The MLP & Energy Funds Portfolio, Series 6 ("Trust") seeks to provide 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 contains three sleeves of security types, all of which focus on the master limited partnership (“MLP”) space. Under normal circumstances, the Trust will invest at least 80% of the value of its assets in a combination of publicly-traded equity securities of energy MLPs, common shares of closed-end investment companies (“Closed-End Funds”) that invest substantially all of their assets in MLPs and companies in the energy sector as classified by Standard & Poor’s Global Industry Classification Standard (“GICs”), and shares of an exchange-traded fund (“ETF”) that tracks the Alerian MLP Infrastructure Index.
The securities in which the Closed-End Funds invest may include, but are not limited to:
• MLP common stocks, which may include all market capitalizations;
• MLP private placements; and
• Securities issued by MLPs and companies in the energy sector, such as warrants, convertible bonds, preferred securities, corporate bonds, senior loans, high-yield or “junk” bonds, or international bonds. The Trust does not have a specific policy as to the maturity of the bonds held by the Closed-End Funds in the portfolio and such Closed-End Funds may invest in bonds of all ranges of maturity.
The securities in which the Closed-End Funds invest may include foreign securities, including securities issued by companies headquartered or incorporated in countries considered to be emerging markets. Please see “Principal Risks” and “Investment Risks” for information concerning the risks associated with such securities.
The Trust may invest in MLPs of any market capitalization and of companies headquartered or incorporated in foreign countries.
See “Investment Policies” in Part B of the prospectus for additional information.
The Sponsor has selected for the portfolio MLPs, Closed-End Funds and an ETF believed to have the best potential to achieve the Trust’s investment objective.
When selecting Closed-End Funds for inclusion in this portfolio, the Sponsor looks at numerous factors. These factors include, but are not limited to:
1) Investment Objective – The Sponsor favors Closed-End Funds with a defined investment objective and a history of adherence to those policies and objectives;
2) Premium/Discount – The Sponsor favors Closed-End Funds that trade at a discount to its net asset value and trade at wider discounts than peers and its own historical average discount;
3) Consistent Dividend – The Sponsor favors Closed-End Funds that have a history of paying a regular monthly, quarterly, semi- or annual distribution;
4) Performance – the Sponsor favors Closed-End Funds with a solid history of performance in relation to its benchmarks and peers; and
5) Liquidity – The Sponsor favors Closed- End Funds with adequate daily trading liquidity. When selecting the ETF for inclusion in this portfolio, the Sponsor will seek to include an ETF that tracks the Alerian MLP Infrastructure Index. Currently, this ETF is the Alerian MLP ETF.
When selecting the ETF, the Sponsor looks at numerous factors. These factors include, but are not limited to:
1) Liquidity – The Sponsor favors ETFs with adequate daily trading liquidity; and
2) Yield – The Sponsor favors ETFs with market yields consistent with the investment objective of the Trust.
When selecting MLP equities for inclusion in this portfolio, the Sponsor looks at numerous factors. These factors include, but are not limited to:
1) Overlap with ETF and underlying Closed-End Fund holdings – The Sponsor seeks to minimize overlap between the MLP selections in relation to the underlying holdings of the ETF and Closed-End Funds;
2) Liquidity – The Sponsor favors MLPs with adequate daily trading liquidity;
3) Yield – The Sponsor favors MLPs with market yields consistent with the investment objective of the Trust;
4) Consistent Distribution Growth – The Sponsor favors MLPs with a history of consistent distribution growth;
5) Valuations – The Sponsor favors MLPs trading at valuation levels in-line or lower than peers, as measured by operating earnings to price; and
6) Debt Levels – The Sponsor favors MLPs with lower overall debt levels in relation to earnings.
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 Alerian MLP Infrastructure Index is comprised of 25 energy infrastructure MLPs that earn the majority of their cash flow from the transportation, storage, and processing of energy commodities. 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 and certain Closed-End Funds held by the Trust invest 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 is concentrated in the energy sector and certain Closed- End Funds held by the Trust include securities issued by companies 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. Some of the risks associated with the energy sector are listed below. 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 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 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 Trust includes an ETF. ETFs are investment pools that hold other securities. 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 the Trust’s expenses, but also the expenses of the underlying ETF. By investing in an ETF, the Trust incurs greater expenses than you would incur if you invested directly in the ETF.
• 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 ETF and 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.
• A Closed-End Fund, ETF or an issuer of securities held by a Closed- End Fund or 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 a Closed-End Fund, ETF or an issuer of securities held by a Closed-End Fund or 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.
• 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.
• 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 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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