Target Double Play Portfolio, 3rd Quarter 2012 Series
Target Double Play Portfolio
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 low-correlated investments primarily helps to reduce volatility and also has the potential to enhance your returns. Target Dbl. Play (Target Double Play Portfolio) has been developed to seek to address this purpose.
The Target Double Play Portfolio is a unit investment trust which consists
of an approximately equal weighting between two strategies - The Dow®
Target Dividend Strategy and the Value Line® Target 25 Strategy.
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 1992, 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 Double Play Portfolio.
History has shown that bear and bull markets are a normal occurrence. Although
past performance is no guarantee of future results, history has also shown that
equity investors have been rewarded for their patience over the long-term.The
chart below illustrates this point based on applying the hypothetical strategy
over one year and three year periods. Of course, there is no guarantee that
the performance of the strategy or the trust will be positive over any future
Portfolio Selection Process
The Target Double Play Portfolio seeks to provide the potential for above-average
total return by adhering to a simple investment strategy; however, there is
no assurance the objective will be met. On the initial date of deposit, the
portfolio is approximately equally weighted between the two strategies described
The Dow® Target Dividend Strategy
- Begin with the stocks that comprise the Dow Jones Select Dividend IndexSM.
The index consists of 100 widely-traded, dividend-paying stocks derived from
the Dow Jones U.S. Total Market IndexSM.
- Rank each of the 100 stocks on two factors:
- Rank each of the 100 stocks on two factors: • Change in return on assets over the last 12 months. An increase in return on assets is generally used as an indication of improving business fundamentals and would receive a higher ranking than a stock with a negative change in return on assets.
- Price to book. A lower, but positive, price to book ratio is generally used as an indication of value.
- Purchase an approximately equally-weighted portfolio of the 20 stocks with
the best overall ranking on the two factors.
Value Line® Target 25 Strategy
- 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 long-term 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%.
| Standard Deviations*
|| Average Annual Total Returns*
|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 0.252%, plus organization costs, but not taxes or commissions paid by the portfolio to purchase securities. Returns assume that all dividends received during a year are reinvested monthly.
Actual portfolio performance will vary from that of investing in the strategy stocks because it may not be invested equally in these 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 results.
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.
Standard Deviation is a measure of price variability (risk). A higher degree of variability indicates more volatility and therefore greater risk.
| 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 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
You should be aware that the portfolio is concentrated in stocks in the financials sector which involves additional risks, including limited diversification. The companies engaged in the financials sector are subject to the adverse effects of volatile interest rates, economic recession, decreases in the availability of capital, increased competition from new entrants in the field, and potential increased regulation.
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 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.
The Dow Jones U.S. Select Dividend IndexSM 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®", "Dow Jones U.S. Select Dividend IndexSM" 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 Double Play Portfolio, based on the Dow
Jones U.S. Select Dividend IndexSM, 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. and/or First Trust Advisors L.P. The Target Double Play Portfolio 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. and First
Trust Advisors L.P. are not affiliated with any Value Line company.