Multi-Sector Income Portfolio, Series 13
This unit investment trust seeks a high rate of current monthly income and capital appreciation. There is, however, no assurance that the objectives will be achieved. The portfolio terminates approximately 15 months from the initial date of deposit.
Canadian Energy Stocks
The Canadian energy common stocks held in the portfolio generate cash flow through the gathering, processing, transportation, storage, and distribution of oil and natural gas.
With continuing geo-political and long-term supply concerns, we believe this investment may represent an attractive alternative for investors seeking oil and gas exposure and high current income potential.
Real Estate Investment Trusts
In investing, low correlation signifies that different investments have not performed in the same way. A study by Ibbotson Associates found that REITs' low correlation to other investments is a key factor for portfolio diversification.1 This makes a compelling case for the use of REITs to reduce risks in a variety of investment portfolios.
1 NAREIT, "The Investor's Guide to REITs," 2012
The Multi-Sector Income Portfolio is a professionally-selected unit investment trust which offers investors the potential for a lower-risk total return alternative to investing solely in stocks. To accomplish this, the portfolio invests in high dividend-paying equity securities diversified among common stocks, Canadian energy stocks and REITs as well as in closed-end funds which invest primarily in master limited partnerships (MLPs), equities and taxable bonds. The portfolio is weighted based on the adjacent allocation.
Master Limited Partnerships
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.
Unlike individual partnership investments,
investing in MLPs through closed-end funds
provides investors with one Form 1099 per
shareholder at the end of the year, rather than
multiple K-1s and potential state filings.
The Importance of Dividends
Corporations are not obligated to share their earnings with stockholders so, in our opinion, dividends may be viewed as a sign of a company's profitability as well as management's assessment of the future. Dividends have had a significant impact on stock performance. Consider the historical effect dividends have had on companies in the S&P 500 Index. According to Ibbotson Associates, dividends have provided approximately 43% of the 9.84% average annual total return on the S&P 500 Index from 1926 through 2012. The S&P 500 Index is an unmanaged index of 500 stocks used to measure large-cap U.S. stock market performance. The index cannot be purchased directly by investors. You should be aware that there is no guarantee that the issuers of the securities included in the portfolio will declare dividends in the future or that, if declared, they will either remain at current levels or increase over time.
|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 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.
An investment in a portfolio containing REIT securities is subject to additional risks, as 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.
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 aftertax income available for distribution by the MLPs and/or the value of the trust's investments.
Certain of the closed-end funds invest in call 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.
An investment in a portfolio containing small-cap companies is subject to additional
risks, as the share prices of small-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
An investment in a portfolio containing securities of foreign issuers is 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 developed, less liquid,
less regulated, and more volatile than the U.S. and developed foreign markets.
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.