a longer operating
history, its past performance should not be construed as an indication of the future results of the private equity investment or the
Fund, particularly as the investment professionals responsible for the performance of the private equity investment may change over time. |
| | Concentration and Non-Diversification
Risk. Investment Funds that have exposure to private equity investments, such as private equity funds in which the Fund can invest, may
at certain times hold large positions in a relatively limited number of investments. In addition, private equity funds may target or
concentrate their investments in particular markets, sectors or industries. Those funds that concentrate in a specific industry or target
a specific sector will also be subject to the risks of that industry or sector, which may include, but are not limited to, rapid obsolescence
of technology, sensitivity to regulatory changes, minimal barriers to entry and sensitivity to overall market swings. Some of these Investment
Funds may hold a single asset and thus are subject to even higher risks. As a result, the net asset values of such funds may be subject
to greater volatility than those of investment companies that are subject to diversification requirements, which may negatively impact
the value of the Common Shares. |
| | Liquidity Risk. The securities held
by private equity funds are often illiquid, and subscriptions to purchase these securities are typically subject to restrictions or delays.
There is no regular market for interests in many private equity funds or portfolio companies, which typically must be sold in privately
negotiated transactions subject to high conflicts, valuation and liquidity risks. Any such sales would likely require the consent of
the manager of the applicable private equity fund or the board of the portfolio company and could occur at a material discount to the
stated net asset value. If GPIM determines to cause the Fund to sell its interest in a private equity investment, the Fund may be unable
to sell such interest quickly, if at all, and could therefore be obligated to continue to hold such interest for an extended period of
time, or to accept a materially lower price. |
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| | Valuation Risk. A large percentage
of private equity investments will not have a readily determinable market value and may be reported at an estimate of fair value determined
by private equity fund managers or the co-investment sponsor that are subject to conflicts (when held through an Investment Fund). In
this regard, a private equity fund manager or a co-investment sponsor may face a conflict of interest in valuing the securities, as their
value may affect the compensation of the manager or sponsor or the managers or sponsors ability to raise additional funds
in the future. As a result, valuations of the securities may be subjective and could subsequently prove to have been inaccurate, potentially
by significant amounts. |
Private Securities
that are debt securities generally are of below-investment grade quality, frequently are unrated and present many of the same risks as
investing in below-investment grade public debt securities. Investing in private debt instruments is a highly specialized investment
practice that depends more heavily on independent credit analysis than investments in other types of obligations.
Risks
Associated with Private Company Investments
Private companies
are generally not subject to SEC reporting requirements, are not required to maintain their accounting records in accordance with generally
accepted accounting principles and are not required to maintain effective internal controls over financial reporting. As a result, GPIM
may not have timely or accurate information about the business, financial condition and results of operations of the private companies
in which the Fund invests. There is risk that the Fund may invest on the basis of incomplete or inaccurate information, which will adversely
affect the Funds investment performance. Some private companies in which the Fund may invest may have limited financial resources,
shorter operating histories, more asset concentration risk, narrower product lines and smaller market shares than larger businesses,
which tend to render such private companies more vulnerable to competitors actions and market conditions, as well as general economic
downturns. In addition, the management of private companies may depend on one or two key individuals, and the loss of the services of
any such individual may adversely affect the performance of the private company.
These companies
generally have less predictable operating results, may from time to time be parties to litigation, may be engaged in rapidly changing
businesses with products subject to a substantial risk of obsolescence, and may require substantial additional capital to support their
operations, finance expansion or maintain their competitive position. These companies may have difficulty accessing the capital markets
to meet future capital needs, which may limit their ability to grow or to repay their outstanding indebtedness upon maturity. In addition,
the Funds investment also may be structured as pay-in-kind securities with minimal or no cash interest or dividends until the company
meets certain growth and liquidity objectives.
Typically,
investments in private companies are in restricted securities that are not traded in public markets and subject to substantial holding
periods, so that the Fund may not be able to resell some of its holdings for extended periods, which may be several years. There can
be no assurance that the Fund will be able to realize the value of private company investments in a timely manner, and these investments
are subject to heightened valuation risks.
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Late-Stage
Private Companies Risk
Investments
in late-stage private companies involve greater risks than investments in shares of companies that have traded publicly on an exchange
for extended periods of time. These investments may present significant opportunities for capital appreciation but involve a high degree
of risk that may result in significant decreases in the value of these investments. The Fund may not be able to sell such investments
when GPIM deems it appropriate to do so because they are not publicly traded. As such, these investments are generally considered to
be illiquid until a companys public offering (which may never occur) and are often subject to additional contractual restrictions
on resale following any public offering that may prevent the Fund from selling its shares of these companies for a period of time. Market
conditions, developments within a company, investor perception or regulatory decisions or other factors may adversely affect a late-stage
private company and delay or prevent such a company from ultimately offering its securities to the public. If a company issues shares
in an IPO, IPOs are risky and volatile and may cause the value of the Funds investment to decrease significantly.
Investment
Funds Risk
The Fund
may also obtain investment exposure to Income Securities and Common Equity Securities by investing up to 30% of its total assets in Investment
Funds. These investments include open-end funds, closed-end funds, ETFs and business development companies as well as other pooled investment
vehicles. Investment Funds may include those advised by the Adviser and/or its affiliates. Investments in Investment Funds present certain
special considerations and risks not present in making direct investments in Income Securities and Common Equity Securities, and in addition
to these risks, investments in Investment Funds subject the Fund to the risks affecting such Investment Funds and involve operating expenses
and fees that are in addition to the expenses and fees borne by the Fund. Such expenses and fees attributable to the Funds investment
in another Investment Fund are borne indirectly by Common Shareholders. Accordingly, investment in such entities involves expenses and
fees at both levels. Fees and expenses borne by other Investment Funds in which the Fund invests may be similar to the fees and expenses
borne by the Fund and can include asset-based management fees and administrative fees payable to such entities advisers and managers,
as well as other expenses borne by such entities, thus resulting in fees and expenses at both levels. To the extent management fees of
Investment Funds are based on total gross assets, it may create an incentive for such entities managers to employ Financial Leverage,
thereby adding additional expense and increasing volatility and risk (including the Funds overall exposure to Financial Leverage
risk). Fees payable to advisers and managers of Investment Funds may include performance-based incentive fees calculated as a percentage
of profits. Such incentive fees directly reduce the return that otherwise would have been earned by investors over the applicable period.
A performance-based fee arrangement may create incentives for an adviser or manager to take greater investment risks in the hope of earning
a higher profit participation.
Investments
in Investment Funds frequently expose the Fund to an additional layer of leverage, and, thus, increase the Funds exposure to leverage
risk and costs. From time to time, the Fund may invest a significant portion of its assets in Investment Funds that employ leverage.
The use of leverage by Investment Funds may cause the Investments Funds market price of common shares and/or NAV to be more volatile
and can magnify the effect of any losses. From time to time, the Fund may invest a significant portion of its assets in Investment Funds
that employ leverage. Investments in Investment Funds expose the Fund to additional management risk. The success
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of the Funds
investments in Investment Funds will depend in large part on the investment skills and implementation abilities of the advisers or managers
of such entities. Decisions made by the advisers or managers of such entities may cause the Fund to incur losses or to miss profit opportunities.
While GPIM will seek to evaluate managers of Investment Funds and where possible independently evaluate the underlying assets, a substantial
degree of reliance on such entities managers is nevertheless present with such investments.
The Fund
may invest in Investment Funds in excess of statutory limits imposed by the 1940 Act in reliance on Rule 12d1-4 under the 1940 Act. These
investments would be subject to the applicable conditions of Rule 12d1-4, which in part could affect or otherwise impose certain limits
on the investments and operations of the underlying Investment Fund (notably such funds ability to invest in other investment companies
and private funds, which include certain structured finance vehicles). It is uncertain what effect the conditions of Rule 12d1-4 will
have on the Funds investment strategies and operations or those of the Investment Funds in which the Fund may invest.
If the Fund
invests in Investment Funds, the Funds realized losses on sales of shares of an underlying Investment Fund may be indefinitely
or permanently deferred as wash sales. Distributions of short-term capital gains by an underlying Investment Fund will be
recognized as ordinary income by the Fund and would not be offset by the Funds capital loss carryforwards, if any. Capital loss
carryforwards of an underlying Investment Fund, if any, would not offset net capital gain of the Fund or of another underlying Investment
Fund.
When the
Fund invests in private investment funds, such investments pose additional risks to the Fund, in addition to those risks described above
with respect to all Investment Funds. Certain private investment funds involve capital call provisions under which an investor is obligated
to make additional investments at specified levels even if it would otherwise choose not to. Investments in private investment funds
may have very limited liquidity. Often there will be no secondary market for such investments and the ability to redeem or otherwise
withdraw from a private investment fund may be prohibited during the term of the private investment fund or, if permitted, may be infrequent.
Certain private investment funds are subject to lock-up periods of a year or more. The valuation of investments in private
investment funds are often subject to high conflicts and valuation risks. Investors in private investment funds are also often exposed
to increased leverage risk.
Synthetic
Investments Risk
As an alternative
to holding investments directly, the Fund may also obtain investment exposure to Income Securities and Common Equity Securities through
the use of customized derivative instruments (including swaps, options, forwards, notional principal contracts or other financial instruments)
to seek to replicate, modify or replace the economic attributes associated with an investment in Income Securities and Common Equity
Securities (including interests in Investment Funds). The Fund may be exposed to certain additional risks to the extent GPIM uses derivatives
as a means to synthetically implement the Funds investment strategies. If the Fund enters into a derivative instrument whereby
it agrees to receive the return of a security or financial instrument or a basket of securities or financial instruments, it will typically
contract to receive such returns for a predetermined period of time. During such period, the Fund may not have the ability to increase
or decrease its exposure. In addition, such customized derivative instruments will likely be highly illiquid, and it is possible that
the Fund will not be able to terminate such derivative instruments prior to their expiration date or that the penalties associated with
such a termination might impact
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the Funds
performance in a material adverse manner. Furthermore, certain derivative instruments contain provisions giving the counterparty the
right to terminate the contract upon the occurrence of certain events. Such events may include a decline in the value of the reference
securities and material violations of the terms of the contract or the portfolio guidelines as well as other events determined by the
counterparty. If a termination were to occur, the Funds return could be adversely affected as it would lose the benefit of the indirect
exposure to the reference securities and it may incur significant termination expenses.
In the event
the Fund seeks to obtain investment exposure to in Investment Funds (including private investment funds) through the use of such synthetic
derivative instruments, the Fund will not acquire any voting interests or other shareholder rights that would be acquired with a direct
investment in the underlying Investment Fund. Accordingly, the Fund will not participate in matters submitted to a vote of the shareholders.
In addition, the Fund may not receive all of the information and reports to shareholders that the Fund would receive with a direct investment
in such Investment Fund.
Further,
the Fund will pay the counterparty to any such customized derivative instrument structuring fees and ongoing transaction fees, which
will reduce the investment performance of the Fund. Finally, certain tax aspects of such customized derivative instruments are uncertain
and a Common Shareholders return could be adversely affected by an adverse tax ruling.
Inflation/Deflation
Risk
Inflation
risk is the risk that the intrinsic value of assets or income from investments will be worth less in the future as inflation decreases
the purchasing power and value of money. As inflation increases, the real value of the Common Shares and distributions can decline. Inflation
rates may change frequently and significantly as a result of various factors, including unexpected shifts in the domestic or global economy
and changes in monetary or economic policies (or expectations that these policies may change), and the Funds investments may not
keep pace with inflation, which would adversely affect the Fund. The market price of debt instruments generally falls as inflation increases
because the purchasing power of the future income and repaid principal is expected to be worth less when received by the Fund. The risk
of inflation is greater for debt instruments with longer maturities and especially those that pay a fixed rather than variable interest
rate. Inflation has reached historically high levels in recent periods and the Federal Reserve has increased interest rates significantly
to seek to reduce it. In addition, during any periods of rising inflation, the dividend rates or borrowing costs associated with the
Funds use of Financial Leverage would likely increase, which would tend to further reduce returns to Common Shareholders. Deflation
risk is the risk that prices throughout the economy decline over timethe opposite of inflation. Deflation may have an adverse effect on the creditworthiness of issuers and may make issuer default more likely, which may result in a decline in the value of the Funds
portfolio.
Market
Discount Risk
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investors
purchase price, taking into account transaction costs for the Common Shares, and is not directly dependent upon the Funds net asset
value. Market price movements of Common Shares are thus material to investors and may result in losses, even when net asset value has
increased.
The Fund
cannot predict whether the Common Shares will trade at a premium or discount to net asset value and the market price for the Common Shares
will change based on a variety of factors. If the Common Shares are trading at a premium to net asset value at the time you purchase
Common Shares, the net asset value per share of the Common Shares purchased will be less than the purchase price paid. Shares of closed-end
investment companies frequently trade at a discount from NAV, but in some cases have traded above net asset value. The risk of the Common
Shares trading at a discount is a risk separate and distinct from the risk of a decline in the Funds net asset value as a result
of the Funds investment activities.
Because the
market price of the Common Shares will be determined by factors such as net asset value, dividend and distribution levels (which are
dependent, in part, on expenses), supply of and demand for Common Shares, stability of dividends or distributions, trading volume of
Common Shares, general market and economic conditions and other factors beyond the Funds control, the Fund cannot predict whether
the Common Shares will trade at, below or above net asset value, or at, below or above the public offering price for the Common Shares.
The Funds
net asset value would be reduced following an offering of the Common Shares due to the costs of such offering, to the extent those costs
are borne by the Fund. The sale of Common Shares by the Fund (or the perception that such sales may occur) may have an adverse effect
on prices of Common Shares in the secondary market. An increase in the number of Common Shares available may put downward pressure on
the market price for Common Shares. The Fund may, from time to time, seek the consent of Common Shareholders to permit the issuance and
sale by the Fund of Common Shares at a price below the Funds then current net asset value, subject to certain conditions, and such
sales of Common Shares at price below net asset value, if any, may increase downward pressure on the market price for Common Shares.
These sales, if any, also might make it more difficult for the Fund to sell additional Common Shares in the future at a time and price
it deems appropriate.
The Fund
is designed for long-term investors and investors in Common Shares should not view the Fund as a vehicle for trading purposes.
Dilution
Risk
The voting
power of current Common Shareholders will be diluted to the extent that current Common Shareholders do not purchase Common Shares in
any future offerings of Common Shares or do not purchase sufficient Common Shares to maintain their percentage interest. If the Fund is
unable to invest the proceeds of such offering as intended or if investments made with these proceeds perform poorly, the Funds
per Common Share distribution may decrease and the Fund may not participate in market advances to the same extent as if such proceeds
were fully invested as planned. If the Fund sells Common Shares at a price below net asset value pursuant to the consent of Common Shareholders,
shareholders will experience a dilution of the aggregate net asset value per Common Share because the sale price will be less than the
Funds then-current net asset value per Common Share. Similarly, were the expenses of the offering to exceed the amount by which
the sale price exceeded the Funds then current net asset value per Common Share, shareholders
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would experience
a dilution of the aggregate net asset value per Common Share. This dilution will be experienced by all shareholders, irrespective of
whether they purchase Common Shares in any such offering.
Financial
Leverage and Leveraged Transactions Risk
Although
the use of Financial Leverage and leveraged transactions by the Fund may create an opportunity for increased after-tax total return for
the Common Shares, it also results in additional risks and can magnify the effect of any losses. If the income and gains earned on securities
purchased with Financial Leverage and leveraged transactions proceeds are greater than the cost of Financial Leverage and leveraged transactions,
the Funds return will be greater than if Financial Leverage and leveraged transactions had not been used. Conversely, if the income
or gains from the securities purchased with such proceeds does not cover the cost of Financial Leverage and leveraged transactions, the
return to the Fund will be less than if Financial Leverage and leveraged transactions had not been used. There can be no assurance that
a leveraging strategy will be implemented or that it will be successful during any period during which it is employed.
Financial
Leverage and the use of leveraged transactions involve risks and special considerations for shareholders, including the likelihood of
greater volatility of NAV and market price of and dividends on the Common Shares than a comparable portfolio without leverage; the risk
that fluctuations in interest rates on Borrowings or in the dividend rate on any Preferred Shares (if any) that the Fund must pay will
reduce the return to the Common Shareholders; and the effect of Financial Leverage and leveraged transactions in a declining market, which
is likely to cause a greater decline in the NAV of the Common Shares than if the Fund were not leveraged, which may result in a greater
decline in the market price of the Common Shares.
Because the
fees received by the Adviser and Sub-Adviser are based on the Managed Assets of the Fund (including the proceeds of any Financial Leverage),
the Adviser and Sub-Adviser has a financial incentive for the Fund to utilize Financial Leverage, which may create a conflict of interest
between the Adviser and Sub-Adviser on the one hand and the Common Shareholders on the other. Common Shareholders bear a portion of the
investment advisory fee attributable to the assets purchased with the proceeds of Financial Leverage, which means that Common Shareholders
effectively bear the entire advisory fee.
Certain types
of Borrowings subject the Fund to covenants in credit agreements relating to asset coverage and portfolio composition requirements. Borrowings
by the Fund also may subject the Fund to certain restrictions on investments imposed by guidelines of one or more rating agencies, which
may issue ratings for such Borrowings. Such guidelines may impose asset coverage or portfolio composition requirements that are more
stringent than those imposed by the 1940 Act. It is not anticipated that these covenants or guidelines will impede the Adviser or GPIM
from managing the Funds portfolio in accordance with the Funds investment objective and policies.
The Fund
may enter into reverse repurchase agreements with the same parties with whom it may enter into repurchase agreements (as described below).
Under a reverse repurchase agreement, the Fund would sell securities or other assets and agree to repurchase them at a particular price
at a future date. Reverse repurchase agreements involve the risks that the interest income earned on the investment of the proceeds will
be less than the interest expense and Fund expenses associated with the repurchase agreement, that the market value of the securities
or other assets sold by the Fund
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may decline
below the price at which the Fund is obligated to repurchase such securities and that the securities may not be returned to the Fund.
There is no assurance that reverse repurchase agreements can be successfully employed. In the event of the insolvency of the counterparty
to a reverse repurchase agreement, recovery of the securities or other assets sold by the Fund may be delayed. The counterpartys
insolvency may result in a loss equal to the amount by which the value of the securities or other assets sold by the Fund exceeds the
repurchase price payable by the Fund; if the value of the purchased securities or other assets increases during such a delay, that loss
may also be increased. When the Fund enters into a reverse repurchase agreement, any fluctuations in the market value of either the securities
or other assets transferred to another party or the securities or other assets in which the proceeds may be invested would affect the
market value of the Funds assets. As a result, such transactions may increase fluctuations in the net asset value of the Funds
Shares.
The Fund
may enter into dollar roll transactions, in which the Fund sells a mortgage-backed or other security for settlement on one date and agrees
to purchase a substantially similar security (but not the same security) for settlement at a later date at an agreed-upon price. During
the roll period, the Fund gives up the principal and interest payments on the sold security, but may invest the sale proceeds. When the
Fund enters into a dollar roll transaction, any fluctuation in the market value of the security transferred or the securities in which
the sales proceeds are invested can affect the market value of the Funds assets, and therefore, the Funds NAV. Successful
use of dollar rolls may depend upon, among other things, GPIMs ability to correctly predict interest rates and prepayments. There
is no assurance that dollar rolls can be successfully employed. In connection with reverse repurchase agreements, the Fund will also
be subject to counterparty risk with respect to the purchaser of the securities. Dollar roll transactions also involve the risk that
the market value of the securities the Fund is required to deliver may decline below the agreed upon repurchase price of those securities.
In addition, in the event that the Funds counterparty becomes insolvent or otherwise unable or unwilling to perform its obligations,
the Funds use of the proceeds may become restricted pending a determination as to whether to enforce the Funds obligation
to purchase the substantially similar securities.
In addition,
the Fund may engage in certain derivatives transactions that have economic characteristics similar to leverage.
The Funds
obligations under reverse repurchase agreements, dollar roll transactions, and derivatives transactions may have economic characteristics
similar to leverage. The Funds obligations under such transactions will not be considered indebtedness for purposes of the 1940
Act, but the Funds use of such transactions may be limited by the applicable requirements of the SEC.
The Fund
may have Financial Leverage and leveraged transactions outstanding during a short-term period during which such Financial Leverage and
leveraged transactions may not be beneficial to the Fund if GPIM believes that the long-term benefits to Common Shareholders of such
Financial Leverage and leveraged transactions would outweigh the costs and portfolio disruptions associated with redeeming and reissuing
or closing out and reopening such Financial Leverage and leveraged transactions. However, there can be no assurance that GPIMs
judgment in weighing such costs and benefits will be correct.
Economic
and market events have at times caused severe market volatility and severe liquidity strains in the credit markets. The terms of the
Funds credit facility include a variable interest rate.
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Accordingly,
during periods when interest rates or the applicable reference rate for the credit facility rise or there are dislocations in the credit
markets, the Funds leverage costs may increase and there is a risk that the Fund may not be able to renew or replace existing leverage
on favorable terms or at all. If the cost of leverage is no longer favorable, or if the Fund is otherwise required to reduce its leverage,
the Fund may not be able to maintain distributions on Common Shares at historical levels and Common Shareholders will bear any costs
associated with selling portfolio securities. The cost of leverage and the risks highlighted above are heightened during periods of rising
or elevated interest rates.
The Funds
total Financial Leverage and leveraged transactions may vary significantly over time. To the extent the Fund increases its amount of
Financial Leverage and leveraged transactions outstanding, it will be more exposed to these risks. Investments in Investment Funds and
certain other pooled and structured finance vehicles, such as collateralized loan obligations, frequently expose the Fund to an additional
layer of financial leverage and, thus, increase the Funds exposure to leverage risk. From time to time, the Fund may invest a significant
portion of its assets in Investment Funds that employ leverage.
Derivatives
Transactions Risk
In addition
to the Covered Call Option Strategy and other options strategies described above, the Fund may, but is not required to, utilize other
derivatives, including futures contracts, swaps transactions and other similar strategic transactions to seek to earn income, facilitate
portfolio management and mitigate risks. Participation in derivatives markets transactions involves investment risks and transaction
costs to which the Fund would not be subject absent the use of these strategies (other than its covered call writing strategy). Certain
derivatives transactions that involve leverage can result in losses that greatly exceed the amount originally invested. Derivatives transactions
utilizing instruments denominated in foreign currencies will expose the Fund to foreign currency risk. Derivatives transactions involve
risks of mispricing or improper valuation, and the documentation governing a derivative instrument or transaction may be unfavorable
or ambiguous. Derivatives transactions may involve commissions and other costs, which may increase the Funds expenses and reduce
its return. Various legislative and regulatory initiatives may impact the availability, liquidity and cost of derivative instruments,
limit or restrict the ability of the Fund to use certain derivative instruments or transact with certain counterparties as a part of
its investment strategy, increase the costs of using derivative instruments or make derivative instruments less effective.
The Fund
may be required to deposit amounts as premiums or to be held in margin accounts. Such amounts may not otherwise be available to the Fund
for investment purposes. The Fund may earn a lower return on its portfolio than it might otherwise earn if it did not have to maintain
such assets in respect of its derivatives transactions positions. Participation in derivatives market transactions involves investment
risk and transaction costs to which the Fund would not be subject absent the use of these strategies. To the extent the Fund engages
in derivatives transactions in an attempt to hedge certain exposures or risks, there can be no assurance that the Funds hedging
investments or transactions will be effective. In addition, hedging investments or transactions involve costs and may reduce gains or
result in losses, which may adversely affect the Fund. Changes in the value of a derivatives transaction may also create sudden margin
delivery or settlement payment obligations for the Fund, which can materially affect the performance of the Fund and its liquidity and
other risk
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profiles.
The skills necessary to successfully execute derivatives strategies may be different from those for more traditional portfolio management
techniques, and if GPIM is incorrect about its expectations of market conditions, the use of derivatives could also result in a loss,
which in some cases may be unlimited. Additional risks inherent in the use of derivatives include (among others):
| | dependence on GPIMs ability
to predict correctly movements in the direction of interest rates and securities prices; |
| | imperfect correlation between the
price of derivatives and movements in the prices of the securities being hedged; |
| | the fact that skills needed to use
these strategies are different from those needed to select portfolio securities; |
| | the possible absence of a liquid
secondary market for any particular instrument at any time; |
| | the possible need to defer closing
out certain hedged positions to avoid adverse tax consequences; |
| | the possible inability of the Fund
to purchase or sell a security at a time that otherwise would be favorable for it to do so, or the possible need for the Fund to sell
a security at a disadvantageous time due to a need for the Fund to make margin or settlement payments in connection with such derivatives
transactions; and |
| | the creditworthiness of counterparties. |
The Fund
is required to trade derivatives and other transactions that create future payment or delivery obligations (except reverse repurchase
agreements and similar financing transactions) subject to value-at-risk (VaR) leverage limits and derivatives risk management
program and reporting requirements. Generally, these requirements apply unless a fund satisfies a limited derivatives users
exception that is included in Rule 18f-4. When the Fund trades reverse repurchase agreements or similar financing transactions, including
certain tender option bonds, it needs to aggregate the amount of indebtedness associated with the reverse repurchase agreements or similar
financing transactions with the aggregate amount of any other senior securities representing indebtedness when calculating the Funds
asset coverage ratio or treat all such transactions as derivatives transactions. Reverse repurchase agreements or similar financing transactions
aggregated with other indebtedness do not need to be included in the calculation of whether a fund satisfies the limited derivatives
users exception, but for funds subject to the VaR testing requirement, reverse repurchase agreements and similar financing transactions
must be included for purposes of such testing whether treated as derivatives transactions or not. The SEC also provided guidance regarding
the use of securities lending collateral that may limit the Funds securities lending activities. In addition, the Fund is permitted
to invest in a security on a when-issued or forward-settling basis, or with a non-standard settlement cycle, and the transaction will
be deemed not to involve a senior security, provided that (i) the Fund intends to physically settle the transaction and (ii) the transaction
will settle within 35 days of its trade date (the Delayed-Settlement Securities Provision). The Fund may otherwise engage
in such transactions that do not meet the conditions of the Delayed-Settlement Securities Provision so long as the Fund treats any such
transaction as a derivatives transaction for purposes of compliance with the rule. Furthermore, under the rule, the Fund
is permitted to enter into an unfunded commitment agreement, and such unfunded commitment agreement will not be subject to the asset
coverage requirements under the 1940 Act, if the Fund reasonably believes, at the time it enters into such agreement, that it will have
sufficient
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cash and
cash equivalents to meet its obligations with respect to all such agreements as they come due. These requirements may limit the ability
of the Fund to use derivatives, reverse repurchase agreements and similar financing transactions, and the other relevant transactions
as part of its investment strategies. These requirements may increase the cost of the Funds investments and cost of doing business,
which could adversely affect investors.
The Adviser
has filed with the National Futures Association a notice of eligibility claiming an exclusion from the definition of commodity
pool operator (CPO) under CFTC Rule 4.5 under the Commodity Exchange Act, as amended (the CEA), with respect
to the Funds operation. Accordingly, the Adviser with respect to the Fund is not subject to registration or regulation as a CPO.
Changes to the Funds investment strategies or investments may cause the Adviser with respect to the Fund to lose the benefits of
the exclusion under CFTC Rule 4.5 under the CEA and may trigger additional CFTC regulation as a CPO. If the Fund becomes subject to CFTC
regulation, the Fund or the Adviser may incur additional expenses.
Futures
Transactions Risk
The Fund
may invest in futures contracts and options on futures contracts. Futures and options on futures involve the risks discussed under Derivatives
Transactions Risk above and certain additional risks, including but not limited to the following:
| | no assurance that futures contracts
or options on futures can be offset at favorable prices; |
| | possible reduction of the return
of the Fund due to their use for hedging; |
| | possible reduction in value of both
the securities hedged and the hedging instrument; |
| | possible lack of liquidity, trading
restrictions or limitations that may be imposed by an exchange, and the potential that government regulations may restrict trading; |
| | imperfect correlation between the
contracts and the securities being hedged; and |
| | losses from investing in futures
transactions that are potentially unlimited and losses resulting from the default or insolvency of intermediaries such as the Funds
futures commission merchant. |
The Fund
will only purchase or sell futures contracts or related options in compliance with the rules of the CFTC. Transactions in financial futures
and options on futures involve certain costs. There can be no assurance that the Funds use of futures contracts will be advantageous.
Financial covenants related to future Fund borrowings may limit use of these transactions.
The CFTC
and various exchanges have rules limiting the maximum net long or short positions which any person or group may own, hold or control
in any given futures contract or option on such futures contract. GPIM must consider the effect of these limits in managing the Fund.
In addition, the CFTC has position limits rules that establish position limits for 25 specified physical commodity futures and related
options contracts traded on exchanges, other futures contracts and related options directly or indirectly linked to such contracts, and
any OTC transactions that are economically equivalent.
Counterparty
Risk
Counterparty
risk is the risk that a counterparty to a fund transaction (e.g., prime brokerage or securities lending arrangement or derivatives
transaction) will be unable or unwilling to perform its
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contractual
obligation to the Fund. The Fund is exposed to credit risks that the counterparty may be unwilling or unable to make timely payments
or otherwise meet its contractual obligations. If the counterparty becomes bankrupt or defaults on (or otherwise becomes unable or unwilling
to perform) its payment or other obligations to the Fund, the Fund may not receive the full amount that it is entitled to receive or
may experience delays in recovering the collateral or other assets held by, or on behalf of, the counterparty. If this occurs, or if
exercising contractual rights involves delays or costs for the Fund, the value of your shares in the Fund may decrease. Such risk is
heightened in market environments where interest rates are changing, notably when rates are rising. Counterparty credit risk also includes
the related risk of having concentrated exposure to such counterparty.
The Fund
bears the risk that counterparties may be adversely affected by legislative or regulatory changes, adverse market conditions, increased
competition, and/or wide scale credit losses resulting from financial difficulties of the counterparties other trading partners or
borrowers.
The counterparty
risk for cleared derivatives is generally lower than for uncleared OTC derivatives transactions since generally a clearing organization
becomes substituted for each counterparty to a cleared derivative contract and, in effect, guarantees the parties performance under
the contract as each party to a trade looks only to the clearing organization for performance of financial obligations under the derivative
contract. However, there can be no assurance that a clearing organization, or its members, will satisfy its obligations to the Fund.
Swap Risk
Swap agreements
are contracts for periods ranging from one day to more than one year and may be negotiated bilaterally and traded OTC between two parties
or, for certain standardized swaps, must be exchange-traded through a futures commission merchant or swap execution facility and/ or
cleared through a clearinghouse that serves as a central counterparty. In a standard swap transaction, two parties agree to exchange
the returns (or differentials in rates of return) earned or realized on particular predetermined investments or instruments.
The Fund
may enter into swap transactions, including credit default swaps, total return swaps, index swaps, currency swaps, commodity swaps and
interest rate swaps, as well as options thereon, and may purchase or sell interest rate caps, floors and collars. The Fund may utilize
swap agreements in an attempt to gain exposure to certain assets without purchasing those assets, to hedge other positions or for investment
purposes.
Risks associated
with the use of swap agreements are different from those associated with ordinary portfolio securities transactions, largely due to the
fact they could be considered illiquid and many swaps currently trade on the OTC market. If GPIM is incorrect in its forecasts of market
values, interest rates or currency exchange rates, the investment performance of the Fund may be less favorable than it would have been
if these investment techniques were not used. Such transactions are subject to various risks, including market risk, risk of default
by the other party to the transaction and risk of imperfect correlation between the value of such instruments and the underlying assets
and may involve commissions or other costs. Written credit default swaps also are subject to the risk of default on the instrument underlying
the swap, which may result in the Fund being obligated to pay the counterparty to the swap the principal amount of the underlying instrument.
Cash-settled swaps generally do not involve the delivery of securities, other underlying assets or principal. Accordingly, the risk of
loss with respect to such swaps generally is limited to the net amount of
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payments
and margin that the Fund is contractually obligated to make, or in the case of the other party to a swap defaulting, the net amount of
payments that the Fund is contractually entitled to receive. Swaps are subject to valuation, liquidity and leveraging risks and could
result in substantial losses to the Fund.
In addition,
the Fund may pay fees or incur costs each time it enters into, amends or terminates a swap agreement.
Swaps may
effectively add leverage to the Funds portfolio because the Fund would be subject to investment exposure on the full notional amount
of the swap. Swaps are subject to the risk that a counterparty will default on its payment obligations to the Fund thereunder.
When the
Fund acts as a seller of a credit default swap agreement with respect to a debt security, it is subject to the risk that an adverse credit
event may occur with respect to the issuer of the debt security and the Fund may be required to pay the buyer the full notional value
of the debt security under the swap net of any amounts owed to the Fund by the buyer under the swap (such as the buyers obligation
to deliver the debt security to the Fund). As a result, the Fund bears the entire risk of loss due to a decline in value of a referenced
debt security on a credit default swap it has sold if there is a credit event with respect to the issuer of the security. If the Fund
is a buyer of a credit default swap and no credit event occurs, the Fund may recover nothing if the swap is held through its termination
date. However, if a credit event occurs, the Fund generally may elect to receive the full notional value of the swap in exchange for
an equal face amount of deliverable obligations of the reference entity whose value may have significantly decreased.
The swap
market has become more standardized in recent years with a large number of banks and investment banking firms acting both as principals
and as agents utilizing standardized swap documentation. As a result, some swaps have become relatively liquid. Although liquidity of
certain swaps has improved, certain types of derivatives products, such as caps, floors and collars may be less liquid than swaps in
general.
Certain standardized
swaps are subject to mandatory exchange-trading and central clearing. While exchange-trading and central clearing are intended to reduce
counterparty credit risk and increase liquidity, they do not make swap transactions risk-free. Depending on the Funds size and
other factors, the margin required under the rules of the clearinghouse and by the clearing member may be in excess of the collateral
required to be posted by the Fund to support its obligations under a similar bilateral swap. In addition, regulators have developed rules
that require trading and execution of the most liquid swaps on trading facilities. Moving trading to an exchange-type system may increase
market transparency and liquidity but may require the Fund to incur increased expenses to access the same types of cleared and uncleared
swaps.
In addition,
the CFTC and other applicable regulators have adopted rules imposing certain margin requirements, including minimums, on uncleared swaps
which may result in the Fund and its counterparties posting higher margin amounts for uncleared swaps. Recently adopted rules also require
centralized reporting of detailed information about many types of cleared and uncleared swaps. Reporting of swap data may result in greater
market transparency, but may subject the Fund to additional administrative burdens and the safeguards established to protect trader anonymity
may not function as expected. GPIM will continue to monitor developments in this area, particularly to the extent regulatory changes
affect the ability of the Fund to enter into swap agreements. In
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addition,
the CFTC adopted position limits rules that could limit the ability of the Fund to place certain trades. It is possible that positions
held by the Fund may have to be liquidated in order to avoid exceeding such limits. These limitations could adversely affect the operations
and performance of the Fund.
Further regulatory
developments in the swap market may adversely impact the swap market generally or the Funds ability to use swaps.
Special
Purpose Acquisition Companies Risk
The Fund
may invest in stock, warrants, rights and other securities of special purpose acquisition companies (SPACs) or similar special
purpose entities in a private placement transaction or as part of a public offering. As an alternative to obtaining a public listing through
a traditional IPO, SPAC investments carry many of the same risks as investments in IPO securities. These may include, but are not limited
to, erratic price movements, greater risk of loss, lack of information about the issuer, limited operating and little public or no trading
history, and higher transaction costs.
Investments
in SPACs also have risks peculiar to the SPAC structure and investment process. Until an acquisition or merger is completed, a SPAC generally
invests its assets, less a portion retained to cover expenses, in U.S. government securities, money market securities and cash and does
not typically pay dividends in respect of its common stock. To the extent a SPAC is invested in cash or similar securities, this may
impact the Funds ability to meet its investment objective. SPAC investments are also subject to the risk that a significant portion
of the funds raised by the SPAC may be expended during the search for a target acquisition or merger. Some SPACs pursue acquisitions
and mergers only within certain market sectors or regions, which can increase the volatility of their prices. Conversely, other SPACs
may invest without such limitations, in which case management may have limited experience or knowledge of the market sector or region
in which the transaction is contemplated. Moreover, interests in SPACs may be illiquid and/or be subject to restrictions on resale, which
may remain for an extended time, and may only be traded in the over-the-counter market. If there is no market for interests in a SPAC,
or only a thinly traded market for interests in a SPAC develops, the Fund may not be able to sell its interest in a SPAC, or may be able
to sell its interest only at a price below what the Fund believes is the SPAC interests value.
Availability
and Quality of Data
GPIM faces
the general risk regarding the availability and quality of information concerning a particular asset or investment, and employs a variety
of policies, practices and methodologies designed to minimize that risk. For example, there is less readily available and reliable information
about most bank loans than is the case for many other types of instruments, including listed securities. Another example is the consideration
of Environmental, Social, and Governance (ESG) criteria where GPIM believes it could have a material impact on an investments
return or issuers financial performance (though, for avoidance of doubt, GPIM does not offer any ESG products). Similar to GPIMs
ability to evaluate traditional factors in making investment decisions, the ability for GPIM to identify and evaluate ESG characteristics
and risks, or to engage with an issuer, is limited to the availability and quality of information on an asset or issuer. In some cases,
GPIM may decline to consider ESG criteria in an investment decision due to the unavailability of information on an issuer, or the quality
of that information. In addition, GPIM often uses data and insights from third-party research to provide additional input in the analysis
of ESG-related criteria. Third-party
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information
and data will, from time to time, be incomplete, inaccurate or unavailable. As a result, there is a risk that GPIM could incorrectly
assess the ESG criteria or risks associated with a particular asset or issuer. Additionally, GPIM expects from time to time to directly
engage with certain corporate credit issuers by requesting improved issuer disclosure relating to ESG factors, as well as discussing
potential opportunities to improve various ESG metrics and other related topics. Direct engagement will occur with only a minority of
portfolio investments and issuers GPIM considers for investment and will depend on a variety of considerations, including the materiality
of ESG criteria to the specific issuer or sector and the size of GPIM client investments in the issuer. There can be no assurance that
GPIMs engagement efforts will be successful or provide benefits to clients.
The application
of ESG criteria and risk factors to portfolio investments (if any) could result in one or more assets or issuers being excluded from
the Fund, which could have an adverse effect on the performance of the Fund. Additionally, in some circumstances a client mandate or applicable
regulations can cause GPIM to restrict specific investments based on particular ESG characteristics. GPIM also reserves the right, in
the future, to implement restrictions or prohibitions on investments within certain industries for all or a sub-set of all client accounts
which could be based on particular ESG criteria or other relevant factors. As a result of any of the aforementioned circumstances, clients
may be limited as to available investments, which could hinder performance when compared to investments with no such restrictions.
Portfolio
Turnover Risk
The Funds
annual portfolio turnover rate may vary greatly from year to year. Portfolio turnover rate is not considered a limiting factor in the
execution of investment decisions for the Fund. A higher portfolio turnover rate results in correspondingly greater brokerage commissions
and other transactional expenses that are borne by the Fund. High portfolio turnover may result in an increased realization of net short-term
capital gains by the Fund which, when distributed to Common Shareholders, will be taxable as ordinary income. Additionally, in a declining
market, portfolio turnover may create realized capital losses.
U.S. Government
Securities Risk
U.S. government
securities are subject to market and interest rate risk, as well as varying degrees of credit risk. Different types of U.S. government
securities have different relative levels of credit risk depending on the nature of the particular government support for that security.
U.S. government securities may be supported by: (i) the full faith and credit of the United States government; (ii) the ability of the
issuer to borrow from the U.S. Treasury; (iii) the credit of the issuing agency, instrumentality or government-sponsored entity (GSE);
(iv) pools of assets (e.g., MBS); or (v) the United States in some other way. The U.S. government and its agencies and instrumentalities
do not guarantee the market value of their securities, which may fluctuate in value and are subject to investment risks, and certain
U.S. government securities may not be backed by the full faith and credit of the United States government and, thus, are subject to greater
credit risk than other types of U.S. government securities. Any downgrades of the U.S. credit rating could increase volatility in both
stock and bond markets, result in higher interest rates and higher Treasury yields and increase the costs of all debt generally. The
value of U.S. government obligations may be adversely affected by changes in interest rates. There is no guarantee that the U.S. government
will provide support to its agencies and GSEs if they are unable to meet their obligations. In addition, it is possible
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that the
issuers of some U.S. government securities will not have the funds to meet their payment obligations in the future and there is a risk
of default.
UK Departure
from EU (Brexit) Risk
The United
Kingdom ceased to be a member of the EU on January 31, 2020 (such departure from the EU, Brexit). A trade agreement between
the EU and the United Kingdom (the TCA) took effect on May 1, 2021, and now governs the relationship between the EU and the
United Kingdom. Although the TCA covers many issues, such as economic partnership, free trade, law enforcement and judicial co-operation
and governance, it is silent on items such as financial services equivalence. As such, there remains uncertainty as to the scope, nature
and terms of the relationship between the United Kingdom and the EU and the effect and implication of the TCA. Brexit may have a negative
impact on the economy and currency of the United Kingdom and EU as a result of anticipated, perceived or actual changes to the United
Kingdoms economic and political relations with the EU. Brexit may also have a destabilizing impact on the EU to the extent other
member states similarly seek to withdraw from the union. Any further exits from member states of the EU, or the possibility of such exits,
would likely cause additional market disruption globally and introduce new legal and regulatory uncertainties. Any or all of these challenges
may affect the value of the Funds investments that are economically tied to the United Kingdom or the EU, and could have an adverse
impact on the Funds performance.
Redenomination
Risk
The result
of Brexit, the progression of the European debt crisis and the possibility of one or more Eurozone countries exiting the European Monetary
Union (EMU), or even the collapse of the euro as a common currency, has in recent years created significant volatility in
currency and financial markets generally. The effects of the collapse of the euro, or of the exit of one or more countries from the EMU,
on the U.S. and global economies and securities markets are impossible to predict and any such events could have a significant adverse
impact on the value and risk profile of the Funds portfolio. Any partial or complete dissolution of the EMU could have significant
adverse effects on currency and financial markets, and on the values of the Funds portfolio investments. If one or more EMU countries
were to stop using the euro as its primary currency, the Funds investments in such countries may be redenominated into a different
or newly adopted currency. As a result, the value of those investments could decline significantly and unpredictably. In addition, securities
or other investments that are redenominated may be subject to foreign currency risk, liquidity risk and valuation risk to a greater extent
than similar investments currently denominated in euros. To the extent a currency used for redenomination purposes is not specified in
respect of certain EMU-related investments, or should the euro cease to be used entirely, the currency in which such investments are
denominated may be unclear, making such investments particularly difficult to value or dispose of. The Fund may incur additional expenses
to the extent it is required to seek judicial or other clarification of the denomination or value of such securities.
Legislation
and Regulation Risk
At any time
after the date hereof, U.S. and non-U.S. governmental agencies and other regulators may implement additional regulations and legislators
may pass new laws that affect the investments held by the Fund, the strategies used by the Fund or the level of regulation or taxation
applying to the Fund (such as regulations related to investments in derivatives and other transactions). These
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regulations
and laws may impact the investment strategies, performance, costs and operations of the Fund, as well as the way investments in, and
shareholders of, the Fund are taxed.
Recent
Market Developments Risk
The value
of, or income generated by, the investments held by the Fund are subject to the possibility of rapid and unpredictable fluctuation, and
loss. These movements may result from factors affecting individual companies or issuers or particular industries, or from broader influences,
including real or perceived changes in prevailing interest rates, changes in inflation rates or expectations about inflation rates ,
adverse investor confidence or sentiment, changing economic, political (including geopolitical), social or financial market conditions,
tariffs and trade disruptions, recession, changes in currency rates, increased instability or general uncertainty, environmental disasters,
governmental actions, public health emergencies (such as the spread of infectious diseases, pandemics and epidemics), debt crises, actual
or threatened wars or other armed conflicts or credit ratings downgrades, and other similar types of events, each of which may be temporary
or last for extended periods.
Periods of
market volatility remain, and may continue to occur in the future, in response to various market, political, social, geopolitical, economic
and public health events both within and outside of the United States. These conditions have resulted in, and in cases continue to result
in, greater price volatility, less liquidity, widening credit spreads and a lack of price transparency, with certain securities remaining
illiquid and of uncertain value. Such market conditions may adversely affect the Fund, including by making valuation of some of the Funds
securities uncertain and/or result in sudden and significant valuation increases or declines in the Funds holdings. If there is
a significant decline in the value of the Funds portfolio, this may impact the asset coverage levels for the Funds outstanding
leverage.
Risks resulting
from any future debt or other economic or public health situation could also have a detrimental impact on the global economies, the financial
condition of financial institutions, operations of businesses and the Funds business, financial condition and results of operation.
Market and economic disruptions have affected, and may in the future affect, consumer confidence levels and spending, personal bankruptcy
rates, levels of incurrence and default on consumer and other debt and home prices, among other factors. To the extent uncertainty regarding
the U.S. or global economy negatively impacts consumer confidence and consumer credit factors, the Funds business, financial condition
and results of operations could be significantly and adversely affected. Downgrades to the credit ratings of major banks could result
in increased borrowing costs for such banks and negatively affect the broader economy. Moreover, Federal Reserve policy, including with
respect to certain interest rates, may also adversely affect the value, volatility and liquidity of various investments, notably dividend-
and interest-paying securities. These policies are subject to change at any time based on a variety of factors and developments, with
uncertain impacts on financial markets and economic conditions and, thus, the Funds investments. Market volatility, changing interest
rates and/or unfavorable economic conditions could impair the Funds ability to achieve its investment objective. Economies and
markets are experiencing, and have experienced, high inflation rates. In response to such inflation, government authorities have implemented
significant fiscal and monetary policies such as increasing interest rates and quantitative tightening (reduction of money available
in the market), which may adversely impact financial markets and the broader economy, as well as the Funds performance, and have
unintended adverse consequences.
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Moreover,
changing economic, political, social, geopolitical, financial market or other conditions in one country or geographic region could adversely
affect the value, yield and return of the investments held by the Fund in a different country or geographic region and economies, markets
and issuers generally because of the increasingly interconnected global economies and financial markets. As a result, there is an increased
risk that geopolitical and other events will disrupt economies and markets globally. For example, local or regional armed conflicts have
led to significant sanctions by the United States, Europe and other countries against certain countries (as well as persons and companies
connected with certain counties) and led to indirect adverse regional and global market, economic and other effects. It is difficult to
accurately predict or foresee when events or conditions affecting the U.S. or global financial markets, economies, and issuers may occur,
the effects of such events or conditions, potential escalations or expansions of these events, possible retaliations in response to sanctions
or similar actions and the duration or ultimate impact of those events. There is an increased likelihood that these types of events or
conditions can, sometimes rapidly and unpredictably, result in a variety of adverse developments and circumstances, such as reduced liquidity,
supply chain disruptions and market volatility, as well as increased general uncertainty and broad ramifications for markets, economies,
issuers, businesses in many sectors and societies globally. In addition, adverse changes in one sector or industry or with respect to
a particular company could negatively impact companies in other sectors or industries or increase market volatility as a result of the
interconnected nature of economies and markets and thus negatively affect the Funds performance. For example, developments in the
banking or financial services sectors (or one or more companies operating in these sectors) could adversely impact a wide range of companies
and issuers. These types of adverse developments could negatively affect the Funds performance or operations.
Increasing
Government and other Public Debt Risk
Government
and other public debt, including municipal obligations in which the Fund may invest, can be adversely affected by large and sudden changes
in local and global economic conditions that result in increased debt levels. Although high levels of government and other public debt
do not necessarily indicate or cause economic problems, high levels of debt may create certain systemic risks if sound debt management
practices are not implemented. A high debt level may increase market pressures to meet an issuers funding needs, which may increase
borrowing costs and cause a government or public or municipal entity to issue additional debt, thereby increasing the risk of refinancing.
A high debt level also raises concerns that the issuer may be unable or unwilling to repay the principal or interest on its debt, which
may adversely impact instruments held by the Fund that rely on such payments. Extraordinary governmental and quasigovernmental responses
to economic, market, labor and public health conditions designed to support the markets may, at times, significantly increase government
and other public debt, which heighten these risks and the long term consequences of these actions are not known. Unsustainable debt levels
can decline the valuation of currencies, and can prevent a government from implementing effective counter-cyclical fiscal policy during
economic downturns or can lead to increases in inflation or generate or contribute to an economic downturn.
Municipal
Securities Risk
Municipal
securities are subject to a variety of risks generally associated with investments in debt instruments, including credit, interest rate,
prepayment, liquidity, and valuation risks, as well as
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risks specific
to municipal securities, and can be more volatile than other investments. Taxable municipal securities are subject to similar risks as
tax-exempt municipal securities. The ability of issuers of municipal securities to pay their obligations can be adversely affected by,
among other developments or events, (i) unfavorable legislative, tax, political or other developments or events, including extreme weather
conditions, natural or man-made disasters and public health conditions, (ii) changes in the economic and fiscal conditions of issuers
of municipal securities or the federal government (in cases where it provides financial support to such issuers), and (iii) litigations
involving such issuers. In addition, the values of, and income generated by, municipal securities may fully or partially depend on a
specific revenue or tax source, such as the taxing authority or revenue of a local government, the credit of a private issuer, or the
current or anticipated revenues from a specific project, which may be adversely affected by actual or perceived changes in economic, social
or public health conditions and general economic downturns. Changes in tax laws or other developments that affect the tax-exempt status
of tax-exempt municipal securities may result in a decline in such municipal securities value. Moreover, the income, value and/or
risk of municipal securities is often correlated to specific project or other revenue sources (such as taxes), which can be negatively
affected by, among other things, demographic trends, such as population shifts or changing tastes and values, or increasing vacancies
or declining rents or property values resulting from legal, cultural, technological, global or local economic developments, as well as
reduced demand for properties, revenues or goods or services.
To the extent
the Fund invests a substantial portion of its assets in municipal securities issued by issuers in a particular state, municipality or
project, the Fund will be particularly sensitive to developments and events adversely affecting such state or municipality or with respect
to a particular project. Certain sectors of the municipal bond market have special risks that can affect them more significantly than
the market as a whole. Because many municipal instruments are issued to finance similar projects (such as education, health care, transportation
and utilities), conditions in these industries can significantly affect the overall municipal market. Also, municipal securities backed
by current or anticipated revenues from a specific project or assets can be negatively affected by the discontinuance of taxation or reduction
of revenue supporting the project or assets.
Municipal
securities that are insured may be adversely affected by developments relevant to that particular insurer, or more general developments
relevant to the market as a whole. The Funds vulnerability to potential losses associated with such developments may be reduced
through investment in municipal securities that feature credit enhancements (such as bond insurance). Although insurance may reduce the
credit risk of a municipal security, it does not protect against fluctuations in the value of the Funds shares caused by market
changes. It is important to note that, although insurance may increase the credit safety of investments held by the Fund, it decreases
the Funds yield as the Fund may pay for the insurance directly or indirectly. In addition, while the obligation of a municipal
bond insurance company to pay a claim extends over the life of an insured bond, there is no assurance that insurers will meet their claims.
A higher-than-anticipated default rate on municipal bonds (or other insurance the insurer provides) could strain the insurers loss
reserves and adversely affect its ability to pay claims to bondholders.
Municipal
securities can be difficult to value and be less liquid than other investments, which may affect performance.
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Additionally,
the amount of public information available about municipal securities is generally less than that for corporate equities or bonds, and
the investment performance of the Funds municipal securities investments, and their risks, may therefore be more dependent on the
analytical abilities of the Adviser than its investment in certain other securities. Information related to municipal securities and
their risks may be provided by the municipality itself, which may not always be accurate. The secondary market for municipal securities,
particularly below investment grade municipal securities, also tends to be less well-developed or liquid than many other securities markets,
which may adversely affect the Funds ability to sell such securities at prices approximating those at which the Fund may currently
value them.
Investments
in municipal securities are subject to risks associated with the financial health of the issuers of such securities or the revenue associated
with underlying projects or other sources. For example, social, political, economic, market or public health conditions can, and have
at times, significantly stressed the financial resources of many municipalities and other issuers of municipal securities, which may
adversely affect their ability to meet their financial obligations and the value or liquidity of the Funds investments in municipal
securities. A number of municipal issuers, in the past, have defaulted on obligations, been downgraded or commenced insolvency proceedings.
Financial difficulties of issuers of municipal securities may occur in the future and the financial condition of such issuers may decline
quickly. The ability of municipal issuers to make timely payments of interest and principal may be diminished during general economic
downturns and as governmental cost burdens are reallocated among federal, state and local governments. The taxing power of any governmental
entity may be limited by provisions of state constitutions or laws and an entitys credit will depend on many factors, including
the entitys tax base, the extent to which the entity relies on federal or state aid and other factors which are beyond the entitys
control. In addition, laws enacted or that may be enacted in the future by governmental authorities could extend the time for payment
of principal and/or interest, or impose other constraints on enforcement of such obligations or on the ability of municipalities to levy
taxes.
Moreover,
as a result of economic, market and other factors, there could be reduced tax or other revenue available to issuers of municipal securities
and, in turn, increased budgetary and financial pressure on the municipality and other issuers of municipal securities, which could increase
the risks associated with municipal securities of such issuer. As a result, the Funds investments in municipal obligations or other
securities may be subject to heightened risks relating to the occurrence of such developments. Issuers of municipal securities might
seek protection under bankruptcy laws. In the event of bankruptcy of such an issuer, holders of municipal securities could experience
delays in collecting principal and interest and such holders may not be able to collect all principal and interest to which they are
entitled. Legislative developments may result in changes to the laws relating to municipal bankruptcies, which may adversely affect the
Funds investments in municipal securities.
When-Issued
and Delayed Delivery Transactions Risk
Securities
purchased on a when-issued or delayed delivery basis may expose the Fund to counterparty risk of default as well as the risk that securities
may experience fluctuations in value prior to their actual delivery. The Fund generally will not accrue income with respect to a when-issued
or delayed delivery security prior to its stated delivery date. Purchasing securities on a when-issued or delayed delivery basis can
involve the additional risk that the price or yield available in the market when the delivery takes place may not be as favorable as
that obtained in the transaction itself.
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Short
Sales Risk
The Fund
may make short sales of securities. Short selling a security involves selling a borrowed security with the expectation that the value
of that security will decline, so that the security may be purchased at a lower price when returning the borrowed security. If the price
of the security sold short increases between the time of the short sale and the time the Fund replaces the borrowed security, the Fund
will incur a loss; conversely, if the price declines, the Fund will realize a capital gain. Any gain will be decreased, and any loss
will be increased, by the transaction costs incurred by the Fund, including the costs associated with providing collateral to the broker-dealer
(usually cash and liquid securities) and the maintenance of collateral with its custodian. Although the Funds gain is limited to
the price at which it sold the security short, its potential loss is theoretically unlimited and may be greater than a direct investment
in the security itself because the price of the borrowed or reference security may rise. The Fund may not always be able to close out
a short position at a particular time or at an acceptable price. A lender may request that borrowed securities be returned to it on short
notice, and the Fund may have to buy the borrowed securities at an unfavorable price, resulting in a loss. The Fund may have to pay a
premium to borrow the securities and must pay any dividends or interest payable on the securities until they are replaced, which will
be expenses of the Fund. Short sales also subject the Fund to risks related to the lender (such as bankruptcy risks) or the general risk
that the lender does not comply with its obligations. Government actions also may affect the Funds ability to engage in short selling.
The use of physical short sales is typically more expensive than gaining short exposure through derivatives.
Repurchase
Agreement Risk
The Fund
may enter into bilateral and tri-party repurchase agreements. In a typical Fund repurchase agreement, the Fund enters into a contract
with a broker, dealer, or bank (the counterparty to the transaction) for the purchase of securities or other assets. The
counterparty agrees to repurchase the securities or other assets at a specified future date, or on demand, for a price that is sufficient
to return to the Fund its original purchase price, plus an additional amount representing the return on the Funds investment. Such
repurchase agreements economically function as a secured loan from the Fund to a counterparty. If the counterparty defaults on the repurchase
agreement, the Fund will retain possession of the underlying securities or other assets. If bankruptcy proceedings are commenced with
respect to the seller, realization on the collateral by the Fund may be delayed or limited and the Fund may incur additional costs. In
such case, the Fund will be subject to risks associated with changes in market value of the collateral securities or other assets. The
Fund intends to enter into repurchase agreements only with brokers, dealers, or banks or other permitted counterparties after the Adviser
(or GPIM) evaluates the creditworthiness of the counterparty. The Fund will not enter into repurchase agreements with the Adviser or
GPIM or their affiliates. Except as provided under applicable law, the Fund may enter into repurchase agreements without limitation.
Repurchase
agreements collateralized fully by cash items, U.S. government securities or by securities issued by an issuer that the Adviser or GPIM
has determined at the time the repurchase agreement is entered into has an exceptionally strong capacity to meet its financial obligations
(Qualifying Collateral) and meet certain liquidity standards generally may be deemed to be collateralized fully
and may be deemed to be investments in the underlying securities for certain purposes. The Fund may accept collateral other than Qualifying
Collateral determined by the Adviser or GPIM to be in the best interests of the Fund to accept as collateral for such repurchase agreement
(which may include high yield debt instruments that are rated below investment grade) (Alternative Collateral).
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Repurchase
agreements secured by Alternative Collateral are not deemed to be collateralized fully under applicable regulations and the
repurchase agreement is therefore considered a separate security issued by the counterparty to the Fund. Accordingly, the Fund must include
repurchase agreements that are not collateralized fully in its calculations of securities issued by the selling institution
held by the Fund for purposes of various portfolio diversification and concentration requirements applicable to the Fund. In addition,
Alternative Collateral may not qualify as permitted or appropriate investments for the Fund under the Funds investment strategies
and limitations. Accordingly, if a counterparty to a repurchase agreement defaults and the Fund takes possession of Alternative Collateral,
the Fund may need to promptly dispose of the Alternative Collateral (or other securities held by the Fund, if the Fund exceeds a limitation
on a permitted investment by virtue of taking possession of the Alternative Collateral). The Alternative Collateral may be particularly
illiquid, especially in times of market volatility or in the case of a counterparty insolvency or bankruptcy, which may restrict the
Funds ability to dispose of Alternative Collateral received from the counterparty. Depending on the terms of the repurchase agreement,
the Fund may determine to sell the collateral during the term of the repurchase agreement and then purchase the same collateral at the
market price at the time of the resale. In tri-party repurchase agreements, an unaffiliated third party custodian maintains accounts to
hold collateral for the Fund and its counterparties and, therefore, the Fund may be subject to the credit risk of those custodians. Securities
subject to repurchase agreements (other than tri-party repurchase agreements) and purchase and sale contracts will be held by the Funds
custodian (or sub-custodian) in the Federal Reserve/Treasury book-entry system or by another authorized securities depository.
Securities
Lending Risk
The Fund
may lend its portfolio securities to banks or dealers which meet the Funds creditworthiness standards. Securities lending is subject
to the risk that loaned securities may not be available to the Fund on a timely basis and the Fund may therefore lose the opportunity
to sell the securities at a desirable price. Any loss in the market price of securities loaned by the Fund that occurs during the term
of the loan would be borne by the Fund and would adversely affect the Funds performance. Also, there may be delays in recovery,
or no recovery, of securities loaned or even a loss of rights in the collateral should the borrower of the securities fail financially
while the loan is outstanding.
Risk of
Failure to Qualify as a RIC
To qualify
for the favorable U.S. federal income tax treatment generally accorded to regulated investment companies (RICs), the Fund
must, among other things, derive in each taxable year at least 90% of its gross income from certain prescribed sources, meet certain
asset diversification tests and distribute for each taxable year at least 90% of its investment company taxable income (generally,
ordinary income plus the excess, if any, of net short-term capital gain over net long-term capital loss). If for any taxable year the
Fund does not qualify as a RIC, all of its taxable income for that year (including its net capital gain) would be subject to tax at regular
corporate rates without any deduction for distributions to shareholders, and such distributions would be taxable as ordinary dividends
to the extent of the Funds current and accumulated earnings and profits.
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Conflicts
of Interest Risk
Guggenheim
Partners, LLC (Guggenheim Partners) is a global asset management and investment advisory organization. Guggenheim Partners
and its affiliates advise clients in various markets and transactions and purchase, sell, hold and recommend a broad array of investments
for their own accounts and the accounts of clients and of their personnel and the relationships and products they sponsor, manage and
advise. Accordingly, Guggenheim Partners and its affiliates may have direct and indirect interests in a variety of global markets and the
securities of issuers in which the Fund may directly or indirectly invest. These interests may cause the Fund to be subject to regulatory
limits, and in certain circumstances, these various activities may prevent the Fund from participating in an investment decision.
An investment
in the Fund is subject to a number of actual or potential conflicts of interest. For example, the Adviser and its affiliates are engaged
in a variety of business activities that are unrelated to managing the Fund, which may give rise to actual, potential or perceived conflicts
of interest in connection with making investment decisions for the Fund. As a result, activities and dealings of Guggenheim Partners
and its affiliates may affect the Fund in ways that may disadvantage or restrict the Fund or be deemed to benefit Guggenheim Partners and
its affiliates. From time to time, conflicts of interest may arise between a portfolio managers management of the investments of
the Fund on the one hand and the management of other registered investment companies, pooled investment vehicles and other accounts (collectively,
other accounts) on the other. The other accounts might have similar investment objectives or strategies as the Fund or otherwise
hold, purchase, or sell securities that are eligible to be held, purchased or sold by the Fund. In certain circumstances, and subject
to its fiduciary obligations under the Investment Advisers Act of 1940 and the requirements of the 1940 Act, the Adviser or GPIM may
have to allocate a limited investment opportunity among its clients. The other accounts might also have different investment objectives
or strategies than the Fund. In addition, the Fund may be limited in its ability to invest in, or hold securities of, any companies that
the Adviser or its affiliates (or other accounts managed by the Adviser or its affiliates) control, or companies in which the Adviser or
its affiliates have interests or with whom they do business. For example, affiliates of the Adviser may act as underwriter, lead agent or
administrative agent for loans or otherwise participate in the market for loans. Because of limitations imposed by applicable law, the
presence of the Advisers affiliates in the markets for loans may restrict the Funds ability to acquire some loans or affect
the timing or price of such acquisitions. To address these conflicts, the Fund and Guggenheim Partners and its affiliates have established
various policies and procedures that are reasonably designed to detect and prevent such conflicts and prevent the Fund from being disadvantaged.
There can be no guarantee that these policies and procedures will be successful in every instance.
Market
Disruption and Geopolitical Risk
The Fund
does not know and cannot predict how long the securities markets may be affected by geopolitical events and the effects of these and similar
events in the future on the U.S. economy and securities markets. The Fund may be adversely affected by abrogation of international agreements
and national laws which have created the market instruments in which the Fund may invest, failure of the designated national and international
authorities to enforce compliance with the same laws and agreements, failure of local, national and international organization to carry
out their duties prescribed to them under the relevant agreements, revisions of these laws and agreements which dilute their effectiveness
or conflicting interpretation of provisions of the same laws and agreements.
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The Fund
may be adversely affected by uncertainties such as terrorism, international political developments, and changes in government policies,
taxation, restrictions on foreign investment and currency repatriation, currency fluctuations and other developments in the laws and
regulations of the countries in which it is invested and the risks associated with financial, economic, geopolitical, public health,
labor and other global market developments and disruptions, such as the ongoing Russia-Ukraine conflict and its risk of expansion or
collateral economic and other effects.
Cyber
Security, Market Disruptions and Operational Risk
Like other
funds and other parts of the modern economy, the Fund and its service providers, as well as exchanges and market participants through
or with which the Fund trades and exchanges on which its shares trade and other infrastructures, services and parties on which the Fund,
the Adviser, GPIM or the Funds other service providers rely, are susceptible to ongoing risks related to cyber incidents and the
risks associated with financial, economic, public health, labor and other global market developments and disruptions, including those
arising out of geopolitical events, public health emergencies (such as the spread of infectious diseases, pandemics and epidemics), natural/environmental
disasters, war, terrorism and governmental or quasi-governmental actions. Cyber incidents can result from unintentional events (such
as an inadvertent release of confidential information) or deliberate attacks (such as cyber extortion) by insiders or third parties,
including cyber criminals, competitors, nation-states and hacktivists, and can be perpetrated by a variety of complex means,
including the use of stolen access credentials, malware or other computer viruses, ransomware, phishing, structured query language injection
attacks, and distributed denial of service attacks, among other means. Cyber incidents and market disruptions may result in actual or
potential adverse consequences for critical information and communications technology, systems and networks that are vital to the operations
of the Fund or its service providers, or otherwise impair Fund or service provider operations. For example, a cyber incident may cause
operational disruptions and failures impacting information systems or information that a system processes, stores, or transmits, such
as by theft, damage or destruction, or corruption or modification of and denial of access to data maintained online or digitally, denial
of service on websites rendering the websites unavailable to intended users or not accessible for such users in a timely manner, and
the unauthorized release or other exploitation of confidential information. Recent geopolitical tensions may have increased the scale
and sophistication of deliberate cyber attacks, particularly from nation-states or entities with nation-state backing.
A cyber incident
or sudden market disruption could adversely impact the Fund, its service providers or its shareholders by, among other things, interfering
with the processing of transactions or other operational functionality, impacting the Funds ability to calculate its NAV or other
data, causing the release of private shareholder information (i.e., identity theft or other privacy breaches) or confidential
Fund information or otherwise compromising the security and reliability of information, impeding trading, causing reputational damage,
and subjecting the Fund or its service providers to regulatory fines, penalties or financial losses, reimbursement or other compensation
or remediation costs, litigation expenses and additional compliance and cyber security risk management costs, which may be substantial.
The same could affect the exchange on which Fund shares trade. A cyber incident could also adversely affect the ability of the Fund (and
its Adviser) to invest or manage the Funds assets.
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Cyber incidents
and developments and disruptions to financial, economic, public health, labor and other global market conditions can obstruct the regular
functioning of business workforces (including requiring employees to work from external locations or from their homes), cause business
slowdowns or temporary suspensions of business activities, each of which can negatively impact Fund service providers and Fund operations.
Although the Fund and its service providers, as well as exchanges and market participants through or with which the Fund trades and other
infrastructures on which the Fund or its service providers rely, may have established business continuity plans and systems reasonably
designed to protect from and/or defend against the risks or adverse consequences associated with cyber incidents and market disruptions,
there are inherent limitations in these plans and systems, including that certain risks may not yet be identified, in large part because
different or unknown threats may emerge in the future and the threats continue to rapidly evolve and increase in sophistication. As a
result, it is not possible to anticipate and prevent every cyber incident and possible obstruction to the normal activities of these
entities employees resulting from market disruptions and attempts to mitigate the occurrence or impact of such events may be unsuccessful.
For example, public health emergencies and governmental responses to such emergencies, including through quarantine measures and travel
restrictions, can create difficulties in carrying out the normal working processes of these entities employees, disrupt their operations
and hamper their capabilities. The nature, extent, and potential magnitude of the adverse consequences of these events cannot be predicted
accurately but may result in significant risks, adverse consequences and costs to the Fund and its shareholders. The use of cloud-based
service providers could heighten all of the above risks.
The issuers
of securities in which the Fund invests are also subject to the ongoing risks and threats associated with cyber incidents and market
disruptions. These incidents could result in adverse consequences for such issuers, and may cause the Funds investment in such
securities to lose value. For example, a cyber incident involving an issuer may include the theft, destruction or misappropriation of
financial assets, intellectual property or other sensitive information belonging to the issuer or their customers (i.e., identity
theft or other privacy breaches) and a market disruption involving an issuer may include materially reduced consumer demand and output,
disrupted supply chains, market closures, travel restrictions and quarantines. As a result, the issuer may experience the types of adverse
consequences summarized above, among others (such as loss of revenue), despite having implemented preventative and other measures reasonably
designed to protect from and/or defend against the risks or adverse effects associated with cyber incidents and market disruptions.
The Fund
and its service providers, as well as exchanges and market participants through or with which the Fund trades and other infrastructures
on which the Fund or its service providers rely, are also subject to the risks associated with technological and operational disruptions
or failures arising from, for example, processing errors and human errors, inadequate or failed internal or external processes, failures
in systems and technology, errors in algorithms used with respect to the Fund, changes in personnel, and errors caused by third parties
or trading counterparties. Although the Fund attempts to minimize such failures through controls and oversight, it is not possible to
identify all of the operational risks that may affect the Fund or to develop processes and controls that completely eliminate or mitigate
the occurrence of such failures or other disruptions in service.
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Cyber incidents,
market disruptions and operational errors or failures or other technological issues may adversely affect the Funds ability to calculate
its NAV correctly, in a timely manner or process trades or Fund or shareholder transactions may be adversely affected, including over
a potentially extended period. The Fund does not control the cyber security, disaster recovery, or other operational defense plans or
systems of its service providers, intermediaries, exchanges where its shares trades, companies in which it invests or other third-parties.
The value of an investment in Fund shares may be adversely affected by the occurrence of the cyber incidents, market disruptions and operational
errors or failures or technological issues summarized above or other similar events and the Fund and its shareholders may bear costs
tied to these risks.
In addition,
work-from-home arrangements by the Fund, the Adviser or GPIM (or their service providers) could increase all of the above risks, create
additional data and information accessibility concerns, and make the Fund, the Adviser or GPIM (or their service providers) more susceptible
to operational disruptions, any of which could adversely impact their operations. Furthermore, the Fund may be an appealing target for
cybersecurity threats such as hackers and malware.
Technology
Risk
The Fund
and its service providers and markets generally have become more susceptible to potential operational risks related to intentional and
unintentional events that may cause the Fund or a service provider to lose proprietary information, suffer data corruption or lose operational
capacity. There can be no guarantee that any risk management systems established by the Fund, its service providers, or issuers of the
securities in which the Fund invests to reduce technology and cyber security risks will succeed, and the Fund cannot control such systems
put in place by service providers, issuers or other third parties whose operations may affect the Fund.
ANTI-TAKEOVER
PROVISIONS
The Funds
Declaration of Trust and By-Laws, each as may be amended and/or restated from time to time, include provisions that could limit the ability
of other entities or persons to acquire control of the Fund or convert the Fund to an open-end fund. These provisions could have the
effect of depriving the Common Shareholders of opportunities to sell their Common Shares at a premium over the then-current market price
of the Common Shares.
In addition,
investors should note that the Fund reserves the right to merge or reorganize with another fund, liquidate or convert into an open-end
fund, in each case subject to applicable approvals by shareholders and the Funds Board of Trustees as required by law and the Funds
governing documents.
EFFECTS
OF LEVERAGE
Assuming
that the Funds total Financial Leverage represented approximately 23.4% of the Funds Managed Assets (based on the Funds
outstanding Financial Leverage of $166,375,625) and interest costs to the Fund at a combined average annual rate of 5.5% (based on
the Funds average annual leverage costs for the fiscal year ended May 31, 2024) with respect to such Financial Leverage, then the
incremental income generated by the Funds portfolio (net of estimated expenses including expenses related to the Financial Leverage)
must exceed approximately 1.28% to cover such interest specifically related to the debt. These numbers are merely estimates used for
illustration. Actual
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interest
rates may vary frequently and may be significantly higher or lower than the rate estimated above.
The following
table is furnished pursuant to requirements of the SEC. It is designed to illustrate the effect of Financial Leverage on Common Share
total return, assuming investment portfolio total returns (comprised of income, net expenses and changes in the value of investments
held in the Funds portfolio) of -10%, -5%, 0%, 5% and 10%. These assumed investment portfolio returns are hypothetical figures
and are not necessarily indicative of what the Funds investment portfolio returns will be. The table further reflects the issuance
of Financial Leverage representing approximately 23.4% of the Funds Managed Assets and interest costs to the Fund at a combined
average annual rate of 5.5% with respect to such Financial Leverage. The table does not reflect any offering costs of Common Shares or
Borrowings.
Assumed
portfolio total return (net of expenses) |
(10.00%) |
(5.00%) |
0.00% |
5.00% |
10.00% |
Common
Share total return |
(14.74%) |
(8.21%) |
(1.68%) |
4.85% |
11.38% |
Common Share
total return is composed of two elementsthe Common Share dividends paid by the Fund (the amount of which is largely determined
by the Funds net investment income after paying the carrying cost of Financial Leverage) and realized and unrealized gains or losses
on the value of the securities the Fund owns. As required by SEC rules, the table assumes that the Fund is more likely to suffer capital
loss than to enjoy capital appreciation. For example, to assume a total return of 0%, the Fund must assume that the net investment income
it receives on its investments is entirely offset by losses on the value of those investments. This table reflects the hypothetical performance
of the Funds portfolio and not the performance of the Common Shares, the value of which will be determined by market and other
factors.
During the
time in which the Fund is utilizing Financial Leverage, the amount of the fees paid to the Adviser by the Fund (and by the Adviser to
GPIM) for investment advisory services will be higher than if the Fund did not utilize Financial Leverage because the fees paid will
be calculated based on the Funds Managed Assets which may create a conflict of interest between the Adviser and GPIM and the Common
Shareholders. Because the Financial Leverage costs will be borne by the Fund at a specified rate, only the Common Shareholders will bear
the cost of the Funds fees and expenses. The Fund generally will not use Financial Leverage if the Adviser and GPIM anticipate
that such use would result in a lower return to Common Shareholders for any significant amount of time.
INTEREST
RATE TRANSACTIONS
In connection
with the Funds use of Financial Leverage, the Fund may enter into interest rate swap or cap transactions to seek to hedge against
possible increases in the variable interest or dividend rate that it will be obligated to pay on its Financial Leverage. Interest rate
swaps involve the Funds agreement with the swap counterparty to pay a fixed-rate payment in exchange for the counterpartys
paying the Fund a variable rate payment that is intended to approximate all or a portion of the Funds variable-rate payment obligation
on the Funds Financial Leverage. The payment obligation would be based on the notional amount of the swap, which will not exceed
the amount of the Funds Financial Leverage.
The Fund
may use an interest rate cap, which would require it to pay a premium to the cap counterparty and would entitle it, to the extent that
a specified variable-rate index exceeds a
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predetermined
fixed rate, to receive payment from the counterparty of the difference based on the notional amount. The Fund would use interest rate
swaps or caps only with the intent to reduce or eliminate the risk that an increase in short-term interest rates could have on Common
Share net earnings as a result of Financial Leverage.
The Fund
will usually enter into swaps or caps on a net basis; that is, the two payment streams will be netted out in a cash settlement on the
payment date or dates specified in the instrument, with the Funds receiving or paying, as the case may be, only the net amount
of the two payments.
The use of
interest rate swaps and caps is a highly specialized activity that involves investment techniques and risks different from those associated
with ordinary portfolio security transactions. Depending on the state of interest rates in general, the Funds use of interest rate
instruments could enhance or harm the overall performance of the Common Shares. To the extent there is a decline in interest rates, the
net amount receivable by the Fund under the interest rate swap or cap could decline and could thus result in a decline in the net asset
value of the Common Shares. In addition, if short-term interest rates are lower than the Funds fixed rate of payment on the interest
rate swap, the swap will reduce Common Share net earnings if the Fund must make net payments to the counterparty. If, on the other hand,
short-term interest rates are higher than the fixed rate of payment on the interest rate swap, the swap will enhance Common Share net
earnings if the Fund receives net payments from the counterparty. Buying interest rate caps could enhance the performance of the Common
Shares by limiting the Funds maximum leverage expense.
Buying interest
rate caps could also decrease the net earnings of the Common Shares if the premium paid by the Fund to the counterparty exceeds the additional
cost of the Financial Leverage that the Fund would have been required to pay had it not entered into the cap agreement.
Interest
rate swaps and caps do not involve the delivery of securities or other underlying assets or principal. Accordingly, the risk of loss
with respect to interest rate swaps is limited to the net amount of interest payments that the Fund is contractually obligated to make.
The Fund will be subject to credit risk with respect to the counterparties to interest rate transactions entered into by the Fund. If
a counterparty becomes bankrupt or otherwise fails to perform its obligations under a derivative contract, the Fund may experience significant
delays in obtaining any recovery under the derivative contract in bankruptcy or other reorganization proceedings. The Fund may obtain
only a limited recovery or may obtain no recovery in such circumstances. Depending on whether the Fund would be entitled to receive net
payments from the counterparty on the swap or cap, which in turn would depend on the general state of short-term interest rates at that
point in time, such default by a counterparty could negatively impact the performance of the Common Shares.
Although
this will not guarantee that the counterparty does not default, the Fund will not enter into an interest rate swap or cap transaction
with any counterparty that GPIM believes does not have the financial resources to honor its obligation under the interest rate swap or
cap transaction. Further, GPIM will regularly monitor the financial stability of a counterparty to an interest rate swap or cap transaction
in an effort to seek to proactively protect the Funds investments.
In addition,
at the time the interest rate swap or cap transaction reaches its scheduled termination date, there is a risk that the Fund will not
be able to obtain a replacement transaction or that the terms of the replacement will not be as favorable as on the expiring transaction.
If this occurs, it could have a negative impact on the performance of the Common Shares.
194 l GUG
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|
|
ADDITIONAL INFORMATION REGARDING
THE FUND |
|
(Unaudited)
continued |
May
31, 2024 |
The Fund
may choose or be required to redeem some or all Fund Preferred Shares, if any, or prepay any Borrowings. Such a redemption or prepayment
would likely result in the Funds seeking to terminate early all or a portion of any swap or cap transaction. Such early termination
of a swap could result in a termination payment by or to the Fund. An early termination of a cap could result in a termination payment
to the Fund. There may also be penalties associated with early termination.
FUNDAMENTAL
INVESTMENT RESTRICTIONS
The Fund
operates under the following restrictions that constitute fundamental policies that, except as otherwise noted, cannot be changed
without the affirmative vote of the holders of a majority of the outstanding voting securities of the Fund voting together as a single
class, which is defined by the 1940 Act as the lesser of (i) 67% or more of the Funds voting securities present at a meeting,
if the holders of more than 50% of the Funds outstanding voting securities are present or represented by proxy; or (ii) more
than 50% of the Funds outstanding voting securities. Except as otherwise noted, all percentage limitations set forth below
apply immediately after a purchase or initial investment and any subsequent change in any applicable percentage resulting from
market fluctuations does not require any action. The fundamental policies of the Fund are:
1. | | The Fund may issue senior securities
to the extent permitted under the 1940 Act and other applicable laws, rules and regulations, as interpreted, modified, or applied by
regulatory authority having jurisdiction from time to time. |
2. | | The Fund may not act as an underwriter
of securities issued by others, except to the extent it could be considered an underwriter in the acquisition and disposition of restricted
securities. |
3. | | The Fund may not concentrate
its investments in a particular industry, except to the extent permitted under the 1940 Act and other applicable laws, rules and regulations,
as interpreted, modified, or applied by regulatory authority having jurisdiction from time to time. |
4. | | The Fund may purchase real estate
or any interest therein (such as securities or instruments backed by or related to real estate) to the extent permitted under the 1940
Act and other applicable laws, rules and regulations, as interpreted, modified, or applied by regulatory authority having jurisdiction
from time to time. |
5. | | The Fund may purchase or sell commodities,
including physical commodities, or contracts, instruments and interests relating to commodities to the extent permitted under the 1940
Act and other applicable laws, rules and regulations, as interpreted, modified, or applied by regulatory authority having jurisdiction
from time to time. |
6. | | The Fund may make loans to the extent
permitted under the 1940 Act and other applicable laws, rules and regulations, as interpreted, modified, or applied by regulatory authority
having jurisdiction from time to time. |
7. | | The Fund may borrow money to the
extent permitted under the 1940 Act and other applicable laws, rules and regulations, as interpreted, modified, or applied by regulatory
authority having jurisdiction from time to time. |
The Fund
is a diversified, closed-end management investment company.
GUG l
GUGGENHEIM ACTIVE ALLOCATION FUND ANNUAL REPORT l 195
|
|
ADDITIONAL INFORMATION REGARDING
THE FUND |
|
(Unaudited)
continued |
May
31, 2024 |
A diversified
company is currently defined under the 1940 Act as a company which meets the following requirements: at least 75 percent of the
value of its total assets is represented by cash and cash items (including receivables), government securities, securities of other investment
companies, and other securities for the purposes of this calculation limited in respect of any one issuer to an amount not greater in
value than 5 percent of the value of the total assets of such company and to not more than 10 percent of the outstanding voting securities
of such issuer. For these purposes, each governmental subdivision, i.e., state, territory, possession of the United States or
any political subdivision of any of the foregoing, including agencies, authorities, instrumentalities, or similar entities, or of the
District of Columbia shall be considered a separate issuer if its assets and revenues are separate from those of the governmental body
creating it and the security is backed only by its own assets and revenues. For these purposes, the Fund generally will consider the
borrower of a syndicated bank loan to be the issuer of the syndicated bank loan but may under unusual circumstances also consider the
lender or person inter-positioned between the lender and the Fund to be the issuer of a syndicated bank loan. In making such a determination,
the Fund will consider all relevant factors, including the following: the terms of the loan agreement and other relevant agreements (including
inter-creditor agreements and any agreements between such person and the Funds custodian); the credit quality of such lender or
inter-positioned person; general economic conditions applicable to such lender or inter-positioned person; and other factors relating
to the degree of credit risk, if any, of such lender or inter-positioned person incurred by the Fund.
For purposes
of applying the limitation set forth in subparagraph (3) above to securities that have a security interest or other collateral claim
on specified underlying collateral (such as asset-backed securities, mortgage-backed securities and collateralized debt and loan obligations)
the Fund will determine the industry classifications of such investments based on GPIMs evaluation of the risks associated with
the collateral underlying such investments.
196 l GUG
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|
|
DIVIDEND
REINVESTMENT PLAN (Unaudited) |
May
31, 2024 |
Unless the
registered owner of common shares elects to receive cash by contacting Computershare Trust Company, N.A. (the Plan Administrator),
all dividends declared on common shares of the Fund will be automatically reinvested by the Plan Administrator for shareholders in the
Funds Dividend Reinvestment Plan (the Plan), in additional common shares of the Fund. Participation in the Plan is
completely voluntary and may be terminated or resumed at any time without penalty by notice if received and processed by the Plan Administrator
prior to the dividend record date; otherwise such termination or resumption will be effective with respect to any subsequently declared
dividend or other distribution. Some brokers may automatically elect to receive cash on your behalf and may re-invest that cash in additional
common shares of the Fund for you. If you wish for all dividends declared on your common shares of the Fund to be automatically reinvested
pursuant to the Plan, please contact your broker.
The Plan
Administrator will open an account for each common shareholder under the Plan in the same name in which such common shareholders
common shares are registered. Whenever the Fund declares a dividend or other distribution (together, a Dividend) payable
in cash, nonparticipants in the Plan will receive cash and participants in the Plan will receive the equivalent in common shares. The
common shares will be acquired by the Plan Administrator for the participants accounts, depending upon the circumstances described
below, either (i) through receipt of additional unissued but authorized common shares from the Fund (Newly Issued Common Shares)
or (ii) by purchase of outstanding common shares on the open market (Open-Market Purchases) on the New York Stock Exchange
or elsewhere. If, on the payment date for any Dividend, the closing market price plus estimated brokerage commission per common share
is equal to or greater than the net asset value per common share, the Plan Administrator will invest the Dividend amount in Newly Issued
Common Shares on behalf of the participants. The number of Newly Issued Common Shares to be credited to each participants account
will be determined by dividing the dollar amount of the Dividend by the net asset value per common share on the payment date; provided
that, if the net asset value is less than or equal to 95% of the closing market value on the payment date, the dollar amount of the Dividend
will be divided by 95% of the closing market price per common share on the payment date. If, on the payment date for any Dividend, the
net asset value per common share is greater than the closing market value plus estimated brokerage commission, the Plan Administrator
will invest the Dividend amount in common shares acquired on behalf of the participants in Open-Market Purchases.
For federal
income tax purposes, the Fund generally would be able to claim a deduction for distributions to shareholders with respect to the common
shares issued at up to a 5-percent discount from the closing market value pursuant to the Plan.
If, before
the Plan Administrator has completed its Open-Market Purchases, the market price per common share exceeds the net asset value per common
share, the average per common share purchase price paid by the Plan Administrator may exceed the net asset value of the common shares,
resulting in the acquisition of fewer common shares than if the Dividend had been paid in Newly Issued Common Shares on the Dividend
payment date. Because of the foregoing difficulty with respect to Open-Market Purchases, the Plan provides that if the Plan Administrator
is unable to invest the full Dividend amount in Open-Market Purchases during the purchase period or if the market discount shifts to
a market premium during the purchase period, the Plan Administrator may cease making Open-Market Purchases and may invest the uninvested
portion of the Dividend
GUG l
GUGGENHEIM ACTIVE ALLOCATION FUND ANNUAL REPORT l 197
|
|
DIVIDEND
REINVESTMENT PLAN (Unaudited) continued |
May
31, 2024 |
amount in
Newly Issued Common Shares at net asset value per common share at the close of business on the Last Purchase Date provided that, if the
net asset value is less than or equal to 95% of the then current market price per common share; the dollar amount of the Dividend will
be divided by 95% of the market price on the payment date.
The Plan
Administrator maintains all shareholders accounts in the Plan and furnishes written confirmation of all transactions in the accounts,
including information needed by shareholders for tax records. Common shares in the account of each Plan participant will be held by the
Plan Administrator on behalf of the Plan participant, and each shareholder proxy will include those shares purchased or received pursuant
to the Plan. The Plan Administrator will forward all proxy solicitation materials to participants and vote proxies for shares held under
the Plan in accordance with the instruction of the participants.
There will
be no brokerage charges with respect to common shares issued directly by the Fund. However, each participant will pay a pro rata share
of brokerage commission incurred in connection with Open-Market Purchases. The automatic reinvestment of Dividends will not relieve participants
of any Federal, state or local income tax that may be payable (or required to be withheld) on such Dividends.
The Fund
reserves the right to amend or terminate the Plan. There is no direct service charge to participants with regard to purchases in the
Plan; however, the Fund reserves the right to amend the Plan to include a service charge payable by the participants.
All correspondence
or questions concerning the Plan should be directed to the Plan Administrator, Computershare Trust Company, N.A., P.O. Box 30170 College
Station, TX 77842-3170: Attention: Shareholder Services Department, Phone Number: (866) 488-3559 or online at www.computershare.com/investor.
198 l GUG
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|
|
FUND
INFORMATION |
May
31, 2024 |
Board of Trustees |
|
Investment Adviser |
Randall C. Barnes
Angela Brock-Kyle
Amy J. Lee*
Thomas F. Lydon, Jr.
Ronald A. Nyberg
Sandra G. Sponem
Ronald E. Toupin, Jr.,
Chairman
* This Trustee
is an interested person (as defined in Section 2(a)(19) of the 1940 Act) (Interested Trustee) of the Fund because
of her affiliation with Guggenheim Investments.
Principal Executive Officers
Brian E. Binder
President and Chief Executive Officer
Joanna M. Catalucci
Chief Compliance Officer
Amy J. Lee
Vice President and Chief Legal Officer
Mark E. Mathiasen
Secretary
James M. Howley
Chief Financial Officer,
Chief Accounting Officer
and Treasurer
|
|
Guggenheim Funds Investment
Advisors, LLC
Chicago, IL
Investment Sub-Adviser
Guggenheim Partners Investment
Management, LLC
Santa Monica, CA
Administrator and Accounting Agent
MUFG Investor Services (US), LLC
Rockville, MD
Custodian
The Bank of New York Mellon Corp.
New York, NY
Legal Counsel
Dechert LLP
Washington, D.C.
Independent Registered Public
Accounting Firm
Ernst & Young LLP
Tysons, VA |
206 l GUG
l GUGGENHEIM ACTIVE ALLOCATION FUND ANNUAL REPORT
|
|
FUND
INFORMATION (Unaudited) continued |
May
31, 2024 |
Privacy
Principles of Guggenheim Active Allocation Fund for Shareholders
The Fund
is committed to maintaining the privacy of its shareholders and to safeguarding its non-public personal information. The following information
is provided to help you understand what personal information the Fund collects, how we protect that information and why, in certain cases,
we may share information with select other parties.
Generally,
the Fund does not receive any non-public personal information relating to its shareholders, although certain non-public personal information
of its shareholders may become available to the Fund. The Fund does not disclose any non-public personal information about its shareholders
or former shareholders to anyone except as permitted by law or as is necessary in order to service shareholder accounts (for example,
to a transfer agent or third party administrator).
The Fund
restricts access to non-public personal information about the shareholders to Guggenheim Funds Investment Advisors, LLC employees with
a legitimate business need for the information. The Fund maintains physical, electronic and procedural safeguards designed to protect
the non-public personal information of its shareholders.
Questions
concerning your shares of Guggenheim Active Allocation Fund?
| | If your shares are held in a Brokerage
Account, contact your Broker. |
| | If you have physical possession of
your shares in certificate form, contact the Funds Transfer Agent: Computershare Trust Company, N.A., P.O. Box 30170 College Station,
TX 77842-3170; (866) 488-3559 or online at www.computershare.com/investor |
This report
is sent to shareholders of Guggenheim Active Allocation Fund for their information. It is not a Prospectus, circular or representation
intended for use in the purchase or sale of shares of the Fund or of any securities mentioned in this report.
Paper copies
of the Funds annual and semi-annual shareholder reports are not sent by mail, unless you specifically request paper copies of the
reports. Instead, the reports are made available on a website, and you are notified by mail each time a report is posted and provided
with a website address to access the report.
You may elect
to receive paper copies of all future shareholder reports free of charge. If you invest through a financial intermediary, you can contact
your financial intermediary to request that you may receive paper copies of your shareholder reports; if you invest directly with the
Fund, you may call Computershare at 1-866-488-3559. Your election to receive reports in paper form may apply to all funds held in your
account with your financial intermediary or, if you invest directly, to all Guggenheim closed-end funds you hold.
A description
of the Funds proxy voting policies and procedures related to portfolio securities is available without charge, upon request, by
calling the Fund at (888) 991-0091 and on the SEC's website at www.sec.gov.
The Funds
Statement of Additional Information includes additional information about directors of the Fund and is available, without charge, upon
request, by calling the Fund at (888) 991-0091.
Information
regarding how the Fund voted proxies for portfolio securities, if applicable, during the most recent 12-month period ended June 30, is
also available, without charge and upon request by calling (888) 991-0091, by visiting the Funds website at guggenheiminvestments.com/gug
or by accessing the Funds Form N-PX on the U.S. Securities and Exchange Commissions (SEC) website at www.sec.gov.
The Fund
files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-PORT. The
Funds Forms N-PORT are available on the SEC website at www.sec.gov or at guggenheiminvestments.com/gug.
Notice
to Shareholders
Notice is
hereby given in accordance with Section 23(c) of the Investment Company Act of 1940, as amended, that the Fund from time to time may
purchase shares of its common stock in the open market or in private transactions.
GUG l
GUGGENHEIM ACTIVE ALLOCATION FUND ANNUAL REPORT l 207
ABOUT THE FUND MANAGERS
Guggenheim Funds Investment Advisors, LLC
Guggenheim
Investments represents the investment management businesses of Guggenheim Partners, LLC (Guggenheim), which includes Guggenheim
Funds Investment Advisors, LLC (GFIA) the investment adviser to the referenced fund. Collectively Guggenheim Investments
has a long, distinguished history of serving institutional investors, ultra-high-net-worth individuals, family offices and financial
intermediaries. Guggenheim Investments offers clients a wide range of differentiated capabilities built on a proven commitment to investment
excellence.
Guggenheim
Partners Investment Management, LLC
Guggenheim
Partners Investment Management, LLC (GPIM) is an indirect subsidiary of Guggenheim Partners, LLC, a diversified financial
services firm. The firm provides capital markets services, portfolio and risk management expertise, wealth management, and investment
advisory services. Clients of Guggenheim Partners, LLC subsidiaries are an elite mix of individuals, family offices, endowments, foundations,
insurance companies and other institutions.
Investment
Philosophy
GPIMs
investment philosophy is predicated upon the belief that thorough research and independent thought are rewarded with performance that
has the potential to outperform benchmark indexes with both lower volatility and lower correlation of returns over time as compared to
such benchmark indexes.
Investment
Process
GPIMs
investment process is a collaborative effort between various groups including the Portfolio Construction Group, which utilize proprietary
portfolio construction and risk modeling tools to determine allocation of assets among a variety of sectors, and its Sector Specialists,
who are responsible for identifying investment opportunities in particular securities within these sectors, including the structuring
of certain securities directly with the issuers or with investment banks and dealers involved in the origination of such securities.
Guggenheim
Funds Distributors, LLC
227 West Monroe Street
Chicago, IL 60606
Member FINRA/SIPC
(07/24)
NOT
FDIC-INSURED l NOT BANK-GUARANTEED l MAY LOSE VALUE
CEF-GUG-AR-0524
Item 2. Code of Ethics.
(a) The registrant has adopted
a code of ethics (the "Code of Ethics") that applies to its principal executive officer, principal financial officer, principal
accounting officer or controller, or persons performing similar functions.
(b) No information need
be disclosed pursuant to this paragraph.
(c) The registrant has not
amended its Code of Ethics during the period covered by the report presented in Item 1 hereto.
(d) The registrant has not
granted a waiver or an implicit waiver to its principal executive officer, principal financial officer, principal accounting officer or
controller, or persons performing similar functions from a provision of its Code of Ethics during the period covered by this report.
(e) Not applicable.
(f) (1) The registrant's
Code of Ethics is attached hereto as Exhibit (a)(1).
(2) Not applicable.
(3) Not applicable.
Item 3. Audit Committee Financial Expert.
The registrant's Board of Trustees has determined that it has at least one
audit committee financial expert serving on its audit committee (the “Audit Committee”), Sandra G. Sponem. Ms. Sponem is “independent,”
meaning that she is not an “interested person” of the Registrant (as that term is defined in Section 2(a)(19) of the Investment
Company Act of 1940, as amended) and she does not accept any consulting, advisory, or other compensatory fee from the Registrant (except
in her capacity as a Board or committee member).
(Under applicable securities laws, a person who is determined to
be an audit committee financial expert will not be deemed an "expert" for any purpose, including without limitation for the
purposes of Section 11 of the Securities Act of 1933, as a result of being designated or identified as an audit committee financial expert.
The designation or identification of a person as an audit committee financial expert does not impose on such person any duties, obligations,
or liabilities that are greater than the duties, obligations, and liabilities imposed on such person as a member of the audit committee
and Board of Trustees in the absence of such designation or identification. The designation or identification of a person as an audit
committee financial expert does not affect the duties, obligations or liability of any other member of the audit committee or Board of
Trustees.)
Item 4. Principal Accountant Fees and Services.
(a) Audit Fees: the aggregate Audit Fees
billed for professional services rendered by the principal accountant for the audit of the registrant's annual financial statements or
services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements were $84,872
and $82,400 for the fiscal years ended May 31, 2024, and May 31, 2023,
respectively.
(b) Audit-Related Fees: the aggregate
Audit-Related Fees billed for assurance and related services by the principal accountant that are reasonably related to the performance
of the audit of the registrant’s financial statements and are not reported under paragraph 4(a) of this Item 4, were $0
and $ 1,667 for the fiscal years ended May 31, 2024,
and May 31, 2023, respectively.
(c) Tax Fees: the aggregate Tax Fees
billed for professional services rendered by the principal accountant for tax compliance, tax advice and tax planning, including federal,
state and local income tax return preparation and related advice and determination of taxable income and miscellaneous tax advice were
$31,947 and $33,021 for the fiscal years ended
May 31, 2024, and May 31, 2023, respectively.
These services consisted of [(i) preparation of U.S. federal, state and excise tax returns; (ii) U.S. federal and state tax planning,
advice and assistance regarding statutory, regulatory or administrative developments, (iii) tax advice regarding tax qualification matters
and/or treatment of various financial instruments held or proposed to be acquired and (iv) review of U.S. federal excise distribution
calculations.
(d) All Other Fees: the aggregate All
Other Fees billed for products and services provided by the principal accountant, other than the services reported in paragraphs (a) through
(c) of this Item 4 were $0 and $0 for the
fiscal years ended May 31, 2024, and May 31, 2023,
respectively.
(e) Audit Committee Pre-Approval Policies and Procedures.
1. Pre-Approval Policy (Trusts). Pre-approve any engagement of
the independent auditors to provide any services, other than “prohibited non-audit services,” to the Trust, including the
fees and other compensation to be paid to the independent auditors (unless an exception is available under Rule 2-01 of Regulation S-X).
(a) The categories of services to be reviewed and considered for
pre-approval include those services set forth under Section II.A.1. of the Background and Definitions for Audit Committee Charter (collectively,
“Identified Services”).
(b) The Committee has pre-approved Identified
Services for which the estimated fees are less than $25,000.
(c) For Identified Services with estimated fees of $25,000 or more,
but less than $50,000, the Chair or any member of the Committee designated by the Chair is hereby authorized to pre-approve such Identified
Services on behalf of the Committee.
(d) For Identified Services with estimated fees of $50,000 or more,
such Identified Services require pre-approval by the Committee.
(e) All requests for Identified Services to be provided by the independent
auditor that were pre-approved by the Committee shall be submitted to the Principal/Chief Accounting Officer (“CAO”) of the
Trust by the independent auditor using the pre-approval request form. The Trust’s CAO will determine
whether such services are included within the list of services that
have received the general pre-approval of the Committee.
(f) The independent auditors or the CAO of the Trust (or an officer
of the Trust who reports to the CAO) shall report to the Committee at each of its regular scheduled meetings all audit, audit-related
and permissible non-audit services initiated since the last such report (unless the services were contained in the initial audit plan,
as previously presented to, and approved by, the Committee). The report shall include a general description of the services and projected
fees, and the means by which such services were approved by the Committee (including the particular category of Identified Services under
which pre-approval was obtained).
2. Pre-Approval Policy (Adviser or Any Control Affiliate). Pre-approve
any engagement of the independent auditors, including the fees and other compensation to be paid to the independent auditors, to provide
any non-audit services to the Adviser (or any “control affiliate” of the Adviser providing ongoing services to the Trust),
if the engagement relates directly to the operations or financial reporting of the Trust (unless an exception is available under Rule
2-01 of Regulation S-X).
(a) The Chair or any member of the Committee designated by the Chair
may grant the pre-approval for non-audit services to the Adviser (or any “control affiliate” of the Adviser providing ongoing
services to the Trust) relating directly to the operations or financial reporting of the Trust for which the estimated fees are less than
$25,000. All such delegated pre-approvals shall be presented to the Committee no later than the next Committee meeting.
(b) For non-audit services to the Adviser (or any “control
affiliate” of the Adviser providing ongoing services to the Trust) relating directly to the operations or financial reporting of
the Trust for which the estimated fees are $25,000 or more, such services require pre-approval by the Committee.
a. Pre-Approval Requirements
i. Categories of Services to be Reviewed and
Considered for Pre-Approval
1. Audit Services
a. Annual financial statement audits
b. Seed audits (related to new product filings,
as required)
c. SEC and regulatory filings and consents
2. Audit-Related Services
a. Accounting consultations
b. Fund merger/reorganization support services
c. Other accounting related matters
d. Agreed upon procedures reports
e. Attestation reports
f. Other internal control reports
3. Tax Services
a. Recurring tax services:
i. Preparation of Federal and state income tax returns, including
extensions
ii. Preparation of calculations of taxable income, including fiscal
year tax designations
iii.Preparation of annual Federal excise tax returns (if applicable)
iv.Preparation of calendar year excise distribution calculations
v. Calculation of tax equalization on an as-needed basis
vi.Preparation of monthly/quarterly estimates of tax undistributed
position for closed-end funds
vii.Preparation of the estimated excise distribution calculations
on an as-needed basis
viii.Preparation of calendar year shareholder reporting designations
on Form 1099
ix.Preparation of quarterly Federal, state and local and franchise
tax estimated tax payments on an as-needed basis
x. Preparation of state apportionment calculations to properly
allocate Fund taxable income among the states for state tax filing purposes
xi.Assistance with management’s identification of passive
foreign investment companies (PFICs) for tax purposes
b. Permissible non-recurring tax services
upon request:
i. Assistance with determining ownership changes which impact
a Fund’s utilization of loss carryforwards
ii. Assistance with corporate actions and tax treatment of complex
securities and structured products
iii.Assistance with IRS ruling requests and calculation of deficiency
dividends
iv.Conduct training sessions for the Adviser’s internal
tax resources
v. Assistance with Federal, state, local and international tax
planning and advice regarding the tax consequences of proposed or actual transactions
vi.Tax services related to amendments to Federal, state and local
returns and sales and use tax compliance
vii.RIC qualification reviews
viii.Tax distribution analysis and planning
ix.Tax authority examination services
x. Tax appeals support services
xi.Tax accounting methods studies
xii.Fund merger, reorganization and liquidation support services
xiii.Tax compliance, planning and advice services and related
projects
xiv.Assistance with out of state residency status
xv.Provision of tax compliance services in India for Funds with
direct investments in India
(2) None of the services described in each of Items 4(b) through
(d) were approved by the Audit Committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X.
(f) Not applicable.
(g) The aggregate non-audit fees billed by the registrant's accountant for
services rendered to the registrant, the registrant’s investment adviser (not including a sub-adviser whose role is primarily portfolio
management and is sub-contracted with or overseen by another investment adviser) and/or any entity controlling, controlled by, or under
common control with the adviser that provides ongoing services to the registrant that directly related to the operations and financial
reporting of the registrant were $31,947 and $34,688
for the fiscal years ended May 31, 2024 and May 31, 2023,
respectively.
(h) Not applicable.
(i) Not applicable.
(j) Not applicable.
Item 5. Audit Committee of Listed Registrants.
(a) The registrant has a separately
designated standing audit committee established in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934, as amended.
The Audit Committee of the registrant is composed of: Randall C. Barnes; Angela Brock-Kyle; Thomas F. Lydon, Jr.; Ronald A. Nyberg; Sandra
G. Sponem; and Ronald E. Toupin, Jr.
(b) Not applicable.
Item 6. Schedule of Investments.
The Schedule of Investments is included as part of Item 1.
Item 7. Financial Statements and Financial Highlights for Open-End
Management Investment Companies.
(a)
Not applicable to this registrant.
(b)
Not applicable to this registrant.
Item 8. Changes in and Disagreements with Accountants for Open-End
Management Investment Companies.
Not applicable to this registrant.
Item 9. Proxy Disclosures for Open-End Management Investment Companies.
Not applicable to this registrant.
Item 10. Remuneration Paid to Directors, Officers, and Others
of Open-End Management Investment Companies.
Not applicable to this registrant.
Item 11. Statement Regarding Basis for Approval of Investment
Advisory Contract.
The statement regarding basis for approval of investment advisory contract is included in the annual report provided in Item 1. Reports to Stockholders.
Item 12. Disclosure of Proxy Voting Policies and Procedures for
Closed-End Management
Investment Companies.
The registrant has delegated the voting of proxies relating to its
voting securities to the registrant’s investment sub-adviser, Guggenheim Partners Investment Management, LLC (“GPIM”).
Guggenheim’s proxy voting policies and procedures are included as Exhibit (c) hereto.
Item 13. Portfolio Managers of Closed-End Management Investment
Companies.
(a)(1) GPIM serves as sub-adviser for the registrant and is responsible
for the day-to-day management of the registrant’s portfolio. GPIM uses a team approach to manage client portfolios. Day
to day management of a client portfolio is conducted under the auspices of GPIM’s Portfolio Construction Group (“PCG”). PCG’s
members include the Chief Investment Officer (“CIO”) and other key investment personnel. The PCG, in consultation
with the CIO, provides direction for overall investment strategy. The PCG performs several duties as it relates to client portfolios
including: determining both tactical and strategic asset allocations; monitoring portfolio adherence to asset allocation targets; providing
sector specialists with direction for overall investment strategy, which may include portfolio design and the rebalancing of portfolios;
performing risk management oversight; assisting sector managers and research staff in determining the relative valuation of market sectors;
and providing a forum for the regular discussion of the economy and the financial markets to enhance the robustness of GPIM’s strategic
and tactical policy directives.
The following individuals at GPIM share primary responsibility
for the management of the registrant’s portfolio and is provided as of May 31, 2024:
Name |
Since |
Professional Experience During the Last Five Years |
|
|
|
|
Anne B. Walsh, CFA, FLMI –Managing Partner and CIO |
2007 |
Guggenheim Partners Investment Management, LLC: Senior Managing Director and Assistant CIO – 2007–2021; Managing Partner and CIO- Fixed Income - 2021- Present |
|
|
|
|
|
Steven Brown – Senior Managing Director and CIO, Fixed Income |
2017 |
Guggenheim Partners Investment Management, LLC Senior Managing Director 2019- Present;Managing Director – 2016 to 2019; Guggenheim Partners Investment Management, LLC – Director 2014 to 2016; Guggenheim Partners Investment Management, LLC – Vice President 2013 to 2014; Senior Associate 2012 to 2013. |
|
Adam Bloch – Managing Director |
2018 |
Guggenheim Partners Investment Management, LLC: Managing Director 2019- Present; Director – 2015- 2019; Vice President – 2014-2015; Senior Associate – 2013-2014; Associate – 2012-2013. Bank of America Merrill Lynch: Associate – 2011-2012. |
|
Evan Serdensky – Managing Director |
2022 |
Guggenheim Partners Investment Management, LLC: Managing Director 2023-Present; Director 2018 – 2023; |
|
(a)(2)(i-iii) Other Accounts Managed by the Portfolio Managers
The following tables summarize information regarding each of the other accounts
managed by the Guggenheim portfolio managers as of May 31, 2024:
Anne Walsh:
|
|
|
|
|
|
|
|
|
Type
of Account |
|
Number of
Accounts |
Total
Assets in the Accounts |
|
Number
of Accounts In Which the Advisory Fee is Based on Performance |
Total
Assets in the Accounts In Which the Advisory Fee is Based on Performance |
Registered
investment companies |
|
19 |
$ 42,968,670,918
|
|
|
0 |
$ 0 |
Other
pooled investment vehicles |
|
5 |
$ 2,419,422,117
|
|
|
3 |
$ 1,625,959,739
|
|
Other
accounts |
|
50 |
$ 116,636,639,894
|
|
|
1 |
$ 108,428,912
|
|
|
|
|
|
|
|
|
|
|
|
Steve Brown:
|
|
|
|
|
|
|
|
|
Type
of Account |
|
Number
of Accounts |
Total
Assets in the Accounts |
|
Number
of Accounts In Which the Advisory Fee is Based on Performance |
Total
Assets in the Accounts In Which the Advisory Fee is Based on Performance |
Registered
investment companies |
|
19 |
$ 42,968,670,918
|
|
|
0 |
$ 0 |
Other
pooled investment vehicles |
|
10 |
$ 3,052,476,916
|
|
|
3 |
$ 1,625,959,739
|
|
Other
accounts |
|
41 |
$ 20,878,576,145
|
|
|
1 |
$ 108,428,912
|
|
|
|
|
|
|
|
|
|
|
|
|
Adam Bloch:
|
|
|
|
|
|
|
|
|
Type
of Account |
|
Number
of Accounts |
Total
Assets in the Accounts |
|
Number
of Accounts In Which the Advisory Fee is Based on Performance |
Total
Assets in the Accounts In Which the Advisory Fee is Based on Performance |
Registered
investment companies |
|
21 |
$ 41,835,438,630
|
|
|
0 |
$ 0 |
Other
pooled investment vehicles |
|
10 |
$ 3,052,476,916
|
|
|
3 |
$ 1,625,959,739
|
|
Other
accounts |
|
41 |
$ 21,940,264,652
|
|
|
1 |
$ 108,428,912
|
|
|
|
|
|
|
|
|
|
|
|
|
Evan Serdensky:
|
|
|
|
|
|
|
|
|
Type
of Account |
|
Number
of Accounts |
Total
Assets in the Accounts |
|
Number
of Accounts In Which the Advisory Fee is Based on Performance |
Total
Assets in the Accounts In Which the Advisory Fee is Based on Performance |
Registered
investment companies |
|
15 |
$ 41,619,741,153
|
|
|
0 |
$ 0 |
Other
pooled investment vehicles |
|
3 |
$ 1,595,795,612
|
|
|
1 |
$ 201,204,522
|
|
Other
accounts |
|
38 |
$ 20,866,143,560
|
|
|
1 |
$ 108,428,912
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)(2)(iv) Potential Conflicts of Interest
Actual or apparent conflicts of interest may arise when a portfolio manager
has day-to-day management responsibilities with respect to more than one fund or other account. More
specifically, portfolio managers who manage multiple funds and/or other
accounts may be presented with one or more of the following potential conflicts.
The management of multiple funds and/or other accounts may result in a portfolio
manager devoting unequal time and attention to the management of each fund and/or other account. GPIM seeks to manage such competing interests
for the time and attention of a portfolio manager by having the portfolio manager focus on a particular investment discipline. Specifically,
the ultimate decision maker for security selection for each client portfolio is the Sector Specialist Portfolio Manager. They
are responsible for analyzing and selecting specific securities that they believe best reflect the risk and return level as provided in
each client’s investment guidelines.
GPIM may have clients with similar investment strategies. As
a result, if an investment opportunity would be appropriate for more than one client, GPIM may be required to choose among those clients
in allocating such opportunity, or to allocate less of such opportunity to a client than it would ideally allocate if it did not have
to allocate to multiple clients. In addition, GPIM may determine that an investment opportunity is appropriate for a particular
account, but not for another.
Allocation decisions are made in accordance with the investment objectives,
guidelines, and restrictions governing the respective clients and in a manner that will not unfairly favor one client over another. GPIM’s
allocation policy provides that investment decisions must never be based upon account performance or fee structure. Accordingly,
GPIM’s allocation procedures are designed to ensure that investment opportunities are allocated equitably among different client
accounts over time. The procedures also seek to ensure reasonable efficiency in client transactions and to provide portfolio
managers with flexibility to use allocation methodologies appropriate to GPIM’s investment disciplines and the specific goals and
objectives of each client account.
In order to minimize execution costs and obtain best execution for clients,
trades in the same security transacted on behalf of more than one client may be aggregated. In the event trades are aggregated,
GPIM’s policy and procedures provide as follows: (i) treat all participating client accounts fairly; (ii) continue to seek best
execution; (iii) ensure that clients who participate in an aggregated order will participate at the average share price with all transaction
costs shared on a pro-rata basis based on each client’s participation in the transaction; (iv) disclose its aggregation policy to
clients.
GPIM, as a fiduciary to its clients, considers numerous factors in arranging
for the purchase and sale of clients’ portfolio securities in order to achieve best execution for its clients. When selecting
a broker, individuals making trades on behalf of GPIM clients consider the full range and quality of a broker’s services, including
execution capability, commission rate, price, financial stability and reliability. GPIM is not obliged to merely get the lowest
price or commission but also must determine whether the transaction represents the best qualitative execution for the account.
In the event that multiple broker/dealers make a market in a particular
security, GPIM’s Portfolio Managers are responsible for selecting the broker-dealer to use with respect to executing the transaction. The
broker-dealer will be selected on the basis of how the transaction can be executed to achieve the most favorable execution for the client
under the circumstances. In
many instances, there may only be one counter-party active in a particular
security at a given time. In such situations the Employee executing the trade will use his/her best effort to obtain the best
execution from the counter-party.
GPIM and the registrant have adopted certain compliance procedures which
are designed to address these types of conflicts. However, there is no guarantee that such procedures will detect each and every situation
in which a conflict arises.
(a)(3) Portfolio Manager Compensation
GPIM compensates the portfolio managers for their management of the registrant’s
portfolio. Compensation is evaluated based on their contribution to investment performance relative to pertinent benchmarks and qualitatively
based on factors such as teamwork and client service efforts. GPIM’s staff incentives may include: a competitive base
salary, bonus determined by individual and firm wide performance, equity participation, and participation opportunities in various GPIM
investments. All GPIM employees are also eligible to participate in a 401(k) plan to which GPIM may make a discretionary match
after the completion of each plan year.
(a)(4) Portfolio Manager Securities Ownership
The following table discloses the dollar range of equity securities of the
registrant beneficially owned by each GPIM portfolio manager as of May 31, 2024:
Name of Portfolio Manager |
Dollar Amount of Equity
Securities in Fund |
|
|
Anne B. Walsh |
$500,001-$1,000,000 |
Steven Brown |
None |
Adam
Bloch
Evan Serdensky |
None
None |
Item 14. Purchases of Equity Securities by Closed-End Management
Investment Company and Affiliated Purchasers.
None.
Item 15. Submission of Matters to a Vote of Security Holders.
The registrant has not made any material changes to the procedures
by which shareholders may recommend nominees to the registrant’s Board of Trustees.
Item 16. Controls and Procedures.
(a) The registrant's principal executive officer and principal financial
officer have evaluated the registrant's disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act)
as of a date within 90 days of this filing and have concluded based on such evaluation, as required by Rule 30a-3(b) under the Investment
Company Act, that the registrant's disclosure controls and procedures were effective, as of that date, in ensuring that information required
to be disclosed by the registrant in this Form N-CSR was recorded,
processed, summarized, and reported within the time periods specified
in the Securities and Exchange Commission’s rules and forms.
(b) There were no changes in the registrant’s internal control
over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act) that occurred during the registrant’s period
covered by this report that have materially affected, or are reasonably likely to materially affect, the registrant’s internal control
over financial reporting.
Item 17. Disclosure of Securities Lending Activities for Closed-End
Management Investment Companies.
(a) The registrant has not participated in securities lending activities
during the period covered by this report.
(b) Not applicable
Item 18. Recovery of Erroneously
Awarded Compensation.
(a) Not applicable.
(b) Not applicable
Item 19. Exhibits.
(a)(1) Code of Ethics for Chief Executive and Senior Financial Officers.
(a)(2) Certifications of principal executive officer and principal financial officer pursuant to Rule 30a-2(a) under the Investment Company Act.
(a)(3) Not applicable.
(b) Certification of principal executive officer and principal financial officer pursuant to Rule 30a-2(b) under the Investment Company Act and Section 906 of the Sarbanes-Oxley Act of 2002.
(c) Guggenheim Partners
Investment Management, LLC Proxy Voting Policies and Procedures.
SIGNATURES
Pursuant to the requirements of the Securities
Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
(Registrant) Guggenheim Active Allocation Fund
By: /s/ Brian E. Binder
Name: Brian E. Binder
Title: President and Chief Executive Officer
Date: August 2, 2024
Pursuant to the requirements of the Securities
Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed by the following persons on behalf of the registrant
and in the capacities and on the dates indicated.
By: /s/ Brian E. Binder
Name: Brian E. Binder
Title: President and Chief Executive Officer
Date: August 2, 2024
By: /s/ James Howley
Name: James Howley
Title: Chief Financial Officer, Chief Accounting Officer and Treasurer
Date: August 2, 2024
CODE OF ETHICS FOR PRINCIPAL EXECUTIVE AND
SENIOR FINANCIAL OFFICERS
I. Covered
Officers/Purpose of the Code
This code of ethics (the “Code”) is applicable
to Guggenheim Funds (each a “Company” and together the “Companies,” each set forth in Exhibit A) and applies to
the Companies’ President/CEO (Principal Executive Officer), and CFO/Treasurer (Principal Financial and Accounting Officer) (the
“Covered Officers”) for the purpose of promoting:
- honest and ethical conduct, including the ethical handling of actual or apparent
conflicts of interest between personal and professional relationships;
- full, fair, accurate, timely and understandable disclosure in reports and documents
that a registrant files with, or submits to, the Securities and Exchange Commission (“SEC”) and in other public communications
made by the Company;
- compliance with applicable laws and governmental rules and regulations;
- the prompt internal reporting of violations of the Code to an appropriate person
or persons identified in the Code; and
- accountability for adherence to the Code.
Covered Officers are expected to dedicate their best
efforts to advancing the Trust’s interests and to use objective and unbiased standards when making decisions that affect the Trust,
while being sensitive to situations that may give rise to actual conflicts of interest, as well as apparent conflicts of interest.
| II. | Covered Officers Should Handle Ethically Actual and Apparent Conflicts of Interest |
Overview. A “conflict
of interest” occurs when a Covered Officer’s private interest interferes with the interests of, or his or her service to,
the Company. For example, a conflict of interest would arise if a Covered Officer, or a member of his or her family, receives improper
personal benefits as a result of his or her position with the Company.
Certain conflicts of interest arise
out of the relationships between Covered Officers and the Company and already are subject to conflict of interest provisions in the Investment
Company Act of 1940 (“Investment Company Act”) and the Investment Advisers Act of 1940 (“Investment Advisers Act”).
For example, Covered Officers may not individually engage in certain transactions (such as the purchase or sale of securities or other
property) with the Company because of their status as “affiliated persons” of the Company. The Company's and the investment
adviser's compliance programs and procedures are designed to prevent, or identify and correct, violations of these provisions. This Code
does not, and is not intended to, repeat or replace these programs and procedures, and such conflicts fall outside of the parameters of
this Code.
Although typically not presenting
an opportunity for improper personal benefit, conflicts arise from, or result from, the contractual relationship between the Company and
the investment adviser of which the Covered Officers are also officers or employees. As a result, this Code recognizes that the Covered
Officers will, in the normal course of their duties (whether formally for the Company or for the adviser, or for both), be involved in
establishing policies and implementing decisions that will have different effects on the adviser and the Company. The participation of
the Covered Officers in such activities is inherent in the contractual relationship between the Company and the adviser and is consistent
with the performance by the Covered Officers of their duties as officers of the Company. Thus, if performed in conformity with the provisions
of the Investment Company Act and the Investment Advisers Act, such activities will be deemed to have been handled ethically. In addition,
it is recognized by the Funds’ Boards of Trustees (“Boards”) that the Covered Officers may also be officers or employees
of one or more other investment companies covered by this code.
Other conflicts of interest are
covered by the Code, even if such conflicts of interest are not subject to provisions in the Investment Company Act and the Investment
Advisers Act. The following list provides examples of conflicts of interest under the Code, but Covered Officers should keep in mind that
these examples are not exhaustive. The overarching principle is that the personal interest of a Covered Officer should not be placed
improperly before the interest of the Company.
***
Each Covered Officer must:
- not use his or her personal influence or personal relationships improperly
to influence investment decisions or financial reporting by the Company whereby the Covered Officer would benefit personally to the detriment
of the Company;
- not cause the Company to take action, or fail to take action, for the individual
personal benefit of the Covered Officer rather than the benefit the Company;
- report at least annually his or her affiliations or other relationships which
may give rise to conflicts of interest with the Funds (provided that annual completion of the Funds’ Trustees and Officers Questionnaire
shall satisfy the requirements of this bullet point).
There are some conflict of interest situations that
should always be discussed with the Secretary of the Funds (the "Secretary"), or other senior legal officer, if material. Examples
of these include:1
- service as a director on the board of any public company;
- the receipt of any non-de minimus gifts;
- the receipt of any entertainment from any company with which the Company has
current or prospective business dealings unless such entertainment is business-related, reasonable in cost, appropriate as to time and
place, and not so frequent as to raise any question of impropriety;
- any ownership interest in, or any consulting or employment relationship with,
any of the Company’s service providers, other than its investment adviser, principal underwriter, administrator or any affiliated
person thereof;
- a direct or indirect financial interest in commissions, transaction charges
or spreads paid by the Company for effecting portfolio transactions or for selling or redeeming shares other than an interest arising
from the Covered Officer’s employment, such as compensation or equity ownership.
III. Disclosure
and Compliance
- Each Covered Officer should familiarize himself or herself with the disclosure
requirements generally applicable to the Company;
- each Covered Officer should not knowingly misrepresent, or cause others to
misrepresent, facts about the Company to others, whether within or outside the Company, including to the Company’s directors and
auditors, and to governmental regulators and self-regulatory organizations;
- each Covered Officer should, to the extent appropriate within his or her area
of responsibility, consult with other officers and employees of the Funds and the adviser with the goal of promoting full, fair, accurate,
timely and understandable disclosure in the reports and documents the Funds file with, or submit to, the SEC and in other public communications
made by the Funds; and
- it is the responsibility of each Covered Officer to promote compliance with
the standards and restrictions imposed by applicable laws, rules and regulations.
IV. Reporting
and Accountability
Each Covered Officer must:
- upon adoption of the Code (or thereafter as applicable, upon becoming a Covered
Officer), affirm in writing to the Board that he or she has received, read, and understands the Code;
- annually thereafter affirm to the Board that he or she has complied with the
requirements of the Code;
- not retaliate against any other Covered Officer or any employee of the Funds
or their affiliated persons for reports of potential violations that are made in good faith; and
- notify the Secretary promptly if he or she knows of any violation of this Code.
Failure to do so is itself a violation of this Code.
The Secretary, or other designated senior legal
officer of the Funds’ investment adviser, is responsible for applying this Code to specific situations in which questions
are presented under it and has the authority to interpret this Code in any particular situation.2
However, any approvals or waivers3 sought by
the President/ CEO will be considered by the Audit Committee of the Funds (the “Committee”). The Chair of the Audit Committee
of the Trust is authorized and encouraged to consult, as appropriate, with the Chair of the Board of Trustees of the Trust, the Independent
Trustees or the Board of Trustees of the Trust and/or with counsel to the Trust, the Investment Adviser(s) or the Independent Trustees.
The Independent Trustees are responsible for granting
waivers of this Code of Ethics, as appropriate. Any changes to or waivers of this Code of Ethics will be disclosed on Form N-CSR3
to the extent required by Securities and Exchange Commission rules.
The Funds will follow these procedures in investigating
and enforcing this Code:
- the Secretary or other designated senior legal officer will take all appropriate
action to investigate any potential violations reported to him or her;
- if, after such investigation, the Secretary believes that no violation has
occurred, the Secretary is not required to take any further action;
- any matter that the Secretary believes is a violation will be reported to the
Committee;
- if the Committee concurs that a violation has occurred, it will inform and
make a recommendation to the Board, which will consider appropriate action, which may include review of, and appropriate modifications
to, applicable policies and procedures; notification to appropriate personnel of the investment adviser or its board; or a recommendation
to dismiss the Covered Officer as an officer of the Funds;
- the Board will be responsible for granting waivers, as appropriate; and
- any changes to or waivers of this Code will, to the extent required, be disclosed
as provided by SEC rules.
Nothing in this Code, any agreement between the
Audit Committee and Covered Officers or any other person serving the Trusts, or any Trust policy or program, prohibits or restricts any
person in any way from reporting possible violations of law or regulation to any governmental agency or entity, or otherwise prevents
anyone from participating, assisting, or testifying in any proceeding or investigation by any such agency or entity or from making other
disclosures that are protected and/or permitted under law or regulation. For more information, please refer to the Guggenheim Capital,
LLC Code of Conduct, available on OneGuggenheim.
V. Other
Policies and Procedures
This Code shall be the sole code of ethics adopted
by the Funds for purposes of Section 406 of the Sarbanes-Oxley Act and the rules and forms applicable to registered investment companies
thereunder. Insofar as other policies or procedures of the Funds, the Funds’ adviser, principal underwriter, or other service providers
govern or purport to govern the behavior or activities of the Covered Officers who are subject to this Code, they are superseded by this
Code to the extent that they overlap or conflict with the provisions of this Code. The Funds’ and their investment advisers’
and principal underwriters’ codes of ethics under Rule 17j-1 under the Investment Company Act are separate requirements applying
to the Covered Officers and others, and are not part of this Code.
VI. Amendments
Any amendments to this Code must be approved or ratified
by a majority vote of the Board, including a majority of independent directors/trustees.
VII Confidentiality
All reports and records prepared or maintained pursuant
to this Code will be considered confidential and shall be maintained and protected accordingly. Except as otherwise required by law or
this Code, such matters shall not be disclosed to anyone other than the Board and its counsel, the Funds’ counsel, the Adviser and
its counsel and any other advisers, consultants or counsel retained by the Board of Trustees.
VIII. Internal
Use
The Code is intended solely for the internal use by
the Funds and does not constitute an admission, by or on behalf of any Company, as to any fact, circumstance, or legal conclusion.
Exhibit A - Covered Entities
Guggenheim Taxable Municipal Bond & Investment
Grade Debt Trust
Guggenheim Strategic Opportunities Fund
Guggenheim Active Allocation Fund
Guggenheim Funds Trust
Guggenheim Variable Funds Trust
Guggenheim Strategy Funds Trust
Transparent Value Trust
Rydex Series Funds
Rydex Dynamic Funds
Rydex Variable Trust
| 1 Any | activity or relationship that would present a conflict for a Covered Officer would likely also
present a conflict for the Covered Officer if a member of the Covered Officer’s family engages in such an activity or has such
a relationship. |
| 2 The | Secretary or other designated senior legal officer is authorized to consult, as appropriate, with
counsel to the Company and counsel to the Independent Trustees, and is encouraged to do so. |
| 3 Item | 2 of Form N-CSR defines “waiver” as “the approval by the registrant of a material departure
from a provision of the code of ethics” and “implicit waiver,” which must also be disclosed, as “the registrant’s
failure to take action within a reasonable period of time regarding a material departure from a provision of the code of ethics that has
been made known to an executive officer” of the registrant. |
Exhibit P-2
CERTIFICATION FORM
This is to certify that I have received, read and understand the
Code of Ethics for Chief Executive and Senior Financial Officers and that I recognize that I am subject to the provisions thereof and
will comply with the policy and procedures contained therein.
This is to further certify that I have complied with the requirements
of the Code of Ethics for Chief Executive and Senior Financial Officers.
Signature: ____________________
Name: _______________________
Date: ______August
2, 2024__________________
Please sign two copies of this Certification Form, return one copy
to the Chief Compliance Officer and retain the other copy, together with a copy of the Code of Ethics for Chief Executive and Senior Financial
Officers, for your records.
EXHIBIT (a)(2)
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
CERTIFICATIONS
I, Brian
E. Binder, certify that:
1. I have reviewed this report on Form N-CSR
of Guggenheim Active Allocation Fund;
2. Based on my knowledge, this report does not
contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements,
and other financial information included in this report, fairly present in all material respects the financial condition, results of operations,
changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant
as of, and for, the periods presented in this report;
4. The registrant's other certifying officer
and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment
Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940)
for the registrant and have:
(a) Designed such disclosure controls and procedures,
or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to
the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the
period in which this report is being prepared;
(b) Designed such internal control over financial
reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s
disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and
procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and
(d) Disclosed in this report any change in the
registrant’s internal control over financial reporting that occurred during the period covered by this report that has materially
affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting: and
5. The registrant's other certifying officer
and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing
the equivalent functions):
(a) All significant deficiencies and material
weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the
registrant's ability to record, process, summarize, and report financial information; and
(b) Any fraud, whether or not material, that
involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date: August 2, 2024
/s/ Brian E. Binder
Brian E. Binder
President and Chief Executive Officer
CERTIFICATION OF CHIEF FINANCIAL OFFICER
CERTIFICATIONS
I, James Howley, certify that:
1. I have reviewed this report on Form N-CSR
of Guggenheim Active Allocation Fund;
2. Based on my knowledge, this report does not
contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements,
and other financial information included in this report, fairly present in all material respects the financial condition, results of operations,
changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant
as of, and for, the periods presented in this report;
4. The registrant's other certifying officer
and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment
Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940)
for the registrant and have:
(a) Designed such disclosure controls and procedures,
or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to
the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the
period in which this report is being prepared;
(b) Designed such internal control over financial
reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s
disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and
procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and
(d) Disclosed in this report any change in the
registrant’s internal control over financial reporting that occurred during the period covered by this report that has materially
affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting: and
5. The registrant's other certifying officer
and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing
the equivalent functions):
(a) All significant deficiencies and material
weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the
registrant's ability to record, process, summarize, and report financial information; and
(b) Any fraud, whether or not material, that
involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date: August 2, 2024
/s/ James Howley
James Howley
Chief Financial Officer, Chief Accounting Officer and Treasurer
EXHIBIT (b)
Certification of CEO and CFO Pursuant to
18 U.S.C. Section 1350,
as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of
2002
In connection with the Report on Form N-CSR of Guggenheim Active
Allocation Fund (the “Issuer”) for the annual period ended May 31, 2024 (the “Report”), Brian E. Binder, as President
and Chief Executive Officer of the Issuer, and James Howley, as Chief Financial Officer, Chief Accounting Officer and Treasurer of the
Issuer, each hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002,
that, to the best of his knowledge:
| (1) | the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
| (2) | the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations
of the Issuer. |
Dated: August 2, 2024
/s/ Brian
E. Binder
Name: Brian E. Binder
Title: President and Chief Executive Officer
/s/ James
Howley
Name: James Howley
Title: Chief Financial Officer, Chief Accounting Officer and Treasurer
v3.24.2.u1
N-2
|
12 Months Ended |
May 31, 2024
shares
|
Cover [Abstract] |
|
Entity Central Index Key |
0001864208
|
Amendment Flag |
false
|
Document Type |
N-CSR
|
Entity Registrant Name |
Guggenheim Active Allocation Fund
|
Other Transaction Expenses [Abstract] |
|
Interest Expenses on Borrowings [Percent] |
5.48%
|
General Description of Registrant [Abstract] |
|
Investment Objectives and Practices [Text Block] |
Guggenheim
Active Allocation Fund (the Fund) was organized as a Delaware statutory trust on May 20, 2021 and commenced investment operations
on November 23, 2021. The Fund is registered as a diversified, closed-end management investment company under the Investment Company
Act of 1940, as amended (the 1940 Act).
The Funds
investment objective is to maximize total return through a combination of current income and capital appreciation. There can be no assurance
that the Fund will achieve its investment objective. The Funds investment objective is considered non-fundamental and may be changed
without shareholder approval. The Fund will provide shareholders with 60 days prior written notice of any change in its investment
objective.
|
Risk [Text Block] |
PRINCIPAL
RISKS OF THE FUND
Investment
in the Fund involves special risk considerations, which are summarized below. The Fund is designed as a long-term investment and not
as a trading vehicle. The Fund is not intended to be a complete investment program. The Funds performance and the value of its
investments will vary in response to changes in interest rates, inflation and other market and economic factors, among others.
The fact
that a particular risk below is not specifically identified as being heightened under current conditions does not mean that the risk
is not greater than under normal conditions.
|
Latest Premium (Discount) to NAV [Percent] |
8.86%
|
Capital Stock, Long-Term Debt, and Other Securities [Abstract] |
|
Outstanding Security, Authorized [Shares] |
32,980,083
|
Document Period End Date |
May 31, 2024
|
Limited Term Risk [Member] |
|
General Description of Registrant [Abstract] |
|
Risk [Text Block] |
Limited
Term Risk In accordance
with the Funds Amended and Restated Agreement and Declaration of Trust, dated February 29, 2024 (the Agreement and Declaration
of Trust), the Fund intends to dissolve as of the first business day following the twelfth anniversary of the effective date of
the Funds initial registration statement, November 23, 2033 (the Dissolution Date); provided that the Board of Trustees
of the Fund (the Board or Board of Trustees, and the members thereof, the Trustees) may, by a vote
of a majority of the Board and seventy-five percent (75%) of the members of the Board, who either (i) have been a member of the Board
for a period of at least thirty-six months (or since the commencement of the Funds operations, if fewer than thirty-six months)
or (ii) were nominated to serve as a member of the Board, or designated as a Continuing Trustee, by a majority of the Continuing Trustees
then members of the Board (the Continuing Trustees), without shareholder approval (a Board Action Vote), extend
the Dissolution Date for one period up to two years (which date shall then become the Dissolution Date). In determining whether to extend
the Dissolution Date, the Board may consider whatever factors it deems appropriate to its analysis including, among other factors, the
inability to sell the Funds assets in a time frame consistent with dissolution due to lack of market liquidity or other circumstances.
Additionally, the Board may consider whether market conditions are such that it is reasonable to believe that, with an extension, the
Funds remaining assets will appreciate and generate capital appreciation and income in an amount that, in the aggregate, is meaningful
relative to the cost and expense of continuing the operation of the Fund. Each holder of Common Shares would be paid a pro rata portion
of the Funds net assets upon dissolution of the Fund. If the Dissolution Date is not extended, the Fund could miss any market appreciation
that occurs after the Funds dissolution. Conversely, if the Dissolution Date is extended, after which market conditions deteriorate,
the Fund may experience losses. Beginning
one year before the Dissolution Date (the Wind-Down Period), the Fund may begin liquidating all or a portion of the Funds
portfolio, and may deviate from its investment policies and may not
achieve its investment objective. During the Wind-Down Period (or in anticipation of an Eligible Tender Offer, as defined below), the
Funds portfolio composition may change as more of its portfolio holdings are called or sold and portfolio holdings are disposed
of in anticipation of liquidation.
As of a date
within the 6-18 months preceding the Dissolution Date (as may be extended as described above), the Board may, by a Board Action Vote
without shareholder approval, cause the Fund to conduct a tender offer to all Common Shareholders to purchase all outstanding Common Shares
of the Fund at a price equal to the NAV per Common Share on the expiration date of the tender offer (an Eligible Tender Offer).
In accordance with the Agreement and Declaration of Trust, in an Eligible Tender Offer, the Fund will offer to purchase all Common Shares
held by each Common Shareholder; provided that if the payment for properly tendered Common Shares would result in the Fund having net
assets totaling less than $200 million (the Dissolution Threshold), the Eligible Tender Offer will be canceled, no Common
Shares will be repurchased pursuant to the Eligible Tender Offer and the Fund will dissolve as scheduled (provided that if the Eligible
Tender Offer was made prior to the Dissolution Date, the Board may approve an extension of the Dissolution Date).
Unless the
limited term provision of the Agreement and Declaration of Trust is amended by shareholders in accordance with the Agreement and Declaration
of Trust, or unless the Fund completes an Eligible Tender Offer and converts to perpetual existence, the Fund will dissolve on or about
the Dissolution Date. The Fund is not a so called target date or life cycle fund whose asset allocation becomes
more conservative over time as its target date, often associated with retirement, approaches. In addition, the Fund is not a target
term fund and thus does not seek to return its initial public offering price per Common Share upon dissolution. As the assets of
the Fund will be liquidated in connection with its dissolution, the Fund may be required to sell portfolio securities or liquidate positions
when it otherwise would not, including at times when market conditions are not favorable, which may cause the Fund to lose money. In
addition, as the Fund approaches the Dissolution Date, the Fund may invest the liquidation proceeds of sold, matured or called securities
or liquidated positions in money market mutual funds, cash, cash equivalents, securities issued or guaranteed by the U.S. government
or its instrumentalities or agencies, high quality, short-term money market instruments, short-term debt securities, certificates of
deposit, bankers acceptances and other bank obligations, commercial paper or other liquid debt securities, which may adversely
affect the Funds investment performance.
Rather than
reinvesting proceeds received from sales of or payments received in respect of portfolio securities and positions, the Fund may distribute
such proceeds in one or more liquidating distributions prior to the final dissolution, which may cause the Funds fixed expenses
to increase when expressed as a percentage of net assets attributable to Common Shares, or the Fund may invest the proceeds in lower
yielding securities or hold the proceeds in cash or cash equivalents, which may adversely affect the performance of the Fund. The final
distribution of net assets upon dissolution may be more than, equal to or less than the Funds initial share price of $20.00
per Common Share. Because the Fund may adopt a plan of liquidation and make liquidating distributions in advance of the Dissolution Date,
the total value of the Funds assets returned to Common Shareholders upon dissolution will be impacted by decisions of the Board
and the Adviser regarding the timing of adopting a plan of liquidation and making liquidating distributions. This may result in Common
Shareholders receiving liquidating distributions with a value more or less than the value that
would have been received if the Fund had liquidated all of its assets on the Dissolution Date, or any other potential date for liquidation
referenced herein, and distributed the proceeds thereof to shareholders.
If the Fund
conducts an Eligible Tender Offer, the Fund anticipates that funds to pay the aggregate purchase price of shares accepted for purchase
pursuant to the tender offer will be first derived from any cash on hand and then from the proceeds from the sale of portfolio investments
held by the Fund. The risks related to the disposition of investments in connection with the Funds dissolution also would be present
in connection with the disposition of investments in connection with an Eligible Tender Offer. It is likely that during the pendency of
a tender offer, and possibly for a time thereafter, the Fund will hold a greater than normal percentage of its total assets in cash and
cash equivalents, which may impede the Funds ability to achieve its investment objective and decrease returns to shareholders.
The tax effect of any such dispositions of portfolio investments will depend on the difference between the price at which the investments
are sold and the tax basis of the Fund in the investments.
Any capital
gains recognized on such dispositions, as reduced by any capital losses the Fund realizes in the year of such dispositions and by any
available capital loss carryforwards, will generally be distributed to shareholders as capital gain dividends (to the extent of net long-term
capital gains over net short-term capital losses) or ordinary dividends (to the extent of net short-term capital gains over net long-term
capital losses) during or with respect to such year, and such distributions will generally be taxable to Common Shareholders. In addition,
the Funds purchase of tendered Common Shares pursuant to an Eligible Tender Offer will generally have tax consequences for tendering
Common Shareholders and may have tax consequences for non-tendering Common Shareholders.
The purchase
of Common Shares by the Fund pursuant to an Eligible Tender Offer will have the effect of increasing the proportionate interest in the
Fund of non-tendering Common Shareholders. All Common Shareholders remaining after an Eligible Tender Offer will be subject to any increased
risks associated with the reduction in the Funds assets resulting from payment for any tendered Common Shares, such as greater
volatility due to decreased diversification and proportionately higher expenses. The reduced assets of the Fund as a result of an Eligible
Tender Offer may result in less investment flexibility for the Fund and may have an adverse effect on the Funds investment performance.
Such reduction in the Funds assets may also cause Common Shares of the Fund to become thinly traded or otherwise negatively impact
secondary trading of Common Shares. A reduction in assets, and the corresponding increase in the Funds expense ratio, could result
in lower returns and put the Fund at a disadvantage relative to its peers and potentially cause the Common Shares to trade at a wider
discount to NAV than they otherwise would. Furthermore, the portfolio of the Fund following an Eligible Tender Offer could be significantly
different and, therefore, Common Shareholders retaining an investment in the Fund could be subject to greater risk. For example, the Fund
may be required to sell its more liquid, higher quality portfolio investments to purchase Common Shares that are tendered in an Eligible
Tender Offer, which would leave a less liquid, lower quality portfolio for remaining shareholders. The prospects of an Eligible Tender
Offer may attract arbitrageurs who would purchase the Common Shares prior to the tender offer for the sole purpose of tendering those shares
which could have the effect of exacerbating the risks described herein for shareholders retaining an investment in the Fund following
an Eligible Tender Offer. The Fund
is not required to conduct an Eligible Tender Offer. If the Fund conducts an Eligible Tender Offer, there can be no assurance that
the payment for tendered Common Shares would not result in the Fund having aggregate net assets below the Dissolution Threshold, in
which case the Eligible Tender Offer will be canceled, no Common Shares will be repurchased pursuant to the Eligible Tender Offer
and the Fund will liquidate on the Dissolution Date (subject to possible extensions). Following the completion of an Eligible Tender
Offer in which the payment for tendered Common Shares would result in the Fund having aggregate net assets greater than or equal to
the Dissolution Threshold, the Board may, by a Board Action Vote, amend the Agreement and Declaration of Trust to eliminate the
Dissolution Date without shareholder approval and provide for the Funds perpetual existence. Thereafter, the Fund will have a
perpetual existence. There is no guarantee that the Board will eliminate the Dissolution Date following the completion of an
Eligible Tender Offer so that the Fund will have a perpetual existence. The Adviser may have a conflict of interest in recommending
to the Board that the Dissolution Date be eliminated and the Fund have a perpetual existence. The Fund is not required to conduct
additional tender offers following an Eligible Tender Offer and conversion to perpetual existence. Therefore, remaining Common
Shareholders may not have another opportunity to participate in a tender offer. Shares of closed-end management investment companies
frequently trade at a discount from their NAV, and as a result remaining Common Shareholders may only be able to sell their shares
at a discount to NAV.
Although
it is anticipated that the Fund will have distributed substantially all of its net assets to shareholders as soon as practicable after
the Dissolution Date, assets for which no market exists or assets trading at depressed prices, if any, may be placed in a liquidating
trust. Assets placed in a liquidating trust may be held for an indefinite period of time, potentially several years or longer, until
they can be sold or pay out all of their cash flows. During such time, the shareholders will continue to be exposed to the risks associated
with the Fund and the value of their interest in the liquidating trust will fluctuate with the value of the liquidating trusts
remaining assets.
Additionally,
the tax treatment of the liquidating trust will generally differ from the tax treatment of the Fund. To the extent the costs associated
with a liquidating trust exceed the value of the remaining assets, the liquidating trust trustees may determine to dispose of the remaining
assets in a manner of their choosing. The Fund cannot predict the amount, if any, of assets that will be required to be placed in a liquidating
trust or how long it will take to sell or otherwise dispose of such assets.
|
Not A Complete Investment Program [Member] |
|
General Description of Registrant [Abstract] |
|
Risk [Text Block] |
Not a
Complete Investment Program
An investment
in the Common Shares of the Fund should not be considered a complete investment program. The Fund is intended for long-term investors
seeking current income and capital appreciation. An investment in the Fund is not meant to provide a vehicle for those who wish to play
short-term swings in the market. Each Common Shareholder should take into account the Funds investment objective as well as the
Common Shareholders other investments when considering an investment in the Fund. Before making an investment decision, a prospective
investor should consider (i) the suitability of this investment with respect to his or her investment objectives and personal situation
and (ii) factors such as his or her personal net worth, income, age, risk tolerance and liquidity needs.
|
Investment And Market Risk [Member] |
|
General Description of Registrant [Abstract] |
|
Risk [Text Block] |
Investment
and Market RiskAn investment
in the Common Shares is subject to investment risk, including the possible loss of the entire principal amount that you invest. During
periods of adverse economic, financial, market, geopolitical, labor and public health conditions, the risks associated with an investment
in Common Shares may be heightened. An investment
in the Common Shares represents an indirect investment in the securities owned by the Fund. The value of, or income generated by, the
investments held by the Fund are subject to the possibility of rapid and unpredictable fluctuation, and loss. These fluctuations may
occur frequently and in large amounts. These movements may result from factors affecting individual companies or issuers or particular
industries, or from broader influences, including real or perceived changes in prevailing interest rates, changes in inflation rates
or expectations about inflation rates, adverse investor confidence or sentiment, changing economic, political (including geopolitical),
social or financial market conditions, tariffs and trade disruptions, recession, changes in currency rates, increased instability or general
uncertainty, extreme weather, natural/environmental or man-made disasters, cyber attacks, terrorism, governmental or quasi-governmental
actions, public health emergencies (such as the spread of infectious diseases, pandemics and epidemics), debt crises, actual or threatened
wars or other armed conflicts (such as the escalated conflict in the Middle East and the ongoing Russia-Ukraine conflict and its risk
of expansion or collateral economic and other effects) or ratings downgrades, and other similar types of events, each of which may be
temporary or last for extended periods. For example, the risks of a borrowers default or bankruptcy or non-payment of scheduled
interest or principal payments from senior floating rate interests held by the Fund are especially acute under these conditions. Furthermore,
interest rates may change and bond yields may fall as a result of types of events, including responses by governmental entities to such
events, which would magnify the Funds fixed-income instruments susceptibility to interest rate risk and diminish their yield
and performance. Moreover, the Funds investments in ABS are subject to many of the same risks that are applicable to investments
in securities generally, including interest rate risk, credit risk, foreign currency risk, below-investment grade securities risk, leverage
risk, prepayment and extension risks and regulatory risk, which would be elevated under the foregoing circumstances.
Moreover,
changing economic, political, social, geopolitical, or financial market or other conditions in one country or geographic region could
adversely affect the value, yield and return of the investments held by the Fund in a different country or geographic region and economies,
markets and issuers generally because of the increasingly interconnected global economies and financial markets. As a result, there is
an increased risk that geopolitical and other events will disrupt economies and markets globally. For example, local or regional armed
conflicts have led to significant sanctions by the United States, Europe and other countries against certain countries (as well as persons
and companies connected with certain countries) and led to indirect adverse regional and global market, economic and other effects. It
is difficult to accurately predict or foresee when events or conditions affecting the U.S. or global financial markets, economies, and issuers
may occur, the effects of such events or conditions, potential escalations or expansions of these events, possible retaliations in response
to sanctions or similar actions and the duration or ultimate impact of those events. There is an increased likelihood that these types
of events or conditions can, sometimes rapidly and unpredictably, result in a variety of adverse developments and circumstances, such
as reduced liquidity, supply chain disruptions and market volatility, as well as increased general uncertainty
and broad ramifications for markets, economies, issuers, businesses in many sectors and societies globally. In addition, adverse changes
in one sector or industry or with respect to a particular company could negatively impact companies in other sectors or industries or
increase market volatility as a result of the interconnected nature of economies and markets and thus negatively affect the Funds
performance. For example, developments in the banking or financial services sectors (or one or more companies operating in these sectors)
could adversely impact a wide range of companies and issuers. These types of adverse developments could negatively affect the Funds
performance or operations.
Different
sectors, industries and security types may react differently to such developments and, when the market performs well, there is no assurance
that the Funds investments will increase in value along with the broader markets and the Funds investments may underperform
general securities markets or other investments. Periods of market stress and volatility of financial markets, including potentially
extreme stress and volatility caused by the events described above or similar circumstances, can expose the Fund to greater market risk
than normal, possibly resulting in greatly reduced liquidity, increased volatility and valuation risks and longer than usual trade settlement
periods. The fewer the number of issuers in which the Fund invests and/or the greater the use of leverage, the greater the potential
volatility in the Funds portfolio. GPIM potentially could be prevented from considering, managing and executing investment decisions
at an advantageous time or price or at all as a result of any domestic or global market or other disruptions, particularly disruptions
causing heightened market volatility and reduced market liquidity, which have also resulted in impediments to the normal functioning
of workforces, including personnel and systems of the Funds service providers and market intermediaries. The Funds investments
may decline in value or otherwise be adversely affected due to general market conditions that are not specifically related to a particular
issuer, such as real or perceived economic conditions, changes in interest or currency rates or changes in investor sentiment or market
outlook generally.
The domestic
political environment, as well as political and diplomatic events within the United States and abroad, such as the U.S. budget and deficit
reduction plan and foreign policy tensions with foreign nations, including embargoes, tariffs, sanctions and other similar developments,
have in the past resulted, and may in the future result, in developments that present additional risks to the Funds investments
and operations. For example, additional and/or prolonged U.S. federal government shutdowns or foreign policy tensions may affect investor
and consumer confidence and may adversely impact financial markets and the broader economy, perhaps suddenly and to a significant degree.
Any market, economic and other disruption could also prevent the Fund from executing its investment strategies and processes in a timely
manner. Changes or disruptions in market conditions also may lead to increased regulation of the Fund and the instruments in which the
Fund may invest, which may, in turn, affect the Funds ability to pursue its investment objective and the Funds performance.
At any point
in time, your Common Shares may be worth less than your original investment, even after including the reinvestment of Fund dividends
and distributions.
|
Management Risk [Member] |
|
General Description of Registrant [Abstract] |
|
Risk [Text Block] |
Management
Risk The Fund
is subject to management risk because it has an actively managed portfolio. GPIM will apply investment techniques and risk analysis in
making investment decisions for the Fund, but there can be no guarantee that these will produce the desired results. The Funds
allocation of its investments
across various asset classes and sectors may vary significantly over time based on GPIMs analysis and judgment. As a result, the
particular risks most relevant to an investment in the Fund, as well as the overall risk profile of the Funds portfolio, may vary
over time. The ability of the Fund to achieve its investment objective depends, in part, on GPIMs investment decisions and the
ability of GPIM to allocate effectively the Funds assets among multiple investment strategies, Investment Funds and investments
and asset classes. There can be no assurance that the actual allocations will be effective in achieving the Funds investment objective
or that an investment strategy or Investment Fund or investment will achieve its particular investment objective.
|
Income Risk [Member] |
|
General Description of Registrant [Abstract] |
|
Risk [Text Block] |
Income
Risk
The income
investors receive from the Fund is based primarily or in part on the interest it earns from its investments in Income Securities, which
can vary widely over the short- and long-term. If prevailing market interest rates drop, investors income from the Fund could drop
as well. The Funds income could also be affected adversely when prevailing short-term interest rates increase and the Fund is utilizing
leverage, although this risk may be mitigated to the extent the Fund invests in floating-rate obligations, or when an issuer defaults,
among other adverse developments.
|
Dividend Risk [Member] |
|
General Description of Registrant [Abstract] |
|
Risk [Text Block] |
Dividend
Risk
Dividends
on common stock and other Common Equity Securities which the Fund may hold are not fixed but are declared at the discretion of an issuers
board of directors. There is no guarantee that the issuers of the Common Equity Securities in which the Fund invests will declare dividends
in the future or that, if declared, they will remain at current levels or increase over time. Therefore, there is the possibility that
such companies could reduce or eliminate the payment of dividends in the future or the anticipated acceleration of dividends could not
occur as a result of, among other things, a sharp change in interest rates or an economic downturn. Changes in the dividend policies
of companies and capital resources available for these companies dividend payments may adversely affect the Fund. Depending upon
market conditions, dividend-paying stocks that meet the Funds investment criteria may not be widely available and/or may be highly
concentrated in only a few market sectors. These circumstances may result from issuer-specific events, adverse economic or market developments,
or legislative or regulatory changes or other developments that limit an issuers ability to declare and pay dividends, which would
affect the Funds performance and ability to generate income. The dividend income from the Funds investments in Common Equity
Securities will be influenced by both general economic activity and issuer-specific factors. In the event of adverse changes in economic
conditions or adverse events effecting a specific industry or issuer, the issuers of the Common Equity Securities held by the Fund may
reduce the dividends paid on such securities (or not declare or pay dividends on such securities).
|
Income Securities Risk [Member] |
|
General Description of Registrant [Abstract] |
|
Risk [Text Block] |
Income
Securities Risk In addition to the risks discussed
above, Income Securities (notably the value and income of such investments), including high-yield bonds, are subject to certain risks,
including: Issuer Risk The value
of Income Securities may decline for a number of reasons which directly relate to the issuer, such as management performance, the issuers
overall level of debt, reduced demand for the issuers goods and services, historical and projected earnings and the value of its
assets. Spread
Risk
Spread risk
is the risk that the market price can change due to broad based movements in spreads. The difference (or spread) between the
yield of a security and the yield of a benchmark measures the additional interest paid. As the spread on a security widens (or increases),
the price (or value) of the security falls. Spread widening may occur, among other reasons, as a result of market concerns over the stability
of the market, excess supply, general credit concerns in other markets, security- or market-specific credit concerns, or general reductions
in risk tolerance.
Credit
Risk
The Fund
could lose money if the issuer or guarantor of a debt instrument, a counterparty to a derivatives transaction or other transaction (such
as a repurchase agreement or a loan of portfolio securities or other instruments) or other obligor to the Fund is unable or unwilling,
or perceived (whether by market participants, rating agencies, pricing services or otherwise) to be unable or unwilling, to pay interest
or repay principal on time or defaults or otherwise fails to meet its obligations. This risk is heightened in market environments where
interest rates are changing, notably when rates are rising or when refinancing obligations becomes more challenging. If an issuer fails
to pay interest, the Funds income would likely be reduced, and if an issuer fails to repay principal, the value of the instrument
and income generated by the instrument likely would fall and the Fund could lose money, including potentially the entire value of the
investment. This risk is especially acute with respect to below investment grade debt instruments (commonly referred to as high-yield
or junk bonds) and unrated high risk debt instruments, whose issuers are particularly susceptible to fail to meet principal
or interest obligations.
Also, the
issuer, guarantor or counterparty may suffer adverse changes in its financial condition, the value of its assets, prospective earnings,
demands for its goods and services or be adversely affected by economic, political or social conditions that could lower the credit quality
(or the markets perception of the credit quality) of the issuer or instrument, guarantor or counterparty, leading to greater volatility
in the price of the instrument and in shares of the Fund. Although credit quality rating may not accurately reflect the true credit risk
of an instrument, credit quality (and credit risks) may change over time and a change in the credit quality rating of an instrument or
an issuer can have a rapid, adverse effect on the instruments value, price volatility and liquidity and make it more difficult for
the Fund to sell at an advantageous price or time. The risk of the occurrence of these types of events is heightened in market environments
where interest rates are changing, notably when rates are rising. In addition, under adverse market or economic conditions, an increasing
number of issuers may be unprofitable, have little cash on hand and/or are unable to pay the interest owed on their debt obligations
and the number of such issuers may increase if demand for their goods and services falls, borrowing costs rise due to governmental action
or inaction or other reasons.
The degree
of credit risk depends on the particular instrument, the adequacy or lack of collateral or credit enhancements and the financial condition
of the issuer, guarantor (including the guarantor of the collateral or credit enhancements, if any) or counterparty, which are often
reflected in its credit quality and may change over time. A credit quality rating is a measure of the issuers expected ability
to make all required interest and principal payments in a timely manner. An issuer with the highest credit rating has a very strong capacity
with respect to making all payments. An issuer with the second-highest credit rating has a strong capacity to make all payments, but
the degree of safety
is somewhat less. An issuer with the lowest credit quality rating may be in default or have extremely poor prospects of making timely
payment of interest and principal. Credit ratings assigned by rating agencies are based on a number of factors and subjective judgments
and therefore do not necessarily represent an issuers actual financial condition or the volatility and liquidity of the security.
Although higher-rated securities generally present lower credit risk as compared to lower-rated or unrated securities, an issuer with
a high credit rating may in fact be exposed to heightened levels of credit or liquidity risk. Credit ratings (or average credit risk
of the portfolio) may not be an accurate assessment of liquidity or credit risk and do not reflect market risk.
If an issuer,
guarantor or counterparty declares bankruptcy or is declared bankrupt, the Fund would be adversely affected in its ability to receive
principal or interest owed or otherwise to enforce the financial obligations of the other party. The Fund may be subject to increased
costs associated with the bankruptcy process and experience losses as a result of the deterioration of the financial condition of the
issuer, guarantor or counterparty. The risks to the Fund related to such bankruptcies are elevated during periods of adverse markets,
economic and similar developments.
Interest
Rate Risk
Fixed-income
and other debt instruments are subject to the possibility that interest rates could change (or are expected to change). Changes in interest
rates (or the expectation of such changes), including changes in reference rates used in fixed-income and other debt instruments (such
as Term SOFR), may adversely affect the Funds investments in these instruments, such as the value or liquidity of, and income generated
by, the investments or increase risks associated with such investments, such as credit or default risks. In addition, changes in interest
rates, including rates that fall below zero, can have unpredictable effects on markets and can adversely affect the Funds yield,
income and performance. Generally, when interest rates increase, the values of fixed-income and other debt instruments decline and when
interest rates decrease, the values of fixed-income and other debt instruments rise. Changes in interest rates also adversely affect the
yield generated by certain Income Securities or result in the issuance of lower yielding Income Securities.
The impact
of interest rate changes on a fixed-income or other debt instrument depends on several factors, notably the instruments duration.
The value of a debt instrument with a longer duration will generally be more sensitive to interest rate changes than a similar instrument
with a shorter duration. Similarly, the longer the average duration (whether positive or negative) of these instruments held by the Fund
or to which the Fund is exposed (i.e., the longer the average portfolio duration of the Fund), the more the Funds NAV will
likely fluctuate in response to interest rate changes. Duration is a measure used to determine the sensitivity of a securitys price
to changes in interest rates that incorporates a securitys yield, coupon, final maturity and call features, among other characteristics.
For example, the NAV per share of a bond fund with an average duration of eight years would be expected to fall approximately 8% if interest
rates rose by one percentage point.
However,
measures such as duration may not accurately reflect the true interest rate sensitivity of instruments held by the Fund and, in turn,
the Funds susceptibility to changes in interest rates. Certain fixed-income and debt instruments are subject to the risk that the
issuer may exercise its right to redeem (or call) the instrument earlier than anticipated. Although an issuer may call an instrument
for a variety of reasons, if an issuer does so during a time of declining interest rates, the Fund might have to reinvest the proceeds
in an investment offering a lower yield or other less favorable features, and therefore might not benefit from any increase in value as
a result of declining interest
rates. Interest only or principal only securities and inverse floaters are particularly sensitive to changes in interest rates, which
may impact the income generated by the security, its value and other features of the security.
Instruments
with variable or floating interest rates generally are less sensitive to interest rate changes, but may decline in value if their interest
rates do not rise as much or as fast as interest rates in general. Conversely, in a decreasing interest rate environment, these instruments
will generally not increase in value and the Funds investment in instruments with floating interest rates may prevent the Fund
from taking full advantage of decreasing interest rates in a timely manner. In addition, the income received from such instruments will
likely be adversely affected by a decrease in interest rates.
Adjustable-rate
securities also react to interest rate changes in a similar manner as fixed-rate securities but generally to a lesser degree depending
on the characteristics of the security, in particular its reset terms (i.e., the index chosen, frequency of reset and reset caps
or floors). During periods of rising interest rates, because changes in interest rates on adjustable-rate securities may lag behind changes
in market rates, the value of such securities may decline until their interest rates reset to market rates. These securities also may
be subject to limits on the maximum increase in interest rates. During periods of declining interest rates, because the interest rates
on adjustable-rate securities generally reset downward, their market value is unlikely to rise to the same extent as the value of comparable
fixed rate securities. These securities may not be subject to limits on downward adjustments of interest rates.
During periods
of rising interest rates, issuers of debt instruments or ABS may pay principal later or more slowly than expected, which may reduce the
value of the Funds investment in such securities and may prevent the Fund from receiving higher interest rates on proceeds reinvested
in other instruments. During periods of falling interest rates, issuers of debt securities or ABS may pay off debts more quickly or earlier
than expected, which will cause the Fund to be unable to recoup the full amount of its initial investment and/or cause the Fund to reinvest
proceeds or matured, traded or called securities in lower-yielding securities, thereby reducing the Funds yield or otherwise adversely
impacting the Fund.
Certain debt
instruments, such as instruments with a negative duration or inverse instruments, are also subject to interest rate risk, although such
instruments generally react differently to changes in interest rates than instruments with positive durations. The Funds investments
in these instruments also may be adversely affected by changes in interest rates. For example, the values of instruments with negative
durations, such as inverse floaters, generally decrease if interest rates decline. Certain fixed-income and debt instruments, including
inverse floaters, interest only securities and principal only securities are especially sensitive to interest rate changes, which may
affect the income flows these securities generate as well as their values.
The U.S.
Federal Reserve (Federal Reserve) has increased interest rates at significant levels over recent periods. It is difficult to
predict how long, and whether, the Federal Reserves current stance on interest rates will persist and the impact these actions
will have on the economy and the Funds investments and the markets where they trade. Such actions may have unforeseen consequences
and materially affect economic and market conditions, the Funds investments and the Funds performance.
The Federal Reserves monetary policy is subject to change at any time and potentially frequently based on a variety of market and
economic conditions.
The Funds
use of leverage will tend to increase the Funds interest rate risk. The Fund may utilize certain strategies, including taking positions
in futures or interest rate swaps, for the purpose of seeking to reduce the interest rate sensitivity of credit securities held by the
Fund or any leverage being employed by the Fund and seeking to decrease the Funds exposure to interest rate risk. The Fund is not
required to hedge its exposure to interest rate risk and may choose not to do so. In addition, there is no assurance that any attempts
by the Fund to seek to reduce interest rate risk will be successful or that any hedges that the Fund may establish will perfectly correlate
with movements in interest rates.
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Current Fixed Income And Debt Market Conditions [Member] |
|
General Description of Registrant [Abstract] |
|
Risk [Text Block] |
Current
Fixed-Income and Debt Market Conditions
Fixed-income
and debt market conditions are highly unpredictable and some parts of the market are subject to dislocations. In response to the inflation
rates in recent periods, governmental authorities have implemented significant fiscal and monetary policy changes, including increasing
interest rates and implementation of quantitative tightening. These actions present heightened risks, particularly to fixed-income and
debt instruments, and such risks could be even further heightened if these actions are ineffective in achieving their desired outcomes
or are quickly reversed. It is difficult to accurately predict changes in the Federal Reserves monetary policies and the effect of
any such changes or policies. Certain economic conditions and market environments will expose fixed-income and debt instruments to heightened
volatility and reduced liquidity, which can impact the Funds investments and may negatively impact the Funds characteristics,
which in turn would impact performance. To the extent the Fund invests in derivatives tied to fixed-income or related markets, the Fund
can be more substantially exposed to these risks than if it did not invest in such derivatives. The liquidity levels of the Funds
portfolio may also be affected and the Fund could be required to sell holdings at disadvantageous times or prices.
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Corporate Bond Risk [Member] |
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General Description of Registrant [Abstract] |
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Risk [Text Block] |
Corporate
Bond Risk Corporate
bonds are debt obligations issued by corporations and other business entities. Corporate bonds may be either secured or unsecured. Collateral
used for secured debt includes real property, machinery, equipment, accounts receivable, stocks, bonds or notes. If a bond is unsecured,
it is known as a debenture. Bondholders, as creditors, have a prior legal claim over common and preferred stockholders as to both income
and assets of the corporation for the principal and interest due them and may have a prior claim over other creditors if liens or mortgages
are involved. Interest on corporate bonds may be fixed or floating, or the bonds may be zero coupons. Interest on corporate bonds is
typically paid semi-annually and is fully taxable to the bondholder. Corporate bonds contain elements of both interest-rate risk and
credit risk and are subject to the risks associated with Income Securities, among other risks. The market value of a corporate bond generally
is expected to rise and fall inversely with interest rates and be affected by the credit rating of the corporation, the corporations
performance and perceptions of the corporation in the marketplace. Depending on the nature of the seniority provisions, a senior corporate
bond may be junior to other credit securities of the issuer. The market
value of a corporate bond may be affected by factors directly related to the issuer, such as investors perceptions of the creditworthiness
of the issuer, the issuers financial performance, perceptions
of the issuer in the marketplace, performance of management of the issuer, the issuers capital structure and use of financial leverage
and demand for the issuers goods and services. There is a risk that the issuers of corporate bonds may not be able to meet their
obligations on interest or principal payments at the time called for by an instrument or at all. Corporate bonds of below investment
grade quality are often high risk and have speculative characteristics and may be particularly susceptible to adverse issuer-specific
and other developments.
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Reinvestment Risk [Member] |
|
General Description of Registrant [Abstract] |
|
Risk [Text Block] |
Reinvestment
Risk
Reinvestment
risk is the risk that income from the Funds portfolio will decline if the Fund invests the proceeds from matured, traded or called
Income Securities at interest rates that are below the Fund portfolios current earnings rate. A decline in income could affect the
Common Shares market price or the overall return of the Fund. These or similar conditions may also occur in the future.
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Extension Risk [Member] |
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General Description of Registrant [Abstract] |
|
Risk [Text Block] |
Extension
Risk
Certain debt
instruments, including mortgage- and other ABS, are subject to the risk that payments on principal may occur at a slower rate or later
than expected. In this event, the expected maturity could lengthen as short or intermediate-term instruments become longer-term instruments,
which would make the investment more sensitive to changes in interest rates. The likelihood that payments on principal will occur at
a slower rate or later than expected is heightened in market environments where interest rates are higher or rising. In addition, the
Funds investment may sharply decrease in value and the Funds income from the investment may quickly decline. These types
of instruments are particularly subject to extension risk, and offer less potential for gains, during periods of rising interest rates.
In addition, the Fund may be delayed in its ability to reinvest income or proceeds from these instruments in potentially higher yielding
investments, which would adversely affect the Fund to the extent its investments are in lower interest rate debt instruments. Thus, changes
in interest rates may cause volatility in the value of and income received from these types of debt instruments.
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Prepayment Risk [Member] |
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General Description of Registrant [Abstract] |
|
Risk [Text Block] |
Prepayment
Risk Certain debt
instruments, including loans and mortgage- and other ABS, are subject to the risk that payments on principal may occur more quickly or
earlier than expected (or an investment is converted or redeemed prior to maturity). These types of instruments are particularly subject
to prepayment risk, and offer less potential for gains, during periods of declining interest rates. For example, an issuer may exercise
its right to redeem outstanding debt securities prior to their maturity (known as a call) or otherwise pay principal earlier
than expected for a number of reasons (e.g., declining interest rates, changes in credit spreads and improvements in the issuers
credit quality). If an issuer calls or prepays a security in which the Fund has invested, the Fund may not recoup the full
amount of its initial investment and may be required to reinvest in generally lower-yielding securities, securities with greater credit
risks or securities with other, less favorable features or terms than the security in which the Fund initially invested, thus potentially
reducing the Funds yield. Income Securities frequently have call features that allow the issuer to repurchase the security prior
to its stated maturity. Loans and mortgage- and other ABS are particularly subject to prepayment risk, and offer less potential for gains,
during periods of declining interest rates (or narrower spreads) as issuers of higher interest rate debt instruments pay off debts earlier
than expected. In addition, the Fund may lose any premiums paid to acquire the investment. Other factors,
such as excess cash flows, may also contribute to prepayment risk. Thus, changes in interest rates may cause volatility in the value
of and income received from these types of debt instruments. Variable
or floating rate investments may be less vulnerable to prepayment risk. Most floating rate loans and fixed-income securities allow for
prepayment of principal without penalty. Accordingly, the potential for the value of a floating rate loan or security to increase in
response to interest rate declines is limited. Corporate loans or fixed-income securities purchased to replace a prepaid corporate loan
or security may have lower yields than the yield on the prepaid corporate loan or security.
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Liquidity Risk [Member] |
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General Description of Registrant [Abstract] |
|
Risk [Text Block] |
Liquidity
Risk
The Fund
may invest without limitation in Income Securities for which there is no readily available trading market or which are unregistered,
restricted or otherwise illiquid, including certain high-yield securities. The Fund invests in privately issued securities of both public
and private companies, which may be illiquid. For example, Common Equity Securities of private companies (including when held through
an Investment Fund) are usually highly illiquid, and the Fund is usually able to sell such securities only in private transactions with
another investor or group of investors, and there can be no assurance that the Fund will be able to successfully arrange such transactions
if and when it desires or that it will obtain favorable values upon the sale. Securities of below investment grade quality tend to be
less liquid than investment grade debt securities, and securities of financially distressed or bankrupt issuers may be particularly illiquid.
Loans typically are not registered with the SEC and are not listed on any securities exchange and may at times be illiquid. Loan investments
through participations and assignments are typically illiquid. Structured finance securities are typically privately offered and sold,
and thus are not registered under the securities laws. As a result, investments in structured finance securities may be characterized
by the Fund as illiquid securities; however, an active dealer market may exist which would allow such securities to be considered liquid
in some circumstances. The securities and obligations of foreign issuers, particular issuers in emerging markets, may be more likely
to experience periods of illiquidity. Derivative instruments, particularly privately-negotiated or OTC derivatives, may be illiquid,
although can be no assurance that a liquid market will exist when the Fund seeks to close out an exchange-traded derivative position.
The Fund
may not be able to readily dispose of illiquid securities and obligations at prices that approximate those at which the Fund could sell
such assets and obligations if they were more widely traded and, as a result of such illiquidity, the Fund may have to sell other investments
or engage in borrowing transactions if necessary to raise cash to meet its obligations. As a result, the Fund may be unable to achieve
its desired level of exposure to certain issuers, asset classes or sectors. The capacity of market makers of fixed-income and other debt
instruments has not kept pace with the consistent growth in these markets over the past decades, which has led to reduced levels in the
capacity of these market makers to engage in trading and provide liquidity to markets. In addition, limited liquidity could affect the
market price of investments, thereby adversely affecting the Funds NAV and ability to make distributions. Dislocations in certain
parts of markets have in the past and may in the future result in reduced liquidity for certain investments. Liquidity of financial markets
may also be affected by government intervention and political, social, public health, economic or market developments (including rapid
interest rate changes). Liquidity risk is heightened in a changing interest rate environment, particularly for fixed-income and other
debt instruments.
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Valuation Of Certain Income Securities Risk [Member] |
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General Description of Registrant [Abstract] |
|
Risk [Text Block] |
Valuation
of Certain Income Securities Risk
GPIM may
use the fair value method to value investments if market quotations for them are not readily available or are deemed unreliable, or if
events occurring after the close of a securities market and before the Fund values its assets would materially affect net asset value.
Because the secondary markets for certain investments may be limited, they may be particularly difficult to value. Where market quotations
are not readily available, valuation may require more research than for more liquid investments. In addition, elements of judgment may
play a greater role in valuation in such cases than for investments with a more active secondary market because there is less reliable
objective data available. A security that is fair valued may be valued at a price higher or lower than the value determined by other
funds using their own fair valuation procedures. Prices obtained by the Fund upon the sales of such securities may not equal the value
at which the Fund carried the investment on its books, which would adversely affect the net asset value of the Fund.
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Duration And Maturity Risk [Member] |
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General Description of Registrant [Abstract] |
|
Risk [Text Block] |
Duration
and Maturity Risk
The Fund
has noffset policy regarding portfolio maturity or duration. Holding long duration and long maturity investments will expose the Fund
to certain magnified risks. These risks include interest rate risk, credit risk and liquidity risks as discussed above. Generally speaking,
the longer the duration of the Funds portfolio, the more exposure the Fund will have to interest rate risk described above.
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Below Investment Grade Securities Risk [Member] |
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General Description of Registrant [Abstract] |
|
Risk [Text Block] |
Below-Investment
Grade Securities Risk The Fund
may invest in Income Securities rated below-investment grade or, if unrated, determined by GPIM to be of comparable credit quality, which
are commonly referred to as high-yield or junk bonds. The Fund will not invest more than 25% of its total assets
in securities rated CCC or below (or, if unrated, determined to be of comparable credit quality by GPIM) at the time of investment. Investment
in securities of below-investment grade quality involves substantial risk of loss, the risk of which is particularly acute under adverse
economic conditions. Income Securities of below-investment grade quality are predominantly speculative with respect to the issuers
continuing capacity to pay interest and repay principal when due and therefore involve a greater risk of default or decline in market
value or income due to adverse economic and issuer-specific developments compared to investment grade bonds. Securities of below-investment
grade quality are often issued by companies without long track records of earnings or sales or by companies with lesser credit profiles
and may be more volatile than higher-rated securities of similar maturity. Securities
of below-investment grade quality generally involve a greater risk of default or decline in market value or income due to adverse economic
and issuer-specific developments, such as operating results and outlook and to real or perceived adverse economic and competitive industry
conditions. Generally, the risks associated with below-investment grade securities are heightened during times of weakening economic
conditions or rising interest rates (particularly for issuers that are highly leveraged). If the Fund is unable to sell an investment
at its desired time, the Fund may miss other investment opportunities while it holds investments it would prefer to sell, which could
adversely affect the Funds performance. In addition, the liquidity of any Fund investment may change significantly over time as
a result of market, economic, trading, issuer-specific and other factors. Accordingly, the performance of the Fund and a shareholders
investment in the Fund may be adversely affected if an issuer is unable to pay interest and repay principal, either on time or at all.
Issuers of below-investment grade securities are not perceived to be as strong financially as those with higher credit ratings. These
issuers are more vulnerable to financial setbacks and recessions
and other adverse economic developments than more creditworthy issuers, which may impair their ability to make interest and principal
payments. Income Securities of below-investment grade quality display increased price sensitivity to changing interest rates and to a
deteriorating economic environment. The market values, total return and yield for securities of below-investment grade quality tend to
be more volatile than the market values, total return and yield for higher quality bonds. Securities of below-investment grade quality
tend to be less liquid than investment grade debt securities and therefore more difficult to value accurately and sell at an advantageous
price or time and may involve greater transactions costs and wider bid/ask spreads, than higher-quality securities. Additionally, issuers
of below-investment grade securities may have the right to call or redeem the issue prior to its maturity, which could result
in the Fund having to reinvest in other below-investment grade or other securities at a lower interest rate or with other less favorable
terms. This may be more likely during a declining interest rate environment. To the extent that a secondary market does exist for certain
below-investment grade securities, the market for them may be subject to irregular trading activity, wide bid/ask spreads and extended
trade settlement periods. Because of the substantial risks associated with investments in below-investment grade securities, you could
have an increased risk of losing money on your investment in Common Shares, both in the short-term and the long-term. To the extent that
the Fund invests in securities that have not been rated by a nationally recognized statistical rating organization, the Funds ability
to achieve its investment objective will be more dependent on GPIMs credit analysis than would be the case when the Fund invests
in rated securities. Investment
in lower-medium and lower-rated debt securities may involve greater investment risk and the success of such investment is highly dependent
on GPIMs credit analysis. The value of securities of below-investment grade quality is particularly vulnerable to changes in interest
rates and a real or perceived economic downturn or higher interest rates could cause a decline in prices of such securities by lessening
the ability of issuers to make principal and interest payments. These securities may not be listed on an exchange and are often thinly
traded or subject to irregular trading and can be more difficult to sell and value accurately than higher-quality securities because there
tends to be less public information available about these securities. Because objective pricing data may be less available, judgment
may play a greater role in the valuation process. In addition, the entire below investment grade market can experience sudden and sharp
price swings due to a variety of factors, including changes in economic forecasts, stock market activity, large or sustained sales by
major investors, a high-profile default, or a change in the markets perception regarding below-investment grade securities. Adverse
conditions could make it difficult at times for the Fund to sell certain securities or could result in lower prices than those used in
calculating the Funds NAV. During periods of deteriorating economic conditions, such as recessions or periods of rising unemployment,
or changing interest rates (notably increases), below-investment grade securities are particularly susceptible to credit and default
risk as delinquencies, non-payment rates and losses could increase, and such increases could be sudden and significant. An economic downturn
or individual corporate developments could adversely affect the market for these investments and reduce the Funds ability to sell
these investments at an advantageous time or price. These or similar types of developments could cause below-investment grade securities
to lose significant market value, including before a default occurs.
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Structured Finace Investments Risk [Member] |
|
General Description of Registrant [Abstract] |
|
Risk [Text Block] |
Structured
Finance Investments Risk
The Funds
structured finance investments may include residential and commercial mortgage-related and other ABS issued by governmental entities
and private issuers. While traditional fixed-income securities typically pay a fixed rate of interest until maturity, when the entire
principal amount is due, these investments represent an interest in a pool of residential or commercial real estate or assets such as
automobile loans, credit card receivables or student loans that have been securitized and provide for monthly or other periodic payments
of interest and principal to the holder based from the cash flow of these assets. Holders of structured finance investments bear risks
of the underlying investments, index or reference obligation and are subject to counterparty and other risks. The Fund may have the right
to receive payments only from the structured product, and generally does not have direct rights against the issuer or the entity that
sold the assets to be securitized. While certain structured finance investments enable the investor to acquire interests in a pool of
securities without the brokerage and other expenses associated with directly holding the same securities, investors in structured finance
investments generally pay their share of the structured products administrative and other expenses. Although it is difficult to accurately
predict whether the prices of indices and securities underlying structured finance investments will rise or fall, these prices (and,
therefore, the prices of structured finance investments) will be influenced by the same types of political, economic and other events
that affect issuers of securities and capital markets generally. If the issuer of a structured product uses shorter term financing to
purchase longer term securities, the issuer may be forced to sell its securities at below market prices if it experiences difficulty in
obtaining short-term financing, which may adversely affect the value of the structured finance investment owned by the Fund.
The Fund
may invest in structured finance products collateralized by low grade or defaulted loans or securities. Investments in such structured
finance products are subject to the risks associated with below-investment grade securities. Such securities are characterized by high
risk. It is likely that an economic recession could severely disrupt the market for such securities and may have an adverse impact on
the value of such securities.
The Fund
may invest in senior and subordinated classes issued by structured finance vehicles. The payment of cash flows from the underlying assets
to senior classes take precedence over those of subordinated classes, and therefore subordinated classes are subject to greater risk.
Furthermore, the leveraged nature of subordinated classes may magnify the adverse impact on such class of changes in the value of the
assets, changes in the distributions on the assets, defaults and recoveries on the assets, capital gains and losses on the assets, prepayment
on assets and availability, price and interest rates of assets.
Structured
finance securities may be thinly traded or have a limited trading market. Structured finance securities are typically privately offered
and sold, and thus are not registered under the securities laws. As a result, investments in structured finance securities may be characterized
by the Fund as illiquid securities; however, an active dealer market may exist which would allow such securities to be considered liquid
in some circumstances.
Structured
finance securities, such as mortgage-backed securities, issued by non-governmental issuers are not guaranteed as to principal or interest
by the U.S. government or a government sponsored enterprise and are typically subject to greater risk than those issued by such governmental
entities. For example, privately issued mortgage-backed securities are not subject to the same underwriting requirements for underlying
mortgages as those issued by governmental entities
and, as a result, mortgage loans underlying such privately issued securities typically have less favorable underwriting characteristics
(such as credit risk and collateral) and a wider range in terms (such as interest rate, term and borrower characteristics).
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Asset Backed Securities Risk [Member] |
|
General Description of Registrant [Abstract] |
|
Risk [Text Block] |
Asset-Backed
Securities Risk
The Fund
may invest in ABS issued by legal entities that are sponsored by banks, investment banks, other financial institutions or companies,
asset management firms or funds and are specifically created for the purpose of issuing such ABS. Investors in ABS receive payments that
are part interest and part return of principal or certain ABS may be interest-only securities or principal-only securities. These payments
typically depend upon the cash flows generated by an underlying pool of assets and vary based on the rate at which the underlying obligors
pay off their liabilities under the underlying assets. The pooled assets provide cash flow to the issuer, which then makes interest and
principal payments to investors. As a result, these investments involve the risk, among other risks, that the borrower may default on
its obligations backing the ABS and, thus, the value of and interest generated by such investment will decline.
Investments
in ABS are subject to many of the same risks that are applicable to investments in certain other types of securities, including currency
risk, geographic emphasis risk, high yield and unrated securities risk, leverage risk, prepayment and extension risk and regulatory risk.
ABS are particularly subject to interest rate, market and credit risks and the risk that non-payment on underlying assets will result
in a decline in the value of the ABS. Compared to other fixed income investments with similar maturity and credit profile, ABS generally
increase in value to a lesser extent when interest rates decline and generally decline in value to a similar or greater extent when interest
rates rise. ABS are also subject to liquidity and valuation risk and, therefore, may be difficult to value accurately or sell at an advantageous
time or price and involve greater transaction costs and wider bid/ask spreads than certain other instruments. In addition, the assets
or collateral underlying an ABS may be insufficient or unavailable in the event of a default and enforcing rights with respect to these
assets or collateral may be difficult and costly.
While traditional
fixed-income securities typically pay a fixed rate of interest until maturity, when the entire principal amount is due, an ABS represents
an interest in a pool of assets, such as automobile loans, credit card receivables, unsecured consumer loans or student loans, that has
been securitized and provides for monthly payments of interest, at a fixed or floating rate, and principal from the cash flow of these
assets. This pool of assets (and any related assets of the issuing entity) is the only source of payment for the ABS. The ability of
an ABS issuer to make payments on the ABS, and the timing of such payments, is therefore dependent on collections on these underlying
assets. The recoveries on the underlying collateral may not, in some cases, be sufficient to support payments on these securities, or may
be unavailable in the event of a default and enforcing rights with respect to these assets or collateral may be difficult and costly, which
may result in losses to investors in an ABS.
Generally,
obligors may prepay the underlying assets in full or in part at any time, subjecting the Fund to prepayment risk related to the ABS it
holds. While the expected repayment streams on ABS are determined by the contractual amortization schedules for the underlying assets,
an investors yield to maturity on an ABS is uncertain and may be reduced by the rate and speed of prepayments of the underlying
assets, which may be influenced by a variety of economic, social and other factors. Any prepayments, repurchases, purchases or liquidations
of the underlying assets could shorten the average life of the ABS to an extent that cannot be fully predicted. Some ABS may be structured
to include a
period of rapid amortization triggered by events such as a significant rise in the default rate of the underlying collateral, a sharp
drop in the credit enhancement level because of credit losses on the underlying assets, a specified regulatory event or the bankruptcy
of the originator. A rapid amortization event will cause any revolving period to end earlier than expected and all collections on the
underlying assets will be used to pay principal to investors earlier than expected. In general, the senior most securities will be paid
prior to any payments being made on the subordinated securities, and if such payments are made earlier than expected, the Funds
yield on such ABS may be negatively affected.
In addition,
investments in ABS entail additional risks relating to the underlying pools of assets, including credit risk, default risk (such as a
borrowers default on its obligation and the default, failure or inadequacy or unavailability of a guarantee, if any, underlying
the ABS intended to protect investors in the event of default) and prepayment and extension risk with respect to the underlying pool
or individual assets represented in the pool. The underlying assets of an ABS may include, without limitation, residential or commercial
mortgages, motor vehicle installment sales or installment loan contracts, leases of various types of real, personal and other property,
receivable from credit card agreements and automobile finance agreements, student loans, consumer loans, and income from other income
streams, such as income from business loans. Moreover, additional risks relating to investments in ABS may arise principally because
of the type of ABS in which the Fund invests, with such risks primarily associated with the particular assets collateralizing the ABS
(such as their type or nature), the structure of such ABS, or the tranche or priority of the ABS held by the Fund (with junior or equity
tranches generally carrying higher levels of risk).
|
Mortgage Backed Securities Risk [Member] |
|
General Description of Registrant [Abstract] |
|
Risk [Text Block] |
Mortgage-Backed
Securities Risk
Mortgage-Backed
Securities (MBS) represent an interest in a pool of mortgages. MBS are subject to certain risks, such as: credit risk associated
with the performance of the underlying mortgage properties and of the borrowers owning these properties; risks associated with their
structure and execution (including the collateral, the process by which principal and interest payments are allocated and distributed
to investors and how credit losses affect the return to investors in such MBS); risks associated with the servicer of the underlying mortgages;
adverse changes in economic conditions and circumstances, which are more likely to have an adverse impact on MBS secured by loans on
certain types of commercial properties than on those secured by loans on residential properties; prepayment and extension risks associated
with the underlying assets of certain MBS, which can shorten the weighted average maturity and lower the return of the MBS, or lengthen
the expected maturity, respectively, leading to significant fluctuations in the value of the MBS; loss of all or part of the premium,
if any, paid; and decline in the market value of the security, whether resulting from changes in interest rates, prepayments on the underlying
mortgage collateral or perceptions of the credit risk associated with the underlying mortgage collateral.
The value
of MBS may be substantially dependent on the servicing of the underlying pool of mortgages. In addition, the Funds level of investment
in MBS of a particular type or in MBS issued or guaranteed by affiliated obligors, serviced by the same servicer or backed by underlying
collateral located in a specific geographic region, may subject the Fund to additional risk.
When market
interest rates decline, more mortgages are refinanced and the securities are paid off earlier than expected. Prepayments may also occur
on a scheduled basis or due to foreclosure. When market
interest rates increase, the market values of MBS decline. At the same time, however, mortgage refinancings and prepayments slow, which
lengthens the effective maturities of these securities. As a result, the negative effect of the rate increase on the market value of MBS
is usually more pronounced than it is for other types of debt securities. In addition, due to instability in the credit markets, the
market for some MBS has at times experienced reduced liquidity and greater volatility with respect to the value of such securities, making
it more difficult to value such securities. The Fund may invest in sub-prime mortgages or MBS that are backed by sub-prime mortgages or
defaulted or nonperforming loans.
Additional
risks relating to investments in MBS may arise principally because of the type of MBS in which the Fund invests, with such risks primarily
associated with the particular assets collateralizing the MBS and the structure of such MBS. For example, collateralized mortgage obligations
(CMOs), which are MBS that are typically collateralized by mortgage loans or mortgage pass-through securities and multi-class
pass-through securities, are commonly structured as equity interests in a trust composed of mortgage loans or other MBS. CMOs are usually
issued in multiple classes, often referred to as tranches, with each tranche having a specific fixed or floating coupon rate
and stated maturity or final distribution date. Under the traditional CMO structure, the cash flows generated by the mortgages or mortgage
pass-through securities in the collateral pool are used to first pay interest and then pay principal to the holders of the CMOs. Subject
to the provisions of individual CMO issues, the cash flow generated by the underlying collateral (to the extent it exceeds the amount
required to pay the stated interest) is used to retire the bonds. As a result of these and other structural characteristics of CMOs,
CMOs may have complex or highly variable prepayment terms, such as companion classes, interest only or principal only payments, inverse
floaters and residuals. These investments generally entail greater market, prepayment and liquidity risks than other MBS, and may be
more volatile or less liquid than other MBS. CMOs are further subject to certain risks specific to these securities. For example, the
average life of CMOs is typically determined using mathematical models that incorporate prepayment and other assumptions that involve
estimates of future economic and market conditions, which may prove to be incorrect, particularly in periods of heightened market volatility.
Further, the average weighted life of certain CMOs may not accurately reflect the price volatility of such securities, resulting in price
fluctuations greater than what would be expected from interest rate movements alone.
Non-agency
MBS (i.e., MBS issued by commercial banks, savings and loans institutions, mortgage bankers, private mortgage insurance companies and
other non-governmental issuers) are subject to the risk that the value of such securities will decline because, among other things, the
securities are not guaranteed as to principal or interest by the U.S. government or a government sponsored enterprise. Non-agency MBS
are not subject to the same underwriting requirements for underlying mortgages as agency MBS and, as a result, mortgage loans underlying
non-agency MBS typically have less favorable underwriting characteristics (such as credit and default risk and collateral) and a wider
range in terms (such as interest rate, term and borrower characteristics) than agency MBS. Non-agency residential mortgage-backed securities
often are issued in the form of several different tranches. Depending on their respective seniority, individual tranches are subject to
increased (and sometimes different) credit, prepayment and liquidity and valuation risks as compared to other tranches. These securities
are often subject to greater credit, prepayment and liquidity and valuation risks than agency MBS. In addition, these securities
may be less readily marketable as the market for these securities is typically smaller and less liquid than the market for agency MBS,
thus these securities may be subject to greater price fluctuation than agency MBS, especially during periods of weakness or perceived
weakness in the mortgage and real estate sectors.
Moreover,
the relationship between prepayments and interest rates may give some high-yielding MBS less potential for growth in value than conventional
bonds with comparable maturities. In addition, during periods of falling interest rates, the rate of prepayment tends to increase. During
such periods, the reinvestment of prepayment proceeds by the Fund will generally be at lower interest rates than the interest rates that
were carried by the obligations that have been prepaid. Because of these and other reasons, MBSs total return and maturity may
be difficult to predict precisely. To the extent that the Fund purchases MBS at a premium, prepayments (which may be made without penalty)
may result in loss of the Funds principal investment to the extent of premium paid.
The general
effects of inflation on the U.S. economy can be wide ranging, as evidenced by rising interest rates, wages, and costs of consumer goods
and necessities. The long-term effects of inflation on the general economy and on any individual mortgagor are unclear, and in certain
cases, rising inflation may affect a mortgagors ability to repay its related mortgage loan, thereby reducing the amount received
by the holders of MBS with respect to such mortgage loan. Additionally, increased rates of inflation, as recently experienced, may negatively
affect the value of certain MBS in the secondary market. In addition, during periods of declining economic conditions, losses on mortgages
underlying MBS generally increase. MBS generally are classified as either CMBS or residential mortgage-backed securities (RMBS),
each of which are subject to certain specific risks. CMBS and RMBS are also subject to risks similar to those associated with investing
in real estate, which are described under Real Estate Risks below.
In addition,
MBS, such as commercial and residential MBS, are subject to the risks of ABS generally and are particularly sensitive to changes in interest
rates and developments in the commercial or residential real estate markets. For example, changing interest rates tend to adjust the
duration of fixed-rate mortgage-backed securities. As a result, a changing interest rate environment can cause the prices of mortgage-backed
securities to be increasingly volatile and increase the risk that payments on principal may occur more quickly (or earlier) or slower
(or later) than expected, each of which may adversely affect the Funds holdings of mortgage-backed securities. For example, a rising
interest rate environment will cause the average life of these securities to extend, which may lock in a below-market interest rate,
increase the securitys duration and increase sensitivity to further interest rate changes. This may negatively affect the Funds
returns because the value of the security decreases when principal payments are made later than expected. In addition, because principal
payments are made later than expected, the Fund may be prevented from investing proceeds it would otherwise have received at a given
time at the higher prevailing interest rates. Rising interest rates generally result in a decline in the value of mortgage-backed securities,
such as MBS. In addition, in general, a decline of housing values and other economic developments (such as a rise in unemployment rates
or a slowdown in the overall economy) may cause delinquencies or non-payment in mortgages (particularly sub-prime and non-prime mortgages)
underlying MBS, which would likely adversely impact the ability of the issuer
to make principal and/or interest payments timely or at all to holders of MBS and negatively affect the Funds investments in such
MBS.
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Commercial Mortgage Backed Securities Risk [Member] |
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General Description of Registrant [Abstract] |
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Risk [Text Block] |
Commercial
Mortgage-Backed Securities Risk
CMBS are
collateralized by one or more commercial mortgage loans. Banks and other lending institutions typically group the loans into pools and
interests in these pools are then sold to investors, allowing the lender to have more money available to loan to other commercial real
estate owners. Commercial mortgage loans may be secured by office properties, retail properties, hotels, mixed use properties or multi-family
apartment buildings. The value of, and income generated by, investments in CMBS are subject to the risks of ABS generally and the commercial
real estate markets and the real estate securing the underlying mortgage.
CMBS are
subject to particular risks, such as those associated with lack of standardized terms, shorter maturities than residential mortgage loans
and payment of all or substantially all of the principal only at maturity rather than regular amortization of principal. In addition,
commercial lending generally is viewed as exposing the lender to a greater risk of loss than residential lending. Commercial lending
typically involves larger loans to single borrowers or groups of related borrowers than residential mortgage loans. In addition, the
repayment of loans secured by income producing properties typically is dependent upon the successful operation of the related real estate
project and the cash flow generated therefrom. Net operating income of an income-producing property can be affected by, among other things:
tenant mix, success of tenant businesses, property management decisions, property location and condition, competition from comparable
types of properties, changes in laws that increase operating expense or limit rents that may be charged, any need to address environmental
contamination at the property, the occurrence of any uninsured casualty at the property, changes in national, regional or local economic
conditions and/or specific industry segments, declines in regional or local or other real estate values, declines in regional or local
rental or occupancy rates, increases in interest rates, real estate tax rates and other operating expenses, change in governmental rules,
regulations and fiscal policies, including environmental legislation, acts of God, terrorism, social unrest and civil disturbances.
Consequently,
adverse changes in economic conditions and circumstances are more likely to have an adverse impact on MBS secured by loans on commercial
properties than on those secured by loans on residential properties. Economic downturns, rises in unemployment, tightening lending standards
and increased interest and lending rates, developments adverse to the commercial real estate markets, and other developments that limit
or reduce demand for commercial retail and office spaces (including continued or expanded remote working arrangement) as well as increased
maintenance or tenant improvement costs and costs to convert properties for other uses adversely impact these investments. For example,
economic decline in the businesses operated by the tenants of office or retail properties may increase the likelihood that the tenants
may be unable to pay their rent or that properties may be unable to attract or retain tenants at all or on favorable terms for the commercial
real estate owners, resulting in vacancies (potentially for extended periods) and losses. These developments could also result from,
among other things, population shifts and other demographic changes, changing tastes and preferences as well as cultural, technological,
working or economic and market developments. In addition, changing interest rate environments and associated changes in lending standards
and higher refinancing
rates may adversely affect the commercial real estate and CMBS markets. Moreover, other types of events, domestic or international, may
affect general economic conditions and financial markets, such as pandemics, armed conflicts, energy supply or price disruptions, natural
disasters and man-made disasters, which may have a significant effect on the underlying commercial mortgage loans and real estate. In
addition, adverse developments in the local, regional and national economies affect consumer spending and can have a significant effect
on the success of a retail space. Further, increased competition in the market of a retail property through the addition of competing
properties nearby can adversely impact the success of a retail property, even if the local, regional and national economies are doing
well. Retail properties are also subject to conditions that could negatively affect the retail sector, such as increased unemployment,
increased federal income and payroll taxes, increased health care costs, increased state and local taxes, increased real estate taxes,
industry slowdowns, lack of availability of consumer credit, weak income growth, increased levels of consumer debt, poor housing market
conditions, adverse weather conditions, natural disasters, plant closings, and other factors. Similarly, local real estate conditions,
such as an oversupply of, or a reduction in demand for, retail space or retail goods, and the supply and creditworthiness of current
and prospective tenants may negatively impact those retail properties. The occurrence of any of the foregoing or similar developments
would likely increase the risks associated with these investments, such as the default risk for the properties and loans underlying the
CMBS investments, and adversely impact the value of, and income generated by, these investments and the underlying properties or loans.
These developments could also result in reduced liquidity for CMBS. CMBS are also subject to the risk that the value of, and income generated
by, such securities will decline because, among other things, the securities are not issued or guaranteed as to principal or interest
by the U.S. government or a government sponsored enterprise and, thus, would be subject to similar risks as non-agency MBS. CMBS often
are issued in the form of several different tranches. Depending on their respective seniority, individual tranches are subject to increased
(and sometimes different) credit, prepayment and liquidity and valuation risks as compared to other tranches. CMBS are often subject to
credit, default, prepayment and liquidity and valuation risks and may experience greater price volatility than other types of ABS or
MBS.
Additional
risks may be presented by the type and use of a particular commercial property. Special risks are presented by hospitals, nursing homes,
hospitality properties and certain other property types. Commercial property values and net operating income are subject to volatility,
which may result in net operating income becoming insufficient to cover debt service on the related mortgage loan. The exercise of remedies
and successful realization of liquidation proceeds relating to CMBS may be highly dependent on the performance of the servicer or special
servicer. There may be a limited number of special servicers available, particularly those that do not have conflicts of interest.
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Residential Mortgage Backed Securities Risk [Member] |
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General Description of Registrant [Abstract] |
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Risk [Text Block] |
Residential
Mortgage-Backed Securities Risk Home mortgage
loans are typically grouped together into pools by banks and other lending institutions, and interests in these pools are then sold to
investors, allowing the bank or other lending institution to have more money available to loan to home buyers. RMBS are particularly
subject to the credit risk of the borrower. Credit-related risk on RMBS primarily arises from losses due to delinquencies and defaults
by the borrowers in payments on the underlying mortgage loans and
breaches by originators and servicers of their obligations under the underlying documentation pursuant to which the RMBS are issued.
RMBS are also subject to the risks of MBS generally and the residential real estate markets. The rate of delinquencies and defaults on
residential mortgage loans and the aggregate amount of the resulting losses will be affected by a number of factors, including general
economic conditions, particularly those in the area where the related mortgaged property is located, the level of the borrowers
equity in the mortgaged property and the individual financial circumstances of the borrower. The risk of non-payment is greater for RMBS
that are backed by loans that were originated under weak underwriting standards, including loans made to borrowers with limited means
to make repayment. RMBS are also subject to risks associated with the actions of mortgage lenders in the marketplace. Such lenders may
adjust their loan programs and underwriting standards, which may reduce the availability of mortgage credit to prospective mortgagors.
This may result in limited financing alternatives for mortgagors seeking to refinance their existing loans, which may in turn result
in higher rates of delinquencies, defaults and losses on mortgages. If a residential mortgage loan is in default, foreclosure on the
related residential property may be a lengthy and difficult process involving significant legal and other expenses. The net proceeds obtained
by the holder on a residential mortgage loan following the foreclosure on the related property may be less than the total amount that
remains due on the loan. The prospect of incurring a loss upon the foreclosure of the related property may lead the holder of the residential
mortgage loan to restructure the residential mortgage loan or otherwise delay the foreclosure process.
Income from
and values of RMBS also may be greatly affected by demographic trends, such as population shifts or changing tastes and values, or increasing
vacancies or declining rents or property values resulting from legal, cultural, technological, global or local economic developments,
as well as reduced demand for properties.
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Sub Prime Mortgage Market Risk [Member] |
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General Description of Registrant [Abstract] |
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Risk [Text Block] |
Sub-Prime
Mortgage Market Risk Loans made
to lower quality borrowers, including those of sub-prime quality, may be underlying assets for an asset-backed security. Loans to such
borrowers involve a higher degree of credit and default risk. As a result, values of ABS backed by lower quality loans are more likely
than others to suffer significant declines due to defaults, delays or the perceived risk of defaults or delays. The residential
mortgage market in the United States has at times experienced difficulties that may adversely affect the performance and market value of
certain mortgages and MBS. Delinquencies and losses on residential mortgage loans (especially sub-prime and second-lien mortgage loans)
generally have increased at times and may again increase, and a decline in or flattening of housing values (as has been experienced at
times and may again be experienced in many housing markets) may exacerbate such delinquencies and losses. Borrowers with adjustable rate
mortgage loans are more sensitive to changes in interest rates, which affect their monthly mortgage payments, and may be unable to secure
replacement mortgages at comparably low interest rates. Also, a number of residential mortgage loan originators have at times experienced
serious financial difficulties or bankruptcy. Largely due to the foregoing, reduced investor demand for mortgage loans and MBS and increased
investor yield requirements has at times caused limited liquidity in the secondary market for certain MBS, which can adversely affect
the market value of MBS. It is possible that such limited liquidity in such secondary markets could occur again or worsen. If the economy
of the United States deteriorates, the incidence
of mortgage foreclosures, especially sub-prime mortgages, may increase, which may adversely affect the value of any MBS owned by the Fund.
Any increase
in prevailing market interest rates may result in increased payments for borrowers who have adjustable rate mortgages. Moreover, with
respect to hybrid mortgage loans after their initial fixed rate period, interest-only products or products having a lower rate, and with
respect to mortgage loans with a negative amortization feature which reach their negative amortization cap, borrowers may experience
a substantial increase in their monthly payment even without an increase in prevailing market interest rates. Increases in payments for
borrowers may result in increased rates of delinquencies and defaults on residential mortgage loans underlying the RMBS.
The significance
of the mortgage crisis and loan defaults in residential mortgage loan sectors led to the enactment of numerous pieces of legislation
relating to the mortgage and housing markets. These actions, along with future legislation or regulation, may have significant impacts
on the mortgage market generally and may result in a reduction of available transactional opportunities for the Fund or an increase in
the cost associated with such transactions and may adversely impact the value of RMBS.
During the
mortgage crisis, a number of originators and servicers of residential and commercial mortgage loans, including some of the largest originators
and servicers in the residential and commercial mortgage loan market, experienced serious financial difficulties. These or similar difficulties
may occur in the future and affect the performance of RMBS and CMBS, particularly non-agency RMBS and CMBS. There can be no assurance
that originators and servicers of mortgage loans will not continue to experience serious financial difficulties or experience such difficulties
in the future, including becoming subject to bankruptcy or insolvency proceedings, or that underwriting procedures and policies and protections
against fraud will be sufficient in the future to prevent such financial difficulties or significant levels of default or delinquency on
mortgage loans.
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C L O C D O And C B O Risk [Member] |
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General Description of Registrant [Abstract] |
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Risk [Text Block] |
CLO, CDO
and CBO Risk The Fund
may invest in CDOs, CBOs and CLOs. A CDO is an ABS whose underlying collateral is typically a portfolio of other structured finance debt
securities or synthetic instruments issued by another ABS vehicle. A CBO is an ABS whose underlying collateral is a portfolio of bonds.
A CLO is an ABS whose underlying collateral is a portfolio of bank loans. In addition
to the general risks (such as interest rate risk, prepayment risk, extension risk, market risk, credit risk and liquidity and valuation
risk) associated with credit or debt securities discussed herein, CLOs, CDOs and CBOs are subject to additional risks due to their complex
structure and highly leveraged nature. Additionally, the Funds investment in CLOs, CDOs and CBOs will provide it with indirect
exposure to the underlying collateral; this indirect investment structure presents certain risks to the Fund. For example, the Funds
interest in CLO securities may be less liquid than the loans held by the CLO; thus, it may be more difficult for the Fund to dispose of
CLO securities than it would be for the Fund to dispose of loans if it held such loans directly. Additionally, CLOs, CDOs and CBOs normally
charge management fees and administrative expenses, which fees and expenses would be borne by the Fund. CLOs, CDOs
and CBOs are subject to risks associated with the involvement of multiple transaction parties related to the underlying collateral and
disruptions that may occur as a result of the restructuring or insolvency of the underlying obligors, which are generally corporate obligors.
Unlike a consumer obligor that is generally obligated to make payments on the collateral backing an ABS, the obligor on the collateral
backing a CLO, a CDO or a CBO may have more effective defenses or resources to cause a delay in payment or restructure the underlying
obligation. If an obligor is permitted to restructure its obligations, distributions from collateral securities may not be adequate to
make interest or other payments.
The performance
of CLOs, CDOs and CBOs depends primarily upon the quality of the underlying assets and the level of credit support or enhancement in
the structure and the relative priority of the interest in the issuer of the CLO, CDO or CBO purchased by the Fund. In general, CLOs,
CDOs and CBOs are actively managed by an asset manager that is responsible for evaluating and acquiring the assets that will collateralize
the CLO, CDO or CBO. The asset manager may have difficulty in identifying assets that satisfy the eligibility criteria for the assets and
may be restricted from trading the collateral. These criteria, restrictions and requirements, while reducing the overall risk to the
Fund, may limit the ability of GPIM to maximize returns on the CLOs, CDOs and CBOs if an opportunity is identified by the collateral
manager. In addition, other parties involved in CLOs, CDOs and CBOs, such as credit enhancement providers and investors in senior obligations
of the CLO, CDO or CBO may have the right to control the activities and discretion of GPIM in a manner that is adverse to the interests
of the Fund. A CLO, CDO or CBO generally includes provisions that alter the priority of payments if performance metrics related to the
underlying collateral, such as interest coverage and minimum overcollateralization, are not met.
These provisions
may cause delays in payments on the securities or an increase in prepayments depending on the relative priority of the securities owned
by the Fund. The failure of a CLO, CDO or CBO to make timely payments on a particular tranche may have an adverse effect on the liquidity
and market value of such tranche.
Payments
to holders of CLOs, CDOs and CBOs may be subject to deferral. If cashflows generated by the underlying assets are insufficient to make
all current and, if applicable, deferred payments on the CLOs, CDOs and CBOs, no other assets will be available for payment of the deficiency
and, following realization of the underlying assets, the obligations of the issuer to pay such deficiency will be extinguished.
Securities
issued by CLOs, CDOs and CBOs may experience substantial losses due to defaults or sales of underlying assets at a loss (due to a decline
in market value of such assets or otherwise). The value of securities issued by CLOs, CDOs and CBOs also may decrease because of, among
other developments, changes in market value; changes in the markets perception of the creditworthiness of the servicer of the assets,
the originator of an asset in the pool, or the financial institution or fund providing credit support or enhancement; loan performance
and prices; broader market sentiment, including expectations regarding future loan defaults, liquidity conditions and supply and demand
for structured products.
The Fund
may invest in any portion of the capital structure of CLOs (including the subordinated, residual and deep mezzanine debt tranches). As
a result, the CLOs in which the Fund invests may have issued and sold debt tranches that will rank senior to the tranches in which the
Fund invests. By their
terms, such more senior tranches may entitle the holders to receive payment of interest or principal on or before the dates on which
the Fund is entitled to receive payments with respect to the tranches in which the Fund invests. Also, in the event of insolvency, liquidation,
dissolution, reorganization or bankruptcy of a CLO, holders of more senior tranches would typically be entitled to receive payment in
full before the Fund receives any distribution. After repaying such senior creditors, such CLO may not have any remaining assets to use
for repaying its obligation to the Fund. In the case of tranches ranking equally with the tranches in which the Fund invests, the Fund
would have to share on an equal basis any distributions with other creditors holding such securities in the event of an insolvency, liquidation,
dissolution, reorganization or bankruptcy of the relevant CLO. Therefore, the Fund may not receive back the full amount of its investment
in a CLO.
CLO securities
carry additional risks due to the complex structure and highly leveraged nature of a CLO. CLO issues classes or tranches
that vary in risk or yield. The most senior tranches have the lowest yield but the lowest level of risk relative to other tranches, as
they are senior in priority to the more junior tranches with respect to payments made by the CLO. Conversely, the most subordinated tranches
have the highest potential yield relative to other tranches but also the highest level of risk relative to the other tranches, as they
are the lowest in the priority of payments. Thus, losses on underlying assets are borne first by the holders of the most subordinate
tranche, followed by the second-most subordinated tranche, and so forth. A CLO may experience substantial losses attributable to loan
defaults or sales of underlying assets at a loss (due to a decline in market value of such assets or otherwise). The Funds investment
in a CLO may decrease in market value because of, among other developments, (i) loan defaults or credit impairment; (ii) losses that
exceed the subordinate tranches; (iii) an event of default occurring under a CLO, which could lead to acceleration and/or liquidation
of the assets at a loss; (iv) market anticipation of defaults; (v) investor aversion to CLO securities as a class; and (vi) poor performance
of the CLOs manager. These risks may be magnified depending on the tranche of CLO securities in which the Fund invests. For example,
investments in a junior tranche of CLO securities will likely be more sensitive to loan defaults or credit impairment than investments
in more senior tranches. Senior tranches are also subject to the risk that junior tranches may disappear, eliminating the protection
such junior tranches normally provide more senior tranches.
Investments
in CLOs, CDOs and CBOs expose the Fund to financial leverage and, thus expose the Fund to the risks associated with financial leverage
(such as higher risk of volatility and magnified financial losses). CLOs, CDOs and CBOs are generally privately offered and sold and are
not registered under securities laws and may be illiquid. Further, the complex nature of CLOs, CDOs and CBOs may lead to disputes with
the issuer or other investors and/or unexpected investment results. CLOs, CDOs and CBOs are also subject to the risk that distributions
from the underlying collateral may be inadequate to make interest or other payments and that the underlying collateral may default or
decline in value or quality and may be subject to risks associated with investments in high yield, below investment grade and unrated
securities. The risks associated with these investments depend in part on the types of collateral underlying the CLO, CDO or CBO and
the class or tranche in which the Fund invests, with certain classes or tranches being subject to heightened risks.
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C L O Subordinated Notes Risk [Member] |
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General Description of Registrant [Abstract] |
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Risk [Text Block] |
CLO Subordinated
Notes Risk
The Fund
may invest in any portion of the capital structure of CLOs (including the subordinated, residual and deep mezzanine debt tranches). The
most senior tranches have the lowest yield but the lowest
level of risk relative to other tranches, as they are senior in priority to the more junior tranches with respect to payments made by
the CLO. Conversely, the most subordinated tranches have the highest potential yield relative to other tranches but also the highest
level of risk relative to the other tranches, as they are the lowest in the priority of payments. Thus, losses on underlying assets are
borne first by the holders of the most subordinate tranche, followed by the second-most subordinated tranche, and so forth. A CLO may
experience substantial losses attributable to loan defaults or sales of underlying assets at a loss (due to a decline in market value
of such assets or otherwise). The Funds investment in a CLO may decrease in market value because of, among other developments,
(i) loan defaults or credit impairment; (ii) losses that exceed the subordinate tranches; (iii) an event of default occurring under a
CLO, which could lead to acceleration and/or liquidation of the assets at a loss; (iv) market anticipation of defaults; (v) investor
aversion to CLO securities as a class; and (vi) poor performance of the CLOs manager. These risks may be magnified depending on
the tranche of CLO securities in which the Fund invests. For example, investments in a junior tranche of CLO securities will likely be
more sensitive to loan defaults or credit impairment than investments in more senior tranches. Senior tranches are also subject to the
risk that junior tranches may disappear, eliminating the protection such junior tranches normally provide more senior tranches. In addition,
the subordinated tranche does not receive ratings and is considered the riskiest portion of the capital structure of a CLO. The subordinated
tranche is junior in priority of payment to the more senior tranches of the CLO and is subject to certain payment restrictions. As a
result, the subordinated tranche bears the bulk of defaults from the loans in the CLO. In addition, the subordinated tranche generally
has only limited voting rights and generally does not benefit from any creditors rights or ability to exercise remedies under the
indenture governing the CLO notes. Certain mezzanine tranches in which the Fund may invest may also be subject to certain risks similar
to risks associated with investment in the subordinated tranche.
The subordinated
tranche is unsecured and ranks behind all of the secured creditors, known or unknown, of the CLO issuer, including the holders of the
secured notes it has issued. Consequently, to the extent that the value of the issuers portfolio of loan investments has been reduced
as a result of conditions in the credit markets, defaulted loans, capital gains and losses on the underlying assets, prepayment or changes
in interest rates, the value of the subordinated tranche realized at redemption could be reduced. If a CLO breaches certain tests set
forth in the CLOs indenture, excess cash flow that would otherwise be available for distribution to the subordinated tranche investors
is diverted to prepay CLO debt investors in order of seniority until such time as the covenant breach is cured. If the covenant breach
is not or cannot be cured, the subordinated tranche investors (and potentially other investors in lower priority rated tranches) may
experience a partial or total loss of their investment. Accordingly, the subordinated tranche may not be paid in full and may be more
vulnerable to loss, including up to 100% loss. At the time of issuance, the subordinated tranche of a CLO is typically under-collateralized
in that the liabilities of a CLO at inception exceed its total assets.
The leveraged
nature of subordinated notes may magnify the adverse impact on the subordinated notes of changes in the market value of the investments
held by the issuer, changes in the distributions on those investments, defaults and recoveries on those investments, capital gains and
losses on those investments, prepayments on those investments and availability, prices and interest rates of those investments. Subordinated
notes are not guaranteed by another party. There can be no assurance that distributions on the assets held by the CLO will be sufficient
to make any distributions or that the yield on the subordinated notes will meet the Funds expectations. Investments in the subordinated
tranche of a CLO are generally less liquid than CLO debt tranches and subject to extensive transfer restrictions, and there may be no
market for subordinated notes. Therefore, the Fund may be required to hold subordinated notes for an indefinite period of time or until
their stated maturity. Certain mezzanine tranches in which the Fund may invest may also be subject to certain risks similar to risks
associated with investment in the subordinated tranche.
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Risk Associated With Risk Linked Securities [Member] |
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General Description of Registrant [Abstract] |
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Risk [Text Block] |
Risks
Associated with Risk-Linked Securities
RLS are a
form of derivative issued by insurance companies and insurance-related special purpose vehicles that apply securitization techniques
to catastrophic property and casualty damages. Unlike other insurable low-severity, high-probability events (such as auto collision coverage),
the insurance risk of which can be diversified by writing large numbers of similar policies, the holders of a typical RLS are exposed
to the risks from high-severity, low-probability events such as that posed by major earthquakes or hurricanes. RLS represent a method
of reinsurance, by which insurance companies transfer their own portfolio risk to other reinsurance companies and, in the case of RLS,
to the capital markets. A typical RLS provides for income and return of capital similar to other fixed-income investments, but involves
full or partial default (or loss) if losses resulting from a certain catastrophe exceeded a predetermined amount. In essence, investors
invest funds in RLS and if a catastrophe occurs that triggers the RLS, investors may lose some or all of the capital invested.
In the case of an event, the funds are paid to the bond sponsoran insurer, reinsurer or corporationto cover losses. In return,
the bond sponsors pay interest to investors for this catastrophe protection. RLS can be structured to pay-off on three types of variablesinsurance-industry
catastrophe loss indices, insure-specific catastrophe losses and parametric indices based on the physical characteristics of catastrophic
events. Such variables are difficult to predict or model, and the risk and potential return profiles of RLS may be difficult to assess. No
active trading market may exist for certain RLS, which may impair the ability of the Fund to realize full value in the event of the need
to liquidate such assets.
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Risks Associated With Structured Notes [Member] |
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General Description of Registrant [Abstract] |
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Risk [Text Block] |
Risks
Associated with Structured Notes
Investments
in structured notes involve risks associated with the issuer of the note and the reference instrument. Where the Funds investments
in structured notes are based upon the movement of one or more factors, including currency exchange rates, interest rates, referenced
bonds and stock indices, depending on the factor used and the use of multipliers or deflators, changes in interest rates and movement
of the factor may cause significant price fluctuations. Additionally, changes in the reference instrument or security may cause the interest
rate on the structured note to be reduced to zero, and any further changes in the reference instrument may then reduce the principal
amount payable on maturity. Structured notes may be less liquid than other types of securities and more volatile than the reference instrument
or security underlying the note.
|
Senior Loans Risk [Member] |
|
General Description of Registrant [Abstract] |
|
Risk [Text Block] |
Senior
Loans Risk
The Fund
may invest in senior secured floating rate Loans made to corporations and other nongovernmental entities and issuers (Senior Loans).
Senior Loans typically hold the most senior position in the capital structure of the issuing entity, are typically secured with specific
collateral and typically have a claim on the assets of the borrower, including stock owned by the borrower in its subsidiaries,
that is senior to that held by junior lien creditors, subordinated debt holders and stockholders of the borrower. The Funds investments
in Senior Loans are typically below-investment grade and are considered speculative because of the credit risk of the applicable issuer.
There is
less readily-available, reliable information about most Senior Loans than is the case for many other types of securities. In addition,
there is rarely a minimum rating or other independent evaluation of a borrower or its securities, and GPIM relies primarily on its own
evaluation of a borrowers credit quality rather than on any available independent sources. As a result, the Fund is particularly
dependent on the analytical abilities of GPIM with respect to investments in Senior Loans. GPIMs judgment about the credit quality
of a borrower may be wrong.
The risks
associated with Senior Loans of below-investment grade quality are similar to the risks of other lower grade Income Securities, although
Senior Loans are typically senior in payment priority and secured on a senior priority basis, in contrast to subordinated and unsecured
Income Securities.
Senior Loans
higher priority has historically resulted in generally higher recoveries in the event of a corporate reorganization. In addition, because
their interest payments are typically adjusted for changes in short-term interest rates, investments in Senior Loans generally have less
interest rate risk than certain other lower grade Income Securities, which may have fixed interest rates. The Funds investments
in Senior Loans are typically below-investment grade and are considered speculative because of the credit risk of their issuers. Such
companies are more likely to default on their payments of interest and principal owed to the Fund, and such defaults could reduce the
Funds NAV and income distributions. Further, transactions in Senior Loans typically settle on a delayed basis and may take longer
than seven days toffsettle. As a result, the Fund may receive the proceeds from a sale of a Senior Loan on a delayed basis which may affect the Funds ability to repay debt, to pay dividends, to pay expenses, or to take advantage of new investment opportunities. An
economic downturn generally leads to a higher non-payment rate, and a Senior Loan may lose significant value before a default occurs.
Moreover, any specific collateral used to secure a Senior Loan may decline in value or become illiquid, which would adversely affect the
Senior Loans value.
Economic
and other events (whether real or perceived) can reduce the demand for certain Senior Loans or Senior Loans generally, which may reduce
market prices of the Senior Loans and cause the Funds NAV per share to fall or otherwise adversely impact the Funds investments
in Senior Loans. The frequency and magnitude of such changes cannot be predicted. Loans and other debt instruments are also subject to
the risk of price declines due to increases in prevailing interest rates, although floating-rate debt instruments are substantially less
exposed to this risk than fixed-rate debt instruments. Interest rate changes may also increase prepayments of debt obligations and require
the Fund to invest assets at lower yields. During periods of deteriorating economic conditions, such as recessions or periods of rising
unemployment, or changing interest rates (notably increases), delinquencies and losses generally increase, sometimes dramatically, with
respect to obligations under such loans. An economic downturn or individual corporate developments could adversely affect the market for
these instruments and reduce the Funds ability to sell these instruments at an advantageous time or price. An economic downturn
would generally lead to a higher non-payment rate, and a Senior Loan may lose significant market value before a default occurs.
No active
trading market may exist for certain Senior Loans, which may impair the ability of the Fund to realize full value in the event of the
need to liquidate such assets and normally make it more difficult to
value Senior Loans (particularly those that are illiquid). Adverse market conditions may impair the liquidity of some actively traded
Senior Loans, meaning that the Fund may not be able to sell them quickly at a desirable price. To the extent that a secondary market
does exist for certain Senior Loans, the market may be subject to irregular trading activity, wide bid/ask spreads and extended trade
settlement periods.
Although
the Senior Loans in which the Fund will invest generally will be secured by specific collateral, there can be no assurance that liquidation
of such collateral would satisfy the borrowers obligation in the event of non-payment of scheduled interest or principal or that
such collateral could be readily liquidated. In the event of the bankruptcy of a borrower, the Fund could experience delays or limitations
with respect to its ability to realize the benefits of the collateral securing a Senior Loan. If the terms of a Senior Loan do not require
the borrower to pledge additional collateral in the event of a decline in the value of the already pledged collateral, the Fund will
be exposed to the risk that the value of the collateral will not at all times equal or exceed the amount of the borrowers obligations
under the Senior Loans. To the extent that a Senior Loan is collateralized by stock in the borrower or its subsidiaries, such stock may
lose all of its value in the event of the bankruptcy of the borrower. Such Senior Loans involve a greater risk of loss or illiquidity.
Some Senior Loans are subject to the risk that a court, pursuant to fraudulent conveyance or other similar laws, could subordinate or
otherwise adversely affect the priority of the Senior Loans to presently existing or future indebtedness of the borrower or could take
other action detrimental to lenders, including the Fund. Such court action could under certain circumstances include invalidation of
Senior Loans.
Senior Loans
are subject to legislative risk. If legislation or state or federal regulations impose additional requirements or restrictions on the
ability of financial institutions to make loans, the availability of Senior Loans for investment by the Fund may be adversely affected.
In addition, such requirements or restrictions could reduce or eliminate sources of financing for certain borrowers. This could increase
the risk of default. If legislation or federal or state regulations require financial institutions to increase their capital requirements
in order to make or hold certain debt investments, this may cause financial institutions to dispose of Senior Loans that are considered
highly levered transactions. Such sales could result in prices that, in the opinion of the Adviser, do not represent fair value. If the
Fund attempts to sell a Senior Loan at a time when a financial institution is engaging in such a sale, the price the Fund could receive
for the Senior Loan may be adversely affected.
The Funds
investments in Senior Loans may be subject to lender liability risk. Lender liability refers to a variety of legal theories generally
founded on the premise that a lender has violated a duty of good faith, commercial reasonableness and fair dealing or a similar duty
owed to the borrower or has assumed an excessive degree of control over the borrower resulting in the creation of a fiduciary duty owed
to the borrower or its other creditors or shareholders. Because of the nature of its investments, the Fund may be subject to allegations
of lender liability. In addition, under common law principles that in some cases form the basis for lender liability claims, a court
may elect to subordinate the claim of an offending lender or bondholder (or group of offending lenders or bondholders) to the claims of
a disadvantaged creditor (or group of creditors).
Economic
exposure to Senior Loans through the use of derivatives transactions may involve greater risks than if the Fund had invested in the Senior
Loan interest directly during a primary distribution or through assignments or participations in a loan acquired in secondary markets
since, in addition to the risks described above, derivatives transactions to gain exposure to Senior Loans may be subject to
leverage risk and greater illiquidity risk, counterparty risk, valuation risk and other risks associated with derivatives discussed herein.
|
Second Lien Loans Risk [Member] |
|
General Description of Registrant [Abstract] |
|
Risk [Text Block] |
Second
Lien Loans Risk
The Fund
may invest in second lien secured floating rate Loans made by public and private corporations and other non-governmental
entities and issuers for a variety of purposes (Second Lien Loans). Second Lien Loans are typically second in right of payment
and/or second in right of priority with respect to collateral remedies to one or more Senior Loans of the related borrower. Second Lien
Loans are subject to the same risks associated with investment in Senior Loans and other lower grade Income Securities. However, Second
Lien Loans are second in right of payment and/or second in right of priority with respect to collateral remedies to Senior Loans and
therefore are subject to the additional risk that the cash flow of the borrower and/or the value of any property securing the Loan may
be insufficient to meet scheduled payments or otherwise be available to repay the Loan after giving effect to payments in respect of a Senior
Loan, including payments made with the proceeds of any property securing the Loan and any senior secured obligations of the borrower.
Second Lien Loans are expected to have greater price volatility and exposure to losses upon default than Senior Loans and may be less
liquid. There is also a possibility that originators will not be able to sell participations in Second Lien Loans, which would create
greater credit risk exposure.
|
Subordinated Secured Loans Risk [Member] |
|
General Description of Registrant [Abstract] |
|
Risk [Text Block] |
Subordinated
Secured Loans Risk
Subordinated
secured Loans generally are subject to similar risks as those associated with investment in Senior Loans, Second Lien Loans and below-investment
grade securities. However, such loans may rank lower in right of payment than any outstanding Senior Loans, Second Lien Loans or other
debt instruments with higher priority of the borrower and therefore are subject to additional risk that the cash flow of the borrower
and any property securing the loan may be insufficient to meet scheduled payments and repayment of principal in the event of default or
bankruptcy after giving effect to the higher-ranking secured obligations of the borrower. Subordinated secured Loans are expected to have
greater price volatility than Senior Loans and Second Lien Loans and may be less liquid.
|
Unsecured Loans Risk [Member] |
|
General Description of Registrant [Abstract] |
|
Risk [Text Block] |
Unsecured
Loans Risk
Unsecured
Loans generally are subject to similar risks as those associated with investment in Senior Loans, Second Lien Loans, subordinated secured
Loans and below-investment grade securities. However, because unsecured Loans have lower priority in right of payment to any higher-ranking
obligations of the borrower and are not backed by a security interest in any specific collateral, they are subject to additional risk
that the cash flow of the borrower and available assets may be insufficient to meet scheduled payments and repayment of principal after
giving effect to any higher-ranking obligations of the borrower. Unsecured Loans are expected to have greater price volatility than Senior
Loans, Second Lien Loans and subordinated secured Loans and may be less liquid.
|
Loans And Loan Participation And Assignments Risk [Member] |
|
General Description of Registrant [Abstract] |
|
Risk [Text Block] |
Loans
and Loan Participations and Assignments Risk
The Fund
may invest in loans directly or through participations or assignments. The Fund may purchase Loans on a direct assignment basis from
a participant in the original syndicate of lenders or from subsequent assignees of such interests. The Fund may also purchase, without
limitation, participations in Loans. The purchaser of an assignment typically succeeds to all the rights and obligations
of the assigning institution and becomes a lender under the credit agreement with respect to the debt obligation; however, the purchasers
rights can be more restricted than those of the assigning institution, and, in any event, the Fund may not be able to unilaterally enforce
all rights and remedies under the loan and with regard to any associated collateral. The Funds interest in a particular loan and/or
in particular collateral securing a loan may be subordinate to the interests of other creditors of the obligor, which leads to the risk
of subordination to other creditors. A participation typically results in a contractual relationship only with the institution participating
out the interest, not with the borrower. In purchasing participations, the Fund generally will have no right to enforce compliance by
the borrower with the terms of the loan agreement against the borrower, and the Fund may not directly benefit from the collateral supporting
the debt obligation in which it has purchased the participation. As a result, the Fund will be exposed to the credit risk of both the
borrower and the institution selling the participation. Further, in purchasing participations in lending syndicates, the Fund may not
be able to conduct the same due diligence on the borrower with respect to a Loan that the Fund would otherwise conduct. In addition,
as a holder of the participations, the Fund may not have voting rights or inspection rights that the Fund would otherwise have if it
were investing directly in the Loan, which may result in the Fund being exposed to greater credit or fraud risk with respect to the borrower
or the Loan. Lenders selling a participation and other persons inter-positioned between the lender and the Fund with respect to a participation
will likely conduct their principal business activities in the banking, finance and financial services industries. Because the Fund may
invest in participations, the Fund may be more susceptible to economic, political or regulatory occurrences affecting such industries.
Loans are
especially vulnerable to the financial health, or perceived financial health, of the borrower but are also particularly susceptible to
economic and market sentiment such that changes in these conditions or the occurrence of other economic or market events may reduce the
demand for loans, increase the risks associated with such investments and cause their value to decline rapidly and unpredictably. Many
loans and loan interests are subject to legal or contractual restrictions on transfer, resale or assignment that may limit the ability
of the Fund to sell its interest in a loan at an advantageous time or price. The resale, or secondary, market for loans is currently
growing, but may become more limited or more difficult to access, and such changes may be sudden and unpredictable. Transactions in loans
are often subject to long settlement periods (in excess of the standard T+1 days settlement cycle for most securities and often longer
than seven days). As a result, sale proceeds potentially will not be available to the Fund to make additional investments or to use proceeds
to meet its current obligations. The Fund thus is subject to the risk of selling other investments at disadvantageous times or prices
or taking other actions necessary to raise cash to meet its obligations such as borrowing from a bank or holding additional cash, particularly
during periods of unusual market or economic conditions or financial stress. Investments in loans can also be difficult to value accurately
because of, among other factors, limited public information regarding the loan or the borrowers. Risks associated with investments in
loans are increased if the loans are secured by a single asset. Loans may offer a fixed rate or floating rate of interest. Loans may decline
in value if their interest rates do not rise as much or as fast as interest rates in general. For example, the interest rates on floating
rate loans typically adjust only periodically and therefore the interest rate payable under such loans may significantly trail market
interest rates.
The Fund
invests in or is exposed to loans and other similar debt obligations that are sometimes referred to as covenant-lite loans
or obligations (covenant-lite obligations), which are loans or other
similar debt obligations that lack financial maintenance covenants or possess fewer or contingent financial maintenance covenants and
other financial protections for lenders and investors. Exposure may also be obtained to covenant-lite obligations through investment
in securitization vehicles and other structured products. Many new, restructured or reissued loans and similar debt obligations may not
feature traditional financial maintenance covenants, which are intended to protect lenders and investors by imposing certain restrictions
and other limitations on a borrowers operations or assets by providing certain information and consent rights to lenders. Covenant-lite
obligations may carry more risk than traditional loans as they allow borrowers to engage in activities that would otherwise be difficult
or impossible under an agreement that is not covenant-lite. The Fund may have fewer rights with respect to covenant-lite obligations,
including fewer protections against the possibility of default and fewer remedies in the event of default as the lender may not have
the opportunity to negotiate with the borrower prior to default. As a result, investments in (or exposure to) covenant-lite obligations
are subject to more risk than investments in (or exposure to) certain other types of obligations. In the event of default, covenant-lite
obligations may exhibit diminished recovery values as the lender may not have the opportunity to negotiate with the borrower prior to
default. The Fund may have a greater risk of loss on investments (or exposure to) in covenant-lite obligations as compared to investments
in traditional loans. In addition, the Fund may receive less or less frequent financial reporting from a borrower under a covenant-lite
obligation, which may result in more limited access to financial information, difficulty evaluating the borrowers financial performance
over time and delays in exercising rights and remedies in the event of a significant financial decline. As a result, investments in or
exposure to covenant-lite obligations are generally subject to more risk than investments that contain traditional financial maintenance
covenants and financial reporting requirements.
In certain
circumstances, the Adviser or its affiliates (including on behalf of clients other than the Fund) or the Fund may be in possession of material
non-public information about a borrower as a result of its ownership of a loan and/or corporate debt security of a borrower. Because
U.S. laws and regulations generally prohibit trading in securities of issuers while in possession of material, non-¬public information,
the Fund might be unable (potentially for a substantial period of time) to trade securities or other instruments issued by the borrower
when it would otherwise be advantageous to do so and, as such, could incur a loss. In circumstances when the Adviser, GPIM or the Fund
determines to avoid or to not receive non-public information about a borrower for loan investments being considered for acquisition by
the Fund or held by the Fund, the Fund may be disadvantaged relative to other investors that do receive such information, and the Fund
may not be able to take advantage of other investment opportunities that it may otherwise have. The Adviser or its affiliates may participate
in the primary and secondary market for loans or other transactions with possible borrowers. As a result, the Fund may be legally restricted
from acquiring some loans and from participating in a restructuring of a loan or other similar instrument. Further, if the Fund, in combination
with other accounts managed by the Adviser or its affiliates, acquires a large portion of a loan, the Funds valuation of its interests
in the loan and the Funds ability to dispose of the loan at favorable times or prices may be adversely affected.
The Fund
is subject to other risks associated with investments in (or exposure to) loans and other similar obligations, including that such loans
or obligations may not be considered securities under federal securities law and, as a result, the Fund may not be entitled
to rely on the anti-fraud protections
under the federal securities laws and instead may have to resort to state law and direct claims.
|
Unfunded Commitments Risk [Member] |
|
General Description of Registrant [Abstract] |
|
Risk [Text Block] |
Unfunded
Commitments Risk
Certain of
the loan participations or assignments acquired by the Fund may involve unfunded commitments of the lenders, revolving credit facilities,
delayed draw credit facilities or other investments under which a borrower may from time to time borrow and repay amounts up to the maximum
amount of the facility. In such cases, the Fund would have an obligation to advance its portion of such additional borrowings upon the
terms specified in the loan documentation. Such an obligation may have the effect of requiring the Fund to increase its investment in
a company at a time when it might not be desirable to do so (including at a time when the companys financial condition makes it
unlikely that such amounts will be repaid). These commitments are generally subject to the borrowers meeting certain criteria such as
compliance with covenants and certain operational metrics. The terms of the borrowings and financings subject to commitment are comparable
to the terms of other loans and related investments in the Funds portfolio.
|
Mezzanine Investments Risk [Member] |
|
General Description of Registrant [Abstract] |
|
Risk [Text Block] |
Mezzanine
Investments Risk
The Fund
may invest in certain lower grade securities known as Mezzanine Investments, which are subordinated debt securities that
are generally issued in private placements in connection with an equity security (e.g., with attached warrants) or may be convertible
into equity securities. Mezzanine Investments are subject to the same risks associated with investment in Senior Loans, Second Lien Loans
and other lower grade Income Securities. However, Mezzanine Investments may rank lower in right of payment than any outstanding Senior
Loans and Second Lien Loans of the borrower, or may be unsecured (i.e., not backed by a security interest in any specific collateral)
and are subject to the additional risk that the cash flow of the borrower and available assets may be insufficient to meet scheduled payments
after giving effect to any higher-ranking obligations of the borrower. Mezzanine Investments are expected to have greater price volatility
and exposure to losses upon default than Senior Loans and Second Lien Loans and may be less liquid.
|
Distressed And Default Securities Risk [Member] |
|
General Description of Registrant [Abstract] |
|
Risk [Text Block] |
Distressed
and Defaulted Securities Risk
Investments
in the securities of financially distressed issuers involve substantial risks. These securities may present a substantial risk of default
or may be in default at the time of investment. The Fund may incur additional expenses to the extent it is required to seek recovery
upon a default in the payment of principal or interest on its portfolio holdings. In any reorganization or liquidation proceeding relating
to a portfolio company, the Fund may lose its entire investment or may be required to accept cash or securities with a value less than
its original investment. Among the risks inherent in investments in a troubled entity is the fact that it frequently may be difficult to
obtain information as to the true financial condition of such issuer. GPIMs judgment about the credit quality of the issuer and
the relative value and liquidity of its securities may prove to be wrong.
|
Convertible Securities Risk [Member] |
|
General Description of Registrant [Abstract] |
|
Risk [Text Block] |
Convertible
Securities Risk Convertible
securities, debt or preferred equity securities convertible into, or exchangeable for, equity securities, are generally preferred stocks
and other securities, including fixed-income securities and warrants that are convertible into or exercisable for common stock. Convertible
securities generally participate in the appreciation or depreciation of the underlying stock into which they are convertible,
but to a lesser degree and are subject to the risks associated with debt and equity securities, including interest rate, market and issuer
risks. For example, if market interest rates rise, the value of a convertible security usually falls. Certain convertible securities
may combine higher or lower current income with options and other features. Warrants are options to buy a stated number of shares of
common stock at a specified price anytime during the life of the warrants (generally, two or more years). Convertible securities may
be lower-rated securities subject to greater levels of credit risk. A convertible security may be converted before it would otherwise
be most appropriate, which may have an adverse effect on the Funds ability to achieve its investment objective.
Synthetic
convertible securities have economic characteristics similar to those of a traditional convertible security due to the combination of
separate securities that possess the two principal characteristics of a traditional convertible security, i.e., an income-producing
security (income-producing component) and the right to acquire an equity security (convertible component). The
income-producing component is achieved by investing in non-convertible, income-producing securities such as bonds, preferred stocks and
money market instruments, which may be represented by derivative instruments.
The convertible
component is achieved by investing in securities or instruments such as warrants or options to buy common stock at a certain exercise
price, or options on a stock index. A simple example of a synthetic convertible security is the combination of a traditional corporate
bond with a warrant to purchase equity securities of the issuer of the bond. The income-producing and convertible components of a synthetic
convertible security may be issued separately by different issuers and at different times.
|
Preferred Securities And Preferred Stock Risk [Member] |
|
General Description of Registrant [Abstract] |
|
Risk [Text Block] |
Preferred
Securities/Preferred Stock Risk The Fund
may invest in preferred stock, which represents the senior residual interest in the assets of an issuer after meeting all claims, with
priority to corporate income and liquidation payments over the issuers common stock, to the extent proceeds are available after
paying any more senior creditors. As such, preferred stock is inherently riskier than the bonds and other debt instruments of the issuer,
but less risky than its common stock. Preferred stocks may pay fixed or adjustable rates of return. Preferred stock is subject to issuer-specific
and market risks applicable generally to equity securities. Certain preferred stocks contain provisions that allow an issuer under certain
conditions to skip (in the case of non-cumulative preferred stocks) or defer (in the case of cumulative preferred
stocks) dividend payments. Preferred stocks often contain provisions that allow for redemption in the event of certain tax or legal changes
or at the issuers call. Preferred stocks typically do not provide any voting rights, except in cases when dividends are in arrears
beyond a certain time period. There is no assurance that dividends on preferred stocks in which the Fund invests will be declared or
otherwise made payable. If the Fund owns preferred stock that is deferring its distributions, the Fund may be required to report income
for U.S. federal income tax purposes while it is not receiving cash payments corresponding to such income. When interest rates fall below
the rate payable on an issue of preferred stock or for other reasons, the issuer may redeem the preferred stock, generally after an initial
period of call protection in which the stock is not redeemable. Preferred stocks may be significantly less liquid than many other securities,
such as U.S. government securities, corporate debt and common stock. Preferred stock has properties of both an equity and a debt instrument
and is generally considered a hybrid instrument.
|
Foreign Securities Risk [Member] |
|
General Description of Registrant [Abstract] |
|
Risk [Text Block] |
Foreign
Securities Risk The Fund
may invest up to 30% of its total assets in issuers located outside the United States. Investing in foreign issuers may involve heightened
risks and certain risks not typically associated with investing in securities of U.S. issuers due to increased exposure to foreign economic,
political (including geopolitical), market and legal developments, including favorable or unfavorable changes in currency exchange rates,
exchange control regulations (including currency blockage), expropriation or nationalization of assets, imposition of withholding taxes
on payments, and possible difficulty in obtaining and enforcing judgments against foreign entities. Furthermore, issuers of foreign securities
and obligations are subject to different, often less comprehensive, accounting, reporting and disclosure requirements than domestic issuers,
and may be subject to less extensive and transparent accounting, auditing, recordkeeping, financial reporting and other requirements
which limit the quality and availability of financial information. The securities and obligations of some foreign companies and foreign
markets are less liquid and at times more volatile than comparable U.S. securities, obligations and markets. In addition, such investments
are subject to other adverse diplomatic or geopolitical developments, which may include the imposition of economic or trade sanctions
or other measures by the U.S. or other governments and supranational organizations, changes in trade policies, or conflicts that may
render the holdings illiquid or even worthless. These risks may be more pronounced to the extent that the Fund invests a significant
amount of its assets in companies located in one region and to the extent that the Fund invests in securities of issuers in emerging
markets. The Fund may also invest in U.S. dollar-denominated Income Securities of foreign issuers, which are subject to many of the risks
described above regarding Income Securities of foreign issuers denominated in foreign currencies. These risks are heightened under adverse
economic, market, geopolitical and other conditions.
Investments
in the securities of foreign issuers involve certain considerations and risks not ordinarily associated with investments in securities
of domestic issuers. Investments in foreign securities are generally denominated in foreign currency. As a result, changes in the value
of those currencies compared to the U.S. dollar may affect (positively or negatively) the value of the Funds investments. In addition,
fluctuations in currency exchange fees and restrictions on costs associated with the exchange of currencies may adversely affect the value
of the Funds investments. The values of foreign currencies may be affected by changes in the exchange rates between particular foreign
currencies and the U.S. dollar or by unfavorable currency regulations imposed by foreign governments. If the Fund invests in securities
issued by foreign issuers, the Fund may be subject to these risks even if the investment is denominated in U.S. dollars. Foreign companies
are not generally subject to uniform accounting, auditing and financial standards and requirements comparable to those applicable to
U.S. companies. Foreign securities exchanges, brokers and listed companies may be subject to less government supervision and regulation
that exists in the United States.
Dividend
and interest income may be subject to withholding and other foreign taxes, which may adversely affect the net return on such investments.
There may be difficulty in obtaining or enforcing a court judgment abroad. The governments of certain countries may prohibit or impose
substantial restrictions on foreign investments in their capital markets or in certain industries. In addition, it may be difficult to
effect repatriation of capital invested in certain countries. With respect to certain countries, there are risks of expropriation, confiscatory
taxation, political or social instability or diplomatic developments that could affect assets of the Fund held in foreign countries. Economic
sanctions or other similar measures may be, and have been, imposed against certain countries, organizations, companies, entities and/or
individuals. Economic sanctions and other similar governmental actions or developments could, among other things, effectively restrict
or eliminate the Funds ability to purchase or sell certain foreign securities or groups of foreign securities, and thus may make
the Funds investments in such securities less liquid, less valuable or more difficult to value. In addition, as a result of economic
sanctions and other similar governmental actions or developments, the Fund may be forced to sell or otherwise dispose of foreign investments
at inopportune times or prices. The type and severity of sanctions and other similar measures, including counter sanctions and other
retaliatory actions, such as those that have been impacted against Russia and other countries and that may further be imposed could vary
broadly in scope, and their impact is difficult to accurately predict. For example, the imposition of sanctions and other similar measures
likely would, among other things, cause a decline in the value and/or liquidity of securities issued by the sanctioned country or companies
located in or economically tied to the sanctioned country and increase market volatility and disruption in the sanctioned country and
throughout the world. Sanctions and other similar measures could significantly delay or prevent the settlement of securities transactions
or their valuation, and significantly impact the Funds liquidity and performance. Sanctions and other similar measures may be in
place for a substantial period of time and enacted with limited advance notice.
There may
be less publicly available information about a foreign company than a U.S. company. Foreign securities markets may have substantially
less volume than U.S. securities markets and some foreign company securities are less liquid than securities of otherwise comparable
U.S. companies. Foreign markets may be more volatile than U.S. markets and offer less protection to investors. Foreign markets also have
different clearance and settlement procedures that could cause the Fund to encounter difficulties in purchasing and selling securities on
such markets and may result in the Fund missing attractive investment opportunities or experiencing a loss. In addition, a portfolio
that includes foreign securities can expect to have a higher expense ratio because of the increased transaction costs on non-U.S. securities
markets and the increased costs of maintaining the custody of foreign securities. Similar foreign investment risks may apply to futures
contracts and other derivative instruments in which the Fund invests that trade on foreign exchanges. The value of derivative and other
instruments denominated in or that pay revenues in foreign currencies may fluctuate based on changes in the value of those currencies
relative to the U.S. dollar, and a decline in applicable foreign exchange rates could reduce the value of such instruments held by the
Fund. Foreign settlement procedures also may involve additional risks.
American
depositary receipts (ADRs) are receipts issued by United States banks or trust companies in respect of securities of foreign
issuers held on deposit for use in the United States securities markets. While ADRs may not necessarily be denominated in the same currency
as the securities into which they may be converted, many of the risks associated with foreign securities may also apply to ADRs. In addition,
the underlying issuers of certain depositary receipts, particularly unsponsored or unregistered depositary receipts, are under no obligation
to distribute shareholder communications to the holders of such receipts, or to pass through to them any voting rights with respect to
the deposited securities.
|
Emerging Markets Risk [Member] |
|
General Description of Registrant [Abstract] |
|
Risk [Text Block] |
Emerging
Markets Risk As noted
above, the Fund may invest up to 30% of its total assets in issuers located outside the United States, which may include issuers which
are located in countries considered to be emerging markets, and investments in such securities are considered speculative. Investing
in securities in emerging countries generally entails greater risks than investing in securities in developed countries. Securities issued
by governments or issuers in emerging market countries are more likely to have greater exposure to the risks of investing in foreign
securities and are subject to risks in addition to the risks associated with investing in foreign securities. These risks are elevated
at times based on adverse conditions, including macroeconomic, geopolitical and global health conditions, and these risks include: (i)
less social, political and economic stability (including the lack or inadequacy of the ability to remedy natural or man-made disasters,
such as pandemics or climate change) and potentially more volatile currency exchange rates, currency blockage or transfer restrictions
and currency devaluation; (ii) the small size of and lack of development of the markets for such securities, limited access to investments
in the event of market closures (including due to local holidays), potentially low or nonexistent volume of trading, and less established
financial market operations, which may result in a lack of liquidity, greater price volatility, higher brokerage and other transaction
costs and delay in settlements or otherwise less developed settlement systems, and/ or a higher risk of failed trades or other trading
issues; (iii) national policies (including sanctions programs or tariffs) which may restrict the Funds investment opportunities,
including restrictions on investment in issuers or industries deemed sensitive to national interests, and trade barriers; (iv) foreign
taxation; (v) the absence of developed legal systems, including structures governing private or foreign investment or allowing for judicial
redress (such as limits on rights and remedies available to the Fund or impediments to bringing litigation or enforcing judgments) for
investment losses and injury to private property or otherwise less developed legal systems; (vi) expropriation and nationalization of
private properties; (vii) lower levels of government regulation, which could lead to market manipulation or disruption, and less extensive
and transparent accounting, auditing, recordkeeping, financial reporting and other requirements and standards, which limit the quality,
reliability and availability of financial information and limited information about issuers and securities as well as increased difficulty
in valuation of securities in emerging markets; (viii) high rates of inflation for prolonged periods and rapid interest rate changes;
(ix) dependence on a few key trading partners and heightened sensitivity to adverse political (including geopolitical) or social events
and conditions affecting the global economy and the region where an emerging market is located compared to developed market securities,
which can change suddenly and significantly, and periods of economic, social or political instability; and (x) particular sensitivity
to global economic conditions, including adverse effects stemming from recessions, depressions or other economic crises, or armed conflicts
and other hostilities, or reliance on international or other forms of aid, including trade, taxation and development policies. Furthermore,
foreign investors may be required to register the proceeds of sales and future economic or political crises could lead to price controls,
forced mergers, expropriation or confiscatory taxation, seizure, nationalization or creation of government monopolies. The currencies
of emerging market countries may experience significant declines against the U.S. dollar, and devaluation may occur subsequent to investments
in these currencies by the Fund. Inflation and rapid fluctuations in inflation rates have had, and may continue to have, negative effects
on the economies and securities markets of certain emerging market countries. To the extent
that the economy of an emerging market is particularly dependent on one or a few commodities or industries, any adverse events affecting
those particular commodities or industries will likely negatively impact the profitability of issuers economically tied to that emerging
market. In addition, government actions with respect to financial markets and economies in emerging markets or assets and foreign ownership
of emerging market companies could adversely affect trading conditions for, and the values of, emerging market securities or otherwise
negatively impact investments in such securities. Sovereign debt of emerging countries may be in default or present a greater risk of
default, the risk of which is heightened in market environments where interest rates are changing, notably when rates are rising. These
risks are heightened for investments in frontier markets.
GPIM has
broad discretion to identify countries that it considers to qualify as emerging markets. In determining whether a country
is an emerging market, GPIM may take into account specific or general factors that GPIM deems to be relevant, including interest rates,
inflation rates, exchange rates, monetary and fiscal policies, trade and current account balances and/or legal, social and political
developments, as well as whether the country is considered to be emerging or developing by supranational organizations such as the World
Bank, the United Nations or other similar entities. Emerging market countries generally will include countries with low gross national
product per capita and the potential for rapid economic growth and are likely to be located in Africa, Asia, the Middle East, Eastern
and Central Europe and Central and South America. In addition, the impact of the economic and public health situation in emerging market
countries may be greater due to their generally less established healthcare systems and capabilities with respect to fiscal and monetary
policies, which may exacerbate other pre-existing political, social and economic risks.
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Foreign Currency Risk [Member] |
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General Description of Registrant [Abstract] |
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Risk [Text Block] |
Foreign
Currency Risk
The value
of securities denominated or quoted in foreign currencies may be adversely affected by fluctuations in the relative currency exchange
rates and by exchange control regulations. The Funds investment performance may be negatively affected by a devaluation of a currency
in which the Funds investments are denominated or quoted. Further, the Funds investment performance may be significantly
affected, either positively or negatively, by currency exchange rates because the U.S. dollar value of securities denominated or quoted
in another currency will increase or decrease in response to changes in the value of such currency in relation to the U.S. dollar. Finally,
the Funds distributions are paid in U.S. dollars, and to the extent the Funds assets are denominated in currencies other
than the U.S. dollar, there is a risk that the value of any distribution from such assets may decrease if the currency in which such
assets or distributions are denominated falls in relation to the value of the U.S. dollar. The Fund currently intends to seek to hedge
its exposures to foreign currencies but may, at the discretion of GPIM, at any time limit or eliminate foreign currency hedging activity.
To the extent the Fund does not hedge (or is unsuccessful in seeking to hedge) its foreign currency risk, the value of the Funds
assets and income could be adversely affected by currency exchange rate movements. The Fund may also use foreign currency transactions
to facilitate portfolio management and to seek to earn income or enhance total return.
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Sovereign Debt Risk [Member] |
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General Description of Registrant [Abstract] |
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Risk [Text Block] |
Sovereign
Debt Risk Investments
in sovereign debt securities, such as foreign government debt or foreign treasury bills, involve special risks in addition to those associated
with foreign investment, including the availability of sufficient foreign exchange on the date a payment is due, the relative size of the
debt service burden to the economy as a whole, the government debtors policy towards the International Monetary
Fund or international lenders, the political constraints to which the debtor may be subject and other political, social and other local,
regional and global considerations. Periods of economic and political uncertainty may result in the illiquidity and increased price volatility
of sovereign debt securities held by the Fund. The governmental authority that controls the repayment of sovereign debt may be unwilling
or unable to repay the principal and/or interest when due in accordance with the terms of such securities due to the extent of its foreign
reserves. If an issuer of sovereign debt defaults on payments of principal and/or interest, the Fund may have limited or no legal recourse
against the issuer and/or guarantor. In certain cases, remedies must be pursued in the courts of the defaulting party itself. For example,
there may be no bankruptcy or similar proceedings through which all or part of the sovereign debt that a governmental entity has not
repaid may be collected. There can be no assurance that the holders of commercial bank loans to the same sovereign entity may not contest
payments to the holders of sovereign debt in the event of default under commercial bank loan agreements.
Certain issuers
of sovereign debt may be dependent on disbursements from foreign governments, multilateral agencies and others abroad to reduce principal
and interest arrearages on their debt. Such disbursements may be conditioned upon a debtors implementation of economic reforms
and/ or economic performance and the timely service of such debtors obligations. A failure on the part of the debtor to implement
such reforms, achieve such levels of economic performance or repay principal or interest when due may result in the cancellation of such
third parties commitments to lend funds to the debtor, which may impair the debtors ability to service its debts on a timely
basis. Foreign investment in certain sovereign debt is restricted or controlled to varying degrees, including requiring governmental
approval for the repatriation of income, capital or proceeds of sales by foreign investors.
These restrictions
or controls may at times limit or preclude foreign investment in certain sovereign debt and increase the costs and expenses of the Fund.
As a holder
of sovereign debt, the Fund may be requested to participate in the restructuring of such sovereign indebtedness, including the rescheduling
of payments and the extension of further loans to debtors, which may adversely affect the Fund. There can be no assurance that such restructuring
will result in the repayment of all or part of the debt. Sovereign debt risk is greater for issuers in emerging markets than issuers
in developed countries and certain emerging market countries have at times declared moratoria on the payment of principal and interest
on external debt. Certain emerging market countries have at times experienced difficulty in servicing their sovereign debt on a timely
basis, which has led to defaults and the restructuring of certain indebtedness.
The Fund
may also invest in securities or other obligations issued or backed by supranational organizations, which are international organizations
that are designated or supported by government entities or banking institutions typically to promote economic reconstruction or development.
These obligations are subject to the risk that the government(s) on whose support the organization depends may be unable or unwilling
to provide the necessary support. With respect to both sovereign and supranational obligations, the Fund may have little recourse against
the foreign government or supranational organization that issues or backs the obligation in the event of default. These obligations may
be denominated in foreign currencies and the prices of these obligations may be more volatile than corporate debt obligations.
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Common Equity Securities Risk [Member] |
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General Description of Registrant [Abstract] |
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Risk [Text Block] |
Common
Equity Securities Risk
The Fund
may invest up to 50% of its total assets in Common Equity Securities. An adverse event, such as an unfavorable earnings report or other
corporate development, may depress the value of a particular common stock held by the Fund. Also, the prices of equity securities are
sensitive to general movements in the stock market, so a drop in the stock market may depress the prices of equity securities to which
the Fund has exposure. Common Equity Securities prices fluctuate for a number of reasons, including changes in investors
perceptions of the financial condition of an issuer, the general condition of the relevant stock market and the economy overall, and
broader domestic and international political and economic events. The prices of Common Equity Securities may also decline due to factors
which affect a particular industry or industries, such as labor shortages or increased production and other costs and competitive conditions
within an industry. The value of a particular common stock held by the Fund may decline for a number of other reasons which directly
relate to the issuer, such as management performance, financial leverage, the issuers historical and prospective earnings, the
value of its assets and reduced demand for its goods and services. In addition, common stock prices may be particularly sensitive to
rising interest rates, as the cost of capital rises and borrowing costs increase. At times, stock markets can be volatile and stock prices
can change substantially and suddenly. While broad market measures of Common Equity Securities have historically generated higher average
returns than most Income Securities, Common Equity Securities have also experienced significantly more volatility in those returns. Common
Equity Securities in which the Fund may invest are structurally subordinated to preferred stock, bonds and other debt instruments in
a companys capital structure in terms of priority to corporate income and are therefore inherently riskier than preferred stock
or debt instruments of such issuers. Dividends on Common Equity Securities which the Fund may hold are not fixed but are declared at
the discretion of the issuers board of directors. There is no guarantee that the issuers of the Common Equity Securities in which
the Fund invests will declare dividends in the future or that, if declared, they will remain at current levels or increase over time.
Equity securities have experienced heightened volatility over certain periods and, therefore, the Funds investments in equity securities
are subject to heightened risks related to volatility and would likely also be subject to such risks in adverse market, economic, geopolitical
and public health conditions in the future.
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New Issues Risk [Member] |
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General Description of Registrant [Abstract] |
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Risk [Text Block] |
New Issues
Risk New
Issues are initial public offerings (IPOs) of U.S. equity securities. There is no assurance that the Fund will have
access to profitable IPOs, and therefore investors should not rely on any potential gains from IPOs as an indication of future performance
of the Fund. The investment performance of the Fund during periods when it is unable to invest significantly or at all in IPOs may be
lower than during periods when the Fund is able to do so. Securities issued in IPOs are subject to many of the same risks as investing
in companies with smaller market capitalizations. Securities issued in IPOs have no trading history, and information about the companies
may be available for very limited periods. In addition, some companies in IPOs are involved in relatively new industries or lines of
business, which may not be widely understood by investors. Some of these companies may be undercapitalized or regarded as developmental
stage companies, without revenues or operating income, or the near-term prospects of achieving them. Further, the prices of securities
sold in IPOs may be highly volatile or may decline shortly after the IPO. When an IPO is brought to the market, availability may be limited
and the Fund may not be able to buy any shares at the offering price, or, if it is able to buy shares, it may not be able to buy as many
shares at the offering price as it would like. The
limited number of shares available for trading in some IPOs may make it more difficult for the Fund to buy or sell significant amounts
of shares. As a result, the Funds investments in such securities are subject to considerable risk.
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Covered Call Option And Put Option Strategy Risk [Member] |
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General Description of Registrant [Abstract] |
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Risk [Text Block] |
Risks
Associated with the Funds Covered Call Option Strategy and Put Options The ability
of the Fund to achieve its investment objective is partially dependent on the successful implementation of its Covered Call Option Strategy.
There are significant differences between the securities and options markets that could result in an imperfect correlation between these
markets, causing a given transaction not to achieve its objectives. A decision as to whether, when and how to use options involves the
exercise of skills and judgment, and even a well-conceived transaction may be unsuccessful to some degree because of market behavior
or unexpected events.
The Fund
may write call options on individual securities, securities indices, ETFs and baskets of securities. The buyer of an option acquires
the right, but not the obligation, to buy (a call option) or sell (a put option) a certain quantity of a security (the underlying security)
or instrument, including a futures contract or swap, at a certain price up to a specified point in time or on expiration, depending on
the terms. The seller or writer of an option is obligated to sell (a call option) or buy (a put option) the underlying instrument upon
exercise of the option. A call option is covered if the Fund owns the security or instrument underlying the call or has an
absolute right to acquire the security or instrument without additional cash consideration (or, if additional cash consideration is required,
cash or assets determined to be liquid by GPIM in such amount are designated or earmarked on the Funds books and records). A call
option is also covered if the Fund holds a call on the same security as the call written where the exercise price of the call held is
(i) equal to or less than the exercise price of the call written, or (ii) greater than the exercise price of the call written, provided
the difference is maintained by the Fund in designated assets determined to be liquid by GPIM as described above. As a seller of covered
call options, the Fund faces the risk that it will forgo the opportunity to profit from increases in the market value of the security
or instrument covering the call option during an options life. As the Fund writes covered calls over more of its portfolio, its
ability to benefit from capital appreciation becomes more limited. For certain types of options, the writer of the option will have no
control over the time when it may be required to fulfill its obligation under the option.
There can
be no assurance that a liquid market will exist if and when the Fund seeks to close out an option position. Once an option writer has
received an exercise notice, it cannot effect a closing purchase transaction in order to terminate its obligation under the option and
must deliver the underlying security or instrument at the exercise price.
The Fund
may purchase and write exchange-listed and OTC options. Options written by the Fund with respect to non-U.S. securities, indices or sectors
and other instruments generally will be OTC options. OTC options differ from exchange-listed options in several respects. They are transacted
directly with the dealers and not with a clearing corporation, and therefore entail the risk of non-performance by the dealer. OTC options
are available for a greater variety of securities and for a wider range of expiration dates and exercise prices than are available for
exchange-traded options. Because OTC options are not traded on an exchange, pricing is done normally by reference to information from
a market maker. OTC options are subject to heightened counterparty, credit, liquidity and valuation risks. The Funds ability to
terminate OTC options is more limited than with exchange-traded options and may involve the risk that broker-dealers participating in
such transactions
will not fulfill their obligations. The hours of trading for options may not conform to the hours during which the underlying securities
are traded. The Funds options transactions will be subject to limitations established by each of the exchanges, boards of trade
or other trading facilities on which such options are traded.
The Fund
may also purchase put options and write covered put options. A put option written by the Fund on a security is covered if
the Fund designates or earmarks assets determined to be liquid by GPIM equal to the exercise price. A put option is also covered if the
Fund holds a put on the same security as the put written where the exercise price of the put held is (i) equal to or greater than the
exercise price of the put written, or (ii) less than the exercise price of the put written, provided the difference is maintained by the
Fund in designated or earmarked assets determined to be liquid by GPIM. As a seller of covered put options, the Fund bears the risk of
loss if the value of the underlying security or instrument declines below the exercise price minus the put premium. If the option is
exercised, the Fund could incur a loss if it is required to purchase the security or instrument underlying the put option at a price
greater than the market price of the security or instrument at the time of exercise plus the put premium the Fund received when it wrote
the option. The Funds potential gain in writing a covered put option is limited to distributions earned on the liquid assets securing
the put option plus the premium received from the purchaser of the put option; however, the Fund risks a loss equal to the entire exercise
price of the option minus the put premium.
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Risks Of Real Property Asset Companies [Member] |
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General Description of Registrant [Abstract] |
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Risk [Text Block] |
Risks
of Real Property Asset Companies The Fund
may invest in Income Securities and Common Equity Securities issued by Real Property Asset Companies. Real Estate
Risks. Because of the Funds ability to make indirect investments in real estate and in the securities of companies in the real
estate industry, it is subject to risks associated with the direct ownership of real estate and the real estate market generally, such
as the possible decline in the value of (or income generated by) the real estate, variations in rental income, fluctuations in occupancy
levels and demand for properties or real estate-related services, and changes in the availability or terms of mortgages and other financing
that may render the sale or refinancing of properties difficult or unattractive. Real estate values or income generated by real estate
may be affected by many additional factors and risks, including, but not limited to: losses from casualty or condemnation; changes in
national, state and local economic conditions and real estate market conditions (such as an oversupply of real estate for rent or sale
or vacancies, potentially for extended periods); changes in real estate values and rental income, rising interest rates (which could
result in higher costs of capital); changes in building, environmental, zoning and other regulations and related costs; possible environmental
liabilities; regulatory limitations on rents; increased property taxes and operating expenses; the attractiveness, type and location
of the property; reduced demand for commercial and office space as well as increased maintenance or tenant improvement costs or other costs
to convert properties for other uses; default risk and credit quality of tenants and borrowers, the financial condition of tenants, buyers
and sellers, and the inability to re-lease space on attractive terms or to obtain mortgage financing on a timely basis at all; overbuilding
and intense competition, including for real estate and related services and technology; construction delays and the supply of real estate
generally; extended vacancies of properties due to economic conditions and tenant bankruptcies; and catastrophic events (such as public
health emergencies, earthquakes, hurricanes and terrorist acts) and other public crises and relief responses thereto. Investments in real estate
companies and companies related to the real estate industry are also subject to risks associated with the management skill, insurance
coverage and credit worthiness of the issuer. Real estate companies tend to have micro-, small- or mid-capitalization, making their securities
more volatile and less liquid than those of companies with larger-capitalizations, and may be subject to heightened cash flow sensitivity.
In addition, the real estate industry has historically been cyclical and particularly sensitive to economic downturns and other events
that limit demand for real estate, which would adversely impact the value of real estate investments.
Real estate
income and values and the real estate market also may be greatly affected by demographic trends, such as population shifts or changing
tastes, preferences (such as remote work arrangements) and values, or increasing vacancies or declining rents or property values resulting
from legal, cultural, technological, global or local economic developments, as well as reduced demand for properties. If the Funds
real estate-related investments are concentrated in one geographic area or in one property type, the Fund will be particularly subject
to the risks associated with that area or property type or related real estate conditions. Similarly, real estate industry companies
whose underlying properties are concentrated in a particular industry or geographic region are also particularly subject to risks affecting
such industries and regions or related real estate conditions.
The value
or price of real estate company securities may drop because of, among other adverse events, defaults by tenants and the failure of borrowers
to repay their loans and the inability to obtain financing either on favorable terms or at all. Changing interest rates and credit quality
requirements will also affect real estate companies, including their cash flow and their ability to meet capital needs. If real estate
properties do not generate sufficient income to meet operating expenses, including, where applicable, debt service, ground lease payments,
tenant improvements, third-party leasing commissions and other capital expenditures, the income and ability (or perceived ability) of
a real estate company to make payments of interest and principal on their loans will be adversely affected, which, as a result, may adversely
affect the Fund. Many real estate companies, and companies operating in the real estate industry, utilize leverage, which increases investment
risk and could adversely affect a companys operations and market value in periods of rising interest rates.
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Energy Companies R Isk [Member] |
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General Description of Registrant [Abstract] |
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Risk [Text Block] |
Energy
Companies Risk Energy Companies are subject to certain
risks, including, but not limited to, the following: Catastrophic Event Risk Energy
companies are subject to many dangers inherent in the production, exploration, management, transportation, processing and distribution
of natural gas, natural gas liquids, crude oil, refined petroleum and petroleum products and other hydrocarbons. These dangers include
leaks, fires, explosions, damage to facilities and equipment resulting from natural disasters, inadvertent damage to facilities and equipment,
cyber-attacks and terrorist acts. These dangers give rise to risks of substantial losses as a result of loss or destruction of commodity
reserves; damage to or destruction of property, facilities and equipment; pollution and environmental damage; and personal injury or
loss of life and could adversely affect such companies financial conditions and ability to pay distributions to shareholders. Energy
Commodity Price Risk
Energy companies
may be adversely affected by fluctuations in the prices of energy commodities, which can be volatile at times, and by the levels of supply
and demand for energy commodities.
Energy
Sector Regulatory Risk
Energy companies
are subject to significant regulation of nearly every aspect of their operations by federal, state and local governmental agencies. Stricter
laws or regulations or stricter enforcement policies with respect to existing regulations would likely increase the costs of regulatory
compliance and could have an adverse effect on the financial performance of energy companies.
Industry-Specific
Risk
The energy
sector involves a number of industry-specific risks including cyclical industry risk, fracturing risk, independent contractor risk, and
oil price volatility risk. The energy industry is cyclical and from time to time may experience a shortage of drilling rigs, equipment,
supplies, or qualified personnel, or due to significant demand, such services may not be available on commercially reasonable terms.
Independent contractors are typically used in operations in the energy industry and there is a risk that such contractors will not operate
in accordance with its own safety standards or other policies. In addition, pipeline companies are subject to the demand for natural
gas, natural gas liquids, crude oil or refined products in the markets they serve, changes in the availability of products for gathering,
transportation, processing or sale. In addition, the further adoption of renewable energies may adversely impact other types of energy
companies or the prices of other types of energy sources.
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Natural Resources And Commodities Risk [Member] |
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General Description of Registrant [Abstract] |
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Risk [Text Block] |
Natural
Resources and Commodities Risks
Because of the Funds ability
to invest in and/or obtain exposure to natural resources and physical commodities, and in Real Property Asset Companies engaged in oil
and gas exploration and production, gold and other precious metals, steel and iron ore production, energy services, forest products,
chemicals, coal, alternative energy sources and environmental services, as well as related transportation companies and equipment manufacturers,
the Fund is subject to special risks associated with such investment, which include (among others):
Supply and Demand Risk A
decrease in the production of a physical commodity or a decrease in the volume of such commodity available for transportation, mining,
processing, storage or distribution may adversely impact the financial performance of an energy, natural resources, basic materials or
an associated company that devotes a portion of its business to that commodity. Production declines and volume decreases could be caused
by various factors, including catastrophic events affecting production, depletion of resources, labor difficulties, environmental proceedings,
increased regulations, equipment failures and unexpected maintenance problems, import supply disruption, governmental expropriation,
political upheaval or conflicts, supply chain disruptions or increased competition from alternative energy sources or commodity prices.
Alternatively, a sustained decline in demand for such commodities could also adversely affect the financial performance of energy, natural
resources, basic materials or associated companies. Factors that could lead to a decline in demand include economic recession or other
adverse economic conditions, higher taxes on commodities or increased governmental regulations, increases in fuel economy, consumer shifts
to the use of alternative commodities or fuel sources, changes in commodity prices, or weather. Depletion
and Exploration Risk
Many energy,
natural resources, basic materials and associated companies are engaged in the production of one or more physical commodities or are
engaged in transporting, storing, distributing and processing these items on behalf of shippers. To maintain or grow their revenues,
these companies or their customers need to maintain or expand their reserves through exploration of new sources of supply, through the
development of existing sources, through acquisitions or through long-term contracts to acquire reserves. The financial performance of
energy, natural resources, basic materials and associated companies may be adversely affected if they, or the companies to whom they provide
the service, are unable to cost-effectively acquire additional reserves sufficient to replace the natural decline.
Operational
and Geological Risk
Energy, natural
resources, basic materials companies and associated companies are subject to specific operational and geological risks in addition to
normal business and management risks. Some examples of operational risks include mine rock falls, underground explosions and pit wall
failures. Geological risk would include faulting of the ore body and misinterpretation of geotechnical data.
Regulatory
Risk
Energy, natural
resources, basic materials and associated companies are subject to significant federal, state and local government regulation in virtually
every aspect of their operations, including how facilities are constructed, maintained and operated, environmental and safety controls,
and the prices they may charge for the products and services they provide. Various governmental authorities have the power to enforce
compliance with these regulations and the permits issued under them, and violators are subject to administrative, civil and criminal
penalties, including civil fines, injunctions or both. Stricter laws, regulations or enforcement policies could be enacted in the future
which would likely increase compliance costs and may adversely affect the operations and financial performance of energy, natural resources
and basic materials companies.
Commodity
Pricing Risk
The operations
and financial performance of energy, natural resources and basic materials companies may be directly affected by commodity prices, especially
those energy, natural resources, basic materials and associated companies that own the underlying commodity. Commodity prices fluctuate
for several reasons, including changes in market and economic conditions, the impact of weather on demand, levels of domestic production
and imported commodities, energy conservation, domestic and foreign governmental regulation and taxation, the availability of local,
intrastate and interstate transportation systems, governmental expropriation and political upheaval and conflicts. Volatility of commodity
prices, which may lead to a reduction in production or supply, may also negatively impact the performance of energy, natural resources,
basic materials and associated companies that are solely involved in the transportation, processing, storing, distribution or marketing
of commodities. Volatility of commodity prices may also make it more difficult for energy, natural resources, basic materials and associated
companies to raise capital to the extent the market perceives that their performance may be directly or indirectly tied to commodity
prices.
Precious
Metals Pricing Risk
The Fund
may invest in companies that have a material exposure to precious metals, such as gold, silver and platinum and precious metals related
instruments and securities. The price of precious metals can fluctuate widely and is affected by numerous factors, including: global or
regional political,
economic or financial events and situations; investors expectations with respect to the future rates of inflation and movements
in world equity, financial and property markets; global supply and demand for specific precious metals, which is influenced by such factors
as mine production and net forward selling activities by precious metals producers, central bank purchases and sales, jewelry demand
and the supply of recycled jewelry, net investment demand and industrial demand, net of recycling; interest rates and currency exchange
rates, particularly the strength of and confidence in the U.S. dollar; and investment and trading activities of hedge funds, commodity
funds and other speculators. The Fund does not intend to hold physical precious metals.
These commodities
risks may be incurred indirectly through the Subsidiary, as discussed below.
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Risk Of Personal Property Asset Companies [Member] |
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General Description of Registrant [Abstract] |
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Risk [Text Block] |
Risks
of Personal Property Asset Companies
The Fund
may invest in Income Securities and Common Equity Securities issued by Personal Property Asset Companies. Personal (as opposed to real)
property includes any tangible, movable property or asset. The Fund will typically seek to invest in Income Securities and Common Equity
Securities of Personal Property Asset Companies that are associated with personal property assets with investment performance that is
not highly correlated with traditional market indexes, such as special situation transportation assets (e.g., railcars, airplanes
and ships) and collectibles (e.g., antiques, wine and fine art).
Special
Situation Transportation Assets Risks
The risks
of special situation transportation assets include (among others):
Cyclicality of Supply and Demand for Transportation Assets Risk
The transportation
asset leasing and sales industry has periodically experienced cycles of oversupply and undersupply of railcars, aircraft and ships. The
oversupply of a specific type of transportation asset in the market is likely to depress the values of that type of transportation asset.
The supply and demand of transportation assets is affected by various cyclical factors, including: (i) passenger and cargo demand; (ii)
commercial demand for certain types of transportation assets, (iii) fuel costs and general economic conditions affecting lessees
operations; (iv) government regulation, including operating restrictions; (v) interest rates; (vi) the availability of credit; (vii)
manufacturer production level; (viii) retirement and obsolescence of certain classes of transportation assets; (ix) re-introduction into
service of transportation assets previously in storage; and (x) traffic control infrastructure constraints.
Risk of
Decline in Value of Transportation Assets and Rental Values
In addition
to factors linked to the railway, aviation and shipping industries, other factors that may affect the value of transportation assets,
and thus of the Personal Property Asset Companies in which the Fund invests, include (among others): (i) manufacturers merging or exiting
the industry or ceasing to produce specific types of transportation asset; (ii) the particular maintenance and operating history of the
transportation assets; (iii) the number of operators using that type of transportation asset; (iv) whether the railcar, aircraft or ship
is subject to a lease; (v) any regulatory and legal requirements that must be satisfied before the transportation asset can be operated,
sold or re-¬leased, (vi) compatibility of parts and layout of the transportation asset among operators of particular asset; and
(vii) any renegotiation of a lease on less favorable terms. Technological
Risks
The availability
for sale or lease of new, technologically advanced transportation assets and the imposition of stringent noise, emissions or environmental
regulations may make certain types of transportation assets less desirable in the marketplace and therefore may adversely affect the owners
ability to lease or sell such transportation assets. Consequently, the owner will have to lease or sell many of the transportation assets
close to the end of their useful economic life. The owners ability to manage these technological risks by modifying or selling
transportation assets will likely be limited.
Risks
Relating to Leases of Transportation Assets
Owner/lessors
of transportation assets will typically require lessees of assets to maintain customary and appropriate insurance. There can be no assurance
that the lessees insurance will cover all types of claims that may be asserted against the owner, which could adversely affect the
value of the Funds investment in the Personal Property Asset Company owning such transportation asset. Personal Property Asset
Companies are subject to credit risk of the lessees ability to the provisions of the lease of the transportation asset and supply
chain disruptions. The Personal Property Asset Company needs to release or sell transportation assets as the current leases expire in
order to continue to generate revenues. The ability to re-lease or sell transportation assets depends on general market and competitive
conditions. Some of the competitors of the Personal Property Asset Company may have greater access to financial resources and may have
greater operational flexibility. If the Personal Property Asset Company is not able to re-lease a transportation asset, it may need to
attempt to sell the aircraft to provide funds for its investors, including the Fund.
|
Collectible Assets Risks [Member] |
|
General Description of Registrant [Abstract] |
|
Risk [Text Block] |
Collectible
Assets Risks
The risks
of collectible assets include (among others):
Valuation of Collectible Assets Risk
The market
for collectible assets as a financial investment is developing. Collectible assets are typically bought and sold through auction houses,
and estimates of prices of collectible assets at auction are imprecise. Accordingly, collectible assets are difficult to value.
Liquidity
of Collectible Assets Risk
There are
relatively few auction houses in comparison to brokers and dealers of traditional financial assets. The ability to sell collectible assets
is dependent on the demand for particular classes of collectible assets, which demand has been volatile and erratic in the past. There
is no assurance that collectible assets can be sold within a particular timeframe or at the price at which such collectible assets are
valued, which may impair the ability of the Fund to realize full value of Personal Property Asset Companies in the event of the need
to liquidate such assets.
Authenticity
of Collectible Assets Risk
The value
of collectible assets often depends on its rarity or scarcity, or of its attribution as the product of a particular artisan. Collectible
Assets are subject to forgery and to the inabilities to assess the authenticity of the collectible asset, which may significantly impair
the value of the collectible asset. High Transaction
and Related Costs Risk
Collectible
assets are typically bought and sold through auction houses, which typically charge commissions to the purchaser and to the seller which
may exceed 20% of the sale price of the collectible asset. In addition, holding collectible assets entails storage and insurance costs,
which may be substantial.
|
Investment In The Subsidiary Risk [Member] |
|
General Description of Registrant [Abstract] |
|
Risk [Text Block] |
Investment
in the Subsidiary Risk The Fund
may also invest in commodities (such as precious metals), commodity-linked notes and other commodity-linked derivative instruments, such
as swaps, options, or forward contracts based on the value of commodities or commodities indices and commodity futures, by investing
a portion of the Funds total assets in a wholly-owned subsidiary, which would be organized as a limited company under the laws
of the Cayman Islands (the Subsidiary). The Subsidiary would primarily obtain its commodities exposure by investing in commodities,
commodity-linked notes, and commodity-linked derivative instruments. The Subsidiarys investments in such instruments would be subject
to limits on leverage imposed by the 1940 Act. The Fund must maintain no more than 25% of its total assets in the Subsidiary at the end
of every quarter of its taxable year.
The Funds
investment in the Subsidiary would be expected to provide the Fund with exposure to the global commodities markets, subject to the limitations
of the federal tax requirements and the limits on leverage imposed by the 1940 Act. The Subsidiary may invest in commodity futures, option
and swap contracts, fixed-income securities, foreign securities, pooled investment vehicles, including those that are not registered
pursuant to the 1940 Act, and other investments intended to serve as margin or collateral for the Subsidiarys positions. Investments
in derivatives may make the Subsidiary subject to regulation as a commodity pool. The Commodity Futures Trading Commission (CFTC)
has not passed upon the merits of an investment in the Fund or the Subsidiary, nor has the CFTC passed on the adequacy of this shareholder
report. GPIM will consider whether it is more advantageous for the Fund to invest directly in commodity-linked financial instruments,
such as commodity-linked structured notes, or if the desired exposure can be achieved more efficiently by investing in the Subsidiary,
which would, in turn, purchase and hold commodity-linked financial instruments, such as futures contracts, swaps or options. As a result,
the level of the Funds investment in the Subsidiary may vary based on GPIMs use of different commodity-linked financial instruments.
To the extent
the Subsidiary invests in commodity-linked derivative instruments, it will comply with requirements that are applicable to the Funds
transactions in derivatives under the 1940 Act. Similarly, to the extent they are applicable to the investment activities of the Subsidiary,
the Subsidiary will be subject to the same fundamental and certain other investment restrictions and will follow the same compliance
policies and procedures as the Fund. The Subsidiary would be managed by the Adviser and sub-advised by GPIM and overseen by its own board
of directors that would be responsible for overseeing the operations of the Subsidiary. However, because the Fund would the sole shareholder
in the Subsidiary, the Board would have direct oversight over the Funds investments in the Subsidiary and indirect oversight over
the Subsidiarys operations and investment activities (i.e., the Board has oversight responsibility for the investment activities
of the Fund, including its investment in the Subsidiary).
The Fund
may invest in the Subsidiary in order to gain exposure to commodities markets. The Subsidiary would not be a registered investment company
under the 1940 Act. Because the Subsidiary
would not be directly subject to all of the investment protections of the 1940 Act, the Fund may not have all of the protections offered
to shareholders of registered investment companies. The Fund would be exposed to the risks of the Subsidiary, which would be exposed
to the risks of investing in the commodities markets and other investments made by the Subsidiary. The Subsidiary is also subject to
these risks. Changes in the laws of the United States and/or the Cayman Islands, under which the Fund is and the Subsidiary would be
organized, respectively, could result in the inability of the Fund, the Subsidiary, or both, to operate as intended, which could result
in losses to the Fund.
In order
to qualify for favorable tax treatment as a regulated investment company (RIC) under the Internal Revenue Code of 1986, as
amended (the Code), the Fund must derive at least 90% of its gross annual income from qualifying sources under Subchapter
M of the Code. Generally, income derived from direct and certain indirect investments in commodities is not considered qualifying income.
However, historically, the IRS has issued private letter rulings (PLRs) in which the IRS specifically concluded that income
from certain commodity-linked notes and from investments in a subsidiary is qualifying income. These PLRs did not require a RIC to receive
any distributions attributable to any gross income recognized from such subsidiaries in order for such gross income to be considered
qualifying gross income. The IRS has indicated that no further PLRs will be issued in this area. The Fund has not received such a PLR,
and is unable to rely on PLRs issued to other taxpayers.
Moreover,
the IRS and the Treasury Department finalized Treasury regulations that generally treat the Funds income inclusion with respect
to the Subsidiary as qualifying income if there is a distribution out of the earnings and profits of the Subsidiary that is attributable
to such inclusion or if the income is related to the Funds business of investing in securities. Based on the foregoing, the Fund
may seek to gain exposure to the commodity markets through the Subsidiary. Any net realized gains earned by the Subsidiary is a given
year will generate ordinary taxable income to the Fund, and net realized losses earned by the Subsidiary in a given year will not generate
any recognizable losses for the Fund and will not carryforward to future years. The tax treatment of investments in commodities through
the Subsidiary may be adversely affected by future legislation, Treasury regulations and/ or guidance issued by the IRS that could affect
the character, timing and/or amount of the Funds taxable income or any gains and distributions made by the Fund and whether income
derived from the Funds investments in the Subsidiary is considered qualifying income. If the Fund does not meet the qualifying
income test, it may be able to cure such a failure. However, if the Fund attempts to cure the failure of the qualifying income test,
significant taxes may be incurred by the Fund and its shareholders.
|
Private Securities Risk [Member] |
|
General Description of Registrant [Abstract] |
|
Risk [Text Block] |
Private
Securities Risk The Fund
may invest directly or indirectly in privately issued securities (Income Securities and Common Equity Securities) of both public and
private companies. Private Securities have additional risk considerations relative to investments in comparable public investments. Whenever
the Fund invests in companies that do not publicly report financial and other material information, it assumes a greater degree of investment
risk and reliance upon GPIMs ability to obtain and evaluate applicable information concerning such companies creditworthiness
and other investment considerations, which information cannot be independently verified. The Fund also depends on the expertise, skills
and network of business contacts of GPIM to evaluate, negotiate, structure, execute and monitor
the Private Securities. Private Securities are often illiquid. Because there is often no readily available trading market for Private
Securities, the Fund will not be able to readily dispose of such investments at prices that approximate those at which the Fund could
sell them if they were more widely traded. Subscriptions to purchase Private Securities are typically subject to restrictions or delays.
Private Securities are also more difficult to value. Valuation will require more research, and elements of judgment will play a greater
role in the valuation of Private Securities as compared to public securities because there is less reliable objective data available.
In addition
to the risks discussed above, investments in Common Equity Securities of private issuers (often called private equity investments) are
subject to certain risks (whether made directly or through Investment Funds), including:
| | Limited Operating History. Private
equity investments may have limited operating histories, and the information GPIM will obtain about such investments may be limited and,
in many cases, cannot be independently verified. As such, GPIMs ability to evaluate past performance of a private equity investment
or to validate its investment strategies will be limited. Moreover, even to the extent a private equity investment has a longer operating
history, its past performance should not be construed as an indication of the future results of the private equity investment or the
Fund, particularly as the investment professionals responsible for the performance of the private equity investment may change over time. |
| | Concentration and Non-Diversification
Risk. Investment Funds that have exposure to private equity investments, such as private equity funds in which the Fund can invest, may
at certain times hold large positions in a relatively limited number of investments. In addition, private equity funds may target or
concentrate their investments in particular markets, sectors or industries. Those funds that concentrate in a specific industry or target
a specific sector will also be subject to the risks of that industry or sector, which may include, but are not limited to, rapid obsolescence
of technology, sensitivity to regulatory changes, minimal barriers to entry and sensitivity to overall market swings. Some of these Investment
Funds may hold a single asset and thus are subject to even higher risks. As a result, the net asset values of such funds may be subject
to greater volatility than those of investment companies that are subject to diversification requirements, which may negatively impact
the value of the Common Shares. |
| | Liquidity Risk. The securities held
by private equity funds are often illiquid, and subscriptions to purchase these securities are typically subject to restrictions or delays.
There is no regular market for interests in many private equity funds or portfolio companies, which typically must be sold in privately
negotiated transactions subject to high conflicts, valuation and liquidity risks. Any such sales would likely require the consent of
the manager of the applicable private equity fund or the board of the portfolio company and could occur at a material discount to the
stated net asset value. If GPIM determines to cause the Fund to sell its interest in a private equity investment, the Fund may be unable
to sell such interest quickly, if at all, and could therefore be obligated to continue to hold such interest for an extended period of
time, or to accept a materially lower price. |
| | Valuation Risk. A large percentage
of private equity investments will not have a readily determinable market value and may be reported at an estimate of fair value determined
by private equity fund managers or the co-investment sponsor that are subject to conflicts (when held through an Investment Fund). In
this regard, a private equity fund manager or a co-investment sponsor may face a conflict of interest in valuing the securities, as their
value may affect the compensation of the manager or sponsor or the managers or sponsors ability to raise additional funds
in the future. As a result, valuations of the securities may be subjective and could subsequently prove to have been inaccurate, potentially
by significant amounts. |
Private Securities
that are debt securities generally are of below-investment grade quality, frequently are unrated and present many of the same risks as
investing in below-investment grade public debt securities. Investing in private debt instruments is a highly specialized investment
practice that depends more heavily on independent credit analysis than investments in other types of obligations.
|
Risks Associated With Private Company Investments [Member] |
|
General Description of Registrant [Abstract] |
|
Risk [Text Block] |
Risks
Associated with Private Company Investments Private companies
are generally not subject to SEC reporting requirements, are not required to maintain their accounting records in accordance with generally
accepted accounting principles and are not required to maintain effective internal controls over financial reporting. As a result, GPIM
may not have timely or accurate information about the business, financial condition and results of operations of the private companies
in which the Fund invests. There is risk that the Fund may invest on the basis of incomplete or inaccurate information, which will adversely
affect the Funds investment performance. Some private companies in which the Fund may invest may have limited financial resources,
shorter operating histories, more asset concentration risk, narrower product lines and smaller market shares than larger businesses,
which tend to render such private companies more vulnerable to competitors actions and market conditions, as well as general economic
downturns. In addition, the management of private companies may depend on one or two key individuals, and the loss of the services of
any such individual may adversely affect the performance of the private company.
These companies
generally have less predictable operating results, may from time to time be parties to litigation, may be engaged in rapidly changing
businesses with products subject to a substantial risk of obsolescence, and may require substantial additional capital to support their
operations, finance expansion or maintain their competitive position. These companies may have difficulty accessing the capital markets
to meet future capital needs, which may limit their ability to grow or to repay their outstanding indebtedness upon maturity. In addition,
the Funds investment also may be structured as pay-in-kind securities with minimal or no cash interest or dividends until the company
meets certain growth and liquidity objectives.
Typically,
investments in private companies are in restricted securities that are not traded in public markets and subject to substantial holding
periods, so that the Fund may not be able to resell some of its holdings for extended periods, which may be several years. There can
be no assurance that the Fund will be able to realize the value of private company investments in a timely manner, and these investments
are subject to heightened valuation risks.
|
Late Stage Private Companies Risk [Member] |
|
General Description of Registrant [Abstract] |
|
Risk [Text Block] |
Late-Stage
Private Companies Risk
Investments
in late-stage private companies involve greater risks than investments in shares of companies that have traded publicly on an exchange
for extended periods of time. These investments may present significant opportunities for capital appreciation but involve a high degree
of risk that may result in significant decreases in the value of these investments. The Fund may not be able to sell such investments
when GPIM deems it appropriate to do so because they are not publicly traded. As such, these investments are generally considered to
be illiquid until a companys public offering (which may never occur) and are often subject to additional contractual restrictions
on resale following any public offering that may prevent the Fund from selling its shares of these companies for a period of time. Market
conditions, developments within a company, investor perception or regulatory decisions or other factors may adversely affect a late-stage
private company and delay or prevent such a company from ultimately offering its securities to the public. If a company issues shares
in an IPO, IPOs are risky and volatile and may cause the value of the Funds investment to decrease significantly.
|
Investment Funds Risk [Member] |
|
General Description of Registrant [Abstract] |
|
Risk [Text Block] |
Investment
Funds Risk The Fund
may also obtain investment exposure to Income Securities and Common Equity Securities by investing up to 30% of its total assets in Investment
Funds. These investments include open-end funds, closed-end funds, ETFs and business development companies as well as other pooled investment
vehicles. Investment Funds may include those advised by the Adviser and/or its affiliates. Investments in Investment Funds present certain
special considerations and risks not present in making direct investments in Income Securities and Common Equity Securities, and in addition
to these risks, investments in Investment Funds subject the Fund to the risks affecting such Investment Funds and involve operating expenses
and fees that are in addition to the expenses and fees borne by the Fund. Such expenses and fees attributable to the Funds investment
in another Investment Fund are borne indirectly by Common Shareholders. Accordingly, investment in such entities involves expenses and
fees at both levels. Fees and expenses borne by other Investment Funds in which the Fund invests may be similar to the fees and expenses
borne by the Fund and can include asset-based management fees and administrative fees payable to such entities advisers and managers,
as well as other expenses borne by such entities, thus resulting in fees and expenses at both levels. To the extent management fees of
Investment Funds are based on total gross assets, it may create an incentive for such entities managers to employ Financial Leverage,
thereby adding additional expense and increasing volatility and risk (including the Funds overall exposure to Financial Leverage
risk). Fees payable to advisers and managers of Investment Funds may include performance-based incentive fees calculated as a percentage
of profits. Such incentive fees directly reduce the return that otherwise would have been earned by investors over the applicable period.
A performance-based fee arrangement may create incentives for an adviser or manager to take greater investment risks in the hope of earning
a higher profit participation. Investments
in Investment Funds frequently expose the Fund to an additional layer of leverage, and, thus, increase the Funds exposure to leverage
risk and costs. From time to time, the Fund may invest a significant portion of its assets in Investment Funds that employ leverage.
The use of leverage by Investment Funds may cause the Investments Funds market price of common shares and/or NAV to be more volatile
and can magnify the effect of any losses. From time to time, the Fund may invest a significant portion of its assets in Investment Funds
that employ leverage. Investments in Investment Funds expose the Fund to additional management risk. The success of the Funds
investments in Investment Funds will depend in large part on the investment skills and implementation abilities of the advisers or managers
of such entities. Decisions made by the advisers or managers of such entities may cause the Fund to incur losses or to miss profit opportunities.
While GPIM will seek to evaluate managers of Investment Funds and where possible independently evaluate the underlying assets, a substantial
degree of reliance on such entities managers is nevertheless present with such investments.
The Fund
may invest in Investment Funds in excess of statutory limits imposed by the 1940 Act in reliance on Rule 12d1-4 under the 1940 Act. These
investments would be subject to the applicable conditions of Rule 12d1-4, which in part could affect or otherwise impose certain limits
on the investments and operations of the underlying Investment Fund (notably such funds ability to invest in other investment companies
and private funds, which include certain structured finance vehicles). It is uncertain what effect the conditions of Rule 12d1-4 will
have on the Funds investment strategies and operations or those of the Investment Funds in which the Fund may invest.
If the Fund
invests in Investment Funds, the Funds realized losses on sales of shares of an underlying Investment Fund may be indefinitely
or permanently deferred as wash sales. Distributions of short-term capital gains by an underlying Investment Fund will be
recognized as ordinary income by the Fund and would not be offset by the Funds capital loss carryforwards, if any. Capital loss
carryforwards of an underlying Investment Fund, if any, would not offset net capital gain of the Fund or of another underlying Investment
Fund.
When the
Fund invests in private investment funds, such investments pose additional risks to the Fund, in addition to those risks described above
with respect to all Investment Funds. Certain private investment funds involve capital call provisions under which an investor is obligated
to make additional investments at specified levels even if it would otherwise choose not to. Investments in private investment funds
may have very limited liquidity. Often there will be no secondary market for such investments and the ability to redeem or otherwise
withdraw from a private investment fund may be prohibited during the term of the private investment fund or, if permitted, may be infrequent.
Certain private investment funds are subject to lock-up periods of a year or more. The valuation of investments in private
investment funds are often subject to high conflicts and valuation risks. Investors in private investment funds are also often exposed
to increased leverage risk.
|
Synthetic Investments Risk [Member] |
|
General Description of Registrant [Abstract] |
|
Risk [Text Block] |
Synthetic
Investments Risk As an alternative
to holding investments directly, the Fund may also obtain investment exposure to Income Securities and Common Equity Securities through
the use of customized derivative instruments (including swaps, options, forwards, notional principal contracts or other financial instruments)
to seek to replicate, modify or replace the economic attributes associated with an investment in Income Securities and Common Equity
Securities (including interests in Investment Funds). The Fund may be exposed to certain additional risks to the extent GPIM uses derivatives
as a means to synthetically implement the Funds investment strategies. If the Fund enters into a derivative instrument whereby
it agrees to receive the return of a security or financial instrument or a basket of securities or financial instruments, it will typically
contract to receive such returns for a predetermined period of time. During such period, the Fund may not have the ability to increase
or decrease its exposure. In addition, such customized derivative instruments will likely be highly illiquid, and it is possible that
the Fund will not be able to terminate such derivative instruments prior to their expiration date or that the penalties associated with
such a termination might impact the Funds
performance in a material adverse manner. Furthermore, certain derivative instruments contain provisions giving the counterparty the
right to terminate the contract upon the occurrence of certain events. Such events may include a decline in the value of the reference
securities and material violations of the terms of the contract or the portfolio guidelines as well as other events determined by the
counterparty. If a termination were to occur, the Funds return could be adversely affected as it would lose the benefit of the indirect
exposure to the reference securities and it may incur significant termination expenses.
In the event
the Fund seeks to obtain investment exposure to in Investment Funds (including private investment funds) through the use of such synthetic
derivative instruments, the Fund will not acquire any voting interests or other shareholder rights that would be acquired with a direct
investment in the underlying Investment Fund. Accordingly, the Fund will not participate in matters submitted to a vote of the shareholders.
In addition, the Fund may not receive all of the information and reports to shareholders that the Fund would receive with a direct investment
in such Investment Fund.
Further,
the Fund will pay the counterparty to any such customized derivative instrument structuring fees and ongoing transaction fees, which
will reduce the investment performance of the Fund. Finally, certain tax aspects of such customized derivative instruments are uncertain
and a Common Shareholders return could be adversely affected by an adverse tax ruling.
|
Inflation Or Deflation Risk [Member] |
|
General Description of Registrant [Abstract] |
|
Risk [Text Block] |
Inflation/Deflation
Risk
Inflation
risk is the risk that the intrinsic value of assets or income from investments will be worth less in the future as inflation decreases
the purchasing power and value of money. As inflation increases, the real value of the Common Shares and distributions can decline. Inflation
rates may change frequently and significantly as a result of various factors, including unexpected shifts in the domestic or global economy
and changes in monetary or economic policies (or expectations that these policies may change), and the Funds investments may not
keep pace with inflation, which would adversely affect the Fund. The market price of debt instruments generally falls as inflation increases
because the purchasing power of the future income and repaid principal is expected to be worth less when received by the Fund. The risk
of inflation is greater for debt instruments with longer maturities and especially those that pay a fixed rather than variable interest
rate. Inflation has reached historically high levels in recent periods and the Federal Reserve has increased interest rates significantly
to seek to reduce it. In addition, during any periods of rising inflation, the dividend rates or borrowing costs associated with the
Funds use of Financial Leverage would likely increase, which would tend to further reduce returns to Common Shareholders. Deflation
risk is the risk that prices throughout the economy decline over timethe opposite of inflation. Deflation may have an adverse effect on the creditworthiness of issuers and may make issuer default more likely, which may result in a decline in the value of the Funds
portfolio.
|
Market Discount Risk [Member] |
|
General Description of Registrant [Abstract] |
|
Risk [Text Block] |
Market
Discount Risk The net asset
value and market price of the Common Shares will fluctuate, sometimes independently, based on market and other factors affecting the Fund
and its investments. The market price of the Common Shares will either be above (premium) or below (discount) their net asset value.
Although the net asset value of Common Shares is often considered in determining whether to purchase or sell shares, whether investors
will realize gains or losses upon the sale of Common Shares will depend upon whether the market price of Common Shares at the time of
sale is above or below the investors
purchase price, taking into account transaction costs for the Common Shares, and is not directly dependent upon the Funds net asset
value. Market price movements of Common Shares are thus material to investors and may result in losses, even when net asset value has
increased.
The Fund
cannot predict whether the Common Shares will trade at a premium or discount to net asset value and the market price for the Common Shares
will change based on a variety of factors. If the Common Shares are trading at a premium to net asset value at the time you purchase
Common Shares, the net asset value per share of the Common Shares purchased will be less than the purchase price paid. Shares of closed-end
investment companies frequently trade at a discount from NAV, but in some cases have traded above net asset value. The risk of the Common
Shares trading at a discount is a risk separate and distinct from the risk of a decline in the Funds net asset value as a result
of the Funds investment activities.
Because the
market price of the Common Shares will be determined by factors such as net asset value, dividend and distribution levels (which are
dependent, in part, on expenses), supply of and demand for Common Shares, stability of dividends or distributions, trading volume of
Common Shares, general market and economic conditions and other factors beyond the Funds control, the Fund cannot predict whether
the Common Shares will trade at, below or above net asset value, or at, below or above the public offering price for the Common Shares.
The Funds
net asset value would be reduced following an offering of the Common Shares due to the costs of such offering, to the extent those costs
are borne by the Fund. The sale of Common Shares by the Fund (or the perception that such sales may occur) may have an adverse effect
on prices of Common Shares in the secondary market. An increase in the number of Common Shares available may put downward pressure on
the market price for Common Shares. The Fund may, from time to time, seek the consent of Common Shareholders to permit the issuance and
sale by the Fund of Common Shares at a price below the Funds then current net asset value, subject to certain conditions, and such
sales of Common Shares at price below net asset value, if any, may increase downward pressure on the market price for Common Shares.
These sales, if any, also might make it more difficult for the Fund to sell additional Common Shares in the future at a time and price
it deems appropriate.
The Fund
is designed for long-term investors and investors in Common Shares should not view the Fund as a vehicle for trading purposes.
|
Dilution Risk [Member] |
|
General Description of Registrant [Abstract] |
|
Risk [Text Block] |
Dilution
Risk The voting
power of current Common Shareholders will be diluted to the extent that current Common Shareholders do not purchase Common Shares in
any future offerings of Common Shares or do not purchase sufficient Common Shares to maintain their percentage interest. If the Fund is
unable to invest the proceeds of such offering as intended or if investments made with these proceeds perform poorly, the Funds
per Common Share distribution may decrease and the Fund may not participate in market advances to the same extent as if such proceeds
were fully invested as planned. If the Fund sells Common Shares at a price below net asset value pursuant to the consent of Common Shareholders,
shareholders will experience a dilution of the aggregate net asset value per Common Share because the sale price will be less than the
Funds then-current net asset value per Common Share. Similarly, were the expenses of the offering to exceed the amount by which
the sale price exceeded the Funds then current net asset value per Common Share, shareholders would experience
a dilution of the aggregate net asset value per Common Share. This dilution will be experienced by all shareholders, irrespective of
whether they purchase Common Shares in any such offering.
|
Financial Leverage And Leveraged Transactions Risk [Member] |
|
General Description of Registrant [Abstract] |
|
Risk [Text Block] |
Financial
Leverage and Leveraged Transactions Risk Although
the use of Financial Leverage and leveraged transactions by the Fund may create an opportunity for increased after-tax total return for
the Common Shares, it also results in additional risks and can magnify the effect of any losses. If the income and gains earned on securities
purchased with Financial Leverage and leveraged transactions proceeds are greater than the cost of Financial Leverage and leveraged transactions,
the Funds return will be greater than if Financial Leverage and leveraged transactions had not been used. Conversely, if the income
or gains from the securities purchased with such proceeds does not cover the cost of Financial Leverage and leveraged transactions, the
return to the Fund will be less than if Financial Leverage and leveraged transactions had not been used. There can be no assurance that
a leveraging strategy will be implemented or that it will be successful during any period during which it is employed.
Financial
Leverage and the use of leveraged transactions involve risks and special considerations for shareholders, including the likelihood of
greater volatility of NAV and market price of and dividends on the Common Shares than a comparable portfolio without leverage; the risk
that fluctuations in interest rates on Borrowings or in the dividend rate on any Preferred Shares (if any) that the Fund must pay will
reduce the return to the Common Shareholders; and the effect of Financial Leverage and leveraged transactions in a declining market, which
is likely to cause a greater decline in the NAV of the Common Shares than if the Fund were not leveraged, which may result in a greater
decline in the market price of the Common Shares.
Because the
fees received by the Adviser and Sub-Adviser are based on the Managed Assets of the Fund (including the proceeds of any Financial Leverage),
the Adviser and Sub-Adviser has a financial incentive for the Fund to utilize Financial Leverage, which may create a conflict of interest
between the Adviser and Sub-Adviser on the one hand and the Common Shareholders on the other. Common Shareholders bear a portion of the
investment advisory fee attributable to the assets purchased with the proceeds of Financial Leverage, which means that Common Shareholders
effectively bear the entire advisory fee.
Certain types
of Borrowings subject the Fund to covenants in credit agreements relating to asset coverage and portfolio composition requirements. Borrowings
by the Fund also may subject the Fund to certain restrictions on investments imposed by guidelines of one or more rating agencies, which
may issue ratings for such Borrowings. Such guidelines may impose asset coverage or portfolio composition requirements that are more
stringent than those imposed by the 1940 Act. It is not anticipated that these covenants or guidelines will impede the Adviser or GPIM
from managing the Funds portfolio in accordance with the Funds investment objective and policies.
The Fund
may enter into reverse repurchase agreements with the same parties with whom it may enter into repurchase agreements (as described below).
Under a reverse repurchase agreement, the Fund would sell securities or other assets and agree to repurchase them at a particular price
at a future date. Reverse repurchase agreements involve the risks that the interest income earned on the investment of the proceeds will
be less than the interest expense and Fund expenses associated with the repurchase agreement, that the market value of the securities
or other assets sold by the Fund may decline
below the price at which the Fund is obligated to repurchase such securities and that the securities may not be returned to the Fund.
There is no assurance that reverse repurchase agreements can be successfully employed. In the event of the insolvency of the counterparty
to a reverse repurchase agreement, recovery of the securities or other assets sold by the Fund may be delayed. The counterpartys
insolvency may result in a loss equal to the amount by which the value of the securities or other assets sold by the Fund exceeds the
repurchase price payable by the Fund; if the value of the purchased securities or other assets increases during such a delay, that loss
may also be increased. When the Fund enters into a reverse repurchase agreement, any fluctuations in the market value of either the securities
or other assets transferred to another party or the securities or other assets in which the proceeds may be invested would affect the
market value of the Funds assets. As a result, such transactions may increase fluctuations in the net asset value of the Funds
Shares.
The Fund
may enter into dollar roll transactions, in which the Fund sells a mortgage-backed or other security for settlement on one date and agrees
to purchase a substantially similar security (but not the same security) for settlement at a later date at an agreed-upon price. During
the roll period, the Fund gives up the principal and interest payments on the sold security, but may invest the sale proceeds. When the
Fund enters into a dollar roll transaction, any fluctuation in the market value of the security transferred or the securities in which
the sales proceeds are invested can affect the market value of the Funds assets, and therefore, the Funds NAV. Successful
use of dollar rolls may depend upon, among other things, GPIMs ability to correctly predict interest rates and prepayments. There
is no assurance that dollar rolls can be successfully employed. In connection with reverse repurchase agreements, the Fund will also
be subject to counterparty risk with respect to the purchaser of the securities. Dollar roll transactions also involve the risk that
the market value of the securities the Fund is required to deliver may decline below the agreed upon repurchase price of those securities.
In addition, in the event that the Funds counterparty becomes insolvent or otherwise unable or unwilling to perform its obligations,
the Funds use of the proceeds may become restricted pending a determination as to whether to enforce the Funds obligation
to purchase the substantially similar securities.
In addition,
the Fund may engage in certain derivatives transactions that have economic characteristics similar to leverage.
The Funds
obligations under reverse repurchase agreements, dollar roll transactions, and derivatives transactions may have economic characteristics
similar to leverage. The Funds obligations under such transactions will not be considered indebtedness for purposes of the 1940
Act, but the Funds use of such transactions may be limited by the applicable requirements of the SEC.
The Fund
may have Financial Leverage and leveraged transactions outstanding during a short-term period during which such Financial Leverage and
leveraged transactions may not be beneficial to the Fund if GPIM believes that the long-term benefits to Common Shareholders of such
Financial Leverage and leveraged transactions would outweigh the costs and portfolio disruptions associated with redeeming and reissuing
or closing out and reopening such Financial Leverage and leveraged transactions. However, there can be no assurance that GPIMs
judgment in weighing such costs and benefits will be correct.
Economic
and market events have at times caused severe market volatility and severe liquidity strains in the credit markets. The terms of the
Funds credit facility include a variable interest rate. Accordingly,
during periods when interest rates or the applicable reference rate for the credit facility rise or there are dislocations in the credit
markets, the Funds leverage costs may increase and there is a risk that the Fund may not be able to renew or replace existing leverage
on favorable terms or at all. If the cost of leverage is no longer favorable, or if the Fund is otherwise required to reduce its leverage,
the Fund may not be able to maintain distributions on Common Shares at historical levels and Common Shareholders will bear any costs
associated with selling portfolio securities. The cost of leverage and the risks highlighted above are heightened during periods of rising
or elevated interest rates.
The Funds
total Financial Leverage and leveraged transactions may vary significantly over time. To the extent the Fund increases its amount of
Financial Leverage and leveraged transactions outstanding, it will be more exposed to these risks. Investments in Investment Funds and
certain other pooled and structured finance vehicles, such as collateralized loan obligations, frequently expose the Fund to an additional
layer of financial leverage and, thus, increase the Funds exposure to leverage risk. From time to time, the Fund may invest a significant
portion of its assets in Investment Funds that employ leverage.
|
Derivatives Transactions Risk [Member] |
|
General Description of Registrant [Abstract] |
|
Risk [Text Block] |
Derivatives
Transactions Risk In addition
to the Covered Call Option Strategy and other options strategies described above, the Fund may, but is not required to, utilize other
derivatives, including futures contracts, swaps transactions and other similar strategic transactions to seek to earn income, facilitate
portfolio management and mitigate risks. Participation in derivatives markets transactions involves investment risks and transaction
costs to which the Fund would not be subject absent the use of these strategies (other than its covered call writing strategy). Certain
derivatives transactions that involve leverage can result in losses that greatly exceed the amount originally invested. Derivatives transactions
utilizing instruments denominated in foreign currencies will expose the Fund to foreign currency risk. Derivatives transactions involve
risks of mispricing or improper valuation, and the documentation governing a derivative instrument or transaction may be unfavorable
or ambiguous. Derivatives transactions may involve commissions and other costs, which may increase the Funds expenses and reduce
its return. Various legislative and regulatory initiatives may impact the availability, liquidity and cost of derivative instruments,
limit or restrict the ability of the Fund to use certain derivative instruments or transact with certain counterparties as a part of
its investment strategy, increase the costs of using derivative instruments or make derivative instruments less effective. The Fund
may be required to deposit amounts as premiums or to be held in margin accounts. Such amounts may not otherwise be available to the Fund
for investment purposes. The Fund may earn a lower return on its portfolio than it might otherwise earn if it did not have to maintain
such assets in respect of its derivatives transactions positions. Participation in derivatives market transactions involves investment
risk and transaction costs to which the Fund would not be subject absent the use of these strategies. To the extent the Fund engages
in derivatives transactions in an attempt to hedge certain exposures or risks, there can be no assurance that the Funds hedging
investments or transactions will be effective. In addition, hedging investments or transactions involve costs and may reduce gains or
result in losses, which may adversely affect the Fund. Changes in the value of a derivatives transaction may also create sudden margin
delivery or settlement payment obligations for the Fund, which can materially affect the performance of the Fund and its liquidity and
other risk profiles.
The skills necessary to successfully execute derivatives strategies may be different from those for more traditional portfolio management
techniques, and if GPIM is incorrect about its expectations of market conditions, the use of derivatives could also result in a loss,
which in some cases may be unlimited. Additional risks inherent in the use of derivatives include (among others):
| | dependence on GPIMs ability
to predict correctly movements in the direction of interest rates and securities prices; |
| | imperfect correlation between the
price of derivatives and movements in the prices of the securities being hedged; |
| | the fact that skills needed to use
these strategies are different from those needed to select portfolio securities; |
| | the possible absence of a liquid
secondary market for any particular instrument at any time; |
| | the possible need to defer closing
out certain hedged positions to avoid adverse tax consequences; |
| | the possible inability of the Fund
to purchase or sell a security at a time that otherwise would be favorable for it to do so, or the possible need for the Fund to sell
a security at a disadvantageous time due to a need for the Fund to make margin or settlement payments in connection with such derivatives
transactions; and |
| | the creditworthiness of counterparties. |
The Fund
is required to trade derivatives and other transactions that create future payment or delivery obligations (except reverse repurchase
agreements and similar financing transactions) subject to value-at-risk (VaR) leverage limits and derivatives risk management
program and reporting requirements. Generally, these requirements apply unless a fund satisfies a limited derivatives users
exception that is included in Rule 18f-4. When the Fund trades reverse repurchase agreements or similar financing transactions, including
certain tender option bonds, it needs to aggregate the amount of indebtedness associated with the reverse repurchase agreements or similar
financing transactions with the aggregate amount of any other senior securities representing indebtedness when calculating the Funds
asset coverage ratio or treat all such transactions as derivatives transactions. Reverse repurchase agreements or similar financing transactions
aggregated with other indebtedness do not need to be included in the calculation of whether a fund satisfies the limited derivatives
users exception, but for funds subject to the VaR testing requirement, reverse repurchase agreements and similar financing transactions
must be included for purposes of such testing whether treated as derivatives transactions or not. The SEC also provided guidance regarding
the use of securities lending collateral that may limit the Funds securities lending activities. In addition, the Fund is permitted
to invest in a security on a when-issued or forward-settling basis, or with a non-standard settlement cycle, and the transaction will
be deemed not to involve a senior security, provided that (i) the Fund intends to physically settle the transaction and (ii) the transaction
will settle within 35 days of its trade date (the Delayed-Settlement Securities Provision). The Fund may otherwise engage
in such transactions that do not meet the conditions of the Delayed-Settlement Securities Provision so long as the Fund treats any such
transaction as a derivatives transaction for purposes of compliance with the rule. Furthermore, under the rule, the Fund
is permitted to enter into an unfunded commitment agreement, and such unfunded commitment agreement will not be subject to the asset
coverage requirements under the 1940 Act, if the Fund reasonably believes, at the time it enters into such agreement, that it will have
sufficient cash and
cash equivalents to meet its obligations with respect to all such agreements as they come due. These requirements may limit the ability
of the Fund to use derivatives, reverse repurchase agreements and similar financing transactions, and the other relevant transactions
as part of its investment strategies. These requirements may increase the cost of the Funds investments and cost of doing business,
which could adversely affect investors.
The Adviser
has filed with the National Futures Association a notice of eligibility claiming an exclusion from the definition of commodity
pool operator (CPO) under CFTC Rule 4.5 under the Commodity Exchange Act, as amended (the CEA), with respect
to the Funds operation. Accordingly, the Adviser with respect to the Fund is not subject to registration or regulation as a CPO.
Changes to the Funds investment strategies or investments may cause the Adviser with respect to the Fund to lose the benefits of
the exclusion under CFTC Rule 4.5 under the CEA and may trigger additional CFTC regulation as a CPO. If the Fund becomes subject to CFTC
regulation, the Fund or the Adviser may incur additional expenses.
|
Futures Transactions Risk [Member] |
|
General Description of Registrant [Abstract] |
|
Risk [Text Block] |
Futures
Transactions Risk
The Fund
may invest in futures contracts and options on futures contracts. Futures and options on futures involve the risks discussed under Derivatives
Transactions Risk above and certain additional risks, including but not limited to the following:
| | no assurance that futures contracts
or options on futures can be offset at favorable prices; |
| | possible reduction of the return
of the Fund due to their use for hedging; |
| | possible reduction in value of both
the securities hedged and the hedging instrument; |
| | possible lack of liquidity, trading
restrictions or limitations that may be imposed by an exchange, and the potential that government regulations may restrict trading; |
| | imperfect correlation between the
contracts and the securities being hedged; and |
| | losses from investing in futures
transactions that are potentially unlimited and losses resulting from the default or insolvency of intermediaries such as the Funds
futures commission merchant. |
The Fund
will only purchase or sell futures contracts or related options in compliance with the rules of the CFTC. Transactions in financial futures
and options on futures involve certain costs. There can be no assurance that the Funds use of futures contracts will be advantageous.
Financial covenants related to future Fund borrowings may limit use of these transactions.
The CFTC
and various exchanges have rules limiting the maximum net long or short positions which any person or group may own, hold or control
in any given futures contract or option on such futures contract. GPIM must consider the effect of these limits in managing the Fund.
In addition, the CFTC has position limits rules that establish position limits for 25 specified physical commodity futures and related
options contracts traded on exchanges, other futures contracts and related options directly or indirectly linked to such contracts, and
any OTC transactions that are economically equivalent.
|
Counterparty Risk [Member] |
|
General Description of Registrant [Abstract] |
|
Risk [Text Block] |
Counterparty
Risk Counterparty
risk is the risk that a counterparty to a fund transaction (e.g., prime brokerage or securities lending arrangement or derivatives
transaction) will be unable or unwilling to perform its contractual
obligation to the Fund. The Fund is exposed to credit risks that the counterparty may be unwilling or unable to make timely payments
or otherwise meet its contractual obligations. If the counterparty becomes bankrupt or defaults on (or otherwise becomes unable or unwilling
to perform) its payment or other obligations to the Fund, the Fund may not receive the full amount that it is entitled to receive or
may experience delays in recovering the collateral or other assets held by, or on behalf of, the counterparty. If this occurs, or if
exercising contractual rights involves delays or costs for the Fund, the value of your shares in the Fund may decrease. Such risk is
heightened in market environments where interest rates are changing, notably when rates are rising. Counterparty credit risk also includes
the related risk of having concentrated exposure to such counterparty.
The Fund
bears the risk that counterparties may be adversely affected by legislative or regulatory changes, adverse market conditions, increased
competition, and/or wide scale credit losses resulting from financial difficulties of the counterparties other trading partners or
borrowers.
The counterparty
risk for cleared derivatives is generally lower than for uncleared OTC derivatives transactions since generally a clearing organization
becomes substituted for each counterparty to a cleared derivative contract and, in effect, guarantees the parties performance under
the contract as each party to a trade looks only to the clearing organization for performance of financial obligations under the derivative
contract. However, there can be no assurance that a clearing organization, or its members, will satisfy its obligations to the Fund.
|
Swap Risk [Member] |
|
General Description of Registrant [Abstract] |
|
Risk [Text Block] |
Swap Risk Swap agreements
are contracts for periods ranging from one day to more than one year and may be negotiated bilaterally and traded OTC between two parties
or, for certain standardized swaps, must be exchange-traded through a futures commission merchant or swap execution facility and/ or
cleared through a clearinghouse that serves as a central counterparty. In a standard swap transaction, two parties agree to exchange
the returns (or differentials in rates of return) earned or realized on particular predetermined investments or instruments.
The Fund
may enter into swap transactions, including credit default swaps, total return swaps, index swaps, currency swaps, commodity swaps and
interest rate swaps, as well as options thereon, and may purchase or sell interest rate caps, floors and collars. The Fund may utilize
swap agreements in an attempt to gain exposure to certain assets without purchasing those assets, to hedge other positions or for investment
purposes.
Risks associated
with the use of swap agreements are different from those associated with ordinary portfolio securities transactions, largely due to the
fact they could be considered illiquid and many swaps currently trade on the OTC market. If GPIM is incorrect in its forecasts of market
values, interest rates or currency exchange rates, the investment performance of the Fund may be less favorable than it would have been
if these investment techniques were not used. Such transactions are subject to various risks, including market risk, risk of default
by the other party to the transaction and risk of imperfect correlation between the value of such instruments and the underlying assets
and may involve commissions or other costs. Written credit default swaps also are subject to the risk of default on the instrument underlying
the swap, which may result in the Fund being obligated to pay the counterparty to the swap the principal amount of the underlying instrument.
Cash-settled swaps generally do not involve the delivery of securities, other underlying assets or principal. Accordingly, the risk of
loss with respect to such swaps generally is limited to the net amount of payments
and margin that the Fund is contractually obligated to make, or in the case of the other party to a swap defaulting, the net amount of
payments that the Fund is contractually entitled to receive. Swaps are subject to valuation, liquidity and leveraging risks and could
result in substantial losses to the Fund.
In addition,
the Fund may pay fees or incur costs each time it enters into, amends or terminates a swap agreement.
Swaps may
effectively add leverage to the Funds portfolio because the Fund would be subject to investment exposure on the full notional amount
of the swap. Swaps are subject to the risk that a counterparty will default on its payment obligations to the Fund thereunder.
When the
Fund acts as a seller of a credit default swap agreement with respect to a debt security, it is subject to the risk that an adverse credit
event may occur with respect to the issuer of the debt security and the Fund may be required to pay the buyer the full notional value
of the debt security under the swap net of any amounts owed to the Fund by the buyer under the swap (such as the buyers obligation
to deliver the debt security to the Fund). As a result, the Fund bears the entire risk of loss due to a decline in value of a referenced
debt security on a credit default swap it has sold if there is a credit event with respect to the issuer of the security. If the Fund
is a buyer of a credit default swap and no credit event occurs, the Fund may recover nothing if the swap is held through its termination
date. However, if a credit event occurs, the Fund generally may elect to receive the full notional value of the swap in exchange for
an equal face amount of deliverable obligations of the reference entity whose value may have significantly decreased.
The swap
market has become more standardized in recent years with a large number of banks and investment banking firms acting both as principals
and as agents utilizing standardized swap documentation. As a result, some swaps have become relatively liquid. Although liquidity of
certain swaps has improved, certain types of derivatives products, such as caps, floors and collars may be less liquid than swaps in
general.
Certain standardized
swaps are subject to mandatory exchange-trading and central clearing. While exchange-trading and central clearing are intended to reduce
counterparty credit risk and increase liquidity, they do not make swap transactions risk-free. Depending on the Funds size and
other factors, the margin required under the rules of the clearinghouse and by the clearing member may be in excess of the collateral
required to be posted by the Fund to support its obligations under a similar bilateral swap. In addition, regulators have developed rules
that require trading and execution of the most liquid swaps on trading facilities. Moving trading to an exchange-type system may increase
market transparency and liquidity but may require the Fund to incur increased expenses to access the same types of cleared and uncleared
swaps.
In addition,
the CFTC and other applicable regulators have adopted rules imposing certain margin requirements, including minimums, on uncleared swaps
which may result in the Fund and its counterparties posting higher margin amounts for uncleared swaps. Recently adopted rules also require
centralized reporting of detailed information about many types of cleared and uncleared swaps. Reporting of swap data may result in greater
market transparency, but may subject the Fund to additional administrative burdens and the safeguards established to protect trader anonymity
may not function as expected. GPIM will continue to monitor developments in this area, particularly to the extent regulatory changes
affect the ability of the Fund to enter into swap agreements. In addition,
the CFTC adopted position limits rules that could limit the ability of the Fund to place certain trades. It is possible that positions
held by the Fund may have to be liquidated in order to avoid exceeding such limits. These limitations could adversely affect the operations
and performance of the Fund.
Further regulatory
developments in the swap market may adversely impact the swap market generally or the Funds ability to use swaps.
|
Special Purpose Acquisition Companies Risk [Member] |
|
General Description of Registrant [Abstract] |
|
Risk [Text Block] |
Special
Purpose Acquisition Companies Risk
The Fund
may invest in stock, warrants, rights and other securities of special purpose acquisition companies (SPACs) or similar special
purpose entities in a private placement transaction or as part of a public offering. As an alternative to obtaining a public listing through
a traditional IPO, SPAC investments carry many of the same risks as investments in IPO securities. These may include, but are not limited
to, erratic price movements, greater risk of loss, lack of information about the issuer, limited operating and little public or no trading
history, and higher transaction costs.
Investments
in SPACs also have risks peculiar to the SPAC structure and investment process. Until an acquisition or merger is completed, a SPAC generally
invests its assets, less a portion retained to cover expenses, in U.S. government securities, money market securities and cash and does
not typically pay dividends in respect of its common stock. To the extent a SPAC is invested in cash or similar securities, this may
impact the Funds ability to meet its investment objective. SPAC investments are also subject to the risk that a significant portion
of the funds raised by the SPAC may be expended during the search for a target acquisition or merger. Some SPACs pursue acquisitions
and mergers only within certain market sectors or regions, which can increase the volatility of their prices. Conversely, other SPACs
may invest without such limitations, in which case management may have limited experience or knowledge of the market sector or region
in which the transaction is contemplated. Moreover, interests in SPACs may be illiquid and/or be subject to restrictions on resale, which
may remain for an extended time, and may only be traded in the over-the-counter market. If there is no market for interests in a SPAC,
or only a thinly traded market for interests in a SPAC develops, the Fund may not be able to sell its interest in a SPAC, or may be able
to sell its interest only at a price below what the Fund believes is the SPAC interests value.
|
Availability And Quality Of Data [Member] |
|
General Description of Registrant [Abstract] |
|
Risk [Text Block] |
Availability
and Quality of Data
GPIM faces
the general risk regarding the availability and quality of information concerning a particular asset or investment, and employs a variety
of policies, practices and methodologies designed to minimize that risk. For example, there is less readily available and reliable information
about most bank loans than is the case for many other types of instruments, including listed securities. Another example is the consideration
of Environmental, Social, and Governance (ESG) criteria where GPIM believes it could have a material impact on an investments
return or issuers financial performance (though, for avoidance of doubt, GPIM does not offer any ESG products). Similar to GPIMs
ability to evaluate traditional factors in making investment decisions, the ability for GPIM to identify and evaluate ESG characteristics
and risks, or to engage with an issuer, is limited to the availability and quality of information on an asset or issuer. In some cases,
GPIM may decline to consider ESG criteria in an investment decision due to the unavailability of information on an issuer, or the quality
of that information. In addition, GPIM often uses data and insights from third-party research to provide additional input in the analysis
of ESG-related criteria. Third-party information
and data will, from time to time, be incomplete, inaccurate or unavailable. As a result, there is a risk that GPIM could incorrectly
assess the ESG criteria or risks associated with a particular asset or issuer. Additionally, GPIM expects from time to time to directly
engage with certain corporate credit issuers by requesting improved issuer disclosure relating to ESG factors, as well as discussing
potential opportunities to improve various ESG metrics and other related topics. Direct engagement will occur with only a minority of
portfolio investments and issuers GPIM considers for investment and will depend on a variety of considerations, including the materiality
of ESG criteria to the specific issuer or sector and the size of GPIM client investments in the issuer. There can be no assurance that
GPIMs engagement efforts will be successful or provide benefits to clients.
The application
of ESG criteria and risk factors to portfolio investments (if any) could result in one or more assets or issuers being excluded from
the Fund, which could have an adverse effect on the performance of the Fund. Additionally, in some circumstances a client mandate or applicable
regulations can cause GPIM to restrict specific investments based on particular ESG characteristics. GPIM also reserves the right, in
the future, to implement restrictions or prohibitions on investments within certain industries for all or a sub-set of all client accounts
which could be based on particular ESG criteria or other relevant factors. As a result of any of the aforementioned circumstances, clients
may be limited as to available investments, which could hinder performance when compared to investments with no such restrictions.
|
Portfolio Turnover Risk [Member] |
|
General Description of Registrant [Abstract] |
|
Risk [Text Block] |
Portfolio
Turnover Risk
The Funds
annual portfolio turnover rate may vary greatly from year to year. Portfolio turnover rate is not considered a limiting factor in the
execution of investment decisions for the Fund. A higher portfolio turnover rate results in correspondingly greater brokerage commissions
and other transactional expenses that are borne by the Fund. High portfolio turnover may result in an increased realization of net short-term
capital gains by the Fund which, when distributed to Common Shareholders, will be taxable as ordinary income. Additionally, in a declining
market, portfolio turnover may create realized capital losses.
|
U S Government Securities Risk [Member] |
|
General Description of Registrant [Abstract] |
|
Risk [Text Block] |
U.S. Government
Securities Risk
U.S. government
securities are subject to market and interest rate risk, as well as varying degrees of credit risk. Different types of U.S. government
securities have different relative levels of credit risk depending on the nature of the particular government support for that security.
U.S. government securities may be supported by: (i) the full faith and credit of the United States government; (ii) the ability of the
issuer to borrow from the U.S. Treasury; (iii) the credit of the issuing agency, instrumentality or government-sponsored entity (GSE);
(iv) pools of assets (e.g., MBS); or (v) the United States in some other way. The U.S. government and its agencies and instrumentalities
do not guarantee the market value of their securities, which may fluctuate in value and are subject to investment risks, and certain
U.S. government securities may not be backed by the full faith and credit of the United States government and, thus, are subject to greater
credit risk than other types of U.S. government securities. Any downgrades of the U.S. credit rating could increase volatility in both
stock and bond markets, result in higher interest rates and higher Treasury yields and increase the costs of all debt generally. The
value of U.S. government obligations may be adversely affected by changes in interest rates. There is no guarantee that the U.S. government
will provide support to its agencies and GSEs if they are unable to meet their obligations. In addition, it is possible that the
issuers of some U.S. government securities will not have the funds to meet their payment obligations in the future and there is a risk
of default.
|
Brexit Risk [Member] |
|
General Description of Registrant [Abstract] |
|
Risk [Text Block] |
UK Departure
from EU (Brexit) Risk
The United
Kingdom ceased to be a member of the EU on January 31, 2020 (such departure from the EU, Brexit). A trade agreement between
the EU and the United Kingdom (the TCA) took effect on May 1, 2021, and now governs the relationship between the EU and the
United Kingdom. Although the TCA covers many issues, such as economic partnership, free trade, law enforcement and judicial co-operation
and governance, it is silent on items such as financial services equivalence. As such, there remains uncertainty as to the scope, nature
and terms of the relationship between the United Kingdom and the EU and the effect and implication of the TCA. Brexit may have a negative
impact on the economy and currency of the United Kingdom and EU as a result of anticipated, perceived or actual changes to the United
Kingdoms economic and political relations with the EU. Brexit may also have a destabilizing impact on the EU to the extent other
member states similarly seek to withdraw from the union. Any further exits from member states of the EU, or the possibility of such exits,
would likely cause additional market disruption globally and introduce new legal and regulatory uncertainties. Any or all of these challenges
may affect the value of the Funds investments that are economically tied to the United Kingdom or the EU, and could have an adverse
impact on the Funds performance.
|
Redenomination Risk [Member] |
|
General Description of Registrant [Abstract] |
|
Risk [Text Block] |
Redenomination
Risk
The result
of Brexit, the progression of the European debt crisis and the possibility of one or more Eurozone countries exiting the European Monetary
Union (EMU), or even the collapse of the euro as a common currency, has in recent years created significant volatility in
currency and financial markets generally. The effects of the collapse of the euro, or of the exit of one or more countries from the EMU,
on the U.S. and global economies and securities markets are impossible to predict and any such events could have a significant adverse
impact on the value and risk profile of the Funds portfolio. Any partial or complete dissolution of the EMU could have significant
adverse effects on currency and financial markets, and on the values of the Funds portfolio investments. If one or more EMU countries
were to stop using the euro as its primary currency, the Funds investments in such countries may be redenominated into a different
or newly adopted currency. As a result, the value of those investments could decline significantly and unpredictably. In addition, securities
or other investments that are redenominated may be subject to foreign currency risk, liquidity risk and valuation risk to a greater extent
than similar investments currently denominated in euros. To the extent a currency used for redenomination purposes is not specified in
respect of certain EMU-related investments, or should the euro cease to be used entirely, the currency in which such investments are
denominated may be unclear, making such investments particularly difficult to value or dispose of. The Fund may incur additional expenses
to the extent it is required to seek judicial or other clarification of the denomination or value of such securities.
|
Legislation And Regulation Risk [Member] |
|
General Description of Registrant [Abstract] |
|
Risk [Text Block] |
Legislation
and Regulation Risk At any time
after the date hereof, U.S. and non-U.S. governmental agencies and other regulators may implement additional regulations and legislators
may pass new laws that affect the investments held by the Fund, the strategies used by the Fund or the level of regulation or taxation
applying to the Fund (such as regulations related to investments in derivatives and other transactions). These regulations
and laws may impact the investment strategies, performance, costs and operations of the Fund, as well as the way investments in, and
shareholders of, the Fund are taxed.
|
Recent Market Developments Risk [Member] |
|
General Description of Registrant [Abstract] |
|
Risk [Text Block] |
Recent
Market Developments Risk The value
of, or income generated by, the investments held by the Fund are subject to the possibility of rapid and unpredictable fluctuation, and
loss. These movements may result from factors affecting individual companies or issuers or particular industries, or from broader influences,
including real or perceived changes in prevailing interest rates, changes in inflation rates or expectations about inflation rates ,
adverse investor confidence or sentiment, changing economic, political (including geopolitical), social or financial market conditions,
tariffs and trade disruptions, recession, changes in currency rates, increased instability or general uncertainty, environmental disasters,
governmental actions, public health emergencies (such as the spread of infectious diseases, pandemics and epidemics), debt crises, actual
or threatened wars or other armed conflicts or credit ratings downgrades, and other similar types of events, each of which may be temporary
or last for extended periods.
Periods of
market volatility remain, and may continue to occur in the future, in response to various market, political, social, geopolitical, economic
and public health events both within and outside of the United States. These conditions have resulted in, and in cases continue to result
in, greater price volatility, less liquidity, widening credit spreads and a lack of price transparency, with certain securities remaining
illiquid and of uncertain value. Such market conditions may adversely affect the Fund, including by making valuation of some of the Funds
securities uncertain and/or result in sudden and significant valuation increases or declines in the Funds holdings. If there is
a significant decline in the value of the Funds portfolio, this may impact the asset coverage levels for the Funds outstanding
leverage.
Risks resulting
from any future debt or other economic or public health situation could also have a detrimental impact on the global economies, the financial
condition of financial institutions, operations of businesses and the Funds business, financial condition and results of operation.
Market and economic disruptions have affected, and may in the future affect, consumer confidence levels and spending, personal bankruptcy
rates, levels of incurrence and default on consumer and other debt and home prices, among other factors. To the extent uncertainty regarding
the U.S. or global economy negatively impacts consumer confidence and consumer credit factors, the Funds business, financial condition
and results of operations could be significantly and adversely affected. Downgrades to the credit ratings of major banks could result
in increased borrowing costs for such banks and negatively affect the broader economy. Moreover, Federal Reserve policy, including with
respect to certain interest rates, may also adversely affect the value, volatility and liquidity of various investments, notably dividend-
and interest-paying securities. These policies are subject to change at any time based on a variety of factors and developments, with
uncertain impacts on financial markets and economic conditions and, thus, the Funds investments. Market volatility, changing interest
rates and/or unfavorable economic conditions could impair the Funds ability to achieve its investment objective. Economies and
markets are experiencing, and have experienced, high inflation rates. In response to such inflation, government authorities have implemented
significant fiscal and monetary policies such as increasing interest rates and quantitative tightening (reduction of money available
in the market), which may adversely impact financial markets and the broader economy, as well as the Funds performance, and have
unintended adverse consequences. Moreover,
changing economic, political, social, geopolitical, financial market or other conditions in one country or geographic region could adversely
affect the value, yield and return of the investments held by the Fund in a different country or geographic region and economies, markets
and issuers generally because of the increasingly interconnected global economies and financial markets. As a result, there is an increased
risk that geopolitical and other events will disrupt economies and markets globally. For example, local or regional armed conflicts have
led to significant sanctions by the United States, Europe and other countries against certain countries (as well as persons and companies
connected with certain counties) and led to indirect adverse regional and global market, economic and other effects. It is difficult to
accurately predict or foresee when events or conditions affecting the U.S. or global financial markets, economies, and issuers may occur,
the effects of such events or conditions, potential escalations or expansions of these events, possible retaliations in response to sanctions
or similar actions and the duration or ultimate impact of those events. There is an increased likelihood that these types of events or
conditions can, sometimes rapidly and unpredictably, result in a variety of adverse developments and circumstances, such as reduced liquidity,
supply chain disruptions and market volatility, as well as increased general uncertainty and broad ramifications for markets, economies,
issuers, businesses in many sectors and societies globally. In addition, adverse changes in one sector or industry or with respect to
a particular company could negatively impact companies in other sectors or industries or increase market volatility as a result of the
interconnected nature of economies and markets and thus negatively affect the Funds performance. For example, developments in the
banking or financial services sectors (or one or more companies operating in these sectors) could adversely impact a wide range of companies
and issuers. These types of adverse developments could negatively affect the Funds performance or operations.
|
Increasing Government And Other Public Debt Risk [Member] |
|
General Description of Registrant [Abstract] |
|
Risk [Text Block] |
Increasing
Government and other Public Debt Risk
Government
and other public debt, including municipal obligations in which the Fund may invest, can be adversely affected by large and sudden changes
in local and global economic conditions that result in increased debt levels. Although high levels of government and other public debt
do not necessarily indicate or cause economic problems, high levels of debt may create certain systemic risks if sound debt management
practices are not implemented. A high debt level may increase market pressures to meet an issuers funding needs, which may increase
borrowing costs and cause a government or public or municipal entity to issue additional debt, thereby increasing the risk of refinancing.
A high debt level also raises concerns that the issuer may be unable or unwilling to repay the principal or interest on its debt, which
may adversely impact instruments held by the Fund that rely on such payments. Extraordinary governmental and quasigovernmental responses
to economic, market, labor and public health conditions designed to support the markets may, at times, significantly increase government
and other public debt, which heighten these risks and the long term consequences of these actions are not known. Unsustainable debt levels
can decline the valuation of currencies, and can prevent a government from implementing effective counter-cyclical fiscal policy during
economic downturns or can lead to increases in inflation or generate or contribute to an economic downturn.
|
Municipal Securities Risk [Member] |
|
General Description of Registrant [Abstract] |
|
Risk [Text Block] |
Municipal
Securities Risk Municipal
securities are subject to a variety of risks generally associated with investments in debt instruments, including credit, interest rate,
prepayment, liquidity, and valuation risks, as well as risks specific
to municipal securities, and can be more volatile than other investments. Taxable municipal securities are subject to similar risks as
tax-exempt municipal securities. The ability of issuers of municipal securities to pay their obligations can be adversely affected by,
among other developments or events, (i) unfavorable legislative, tax, political or other developments or events, including extreme weather
conditions, natural or man-made disasters and public health conditions, (ii) changes in the economic and fiscal conditions of issuers
of municipal securities or the federal government (in cases where it provides financial support to such issuers), and (iii) litigations
involving such issuers. In addition, the values of, and income generated by, municipal securities may fully or partially depend on a
specific revenue or tax source, such as the taxing authority or revenue of a local government, the credit of a private issuer, or the
current or anticipated revenues from a specific project, which may be adversely affected by actual or perceived changes in economic, social
or public health conditions and general economic downturns. Changes in tax laws or other developments that affect the tax-exempt status
of tax-exempt municipal securities may result in a decline in such municipal securities value. Moreover, the income, value and/or
risk of municipal securities is often correlated to specific project or other revenue sources (such as taxes), which can be negatively
affected by, among other things, demographic trends, such as population shifts or changing tastes and values, or increasing vacancies
or declining rents or property values resulting from legal, cultural, technological, global or local economic developments, as well as
reduced demand for properties, revenues or goods or services.
To the extent
the Fund invests a substantial portion of its assets in municipal securities issued by issuers in a particular state, municipality or
project, the Fund will be particularly sensitive to developments and events adversely affecting such state or municipality or with respect
to a particular project. Certain sectors of the municipal bond market have special risks that can affect them more significantly than
the market as a whole. Because many municipal instruments are issued to finance similar projects (such as education, health care, transportation
and utilities), conditions in these industries can significantly affect the overall municipal market. Also, municipal securities backed
by current or anticipated revenues from a specific project or assets can be negatively affected by the discontinuance of taxation or reduction
of revenue supporting the project or assets.
Municipal
securities that are insured may be adversely affected by developments relevant to that particular insurer, or more general developments
relevant to the market as a whole. The Funds vulnerability to potential losses associated with such developments may be reduced
through investment in municipal securities that feature credit enhancements (such as bond insurance). Although insurance may reduce the
credit risk of a municipal security, it does not protect against fluctuations in the value of the Funds shares caused by market
changes. It is important to note that, although insurance may increase the credit safety of investments held by the Fund, it decreases
the Funds yield as the Fund may pay for the insurance directly or indirectly. In addition, while the obligation of a municipal
bond insurance company to pay a claim extends over the life of an insured bond, there is no assurance that insurers will meet their claims.
A higher-than-anticipated default rate on municipal bonds (or other insurance the insurer provides) could strain the insurers loss
reserves and adversely affect its ability to pay claims to bondholders.
Municipal
securities can be difficult to value and be less liquid than other investments, which may affect performance. Additionally,
the amount of public information available about municipal securities is generally less than that for corporate equities or bonds, and
the investment performance of the Funds municipal securities investments, and their risks, may therefore be more dependent on the
analytical abilities of the Adviser than its investment in certain other securities. Information related to municipal securities and
their risks may be provided by the municipality itself, which may not always be accurate. The secondary market for municipal securities,
particularly below investment grade municipal securities, also tends to be less well-developed or liquid than many other securities markets,
which may adversely affect the Funds ability to sell such securities at prices approximating those at which the Fund may currently
value them.
Investments
in municipal securities are subject to risks associated with the financial health of the issuers of such securities or the revenue associated
with underlying projects or other sources. For example, social, political, economic, market or public health conditions can, and have
at times, significantly stressed the financial resources of many municipalities and other issuers of municipal securities, which may
adversely affect their ability to meet their financial obligations and the value or liquidity of the Funds investments in municipal
securities. A number of municipal issuers, in the past, have defaulted on obligations, been downgraded or commenced insolvency proceedings.
Financial difficulties of issuers of municipal securities may occur in the future and the financial condition of such issuers may decline
quickly. The ability of municipal issuers to make timely payments of interest and principal may be diminished during general economic
downturns and as governmental cost burdens are reallocated among federal, state and local governments. The taxing power of any governmental
entity may be limited by provisions of state constitutions or laws and an entitys credit will depend on many factors, including
the entitys tax base, the extent to which the entity relies on federal or state aid and other factors which are beyond the entitys
control. In addition, laws enacted or that may be enacted in the future by governmental authorities could extend the time for payment
of principal and/or interest, or impose other constraints on enforcement of such obligations or on the ability of municipalities to levy
taxes.
Moreover,
as a result of economic, market and other factors, there could be reduced tax or other revenue available to issuers of municipal securities
and, in turn, increased budgetary and financial pressure on the municipality and other issuers of municipal securities, which could increase
the risks associated with municipal securities of such issuer. As a result, the Funds investments in municipal obligations or other
securities may be subject to heightened risks relating to the occurrence of such developments. Issuers of municipal securities might
seek protection under bankruptcy laws. In the event of bankruptcy of such an issuer, holders of municipal securities could experience
delays in collecting principal and interest and such holders may not be able to collect all principal and interest to which they are
entitled. Legislative developments may result in changes to the laws relating to municipal bankruptcies, which may adversely affect the
Funds investments in municipal securities.
|
When Issued And Delayed Delivery Transactions Risk [Member] |
|
General Description of Registrant [Abstract] |
|
Risk [Text Block] |
When-Issued
and Delayed Delivery Transactions Risk
Securities
purchased on a when-issued or delayed delivery basis may expose the Fund to counterparty risk of default as well as the risk that securities
may experience fluctuations in value prior to their actual delivery. The Fund generally will not accrue income with respect to a when-issued
or delayed delivery security prior to its stated delivery date. Purchasing securities on a when-issued or delayed delivery basis can
involve the additional risk that the price or yield available in the market when the delivery takes place may not be as favorable as
that obtained in the transaction itself.
|
Short Sales Risk [Member] |
|
General Description of Registrant [Abstract] |
|
Risk [Text Block] |
Short
Sales Risk
The Fund
may make short sales of securities. Short selling a security involves selling a borrowed security with the expectation that the value
of that security will decline, so that the security may be purchased at a lower price when returning the borrowed security. If the price
of the security sold short increases between the time of the short sale and the time the Fund replaces the borrowed security, the Fund
will incur a loss; conversely, if the price declines, the Fund will realize a capital gain. Any gain will be decreased, and any loss
will be increased, by the transaction costs incurred by the Fund, including the costs associated with providing collateral to the broker-dealer
(usually cash and liquid securities) and the maintenance of collateral with its custodian. Although the Funds gain is limited to
the price at which it sold the security short, its potential loss is theoretically unlimited and may be greater than a direct investment
in the security itself because the price of the borrowed or reference security may rise. The Fund may not always be able to close out
a short position at a particular time or at an acceptable price. A lender may request that borrowed securities be returned to it on short
notice, and the Fund may have to buy the borrowed securities at an unfavorable price, resulting in a loss. The Fund may have to pay a
premium to borrow the securities and must pay any dividends or interest payable on the securities until they are replaced, which will
be expenses of the Fund. Short sales also subject the Fund to risks related to the lender (such as bankruptcy risks) or the general risk
that the lender does not comply with its obligations. Government actions also may affect the Funds ability to engage in short selling.
The use of physical short sales is typically more expensive than gaining short exposure through derivatives.
|
Repurchase Agreement Risk [Member] |
|
General Description of Registrant [Abstract] |
|
Risk [Text Block] |
Repurchase
Agreement Risk
The Fund
may enter into bilateral and tri-party repurchase agreements. In a typical Fund repurchase agreement, the Fund enters into a contract
with a broker, dealer, or bank (the counterparty to the transaction) for the purchase of securities or other assets. The
counterparty agrees to repurchase the securities or other assets at a specified future date, or on demand, for a price that is sufficient
to return to the Fund its original purchase price, plus an additional amount representing the return on the Funds investment. Such
repurchase agreements economically function as a secured loan from the Fund to a counterparty. If the counterparty defaults on the repurchase
agreement, the Fund will retain possession of the underlying securities or other assets. If bankruptcy proceedings are commenced with
respect to the seller, realization on the collateral by the Fund may be delayed or limited and the Fund may incur additional costs. In
such case, the Fund will be subject to risks associated with changes in market value of the collateral securities or other assets. The
Fund intends to enter into repurchase agreements only with brokers, dealers, or banks or other permitted counterparties after the Adviser
(or GPIM) evaluates the creditworthiness of the counterparty. The Fund will not enter into repurchase agreements with the Adviser or
GPIM or their affiliates. Except as provided under applicable law, the Fund may enter into repurchase agreements without limitation.
Repurchase
agreements collateralized fully by cash items, U.S. government securities or by securities issued by an issuer that the Adviser or GPIM
has determined at the time the repurchase agreement is entered into has an exceptionally strong capacity to meet its financial obligations
(Qualifying Collateral) and meet certain liquidity standards generally may be deemed to be collateralized fully
and may be deemed to be investments in the underlying securities for certain purposes. The Fund may accept collateral other than Qualifying
Collateral determined by the Adviser or GPIM to be in the best interests of the Fund to accept as collateral for such repurchase agreement
(which may include high yield debt instruments that are rated below investment grade) (Alternative Collateral). Repurchase
agreements secured by Alternative Collateral are not deemed to be collateralized fully under applicable regulations and the
repurchase agreement is therefore considered a separate security issued by the counterparty to the Fund. Accordingly, the Fund must include
repurchase agreements that are not collateralized fully in its calculations of securities issued by the selling institution
held by the Fund for purposes of various portfolio diversification and concentration requirements applicable to the Fund. In addition,
Alternative Collateral may not qualify as permitted or appropriate investments for the Fund under the Funds investment strategies
and limitations. Accordingly, if a counterparty to a repurchase agreement defaults and the Fund takes possession of Alternative Collateral,
the Fund may need to promptly dispose of the Alternative Collateral (or other securities held by the Fund, if the Fund exceeds a limitation
on a permitted investment by virtue of taking possession of the Alternative Collateral). The Alternative Collateral may be particularly
illiquid, especially in times of market volatility or in the case of a counterparty insolvency or bankruptcy, which may restrict the
Funds ability to dispose of Alternative Collateral received from the counterparty. Depending on the terms of the repurchase agreement,
the Fund may determine to sell the collateral during the term of the repurchase agreement and then purchase the same collateral at the
market price at the time of the resale. In tri-party repurchase agreements, an unaffiliated third party custodian maintains accounts to
hold collateral for the Fund and its counterparties and, therefore, the Fund may be subject to the credit risk of those custodians. Securities
subject to repurchase agreements (other than tri-party repurchase agreements) and purchase and sale contracts will be held by the Funds
custodian (or sub-custodian) in the Federal Reserve/Treasury book-entry system or by another authorized securities depository.
|
Securities Lending Risk [Member] |
|
General Description of Registrant [Abstract] |
|
Risk [Text Block] |
Securities
Lending Risk
The Fund
may lend its portfolio securities to banks or dealers which meet the Funds creditworthiness standards. Securities lending is subject
to the risk that loaned securities may not be available to the Fund on a timely basis and the Fund may therefore lose the opportunity
to sell the securities at a desirable price. Any loss in the market price of securities loaned by the Fund that occurs during the term
of the loan would be borne by the Fund and would adversely affect the Funds performance. Also, there may be delays in recovery,
or no recovery, of securities loaned or even a loss of rights in the collateral should the borrower of the securities fail financially
while the loan is outstanding.
|
Risk Of Failure To Quality As R I C [Member] |
|
General Description of Registrant [Abstract] |
|
Risk [Text Block] |
Risk of
Failure to Qualify as a RIC
To qualify
for the favorable U.S. federal income tax treatment generally accorded to regulated investment companies (RICs), the Fund
must, among other things, derive in each taxable year at least 90% of its gross income from certain prescribed sources, meet certain
asset diversification tests and distribute for each taxable year at least 90% of its investment company taxable income (generally,
ordinary income plus the excess, if any, of net short-term capital gain over net long-term capital loss). If for any taxable year the
Fund does not qualify as a RIC, all of its taxable income for that year (including its net capital gain) would be subject to tax at regular
corporate rates without any deduction for distributions to shareholders, and such distributions would be taxable as ordinary dividends
to the extent of the Funds current and accumulated earnings and profits.
|
Conflicts Of Interest Risk [Member] |
|
General Description of Registrant [Abstract] |
|
Risk [Text Block] |
Conflicts
of Interest Risk Guggenheim
Partners, LLC (Guggenheim Partners) is a global asset management and investment advisory organization. Guggenheim Partners
and its affiliates advise clients in various markets and transactions and purchase, sell, hold and recommend a broad array of investments
for their own accounts and the accounts of clients and of their personnel and the relationships and products they sponsor, manage and
advise. Accordingly, Guggenheim Partners and its affiliates may have direct and indirect interests in a variety of global markets and the
securities of issuers in which the Fund may directly or indirectly invest. These interests may cause the Fund to be subject to regulatory
limits, and in certain circumstances, these various activities may prevent the Fund from participating in an investment decision.
An investment
in the Fund is subject to a number of actual or potential conflicts of interest. For example, the Adviser and its affiliates are engaged
in a variety of business activities that are unrelated to managing the Fund, which may give rise to actual, potential or perceived conflicts
of interest in connection with making investment decisions for the Fund. As a result, activities and dealings of Guggenheim Partners
and its affiliates may affect the Fund in ways that may disadvantage or restrict the Fund or be deemed to benefit Guggenheim Partners and
its affiliates. From time to time, conflicts of interest may arise between a portfolio managers management of the investments of
the Fund on the one hand and the management of other registered investment companies, pooled investment vehicles and other accounts (collectively,
other accounts) on the other. The other accounts might have similar investment objectives or strategies as the Fund or otherwise
hold, purchase, or sell securities that are eligible to be held, purchased or sold by the Fund. In certain circumstances, and subject
to its fiduciary obligations under the Investment Advisers Act of 1940 and the requirements of the 1940 Act, the Adviser or GPIM may
have to allocate a limited investment opportunity among its clients. The other accounts might also have different investment objectives
or strategies than the Fund. In addition, the Fund may be limited in its ability to invest in, or hold securities of, any companies that
the Adviser or its affiliates (or other accounts managed by the Adviser or its affiliates) control, or companies in which the Adviser or
its affiliates have interests or with whom they do business. For example, affiliates of the Adviser may act as underwriter, lead agent or
administrative agent for loans or otherwise participate in the market for loans. Because of limitations imposed by applicable law, the
presence of the Advisers affiliates in the markets for loans may restrict the Funds ability to acquire some loans or affect
the timing or price of such acquisitions. To address these conflicts, the Fund and Guggenheim Partners and its affiliates have established
various policies and procedures that are reasonably designed to detect and prevent such conflicts and prevent the Fund from being disadvantaged.
There can be no guarantee that these policies and procedures will be successful in every instance.
|
Market Disruption And Geopolitcal Risk [Member] |
|
General Description of Registrant [Abstract] |
|
Risk [Text Block] |
Market
Disruption and Geopolitical Risk
The Fund
does not know and cannot predict how long the securities markets may be affected by geopolitical events and the effects of these and similar
events in the future on the U.S. economy and securities markets. The Fund may be adversely affected by abrogation of international agreements
and national laws which have created the market instruments in which the Fund may invest, failure of the designated national and international
authorities to enforce compliance with the same laws and agreements, failure of local, national and international organization to carry
out their duties prescribed to them under the relevant agreements, revisions of these laws and agreements which dilute their effectiveness
or conflicting interpretation of provisions of the same laws and agreements. The Fund
may be adversely affected by uncertainties such as terrorism, international political developments, and changes in government policies,
taxation, restrictions on foreign investment and currency repatriation, currency fluctuations and other developments in the laws and
regulations of the countries in which it is invested and the risks associated with financial, economic, geopolitical, public health,
labor and other global market developments and disruptions, such as the ongoing Russia-Ukraine conflict and its risk of expansion or
collateral economic and other effects.
|
Cybersecurity Market Disruptions And Operational Risk [Member] |
|
General Description of Registrant [Abstract] |
|
Risk [Text Block] |
Cyber
Security, Market Disruptions and Operational Risk Like other
funds and other parts of the modern economy, the Fund and its service providers, as well as exchanges and market participants through
or with which the Fund trades and exchanges on which its shares trade and other infrastructures, services and parties on which the Fund,
the Adviser, GPIM or the Funds other service providers rely, are susceptible to ongoing risks related to cyber incidents and the
risks associated with financial, economic, public health, labor and other global market developments and disruptions, including those
arising out of geopolitical events, public health emergencies (such as the spread of infectious diseases, pandemics and epidemics), natural/environmental
disasters, war, terrorism and governmental or quasi-governmental actions. Cyber incidents can result from unintentional events (such
as an inadvertent release of confidential information) or deliberate attacks (such as cyber extortion) by insiders or third parties,
including cyber criminals, competitors, nation-states and hacktivists, and can be perpetrated by a variety of complex means,
including the use of stolen access credentials, malware or other computer viruses, ransomware, phishing, structured query language injection
attacks, and distributed denial of service attacks, among other means. Cyber incidents and market disruptions may result in actual or
potential adverse consequences for critical information and communications technology, systems and networks that are vital to the operations
of the Fund or its service providers, or otherwise impair Fund or service provider operations. For example, a cyber incident may cause
operational disruptions and failures impacting information systems or information that a system processes, stores, or transmits, such
as by theft, damage or destruction, or corruption or modification of and denial of access to data maintained online or digitally, denial
of service on websites rendering the websites unavailable to intended users or not accessible for such users in a timely manner, and
the unauthorized release or other exploitation of confidential information. Recent geopolitical tensions may have increased the scale
and sophistication of deliberate cyber attacks, particularly from nation-states or entities with nation-state backing.
A cyber incident
or sudden market disruption could adversely impact the Fund, its service providers or its shareholders by, among other things, interfering
with the processing of transactions or other operational functionality, impacting the Funds ability to calculate its NAV or other
data, causing the release of private shareholder information (i.e., identity theft or other privacy breaches) or confidential
Fund information or otherwise compromising the security and reliability of information, impeding trading, causing reputational damage,
and subjecting the Fund or its service providers to regulatory fines, penalties or financial losses, reimbursement or other compensation
or remediation costs, litigation expenses and additional compliance and cyber security risk management costs, which may be substantial.
The same could affect the exchange on which Fund shares trade. A cyber incident could also adversely affect the ability of the Fund (and
its Adviser) to invest or manage the Funds assets. Cyber incidents
and developments and disruptions to financial, economic, public health, labor and other global market conditions can obstruct the regular
functioning of business workforces (including requiring employees to work from external locations or from their homes), cause business
slowdowns or temporary suspensions of business activities, each of which can negatively impact Fund service providers and Fund operations.
Although the Fund and its service providers, as well as exchanges and market participants through or with which the Fund trades and other
infrastructures on which the Fund or its service providers rely, may have established business continuity plans and systems reasonably
designed to protect from and/or defend against the risks or adverse consequences associated with cyber incidents and market disruptions,
there are inherent limitations in these plans and systems, including that certain risks may not yet be identified, in large part because
different or unknown threats may emerge in the future and the threats continue to rapidly evolve and increase in sophistication. As a
result, it is not possible to anticipate and prevent every cyber incident and possible obstruction to the normal activities of these
entities employees resulting from market disruptions and attempts to mitigate the occurrence or impact of such events may be unsuccessful.
For example, public health emergencies and governmental responses to such emergencies, including through quarantine measures and travel
restrictions, can create difficulties in carrying out the normal working processes of these entities employees, disrupt their operations
and hamper their capabilities. The nature, extent, and potential magnitude of the adverse consequences of these events cannot be predicted
accurately but may result in significant risks, adverse consequences and costs to the Fund and its shareholders. The use of cloud-based
service providers could heighten all of the above risks.
The issuers
of securities in which the Fund invests are also subject to the ongoing risks and threats associated with cyber incidents and market
disruptions. These incidents could result in adverse consequences for such issuers, and may cause the Funds investment in such
securities to lose value. For example, a cyber incident involving an issuer may include the theft, destruction or misappropriation of
financial assets, intellectual property or other sensitive information belonging to the issuer or their customers (i.e., identity
theft or other privacy breaches) and a market disruption involving an issuer may include materially reduced consumer demand and output,
disrupted supply chains, market closures, travel restrictions and quarantines. As a result, the issuer may experience the types of adverse
consequences summarized above, among others (such as loss of revenue), despite having implemented preventative and other measures reasonably
designed to protect from and/or defend against the risks or adverse effects associated with cyber incidents and market disruptions.
The Fund
and its service providers, as well as exchanges and market participants through or with which the Fund trades and other infrastructures
on which the Fund or its service providers rely, are also subject to the risks associated with technological and operational disruptions
or failures arising from, for example, processing errors and human errors, inadequate or failed internal or external processes, failures
in systems and technology, errors in algorithms used with respect to the Fund, changes in personnel, and errors caused by third parties
or trading counterparties. Although the Fund attempts to minimize such failures through controls and oversight, it is not possible to
identify all of the operational risks that may affect the Fund or to develop processes and controls that completely eliminate or mitigate
the occurrence of such failures or other disruptions in service. Cyber incidents,
market disruptions and operational errors or failures or other technological issues may adversely affect the Funds ability to calculate
its NAV correctly, in a timely manner or process trades or Fund or shareholder transactions may be adversely affected, including over
a potentially extended period. The Fund does not control the cyber security, disaster recovery, or other operational defense plans or
systems of its service providers, intermediaries, exchanges where its shares trades, companies in which it invests or other third-parties.
The value of an investment in Fund shares may be adversely affected by the occurrence of the cyber incidents, market disruptions and operational
errors or failures or technological issues summarized above or other similar events and the Fund and its shareholders may bear costs
tied to these risks.
In addition,
work-from-home arrangements by the Fund, the Adviser or GPIM (or their service providers) could increase all of the above risks, create
additional data and information accessibility concerns, and make the Fund, the Adviser or GPIM (or their service providers) more susceptible
to operational disruptions, any of which could adversely impact their operations. Furthermore, the Fund may be an appealing target for
cybersecurity threats such as hackers and malware.
|
Technology Risk [Member] |
|
General Description of Registrant [Abstract] |
|
Risk [Text Block] |
Technology
Risk
The Fund
and its service providers and markets generally have become more susceptible to potential operational risks related to intentional and
unintentional events that may cause the Fund or a service provider to lose proprietary information, suffer data corruption or lose operational
capacity. There can be no guarantee that any risk management systems established by the Fund, its service providers, or issuers of the
securities in which the Fund invests to reduce technology and cyber security risks will succeed, and the Fund cannot control such systems
put in place by service providers, issuers or other third parties whose operations may affect the Fund.
|
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