The Flaherty & Crumrine Preferred Portfolio, Series 36 ("Trust") primarily seeks to provide 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
Under normal circumstances, the Trust will invest at least 80% of the value of its assets in preferred securities. The Sponsor has selected Flaherty & Crumrine Incorporated (“Flaherty”) 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 consists of a portfolio of exchange-listed preferred stocks, Trust preferred securities and baby bonds selected from Flaherty’s proprietary preferred securities database and its internally generated credit research. The U.S.-listed common stocks held by the Trust may include the common stocks of U.S. and non-U.S. companies. 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. Certain of the securities are rated below investment-grade and are considered to be “junk” securities. Please see “Principal Risks” and “Investment Risks” for additional information about the risks of investing in high-yield or “junk” securities. As a result of this strategy, the Trust is concentrated in the financial sector.
With assistance from Flaherty, the Sponsor has selected preferred stocks, Trust preferred securities and baby bonds believed to have the best potential for 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 the 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 50% of the securities included in the Trust are rated investment-grade quality by at least one nationally recognized statistical rating organization.
See “Description of Ratings” in Part B of the prospectus for additional information regarding the ratings criteria.
Preferred Stock. As of the Inception Date, 80.24% of the Trust consists of preferred stocks. Similar to bonds, preferred stocks offer a stated rate of return paid in the form of a dividend and are traded on the basis of their yield. Dividend distributions of preferred stocks may be eligible for the dividends received deduction for corporations and typically count as qualified dividend income for individual investors.
Like common stock, preferred stocks are perpetual equity securities representing ownership in a company. Preferred stock ranks senior to common stock and preferred stockholders enjoy preference over common stockholders with regard to dividends and liquidations. Preferred stockholders may also 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, 12.52% of the Trust consists of Trust preferred securities. 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. Preferred securities are 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 for corporations and typically do not count as qualified dividend income for individual investors.
Baby Bonds. As of the Inception Date, 7.24% of the Trust consists of baby bonds. Baby bonds are generally long-term, fixed-income debt securities that rank as senior indebtedness. As with other types of bonds, baby bonds usually have a stated maturity that is at least 10 years after they are issued, and some are issued for as long as 50 years. When a baby bond reaches maturity, the issuing organization is required to repay the principal to the bondholder. The distributions from baby bonds are generally treated as interest rather than dividends for federal income tax purposes and therefore, are not eligible for the dividends-received deduction for corporations and do not count as qualified dividend income for individual investors.
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 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 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. 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 preferred stocks and Trust preferred securities. Preferred securities are typically subordinated to bonds and other debt instruments in a company’s capital structure in terms of priority to corporate income and therefore will be subject to greater risk than those debt instruments.
• The Trust is concentrated in the financial sector. As a result, the factors that impact the financial sector will likely have a greater effect on this Trust than on a more broadly diversified Trust. Companies in the financial sector include banks, insurance companies and investment firms. The profitability of companies in the financial sector is largely dependent upon the availability and cost of capital which may fluctuate significantly in response to changes in interest rates and general economic developments. Financial sector companies are especially subject to the adverse effects of economic recession, decreases in the availability of capital, volatile interest rates, portfolio concentrations in geographic markets and in commercial and residential real estate loans, and competition from new entrants in their fields of business. Negative developments initially relating to the subprime mortgage market and subsequently spreading to other parts of the economy, have adversely affected credit and capital markets worldwide and significantly impacted financial sector companies.
• The Trust invests 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 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 of the securities held by the Trust may be 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.
• The Trust may invest in securities that are not rated by one or more of the rating agencies. As a result, it may be difficult to assess the credit quality of such securities.
• The Trust invests in U.S.-listed foreign securities. The Trust’s investment in U.S.-listed foreign securities presents additional risk. Securities of foreign issuers present risks beyond those of domestic securities. More specifically, 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.
• 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; 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 markets in the United States; and other factors beyond the control of the issuer of the security.
• The value of your units 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. The Trust may be subject to greater risk of rising interest rates than would normally be the case due to the current period of historically low rates.
• An insurer or an issuer of the securities may be unwilling or unable to make principal payments and/or to declare dividends in the future, may call a security before its stated maturity or may reduce the level of dividends declared. This may result in a reduction in the value of your units.
• The financial condition of an issuer or an insurer of the securities may worsen or its credit ratings may drop, resulting in a reduction in the value of your units. This may occur at any point in time, including during the initial offering period.
• The Trust will receive early returns of principal if securities held by the Trust are called or sold before they mature. If this happens your income will decline and you may not be able to reinvest the money you receive at as high a yield or as long a maturity.
• Certain of the preferred securities held by the Trust may have “make whole” call options that generally cause the securities to be redeemable at any time at a designated price. Such securities are generally more likely to be subject to early redemption and may result in the reduction of income received by the Trust and the early termination of the Trust.
• Inflation may lead to a decrease in the value of assets or income from investments.
• The Sponsor does not actively manage the portfolio. The value of your investment may fall over time. The Trust will generally hold, and may, when creating additional units, continue to buy, the same securities even though a security’s outlook, rating, 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.
© 2023 Guggenheim Investments. All Rights Reserved.
Research our firm with FINRA Broker Check.
• Not FDIC Insured • No Bank Guarantee • May Lose Value
This website is directed to and intended for use by citizens or residents of the United States of America only. The material provided on this website is not intended as a recommendation or as investment advice of any kind, including in connection with rollovers, transfers, and distributions. Such material is not provided in a fiduciary capacity, may not be relied upon for or in connection with the making of investment decisions, and does not constitute a solicitation of an offer to buy or sell securities. All content has been provided for informational or educational purposes only and is not intended to be and should not be construed as legal or tax advice and/or a legal opinion. Always consult a financial, tax and/or legal professional regarding your specific situation. Investing involves risk, including the possible loss of principal.