Multi-Sector Income Portfolio, Series 37
The Multi-Sector Income Portfolio offers investors the potential for a lower-risk total return
alternative to investing solely in
stocks. To accomplish this, the
portfolio invests in high dividendpaying
equity securities diversified
among common stocks, Canadian
energy stocks and Real Estate
Investment Trusts (REITs) as well as in closed-end
funds (CEFs) which invest primarily in master limited partnerships (MLPs), equities and taxable
bonds. The portfolio is approximately weighted based on the allocation below.
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
The Importance of Dividends
Due to the fact that corporations are not obligated
to share their earnings with stockholders, dividends may be viewed as a sign of a company's profitability
as well as management's assessment of the future, in our opinion.
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 42% of the 10.04% average annual total return on the S&P 500 Index from 1926 through
2016. 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.
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.
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.
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. Although
this portfolio terminates in approximately 15
months, the strategy is long-term. 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 qualified plan.
|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.
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.
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.
The companies engaged in the energy sector are subject to certain risks, including price and
supply fluctuations caused by international politics, energy conservation, taxes, price controls,
and other regulatory policies of various governments. Falling oil and gas prices may negatively
impact the profitability and business prospects of certain energy companies.
Certain of the common stocks held by the trust are issued by companies headquartered in
Canada which involves additional risks. The Canadian market is relatively concentrated in
issuers involved in the production and distribution of natural resources and continued demands
by the Province of Quebec for sovereignty could significantly affect the Canadian market,
particularly if such demands are met.
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.
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. Highyield
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 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 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
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.
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