Guggenheim Credit Allocation Fund GGM - Guggenheim Investments

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the Fund bears the entire risk of loss due to a decline in value of a referenced debt security on a credit defaultswap it has sold if there is a credit event with respect to the security. If the Fund is a buyer of a credit defaultswap and no credit event occurs, the Fund may recover nothing if the swap is held through its termination date.However, if a credit event occurs, the Fund generally may elect to receive the full notional value of the swap inexchange for an equal face amount of deliverable obligations of the reference entity whose value may havesignificantly decreased. See “Risks—Swap Risk.”Counterparty riskThe Fund will be subject to credit risk with respect to the counterparties to the derivative contracts entered intoby the Fund. If a counterparty becomes bankrupt or otherwise fails to perform its obligations under a derivativecontract, the Fund may experience significant delays in obtaining any recovery under the derivative contract inbankruptcy or other reorganization proceeding. The Fund may obtain only a limited recovery or may obtain norecovery in such circumstances. If a counterparty’s credit becomes significantly impaired, multiple requests forcollateral posting in a short period of time could increase the risk that the Fund may not receive adequatecollateral. See “Risks—Counterparty Risk.”Synthetic investment riskThe Fund may be exposed to certain additional risks should the Adviser uses derivatives transactions as a meansto synthetically implement the Fund’s investment strategies. Customized derivative instruments will likely behighly illiquid, and it is possible that the Fund will not be able to terminate such derivative instruments prior totheir expiration date or that the penalties associated with such a termination might impact the Fund’sperformance in a materially adverse manner. Synthetic investments may be imperfectly correlated to theinvestment the Adviser is seeking to replicate. See “Risk—Synthetic Investment Risk.”Event-linked securities riskEvent-linked securities (“ELS”) are a form of derivative issued by insurance companies and insurance-relatedspecial purpose vehicles that apply securitization techniques to catastrophic property and casualty damages.Unlike other insurable low-severity, high-probability events (such as auto collision coverage), the insurance riskof which can be diversified by writing large numbers of similar policies, the holders of a typical ELS areexposed to the risks from high-severity, low-probability events such as that posed by major earthquakes orhurricanes. A typical ELS provides for income and return of capital similar to other fixed-income investments,but involves full or partial default if losses resulting from a certain catastrophe exceeded a predeterminedamount. No active trading market may exist for certain ELS, which may impair the ability of the Fund to realizefull value in the event of the need to liquidate such assets. See “Risks—Event-Linked Securities Risk.”Inflation-indexed securities riskInflation-indexed debt securities are subject to the effects of changes in market interest rates caused by factorsother than inflation, such as real interest rates. In general, the value of an inflation-indexed security, includingTreasury Inflation-Protected Securities (“TIPS”), tends to decrease when real interest rates increase and canincrease when real interest rates decrease. Thus generally, during periods of rising inflation, the value ofinflation-indexed securities will tend to increase and, during periods of deflation, their value will tend todecrease. Interest payments on inflation-indexed securities are unpredictable and will fluctuate as the principaland interest are adjusted for inflation. There can be no assurance that the inflation index used (i.e., theConsumer Price Index for All Urban Consumers (“CPI”)) will accurately measure the real rate of inflation inthe prices of goods and services. Increases in the principal value of TIPS due to inflation are considered taxableordinary income for the amount of the increase in the calendar year. Any increase in the principal amount of aninflation-indexed debt security will be considered taxable ordinary income, even though the Fund will notreceive the principal until maturity. In order to receive the special treatment accorded to “regulated investmentcompanies” (“RICs”) and their shareholders under the Code and to avoid U.S. federal income and/or excisetaxes at the Fund level, the Fund may be required to distribute this income to shareholders in the tax year inwhich the income is recognized (without a corresponding receipt of cash). Therefore, the Fund may be requiredto pay out as an income distribution in any such tax year an amount greater than the total amount of cash20
income the Fund actually received, and to sell portfolio securities, including at potentially disadvantageoustimes or prices, to obtain cash needed for these income distributions.Municipal securities riskThe amount of public information available about municipal securities is generally less than that for corporateequities or bonds, and the investment performance of the Fund’s municipal securities investments may thereforebe 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 thanmany other securities markets, which may adversely affect the Fund’s ability to sell such securities at pricesapproximating those at which the Fund may currently value them. In addition, many state and municipalgovernments that issue securities are under significant economic and financial stress and may not be able tosatisfy their obligations. The ability of municipal issuers to make timely payments of interest and principal maybe diminished during general economic downturns and as governmental cost burdens are reallocated amongfederal, state and local governments. Issuers of municipal securities might seek protection under bankruptcylaws. In the event of bankruptcy of such an issuer, holders of municipal securities could experience delays incollecting principal and interest and such holders may not be able to collect all principal and interest to whichthey are entitled. The Fund may invest in taxable municipal securities, which consist primarily of BuildAmerica Bonds (“BABs”). The issuance of BABs was discontinued on December 31, 2010. Under thesequestration process under the Budget Control Act of 2011, automatic spending cuts that became effective onMarch 1, 2013 will reduce the federal subsidy for BABs. See “Risks—Municipal Securities Risk.”Recent market developments riskGlobal and domestic financial markets have experienced periods of severe turmoil. The debt and equity capitalmarkets in the United States have been negatively impacted by significant write-offs in the financial servicessector relating to sub-prime mortgages and the re-pricing of credit risk, among other things. These events, alongwith the deterioration of the housing market, the failure of major financial institutions and the resulting UnitedStates federal government actions led to worsening general economic conditions, which materially andadversely impacted the broader financial and credit markets and reduced the availability of debt and equitycapital for the market as a whole and financial firms in particular. Such market conditions may increase thevolatility of the value of securities owned by the Fund, may make it more difficult for the Fund to accuratelyvalue its securities or to sell its securities on a timely basis and may adversely affect the ability of the Fund toborrow for investment purposes and increase the cost of such borrowings, which would reduce returns to theholders of Common Shares. These developments adversely affected the broader economy, and may continue todo so, which in turn may adversely affect issuers of securities owned by the Fund. Such developments could, inturn, reduce the value of securities owned by the Fund and adversely affect the net asset value of the Fund’sCommon Shares.Instability in the financial markets led the U.S. Government and other governments around the world to take anumber of actions designed to support certain financial institutions and segments of the financial markets thatexperienced extreme volatility, and in some cases a lack of liquidity. The long-term implications ofgovernment ownership and disposition of distressed assets and interests in financial institutions are unclear.Recently, markets have witnessed more stabilized economic activity as expectations for an economic recoveryincreased. However, risks to a robust resumption of growth persist. A return to unfavorable economic conditionsor sustained economic slowdown could adversely impact the Fund’s portfolio. Financial market conditions, aswell as various social and political tensions in the United States and around the world, have contributed toincreased market volatility and may have long-term effects on the U.S. and worldwide financial markets andcause further economic uncertainties or deterioration in the United States and worldwide. The Adviser does notknow how long the financial markets will continue to be affected by these events and cannot predict the effectsof these or similar events in the future on the U.S. and global economies and securities markets in the Fund’sportfolio. The Adviser intends to monitor developments and seek to manage the Fund’s portfolio in a mannerconsistent with achieving the Fund’s investment objective, but there can be no assurance that they will besuccessful in doing so.21
Page 4 and 5: Introducing GuggenheimCredit Alloca
Page 6 and 7: An Experienced Investment TeamGugge
Page 8 and 9: Risks and Considerations (continued
Page 14 and 15: (notes from cover page)(1) The Fund
Page 16: TABLE OF CONTENTSProspectus summary
Page 19 and 20: and their political subdivisions, a
Page 21 and 22: Leverage, so the fees paid to the A
Page 23 and 24: segments of the credit securities m
Page 25 and 26: Corporate bond riskThe market value
Page 27 and 28: interest on its portfolio holdings.
Page 29 and 30: loan to restructure the residential
Page 31 and 32: Emerging markets riskInvestments in
Page 33 and 34: larger companies, and may experienc
Page 35: layering. Investments in other inve
Page 39 and 40: At any time after the date of this
Page 41 and 42: Summary of Fund expensesThe purpose
Page 43 and 44: The FundGuggenheim Credit Allocatio
Page 45 and 46: Investment objective and policiesba
Page 47 and 48: The Fund’s investmentsSenior Loan
Page 49 and 50: The Fund’s investmentspay interes
Page 51 and 52: The Fund’s investmentsgeneral cha
Page 53 and 54: The Fund’s investmentscause it to
Page 55 and 56: The Fund’s investmentsrisk of the
Page 57 and 58: The Fund’s investmentsRecovery an
Page 59 and 60: The Fund’s investmentsbe characte
Page 61 and 62: The Fund’s investmentstransaction
Page 63 and 64: The Fund’s investmentsFund has ea
Page 65 and 66: The Fund’s investmentsexpenses of
Page 67 and 68: Use of Financial LeverageREVERSE RE
Page 69 and 70: Use of Financial LeverageUnless and
Page 71 and 72: RisksMANAGEMENT RISKThe Fund is sub
Page 73 and 74: Risksderivative position. The Fund
Page 75 and 76: RisksNo active trading market may e
Page 77 and 78: RisksPREFERRED SECURITIES RISKThere
Page 79 and 80: Risksthan on those secured by loans
Page 81 and 82: Risksreduced investor demand for mo
Page 83 and 84: Riskscontain provisions that, in th
Page 85 and 86: Risksuse of leverage may result in
Page 87 and 88:
Risksof the premium received) shoul
Page 89 and 90:
Risksrecognized by the Fund from it
Page 91 and 92:
RisksDERIVATIVES TRANSACTIONS RISKT
Page 93 and 94:
Risksevents, such as a decline in t
Page 95 and 96:
RisksREDENOMINATION RISKContinuing
Page 97 and 98:
Riskssecurity during this period, a
Page 99 and 100:
Management of the FundTRUSTEES AND
Page 101 and 102:
Management of the Fundand beverage
Page 103 and 104:
Distributionsmonthly period. As a r
Page 105 and 106:
Description of capital structureAny
Page 107 and 108:
Anti-takeover and other provisions
Page 109 and 110:
Tax matters(ii) The Fund must diver
Page 111 and 112:
Tax mattersThe Fund will send you i
Page 113 and 114:
UnderwritingThe Fund has agreed not
Page 115 and 116:
Independent registered public accou
Page 117 and 118:
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Guggenheim Credit Allocation Fund GGM - Guggenheim Investments

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