The Target VIP Conservative Equity Portfolio, 3rd Quarter 2012 Series
Finding the right mix of investments is a key factor to successful investing.
Because different investments often react differently to economic and market
changes, diversifying among investments that focus on different areas of the
market primarily helps to reduce volatility and also has the potential to enhance
your returns. Target VIP Cons. Eqty. 3Q '12 - Term 10/9/13 ( Target VIP Conservative
Equity Portfolio) has been developed for this purpose.
The Target VIP Conservative Equity Portfolio is a unit investment trust which
provides you with the convenience of owning four distinct strategies in one
investment. It invests in a fixed portfolio of stocks which are selected by
applying pre-determined screens and factors and holds the stocks for approximately
15 months. The portfolio offers several important advantages:
- Complete transparency from the stock selection process to portfolio holdings
and individual stock weightings;
- Automated buy decisions helping to eliminate unwanted emotions from the
- No style drift from manager-driven trading;
- Low cash positions so more of your money is put to work;
- Diversification, discipline, and a periodic rebalancing opportunity helping
to decrease volatility and potentially increase returns.
As you can see in the adjacent charts, if this strategy had been applied since
1987, investors would have realized higher total returns than by investing in
the S&P 500 Index. It is important to note that the past performance of the
strategy is hypothetical and it is not indicative of the future performance
of the Target VIP Conservative Equity Portfolio.
Portfolio Selection Process
The Target VIP Conservative Equity Portfolio seeks above-average total return
by adhering to a simple investment strategy; however, there is no assurance
the objective will be met. The portfolio is comprised of the four strategies
The S&P Target 24 Strategy-50%
- Begin with the companies listed in the S&P 500 Index.
- Select the eight largest sectors in the index based upon market capitalization.
- Purchase the three stocks from each sector with the best overall ranking
on the following criteria:
- Trailing four quarter's return on assets.
- Buyback yield. A measure of the percentage decrease in a company's outstanding
common shares versus one year earlier.
- Bullish interest indicator. A comparison, over the past twelve months,
between the number of a company's shares that traded in months when the
stock price rose versus the number of shares that traded in months when
the stock price fell.
- The stocks are weighted according to their market capitalization relative to their sector and relative to their peers within the sector.
The DowSM DART 10 Strategy- 30%
- Rank the companies in the DJIASM by a combination of dividend
yield and the percentage reduction in the number of outstanding shares over
the past 12 months.
- Identify and purchase an approximately equally-weighted portfolio of the
The Value Line® Target 25 Strategy-10%
- Begin with the 100 stocks that Value Line® currently gives a #1 ranking
for TimelinessTM (stocks of financial companies and companies whose shares
are not listed on a U.S. exchange are not eligible for inclusion in the Value
Line® Target 25 Strategy). Value Line® ranks approximately 1,700 stocks, only
100 of which are given their #1 ranking for TimelinessTM. They base their
rankings on a longterm trend of earnings, prices, recent earnings, price momentum,
and earnings surprises.
- Rank the stocks on four factors:
- 12-month price appreciation
- 6-month price appreciation
- Return on assets
- Price to cash flow
- Purchase a market cap-weighted portfolio of the 25 eligible stocks with the best
overall ranking on the factors, subject to a minimum weighting of approximately
1% and a maximum weighting of approximately 25%.
The Global Target 15 Strategy- 10%
- Rank the stocks in the DJIASM, Financial Times Industrial Ordinary Share Index and Hang Seng Index by current indicated dividend yield. The Hang Seng Index is an index of stocks currently listed on the Stock Exchange of Hong Kong. The Financial Times Industrial Ordinary Share Index is an index of stocks chosen by the editors of The Financial Times as being representative of the British industry and commerce.
- Identify and purchase an approximately equally-weighted portfolio of the
5 lowest priced of the 10 highest dividend-yielding stocks from each index.
The actual weightings of each of the component strategies on the initial date
of deposit may differ slightly from those indicated above due to the requirement
that only whole shares be purchased for the portfolio and will likely vary thereafter
due to market fluctuations in the underlying securities.
Not FDIC Insured Not Bank Guaranteed May Lose Value
| Standard Deviations*
|| Average Annual Total Returns*
||S&P 500 Index
||S&P 500 Index
|Annual Total Returns
Past performance is no guarantee of future results and the actual current
performance of the portfolio may be lower or higher than the hypothetical performance
of the strategy. Hypothetical returns for the strategy in certain years were
significantly higher than the returns of the S&P 500 Index. Hypothetical strategy
returns were the result of certain market factors and events which may not be
replicated in the future. You can obtain performance information which is current
through the most recent month-end by calling First Trust Portfolios L.P. at
1-800-621-1675 option 2. Investment return and principal value of the portfolio
will fluctuate causing units of the portfolio, when redeemed, to be worth more
or less than their original cost.
Simulated strategy returns are hypothetical, meaning that they do not represent actual trading, and, thus, may not reflect material economic and market factors, such as liquidity constraints, that may have had an impact on actual decision making. The hypothetical performance is the retroactive application of the strategy designed with the full benefit of hindsight. Strategy returns reflect a sales charge of 2.95% in the first year, 1.95% in subsequent years, estimated annual operating expenses of 0.564%, plus organization costs, but not taxes or commissions paid by the portfolio to purchase securities. Strategy returns assume that dividends are reinvested semi-annually while index returns assume dividends are reinvested monthly.
Actual portfolio performance will vary from that of investing in the strategy
stocks because it may not be weighted the same as the strategy stocks and may
not be fully invested at all times. It is important to note that the strategy
may underperform the S&P 500 Index in certain years and may produce negative
Please note that the S&P 500 Index has been included for comparative purposes
only. 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
Standard Deviation is a measure of price variability (risk). A higher degree of variability indicates more volatility and therefore greater risk.
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 owning common stocks, 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.
One of the securities in the portfolio is issued by a REIT. 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.
An investment in a portfolio containing equity securities of foreign issuers
is subject to additional risks, including currency fluctuations, political risks,
withholding, the lack of adequate financial information, and exchange control
restrictions impacting foreign issuers.
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.
"S&P", "S&P 500", and "Standard & Poor's" are trademarks of The McGraw-Hill
Companies, Inc. and have been licensed for use by First Trust Portfolios L.P.
The S&P Target 24 strategy is not sponsored, endorsed, sold, or promoted by
Standard & Poor's and Standard & Poor's makes no representation regarding the
advisability of investing in such products.
The Dow Jones Industrial AverageSM is a product of Dow Jones Indexes, a licensed
trademark of CME Group Index Services LLC ("CME"), and has been licensed for
use. "Dow Jones®", "The Dow®", "Dow Jones Industrial AverageSM" and "Dow Jones
Indexes" are service marks of Dow Jones Trademark Holdings, LLC ("Dow Jones"),
and have been licensed to CME and have been sublicensed for use for certain
purposes by First Trust. The Target VIP Conservative Portfolio, based on the
Dow Jones Industrial AverageSM, is not sponsored, endorsed, sold or promoted
by Dow Jones, CME or their respective affiliates and none of them makes any
representation regarding the advisability of investing in such products.
"Value Line," "The Value Line Investment Survey," and "Value Line TimelinessTM
Ranking System" are registered trademarks of Value Line Securities, Inc. or
Value Line Publishing, Inc. that have been licensed to First Trust Portfolios
L.P. This product is not sponsored, recommended, sold or promoted by Value Line
Publishing, Inc., Value Line, Inc. or Value Line Securities, Inc. First Trust
Portfolios L.P. is not affiliated with any Value Line company.