The Guggenheim Balanced Income Builder Portfolio, Series 9 ("Trust") seeks current income with 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
The Trust seeks to provide a high level of income with the potential for capital appreciation by investing in dividend-paying stocks of U.S.-listed companies along with shares of exchange-traded funds (“ETFs”) that invest in fixed-income securities.
The Sponsor, with the assistance of Guggenheim Partners Investment Management, LLC (“GPIM”), an affiliate of Guggenheim Partners, LLC, has selected the securities to be included in the Trust’s portfolio. The common stocks in the Trust are selected according to the quantitatively-selected US High Dividend Strategy described below. The U.S.-listed common stocks held the Trust may include the common stocks of U.S. and non-U.S. companies of small-, mid- or large-capitalizations. Certain of the common stocks included in the Trust portfolio are issued by real estate investment Trusts (“REITs”). Please see “Principal Risks” and “Investment Risks” for additional information concerning the risks associated with investing in REITs.
The Sponsor and GPIM believe that companies that distribute significant dividends on a consistent basis generally demonstrate strong financial strength and positive performance relative to their peers. The common stocks selected according to the US High Dividend Strategy will constitute approximately 50% of the Trust portfolio.
Shares of ETFs that invest substantially all of their assets in fixed-income securities will make up the remaining 50% of the Trust portfolio. The fixed-income ETFs included in the portfolio invest in a wide range of debt securities rated investment-grade through below investment-grade. High-yield, below investment-grade securities or “junk” bonds are considered to be speculative and are subject to greater market and credit risks than investment-grade securities. Please see “Principal Risks” and “Investment Risks” for additional information concerning the risks associated with investing in high-yield securities or “junk” bonds.
The fixed-income ETFs included in the portfolio will invest in debt securities with short-term, medium-term and long-term maturities. Typically fixed-income securities with longer periods before maturity are more sensitive to interest rate changes. See “Principal Risks” and “Investment Risks” for additional information concerning the risks associated with investing in fixed-income securities of short, medium and long-term durations.
Finally, the fixed-income ETFs included in the portfolio will also invest in debt securities issued by foreign companies, including companies located in emerging markets. See “Principal Risks” and “Investment Risks” for additional information concerning the risks associated with investing in securities of foreign issuers, including issuers located in emerging markets.
See “Investment Policies” in Part B of the prospectus for more information.
US High Dividend Strategy
Approximately 50% of the Trust portfolio will constitute the 25 common stocks selected according to the US High Dividend Strategy. These stocks were selected five business days prior to the initial date of deposit (the “Security Selection Date”) using the security selection rules described below.
Security Selection Rules:
In constructing the common stock component of the Trust’s portfolio, 25 securities will be selected based on the following fundamentally based quantitative criteria:
1. Initial Universe: Start with an initial universe of all securities in the Russell 3000® Index as of the Security Selection Date.
2. Rank on Fundamentals: Rank every company identified in the initial universe against other companies in the same sector, as defined by Global Industry Classification Standard (GICS), along each of the following reported financial metrics. Each ranking is determined as of the Security Selection Date using the most recently reported information and uses a scale of 1 through 10 (1 representing the highest scoring 10% in the sector and 10 representing the lowest scoring 10% in the sector):
• Return on assets as provided by S&P Compustat, and calculated as latest four quarters of reported operating income divided by the average of most recent reported total assets and year ago reported total assets.
• Earnings before interest, taxes, depreciation and amortization for the latest four quarters divided by enterprise value, as provided by S&P Compustat. Enterprise value is determined by adding the equity market capitalization as of the most recent closing price with the total outstanding long term and short term debt as determined by the most recently available balance sheet, and then subtracting any cash and short term investments as determined by the most recently available balance sheet.
• Year-over-year growth in sales per share, as provided by S&P Compustat. Trailing year-over-year growth is the percentage change in sales per-share for the trailing 12 months versus the sales per-share from the prior 12 months. Sales per-share is the trailing 12 months of sales from the most recent trailing quarterly or semi-annual filings, whichever is most current, divided by the end of period reported count of common shares outstanding used to calculate basic earnings per share. Each financial metric will create a separate score so that every company will have three scores. These three scores are averaged together to create one composite score for a company. This composite score is used to rank the companies in the next step in order to determine the sub-universe of securities.
3. Define Sub-Universe: Reduce the initial universe of securities to a sub-universe that meets the following requirements, with each requirement being applied independently to the initial universe from the other requirements in this step, as of the Security Selection Date:
• Exclude the lowest ranked 25% of securities from the initial universe determined by the average of the three financial rankings described in step 2.
• Exclude the 20% of the initial universe with the lowest trailing six month total return.
• Exclude securities which do not have a policy of regular periodic cash dividends (quarterly, semiannual or yearly), or have omitted the most recent regular periodic cash dividend.
• Exclude securities with a market capitalization less than $200 million. Market capitalization is determined by the closing price as of the Security Selection Date.
• Exclude securities with a liquidity of less than $0.6 million. Liquidity is determined by the median trading volume in U.S. dollars looking back 90 days from the Security Selection Date (i.e., trading volume each day in shares multiplied by the closing price for the day as provided by FactSet Research Systems, Inc.).
• Exclude business development companies as identified by Bloomberg Industry Classification System sub-industry.
• Exclude mortgage real estate investment Trusts, as identified by GICS sub-industry.
• Exclude securities that have a pending cash or stock merger and acquisition or bankruptcy which will lead to delisting the security. Such events will be determined by reviewing the announced merger and acquisition data from Bloomberg.
• Exclude securities that are not one of the largest 500 companies of the initial universe by market capitalization (per FactSet).
4. Selection: Select from the sub-universe the twenty-five top dividend yielding securities (with higher rank given to larger market capitalization when yields are equal) and equally weight these securities as of the Security Selection Date so that each security represents 2% of the total Trust portfolio. Selected securities must adhere to following strategy limits as of the Security Selection Date:
• Maximum 20% weight in any GICS sector.
• Minimum 80% in U.S. incorporated companies.
Once an investment limitation has been reached, additional securities of the type that would violate the limitation will not be included in the Trust and the next highest yielding security will be used.
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.
Fixed-Income Exchange-Traded Funds
Approximately 50% of the Trust portfolio will constitute ETFs that invest substantially all of their assets in fixed-income securities. The Sponsor, with the assistance of GPIM, has selected fixed-income ETFs believed to have the best potential for current income. When selecting the ETFs for the Trust, the Sponsor considers a number of factors, including but not limited to, the size, liquidity and daily trading volume, the current dividend yield, the strategy and investment objective, the fixed-income securities held by the ETF, the expense ratio and the overlap of the underlying fixed-income securities held by the ETFs.
Guggenheim Partners Investment Management, LLC
Guggenheim Partners Investment Management, LLC is a subsidiary of Guggenheim Partners, LLC and an affiliate of the Sponsor, which offers financial services expertise within its asset management, investment advisory, capital markets, institutional finance and merchant banking business lines. Clients consist of a mix of individuals, family offices, endowments, foundations, insurance companies, pension plans and other institutions that together have entrusted the firm with supervision of more than $100 billion in assets. A global diversified financial services firm, Guggenheim Partners, LLC office locations include New York, Chicago, Los Angeles, Miami, Boston, Philadelphia, St. Louis, Houston, London, Dublin, Geneva, Hong Kong, Singapore, Mumbai and Dubai.
The Sponsor is also indirectly owned by Guggenheim Partners, LLC and is an affiliate of GPIM.
ETFs are investment pools that hold securities. ETFs provide an efficient and relatively simple way to invest in that they offer investors the opportunity to buy and sell an entire basket of securities with a single transaction throughout the trading day. ETFs are often built like an index fund, but trade like a stock on an exchange. ETFs generally offer advantages similar to those found in index funds such as low operating costs, performance designed to track an index, the potential for high tax efficiency and consistent investment strategies. Unlike conventional mutual funds, ETFs normally issue and redeem shares on a continuous basis at their net asset value in large specified blocks of shares, known as “creation units.” Market makers, large investors and institutions deal in creation units. The Trust will buy shares of the ETF on the exchanges and will incur brokerage costs.
INDEX DEFINITION: The Russell 3000® Index (“Index”) measures the performance of the largest 3000 U.S. companies representing approximately 98% of the investable equity market. The Index is unmanaged and it is not possible to invest directly in the Index.
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.
• The Trust invests in shares of ETFs. ETFs are investment pools that hold other securities. The ETFs in the Trust are usually passively-managed index funds that seek to replicate the performance or composition of a recognized securities index. ETFs are subject to various risks, including management’s ability to meet the fund’s investment objective. Shares of ETFs may trade at a discount from their net asset value in the secondary market. This risk is separate and distinct from the risk that the net asset value of the ETF shares may decrease. The amount of such discount from net asset value is subject to change from time to time in response to various factors. The underlying ETF has management and operating expenses. Consequently, you will bear not only your share of your Trust’s expenses, but also the expenses of the underlying ETFs. By investing in ETFs, the Trust incurs greater expenses than you would incur if you invested directly in the ETFs.
• The ETFs 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 Trust is subject to an ETF’s index correlation risk. To the extent that an underlying ETF is an index tracking ETF, index correlation risk is the risk that the performance of an ETF will vary from the actual performance of the fund’s target index, known as “tracking error.” This can happen due to fund expenses, transaction costs, market impact, corporate actions (such as mergers and spin-offs) and timing variances.
• The value of the fixed-income securities ETFs 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.
• An ETF or an issuer of securities held by an ETF 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 an ETF or an issuer of securities held by an ETF 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.
• Economic conditions may lead to limited liquidity and greater volatility. The markets for fixed-income securities, such as those held by certain ETFs, 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 an ETF uncertain and/or result in sudden and significant valuation increases or declines in its holdings.
• Certain ETFs 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 ETFs 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.
• Certain ETFs held by the Trust invest in foreign securities. Investment in foreign securities presents additional risk. 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.
• Certain ETFs held by the Trust invest in securities issued by companies headquartered or incorporated in countries considered to be emerging markets. Emerging markets are generally defined as countries with low per capita income in the initial stages of their industrialization cycles. Risks of investing in developing or emerging countries include the possibility of investment and trading limitations, liquidity concerns, delays and disruptions in settlement transactions, political uncertainties and dependence on international trade and development assistance. Companies headquartered in emerging market countries may be exposed to greater volatility and market risk.
• The Trust includes 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 market in the United States; and other factors beyond the control of the issuer of the security.
• The Trust includes securities issued by mid-capitalization companies. These securities customarily involve more investment risk than large-capitalization companies. Mid-capitalization companies may have limited product lines, markets or financial resources and may be more vulnerable to adverse general market or economic developments.
• 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 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.
• 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.
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 Partners Advisors, LLC, Guggenheim Corporate Funding, LLC, Guggenheim Partners Europe Limited, Guggenheim Partners Fund Management (Europe) Limited, Guggenheim Partners Japan Limited, GS GAMMA Advisors, LLC, and Guggenheim Partners India Management. Securities offered through Guggenheim Funds Distributors, LLC.
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