Thomas
A. Hale
Skadden,
Arps, Slate, Meagher & Flom LLP
155
N. Wacker Drive
Chicago,
Illinois 60606
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Title
of Securities
Being Registered
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Amount
Being
Registered (1)
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Aggregate
Offering Price (2)
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Amount
of
Registration Fee
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Common
shares of beneficial interest, $.01 par value
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$1,000,000
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$71.30
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The
Fund
.......................................................................
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Claymore/Guggenheim
Strategic Opportunities Fund (the “Fund”) is a diversified, closed-end
management investment company that commenced operations on July 26, 2007.
The Fund’s objective is to maximize total return through a combination of
current income and capital appreciation.
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Claymore
Advisors, LLC (the “Investment Adviser”) serves as the Fund’s investment
adviser and is responsible for the management of the Fund. Guggenheim
Partners Asset Management, LLC (the “Sub-Adviser”) is responsible for
the management of the Fund’s portfolio of securities. Each of the
Investment Adviser and the Sub-Adviser are wholly-owned subsidiaries of
Guggenheim Partners, LLC (“Guggenheim”).
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The
Offering
..............................................................
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The
Fund may offer, from time to time, up to $[ ] aggregate initial offering
price of Common Shares, on terms to be determined at the time of the
offering. The Fund will offer Common Shares at prices and on terms to be
set forth in one or more supplements to this Prospectus (each a
“Prospectus Supplement”).
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The
Fund may offer Common Shares (1) directly to one or more purchasers, (2)
through agents that the Fund may designate from time to time, or (3) to or
through underwriters or dealers. The Prospectus Supplement relating to a
particular offering will identify any agents or underwriters involved in
the sale of Common Shares, and will set forth any applicable purchase
price, fee, commission or discount arrangement between the Fund and agents
or underwriters or among underwriters or the basis upon which such amount
may be calculated. The Fund may not sell Common Shares through agents,
underwriters or dealers without delivery of a Prospectus Supplement
describing the method and terms of the offering of Common Shares. See
“Plan of Distribution.”
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Use
of Proceeds
............................................................
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Unless
otherwise specified in a Prospectus Supplement, the Fund intends to invest
the net proceeds of an offering of Common Shares in accordance with its
investment objective and policies as stated herein. It is currently
anticipated that the Fund will be able to invest substantially all of the
net proceeds of an offering of Common Shares in accordance with its
investment objective and policies within three months after the completion
of such offering. Pending such investment, it is anticipated that the
proceeds will be invested in U.S. government securities or high quality,
short-term money market securities. The Fund may also use the proceeds for
working capital purposes, including the payment of distributions, interest
and operating expenses, although the Fund currently has no intent to issue
Common Shares primarily for this
purpose.
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•
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mezzanine
and preferred securities; and
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•
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convertible
securities.
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The
Fund may invest up to 20% of its total assets in non-U.S.
dollar-denominated Income Securities of corporate and governmental issuers
located outside the United States, including up to 10% in emerging
markets.
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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 (“Common Equity Securities”) that the Sub-Adviser believes
offer attractive yield and/or capital appreciation potential. As part of
its Common Equity Securities strategy, the Fund currently intends to
employ a strategy of writing (selling) covered call options and may, from
time to time, buy or sell put options on individual Common Equity
Securities and, to a lesser extent, 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 Fund’s Common Shareholders.
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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”).
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Personal 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 “personal property assets,” such as special situation
transportation assets (
e.g.
, railcars, ships,
airplanes and automobiles) and collectibles (
e.g.
, antiques, wine
and fine art) (“Personal Property Asset Companies”). 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.
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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 than comparable
public securities, including availability of financial information about
the issuer and valuation and liquidity issues.
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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”). 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, of which
amount up to 20% of its total assets may be invested in Investment Funds
that are registered as investment companies (“Registered
Investment
|
Funds”)
under the Investment Company Act of 1940, as amended (the “1940 Act”). As
used in this prospectus, “Private Investment Funds” means privately
offered Investment Funds that are excluded from the definition of
“investment company” under the 1940 Act, including by operation of Section
3(c)(1) or 3(c)(7) thereof. 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 Fund’s Common Shares.
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Affiliated Investment
Funds
. Affiliates of the Sub-Adviser and of Guggenheim may act as
investment adviser or manager of Private Investment Funds and other pooled
or structured vehicles, including Investment Funds utilized in connection
with structured finance investments (collectively, “Affiliated Investment
Funds”). The Fund would only invest in Affiliated Investment Funds that
offer their securities to unaffiliated third parties (including to
existing security holders) and only on the same terms and at the same
times as such securities are offered to such unaffiliated third parties.
The Fund would pay its pro rata share of the fees and expenses allocable
to its investments in Affiliated Investment Funds. However, investments in
Affiliated Investment Funds would not constitute Managed Assets (as
defined herein) for purposes of determining the amount of management fees
payable by the Fund to the Sub-Adviser. The Fund may only invest in
Affiliated Investment Funds to the extent permitted by applicable law and
related interpretations of the staff of the SEC. The Fund may seek
exemptive relief from the SEC that would permit the Fund to co-invest in
Private Securities, including Private Investment Funds managed by third
parties, with Affiliated Investment Funds. There can be no assurance that
the Fund will obtain such relief or that, if obtained, the terms will be
acceptable to the Fund.
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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
swaps, options, forwards, notional principal contracts or other financial
instruments) to replicate, modify or replace the economic attributes
associated with an investment in Income Securities and Common Equity
Securities (including interests in Investment Funds and, in certain
circumstances, Affiliated Investment Funds).
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Investment
Policies
...........................................................
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The
Fund may allocate its assets among a wide variety of Income Securities and
Common Equity Securities, provided that, under normal market conditions,
the Fund will not invest more than:
|
|
•
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60%
of its total assets in Income Securities rated below-investment
grade;
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•
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50%
of its total assets in Common Equity Securities consisting of common
stock;
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•
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30%
of its total assets in Investment Funds;
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•
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20%
of its total assets in non-U.S. dollar-denominated Income Securities;
and
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•
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10%
of its total assets in Income Securities of issuers in emerging
markets.
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Unless
otherwise stated in this prospectus or the SAI, the Fund’s investment
policies are considered non-fundamental and may be changed by the Board of
Trustees of the Fund (the “Board of Trustees”) without Common Shareholder
approval. The Fund will provide investors with at least 60 days’ prior
notice of any change in the Fund’s investment policies. See “Investment
Objective and Policies” in this prospectus and in the
SAI.
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Financial
Leverage
.........................................................
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The
Fund may seek to enhance the level of its current distributions by
utilizing financial leverage through the issuance of senior securities
such as preferred shares (“Preferred Shares”), through borrowing or the
issuance of commercial paper or other forms of debt (“Borrowings”),
through reverse repurchase agreements, dollar rolls or similar
transactions or through a combination of the foregoing (collectively
“Financial Leverage”). The Fund’s total Financial Leverage may vary over
time; however, the aggregate amount of Financial Leverage is not expected
to exceed 33
1
/
3
% of
the Fund’s Managed Assets after such issuance and/or borrowing; however,
the Fund may utilize Financial Leverage up to the limits imposed by the
1940 Act. The Fund may also borrow in excess of such limit for temporary
purposes such as the settlement of transactions.
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The
Fund has entered into a committed facility agreement with BNP Paribas
Prime Brokerage, Inc. pursuant to which the Fund may borrow up to $30
million. On May 31, 2010, outstanding Borrowings under the committed
facility agreement were $[ ] million, which represented [ ]% of the Fund’s
Managed Assets as of such date. The Fund may invest a portion of its
Managed Assets through participation in the Term Asset-Backed Securities
Loan Facility program (the “TALF Program”), a program developed by the
Board of Governors of the Federal Reserve System and the U.S. Department
of the Treasury and operated by the Federal Reserve Bank of New York
(“FRBNY”). Under the TALF Program, the FRBNY may provide loans to the Fund
to purchase certain investment-grade, asset-backed securities which must
be backed by auto loans, student loans, credit card loans, small business
loans or certain commercial mortgage-backed securities. As of May 31,
2010, the Fund’s borrowings under the TALF Program represented [ ]% of the
Fund’s Managed Assets. In addition, as of May 31, 2010, the Fund had
reverse repurchase agreements outstanding representing approximately [ ]%
of the Fund’s Managed assets (including the leverage obtained through the
use of the instruments), such that the Fund’s total Financial Leverage
represented approximately [ ]% of the Fund’s Managed Assets, as of May 31,
2010.
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So
long as the net rate of return on the Fund’s investments purchased with
the proceeds of Financial Leverage exceeds the cost of such Financial
Leverage, such excess amounts will be available to pay higher
distributions to holders of the Fund’s Common Shares. Any use of Financial
Leverage must be approved by the Fund’s Board of Trustees. In connection
with the Fund’s use of
Financial
|
Fund’s
average daily Managed Assets, less 0.50% of the Fund’s average daily
assets attributable to any investments by the Fund in Affiliated
Investment Funds.
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Each
of the Investment Adviser and the Sub-Adviser are wholly-owned
subsidiaries of Guggenheim.
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Distributions
...............................................................
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The
Fund intends to pay substantially all of its net investment income to
Common Shareholders through monthly distributions. In addition, the Fund
intends to distribute any net long-term capital gains to Common
Shareholders as long-term capital gain dividends at least annually. The
Fund expects that dividends paid on the Common Shares will consist of (i)
investment company taxable income, which includes, among other things,
ordinary income, short-term capital gain (for example, premiums earned in
connection with the Fund’s covered call option strategy) and income from
certain hedging and interest rate transactions, (ii) qualified dividend
income and (iii) long-term capital gain (gain from the sale of a capital
asset held longer than one year). To the extent the Fund receives
dividends with respect to its investments in Common Equity Securities that
consist of qualified dividend income (income from domestic and certain
foreign corporations), a portion of the Fund’s distributions to its Common
Shareholders may consist of qualified dividend income. The Fund cannot
assure you, however, as to what percentage of the dividends paid on the
Common Shares, if any, will consist of qualified dividend income or
long-term capital gains, which are taxed at lower rates for individuals
than ordinary income. See “Distributions.”
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If
you hold your Common Shares in your own name or if you hold your Common
Shares with a brokerage firm that participates in the Fund’s Automatic
Dividend Reinvestment Plan (the “Plan”), unless you elect to receive cash,
all dividends and distributions that are declared by the Fund will be
automatically reinvested in additional Common Shares of the Fund pursuant
to the Plan. If you hold your Common Shares with a brokerage firm that
does not participate in the Plan, you will not be able to participate in
the Plan and any dividend reinvestment may be effected on different terms
than those described above. Consult your financial adviser for more
information. See “Automatic Dividend Reinvestment
Plan.”
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Listing
and Symbol
..................................................
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The
Common Shares of the Fund have been authorized for listing on the New York
Stock Exchange (the “NYSE”) under the symbol “GOF”.
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Special
Risk Considerations .................................
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Not a Complete Investment
Program
. The Fund is intended for investors seeking current income
and capital appreciation. The Fund is not meant to provide a vehicle for
those who wish to play short-term swings in the stock market. An
investment in the Common Shares of the Fund should not be considered a
complete investment program. Each Common Shareholder should take into
account the Fund’s investment objective as well as the Common
Shareholder’s other investments when considering an investment in the
Fund.
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Investment and Market
Risk
. An investment in Common Shares of the Fund is subject to
investment risk, including the possible loss of the entire principal
amount that you invest. An investment in the
Common
|
Shares
of the Fund represents an indirect investment in the securities owned by
the Fund. The value of those securities may fluctuate, sometimes rapidly
and unpredictably. The value of the securities owned by the Fund will
affect the value of the Common Shares. At any point in time, your Common
Shares may be worth less than your original investment, including the
reinvestment of Fund dividends and distributions.
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Management Risk
. The
Fund is subject to management risk because it has an actively managed
portfolio. The Sub-Adviser 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.
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Income Risk
. The income
investors receive from the Fund is based primarily 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 Fund’s income
could also be affected adversely when prevailing short-term interest rates
increase and the Fund is utilizing leverage, although this risk is
mitigated to the extent the Fund’s investments include floating-rate
obligations.
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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
issuer’s 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.
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Income Securities Risk
.
In addition to the risks discussed above, Income Securities, including
high-yield bonds, are subject to certain risks,
including:
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Issuer Risk
.
The value of Income Securities may decline for a number of reasons which
directly relate to the issuer, such as management performance, financial
leverage and reduced demand for the issuer’s goods and
services.
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Credit Risk
.
Credit risk is the risk that one or more debt obligations in the Fund’s
portfolio will decline in price, or fail to pay interest or principal when
due, because the issuer of the obligation experiences a decline in its
financial status.
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Interest Rate
Risk
. Interest rate risk is the risk that Income Securities will
decline in value because of changes in market interest rates. When market
interest rates rise, the market value of Income Securities generally will
fall.
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Reinvestment
Risk
. Reinvestment risk is the risk that income from the Fund’s
portfolio will decline if the Fund invests the proceeds from matured,
traded or called Income Securities at market interest rates that are below
the Fund portfolio’s current earnings rate. A decline in income could
affect the Common Shares’ market price or the overall return of the
Fund.
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Prepayment
Risk
. During periods of declining interest rates, borrowers may
exercise their option to prepay principal earlier than scheduled, forcing
the Fund to reinvest in lower yielding securities. This is known as call
or prepayment risk.
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Liquidity Risk
.
The Fund may invest without limitation in Income Securities for which
there is no readily available trading market or which are otherwise
illiquid, including certain high-yield bonds. 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 securities 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.
In addition, limited liquidity could affect the market price of Income
Securities, thereby adversely affecting the Fund’s net asset value and
ability to make distributions.
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Valuation of Certain
Income Securities
. The Sub-Adviser normally uses an independent
pricing service to value most Income Securities held by the Fund. Because
the secondary markets for certain investments may be limited, they may be
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.
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Duration and Maturity
Risk
. The Fund has no set 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.
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Below-Investment Grade
Securities Risk.
The Fund may invest in Income Securities rated
below-investment grade or, if unrated, determined by the Sub-Adviser to be
of comparable credit quality, which are commonly referred to as
“high-yield” or “junk” bonds. Investment in securities of below-investment
grade quality involves substantial risk of loss. Income Securities of
below-investment grade quality are predominantly speculative with respect
to the issuer’s capacity to pay interest and repay principal when due and
therefore involve a greater risk of default or decline in market value due
to adverse economic and issuer-specific developments. Income Securities of
below-investment grade quality display increased price sensitivity to
changing interest rates and to a deteriorating economic environment. The
market values for Income Securities of below-investment grade quality tend
to be more volatile and such securities tend to be less liquid than
investment grade debt securities.
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Senior Loans Risk
. The
Fund may invest in senior secured floating rate Loans made to corporations
and other non-governmental 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 and/or stock of the borrower that is
senior to that held by
subordinated
|
debt
holders and stockholders of the borrower. The Fund’s investments in Senior
Loans are typically below-investment grade and are considered speculative
because of the credit risk of their issuers. 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 and secured in contrast to subordinated and unsecured Income
Securities. Senior Loans’ higher standing has historically resulted in
generally higher recoveries in the event of a corporate reorganization. In
addition, because their interest payments are adjusted for changes in
short-term interest rates, investments in Senior Loans generally have less
interest rate risk than other lower grade Income Securities, which may
have fixed interest rates.
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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 second in right of payment 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 to Senior Loans
and therefore are subject to the additional risk that the cash flow of the
borrower and any property securing the Loan may be insufficient to meet
scheduled payments after giving effect to the 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.
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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.
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|
Convertible Securities
Risk
. The Fund may invest in convertible securities, which include
bonds, debentures, notes, preferred stocks and other securities that
entitle the holder to acquire common stock or other equity securities of
the same or a different issuer. Convertible securities generally offer
lower interest or dividend yields than non-convertible securities of
similar quality. As with all Income Securities, the market values of
convertible securities tend to decline as
interest
|
rates
increase and, conversely, to increase as interest rates decline.
Convertible securities also tend to reflect the market price of the
underlying stock in varying degrees, depending on the relationship of such
market price to the conversion price in the terms of the convertible
security. Convertible securities rank senior to common stock in an
issuer’s capital structure and consequently entail less risk than the
issuer’s common stock.
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|
Preferred Stock Risks
.
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
issuer’s common stock. As such, preferred stock is inherently more risky
than the bonds and other debt instruments of the issuer, but less risky
than its common stock. Preferred stocks may be significantly less liquid
than many other securities, such as U.S. Government securities, corporate
debt and common stock.
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|
Structured Finance Investments
Risk
. The Fund’s structured finance investments may include
residential and commercial mortgage-related and asset-backed securities
issued by governmental entities and private issuers, collateralized debt
obligations and risk-linked securities. These securities entail
considerable risk, including many of the risks described above (
e.g.
, market risk,
credit risk, interest rate risk and prepayment risk). The value of
collateralized debt obligations also may change because of changes in the
market’s perception of the underlying collateral of the pool, the
creditworthiness of the servicing agent for or the originator of the pool,
or the financial institution or entity providing credit support for the
pool. Returns on risk-linked securities are dependant upon such events as
property or casualty damages which may be caused by such catastrophic
events as hurricanes or earthquakes or other unpredictable
events.
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|
Foreign Securities
Risk
. The Fund may invest up to 20% of its total assets in non-U.S.
dollar-denominated Income Securities of foreign issuers. Investing in
foreign issuers may involve certain risks not typically associated with
investing in securities of U.S. issuers due to increased exposure to
foreign economic, political 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.
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. 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.
|
Emerging Markets Risk
.
The Fund may invest up to 10% of its total assets in Income Securities the
issuers of which are located in countries considered to be emerging
markets, and investments in such securities are considered speculative.
Heightened risks of investing in emerging markets include: smaller market
capitalization of securities markets, which may suffer periods of relative
illiquidity; significant price volatility; restrictions on foreign
investment; and potential restrictions on repatriation of investment
income and capital.
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|
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 Fund’s investment performance may
be negatively affected by a devaluation of a currency in which the Fund’s
investments are denominated or quoted. Further, the Fund’s 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.
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|
Common Equity Securities
Risk
. The Fund may invest up to 50% of its total assets in Common
Equity Securities. 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 broader domestic and international political and economic events. The
prices of Common Equity Securities are also sensitive to general movements
in the stock market, so a drop in the stock market may depress the prices
of Common Equity Securities to which the Fund has exposure. While broad
market measures of Common Equity Securities have historically generated
higher average returns than 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
company’s capital structure in terms of priority to corporate income and
are therefore inherently more risky than preferred stock or debt
instruments of such issuers.
|
|
Risks Associated with the
Fund’s Covered Call Option Strategy
. 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 skill and judgment, and
even a well conceived transaction may be unsuccessful to some degree
because of market behavior or unexpected events.
|
|
As
the writer of a covered call option, the Fund forgoes, during the option’s
life, the opportunity to profit from increases in the market value of the
security covering the call option above the sum of the premium and the
strike price of the call, but retains the risk of
loss
|
should
the price of the underlying security decline. As the Fund writes covered
calls over more of its portfolio, its ability to benefit from capital
appreciation becomes more limited. See “Risks—Risks Associated with the
Fund’s Covered Call Option Strategy—Risks Associated with Covered Call and
Put Options.”
|
|
With
respect to exchange-traded options, there can be no assurance that a
liquid market will exist when the Fund seeks to close out an option
position on an options exchange. If the Fund were unable to close out a
covered call option that it had written on a security, it would not be
able to sell the underlying security unless the option expired without
exercise. See “Risks—Risks Associated with the Fund’s Covered Call Option
Strategy—Exchange-Listed Option Risk.”
|
|
The
Fund may also write (sell) over-the-counter options (“OTC options”).
Options written by the Fund with respect to non-U.S. securities, indices
or sectors generally will be OTC options. OTC options differ from
exchange-listed options in that they are two-party contracts, with
exercise price, premium and other terms negotiated between buyer and
seller, and generally do not have as much market liquidity as
exchange-listed options. See “Risks—Risks Associated with the Fund’s
Covered Call Option Strategy—OTC Option Risk.”
|
|
Risks of Real Property Asset
Companies
. The Fund may invest in Income Securities and Common
Equity Securities issued by Real Property Asset Companies. Because of the
Fund’s 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, including
declines in the value of real estate; general and local economic
conditions; increased competition; and changes in interest rates. Because
of the Fund’s ability to make indirect investments in 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 risks associated with such real property assets,
including supply and demand risk, depletion risk, regulatory risk and
commodity pricing risk.
|
|
Risks of Personal Property
Asset Companies
. The Fund may invest in Income Securities and
Common Equity Securities issued by Personal Property Asset Companies which
invest in personal property such as special situation transportation
assets (
e.g.
,
railcars, airplanes and ships) and collectibles (
e.g.
, antiques, wine
and fine art). The risks of special situation transportation assets
include cyclicality of supply and demand for transportation assets and
risk of decline in the value of transportation assets and rental values.
The risks of collectible assets include the difficulty in valuing
collectible assets, the relative illiquidity of collectible assets, the
prospects of forgery or the inability to assess the authenticity of
collectible assets and the high transaction and related costs of
purchasing, selling and safekeeping collectible
assets.
|
Private Securities
Risk
. The Fund may invest in privately issued Income Securities and
Common Equity Securities of both public and private companies. Private
Securities have additional risk considerations than 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 the
Sub-Adviser’s ability to obtain and evaluate applicable information
concerning such companies’ creditworthiness and other investment
considerations. Because there is often no readily available trading market
for Private Securities, the Fund may 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. Private Securities are also
more difficult to value. 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.
|
|
Investment Funds Risk
.
As an alternative to holding investments directly, the Fund may also
obtain investment exposure to Income Securities and Common Equity
Securities by investing up to 20% of its total assets in Investment Funds,
of which amount up to 10% of its total assets may be invested in
Registered Investment Funds. Investments in Investment Funds present
certain special considerations and risks not present in making direct
investments in Income Securities and Common Equity Securities. Investments
in Investment Funds 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 Fund’s investment in another Investment Fund are
borne indirectly by Common Shareholders. Accordingly, investment in such
entities involves expense and fee layering. 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. 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 financial leverage.
|
|
Private Investment Funds
Risk
. In addition to those risks described above with respect to
all Investment Funds, investing in Private Investment Funds (including
Affiliated Investment Funds) may pose additional risks to the Fund.
Certain Private Investment Funds in which the Fund participates may
involve capital call provisions under which the Fund 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 may be subject to “lock-up” periods of a year or more.
The valuation of
|
investments
in Private Investment Funds often will be based upon valuations provided
by the adviser or manager and it may not always be possible to effectively
assess the accuracy of such valuations, particularly if the fund holds
substantial investments the values of which are determined by the adviser
or manager based upon a fair valuation methodology. Incentive fee
considerations, which are generally expected to be between 15%-25% of the
net capital appreciation (if any) in the assets managed by a Private
Investment Fund manager, may cause conflicts in the fair valuation of
investment holdings by a Private Investment Fund’s adviser or
manager.
|
|
Private
Investment Funds (including Affiliated Investment Funds) in which the Fund
invests may employ a number of investment techniques, including short
sales, investment in non-investment grade or nonmarketable securities,
uncovered option transactions, forward transactions, futures and options
on futures transactions, foreign currency transactions and highly
concentrated portfolios, among others, which could, under certain
circumstances, magnify the impact of any negative market, sector or
investment development. The Fund may be exposed to increased leverage
risk, as the Private Investment Funds in which it invests may borrow and
may utilize various lines of credit, reverse repurchase agreements,
“dollar” rolls, issuance of debt securities, swaps, forward purchases and
other forms of leverage. Some of the Private Investment Funds may provide
very limited information with respect to their operation and performance
to the Fund, thereby severely limiting the Fund’s ability to verify
initially or on a continuing basis any representations made by the Private
Investment Funds or the investment strategies being employed, and exposing
the Fund to concentration risk if it invests in a number of Private
Investment Funds which have overlapping strategies and accumulate large
positions in the same or related instruments without the Sub-Adviser’s
knowledge. The Fund will not have the ability to direct or influence the
management of the Private Investment Funds in which it invests, so the
returns on such investments will primarily depend on the performance of
the Private Investment Funds’ managers and could suffer substantial
adverse effects by the unfavorable performance of such
managers.
|
|
Affiliated Investment Funds
Risk
. In addition to those risks described above with respect to
all Private Investment Funds, investing in Affiliated Investment Funds may
pose additional risks to the Fund. The Fund would only invest in
Affiliated Investment Funds that offer their securities to unaffiliated
third parties (including to existing security holders) and only on the
same terms and at the same times as such securities are offered to such
unaffiliated third parties. Similarly, the Fund may only redeem shares of
Affiliated Investment Funds on the same terms and at the same times as
redemptions are offered to such unaffiliated third parties. The Fund may
therefore be limited in the Affiliated Investment Funds in which it can
invest. The Fund may only invest in Affiliated Investment Funds to the
extent permitted by applicable law and related interpretations of the
staff of the SEC. Under the 1940 Act, the Fund will be prohibited from
co-investing with Affiliated Investment Funds in certain Private
Securities. The
|
Fund
may seek exemptive relief from the SEC that would permit the Fund to
co-invest in Private Securities, (including Private Investment Funds
managed by third parties) with Affiliated Investment Funds. There can be
no assurance that the Fund will obtain such relief or that, if obtained,
the terms will be acceptable to the Fund.
|
|
Synthetic Investments
Risk
. The Fund may be exposed to certain additional risks to the
extent the Sub-Adviser uses derivatives as a means to synthetically
implement the Fund’s 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 Fund’s performance in
a material adverse manner. Furthermore, derivative instruments typically
contain provisions giving the counterparty the right to terminate the
contract upon the occurrence of certain events. If a termination were to
occur, the Fund’s 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.
|
|
Inflation/Deflation
Risk
. Inflation risk is the risk that the value of assets or income
from investments will be worth less in the future as inflation decreases
the value of money. As inflation increases, the real value of the Common
Shares and distributions can decline. In addition, during any periods of
rising inflation, the dividend rates or borrowing costs associated with
the Fund’s 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 time—the opposite
of inflation. Deflation may have an adverse affect on the creditworthiness
of issuers and may make issuer default more likely, which may result in a
decline in the value of the Fund’s portfolio.
|
|
Market Discount Risk
.
The Fund’s Common Shares have a limited trading history and have traded
both at a premium and at a discount in relation to NAV. The Fund cannot
predict whether the Common Shares will trade in the future at a premium or
discount to NAV. The Fund’s Common Shares have recently traded at a
premium to NAV per share, which may not be sustainable. If the Common
Shares are trading at a premium to net asset value at the time you
purchase Common Shares, the NAV 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 NAV. The risk of the Common Shares trading at a discount is a
risk separate from the risk of a decline in the Fund’s NAV as a result of
the Fund’s investment activities. The Fund’s NAV will be reduced
immediately following an offering of the Common Shares due to the costs of
such offering, which will be borne entirely 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 holders of Common Shares to permit
the issuance and sale by the Fund of Common Shares at a price below the
Fund’s then current NAV, subject to certain conditions, and such sales of
Common Shares at price below NAV, 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.
|
|
Whether
Common Shareholder will realize a gain or loss upon the sale of Common
Shares depends upon whether the market value of the Common Shares at the
time of sale is above or below the price the Common Shareholder paid,
taking into account transaction costs for the Common Shares, and is not
directly dependent upon the Fund’s NAV. Because the market value of the
Common Shares will be determined by factors such as the relative demand
for and supply of the shares in the market, general market conditions and
other factors outside the Fund’s control, the Fund cannot predict whether
the Common Shares will trade at, below or above NAV, or at, below or above
the public offering price for the Common Shares. Common Shares of the Fund
are designed primarily for long-term investors; 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, the Fund’s 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 NAV pursuant to
the consent of holders of Common Shares, shareholders will experience a
dilution of the aggregate NAV per Common Share because the sale price will
be less than the Fund’s then-current NAV per Common Share. This dilution
will be experienced by all shareholders, irrespective of whether they
purchase Common Shares in any such offering. See “Description of Capital
Structure—Common Shares— Issuance of Additional Common
Shares.”
|
|
Financial Leverage
Risk
. Although the use of Financial Leverage 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 proceeds are greater than the cost of Financial
Leverage, the Fund’s return will be greater than if Financial Leverage 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, the return to the Fund will be less than if
Financial Leverage had not been used.
|
|
Financial
Leverage involves risks and special considerations for shareholders,
including the likelihood of greater volatility of net asset value 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 that the
Fund must pay will reduce the return to the Common Shareholders; and the
effect of Financial Leverage in a declining market, which is likely to
cause a greater decline in the net asset value 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 Investment Adviser and Sub-Adviser are based on
the Managed Assets of the Fund (including the proceeds of any Financial
Leverage), the Investment Adviser and Sub-Adviser have a financial
incentive for the Fund to utilize Financial Leverage, which may create a
conflict of interest between the Investment Adviser and the Sub-Adviser on
the one hand and the Common Shareholders on the other. 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 may also be achieved through the purchase of certain derivative
instruments. The Fund’s use of derivative instruments exposes the Fund to
special risks. See “Investment Objectives and Policies—Certain Other
Investment Practices— Derivative Transactions” and “—Derivative
Transactions Risk” below.
|
|
Recent
economic and market event have contributed to severe market volatility and
caused severe liquidity strains in the credit markets. If dislocations in
the credit markets continue, the Fund’s 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.
|
|
Derivative Transactions
Risks
. Participation in options, futures and other derivative
transactions involves investment risks and transaction costs to which the
Fund would not be subject absent the use of such strategies. If the
Sub-Adviser’s prediction of movements in the direction of the securities
and interest rate markets is inaccurate, the consequences to the Fund may
leave the Fund in a worse position than if it had not used such
strategies. Positions in derivatives (such as options, swaps, and futures
and forward contracts and options thereon) may subject the Fund to
substantial loss of principal in relation to the Fund’s investment
amount.
|
|
Portfolio Turnover
Risk
. The Fund’s 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.
|
|
Recent Market
Developments
. Global and domestic financial markets have
experienced periods of unprecedented turmoil. Instability in the credit
markets has made it more difficult for a number of issuers to obtain
financings or refinancings for their investment or lending activities or
operations. There is a risk that such issuers will be unable to
successfully complete such financings or refinancings. In particular,
because of the conditions in the credit markets, issuers of debt
securities may be subject to increased cost for debt, tightening
underwriting standards and reduced liquidity for loans they make,
securities they purchase and securities they issue. There is also a risk
that developments in sectors of the credit markets in which the Fund does
not invest may adversely affect the liquidity and the value of securities
in sectors of the credit markets in which the Fund does invest, including
securities owned by the Fund.
|
|
The
debt and equity capital markets in the United States have been negatively
impacted by significant write-offs in the financial services sector
relating to sub-prime mortgages and the re-pricing of credit risk in the
broadly syndicated market, among other things. These events, along with
the deterioration of the housing market, the failure of major financial
institutions and the resulting United States federal government actions
led to worsening general economic conditions, which materially and
adversely impacted the broader financial and credit markets and reduced
the availability of debt and equity capital for the market as a whole and
financial firms in particular. These events adversely affected the
willingness of some lenders to extend credit, which may make it more
difficult for issuers of Senior Loans to finance their operations. Such
market conditions may increase the volatility of the value of securities
owned by the Fund, may make it more difficult for the Fund to accurately
value its securities or to sell its securities on a timely basis and may
adversely affect the ability of the Fund to borrow for investment purposes
and increase the cost of such borrowings, which would reduce returns to
the holders of Common Shares. These developments adversely affected the
broader economy, and may continue to do so, which in turn may adversely
affect the ability of issuers of securities owned by the Fund to make
payments of principal and interest when due, lead to lower credit ratings
and increased defaults. Such developments could, in turn, reduce the value
of securities owned by the Fund and adversely affect the net asset value
of the Fund’s Common Shares. In addition, the prolonged continuation or
further deterioration of current market conditions could adversely impact
the Fund’s portfolio.
|
|
The
third and fourth quarters of 2009 witnessed more stabilized economic
activity as expectations for an economic recovery increased. However,
risks to a robust resumption of growth persist. A return
to
|
unfavorable
economic conditions or sustained economic slowdown could adversely impact
the Fund’s portfolio. Financial market conditions, as well as various
social, political, and psychological tensions in the United States and
around the world, have contributed to increased market volatility, may
have long-term effects on the U.S. and worldwide financial markets; and
may cause further economic uncertainties or deterioration in the United
States and worldwide. The Adviser and Sub-Adviser do not know how long the
financial markets will continue to be affected by these events and cannot
predict the effects of these or similar events in the future on the U.S.
and global economies and securities markets in the Fund’s portfolio. The
Investment Advisor and the Sub-Adviser intend to monitor developments and
seek to manage the Fund’s portfolio in a manner consistent with achieving
the Fund’s investment objective, but there can be no assurance that it
will be successful in doing so. Given the risks described above, an
investment in Common Shares may not be appropriate for all prospective
investors. A prospective investor should carefully consider his or her
ability to assume these risks before making an investment in the
Fund.
|
|
Government Intervention in
Financial Markets
. The recent instability in the financial markets
discussed above has led the U.S. Government to take a number of
unprecedented actions designed to support certain financial institutions
and segments of the financial markets that have experienced extreme
volatility, and in some cases a lack of liquidity. Federal, state, and
other governments, their regulatory agencies, or self regulatory
organizations may take actions that affect the regulation of the
instruments in which the Fund invests, or the issuers of such instruments,
in ways that are unforeseeable.
|
|
Governments
or their agencies may also acquire distressed assets from financial
institutions and acquire ownership interests in those institutions. The
implications of government ownership and disposition of these assets are
unclear, and such a program may have positive or negative effects on the
liquidity, valuation and performance of the Fund’s portfolio holdings.
Furthermore, volatile financial markets can expose the Fund to greater
market and liquidity risk and potential difficulty in valuing portfolio
instruments held by the Fund. The Sub-Adviser will monitor developments
and seek to manage the Fund’s portfolio in a manner consistent with
achieving the Fund’s investment objective, but there can be no assurance
that it will be successful in doing so.
|
|
Legislation Risk
. At
any time after the date of this Prospectus, legislation may be enacted
that could negatively affect the assets of the Fund or the issuers of such
assets. Changing approaches to regulation may have a negative impact on
the Fund entities in which the Fund invests. Legislation or regulation may
also change the way in which the Fund itself is regulated. There can be no
assurance that future legislation, regulation or deregulation will not
have a material adverse effect on the Fund or will not impair the ability
of the Fund to achieve its investment
objective.
|
TALF, TARP, PPIP and Other
Government Programs Risks
. In response to the financial crises
affecting the banking system and the financial markets, the United States
government, the Treasury, the Board of Governors of the Federal Reserve
System and other governmental and regulatory bodies have taken action in
an attempt to stabilize the financial markets.
|
|
The
TALF Program and the Legacy Term Asset-Backed Securities Loan Facility
program (“Legacy TALF Program”) are operated by the established by the
Board of Governors of the Federal Reserve System (the “Federal Reserve”)
and the U.S. Treasury as a credit facility designed to restore liquidity
to the market for asset-backed securities and operated by the
FRBNY.
|
|
Pursuant
to the Emergency Economic Stabilization Act of 2008 (the “EESA”), the
Troubled Asset Relief Program (the “TARP”) was established. The purpose of
this legislation was to stabilize financial markets and institutions in
light of the financial crisis affecting the United States. In connection
with the TARP, the Treasury announced the creation of the Financial
Stability Plan in early 2009. The Financial Stability Plan outlined a
series of key initiatives to help restore the United States economy, one
of which was the creation of the Public-Private Investment Program
(“PPIP”). The PPIP is designed to encourage the transfer of eligible
assets, which include certain illiquid real estate-related assets issued
prior to 2009 (which may be rated below investment grade, have no readily
available trading market (or otherwise be considered illiquid), may be
difficult to value and may be backed in part by non-performing mortgages),
from banks and other financial institutions in an effort to restart the
market for these assets and support the flow of credit and other capital
into the broader economy.
|
|
Other
such programs may be sponsored, established or operated by U.S. or non
U.S. governments from time to time. It is unclear what effect these
programs, and their eventual termination, may have on the markets for
credit securities in which the fund may invest over the near- and
long-term. Such programs may have positive or negative effects on the
liquidity, valuation and performance of the Fund’s portfolio
holdings.
|
|
The
Fund may invest a portion of its Managed Assets through participation in
the TALF Program. Under the TALF Program, the FRBNY may provide loans to
the Fund to purchase certain investment-grade, asset-backed securities
which must be backed by auto loans, student loans, credit card loans,
small business loans or certain commercial mortgage-backed securities. The
Fund may seek to participate in other government programs from time to
time. Participation in such programs may expose the Fund to additional
risks and may limit the Fund’s ability to engage in certain of the
investment strategies or transactions described in this Prospectus or in
the SAI. There can be no assurance that the Trust will be able to
participate in any such program.
|
|
Market Disruption and
Geopolitical Risk
. The aftermath of the war in Iraq and the
continuing occupation of Iraq, instability in the
Middle
|
East
and terrorist attacks in the United States and around the world may result
in market volatility, may have long-term effects on the U.S. and worldwide
financial markets and may cause further economic uncertainties in the
United States and worldwide. The Fund does not know how long the
securities markets may be affected by these events and cannot predict the
effects of the occupation or similar events in the future on the U.S.
economy and securities markets.
|
|
Anti-Takeover
Provisions
|
|
in
the Fund’s Governing
|
|
Documents
..........................................................
|
The
Fund’s Agreement and Declaration of Trust and Bylaws (the “Governing
Documents”) 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. See
“Anti-Takeover and Other Provisions in the Fund’s Governing Documents” and
“Risks—Anti-Takeover Provisions.”
|
Administrator,
Custodian,
|
|
Transfer
Agent and Dividend
|
|
Disbursing
Agent ................................................
|
The
Bank of New York Mellon serves as the custodian of the Fund’s assets
pursuant to a custody agreement. Under the custody agreement, the
custodian holds the Fund’s assets in compliance with the 1940 Act. For its
services, the custodian will receive a monthly fee based upon, among other
things, the average value of the total assets of the Fund, plus certain
charges for securities transactions. The Bank of New York Mellon also
serves as the Fund’s dividend disbursing agent, agent under the Fund’s
Automatic Dividend Reinvestment Plan (the “Plan Agent”), transfer agent
and registrar with respect to the Common Shares of the
Fund.
|
Claymore
Advisors, LLC serves as the Fund’s administrator. Pursuant to an
administration agreement with the Fund, Claymore Advisors, LLC provides
certain administrative, bookkeeping and accounting services to the
Fund.
|
Sales
load (as a percentage of offering price)
|
----% (1) | ||
Offering expenses borne by the Fund
(as a percentage of offering price)
|
----% (1) | ||
Automatic Dividend Reinvestment
Plan fees
(2)
|
None
|
Percentage of Net
Assets
|
|
Annual
Expenses
|
Attributable to Common
Shares
(3)
|
Management fees
|
[
]%
|
Interest payments on borrowed funds
(4)
|
[
]%
|
Interest expense on reverse
repurchase agreements
(5)
|
[
]%
|
Acquired Investment Fund fees and
expenses
(6)
|
[
]%
|
Other
expenses
(7)
|
[
]%
|
Total
annual expenses
|
[
]%
|
(1)
|
If
Common Shares to which this Prospectus relates are sold to or through
underwriters, the Prospectus Supplement will set forth any applicable
sales load and the estimated offering expenses borne by the
Fund.
|
(2)
|
You
will pay brokerage charges if you direct the Plan Agent to sell your
Common Shares held in a dividend reinvestment account. See “Automatic
Dividend Reinvestment Plan.”
|
(3)
|
Based
upon net assets applicable to common shares as of May 31,
2010.
|
(4)
|
Based
upon the Fund’s outstanding Financial Leverage as of May 31, 2010, which
included Borrowings under the Fund’s committed facility agreement in an
amount equal to [ ]% of the Fund’s Managed Assets, at an annual interest
rate cost to the Fund of [ ]% and Borrowings under the TALF program in an
amount equal to [ ]% of the Fund’s Managed Assets, at an annual interest
rate cost to the Fund of [ ]%. The actual amount of interest payments by
the Fund will vary over time in accordance with the amount of Borrowings
and variations in market interest rates.
|
(5)
|
Assumes
the use of leverage in the form of reverse repurchase agreements
representing [ ]% of the Fund’s Managed Assets at an annual interest rate
cost to the Fund of [ ]%. The actual amount of interest expense
on reverse repurchase agreements borne by the Fund will
vary over time in accordance with the level of the Fund’s use of reverse
repurchase agreements and variations in market interest
rates.
|
(6)
|
Fees
associated with Acquired Investment Funds typically include a base fee
plus a performance-based fee. The above figures include estimates of base
fees plus performance-based fees charged by representative Investment
Funds over the past twelve months. To the extent a performance-based fee
is triggered at termination or realization of an investment, it is not
included in this estimate. Therefore, the amount of fees paid on an
investment in Acquired Investment Funds may be higher or lower than the
amount shown.
|
(7)
|
Other
expenses are estimated based upon those incurred during the fiscal year
ended May 31, 2010.
|
1 Year
|
3 Years
|
5 Years
|
10 Years
|
||||||||||||||
Total
Expenses Incurred
(1)
|
$ [ ] | $ [ ] | $ [ ] | $ [ ] | |||||||||||||
|
|||||||||||||||||
*
|
The Example should not be
considered a representation of future expenses or returns. Actual expenses
may be higher or lower than those assumed. Moreover, the Fund’s actual
rate of return may be higher or lower than the hypothetical 5% return
shown in the Example.
The Example assumes that all dividends and
distributions are reinvested at net asset value.
|
||||||||||||||||
(1)
|
The
example above does not include sales loads or estimated offering
costs.
|
Per
share operating performance
for
a common share outstanding throughout the period
|
For
the
Year
Ended
May
31, 2010
|
For
the
Year
Ended
May
31, 2009
|
For
the period
July
27, 2007*
through
May
31, 2008
|
|||||||
Net
asset value, beginning of period
|
$
|
$
|
17.52
|
$
|
19.10
|
(b)
|
||||
Income
from investment operations
|
||||||||||
Net
investment income
(a)
|
1.06
|
0.79
|
||||||||
Net
realized and unrealized gain (loss) on investments, options, futures,
swaps and unfunded commitments
|
(4.31
|
)
|
(0.99
|
)
|
||||||
Total
from investment operations
|
(3.25
|
)
|
(0.20
|
)
|
||||||
Common
share offering expenses charged to paid-in-capital
|
—
|
(0.04
|
)
|
|||||||
Distributions
to Common Shareholders
|
||||||||||
From
and in excess of net investment income
|
(1.36
|
)
|
(0.98
|
)
|
||||||
Return
of capital
|
(0.49
|
)
|
(0.36
|
)
|
||||||
Total
distributions
|
(1.85
|
)
|
(1.34
|
)
|
||||||
Net
asset value, end of period
|
$
|
$
|
12.42
|
$
|
17.52
|
|||||
Market
value, end of period
|
$
|
$
|
11.53
|
$
|
16.78
|
|||||
Total
investment return
(c)
|
||||||||||
Net
asset value
|
-18.37
|
%
|
-1.40
|
%
|
||||||
Market
value
|
-19.51
|
%
|
-9.41
|
%
|
||||||
Ratios
and supplemental data
|
||||||||||
Net
assets, applicable to common shareholders, end of period
(thousands)
|
$
|
$
|
113,076
|
$
|
159,509
|
|||||
Ratios
to Average Net Assets applicable to Common Shares:
|
||||||||||
Total
expenses, excluding interest expense
|
2.06
|
%(g)
|
1.72
|
%
(d)(g)
|
||||||
Total
expenses, including interest expense
|
3.25
|
%(g)
|
3.36
|
%
(d)(g)
|
||||||
Net
investment income, including interest expense
|
7.84
|
%
|
5.08
|
%(d)
|
||||||
Ratios
to Average Managed Assets:
(e)
|
||||||||||
Total
expenses, excluding interest expense
|
1.51
|
%(g)
|
1.24
|
%(d)(g)
|
||||||
Total
expenses, including interest expense
|
2.37
|
%(g)
|
2.43
|
%(d)(g)
|
||||||
Net
investment income, including interest expense
|
5.72
|
%
|
3.67
|
%(d)
|
||||||
Portfolio
turnover
(h)
|
58
|
%
|
210
|
%
|
||||||
Senior
Indebtedness
|
||||||||||
Total
Borrowings outstanding (in thousands)
|
$
|
$
|
31,085
|
$
|
76,016
|
|||||
Asset
coverage per $1,000 of indebtedness
(f)
|
$
|
$
|
4,638
|
$
|
3,098
|
*
|
Commencement
of operations.
|
(a)
|
Based
on average shares outstanding during the period.
|
(b)
|
Before
deduction of offering expenses charged to capital.
|
(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 Fund’s Dividend Reinvestment Plan
for market value returns. Total investment return does not reflect
brokerage commissions. A return calculated for a period of less than one
year is not annualized.
|
(d)
|
Annualized.
|
(e)
|
Managed
assets is equal to net assets applicable to common shareholders plus
outstanding leverage.
|
(f)
|
Calculated
by subtracting the Fund’s total liabilities (not including the borrowings)
from the Fund’s total assets and dividing by the total
borrowings.
|
(g)
|
The
ratios of total expenses to average net assets applicable to common shares
and to average managed assets do not reflect fees and espense 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 net impact to the expense ratios would be 0.08% and 0.06% for the year
ended May 31, 2009 and 0.04% and 0.03% for the period ended May 31,
2008.
|
(h)
|
Portfolio
tunrover is not annualized for periods less than a
year.
|
Fiscal Period Ended
|
Title of Security
|
Total Principal
Amount Outstanding
|
Asset Coverage Per $1,000
of Principal Amount
|
|||||||
May
31, 2010
|
Borrowings
|
$
[ ]
|
$
[ ]
|
|||||||
May
31, 2009
|
Borrowings
|
$76,016,239
|
$4,638
|
|||||||
May
31, 2008
|
Borrowings
|
$31,084,801
|
$3,098
|
NAV
per Common
|
Premium/(Discount)
on
|
|||||||||||
Share
on Date of Market
|
Date
of Market Price
|
|||||||||||
Market Price
|
Price High and Low
(1)
|
High and Low
(2)
|
||||||||||
During Quarter Ended
|
High
|
Low
|
High
|
Low
|
High
|
Low
|
||||||
May
31, 2010
|
18.97
|
16.02
|
17.97
|
17.68
|
5.56
|
(9.39)
|
||||||
February
28, 2010
|
17.82
|
16.00
|
17.03
|
15.89
|
4.64
|
0.69
|
||||||
November
30, 2009
|
15.91
|
14.35
|
15.76
|
14.24
|
0.95
|
0.77
|
||||||
August
31, 2009
|
14.88
|
12.01
|
14.15
|
12.45
|
5.16
|
(3.53)
|
||||||
May
31, 2009
|
11.90
|
7.50
|
12.34
|
10.51
|
(3.57)
|
(28.64)
|
||||||
February
28, 2009
|
11.26
|
8.71
|
12.31
|
11.04
|
(8.53)
|
(21.11)
|
||||||
November
30, 2008
|
16.13
|
8.05
|
16.33
|
11.89
|
(1.22)
|
(32.30)
|
||||||
August
31, 2008
|
17.06
|
14.36
|
17.46
|
16.46
|
(2.29)
|
(12.76)
|
•
|
60%
of its total assets in Income Securities rated below-investment
grade;
|
•
|
50%
of its total assets in Common Equity Securities;
|
•
|
30%
of its total assets in other investment companies, including registered
investment companies, private investment funds and/or other pooled
investment vehicles;
|
•
|
20%
of its total assets in non-U.S. dollar-denominated fixed-income
securities; and
|
•
|
10%
of its total assets in emerging
markets.
|
•
|
Companies
engaged in the ownership, construction, financing, management and/or sale
of commercial, industrial and/or residential real estate (or that have
assets primarily invested in such real estate), including real estate
investment trusts (“REITs”); and
|
•
|
Companies
engaged in energy, natural resources and basic materials businesses and
companies engaged in associated businesses. These companies include, but
are not limited to, those engaged in businesses such as 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.
|
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, 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.
|
|
Asset-Backed
Securities
. Asset-backed securities are a form of derivative issued
by governmental entities and private issuers which utilizes securitization
techniques similar to those used for mortgage-related securities. The
collateral for these securities may include 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 asset-backed
securities that may be developed in the future. Asset-backed securities
are subject to the same risk of prepayment described above with respect to
mortgage-related securities. Asset-backed securities may provide the Fund
with a less effective security interest in the related collateral than do
mortgage-related securities, and thus it is possible that recovery on
repossessed collateral might be unavailable or inadequate 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 CDOs bear the
credit risk of the underlying collateral. Multiple tranches of securities
are issued by the CDO, 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 CDO’s 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. CDOs are subject to the same
risk of prepayment described with respect to certain mortgage-related and
asset-backed securities. The value of CDOs may be affected by changes in
the market’s perception of the creditworthiness of the servicing agent for
the pool, the originator of the pool, or the financial institution or fund
providing the credit support or enhancement.
|
|
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. Insurance
companies securitize this risk to transfer to the capital markets the
truly catastrophic part of the risk exposure. A typical RLS provides for
income and return of capital similar to other fixed-income investments,
but would involve full or partial default if losses resulting from a
certain catastrophe exceeded a predetermined amount. RLS typically have
relatively high yields compared with similarly rated fixed-income
securities, and also have low correlation with the returns of traditional
securities. The Sub-Adviser believes that inclusion of RLS in the Fund’s
portfolio could lead to significant improvement in its overall risk-return
profile. Investments in RLS may be linked to a broad range of insurance
risks, which can be broken down into three major categories: natural risks
(such as hurricanes and earthquakes), weather risks (such as insurance
based on a regional average temperature) and non-natural events (such as
aerospace and shipping catastrophes). Although property-casualty RLS have
been in existence for over a decade, significant developments have started
to occur in securitizations done by life insurance companies. In general,
life insurance industry securitizations could fall into a number
of
|
categories.
Some are driven primarily by the desire to transfer risk to the capital
markets, such as the transfer of extreme mortality risk (mortality bonds).
Others, while also including the element of risk transfer, are driven by
other considerations. For example, a securitization could be undertaken to
relieve the capital strain on life insurance companies caused by the
regulatory requirements of establishing very conservative reserves for
some types of products. Another example is the securitization of the
stream of future cash flows from a particular block of business, including
the securitization of embedded values of life insurance business or
securitization for the purpose of funding acquisition
costs.
|
Assumed
portfolio total return (net of expenses)
|
(10.00)%
|
(5.00)%
|
0.00%
|
5.00%
|
10.00%
|
Common
Share total return
|
[
]%
|
[
]%
|
[
]%
|
[
]%
|
[
]%
|
•
|
The
relationship between prepayments and interest rates may give some lower
grade mortgage-related and asset-backed securities less potential for
growth in value than conventional bonds with comparable
maturities.
|
|
•
|
In
addition, when interest rates fall, the rate of prepayments tends to
increase, and during such periods, the reinvestment of prepayment proceeds
by the Fund will generally be at lower rates than the rates that were
carried by the obligations that have been prepaid.
|
|
•
|
Because
of these and other reasons, a mortgage-related or asset-backed security’s
total return and maturity may be difficult to predict.
|
|
•
|
To
the extent that the Fund purchases mortgage-related or asset-backed
securities at a premium, prepayments may result in loss of the Fund’s
principal investment to the extent of premium
paid.
|
•
|
credit
risks associated with the performance of the underlying mortgage
properties and of the borrowers owning these
properties;
|
|
•
|
adverse
changes in economic conditions and circumstances, which are more likely to
have an adverse impact on mortgage-related securities secured by loans on
certain types of commercial properties than on those secured by loans on
residential properties;
|
|
•
|
prepayment
risk, which can lead to significant fluctuations in value of the
mortgage-related security; and
|
|
•
|
loss
of all or part of the premium, if any, paid if there is a decline in the
market value of the security, whether resulting from changes in interest
rates or prepayments on the underlying mortgage
collateral.
|
•
|
Primarily,
these securities do not have the benefit of the same security interest in
the underlying collateral and are more dependent on the borrower’s ability
to pay.
|
|
•
|
Credit
card receivables are generally unsecured, and the debtors are entitled to
the protection of a number of state and Federal consumer credit laws, many
of which give debtors the right to set off certain amounts owed on the
credit cards, thereby reducing the balance due.
|
|
•
|
Most
issuers of automobile receivables permit the servicers to retain
possession of the underlying obligations. If the servicer were to sell
these obligations to another party, there is a risk that the purchaser
would acquire an interest superior to that of the holders of the related
automobile receivables. In addition, because of the large number of
vehicles involved in a typical issuance and technical requirements under
state laws, the trustee for the holders of the automobile receivables may
not have an effective security interest in all of the obligations backing
such receivables. There is a possibility that recoveries on repossessed
collateral may not, in some cases, be able to support payments on these
securities.
|
•
|
declines
in the value of real estate;
|
|
•
|
general
and local economic conditions;
|
|
•
|
unavailability
of mortgage funds;
|
|
•
|
overbuilding;
|
|
•
|
extended
vacancies of properties;
|
|
•
|
increased
competition;
|
|
•
|
increases
in property taxes and operating expenses;
|
|
•
|
changes
in zoning laws;
|
|
•
|
losses
due to costs of cleaning up environmental problems and
contamination;
|
|
•
|
limitations
on, or unavailability of, insurance on economic terms;
|
|
•
|
liability
to third parties for damages resulting from environmental
problems;
|
|
•
|
casualty
or condemnation losses;
|
|
•
|
limitations
on rents;
|
|
•
|
changes
in neighborhood values and the appeal of properties to
tenants;
|
|
•
|
changes
in valuation due to the impact of terrorist incidents on a particular
property or area, or on a segment of the economy; and
|
|
•
|
changes
in interest rates.
|
National Resources and
Commodities Risks.
Because of the Fund’s ability to make indirect
investments in 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 risks
associated with special risks, which
include:
|
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 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
|
Cyclicality of Supply
and Demand for Transportation Assets
. 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
that are not under the Fund’s control, 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:
(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 Fund’s investment in
the Personal Property Asset Company owning such transportation asset.
Personal Property Asset Companies will be subject to credit risk of the
lessees’ ability to the provisions of the lease of the transportation
asset. The Personal Property Asset Company will need 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
will depend 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.
|
Valuation of
Collectible Assets
. The market for collectible assets as a
financial investment is in the early stages of development. 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
. 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
. 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
. 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.
|
Title
of Class
|
Amount
Authorized
|
Amount
Held by the
Fund
or for its Account
|
Amount
Outstanding
|
||||||
|
|
|
|
||||||
Common
shares of
|
|||||||||
beneficial
interest, par
|
|||||||||
value
$0.01 per share
|
Unlimited
|
0
|
9,215,636
|
•
|
the
merger or consolidation of the Fund or any subsidiary of the Fund with or
into any Principal Shareholder;
|
|
•
|
the
issuance of any securities of the Fund to any Principal Shareholder for
cash (other than pursuant of any automatic dividend reinvestment
plan);
|
|
•
|
the
sale, lease or exchange of all or any substantial part of the assets of
the Fund to any Principal Shareholder, except assets having an aggregate
fair market value of less than $1,000,000, aggregating for the purpose of
such computation all assets sold, leased or exchanged in any series of
similar transactions within a twelve-month period; or
|
|
•
|
the
sale, lease or exchange to the Fund or any subsidiary of the Fund, in
exchange for securities of the Fund, of any assets of any Principal
Shareholder, except assets having an aggregate fair market value of less
than
|
$1,000,000,
aggregating for purposes of such computation all assets sold, leased or
exchanged in any series of similar transactions within a twelve-month
period.
|
(i)
|
The
Fund must derive in each taxable year at least 90% of its gross income
from the following sources: (a) dividends, interest (including tax-exempt
interest), payments with respect to certain securities loans, and gains
from the sale or other disposition of stock, securities or foreign
currencies, or other income (including gain from options, futures and
forward contracts) derived with respect to its business of investing in
such stock, securities or foreign currencies; and (b) interests in
“qualified publicly traded partnerships” (as defined in the Code).
Generally, a qualified publicly traded partnership includes a partnership
the interests of which are traded on an established securities market or
readily tradable on a secondary market (or the substantial equivalent
thereof).
|
|
(ii)
|
The
Fund must diversify its holdings so that, at the end of each quarter of
each taxable year (a) at least 50% of the market value of the Fund’s total
assets is represented by cash and cash items, U.S. government securities,
the securities of other RICs and other securities, with such other
securities limited, in respect of any one issuer, to an amount not greater
than 5% of the value of the Fund’s total assets and not more than 10% of
the outstanding voting securities of such issuer and (b) not more than 25%
of the market value of the Fund’s total assets is invested in the
securities (other than U.S. government securities and the securities of
other RICs) of (I) any one issuer, (II) any two or more issuers that the
Fund controls and that are determined to be engaged in the same business
or similar or related trades or businesses or (III) any one or more
“qualified publicly traded partnerships” (as defined in the
Code).
|
•
|
the
names of any agents, underwriters or dealers
|
|
•
|
any
sales loads or other items constituting underwriters’
compensation;
|
|
•
|
any
discounts, commissions, or fees allowed or paid to dealers or
agents;
|
|
•
|
the
public offering or purchase price of the offered Common Shares and the net
proceeds the Fund will receive from the sale; and
|
|
•
|
any
securities exchange on which the offered Common Shares may be
listed.
|
•
|
An
overallotment in connection with an offering creates a short position in
the common stock for the underwriter’s own account.
|
|
•
|
An
underwriter may place a stabilizing bid to purchase the Common Shares for
the purpose of pegging, fixing, or maintaining the price of the Common
Shares.
|
|
•
|
Underwriters
may engage in syndicate covering transactions to cover overallotments or
to stabilize the price of the Common Shares by bidding for, and
purchasing, the Common Shares or any other securities in the open market
in order to reduce a short position created in connection with the
offering.
|
|
•
|
The
managing underwriter may impose a penalty bid on a syndicate member to
reclaim a selling concession in connection with an offering when the
Common Shares originally sold by the syndicate member is purchased in
syndicate covering transactions or
otherwise.
|
STATEMENT
OF ADDITIONAL INFORMATION
|
|||
Page
|
|||
|
|
||
The
Fund
|
S-2
|
||
Investment
Objective and Policies
|
S-2
|
||
Investment
Restrictions
|
S-12
|
||
Management
of the Fund
|
S-13
|
||
Portfolio
Transactions
|
S-26
|
||
Portfolio
Turnover
|
S-27
|
||
U.S.
Federal Income Tax Considerations
|
S-27
|
||
General
Information
|
S-33
|
||
Financial
Statements and Report of Independent Registered Public Accounting
Firm
|
S-35
|
||
Appendix
A: Description of Securities Ratings of Investments
|
A-1
|
||
Appendix
B: Proxy Voting Procedures
|
B-1
|
Page
|
|
S-2
|
|
S-2
|
|
S-12
|
|
S-13
|
|
S-25
|
|
S-26
|
|
S-26
|
|
S-32
|
|
S-34
|
|
A-1
|
|
B-1
|
Name,
Business Address (1) and Age |
Position
Held
with the Fund |
Term
of
Office (2) and Length of Time Served |
Principal
Occupation During Past Five Years |
Number
of
Portfolios in Fund Complex (3) Overseen by Trustee |
Other
Directorships
Held by Trustee During the Past Five Years |
|||||
INDEPENDENT
TRUSTEES:
|
||||||||||
Randall
C. Barnes Year of Birth: 1951
|
Trustee
|
Trustee
since 2006
|
Investor
(2001-present). Formerly, Senior Vice President, Treasurer (1993-1997),
President, Pizza Hut International (1991-1993) and Senior Vice President,
Strategic Planning and New Business Development (1987-1990) of PepsiCo,
Inc. (1987-1997).
|
[
]
|
None
|
|||||
Roman
Friedrich III Year of Birth: 1946
|
Trustee
|
Trustee
since 2010
|
Founder
of Roman Friedrich & Company, which specializes in the provision of
financial advisory services to corporations in the resource sector (1998-
present). Formerly, Managing Director of TD Securities (1996- present);
Managing Director of Lancaster Financial Ltd. (1990- 1996); Managing
Director of Burns Fry Ltd. (1980-1984); President of Chase Manhattan Bank
(Canada) Ltd. (1975-1977).
|
[
]
|
Director,
Zincore Metals Inc. (2009- present); GFM Resources Ltd. (2005- present);
StrataGold Corporation (2003-2009); Gateway Gold Corp.
(2004-2008).
|
|||||
Robert
B. Karn III Year of Birth: 1942
|
Trustee
|
Trustee
since 2010
|
Consultant
(1998- present). Formerly, Partner of Arthur Andersen, LLP
(1977-1997).
|
[
]
|
Director,
Peabody Energy Company (2003-present); Natural Resource Partners, LLC
(2002-present); Kennedy Capital Management, Inc.
(2002-present).
|
*
|
Mr.
Robinson is an interested person of the Fund because of his position as an
officer of the Investment Adviser and certain of its
affiliates.
|
|
(1)
|
The
business address of each Trustee of the Fund is 2455 Corporate West Drive,
Lisle, Illinois 60532, unless otherwise noted.
|
|
(2)
|
Each
Trustee is expected to serve a two year term concurrent with the class of
Trustees for which he serves.
|
|
•
|
Messrs.
Barnes, Friedrich and Robinson are the Class I Trustees. It is currently
anticipated that the Class I Trustees will next stand for election at the
Fund’s annual meeting of Shareholders for the Fund’s fiscal year ending
May 31, 2012.
|
|
•
|
Messrs.
Karn, Nyberg and Toupin are the Class II Trustees. It is currently
anticipated that the Class II Trustees will next stand for election at the
Fund’s annual meeting of Shareholders for the Fund’s fiscal year ending
May 31, 2011.
|
|
(3)
|
As
of the date of this SAI, the “Fund Complex” consists of [ ] closed-end
funds and [ ] exchange-traded funds advised or serviced by the
Adviser
|
Name,
Business
Address (1) and Age |
Position
|
Term
of Office
(2)
and
Length of Time Served |
Principal
Occupation
During the Past Five Years |
|||
J.
Thomas Futrell Year of Birth: 1955
|
Chief
Executive Officer
|
Officer
since 2006
|
Senior
Managing Director and Chief Investment Officer of Claymore Advisors, LLC
and Claymore Securities, Inc. (2008-present). Formerly, Managing Director
of Research, Nuveen Asset Management (2000-2007).
|
|||
Steven
M. Hill Year of Birth: 1964
|
Chief
Financial Officer, Chief Accounting Officer and Treasurer
|
Officer
since 2006
|
Senior
Managing Director of Claymore Advisors, LLC and Claymore Securities Inc.
(2005-present). Formerly, Chief Financial Officer of Claymore Group Inc.
(2005-2006), Managing Director of Claymore Advisors, LLC and Claymore
Securities. Inc. 92003-2005). Formerly, Treasurer of Henderson Global
Funds and Operations Manager of Henderson Global Investors (NA) Inc.
(2002-2003); Managing Director of FrontPoint Partners LLC (2001-2002);
Vice President of Nuveen Investments (1999-2001).
|
|||
Mark
E. Mathiasen Year of Birth: 1978
|
Secretary
|
Officer
since 2008
|
Vice
President, Assistant General Counsel of Claymore Securities, Inc. (2007-
present). Secretary of certain funds in the Fund Complex. Previously, Law
Clerk, Idaho State Courts (2003-2006).
|
|||
Bruce
Saxon Year of Birth: 1957
|
Chief
Compliance Officer
|
Officer
since 2006
|
Vice
President, Fund Compliance Officer of Claymore Group, Inc. (2006 to
present). Formerly, Chief Compliance Officer/Assistant Secretary of Harris
Investment Management, Inc. (2003-2006). Director-Compliance of
Harrisdirect LLC (1999-2003).
|
|||
James
Howley Year of birth: 1972
|
Assistant
Treasurer
|
Officer
since 2007
|
Vice
President, Fund Administration (2004-present) of Claymore Advisors, LLC
and Claymore Securities, Inc.; Assistant Treasurer of certain funds in the
Fund Complex. Previously, Manager, Mutual Fund Administration of Van
Kampen Investments, Inc.
(2000-2004).
|
Name,
Business
Address (1) and Age |
Position
|
Term
of Office
(2)
and
Length of Time Served |
Principal
Occupation
During the Past Five Years |
|||
Mark
J. Furjanic Year of birth: 1959
|
Assistant
Treasurer
|
Officer
since 2008
|
Vice
President, Fund Administration- Tax (2005-present) of Claymore Advisors,
LLC and Claymore Securities, Inc.; Assistant Treasurer of certain funds in
the Fund Complex. Formerly, Senior Manager (1999-2005) for Ernst &
Young LLP.
|
|||
Donald
P. Swade Year of birth: 1972
|
Assistant
Treasurer
|
Officer
since 2008
|
Vice
President, Fund Administration (2006-present) of Claymore Advisors, LLC
and Claymore Securities, Inc.; Assistant Treasurer of certain funds in the
Fund Complex. Formerly, Manager- Mutual Fund Financial Administration
(2003-2006) for Morgan Stanley/Van Kampen Investments.
|
|||
Melissa
J. Nguyen Year of birth: 1978
|
Assistant
Secretary
|
Officer
since 2008
|
Vice
President, Assistant General Counsel of Claymore Group Inc. (2005-
present). Secretary of certain funds in the Fund Complex. Previously,
Associate, Vedder Price P.C. (2003-2005).
|
|||
Elizabeth
H. Hudson Year of birth: 1980
|
Assistant
Secretary
|
Officer
since 2009
|
Assistant
General Counsel of Claymore Group Inc. (2009-present) Assistant Secretary
of certain funds in the Fund Complex. Previously, associate at Bell, Boyd
& Lloyd LLP (nka K&L Gates LLP)
(2007-2008).
|
(1)
|
The
business address of each officer of the Fund is 2455 Corporate West Drive,
Lisle, Illinois 60532, unless otherwise noted.
|
(2)
|
Officers
serve at the pleasure of the Board and until his or her successor is
appointed and qualified or until his or her resignation or
removal.
|
Name
(1)
|
Aggregate
Estimated Compensation from the Fund |
Pension
or Retirement Benefits Accrued
as Part of Fund Expenses (2) |
Estimated
Annual
Benefits Upon Retirement (2) |
Total
Compensation
from the Fund and Fund Complex (3) Paid to Trustee |
||||
Independent
Trustees:
|
||||||||
Randall
C. Barnes
|
$25,000
|
None
|
None
|
$275,00
|
||||
Roman
Friedrich III
|
$1,000
|
None
|
None
|
$43,500
|
||||
Robert
B. Karn III
|
$1,000
|
None
|
None
|
$51,000
|
||||
Ronald
A. Nyberg
|
$25,000
|
None
|
None
|
$380,500
|
||||
Ronald
E. Toupin, Jr.
|
$28,000
|
None
|
None
|
$325,000
|
(1)
|
Trustees
not entitled to compensation are not included in the table.
|
(2)
|
The
Fund does not accrue or pay retirement or pension benefits to Trustees as
of the date of this SAI.
|
(3)
|
As
of the date of this SAI, the “Fund Complex” consists of [ ] closed-end
funds and [ ] exchange-traded funds advised or serviced by the
Adviser
|
Name
|
Dollar
Range of
Equity Securities in the Fund |
Aggregate
Dollar Range of Equity
Securities in All Registered Investment Companies Overseen by Trustee in Fund Complex (1)s |
||
Independent
Trustees:
|
||||
Randall
C. Barnes
|
$10,001-$50,000
|
over
$100,000
|
||
Roman
Friedrich III
|
None
|
$1-$10,000
|
||
Robert
B. Karn III
|
None
|
$10,001-$50,000
|
||
Ronald
A. Nyberg
|
$1-$10,000
|
over
$100,000
|
||
Ronald
E. Toupin, Jr.
|
None
|
None
|
||
Interested
Trustee:
|
||||
Kevin
Robinson
|
None
|
None
|
(1)
|
As
of the date of this SAI, the “Fund Complex” consists of [ ] closed-end
funds and [ ] exchange-traded funds advised or serviced by the
Adviser
|
Number
of
Accounts |
Assets
of
Accounts |
Number
of
Accounts Subject to a Performance Fee |
Assets
Subject to a Performance Fee |
|||||
Registered
Investment Companies
|
[
]
|
$[
]
|
[
]
|
$[
]
|
||||
Pooled
Investment Vehicles Other Than Registered Investment
Companies
|
[
]
|
$[
]
|
[
]
|
$[
]
|
||||
Other
Accounts
|
[
]
|
$[
]
|
[
]
|
$[
]
|
Number
of
Accounts |
Assets
of
Accounts |
Number
of
Accounts Subject to a Performance Fee |
Assets
Subject to a Performance Fee |
|||||
Registered
Investment Companies
|
[
]
|
$[
]
|
[
]
|
$[
]
|
||||
Pooled
Investment Vehicles Other Than Registered Investment
Companies
|
[
]
|
$[
]
|
[
]
|
$[
]
|
||||
Other
Accounts
|
[
]
|
$[
]
|
[
]
|
$[
]
|
Number
of
Accounts |
Assets
of
Accounts |
Number
of
Accounts Subject to a Performance Fee |
Assets
Subject to a Performance Fee |
|||||
Registered
Investment Companies
|
[
]
|
$[
]
|
[
]
|
$[
]
|
||||
Pooled
Investment Vehicles Other Than Registered Investment
Companies
|
[
]
|
$[
]
|
[
]
|
$[
]
|
||||
Other
Accounts
|
[
]
|
$[
]
|
[
]
|
$[
]
|
Number
of
Accounts |
Assets
of
Accounts |
Number
of
Accounts Subject to a Performance Fee |
Assets
Subject to a Performance Fee |
|||||
Registered
Investment Companies
|
[
]
|
$[
]
|
[
]
|
$[
]
|
||||
Pooled
Investment Vehicles Other Than Registered Investment
Companies
|
[
]
|
$[
]
|
[
]
|
$[
]
|
||||
Other
Accounts
|
[
]
|
$[
]
|
[
]
|
$[
]
|
Number
of
Accounts |
Assets
of
Accounts |
Number
of
Accounts Subject to a Performance Fee |
Assets
Subject to a Performance Fee |
|||||
Registered
Investment Companies
|
[
]
|
$[
]
|
[
]
|
$[
]
|
||||
Pooled
Investment Vehicles Other Than Registered Investment
Companies
|
[
]
|
$[
]
|
[
]
|
$[
]
|
||||
Other
Accounts
|
[
]
|
$[
]
|
[
]
|
$[
]
|
Fiscal
Year Ended May 30,
|
||||||||||
2010
|
2009
|
2008
(1)
|
||||||||
The
Investment Adviser received approximate advisory fees of
|
$
|
[
]
|
$
|
1,690,591
|
$
|
1,966,137
|
(1)
|
For
the period from July 27, 2007 (commencement of operations) through May 31,
2008.
|
Fiscal
Year Ended May 30,
|
||||||||||
2010
|
2009
|
2008
(1
)
|
|
|||||||
The Sub-Adviser received approximate sub-advisory fees of
|
$
|
[
]
|
$
|
845,295
|
$
|
983,068
|
(1)
|
For
the period from July 27, 2007 (commencement of operations) through May 31,
2008.
|
Fiscal
Year Ended May 30,
|
||||||||||
2010
|
2009
|
2008
(
1)
|
|
|||||||
Claymore Advisors, LLC received approximate administration fees
of
|
$
|
[
]
|
$
|
45,980
|
$
|
51,770
|
(1)
|
For
the period from July 27, 2007 (commencement of operations) through May 31,
2008.
|
Fiscal Year Ended May 31,
|
All
Brokers
|
Affiliated
Brokers
|
|||||
2010
|
$
|
[
]
|
$
|
[
]
|
|||
2009
|
$
|
189,357
|
$
|
0
|
|||
2008
(1)
|
$
|
316,826
|
$
|
0
|
(1)
|
For
the period from July 27, 2007 (commencement of operations) through May 31,
2008.
|
Percentage
of aggregate brokerage commissions paid to affiliated
broker
|
[
]
|
%
|
||
Percentage
of aggregate dollar amount of transactions involving the payment of
commissions effected through affiliated broker
|
[
]
|
%
|
•
|
Likelihood
of payment – capacity and willingness of the obligor to meet its financial
commitment on an obligation in accordance with the terms of the
obligation;
|
|
•
|
Nature
of and provisions of the obligation;
|
|
•
|
Protection
afforded by, and relative position of, the obligation in the event of
bankruptcy, reorganization, or other arrangement under the laws of
bankruptcy and other laws affecting creditors’
rights.
|
AAA
|
An
obligation rated ‘AAA’ has the highest rating assigned by S&P. The
obligor’s capacity to meet its financial commitment on the obligation is
extremely strong.
|
AA
|
An
obligation rated ‘AA’ differs from the highest-rated obligations only to a
small degree. The obligor’s capacity to meet its financial commitment on
the obligation is very strong.
|
A
|
An
obligation rated ‘A’ is somewhat more susceptible to the adverse effects
of changes in circumstances and economic conditions than obligations in
higher-rated categories. However, the obligor’s capacity to meet its
financial commitment on the obligation is still strong.
|
BBB
|
An
obligation rated ‘BBB’ exhibits adequate protection parameters. However,
adverse economic conditions or changing circumstances are more likely to
lead to a weakened capacity of the obligor to meet its financial
commitment on the obligation.
|
BB
|
An
obligation rated ‘BB’ is less vulnerable to nonpayment than other
speculative issues. However, it faces major ongoing uncertainties or
exposure to adverse business, financial, or economic conditions which
could lead to the obligor’s inadequate capacity to meet its financial
commitment on the obligation.
|
B
|
An
obligation rated ‘B’ is more vulnerable to nonpayment than obligations
rated ‘BB’, but the obligor currently has the capacity to meet its
financial commitment on the obligation. Adverse business, financial, or
economic conditions will likely impair the obligor’s capacity or
willingness to meet its financial commitment on the
obligation.
|
CCC
|
An
obligation rated ‘CCC’ is currently vulnerable to nonpayment, and is
dependent upon favorable business, financial, and economic conditions for
the obligor to meet its financial commitment on the obligation. In the
event of adverse business, financial, or economic conditions, the obligor
is not likely to have the capacity to meet its financial commitment on the
obligation.
|
CC
|
An
obligation rated “CC” is currently highly vulnerable to
nonpayment.
|
C
|
A
'C' rating is assigned to obligations that are currently highly vulnerable
to nonpayment, obligations that have payment arrearages allowed by the
terms of the documents, or obligations of an issuer that is the subject of
a bankruptcy petition or similar action which have not experienced a
payment default. Among others, the 'C' rating may be assigned to
subordinated debt, preferred stock or other obligations on which cash
payments have been suspended in accordance with the instrument's terms or
when preferred stock is the subject of a distressed exchange offer,
whereby some or all of the issue is either repurchased for an amount of
cash or replaced by other instruments having a total value that is less
than par.
|
D
|
An
obligation rated 'D' is in payment default. The 'D' rating category is
used when payments on an obligation are not made on the date due even if
the applicable grace period has not expired, unless S&P believes that
such payments will be made during such grace period. The 'D' rating also
will be used upon the filing of a bankruptcy petition or the taking of
similar action if payments on an obligation are jeopardized. An
obligation's rating is lowered to 'D' upon completion of a distressed
exchange offer, whereby some or all of the issue is either repurchased for
an amount of cash or replaced by other instruments having a total value
that is less than par.
|
Aaa
|
Obligations
rated Aaa are judged to be of the highest quality with minimal credit
risk.
|
Aa
|
Obligations
rated Aa are judged to be of high quality and are subject to very low
credit risk.
|
A
|
Obligations
rated A are considered upper-medium grade and are subject to low credit
risk.
|
Baa
|
Obligations
rated Baa are subject to moderate credit risk. They are considered
medium-grade and as such may possess certain speculative
characteristics.
|
Ba
|
Obligations
rated Ba are judged to have speculative elements and are subject to
substantial credit risk.
|
B
|
Obligations
rated B are considered speculative and are subject to high credit
risk.
|
Caa
|
Obligations
rated Caa are judged to be of poor standing and are subject to very high
credit risk.
|
Ca
|
Obligations
rated Ca are highly speculative and are likely in, or very near, default,
with some prospect of recovery of principal and
interest.
|
C
|
Obligations
rated C are the lowest rated class of bonds and are typically in default,
with little prospect for recovery of principal or
interest.
|
•
|
Notes
containing features that link interest or principal to the credit
performance of any third party or parties (
i.e.
, credit-linked
notes);
|
|
•
|
Notes
allowing for negative coupons, or negative principal;
|
|
•
|
Notes
containing any provision that could obligate the investor to make any
additional payments;
|
|
•
|
Notes
containing provisions that subordinate the
claim.
|
P-1
|
Issuers
(or supporting institutions) rated Prime-1 have a superior ability to
repay short-term debt obligations.
|
P-2
|
Issuers
(or supporting institutions) rated Prime-2 have a strong ability to repay
short-term debt obligations.
|
P-3
|
Issuers
(or supporting institutions) rated Prime-3 have an acceptable ability to
repay short-term debt obligations.
|
NP
|
Issuers
(or supporting institutions) rated Not Prime do not fall within any of the
Prime rating categories.
|
(i)
|
A
copy of these Proxy Policies, as they may be amended from time to time;
|
|
(ii)
|
Copies
of proxy statements received regarding client securities, unless these
materials are available electronically through the SEC’s EDGAR system;
|
|
(iii)
|
A
record of each proxy vote cast on behalf of its clients;
|
|
(iv)
|
A
copy of internal documents created by GPAM that were material
to making the decision how to vote proxies on behalf of its clients; and
|
|
(v)
|
Each
written client request for information on how GPAM voted proxies on behalf
of the client and all written responses by GPAM to oral or written client
requests for such proxy voting
information.
|
(a)
|
Amended
and Restated Agreement and Declaration of Trust of
Registrant(1)
|
||
(b)
|
Amended
and Restated By-Laws of Registrant*
|
||
(c)
|
Not
applicable
|
||
(d)
|
Not
applicable
|
||
(e)
|
Dividend
Reinvestment Plan of Registrant(1)
|
||
(f)
|
Not
applicable
|
||
(g)
|
(i)
|
Investment
Advisory Agreement between Registrant and Claymore
Advisors,
|
|
LLC
(the “Investment Adviser”)*
|
|||
(ii)
|
Investment
Sub-Advisory Agreement among Registrant, the Investment
|
||
Adviser
and Guggenheim Partners Asset Management, LLC (the
“Sub-
|
|||
Adviser”)*
|
|||
(h)
|
(i)
|
Form
of Underwriting Agreement and/or Sales Agreement++
|
|
(i)
|
Not
applicable
|
||
(j)
|
(i)
|
Form
of Custody Agreement(1)
|
|
(ii)
|
Form
of Foreign Custody Manager Agreement(1)
|
||
(k)
|
(i)
|
Form
of Stock Transfer Agency Agreement(1)
|
|
(ii)
|
Form
of Fund Accounting Agreement(1)
|
||
(iii)
|
Form
of Administration Agreement (1)
|
||
(iv)
(1)
|
Committed
Facility Agreement (the “Committed Facility Agreement”)
between
|
||
Registrant
and BNP Prime Brokerage, Inc. (“BNP Prime Brokerage”)*
|
|||
(2) | Amendment to Committed Facility Agreement | ||
(vi)
|
Account
Agreement between Registrant and BNP Prime Brokerage*
|
||
(vii)
|
Special
Custody and Pledge Agreement among Registrant, BNP
Prime
|
||
Brokerage
and The Bank of New York Mellon*
|
|||
(l)
|
Opinion
and Consent of Skadden, Arps, Slate, Meagher & Flom
LLP+
|
||
(m)
|
Not
applicable
|
||
(n)
|
Consent
of Independent Registered Public Accounting Firm+
|
||
(o)
|
Not
applicable
|
||
(p)
|
Form
of Initial Subscription Agreement(1)
|
||
(q)
|
Not
applicable
|
(r)
|
(i)
|
Code
of Ethics of the Registrant and the Investment Adviser*
|
|
(ii)
|
Code
of Ethics of the Sub-Adviser*
|
||
(s)
|
Power
of Attorney*
|
*
|
Filed
herewith
|
+
|
To
be filed by further amendment
|
++
|
To
be filed by post-effective
amendment
|
(1)
|
Incorporated
by reference to Pre-Effective Amendment No. 2 to the Registrant’s
Registration Statement on Form N-2, filed June 26, 2007 (File No.
333-138686).
|
NYSE
Listing Fees
|
$
|
SEC
Registration Fees
|
$
|
Printing/engraving
expenses
|
$
|
Accounting
fees
|
$
|
NASD
Fees
|
$
|
Legal
fees
|
$
|
FINRA
fees
|
$
|
Miscellaneous
|
$
|
Total
|
$
|
Title of Class
|
Number
of Record Shareholders
as of [
],
2010
|
Common
shares of beneficial interest, par value $.01 per share
|
[
]
|
|
1.
|
Registrant
undertakes to suspend the offering of Common Shares until the prospectus
is amended, if subsequent to the effective date of this registration
statement, its net asset value declines more than ten percent from its net
asset value, as of the effective date of the registration statement or its
net asset value increases to an amount greater than its net proceeds as
stated in the prospectus.
|
|
2.
|
Not
applicable.
|
|
3.
|
Not
applicable.
|
|
4.
|
Registrant
undertakes:
|
|
(a)
|
to
file, during any period in which offers or sales are being made, a
post-effective amendment to this registration
statement:
|
|
(1)
|
to
include any prospectus required by Section 10(a)(3) of the Securities Act
of 1933;
|
|
(2)
|
to
reflect in the prospectus any facts or events arising after the effective
date of the registration statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate, represent a
fundamental change in the information set forth in the registration
statement; and
|
|
(3)
|
to
include any material information with respect to the plan of distribution
not previously disclosed in the registration statement or any material
change to such information in the registration
statement.
|
|
(b)
|
that,
for the purpose of determining any liability under the 1933 Act, each such
post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of
those securities at that time shall be deemed to be the initial bona fide
offering thereof; and
|
|
(c)
|
to
remove from registration by means of a post-effective amendment any of the
securities being registered which remain unsold at the termination of the
offering;
|
|
(d)
|
that,
for the purpose of determining liability under the 1933 Act to any
purchaser, if the Registrant is subject to Rule 430C: Each prospectus
filed pursuant to Rule 497(b), (c), (d) or (e) under the 1933 Act as part
of a registration statement relating to an offering, other than
prospectues filed in reliance on Rule 430A under the 1933 Act, shall be
deemed to be part of and included in the registration statement as of the
date it is first used after effectiveness. Provided, however, that no
statement made in a registration statement or prospectus that is part of
the registration statement or made in a document incorporated or deemed
incorporated by reference into the registration statement or prospectus
that is part of the registration statement will, as to a purchaser with a
time of contract of sale prior to such first use, supercede or modify any
statement that was made in the registration statement or prospectus that
was part of the registration statement or made in any such document
immediately prior to such date of first
use.
|
|
(e)
|
that
for the purpose of determining liability of the Registrant under the 1933
Act to any purchaser in the initial distribution of securities: The
undersigned Registrant undertakes that in a primary offering of securities
of the undersigned Registrant pursuant to this registration statement,
regardless of the underwriting method used to sell the securities to the
purchaser, if the securities are offered or sold to such purchaser by
means of any of the following communications, the undersigned Registrant
will
|
|
|
be
a seller to the purchaser and will be considered to offer or sell such
securities to the purchaser:
|
|
(1)
|
any
preliminary prospectus or prospectus of the undersigned Registrant
relating to the offering required to be filed pursuant to Rule 497 under
the 1933 Act;
|
|
(2)
|
the
portion of any advertisement pursuant to Rule 482 under the 1933 Act
relating to the offering containing material information about the
undersigned Registrant or its securities provided by or on behalf of the
undersigned Registrant; and
|
|
(3)
|
any
other communication that is an offer in the offering made by the
undersigned Registrant to the
purchaser.
|
|
5.
|
Registrant
undertakes that:
|
|
(a)
|
for
the purpose of determining any liability under the 1933 Act, the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the Registrant under Rule 497(h) under the 1933 Act
shall be deemed to be part of this registration statement as of the time
it was declared effective; and
|
|
(b)
|
for
the purpose of determining any liability under the 1933 Act, each
post-effective amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of the securities at that time shall be
deemed to be the initial bona fide offering
thereof.
|
|
6.
|
Registrant
undertakes to send by first class mail or other means designed to ensure
equally prompt delivery, within two business days of receipt of a written
or oral request, any Statement of Additional
Information.
|
Principal
Executive Officer:
/s/
J. Thomas
Futrell
J.
Thomas Futrell
|
Chief
Executive Officer
|
|
Principal
Financial Officer:
/s/ Steven M.
Hill
Steven
M. Hill
|
Chief
Financial Officer, Chief Accounting Officer and
Treasurer
|
|
Trustees:
*_____________________________
Randall
C. Barnes
*_____________________________
Roman
Friedrich III
*_____________________________
Robert
B. Karn III
*_____________________________
Ronald
E. Toupin, Jr.
*_____________________________
Kevin
M. Robinson
|
Trustee
Trustee
Trustee
Trustee
Trustee
|
(b)
|
Amended
and Restated By-Laws of Registrant
|
|
(g)
|
(i)
|
Investment
Advisory Agreement between Registrant and Claymore Advisors, LLC (the
“Investment Adviser”)
|
(g)
|
(ii)
|
Investment
Sub-Advisory Agreement among Registrant, the Investment Adviser and
Guggenheim Partners Asset Management, LLC (the
“Sub-Adviser”)
|
(k)
|
(iv)
(1)
|
Committed
Facility Agreement (the “Committed Facility Agreement”) between Registrant
and BNP Prime Brokerage, Inc. (“BNP Prime Brokerage”)
|
(k) | (iv) (2) | Amendment to Committed Facility Agreement |
(k)
|
(vi)
|
Account
Agreement between Registrant and BNP Prime Brokerage
|
(k)
|
(vii)
|
Special
Custody and Pledge Agreement among Registrant, BNP Prime Brokerage and The
Bank of New York Mellon
|
(r)
|
(i)
|
Code
of Ethics of the Registrant and the Investment Adviser
|
(r)
|
(ii)
|
Code
of Ethics of the Sub-Adviser
|
(s)
|
Power
of Attorney
|
|
By:
|
/s/ Kevin M. Robinson |
Name: Kevin M. Robinson
Title: Senior Managing Director
|
By:
|
/s/ Authorized Signatory |
Name: Authorized Signatory
Title:
|
By:
|
/s/ Mark E. Mathiasen |
Name: Mark E. Mathiasen
Title: Secretary
|
Committed Facility Agreement
|
|
BNP PARIBAS PRIME BROKERAGE, INC. (
“BNPP PB, Inc.”
) and the counterparty specified on the signature page (
“Customer”
), hereby enter into this Committed Facility Agreement (this
“Agreement”
), dated as of the date specified on the signature page.
|
|||
Whereas
BNPP PB, Inc. and Customer have entered into the U.S. PB Agreement, dated as of the date hereof (the
“U.S. PB Agreement”
) (the U.S. PB Agreement and this Agreement, collectively, the
“40 Act Financing Agreements”
).
|
|||
Whereas
this Agreement supplements and forms part of the other 40 Act Financing Agreements and sets out the terms of the commitment of BNPP PB, Inc. to provide financing to Customer under the 40 Act Financing Agreements.
|
|||
Now, therefore,
in consideration of the foregoing promises and for other good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, the parties agree as follows:
|
|||
1.
|
Definitions -
|
||
(a)
|
Capitalized terms not defined in this Agreement have the respective meaning assigned to them in the U.S. PB Agreement. The 40 Act Financing Agreements are included in the term “Contract,” as defined in the U.S. PB Agreement.
|
||
(b)
|
“Account Agreement”
means the Account Agreement attached as Exhibit A to the U.S. PB Agreement.
|
||
(c)
|
“Collateral Requirements”
means the collateral requirements set forth in Section 1 of Appendix A attached hereto.
|
||
(d)
|
“Default”
is defined in Section 9(c) hereof.
|
||
(e)
|
“Default Action”
means exercising any rights of set-off, liquidating positions or Contracts, terminating or accelerating any loan or Contract, canceling orders, closing out transactions, deducting charges from an account (other than normal charges for interest, clearing fees and ticket charges), selling any or all of the securities and commodities or other property that may be in possession or control of the BNPP Entities (either individually or jointly with others), buying-in any securities, commodities or other property that Customer’s account or accounts may be short, or acting as attorney-in-fact with respect to Customer, any Customer account or any property in a Customer account
|
||
(f)
|
“Eligible Securities”
shall have the meaning ascribed to such term in Appendix A hereto.
|
||
(g)
|
“Initial NAV”
means the Net Asset Value of Customer as of the date of execution hereof.
|
||
(h)
|
“Maximum Commitment Financing”
means $30 million USD; provided, however, that if (1) credit spreads increase to a degree that the financing of assets related to Customer’s business would present an imprudent economic risk for the Customer’s shareholders or (2) the regulatory or tax treatment of Customer’s borrowings change in a manner substantially adverse to Customer, then Customer may, to the extent necessary, reduce the Maximum Commitment Financing or terminate this Agreement to address the risk or adverse change, upon written notice to BNP PB, Inc. setting forth in reasonable detail its basis for the reduction or termination.
|
||
(i)
|
“Net Asset Value”
means, with respect to Customer, the aggregate net asset value of the common stock issued by Customer calculated in accordance with the 1940 Act.
|
(j)
|
“Net Asset Value Floor”
means, with respect to Customer, an amount equal to 50% of the Initial NAV (such initial 50% amount, the
“Execution Date NAV Floor”
); provided, however, that following the date hereof, the Net Asset Value Floor shall equal the greater of (i) the Net Asset Value Floor on the Execution Date or (ii) 50% of the Net Asset Value of Customer, calculated based on the Customer’s Net Asset Value as of its most recent fiscal year end subsequent to the date hereof.
|
||
(k)
|
“Portfolio Gross Market Value”
means the Gross Market Value (as defined in Appendix A attached hereto) of all of Customer’s Positions that are Eligible Securities (as defined in Appendix A attached hereto).
|
||
(l)
|
“1940 Act”
means the Investment Company Act of 1940, as amended.
|
||
2.
|
Scope of Committed Facility -
|
||
Subject to Section 3, BNPP PB, Inc. shall make available cash financing under and in accordance with the 40 Act Financing Agreements in an amount up to the Maximum Commitment Financing, and may not take any of the following actions except upon at least 90 calendar days’ prior notice (the
“Facility Modification Notice”
):
|
|||
(a)
|
modify the Collateral Requirements;
|
||
(b)
|
recall any cash loan under the 40 Act Financing Agreements;
|
||
(c)
|
modify the interest rate spread on cash loans under the 40 Act Financing Agreements, as set forth in Appendix B attached hereto;
|
||
(d)
|
modify the fees, charges or expenses other than those described in clause (c) above, as set forth in Appendix B attached hereto (the
“Fees”
),
provided that
BNPP PB, Inc. may modify any Fees immediately if (i) the amount of such Fees charged to BNPP PB, Inc., as the case may be, have been increased by the provider of the relevant services or (ii) consistent with increases generally to customers; or
|
||
(e)
|
terminate any of the 40 Act Financing Agreements.
|
||
3.
|
Conditions for Committed Facility -
|
||
The commitment as set forth in Section 2 only applies so long as -
|
|||
(a)
|
Customer satisfies the Collateral Requirements and
|
||
(b)
|
no Default or Facility Termination Event has occurred.
|
||
4.
|
Arrangement and Commitment Fees -
|
||
(a)
|
Customer shall pay an arrangement fee as set forth in Appendix B.
|
||
(b)
|
Customer shall pay a commitment fee as set forth in Appendix B.
|
||
5.
|
No Right of Substitution -
|
||
(a)
|
After BNPP PB, Inc. sends a Facility Modification Notice, Customer may not substitute any collateral,
provided that
Customer may purchase and sell portfolio securities in the ordinary course of business consistent with its investment restrictions;
provided further
that BNPP PB, Inc. may permit substitutions upon request, which permission shall not be unreasonably withheld;
provided further
that for substitutions of rehypothecated collateral, such collateral shall be returned for substitution within a commercially reasonable period
|
(in any event no sooner than the standard settlement period applicable to such collateral). | ||||
(b)
|
Prior to BNPP PB, Inc. sending a Facility Modification Notice, Customer may substitute collateral,
provided that
for substitutions of rehypothecated collateral, such collateral shall be returned for substitution within a reasonable period (in any event no sooner than the standard settlement period applicable to such collateral).
|
|||
6.
|
Collateral Delivery -
|
|||
If notice of a Collateral Requirement is sent to Customer orally or via facsimile or electronic mail or such delivery method as the parties agree (in each case, with delivery deemed when sent): (i) on or before 10:00 a.m. on any Business Day, then Customer shall deliver all required Collateral no later than the close of business on such Business Day, and (ii) after 10:00 a.m. on any Business Day, then Customer shall deliver all required Collateral no later than the close of business on the immediately succeeding Business Day.
|
||||
7.
|
Representations and Warranties -
|
|||
Customer hereby makes all the representations and warranties set forth in Section 5 of the Account Agreement, which are deemed to refer to this Agreement, and such representations and warranties shall survive each transaction and the termination of the 40 Act Financing Agreements until such time as no assets remain in the Accounts.
|
||||
8.
|
Financial Information -
|
|||
Customer shall provide BNPP PB, Inc. with copies of-
|
||||
(a)
|
the most recent annual report of Customer containing financial statements certified by independent certified public accountants and prepared in accordance with generally accepted accounting principles in the United States, as soon as available and in any event within 120 calendar days after the end of each fiscal year of Customer;
|
|||
(b)
|
the most recent monthly financial statement of Customer, including performance returns and net asset value of Customer, as soon as available and in any event within 30 calendar days after the end of each month; and
|
|||
(c)
|
the estimated net asset value statement of Customer as of any Business Day, upon request therefor by BNPP PB, Inc..
|
|||
9.
|
Termination -
|
|||
(a)
|
Upon the occurrence of a Facility Termination Event (as defined in clause (d) below), this Agreement automatically terminates.
|
|||
(b)
|
Upon the occurrence of a Default, the BNPP Entities may terminate any of the 40 Act Financing Agreements and take Default Action.
|
|||
(c)
|
Each of the following events constitutes a
“Default”
:
|
|||
i.
|
Customer fails to meet the Collateral Requirements within one Business Day after the time periods set forth in Section 6;
|
|||
ii.
|
Customer fails to deliver the financial information (1) within five Business Days after the time periods set out in Sections 8(a) and (b), and (2) within one Business Day after the time period set out in Section 8(c), provided that such cure periods shall apply only In respect of Section 8;
|
iii.
|
the Net Asset Value of Customer declines below the Net Asset Value Floor,
|
|||
iv.
|
any representation or warranty made or deemed made by Customer to BNPP PB, Inc. under any 40 Act Financing Agreements (including under with Section 7 herein) proves false or misleading when made or deemed made;
|
|||
v.
|
Customer fails to comply with or perform any agreement or obligation under this Agreement or the other 40 Act Financing Agreements (other than those covered by Section 9(c)i or ii), provided, however, that other than a failure by Customer to make a payment due to a BNPP Entity or a Default as set forth in Sections 9(c)i, 9(c)ii, or 9(c)iv, such event or occurrence shall not be deemed a Default and Default Action may not be taken unless Customer has failed to remedy such event or occurrence within five Business Days of its receipt or deemed receipt, pursuant to Section 12(a) of Exhibit A of the U.S. PB Agreement, of notice of such event or occurrence;
|
|||
vi.
|
the filing by or against Customer of a petition or other proceeding in bankruptcy, insolvency or for the appointment of a receiver or upon the levy or attachment against any property or accounts of Customer; or
|
|||
vii.
|
the occurrence of a repudiation, material breach or the occurrence of a default, termination event or similar condition (howsoever characterized, which, for the avoidance of doubt, includes the occurrence of an Additional Termination Event under an ISDA Master Agreement between Customer and a BNPP Entity, if applicable) by Customer under any contract with (A) a BNPP Entity or affiliate of a BNPP Entity or (B) a third party entity, where the aggregate principal amount of any such contract (which, for the avoidance of doubt, includes any obligations with respect to borrowed money or other assets in connection with such contract) is not less than $10,000,000.
|
|||
(d)
|
Each of the following events constitutes a
“Facility Termination Event”
:
|
|||
i.
|
there occurs any change in BNPP PB, Inc.’s interpretation of any Applicable Law or the adoption of or any changes in the same that, In the reasonable opinion of counsel to BNPP PB, Inc., has the effect with regard to BNPP PB, Inc. of impeding or prohibiting the arrangements under the 40 Act Financing Agreements (including, but not limited to, imposing or adversely modifying or affecting the amount of regulatory capital to be maintained by BNPP PB, Inc.); provided, however, that it shall not be a Facility Termination Event if there occurs a change in, or change in BNPP PB, Inc.’s interpretation of, any Applicable Law that results in a cost increase to BNPP PB, Inc. (as determined in its sole discretion), and such cost increase is accepted by Customer (for the avoidance of doubt, such cost increase may be implemented by adjusting the fees and rates in Appendix B or in any other manner as determined by BNPP PB, Inc. in its sole discretion);
|
|||
ii.
|
(A) as of any day, the Net Asset Value of Customer has declined by twenty-five percent (25%) or more from the highest Net Asset Value in the preceding one-month period then ending; or (B) as of any day, the Net Asset Value of Customer has declined by thirty-five percent (35%) or more from the highest Net Asset Value in the preceding three-month period then ending; or (C) as of any day, the Net Asset Value of Customer, has declined by fifty percent (50%) or more from the highest Net Asset Value in the preceding 12-month period then ending; provided that, for purposes of (A), (B) and (C), the calculations under this paragraph shall be adjusted to exclude any decline in the Net Asset Value attributable to the payment of distributions, the repayment or redemption of any senior securities representing preferred stock or indebtedness or other corporate actions or any positive change caused by subscriptions, contributions or investments;
|
iii.
|
(A) the investment management agreement between Customer and its investment manager (
“Advisor”
) is terminated or (B) Advisor otherwise ceases to act as investment advisor of Customer and a replacement investment advisor approved by BNPP PB, Inc. in its sole discretion has not been appointed immediately, provided, however, that it shall not be a Facility Termination Event under sub-clause (A) if such investment manager agreement has automatically terminated in connection with a change of control relating to the Advisor and a new investment management agreement with the Advisor is approved in accordance with applicable law and effective as of such termination date;
|
|||
iv.
|
the asset coverage for all borrowings constituting ’senior securities representing indebtedness’ (as defined for purposes of Section 18(g) of the 1940 Act of Customer falls below the 300% minimum required by Section 18(f)(1) of the 1940 Act or such other minimum percentage as may be approved by U.S. governmental authorities from time to time under applicable U.S. securities law (provided that, for purposes of this provision, such minimum percentage cannot be lower than 200%) and such decline below the minimum continues for three Business Days (provided that such three Business Day cure period shall not apply where Customer is in violation of the 1940 Act);
|
|||
v.
|
Customer fails to make any filing necessary to comply with the rules of any exchange in which its shares are listed and such failure continues for at least five Business Days, provided, however, that such additional five Business Day period shall not apply in respect of any filing failure which has a material adverse effect on Customer’s business;
|
|||
vi.
|
Customer determines that the introduction of, or any change in or in the interpretation of, any law, treaty or governmental rule, regulation or order after the date hereof adversely effects the tax treatment of the loans advanced pursuant to this Agreement or any of the transactions contemplated hereunder in any material respect and notifies BNPP PB, Inc. thereof in writing;
|
|||
vii.
|
Customer enters into any additional indebtedness with a party other than a BNPP Entity or its affiliates beyond the financing provided hereunder through the 40 Act Financing Agreements, including without limitation any further borrowings constituting ’senior securities’ (as defined for purposes of Section 18 of the 1940 Act) or any promissory note or other evidence of indebtedness, whether with a bank or any other person; provided, however, that pledges by Customer of assets under a Credit Support Annex to an ISDA Master Agreement or in connection with listed call options transactions, repurchase agreements and/or any other permitted derivative transactions pursuant to Customer’s investment portfolio activities shall be permissible additional indebtedness; or
|
|||
viii.
|
Customer changes its fundamental investment policies.
|
|||
(e)
|
Adjustments to Maximum Commitment Financing
|
|||
i.
|
Customer may, by providing not less than 10 Business Day’s prior written notice to BNPP PB, Inc., adjust the Maximum Commitment Financing in a manner and amount commensurate with any changes to the asset coverage requirement for borrowings constituting ’senior securities representing indebtedness’ (as defined for purposes of Section 18(g) of the 1940 Act) from the 300% minimum required by Section 18(f)(1) of the 1940 Act.
|
10.
|
Notices -
|
|||
Notices under this Agreement shall be provided pursuant to Section 12(a) of the Account Agreement
|
||||
11.
|
Compliance with Applicable Law -
|
|||
(a)
|
Notwithstanding any of the foregoing, to the extent required by Applicable Law -
|
|||
i.
|
the BNPP Entities may terminate any 40 Act Financing Agreement and any Contract;
|
|||
ii.
|
BNPP PB, Inc. may recall any outstanding loan under the 40 Act Financing Agreements;
|
|||
iii.
|
BNPP PB, Inc. may modify the Collateral Requirements (as and to the extent required by Applicable Law); and
|
|||
iv.
|
the BNPP Entities may take Default Action.
|
|||
(b)
|
This Agreement will not limit the ability of BNPP PB, Inc. to change the product provided under this Agreement and the 40 Act Financing Agreements as necessary to comply with Applicable Law.
|
|||
(c)
|
The BNPP Entities may exercise any remedies permitted under the Contracts if Customer fails to comply with Applicable Law that relates to (i) felonies, (ii) fraud, (iii) activities related to the conduct of Customer’s business or (iv) activities related to the securities industry (except in the case of (iii) or (iv), where the failure to do so would not have a material adverse effect on Customer or its ability to perform under the Contracts, as determined by the BNPP Entities).
|
|||
12.
|
Miscellaneous -
|
|||
(a)
|
In the event of a conflict between any provision of this Agreement and the other 40 Act Financing Agreements, this Agreement prevails.
|
|||
(b)
|
This Agreement is governed by and construed in accordance with the laws of the State of New York, without giving effect to the conflict of laws doctrine.
|
|||
(c)
|
Section 16(c) of the Account Agreement is hereby incorporated by reference in its entirety and shall be deemed to be a part of this Agreement to the same extent as if such provision had been set forth in full herein.
|
|||
(d)
|
This Agreement may be executed in counterparts, each of which will be deemed an original instrument and all of which together will constitute one and the same agreement.
|
|||
(e)
|
This Agreement and the other 40 Act Financing Agreements shall not be publicly distributed via syndication (for the avoidance of doubt, nothing in this Subsection shall affect the rehypothecation rights in the 40 Act Financing Agreements).
|
CLAYMORE/GUGGENHEIM STRATEGIC
OPPORTUNITIES FUND
|
|||
By:
|
/s/ Steven M. Hill
|
||
Name: Steven M. Hill | |||
Title: Chief Financial Officer | |||
BNP PARIBAS PRIME BROKERAGE, INC.
|
|||
By:
|
/s/ Authorized Signatory
|
||
Name: Authorized Signatory | |||
Title: |
1.
|
Amendments to Termination Provision
|
a.
|
The following shall be added after “Customer’s investment portfolio activities” in Section 9(d)(vii) of the Agreement:
|
2.
|
Representations
|
3.
|
Miscellaneous
|
a.
|
Definitions.
Capitalized terms used in this Amendment and not otherwise defined herein shall have the meanings specified for such terms in the Agreement.
|
b.
|
Entire Agreement.
This Amendment constitutes the entire agreement and understanding of the parties with respect to its subject matter and supersedes all oral communications and prior writings (except as otherwise provided herein) with respect thereto.
|
c.
|
Counterparts.
This Amendment may be executed and delivered in counterparts (including by facsimile transmission), each of which will be deemed an original.
|
d.
|
Headings.
The headings used in this Amendment are for convenience of reference only and are not to affect the construction of or to be taken into consideration in interpreting this Amendment.
|
e.
|
Governing Law.
This Amendment will be governed by and construed in accordance with the laws of the State of New York (without reference to choice of law doctrine).
|
BNP PARIBAS PRIME BROKERAGE, INC.
/s/ Authorized Signatory
__________________________________
Name: Authorized Signatory
Title:
|
CLAYMORE/GUGGENHEIM STRATEGIC OPPORTUNITIES FUND
/s/ J. Thomas Futrell
_________________________
Name: J. Thomas Futrell
Title: Chief Executive Officer
|
|
U.S. PB Agreement
|
(a)
|
Account Agreement,
attached as Exhibit A hereto;
|
|
(b)
|
Custody Terms,
attached as Exhibit B hereto;
|
|
(c)
|
Arranged Financing Terms,
attached as Exhibit C hereto; and
|
BNP PARIBAS PRIME BROKERAGE, INC.
|
||
By:
|
/s/ Authorized Signatory
|
|
Name: Authorized Signatory | ||
Title: |
CLAYMORE/GUGGENHEIM STRATEGIC
OPPORTUNITIES FUND
|
||
Name of Customer
|
||
By:
|
/s/Steven M Hill
|
|
Name: Steven M. Hill
|
||
Title: Chief Financial Officer
|
||
Jurisdiction of organization
Delaware
|
||
Type of organization
Trust
|
||
Place of business / chief executive office Lisle. Illinois
|
||
Organizational identification number
|
Telephone
|
Fax
|
Email
|
|
|
|
1.
|
Collateral Maintenance, Repayment of Financing -
The provisions of this Subsection shall apply except to the extent any such provisions contravene the Committed Facility Agreement. Customer will at all times maintain in, and upon written or oral demand furnish to, the Accounts, or otherwise provide to the BNPP Entitles in a manner satisfactory to the BNPP Entities, assets of the types and in the amounts required by the BNPP Entities in light of outstanding Contracts (
“Deliverable Collateral”
). Immediately upon written or oral demand by BNPP PB, Inc., Customer shall pay to BNPP PB, Inc. in immediately available U.S. funds any principal balance of, accrued unpaid interest on, and any other Obligation owing in respect of, any Account.
|
||
2.
|
Security Interest -
|
||
(a)
|
Grant of Security Interest.
Customer hereby assigns and pledges to the BNPP Entities all Collateral, and Customer hereby grants a continuing first priority security interest therein, a lien thereon and a right of set off against any Collateral, and all such Collateral shall be subject to a general lien and a continuing first security interest and fixed charge, in each case securing the discharge of all Obligations, Contracts with BNPP Entities and liabilities of Customer to the BNPP Entities hereunder and thereunder, whether now existing or hereafter arising and irrespective of whether or not the BNPP Entities has made advances in connection with such Collateral, and irrespective of the number of accounts Customer may have with the BNPP Entities, and of which BNPP Entity holds such Collateral.
|
||
(b)
|
No other Liens.
All Collateral delivered to a BNPP Entity shall be free and clear of all prior liens, claims and encumbrances (other than liens solely in favor of the BNPP Entities), and Customer will not cause or allow any of the Collateral, whether now owned or hereafter acquired, to be or become subject to any liens, security interests, mortgages or encumbrances of any nature other than security interests solely in the BNPP Entities’ favor. Furthermore, Collateral consisting of securities shall be delivered in good deliverable form (or the BNPP Entities shall have the power to place such securities in good deliverable form) in accordance with the requirements of the primary market or markets for such securities.
|
||
(c)
|
Perfection.
Customer shall execute such documents and take such other actions as the BNPP Entities shall reasonably request In order to perfect the BNPP Entities’ rights with respect to any such Collateral. Without limiting the generality of the foregoing, Customer agrees to record the security interests granted hereunder in any internal or external register of mortgages and charges maintained by or with respect to Customer under Applicable Law. Customer shall pay the fees for any filing, registration, recording or perfection of any security interest contemplated by this Agreement and pay, or cause to be paid, from the Accounts any and all Taxes imposed on the Collateral by any authority. In addition, Customer appoints the BNPP Entities as Customer’s attorney-in-fact to act on Customer’s behalf to sign, seal, execute and deliver all documents, and do all acts, as may be required, or as a BNPP Entity shall determine to be advisable, to perfect the security interests created hereunder in, provide for a BNPP Entity to have control of, or realize upon any rights of a BNPP Entity in, any or ail of the Collateral, as expressly permitted under this Agreement, (including without limitation as permitted under Section 8(a) herein) and/or the Committed Facility Agreement. The BNPP Entities and Customer each acknowledge and agree that each account maintained by a BNPP Entity to which any Collateral is credited is a “securities account
”
within the meaning of Article 8 of the Uniform Commercial Code, as in effect in the State of New York (the “NYUCC”), and all property and assets held in or credited from time to time to such an account (other than any commodity contract (as defined in Section 9-115 of the NYUCC) shall be treated as a “financial asset
”
for purposes of Article 8 of the NYUCC,
provided
that any such account may also be a “deposit account
”
(within the meaning of Section 9-102(a)(29) of the NYUCC) or a “commodity account” (within Die meaning of Section 9-102(a)(14) of the NYUCC). Each BNPP Entity represents and warrants that it is a “securities intermediary” within the meaning of Article 8 of the NYUCC and is acting in such capacity with respect to each such account maintained by it.
|
||
(d)
|
Effect of Security Interest.
The BNPP Entitles’ security interest in the Collateral shall (i) remain in full force and effect until the payment and performance in full of Customer’s Obligations, (ii) be binding upon Customer, its successors and permitted assigns, and (Hi) Inure to the benefit of, and be enforceable by, the BNPP Entities and their respective successors, transferees and assigns.
|
||
(e)
|
Contract Status.
The parties acknowledge that this Agreement and each Contract entered into pursuant to this Agreement are each a “securities contract”, “swap agreement”,“ forward contract”, or “commodity contract” within the meaning of the United States Bankruptcy Code (Title 11 of the United States Code) (the “Bankruptcy Code”) and that each delivery, transfer, payment and grant of a security interest made or required to be made hereunder or thereunder or contemplated hereby or thereby or made, required to be made or contemplated in connection herewith or therewith is a “transfer” and a “margin payment” or a “settlement payment” within the meaning of Sections 362(b)(6),(7),(17) and/or (27) and Sections 546(e), (f), (g) and/or (j) of the Bankruptcy Code. The parties further acknowledge that this Agreement is a “master netting agreement“ within the meaning of the
|
(b)
|
Collateral Return.
BNPP will return rehypothecated Collateral securities to Customer within the ordinary settlement cycle for such securities upon (i) the removal or transfer by Customer of the securities from the Special Custody Account pursuant to the terms of the Special Custody and Pledge Agreement or (ii) five business days prior notice from Customer. For the purposes of the return of any Collateral to Customer, the BNPP Entities’ return obligations shall be satisfied by delivering securities or other financial assets of the same issuer, class and quantity as the Collateral initially transferred.
|
|
(c)
|
Rehvpothecation Excess: Distribution: Delivery Failure.
Rehypothecation of Customer’s collateral shall be subject to the following: (i) if as of the close of business on any Business Day the value of all outstanding rehypothecated Collateral exceeds the Outstanding Debit Financing (as defined in the Committed Facility Agreement) (such excess amount, the
“Rehvpothecation Excess”
), the BNPP Entities shall, at its option, either (A) reduce the amount of outstanding rehypothecated Collateral so that the total value of rehypothecated Collateral does not exceed the Outstanding Debit Financing or (B) deliver to, and maintain within, the Special Custody Account an amount of cash at least equal to any Rehypothecatlon Excess (for the avoidance of doubt, if there is no Rehypothecation Excess, the BNPP Entities can recall any cash delivered hereunder); (ii) to the extent the BNPP Entities receive any distributions (including dividends or coupons) on the rehypothecated Collateral, the BNPP Entities shall deliver such distributions to the Special Custody Account; and (iii) if the BNPP Entities are unable to return securities of the same issuer, class and quantity as the Collateral initially transferred, the Customer may elect by three Business Days’ notice to reduce its overall debit by the value of the rehypothecated Collateral unable to be returned, in which case the BNPP Entities’ obligation to return a like amount of the rehypothecated Collateral shall terminate.
|
|
5.
|
Representations and Warranties of Customer -
Customer (and, If a person or entity is signing this Agreement on behalf of Customer, such person or entity) hereby represents and warrants as of the date hereof, which representations and warranties will be deemed repeated on each date on which this Agreement is in effect, that:
|
|
(a)
|
Due Organization: Organizational Information.
Customer is duly organized and validly existing under the laws of the jurisdiction of its organization; Customer’s jurisdiction of organization, type of organization, place of business (if it has only one place of business) or chief executive office (if it has more than one place of business) and organizational identification number are, in each case as set forth on the cover page hereof or as shall have been notified to BNPP PB, Inc. not less than 30 days prior to any change of such Information; and unless Customer otherwise informs BNPP PB, Inc. in writing, Customer does not have any place of business in the United Kingdom.
|
|
(b)
|
Non-Contravention: Compliance with Applicable Laws.
Except as previously disclosed in Customer’s public filings, Customer is and will at all times be, in compliance with (i) Applicable Law that relates to (a) felonies, (b) fraud, (c) activities related to the conduct of Customer’s business or (d) activities related to the securities industry (except in the case of (c) or (d), where the failure to do so would not have a material adverse effect on Customer or its ability to perform under the Contracts, as determined by the BNPP Entitles), (ii) all orders and awards binding on Customer or its property, (iii) Customer’s internal documents and policies (including organizational documents) (except where such failure would not have a material adverse effect on Customer or its ability to perform under the Contracts, as determined by the BNPP Entities), and (Iv) all material contracts (including this Agreement) or other instruments binding on or affecting Customer or any of its property. Further, Customer maintains adequate controls to be reasonably assured of such compliance. Except as previously disclosed In Customer’s public filings, there are and have been no criminal or governmental enforcement proceedings, investigations, or other litigation pending or, to Customer’s knowledge, threatened which relate to (a) felonies, (b) fraud, (c) activities related to the conduct of Customer’s business or, to Customer’s Knowledge, the business of Customer’s investment advisers or (d) activities related to the security industry to which Customer or any Related Person is a party or to which any of the properties of Customer or any Related Person is subject Further, the education, employment and other qualifications for the officers for the Customer in the prospectus provided to any investors or otherwise made available by the Customer are correct and complete.
|
|
(c)
|
Full Power.
Customer has full power and is duly authorized to execute and deliver this Agreement and to perform its obligations hereunder. Customer has full power to enter into and engage in any and alt transactions (i) in any Account with a BNPP Entity or (ii) that is subject to this Agreement. Further, this Agreement has been duly executed and delivered by Customer, and constitutes a valid, binding and enforceable agreement of Customer, enforceable in accordance with its terms, subject to applicable bankruptcy, insolvency and similar laws affecting creditors’ rights generally and general principles of equity.
|
|
(d)
|
No Consent.
No consent of any person and no authorization or other action by, and no notice to, or filing with, any governmental authority or any other person is required that has not already been obtained (I) for the due execution, delivery and performance by Customer of this Agreement; or (ii) for the exercise by the BNPP Entities of the rights or remedies provided for in this Agreement, including rights and remedies In respect of the Collateral.
|
|
(e)
|
No Prior Lien.
Customer is the lawful owner of all Collateral, free and clear of all liens, claims, encumbrances and transfer restrictions, except such as are created under this Agreement, other liens in favor of a BNPP Entity, and Customer will not cause or allow any of the Collateral, whether now owned or hereafter acquired, to be or become subject to any liens, security interests, mortgages or encumbrances of any nature other than those in favor of the BNPP Entities. No person (other than a BNPP Entity) has an interest in
|
any Account or any other accounts of Customer with the BNPP Entities, any Collateral or other assets or property held therein or credited thereto or any other Collateral. Unless Customer has notified BNPP PB, Inc. to the contrary, none of the Collateral are “restricted securities
”
as defined in Rule 144 under the Securities Act of 1933.
|
||||
(f)
|
ERISA.
The assets of Customer are not and will not be assets of (i) an “employee benefit plan
”
that is subject to the fiduciary responsibility provisions of the Employee Retirement Income Security Act of 1974, as amended
(“ERISA”
), (ii) a “plan
”
within the meaning of Section 4975 of the Internal Revenue Code of 1986, as amended (the “Code”), (iii)a person or entity the underlying assets of which include plan assets by reason of Department of Labor Regulation Section 2510.3-101 or otherwise, or (iv) a “governmental plan
”
as defined in Section 3(32) of ERISA or a “church plan” as defined in Section 3(33) of ERISA that is subject to any federal, state or local law that is substantially similar to the provisions of Section 406 of ERISA or Section 4975 of the Code.
|
|||
(g)
|
Market Timing.
Customer does not presently engage in and will not engage in any Market-Timing Trading Activity, and Customer will not use the proceeds of any financing in furtherance of any Market-Timing Trading Activity. Customer does not presently engage in and will not engage in any transactions and does not and will not cause any person to engage in any transactions, that would constitute, for any party to such transactions, a violation of (i) Rule 22c-1 of the Investment Company Act or (ii) analogous Applicable Law relating to the timing of purchases, sales and exchanges of non-U.S. mutual funds, non-U.S. unit trusts or analogous non-U.S. investment vehicles. Customer will not use the proceeds of any financing to invest, whether directly or indirectly, in Market-Timing Investment Entities and Customer is, and at all times will be, in compliance with (i) Investment Company Act Rule 22c-1 in connection with the purchase, sale and exchange of all U.S. mutual funds and (ii) all analogous Applicable Law relating to the timing of purchases, sales and exchanges of non-U.S. mutual funds, non-U.S. unit (rusts or analogous Q non-U.S. investment vehicles. To the extent that Customer learns that Customer has invested in a Market-Timing Investment Entity, Customer shall immediately notify BNPP PB, Inc. of such investment, including the name of each such 7. Market-Timing Investment Entity and the amount of the investment, as well as Customer’s plan to divest Customer’s investment in such entity in a timely manner, and Customer shall immediately commence such divestment and complete the same in a timely manner.
|
|||
(h)
|
Information Provided by Customer: Financial Statements.
Any information provided by Customer to a BNPP Entity in connection with this Agreement is correct and complete, and Customer 8. agrees promptly to notify the relevant BNPP Entity if there is any material change with respect to any such information. Customer’s financial statements or similar documents previously or hereafter provided to the BNPP Entities (I) do or will fairly present the financial condition of Customer as of the date of such financial statements and the results of its operations for the period for which such financial statements are applicable, (ii)have been prepared in accordance with generally accepted accounting principles consistently applied and, (Hi) if audited, have been certified without reservation by a firm of independent public accountants. Customer will promptly furnish to the relevant BNPP Entity any information (including financial information) about Customer upon such BNPP Entity’s request.
|
|||
(i)
|
Anti-Money Laundering.
To the best of Customer’s knowledge, none of Customer, any person controlling or controlled by Customer, any person having a beneficial interest in Customer, or any person for whom Customer acts as agent or nominee in connection herewith is: (A) an individual or entity, country or territory, that Is named on a list issued by the U.S. Department of the Treasury’s Office of Foreign Assets Control (“OFAC”), or an individual or entity that resides, is organized or chartered, or has a place of business, in a county or territory subject to OFAC’s various sanctions/embargo programs; (B)a resident in, or organized or chartered under the laws of (1)a jurisdiction that has been designated by the Secretary of the Treasury under the USA PATRIOT Act as warranting special measures and/or as being of primary money laundering concern, or (2) a jurisdiction that has been designated as non-cooperative with international anti-money laundering principles by a multinational or inter-governmental group such as the Financial Action Task Force on Money Laundering (“FATF”) of which the United States is a member; (C)a financial institution that has been designated by the Secretary of the Treasury as warranting special measures and/or as being of primary money laundering concern; (D)a “senior foreign political figure,” or any “immediate family” member or “close associate” of a senior foreign political figure, in each case within the meaning of Section 5318(i) of Title 31 of the United States Code or regulations issued thereunder; or (E)a prohibited “foreign shell bank” as defined in Section 5318 (j) of Title 31 of the United States Code or regulations -issued thereunder, or a U.S. financial institution that has established, maintains, administers or manages an account in the U.S. for, or on behalf of, a prohibited “foreign shell bank.”
|
|||
6.
|
Short Sales
- Customer agrees to comply with Applicable Law relating to short sales, including but not limited to any requirement that Customer designate a sale as “long” or “short”
|
|||
7.
|
No Obligation
- Customer agrees that BNPP PB, Inc. shall be under no obligation to effect or settle any trade on behalf of Customer and that BNPP PB, Inc. reserves the right at any time to place a limit on the type or size of transactions which are to be settled and cleared by BNPP PB, Inc.. For the avoidance of doubt, no BNPP Entity Is required to extend, renew or “roll-over” any Contract or transaction Including, but not limited to, any Contract executed on an “open” basis or demand basis with Customer, notwithstanding past practice or market custom.
|
|||
8.
|
Events of Default; Setoff -
|
|||
(a)
|
Events of Default.
The following shall apply only to the extent the Committed Facility Agreement has been terminated or the commitment therein has expired, (i) In the event of default by Customer on any Obligation
|
under any transaction or contract or a default, event of default, declaration of default, termination event, exercise of default remedies, or other similar condition or event under any transaction or contract (howsoever characterized, which, for the avoidance of doubt, Includes the occurrence of an Additional Termination Event or Specified Condition under an ISDA Master Agreement between Customer and a BNPP Entity, affiliate of a BNPP Entity or a third party entity, if applicable) in respect of Customer or any guarantor or credit support provider of Customer, (ii) if Customer shall become bankrupt, insolvent, or subject to any bankruptcy, reorganization, insolvency or similar proceeding or all or substantially all its assets become subject to a suit, levy, enforcement, or other legal process where a secured party maintains possession of such assets, has a resolution passed for its winding-up, official management or liquidation (other than pursuant to a consolidation, amalgamation or merger), seeks or becomes subject to the appointment of an administrator, provisional liquidator, conservator, receiver, trustee, custodian or other similar official for it or for all or substantially all its assets, has a secured party take possession of all or substantially all its assets, or takes any action in furtherance of, or Indicating its consent to, approval of, or acquiescence In, any of the foregoing acts, (iii) if any representation or warranty made or deemed made by Customer under the Agreement proves false or misleading when made or deemed made or (iv) if for any reason any BNPP Entity deems it advisable for its protection (each of the foregoing, an
“Event of Default”
), (he BNPP Entities are hereby authorized, In their discretion, to take Default Action. If a BNPP Entity elects to sell any Collateral, buy in any property, or cancel any orders upon an Event of Default, such sale, purchase or cancellation may be made on the exchange or other market where such business is then usually transacted, or at public auction or at private sale, without advertising the same and without any notice of the time or place of sale to Customer or to the personal representatives of Customer, and without prior tender, demand or call of any kind upon Customer or upon the personal representatives of Customer, all of which are expressly waived. The BNPP Entities may purchase or sell the property to or from a BNPP Entity or third parties in whole or in any part thereof free from any right of redemption, and Customer shall remain liable for any deficiency. A prior tender, demand or call of any kind from the BNPP Entities, or prior notice from the BNPP Entities, of the time and place of such sale or purchase shall not be considered a waiver of the BNPP Entities’ right to sell or buy any Collateral at any time as provided herein.
|
||||
(b)
|
Close-out.
Upon the Close-out of any Contract, the Close-out Amount for such Contract shall be due. If, however. Applicable Law would stay or otherwise impair the enforcement of the provisions of this Agreement or any Contract upon the occurrence of an insolvency related Close-out or Event of Default, then Close-out shall automatically occur immediately prior to the occurrence of such insolvency related Close-out or Event of Default.
|
|||
(c)
|
Setoff.
At any time and from time to time, the BNPP Entities are hereby authorized, in their discretion, to set off and otherwise apply any and all of the obligations of a BNPP Entity then due to Customer against any and all Obligations of Customer then due to the BNPP Entities (whether at maturity, upon acceleration or termination or otherwise). Without limiting the generality of the foregoing, upon the occurrence of the Close-out of any Contract, each BNPP Entity shall have the right to net the Close-out Amounts due from it to Customer and from Customer to it, so that a single settlement payment (the “Net Payment
”
) shall be payable by one party to the other, which Net Payment shall be immediately due and payable (subject to the other provisions hereof and of any Contract);
provided
that if any Close-out Amounts may not be netted against all other Close-out Amounts, such excluded Close-out Amounts shall be netted among themselves to the fullest extent permitted under Applicable Law. Upon the occurrence of a Close-out, each BNPP Entity may also (i) liquidate, apply and set off any or all Collateral against any Net Payment, payment, or Obligation owed to it or the other BNPP Entity under any Contract and (ii) set off and net any Net Payment, payment or obligation owed by it or the other BNPP Entity under any Contract against (x) any or all collateral or margin (or the Cash value thereof) posted by it or the other BNPP Entity to Customer under any Contract and (y) any Net Payment, payment or Obligation owed by Customer to a BNPP Entity (whether mature or unmatured, fixed or contingent, liquidated or unliquidated).
|
|||
(d)
|
Reinstatement of Obligations.
If the exercise of any right to reduce and set-off pursuant to this Agreement shall be avoided or set aside by a court or shall be restrained, stayed or enjoined under Applicable Law, the obligations in respect thereof shall be reinstated or, in the event of restraint, stay or injunction, preserved in at least the amounts as of the date of restraint, stay or injunction between the BNPP Entities, on the one hand, and Customer on the other, until such time as such restraint, stay or injunction shall no longer prohibit exercise of such right.
|
|||
(e)
|
BNPP Entity Consent.
No BNPP Entity shall make any payment to Customer in respect of a Close-Out Amount without the consent of the other BNPP Entity that has a security interest in such Close-Out Amount.
|
|||
9.
|
Indemnity -
|
|||
(a)
|
General.
Customer agrees to indemnify and hold the BNPP Entities harmless from and fully reimburse the BNPP Entities for any Indemnified Losses. The Indemnities under this Section 9 shall be separate from and in addition to any other indemnity under any Contract.
|
|||
(b)
|
Delivery Failures.
In case of the sale of any security, commodity, or other property by the BNPP Entities at the direction of Customer and the BNPP Entities’ inability to deliver the same to the purchaser by reason of failure of Customer to supply the BNPP Entities therewith, Customer authorizes the BNPP Entities to borrow or purchase any such security, commodity, or other property necessary to make delivery thereof. Customer hereby agrees to be responsible for any cost,
|
expense or loss which the BNPP Entities may sustain thereby.
|
|||
10.
|
Limitation of Liability -
|
||
(a)
|
General.
No BNPP Entity, nor any of their respective officers, directors, employees, agents or counsel, shall be liable for any action taken or omitted to be taken by any of them hereunder or in connection herewith except for the gross negligence or willful misconduct of the applicable BNPP Entity. No BNPP Entity shall be liable for any error of judgment made by it in good faith. The BNPP Entities may consult with legal counsel and any action taken or suffered in good faith in accordance with the advice of such counsel shall be full justification and protection to them.
|
||
(b)
|
Third Parties.
The BNPP Entities may execute any of their duties and exercise their rights hereunder by or through agents (which may include affiliates) or employees. No BNPP Entity shall be liable for the acts or omissions of any subcustodian or other agent selected by it with reasonable care. All transactions effected with a third party for Customer shall be for the account of Customer and the BNPP Entities shall have no responsibility to Customer or such third party with respect thereto. Nothing in this Agreement shall create, or be deemed to create, any third party beneficiary rights in any person or entity (including any investor or adviser of Customer), other than the BNPP Entities.
|
||
(c)
|
No Liability for Indirect. Consequential. Exemplary
or
Punitive Damages: Force Majeure.
In no event shall the BNPP Entities be held liable for (i) indirect, consequential, exemplary or punitive damages or (ii)any loss of any kind caused, directly or indirectly, by any Force Majeure Event.
|
||
11.
|
Taxes -
|
||
(a)
|
Withholding Tax.
Except as required by Applicable Law, each payment by Customer and all deliveries of Deliverable Collateral or Collateral under this Agreement shall be made, and the value of any Deliverable Collateral or Collateral shall be calculated, without withholding or deducting any Taxes. If any Taxes are required to be withheld or deducted, Customer shall pay such additional amounts as necessary to ensure that the actual net amount received by the BNPP Entities is equal to the amount that the BNPP Entities would have received had no such withholding or deduction been required. Customer will provide the BNPP Entities with any forms or documentation reasonably requested by the BNPP Entities in order to reduce or eliminate withholding tax on payments made to Customer with respect to this Agreement. The BNPP Entities are hereby authorized to withhold Taxes from any payment in delivery made hereunder and remit such Taxes to the relevant taxing authorities to the extent required by Applicable Law.
|
||
(b)
|
Qualified Dividends.
Customer acknowledges 9iat, with respect to the reduced U.S. federal income tax rate that applies to dividends received from U.S. corporations and certain foreign corporations by individuals who are citizens or residents of the United States, (i) the individual must satisfy applicable holding period requirements in order to be eligible for the reduced tax rate; (ii) the reduced tax rate does not apply to substitute or “in lieu” dividend payments paid to shareholders by broker-dealers under cash lending or securities lending arrangements which permit the broker-dealers to borrow securities from investors; and (ill) the reduced tax rate may not apply to dividends received from certain corporations, including money market funds, bond mutual funds, and Real Estate Investment Trusts. Customer further acknowledges that although Customer may receive from BNPP PB, Inc. a Form 1099-DIV indicating which dividends may qualify for the reduced tax rate, as required by applicable rules, Customer is responsible for determining which dividends qualify for the reduced tax rate based on Customer’s own tax situation.
|
||
12.
|
Notices; Instructions -
|
||
(a)
|
Notices.
All notices and other communications provided hereunder shall be (i) in writing and delivered to the address of the intended recipient specified on the cover page hereof or to such other address as such intended recipient may provide or (Ii) posted onto the website maintained by the BNPP Entities for Customer or (iii) in such other form agreed to by the parties. All communications sent to Customer, shall be deemed delivered to Customer as of (x) the date sent, if sent via facsimile, email or posted onto the Internet, (y) the date the messenger arrives at Customer’s address as set forth on the signature page hereof, if sent via messenger; or (z) the next Business Day if sent via mail, in each case, whether actually received or not. Failure by Customer to object in writing to any communication within five Business Days of delivery shall be deemed evidence, in the absence of manifest error, that such communication is complete and correct.
|
||
(b)
|
Instructions.
Notwithstanding anything to the contrary, Customer agrees that the BNPP Entities may rely upon any authorized instructions or any notice, request, waiver, consent, receipt or other document which the BNPP Entities reasonably believe to be genuine and transmitted by authorized persons.
|
||
13.
|
BNPP Entities Are Not Advisers or Fiduciaries -
Customer represents that it is capable of assessing the merits (on its own behalf or through independent professional advice), and understands and accepts, the terms and conditions set forth in this Agreement and any transaction it may undertake with the BNPP Entities. Customer acknowledges that (a) no BNPP Entity is (i) acting as a fiduciary for or an adviser to Customer in respect of this Agreement or any transaction it may undertake with the BNPP Entities; (ii) advising it, performing any analysis, or making any judgment on any matters pertaining to the suitability of any transaction, or (iii) offering any opinion, judgment or other type of information pertaining to the nature, value, potential or suitability of any particular investment or transaction, (b)the BNPP Entitles do not guarantee or warrant the accuracy, reliability or timeliness of any information that the BNPP Entities may from time to lime provide or make available to Customer and (c) the BNPP Entitles may take positions in financial instruments discussed in the information provided Customer (which positions may be inconsistent with the information provided) and may execute transactions for themselves or others in those instruments and may provide investment banking and other services to the issuers of those instruments or with respect to those instruments. Customer agrees that (x) it is
|
solely responsible for monitoring compliance with its own Internal restrictions and procedures governing investments, trading limits and manner of authorizing investments, and with the Applicable Law affecting its authority and ability to trade and invest and (y) in no event shall any BNPP Entity undertake to assess whether a Contract or transaction is appropriate or legal for Customer.
|
|||
14
|
Litigation in Court, Sovereign Immunity, Service -
|
||
(a)
|
ANY LITIGATION BETWEEN CUSTOMER AND THE BNPP ENTITIES OR INVOLVING THEIR RESPECTIVE PROPERTY MUST BE INSTITUTED IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK OR THE SUPREME COURT OF THE STATE OF NEW YORK FOR THE COUNTY OF NEW YORK. EACH PARTY HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF
FORUM NON CONVENIENS,
WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY SUCH ACTION OR PROCEEDING IN SUCH COURTS. EACH PARTY HEREBY AGREES THAT A JUDGMENT IN ANY SUCH DISPUTE MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW.
|
||
(b)
|
ANY RIGHT TO TRIAL BY JURY WITH RESPECT TO ANY CLAIM, ACTION, PROCEEDING OR COUNTERCLAIM OR OTHER LEGAL ACTION IS HEREBY WAIVED BY ALL PARTIES TO THIS AGREEMENT.
|
||
(c)
|
EACH PARTY HERETO, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, IRREVOCABLY WAIVES WITH RESPECT TO ITSELF AND ITS REVENUES AND ASSETS (IRRESPECTIVE OF THEIR USE OR INTENDED USE) ALL IMMUNITY ON THE GROUNDS OF SOVEREIGNTY OR SIMILAR GROUNDS FROM (I) SUIT, (II) JURISDICTION OF ANY COURT, (III) RELIEF BY WAY OF INJUNCTION, ORDER FOR SPECIFIC PERFORMANCE, OR RECOVERY OF PROPERTY, (IV) ATTACHMENT OF ITS ASSETS (WHETHER BEFORE OR AFTER JUDGMENT) AND (V) EXECUTION OR ENFORCEMENT OF ANY JUDGMENT TO WHICH IT OR ITS REVENUES OR ASSETS MIGHT OTHERWISE BE ENTITLED IN ANY ACTIONS OR PROCEEDINGS IN SUCH COURTS, AND IRREVOCABLY AGREES THAT IT WILL NOT CLAIM SUCH IMMUNITY IN ANY SUCH ACTIONS OR PROCEEDINGS.
|
||
(d)
|
CUSTOMER HEREBY CONSENTS TO PROCESS BEING SERVED BY ANY BNPP Entity ON CUSTOMER IN ANY SUIT, ACTION OR PROCEEDING OF THE NATURE SPECIFIED IN CLAUSE (a) ABOVE BY THE MAILING OF A COPY THEREOF BY REGISTERED OR CERTIFIED AIRMAIL, POSTAGE PRE-PAID, TO CUSTOMER AT THE ADDRESS SET FORTH AFTER CUSTOMER’S SIGNATURE BELOW; SUCH SERVICE SHALL BE DEEMED COMPLETED AND EFFECTIVE AS FROM 30 DAYS AFTER SUCH MAILING. NOTHING CONTAINED HEREIN SHALL AFFECT THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.
|
||
15.
|
Applicable Law, Enforceability -
THIS AGREEMENT, ITS ENFORCEMENT, ANY CONTRACT (UNLESS EXPRESSLY PROVIDED TO THE CONTRARY THEREIN), AND ANY DISPUTE BETWEEN THE BNPP ENTITIES AND CUSTOMER, WHETHER ARISING OUT OF OR RELATING TO CUSTOMER’S ACCOUNTS OR OTHERWISE INCIDENTAL TO SUCH ACCOUNTS OR THIS AGREEMENT, SHALL BE GOVERNED BY THE INTERNAL LAW OF THE STATE OF NEW YORK. The parties hereto further agree that (I) the securities intermediary’s jurisdiction, within the meaning of Section 8-110(e) of the NYUCC, in respect of any securities account constituting Collateral or to which any Collateral is credited or in which any Collateral is held or carried and in respect of any Collateral consisting of security entitlements; (li) the bank’s jurisdiction, within the meaning of Section 9-304(b) of the NYUCC, in respect of any deposit account constituting Collateral, or to which any Collateral is credited or in which any Collateral Is held or carried; and (iii) the commodity intermediary’s jurisdiction, within the meaning of Section 9-305(b) of the NYUCC, in respect of any commodity account constituting Collateral, or to which any Collateral is credited or in which any Collateral is held or carried and in respect of any Collateral consisting of commodity contracts, is the State of New York and agree that none of them has or will enter into any agreement to the contrary. Customer and BNPP PB, Inc. agree that, in respect of any Account maintained by BNPP PB, Inc., the law applicable to all the issues specified in Article 2(1) of the “Hague Convention on the Law Applicable to Certain Rights in Respect of Securities Held with an Intermediary (Hague Securities Convention)” is the law in force in the State of New York and agree that none of them has or will enter into any agreement to the contrary.
|
||
16.
|
Modification; Termination; Assignment-
|
||
(a)
|
Modification.
Any modification of the terms of this Agreement must be made in writing and executed by the parties to this Agreement.
|
||
(b)
|
Termination.
Subject to the Committed Facility Agreement, either BNPP PB, Inc. or Customer may terminate this Agreement upon delivery of written notice to the other party,
provided that
Customer’s termination notice is only effective if It is accompanied by instructions as to the transfer of all property held in the Accounts. Sections 8, 9, 10, 14 and 15 shall survive any termination and Sections 2 and 3 and each representation made hereunder shall survive any termination until such time as no assets remain in the Accounts.
|
||
(c)
|
Assignment.
Subject to the Committed Facility Agreement, BNPP PB, Inc. may assign its rights hereunder or any interest herein or under any other Contract to any affiliate and otherwise on thirty days prior written notice to an unaffiliated entity. Customer may not assign its rights under or any Interest in (i) any Contract without the prior written consent of each BNPP Entity that is a party thereto or (ii) this Agreement, including without limitation its right to any Close-Out Amount, without the prior written consent of each BNPP Entity. Any attempted assignment by Customer in violation of this Agreement shall be null, void and without effect.
|
17.
|
Miscellaneous -
|
||
(a)
|
Fees.
The provisions of this Subsection shall apply except to the extent any such provisions contravene the Committed Facility Agreement. Customer agrees to pay all brokerage commissions, markups or markdowns in connection with the execution of transactions and other fees for custody and other services rendered to Customer as determined by BNPP PB, Inc.. Customer authorizes the BNPP Entitles to pay themselves for fees, commissions, markups and other charges, expenses and Obligations otherwise reimbursable or payable by Customer to such BNPP Entity from any Account.
|
||
(b)
|
Contingency.
The fulfillment of the obligations of a BNPP Entity to Customer under any Contract is contingent upon there being no repudiation or Event of Default (however characterized) by Customer which has occurred and is continuing under any Contract.
|
||
(c)
|
Conversion of Currencies.
The BNPP Entities shall have the right to convert currencies in connection with the effecting of transactions and the exercise of any of their rights hereunder in a commercially reasonable manner.
|
||
(d)
|
Truth-in-Lending Statement.
Customer hereby acknowledges receipt of a Truth-in-Lending disclosure statement. Subject to the Committed Facility Agreement, interest will be charged on any debit balances in the Accounts in accordance with the methods described in such statement or in any amendment or revision thereto which may be provided to Customer. Any debit balance which is not paid at the close of an interest period will be added to the opening balance for the next interest period.
|
||
(e)
|
Federal Deposit Insurance Corporation.
Unless explicitly stated otherwise, transactions hereunder and funds held in the Accounts (i) are not insured by the Federal Deposit Insurance Corporation or any government agency, (ii)are not deposits or obligations of, or guaranteed by, BNP Paribas or any other bank; and (iii) Involve market and investment risks, including possible loss of the principal amount invested.
|
||
(f)
|
USA Patriot Act Disclosure.
BNPP PB, Inc., like all financial institutions, is required by Federal law to obtain, verify and record information that identifies each customer who opens an account with BNPP PB, Inc.. When Customer opens an account with BNPP PB, Inc., BNPP PB, Inc. will ask for Customer’s name, address, date of birth, government-issued identification number and/or other information that will allow BNPP PB, Inc. to form a reasonable belief as to Customer’s identity, such as documents that establish legal status.
|
||
(g)
|
Anti-Money Laundering.
Customer understands and acknowledges that the BNPP Entities are, or may in the future become, subject to money laundering statutes, regulations and conventions of the United States or other international jurisdictions, and Customer agrees to execute instruments, provide information, or perform any other acts as may reasonably be requested by a BNPP Entity for the purpose of carrying out due diligence as may be required by Applicable Law. Customer agrees that it will provide the BNPP Entities with such Information as a BNPP Entity may reasonably require to comply with applicable anti-money laundering laws or regulations. Customer understands, acknowledges and agrees that to the extent permitted by Applicable Law, a BNPP Entity may provide information, including confidential information, to the Financial Crimes Enforcement Network, a bureau of the U.S. Department of the Treasury, or any other agency or instrumentality of the U.S. Government, or as otherwise required by Applicable Law, in connection with a request for information on behalf of a U.S. federal law enforcement agency investigating terrorist activity or money laundering.
|
||
(h)
|
Money Market Funds.
Customer agrees that with respect to transactions effected in shares of any money market fund and any other transactions listed in Rule 10b-10(bX1) of the Exchange Act, BNPP PB, Inc. or another BNPP Entity may provide Customer with a monthly or quarterly written statement pursuant to Rule 10b-10(b) of the Exchange Act in lieu of an immediate confirmation.
|
||
(i)
|
No Waivers.
No failure or delay in exercising any right, or any partial exercise of a right will operate as a waiver of the full exercise of that right. The rights provided in the Contracts are cumulative and not exclusive of any rights provided by law.
|
||
(j)
|
Counterparts.
This Agreement may be executed by the parties hereto in any number of counterparts, each of which when so executed and delivered will be an original, but ail of which counterparts will together constitute one and the same instrument.
|
||
(k)
|
Integration: Severabiliy.
This Agreement supersedes ail prior agreements as to matters within Its scope. To the extent this Agreement contains any provision which is inconsistent with provisions in any other Contract or agreement between Customer and the BNPP Entities, or of which Customer is a beneficiary, the provisions of this Agreement shall control except if such other Contract explicitly states that It is intended to supersede this Agreement by name, in which case such other Contract shall prevail. If any provision of this Agreement is or becomes inconsistent with Applicable Law, that provision will be deemed modified or, if necessary, rescinded in order to comply. All other provisions of this Agreement shall remain in full force and effect. To the extent that this Agreement is not enforceable as to any Contract, this Agreement shall remain in full force and effect and be enforceable in accordance with its terms as to all other Contracts.
|
||
(l)
|
Master Agreement
This Agreement, together with each Contract and any supplements, modifications or amendments hereto or thereto, shall constitute a single business and contractual relationship among the parties with respect to the subject matter hereof.
|
||
(m)
|
Captions.
Section designations and captions are provided for convenience of reference, do not constitute a part of this Agreement, and are not to be considered in Its interpretation.
|
||
(n)
|
Recording of Conversations.
Customer is aware that the BNPP Entities may record conversations between any of them and Customer or Customer’s representatives relating to the matters referred to in this
|
Agreement and Customer has no objection and hereby agrees to such recording.
|
|||
(o)
|
Proxy Disclosures.
Any attempt to vote securities will be void to the extent that such securities are not in the possession or control of a BNPP Entity, Including (i) securities not yet delivered to a BNPP Entity and (ii) securities purchased and not paid for by settlement date. Please be advised that for the purposes of proxy voting, Customer will not be notified that the securities are not in a BNPP Entity’s possession or control. Furthermore, no BNPP Entity will notify Customer that a vote was void.
|
||
18.
|
Certain Definitions -
|
||
(a)
|
“Applicable Law”
means all applicable laws, rules, regulations and customs, including, without limitation, those of all U.S. and non-U.S., federal, state and local governmental authorities, self-regulatory organizations, markets, exchanges and clearing facilities. In all cases where applicable.
|
||
(b)
|
“BNPP Entities”
means BNP Paribas and BNP Paribas Prime Brokerage, Inc. f/k/a Banc of America Finance Services, Inc.
|
||
(c)
|
“Business Day”
means any day other than a Saturday, Sunday or other day on which the New York Stock Exchange is closed.
|
||
(d)
|
“Close-out”
means the termination, cancellation, liquidation, acceleration, or other similar action with respect to all transactions under one or more Contracts.
|
||
(e)
|
“Close-out Amount”
means with respect to each Contract, the amount (expressed in U.S. Dollars or the U.S. Dollar Equivalent) calculated as payable by one party to the other upon Close-out of such Contract determined in accordance with the provisions of such Contract, or if no such provisions are specified, by following such procedures as the BNPP Entities determine In good faith are commercially reasonable and in accordance with industry practice.
|
||
(f)
|
“Collateral”
means all right, title and interest of Customer in and to (i)each deposit, custody, securities, commodity or other account maintained by Customer with a BNPP Entity (including, but not limited to, any or all Accounts); (ii) any cash, securities, commodity contracts, general Intangibles and other property which may from time to time be deposited, credited, held or carried in any such account, that is due to Customer from a BNPP Entity, or that is delivered to or in the possession or control of a BNPP Entity or any of the BNPP Entities’ agents and all security entitlements with respect to any of the foregoing; (iii) all of Customer’s right, title or interest in, to or under any Contract, including obligations owed by a BNPP Entity (after any netting or set off, in each case to the extent enforceable, of amounts owed under such Contract); (iv)all of Customer’s security Interests (or similar interests) In any property of a BNPP Entity securing a BNPP Entity’s obligations to Customer under any Contract; (v)any property of Customer in which the BNPP Entities is granted a security interest under any Contract or otherwise (howsoever held); (vi) all income and profits on any of the foregoing, all dividends, interest and other payments and distributions with respect to any of the foregoing, all other rights and privileges appurtenant to any of the foregoing, including any voting rights and any redemption rights, and any substitutions for any of the foregoing; and (vii) all proceeds of any of the foregoing, in each case whether now existing or owned by Customer or hereafter arising or acquired.
|
||
(g)
|
“Contract”
means this Agreement and the Committed Facility Agreement (
“Committed Facility Agreement”
) between Customer and one or more of the BNPP Entities dated the date hereof, including in each case, the schedules, exhibits, and appendices thereto.
|
||
(h)
|
“Default Action”
means (i) to terminate, liquidate and accelerate any Contract, (ii) to exercise any right under any security relating to any Contract, (iii) to net or set off payments which may arise under any Contract or other agreement or under Applicable Law, (iv) to cancel any outstanding orders for the purchase or sale or borrowing or lending of any securities or other property, (v) to sell, apply or collect on any or all of the Collateral (either individually or jointly with others), (vi) to buy in any securities, commodities or other property of which any Account of Customer may be short, and (vii) to exercise any rights and remedies available to a secured creditor under any Applicable Law or under the NYUCC (whether or not the NYUCC is otherwise applicable in the relevant jurisdiction).
|
||
(i)
|
“Force Majeure Event”
means government restrictions, exchange or market actions or rulings, suspension of trading, war (whether declared or undeclared), terrorist acts, insurrection, riots, fires, floods, strikes, failure of utility or similar services, accidents, adverse weather or other events of nature (including but not limited to earthquakes, hurricanes and tornadoes) and any other conditions beyond the BNPP Entities’ control and any event where any communications network, data processing system or computer system used by the BNPP Entities or Customer or by market participants is rendered wholly or partially inoperable.
|
||
(j)
|
“Indemnified Losses”
means any loss, claim, damage, liability, penalty, fine or excise tax (including any reasonable legal fees and expenses relating to any action, proceeding, investigation and preparation therefor) when and as incurred by the BNPP Entities (i) pursuant to authorized Instructions received by the BNPP Entities’ from Customer or its agents, (ii) as a consequence of a breach by Customer of any covenant, representation or warranty hereunder, (iii) in settlement of any claim or litigation relating to BNPP Entities’ acting as agent for Customer or (iv)in connection with or related to any Account, this Agreement, any Contract, any transactions hereunder or thereunder, any activities or services of the BNPP Entitles In connection with this Agreement or otherwise (Including, without limitation, (A) any technology services, reporting, trading, research or capital Introduction services or (B) any DK or disaffirmance of any transaction hereunder).
“
Indemnified Losses
”
shall (x) include without limitation any damage, loss, cost and expense that is incurred to put the BNPP Entitles In the same economic position as they would have been in had a default (howsoever defined) under any Contract not occuned, or that arises out of any other commitment a BNPP Entity has entered into in connection with or as a hedge in connection with any transaction or in an effort to mitigate any resulting loss
|
to which a BNPP Entity is exposed because of a default (howsoever defined) under any Contract and (y) not include any losses of a BNPP Entity resulting directly from such BNPP Entity’s gross negligence or willful misconduct.
|
||
(k)
|
“Market-Timing Investment Entities”
means hedge funds, private investment funds or other companies or partnerships that engage in Market Timing Trading Activity.
|
|
(l)
|
“Market-Timing Trading Activity”
means (i) purchasing and selling, or exchanging, mutual fund or similar investment units to exploit short-term differentials in the prices of such funds or similar units and their underlying assets, and similar trading strategies or (ii) purchasing and selling, or exchanging mutual fund or similar Investment units more than twice within a thirty-day period. Notwithstanding the above, the following shall not constitute
“
Market-Timing Trading Activity
”
(x) trading of money market funds, short-term bond funds or exchange-traded funds or (y) trading of mutual funds in the manner consistent with such fund’s prospectus or other offering documents.
|
|
(m)
|
“Obligations”
means any and all obligations of Customer to a BNPP Entity arising at anytime and from time to time under or in connection with any Contract (including but not limited to obligations to deliver or return Deliverable Collateral or other assets or property (howsoever described) under or in connection with any such Contract), in each case whether now existing or hereafter arising, whether or not mature or contingent.
|
|
(n)
|
“Related Person”
means principals, directors and officers (in such official capacity as principal, director or officer, as the case may be) of (i) Customer, (ii) Customer’s affiliates, (iii) Customer’s investment manager or (iv) any person or entity for which Customer’s investment manager acts as investment manager.
|
|
(o)
|
“Taxes”
means any taxes, levies, imposts, duties, charges, assessments or fees of any nature, including interest penalties and additions thereto that are imposed by any taxing authority.
|
|
(p)
|
“U.S. Dollar Equivalent”
of an amount, as of any date, means: in respect of any amount denominated in a currency, including a composite currency, other than U.S. Dollars (an
“
Other Currency
”
), the amount expressed in U.S. Dollars, as determined by the BNPP Entities, that would be required to purchase such amount (where the BNPP Entities would require Customer to deliver such Other Currency in connection with a Contract) or would be received for the sale of such amount of such Other Currency (where the BNPP Entities would deliver such Other Currency to Customer in connection with a Contract), as of such date at the rate equal to the spot exchange rate of a foreign exchange agent (selected in good faith by the BNPP Entities) at or about 11:00 a.m. (in the city in which such foreign exchange agent is located) or such later time as the BNPP Entities in their reasonable discretion shall determine.
|
19.
|
Software -
|
|||
(a)
|
License: Use.
Upon a BNPP Entity’s delivering to Customer, or making available for use by Customer, any computer software or application, as such may be delivered, made available, and modified by a BNPP Entity from time to time in Its sole discretion (the
“Software”
), the BNPP Entities grant to Customer a personal, non-transferable and non-exclusive license to use the Software solely for Customer’s own internal and proper business purposes and not in the operation of a service bureau or other business outside of or in addition to Customer’s ordinary course of business. The Software includes all associated
“
Information
”
as that term is used in this Section. The Software may include trade blotter functions, capital accounting functions, interfaces with other systems and accounting functions, a Customer website, and other software or communication or encryption systems that may be developed from time to time. Except as set forth herein, no license or right of any kind is granted to Customer with respect to the Software.
|
|||
(b)
|
Ownership.
Customer acknowledges that the BNPP Entities and their suppliers retain and have title and exclusive proprietary rights to the Software, including any trade secrets or other ideas, concepts, know-how, methodologies, or information incorporated therein and the exclusive rights to any copyrights, trademarks and patents (including registrations and applications for registration of either), or other statutory or legal protections available in respect thereof. Customer further acknowledges that all or a part of the Software may be copyrighted or trademarked (or a registration or claim made therefore) by a BNPP Entity or its suppliers. Customer may not remove any statutory copyright notice or other notice included in the Software or on any media containing the Software. Customer shall not take any action with respect to the Software inconsistent with the foregoing acknowledgments.
|
|||
(c)
|
Limitation on Reverse Engineering. Decompilation and Disassembly.
Customer shall not, nor shall it attempt to decompile, disassemble, reverse engineer, modify, or create derivative works from the Software.
|
|||
(d)
|
Transfer.
Customer may not, directly or indirectly, sell, rent, lease or lend the Software or provide any of the Software or any portion thereof to any other person or entity without the BNPP Entities’ prior written consent. Customer may not copy or reproduce except to create a backup copy or to move the Software to a different computer.
|
|||
(e)
|
Upgrades.
The Software Includes all updates or supplements to the Software and this Section 19 applies to all such updates or supplements, unless the BNPP Entities provide other terms along with the update or supplement.
|
|||
(f)
|
Equipment.
Customer shall obtain and shall maintain all equipment, software and services, including but not limited to computer equipment and telecommunications services, necessary for it to use the Software, and the BNPP Entities shall not be responsible for the reliability or availability of any such equipment software or services.
|
(g)
|
Proprietary Information.
The Software, any database and any proprietary data, processes, information and documentation made available to Customer (other than those that are or become part of the public domain or are legally required to be made available to the public) (collectively, the
“
Information
”
), are the exclusive and confidential property of the BNPP Entities or their suppliers. Customer shall keep the Informalion confidential by using the same care and discretion that Customer uses with respect to its own confidential property and trade secrets, but not less than reasonable care. Upon termination of the Account Agreement, the PB Terms or the Software license granted herein for any reason, Customer shall return to the BNPP Entitles any and all copies of the Information that are in its possession or under its control.
|
||
(h)
|
Support Services.
Other than the assistance provided in the Information, the BNPP Entities do not offer any support services in connection with the Software.
|
||
(i)
|
DISCLAIMER OF WARRANTIES.
TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW, THE BNPP ENTITIES AND THEIR SUPPLIERS PROVIDE THE SOFTWARE TO CUSTOMER, AND ANY (IF ANY) SUPPORT SERVICES RELATED TO THE SOFTWARE AS IS AND WITH ALL FAULTS; AND THE BNPP ENTITIES AND THEIR SUPPLIERS HEREBY DISCLAIM WITH RESPECT TO THE SOFTWARE AND SUPPORT SERVICES ALL WARRANTIES AND CONDITIONS. WHETHER EXPRESS, IMPLIED OR STATUTORY, INCLUDING, BUT NOT LIMITED TO, ANY (IF ANY) WARRANTIES, DUTIES OR CONDITIONS OF OR RELATED TO; MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, LACK OF VIRUSES, ACCURACY OR COMPLETENESS OF RESPONSES, RESULTS, WORKMANLIKE EFFORT AND LACK OF NEGLIGENCE. ALSO THERE IS NO WARRANTY, DUTY OR CONDITION OF TITLE, QUIET ENJOYMENT, QUIET POSSESSION, CORRESPONDENCE TO DESCRIPTION OR NON-INFRINGEMENT. THE ENTIRE RISK ARISING OUT OF USE OR PERFORMANCE OF THE SOFTWARE AND ANY SUPPORT SERVICES REMAINS WITH CUSTOMER.
|
||
(j)
|
EXCLUSION OF INCIDENTAL.
CONSEQUENTIAL AND CERTAIN OTHER DAMAGES.
TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW, IN NO EVENT SHALL THE BNPP ENTITIES OR THEIR SUPPLIERS BE LIABLE FOR ANY SPECIAL, INCIDENTAL, INDIRECT, OR CONSEQUENTIAL DAMAGES WHATSOEVER (INCLUDING, BUT NOT LIMITED TO, DAMAGES FOR LOSS OF PROFITS OR CONFIDENTIAL OR OTHER INFORMATION, FOR BUSINESS INTERRUPTION, FOR PERSONAL INJURY, FOR LOSS OF PRIVACY, FOR FAILURE TO MEET ANY DUTY INCLUDING OF GOOD FAITH OR OF REASONABLE CARE, FOR NEGLIGENCE, AND FOR ANY OTHER PECUNIARY OR OTHER LOSS WHATSOEVER) ARISING OUT OF OR IN ANY WAY RELATED TO THE USE OF OR INABILITY TO USE THE SOFTWARE, THE PROVISION OF OR FAILURE TO PROVIDE SUPPORT SERVICES, OR OTHERWISE UNDER OR IN CONNECTION WITH ANY PROVISION OF THIS SECTION 19, EVEN IN THE EVENT OF THE FAULT, TORT (INCLUDING NEGLIGENCE), STRICT LIABILITY, BREACH OF CONTRACT OR BREACH OF WARRANTY OF THE BNPP ENTITIES OR ANY SUPPLIER, AND EVEN IF THE BNPP ENTITIES OR ANY SUPPLIER HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. IN NO EVENT SHALL ANY BNPP ENTITY OR ANY SUPPLIER BE LIABLE FOR ACTS OF GOD, ACTS OF WAR OR TERRORISM, MACHINE OR COMPUTER BREAKDOWN OR MALFUNCTION, INTERRUPTION OR MALFUNCTION OF COMMUNICATION FACILITIES, LABOR DIFFICULTIES OR ANY OTHER SIMILAR OR DISSIMILAR CAUSE BEYOND THEIR REASONABLE CONTROL.
|
||
(k)
|
Security: Reliance: Unauthorized Use.
Customer will cause all persons using the Software to treat all applicable user and authorization codes, passwords and authentication keys with extreme care, and Customer will establish internal control and safekeeping procedures to restrict the availability of the same to duly authorized persons only. No BNPP Entity shall be liable or responsible to Customer or any third party for any unauthorized use of the Software or of the user and authorization codes, passwords and authentications keys that may be used in connection with the Software.
|
||
(I)
|
Encryption.
Customer acknowledges and agrees that encryption may not be available for any or all data or communications between Customer and a BNPP Entity. Customer agrees that a BNPP Entity may, at any time, deactivate any encryption features such BNPP Entity may in its sole discretion provide, without notice or liability to Customer.
|
||
(m)
|
Termination.
Customer acknowledges and agrees that a BNPP Entity may, in its sole discretion, at any time, and without any notice or liability to Customer, suspend or terminate this license of the Software to Customer and deny Customer’s access to and use of the Software.
|
||
(n)
|
Other Terms and Conditions.
Customer shall comply with all other terms and conditions that may be posted by a BNPP Entity on any website or web page through which Customer accesses or uses the Software or that may otherwise be delivered in any form to Customer in connection with its use of the Software. The use by Customer of the Software constitutes Customer’s acceptance of and agreement to be bound by all such other terms and conditions.
|
||
(o)
|
Compliance with Law.
Customer shall comply with all Applicable Law applicable to Customer’s use of the Software.
|
Exhibit B to U.S. PB Agreement -Custody Terms
|
|
The Custody Terms (the
“
Custody Terms
”
) are entered into between Customer and BNP PARIBAS PRIME BROKERAGE, INC. (
“
BNPP PB, Inc.
”
). Customer and BNPP PB, inc., on behalf of itself and as agent for the BNPP Entities, have also entered into an Account Agreement. The following provisions apply where BNPP PB, Inc.is acting as custodian of Collateral. All capitalized terms used but not defined herein shall have the meanings set forth in the Account Agreement.
|
1.
|
Collateral in the form of registrable securities will be registered as BNPP PB, Inc. may direct in the name of a nominee company controlled by BNPP PB, Inc. or by an approved depositary.
|
|
2.
|
BNPP PB, Inc. may hold Collateral through an affiliated custodian, and accepts the same level of responsibility to Customer for any default of such entity or nominee controlled by it as BNPP PB, Inc. itself owes to Customer for the safe custody of the Collateral.
|
|
3.
|
BNPP PB, Inc. need not notify Customer of any corporate actions, including any events concerning takeovers, other offers or capital reorganisations or voting, conversion and subscription rights relating to Collateral. If instructions are received by BNPP PB, Inc. within sufficient time, it will use reasonable endeavours to ensure that Customer has the benefit of all corporate actions attached to the Collateral, although the benefit of such actions cannot be guaranteed.
|
|
4.
|
All voting rights in respect of the securities will be exercisable only at the direction of Customer.
|
|
BNPP PB, Inc. will not be liable to Customer for any losses suffered as a result of the benefit of corporate actions not being obtained or voting rights not being exercised provided that BNPP PB, Inc. has used all reasonable endeavours to forward Customer’s instructions to the appropriate recipient.
|
||
5.
|
Where Collateral has been pooled with assets of other customers, Customer shall be treated as the beneficial owner of such proportion of the relevant securities, as the number of its securities bears to the total number of securities held. In this case Customer’s redelivery rights In respect of the securities are not in specie but rather in respect of securities of the same number, class, denomination and Issue as those originally deposited with BNPP PB, Inc.. Entitlements to shares and any other benefits including cash proceeds arising from corporate actions will be distributed amongst the clients for whom BNPP PB, Inc. holds the pooled securities in the same proportions as the respective holdings of clients of BNPP PB, Inc. who have given identical instructions in connection with the relevant corporate action in relation to their holdings of the pooled securities.
|
|
6.
|
Customer will receive periodic statements of account providing details of the Collateral (
“
Statements
”
) at intervals agreed with Customer and at least annually. The basis on which assets shown on these Statements will be valued will be the market price of such assets on the date(s) shown on the Statement based on information received by BNPP PB, Inc. from reputable pricing sources.
|
|
7.
|
Nothing in the Custody Terms, the Arranged Financing Terms or the Account Agreement shall be construed as excluding any liability of BNPP PB, Inc. to Customer in a manner that is not permitted.
|
Exhibit C to U.S. PB Agreement - Arranged Financing Terms
|
|||
The Arranged Financing Terms ((he
“
Arranged Financing Terms
”
) are entered into between Customer and BNP PARIBAS PRIME BROKERAGE, INC. (
“
BNPP PB, Inc.
”
). The Arranged Financing Terms set forth the terms and conditions on which BNPP PB, Inc. will open and maintain accounts (the
“
Accounts
”
) for and otherwise transact business with Customer. Customer and BNPP PB, Inc., on behalf of itself and as agent for the BNPP Entities, have also entered into an Account Agreement All capitalized terms used but not defined herein shall have the meanings set forth In the Account Agreement.
|
|||
1.
|
The Account Agreement -
|
||
(a)
|
All capitalized terms used but not defined herein shall have the meanings set forth in the Account Agreement. For the avoidance of doubt, the Arranged Financing Terms is a
“
Contract
”
as defined in the Account Agreement and all obligations of Customer to BNPP PB, Inc. arising hereunder or in connection with any Loan (as defined below) are
“
Obligations
”
as defined In the Account Agreement.
|
||
(b)
|
Customer specifically agrees that BNPP PB, Inc. is entitled to the rights and remedies accorded to the BNPP Entities under the Account Agreement. Customer specifically acknowledges that BNPP PB, Inc. is a pledgee under that Account Agreement. To the extent that any other BNPP Entity performs any obligations under the Arranged Financing Terms, Customer agrees that such BNPP Entity is acting solely as agent for BNPP PB, Inc.. Customer acknowledges and agrees that any such BNPP Entity is not assuming any principal obligations to it.
|
||
2.
|
Loans of Cash -
|
||
(a)
|
Subject to the Committed Facility Agreement, Customer and BNPP PB, Inc. hereby agree that BNPP PB, Inc. is authorized, but in no event obligated, except to the extent expressly set forth in the Committed Facility Agreement, to extend credit in the form of cash to Customer hereunder in connection with Customer’s purchase of securities. The term
“
Loan
”
means the outstanding amount of each cash loan from BNPP PB, Inc. to Customer at any time and from time to time outstanding under the Arranged Financing Terms. Subject to the Committed Facility Agreement, BNPP PB, Inc. shall have no commitment to make, or Customer to accept, any Loan hereunder. Customer hereby agrees to repay any such Loan in accordance with the provisions of the Arranged Financing Terms and the Committed Facility Agreement
|
||
(b)
|
Interest on Loans is computed from the date a Loan is advanced and otherwise from the first to the last calendar day of each month and shall compound on a daily basis. Interest shall accrue on any Loan at an annual rate determined (subject to the Committed Facility Agreement) on the basis of the sum of a published base rate in the U.S., plus an additional percentage and based on a notional year appropriate to the interest rate basis (the
“
Interest Rate
”
). Customer hereby acknowledges that, to the extent the Committed Facility Agreement has been terminated or the commitment therein has expired, the Interest Rate may change without prior notice to Customer.
|
||
(c)
|
Interest shall be due and payable in arrears on the first Business Day of the month following the month in which the interest accrued.
|
||
(d)
|
If the Committed Facility Agreement has been terminated or the commitment therein has expired, immediately upon BNPP PB, Inc.’s demand at any time and for any reason whatsoever, Customer shall repay to BNPP PB, Inc. the aggregate principal amount of any Loans outstanding, together with accrued interest. Interest shall accrue on any amounts (including unpaid interest) not paid immediately upon demand at the Interest Rate plus 2% per annum commencing the Business Day immediately following the date of demand therefor.
|
||
(e)
|
If BNPP PB, Inc. is required by any court or otherwise to return to Customer (or any representative thereof) any amount relating to the Loans or any other obligations of Customer hereunder (the
“
Secured Lending Obligations
”
), then Customer’s obligations hereunder In respect of the pertinent Secured Lending Obligations, to the extent theretofore discharged, shall be reinstated.
|
||
(f)
|
If the Committed Facility Agreement has been terminated or the commitment therein has expired, Customer will transfer in respect of the Loans, pursuant to the Arranged Financing Terms, securities, cash and other investment property and assets of such types, in such amounts arid at such times as BNPP PB, Inc. shall from time to time request.
|
||
(g)
|
Notwithstanding the foregoing, the parties agree that the BNPP Entities may act as agent in accordance with any Loan entered into hereunder. To the extent the BNPP Entities appoint a subagent, such subagent shall have no responsibility or liability to Customer or BNPP PB, Inc. with respect to the performance of either such party under the Arranged Financing Terms, and the BNPP Entities and any subagent that they may appoint shall not be deemed to endorse or guarantee any transaction effected hereunder.
|
3.
|
Representations and Warranties of Customer -Qualified Investor-
Customer (and, if a person or entity is signing this Agreement on behalf of Customer, such person or entity) hereby represents and warrants as of the date hereof, which representations and warranties will be deemed repeated on each date on which this Agreement Is In effect, that Customer is a
“
qualified investor
”
as defined in Section 3(a)(54) of the Securities Exchange Act of 1934, as amended.
|
(a)
|
There occurs a Default (as defined in the Committed Facility Agreement), an Event of Default (as defined in the Account Agreement) or a failure by Customer to perform any obligation hereunder or under the Account Agreement or Committed Facility Agreement including, without limitation, its obligation to maintain Adequate Performance Assurance as herein provided; or
|
(b) | Customer’s Insolvency. |
By: | /s/ Steven M. Hill |
By: | /s/ Authorized Signatory | |
Title: |
I. INTRODUCTION | 1 |
II. GENERAL STANDARDS | 1 |
III. DEFINITIONS | 2 |
IV. APPLICATION OF THE CODE | 4 |
V. RESTRICTIONS | 4 |
VI. PRE-CLEARANCE AND REPORTING PROCEDURES | 6 |
VII. EXCEPTIONS TO PRE-CLEARANCE AND REPORTING REQUIREMENTS | 8 |
VIII. INDEPENDENT TRUSTEES OF INVESTMENT COMPANY CLIENTS | 9 |
IX. COMPLIANCE WITH OTHER ADVISER OR FUND CODES | 10 |
X. ENFORCEMENT OF CODE AND CONSEQUENCES FOR FAILURE TO COMPLY | 10 |
XI. RETENTION OF RECORDS | 11 |
XII. AMENDMENT TO THIS CODE | 11 |
•
|
employ any device, scheme, or artifice to defraud the client
|
•
|
make any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made, in light of circumstances under which they are made, not misleading or in any way mislead the client regarding a material fact
|
•
|
engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon the client
|
•
|
engage in any manipulative practice with respect to the client
|
A.
|
Access Person
. Any director, officer, or partner of Claymore or an Investment Company
Client or any employee of Claymore or an Investment Company Client who (a) has access to nonpublic information regarding any clients’ purchase or sale of securities, or nonpublic information regarding the portfolio holdings of an Investment Company Client or (b) is involved in making securities recommendations to clients, or who has access to
|
1
|
Federal Securities Laws means the Securities Act of 1933(15 U.S.C. 771-aa), the Securities Exchange Act of
1934 (15 U.S.C. 78a-mm), the Sarbanes-Oxley Act of 2002 (Pub. L. 107-204, 116 Stat. 745 (2002)), the Investment Company Act of 1940 (15 U.S.C. 80a), the Investment Advisers Act of 1940 (15 U.S.C. 80b), Title V of the Gramm-Leach-Bliley Act (Pub. L. No. 106-102) 113 Stat 1338 (1999), any rules adopted by the SEC under any of these statutes, the Bank Secrecy Act (31 U.S.C. 5311-5314; 5316-5332) as it applies to funds and investment advisers, and any rules adopted thereunder by the SEC or the Department of the Treasury.
|
B.
|
Chief Compliance Officer
. The Code contains many references to the Chief Compliance
Officer (CCO). The CCO is Anne Kochevar. References to the CCO also include, for any function, any person designated by the CCO as having responsibility for that function from time to time. If the CCO is not available, reports required to be made to the CCO, or actions permitted to be taken by the CCO, may be made to Sue Pittner, provided a copy is sent to the CCO. See Exhibit B.
|
C.
|
Independent Trustee
. A trustee of a closed-end fund or exchange-traded fund which is an
Investment Company Client who is not an “interested person” of the closed-end fund or exchange-traded fund within the meaning of Section 2(a)(19) of the 1940 Act.
|
D.
|
Investment Personnel
. Any Access Person who, in connection with his or her regular
functions or duties, makes or participates in making recommendations regarding the purchase or sale of securities for a client, and (2) any natural person who controls an Investment Company Client or Claymore and who obtains information concerning recommendations made to a client regarding the purchase or sale of securities by the client, and (3) personnel involved in Claymore index administration functions. A list of Investment Personnel is attached as Exhibit C.
|
E.
|
Personal Securities Transaction.
The Code regulates Personal Securities Transactions as
a part of the effort by Claymore to detect and prevent conduct that might violate the general prohibitions outlined above.
A Personal Securities Transaction is a transaction
in a security, other than an exempted security (as defined below), in which a person subject to this Code has a beneficial interest.
|
1.
|
Security.
Security is defined very broadly, and means any note, stock, bond,
debenture, investment contract, limited partnership or limited liability membership interest, and includes any right to acquire any security (an option or warrant, for example).
|
2.
|
Beneficial interest.
You have a beneficial interest in a security in which you have,
directly or indirectly, the opportunity to profit or share in any profit derived from a transaction in the security, or in which you have an indirect interest, including beneficial ownership by your spouse or minor children or other dependents or any immediate family member living in your household, or your share of securities held by a partnership of which you are a general partner.
Technically, Rule 16a-1(a)(2) under the Securities Exchange Act of 1934 will be applied to determine if you have a beneficial interest in a security (even if the security would not be within the scope of section 16).
|
•
|
Portfolio managers who manage the accounts
|
•
|
Research analysts or research assistants who are members of the management team for the accounts
|
•
|
Traders who trade on behalf of clients
|
•
|
Support staff and administrative assistants working directly with portfolio managers and analysts
|
•
|
Personnel involved in Claymore index administration.
|
V.
|
RESTRICTIONS
|
A.
|
No Conflicting Personal Securities Transactions.
No Access Person shall engage in a
Personal Securities Transaction in a security which the person
knows or has reason to
believe
(i) is being purchased or sold (i.e., a pending “buy” or “sell” order), (ii) has been
purchased or sold for a client within the last seven (7) calendar days, or (iii) is being considered for purchase or sale by a client, until that client’s transactions have been completed
or
consideration of such transactions has been abandoned. A security will be treated as
“under consideration”
for a client, if the portfolio manager or investment team responsible for the management of the account of that client intends to purchase or sell the security in the next seven (7) calendar days. No Access Person shall engage in a Personal Securities Transaction in a security which the person knows or has reason to believe is under consideration for inclusion or exclusion in an index administered by Claymore within seven (7) calendar days prior to or after the index rebalance being published.
|
B.
|
Private Placements.
No Access Person shall acquire
or dispose of
a beneficial interest in
a security in a private placement without express prior written approval from the CCO or her designee.
|
C.
|
Initial Public Offerings.
No Access Person shall acquire a beneficial interest in a security
in an initial public offering.
|
D.
|
Short-term trading.
Investment Personnel and Fund Trustee’s shall not profit in the
purchase and sale, or sale and purchase, of the same (or equivalent) security within sixty calendar days.
Access persons shall not profit in the purchase and sale, or sale and
purchase of any Claymore Fund or Trust within sixty calendar days.
Trades made in
violation of this prohibition shall be unwound or, if that is impracticable, any profits must be disgorged to a charitable organization that is selected by the CCO or her designee.
|
E.
|
Gifts.
Access Persons shall not accept any gift or other thing of more than de minimus
value (e.g. $100 for U.S. and $300 CDN for Claymore Canada) from any person or entity that does business with or on behalf of any client of Claymore, or seeks to do business with or on behalf of a client. Gifts in excess of this value must either be returned to the donor or paid for by the recipient. It is not the intent of the Code to prohibit the everyday courtesies of business life. Therefore, this prohibition does not include an occasional meal or ticket to a theater, entertainment or sporting event that is an incidental part of a meeting that has a clear business purpose.
|
F.
|
Service as Director.
Access Persons shall not serve on the board of directors of a
publicly traded company, without prior authorization by the CCO. Access Persons may submit a request for authorization and such request shall state the position sought, the reason service is desired and any possible conflicts of interest known at the time of the request. Service may be authorized by the CCO only if the CCO determines that service in that capacity would be consistent with the interests of Claymore and its clients. In addition, Investment Personnel who receive authorization to serve in such a capacity shall
|
A.
|
Pre-clearance Procedures.
|
1.
|
Pre-clearance Requirement.
Except as provided below, all Access Persons must
receive prior approval of their Personal Securities Transactions from the CCO or her designee. Personal Securities Transactions of the CCO must be approved by the General Counsel. Any approval shall be valid for one business day.
|
2.
|
Personal Securities Transaction Form.
All requests for pre-clearance of Personal
Securities Transactions must be made on the form attached as Exhibit G
or
Exhibit G(a) for Claymore Group Stock.
|
3.
|
Factors to Consider in Pre-clearing Personal Securities Transactions.
The CCO
should consider:
|
•
|
whether the security appears on Claymore’s Product Security List or Index Consideration List
|
•
|
whether the investment opportunity should be reserved for a client
|
•
|
whether the opportunity is being offered to an individual by virtue of his/her position with respect to Claymore’s relationship with a client
|
4.
|
Subsequent Disclosure by Access Person.
If pre-clearance is granted, the Access
Person must disclose the Personal Securities Transaction when he or she participates in any subsequent investment decision for a client regarding the same issuer. In such circumstances, the decision to purchase or sell securities of the issuer will be subject to an independent review by the CCO or her designee.
|
5.
|
Exemptions from Pre-clearance.
Access Persons do not need to seek pre-clearance for the following transactions:
|
•
|
Purchases or sales which are
non-volitional
on the part of either the Access Person or the Investment Company Client (e.g., transactions in corporate mergers, stock splits, tender offers); or
|
•
|
Purchases effected upon the
exercise of rights
issued by an issuer pro rata to all holders of a class of its securities.
|
•
|
Purchases or sales effected in any account (previously approved by the CCO or her designee) over which the Access Person has no direct or indirect influence or control.
|
•
|
Purchases which are part of ongoing participation in an automatic dividend reinvestment plan. (The initial election to participate in an automatic dividend reinvestment plan should be pre-cleared.)
|
B.
|
Reporting Requirements
.
Every Access Person must report to the CCO or her designee
the following reports regarding the Access Persons direct or indirect beneficial ownership in securities (other than Excepted Securities):
|
1.
|
Initial and Annual Holdings Reports.
No later than ten days after the person
becomes an Access Person, and annually thereafter as of December 31, the following information:
|
•
|
the title and type of security, interest rate and maturity date (if applicable), CUSIP number or exchange ticker symbol, number of shares and principal amount of each security beneficially owned
|
•
|
the name of any broker, dealer or bank with whom the Access Person maintained an account
|
•
|
the date that the report is submitted by the Access Person
|
•
|
the reports can be accomplished through submission of account statements or the form at Exhibit H or
Exhibit H(a) for Claymore
Group Stock.
|
2.
|
Quarterly Transaction Reports
.
No later than ten days after the end of the calendar quarter, the following information (a) with respect to any Personal Securities Transaction during the quarter:
|
•
|
The date of the transaction, the title and type of security, the CUSIP number or exchange ticker symbol (if applicable), the interest rate and maturity date (if applicable), the number of shares and the principal amount of each security
|
•
|
The nature of the transaction (i.e., purchase, sale or any other type of acquisition or disposition)
|
•
|
The price at which the transaction was effected
|
•
|
The name of the broker, dealer or bank with or through which the transaction was effected
|
•
|
The date that the report is submitted by the Access Person
|
(b)
|
With respect to any account established by the Access Person:
|
•
|
The name of the broker, dealer or bank with whom the Access Person established the account
|
•
|
The date the account was established
|
•
|
The date that the report is submitted by the Access Person
|
C.
|
Execution of Personal Securities Transactions Through Disclosed Brokerage Accounts; Duplicate Confirmations.
All Personal Securities Transactions must be conducted
through brokerage or other accounts that have been identified to the CCO or her designee. Each such account must be set up to deliver or mail duplicate copies of all confirmations and statements to: Claymore Securities, Inc., Attention: Compliance Department, 2455 Corporate West Drive, Lisle, IL 60532.
|
•
|
shares of open-end investment companies that are not Investment Company Clients (open-end funds for which Claymore is not the investment adviser or distributor)
Please note that all ETFs must be pre-cleared.
|
•
|
direct obligations of the U.S. government (U.S. treasury bills, notes and bonds);
|
•
|
money market instruments, including bank certificates of deposit, bankers’ acceptances, commercial paper and repurchase agreements
|
•
|
shares of money market funds;
|
•
|
shares issued by unit investment trusts that are invested exclusively in one or more open-end investment companies, none of whom are Investment Company Clients. Note: All purchases and sales of Claymore sponsored Unit Investment Trusts must be pre-cleared.
|
1.
|
Independent Trustees shall be subject to Sections V.A. “Restrictions-No Conflicting Personal Securities Transactions”, V.B. “Restrictions-Private Placements” and VI.B.2. “Pre-Clearance and Reporting Procedures-Reporting Requirements-Quarterly Transaction Reports” only if the Independent Trustee knew or, in the ordinary course of fulfilling his or her official duties as a trustee, should have known that during the 15-day period immediately before or after the trustee’s transaction in a security (except for Excepted Securities described in Section VII “Exceptions to Preclearance and Reporting Requirements”), the closed-end fund or ETF of which such person is an Independent Trustee, purchased or sold the security, or a purchase or sale was considered on behalf of the closed-end fund or ETF.
|
2.
|
Although not strictly prohibited, it is recommended that Independent Trustees refrain from trading in shares of the relevant closed-end fund or ETF for a period of seven calendar days before and after meetings of the Board of Trustees of such fund.
|
3.
|
Independent Trustees shall not accept any gift or other thing of more than de minimis value (e.g. $100) from any person or entity that the Independent Trustee knows or should know does business with or on behalf of, or seeks to do business with or on behalf of a closed-end fund or ETF on whose board the Trustee serves. Gifts in excess of this value must either be returned to the donor or paid for by the recipient. It is not the intent of the Code to prohibit the everyday courtesies of business life. Therefore, this prohibition does not include an occasional meal or
|
4.
|
In lieu of the sanctions contemplated by Section X.D. hereof, Independent Trustees shall be subject to sanctions as determined by the Board of Trustees of the relevant closed-end fund or ETF.
|
A.
|
Certification
. All persons subject to the Code (other than Independent Trustees) shall
certify annually that they have read and understood the Code and recognized that they are subject thereto, and that they have complied with the requirements of the Code. See Exhibit F.
|
B.
|
Review of Reports.
The CCO or her designee shall review all reports submitted under
the Code.
|
C.
|
Notification of Reporting Obligation.
The CCO or her designee shall update Exhibits A,
B, C as necessary to include new Access Persons and Investment Personnel and shall notify those persons of their obligations under the Code.
|
D.
|
Sanctions for Violations.
Upon discovery of a violation of this Code, including either
violations of the enumerated provisions or the general principles provided, Claymore may impose such sanctions as it deems appropriate, including,
inter alia
, a letter of censure or suspension or termination of the employment of the violator.
|
E.
|
Annual Review.
Pursuant to Rule 17j-1(c)(2)(ii), Claymore will at least annually review this Code of Ethics to determine whether it is reasonably designed to prevent persons subject to the Code from engaging in fraudulent activities prohibited by paragraph (b) of the rule. The CCO, General Counsel or Chief Administrative Officer will certify
|
1.
|
I have read and understood the Code of Ethics and recognize that I am subject to its provisions;
|
2.
|
In accordance with Section VI of the Code of Ethics, I will report all securities transactions in which I have a beneficial interest, except for transactions exempt from reporting under Section VII of the Code of Ethics.
|
3.
|
I will comply with the Code of Ethics in all other respects.
|
I.
|
OBJECTIVES OF THE CODE
|
A.
|
Adoption of Code of Ethics by Guggenheim Partners Asset Management, LLC
|
B.
|
Regulatory Requirement
|
C.
|
Compliance with Applicable Law
|
D.
|
Confidential Information
|
E.
|
Avoiding Conflicts of Interest
|
F.
|
Upholding the Spirit of the Code of Ethics
|
II.
|
WHO IS SUBJECT TO THE CODE?
|
A.
|
GPAM Employees, Officers and Directors
|
1.
|
“
Supervised Person
” includes any:
|
a)
|
Director, officer, manager, principal and partner of the Adviser (or other persons occupying a similar status or performing similar functions);
|
b)
|
Employee of the Adviser; and
|
c)
|
Other person who provides advice on behalf of the Adviser or is subject to the Adviser’s supervision and control.
|
2.
|
“
Access Person
” means any Supervised Person who:
|
a)
|
Has access to nonpublic information regarding any client’s purchase or sale of securities, or nonpublic information regarding the portfolio holdings of any client account the Adviser or its affiliates manage or any fund which is advised or sub-advised by the Adviser (or certain affiliates, where applicable);
|
b)
|
c)
|
In connection with his/her regular functions or duties, makes or participates in making recommendations regarding the purchase or sale of securities on behalf of a client;
|
d)
|
Obtains information concerning recommendations made regarding the purchase or sale of securities on behalf of a client;
|
e)
|
Otherwise exercises Investment Control (defined below) over client accounts; or
|
f)
|
Is a director, officer or partner of the Adviser.
|
3.
|
Temporary Employees
: The CCO shall determine on a case-by-case basis whether
a temporary employee (e.g., consultant or intern) should be considered a Supervised Person, Access Person or neither. Such determination shall be made based upon on an application of the criteria provided above.
|
4.
|
Access Persons with Investment Control
: This category includes all accounts
over which an Access Person exercises Investment Control. Investment Control shall mean the direct or indirect power to exercise controlling influence over investment decisions. This includes any arrangement where the Access Person serves as an agent, executor, trustee or in another similar capacity.
|
III.
|
WHO ADMINISTERS THE CODE?
|
1.
|
Responsibilities: The GPAM CCO is responsible for administering the Code of Ethics under the auspices of Guggenheim Partners’ Legal & Compliance Department (the “Legal & Compliance Department”) and GPAM’s senior management.
|
2.
|
Reporting of Violations: If a Supervised Person becomes aware of a violation of this Code of Ethics or a violation of applicable law, they have an obligation to report the matter promptly to the CCO.
|
3.
|
Review of Violations: The CCO will review all violations of the Code of Ethics and oversee any appropriate investigation and subsequent response with respect to GPAM. As the designee of senior management, the CCO shall have the right to make final and binding interpretations of the Code and may grant, using her discretion, exceptions to certain of the above restrictions.
|
4.
|
Review of CCO’s Compliance with Code of Ethics: A member of senior management of the Adviser or any other person designated (
e.g
., a member of the Legal & Compliance Department), who may or may not be an employee of the Adviser, is responsible for reviewing the CCO's personal trading reports required under the Code of Ethics. If the CCO is in violation of the Code of Ethics, senior management will impose the appropriate sanction(s).
|
5.
|
Sanctions: For violations of this Code of Ethics, sanctions may be imposed as deemed appropriate by the CCO and as applicable in coordination with senior management, including, among other things, sale of an open position and disgorgement of profits realized from a prohibited transaction under the Code of Ethics, a letter of censure or suspension or termination of the employment of the employee. A pattern of violations that individually do not violate the law, but which taken together demonstrate a lack of respect for the Code of Ethics, may result in disciplinary action, including termination of employment.
|
6.
|
Employee Cooperation: Employees are encouraged to share questions, concerns, suggestions or complaints with management of the Adviser, the CCO or other members of the Legal & Compliance Department. Reports of violations or suspected violations will be kept confidential to the extent possible, but consistent with the need to conduct an adequate investigation.
|
B.
|
Financial Tracking Technology, LLC (“FTT”)
|
1.
|
Use of FTT: GPAM has implemented an automated system, FTT, to manage Code of Ethics reporting obligations. All Supervised Persons and Access Persons are required to use the system.
|
A.
|
Comply with Applicable Law
|
C.
|
Compliance with the Code of Ethics
|
D.
|
Personal Interests
|
E.
|
Maintaining the Best Interests of Clients
|
F.
|
Confidentiality
|
G.
|
Gifts and Entertainment
|
1.
|
Supervised Persons may be offered or may receive gifts and entertainment such as hosted dinners or other events from persons that are personally in a position to do or potentially to do business with GPAM such as clients, consultants, vendors or other business contacts (generally know as “business contacts”). To monitor that Supervised Persons are not beholden to a business contact and that their judgment remains objective, Supervised Persons may only accept appropriate and reasonable gifts and entertainment of a de minimis value as provided in GPAM’s Gifts and
|
2.
|
Supervised Persons may not personally give gifts to business contacts that exceed a de minimis value as provided in GPAM’s Gifts and Entertainment Policy. Any gifts or entertainment provided to business contacts should be done on behalf of GPAM with proper authorization.
|
3.
|
Supervised Persons may not solicit gifts or entertainment or anything of value from a business contact.
|
4.
|
The acceptance and providing of gifts and entertainment shall also be subject to GPAM’s policies and procedures as applicable.
|
5.
|
Supervised Persons are required to report gifts and entertainment, received and given, on a quarterly basis via FTT. Reporting of gifts of an insignificant amount in value such as pens, baseball caps, or t-shirts does not require reporting. Nor do food gifts that are sent to or shared with multiple employees.
|
H.
|
Outside Affiliations
|
1.
|
Any Supervised Person who is employed by, accepts any remuneration from, or performs any services for any person or entity, including serving as a director of a public or private company, trustee or general partner of a partnership, other than the Adviser or any affiliate of the Adviser (or in these capacities, i.e. director or partner, in a non-profit corporation.), must complete the Pre-Clearance Questionnaire posted on FTT.
|
2.
|
The CCO may require specific information to verify no conflict of interest exists between the outside affiliation and the GPAM’s activities and the Supervised Person’s role at GPAM. If authorized to engage in the outside affiliation or business activity, appropriate safeguards and procedures may be implemented to prevent potential conflicts of interest.
|
3.
|
In no event should any Supervised Person have any outside employment that might cause embarrassment to, or jeopardize the interests of the Adviser, interfere with its operations, or adversely affect his or her productivity or that of other employees.
|
I.
|
Political Contributions
|
1.
|
Neither GPAM nor any Supervised Person is allowed to make political contributions that intentionally or unintentionally have the perceived effect of influencing whether a government entity, official or candidate hires or retains GPAM or its affiliates as investment advisers or invests or maintains an investment in any fund advised or sub-advised by GPAM or a GPAM affiliate.
|
2.
|
Supervised Persons are prohibited from contributing to a candidate’s campaign in a state for which GPAM manages state or local governments’ funds.
|
3.
|
J.
|
Personal Trading
|
1.
|
A potential conflict exists between the interests of clients and personal investment activities of Supervised Persons and particularly Access Persons. This conflict may take shape in a variety of ways, including the particular trades executed and the volume of trading done in personal accounts.
|
2.
|
Supervised Persons may not engage in an excessive volume of trading in personal accounts. High volumes of personal trading, as determined by the CCO and or senior management, may raise concerns that Supervised and Access Persons energies and interests are not aligned with client interests.
|
3.
|
At all times, Supervised Persons have an obligation to refrain from personal trading to manipulate the prices of securities and trading on material, non-public information.
|
4.
|
Given the potential conflict that exists among client transactions, holdings and intentions and Supervised Persons personal trading activity, the Code of Ethics contains more detailed requirements to permit the monitoring of personal trading activity. The remaining sections of the Code of Ethics provide guidance on the requirements that must be followed in connection with personal trading activity.
|
A.
|
Personal Investment Accounts
|
B.
|
Electronic Personal Trading Reporting System
|
C.
|
Which Investment Accounts Do Access Persons Need to Report?
|
1.
|
Report any of the following investment accounts:
|
(b)
|
Any investment account with a broker-dealer or bank over which the Access Person has investment decision-making authority (including accounts that the Access Person is named on, such as being a guardian, executor or trustee, as well as accounts that Access Person is not named on such as an account owned by another person but for which the Access Person has been granted trading authority).
|
(c)
|
Any investment account with a broker-dealer or bank established by partnership, corporation, or other entity in which the Access Person has a direct or indirect interest through any formal or informal understanding or agreement.
|
(d)
|
Any college savings account in which the Access Person holds securities issued under Section 529 of the Internal Revenue Code and in which the Access Person has a direct or indirect interest.
|
(e)
|
Any other account that the CCO deems appropriate in light of the Access Person’s interest or involvement.
|
(f)
|
Any account in which the Access Person’s immediate family is the owner. Access Persons are presumed to have investment decision-making authority for, and therefore must report, any investment account of a member of their immediate family if they live in the same household as them. (Immediate family includes, but is not limited to, a spouse, child, grandchild, stepchild, parent, grandparent, sibling, mother or father-in-law, son or daughter-in-law, or brother or sister-in-law). Access Persons may rebut this presumption if they are able to provide GPAM with satisfactory assurances that they have no material interest in the account and exercise no control over investment decisions made regarding the account. Access Persons should consult with the CCO for guidance regarding this process.
|
2.
|
Independently managed third party account reporting:
|
(a)
|
Accounts over which the Access Person retains no Investment Control and that are managed by an independent third-party must be reported but are not subject to the trading restrictions of the Code, if:
|
(i)
|
A copy of the discretionary account management agreement is provided to the CCO promptly upon establishment of the account;
|
(ii)
|
The CCO finds no exceptions after his/her review of the discretionary account management agreement; and
|
(iii)
|
The CCO is provided with an attestation from the Access Person’s discretionary money manager that such Access Person has no ability to
|
D.
|
Required Initial, Quarterly and Annual Reports
|
1.
|
Initial
: What information is required when you initially become subject to GPAM’s
Code of Ethics?
|
(a)
|
Access Persons must report all of their investment accounts. (See Section V.C. above for more detail for which accounts must be reported.)
|
(b)
|
The report must either include copies of statements or the name of the broker, dealer or bank, title on the account, security names, and the number of shares and principal amount of all holdings.
|
(i)
|
If the Access Person’s brokerage firm provides automatic feeds to FTT, GPAM will obtain account information electronically, after the Access Person has completed the appropriate authorizations as required by the brokerage firm.
|
(ii)
|
If the brokerage firm does not provide automatic feeds to FTT, the CCO will arrange with the broker to send duplicate confirmations and statements directly to FTT, but the Access Person’s assistance may be required.
|
(c)
|
All required account information must be reported within 10 calendar days from the date of hire or the date on which the Access Person becomes a GPAM employee and the information must be current as of a date no more than 45 calendar days prior to the date the person becomes an Access Person.
|
(d)
|
Supervised Persons report any Outside Business Activities, in addition to completing a disciplinary history form.
|
(e)
|
Supervised Persons must complete a form certifying receipt of this Code of Ethics.
|
2.
|
Quarterly Transaction Reports
: What information is required on a quarterly basis?
|
(a)
|
Access Persons must review FTT’s report of all transactions in Covered Securities, in which they have a direct or indirect beneficial interest,
within 30
days after quarter end.
|
(i)
|
What are “Covered Securities”? “Covered Securities” are securities as defined by the Acts are any financial instrument related to a security, including:
|
1.
|
Stock;
|
2.
|
Note;
|
3.
|
Treasury stock;
|
4.
|
Security future;
|
5.
|
Bond;
|
7.
|
Evidence of indebtedness;
|
8.
|
Future;
|
9.
|
Investment contract;
|
10.
|
Voting trust certificate;
|
11.
|
Certificate of deposit for a security;
|
12.
|
Option on any security or on any group or index of securities (
e.g.
, put, call or straddle);
|
13.
|
Exchange traded fund (ETF);
|
14.
|
Limited partnership;
|
15.
|
Certificate of interest or participation in any profit-sharing agreement;
|
16.
|
Collateral-RIC certificate;
|
17.
|
Fractional undivided interest in oil, gas or other mineral right;
|
18.
|
Pre-organizational certificate or subscription;
|
19.
|
Transferable shares;
|
20.
|
Foreign unit trust (
i.e.
, UCIT) and foreign mutual fund;
|
21.
|
Private investment fund, hedge fund, and investment club;
|
22.
|
Unit investment trusts (UIT’s);
|
23.
|
Any open-end mutual funds managed, advised or sub-advised by GPAM or an affiliate; and
|
24.
|
Any other instrument that is considered a “security” under the various securities laws.
|
(ii)
|
The term “Covered Securities” does not include obligations of the US government, bank loans, banker’s acceptances, bank certificates of deposit, commercial paper and high quality short term debt instruments such as repurchase agreements, shares issued by unit investment trusts that are invested exclusively in one or more open end funds, none of which are reportable funds, or open-end mutual funds which GPAM or an affiliate doesn’t manage, advise or sub-advise.
|
(b)
|
From time to time, FTT may not receive all duplicate statements from brokers or may not receive them on a timely basis. In those cases, Access Persons will be notified by the CCO and must provide copies of the statements to the CCO who will forward the information to FTT.
|
(c)
|
Access Persons who do not maintain investment accounts or did not execute transactions in “Covered Securities,” will be required to confirm that there was no investment activity on FTT.
|
(d)
|
Supervised Persons must report all gifts and entertainment from clients and business contacts received or given during the quarter.
|
(a)
|
Access Persons must provide a list of all Covered Securities in which they or their Immediate Family
2
have a direct or indirect interest, including those not held in an account at a broker-dealer or bank. The list must include the title, number of shares and principal amount of each covered security. Access Persons must report the account number, account name and financial institution for each investment account with a broker-dealer or bank for which they are required to report.
|
(b)
|
On an annual basis Access Persons must confirm that all accounts and holdings are reported in FTT.
|
(c)
|
The information in the annual report must be as of December 31.
|
(d)
|
Supervised Persons must also certify annually that they have complied with the requirements of this Code of Ethics and that they have disclosed all transactions and holdings required to be disclosed pursuant to the requirements of this Code.
|
E.
|
New Investment Accounts
|
A.
|
What Trades Must Be Pre-Cleared?
|
2
|
All accounts of Immediate Family members of an Access Person, including any relative by blood or marriage, living in the employee’s household or who are financial dependents of the employee are subject to this Code of Ethics (adult children in a separate household are not covered under the Code). Immediate Family members may include any of the employee’s child, stepchild, grandchild, parent, stepparent, grandparent, spouse, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law and shall include adoptive relationships.
|
1.
|
2.
|
Shares in any Affiliated Investment Company
: Pre-clearance is required for
purchases or sale of shares of closed-end funds advised or sub-advised by GPAM. This includes pre-clearance for such purchases or sales in an Immediate Family member’s account.
|
3.
|
Private Placement Securities
: Any trades in private placement securities (i.e., any
offering that is exempt from registration under the Securities Act of 1933, as amended, pursuant to section 4(2) or 4(6) or pursuant to rule 504, rule 505, or rule 506 under the Securities Act of 1933, as amended) must be precleared. For example, private investment partnerships or private real estate holding partnerships would be subject to pre-clearance.
|
4.
|
Initial Public Offerings
: Trade in IPO’s must be pre-cleared. After obtaining pre-approval from the CCO, participation is limited to the scope permitted for “Restricted Persons” under NASD Conduct Rule 5130.
|
5.
|
529 College Savings Plans
: Any transaction in units of a college savings plan
established under Section 529 of the Internal Revenue Code where the underlying investments are open-end funds advised or sub-advised by GPAM.
|
B.
|
What Trades are Not Required to be Pre-Cleared?
|
1.
|
Government Securities
: Trades in any direct obligations of the U.S. Government,
bankers’ acceptances, bank certificates of deposit, commercial paper and high quality short-term debt instruments including repurchase agreements are not required to be pre-cleared.
|
2.
|
Money Market Funds
: Trades in any investment company or fund that is a money
market fund are not required to be pre-cleared.
|
3.
|
Open-End Mutual Funds
: Trades in open-end mutual funds that are not advised or
sub-advised by GPAM are not required to be pre-cleared.
|
4.
|
No Knowledge
: Securities transactions where no knowledge of the transaction exists
before it is completed. For example, a transaction effected by a Trustee of a blind trust or discretionary trades involving an investment partnership or investment club, when the Access Person is neither consulted nor advised of the trade before it is executed are not required to be pre-cleared.
|
5.
|
Certain Corporate Actions
: Any acquisition of securities through stock dividends,
dividend reinvestments, stock splits, reverse stock splits, mergers, consolidations, spin-offs, exercise of rights or other similar corporate reorganizations or distributions generally applicable to all holders of the same class of securities is not required to be pre-cleared.
|
6.
|
529 College Savings Plans
: Any transaction in units of a college savings plan
established under Section 529 of the Internal Revenue Code, unless the underlying investment includes open-end funds advised or sub-advised by GPAM.
|
7.
|
Miscellaneous
: Any transaction in any other securities as the GPAM CCO may
designate on the grounds that the risk of abuse is minimal or non-existent.
|
C.
|
How Does Pre-Clearance Process Work?
|
1.
|
Understand the Pre-Clearance Requirements
: Review Sections VI.A and VI.B to
determine if the security requires pre-clearance.
|
2.
|
Pre-Clearance Request Form
: Log on to FTT, complete the online pre-clearance form,
and electronically submit request.
|
3.
|
Approval or Denial
: Approval of the proposed trade may automatically be generated
so long as the trade is not currently listed on applicable restricted lists or does not require additional review or authorization by the CCO or senior management.
|
A.
|
For All Trading
|
1.
|
Market Manipulation
: Securities transactions may not be executed with the intent to
raise, lower, or maintain the price of any security or to falsely create the appearance of trading activity.
|
2.
|
Trading on Inside Information
: Transactions (buy’s or sell’s) of any security cannot
be made if in possession of material non-public information about the security or the issuer of the security. (Please also refer to GPAM’s Policy on Insider Trading.)
|
3.
|
Regardless of whether a transaction is specifically prohibited in this Code of Ethics, no person subject to this Code of Ethics may engage in any personal securities transactions that (i) impact their ability to carry out their assigned duties or (ii) increase the possibility of an actual or apparent conflict of interest.
|
B.
|
Excessive Trading in Reportable Accounts
|
1.
|
For Access Persons:
|
(a)
|
After purchase in an account of a fund advised or sub-advised by GPAM, Access Persons must hold that security in that account for at least 60 days from the date of purchase.
|
(b)
|
Note that this limitation also applies to any purchase or sales in an Access Person’s individual retirement account, 401(k), deferred compensation plan, or any similar retirement plan or investment account for their or their immediate family.
|
(A)
|
Policy Statement on Insider Trading
|
(B)
|
In General – Inside Information
|
(C)
|
Prohibiting Misuse of Inside Information
|
•
|
No Adviser employee, while in possession of inside information relevant to a security, shall purchase or sell, or recommend or direct the purchase or sale of, such security for the account of the Adviser, an employee, a client, or anyone else.
|
•
|
No employee shall use inside information to purchase or sell securities for his or her own account, any account in which he or she has a direct or indirect beneficial interest (including accounts for family members), or any other account over which the employee has discretionary authority or a power of attorney.
|
•
|
Any employee who, in the course of his or her employment, obtains “inside” information that is later disclosed to the general public must allow sufficient time to elapse for the investing public to assimilate and evaluate the information before taking any action for his or her personal account on the basis of the disclosed facts.
|
(D)
|
General Guidelines
|
(E)
|
Maintenance of Restricted List
|
•
|
Where there is a concentration of ownership in a security and the Adviser’s clients already own a substantial portion of the publicly held outstanding shares; or
|
•
|
When an Adviser comes into possession of material, non-public information about a public company, such as business plans, earnings projections, or merger and acquisition plans.
|
(F)
|
Review of Trading
|
(G)
|
Investigations
|
(i)
|
The name of the security;
|
(ii)
|
The date the investigation commenced;
|
(iii)
|
An identification of the accounts involved; and
|
(iv)
|
A summary of the disposition of the investigation.
|
(i)
|
Do not purchase or sell the securities on behalf of yourself or others;
|
(ii)
|
Report the matter immediately to the CCO: and
|
(iii)
|
Do not communicate the information inside or outside an Adviser, other than to the CCO.
|
1.
|
Pre-Approval
– Access Persons are required to obtain prior written approval through
Financial Tracking (“FTT”) before undertaking any transaction (e.g., purchase or sale) in GOF. Pre-approval is in addition to, not a substitute, for other restrictions discussed below.
|
2.
|
Blackouts: Dividend
– Access Persons are prohibited from trading in GOF seven (7) days
before and seven (7) days after the initial dividend of GOF is declared (or any subsequent changes thereto).
|
3.
|
Blackouts: Fund Securities
– Access Persons may not engage in personal transactions in
securities to be traded in GOF seven (7) days before and seven (7) days after such transaction.
|
4.
|
Blackouts: Board Meetings
– Access Person may not trade in GOF seven (7) days before
and seven (7) days after a GOF board meeting.
|
5.
|
Holding Period
– Access Persons are required to hold any purchase of GOF for sixty (60)
calendar days.
|
6.
|
Re-investment of Dividends
– Dividends that are automatically reinvested are not subject
to the pre-approval requirement.
|
7.
|
Reporting of Transactions
– Access Persons must notify the Claymore Advisors’ Legal
Department Patty Villasenor (
pvillasenor@claymore.co
m
) and Dolores Delgado (ddelgado@claymore.com) immediately, but in no event more than 24 hours, after any transaction in GOF. Such reporting is required for Claymore to make mandatory regulatory filings within the required time period.
|
FUND
|
TICKER
|
|
American Beacon High Yield Bond Fund – Instl
|
AYBFX
|
|
American Beacon High Yield Bond Fund – Investor
|
AHYPX
|
|
CNI Charter High Yield Bond Fund – Class N
|
CHBAX
|
|
CNI Charter High Yield Bond Fund – Instl
|
CHYIX
|
|
Pinnacle American Core-Plus Bond Fund – Class: A, F, I (Canada) |
----------
|
|
Principal Global Diversified Income Fund – Class A
|
PGBAX
|
|
Principal Global Diversified Income Fund – Class C
|
PGDCX
|
|
Principal Global Diversified Income Fund – Instl
|
PGDIX
|
|
Russell Short Duration Bond Fund – Class A
|
RSBTX
|
|
Russell Short Duration Bond Fund – Class C
|
RSBCX
|
|
Russell Short Duration Bond Fund – Class E
|
RSBEX
|
|
Russell Short Duration Bond Fund – Class S
|
RFBSX
|
|
Russell Short Duration Bond Fund – Class Y
|
RSBYX
|
|
Russell Strategic Bond Fund – Class A
|
RFDAX
|
|
Russell Strategic Bond Fund – Class C
|
RFCCX
|
|
Russell Strategic Bond Fund – Class E
|
RFCEX
|
|
Russell Strategic Bond Fund – Class S
|
RFCTX
|
|
Russell Strategic Bond Fund – Class Y
|
RFCYX
|
|
Russell Strategic Bond Fund – Instl
|
RFCSX
|
|
SEI Canada US High Yield Bond Fund
|
----------
|
|
SEI Global Master Fund PLC High Yield Fixed Income Fund
|
----------
|
|
SEI Institutional Investment Trust High Yield Bond Fund
|
SGYAX
|
|
SEI Institutional Managed High Yield Bond Fund – Class A
|
SHYAX
|