Income Allocation Closed-End Portfolio, 2nd Quarter 2017 Series
The Multi-Sector Approach
The Income Allocation Closed-End 2Q. '17 (The Income Allocation Closed-End Portfolio) is a unit
investment trust designed to enable investors who are seeking a high rate of current monthly
income to reduce some of the volatility typically associated with high-income investments. To
accomplish this, the portfolio is diversified across a broad range of closed-end funds. Because
different sectors follow different cycles and react differently to changes in global economies and
interest rates, spreading assets across this spectrum of securities has the potential to reduce the
overall risk of the portfolio.
Unlike open-end mutual funds, closed-end funds maintain a relatively fixed pool
of investment capital. This allows portfolio managers to better adhere to their
investment philosophies through greater flexibility and control. In addition,
closed-end funds don't have to manage fund liquidity to meet potentially large
The portfolio offers investors diversification by investing in a broad range
of closed-end funds that are further diversified across hundreds of individual
issues. Diversification does not guarantee a profit or protect against loss.
Closed-end funds are structured to generally provide a more stable income stream
than other managed fixed-income investment products because they are not subjected
to cash inflows and outflows, which can dilute dividends over time. However,
as a result of bond calls, redemptions and advanced refundings, which can dilute
a fund's income, the portfolio cannot guarantee consistent income.
This unit investment trust seeks high current monthly income, with capital appreciation as a secondary objective. There is, however, no assurance that the objectives will be achieved.
| 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.
An investment in this unmanaged unit investment trust should be made with an
understanding of the risks associated with an investment in a portfolio of closed-end
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
Certain of the closed-end funds invest in common stocks. Common stocks are
subject to 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.
Certain of the closed-end funds invest in options. Options are subject to various
risks including that their value may be adversely affected if the market for
the option becomes less liquid or smaller. In addition, options will be affected
by changes in the value and dividend rates of the stock subject to the option,
an increase in interest rates, a change in the actual and perceived volatility
of the stock market and the common stock and the remaining time to expiration.
Certain of the closed-end 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 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 which utilize
such securities. 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 securities and are affected
by short-term credit developments to a greater degree.
Certain of the closed-end funds invest in investment grade bonds.
Investment grade bonds are subject to numerous risks including higher
interest rates, economic recession, deterioration of the investment grade
bond market or investors' perception thereof, possible downgrades and
defaults of interest and/or principal.
Certain of the closed-end 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. As a result,
the yield on such a security will generally decline in a falling
interest rate environment, causing the trust to experience a
reduction in the income it receives from such securities.
All of the closed-end funds invest in securities issued by foreign
issuers. Such securities are subject to certain risks, 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. Risks associated with investing in
foreign securities may be more pronounced in emerging
markets where the securities markets are substantially smaller,
less liquid, less regulated and more volatile than the U.S. and
developed foreign markets.
Although this portfolio terminates in
approximately 15 months, the strategy is longterm.
Investors should consider their ability to
pursue investing in successive portfolios, if
available. There may be tax consequences
unless units are purchased in an IRA or other
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
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.
For a discussion of additional risks of investing
in the trust see the “Risk Factors” section of the