The Flaherty & Crumrine Preferred Trust ("Trust") seeks to provide high current income with a secondary objective of 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 Sponsor has selected Flaherty & Crumrine Incorporated ("Flaherty & Crumrine") to serve as the Trust’s portfolio consultant. The portfolio consultant is responsible for assisting the Sponsor with the selection of the Trust’s portfolio.
The Trust will consist of a diversified portfolio of exchange-listed preferred stocks, trust preferred securities and baby bonds selected from Flaherty & Crumrine’s proprietary preferred securities database and its internally generated credit research.
In choosing the securities the primary factors include, but are not limited to, credit quality of the issuer and the liquidity and dividend yield of the security as of the Trust’s initial date of deposit.
See “Investment Policies” in Part B of the prospectus for additional information.
With assistance from Flaherty & Crumrine, the Sponsor has selected preferred stocks, trust preferred securities and baby bonds believed to have the best potential for high current income with the potential for capital appreciation. The Sponsor believes that an investment in a portfolio of preferred stocks, trust preferred securities and baby bonds offers investors an opportunity to receive many of the income flow advantages of bonds. The Trust is diversified across the listed preferred and baby bonds market, with attention paid to credit quality of the issuer and the liquidity and dividend yield of the security. As of the Trust’s initial date of deposit (the “Inception Date”), at least 80% of the securities included in the Trust are rated in the category of “Baa” or better by Moody’s Investors Services, Inc. (“Moody’s”), or in the category of “BBB” or better by Standard & Poor’s, a division of The McGraw-Hill Companies, Inc. (“Standard & Poor’s”), or in the category of “BBB” or better by Fitch Ratings, Ltd. (“Fitch”).
See “Description of Ratings” in Part B of the prospectus for additional information regarding the ratings criteria.
Preferred Stock. As of the Inception Date, 19.35% of the Trust consists of preferred stocks. Similar to bonds, many preferred stocks offer a fixed rate of return paid in the form of a dividend and are traded on the basis of their current yield.
Like common stock, most preferred stocks are equity securities representing ownership in a company. Preferred stocks are generally considered “senior securities” and preferred stockholders enjoy preference over common stockholders with regard to dividends and liquidations. For the prospect of a higher yield, preferred stockholders may forfeit or at least be limited in their voting rights. The preferred stocks included in the Trust, if applicable, are traded on the major stock exchanges.
Trust Preferred Securities. As of the Inception Date, 65.69% of the Trust consists of trust preferred securities. Trust preferred securities are limited-life preferred securities typically issued by corporations, generally in the form of interest-bearing notes or preferred securities, or by an affiliated business trust of a corporation, generally in the form of beneficial interests in subordinated debentures issued by the corporation, or similarly structured securities, including SATURNS (structured asset trust unit repackagings). Dividend payments of the trust preferred securities generally coincide with interest payments on the underlying obligations. Unlike preferred stocks, distributions for trust preferred securities are generally treated as interest rather than dividends for federal income tax purposes and therefore, are not eligible for the dividends-received deduction. Trust preferred securities and the underlying subordinated debentures typically rank senior to the company’s common and preferred stock and junior to the company’s senior debt, subordinated debt and other indebtedness.
Certain trust preferred securities have maturity dates. The maturities for the trust preferred securities included in the Trust that have maturity dates range from 2031 to 2068 years.
Baby Bonds. As of the Inception Date, 14.96% of the Trust consists of baby bonds. Baby bonds are generally long-term, fixed-income debt securities issued by corporations to raise money and have principal, or face value, amounts under $1,000. As with other types of bonds, baby bonds usually mature 10 years after they are issued, and some are issued for as long as 30 years. When a baby bond reaches maturity, the issuing organization is required to repay the principal to the bondholder. Because baby bonds are somewhat unusual, they may be more expensive to trade.
Flaherty & Crumrine Incorporated
Flaherty & Crumrine Incorporated was formed in 1983 with the express intention of managing portfolios of preferred and debt securities for institutional investors. The firm has experience dating back to 1991 in managing preferred securities funds. Through its experience in the preferred and debt securities markets, Flaherty & Crumrine has developed the expertise necessary to implement the portfolio and interest rate management strategies necessary in seeking to obtain the highest sustainable income. In addition to receiving a portfolio consulting fee, the Trust pays Flaherty & Crumrine a licensing fee for the use of its intellectual property.
Risks and Other Considerations
As with all investments, you may lose some or all of your investment 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 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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