The Senior Loan & Income Portfolio of CEFs, Series 40 ("Trust") seeks to provide current income and the potential for capital appreciation.
|Wrap Fee Price||$10.2531|
|Remaining Deferred Sales Charge||$0.2250|
|Mandatory Maturity Date||5/3/2023|
|Inception Unit Price||$10.0000|
|Inception Liquidation Price||$9.7750|
|Deferred Sales Charge Dates||
|Number of Holdings||14|
|Rate Fee Based||5.89%|
* The Historical Annual Dividend Distribution (HADD) per unit is as of the day prior to trust deposit and subject to change. The HADD per unit is the weighted average of the trailing twelve-month distributions paid by the securities included in the portfolio. The HADD rate is based on the HADD divided by the current offer price and recalculated daily. Both the HADD per unit and the rate shown are reduced to account for the effects of fees and expenses, which will be incurred when investing in the Trust. The HADD per unit and rate will vary due to certain factors that may include, but are not limited to, a change in the dividends paid by issuers, a change in Trust expenses or the sale or maturity of securities in the portfolio. There is no guarantee the issuers of the securities included in the Trust will declare dividends or distributions in the future. The HADD of the securities included in the Trust is for illustrative purposes only and is not indicative of the Trust’s distribution. Due to the negative economic impact across many industries caused by the recent COVID-19 outbreak, certain issuers of the securities included in the trust may elect to reduce the amount of, or cancel entirely, dividends and/or distributions paid in the future. As a result, the HADD figure will likely be higher, and in some cases significantly higher, than the actual distribution rate achieved by the trust.
|Trust Weighted Average||-1.38%|
|Closed-End Fund ("CEF") Universe Average||-2.13%|
* Closed-end funds may trade at a premium or discount to their net asset value (“NAV”). The Premium/Discount shown is for the underlying securities held by the closed-end funds in the UIT. This is the weighted average of all the CEFs in portfolio.
|Weighted Average Leverage Ratio**||33.97%|
** The Total value of the fund’s outstanding leverage presented as a percentage of total assets.
Example: Percentage of Total Assets represented by leverage.(e.g., Total Assets = $200M; Net Assets = $160M; Leverage = $40M. Leverage = 20%, calculated by dividing $40M by $200M.)
Premium/Discount and Holdings Analysis data is provided by Morningstar Traded Fund Center. Data is subject to change on a nightly basis. The data is for the underlying securities held by the closed-end funds in the UIT. The total percentages may not be equal to 100% due to rounding. N/A indicates that certain securities have not been identified and/or classified by the data provider.
The Closed-End Fund (“CEF”) Universe is comprised of all CEFs currently listed on U.S. exchanges.
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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.
Principal Investment Strategy
Under normal circumstances, the trust invests at least 80% of the value of its assets in common shares of closed-end investment companies (“Closed-End Funds”) that invest substantially all of their assets in senior loan funds and/or income funds. Guggenheim, through proprietary research, will strive to select Closed-End Funds featuring the potential for current income, diversification and overall liquidity.
The Sponsor has selected for the portfolio Closed-End Funds believed to have the best potential to achieve the Trust’s investment objective. The Closed-End Funds’ portfolios invest substantially all of their assets in 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 invest substantially all of their assets in 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:
Investing in Senior Loans
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 generally are not subordinate to other significant claims on a Borrower’s assets. Senior loans held by Closed-End Funds may be in the form of various bonds and other income-producing securities, including high-yield securities. High-yield securities are securities rated below investment-grade by a nationally recognized statistical rating organization.
Senior loans are also generally rated below investment-grade by a nationally recognized statistical rating organization. Senior loans are generally 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-rate 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 three to six month period). Conversely, if interest rates fall, the interest payments on a floating-rate loan will be reset 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 is usually:
LIBOR, as provided for in Loan Agreements, is usually 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 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 one national rating agency will be deemed to be below investment-grade for purposes of the Trust even if the security has received an investment-grade rating by a different national rating agency. 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.
Risks and Other Considerations
As with all investments, you may lose some or all of your investment in the Trust. No assurance can be given that the Trust’s investment objective will be achieved. The Trust also might not perform as well as you expect. This can happen for reasons such as these:
See “Investment Risks” in Part A of the prospectus and “Risk Factors” in Part B of the prospectus for additional information.
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 Corporate Funding, LLC, Guggenheim Partners Europe Limited, GS GAMMA Advisors, LLC, and Guggenheim Partners India Management. Securities offered through Guggenheim Funds Distributors, LLC.
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