Michael K. Hoffman, Esq.
Skadden, Arps, Slate, Meagher & Flom LLP Four Times Square New York, New York 10036 |
Kevin T. Hardy, Esq.
Skadden, Arps, Slate, Meagher & Flom LLP 155 North Wacker Drive Chicago, Illinois 60606 |
Title of Securities Being Registered
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Amount Being Registered
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Proposed Maximum Offering Price
Per Share
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Proposed Maximum Aggregate Offering Price
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Amount of Registration
Fee
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Common Shares, $0.01 par value
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(1)
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(2)
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$1,000,000(3)
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$121.20(4)
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(1)
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There are being registered hereunder a presently indeterminate number of common shares to be offered on an immediate, continuous or delayed basis.
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(2)
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The proposed maximum offering price per share will be determined, from time to time, by the Registrant in connection with the sale by the Registrant of the common shares registered under this registration statement.
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(3)
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Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(o) under the Securities Act of 1933.
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(4)
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Paid herewith.
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TABLE OF CONTENTS
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PROSPECTUS SUMMARY
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1
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SUMMARY OF TRUST EXPENSES
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21
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FINANCIAL HIGHLIGHTS |
23
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SENIOR SECURITIES AND OTHER FINANCIAL LEVERAGE |
25
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THE TRUST
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26
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USE OF PROCEEDS |
26
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MARKET AND NET ASSET VALUE INFORMATION |
26
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INVESTMENT OBJECTIVES AND POLICIES |
27
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THE TRUST’S INVESTMENTS |
29
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USE OF FINANCIAL LEVERAGE |
38
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RISKS |
42
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MANAGEMENT OF THE TRUST |
55
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NET ASSET VALUE |
58
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DISTRIBUTIONS
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58
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DIVIDEND REINVESTMENT PLAN |
60
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DESCRIPTION OF CAPITAL STRUCTURE |
61
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ANTI-TAKEOVER AND OTHER PROVISIONS IN THE TRUST’S GOVERNING DOCUMENTS |
63
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CLOSED-END FUND STRUCTURE
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64
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REPURCHASE OF COMMON SHARES; CONVERSION TO OPEN-END FUND |
64
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TAX MATTERS |
65
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PLAN OF DISTRIBUTION | 69 |
CUSTODIAN, ADMINISTRATOR, TRANSFER AGENT AND DIVIDEND-DISBURSING AGENT | 71 |
LEGAL MATTERS | 71 |
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM | 71 |
ADDITIONAL INFORMATION | 71 |
PRIVACY PRINCIPLES OF THE TRUST | 72 |
TABLE OF CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION | 73 |
investment objectives are considered fundamental and may not be changed without the approval of the holders of the Common Shares (the “Common Shareholders”).
The Trust seeks to achieve its investment objectives by investing primarily in a diversified portfolio of taxable municipal securities, including Build America Bonds (“BABs”).
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Investment Policies
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Under normal market conditions:
· The Trust invests at least 80% of its net assets, plus the amount of any borrowings for investment purposes, in taxable municipal securities, including BABs.
· The Trust may invest up to 20% of its Managed Assets (as defined herein) in securities other than taxable municipal securities, including tax-exempt municipal securities, asset-backed securities, senior loans and other income producing securities.
· The Trust will not invest more than 25% of its Managed Assets in municipal securities of any one state of origin.
· The Trust will not invest more than 15% of its Managed Assets in municipal securities that, at the time of investment, are illiquid.
Credit Quality. Under normal market conditions, the Trust invests at least 80% of its Managed Assets in securities that, at the time of investment, are investment grade quality. A security is considered investment grade quality if, at the time of investment, it is rated within the four highest letter grades by at least one of the nationally recognized statistical rating organizations (“NRSROs”) (that is Baa3 or better by Moody’s Investors Service, Inc. (“Moody’s”) or BBB- or better by Standard & Poor’s Ratings Services (“S&P”) or Fitch Ratings (“Fitch”)) that rate such security, even if it is rated lower by another, or if it is unrated by any NRSRO but judged to be of comparable quality by the Adviser.
Under normal market conditions, the Trust may invest up to 20% of its Managed Assets in securities that, at the time of investment, are rated below investment grade (that is below Baa3 by Moody’s or below BBB- by S&P or Fitch) or are unrated by any NRSRO but judged to be of comparable quality by the Adviser. If NRSROs assign different ratings to the same security, the Trust will use the highest rating for purposes of determining the security’s credit quality. Securities of below investment grade quality are regarded as having predominately speculative characteristics with respect to capacity to pay interest and repay principal, and are commonly referred to as “junk bonds.” See “Risks—Below Investment Grade Securities Risk.”
Duration Management Strategy. “Duration” is a measure of the price volatility of a security as a result of changes in market rates of interest, based on the weighted average timing of a security’s expected principal and interest payments. There is no limit on the remaining maturity or duration of any individual security in which the Trust may invest, nor will the Trust’s portfolio be managed to any duration benchmark prior to taking into account the duration management strategy discussed herein.
The Trust intends to employ investment and trading strategies to seek to maintain the leverage-adjusted portfolio duration to generally less than 10 years. As of May 31, 2019, the Trust’s duration was approximately six years. The Adviser may seek to manage the duration of the Trust’s portfolio through the use of derivative instruments, including U.S. treasury swaps, credit default swaps, total return swaps and futures contracts to reduce the overall volatility of the Trust’s portfolio to changes in market interest rates. For example, the
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Adviser may seek to manage the overall duration through the combination of the sale of interest-rate swaps on the long end of the yield curve (for example a transaction in which the Trust would pay a fixed interest rate on a 30 year swap transaction) with the purchase of an interest-rate swap on the intermediate portion of the yield curve (for example a transaction in which the Trust would receive a fixed interest rate on a ten year swap transaction). In addition, the Trust may invest up to 20% of its Managed Assets in securities other than taxable municipal securities, which may consist of short-duration fixed-income securities, which may help to decrease the overall duration of the Trust’s portfolio while also potentially adding incremental yield. The Adviser anticipates focusing such investments in ABS, senior loans and high-yield fixed-income securities, although the types of short-duration fixed-income securities in which the Trust may invest may vary significantly over time. The Adviser may seek to manage the Trust’s duration in a flexible and opportunistic manner based primarily on then current market conditions and interest rate levels. The Trust may incur costs in implementing the duration management strategy, but such strategy will seek to reduce the volatility of the Trust’s portfolio. There can be no assurance that the Adviser’s duration management strategy will be successful at any given time in managing the duration of the Trust’s portfolio or helping the Trust to achieve its investment objectives.
Investment Funds. As an alternative to holding investments directly, the Trust may also obtain investment exposure to securities in which it may invest directly by investing up to 20% of its Managed Assets in other investment companies, including U.S. registered investment companies and/or other U.S. or foreign pooled investment vehicles (collectively, “Investment Funds”). Investment Funds do not include structured finance investments, such as asset-backed securities. To the extent that the Trust invests in Investment Funds that invest at least 80% of their total assets in taxable municipal securities, such investment will be counted for purposes of the Trust’s policy of investing at least 80% of its Managed Assets in taxable municipal securities. Investments in other Investment Funds involve operating expenses and fees at the Investment Funds level that are in addition to the expenses and fees borne by the Trust and are borne indirectly by Common Shareholders.
Synthetic Investments. As an alternative to holding investments directly, the Trust may also obtain investment exposure to investments in which the Trust may invest directly through the use of derivative instruments (including swaps, options, forwards, notional principal contracts or customized derivative or financial instruments) to replicate, modify or replace the economic attributes associated with an investment in which the Trust may invest directly. The Trust may be exposed to certain additional risks should the Adviser use derivatives as a means to synthetically implement the Trust’s investment strategies, including counterparty risk, lack of liquidity in such derivative instruments and additional expenses associated with using such derivative instruments. To the extent that the Trust obtains indirect investment exposure to taxable municipal securities through the use of the foregoing derivative instruments with economic characteristics similar to taxable municipal securities, such investments will be counted for purposes of the Trust’s policy of investing at least 80% of its Managed Assets in taxable municipal securities. The Trust has not adopted any percentage limitation with respect to the overall percentage of investment exposure to taxable municipal securities that the Trust may obtain through the use of derivative instruments.
Strategic Transactions. In addition to those derivatives transactions utilized in connection with the Trust’s duration management strategy, the Trust may, but
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is not required to, use various portfolio strategies, including derivatives transactions involving interest rate and foreign currency transactions, swaps, options and futures (“Strategic Transactions”), to earn income, facilitate portfolio management and mitigate risks. In the course of pursuing Strategic Transactions, the Trust may purchase and sell exchange-listed and over-the-counter put and call options on securities, instruments or equity and fixed-income indices, purchase and sell futures contracts and options thereon, and enter into swap, cap, floor or collar transactions. In addition, Strategic Transactions may also include new techniques, instruments or strategies that are developed or permitted as regulatory changes occur. Successful use of Strategic Transactions depends on the Adviser’s ability to predict correctly market movements, which cannot be assured. Losses on Strategic Transactions may reduce the Trust’s net asset value and its ability to pay distributions if they are not offset by gains on portfolio positions being hedged. See “Investment Objectives and Policies—Strategic Transactions” in this Prospectus and “Investment Objectives and Policies—Derivative Instruments” in the SAI.
Other Investment Practices. The Trust may engage in certain investment transactions described herein. The Trust may enter into forward commitments for the purchase or sale of securities. The Trust may enter into transactions on a “when issued” or “delayed delivery” basis, in excess of customary settlement periods for the type of security involved. The Trust may lend portfolio securities to securities broker-dealers or financial institutions and enter into short sales and repurchase agreements. The Trust may, without limitation, seek to obtain market exposure to the securities in which it primarily invests by entering into a series of purchase and sale contracts or by using similar investment techniques (such as buy backs or dollar rolls). See “Investment Objectives and Policies—Certain Other Investment Practices.”
These policies may be changed by the Board of Trustees of the Trust (the “Board of Trustees”), but no change is anticipated. If the Trust’s policy with respect to investing at least 80% of its Managed Assets in taxable municipal securities changes, the Trust will provide shareholders at least 60 days’ prior notice before implementation of the change.
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Special Tax Considerations
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The Trust has elected to be treated as, and intends to continue to qualify for taxation as, a regulated investment company (“RIC”) for U.S. federal income tax purposes. For so long as the Trust so qualifies, it will generally not be subject to U.S. federal income tax on income or gains that it timely distributes to its shareholders. The Trust primarily invests in taxable municipal securities whose income is subject to U.S. federal income tax. Thus, dividends with respect to the Common Shares will generally be taxable as ordinary income for U.S. federal income tax purposes (except in the case of capital gain dividends). See “Tax Matters.”
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Financial Leverage
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The Trust may employ leverage through (i) the issuance of senior securities representing indebtedness, including through borrowing from financial institutions or issuance of debt securities, including notes or commercial paper (collectively, “Indebtedness”), (ii) engaging in reverse repurchase agreements, dollar rolls and economically similar transactions, (iii) investments in inverse floating rate securities, which have the economic effect of leverage, and (iv) the issuance of preferred shares (“Preferred Shares”) (collectively “Financial Leverage”).
The Trust may utilize leverage up to the limits imposed by the Investment Company Act of 1940 (the “1940 Act”). Under the 1940 Act the Trust may
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not incur Indebtedness if, immediately after incurring such Indebtedness, the Trust would have asset coverage (as defined in the 1940 Act) of less than 300% (i.e., for every dollar of Indebtedness outstanding, the Trust is required to have at least three dollars of assets). Under the 1940 Act, the Trust may not issue Preferred Shares if, immediately after issuance, the Trust would have asset coverage (as defined in the 1940 Act) of less than 200% (i.e., for every dollar of Preferred Shares outstanding, the Trust is required to have at least two dollars of assets). However, under current market conditions, the Trust currently expects to utilize Financial Leverage through Indebtedness and/or reverse repurchase agreements, such that the aggregate amount of Financial Leverage is not expected to exceed 33 1/3 % of the Trust’s Managed Assets (including the proceeds of such Financial Leverage) (or 50% of net assets). The Trust has entered a committed facility agreement with Société Générale S.A., pursuant to which the Trust may borrow up to $125 million. As of May 31, 2019, there was approximately $44.5 in borrowings outstanding under the committed facility agreement, representing approximately 9% of the Trust’s Managed Assets as of such date, and there was approximately $56.2 million in reverse repurchase agreements outstanding, representing approximately 11% of the Trust’s Managed Assets as of such date.
Although the use of Financial Leverage by the Trust may create an opportunity for increased total return for the Common Shares, it also results in additional risks and can magnify the effect of any losses. 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 Share. To the extent the Trust increases its amount of Financial Leverage outstanding, it will be more exposed to these risks. The cost of Financial Leverage, including the portion of the investment advisory fee attributable to the assets purchased with the proceeds of Financial Leverage, is borne by Common Shareholders. To the extent the Trust increases its amount of Financial Leverage outstanding, the Trust’s annual expenses as a percentage of net assets attributable to Common Shares will increase.
With respect to leverage incurred through investments in reverse repurchase agreements, dollar rolls and economically similar transactions, the Trust intends to earmark or segregate cash or liquid securities in accordance with applicable interpretations of the staff of the Securities and Exchange Commission (the “SEC”). As a result of such segregation, the Trust’s obligations under such transactions will not be considered indebtedness for purposes of the 1940 Act and the Trust’s use of leverage through reverse repurchase agreements, dollar rolls and economically similar transactions will not be limited by the 1940 Act. However, the Trust’s use of leverage through reverse repurchase agreements, dollar rolls and economically similar transactions will be included when calculating the Trust’s Financial Leverage and therefore will be limited by the Trust’s maximum overall Financial Leverage levels approved by the Board of Trustees and may be further limited by the availability of cash or liquid securities to earmark or segregate in connection with such transactions.
In addition, the Trust may engage in certain derivatives transactions that have economic characteristics similar to leverage. To the extent the terms of such transactions obligate the Trust to make payments, the Trust intends to earmark or segregate cash or liquid securities in an amount at least equal to the current value of the amount then payable by the Trust under the terms of such transactions or otherwise cover such transactions in accordance with
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applicable interpretations of the staff of the SEC. As a result of such segregation or cover, the Trust’s obligations under such transactions will not be considered indebtedness for purposes of the 1940 Act and will not be included in calculating the aggregate amount of the Trust’s Financial Leverage. To the extent that the Trust’s obligations under such transactions are not so segregated or covered, such obligations may be considered “senior securities representing indebtedness” under the 1940 Act and therefore subject to the 300% asset coverage requirement described above and other requirements of the 1940 Act.
The Adviser anticipates that the use of Financial Leverage may result in higher total return to the Common Shareholders over time; however, there can be no assurance that the Adviser’s expectations will be realized or that a leveraging strategy will be successful in any particular time period. Use of Financial Leverage creates an opportunity for increased income and capital appreciation but, at the same time, creates special risks. The costs associated with the issuance of Financial Leverage will be borne by Common Shareholders, which will result in a reduction of net asset value of the Common Shares. The fee paid to the Adviser will be calculated on the basis of the Trust’s Managed Assets, including proceeds from Financial Leverage, so the fees paid to the Adviser will be higher when Financial Leverage is utilized.
Common Shareholders bear the portion of the investment advisory fee attributable to the assets purchased with the proceeds of Financial Leverage, which means that Common Shareholders effectively bear the entire advisory fee. The maximum level of and types of Financial Leverage used by the Trust will be approved by the Board of Trustees. There can be no assurance that a leveraging strategy will be utilized or, if utilized, will be successful. See “Risks—Financial Leverage Risk.”
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Temporary Defensive Investments
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During periods in which the Adviser believes that changes in economic, financial or political conditions make it advisable to maintain a temporary defensive posture (an Investments “temporary defensive period”), or in order to keep the Trust’s cash fully invested, including the period during which the net proceeds of the offering of Common Shares are being invested, the Trust may, without limitation, hold cash or invest its assets in money market instruments and repurchase agreements in respect of those instruments. The Trust may not achieve its investment objectives during a temporary defensive period or be able to sustain its historical distribution levels. See “The Trust’s Investments—Temporary Defensive Investments.”
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Management of the Trust
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Guggenheim Funds Investment Advisors, LLC acts as the Trust’s investment adviser pursuant to an investment advisory agreement with the Trust (the “Advisory Agreement”). Pursuant to the Advisory Agreement, the Investment Adviser is responsible for the management of the Trust and administers the affairs of the Trust to the extent requested by the Board of Trustees. As compensation for its services, the Trust pays the Investment Adviser a fee, payable monthly, in an annual amount equal to 0.60% of the Trust’s average daily Managed Assets.
“Managed Assets” means the total assets of the Trust, including the assets attributable to the proceeds of any Financial Leverage (whether or not these assets are reflected in the Trust’s financial statements for purposes of generally accepted accounting principles), minus liabilities, other than liabilities related to any Financial Leverage. Managed Assets shall include assets attributable to Financial Leverage of any form, including Indebtedness,
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engaging in reverse repurchase agreements, dollar rolls and economically similar transactions, investments in inverse floating rate securities, and Preferred Shares.
Guggenheim Partners Investment Management, LLC acts as the Trust’s investment Sub-Adviser pursuant to an investment sub-advisory agreement with the Trust and the Investment Adviser (the “Sub-Advisory Agreement”). Pursuant to the Sub-Advisory Agreement, the Sub-Adviser is responsible for the management of the Trust’s portfolio of investments. As compensation for its services, the Investment Adviser pays the Sub-Adviser a fee, payable monthly, in an annual amount equal to 0.30% of the Trust’s average daily Managed Assets.
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Distributions
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The Trust intends to pay substantially all of its net investment income to Common Shareholders through monthly distributions. In addition, the Trust intends to distribute any net long-term capital gains to Common Shareholders at least annually. The Trust expects that dividends paid on the Common Shares will consist primarily of (i) investment company taxable income, which includes, among other things, ordinary income, net short-term capital gain and income from certain hedging and interest rate transactions, and (ii) net capital gain (which is the excess of net long-term capital gain over net short-term capital loss). Distributions may be paid by the Trust from any permitted source and, from time to time, all or a portion of a distribution may be a return of capital. The Trust cannot assure you, however, as to what percentage of the dividends paid on the Common Shares, if any, will consist of net capital gain, which is taxed at reduced rates for non-corporate investors. The distributions paid by the Trust for any particular month may be more than the amount of net investment income from that monthly period. As a result, all or a portion of a distribution may be a return of capital, which is in effect a partial return of the amount a Common Shareholder invested in the Trust. For U.S. federal income tax purposes, a return of capital distribution is generally not taxable up to the amount of the Common Shareholder’s tax basis in their Common Shares and would reduce such tax basis. Although a return of capital may not be taxable, it will generally increase the Common Shareholder’s potential gain, or reduce the Common Shareholder’s potential loss, on any subsequent sale or other disposition of Common Shares. Shareholders who periodically receive the payment of a distribution consisting of a return of capital may be under the impression that they are receiving net income or profits when they are not. Shareholders should not assume that the source of a distribution from the Trust is net income or profit. Alternatively, in certain circumstances, the Trust may elect to retain income or capital gain and pay income or excise tax on such undistributed amount, to the extent that the Board of Trustees, in consultation with Trust management, determines it to be in the best interest of shareholders to do so. During the Trust’s fiscal year ended May 31, 2019, the Trust paid excise tax of $192,846. See “Distributions” and “Tax Matters.”
The Trust reserves the right to change its distribution policy and the basis for establishing the rate of distributions at any time and may do so without prior notice to Common Shareholders.
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 Trust’s Dividend Reinvestment Plan (the “Plan”), unless you elect to receive cash, all dividends and distributions that are declared by the Trust will be automatically reinvested in additional Common Shares of the Trust pursuant to the Plan. If you hold your Common Shares with a brokerage firm that does
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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 advisor for more information. See “Dividend Reinvestment Plan.” | |
Listing and Symbol
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The Trust’s currently outstanding Common Shares are, and the Common Shares offered by this Prospectus, will be, subject to notice of issuance, listed on the New York Stock Exchange (the “NYSE”) under the symbol “GBAB.” The net asset value of the Common Shares at the close of business on August 26, 2019 was $23.32 per share, and the last reported sale price of the Common Shares on the NYSE on such date was $25.13, representing a premium to net asset value of 7.76%. See “Market and Net Asset Value Information.”
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Special Risk Considerations
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Investment in the Trust involves special risk considerations, which are summarized below. The Trust is designed as a long-term investment and not as a trading vehicle. The Trust is not intended to be a complete investment program. The Trust’s performance and the value of its investments will vary in response to changes in interest rates, inflation and other market factors. See “Risks” for a more complete discussion of the special risk considerations associated with an investment in the Trust.
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Not a Complete Investment Program. An investment in the Common Shares of the Trust should not be considered a complete investment program. The Trust is intended for long-term investors seeking current income and capital appreciation. The Trust is not meant to provide a vehicle for those who wish to play short-term swings in the stock market. Each Common Shareholder should take into account the Trust’s investment objectives as well as the Common Shareholder’s other investments when considering an investment in the Trust.
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Investment and Market Risk. An investment in Common Shares of the Trust 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 Trust represents an indirect investment in the securities owned by the Trust. The value of those securities may fluctuate, sometimes rapidly and unpredictably. The value of the securities owned by the Trust may decline due to general market conditions that are not specifically related to a particular issuer, such as real or perceived economic conditions, changes in interest or currency rates or changes in investor sentiment or market outlook generally. At any point in time, your Common Shares may be worth less than your original investment, including the reinvestment of Trust dividends and distributions.
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Management Risk. The Trust is subject to management risk because it is an actively managed portfolio. In acting as the Trust’s Adviser, responsible for management of the Trust’s portfolio securities, the Adviser will apply investment techniques and risk analyses in making investment decisions for the Trust, but there can be no guarantee that these will produce the desired results.
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Municipal Securities Risk. The amount of public information available about municipal securities is generally less than that for corporate equities or bonds, and the investment performance of the Trust’s municipal securities investments may therefore be more dependent on the analytical abilities of the Adviser. The secondary market for municipal securities, particularly below investment grade municipal securities, also tends to be less well-developed or liquid than many other securities markets, which may adversely affect the
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Trust’s ability to sell such securities at prices approximating those at which the Trust may currently value them.
In addition, many state and municipal governments that issue securities are under significant economic and financial stress and may not be able to satisfy their obligations. The ability of municipal issuers to make timely payments of interest and principal may be diminished during general economic downturns and as governmental cost burdens are reallocated among federal, state and local governments. Issuers of municipal securities might seek protection under bankruptcy laws. In the event of bankruptcy of such an issuer, holders of municipal securities could experience delays in collecting principal and interest and such holders may not be able to collect all principal and interest to which they are entitled.
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Taxable Municipal Securities Risk. While interest earned on municipal securities is generally not subject to federal tax, any interest earned on taxable municipal securities is fully taxable at the federal level and may be subject to tax at the state level. Additionally, litigation, legislation or other political events, local business or economic conditions or the bankruptcy of the issuer could have a significant effect on the ability of an issuer of municipal securities to make payments of principal and/or interest. Political changes and uncertainties in the municipal market related to taxation, legislative changes or the rights of municipal security holders can significantly affect municipal securities. Because many securities are issued to finance similar projects, especially those relating to education, health care, transportation and utilities, conditions in those sectors can affect the overall municipal market. In addition, changes in the financial condition of an individual municipal issuer can affect the overall municipal market.
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Build America Bonds Risk. BABs are a form of municipal financing. The BABs market is smaller and less diverse than the broader municipal securities market. In addition, because the relevant provisions of the American Recovery and Reinvestment Act of 2009 were not extended, bonds issued after December 31, 2010 cannot qualify as BABs. As of the date of this prospectus, there is no indication that Congress will renew the program to permit issuance of new Build America Bonds. As a result, the number of available BABs is limited, which may negatively affect the value of the BABs. In addition, there can be no assurance that BABs will continue to be actively traded. It is difficult to predict the extent to which a market for such bonds will continue, meaning that BABs may experience greater illiquidity than other municipal obligations. Because issuers of direct payment BABs held in the Trust’s portfolio receive reimbursement from the U.S. Treasury with respect to interest payments on bonds, there is a risk that those municipal issuers will not receive timely payment from the U.S. Treasury and may remain obligated to pay the full interest due on direct payment BABs held by the Trust. Under the sequestration process under the Budget Control Act of 2011, automatic spending cuts that became effective on March 1, 2013 reduced the federal subsidy for BABs and other subsidized taxable municipal bonds. The reduced federal subsidy has been extended through 2024. The subsidy payments were reduced by 6.6% in 2018 and by 6.2% in 2019. Furthermore, it is possible that a municipal issuer may fail to comply with the requirements to receive the direct pay subsidy or that a future Congress may further reduce or terminate the subsidy altogether. In addition, the Internal Revenue Code of 1986, as amended (the “Code”) contains a general offset rule (the “IRS Offset Rule”) which allows for the possibility that subsidy payments to be received by issuers of BABs may be subject to offset against amounts owed by them to the federal government. Moreover, the Internal Revenue Service (the “IRS”) may audit the agencies issuing BABs and such audits may, among other things, examine the price at which BABs are initially
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sold to investors. If the IRS concludes that a BAB was mispriced based on its audit, it could disallow all or a portion of the interest subsidy received by the issuer of the BAB. The IRS Offset Rule and the disallowance of any interest subsidy as a result of an IRS audit could potentially adversely affect a BABs issuer’s credit rating, and adversely affect the issuer’s ability to repay or refinance BABs. This, in turn, could adversely affect the ratings and value of the BABs held by the Trust and the Trust’s net asset value. The IRS has withheld subsidies from several states and municipalities. | |
Credit Risk. Credit risk is the risk that one or more securities in the Trust’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. A downgrade of the rating assigned to a security by an NRSRO may reduce the value of that security.
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Interest Rate Risk. Interest rate risk is the risk that fixed income securities, such as preferred and debt securities and certain equity securities will decline in value because of a rise in market interest rates. These risks may be greater in the current market environment because interest rates recently have declined significantly below historical average rates, and the Federal Reserve has begun to raise the Federal Funds rate. Prevailing interest rates may be adversely impacted by market and economic factors, including the potential impact of tapering of “quantitative easing” by the Federal Reserve Board. If interest rates rise the markets may experience increased volatility, which may adversely affect the value and/or liquidity of certain of the Trust’s investments. Increases in interest rates may adversely affect the Trust’s ability to achieve its investment objectives. The prices of longer-term securities fluctuate more than prices of shorter-term securities as interest rates change. The Trust’s use of leverage, as described below, will tend to increase Common Share interest rate risk. The Trust may utilize certain strategies, including taking positions in futures or interest rate swaps, for the purpose of reducing the interest rate sensitivity of credit securities held by the Trust and decreasing the Trust’s exposure to interest rate risk. The Trust is not required to hedge its exposure to interest rate risk and may choose not to do so. In addition, there is no assurance that any attempts by the Trust to reduce interest rate risk will be successful or that any hedges that the Trust may establish will perfectly correlate with movements in interest rates. The Trust may invest in variable and floating rate debt instruments, which generally are less sensitive to interest rate changes than fixed rate instruments, but generally will not increase in value if interest rates decline.
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Duration Management Risk. The Trust’s managers expect to employ investment and trading strategies to seek to maintain the leverage-adjusted duration of the Trust’s portfolio at generally less than 10 years. Such strategies include, among others, security selection and the use of financial products. Financial products may include US treasury swaps, total return swaps and futures contracts, among others. During the latest semi-annual period the Trust’s managers used a combination of Corporate Bonds, Asset Backed Securities, Collateralized Loan Obligations, Collateralized Mortgage Obligations, Preferred Stock, Term Loans and other similar instruments to
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achieve a leverage-adjusted duration of less than 10 years. These investments were also used to provide the Trust with protection against interest rate volatility while providing income to the Trust. (Duration is a measure of a bond’s price sensitivity to changes in interest rates, expressed in years. Duration is a weighted average of the times that interest payments and the final return of principal are received. The weights are the amounts of the payments discounted by the yield to maturity of the bond.) | |
Financial Leverage Risk. Although the use of Financial Leverage by the Trust 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 Trust’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 Trust 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, market price and dividends on the Common Shares than a comparable portfolio without leverage; the risk that fluctuations in interest rates on borrowings and short-term debt or in the dividend rates on any Financial Leverage that the Trust 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 Trust were not leveraged, which may result in a greater decline in the market price of the Common Shares.
It is also possible that the Trust will be required to sell assets, possibly at a loss, in order to redeem or meet payment obligations on any leverage. Such a sale would reduce the Trust’s net asset value and also make it difficult for the net asset value to recover. The Trust in its best judgment nevertheless may determine to continue to use Financial Leverage if it expects that the benefits to the Trust’s shareholders of maintaining the leveraged position will outweigh the current reduced return.
Certain types of Borrowings subject the Trust to covenants in credit agreements relating to asset coverage and portfolio composition requirements. Certain Borrowings issued by the Trust also may subject the Trust to certain restrictions on investments imposed by guidelines of one or more rating agencies, which may issue ratings for such Borrowings. Such guidelines may impose asset coverage or portfolio composition requirements that are more stringent than those imposed by the 1940 Act. It is not anticipated that these covenants or guidelines will impede the Adviser from managing the Trust’s portfolio in accordance with the Trust’s investment objectives and policies.
Reverse repurchase agreements involve the risks that the interest income earned on the investment of the proceeds will be less than the interest expense and Trust expenses associated with the repurchase agreement, that the market value of the securities sold by the Trust may decline below the price at which the Trust is obligated to repurchase such securities and that the securities may not be returned to the Trust. There is no assurance that reverse repurchase agreements can be successfully employed. In connection with reverse repurchase agreements, the Trust will also be subject to counterparty risk with respect to the purchaser of the securities. If the broker/dealer to whom the Trust sells securities becomes insolvent, the Trust’s right to purchase or
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repurchase securities may be restricted.
Because the fees received by the Adviser are based on the Managed Assets of the Trust (including the proceeds of any Financial Leverage), the Adviser has a financial incentive for the Trust to utilize Financial Leverage, which may create a conflict of interest between the Adviser and the Common Shareholders. There can be no assurance that a leveraging strategy will be successful during any period during which it is employed.
If the cost of leverage is no longer favorable, or if the Trust is otherwise required to reduce its leverage, the Trust 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.
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Reinvestment Risk. Reinvestment risk is the risk that income from the Trust’s portfolio will decline if the Trust invests the proceeds from matured, traded or called bonds at market interest rates that are below the portfolio’s current earnings rate. A decline in income could affect the Common Shares’ market price or the overall return of the Trust.
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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 Trust’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 effect on the creditworthiness of issuers and may make issuer default more likely, which may result in a decline in the value of the Trust’s portfolio.
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Insurance Risk. The Trust may purchase municipal securities that are secured by insurance, bank credit agreements or escrow accounts. The credit quality of the companies that provide such credit enhancements will affect the value of those securities. Certain significant providers of insurance for municipal securities have in the past incurred significant losses as a result of exposure to sub-prime mortgages and other lower credit quality investments that experienced recent defaults or otherwise suffered extreme credit deterioration. As a result, such losses reduced the insurers’ capital and called into question their continued ability to perform their obligations under such insurance if they are called upon to do so in the future. While an insured municipal security will typically be deemed to have the rating of its insurer, if the insurer of a municipal security suffers a downgrade in its credit rating or the market discounts the value of the insurance provided by the insurer, the rating of the underlying municipal security will be more relevant and the value of the municipal security would more closely, if not entirely, reflect such rating. In such a case, the value of insurance associated with a municipal security would decline and may not add any value. The insurance feature of a municipal security normally provides that it guarantees the full payment of principal and interest when due through the life of an insured obligation, but does not guarantee the market value of the insured obligation or the net asset value of the Common Shares attributable to such insured obligation.
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Below Investment Grade Securities Risk. The Trust may invest in securities rated below investment grade (that is below Baa3 by Moody’s; or below BBB- by S&P or Fitch; comparably rated by another statistical rating organization; or,
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if unrated, as determined by the Adviser to be of comparable credit quality), which are commonly referred to as “junk bonds.” Investment in securities of below investment grade quality involves substantial risk of loss. Securities of below investment grade quality are considered 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. Issuers of below investment grade securities are not perceived to be as strong financially as those with higher credit ratings. These issuers are more vulnerable to financial setbacks and recession than more creditworthy issuers, which may impair their ability to make interest and principal payments. Securities of below investment grade quality display increased price sensitivity to changing interest rates and to a deteriorating economic environment. The market values, total return and yield for securities of below investment grade quality tend to be more volatile than the market values, total return and yield for higher-quality securities. Securities of below investment grade quality tend to be less liquid than investment grade debt securities and therefore more difficult to value accurately and sell at an advantageous price or time and may involve greater transactions costs and wider bid/ask spreads than higher-quality securities. To the extent that a secondary market does exist for certain below investment grade securities, the market for them may be subject to irregular trading activity, wide bid/ask spreads and extended trade settlement periods. Because of the substantial risks associated with investments in below investment grade securities, you could have an increased risk of losing money on your investment in Common Shares, both in the short-term and the long-term. To the extent that the Trust invests in securities that have not been rated by an NRSRO, the Trust’s ability to achieve its investment objectives will be more dependent on the Adviser’s credit analysis than would be the case when the Trust invests in rated securities. | |
Sector Risk. The Trust may invest a significant portion of its managed assets in certain sectors which may subject the Trust to additional risk and variability. To the extent that the Trust focuses its managed assets in the hospital and healthcare facilities sector, for example, the Trust will be subject to risks associated with such sector, including adverse government regulation and reduction in reimbursement rates, as well as government approval of products and services and intense competition. Securities issued with respect to special taxing districts will be subject to various risks, including real-estate development related risks and taxpayer concentration risk. Further, the fees, special taxes or tax allocations and other revenues established to secure the obligations of securities issued with respect to special taxing districts are generally limited as to the rate or amount that may be levied or assessed and are not subject to increase pursuant to rate covenants or municipal or corporate guarantees. Charter schools and other private educational facilities are subject to various risks, including the reversal of legislation authorizing or funding charter schools, the failure to renew or secure a charter, the failure of a funding entity to appropriate necessary funds and competition from alternatives such as voucher programs. Issuers of municipal utility securities can be significantly affected by government regulation, financing difficulties, supply and demand of services or fuel and natural resource conservation. The transportation sector, including airports, airlines, ports and other transportation facilities, can be significantly affected by changes in the economy, fuel prices, maintenance, labor relations, insurance costs and government regulation.
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Special Risks Related to Certain Municipal Securities. The Trust may invest in municipal leases and certificates of participation in such leases. Municipal leases and certificates of participation involve special risks not normally associated with general obligations or revenue bonds. Leases and installment purchase or conditional sale contracts (which normally provide for title to the leased asset to pass eventually to the governmental issuer) have evolved as a means for governmental issuers to acquire property and equipment without meeting the constitutional and statutory requirements for the issuance of debt. The debt issuance limitations are deemed to be inapplicable because of the inclusion in many leases or contracts of “non-appropriation” clauses that relieve the governmental issuer of any obligation to make future payments under the lease or contract unless money is appropriated for such purpose by the appropriate legislative body on a yearly or other periodic basis. In addition, such leases or contracts may be subject to the temporary abatement of payments in the event the governmental issuer is prevented from maintaining occupancy of the leased premises or utilizing the leased equipment. Although the obligations may be secured by the leased equipment or facilities, the disposition of the property in the event of non-appropriation or foreclosure might prove difficult, time consuming and costly, and may result in a delay in recovering or the failure to fully recover the Trust’s original investment. In the event of non-appropriation, the issuer would be in default and taking ownership of the assets may be a remedy available to the Trust, although the Trust does not anticipate that such a remedy would normally be pursued. To the extent that the Trust invests in unrated municipal leases or participates in such leases, the credit quality and risk of cancellation of such unrated leases will be monitored on an ongoing basis. Certificates of participation, which represent interests in unmanaged pools of municipal leases or installment contracts, involve the same risks as the underlying municipal leases. In addition, the Trust may be dependent upon the municipal authority issuing the certificates of participation to exercise remedies with respect to the underlying securities. Certificates of participation entail a risk of default or bankruptcy not only of the issuer of the underlying lease but also of the municipal agency issuing the certificate of participation.
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Structured Finance Investments Risk. The Trust’s structured finance investments may consist of residential mortgage-backed securities (“RMBS”) and commercial mortgage-backed securities (“CMBS”) issued by governmental entities and private issuers, ABS, structured notes, credit-linked notes and other types of structured finance securities. Holders of structured finance securities bear risks of the underlying assets, index or reference obligation and are subject to counterparty risk. The Trust may have the right to receive payments only from the issuer of the structured finance security, and generally does not have direct rights against the issuer or the entity that sold the assets to be securitized. While certain structured finance investments enable the investor to acquire interests in a pool of assets without the brokerage and other expenses associated with directly holding the same assets, investors in structured finance securities generally pay their share of the structured finance security issuer’s administrative and other expenses. The prices of indices and assets underlying structured finance securities, and, therefore, the prices of structured finance securities, will be influenced by, and will rise and fall in response to, the same types of political and economic events that affect issuers of securities and capital markets generally. If the issuer of a structured finance security uses shorter term financing to purchase longer term assets, the issuer may be forced to sell its assets at below market prices if it experiences difficulty in obtaining short-term financing, which may adversely affect the value of the structured finance securities owned by the Trust. Certain structured finance securities may be thinly traded or have a limited trading market.
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The Trust may invest in structured finance securities collateralized by low grade or defaulted loans or securities. Investments in such structured finance securities are subject to the risks associated with below investment grade securities. Such securities are characterized by high risk. It is likely that an economic recession could severely disrupt the market for such securities and may have an adverse impact on the value of such securities.
The Trust may invest in senior and subordinated classes issued by structured finance vehicles. The payment of cash flows from the underlying assets to senior classes take precedence over those of subordinated classes, and therefore subordinated classes are subject to greater risk. Furthermore, the leveraged nature of subordinated classes may magnify the adverse impact on such class of changes in the value of the assets, changes in the distributions on the assets, defaults and recoveries on the assets, capital gains and losses on the assets, prepayment on assets and availability, price and interest rates of assets.
Structured finance securities are typically privately offered and sold, and thus are not registered under the securities laws. As a result, investments in structured finance securities may be characterized by the Trust as illiquid securities; however, an active dealer market may exist which would allow such securities to be considered liquid in some circumstances.
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Asset-Backed Securities Risk. In addition to the general risks associated with credit securities discussed herein and the risks discussed under “Structured Finance Investments Risks,” ABS are subject to additional risks. ABS may be particularly sensitive to changes in prevailing interest rates. ABS involve certain risks in addition to those presented by mortgage-backed securities (“MBS”). ABS do not have the benefit of the same security interest in the underlying collateral as MBS and are more dependent on the borrower’s ability to pay and may provide the Trust with a less effective security interest in the related collateral than do MBS. There is the possibility that recoveries on the underlying collateral may not, in some cases, be available to support payments on these securities. The collateral underlying ABS may constitute assets related to a wide range of industries and sectors, such as credit card and automobile receivables or other assets derived from consumer, commercial or corporate sectors.
For example, ABS can be collateralized with credit card and automobile receivables. 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. If the economy of the United States deteriorates, defaults on securities backed by credit card, automobile and other receivables may increase, which may adversely affect the value of any ABS owned by the Trust. In recent years, certain automobile
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manufacturers have been granted access to emergency loans from the U.S. Government and have experienced bankruptcy. As a result of these events, the value of securities backed by receivables from the sale or lease of automobiles may be adversely affected.
If the economy of the United States deteriorates, defaults on securities backed by credit card, automobile and other receivables may increase, which may adversely affect the value of any ABS owned by the Trust. In addition, these securities may provide the Trust with a less effective security interest in the related collateral than do mortgage-related securities. Therefore, there is the possibility that recoveries on the underlying collateral may not, in some cases, be available to support payments on these securities.
ABS collateralized by other types of assets are subject to risks associated with the underlying collateral.
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Senior Loans Risk. The Trust 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 Trust’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 securities, although Senior Loans are typically senior and secured in contrast to subordinated and unsecured 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 securities, which may have fixed interest rates.
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Liquidity Risk. The Trust may invest up to 15% of its Managed Assets in municipal securities that are, at the time of investment, illiquid, and certain other securities in which the Trust may invest may be illiquid. Illiquid securities are securities that cannot be disposed of within seven days in the ordinary course of business at approximately the value that the Trust values the securities. Illiquid securities may trade at a discount from comparable, more liquid securities and may be subject to wide fluctuations in market value. The Trust may be subject to significant delays in disposing of illiquid securities. Accordingly, the Trust may be forced to sell these securities at less than fair market value or may not be able to sell them when the Adviser believes it is desirable to do so. Illiquid securities also may entail registration expenses and other transaction costs that are higher than those for liquid securities. Restricted securities (i.e., securities subject to legal or contractual restrictions on resale) may be illiquid. However, some restricted securities (such as securities issued pursuant to Rule 144A under the Securities Act of 1933, as amended (the “1933 Act”) and certain commercial paper) may be treated as liquid for these purposes. Inverse floating-rate securities or the residual interest certificates of tender option bond trusts are not considered illiquid securities.
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Volatility Risk. The use of Financial Leverage by the Trust will cause the net asset value, and possibly the market price, of the Trust’s Common Shares to fluctuate significantly in response to changes in interest rates and other
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economic indicators. In addition, the Trust may invest up to 20% of its managed assets in below investment grade securities (i.e., “junk bonds”), which may be less liquid and therefore more volatile than investment grade municipal securities. As a result, the net asset value and market price of the Trust’s Common Shares will be more volatile than those of a closed-end investment company that is not exposed to leverage or that does not invest in below investment grade securities. In a declining market, the use of leverage may result in a greater decline in the net asset value of the Common Shares than if the Trust were not leveraged. | |
Inverse Floating-Rate Securities Risk. Under current market conditions, the Trust anticipates utilizing Financial Leverage through Indebtedness and/or engaging in reverse repurchase agreements. However, the Trust also may utilize Financial Leverage through investments in inverse floating-rate securities (sometimes referred to as “inverse floaters”). Typically, inverse floating-rate securities represent beneficial interests in a special purpose trust (sometimes called a “tender option bond trust”) formed by a third party sponsor for the purpose of holding municipal bonds. Distributions on inverse floating-rate securities bear an inverse relationship to short-term municipal bond interest rates. In general, income on inverse floating-rate securities will decrease, or in the extreme be eliminated, when interest rates increase and increase when interest rates decrease. Investments in inverse floating-rate securities may subject the Trust to the risks of reduced or eliminated interest payments and losses of principal. Short-term interest rates are at historic lows and may be more likely to rise in the current market environment. Inverse floating-rate securities may increase or decrease in value at a greater rate than the underlying interest rate, which effectively leverages the Trust’s investment. As a result, the market value of such securities generally will be more volatile than that of fixed-rate securities. Inverse floating-rate securities have varying degrees of liquidity based, among other things, upon the liquidity of the underlying securities deposited in a special purpose trust. The Trust may invest in taxable inverse floating-rate securities, issued by special purpose trusts formed with taxable municipal securities. The market for such inverse floating-rate securities issued by special purpose trusts formed with taxable municipal securities is relatively new and undeveloped. Initially, there may be a limited number of counterparties, which may increase the credit risks, counterparty risk and liquidity risk of investing in taxable inverse floating-rate securities. The leverage attributable to such inverse floating-rate securities may be “called away” on relatively short notice and therefore may be less permanent than more traditional forms of Financial Leverage. In certain circumstances, to the extent the Trust relies on inverse floating-rate securities to achieve its desired effective leverage ratio the likelihood of an increase in the volatility of net asset value and market price of the Common Shares may be greater. To the extent the Trust relies on inverse floating-rate securities to achieve its desired effective leverage ratio, the Trust may be required to sell its inverse floating-rate securities at less than favorable prices, or liquidate other Trust portfolio holdings in certain circumstances.
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Sovereign Debt Risk. Investments in sovereign debt involve special risks. Foreign governmental issuers of debt or the governmental authorities that control the repayment of the debt may be unable or unwilling to repay principal or pay interest when due. In the event of default, there may be limited or no legal recourse in that, generally, remedies for defaults must be pursued in the courts of the defaulting party. Political conditions, especially a sovereign entity’s willingness to meet the terms of its debt obligations, are of considerable significance. The ability of a foreign sovereign issuer, especially
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an emerging market country, to make timely payments on its debt obligations will also be strongly influenced by the sovereign issuer’s balance of payments, including export performance, its access to international credit facilities and investments, fluctuations of interest rates and the extent of its foreign reserves. | |
Strategic Transactions Risk. The Trust may engage in various portfolio strategies, including derivatives transactions involving interest rate and foreign currency transactions, swaps, options and futures, for hedging and risk management purposes and to enhance total return. The use of Strategic Transactions to enhance total return may be particularly speculative. Strategic Transactions involve risks, including the imperfect correlation between the value of such instruments and the underlying assets, the possible default of the other party to the transaction and illiquidity of the derivative instruments. Furthermore, the Trust’s ability to successfully use Strategic Transactions depends on the Adviser’s ability to predict pertinent market movements, which cannot be assured. The use of Strategic Transactions may result in losses greater than if they had not been used, may require the Trust to sell or purchase portfolio securities at inopportune times or for prices other than current market values, may limit the amount of appreciation the Trust can realize on an investment or may cause the Trust to hold a security that it might otherwise sell. Additionally, amounts paid by the Trust as premiums and cash or other assets held in margin accounts with respect to Strategic Transactions are not otherwise available to the Trust for investment purposes.
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Synthetic Investments Risk. The Trust may be exposed to certain additional risks to the extent the Adviser uses derivatives as a means to synthetically implement the Trust’s investment strategies. If the Trust 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 Trust 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 Trust 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 Trust’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 Trust’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.
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Counterparty Risk. The Trust will be subject to credit risk with respect to the counterparties to the derivative contracts purchased by the Trust. If a counterparty becomes bankrupt or otherwise fails to perform its obligations under a derivative contract due to financial difficulties, the Trust may experience significant delays in obtaining any recovery under the derivative contract in bankruptcy or other reorganization proceedings. The Trust may obtain only a limited recovery or may obtain no recovery in such circumstances.
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Securities Lending Risk. The Trust may lend its portfolio securities to banks or dealers which meet the creditworthiness standards established by the Board of Trustees. Securities lending is subject to the risk that loaned securities may not be available to the Trust on a timely basis and the Trust may therefore lose
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the opportunity to sell the securities at a desirable price. Any loss in the market price of securities loaned by the Trust that occurs during the term of the loan would be borne by the Trust and would adversely affect the Trust’s performance. Also, there may be delays in recovery, or no recovery, of securities loaned or even a loss of rights in the collateral should the borrower of the securities fail financially while the loan is outstanding. | |
Investment Funds Risk. As an alternative to holding investments directly, the Trust may also obtain investment exposure to securities in which it may invest directly by investing up to 20% of its Managed Assets in Investment Funds. Investments in Investment Funds present certain special considerations and risks not present in making direct investments in securities in which the Trust may invest. Investments in Investment Funds involve operating expenses and fees that are in addition to the expenses and fees borne by the Trust. Such expenses and fees attributable to the Trust’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 Trust to an additional layer of Financial Leverage.
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Market Discount Risk. Shares of closed-end management investment companies frequently trade at a discount from their net asset value, which is a risk separate and distinct from the risk that the Trust’s net asset value could decrease as a result of its investment activities. Although the value of the Trust’s net assets is generally considered by market participants in determining whether to purchase or sell Common Shares, whether investors will realize gains or losses upon the sale of Common Shares will depend entirely upon whether the market price of Common Shares at the time of sale is above or below the investor’s purchase price for Common Shares.
The Trust’s net asset value 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 Trust. The sale of Common Shares by the Trust (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 Trust may, from time to time, seek the consent of Common Shareholders to permit the issuance and sale by the Trust of Common Shares at a price below the Trust’s then current net asset value, subject to certain conditions, and such sales of Common Shares at price below net asset value, if any, may increase downward pressure on the market price for Common Shares. These sales, if any, also might make it more difficult for the Trust 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 Trust’s net asset value. Because the market price of Common Shares will be determined by factors such as net asset value, dividend and distribution levels (which are dependent,
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Common Shareholder Transaction Expenses
|
||||
Sales load paid by you (as a percentage of offering price)
|
—
|
%(1)
|
||
Offering expenses borne by the Trust (as a percentage of offering price)
|
0.60
|
%(1)(2)
|
||
Dividend Reinvestment Plan fees(3)
|
None
|
As a Percentage of
Net Assets Attributable to Common Shares(4) |
||||
Annual Expenses
|
||||
Management fees(5)
|
0.73
|
%
|
||
Interest expense(6)
|
0.73
|
%
|
||
Other expenses(7)
|
0.22
|
%
|
||
Total annual expenses
|
1.68
|
%
|
(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 Trust.
|
(2)
|
The Adviser has incurred on behalf of the Trust all costs associated with the Trust’s registration statement and any offerings pursuant to such registration statement. The Trust has agreed, in connection with offerings under this registration statement, to reimburse the Adviser for offering expenses incurred by the Adviser on the Trust’s behalf in an amount up to the lesser of the Trust’s actual offering costs or 0.60% of the total offering price of the Common Shares sold in such offering.
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(3)
|
Common Shareholders will pay brokerage charges if they direct the Plan Agent to sell Common Shares held in a dividend reinvestment account. See “Dividend Reinvestment Plan.”
|
(4)
|
Based upon average net assets applicable to Common Shares during the fiscal year ended May 31, 2019.
|
(5)
|
The Trust pays the Adviser an annual fee, payable monthly, in an amount equal to 0.60% of the Trust’s average daily Managed Assets (net assets plus any assets attributable to Financial Leverage). The fee shown above is based upon outstanding Financial Leverage of 20% of the Trust’s Managed Assets. If Financial Leverage of more than 20% of the Trust’s Managed Assets is used, the management fees shown would be higher.
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(6)
|
Includes interest payments on borrowed funds and interest expense on reverse repurchase agreements. Interest payments on borrowed funds is based upon the Trust’s outstanding Borrowings as of May 31, 2019, which included Borrowings under the Trust’s committed facility agreement in an amount equal to 9% of the Trust’s Managed Assets, at an average interest rate of 3.32%. Interest expenses on reverse repurchase agreements is based on the Trust’s outstanding reverse repurchase agreements as of May 31, 2019, which included leverage in the form of reverse repurchase agreements in an amount equal to 11% of the Trust’s Managed Assets, at a weighted average interest rate cost to the Trust of 2.96%. The actual amount of interest payments and expenses by the Trust will vary over time in accordance with the amount of Borrowings and reverse repurchase agreements and variations in market interest rates.
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(7)
|
Other expenses are estimated based upon those incurred during the fiscal year ended May 31, 2019.
|
1 Year
|
3 Years
|
5 Years
|
10 Years
|
|
Total Annual Expenses paid by Common Shareholders(1)
|
$23
|
$59
|
$97
|
$205
|
* |
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 Trust’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. In connection with an offering of Common Shares, the Prospectus Supplement will set forth an Example including sales load and estimated offering costs.
|
|
Year Ended
|
Year Ended
|
Year Ended
|
Year Ended
|
Year Ended
|
|||||||||||||||
|
May 31, 2019
|
May 31, 2018
|
May 31, 2017
|
May 31, 2016
|
May 31, 2015
|
|||||||||||||||
Per Share Data:
|
||||||||||||||||||||
Net asset value, beginning of period
|
$
|
22.69
|
$
|
23.30
|
$
|
23.30
|
$
|
23.35
|
$
|
23.26
|
||||||||||
Income from investment operations:
|
||||||||||||||||||||
Net investment income(a)
|
1.30
|
1.48
|
1.59
|
1.48
|
1.48
|
|||||||||||||||
Net gain (loss) on investments (realized and unrealized)
|
0.23
|
(0.58
|
)
|
(0.04
|
)
|
0.13
|
0.27
|
|||||||||||||
Total from investment operations
|
1.53
|
0.90
|
1.55
|
1.61
|
1.75
|
|||||||||||||||
Common shares’ offering expense charged to paid-in capital
|
—
|
—
|
—
|
—
|
—
|
|||||||||||||||
Less distributions from:
|
||||||||||||||||||||
Net investment income
|
(1.43
|
)
|
(1.35
|
)
|
(1.55
|
)
|
(1.64
|
)
|
(1.48
|
)
|
||||||||||
Capital gains
|
(0.08
|
)
|
(0.16
|
)
|
—
|
(0.02
|
)
|
(0.18
|
)
|
|||||||||||
Total distributions to shareholders
|
(1.51
|
)
|
(1.51
|
)
|
(1.55
|
)
|
(1.66
|
)
|
(1.66
|
)
|
||||||||||
Net asset value, end of period
|
$
|
22.71
|
$
|
22.69
|
$
|
23.30
|
$
|
23.30
|
$
|
23.35
|
||||||||||
Market value, end of period
|
$
|
23.38
|
$
|
21.44
|
$
|
23.23
|
$
|
22.28
|
$
|
21.64
|
||||||||||
Total Return(b)
|
||||||||||||||||||||
Net asset value
|
7.11
|
%
|
3.93
|
%
|
6.81
|
%
|
7.25
|
%
|
7.64
|
%
|
||||||||||
Market value
|
16.81
|
%
|
(1.23
|
%)
|
11.62
|
%
|
10.95
|
%
|
7.52
|
%
|
||||||||||
Ratios/Supplemental Data:
|
||||||||||||||||||||
Net assets, end of period (in thousands)
|
$
|
395,716
|
$
|
395,221
|
$
|
405,780
|
$
|
405,820
|
$
|
406,668
|
||||||||||
Ratio to average net assets of:
|
||||||||||||||||||||
Total expenses, including interest expense(c)
|
1.68
|
%
|
1.65
|
%
|
1.54
|
%
|
1.38
|
%
|
1.32
|
%
|
||||||||||
Net investment income, including interest expense
|
5.82
|
%
|
6.42
|
%
|
6.80
|
%
|
6.47
|
%
|
6.26
|
%
|
||||||||||
Portfolio turnover rate
|
6
|
%
|
8
|
%
|
6
|
%
|
7
|
%
|
11
|
%
|
||||||||||
Senior Indebtebness:
|
||||||||||||||||||||
Borrowings – committed facility agreement (in thousands)
|
$
|
44,510
|
$
|
44,510
|
$
|
47,509
|
$
|
61,710
|
$
|
35,510
|
||||||||||
Asset Coverage per $1,000 of borrowings(d)
|
$
|
9,891
|
$
|
9,879
|
$
|
9,541
|
$
|
7,576
|
$
|
12,452
|
||||||||||
Supplemental asset coverage per $1,000 of borrowings(e)
|
$
|
11,152
|
$
|
11,014
|
$
|
10,966
|
$
|
9,030
|
$
|
14,993
|
For the Year
|
For the Year
|
For the Year
|
October 28, 2010*
|
|||||||||
Ended
|
Ended
|
Ended
|
through
|
|||||||||
May 31, 2014
|
May 31, 2013
|
May 31, 2012
|
May 31, 2011
|
|||||||||
$
|
23.61
|
$
|
23.49
|
$
|
20.65
|
$
|
19.1
|
(f)
|
||||
1.63
|
1.65
|
1.59
|
0.68
|
|||||||||
(0.32
|
)
|
0.07
|
2.74
|
1.5
|
||||||||
1.31
|
1.72
|
4.33
|
2.18
|
|||||||||
—
|
—
|
—
|
(0.04
|
)
|
||||||||
(1.60
|
)
|
(1.60
|
)
|
(1.49
|
)
|
(0.59
|
)
|
|||||
(0.06
|
)
|
—
|
—
|
—
|
||||||||
(1.66
|
)
|
(1.60
|
)
|
(1.49
|
)
|
(0.59
|
)
|
|||||
$
|
23.26
|
$
|
23.61
|
$
|
23.49
|
$
|
20.65
|
|||||
$
|
21.69
|
$
|
22.7
|
$
|
22.46
|
$
|
19.54
|
|||||
6.15
|
%
|
7.48
|
%
|
21.64
|
%
|
11.34
|
%
|
|||||
3.54
|
%
|
8.27
|
%
|
23.35
|
%
|
0.80
|
%
|
|||||
$
|
405,039
|
$
|
411,135
|
$
|
408,960
|
$
|
359,444
|
|||||
1.35
|
%
|
1.38
|
%
|
1.36
|
%
|
1.05
|
%(g)
|
|||||
7.37
|
%
|
6.99
|
%
|
7.33
|
%
|
6.00
|
%(g)
|
|||||
10
|
%
|
12
|
%
|
7
|
%
|
3
|
%
|
|||||
$
|
30,964
|
$
|
44,213
|
$
|
37,444
|
$
|
N/A
|
|||||
$
|
14,081
|
$
|
10,299
|
$
|
11,922
|
$
|
N/A
|
|||||
$
|
16,953
|
$
|
12,239
|
$
|
14,275
|
$
|
N/A
|
*
|
Commencement of investment operations.
|
||||
(a)
|
Based on average shares outstanding.
|
||||
(b)
|
Total 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 Trust’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.
|
||||
(c)
|
Excluding interest expense, the operating expense ratios for the years ended May 31 would be:
|
||||
|
|
|
|
|
|
2019
|
2018
|
2017
|
2016
|
2015
|
|
0.95%
|
0.99%
|
1.00%
|
0.99%
|
1.02%
|
|
|
|
||||
(d)
|
Calculated by subtracting the Trust’s total liabilities (not including the borrowings) from the Trust’s total assets and dividing by the borrowings
|
||||
(e)
|
Calculated by subtracting the Trust’s total liabilities (not including the borrowings or reverse repurchase agreements) from the Trust’s total assets and dividing by the borrowings.
|
||||
(f)
|
Before deduction of offering expenses charged to capital.
|
||||
(g)
|
Annualized.
|
Fiscal Year Ended
|
Title of Security
|
Total Principal
Amount Outstanding |
Asset Coverage
Per $1,000 of Principal Amount |
May 31, 2019
|
Borrowings
|
$44,509,544
|
$9,891
|
May 31, 2018
|
Borrowings
|
$44,509,544
|
$9,879
|
May 31, 2017
|
Borrowings
|
$47,509,544
|
$9,541
|
May 31, 2016
|
Borrowings
|
$61,709,544
|
$7,576
|
May 31, 2015
|
Borrowings
|
$35,509,544
|
$12,452
|
May 31, 2014
|
Borrowings
|
$30,963,936
|
$14,081
|
May 31, 2013
|
Borrowings
|
$44,213,936
|
$10,299
|
May 31, 2012
|
Borrowings
|
$37,444,000
|
$11,922
|
May 31, 2011
|
Borrowings
|
N/A
|
N/A
|
Market Price
|
Net Asset Value
per Common Share on Date of Market Price High and Low(1) |
Premium/(Discount)
on Date of Market Price High and Low(2) |
|||||||||
Fiscal Quarter Ended
|
High
|
Low
|
High
|
Low
|
High
|
Low
|
|||||
August 31, 2019
|
|
|
|
||||||||
May 31, 2019
|
$23.55
|
$21.97
|
$22.57
|
$22.19
|
4.34%
|
(0.99)%
|
|||||
February 28, 2019
|
$22.88
|
$21.23
|
$22.24
|
$22.25
|
2.88%
|
(4.58)%
|
|||||
November 30, 2018
|
$22.19
|
$19.94
|
$22.48
|
$22.01
|
(1.29)%
|
(9.40)%
|
|||||
August 31, 2018
|
$22.21
|
$21.24
|
$22.66
|
$22.55
|
(1.99)%
|
(5.81)%
|
May 31, 2018
|
$21.84
|
$21.10
|
$22.80
|
$22.53
|
(4.21)%
|
(6.35)%
|
|||||
February 28, 2018
|
$23.12
|
$20.98
|
$23.51
|
$22.63
|
(1.66)%
|
(7.29)%
|
|||||
November 30, 2017
|
$23.23
|
$22.14
|
$23.74
|
$23.24
|
(2.15)%
|
(4.73)%
|
|||||
August 31, 2017
|
$23.24
|
$22.57
|
$23.49
|
$23.33
|
(1.06)%
|
(3.26)%
|
|||||
May 31, 2017
|
$23.23
|
$21.40
|
$23.30
|
$22.71
|
(0.30)%
|
(5.77)%
|
(1)
|
Based on the Trust’s computations.
|
(2)
|
Calculated based on the information presented. Percentages are rounded.
|
·
|
The Trust invests at least 80% of its net assets, plus the amount of any borrowings for investment purposes, in taxable municipal securities, including BABs.
|
·
|
The Trust may invest up to 20% of its Managed Assets in securities other than taxable municipal securities, including municipal securities the interest income from which is exempt from regular federal income tax (sometimes referred to as “tax-exempt municipal securities”), asset-backed securities (“ABS”), senior loans and other income producing securities.
|
·
|
The Trust will not invest more than 25% of its Managed Assets in municipal securities in any one state of origin.
|
·
|
The Trust will not invest more than 15% of its Managed Assets in municipal securities that, at the time of investment, are illiquid.
|
Assumed Portfolio Total Return (Net of Expenses)
|
(10.00)%
|
(5.00)%
|
0.00%
|
5.00%
|
10.00%
|
Common Share Total Return
|
(13.34)%
|
(7.07)%
|
(0.79)%
|
5.48%
|
11.75%
|
Title of Class
|
Amount Authorized
|
Amount Held by Trust for its own Account
|
Amount Outstanding Exclusive of Amounts held by Trust
|
Common Shares of Beneficial Interest, par value $0.01 per share
|
Unlimited
|
—
|
17,422,970
|
·
|
the merger or consolidation of the Trust or any subsidiary of the Trust with or into any Principal Shareholder;
|
·
|
the issuance of any securities of the Trust to any Principal Shareholder for cash (other than pursuant to any dividend reinvestment plan);
|
·
|
the sale, lease or exchange of all or any substantial part of the assets of the Trust 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 Trust or any subsidiary of the Trust, in exchange for securities of the Trust, 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.
|
·
|
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 Trust 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.
|
The Trust
|
S-[ ]
|
Investment Objectives and Policies
|
S-[ ]
|
Investment Restrictions
|
S-[ ]
|
Management of the Trust
|
S-[ ]
|
Portfolio Transactions
|
S-[ ]
|
Tax Matters
|
S-[ ]
|
General Information
|
S-[ ]
|
Financial Statements
|
S-[ ]
|
Appendix A: Description of Securities Ratings
|
A-1
|
Appendix B: Proxy Voting Policies and Procedures
|
B-1
|
Page
|
|
The Trust
|
S-[ ]
|
Investment Objectives and Policies
|
S-[ ]
|
Investment Restrictions
|
S-[ ]
|
Management of the Trust
|
S-[ ]
|
Portfolio Transactions
|
S-[ ]
|
Tax Matters
|
S-[ ]
|
General Information
|
S-[ ]
|
Financial Statements
|
S-[ ]
|
Appendix A: Description of Securities Ratings
|
A-1
|
Appendix B: Proxy Voting Policies and Procedures
|
B-1
|
·
|
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 REITs; and
|
·
|
Companies engaged in energy, natural resources and basic materials businesses and companies engaged in associated businesses. These companies include 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.
|
Name, Business Address(1) and Year of Birth
|
Position(s) Held with the Trust
|
Term of Office(2) and Length of Time Served
|
Principal Occupation(s) During the Past Five Years
|
Number of Portfolios in Fund Complex(3) Overseen by Trustee
|
Other Directorships Held by Trustee
|
* |
Ms. Lee is deemed to be an “interested person” of the Trust under the 1940 Act by reason of her position with the Trust’s Investment Adviser and/or the parent of the Investment Adviser.
|
(1)
|
The business address of each Trustee of the Trust is 227 West Monroe Street, Chicago, Illinois 60606, unless otherwise noted.
|
(2)
|
Each Trustee is expected to serve a three year term concurrent with the class of Trustees for he serves.
|
·
|
Messrs. Barnes and Chubb, as Class I Trustees, are expected to stand for re-election at the Trust’s annual meeting of shareholders for the fiscal year ending May 31, 2020.
|
·
|
Messrs. Farley, Friedrich and Nyberg, as Class II Trustees, are expected to stand for re-election at the Trust’s annual meeting of shareholders for the fiscal year ending May 31, 2021.
|
·
|
Mr. Toupin and Ms. Lee, as Class III Trustees, are expected to stand for re-election at the Trust’s annual meeting of shareholders for the fiscal year ending May 31, 2022.
|
(3)
|
As of the date of this SAI, the “Fund Complex” consists of seven closed-end funds, including the Trust, and 150 open-end funds advised or serviced by the Investment Adviser or its affiliates. The funds in the Fund Complex are overseen by multiple boards of trustees.
|
Name, Business
Address(1) and Year of Birth
|
Position(s) held with the Trust
|
Term of Office(2) and Length of Time Served
|
Principal Occupation(s) During the Past Five Years
|
Brian E. Binder
Year of Birth: 1972
|
President and Chief Executive Officer
|
Since 2018
|
Current: President and Chief Executive Officer, certain other funds in the Fund Complex (2018-present); President and Chief Executive Officer, Guggenheim Funds Investment Advisors, LLC and Security Investors, LLC (2018-present); Senior Managing Director and Chief Administrative Officer, Guggenheim Investments (2018-present).
Former: Managing Director and President, Deutsche Funds, and Head of US Product, Trading and Fund Administration, Deutsche Asset Management (2013-2018); Managing Director, Head of Business Management and Consulting, Invesco Ltd. (2010-2012).
|
John L. Sullivan
Year of Birth: 1955
|
Chief Financial Officer, Chief Accounting Officer and Treasurer
|
Since 2013
|
Current: CFO, Chief Accounting Officer and Treasurer, certain other funds in the Fund Complex (2010-present); Senior Managing Director, Guggenheim Investments (2010-present).
Former: Managing Director and CCO, Van Kampen Funds (2004-2010); Head of Fund Accounting, Morgan Stanley Investment Management (2002 -2004); CFO and Treasurer, Van Kampen Funds (1996-2004).
|
Joanna M. Catalucci
Year of Birth: 1966
|
Chief Compliance Officer
|
Since 2013
|
Current: Chief Compliance Officer of certain funds in the Fund Complex (2012-present); Senior Managing Director of Compliance and Fund Board Relations, Guggenheim Investments (2012-present).
Former: AML Officer, certain other funds in the Fund Complex (2016-2017); Chief Compliance Officer and Secretary, certain other funds in the Fund Complex (2008-2012); Vice President, Rydex Holdings, LLC (2009-2012); Vice President, Security Benefit Asset Management Holdings, LLC (2009--2012); and Senior Vice President and Chief Compliance Officer, Security Investors, LLC (2010-2012); Senior Vice President, Security Global Investors, LLC, (2010-2011); Chief Compliance Officer and Senior Vice President Rydex Advisors, LLC (f/k/a PADCO Advisors, Inc.) and Rydex Advisors II, LLC (f/k/a PADCO Advisors II, Inc.), (2010-2011); Chief Compliance Officer Rydex Capital Partners I, LLC & Rydex Capital Partners II, LLC, (2006-2007); and Vice President Rydex Fund Services, LLC (f/k/a Rydex Fund Services, Inc.) (2001-2006).
|
Mark E. Mathiasen
Year of Birth: 1978
|
Secretary
|
Since 2013
|
Current: Secretary of certain funds in the Fund Complex (2007-present); Managing Director, Guggenheim Investments (2007-present).
|
Bryan Stone
Year of birth: 1979
|
Vice President |
Since 2014
|
Current: Vice President, certain other funds in the Fund Complex (2014-present); Managing Director, Guggenheim Investments (2013-present).
Former: Senior Vice President, Neuberger Berman Group LLC (2009-2013); Vice President, Morgan Stanley (2002-2009).
|
Kimberly J. Scott
Year of birth: 1974
|
Assistant Treasurer
|
Since 2013
|
Current: Director, Fund Administration of Guggenheim Investments (2012- present); Assistant Treasurer of certain funds in the Fund Complex (2012- present).
Former: Financial Reporting Manager, Invesco, Ltd. (2010-2011); Vice President and Assistant Treasurer (2009-2010), Manager (2005-2009), Mutual Fund Administration, Van Kampen Investments, Inc. (f/k/a Morgan Stanley Investment Management).
|
Name, Business
Address(1) and Year of Birth
|
Position(s) held with the Trust
|
Term of Office(2) and Length of Time Served
|
Principal Occupation(s) During the Past Five Years
|
James M. Howley
Year of Birth: 1972
|
Assistant Treasurer
|
Since 2013
|
Current: Managing Director, Fund Administration, Guggenheim Investments (2004-present); Assistant Treasurer of certain funds in the Fund Complex (2004-present).
Former: Manager of Mutual Fund Administration, Van Kampen Investments, Inc. (2000-2004).
|
Michael P. Megaris
Year of Birth: 1984
|
Assistant Secretary
|
Since 2014
|
Current: Assistant Secretary, certain other funds in the Fund Complex (2014 -present); Director, Guggenheim Investments (2000-present).
|
Adam J. Nelson
Year of birth: 1979
|
Assistant Treasurer
|
Since 2015
|
Current: Vice President, Guggenheim Investments (2012-present); Assistant Treasurer, certain other funds in the Fund Complex (2012-present).
Former: Assistant Vice President and Fund Administration Director, State Street Corporation (2013-2015); Fund Administration Assistant Director, State Street (2011-2013); Fund Administration Manager, State Street (2009--2011).
|
Glenn McWhinnie
Year of birth: 1969
|
Assistant Treasurer
|
Since 2016
|
Current: Vice President, Guggenheim Investments (2009-present); Assistant Treasurer, certain other funds in the Fund Complex (2016-present).
Former: Tax Compliance Manager, Ernst & Young LLP (1996-2009).
|
Jon Szafran
Year of Birth: 1989
|
Assistant Treasurer
|
Since 2017
|
Current: Vice President, Guggenheim Investments (2017-present); Assistant Treasurer, certain other funds in the Fund Complex (2017-present).
Former: Assistant Treasurer of Henderson Global Funds and Manager of US Fund Administration, Henderson Global Investors (North America) Inc. (“HGINA”) (2017); Senior Analyst of US Fund Administration, HGINA (2014-2017); Senior Associate of Fund Administration, Cortland Capital Market Services, LLC (2013-2014); Experienced Associate, PricewaterhouseCoopers LLP (2012-2013).
|
(1)
|
The business address of each officer is c/o Guggenheim Investments, 227 West Monroe Street, Chicago, Illinois 60606.
|
(2)
|
Each officer serves an indefinite term, until his or her successor is duly elected and qualified. The date reflects the commencement date upon which the officer held any officer position with the Trust.
|
Name(1)
|
Aggregate Estimated Compensation
from the Trust |
Pension or Retirement Benefits Accrued as Part of
Trust Expenses(2) |
Estimated Annual Benefits Upon Retirement(2)
|
Total Compensation from the Trust and Fund Complex
Paid to Trustee(3) |
INDEPENDENT TRUSTEES:
|
||||
Randall C. Barnes
|
$12,342
|
None
|
None
|
$339,632
|
Donald A. Chubb, Jr.
|
$12,590
|
None
|
None
|
$255,179
|
Jerry B. Farley
|
$13.578
|
None
|
None
|
$275,179
|
Roman Friedrich III
|
$13,084
|
None
|
None
|
$265,179
|
Ronald A. Nyberg
|
$12,567
|
None
|
None
|
$406,007
|
Maynard Oliverius(4)
|
$12,724
|
None
|
None
|
$255,179
|
Ronald E. Toupin, Jr.
|
$14,275
|
None
|
None
|
$378,179
|
(1)
|
Trustees not entitled to compensation are not included in the table.
|
(2)
|
The Trust 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 7 closed-end funds, including the Trust, and 150 open-end funds advised or serviced by the Investment Adviser or its affiliates. The funds in the Fund Complex are overseen by multiple boards of trustees. Because the funds in the Fund Complex have different fiscal year ends, the amounts shown in this column are presented on a calendar year basis.
|
(4)
|
Mr. Oliverius retired from the Board of Trustees effective as of April 4, 2019 in accordance with the Independent Trustees Retirement Policy of the Trust.
|
Name
|
Dollar Range of
Equity Securities in the Trust
|
Aggregate Dollar Range of Equity
Securities in All Registered Investment
Companies Overseen by Trustee in
Family of Investment Companies(1)
|
INDEPENDENT TRUSTEES:
|
||
Randall C. Barnes
|
$0
|
Over $100,000
|
Donald A. Chubb, Jr.
|
$10,001-$50,000
|
Over $100,000
|
Jerry B. Farley
|
$0
|
Over $100,000
|
Roman Friedrich III
|
$0
|
Over $100,000
|
Ronald A. Nyberg
|
$0
|
Over $100,000
|
Ronald E. Toupin, Jr.
|
$10,001-$50,000
|
Over $100,000
|
INTERESTED TRUSTEE:
|
||
Amy J. Lee
|
$0
|
$10,001-$50,000
|
(1)
|
As of the date of this SAI, the “Fund Complex” consists of seven closed-end funds, including the Trust, and 150 open-end funds advised or serviced by the Investment Adviser or its affiliates. The funds in the Fund Complex are overseen by multiple boards of trustees.
|
Name of
Portfolio Manager
|
Number of Other Accounts
Managed and Assets by Account Type |
Number of Other Accounts Assets for
Which Advisory Fee is Performance-Based |
||||
Other
Registered
Investment
Companies |
Other
Pooled
Investment Vehicles
|
Other
Accounts
|
Other
Registered
Investment
Companies
|
Other Pooled
Investment
Vehicles
|
Other
Accounts
|
|
B. Scott Minerd
|
12
|
61
|
114
|
—
|
32
|
9
|
$23.7 billion
|
$16.3 billion
|
$151.4 billion
|
$0
|
$7.6 billion
|
$1 billion
|
|
Anne Bookwalter Walsh
|
16
|
5
|
74
|
—
|
2
|
4
|
$28.4 billion
|
$3.1 billion
|
$143.5 billion
|
$0
|
$2.3 billion
|
$270 million
|
|
Jeffrey S. Carefoot
|
2
|
—
|
1
|
—
|
—
|
—
|
$508 million
|
$0
|
$101 million
|
$0
|
$0
|
$0
|
|
Allen Li
|
2
|
—
|
3
|
—
|
—
|
—
|
$508 million
|
$0
|
$160 million
|
$0
|
$0
|
$0
|
|
Steve Brown
|
12
|
5
|
21
|
—
|
2
|
4
|
$25.7 billion
|
$3.1 billion
|
$13.2 billion
|
$0
|
$2.3 billion
|
$270 million
|
|
Adam J. Bloch
|
18
|
5
|
21
|
—
|
2
|
4
|
$25.8 billion
|
$3.1 billion
|
$13.2 billion
|
$0
|
$2.3 billion
|
$270 million
|
Fiscal Year Ended May 31,
|
||||||
2019
|
2018
|
2017
|
||||
The Investment Adviser received advisory fees of :
|
$2,841,819
|
$3,073,155
|
$3,258,330
|
Fiscal Year Ended May 31,
|
||||||
2019
|
2018
|
2017
|
||||
The Sub-Adviser received sub-advisory fees of :
|
$1,420,910
|
$1,536,578
|
$1,629,165
|
Fiscal Year Ended May 31,
|
||||||
2019
|
2018
|
2017
|
||||
MUFG received administration fees of :
|
$109,725
|
$116,786
|
$121,458
|
Fiscal Year Ended May 31,
|
||||||
2019
|
2018
|
2017
|
||||
MUFG received fund accounting fees of :
|
$125,257
|
$131,144
|
$129,773
|
Shareholder Name and Address
|
|
Class of Shares
|
|
Share Holdings
|
|
Percentage Owned
|
Guggenheim Capital, LLC(1)
Guggenheim Partners, LLC 227 West Monroe Street Chicago IL 60606 GI Holdco LLC GI Holdco II LLC Guggenheim Partners Investment Management Holdings, LLC 330 Madison Avenue New York, NY 10017 Guggenheim Partners Investment Management, LLC 100 Wilshire Boulevard, 5th Floor Santa Monica, CA 90401 |
|
Common Shares
|
|
1,154,388
|
|
6.63%
|
(1) |
Based on information obtained from a Schedule 13 G/A filed with the SEC on February 14, 2019.
|
·
|
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, and the promise we impute.
|
·
|
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 Standard & Poor’s. 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 in the near term 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. The ‘CC’ rating is used when a default has not yet occurred, but Standard & Poor’s expects default to be a virtual certainty, regardless of the anticipated time to default.
|
C |
An obligation rated ‘C’ is currently highly vulnerable to nonpayment, and the obligation is expected to have lower relative seniority or lower ultimate recovery compared to obligations that are rated higher.
|
D |
An obligation rated ‘D’ is in default or in breach of an imputed promise. For non-hybrid capital instruments, the ‘D’ rating category is used when payments on an obligation are not made on the date due, unless Standard & Poor’s believes that such payments will be made within five business days in the absence of a stated grace period or within the earlier of the stated grace period or 30 calendar days. The ‘D’ rating also will be used upon the filing of a bankruptcy petition or the taking of similar action and where default on an obligation is a virtual certainty, for example due to automatic stay provisions. An obligation’s rating is lowered to ‘D’ if it is subject to a distressed exchange offer.
|
NR |
This indicates that no rating has been requested, that there is insufficient information on which to base a rating, or that Standard & Poor’s does not rate a particular obligation as a matter of policy.
|
A-1 |
A short-term obligation rated ‘A-1’ is rated in the highest category by Standard & Poor’s. The obligor’s capacity to meet its financial commitment on the obligation is strong. Within this category,
|
certain obligations are designated with a plus sign (+). This indicates that the obligor’s capacity to meet its financial commitment on these obligations is extremely strong.
|
A-2 |
A short-term obligation rated ‘A-2’ is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligations in higher rating categories. However, the obligor’s capacity to meet its financial commitment on the obligation is satisfactory.
|
A-3 |
A short-term obligation rated ‘A-3’ exhibits adequate protection parameters. However, adverse economic conditions or changing circumstances are more likely to lead to weaken the an obligor’s capacity to meet its financial commitment on the obligation.
|
B |
A short-term obligation rated ‘B’ is regarded as vulnerable and has significant speculative characteristics. The obligor currently has the capacity to meet its financial commitments; however, it faces major ongoing uncertainties which could lead to the obligor’s inadequate capacity to meet its financial commitments.
|
C |
A short-term obligation rated ‘C’ 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.
|
D |
A short-term obligation rated ‘D’ is in default or in breach of an imputed promise. For non-hybrid capital instruments, the ‘D’ rating category is used when payments on an obligation are not made on the date due, unless Standard & Poor’s believes that such payments will be made within any stated grace period. However, any stated grace period longer than five business days will be treated as five business days. The ‘D’ rating also will be used upon the filing of a bankruptcy petition or the taking of a similar action and where default on an obligation is a virtual certainty, for example due to automatic stay provisions. An obligation’s rating is lowered to ‘D’ if it is subject to a distressed exchange offer.
|
·
|
Amortization schedule — the larger the final maturity relative to other maturities, the more likely it will be treated as a note; and
|
·
|
Source of payment — the more dependent the issue is on the market for its refinancing, the more likely it will be treated as a note.
|
·
|
Preliminary ratings may be assigned to obligations, most commonly structured and project finance issues, pending receipt of final documentation and legal opinions.
|
·
|
Preliminary ratings may be assigned to obligations that will likely be issued upon the obligor’s emergence from bankruptcy or similar reorganization, based on late-stage reorganization plans, documentation, and discussions with the obligor. Preliminary ratings may also be assigned to the obligors. These ratings consider the anticipated general credit quality of the reorganized or post- bankruptcy issuer as well as attributes of the anticipated obligation(s).
|
·
|
Preliminary ratings may be assigned to entities that are being formed or that are in the process of being independently established when, in S&P’s opinion, documentation is close to final. Preliminary ratings may also be assigned to the obligations of these entities.
|
·
|
Preliminary ratings may be assigned when a previously unrated entity is undergoing a well- formulated restructuring, recapitalization, significant financing, or other transformative event, generally at the point that investor or lender commitments are invited. The preliminary rating may be assigned to the entity and to its proposed obligation(s). These preliminary ratings consider the anticipated general credit quality of the obligor, as well as attributes of the anticipated obligation(s), assuming successful completion of the transformative event. Should the transformative event not occur, S&P would likely withdraw these preliminary ratings.
|
·
|
A preliminary recovery rating may be assigned to an obligation that has a preliminary issue credit rating.
|
Aaa
|
Obligations rated Aaa are judged to be of the highest quality, subject to the lowest level of 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 judged to be upper-medium grade and are subject to low credit risk.
|
Baa
|
Obligations rated Baa are judged to be medium-grade and subject to moderate credit risk and as such may possess certain speculative characteristics.
|
Ba
|
Obligations rated Ba are judged to be speculative 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 speculative 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 and are typically in default, with little prospect for recovery of principal or interest.
|
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 obligations.
|
NP
|
Issuers (or supporting institutions) rated Not Prime do not fall within any of the Prime rating categories.
|
(1)
|
Financial Statements
|
(2)
|
Exhibits
|
(a)
|
Amended and Restated Agreement and Declaration of Trust of Registrant(2)
|
|
(b)
|
Amended and Restated By-Laws of Registrant(3)
|
|
(c)
|
Not applicable
|
|
(d)
|
Not applicable
|
|
(e)
|
Dividend Reinvestment Plan of Registrant(1)
|
|
(f)
|
Not applicable
|
|
(g)
|
(i)
|
Investment Advisory Agreement(*)
|
|
(ii)
|
Investment Sub-Advisory Agreement(*)
|
(h)
|
Form of Underwriting Agreement and/or Sales Agreement(+)
|
|
(i)
|
Not applicable
|
|
(j)
|
(i)
|
Custody Agreement(*)
|
|
(ii)
|
Foreign Custody Manager Agreement(*)
|
(k)
|
(i)(1)
|
Transfer Agency and Servicing Agreement(*)
|
|
(i)(2)
|
Amendment to Transfer Agency and Servicing Agreement(*)
|
|
(ii)(1)
|
Fund Accounting Agreement(*)
|
|
(ii)(2)
|
Amendment to Fund Accounting Agreement(*)
|
|
(iii)(1)
|
Administration Agreement(*)
|
|
(iii)(2)
|
Amendment to Administration Agreement(*)
|
|
(iv)(1)
|
Credit Agreement(*)
|
|
(iv)(2)
|
Amendment No. 1 to Credit Agreement(*)
|
|
(iv)(3)
|
Amendment No. 2 to Credit Agreement(*)
|
|
(iv)(4)
|
Amendment No. 3 to Credit Agreement(*)
|
|
(v)
|
Security Agreement(*)
|
|
(vi)
|
Collateral Account Control Agreement(*)
|
|
(vii)
|
Fee and Servicing Agreement(*)
|
(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)
|
Initial Subscription Agreement(2)
|
|
(q)
|
Not applicable
|
|
(r)
|
(i)
|
Code of Ethics of the Registrant and the Adviser(*)
|
|
(ii)
|
Code of Ethics of the Sub-Adviser(*)
|
(s)
|
Power of Attorney(*)
|
|
(z)
|
Form of Prospectus Supplement for Common Shares Offering(*)
|
(*)
|
Filed herewith.
|
(+)
|
To be filed by further amendment.
|
(1)
|
Incorporated herein by reference to Pre-Effective Amendment No. 2 to the Registrant’s Registration Statement on Form N-2 (File Nos. 333-168042 and 811-22437), filed with the Securities and Exchange Commission on September 30, 2010.
|
(2)
|
Incorporated herein by reference to Pre-Effective Amendment No. 4 to the Registrant’s Registration Statement on Form N-2 (File Nos. 333-168042 and 811-22437), filed with the Securities and Exchange Commission on October 25, 2010.
|
(3)
|
Incorporated herein by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K (File No. 811-22437) , filed with the Securities and Exchange Commission on March 1, 2016.
|
NYSE Listing Fees
|
$ [ ]
|
SEC Registration Fees
|
$ [ ]
|
Independent Registered Public Accounting Firm Fees
|
$ [ ]
|
Legal Fees
|
$ [ ]
|
FINRA Fees
|
$ [ ]
|
Miscellaneous
|
$ [ ]
|
Total
|
$ [ ]
|
Title of Class
|
Number of Record Shareholders
as of August 26, 2019 |
Common shares of beneficial interest, par value $0.01 per share
|
4
|
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 later of the effective date of the registration statement or the filing of a prospectus supplement pursuant to Rule 497, under the Securities Act of 1933 (the “Securities Act”), setting forth the terms of the offering 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 the Registration Statement:
|
(1) |
to include any prospectus required by Section 10(a)(3) of the Securities Act;
|
(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 Securities 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;
|
(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 Securities 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 Securities Act as part of a registration statement relating to an offering, other than prospectuses filed in reliance on Rule 430A under the Securities 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, supersede 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 Securities Act to any purchaser in the initial distribution of securities;
|
(1) |
any preliminary prospectus or prospectus of the undersigned Registrant relating to the offering required to be filed pursuant to Rule 497 under the Securities Act.
|
(2) |
the portion of any advertisement pursuant to Rule 482 under the Securities 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
|
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 constituting Part B of this Registration Statement.
|
Principal Executive Officer:
|
||
/s/ Brian E. Binder
Brian E. Binder |
Chief Executive Officer
|
|
Principal Financial Officer:
|
||
/s/ John L. Sullivan
John L. Sullivan
|
Chief Financial Officer, Chief Accounting Officer and Treasurer
|
|
Trustees:
|
||
*
Randall C. Barnes
|
Trustee
|
|
*
Donald A. Chubb
|
Trustee
|
|
*
Jerry B. Farley
|
Trustee
|
|
*
Roman Friedrich III
|
Trustee
|
|
*
Amy J. Lee
|
Trustee
|
|
*
Ronald A. Nyberg
|
Trustee
|
|
*
Ronald E. Toupin Jr.
|
Trustee
|
* |
Signed by Mark E. Mathiasen pursuant to a power of attorney incorporated herein by reference.
|
(g)(i)
|
Investment Advisory Agreement
|
(g)(ii)
|
Investment Sub-Advisory Agreement
|
(j)(i)
|
Custody Agreement
|
(j)(ii)
|
Foreign Custody Manager Agreement
|
(k)(i)(1)
|
Transfer Agency and Servicing Agreement
|
(k)(i)(2)
|
Amendment to Transfer Agency and Servicing Agreement
|
(k)(ii)(1)
|
Fund Accounting Agreement
|
(k)(ii)(2)
|
Amendment to Fund Accounting Agreement
|
(k)(iii)(1)
|
Administration Agreement
|
(k)(iii)(2)
|
Amendment to Administration Agreement
|
(k)(iv)(1)
|
Credit Agreement
|
(k)(iv)(2)
|
Amendment No. 1 to Credit Agreement
|
(k)(iv)(3)
|
Amendment No. 2 to Credit Agreement
|
(k)(iv)(4)
|
Amendment No. 3 to Credit Agreement
|
(k)(v)
|
Security Agreement
|
(k)(vi)
|
Collateral Account Control Agreement
|
(k)(vii)
|
Fee and Servicing Agreement
|
(n)
|
Consent of Independent Registered Public Accounting Firm
|
(r)(i)
|
Code of Ethics of the Registrant and the Adviser
|
(r)(ii)
|
Code of Ethics of the Sub-Adviser
|
(s)
|
Power of Attorney
|
(z)
|
Form of Prospectus Supplement for Common Shares Offering
|
By:
|
/s/ Kevin M. Robinson
|
||
Name: Kevin M. Robinson
Title: Senior Managing Director
|
By:
|
/s/ Anne B. Walsh
|
||
Name: Anne B. Walsh
Title: Treasurer
|
By:
|
/s/ Mark E. Mathiasen
|
||
Name: Mark E. Mathiasen
Title: Secretary
|
Scott Minerd
Name |
Portfolio Manager
Title |
/s/ Scott Minerd
Signature |
||
Anne Walsh
Name |
Portfolio Manager
Title |
/s/ Anne Walsh
Signature |
||
Don Cacciapaglia
Name |
Authorized Person
Title |
/s/ Don Cacciapaglia
Signature |
||
Mike Sterling
Name |
Authorized Person
Title |
/s/ Mike Sterling
Signature |
||
Maureen Moster
Name |
Authorized Person
Title |
Signature |
||
Name |
Title |
Signature |
||
Name |
Title |
Signature |
1.2 “Agreement” means this agreement and any and all exhibits or schedules attached hereto and any and all amendments or modifications which may from time to time be executed.
|
1.3 “Confidential Information” means any and all technical or business information relating to a party, including, without limitation, financial, marketing and product development information, Shareholder Data (including any non-public information of such Shareholder), Proprietary Information, and the terms and conditions (but not the existence) of this Agreement, that is disclosed or otherwise becomes known to the other party or its affiliates, agents or representatives before or during the term of this Agreement. Confidential Information constitutes trade secrets and is of great value to the owner (or its affiliates). Confidential Information shall not include any information that is: (a) already known to the other party or its affiliates at the time of the disclosure; (b) publicly known at the time of the disclosure or becomes publicly known through no wrongful act or failure of the other party; (c) subsequently disclosed to the other party or its affiliates on a non-confidential basis by a third party not having a confidential relationship with the owner and which rightfully acquired such information; or (d) independently developed by one party without access to the Confidential Information of the other.
|
1.3 “Confidential Information” means any and all technical or business information relating to a party, including, without limitation, financial, marketing and product development information, Shareholder Data (including any non-public information of such Shareholder), Proprietary Information, and the terms and conditions (but not the existence) of this Agreement, that is disclosed or otherwise becomes known to the other party or its affiliates, agents or representatives before or during the term of this Agreement. Confidential Information constitutes trade secrets and is of great value to the owner (or its affiliates). Confidential Information shall not include any information that is: (a) already known to the other party or its affiliates at the time of the disclosure; (b) publicly known at the time of the disclosure or becomes publicly known through no wrongful act or failure of the other party; (c) subsequently disclosed to the other party or its affiliates on a non-confidential basis by a third party not having a confidential relationship with the owner and which rightfully acquired such information; or (d) independently developed by one party without access to the Confidential Information of the other.
|
1.4 “DSPP” means direct stock purchase plan.
|
1.5 “Non-Public Personal Information” about a Shareholder shall mean (i) personally identifiable financial information; and (ii) any list, description, or other grouping of Shareholders that is derived from using any personally identifiable information that is not publicly available.
|
1.6 “Plans” means any dividend reinvestment plan, DSPP, or other investment programs administered by Trust Company for each Fund, relating to the Shares, whether as of the Effective Date or at any time during the term of this Agreement.
|
1.7 “Services” means all services performed or made available by Agent pursuant to this Agreement.
|
1.8 “Share” means each Fund’s common shares issued in accordance with such Fund’s Certificate of Trust or other governing documents, and other classes of Fund’s shares to be designated by Fund in writing and which Agent agrees to service under this Agreement.
|
1.9 “Shareholder” means a holder of record of Shares.
|
1.10 “Shareholder Data” means all information maintained on the records database of Agent concerning Shareholders.
|
2. APPOINTMENT OF AGENT.
|
2.1 Appointments. Each Fund hereby appoints Computershare to act as sole transfer agent and registrar for all Shares and as processor of all payments received or made by or on behalf of Fund under this Agreement and appoints Trust Company as administrator of Plans in accordance with the terms and conditions hereof, and Computershare and Trust Company accept the respective appointments.
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2.2 Documents. In connection with the appointments herein, Fund has provided or will provide the following appointment and corporate authority documents to Agent:
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(a)
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A copy of the resolution appointing Computershare as the transfer agent;
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(b)
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If applicable, specimens of all forms of outstanding Share certificates, in forms approved by the Board of Trustees/Directors of Fund, with a certificate of the Secretary of Fund as to such approval;
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(c)
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A board resolution and/or certificate of incumbency designating officers or other designated persons of Fund authorized to sign written instructions and requests and, if applicable, Share certificates, in connection with this Agreement (each an “Authorized Person”);
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(d)
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An opinion of counsel for any Fund added after the Effective Date addressed to both Computershare and Trust Company stating that:
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(i)
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Fund is duly organized, validly existing and in good standing under the laws of its state of organization;
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(ii)
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All Shares issued and outstanding on the date hereof were issued as part of an offering that was registered under the Securities Act of 1933, as amended (“1933 Act”) and any other applicable federal or state statute or that was exempt from such registration;
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(iii)
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All Shares issued and outstanding on the date hereof are duly authorized, validly issued, fully paid and non-assessable; and
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(iv)
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If applicable, the use of facsimile signatures by Agent in connection with the countersigning and registering of Share certificates has been duly authorized by Fund and is valid and effective.
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(e)
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A certificate of each Fund as to the Shares authorized, issued and outstanding, as well as a description of all reserves of unissued Shares relating to the exercise of options;
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(f)
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A completed Internal Revenue Service Form 2678; and
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(g)
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A completed Form W-8 or W-9, as applicable.
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In addition, Fund acknowledges that upon any future original issuance of Shares for which Agent will act as transfer agent hereunder, Agent will require an opinion of counsel for Fund addressed to both Computershare and Trust Company stating that such Shares (i) have been issued as part of an offering that was registered under the 1933 Act and any other applicable federal or state statute, or that was exempt from such registration, and (ii) are duly authorized, validly issued, fully paid and non-assessable.
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2.3 Records. Agent may adopt as part of its records all Shareholder lists, Share ledgers, records, books, and documents which have been employed by Fund or any of its agents and which are certified to be true,
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authentic and complete. Agent shall keep records relating to the Services, in the form and manner it deems advisable, but in any event consistent with the reasonable standards of the transfer agency industry. Agent agrees that all such records prepared or maintained by it relating to the Services are the property of the Fund and will be preserved, maintained and made available in accordance with the requirements of law and Agent’s records management policy, and will be surrendered promptly to the Fund in accordance with its request subject to applicable law and Agent’s records management policy.
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2.4 Shares. Fund shall, if applicable, inform Agent as soon as possible in advance as to: (a) the existence or termination of any restrictions on the transfer of Shares, the application to or removal from any Share of any legend restricting the transfer of such Shares (which may be subject, in the case of removal of any such legend, to delivery of a legal opinion in form and substance acceptable to Agent), or the substitution for such Share of a Share without such legend; (b) any authorized but unissued Shares reserved for specific purposes; (c) any outstanding Shares which are exchangeable for Shares and the basis for exchange; (d) reserved Shares subject to option and the details of such reservation; (e) any Share split or Share dividend; (f) any other relevant event or special instructions which may affect the Shares; and (g) any bankruptcy, insolvency or other proceeding regarding each Fund affecting the enforcement of creditors’ rights.
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2.5 Share Certificates. If applicable, Fund shall provide Agent with (i) documentation required to print on demand Share certificates, or (ii) an appropriate supply of Share certificates which contain a signature panel for use by an authorized signor of Agent and state that such certificates are only valid after being countersigned and registered, whichever is applicable.
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2.6 Fund Responsibility. Fund shall perform, execute, acknowledge and deliver or cause to be performed, executed, acknowledged and delivered all such further and other acts, documents, instruments and assurances as Agent may reasonably require in order to carry out or perform its obligations under this Agreement.
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2.7 Scope of Agency.
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(a)
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Agent shall act solely as agent for Fund under this Agreement and owes no duties hereunder to any other person. Agent undertakes to perform the duties and only the duties that are specifically set forth in this Agreement, and no implied covenants or obligations shall be read into this Agreement against Agent.
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(b)
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Agent may rely upon, and shall be protected in acting or refraining from acting in good faith reliance upon, (i) any communication from Fund, any predecessor transfer agent or co-transfer agent or any registrar (other than Agent), predecessor registrar or co-registrar; (ii) any instruction, notice, request, direction, consent, report, certificate, opinion or other instrument, paper, document or electronic transmission believed in good faith by Agent to be genuine and to have been signed or given by the proper party or parties; (iii) any guaranty of signature by an “eligible guarantor institution” that is a member or participant in the Securities Transfer Agents Medallion Program or other comparable “signature guarantee program” or insurance program in addition to, or in substitution for, the foregoing; or (iv) any instructions received through Direct Registration System/Profile. In addition, Agent is authorized to refuse to make any transfer that it determines in good faith not to be in good order.
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(c)
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From time to time, Fund may provide Agent with Instructions concerning the Services. Further, Agent may apply to any Authorized Person of Fund for instruction, and may consult with legal counsel for Agent or Fund with respect to any matter arising in connection with the Services. Agent and its agents and subcontractors shall not be liable and shall be indemnified by Fund under Section 9.2 of this Agreement for any action taken or omitted by Agent In good faith reliance upon any Fund instructions or upon the advice or opinion of such counsel. Fund shall promptly provide Agent with an updated board resolution and/or certificate of incumbency regarding any change of authority for any Authorized Person. Agent shall not be held to have notice of any change of authority of any Authorized Person, until receipt of written notice thereof from Fund.
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(d)
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Compliance with Laws. Agent is obligated and agrees to comply with all applicable U.S. federal, state and local laws and regulations, codes, orders and government rules in the performance of its duties under this Agreement.
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3. STANDARD SERVICES.
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3.1 Share Services. Agent shall perform the Services set forth in the Fee and Service Schedule (“Fee and Service Schedule”) attached hereto and incorporated herein. Further, Agent shall issue and record Shares as authorized, hold Shares in the appropriate Account, and effect transfers of Shares upon receipt of appropriate documentation.
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3.2 Replacement Shares. Agent shall issue replacement Shares for those certificates alleged to have been lost, stolen or destroyed, upon receipt by Agent of an open penalty surety bond satisfactory to it and holding it and Fund harmless, absent notice to Agent that such certificates have been acquired by a bona fide purchaser. Agent may, at its option, issue replacement Shares for mutilated certificates upon presentation thereof without such indemnity. Agent may, at its sole option, accept indemnification from Fund to issue replacement Shares for those certificates alleged to have been lost, stolen or destroyed in lieu of an open penalty bond. Agent shall charge Shareholders an administrative fee for replacement of lost certificates, which shall be charged only once in instances where a single surety bond obtained covers multiple certificates. Agent may receive compensation, including in the form of surety premiums, for administrative services provided in connection with surety programs offered to Shareholders.
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3.3 Internet Services. Agent shall make available to Fund and Shareholders, through www.computershare.com (“Web Site”), online access to certain Account and Shareholder information and certain transaction capabilities (“Internet Services”), subject to Agent’s security procedures and the terms and conditions set forth herein and on the Web Site. Agent provides Internet Services “as is,” on an “as available” basis, and hereby specifically disclaims any and all representations or warranties, express or implied, regarding such Internet Services, including any implied warranty of merchantability or fitness for a particular purpose and Implied warranties arising from course of dealing or course of performance. Notwithstanding the foregoing, in providing Internet Services to Shareholders, Agent shall comply with all applicable laws concerning consent to delivery and delivery of documents electronically.
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3.4 Proprietary Information. Fund agrees that the databases, programs, screen and report formats, interactive design techniques, Internet Services, software (including methods or concepts used therein, source code, object code, or related technical information) and documentation manuals furnished to Fund by Agent as part of the Services are under the control and ownership of Agent or a third party (including its affiliates) and constitute copyrighted, trade secret, or other proprietary information (collectively, “Proprietary Information”). Shareholder Data is not Proprietary Information. Fund agrees that Proprietary Information is of substantial value to Agent or other third party and will treat all Proprietary Information as confidential in accordance with Section 11 of this Agreement. Fund shall take reasonable efforts to advise its relevant employees and agents of its obligations pursuant to this Section 3.4.
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3.5 Third Party Content. Agent may provide real-time or delayed quotations and other market information and messages (“Market Data”), which Market Data is provided to Agent by certain third parties who may assert a proprietary interest in Market Data disseminated by them but do not guarantee the timeliness, sequence, accuracy or completeness thereof. Fund agrees and acknowledges that Agent shall not be liable in any way for any loss or damage arising from or occasioned by any inaccuracy, error, delay in, omission of, or interruption in any Market Data or the transmission thereof.
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3.6 Lost Shareholders: In-Depth Shareholder Search.
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(a)
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Agent shall conduct such database searches to locate lost Shareholders as are required by Rule 17Ad-17 under the Securities Exchange Act of 1934, as amended (“1934 Act”), without charge to the Shareholder. If a new address is so obtained in a database search for a lost Shareholder,
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Agent shall conduct a verification mailing and update its records for such Shareholder accordingly.
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(b)
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Computershare may facilitate the performance of a more in-depth search for the purpose of (i) locating lost Shareholders for whom a new address is not obtained in accordance with clause (a) above, (ii) identifying Shareholders who are deceased (or locating the deceased Shareholder’s estate representative, heirs or other party entitled to act with respect to such Shareholder’s account (“Authorized Representative”)), and (in) locating Shareholders whose accounts contain an uncashed check older than 180 days, in each case using the services of a locating service provider selected by Computershare, which service provider may be an affiliate of Computershare. Such provider may compensate Computershare for processing and other services that Computershare provides in connection with such in-depth search, including providing Computershare a portion of its service fees.
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(c)
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Upon locating any Shareholder (or such Shareholder’s Authorized Representative) pursuant to clause (b) above, the locating service provider shall clearly identify to such Shareholder (or such Shareholder’s Authorized Representative) all assets held in such Shareholder’s account. Such provider shall inform any such located Shareholders (or such Shareholder’s Authorized Representative) that such Shareholder (or such Shareholder’s Authorized Representative) may choose either (i) to contact Computershare directly to obtain the assets in such account, at no charge other than any applicable fees to replace lost certificates, if applicable, or (ii) to use the services of such provider for a processing fee, which may not exceed 20% of the asset value of such Shareholder’s property where the registered Shareholder is living, deceased, or not a natural person; provided that in no case shall such fee exceed the maximum statutory fee permitted by the applicable state jurisdiction. If Fund selects a locating service provider other than one selected by Computershare, then Agent shall not be responsible for the terms of any agreement between such provider and Fund and additional fees may apply.
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(d)
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Pursuant to Section 2.7(c) of this Agreement, Fund hereby authorizes and instructs Agent to provide a Shareholder file or list of those Shareholders not located following the required Rule 17Ad-17 searches to any service provider administering any in-depth shareholder location program on behalf of Agent or Fund.
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3.7 Compliance Matters. Upon request, Agent shall provide reasonable and customary information or reports to Fund or Fund’s chief compliance officer, as necessary for Fund or Fund’s chief compliance officer to comply with Rule 38a-l under the Investment Company Act of 1940.
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4. PLAN SERVICES.
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4.1 Trust Company shall perform all services under the Plans, as the administrator of such Plans, with the exception of payment processing for which Computershare has been appointed as agent by each Fund, and certain other services that Trust Company may subcontract to Computershare as permitted by applicable law (e.g., ministerial services).
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4.2 To the extent Fund does not have a DSPP as of the Effective Date, Fund agrees that Trust Company may implement and administer a Trust Company-sponsored DSPP on behalf of Fund for the Shares at any time during the term of this Agreement, upon providing prior written notice to Fund. In consideration of Trust Company receiving service and transaction fees from the DSPP participants in connection with its administration of the DSPP, Agent shall not charge any fees to Fund for such administration.
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4.3 Agent shall act as agent for Shareholders pursuant to the Plans in accordance with the terms and conditions of such Plans.
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5. DIVIDEND DISBURSING AND PAYMENT SERVICES.
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5.1 Declaration of Dividends. Upon receipt of written notice from an Authorized Person declaring the payment of a dividend, Computershare shall disburse such dividend payments to Shareholders provided that
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Fund furnishes Computershare with sufficient funds one day in advance of the applicable payable date. The payment of such funds to Computershare for the purpose of being available for the payment of dividends from time to time is not intended by Fund to confer any rights in such funds on Shareholders whether in trust, contract, or otherwise.
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6.
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ADDITIONAL SERVICES. To the extent that Fund elects to engage any entity other than Agent (“Vendor”) to provide any additional services (e.g., plans, restricted stock, corporate actions, etc.), Fund shall give Agent or its affiliates an opportunity to bid on such services upon the same terms and conditions as Vendor.
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(a)
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If any undisputed amount in an invoice of Agent (for fees or reimbursable expenses) is not paid within 30 days after the date of such invoice, Agent may charge Fund interest thereon (from the due date to the date of payment) at a monthly rate equal to one and a half percent (1.5%). Notwithstanding any other provision hereof, such interest rate shall be no greater than permitted under applicable law.
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(b)
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The failure by Fund to (i) pay the undisputed portion of an invoice within 90 days after the date of such invoice or (ii) timely pay the undisputed portions of two consecutive invoices shall constitute a material breach of this Agreement by such Fund. Notwithstanding terms to the contrary in Section 12.2 below, Agent may terminate this Agreement with respect to such breaching Fund for such material breach immediately and shall not be obligated to provide Fund with 30 days to cure such breach.
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(c)
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Each Fund is severally, and not jointly, responsible for its pro rata portion of the undisputed portion of the invoice.
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(a)
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Governance. Computershare is a corporation duly organized, validly existing, and in good standing under the laws of the State of Delaware and Trust Company is a federally chartered trust company duly organized, validly existing, and in good standing under the laws of the United States and each has full power, authority and legal right to execute, deliver and perform this Agreement; and
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(b)
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Compliance with Laws. The execution, delivery and performance of this Agreement by Agent has been duly authorized by all necessary action, constitutes a legal, valid and binding obligation of Agent enforceable against Agent in accordance with its terms, will not require the consent of any third party that has not been given, and will not violate, conflict with or result in the breach of any material term, condition or provision of (i) any existing law, ordinance, or governmental rule or regulation to which Agent is subject, (ii) any judgment, order, writ, injunction, decree or award of any court, arbitrator or governmental or regulatory official, body or authority applicable to Agent, (iii) Agent’s incorporation documents or by-laws, or (iv) any material agreement to which Agent is a party.
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(a)
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Governance. It is duly organized, validly existing and in good standing under its state of incorporation and it has full power, authority and legal right to enter into and perform this Agreement;
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(b)
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Compliance with Laws. The execution, delivery and performance of this Agreement by Fund has been duly authorized by all necessary action, constitutes a legal, valid and binding obligation of Fund enforceable against Fund in accordance with its terms, will not require the consent of any third party that has not been given, and will not violate, conflict with or result in the breach of any material term, condition or provision of (i) any existing law, ordinance, or governmental rule or regulation to which Fund is subject, (ii) any judgment, order, writ, injunction, decree or award of any court, arbitrator or governmental or regulatory official, body or authority applicable to Fund, (iii) Fund’s governing documents or by-laws, (iv) any material agreement to which Fund is a party, or (v) any applicable stock exchange rules;
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(c)
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Securities Laws. Registration statements under the 1933 Act and the 1934 Act have been filed and were effective at the time of, or will be effective prior to, the sale of any Shares, and will remain so effective for so long as required by applicable law, and all appropriate state securities law filings have been made with respect to all Shares being offered for sale except for any Shares which are offered in a transaction or series of transactions which are exempt from the registration requirements of the 1933 Act, 1934 Act and state securities laws; Fund will immediately notify Agent of any information to the contrary;
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(d)
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Shares. The Shares issued and outstanding on the date hereof have been duly authorized, validly issued and are fully paid and are non-assessable; and any Shares to be issued hereafter, when issued, shall have been duly authorized, validly issued and fully paid and will be non-assessable; and
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(e)
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Facsimile Signatures. The use of facsimile signatures by Agent in connection with the countersigning and registering of Share certificates has been duly authorized by Fund and is valid and effective.
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(a)
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notify the other party in writing of any unauthorized possession, use or disclosure of the other party’s Confidential Information by any person or entity that may become known to such party;
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(b)
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furnish to the other party full details of the unauthorized possession, use or disclosure; and
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(c)
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use commercially reasonable efforts to prevent a recurrence of any such unauthorized possession, use or disclosure of Confidential Information.
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If to Fund:
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Guggenheim
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227 West Monroe Street
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Chicago, IL 60606
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If to Agent:
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Computershare Inc.
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250 Royall Street
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Canton, MA 02021
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Attn: General Counsel
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Computershare Inc. and
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Computershare Trust Company, N. A.
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On Behalf of Both Entities:
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On behalf of each of the Guggenheim Closed-End
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Investment Companies Listed on
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Schedule 1 Attached Hereto
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By: /s/ Martin J. McHale, Jr.
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By: /s/ John L. Sullivan
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Name: Martin J. McHale, Jr.
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Name: John L. Sullivan
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Title: President, U.S. Equity Services
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Title Chief Financial Officer & Treasurer
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Termination
Phase
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Standard Services. $5,000.00
Minimum Fee Per Termination |
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Extended Services. $2,500.00 for each of the individual Services listed below.
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Test of
Conversion
Services
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•
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Not applicable
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•
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Test full audit extracts files (which are either transmitted to the agent or copied on to a protected CD); test Full Registered List, all classes Opened and/or Closed
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•
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Additional test audit extracts (includes all shareholder details. Control totals & codes sent w/extracts)
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•
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Test separate exchange lists for each class
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•
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Test certificate stop list
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•
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Test certificate legend list
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•
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Test RPO accounts
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•
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Test full transactions lists
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•
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Test ACH debit list including plan shares and reinvestment code
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•
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Test ACH credit list and secondary address list
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Final
Conversion
Services
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•
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Full audit extracts
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•
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Separate exchange lists for each class
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•
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Full registered list opened and closed
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•
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Full transactions list
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•
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Certificate stop list
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•
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ACH Debit including plan shares and reinvestment code*
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•
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Certificate legend list
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•
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ACH Credit list and secondary address list*
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•
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RPO accounts
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•
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1099D detailed report*
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•
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End of year tax report*
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•
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1042S detailed report*
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•
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Parallel processing for up to 4 days
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•
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Parallel processing for more than 4 days (each additional day is considered one extended service)
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•
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Communications with new agent as applicable
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Post
Conversion
Services
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|
•
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Certification letter
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•
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Not applicable
|
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•
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Due Diligence statement
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•
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3 months post conversion
|
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•
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Check extract files
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•
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Check reports
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•
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Check reports and extracts to CDs
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•
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Communications with new agent as applicable
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*
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Not applicable to terminations for non-dividend payers.
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FUND
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Advent Claymore Convertible Securities & Income Fund
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Advent Claymore Convertible Securities & Income Fund II
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Managed Duration Investment Grade Municipal Fund
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Guggenheim Strategic Opportunities Fund
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Guggenheim Build America Bonds Managed Duration Trust
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Guggenheim Credit Allocation Fund
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Guggenheim Egual Weight Enhanced Eguity Income Fund
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Advent/Claymore Enhanced Growth & Income Fund
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Fiduciary/Claymore MLP Opportunity Fund
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Guggenheim Enhanced Equity Strategy Fund
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Guggenheim Enhanced Equity Income Fund
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Guggenheim Energy & Income Fund
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1.
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Amendment to the Agreement. Schedule 1 of the Agreement is hereby deleted in its entirety and replaced with the new Schedule 1 attached hereto.
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2.
|
Limited Effect. Except as expressly modified herein, the Agreement shall continue to be and shall remain, in full force and effect and the valid and binding obligation of the parties thereto in accordance with its terms.
|
3.
|
Counterparts. This Amendment may be executed in counterparts, each of which shall be deemed as original, but all of which together shall constitute one and the same instrument. A signature to this Amendment executed and/or transmitted electronically shall have the same authority, effect, and enforceability as an original signature.
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COMPUTERSHARE INC.
|
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COMPUTERSHARE TRUST COMPANY, N.A.
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On behalf of each of the Guggenheim
|
On Behalf of Both Entities:
|
Closed-End Investment Companies Listed
|
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on Schedule 1 Attached Hereto:
|
By: /s/ Dennis V. Moccia
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By: /s/ Mark E. Mathiasen
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Name: _Dennis V. Moccia
|
Name: Mark E. Mathiasen
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Title: _Manager, Contract Administration
|
Title: Secretary
|
FUND
|
Advent Claymore Convertible Securities & Income Fund
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Advent Claymore Convertible Securities & Income Fund II
|
Guggenheim Strategic Opportunities Fund
|
Guggenheim Taxable Municipal Managed Duration Trust
|
Guggenheim Credit Allocation Fund
|
Advent/Claymore Enhanced Growth & Income Fund
|
Fiduciary/Claymore MLP Opportunity Fund
|
Guggenheim Enhanced Equity Income Fund
|
Guggenheim Energy & Income Fund
|
(i)
|
Journals containing an itemized daily record in detail of all purchases and sales of securities, all receipts and disbursements of cash and all other debits and credits, as required by subsection (b)(1) of the Rule;
|
(ii)
|
General and auxiliary ledgers reflecting all asset, liability, reserve, capital, income and expense accounts, including interest accrued and interest received, as required by subsection (b)(2)(i) of the Rule;
|
(iii)
|
Separate ledger accounts required by subsection (b)(2)(ii) and (iii) of the Rule; and
|
(iv)
|
A monthly trial balance of all ledger accounts (except shareholder accounts) as required by subsection (b)(8) of the Rule.
|
(i)
|
On each day that the Fund calculates the net asset values, calculate the net asset value per share utilizing prices obtained from the sources described in subsection 1(b)(ii) below;
|
(ii)
|
Obtain security prices from independent pricing services, or if such quotes are unavailable, then obtain such prices from the Trust's investment adviser or its designee, as determined in accordance with procedures adopted and approved by the Trust's Board of Trustees (hereafter referred to as the "Board");
|
(iii)
|
Verify and reconcile with the Trust's custodian all daily trade activity;
|
(iv)
|
Compute, as appropriate, the Trust's net income and capital gains, dividend payables, dividend factors, 7-day yields, 7-day effective yields, 30-day yields, and weighted average portfolio maturity;
|
(v)
|
On each day that the Fund calculates net asset values, review the net asset value calculation and dividend factor (if any) for the Trust prior to release, check and confirm the net asset values and dividend factors for reasonableness, and distribute net asset values and yields;
|
(vi)
|
Determine unrealized appreciation and depreciation on securities held by the Trust;
|
(vii)
|
Amortize premiums and accrete discounts on securities purchased at a price other than face value, if requested by the Trust;
|
(viii)
|
Update fund accounting system to reflect rate changes, as received from an independent pricing service, on variable interest rate instruments;
|
(ix)
|
Post Trust transactions to appropriate categories;
|
(x)
|
Accrue all necessary and appropriate expenses of the Trust;
|
(xi)
|
Determine the outstanding receivables and payables for all (1) security trades, (2) Trust share transactions and (3) income and expense accounts;
|
(xii)
|
Provide accounting reports in connection with the Trust's regular annual audit and other audits and examinations by regulatory agencies; and
|
(xiii)
|
Provide such periodic reports as the parties shall agree upon, as set forth in a separate schedule.
|
(ii) |
RFS may provide such other similar services with respect to a Fund as may be reasonably requested by the Trust, which may result in an additional charge, the amount of which shall be agreed upon between the parties.
|
(A)
|
federal and state income tax returns and federal excise tax returns;
|
(B)
|
semi-annual reports with the Securities and Exchange Commission ("SEC") on Form N-SAR;
|
(C)
|
annual and semi-annual shareholder reports and related Form N-CSR filings;
|
(D)
|
registration statements on Form N-2 and other filings relating to the registration of shares;
|
(E)
|
the fund administrator's monitoring of the Trust's status as a regulated investment company under Subchapter M of the Internal Revenue Code, as amended;
|
(F)
|
annual audits by the Trust's auditors; and
|
(G)
|
examinations performed by the SEC.
|
2.
|
Subcontracting
|
3.
|
Compensation
|
(i)
|
All freight and other delivery and bonding charges incurred by RFS in delivering materials to and from the Trust or other service providers of the Trust;
|
(ii)
|
All direct telephone, telephone transmission and telecopy or other electronic transmission expenses incurred by RFS in communication with the Trust, the Trust's investment advisor or custodian, dealers or others as required for RFS to perform the services to be provided hereunder;
|
(iii)
|
The cost of microfilm or microfiche of records or other materials;
|
(iv)
|
All systems-related expenses associated with the provision of special reports and services pursuant to,Section 1(c) herein; and
|
(v)
|
Any additional expenses reasonably incurred by RFS in the performance of its duties and obligations under this Agreement.
|
(i)
|
Systems development fees billed at an hourly rate of $150 per hour, as approved by the Trust;
|
(ii)
|
Ad hoc reporting fees billed at an agreed upon rate; and
|
(iii)
|
Charges for the pricing information obtained from third party vendors for use in pricing the securities of each Trust's portfolio pursuant to Section 1(b)(ii) of this Agreement, which shall not exceed the amounts that would be incurred if the Trust were to obtain the information directly from the relevant vendor or vendors.
|
8.
|
Record Retention and Confidentiality
|
9.
|
Activities of RFS
|
14.
|
Insurance
|
15.
|
Legal Advice; Reliance on Prospectus and Instructions
|
|
|
|
Rydex Fund Services, LLC
|
|
|
|
|
|
|
|
By: /s/ Nikolaos Bonos
|
|
Name: Nikolaos Bonos
|
|
Title: Chief Executive Officer and
|
|
President
|
|
|
|
|
|
|
|
Guggenheim Build America Bonds
|
|
Managed Duration Trust
|
|
|
|
|
|
|
|
By: /s/ John L. Sullivan
|
|
Name: John L. Sullivan
|
|
Title: Chief Financial Officer, Chief
|
|
Accounting Officer & Treasurer
|
|
|
|
|
|
|
n
|
3.00 bps on first $200M
|
n
|
1.50 bps on next $300M
|
n
|
1.00 bps on next $500M
|
n
|
0.75 bps excess over $1B
|
n
|
$50,000 minimum per fund per year.
|
1.
|
Superseding Terms. Except as specifically set forth in this Amendment, as of the Effective Time, (a) the terms of this Amendment shall supersede any contrary terms of the Existing Agreement and (b) in the event of any inconsistency between this Amendment and the terms of the Existing Agreement, this Amendment shall control. Except as otherwise specifically set forth in this Amendment, the Existing Agreement shall remain in full force and effect in accordance with its terms.
|
2.
|
Term. As of the Effective Time, the Agreement shall be amended such that, subject to the termination provisions in Section 5 of this Amendment, (x) the term of the Agreement shall be extended until the last business day prior to the date that is five years from the Effective Time (the “Initial Term”), and (y) at the end of the Initial Term, the term of the Agreement will automatically be extended first for a single two (2) year term and then successive one (1) year terms, in each case unless either party provides written notice of non-renewal to the other party at least 90 days prior to the date at which such automatic extension would otherwise occur.
|
3.
|
Fees. As of the Effective Time:
|
(b)
|
The fees set forth in the Agreement for the services provided by RFS as of the Effective Time shall not be subject to renegotiation or adjustment during the First Period, and, except as otherwise provided in Section 3(a) of this Amendment, during the remaining two years of the Initial Term or during any extension period thereafter.
|
(c)
|
The parties mutually agree that in the event the Trust wishes to engage RFS to perform additional services for the Trust not performed by RFS for the Trust as of the Effective Time, the scope of and the fees for such services shall be negotiated by the parties in good faith and agreed on in writing, taking into account RFS pricing of substantially similar services to similarly situated parties.
|
4.
|
Assignment. As of the Effective Time, the Agreement may not be assigned by either party without the written consent of the other party; provided that RFS may designate one or more direct or indirect subsidiaries of Mitsubishi UFJ Financial Group, Inc. to perform all or any portion of its obligations under the Agreement, so long as such assignment or designation would not reasonably be expected to adversely impact the quality of the services provided to the Trust and RFS provides prompt written notice to the Trust of such designation, provided that no such designation shall relieve RFS of any of its obligations under the Agreement.
|
5.
|
Early Termination. As of the Effective Time, notwithstanding anything to the contrary set forth in the Existing Agreement, only upon the occurrence of any of the following events and subject to the notice and cure periods (if applicable) set forth below, the Trust may terminate the Agreement during the Initial Term or any renewal period without penalty upon written notice to RFS following the occurrence of:
|
(b)
|
a material breach of the Agreement, provided that RFS shall have sixty (60) days from delivery of written notice of breach to cure such material breach;
|
(c)
|
RFS, or its direct or indirect parent, filing for bankruptcy, insolvency, dissolution or liquidation;
|
(d)
|
material regulatory non-compliance by RFS that is reasonably likely to adversely affect the provision of services of the type provided by RFS under the Agreement to the Trust, or disqualification of RFS or its affiliates from providing the services set forth under the Agreement to the Trust; or
|
(e)
|
a material diminution (other than as contractually agreed between the Trust and RFS) in the quality of the services provided by RFS relative to the quality of services provided by RFS in the one (1) year prior to the Effective Time (taking into account regulatory developments and requests of the Trust), provided that RFS shall have sixty (60) days from delivery of written notice to cure such material diminution.
|
6.
|
Governing Law. This Amendment shall be governed by the provisions of Section 18 of the Existing Agreement, and such provisions are hereby incorporated into this Agreement, mutatis mutandis.
|
7.
|
Other. If the agreement pursuant to which MUTB has agreed to acquire RFS is terminated for any reason, this Amendment shall be null and void and of no force and effect and RFS shall promptly notify the Trust of such termination.
|
8.
|
Transition. Following delivery of notice of termination or non-renewal of the Agreement by either party after the Effective Time, RFS will promptly transfer to
|
Closed-End Trusts Party to this Agreement
|
|
Fund Name
|
Symbol
|
Guggenheim Build America Bonds
Managed Duration Trust
|
GBAB
|
Guggenheim Equal Weight Enhanced
Equity Income Fund
|
GEQ
|
Guggenheim Enhanced Equity Strategy Fund
|
GGE
|
Guggenheim Strategic Opportunities Fund
|
GOF
|
Guggenheim Enhanced Equity Income Fund
|
GPM
|
Fiduciary/Claymore MLP Opportunity
Fund
|
FMO
|
Guggenheim Credit Allocation Fund
|
GGM*
|
·
|
Annual and semi-annual reports to shareholders, including coordination of typesetting, printing and distribution of reports
|
·
|
Annual and semi-annual regulatory filings (Forms N-CSR and N-SAR)
|
·
|
Quarterly portfolio filings (Form N-Q)
|
·
|
Quarterly Board of Trustees reporting
|
·
|
Establish and monitor expense accruals
|
·
|
Coordinate with custodian and fund accounting agent the timely processing of invoices
|
·
|
Recommend and monitor fund distributions and corresponding earnings levels, including preparation of Section 19 notices, as appropriate
|
·
|
Facilitate the preparation of statistical reports for outside tracking agencies (i.e. ICI, Lipper Analytics) as appropriate
|
·
|
Calculate required yields, total returns, and portfolio turnover rate
|
·
|
Monitor leverage use and requirements (and preferred share asset maintenance tests or borrowing base requirements) and evaluate exposure to short-terms interest rates
|
·
|
Coordinate the annual audit with independent registered public accounting firm
|
·
|
Assist in the preparation of registration statements (Form N-IA) and other filings relating to the registration of shares, and proxy statements (Form N-PX)
|
·
|
Assisting the Trust in responding to and providing documents for routine regulatory examinations or investigations; and working closely with counsel to the Trust in response to such routine or any non-routine regulatory matters
|
·
|
Assist in preparing for Board meetings by (i) coordinating Board book production and distribution, (ii) preparing the relevant sections of the Board materials pertaining to the responsibilities of RFS, (iii) assisting and coordinating special materials related to annual contract approvals and related matters, and (v) performing such other Board meeting functions as agreed by the parties
|
·
|
Obtain, maintain and file fidelity bonds and directors and officers/errors and omissions insurance policies for the Trust at the expense of the Trust in accordance with the requirements of Rules 17g-1 and 17d-1(7) under the 1940 Act to the extent such bonds and policies are approved by the Board
|
·
|
Make available appropriate individuals to serve as officers of the Company, upon designation as such by the Board
|
·
|
Such other services for the Trust that are mutually agreed upon by the parties from time to time
|
·
|
Provide oversight of tax service provider
|
·
|
Provide on-premises tax guidance, with consultation of outside service provider, to portfolio managers, product development and other business units as needed.
|
·
|
Preparation of tax related financial statement footnote disclosures
|
·
|
Preparation of FIN 48 memoranda
|
·
|
Analyze wash sales
|
·
|
Analysis of potential fund ownership changes
|
·
|
Preparation of annual ICI Survey/1099 information
|
·
|
Monitor quarterly sub-chapter M diversification tests
|
·
|
Perform high level review of tax returns
|
·
|
Provide portfolio managers with periodic realized/unrealized gain/loss reports
|
·
|
Review in conjunction with the service provider
|
·
|
new securities tax treatments
|
·
|
fund tax provisions
|
·
|
fund distribution calculations
|
·
|
Maintain required books and records in accordance with Rules 31a-1 and 31a-2 under the 1940 Act
|
·
|
Monitor compliance with the requirements of the 1940 Act, Subchapter M of the Internal Revenue Code, and the U.S. Commodities and Futures Commission, and the Trust’s prospectus and statement of additional information on a post-trade basis, coordinating findings with the Trust’s Adviser and Sub-Adviser (as applicable and necessary)
|
·
|
Facilitate annual filings of Trust proxy voting (Form N-PX)
|
·
|
Sarbanes Oxley considerations, including the provision of necessary sub-certifications
|
1.
|
0.0275% for the first $200,000,000;
|
2.
|
0.0200% for the next $300,000,000;
|
3.
|
0.0150% for the next $500,000,000; and
|
4.
|
0.0100% for amounts over $1,000,000,000
|
1.
|
Superseding Terms. Except as specifically set forth in this Amendment, as of the Effective Time, (a) the terms of this Amendment shall supersede any contrary terms of the Existing Agreement and (b) in the event of any inconsistency between this Amendment and the terms of the Existing Agreement, this Amendment shall control. Except as otherwise specifically set forth in this Amendment, the Existing Agreement shall remain in full force and effect in accordance with its terms.
|
2.
|
Term. As of the Effective Time, the Agreement shall be amended such that, subject to the termination provisions in Section 5 of this Amendment, (x) the term of the Agreement shall be extended until the last business day prior to the date that is five years from the Effective Time (the “Initial Term”), and (y) at the end of the Initial Term, the term of the Agreement will automatically be extended first for a single two (2) year term and then successive one (1) year terms, in each case unless either party provides written notice of non-renewal to the other party at least 90 days prior to the date at which such automatic extension would otherwise occur. For the avoidance of doubt, the continuation or termination of the
|
(a)
|
The fees set forth in the Existing Agreement for the services provided by RFS as of the date hereof are hereby confirmed and shall be in effect until the last business day prior to the date that is three years from the Effective Time (such period, the “First Period”) and shall thereafter be subject to renegotiation in good faith, taking into account any reasonable supporting detail and documentation provided by either party, to the extent that similarly situated funds (other than funds advised by Guggenheim Partners Investment Management Holdings, LLC or any of its subsidiaries) are receiving services that are substantially similar to those provided under the Agreement at fee levels materially lower than those paid by the Trust, with the renegotiated fees for such services to apply for the remainder of the Initial Term and for any extension period thereafter, subject to further renegotiation for any extension period in good faith as set forth in this section.
|
(b)
|
The fees set forth in the Agreement for the services provided by RFS as of the Effective Time shall not be subject to renegotiation or adjustment during the First Period, and, except as otherwise provided in Section 3(a) of this Amendment, during the remaining two years of the Initial Term or during any extension period thereafter.
|
(c)
|
The parties mutually agree that in the event the Trust wishes to engage RFS to perform additional services for the Trust not performed by RFS for the Trust as of the Effective Time, the scope of and the fees for such services shall be negotiated by the parties in good faith and agreed on in writing, taking into account RFS pricing of substantially similar services to similarly situated parties.
|
5. |
Early Termination. As of the Effective Time, notwithstanding anything to the contrary set forth in the Existing Agreement, only upon the occurrence of any of the following events and subject to the notice and cure periods (if applicable) set forth below, the Trust may terminate the Agreement during the Initial Term or
|
(a)
|
a determination by a majority of the Trust’s trustees who are not “interested persons” (as defined in Section 2(a)(19) of the 1940 Act) of a party to the Agreement (the “Independent Trustees”), after consultation with outside counsel, that continuation of the Agreement would be inconsistent with the fiduciary duties of the Trust’s board of trustees (such fiduciary duty to be interpreted in accordance with the laws of the state in which the Trust is organized), provided that (i) prior to the effectiveness of such termination (which may be no earlier than sixty (60) days following delivery of written notice of termination by the Trust) and (ii) commencing as promptly as practicable following the delivery of notice from the Trust, the parties will use good faith efforts to negotiate amendments to the Agreement to avoid such termination;
|
(b)
|
a material breach of the Agreement, provided that RFS shall have sixty (60) days from delivery of written notice of breach to cure such material breach;
|
(c)
|
RFS, or its direct or indirect parent, filing for bankruptcy, insolvency, dissolution or liquidation;
|
(d)
|
material regulatory non-compliance by RFS that is reasonably likely to adversely affect the provision of services of the type provided by RFS under the Agreement to the Trust, or disqualification of RFS or its affiliates from providing the services set forth under the Agreement to the Trust; or
|
(e)
|
a material diminution (other than as contractually agreed between the Trust and RFS) in the quality of the services provided by RFS relative to the quality of services provided by RFS in the one (1) year prior to the Effective Time (taking into account regulatory developments and requests of the Trust), provided that RFS shall have sixty (60) days from delivery of written notice to cure such material diminution.
|
6.
|
Governing Law. This Amendment shall be governed by the provisions of Section 9 of the Existing Agreement, and such provisions are hereby incorporated into this Agreement, mutatis mutandis.
|
7.
|
Other. If the agreement pursuant to which MUTB has agreed to acquire RFS is terminated for any reason, this Amendment shall be null and void and of no force and effect and RFS shall promptly notify the Trusts of such termination.
|
8.
|
Transition. Following delivery of notice of termination or non-renewal of the Agreement by either party after the Effective Time, RFS will promptly transfer to the new service provider designated by the Trust (the “New Provider”) all relevant books, records, correspondence and other data established or maintained by RFS under the Agreement in a form reasonably acceptable to RFS, and for a reasonable period following such notice, which in no event shall exceed ninety (90) days following the effectiveness of such termination, (a) will otherwise reasonably cooperate in the transfer of its duties and responsibilities, including by providing assistance in the establishment of books, records and other data by the New Provider and (b) will take any other reasonably necessary actions which the Trust or its designee may reasonably request to facilitate the Trust’s transition to the New Provider.
|
(i)
|
the Borrower delivers a written notice of withdrawal or substitution to the Agent on or before 11:00 a.m. (New York time) on the Business Day of the requested withdrawal or substitution;
|
(ii)
|
prior to and after giving effect to such withdrawal or substitution, no Event of Default exists or would occur;
|
(iii)
|
all representations and warranties in the Transaction Documents are true and correct in all material respects as of the date of the requested withdrawal or substitution as if made on such date, except to the extent such representations and warranties relate to an earlier date in which case such representations and warranties shall be true and correct in all material respects as of such earlier date;
|
(iv)
|
immediately prior to and after giving effect to such withdrawal or substitution, no Margin Deficiency exists;
|
(v)
|
prior to and after giving effect to such withdrawal or substitution, the Asset Coverage is at least 300%; and
|
(vi)
|
the withdrawal or substitution of such amount of Collateral shall not violate any applicable Law, including Regulation U or Regulation X.
|
(i)
|
The Borrower may elect to terminate the Commitment in whole or reduce the Commitment to an amount not less than $25,000,000 on any day by irrevocable written notice to the Agent not less than 30 days prior to the proposed date of termination or reduction (or upon such shorter notice period as mutually agreed upon by the Borrower and the Agent); provided that (i) the Borrower may not designate a termination date or reduce the Commitment on a date that is earlier than 180 days after the date of this Agreement and (ii) each reduction of the Commitment shall be in a whole multiple of $1,000,000. In the event the Commitment is terminated by the Borrower pursuant to this Section 2(h)(i), the Borrower shall pay to the Agent for the account of the Lender on the date of such termination (A) the aggregate principal amount of all outstanding Loans, together with accrued and unpaid interest thereon, and (B) all other fees and other amounts, if any, payable hereunder.
|
(ii)
|
The Lender may elect to terminate the Commitment in whole but not in part on any day by irrevocable written notice to the Agent not less than 360 days prior to the proposed date of termination; the Agent shall give such notice of termination to the Borrower promptly after its receipt of such notice. In the event the Commitment is terminated by the Lender pursuant to this Section 2(h)(ii), the Borrower shall pay to the Agent for the account of the Lender on the date of such termination (A) the aggregate principal amount of all outstanding Loans, together with accrued interest thereon and (B) all other fees and other amounts payable hereunder.
|
(iii)
|
The Facility shall automatically terminate on the date (the “Early Termination Date”) that is fifteen (15) days following the date on which Custodian provides notice to the Agent to terminate the Control Agreement pursuant to the terms thereof unless a successor Custodian that is reasonably acceptable to the Agent shall have been appointed. On the Early Termination Date, the outstanding principal amount of all Loans, all accrued but unpaid interest thereon, and all fees, expenses and any other amounts, if any, due hereunder or under any other Transaction Document shall become due and payable.
|
(i)
|
The Agent shall have received each of the following documents, duly executed, each (unless otherwise specified below) dated the Closing Date and in form and substance satisfactory to the Agent:
|
(A)
|
duly executed counterpart of this Agreement;
|
(B)
|
duly executed Security Documents and all documents contemplated thereby, including UCC-1 financing statements;
|
(C)
|
certified copies of (1) the Organization Documents and the Offering Documents (including any amendments or supplements thereto) of the Borrower, (2) the resolutions of the Borrower authorizing and approving the execution, delivery and performance by the Borrower of this Agreement, the Security Agreement, and the other Transaction Documents and the Loans hereunder, and otherwise satisfactory to the Agent; and (3) documents evidencing all other necessary company action, governmental approvals and third-party consents, if any, with respect to this Agreement, the Security Agreement, and any other Transaction Document;
|
(D)
|
a certificate of the Borrower certifying the names and true signatures of the Responsible Officers of the Borrower authorized to sign this Agreement, the Security Agreement, any other Transaction Document, or any other document to be delivered hereunder or thereunder;
|
(E)
|
certificates evidencing the good standing of the Borrower in its jurisdiction of formation dated a date not earlier than ten (10) Business Days prior to the Closing Date;
|
(F)
|
the results of tax, judgment and Lien searches on the Borrower in Delaware, obtained by and satisfactory to the Agent, and not dated earlier than ten (10) days prior to the Closing Date;
|
(G)
|
opinions of New York and Delaware counsel to the Borrower; and
|
(H)
|
such other assurances, certificates, documents, consents, or opinions as the Agent reasonably may require.
|
(ii)
|
The Collateral Account has been established by the Borrower.
|
(i)
|
The representations and warranties of the Borrower contained in Section 4 or any other Transaction Document or any document furnished at any time under or in connection herewith or therewith shall be true and correct in all material respects on and as of the date of such Loan immediately prior to and after giving effect to such Loan, except to the extent such representations and warranties relate to an earlier date in which case such representations and warranties shall be true and correct in all material respects as of such earlier date.
|
(ii)
|
No Default or Event of Default shall exist, or would result from such proposed Loan.
|
(iii)
|
Neither the Lender nor the Borrower shall have terminated the Facility effective as of such draw date.
|
(iv)
|
The Custodian shall not have provided notice of termination of the Control Agreement unless a successor Control Agreement is in effect.
|
(v)
|
Prior to and after giving effect to such Loan, the Asset Coverage shall be at least 300%.
|
(vi)
|
Immediately prior to and immediately after giving effect to such Loan, no Margin Deficiency exists and the Total Outstandings shall not exceed the Commitment or the Maximum Amount.
|
(vii)
|
The Agent has received evidence that the Collateral Requirement has been satisfied.
|
(viii)
|
The absence of any action, suit, investigation or proceeding pending or, to the knowledge of the Borrower, threatened in writing in any court or before any arbitrator or Governmental Authority that could reasonably be expected to result in a Material Adverse Effect.
|
(ix)
|
Each borrowing shall be deemed to be a representation and warranty by the Borrower that the conditions specified in Section 3(a) (solely for the initial Loan), and Section 3(b), as applicable, have been satisfied on and as of the date of the making of a Loan.
|
(x)
|
The Borrower shall have provided any form requested by the Agent necessary to comply with Regulation U or Regulation X, or any other provisions of the regulations of the Board of Governors of the Federal Reserve System of the United States.
|
(i)
|
as soon as available, but in any event within 180 days after the end of each fiscal year of the Borrower, a balance sheet of the Borrower as at the end of such fiscal year, and the related statements of income or operations and cash flows for such fiscal year, setting forth in each case in comparative form the figures for the previous fiscal year, all in reasonable detail and prepared in accordance with Appropriate Accounting Principles, audited and accompanied by a report and opinion of an independent certified public accountant of nationally recognized standing reasonably acceptable to the Lender and the Agent, which report and opinion shall be prepared in accordance with generally accepted auditing standards and shall not be subject to any “going concern” or like qualification or exception or any qualification or exception as to the scope of such audit;
|
(ii)
|
as soon as possible and in any event within four (4) Business Days after the Borrower obtains actual knowledge of the occurrence of (A) any Default or Event of Default or (B) any actual litigation or other event which, if adversely determined to the Borrower, could reasonably be likely to result in a Material Adverse Effect, a statement of a Responsible Officer of the Borrower setting forth the details thereof and the action which the Borrower has taken and proposes to take with respect thereto;
|
(iii)
|
notice of any material change in accounting policies or financial reporting practices by the Borrower except as required or permitted by Appropriate Accounting Principles; and
|
(iv)
|
promptly after written request therefor, such other business and financial information respecting the condition or operations, financial or otherwise, of the Borrower as the Agent may from time to time reasonably request.
|
(i)
|
Each of the Lender and the Agent agree to maintain the confidentiality of all information received from or on behalf of the Borrower relating to the Borrower or its business (“Borrower Confidential Information”), and the Borrower agrees to maintain the confidentiality of each of the Transaction Documents and all other information received from the Lender or the Agent, including all reports prepared by the Agent or the Lender (“Lender Confidential Information” and, together with Borrower Confidential Information, “Confidential Information”) except that the Borrower may disclose Lender Confidential Information and the Lender or the Agent may disclose Borrower Confidential Information (i) to its and its respective Affiliates’ directors, officers, employees and agents, including accountants, legal counsel and other advisors (collectively, “Representatives”) (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature thereof and instructed to keep the content thereof confidential and that such party shall be responsible for any breach or failure to comply with this Section 8(m)(i) (or any instruction hereunder) by its Representatives); (ii) to the extent requested by any regulatory authority or required by applicable Laws or by any subpoena or similar legal process or, with respect to the Lender, by any rating agency then rating the commercial paper notes issued by or on behalf of the Lender or other debt obligations of the Lender or its Affiliates; (iii) in connection with the exercise of any remedies hereunder or any suit, action or proceeding relating to this Agreement or the enforcement of rights hereunder; (iv) in the case of the Lender or the Agent, subject to an agreement containing provisions substantially similar to those of this Section 8(m), to any actual or prospective permitted assignee or participant in any of the Lender’s rights or obligations under this Agreement; (v) with the consent of the Borrower with respect to the disclosure of Borrower Confidential Information, and with the consent of the Lender and the Agent with respect to the disclosure of Lender Confidential Information; or (vi) to the extent such Confidential Information (A) is available to the disclosing Person on a nonconfidential basis prior to disclosure by the other Person, (B) becomes publicly available other than as a result of a breach of this Section 8(m) or (C) becomes available to the disclosing Person on a nonconfidential basis from a source other than the other Person. It is understood and agreed that regulators having jurisdiction over the Agent or the Lender shall have unrestricted access to all books, records, files and other materials in the Agent’s or the Lender’s possession, including any Borrower Confidential Information, and disclosure of any Borrower Confidential Information to such persons solely for purposes of supervision or examination may occur without written notice to or authorization from the Borrower.
|
(ii)
|
The Borrower agrees to maintain the confidentiality of the content of Appendix I, except that such content may be disclosed (i) to each of its Representatives who need to know such content in relation to the transactions contemplated by this Agreement (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of Appendix I and instructed to keep the content of Appendix I confidential and that the Borrower shall be responsible for any breach or failure to comply with this Section 8(m)(ii) (or any instruction hereunder) by its Representatives), (ii) to the extent requested by any regulatory authority purporting to have jurisdiction over the Borrower (including any self-regulatory authority), (iii) to the extent required by applicable Law or regulations or by any subpoena or similar legal process, or (iv) with the consent of the Agent.
|
(i)
|
the applicable ICE Benchmark Administration’s LIBOR (or such corresponding rate published by any successor in interest to the ICE Benchmark Administration) (“ICE LIBOR”), as published by Reuters (or, if not so published, other commercially available source providing quotations of ICE LIBOR as designated by Agent from time to time) at approximately 11:00 a.m., London time, on such day (or, if such day is not a Business Day, then the ICE LIBOR published on the immediately preceding Business Day), for Dollar deposits (for delivery on such day or such immediately preceding Business Day, as applicable) with a three-month term, or
|
(ii)
|
if the rate referenced in the preceding clause (i) does not appear on such page or service or such page or service shall not be available, the rate per annum equal to the rate determined by the Agent to be the offered rate on such other page or other service that displays an average interest settlement rate for Dollar deposits (for delivery on the first day of such Interest Period) with a term of [three months], determined as of approximately 11:00 a.m. (London time) on such day, or
|
(iii)
|
if the rates referenced in the preceding clauses (i) and (ii) are not available, the rate per annum determined by the Agent as the rate of interest at which Dollar deposits for delivery on the first day of such Interest Period in same day funds in the approximate amount of the Loan being made and with a term of [three months] would be offered by the London Branch of Société Générale to major banks in the London interbank eurodollar market at their request at approximately 4:00 p.m. (London time) on such day;
|
(i)
|
all documents and instruments required by applicable Laws or reasonably requested by the Agent to be filed, registered or recorded to create the Liens intended to be created by the Security Documents and perfect or record such Liens to the extent, and with the priority, required by the Security Agreement, shall have been filed, registered or recorded or delivered to the Agent for filing, registration or recording;
|
(ii)
|
the Borrower shall have obtained all consents and approvals required to be obtained by it in connection with the execution and delivery of all Security Documents to which it is a party, the performance of its obligations thereunder and the granting of the Liens granted by it thereunder; and
|
(iii)
|
the Borrower shall have taken all other action reasonably required by it under the Security Documents to perfect, register and/or record the Liens granted by it thereunder.
|
(A)
|
to the extent the Market Value of Eligible Collateral attributable to any single issuer (other than the United States) exceeds 10% of the Market Value of all Eligible Collateral, such excess shall not constitute Eligible Collateral;
|
(B)
|
to the extent the Market Value of Eligible Collateral attributable to any bond (other than bonds issued by the United States) exceeds 10% of the outstanding issuance of such bond or security, such excess shall not constitute Eligible Collateral;
|
(C)
|
to the extent the Market Value of Eligible Collateral attributable to any municipal bond exceeds 40% of the outstanding issuance of such bond or security, such excess shall not constitute Eligible Collateral;
|
(D)
|
to the extent the Market Value of Eligible Collateral attributable to issuers domiciled in countries that are not Tier-One Countries exceeds 10% of the Market Value of all Eligible Collateral, such excess shall not constitute Eligible Collateral;
|
(E)
|
to the extent the Market Value of Eligible Collateral attributable to Eligible Securities rated below BBB- exceeds 10% of the Market Value of all Eligible Collateral, such excess shall not constitute Eligible Collateral;
|
(F)
|
to the extent the Market Value of a corporate bond (other than a zero coupon bond) or a security is less than 70% of its par value, such bond or security shall not constitute Eligible Collateral;
|
(G)
|
shares of any equity security (excluding any preferred security) in excess of five (5) times the average daily trading volume over the immediately preceding ninety (90) day period as reported by Bloomberg for such equity security (excluding any preferred security) shall not be accepted as Eligible Collateral;
|
(H)
|
to the extent the Market Value of Eligible Collateral attributable to equity securities (excluding preferred securities) issued by Small Cap Issuers exceeds 20% of the Market Value of all Eligible Collateral, such excess shall not constitute Eligible Collateral; and
|
(I)
|
to the extent the Market Value of Eligible Collateral attributable to municipal bonds in any one state of origin exceeds 25% of the Market Value of all Eligible Collateral, such excess shall not constitute Eligible Collateral.
|
(i)
|
Construction. As used herein and in any Transaction Document:
|
(ii)
|
Computations. All financial computations required under this Agreement shall be made, and all financial information required under this Agreement shall be prepared, in accordance with Appropriate Accounting Principles.
|
(iii)
|
References to Agreements, Laws and Persons. Unless otherwise expressly provided herein, (A) references to documents, agreements and other contractual instruments shall be deemed to include all subsequent amendments, restatements, extensions, supplements and other modifications thereto permitted hereby; and (B) references to any Law shall include all statutory and regulatory provisions consolidating, amending, replacing, supplementing or interpreting such Law and (C) references to any Person include its successors and permitted assigns.
|
(iv)
|
Other References. Unless otherwise specified, (A) the meanings of defined terms are equally applicable to the singular and plural forms of the defined terms, (B) the words “herein”, “hereto”, “hereof” and “hereunder” and words of similar import when used in any Transaction Document shall refer to such Transaction Document as a whole and not to any particular provision thereof, (C) Article, Section and Appendix references are to the Transaction Document in which such reference appears, (D) the term “including” is by way of example and not limitation, and (E) section headings are included for convenience of reference only and shall not affect the interpretation of this Agreement or any other Transaction Document.
|
|
|
|
|
Address for Notices:
|
227 West Monroe Street, 7th Floor |
Telephone: |
(312) 873-1477
|
Facsimile: |
(312) 827-0157
|
Attention: |
GPIM Trade Ops
|
Email: |
GPIMTradeOps@guggenheimpartners.com
|
|
|
With a copy to: |
|
|
|
Address for Notices:
|
227 West Monroe Street, 7th Floor
|
Telephone:
|
(312) 357-0394
|
Facsimile:
|
(312) 827-0161
|
Attention: | GI Legal |
Email: | FundsLegal@guggenheimpartners.com |
Address for Notices:
|
Société Générale
|
|
245 Park Avenue
|
|
New York, New York 10167
|
Telephone: |
212-278-5814
|
Facsimile: |
646-365-4222
|
Attention: |
Robert O’Connell
|
Email: |
robert.oconnell@sgcib.com
|
Wiring instructions: |
Société Générale, New York
|
ABA # 026-004-226
For Account of: Loan Clearing
A/C 9051422
Ref : Guggenheim Build America Bonds Managed Duration Trust
Attn : Nadira TIWARI & Cheriese BRATHWAITE
|
Address for Notices:
|
Société Générale
|
|
245 Park Avenue
|
|
New York, New York 10167
|
Telephone: |
212-278-5814
|
Facsimile: |
646-365-4222
|
Attention: |
Robert O’Connell
|
Email: |
robert.oconnell@sgcib.com
|
MATURITY
|
||||
< 3 years
|
3 - 6 years
|
6 - 12 years
|
> 12 years
|
|
U.S. TREASURIES
|
2%
|
4%
|
6%
|
8%
|
RATING
|
MATURITY
|
|||
< 3 years
|
3 - 6 years
|
6 - 12 years
|
> 12 years
|
|
Other G7 Countries >= AA-
|
4.5%
|
5%
|
6%
|
8%
|
RATING
|
Margin Requirement
|
AAA
|
15%
|
> AA-
|
15%
|
A+ to A-
|
15%
|
BBB+ to BBB-
|
22.5%
|
BB+ to BB-
|
55%
|
B+ to B-
|
60%
|
< B-
|
70%
|
NR
|
100%
|
Percentage of Par Value
|
Multiplier
|
Greater than or equal to 80%
|
1.00
|
Greater than or equal to 70% and less than 80%
|
1.15
|
Amount of Issue Outstanding Held in Agent Collateral Account
|
Multiplier
|
Less than 10%
|
1.00
|
Greater than 10% and less than 25%
|
1.25 (with a max haircut of 70% for bonds above B-)
|
Greater than 25% and less than 40%
|
2.00 (with a max haircut of 70% for bonds above B-)
|
Greater than 40%
|
No financing on portion greater than 40%
|
AU
|
Australia
|
BE
|
Belgium
|
CA
|
Canada
|
DK
|
Denmark
|
FI
|
Finland
|
FR
|
France
|
DE
|
Germany
|
JP
|
Japan
|
LU
|
Luxembourg
|
NL
|
Netherlands
|
NZ
|
New Zealand
|
NO
|
Norway
|
SG
|
Singapore
|
SE
|
Sweden
|
CH
|
Switzerland
|
GB
|
United Kingdom
|
US
|
United States
|
(i)
|
is a senior unsecured obligation;
|
(ii)
|
has a maturity of less than or equal to 30 years;
|
(iii)
|
is not a private issuance;
|
(iv)
|
is not subordinated to any other obligation;
|
(v)
|
is not a defaulted obligation;
|
(vi)
|
is not an asset-backed obligation or a structured obligation;
|
(vii)
|
is not a convertible bond;
|
(viii)
|
is not a stripped security;
|
(ix)
|
for all bonds other than municipal bonds, has a minimum outstanding principal amount issuance size of $100,000,000;
|
(x)
|
for municipal bonds, has a minimum outstanding principal amount issuance size of $20,000,000;
|
(xi)
|
with respect to government bonds, is issued by the United States or another G7 Country; and
|
(xii)
|
with respect to municipal bonds, is not issued by Puerto Rico.
|
By: | /s/ John L. Sullivan |
Name: |
John L. Sullivan
|
Title: | CFO |
By: | /s/ Julien Gimbrere |
Name: |
Julien Gimbrere
|
Title: | Authorized Signatory |
By: | /s/ Julien Gimbrere |
Name: |
Julien Gimbrere
|
Title: | Authorized Signatory |
By: | /s/ John L. Sullivan |
Name: |
John L. Sullivan
|
Title: | CFO |
By: | /s/Noemie Chantier |
Name: |
Noemie Chantier
|
Title: | Director |
By: | /s/Noemie Chantier |
Name: |
Noemie Chantier
|
Title: | Director |
By: | /s/ John L. Sullivan |
Name: |
John L. Sullivan
|
Title: | CFO |
By: |
/s/ Noemie Chantier
|
Name: |
Noemie Chantier
|
Title: |
Director
|
By: |
/s/ Noemie Chantier
|
Name: |
Noemie Chantier
|
Title: |
Director
|
3. |
REPRESENTATIONS AND WARRANTIES OF PLEDGOR
|
|
|
|
|
Address for Notices:
|
227 West Monroe Street, 7th Floor |
Telephone: |
(312) 873-1477
|
Facsimile: |
(312) 827-0157
|
Attention: |
GPIM Trade Ops
|
Email: |
GPIMTradeOps@guggenheimpartners.com
|
|
|
With a copy to: |
|
Address for Notices:
|
227 West Monroe Street, 7th Floor
|
Telephone:
|
(312) 357-0394
|
Facsimile:
|
(312) 827-0161
|
Attention: | GI Legal |
Email: | FundsLegal@guggenheimpartners.com |
|
|
|
|
Address for Notices:
|
Societe Generale |
245 Park Avenue | |
New York, New York 10167 | |
Telephone: | 212-278-5814 |
Facsimile: |
646-365-4222
|
Attention: |
Robert O’Connell
|
Email: |
Robert oconnell@socib.com
|
|
|
a. |
To facilitate access to Electronic Access, You will furnish Securities Intermediary with a written list of the names, and the extent of authority or level of access, of persons You are authorizing to access the Sites, products and services and to use the Electronic Access (“Authorized Users”) on a read-only basis. In addition. You may also designate Authorized Users who will have authority to enter
|
transactions and provide instructions to Securities Intermediary that cause a change in or have an impact on assets held by Securities Intermediary in the Account (as defined in the Control Agreement) (“Authorized Transactional Users”). Where appropriate. Authorized Users and Authorized Transactional Users are collectively referred to herein as “Users.” If You wish to allow any third party (such as an investment manager, consultant or third party service provider) or any employee of a third party to have access to Your account information through Electronic Access and be included as a “User” under these Terms and Conditions, You may designate a third party or employee of a third party as an Authorized User or Authorized Transactional User under these Terms and Conditions and any such third party or employee of a third party so designated by You (and, if a third party is so designated, any employee of such third party designated by such third party) will be included within the definition of Authorized User. Authorized Transactional User. and User as appropriate.
|
b. |
Upon BNY Mellon’s approval of Users (which approval will not be unreasonably withheld), BNY Mellon will send You a user-id, temporary password and, where applicable, a security identification device for each User. You will be responsible for providing to Users the user-ids, temporary passwords and, where applicable, secure identification devices. You will ensure that any User receiving a secure identification device returns such device immediately following the termination of the User’s authorization to access the products and services for which the secure identification device was provided to such User. You are solely responsible for Users’ access to Electronic Access, and You and Users are solely responsible for the confidentiality of the user-ids and passwords and secure identification devices that are provided to them and will remain responsible for each secure identification device until it is returned to BNY Mellon. You acknowledge and agree that BNY Mellon will have no duty or obligation to verify or confirm the actual identity of the person who accessed Electronic Access using a validly issued user-id and password (and, where applicable, security identification device) or that the person who accessed Electronic Access using such validly issued user-id and password (and, where applicable, security identification device) is, in fact, a User (whether an Authorized User or an Authorized Transactional User).
|
c. |
You are also solely responsible for ensuring that all Users comply with these Terms and Conditions and any Terms of Use included on the Sites, the Service Agreement for each product or service accessed through the Sites and their associated services and all applicable terms and conditions, restrictions on the use of such products and services and data obtained through the use of Electronic Access. BNY Mellon reserves the right to prohibit access or revoke the access of any User to Electronic Access whom BNY Mellon determines has violated or breached these Terms and Conditions or any Terms of Use on a Site accessed by the User, including the Data Terms Web Site (as defined below), or whose conduct BNY Mellon reasonably determines may constitute a criminal offense, violate any applicable local, state. national or international law or constitute a security risk for BNY Mellon, a BNY Mellon third party supplier (“BNY
|
Mellon’s Supplier”). BNY Mellon’s clients or any Users of Electronic Access. BNY Mellon may also terminate access to all Users following termination of the Control Agreement.
|
2. |
Proprietary Software: Depending upon the products and services You elect to access through Electronic Access. You may be provided software owned by BNY Mellon or licensed to BNY Mellon by a BNY Mellon Supplier (“Proprietary Software”). You are granted a limited, non-exclusive, non-transferable license to install the Proprietary Software on Your authorized computer system (including mobile devices registered with BNY Mellon) and to use the Proprietary Software solely for Your own internal purposes in connection with Electronic Access and solely for the purposes for which it is provided to You. You and Your Users may make copies of the Proprietary Software for backup purposes only, provided all copyright and other proprietary information included in the original copy of the Proprietary Software are reproduced in or on such backup copies.
|
3. |
Use of Data:
|
a. |
Electronic Access may include information and data that is proprietary to the providers of such information or data (“Information Providers”) or may be used to access Sites that include such information or data from Information Providers. This information and data may be subject to restrictions and requirements which are imposed on BNY Mellon by the Information Providers and which are posted on hap://www.bnvmellon.conilproducts/assetservicinakendoragreement.pdf or any successor web site of which You are provided notice from time to time (the “Data Terms Web Site”). You will be solely responsible for ensuring that Users comply with the restrictions and requirements concerning the use of proprietary data that are posted on the Data Terms Web Site.
|
b. |
You consent to BNY Mellon, its affiliates and BNY Mellon’s Suppliers disclosing to each other and using data received from You and Users and, where applicable, Your third parties in connection with these Terms and Conditions (including, without limitation, client data and personal data of Users) (1) to the extent necessary for the provision of Electronic Access; (2) in order for BNY Mellon and its affiliates to meet any of their obligations under these Terms and Conditions to provide Electronic Access; or (3) to the extent necessary for Users to access Electronic Access.
|
c. |
In addition, You permit BNY Mellon to aggregate data concerning Your accounts with other data collected and/or calculated by BNY Mellon. BNY Mellon will own such aggregated data, but except as provided in the Control Agreement will not distribute the aggregated data in a format that identifies You or Your data.
|
a. |
Electronic Access, including any database, any software (including for the avoidance of doubt, Proprietary Software) and any proprietary data, processes. scripts, information. training materials, manuals or documentation made available
|
as part of the Electronic Access (collectively, the “Information”), are the exclusive and confidential property of BNY Mellon and/or BNY Mellon’s Suppliers. You may not use or disclose the Information except as expressly authorized by these Terms and Conditions. You will, and will cause Users and Your third parties and their users, to keep the Information confidential by using the same care and discretion that You use with respect to Your own confidential information, but in no event less than reasonable care.
|
b. |
The provisions of this paragraph will not affect the copyright status of any of the Information which may be copyrighted and will apply to all Information whether or not copyrighted.
|
c. |
Nothing in these Terms and Conditions will be construed as giving You or Users any license or right to use the trade marks, logos and/or service marks of BNY Mellon, its affiliates, its Information Providers or BNY Mellon’s Suppliers.
|
d. |
Any Intellectual Property Rights and any other rights or title not expressly granted to You or Users under these Terms and Conditions are reserved to BNY Mellon, its Information Providers and BNY Mellon’s Suppliers. “Intellectual Property Rights” includes all copyright, patents, trademarks and service marks, rights in designs, moral rights, rights in computer software, rights in databases and other protectable lists of information, rights in confidential information, trade secrets, inventions and know-how, trade and business names, domain names (including all extensions, revivals and renewals, where relevant) in each case whether registered or unregistered and applications for any of them and the goodwill attaching to any of them and any rights or forms of protection of a similar nature and having equivalent or similar effect to any of them which may subsist anywhere in the world.
|
a. |
BNY Mellon will be entitled to rely on, and will be fully protected in acting upon, any actions or instructions associated with a user-id or a secure identification device issued to a User until such time as BNY Mellon receives actual notice in writing from You of the change in status of the User and receipt of the secure identification device issued to such User. You acknowledge that all commands, directions and instructions, including commands, directions and instructions for transactions issued by a User are issued at Your sole risk. You agree to accept full and sole responsibility for all such commands, directions and instructions and that BNY Mellon will have no liability for, and you hereby release BNY Mellon from, any losses, liabilities, damages, costs, expenses, claims, causes of action and judgments (including attorneys fees and expenses) (collectively “Losses”) incurred or sustained by You or any other party in connection with or as a result of BNY Mellon’s reliance upon or compliance with such commands, directions and instructions.
|
b. |
All commands, directions and instructions involving a transaction entered by an Authorized Transactional User will be treated as an authorized instruction under the applicable Services Agreement(s) between You and Securities Intermediary covering accounts, products and services provided by Securities Intermediary with respect to which Electronic Access is being used hereunder whether such Services Agreement is executed prior to or after the execution of these Terms and Conditions.
|
a. |
Although BNY Mellon uses reasonable efforts to provide accurate and up-to-date information through Electronic Access, BNY Mellon. its Content Providers and Information Providers make no warranties or representations under these Terms and Conditions as to accuracy, reliability or comprehensiveness of the content, information or data accessed through Electronic Access. Without limiting the foregoing, some of the content on Electronic Access may be provided by sources unaffiliated with BNY Mellon (“Content Providers”) and by Information Providers. For that content BNY Mellon is a distributor and not a publisher of such content and has no control over it. Information provided by Information Providers has not been independently verified by BNY Mellon and BNY Mellon makes no representation as to the accuracy or completeness of the content or information provided. Any opinions, advice, statements, services, offers or other information given or provided by Content Providers and Information Providers (including merchants and licensors) are those of the respective authors of such content and not that of BNY Mellon. BNY Mellon will not be liable to You or Users for such content or information in any way nor for any action taken in reliance on such information nor for direct or indirect damages resulting from the use of such information. For purposes of these Terms and Conditions, all information and data, including all proprietary information and materials and all client data, provided to You through Electronic Access are provided on an “AS-IS”, “AS AVAILABLE” basis.
|
b. |
There is no guarantee or warranty that Electronic Access or the information and data provided through the Electronic Access are or will be virus-free or will be free of viruses, worms. Trojan horses or other code with contaminating or destructive properties. Securities Intermediary will employ commercially reasonable anti-virus software to its systems to protect its systems against viruses.
|
c. |
Some Sites accessed through the use of Electronic Access may include links to websites provided by parties that are not affiliated with BNY Mellon (“Third Party Websites”). BNY Mellon will not be liable to any person for the content found on such Third Party Websites. BNY Mellon will not be responsible for Third Party Websites that collect information from parties who visit their web sites through links on the Sites. BNY Mellon will not be liable or responsible for any loss suffered by any person as a result of their use of any Third Party Websites that are linked to the BNY Mellon Sites.
|
d. |
BNY Mellon retains complete discretion and authority to add, delete or revise in whole or in part Electronic Access, including its Sites, and to modify from time to time any Proprietary Software provided in conjunction with the use of Electronic Access and/or any of the Sites. To the extent reasonably possible, Securities Intermediary will provide notice of such modifications. BNY Mellon may terminate. immediately and without advance notice, and without right of cure, any portion or component of Electronic Access or the Sites.
|
e. |
TO THE FULLEST EXTENT PERMITTED BY LAW, THERE IS NO WARRANTY OF MERCHANTABILITY, NO WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE, NO WARRANTY OF QUALITY AND NO WARRANTY OF TITLE OR NONINFRINGEMENT. THERE IS NO OTHER WARRANTY OF ANY KIND, EXPRESS OR IMPLIED, REGARDING ELECTRONIC ACCESS. THE SITES, ANY PROPRIETARY SOFTWARE. INFORMATION, MATERIALS OR CLIENT DATA.
|
f. |
Notwithstanding the prior paragraph, Securities Intermediary or an affiliate designated by it will defend You and pay any amounts agreed to by Securities Intermediary in a settlement and damages finally awarded by a court of competent jurisdiction, in an action or proceeding commenced against You based on a claim that Electronic Access or the Proprietary Software infringe plaintiff(s)’s patent. copyright or trade secret, provided that You (i) notify Securities Intermediary promptly of any such action or claim (except that the failure to so notify Securities Intermediary will not limit Securities Intermediary’s obligations hereunder except to the extent that such failure prejudices BNY Mellon); (ii) grant Securities Intermediary or its designated affiliate full and exclusive authority to defend, compromise or settle such claim or action; and (iii) provide Securities Intermediary or its designated affiliate all assistance reasonably necessary to so defend, compromise or settle. The foregoing obligations will not apply. however, to any claim or action arising from (i) use of the Proprietary Software Information or Electronic Access in a manner not authorized under these Terms and Conditions, the Terms of Use or the Data Terms Web Site or (ii) use of the Proprietary Software or Electronic Access in combination with other software or services not supplied by BNY Mellon.
|
a. |
IN NO EVENT WILL BNY MELLON. BNY MELLON’S SUPPLIERS OR ITS CONTENT PROVIDERS OR INFORMATION PROVIDERS BE LIABLE TO YOU OR ANYONE ELSE UNDER THESE TERMS AND CONDITIONS FOR ANY LOSSES. LIABILITIES. DAMAGES. COSTS OR EXPENSES INCLUDING BUT NOT LIMITED TO, ANY DIRECT DAMAGES, CONSEQUENTIAL DAMAGES, RELIANCE DAMAGES, EXEMPLARY DAMAGES, INCIDENTAL DAMAGES, SPECIAL DAMAGES, PUNITIVE DAMAGES, INDIRECT DAMAGES OR DAMAGES FOR LOSS OF PROFITS, GOOD WILL, BUSINESS INTERRUPTION, USE, DATA, EQUIPMENT OR OTHER INTANGIBLE LOSSES (EVEN IF THE SAME
|
HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES) THAT RESULT FROM (l) THE USE OF OR INABILITY TO USE ELECTRONIC ACCESS; (2) THE CONSEQUENCES OF ANY DECISION MADE OR ACTION OR NON-ACTION TAKEN BY YOU OR ANY OTHER PERSON, OR FOR ANY ERRORS BY YOU IN COMMUNICATING SUCH INFORMATION; (3) THE COST OF SUBSTITUTE ACCESS SERVICES; OR (4) ANY OTHER MATTER RELATING TO THE CONTENT OR ACCESS THROUGH ELECTRONIC ACCESS. BNY MELLON WILL NOT BE LIABLE FOR LOSS, DAMAGE OR INJURY TO PERSONS OR PROPERTY ARISING FROM ANY USE OF ANY PRODUCT, INFORMATION, PROCEDURE OR SERVICE OBTAINED THROUGH ELECTRONIC ACCESS. BNY MELLON WILL NOT BE LIABLE FOR ANY LOSS, DAMAGE OR INJURY RESULTING FROM VOLUNTARY SHUTDOWN OF THE SERVER, ELECTRONIC ACCESS OR ANY OF THE SITES TO ADDRESS TECHNICAL PROBLEMS, COMPUTER VIRUSES. DENIAL-OF-SERVICE MESSAGES OR OTHER SIMILAR PROBLEMS.
|
b. |
BNY MELLON’S ENTIRE LIABILITY AND YOUR EXCLUSIVE REMEDY UNDER THESE TERMS AND CONDITIONS FOR ANY DISPUTE OR CLAIM RELATED TO THESE TERMS OF USE, ELECTRONIC ACCESS OR SITES, IS AS FOLLOWS: IF YOU REPORT A MATERIAL MALFUNCTION IN ELECTRONIC ACCESS THAT BNY MELLON IS ABLE TO REPRODUCE, BNY MELLON WILL USE REASONABLE EFFORTS TO CORRECT THE MALFUNCTION. IF BNY MELLON IS UNABLE TO CORRECT THE MALFUNCTION, YOU MAY CEASE ALL USE OF ELECTRONIC ACCESS AND RECEIVE A REFUND OF ANY FEES PAID IN ADVANCE, SPECIFICALLY FOR ELECTRONIC ACCESS, APPLICABLE TO PERIODS AFTER CESSATION OF SUCH USE. BECAUSE SOME JURISDICTIONS DO NOT ALLOW THE EXCLUSION OR LIMITATION OF LIABILITY FOR DAMAGES, IN SUCH JURISDICTIONS LIABILITY IS LIMITED TO THE FULLEST EXTENT PERMITTED BY LAW.
|
c. |
The limitation of liability set forth in this Limitation of Liability section and in other provisions in these Terms and Conditions is in addition to any limitation of liability provisions contained in any Services Agreements and will not supersede or be superseded by limitation of liability provisions contained in such Services Agreements, whether executed prior to or after the execution of these Terms and Conditions, except to the extent specifically set forth in such other Services Agreements containing a reference to these Terms and Conditions.
|
8. |
Indemnification:
|
a. |
You agree to indemnify, protect and hold BNY Mellon. BNY Mellon’s Suppliers. Content Providers and Information Providers harmless from and against all liability, claims, damages, costs and expenses, including reasonable attorneys’ fees and expenses. resulting from a claim that arises out of (i) any breach by You or Users of these Terms and Conditions, the Terms of Use or the Data Terms Web
|
Site and (ii) any person obtaining access to Electronic Access through You or Users or through use of any password, user-id or secure identification device issued to a User, whether or not You or a User authorized such access. For the avoidance of doubt, and by way of illustration and not by way of limitation, the forgoing indemnity is applicable to disputes between You and an indemnified party, including the enforcement of these Terms and Conditions. The rights and remedies conferred hereunder will be cumulative and the exercise or waiver of any such right or remedy will not preclude or inhibit the exercise of additional rights or remedies or the subsequent exercise of such right or remedy.
|
b. |
The indemnity provided herein is in addition to any indemnity and other remedies contained in any Services Agreements and will not supersede or be superseded by such Services Agreements, whether executed prior to or after the execution of these Terms and Conditions. except to the extent specifically set forth in such Services Agreements and expressly stating an intent to modify these Terms and Conditions. Nothing contained herein will, or be deemed to, alter or modify the rights and remedies of Securities Intermediary as set forth in the Services Agreements.
|
9. |
Choice of Law and Forum: Unless otherwise agreed and specified herein, these Terms and Conditions are governed by and construed in accordance with the laws of the State of New York, without giving effect to any principles of conflicts of law; You expressly and irrevocably agree that exclusive jurisdiction and venue for any claim or dispute with BNY Mellon, its employees, contractors, officers or directors relating in any way to Your use of Electronic Access resides in the state or federal courts in New York City. New York; and You further irrevocably agree and expressly and irrevocably consent to the exercise of personal jurisdiction in those courts over any action brought with respect to these Terms and Conditions. Securities Intermediary and You hereby waive the right of trial by jury in any action arising out of or related to these Terms and Conditions.
|
10. |
Term and Termination:
|
a. |
Either Securities Intermediary or You may terminate these Terms and Conditions and the Electronic Access upon thirty (30) days’ written notice to the other party.
|
b. |
In the event of any breach of the provisions of these Terms and Conditions or a breach by any Authorized User of the Terms of Use or the restrictions and requirements concerning the use of Information Providers’ proprietary data that are posted on the Data Terms Web Site, the non-breaching party may terminate these Terms and Conditions and the Electronic Access immediately upon written notice to the breaching party if any breach remains uncured after ten (10) days’ written notice of the breach is sent to the breaching party.
|
c. |
BNY Mellon may immediately terminate access through an Authorized User’s user-id and password and may, at its discretion, also terminate access by an Authorized User, without right of cure, in the event of an unauthorized use of an
|
Authorized User’s user-id or password, or where BNY Mellon believes there is a security risk created by such access.
|
d. |
BNY Mellon may terminate, without advance notice, Your access or the access of Users to any portion or component of Electronic Access or the Sites in the event a BNY Mellon Supplier, Content Provider or Information Provider prohibits BNY Mellon from permitting You or Users to have access to their information or services.
|
e. |
Promptly upon receiving or giving notice of termination, You will notify all Users of the effective date of the termination.
|
f. |
Upon termination of Your access to Electronic Access. You shall return all manuals, documentation, workflow descriptions and the like that are in Your possession or under Your control and all security identification devices.
|
g. |
The Reliance. Disclaimers. Limitation of Liability. Indemnification and confidentiality provisions of these Terms and Conditions (and other provision of these Terms and Conditions containing disclaimers, limitation of liability and indemnification) shall survive the termination of these Terms and Conditions.
|
|
|
|
$2,500
|
Initial Fund Set-Up Fee
|
|
|
$1,500
|
Per Month
|
|
*
|
If the average volume of transactions or inquiries significantly increases during the term of this Agreement, as a result of outside factors or unforeseen circumstances for which the Agent is not the proximate cause, the Agent and the Fund shall negotiate an additional fee.
|
•
|
Annual administration fee
|
Included
|
•
|
Due Diligence
|
$4.00 per Account
|
•
|
State report fee
|
$125 per positive report
|
•
|
Negative (nil) report fee
|
$ 25 per negative report (maximum $500 per year)
|
•
|
Account processed
|
$1.25 per Account escheated
|
|
|
•
|
SEC Electronic Database Search
|
$2.00 per Account searched
|
•
|
Administer plan services
|
Included
|
•
|
Each dividend disbursement reinvested
|
Included
|
•
|
Each optional cash transaction
|
Included
|
•
|
Each withdrawal or liquidation of shares from the plan
|
Included
|
•
|
Service fee-includes brokerage commission (per share purchased/sold)*
|
$ 0.03
|
|
•
|
Annual administrative services as Transfer Agent and Registrar for the common stock of each Fund
|
|
•
|
Provide management and board report information as requested
|
|
•
|
Assignment of relationship manager
|
|
•
|
Maintain 1,000 registered Shareholder Accounts per Fund (additional Accounts to be billed at $6.00 each per year)
|
|
•
|
Create new Shareholder Accounts
|
|
•
|
Post and acknowledge address changes
|
|
•
|
Process other routine file maintenance adjustments
|
|
•
|
Post all transactions, including debit and credit certificates, to the Shareholder file
|
|
•
|
Provide confirmation of authorized and issued capital amounts to Fund, upon request
|
|
•
|
Perform OFAC (Office of Foreign Asset Control) and Patriot Act reporting
|
|
•
|
Obtain tax certifications for companies who are tax resident in the United States
|
|
•
|
If any Fund is tax resident in a country other than the United States, such Fund shall advise Agent Additional fees may apply under such circumstance.
|
|
•
|
Issue, cancel and register Shares
|
|
•
|
Process all legal transfers as appropriate
|
|
•
|
Place, maintain and remove stop-transfer notations
|
|
•
|
Provide Fund-specific Shareholder contact number
|
|
•
|
Provide IVR 24/7 (subject to system maintenance)
|
|
•
|
Respond to Shareholder inquiries (written, e-mail and web)
|
|
•
|
Record Shareholder calls
|
|
•
|
Scan and image incoming correspondence from Shareholders
|
|
•
|
Register, issue and transfer DRS book-entry Shares
|
|
•
|
Issue DRS statements of holding
|
|
•
|
Provide Shareholders with the ability to sell Shares in accordance with the terms and conditions, including applicable fees, of the DRS Sales Facility
|
|
•
|
Process sales requests within the appropriate timeframe based on the type of service requested, in accordance with the terms of the DRS sales facility
|
|
•
|
Coordinate the issuance, payment and reconcilement for any proceeds stemming from the use of the DRS sales facility, in accordance with the terms and conditions of the facility
|
|
•
|
Coordinate the mailing of advices to Shareholders
|
|
|
|
•
|
Accept and cancel certificated Shares and credit such Shares into a DRS position
|
|
•
|
Provide availability to “Issuer Online,” which provides access to Fund and Shareholder information administered by Agent, which permits data management including accessing standard reports such as Top 10 - 200 Shareholder lists, submitting real-time inquiries such as an issued capital query, and reporting by holding range
|
|
•
|
Provide availability to “Investor Centre,” which provides Shareholder Account information, transaction capabilities, downloadable forms and FAQs
|
|
•
|
Provide on-demand reporting to allow Fund to generate non-standard reports at Transfer Agent’s standard fee for such reports
|
|
•
|
Receive full funding on payable date by 11:00 a.m., Eastern Time via Federal Funds Wire, ACH or Demand Deposit Account debit
|
|
•
|
Coordinate the mailing of dividends with an additional enclosure with each dividend check
|
|
•
|
Prepare and file federal information returns (Form 1099) of dividends paid in a year
|
|
•
|
Prepare and file state information returns of dividends paid in a year to Shareholders resident within such state
|
|
•
|
Prepare and file annual withholding return (Form 1042) and payments to the government of income taxes withheld from non-resident aliens
|
|
•
|
Coordinate the mailing of Form 1099 to Shareholders
|
|
•
|
Coordinate the email notification to Shareholders of the online availability of Form 1099
|
|
•
|
Replace lost dividend checks
|
|
•
|
Reconcile paid and outstanding checks
|
|
•
|
Code “undeliverable” Accounts to suppress mailing dividend checks to same
|
|
•
|
Keep records of accumulated uncashed dividends
|
|
•
|
Withhold tax from Shareholder Accounts as required by United States government regulations Reconcile and report taxes withheld, including additional Form 1099 reporting requirements, to the Internal Revenue Service
|
|
•
|
Mail to new Accounts who have had taxes withheld, to inform them of procedures to be followed to curtail subsequent back-up withholding
|
|
•
|
Perform Shareholder file adjustments to reflect certification of Accounts
|
|
•
|
If Fund is not tax resident in the United States, Fund shall advise Agent. Dividend withholding tax services are subject to additional fees.
|
|
•
|
Review data for accuracy and completeness
|
|
•
|
Mall cure letter to Shareholders with incomplete information
|
|
•
|
Code Accounts for ACH and performing pre-note test
|
|
•
|
Identify rejected ACH transmissions, mail dividend check and explanation letter to Shareholders with rejected transmissions
|
|
•
|
Respond to Shareholder inquiries concerning the ACH Program
|
|
•
|
Calculate on a quarterly basis the Share breakdown for ACH vs. other dividend payments and notifying the Fund of funding amount for ACH transmissions and other payable date funds
|
|
•
|
Credit ACH designated bank accounts automatically on dividend payable date
|
|
•
|
Maintenance of ACH participant file, including coding new ACH Accounts
|
|
•
|
Process termination requests
|
|
•
|
Keep adequate records including retention of ACH documents
|
|
•
|
Maintain Plan Accounts and establish new participant Accounts
|
|
•
|
As requested, invest dividend monies purchases per the Plan document
|
|
|
|
•
|
Coordinate the distribution of statements and/or transaction advices to Plan participants when activity occurs
|
|
•
|
Coordinate an email notification to requesting Plan participants of the online availability of their Plan statements
|
|
•
|
Process automatic investments
|
|
•
|
Process termination and withdrawal requests
|
|
•
|
Provide Plan participants with the ability to sell Shares in accordance with the terms of the Plan
|
|
•
|
Process sale requests within the appropriate timeframe based on the type of service requested and the stipulations of the Plan
|
|
•
|
Coordinate the issuance, payment and reconcilement for any proceeds stemming from the use of the Plan sales facility, in accordance with the terms and conditions of the Plan
|
|
•
|
Issue the proper tax forms and perform the required reporting to the IRS
|
|
•
|
Accept and cancel certificated Shares and credit such Shares In book-entry form into the Plan
|
|
•
|
Coordinate the mailing of Form 1099 to participants, including Plan participants and perform related filings with the IRS
|
|
•
|
Supply summary reports for each reinvestment/investment to client if requested
|
|
•
|
Coordinate the mailing of annual privacy notice to Plan participants, as required, at Fund’s expense
|
|
•
|
Allow Shareholders to elect to receive sale proceeds, dividend payments and other payment types in foreign currencies (subject to certain geographic restrictions) by check or by electronic funds transfer in accordance with Agent’s guidelines (fees paid by Shareholders)
|
|
•
|
Provide a proxy record date list through Issuer Online’s FileShare; includes Shareholder name, address and Share amount (additional fees assessed for paper requests or other file delivery mechanisms)
|
|
•
|
Address proxy cards for all registered Shareholders
|
|
•
|
Coordinate the mailing of the proxy package
|
|
•
|
Receive, open and examine returned paper proxies
|
|
•
|
Tabulate returned paper proxies
|
|
•
|
Provide the company vote status via online web portal
|
|
•
|
Attend Annual Meeting and provide one Inspector of Election for Annual Meeting (travel expenses billed as incurred)
|
|
•
|
Prepare a final voted/unvoted list through online web portal
|
|
•
|
Coordinate the return/destruction of excess materials
|
|
•
|
Coordinate the mailing of due diligence notices to all qualifying Shareholder Accounts as defined by the state filing matrix
|
|
•
|
Process returned due diligence notices and remitting property to Shareholders prior to escheatment
|
|
•
|
Prepare and file required preliminary and final unclaimed property reports
|
|
•
|
Prepare and file checks/wires for each state covering unclaimed funds as per state requirements
|
|
•
|
Retain, as required by law or otherwise, records of property escheated to the states and responding, after appropriate research, to Shareholder Inquiries relating to same
|
|
•
|
Identify Accounts eligible for SEC Mandated Searches
|
|
•
|
Perform electronic database searches in accordance with SEC requirements
|
|
•
|
Update new addresses provided by search firm
|
|
•
|
Send verification form to Shareholder to validate address
|
|
•
|
Reissue unclaimed property held to Shareholders upon receipt of signed verification form
|
|
|
Policy Number: IC24.0
|
Procedure Creation Date:
|
Adopted April 23, 2014 (by the Security Investors, LLC and Guggenheim Funds Investment Advisers, LLC)
|
Procedure Reviewed As Of:
|
April 23, 2014, March 20, 2015, May 9, 2016, April 2017, February 2018, August 2018
|
Procedure Revised As Of:
|
October 1, 2014
March 20, 2015
May 9, 2016
November 2016
April 2017
February 2018
August 2018
|
Regulatory Rules:
|
Rule 17j-1 under the Investment Company Act of 1940 and Rule 204A-1 under the Investment Advisers Act of 1940
|
Business Unit Responsible:
|
Compliance Department
|
Funds
|
Advisers
|
Service Providers
|
· Rydex Dynamic Funds
|
· Security Investors, LLC
|
· Guggenheim Funds Distributors, LLC*
|
· Rydex Series Funds
|
· Guggenheim Funds Investment Advisers, LLC
|
|
· Rydex Variable Trust
|
· Guggenheim Funds Distributors, LLC*
|
|
· Guggenheim Funds Trust
|
||
· Guggenheim Variable Funds Trust
|
||
· Guggenheim Strategy Funds Trust
|
||
· Transparent Value Trust
|
||
· Fiduciary/Claymore MLP Opportunity Fund
|
||
· Guggenheim Taxable Municipal Managed Duration Trust
|
||
· Guggenheim Credit Allocation Fund
|
||
· Guggenheim Enhanced Equity Income Fund
|
||
· Guggenheim Strategic Opportunities Fund
|
· Guggenheim Energy & Income Fund
|
||
*This code also covers those unit investment trusts for which Guggenheim Funds Distributors, LLC serves as depositor and references to “clients” herein include the unit investment trusts.
|
§
|
Know about present or future portfolio transactions or
|
§
|
Have the power to influence portfolio transactions; and
|
§
|
Engage in personal transactions in securities.
|
§
|
All Company officers and directors;
|
§
|
Company employees who have access to nonpublic information regarding any client’s purchase or sale of securities or the portfolio holdings of any reportable fund, e.g., portfolio management and fund accounting personnel, or who are involved in making securities recommendations to clients, or have access to such recommendations that are nonpublic;
|
§
|
Employees of any sub-adviser to the Funds who, in connection with their regular functions or duties, make, participate in, or obtain information regarding, the purchase or sale of a security by a Fund, or whose functions relate to the making of any recommendations with respect to such purchases or sales (“Sub-Advisor Access Persons”);
|
§
|
All Trustees of the Funds, both Interested and Independent; and
|
§
|
Natural persons in a control relationship with a Company who obtain information concerning recommendations made to a Fund or client about the purchase or sale of a security and are not specifically covered by any other section of the Code.
|
§
|
Independent Trustees of the Funds - Part A
|
§
|
Advisers Access Persons (Other than Independent Trustees of the Funds) - Part B
|
§
|
Natural Control Persons - Part C
|
2.2.
|
Other Provisions
|
1.
|
Shareholders’ and clients’ interests are paramount. You must place shareholder and client interests before your own.
|
2.
|
You must accomplish all personal securities transactions in a manner that avoids an actual conflict or even the appearance of a conflict of your personal interests with those of a Company’s clients, including a Fund’s shareholders.
|
3.
|
You must avoid actions or activities that allow (or appear to allow) you or your family to profit or benefit from your position with GI, or that bring into question your independence or judgment.
|
4.
|
You must comply with all applicable federal securities laws, including the prohibitions against the misuse of material nonpublic information, in conducting yourself and the operations of GI.
|
a.
|
employ any device, scheme or artifice to defraud the Fund or client account;
|
b.
|
make to a Fund or client any untrue statement of a material fact or omit to state to a Fund or client a material fact necessary in order to make the statements made, in light of the circumstances under which they are made, not misleading;
|
c.
|
engage in any act, practice or course of business which would operate as a fraud or deceit upon a Fund or client; or
|
d.
|
engage in any manipulative practice with respect to a Fund or client account.
|
4.2.
|
Limits on Accepting or Receiving Gifts
|
§
|
establish, maintain and enforce a code of ethics that meets the minimum requirements set forth in Rule 204A-1 under the Advisers Act and Rule 17j-1 under the 1940 Act, and submit such code of ethics to the Fund’s Board of Trustees;
|
§
|
on a quarterly basis provide the appropriate Fund(s) or the Advisor of such Fund a written attestation that the sub-adviser is in compliance with its code of ethics adopted pursuant to Rule 17j-1 under the 1940 Act;
|
§
|
promptly report, in writing, to the appropriate Fund(s) any material amendments to such code(s) of ethics;
|
§
|
promptly furnish to such Fund or the Advisor to such Fund, upon request, copies of any reports made pursuant to such code of ethics by any person who is a Sub-Advisor Access Person;
|
§
|
immediately furnish to such Fund or the Advisor to such Fund, without request, all material information regarding any violation of such code of ethics by any person who is a Sub-Advisor Access Person; and
|
§
|
at least once a year, provide such Fund or the Advisor of such Fund a written report that describes any issue(s) that arose during the previous year under its code of ethics, including any material code violations and any resulting sanction(s), and a certification that it has adopted measures reasonably necessary to prevent its personnel from violating its code of ethics.
|
§
|
Imply a duty of inquiry;
|
§
|
Presume you should have deduced or extrapolated from discussions or memoranda dealing with the Fund’s
|
§
|
Impute knowledge from your prior knowledge of the Fund’s portfolio holdings, market considerations, or investment policies, objectives and restrictions.
|
§
|
A copy of this Code and any other code which is, or at any time within the past five years has been, in effect will be preserved in an easily accessible place;
|
§
|
A list of all persons who are, or within the past five years have been, required to submit reports under this Code will be maintained in an easily accessible place;
|
§
|
A copy of each report made by a person under this Code will be preserved for a period of not less than five years from the end of the fiscal year in which it is made, the first two years in an easily accessible place;
|
§
|
A copy of each duplicate brokerage confirmation and each periodic statement provided under this Code will be preserved for a period of not less than five years from the end of the fiscal year in which it is made, the first two years in an easily accessible place.
|
§
|
A record of any Code violation and of any sanctions taken will be preserved in an easily accessible place for a period of not less than five years following the end of the fiscal year in which the violation occurred;
|
§
|
A copy of each annual report to the Board of Trustees will be maintained for at least five years from the end of the fiscal year in which it is made, the first two years in an easily accessible place;
|
§
|
A copy of all Acknowledgements of Receipt and Annual Certifications as required by this Code for each person who is currently, or within the past five years was required to provide such Acknowledgement of Receipt or Annual Certification; and
|
§
|
The Companies will maintain a record of any decision, and the reasons supporting the decision, to approve the acquisition of securities in a private placement, for at least five years after the end of the fiscal year in which the approval is granted.
|
Part A
|
Procedures for Independent Trustees
|
·
|
imply a duty of inquiry;
|
·
|
presume you should have deduced or extrapolated from discussions or memoranda dealing with the Fund’s investment strategies; or
|
·
|
impute knowledge from your prior knowledge of the Fund’s portfolio holdings, market considerations, or investment policies, objectives and restrictions.
|
Part B
|
Advisers Access Persons (Other Than Independent Trustees of the Funds)
|
Security Type:
|
Pre-Clearance Required:
|
Include on Quarterly Transaction & Annual Holdings Reports:
|
-Equities (stocks)
|
Yes
|
Yes
|
-Corporate, US Gov Agency, and Municipal Bonds
|
||
-Debt instruments issued directly by US Gov. (doesn’t include US Gov Agencies)
|
No
|
No
|
-All Options & Futures
|
Yes
|
Yes
|
-Commodity Futures
|
Yes
|
Yes
|
-ETFs
|
Yes
|
Yes
|
-Affiliated & Unaffiliated Closed-End Funds
|
Yes
|
Yes
|
-Bitcoin-Related Entities (e.g., entities deriving a substantial amount of revenue therefrom) or funds investing primarily in cryptocurrency (e.g., private funds or ETFs)
|
Yes
|
Yes
|
- Open End Mutual Funds (Affiliated – Rydex, Transparent Value (TV), GFunds except money market fund)
|
No
|
Yes
|
- Open End Mutual Funds (not advised by the Advisers covered by the code)
|
No
|
No
|
-Money Market Funds – Affiliated & Unaffiliated
|
No
|
No
|
-Bankers’ Acceptances & Bank CDs
|
No
|
No
|
-Commercial Paper
|
||
-Repurchase Agreements
|
||
-Affiliated & Unaffiliated Unit Investment Trusts invested exclusively in mutual funds
|
No
|
No
|
-Cryptocurrencies (direct investment)
|
No
|
No
|
Special Transaction Type**:
|
Pre-Clearance Required:
|
Include on Quarterly Transaction & Annual Holdings Reports:
|
IPOs (issued directly from the underwriting syndicate)
|
Prohibited
|
Prohibited
|
Initial Coin Offerings (“ICOs”)
|
Prohibited
|
Prohibited
|
Limited Offering
|
Yes
|
Yes
|
Participation in Investment Clubs
|
Prohibited
|
Prohibited
|
Private Placements
|
Yes
|
Yes
|
Automatic Dividend Reinvestments
|
No***
|
No***
|
Automatic Investment Plan
|
No***
|
No***
|
Exercising a put/call option that you purchased
|
Yes
|
Yes
|
Purchases/sales resulting from a put/call option written by you being exercised by other party
|
No
|
Yes
|
Tender offer transactions**
|
No
|
Yes
|
Acquisition of securities by gift or inheritance
|
No
|
Yes
|
Sale of securities acquired by gift or inheritance****
|
Yes
|
Yes
|
Trades in accounts managed on a discretionary basis by broker/RIA (documentation required)
|
No
|
Yes
|
Guggenheim Capital LLC membership interests
|
No
|
No
|
Guggenheim 401K****
|
Yes
|
Yes
|
Purchases arising from the exercise of rights issued by an issuer pro rata to all holders of a class of its securities, as long as you acquired these rights from the issuer, and sales of such rights so acquired.
|
No
|
Yes
|
Transactions which are non-volitional on your part, including sales from a margin account due to a bona fide margin call.
|
No
|
Yes
|
Transactions effected for any account over which you have no direct or indirect influence or control.
|
No
|
No
|
·
|
Futures referencing broad-based securities indices: for example, S&P 500, NASDAQ 100, and Russell 2000;
|
·
|
Futures referencing major currencies: for example, Euro, Yen, Australian dollar, and British pound;
|
·
|
Futures referencing the following physical commodities: Silver, Gold, Oil, and Natural Gas; and
|
·
|
Futures referencing US Government debt obligations: for example, 30 year Treasury bond, 10/5 year Treasury notes and long-term Treasury bonds
|
·
|
You may not acquire beneficial ownership of any cryptocurrencies offered in connection with an ICO;
|
·
|
You may not purchase or sell virtual coin futures or options; and
|
·
|
Investments in bitcoin-related entities (e.g., entities deriving a substantial amount of revenue therefrom) or funds investing primarily in cryptocurrency (e.g., private funds or ETFs) are permitted but must be pre-cleared prior to investment and reported in the Initial Holdings Report, Quarterly Personal Securities Transactions Report, and Annual Holdings Report.
|
Part C
|
Natural Control Persons
|
·
|
Futures referencing broad-based securities indices: for example, S&P 500, NASDAQ 100, and Russell 2000;
|
·
|
Futures referencing major currencies: for example, Euro, Yen, Australian dollar, and British pound;
|
·
|
Futures referencing the following physical commodities: Silver, Gold, Oil, and Natural Gas; and
|
·
|
Futures referencing US Government debt obligations: for example, 30-year Treasury bond, 10/5 year Treasury notes and long-term Treasury bonds
|
·
|
You may not acquire beneficial ownership of any cryptocurrencies offered in connection with an ICO;
|
·
|
You may not purchase or sell virtual coin futures or options; and
|
·
|
Investments in bitcoin-related entities (e.g., entities deriving a substantial amount of revenue therefrom) or funds investing primarily in cryptocurrency (e.g., private funds or ETFs) are permitted but must be pre-cleared prior to investment and reported in the Initial Holdings Report, Quarterly Personal Securities Transactions Report, and Annual Holdings Report.
|
Appendix A
|
Definitions
|
Entity
|
Rydex Dynamic Funds, Rydex Series Funds, Rydex Variable Trust, Guggenheim Funds Trust, Guggenheim Variable Funds Trust, Guggenheim Strategy Funds Trust, and Transparent Value Trust
|
Fiduciary/Claymore MLP Opportunity Fund, Guggenheim Taxable Municipal Bonds Managed Duration Trust, Guggenheim Credit Allocation Fund, Guggenheim Enhanced Equity Income Fund, Guggenheim Strategic Opportunities Fund, and Guggenheim Energy & Income Fund
|
Guggenheim Funds Distributors, LLC
|
Security Investors, LLC and Guggenheim Funds Investment Advisers, LLC
|
Compliance Officer
|
Elisabeth Miller
|
Joanna Catalucci
|
Dennis Metzger
|
Margaux Misantone
|
·
|
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).
|
·
|
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.
|
·
|
Any college savings account in which the Access Person has investment discretion and which holds Securities issued under Section 529 of the Internal Revenue Code and in which the Access Person has a direct or indirect interest.
|
·
|
Any other account that the CCO deems appropriate in light of the Access Person’s interest or involvement.
|
·
|
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 should report, any investment account of a member of their Immediate Family if they live in the same household.
|
·
|
Any 401(k) accounts from a previous employer which can or offer the ability to hold Securities.
|
This is to certify that I have reviewed the Code of Ethics (“Code”) and that I understand its terms and requirements. I hereby certify that:
|
|
· I have complied with the Code during the course of my association with the entities covered by the Code;
|
|
· I will continue to comply with the Code in the future;
|
|
· I will promptly report to a Compliance Officer any violation or possible violation of the Code of which I become aware; and
|
|
· I understand that a violation of the Code may be grounds for disciplinary action or termination of my employment and may also be a violation of federal and/or state securities laws.
|
|
Name: ________________________
|
|
Signature: ________________________
|
Date: ________________
|
1. | Objectives of the Code of Ethics | 4 |
2. | Who is Subject to the Code? | 4 |
3. | Who Administers the Code? | 5 |
3.1. | Chief Compliance Officer | 5 |
3.2. | Code of Ethics Compliance Platform | 6 |
4. | Fiduciary Duty to Clients | 7 |
4.1. | Managing Conflicts | 7 |
4.2. | Confidentiality and Safeguarding Information | 7 |
4.3. | Prohibition on Front Running | 7 |
4.4. | Compliance with the Code of Ethics | 7 |
5. | Reporting of Personal Trading | 8 |
5.1. | Which Investment Accounts Do Access Persons Need to Report? | 8 |
5.2. | Required Initial Holdings Reports and Certifications | 9 |
5.3. | Required Quarterly Transaction Reports | 10 |
5.4. | Annual Holdings Reports and Certifications | 12 |
5.5. | New Investment Accounts | 12 |
6. | Pre-clearance for Personal Trading | 12 |
6.1. | Trades Requiring Pre-Clearance | 13 |
6.2. | Trades Not Requiring Pre-Clearance | 13 |
6.3. | Prohibited Transactions | 14 |
7. | Trading Restrictions | 15 |
7.1. | For All Trading | 15 |
7.2. | Excessive Trading in Reportable Accounts | 15 |
7.3. | Holding Periods | 15 |
8. | Annual Review | 16 |
9. | Retention of Records | 16 |
10. | Sanctions | 16 |
11. | Interpretations and Exceptions | 17 |
12. |
Supplement 1 – Transactions in Closed End Funds (“CEFs”) Advised or Sub-Advised by the Advisor
|
18 |
13. |
Supplement 2 – Transactions in Exchange Traded Funds (“ETFs”) Advised or Sub-Advised by the Advisor and Securities Traded by Such Funds
|
20 |
14. |
Supplement 3 – Transactions in Unit Investment Trusts (“UITs”) for Which the Advisor Assists with the Selection of Securities Traded by Such Trusts
|
21 |
1.
|
Objectives of the Code of Ethics
|
2.
|
Who is Subject to the Code?
|
a.
|
Employee, Director, officer, manager, principal and partner of the Advisor (or other persons occupying a similar status or performing similar functions), or other person who provides advice on behalf of the Advisor or is subject to the Advisor’s supervision and control;
|
b.
|
Any person who:
|
i.
|
Has access to nonpublic information regarding any of the Advisor’s client’s purchase or sale of securities, or nonpublic information regarding the portfolio holdings of any client account the Advisor or their affiliates manage, or any fund which is advised or sub-advised by the Advisor (or certain affiliates, where applicable);
|
ii.
|
Makes recommendations or investment decisions on behalf of the Advisor;
|
iii.
|
Has the power to exercise a controlling influence over the management and policies of the Advisor, or over investment decisions, who obtains information concerning recommendations made to a client account with regard to the purchase or sale of a security;
|
iv.
|
The CCO shall determine on a case-by-case basis whether a temporary employee (e.g., consultant or intern) should be considered an Access Person. Such determination shall be made based upon an application of the criteria provided above, whether an appropriate confidentiality agreement is in place, and such other information as may be necessary to ensure that proprietary information is protected. As such, temporary employees may only be subject to certain sections of the Code, such as certifying to it, or may be exempt from certain reporting requirements such as not having to hold their reportable accounts at the permitted broker-dealers; or
|
v.
|
Any person deemed to be an Access Person by the CCO.
|
3.
|
Who Administers the Code?
|
3.1.
|
Chief Compliance Officer
|
3.1.1.
|
Responsibilities
|
3.1.2.
|
Reporting of Violations
|
3.1.3.
|
Review of Violations
|
▪
|
No Employee, who in good faith reports a violation of this Code, shall suffer harassment, retaliation or with respect to a report concerning a violation by another Employee, adverse employment consequences.
|
▪
|
An Employee who retaliates against someone who has reported a violation in good faith may be subject to disciplinary action. Alternatively, the Advisor will treat any malicious or knowingly false report of a violation to be a serious offense and may discipline the Employee making such a report.
|
3.1.4.
|
Review of CCO Compliance with Code
|
3.1.5.
|
Employee Cooperation
|
3.2.
|
Code of Ethics Compliance Platform
|
3.2.1.
|
Use of Compliance Platform
|
▪
|
Code reporting requirements are to be completed through the Compliance Platform (including certifications, personal securities transactions covered by the Code, disciplinary disclosures, outside business affiliations, private transactions, board memberships, and gifts and entertainment) or through an alternate manner approved by the GPIM Compliance Department.
|
▪
|
At the time of designation as an Access Person, Central Compliance will provide all Access Persons with login information and instructions for using the Compliance Platform.
|
3.2.2.
|
Electronic Reporting
|
3.2.3.
|
Exceptions to Electronic Reporting
|
4.
|
Fiduciary Duty to Clients
|
4.1.
|
Managing Conflicts
|
4.2.
|
Confidentiality and Safeguarding Information
|
4.3.
|
Prohibition on Front Running
|
4.4.
|
Compliance with the Code of Ethics
|
5.
|
Reporting of Personal Trading
|
5.1.
|
Which Investment Accounts Do Access Persons Need to Report?
|
5.1.1.
|
Report any of the following Investment Accounts:
|
a.
|
The Access Person has Beneficial Ownership3 over an Investment Account.
|
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 has investment discretion and which 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 should report, any Investment Account of a member of their Immediate Family if they live in the same household.
|
g.
|
Any 401(k) accounts from a previous employer which can, or offer the ability to, hold Covered Securities.
|
5.1.2.
|
Independently managed third-party account reporting:
|
a.
|
Access Persons must disclose managed/third-party discretionary accounts, i.e., where the person has “no direct or indirect influence or control”.
|
b.
|
Access Persons are required to obtain a signed copy of the Managed Account Letter (provided by Central Compliance) from their third-party investment advisor confirming that the advisor has authority to effect transactions on behalf of the account without obtaining prior consent of the Access Person and that the Access Person does not direct trades in the account.
|
c.
|
Access Persons should immediately notify Central Compliance in writing if there are any changes in control over the account or if there are any changes to the relationship between the trustee or third-party investment advisor and the Access Person (i.e., independent professional or friend or relative, unaffiliated versus affiliated firm). Please note that an immediate family member with discretion over a covered account is not considered a third-party advisor.
|
d.
|
Trades in managed/third-party discretionary accounts are not subject to the pre-clearance requirements and trading restrictions of the Code.
|
e.
|
Account holdings/transactions in such accounts do not need to be reported if the Access Person has no influence or control over the account.
|
5.2.
|
Required Initial Holdings Reports and Certifications
|
a.
|
Access Persons must report all of their Investment Accounts. (See Section 5.1.1 for more information.)
|
b.
|
The report must include copies of statements which include 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 the Compliance Platform, the Advisor will obtain account information electronically, after the Access Person has completed the appropriate authorizations as required by the brokerage firm.
|
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 an Employee of the Advisor and so designated as an Access Person, 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.
|
Access Persons must complete a form certifying receipt and acknowledgement of this Code.
|
e.
|
All Access Persons and any new accounts of current Access Persons must maintain their personal brokerage accounts with brokerage firms designated and approved by Central Compliance.4 The CCO or his designee may provide exceptions to this policy on a limited basis, however the Access Person will be responsible for ensuring that the account statements and trade confirmations are received by Central Compliance in a timely manner.
|
f.
|
Existing accounts by new Access Persons which are not held at the permitted broker-dealers must be transferred within 60 calendar days from the date the Access Person is so designated; the failure to transfer within this time will be considered a violation of this Code. Any request to extend the 60 days transfer deadline must be accompanied by a written explanation by the current broker-dealer as to the reason for delay. Central Compliance may grant specific exceptions in writing.
|
5.3.
|
Required Quarterly Transaction Reports
|
5.3.1.
|
Information required on a quarterly basis:
|
▪
|
Stock
|
▪
|
Note
|
▪
|
Treasury stock
|
▪
|
Security future
|
▪
|
Bond
|
▪
|
Debenture
|
▪
|
Evidence of indebtedness
|
▪
|
Investment contract
|
▪
|
Voting trust certificate
|
▪
|
Certificate of deposit for a security
|
▪
|
Option on any security or on any group or index of securities (e.g., put, call or straddle)
|
▪
|
Exchange traded fund (ETF)
|
▪
|
Limited partnership
|
▪
|
Certificate of interest or participation in any profit-sharing agreement
|
▪
|
Collateral-RIC certificate
|
▪
|
Fractional undivided interest in oil, gas or other mineral right
|
▪
|
Pre-organizational certificate or subscription
|
▪
|
Transferable shares
|
▪
|
Foreign unit trust (i.e., UCIT) and foreign mutual fund
|
▪
|
Private Investments (as defined in Section 6.1 below). Please note that a Private Investment and Loan Pre-Clearance Form (available through OneGuggenheim) must be completed prior to any new investment.
|
▪
|
Unit investment trusts (UIT)
|
▪
|
Closed-end mutual funds
|
▪
|
Any 529 college savings plans
|
▪
|
Open-end mutual funds managed, advised or sub-advised by the Advisor or an affiliate, as applicable
|
▪
|
Any other instrument that is considered a “security” under the applicable securities laws
|
5.4.
|
Annual Holdings Reports and Certifications
|
5.4.1.
|
Information required on an annual basis:
|
▪
|
Access Persons must provide a list of all Covered Securities in which they or their Immediate Family 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.
|
▪
|
Access Persons must report all accounts and holdings within 30 calendar days after year end via the Compliance Platform, or as otherwise permitted by Central Compliance, and the information must be current as of a date no more than 45 calendar days prior to the date the report is submitted.
|
▪
|
Access Persons must also certify annually that they have complied with the requirements and have disclosed all holdings required to be disclosed pursuant to the requirements of this Code. In addition, Access Persons will respond to personal disciplinary history questions.
|
5.5.
|
New Investment Accounts
|
6.
|
Pre-clearance for Personal Trading
|
6.1.
|
Trades Requiring Pre-Clearance
|
1. |
Covered Securities: Unless excluded below, Access Persons must pre-clear trades in Covered Securities through the Compliance Platform, which checks the trade against the Advisor’s Restricted List and any other applicable rules and guidelines. (See Section 5.3.1 above for the full list of Covered Securities.)
|
2. |
Initial Public Offerings: Trades in IPO’s must be pre-cleared. Access Persons must request pre-approval by submitting the Private Investment and Loan Pre-Clearance Form to Central Compliance. The form is available on OneGuggenheim. Note: Any Employee who is also registered with a broker-dealer is prohibited from participating in an IPO.
|
3. |
Private Investments: Private Investments include, but are not limited to investments in: hedge funds, private equity funds, venture capital funds, other private fund vehicles and privately-held companies. New Access Persons must disclose any existing Private Investments within 10 days of becoming an Access Person. The Central Compliance Employee Activities Group sends an email to all new Access Persons with the Private Investments Disclosure Form, which they must complete. Existing Access Persons are required to seek prior written approval to invest in any new Private Investments and must complete the Private Investment and Loan Pre-Clearance Form (available through OneGuggenheim), providing information about the investment that will assist Central Compliance with the review of the request. The Guggenheim Capital Conflicts Review Committee (“CRC”) may also review private investment requests for approval, as necessary. Approval by the CRC is required in the event that it is determined that a proposed or existing private investment involves one or more potential significant conflicts of interest.
|
6.2.
|
Trades Not Requiring Pre-Clearance
|
1. |
Government Securities/Certain Other Debt Instruments: 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 Registered Funds: Trades in open-end mutual funds that are not advised or sub-advised by the Advisor or affiliates are not required to be pre-cleared.
|
4. |
No Knowledge: Securities transactions where no knowledge of the transaction exists before it is completed are not required to be pre-cleared. For example, a transaction
|
effected by a trustee of a blind trust or discretionary trades involving an investment partnership, when the Access Person is neither consulted nor advised of the trade before it is executed, are not required to be pre-cleared. If an option is exercised, the underlying transaction need not be pre-cleared though the option itself must 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 Not Advised or Sub-Advised by the Advisor: 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 Registered Funds advised or sub-advised by the Advisor, are not required to be pre-cleared.
|
7. |
Miscellaneous: Any transaction in any other securities as Central Compliance may designate.
|
6.3.
|
Prohibited Transactions
|
1. |
Investment Clubs: Participation in Investment Clubs is prohibited. Generally, an Investment Club is a group of people who pool their money to make investments. Usually, Investment Clubs are organized as partnerships and after members study different investments, the group decides to buy or sell based on a majority vote of the members. If you have any questions regarding whether an arrangement is an Investment Club, please contact Central Compliance.
|
2. |
Commodity Interests: Trading in Commodity Interests and related Futures are generally prohibited, except for the following types of futures: (i) Futures referencing broad-based securities indices (for example; S&P 500; NASDAQ 1000; and Russell 2000); (ii) Futures referencing major currencies (for example: Euro; Yen; Australian Dollar; and British Pound); (iii) Futures referencing the following physical commodities: Gold; Silver; Oil; and Natural Gas; and (iv) Futures referencing US Government debt obligations (for example: 30 year Treasury bond; 10/5 year Treasury Notes; and long-term Treasury Bonds).
|
7.
|
Trading Restrictions
|
7.1.
|
For All Trading
|
7.1.1.
|
Market Manipulation
|
7.1.2.
|
Trading on Inside Information
|
7.1.3.
|
Front-running
|
7.2.
|
Excessive Trading in Reportable Accounts
|
7.3.
|
Holding Periods
|
7.3.1.
|
Registered Funds
|
▪
|
After purchase in an account of a closed-end mutual fund advised or sub-advised by the Advisor, Access Persons must hold that security in that account for at least 60 calendar days from the date of purchase.
|
▪
|
Note that this limitation also applies to any purchase or sale 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.
|
8.
|
Annual Review
|
9.
|
Retention of Records
|
10.
|
Sanctions
|
11.
|
Interpretations and Exceptions
|
12.
|
Supplement 1 – Transactions in Closed End Funds (“CEFs”) Advised or Sub-Advised by the Advisor
|
12.1.
|
Pre-Approval
|
12.2.
|
Blackouts – Dividend
|
12.3.
|
Blackouts – Fund Securities
|
12.4.
|
Holding Period
|
12.5.
|
Requests for Exceptions from Blackouts
|
12.6.
|
Review of Trading
|
12.7.
|
Reporting of Transactions
|
13.
|
Supplement 2 – Transactions in Exchange Traded Funds (“ETFs”) Advised or Sub-Advised by the Advisor and Securities Traded by Such Funds
|
13.1.
|
Pre-Approval
|
13.2.
|
Blackouts – Fund Securities
|
13.3.
|
Investment of Dividends
|
13.4.
|
Requests for Exceptions from Blackouts
|
13.5.
|
Review of Trading
|
14.
|
Supplement 3 – Transactions in Unit Investment Trusts (“UITs”) for Which the Advisor Assists with the Selection of Securities Traded by Such Trusts
|
14.1.
|
Blackouts
|
14.2.
|
Requests for Exceptions from Blackouts
|
14.3.
|
Review of Trading
|
/s/ Brian E. Binder
Brian E. Binder
President, Chief Executive Officer
|
/s/ Randall C. Barnes
Randall C. Barnes
Trustee
|
/s/ John L. Sullivan
John L. Sullivan
Chief Financial Officer, Chief Accounting
Officer and Treasurer
|
/s/ Donald A. Chubb, Jr.
Donald A. Chubb, Jr.
Trustee
|
/s/ Jerry B. Farley
Jerry B. Farley
Trustee
|
|
/s/ Roman Friedrich III
Roman Friedrich III
Trustee
|
|
/s/ Amy J. Lee
Amy J. Lee
Trustee
|
|
/s/ Ronald A. Nyberg
Ronald A. Nyberg
Trustee
|
|
/s/ Ronald E. Toupin, Jr.
Ronald E. Toupin, Jr.
Trustee
|
Per Share
|
Total(1)
|
|
Public offering price
|
$
|
$
|
Underwriting discount
|
$
|
$
|
Proceeds, before expenses, to the Trust(2)
|
$
|
$
|
1 |
In addition to the sections outlined in this form of prospectus supplement, each prospectus supplement actually used in connection with an offering conducted pursuant to the registration statement to which this form of prospectus supplement is attached will be updated to include such other information as may then be required to be disclosed therein pursuant to applicable law or regulation as in effect as of the date of each such prospectus supplement, including, without limitation, information particular to the terms of each security offered thereby and any related risk factors or tax considerations pertaining thereto. This form of prospectus supplement is intended only to provide a rough approximation of the nature and type of disclosure that may appear in any actual prospectus supplement used for the purposes of offering securities pursuant to the registration statement to which this form of prospectus supplement is attached, and is not intended to and does not contain all of the information that would appear is any such actual prospectus supplement, and should not be used or relied upon in connection with any offer or sale of securities.
|
(1) |
[The Trust has granted the underwriters an option to purchase up to an additional common shares at the public offering price, less the sales load, within days of the date of this prospectus solely to cover overallotments, if any. If such option is exercised in full, the public offering price, sales load, estimated offering expenses and proceeds, before expenses, to the Trust will be $ , $ and $ , respectively. See “Underwriting.”]
|
(2) |
Offering expenses payable by the Trust will be deducted from the Proceeds, before expenses, to the Trust. Total offering expenses (other than sales load) are estimated to be $ , which will be paid by the Trust.
|
|
Page
|
Prospectus Supplement
|
S-
|
|
S-
|
Prospectus Supplement Summary
|
S-
|
Summary of Trust Expenses
|
S-
|
Capitalization |
S-
|
Use of Proceeds |
S-
|
Recent Developments
|
S-
|
Underwriters
|
S-
|
Legal Matters
|
S-
|
Independent Registered Public Accounting Firm |
S-
|
Additional Information |
S-
|
Prospectus
|
|
|
|
Prospectus Summary
|
|
Summary of Trust Expenses |
|
Senior Securities and Other Financial Leverage |
|
The Trust |
|
Use of Proceeds |
|
Market and Net Asset Value Information |
|
Investment Objective and Policies |
|
The Trust’s Investments |
|
Use of Financial Leverage |
|
Risks |
|
Management of the Trust |
|
Net Asset Value
|
|
Distributions |
|
Dividend Reinvestment Plan |
|
Description of Capital Structure
|
|
Anti-Takeover and Other Provisions in the Trust’s Governing Documents |
|
Closed-End Fund Structure |
|
Repurchase of Common Shares; Conversion to Open-End Fund |
|
Tax Matters |
|
Plan of Distribution |
|
Custodian, Administrator, Transfer Agent and Dividend Disbursing Agent |
|
Legal Matters
|
|
Independent Registered Public Accounting Firm |
|
Additional Information |
|
Privacy Principles of the Trust |
|
Table of Contents of the Statement of Additional Information
|
|
Common Shares Outstanding after the Offering
The number of Common Shares offered and outstanding after the offering assumes the underwriters’ over-allotment option is not exercised. If the over-allotment option is exercised in full, the Trust will issue an additional Common Shares and will have Common Shares outstanding after the Offering.
The Trust’s Common Shares have recently traded at a premium to net asset value (“NAV”) per share and the price of the Common Shares is expected to be above net asset value per share. Therefore, investors in this offering are likely to experience immediate dilution of their investment. Furthermore, shares of closed-end investment companies, such as the Trust, frequently trade at a price below their NAV. The Trust cannot predict whether its Common Shares will trade at a premium or a discount to NAV.
|
|
Risks
|
See “Risks” beginning on page of the accompanying Prospectus for a discussion of factors you should consider carefully before deciding to invest in the Trust’s Common Shares.
|
Use of Proceeds
|
The Trust estimates the net proceeds of the offering to be approximately $ . The Trust intends to invest the net proceeds of the offering in accordance with its investment objective and policies as stated in the accompanying Prospectus. It is currently anticipated that the Trust will be able to invest substantially all of the net proceeds of the offering in accordance with its investment objective and policies within months after the completion of the offering. Pending such investment, it is anticipated that the proceeds will be invested in cash, cash equivalents or other securities, including U.S. government securities or high quality, short-term debt securities. The Trust may also use the proceeds for working capital purposes, including the payment of distributions, interest and operating expenses, although the Trust currently has no intent to issue Securities primarily for these purposes.
|
Shareholder Transaction Expenses |
|
Sales load (as a percentage of offering price)
|
%
|
Offering expenses borne by the Trust (as a percentage of offering price)
|
%
|
Automatic Dividend Reinvestment Plan fees(1)
|
None
|
Annual Expenses |
Percentage of Net Assets
Attributable to Common Shares
|
Management fees(2)
|
%
|
Interest expense(3)
|
%
|
Other expenses(4)
|
%
|
Total annual expenses
|
%
|
(1) |
Dividend reinvestment plan participants that direct a sale of Common Shares through the Plan Agent are subject to a sales fee of $ plus $ per share sold. See “Dividend Reinvestment Plan.”
|
(2) |
The Trust pays the Adviser an annual fee, payable monthly, in an amount equal to 0.60% of the Trust’s average daily Managed Assets (net assets plus any assets attributable to Financial Leverage). The fee shown above is based upon outstanding Financial Leverage of % of the Trust’s Managed Assets. If Financial Leverage of more than % of the Trust’s Managed Assets is used, the management fees shown would be higher. Management fees calculated based on management fees earned for the year ended divided by average net assets attributable to Common Shareholders for the period ended .
|
(3) |
Interest expense is based on the Trust’s outstanding reverse repurchase agreements as of , and assumes the use of leverage in the form of reverse repurchase agreements representing % of the Trust’s Managed Assets at an annual interest rate cost to the Trust of %. The actual interest expense will vary over time in accordance with the amount of reverse repurchase agreement transactions and variations in market interest rates.
|
(4) |
Other expenses are estimated based upon those incurred during the fiscal year ended.
|
1 Year
|
3 Years
|
5 Years
|
10 Years
|
|
Total Expenses Incurred
|
$
|
$
|
$
|
$
|
* |
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 Trust’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.
|
(i) | on a historical basis; |
(ii) | on an as adjusted basis to reflect the issuance of an aggregate of Common Shares pursuant to the Trust’s Automatic Dividend Reinvestment Plan, and the application of the net proceeds from such issuances of Common Shares; and |
(iii) | on an as further adjusted basis to reflect the assumed sale of of Common Shares at a price of $ per share in an offering under this Prospectus Supplement and the accompanying Prospectus less the aggregate underwriting discount of $ and estimated offering expenses payable by the Trust of $ (assuming no exercise of the underwriters’ over-allotment option). |
Actual
|
As Adjusted
(unaudited)
|
As Further
Adjusted
(unaudited)
|
|
Short-Term Debt:
|
|||
Borrowings
|
$
|
$
|
$
|
Common Shareholder’s Equity:
|
|||
Common shares of beneficial interest, par value $0.01 per share; unlimited shares authorized, shares issued and outstanding (actual), shares issued and outstanding (as adjusted), and shares issued and outstanding (as further adjusted)
|
|||
Additional paid-in capital
|
|||
Total distributable earnings (loss)
|
|||
Net assets
|