The Flaherty & Crumrine Preferred Portfolio, Series 38 (“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, 84.52% 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, 13.48% 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, 2.00% 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 dividendsreceived 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:
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.