The Zacks Income Advantage Strategy Portfolio, Series 35 ("Trust") seeks to provide current income with the potential for capital appreciation.
|Wrap Fee Price||$9.719800|
|Remaining Deferred Sales Charge||$0.145000|
|Mandatory Maturity Date||11/15/2017|
|NASDAQ Ticker Symbol||CCZIJX|
|Inception Unit Price||$10.000000|
|Inception Bid Price||$9.900000|
|Inception Liquidation Price||$9.755000|
|Deferred Sales Charge Dates||
|Number of Holdings||100|
|Historical Annual Dividend Distribution||$0.673400|
All data is subject to change daily. Data may differ from the prospectus due to different data sources or market changes. Please refer to prospectus for additional information about the trust including the portfolio section criteria. Source: FactSet Research Systems Inc. unless otherwise noted. 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. A unit is a combination of securities or types of securities traded together.
|Weighted Average Leverage Ratio**||2.21%|
** 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.)
|Weighted Average Price/Earnings (P/E) Ratio||43.51|
|Weighted Average Price/Book (P/B) Ratio||2.62|
|Weighted Average Market Cap (MM)||$23,347.00|
|US Common Stock||39.34%|
|Non US Common Stock||8.45%|
|Oil Gas & Consumable Fuels||29.83%|
|Mortgage Real Estate Investment Trusts (REITs)||9.59%|
|Thrifts & Mortgage Finance||1.11%|
|Equity Real Estate Investment Trusts (REITs)||9.01%|
|Containers & Packaging||0.93%|
|Metals & Mining||2.15%|
|Hotels Restaurants & Leisure||2.02%|
|Semiconductors & Semiconductor Equipment||0.89%|
|Technology Hardware Storage & Peripherals||2.34%|
|Diversified Telecommunication Services||3.37%|
|Commercial Services & Supplies||0.71%|
|Trust Weighted Average||-10.02%|
|Closed-End Fund ("CEF") Universe Average||-6.00%|
* 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.
|US Hybrid (Growth & Income)||0.81%|
|Emerging Market Income||0.57%|
|Global Equity Dividend||0.56%|
|Real Estate (Global)||0.54%|
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.
© 2016 Morningstar, Inc. All Rights Reserved. The information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information.
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
The Zacks Income Advantage Strategy utilizes a quantitative selection process developed by Zacks Investment Management (“ZIM”) to determine the constituents of a final portfolio. The screening process to determine the actual investment portfolio of the Trust was executed nine business days before the initial date of deposit of the Trust (the “Security Selection Date”). As a result of this strategy, the Trust is concentrated in the energy sector and the financials sector.
The Trust is split into five different asset segments: master limited partnerships (“MLPs”), real estate investment Trusts (“REITs”), stocks of oil and energy companies that, according to their most recent Form 10-K filing with the Securities and Exchange Commission, derive the largest percentage of their total revenues from the oil and energy sector (“Oil & Energy Companies”), closed-end investment companies (“Closed-End Funds”), and high-yielding common stocks/American Depositary Receipts (“ADRs”). Examples of industries that fall into the oil and energy sector are: oil exploration, oil production, integrated oil services and oil drilling. Certain of the Closed-End Funds selected for the Trust may invest in high-yield or “junk” securities. The Trust, and certain Closed-End Funds held by the Trust, may invest in securities of companies with all market capitalizations. In addition, the Trust, and certain Closed-End Funds held by the Trust, may invest in domestic and foreign companies, which may include companies located in emerging markets. The methodology of each asset segment is as follows as of Security Selection Date:
The security selection process begins by identifying an initial universe of all securities that trade on at least one public North American securities exchange as of the Security Selection Date. These securities include only Closed-End Funds, common stocks, ADRs, MLPs and REITs. From this initial universe, the Trust portfolio is compiled using factors designed to identify securities in each segment below that meet certain investment criteria.
The MLP portion of the Trust’s portfolio is reduced to 15 MLPs based on the following pre-set quantitative investment criteria:
1. Eliminate those MLPs with a share price less than $10.00 and less than $3 million in liquidity, where liquidity is defined as share price times the most recent 3-month trading volume as reported to Zacks Investment Research, Inc. by Sungard Reference Data Solutions, Inc.
2. Rank the remaining MLPs based on proportional short interest and eliminate the 20% with the largest amount of short interest, where short interest is defined as the percentage of shares outstanding that are held short as reported to the New York Stock Exchange or the NASDAQ Stock Market on the 15th day and last day of each month (the most recent reporting will be used).
3. Rank the remaining MLPs based on descending dividend yield, where dividend yield is defined as a company’s annual dividend (trailing 12 months dividend as reported by Morningstar) divided by its current market price, and select the highest 15 MLPs for inclusion in the Trust.
4. Weight these 15 MLPs based on dividend yield to make up 17.5% of the Trust. To weight these MLPs based on dividend yield, add together each of the 15 MLPs’ dividend yields to determine the aggregate dividend yield (“Aggregate Dividend Yield”) of the MLP Segment. Weight the 15 MLPs based on their individual contribution to the Aggregate Dividend Yield of the MLP Segment. For example, if the Aggregate Dividend Yield of the MLPs Segment is 50%, a MLP with a dividend yield of 3.5% will have a weighting equal to 7% (in other words, 3.5% divided by 50% equals 7% of the Aggregate Dividend Yield) of the MLP Segment.
Common Stock/ADR Segment
The Common Stock/ADR portion of the Trust’s portfolio is reduced to 40 securities based on the following pre-set quantitative investment criteria:
1. Eliminate all securities from the Zacks Oil/Energy Sector.
2. Rank the remaining securities in this asset segment by descending market capitalization and eliminate those securities not among the largest 1,000.
3. Eliminate those securities with a payout ratio of greater than 80%, where payout ratio is defined as a company’s most recent indicated annual dividend per share (defined as the last dividend declared, multiplied by four and then divided by the number of shares outstanding) divided by a company’s most recently reported earnings per share (defined as the trailing 12-month actual earnings divided by the number of shares outstanding), as reported by Zacks Investment Research.
4. From the remaining universe, eliminate those securities with a share price less than $10.00 and less than $5 million in liquidity, where liquidity is defined as share price times the most recent 3- month trading volume as reported to Zacks Investment Research, Inc. by Sungard Reference Data Solutions, Inc.
5. Rank the remaining securities based on descending dividend yield and select the highest 40 securities for inclusion in the Trust.
6. Weight these 40 stocks based on their individual contribution to the Aggregate Dividend Yield generated by the Common Stock/ADR Segment, which will make up 37.5% of the Trust.
The REIT portion of the Trust’s portfolio is reduced to 20 REITs based on the following pre-set quantitative investment criteria:
1. Eliminate those REITs with a share price less than $10.00 and less than $5 million in liquidity, where liquidity is defined as share price times the most recent 3-month trading volume as reported to Zacks Investment Research, Inc. by Sungard Reference Data Solutions, Inc.
2. Rank the remaining REITs based on proportional short interest and eliminate the 20% with the largest amount of short interest.
3. Rank the remaining REITs based on descending dividend yield and select the highest 20 REITs for inclusion in the Trust.
4. Weight these 20 REITs based on their individual contribution to the Aggregate Dividend Yield generated by the REIT Segment, which will make up 20% of the Trust.
5. Mortgage REITs cannot make up more than 50% of the REIT Segment (i.e., 10% of the total portfolio). Should mortgage REITs make up more than 50% of the REIT Segment, their weight will be limited 10% of the total portfolio and the remainder will be proportionally weighted to the remaining REITs.
Oil & Energy Companies Segment
The Oil & Energy Companies portion of the Trust’s portfolio is reduced to 10 stocks based on the following pre-set quantitative investment criteria:
1. Eliminate any Oil & Energy stocks with a share price less than $10.00 and less than $3 million in liquidity, where liquidity is defined as share price times the most recent 3-month trading volume as reported to Zacks Investment Research, Inc. by Sungard Reference Data Solutions, Inc.
2. Rank the remaining stocks based on descending dividend yield and select the highest 10 stocks for inclusion in the Trust.
3. Weight these 10 stocks based on liquidity to make up 15% of the Trust. To weight these stocks based on liquidity, add together each of the 10 stocks’ liquidities to determine the aggregate liquidity (“Aggregate Liquidity”) of the Oil & Energy Companies Segment. Weight the 10 stocks based on their individual contribution to the Aggregate Liquidity of the Oil & Energy Companies Segment.
Closed-End Fund Segment
The Closed-End Fund portion of the Trust’s portfolio is reduced to 15 Closed-End Funds based on the following pre-set quantitative investment criteria:
1. Eliminate those Closed-End Funds that are not trading at a discount or have less than $300 million in assets under management.
2. Eliminate those Closed-End Funds that have a dividend yield equal to zero.
3. Eliminate those Closed-End Funds with less than $3 million in liquidity, where liquidity is defined as share price times the most recent 3-month trading volume as reported to Zacks Investment Research, Inc. by Morningstar, Inc.
4. Rank the remaining Closed-End Funds based on descending dividend yield and select the highest 15 Closed-End Funds for inclusion in the Trust.
5. Weight these 15 Closed-End Funds based on their individual contribution to the Aggregate Dividend Yield generated by the Closed-End Fund Segment, which will make up 10% of the Trust.
Final Portfolio Construction
The 5 asset segments are combined to form the total portfolio. A final liquidity check is performed to ensure investability and portfolio capacity. Any security eligible for inclusion in the Trust portfolio with liquidity of less than the estimated total dollar value of the security as of the Security Selection Date will be removed from the Trust portfolio and replaced by the next highest ranked security in the same asset segment. Individual securities are capped at a maximum weighting of 4%.
In the event that a security that has a pending cash or stock merger and acquisition or bankruptcy which will lead to delisting the security is chosen, that security will be removed and the next security in the list will be selected for inclusion in the portfolio. Such events will be determined by reviewing the announced merger and acquisition data from Bloomberg and if the announced date falls before the Security Selection Date, an announcement of an agreement to be acquired in whole for cash or stock from an acquiring company or bankruptcy filing will cause removal.
In the event that a non-MLP security is selected which is not treated as a corporation for U.S. tax purposes, that non-MLP security will be removed and the next security in the list will be selected for inclusion in the portfolio.
Please note that due to the fluctuating nature of security prices, the weighting of an individual security or sector in the Trust portfolio may change after the Security Selection Date.
Zacks Investment Management
Zacks Investment Management, founded in 1992 as a wholly owned subsidiary of Zacks Investment Research, one of the largest providers of independent research in the U.S. ZIM has over $1.8 billion in assets under management for retail and institutional clients in separately managed accounts that employ proprietary quantitative models and three mutual funds which it markets through its wholesale division. ZIM manages equity and fixed income portfolios for clients using a unique combination of Zacks independent research and Zacks proprietary quantitative models. The Trust will pay a portfolio consulting fee to ZIM for its assistance in the selection of the Trust portfolio.
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:
• Securities prices can be volatile. The value of your investment may fall over time. Market value fluctuates in response to various factors. These can include stock market movements, purchases or sales of securities by the Trust, government policies, litigation, and changes in interest rates, inflation, the financial condition of the securities’ issuer or even perceptions of the issuer. Units of the Trust are not deposits of any bank and are not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.
• Securities selected according to this strategy may not perform as intended. The Trust is exposed to additional risk due to its policy of investing in accordance with an investment strategy. Although the Trust’s investment strategy is designed to achieve the Trust’s investment objective, the strategy may not prove to be successful. The investment decisions may not produce the intended results and there is no guarantee that the investment objective will be achieved.
• The Trust is concentrated in the energy sector. As a result, the factors that impact the energy sector will likely have a greater effect on this Trust than on a more broadly diversified Trust. Companies in the energy sector are subject to volatile fluctuations in price and supply of energy fuels, and can be impacted by international politics and conflicts, including the unrest in Iraq and hostilities in the Middle East, terrorist attacks, the success of exploration projects, reduced demand as a result of increases in energy efficiency and energy conservation, natural disasters, clean-up and litigation costs associated with environmental damage and extensive regulation.
• The Trust is concentrated in the financial sector. As a result, the factors that impact the financial sector will likely have a greater effect on this Trust than on a more broadly diversified Trust. Companies in the financial sector include banks, insurance companies and investment firms. The profitability of companies in the financial sector is largely dependent upon the availability and cost of capital which may fluctuate significantly in response to changes in interest rates and general economic developments. Financial sector companies are especially subject to the adverse effects of economic recession, decreases in the availability of capital, volatile interest rates, portfolio concentrations in geographic markets and in commercial and residential real estate loans, and competition from new entrants in their fields of business. Negative developments initially relating to the subprime mortgage market and subsequently spreading to other parts of the economy, have adversely affected credit and capital markets worldwide and significantly impacted financial sector companies.
• The Trust invests in MLPs. MLPs are limited partnerships or limited liability companies that are taxed as partnerships and whose interests (limited partnership units or limited liability company units) are traded on securities exchanges like shares of common stock. Currently, most MLPs operate in the energy, natural resources or real estate sectors. Investments in MLP interests are subject to the risks generally applicable to companies in the energy and natural resources sectors, including commodity pricing risk, supply and demand risk, depletion risk and exploration risk.
The benefit the Trust derives from its investment in MLPs is largely dependent on their being treated as partnerships for federal income tax purposes. As a partnership, an MLP has no income tax liability at the entity level. If, as a result of a change in an MLP’s business, an MLP were treated as a corporation for federal income tax purposes, such MLP would be obligated to pay federal income tax on its income at the applicable corporate tax rate. If an MLP was classified as a corporation for federal income tax purposes, the amount of cash available for distribution with respect to its units would be reduced and any such distributions received by the Trust would be taxed entirely as dividend income if paid out of the earnings of the MLP. Therefore, treatment of an MLP as a corporation for federal income tax purposes would result in a material reduction in the after-tax return to the Trust, likely causing a substantial reduction in the value of the units of the Trust.
• The Trust includes Closed-End Funds. Closed-End Funds are actively managed investment companies that invest in various types of securities. Closed-End Funds issue common shares 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’s portfolio 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. Instability in the auction rate preferred shares market may affect the volatility of Closed-End Funds that use such instruments to provide leverage.
• The Closed-End Funds are subject to annual fees and expenses, including a management fee. Unitholders of the Trust will bear these fees in addition to the fees and expenses of the Trust. See “Fees and Expenses” for additional information.
• The value of the fixed-income securities in the Closed-End Funds will generally fall if interest rates, in general, rise. Typically, fixed-income securities with longer periods before maturity are more sensitive to interest rate changes. The Trust may be subject to greater risk of rising interest rates than would normally be the case due to the current period of historically low rates.
• A Closed-End Fund or an issuer of securities held by a Closed-End Fund may be unwilling or unable to make principal payments and/or to declare distributions in the future, may call a security before its stated maturity, or may reduce the level of distributions declared. This may result in a reduction in the value of your units.
• The financial condition of a Closed- End Fund or an issuer of securities held by a Closed-End Fund may worsen, resulting in a reduction in the value of your units. This may occur at any point in time, including during the primary offering period.
• 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 non-payment or default is higher than with investment-grade securities. In addition, such securities may be more sensitive to interest rate changes and more likely to receive early returns of principal.
• Certain 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 subject to a greater risk of default than securities rated as investment-grade by more than one rating agency.
• The Trust invests in REITs. REITs may concentrate their investments in specific geographic areas or in specific property types, such as, hotels, shopping malls, residential complexes and office buildings. The value of the REITs and other real estate securities and the ability of such securities to distribute income may be adversely affected by several factors, including: rising interest rates; changes in the global and local economic climate and real estate conditions; perceptions of prospective tenants of the safety, convenience and attractiveness of the properties; the ability of the owner to provide adequate management, maintenance and insurance; the cost of complying with the Americans with Disabilities Act; increased competition from new properties; the impact of present or future environmental legislation and compliance with environmental laws; changes in real estate taxes and other operating expenses; adverse changes in governmental rules and fiscal policies; adverse changes in zoning laws; declines in the value of real estate; the downturn in the subprime mortgage lending market and the real estate markets in the United States; and other factors beyond the control of the issuer of the security.
• Share prices or dividend rates on the securities in the Trust may decline during the life of the Trust. There is no guarantee that share prices of the securities in the Trust will not decline and that the issuers of the securities will declare dividends in the future and, if declared, whether they will remain at current levels or increase over time.
• The Trust invests and certain Closed-End Funds held by the Trust may invest in securities issued by small-capitalization and mid-capitalization companies. These securities customarily involve more investment risk than securities of large-capitalization companies. Small-capitalization and mid-capitalization companies may have limited product lines, markets or financial resources and may be more vulnerable to adverse general market or economic developments.
• The Trust and certain Closed-End Funds held by the Trust invest in ADRs, U.S.-listed foreign securities and foreign securities listed on a foreign exchange. The Trust’s and certain Closed-End Funds’ held by Trust investments in ADRs, U.S.-listed foreign securities and foreign securities listed on a foreign exchange presents additional risk. ADRs are issued by a bank or Trust company to evidence ownership of underlying securities issued by foreign corporations. Securities of foreign issuers present risks beyond those of domestic securities. More specifically, foreign risk is the risk that foreign securities will be more volatile than U.S. securities due to such factors as adverse economic, currency, political, social or regulatory developments in a country, including government seizure of assets, excessive taxation, limitations on the use or transfer of assets, the lack of liquidity or regulatory controls with respect to certain industries or differing legal and/or accounting standards. In addition, the Trust’s investment in Energy Companies may expose unitholders to additional risks that may be associated with Canada or the Canadian securities markets.
• The Trust and certain Closed-End Funds held by the Trust include securities whose value may be dependent on currency exchange rates. The U.S. dollar value of these securities may vary with fluctuations in foreign exchange rates. Most foreign currencies have fluctuated widely in value against the U.S. dollar for various economic and political reasons such as the activity level of large international commercial banks, various central banks, speculators, hedge funds and other buyers and sellers of foreign currencies.
• Economic conditions may lead to limited liquidity and greater volatility. The markets for fixed-income securities, such as those held by certain Closed-End Funds, may experience periods of illiquidity and volatility. General market uncertainty and consequent repricing risk have led to market imbalances of sellers and buyers, which in turn have resulted in significant valuation uncertainties in a variety of fixed-income securities. These conditions resulted, and in many cases continue to result in, greater volatility, less liquidity, widening credit spreads and a lack of price transparency, with many debt securities remaining illiquid and of uncertain value. These market conditions may make valuation of some of the securities held by a Closed-End Fund uncertain and/or result in sudden and significant valuation increases or declines in its holdings.
• Inflation may lead to a decrease in the value of assets or income from investments.
• The Sponsor does not actively manage the portfolio. The Trust will generally hold, and may, when creating additional units, continue to buy, the same securities even though a security’s outlook, market value or yield may have changed.
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.
Guggenheim Investments represents the investment management business of Guggenheim Partners, LLC ("Guggenheim"), which includes Security Investors, LLC ("SI"), Guggenheim Funds Investments Advisors, LLC ("GFIA") and Guggenheim Partners Investment Management ("GPIM") the investment advisors to the referenced funds.
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