Closed-End Senior Loan & Income Portfolio Series 5

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.

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 closed-end funds’ portfolios consist primarily of senior loans and/or income producing securities including high-yield securities.

As of the Trust’s initial date of deposit (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.

When selecting closed-end funds for inclusion in this portfolio the Sponsor looks at numerous factors. These factors include, but are not limited to:

• Investment Objective. The Sponsor favors funds that have a clear investment objective in line with the Trust’s objective and, based upon a review of publicly available information, appear to be maintaining it.
• Premium/Discount. The Sponsor favors funds that are trading at a discount relative to their peers and relative to their long-term average.
• Consistent Dividend. The Sponsor favors funds that have a history of paying a consistent and competitive dividend which, in the opinion of the Sponsor, can be maintained.
• Performance. The Sponsor favors funds that have a history of strong relative performance (based on market price and net asset value) when compared to their peers and an applicable benchmark.

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:

• Stock 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. Senior loans in which the closed-end funds invest:
  • generally are of below investment grade credit quality
  • may be unrated at the time of investment
  • generally are not registered with the Securities and Exchange Commission (“SEC”) or any state securities commission
  • generally are not listed on any securities exchange
  In addition, the amount of public information available on senior loans generally is less extensive than that available for other types of assets.
• The Trust is considered to be a “trust of funds.” As such, it is subject to certain termination restrictions that may result in a reduction in the value of your units.
• The Sponsor does not actively manage the portfolio. The Trust will generally hold, and may continue to buy, the same securities even though the security’s outlook or rating or its market value or yield may have changed.
• Inflation may decrease the value of money. Inflation may lead to a decrease in the value of assets or income from investments.