The Closed-End Convertible & Income Portfolio ("Trust") seeks to provide high current income and the potential for capital appreciation by investing in common stocks of closed-end investment companies that are considered to be convertible securities and/or income funds.
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.
This information does not constitute an offer to sell or a solicitation of any offer to buy: nor shall there be any sale of these securities in any state where the offer, solicitation, or sale is not permitted.
Principal Investment Strategy
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 convertible securities 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 “securities”). The closed-end funds’ portfolios consist primarily of convertible securities and/or income producing securities including, high-yield bonds and preferred securities.
As of the Trust’s inception date (the “Inception Date”), 100% of the Trust’s portfolio is invested in securities of closed-end funds with portfolios that consist primarily of convertible securities and/or income producing securities including high yield bonds and preferred 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:
Convertible securities are bonds, debentures, notes, preferred securities or other securities that may be converted or exchanged (by the holder or the issuer) into shares of the underlying common stock (or cash or securities of equivalent value) at a stated exchange ratio or predetermined price (the “conversion price”). Convertible securities have general characteristics similar to both debt securities and common stocks. The interest paid on convertible securities may be fixed or floating rate. Floating rate convertible securities may specify an interest rate or rates that are conditioned upon changes to the market price of the underlying common stock. Convertible securities also may be issued in zero coupon form with an original issue discount. Although to a lesser extent than with debt securities, the market value of convertible securities tends to decline as interest rates increase and, conversely, tends to increase as interest rates decline. In addition, because of the conversion feature, the market value of convertible securities tends to vary with fluctuations in the market value of the underlying common stocks and, therefore, will also react to the variations in the general market for common stocks. Depending upon the relationship of the conversion price to the market value of the underlying common stock, a convertible security may trade more like a common stock than a debt instrument. With interest rates at historic lows, investors seeking better total returns than those available from bonds and other fixed-income instruments might find convertible securities an attractive alternative.
Investors who believe that equity markets will improve in the months and years ahead, but who still want an investment with a fixed-income component, might also be drawn to convertible securities. The Sponsor believes that the recent year’s performance of both the convertible and equity markets in the United States have created some inherent inefficiencies in the convertible market that might be profitably exploited by skilled convertible securities managers.
Mandatory convertible securities are distinguished as a subset of convertible securities because they may be called for conversion by the issuer after a particular date and under certain circumstances (including at a specified price) established upon its issuance. If a mandatory convertible security is called for conversion, the closed-end fund will be required to either convert it into the underlying common stock or sell it to a third party.
Convertible securities are investments that typically provide for a stable stream of income with generally higher yields than common stocks. There can be no assurance of current income because the issuers of the convertible securities may default on their obligations. Certain convertible securities may be below investment grade quality.
Convertible securities generally offer lower interest or dividend yields than non-convertible securities of similar credit quality because of the potential for capital appreciation. A convertible security, in addition to providing current income, offers the potential for capital appreciation through the conversion feature, which enables the holder to benefit from any increases in the market price of the underlying common stock.
Some of the securities held by the closed-end funds may be income producing securities including corporate bonds, preferred securities and high-yield bonds. High-yield or “junk” bonds, the generic names for bonds rated below the category of “BBB” by Standard & Poor’s or the category of “Baa” by Moody’s, 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. Obligations rated below investment grade should be considered speculative as these ratings indicate a quality of less than investment grade. Because high-yield bonds are generally subordinated obligations and are 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.
See “Description of Ratings” in Part B of the prospectus for additional information regarding the ratings criteria.
Risks and Other Considerations
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:
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 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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