gug60245-nq.htm
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC  20549

FORM N-Q

QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS OF REGISTERED
MANAGEMENT INVESTMENT COMPANY

Investment Company Act file number
811-22715
 
Guggenheim Credit Allocation Fund
(Exact name of registrant as specified in charter)
 
227 West Monroe Street, Chicago, IL 60606
  (Address of principal executive offices) (Zip code)
 
Amy J. Lee
 
227 West Monroe Street, Chicago, IL 60606
(Name and address of agent for service)

Registrant’s telephone number, including area code: (312) 827-0100

Date of fiscal year end: May 31
Date of reporting period: June 1, 2014 – August 31, 2014

 
 
 
 
 

 
Item 1. Schedule of Investments.
Attached hereto.
   
Guggenheim Credit Allocation Fund 
  
SCHEDULE OF INVESTMENTS (Unaudited) 
August 31, 2014 
 
     
 
Shares 
Value 
COMMON STOCKS† - 1.5% 
    
Consumer Discretionary - 1.2% 
    
Travelport LLC* 
1,146,556 
$ 1,897,550 
Basic Materials - 0.2% 
    
Mirabela Nickel Ltd.* 
4,839,202 
406,751 
Industrials - 0.1% 
    
Project Silverback Holdings 
    
Corp.*, †††,2 
228 
227,700 
Project Silverback Holdings 
    
Corp.*, †††,2 
94,522 
1,890 
Total Industrials 
  
229,590 
Total Common Stocks 
    
(Cost $3,635,423) 
  
2,533,891 
PREFERRED STOCKS† - 2.5% 
    
Seaspan Corp. 
    
6.38% due 04/30/19 
88,000 
2,262,480 
Kemper Corp. 
    
7.38% due 02/27/54 
72,000 
1,874,160 
Total Preferred Stocks 
    
(Cost $4,009,518) 
  
4,136,640 
 
Face 
  
 
Amount~ 
Value 
CORPORATE BONDS†† - 69.2% 
    
Energy - 20.3% 
    
Atlas Energy Holdings 
    
Operating Company LLC / 
    
Atlas Resource Finance Corp. 
    
9.25% due 08/15/21 
2,300,000 
2,420,750 
7.75% due 01/15/213 
1,826,000 
1,862,520 
Legacy Reserves, LP / Legacy 
    
Reserves Finance Corp. 
    
8.00% due 12/01/20 
3,000,000 
3,225,000 
Regency Energy Partners, LP / 
    
Regency Energy Finance Corp. 
    
8.38% due 06/01/193 
3,000,000 
3,225,000 
Endeavor Energy Resources. 
    
LP / EER Finance, Inc. 
    
7.00% due 08/15/213 
3,000,000 
3,187,500 
BreitBurn Energy Partners LP / 
    
BreitBurn Finance Corp. 
    
7.88% due 04/15/22 
3,000,000 
3,180,000 
SandRidge Energy, Inc. 
    
8.75% due 01/15/20 
3,000,000 
3,150,000 
Bill Barrett Corp. 
    
7.00% due 10/15/22 
3,000,000 
3,090,000 
Atlas Pipeline Partners Limited 
    
Partnership / Atlas Pipeline 
    
Finance Corp. 
    
5.88% due 08/01/23 
2,000,000 
2,030,000 
ContourGlobal Power Holdings 
    
S.A. 
    
7.13% due 06/01/193 
1,850,000 
1,863,875 
Keane Group Holdings LLC 
    
8.50% due 08/08/19†††,2 
1,200,000 
1,176,000 
2.00% due 08/30/19†††,2 
400,000 
400,000 
Precision Drilling Corp. 
    
5.25% due 11/15/243 
1,200,000 
1,200,000 
Legacy Reserves Limited 
    
Partnership / Legacy Reserves 
    
Finance Corp. 
    
6.63% due 12/01/213 
1,000,000 
1,012,500 
FTS International, Inc. 
    
6.25% due 05/01/223 
650,000 
664,625 
Summit Midstream Holdings 
    
LLC / Summit Midstream 
    
Finance Corp. 
    
5.50% due 08/15/22 
600,000 
612,000 
Jones Energy Holdings LLC / 
    
Jones Energy Finance Corp. 
    
6.75% due 04/01/223 
500,000 
527,500 
IronGate Energy Services LLC 
    
11.00% due 07/01/181,3 
200,000 
203,000 
Total Energy 
  
33,030,270 
Consumer, Non-cyclical - 
    
10.0% 
    
Central Garden and Pet Co. 
    
8.25% due 03/01/18 
3,500,000 
3,609,375 
KeHE Distributors LLC / KeHE 
    
Finance Corp. 
    
7.63% due 08/15/213 
2,900,000 
3,117,500 
Vector Group Ltd. 
    
7.75% due 02/15/21 
2,381,000 
2,535,765 
JBS USA LLC / JBS USA 
    
Finance, Inc. 
    
5.88% due 07/15/243 
1,750,000 
1,750,000 
R&R Ice Cream plc 
    
8.25% due 05/15/203 
1,700,000 AUD 
1,580,348 
Premier Foods Finance plc 
    
6.50% due 03/15/213 
800,000 GBP 
1,301,569 
Amsurg Corp. 
    
5.63% due 07/15/223 
1,050,000 
1,073,625 
American Seafoods Group LLC 
    
/ American Seafoods Finance, 
    
Inc. 
    
10.75% due 05/15/163 
1,000,000 
1,000,000 
Ceridian LLC / Comdata, Inc. 
    
8.13% due 11/15/173 
300,000 
304,050 
Total Consumer, Non-cyclical 
  
16,272,232 
Consumer, Cyclical - 7.8% 
    
GRD Holdings III Corp. 
    
10.75% due 06/01/193 
3,200,000 
3,528,000 
WMG Acquisition Corp. 
    
6.75% due 04/15/223 
3,500,000 
3,465,000 
Checkers Drive-In Restaurants, 
    
Inc. 
    
11.00% due 12/01/173 
2,400,000 
2,664,000 
Guitar Center, Inc. 
    
6.50% due 04/15/193 
1,870,000 
1,776,500 
 
 
 
 
 

   
Guggenheim Credit Allocation Fund 
  
SCHEDULE OF INVESTMENTS (Unaudited) 
August 31, 2014 
 
     
 
Face 
  
 
Amount~ 
Value 
CORPORATE BONDS†† - 69.2% (continued) 
  
Consumer, Cyclical - 7.8% 
    
(continued) 
    
Suburban Propane Partners 
    
Limited Partnership/Suburban 
    
Energy Finance Corp. 
    
5.50% due 06/01/24 
$1,000,000 
$997,500 
Men's Wearhouse, Inc. 
    
7.00% due 07/01/223 
200,000 
209,500 
Global Partners Limited 
    
Partnership/GLP Finance Corp. 
    
6.25% due 07/15/223 
110,000 
110,550 
Total Consumer, Cyclical 
  
12,751,050 
Communications - 7.1% 
    
SITEL LLC / Sitel Finance Corp. 
    
11.00% due 08/01/173 
3,400,000 
3,553,000 
Alcatel-Lucent USA, Inc. 
    
8.88% due 01/01/203 
3,000,000 
3,337,500 
Avaya, Inc. 
    
7.00% due 04/01/193 
2,050,000 
2,039,750 
Sirius XM Radio, Inc. 
    
6.00% due 07/15/243 
1,050,000 
1,092,000 
CSC Holdings LLC 
    
5.25% due 06/01/243 
1,000,000 
990,000 
Expo Event Transco, Inc. 
    
9.00% due 06/15/211,3 
550,000 
572,688 
Total Communications 
  
11,584,938 
Technology - 5.9% 
    
First Data Corp.7 
    
8.75% due 01/15/223 
3,000,000 
3,285,000 
Aspect Software, Inc. 
    
10.63% due 05/15/17 
3,200,000 
3,264,000 
Eagle Midco, Inc. 
    
9.00% due 06/15/183 
3,000,000 
3,082,500 
Total Technology 
  
9,631,500 
Financial - 5.7% 
    
Majid AL Futtaim Holding 
    
7.12% due 12/31/49 
1,500,000 
1,646,580 
Nationstar Mortgage LLC / 
    
Nationstar Capital Corp. 
    
6.50% due 07/01/21 
1,400,000 
1,372,000 
Citigroup, Inc. 
    
6.30%4,5 
1,100,000 
1,119,250 
Jefferies Finance LLC / JFIN 
    
Company-Issuer Corp. 
    
7.38% due 04/01/203 
1,000,000 
1,045,000 
Lock AS 
    
7.00% due 08/15/21 
600,000 EUR 
825,833 
Schahin II Finance Company 
    
SPV Ltd. 
    
5.88% due 09/25/223 
835,800 
814,905 
Banco do Brasil S.A. 
    
9.00% due3,4,5 
800,000 
804,000 
Prosight Global Inc.††† 
    
7.50% due 11/26/20 
650,000 
668,070 
Ultra Resources, Inc.††† 
    
4.66% due 10/12/22 
700,000 
652,960 
Cabot Financial Luxembourg 
    
S.A. 
    
6.50% due 04/01/213 
250,000 GBP 
404,665 
Total Financial 
  
9,353,263 
Diversified - 4.2% 
    
Opal Acquisition, Inc. 
    
8.88% due 12/15/213 
3,400,000 
3,587,000 
Harbinger Group, Inc. 
    
7.88% due 07/15/19 
3,000,000 
3,255,000 
Total Diversified 
  
6,842,000 
Industrial - 3.7% 
    
Deutsche Raststatten 
    
6.75% due 12/30/20 
1,300,000 EUR 
1,834,588 
Unifrax I LLC / Unifrax Holding 
    
Co. 
    
7.50% due 02/15/193 
1,401,000 
1,443,030 
Odebrecht Offshore Drilling 
    
Finance Ltd. 
    
6.63% due 10/01/223 
890,010 
953,423 
CEVA Group plc 
    
7.00% due 03/01/213 
800,000 
808,000 
LMI Aerospace, Inc. 
    
7.38% due 07/15/193 
500,000 
506,250 
Princess Juliana International 
    
Airport Operating Company 
    
N.V. 
    
5.50% due 12/20/273 
466,358 
462,954 
Total Industrial 
  
6,008,245 
Basic Materials - 2.9% 
    
TPC Group, Inc. 
    
8.75% due 12/15/203 
2,395,000 
2,640,488 
Mirabela Nickel Ltd. 
    
9.50% due 05/20/19†††,2 
1,063,000 
1,063,000 
KGHM International Ltd. 
    
7.75% due 06/15/191,3 
500,000 
536,875 
Cascades, Inc. 
    
5.50% due 07/15/223 
500,000 
496,250 
Total Basic Materials 
  
4,736,613 
Utilities - 1.6% 
    
NGL Energy Partners, LP / NGL 
    
Energy Finance Corp. 
    
6.88% due 10/15/213 
2,500,000 
2,681,250 
Total Utilities 
  
2,681,250 
Total Corporate Bonds 
    
(Cost $109,543,494) 
  
112,891,361 
SENIOR FLOATING RATE INTERESTS††,4 - 47.9% 
  
Industrial - 14.3% 
    
Ursa Insulation B.V. 
    
5.04% due 04/26/21†††,1,2 
1,393,486 EUR 
1,831,004 
7.75% due 04/26/20†††,1,2 
1,250,000 EUR 
1,642,468 
Flakt Woods 
    
4.82% due 03/20/171 
2,475,000 EUR 
3,122,003 
 
 
 
 
 
 

   
Guggenheim Credit Allocation Fund 
  
SCHEDULE OF INVESTMENTS (Unaudited) 
August 31, 2014 
 
     
 
Face 
  
 
Amount 
Value 
SENIOR FLOATING RATE INTERESTS††,4 - 47.9% (continued) 
Industrial - 14.3% (continued) 
    
Total Safety U.S., Inc. 
    
9.25% due 09/13/201 
$3,000,000 
$2,940,000 
Minimax Viking 
    
4.50% due 08/14/201 
2,519,747 
2,518,688 
Mitchell International, Inc. 
    
8.50% due 10/11/211 
2,350,000 
2,366,168 
Doncasters Group Ltd. 
    
9.50% due 10/09/201 
2,206,897 
2,217,931 
NaNa Development Corp. 
    
8.00% due 03/15/181 
1,735,294 
1,709,265 
NVA Holdings, Inc. 
    
8.00% due 08/14/221 
1,650,000 
1,652,063 
AlliedBarton Security Services 
    
LLC 
    
8.00% due 08/12/211 
1,452,055 
1,439,349 
Camp Systems International 
    
8.25% due 11/29/191 
1,000,000 
1,007,500 
Wencor Group 
    
7.75% due 06/19/221
900,000 
893,250 
Omnitracs, Inc. 
    
8.75% due 05/25/211 
150,000 
150,000 
Total Industrial 
  
23,489,689 
Technology - 8.9% 
    
Greenway Medical 
    
Technologies 
    
9.25% due 11/04/211 
2,200,000 
2,178,000 
6.00% due 11/04/201 
1,990,000 
1,985,025 
LANDesk Group, Inc. 
    
5.00% due 02/25/201 
3,970,050 
3,951,867 
Aspect Software, Inc. 
    
7.25% due 05/07/161 
1,900,000 
1,897,625 
Sparta Systems, Inc. 
    
6.25% due 07/28/20†††,1,2 
1,800,000 
1,782,197 
EIG Investors Corp. 
    
5.00% due 11/09/191 
1,670,141 
1,670,141 
Lantiq Deutschland GmbH 
    
11.00% due 11/16/151 
700,000 
693,000 
Gogo LLC 
    
7.50% due 03/21/181 
360,570 
364,176 
Total Technology 
  
14,522,031 
Consumer, Non-cyclical - 
    
7.1% 
    
CTI Foods Holding Co. LLC 
    
8.25% due 06/28/211 
4,000,000 
4,020,000 
Reddy Ice Holdings, Inc. 
    
10.75% due 10/01/191 
4,000,000 
3,520,000 
AdvancePierre Foods, Inc. 
    
9.50% due 10/10/171 
1,592,000 
1,548,220 
Arctic Glacier Holdings, Inc. 
    
5.00% due 05/10/191 
1,449,075 
1,430,962 
Pelican Products, Inc. 
    
9.25% due 04/09/211 
550,000 
550,000 
Targus Group International, 
    
Inc. 
    
12.00% due 05/24/161 
574,352 
475,276 
Total Consumer, Non-cyclical 
  
11,544,458 
Financial - 5.0% 
    
Ranpak 
    
8.50% due 04/23/201 
3,000,000 
3,052,500 
Expert Global Solutions 
    
8.50% due 04/03/181 
2,944,405 
2,939,488 
Intertrust Group 
    
8.00% due 04/11/221 
2,200,000 
2,193,136 
Total Financial 
  
8,185,124 
Basic Materials - 2.8% 
    
Royal Adhesives and Sealants 
    
5.50% due 07/31/181 
2,528,942 
2,533,165 
Ennis Flint Road Infrastructure 
    
7.75% due 09/30/211 
2,000,000 
1,975,000 
Total Basic Materials 
  
4,508,165 
Communications - 2.7% 
    
Anaren, Inc. 
    
9.25% due 08/18/211 
2,200,000 
2,199,999 
Gogo LLC 
    
11.25% due 03/21/181 
1,127,937 
1,184,333 
Cengage Learning 
    
Acquisitions, Inc. 
    
7.00% due 03/31/201 
748,125 
752,644 
Mcgraw-Hill Global Education 
    
Holdings LLC 
    
2.48% due 03/22/181 
208,333 
187,570 
Max Broadcast Group LLC 
    
6.25% due 03/31/14†††,1,2 
82,737 
78,424 
6.25% due 03/31/14†††,1,2 
 39,158  37,117 
Total Communications 
  
4,440,087 
Energy - 2.7% 
    
Panda Temple II Power 
    
7.25% due 04/03/191 
3,000,000 
3,060,000 
Cactus Wellhead 
    
7.00% due 07/31/201 
1,400,000 
1,379,000 
Total Energy 
  
4,439,000 
Transportation - 2.2% 
    
Travelport Holdings Ltd. 
    
9.50% due 01/31/161 
2,224,686 
2,265,753 
Ceva Logistics US Holdings 
    
6.50% due 03/19/211 
511,034 
499,005 
Ceva Logistics Holdings BV 
    
(Dutch) 
    
6.50% due 03/19/211 
370,500 
361,778 
Ceva Group Plc (United 
    
Kingdom) 
    
6.50% due 03/19/211 
352,217 
339,889 
 
 
 
 
 
 
 

   
Guggenheim Credit Allocation Fund 
  
SCHEDULE OF INVESTMENTS (Unaudited) 
August 31, 2014 
 
     
 
Face 
  
 
Amount 
Value 
SENIOR FLOATING RATE INTERESTS††,4 - 47.9% (continued) 
Transportation - 2.2% 
    
(continued) 
    
Ceva Logistics Canada, ULC 
    
6.50% due 03/19/211 
$63,879 
$62,376 
Total Transportation 
  
3,528,801 
Utilities - 1.7% 
    
Astoria Generating Company 
    
Acquisitions LLC 
    
8.50% due 10/26/171 
2,708,182 
2,775,886 
Consumer, Cyclical - 0.5% 
    
DLK Acquisitions BV 
    
4.25% due 08/06/191 
400,000 EUR 
516,723 
4.25% due 02/06/191 
250,000 EUR 
324,867 
Total Consumer, Cyclical 
  
841,590 
Total Senior Floating Rate Interests 
    
(Cost $82,286,706) 
  
78,274,831 
ASSET BACKED SECURITIES†† - 8.9% 
  
Structured Asset Securities Corporation Mortgage Loan 
Trust 2006-BC6 
    
2006-BC6, 0.33% due 
    
01/25/374 
2,000,000 
1,651,877 
Newstar Commercial Loan Funding 2013-1 LLC 
  
2013-1A, 5.53% due 
    
09/20/231,3,4 
1,500,000 
1,496,250 
Emerald Aviation Finance Ltd. 
    
2013-1, 6.35% due 
    
10/15/383,6 
1,421,875 
1,443,914 
Castlelake Aircraft Securitization Trust 
  
2014-1, 5.25% due 
    
02/15/29 
776,909 
781,726 
2014-1, 7.50% due 
    
02/15/29 
594,107 
596,364 
COA Summit CLO Ltd. 
    
2014-1A, 4.09% due 
    
04/20/233,4 
1,000,000 
984,600 
Duane Street CLO IV Ltd. 
    
2007-4A, 2.48% due 
    
11/14/213,4 
1,000,000 
966,500 
Monroe Capital CLO 2014-1 Ltd. 
  
2014-1A, 4.96% due 
    
10/22/263,4 
1,000,000 
961,400 
GSAA Home Equity Trust 
    
2006-18, 6.00% due 
    
11/25/366 
1,386,766 
953,126 
RAIT CRE CDO I Ltd. 
    
2006-1X, 0.48% due 
    
11/20/46 
1,058,599 
945,858 
KKR Financial CLO Ltd. 
    
2007-1X, 5.23% due 
    
05/15/211 
750,000 
748,650 
NewStar Arlington Senior Loan Program LLC 
  
2014-1A, 4.48% due 
    
07/25/253,4 
750,000 
717,825 
Salus CLO 2012-1 Ltd. 
    
2013-1AN, 6.98% due 
    
03/05/211,3,4 
500,000 
494,400 
Rise Ltd. 
    
6.50% due 02/12/391 
484,375 
489,800 
NXT Capital CLO 2013-1 LLC 
    
2013-1A, 4.38% due 
    
04/25/243,4 
500,000 
481,600 
Cerberus Onshore II CLO LLC 
    
2014-1A, 4.23% due 
    
10/15/233,4 
500,000 
471,750 
Turbine Engines Securitization Ltd. 
  
2013-1A, 6.38% due 
    
12/13/483 
376,291 
381,936 
Total Asset Backed Securities 
    
(Cost $14,407,934) 
  
14,567,576 
MORTGAGE BACKED SECURITIES†† - 1.5% 
  
SRERS Funding Ltd. 
    
2011-RS,0.41% due 
    
05/09/461,3,4 
2,181,404 
2,058,155 
Washington Mutual Mortgage Pass-Through Certificates 
WMALT Series 2006-8 Trust 
    
2006-8,4.92% due 
    
10/25/366 
542,369 
388,024 
Total Mortgage Backed Securities 
    
(Cost $2,324,106) 
  
2,446,179 
SHORT TERM INVESTMENTS† - 1.4% 
  
Dreyfus Treasury Prime Cash 
    
Management Fund 
2,221,593 
2,221,593 
Total Short Term Investments 
    
(Cost $2,221,593) 
  
2,221,593 
Total Investments - 132.9% 
    
(Cost $218,428,774) 
  
$ 217,072,071 
Other Assets & Liabilities, net - (32.9)% 
(53,688,517) 
Total Net Assets - 100.0% 
  
$ 163,383,494 
 
 
~  
The principal amount is denominated in U.S. Dollars, unless otherwise noted.
*  
Non-income producing security.
†
Value determined based on Level 1 inputs — See Note 2.
††
Value determined based on Level 2 inputs — See Note 2.
†††
Value determined based on Level 3 inputs — See Note 2.
1 
All or a portion of these securities have been physically segregated in connection with reverse repurchase agreements and unfunded loan commitments. As of August 31, 2014, the total amount segregated was $84,864,100.
2 
Security was fair valued by the Valuation Committee at August 31, 2014. The total market value of fair valued securities amounts to $8,239,800, (cost $11,383,067) or 5.0% of total net assets.
 
 
 
 
 
 
 

   
Guggenheim Credit Allocation Fund 
  
SCHEDULE OF INVESTMENTS (Unaudited) 
August 31, 2014 
 
3     
Security is a 144A or Section 4(a)(2) security. The total market value of 144A or Section 4(a)(2) securities is $79,665,499 (cost $77,719,619), or 48.8% of total net assets.
4     
Variable rate security. Rate indicated is rate effective at August 31, 2014.
5     
Perpetual maturity.
6     
Security is a step up/step down bond. The coupon increases or decreases at regular intervals until the bond reaches full maturity.
7   
Paid-in-kind toggle note. This issuer in each interest period has the option to pay interest in cash or to issue payment-in-kind shares of the note.

plc
REIT
Public Limited Company
Real Estate Investment Trust
 
 
At August 31, 2014, the Fund had the following unfunded loan commitments which could be extended at the option of the borrower:

Borrower††
Expiration Date
Principal Amount
Unrealized Appreciation
Advantage Sales and Market†††
07/21/2019
 $                 900,000
 $                           -
AlliedBarton Security Services
08/12/2021
                  547,945
                                            297
American Stock Transfer
06/11/2018
                  400,000
                                      10,935
CEVA Group plc
03/19/2019
                  500,000
                                        3,873
Hillman Group, Inc.†††
06/13/2019
                    900,000
                                               -
IntraWest Holdings S.A.R.
12/10/2018
              1,100,000
                                        2,344
Learning Care Group†††
05/05/2021
                    500,000
                                               -
McGraw-Hill Global Education
03/22/2018
                  791,667
                                        2,244
National Financial Partners
07/01/2018
              1,500,000
                                      23,282
Phillips-Medsize Corp.†††
06/13/2019
                1,100,000
                                               -
Signode Industrial Group†††
05/01/2019
                1,050,000
                                               -
Signode Industrial Group†††
05/01/2019
                    350,000
                                               -
Wencor†††
06/19/2019
                    500,000
                                               -
     
    $                  42,975

At August 31, 2014, the following forward exchange currency contracts were outstanding:
Contracts to Sell
Counterparty
Settlement Date
Settlement Value
Value at 8/31/14
Net Unrealized Appreciation (Depreciation)
AUD
   2,900,000
          
for USD
   2,697,087
 The Bank of New York Mellon
09/04/2014
 $              2,697,087
 $             2,707,692
 $               (10,605)
EUR
   4,000,000
          
for USD
   5,351,568
 The Bank of New York Mellon
09/04/2014
5,351,568
5,256,219
                    95,349
EUR
      600,000
          
for USD
      801,462
 The Bank of New York Mellon
09/04/2014
801,462
788,433
                    13,029
EUR
   2,300,000
          
for USD
   3,056,194
 The Bank of New York Mellon
09/04/2014
3,056,194
3,022,326
                    33,868
GBP
   1,100,000
          
for USD
   1,859,324
 The Bank of New York Mellon
09/04/2014
1,859,324
1,826,241
                    33,083
Total unrealized appreciation for forward exchange currency contracts
 $                164,724


 
 
 
 
NOTES TO SCHEDULE OF INVESTMENTS (Unaudited)         
                                               

For information on the Guggenheim Credit Allocation Fund’s (the “Fund”) policy regarding valuation of investments and other significant accounting policies, please refer to the Fund’s most recent semiannual or annual shareholder report.

1.  
Significant Accounting Policies
 
The following significant accounting policies are in conformity with U.S. generally accepted accounting principles ("U.S. GAAP") and are consistently followed by the Fund. This requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. All time references are based on Eastern Time.

The Board of Trustees of the Fund (the “Board”) has adopted policies and procedures for the valuation of the Fund’s investments (the “Valuation Procedures”). Pursuant to the Valuation Procedures, the Board has delegated to a valuation committee, consisting of representatives from Guggenheim’s investment management, fund administration, legal and compliance departments (the “Valuation Committee”), the day-to-day responsibility for implementing the Valuation Procedures, including, under most circumstances, the responsibility for determining the fair value of the Fund’s securities or other assets.

Valuations of the Fund’s securities are supplied primarily by pricing services appointed pursuant to the processes set forth in the Valuation Procedures. The Valuation Committee convenes monthly, or more frequently as needed and will review the valuation of all assets which have been fair valued for reasonableness. The Fund’s officers, through the Valuation Committee and consistent with the monitoring and review responsibilities set forth in the Valuation Procedures, regularly review procedures used by, and valuations provided by, the pricing services.

Equity securities listed on an exchange (New York Stock Exchange (“NYSE”) or American Stock Exchange) are valued at the last quoted sales price as of the close of business on the NYSE, usually 4:00 p.m. on the valuation date. Equity securities listed on the NASDAQ market system are valued at the NASDAQ Official Closing Price on the valuation date, which may not necessarily represent the last sale price. If there has been no sale on such exchange or NASDAQ on such day, the security is valued at the mean of the most recent bid and asked prices on such day.

Debt securities with a maturity of greater than 60 days at acquisition are valued at prices that reflect broker/dealer supplied valuations or are obtained from independent pricing services, which may consider the trade activity, treasury spreads, yields or price of bonds of comparable quality, coupon, maturity, and type, as well as prices quoted by dealers who make markets in such securities. Short-term debt securities with a maturity of 60 days or less at acquisition and repurchase agreements are valued at amortized cost, which approximates market value.

Typically loans are valued using information provided by an independent third party pricing service which uses broker quotes. If the pricing service cannot or does not provide a valuation for a particular loan or such valuation is deemed unreliable, such loan is fair valued by the Valuation Committee.

Generally, trading in foreign securities markets is substantially completed each day at various times prior to the close of the NYSE. The values of foreign securities are determined as of the close of such foreign markets or the close of the NYSE, if earlier. All investments quoted in foreign currency are valued in U.S. dollars on the basis of the foreign currency exchange rates prevailing at the close of U.S. business at 4:00 p.m. Investments in foreign securities may involve risks not present in domestic investments. The Valuation Committee will determine the current value of such foreign securities by taking into consideration certain factors which may include those discussed above, as well as the following factors, among others: the value of the securities traded on other foreign markets, ADR trading, closed-end fund trading, foreign currency exchange activity, and the trading prices of financial products that are tied to foreign securities such as World Equity Benchmark Securities. In addition, under the Valuation Procedures, the Valuation Committee and the Guggenheim Funds Investment Advisors, LLC (“GFIA or the “Adviser”) are authorized to use prices and other information supplied by a third party pricing vendor in valuing foreign securities.

Investments for which market quotations are not readily available are fair valued as determined in good faith by the Adviser, subject to review by the Valuation Committee, pursuant to methods established or ratified by the Board. Valuations in accordance with these methods are intended to reflect each security’s (or asset’s) “fair value.” Each such determination is based on a consideration of all relevant factors, which are likely to vary from one pricing context to another. Examples of such factors may include, but are not limited to: (i) the type of security, (ii) the initial cost of the security, (iii) the existence of any contractual restrictions on the security’s disposition, (iv) the price and extent of public trading in similar securities of the issuer or of comparable companies, (v) quotations or

 
 
 
 

evaluated prices from broker-dealers and/or pricing services, (vi) information obtained from the issuer, analysts, and/or the appropriate stock exchange (for exchange traded securities), (vii) an analysis of the company’s financial statements, and (viii) an evaluation of the forces that influence the issuer and the market(s) in which the security is purchased and sold (e.g. the existence of pending merger activity, public offerings or tender offers that might affect the value of the security).

2.  
Fair Value Measurement
In accordance with U.S. GAAP, fair value is defined as the price that the Fund would receive to sell an investment or pay to transfer a liability in an orderly transaction with an independent buyer in the principal market, or in the absence of a principal market, the most advantageous market for the investment or liability. U.S GAAP establishes a three-tier fair value hierarchy based on the types of inputs used to value assets and liabilities and requires corresponding disclosure. The hierarchy and the corresponding inputs are summarized below:

Level 1 — quoted prices in active markets for identical assets or liabilities.

Level 2 — significant other observable inputs (for example quoted prices for securities that are similar based on characteristics such as interest rates, prepayment speeds, credit risk, etc.).

Level 3— significant unobservable inputs based on the best information available under the circumstances, to the extent observable inputs are not available, which may include assumptions.

The types of inputs available depend on a variety of factors, such as the type of security and the characteristics of the markets in which it trades, if any. Fair valuation determinations that rely on fewer or no observable inputs require greater judgment. Accordingly, fair value determinations for Level 3 securities require the greatest amount of judgment.

The following tables summarize the inputs used to value the Fund’s investments as of August 31, 2014:

 
                         
   
Level 1
    
Level 2
    
Level 3
        
   
Investments
    
Investments
    
Investments
        
   
In Securities
    
In Securities
    
In Securities
    
Total
  
Assets
                        
Common Stocks
   $ 2,304,301     $ -     $ 229,590     $ 2,533,891  
Preferred Stocks
     4,136,640       -       -       4,136,640  
Corporate Bonds
     -       108,931,331       3,960,030       112,891,361  
Senior Floating Rate Interests
     -       72,903,621       5,371,210       78,274,831  
Asset Backed Securities
     -       14,567,576       -       14,567,576  
Mortgage Backed Securities
     -       2,446,179       -       2,446,179  
Short Term Investmemts
     2,221,593       -       -       2,221,593  
Unfunded Commitments
     -       42,975       -       42,975  
Forward Exchange Currency
                                
Contracts
     -       175,329       -       175,329  
Total Assets
   $ 8,662,534     $ 199,317,011     $ 9,560,830     $ 217,540,375  
   
Liabilities
                                
Forward Exchange Currency
                                
Contracts
   $ -     $ 10,605     $ -     $ 10,605  
Total Liabilities
   $ -     $ 10,605     $ -     $ 10,605  
 
Independent pricing services are used to value a majority of the Fund’s investments. When values are not available from a pricing service, they will be determined under the valuation policies that have been reviewed and approved by the Board. In any event, values are determined using a variety of sources and techniques, including: market prices; broker quotes; and models which derive prices based on inputs such as prices of securities with comparable maturities and characteristics or based on inputs such as anticipated cash flows or collateral, spread over Treasuries, and other information and analysis.

Indicative quotes from broker-dealers, adjusted for fluctuations in criteria such as credit spreads and interest rates, may be also used to value the Fund’s assets and liabilities, i.e. prices provided by a broker-dealer or other market participant who has not committed to trade at that price. Although indicative quotes are typically received from established market participants, the Fund may not have the transparency to view the underlying inputs which support the market quotations.
 
 
 
 
 
 

 
Certain fixed income securities are valued by obtaining a monthly indicative quote from a broker-dealer, adjusted for fluctuations in criteria such as credit spreads and interest rates.

The inputs or methodologies used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. The suitability of the techniques and sources employed to determine fair valuation are regularly monitored and subject to change.

The following is a summary of significant unobservable inputs used in the fair valuation of assets and liabilities categorized within Level 3 of the fair value hierarchy:

Category
Ending Balance at  8/31/14
Valuation Technique
Unobservable Inputs
Common Stock
$229,590
Model Price
Trade Price
Corporate Bonds
2,639,000
Model Price
Trade Price
Corporate Bonds    1,321,030 Option adjusted spread off the month end broker quote mark over the 3 month LIBOR Indicative Quote
Term Loans
3,589,013
Enterprise Value
Valuation Multiple*
Term Loans 1,782,197 Model Price Trade Price
*Valuation multiples utilized ranged from 7.0 to 7.8.

Significant changes in an indicative quote, trade price or valuation multiple would generally result in significant changes in the fair value of the security.

Transfers between investment levels may occur as the markets fluctuate and/or the availability of data used in an investment’s valuation changes. Transfers between valuation levels, if any, are in comparison to the valuation levels at the end of the previous fiscal year, and are effective using the fair value as of the end of the current period.

At August 31, 2014, the Fund had securities with a total value of $3,880,432 transfer from Level 3 to Level 2. These Transfers were due to the availability of a vendor price.

Summary of Fair Value Level 3 Activity
Following is a reconciliation of Level 3 assets for which significant unobservable inputs were used to determine fair value for the period ended August 31, 2014:

Level 3 – Fair value measurement using significant unobservable inputs
  
Guggenheim Credit Allocation Fund
      
Assets:
      
Beginning Balance
   $ 11,511,694  
Realized Gain/Loss
     (2,608,160 )
Purchases
     4,650,787  
Total change in unrealized gains or losses included in earnings
     (113,059 )
Unrealized gains or losses on unfunded commitments     -  
Transfers out of Level 3
     (3,880,432 )
Ending Balance
   $ 9,560,830  

3.  
Federal Income Taxes
As of August 31, 2014, cost and related gross unrealized appreciation and depreciation on investments for tax purposes are as follows:
Cost of Investments for Tax Purposes
Gross Tax Unrealized
Appreciation
Gross Tax  Unrealized Depreciation
Net Tax Unrealized
Depreciation
$218,428,849
$4,497,213
$(5,853,991)
 $(1,356,778)

The net tax unrealized appreciation on unfunded commitments is $42,975.
 
 
 
 
 
 
 
Item 2. Controls and Procedures.

(a)
The registrant’s principal executive officer and principal financial officer have evaluated the registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended) as of a date within 90 days of the filing date of this report and have concluded, based on such evaluation, that the registrant’s disclosure controls and procedures were effective, as of that date, in ensuring that information required to be disclosed by the registrant in this Form N-Q was recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms.

(b)
There was no change in the registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940, as amended) that occurred during the registrant’s last fiscal quarter that has materially affected or is reasonably likely to materially affect the registrant’s internal control over financial reporting.

Item 3. Exhibits.

A separate certification for each principal executive officer and principal financial officer of the registrant as required by Rule 30a-2(a) under the Investment Company Act of 1940, as amended (17 CFR 270.30a-2(a)), is attached hereto.
 
 
 
 
 
 
 
SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Guggenheim Credit Allocation Fund  

By:  /s/ Donald C. Cacciapaglia
Donald C. Cacciapaglia
Chief Executive Officer

Date: October 30, 2014


Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

By:  /s/ Donald C. Cacciapaglia
Donald C. Cacciapaglia
Chief Executive Officer

Date: October 30, 2014



By:  /s/ John L. Sullivan
John L. Sullivan
Chief Financial Officer, Chief Accounting Officer & Treasurer

Date: October 30, 2014