Preferred Income Portfolio, Series 109
The Preferred Income Portfolio is a unit investment trust that is diversified across preferred stocks and
trust preferred securities from several companies and because the portfolio remains fixed, you have the
confidence of knowing what you own.
About Preferred Securities
- Preferred stocks are equity securities of the issuing company which pay income in the form of dividends.
- Trust preferred securities are securities issued by corporations, generally in the form of interest-bearing
notes or preferred stocks, distributions on which are treated as interest, rather than dividends, for
federal tax purposes.
- Preferred securities typically have a yield advantage over common stocks as well as comparably rated
fixed income investments.
- Preferred securities are “senior securities” which have preference over common stocks, but not debt,
of an issuer.
The Current Opportunity In Preferred Securities
- Current yields on preferred securities are attractive relative to many other income-producing
- Preferred securities offer diversification and historically low correlation to other asset
classes, which may reduce portfolio volatility.
- Preferred securities offer the potential for capital appreciation and have historically
proven to be a more reliable source of income than common stocks as they are senior
in the capital structure, have produced a more stable stream of income and have been
Why are New Issues Important?
Newly issued preferred securities are important as they provide liquidity and call protection. We
believe this is important during the current low rate environment we are experiencing.
Why is Call Protection Important?
The securities in the portfolio provide call protection, which helps provide consistent distributions
through the life of the trust. If a preferred security does not have call protection, it can be “called” or paid off prior to its stated maturity. Call protection is beneficial to investors when interest
rates are low or falling because if the securities are called, there is the risk that the proceeds will
be reinvested at a potentially lower rate of return. The securities chosen for the portfolio have call
protection, which may provide for consistent distributions over the life of the trust.
This unit investment trust seeks a high rate of current income; however, there is no assurance the
objective will be met.
|Not FDIC Insured Not Bank Guaranteed May Lose Value
You should consider the portfolio's investment objectives, risks, and
charges and expenses carefully before investing. Contact your financial professional
or call First Trust Portfolios L.P. at 1.800.621.1675 to request a prospectus,
which contains this and other information about the portfolio. Read it carefully
before you invest.
An investment in this unmanaged unit investment trust should be made
with an understanding of the risks involved with owning preferred stocks and trust preferred securities,
such as an economic recession, volatile interest rates and the possible deterioration of either the financial
condition of the issuers of the trust preferred securities or the general condition of the stock market.
You should be aware that the portfolio is concentrated in preferred stocks and trust preferred securities issued
by companies in the financials sector which involves additional risks, including limited diversification. The
financials sector is subject to the adverse effects of volatile interest rates, economic recession, decreases
in the availability of capital, increased competition from new entrants in the field, and the potential for
increased regulation. Preferred stocks and trust 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 credit risk than those debt instruments.
Certain of the securities in the portfolio are issued by Real Estate Investment Trusts (REITs). Companies
involved in the real estate industry are subject to changes in the real estate market, vacancy rates and
competition, volatile interest rates and economic recession.
An investment in a portfolio containing equity securities of foreign issuers is subject to additional risks,
including currency fluctuations, political risks, withholding, the lack of adequate financial information, and
exchange control restrictions impacting foreign issuers.
As the use of Internet technology has become more prevalent in the course of business, the trust has become
more susceptible to potential operational risks through breaches in cybersecurity.
The COVID-19 global pandemic has caused significant volatility and declines in global financial markets,
causing losses for investors. The development of vaccines has slowed the spread of the virus and allowed
for the resumption of “reasonably” normal business activity in the United States, although many countries
continue to impose lockdown measures. Additionally, there is no guarantee that vaccines will be effective
against emerging variants of the disease.
The value of the securities held by the trust may
be subject to steep declines or increased volatility
due to changes in performance or perception of
This UIT is a buy and hold strategy and investors
should consider their ability to hold the trust until
maturity. There may be tax consequences unless
units are purchased in an IRA or other qualified plan.