Flaherty & Crumrine Preferred Portfolio Series 22

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 consists 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.

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 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 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, 30.45% 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, 54.52% 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.

Baby bonds. As of the Inception Date, 15.03% 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 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.

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.
• Due to the current state of the economy, 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 the issuers. Starting in December 2007 and throughout most of 2009, economic activity declined across all sectors of the economy, and the United States experienced increased unemployment. The economic crisis affected the global economy with European and Asian markets also suffering historic losses. Although the latest economic data suggests slightly increased activity in the U.S. economy, unemployment remains high. Extraordinary steps have been taken by the governments of several leading economic countries to combat the economic crisis; however, the impact of these measures is not yet fully known and cannot be predicted.
• 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 includes securities issued by companies in the financial sector. 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.
• 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.
• 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 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.
• 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 securities held by the Trust are 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 both Moody’s and Standard & Poor’s.
• The Trust invests 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 may invest in issuers that are considered to be passive foreign investment companies (“PFICs”). In general, PFICs are certain non-U.S. corporations that receive at least 75% of their annual gross income from passive sources (such as interest, dividends, certain rents and royalties or capital gains) or that hold at least 50% of their assets in investments producing such passive income. As a result of an investment in PFICs, the Trust could be subject to U.S. federal income tax and additional interest charges on gains and certain distributions with respect to those equity interests, even if all the income or gain is distributed to its unitholders in a timely manner. The Trust will not be able to pass through to its unitholders any credit or deduction for such taxes.
• 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 continue to buy, the same securities even though a security’s outlook, rating, market value or yield may have changed.