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Closed-End Senior Loan & Income Portfolio Series 2


Investment Objective

The Closed-End Senior Loan and Income Portfolio ("Trust") seeks to provide high current income and the potential for capital appreciation.

Principal Investment Strategy

Selection Criteria

Risks and Other Considerations

Portfolio Information

Deposit Information

Inception Date 4/21/2004
Non-Reoffered Date 10/8/2004
Mandatory Maturity Date 4/22/2009
Ticker Symbol CESLBX
Trust Structure Grantor
Inception Unit Price $10.0000
Maturity Price (as of 4/22/09) $3.8682

Past performance is no guarantee of future results. Investment returns and principal value will fluctuate with changes in market conditions. Investors' units, when redeemed, may be worth more or less than their original cost.

This information does not constitute an offer to sell or a solicitation of any offer to buy: nor shall there be any sale of these securities in any state where the offer, solicitation, or sale is not permitted.

Principal Investment Strategy

The Trust will invest, under normal circumstances, at least 80% of the value of its assets in common stocks of closed-end investment companies (“closed-end funds”) that are considered to be senior loan funds and/or income funds. Claymore, through proprietary research and strategic alliances, will strive to select closed-end funds featuring the potential for current income, diversification and overall liquidity.

Selection Criteria

The Sponsor has selected for the portfolio common stocks of closed-end funds believed to have the best potential to achieve the Trust’s investment objective (the “securities”). The closed-end funds’ portfolios consist primarily of Senior Loans and/or income producing securities including high-yield securities.

As of the Trust’s inception date (the “Inception Date”), 100% of the Trust’s portfolio is invested in securities of closed-end funds with portfolios that consist primarily of Senior Loans and/or income producing securities including high-yield securities.

Senior loans are made by banks, other financial institutions, and other investors (“Lenders”), to corporations, partnerships, limited liability companies and other entities (“Borrowers”) to finance leveraged buyouts, recapitalizations, mergers, acquisitions, stock repurchases, debt refinancings and, to a lesser extent, for general operating and other purposes (“Senior Loans”). Senior Loans generally are not subordinate to other significant claims on a Borrower’s assets. Closed-end income funds may include various bonds and other income producing securities including high-yield securities. High-yield securities are securities rated below investment grade (Baa or BBB) as determined by Moody’s Investor Services (“Moody’s”) and/or Standard & Poor’s, a division of The McGraw-Hill Companies, Inc. (“Standard & Poor’s”). Senior loans are generally rated below investment grade.

Senior Loans generally are negotiated between a Borrower and the Lenders represented by one or more Lenders acting as agent (“Agent”) of all the Lenders. The Agent is responsible for negotiating the loan agreement (“Loan Agreement”) that establishes the terms and conditions of the Senior Loan and the rights of the Borrower and the Lenders. The Agent is paid a fee by the Borrower for its services.

The majority of senior loans have either fixed or floating rates. The key difference between floating- and fixed-rate debt instruments is the manner in which the interest rate is set. In the case of fixed rate loans, the rate of interest to be paid is fixed at the time of issuance. In the case of a floating rate loan, current market interest rates dictate the rate of interest paid on the loan. Therefore, if interest rates go up, the interest payments on a floating rate loan will be reset at a higher level (typically over a 3-6 month period). Conversely, if interest rates fall, the interest payments on a floating rate loan will be re-set at a lower level.

While senior loans can provide investors with high current income potential, the majority of senior loans are considered below investment grade, and therefore retain a higher credit risk relative to lower yielding, investment grade securities. The provision of price stability and preservation of capital is typical to senior loans as well; however, the senior loan market is still considered relatively illiquid.

For floating rate Senior Loans, the interest rates are generally adjusted based on a base rate plus a premium or spread over the base rate. The base rate usually is:

  • the London Inter-Bank Offered Rate (“LIBOR”);
  • the prime rate offered by one or more major United States banks (the “Prime Rate”)
  • the certificate of deposit (“CD”) rate or other base lending rates used by commercial lenders.

LIBOR, as provided for in Loan Agreements, usually is an average of the interest rates quoted by several designated banks as the rates at which they pay interest to major depositors in the London interbank market on U.S. dollar-denominated deposits. The Prime Rate quoted by a major U.S. bank is generally the interest rate at which that bank is willing to lend U.S. dollars to its most creditworthy borrowers, although it may not be the bank’s lowest available rate. The CD rate, as provided for in Loan Agreements, usually is the average rate paid on large certificates of deposit traded in the secondary market.

Interest rates on Senior Loans may adjust daily, monthly, quarterly, semi-annually or annually. Senior Loans are generally rated below investment grade and may be unrated at the time of investment.

High-yield or “junk” securities, the generic names for securities rated below “BBB” by Standard & Poor’s or “Baa” by Moody’s, are frequently issued by corporations in the growth stage of their development or by established companies who are highly leveraged or whose operations or industries are depressed. Securities that are rated below investment grade by either Standard & Poor’s or Moody’s will be deemed to be below investment grade for purposes of the trust even if the security has received an investment grade rating by either party. Obligations rated below investment grade should be considered speculative as these ratings indicate a quality of less than investment grade. Because high-yield securities are generally perceived by investors to be riskier than higher rated securities, their prices tend to fluctuate more than higher rated securities and are affected by short-term credit developments to a greater degree.

See “Description of Ratings” in Part B of the prospectus for additional information regarding the ratings criteria.

Risks and Other Considerations

You can lose money by investing in the Trust. The Trust also might not perform as well as you expect. This can happen for reasons such as these:

  • Share prices can be volatile. The value of your investment may fall over time.
  • The value of the securities in the closed-end funds will generally fall if interest rates, in general, rise. Typically, securities with longer periods before maturity are more sensitive to interest rate changes.
  • An issuer may be unwilling or unable to make principal payments and/or to declare dividends in the future, may call a security before its stated maturity, or may reduce the level of dividends declared. This may result in a reduction in the value of your units.
  • The financial condition of an issuer may worsen or its credit ratings may drop, resulting in a reduction in the value of your units. This may occur at any point in time, including during the primary offering period.
  • The Trust is concentrated in securities of closed-end funds. Closed-end funds are actively managed investment companies that invest in various types of securities. Closed-end funds issue shares of common stock that are traded on a securities exchange. Closed-end funds are subject to various risks, including management’s ability to meet the closed-end fund’s investment objective, and to manage the closed-end fund portfolio when the underlying securities are redeemed or sold, during periods of market turmoil and as investors’ perceptions regarding closed-end funds or their underlying investments change. Closed-end funds are not redeemable at the option of the shareholder and they may trade in the market at a discount to their net asset value. Closed-end funds may also employ the use of leverage which increases risk and volatility.
  • Certain closed-end funds held by the Trust invest in securities that are rated below investment grade and are considered to be “junk” securities. Below investment grade obligations are considered to be speculative and are subject to greater market and credit risks, and accordingly, the risk of nonpayment or default is higher than investment grade securities. In addition, such securities may be more sensitive to interest rate changes and more likely to receive early returns of principal.
  • Some of the closed-end funds held by the Trust may invest in securities that are rated as investment grade by only one rating agency. As a result, such split-rated securities may have more speculative characteristics and are more subject to a greater risk of default than securities rated as investment grade by both Moody’s and Standard & Poor’s.
  • Certain closed-end funds held by the Trust invest in Senior Loans. Borrowers under Senior Loans may default on their obligations to pay principal or interest when due. This non-payment would result in a reduction of income to the applicable closed-end fund, a reduction in the value of the Senior Loan experiencing non-payment and a decrease in the net asset value of the closed-end fund. Although Senior Loans in which the closed-end funds invest may be secured by specific collateral, there can be no assurance that liquidation of collateral would satisfy the Borrower’s obligation in the event of non-payment of scheduled principal or interest or that such collateral could be readily liquidated

Please see the Trust prospectus for more complete risk information.

Unit Investment Trusts are fixed, not actively managed and should be considered as part of a long-term strategy. Investors should consider their ability to invest in successive portfolios, if available, at the applicable sales charge. UITs are subject to annual fund operating expenses in addition to the sales charge. Investors should consult an attorney or tax advisor regarding tax consequences associated with an investment from one series to the next, if available, and with the purchase or sale of units. Guggenheim Funds Distributors, LLC does not offer tax advice.

Read a prospectus and summary prospectus (if available) carefully before investing. It contains the investment objective, risks charges, expenses and the other information, which should be considered carefully before investing. To obtain a prospectus and summary prospectus (if available) click here or call 800.820.0888.

Investing involves risk, including the possible loss of principal.

Guggenheim Investments represents the following affiliated investment management businesses of Guggenheim Partners, LLC: Guggenheim Partners Investment Management, LLC, Security Investors, LLC, Guggenheim Funds Distributors, LLC, Guggenheim Funds Investment Advisors, LLC, Guggenheim Partners Advisors, LLC, Guggenheim Corporate Funding, LLC, Guggenheim Partners Europe Limited, Guggenheim Partners Fund Management (Europe) Limited, Guggenheim Partners Japan Limited, GS GAMMA Advisors, LLC, and Guggenheim Partners India Management. Securities offered through Guggenheim Funds Distributors, LLC.

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