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Alternative Income Portfolio, Series 23

As interest rates remain low, these are challenging times to invest for income. Low yields in the traditional bond markets have led investors to look for yield from other sources. We believe that the multi-asset income way of investing is one way to potentially provide income generation, diversification and the potential for reduced volatility.

The Alternative Income Portfolio is a unit investment trust that offers a disciplined and transparent solution for income investors by providing exposure to a diversified mix of asset classes in a single investment portfolio.

Portfolio Objective

This unit investment trust seeks to provide current monthly income, with capital appreciation as a secondary objective. There is, however, no assurance that the objectives will be achieved. The portfolio terminates approximately two years from the initial date of deposit.

Portfolio Composition

The portfolio invests in closed-end funds and common stocks in five distinct segments of the market that we believe have the potential to provide a more stable income stream over various market conditions.

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Consider The Following:

  • The portfolio provides the potential for a lower-risk total return alternative to investing solely in one asset class. The portfolio is further diversified within each asset class. However, diversification does not guarantee a profit or protect against loss.

  • The portfolio may provide less interest rate sensitivity than traditional fixed income securities due to income being generated from multiple sources.


  • Inflation causes interest rates to rise and erodes purchasing power. REITs, MLPs and dividend-paying securities are a few asset classes that have historically generated cash flow during times of rising inflation, although past performance is no guarantee of future results.
Not FDIC Insured • Not Bank Guaranteed • May Lose Value

Investment Characteristics

The Alternative Income Portfolio invests in the following:

  • Business Development Companies (BDCs) – Closed-end investment companies electing to be treated as BDCs that invest in and lend to private middle-market businesses.

  • Closed-End Funds – Actively managed investment companies which invest in various types of securities. Closed-end funds issue shares that are traded on a securities exchange.


  • Dividend-Paying Companies – Common stocks of companies that pay dividends to shareholders out of the companies' profits or expected profits.


  • MLP CEFs – MLPs are limited partnerships that are publicly traded on a U.S. securities exchange, which combine the tradeability of common stocks with the corporate structure of a limited partnership. MLPs are traditionally high cash flow businesses that pay out a majority of that cash to investors.


  • REITs – Financial vehicles that pool investors' capital to purchase or finance real estate. REITs may concentrate their investments in specific geographic areas or in specific property types.
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 advisor 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.

Risk Considerations:
An investment in this unmanaged unit investment trust should be made with an understanding of the risks involved with an investment in a portfolio of common stocks and closed-end funds.

Common stocks are subject to certain risks, such as an economic recession and the possible deterioration of either the financial condition of the issuers of the equity securities or the general condition of the stock market.

Closed-end funds are subject to various risks, including management's ability to meet the fund's investment objective, and to manage the fund's portfolio when the underlying securities are redeemed or sold, during periods of market turmoil and as investors' perceptions regarding the funds or their underlying investments change. Unlike open-end funds, which trade at prices based on a current determination of the fund's net asset value, closed-end funds frequently trade at a discount to their net asset value in the secondary market. Certain closed-end funds may employ the use of leverage, which increases the volatility of such funds.

Certain of the securities in the portfolio are issued by closed-end investment companies which have been elected to be treated as Business Development Companies (BDCs). An investment in BDCs is subject to various risks, including management’s ability to meet the BDC’s investment objective, and to manage the BDC’s portfolio during periods of market turmoil. BDCs may trade in the market at a discount to their net asset value. BDCs may employ the use of leverage which subjects the BDC to increased risks.

Certain of the common stocks are issued by, and certain of the closed-end funds invest in REITs. Companies involved in the real estate industry are subject to changes in the real estate market, vacancy rates, competition, volatile interest rates and economic recession.

Certain of the closed-end funds invest in high-yield securities or "junk" bonds. Investing in high-yield securities should be viewed as speculative and you should review your ability to assume the risks associated with investments that utilize such bonds. High-yield securities are subject to numerous risks including higher interest rates, economic recession, deterioration of the junk bond market, possible downgrades and defaults of interest and/or principal. High-yield security prices tend to fluctuate more than higher rated bonds and are affected by short-term credit developments to a greater degree.

Certain of the closed-end funds invest in MLPs. Investments in MLPs are subject to the risks generally applicable to companies in the energy and natural resources sectors, including commodity pricing risk, supply and demand risk, depletion risk and exploration risk. U.S. taxing authorities could challenge the trust’s treatment of the MLPs for federal income tax purposes. These tax risks could have a negative impact on the after-tax income available for distribution by the MLPs and/or the value of the trust’s investments.

An investment in a portfolio which includes securities issued by foreign entities should be made with an understanding of the additional risks involved, including currency and interest rate fluctuations, nationalization or other adverse political or economic developments, lack of liquidity of certain foreign markets, withholding, the lack of adequate financial information, and exchange control restrictions impacting foreign issuers.

Certain of the funds invest in senior loans. The yield on closed-end funds which invest in senior loans will generally decline in a falling interest rate environment and increase in a rising interest rate environment. Senior loans are generally below investment grade quality ("junk" bonds). An investment in senior loans involves the risk that the borrowers may default on their obligations to pay principal or interest when due.

Certain of the funds invest in floating-rate securities. A floating-rate security is an instrument in which the interest rate payable on the obligation fluctuates on a periodic basis based upon changes in an interest rate benchmark.

An investment in a portfolio containing small-cap and mid-cap companies is subject to additional risks, as the share prices of small-cap companies and certain mid-cap companies are often more volatile than those of larger companies due to several factors, including limited trading volumes, products, financial resources, management inexperience and less publicly available information.

Certain of the closed-end funds invest in limited duration bonds. Limited duration bonds are subject to interest rate risk, which is the risk that the value of a security will fall if interest rates increase. While limited duration bonds are generally subject to less interest rate sensitivity than longer duration bonds, there can be no assurance that interest rates will not rise during the life of the trust.

It is important to note that an investment can be made in the underlying funds directly rather than through the trust. These direct investments can be made without paying the trust's sales charge, operating expenses and organizational costs.

For a discussion of additional risks of investing in the trust see the “Risk Factors” section of the prospectus.

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.

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.

 
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