The Floating Rate & Dividend Growth Portfolio, Series 8 (“Trust”) seeks to provide current income and, as a secondary objective, the potential for capital appreciation.
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
Under normal circumstances, the Trust will invest at least 80% of the value of its assets in a combination of dividend-paying equity securities, common shares of closed-end investment companies (“Closed-End Funds”) that invest substantially all of their assets in floating rate securities and shares of exchange-traded funds (“ETFs”) that invest substantially all of their assets in floating rate securities. The Trust seeks to provide current income with the potential for capital appreciation by investing approximately 50% of the portfolio in dividend-paying equity securities that have historically increased their dividends and approximately 50% of the portfolio in ETFs and Closed-End Funds that invest substantially all of their assets in floating rate securities, which will principally be senior loans. The senior loans held by the Closed-End Funds or ETFs in the Trust will include high-yield or “junk” securities. The Sponsor will consider Closed-End Funds and ETFs investing in securities of all durations. The Trust may invest in stocks of companies with all market capitalizations that trade on an U.S. securities exchange, including U.S.-listed foreign companies. The Sponsor believes that dividends are often a good indicator of a corporation’s current financial condition and, furthermore, may signal management’s belief in a profitable future for the corporation. Additionally, the Sponsor will strive to select ETFs and Closed-End Funds featuring the potential for current income, diversification and overall liquidity.
Equity Securities Selection
Approximately 50% of the Trust portfolio will constitute dividend-paying stocks of U.S.- traded companies. To select the stocks the Sponsor follows a disciplined process that includes both quantitative screening and qualitative analysis.
The Sponsor begins with a universe of all dividend-paying companies traded in the United States as of the date of the security selection. The Sponsor then reduces the universe to approximately 100 companies by performing quantitative screening, which may be primarily based on, but not limited to, the following factors:
From this universe of approximately 100 companies, the Sponsor identifies companies for inclusion in the portfolio through a qualitative analysis based on factors such as, but not limited to:
Closed-End Fund Selection
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 floating rate securities, including high-yield securities. See “Principal Risks” and “Investment Risks” for a description of the risks of investing in high-yield securities or “junk” securities. The Sponsor will consider Closed-End Funds investing in securities of all durations.
When selecting Closed-End Funds for inclusion in this portfolio the Sponsor looks at numerous factors. These factors include, but are not limited to:
Exchange-Traded Fund Selection
The Sponsor will seek to select ETFs for inclusion in the Trust portfolio that invest substantially all of their assets in floating rate securities. When selecting ETFs the Sponsor looks at numerous factors. These factors include, but are not limited to, duration, maturity and liquidity. The Sponsor will consider ETFs investing in securities of all durations. The duration of a security is a measure of its price sensitivity to changes in interest rates based on the weighted average term to maturity of its interest and principal cash flows.
Investing in Senior Loans
The Trust will invest approximately 50% of the portfolio in Closed-End Funds and ETFs that invest substantially all of their assets in floating rate securities, which will principally be 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. These Closed-End Funds or ETFs may also include various bonds and other incomeproducing 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 floatingrate 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 investmentgrade, and therefore retain a higher credit risk relative to lower yielding, investment-grade securities. 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. dollardenominated 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 investmentgrade 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.
See “Description of Ratings” in Part B of the prospectus for additional information regarding the ratings criteria.
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
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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