Strategic Income Closed-End Portfolio, Series 77
The Multi-Sector Approach
The Strategic Income Closed-End Portfolio seeks to provide investors a high rate of current monthly income and diversification across various fixed income securities. To accomplish this, the portfolio is diversified across a broad range of closed-end funds that invest in U.S. and foreign taxable bonds. Because different sectors within the taxable debt market 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 taxable debt closed-end funds that are further diversified across hundreds
of individual issues. Diversification does not guarantee a profit or protect
Closed-end funds are structured to generally provide a more stable income stream than other
managed investment products because they are not subjected to cash inflows and outflows,
which can dilute distributions over time. However, stable income cannot be assured.
This unit investment trust seeks a high rate of current monthly income, with capital
appreciation as a secondary objective. There is, however, no assurance that the
objectives of the portfolio 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 funds.
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
from their net asset value in the secondary market. Certain closed-end
funds in which the portfolio invests employ the use of leverage, which
increases the volatility of such funds.
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. Certain of the floating-rate securities pay interest
based on LIBOR. Due to the uncertainty regarding the future utilization
of LIBOR and the nature of any replacement rate, the potential effect of
a transition away from LIBOR on a fund or the financial instruments in
which the fund invests cannot yet be determined.
All 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 securities.
Investment grade securities are subject to numerous risks including
higher interest rates, economic recession, deterioration of the
investment grade security market or investors’ perception thereof,
possible downgrades and defaults of interest and/or principal.
Certain of the closed-end funds invest in limited duration bonds.
Limited duration bonds are subject to interest rate risk, which is the
risk that the value of a security will fall if interest rates increase. While
limited duration bonds are generally subject to less interest rate
sensitivity than longer duration bonds, there can be no assurance that
interest rates will not rise during the life of the trust.
Certain of the closed-end funds invest in senior loan securities. 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 covenant-lite loans which
contain fewer or no maintenance covenants and may hinder the
closed-end funds’ ability to reprice credit risk and mitigate potential
loss especially during a downturn in the credit cycle.
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
On January 31, 2020, the United Kingdom officially departed the
European Union (commonly referred to as “Brexit”). Brexit has led to
volatility in global financial markets, in particular those of the United
Kingdom and across Europe, and may also lead to weakening in
political, regulatory, consumer, corporate and financial confidence in
the United Kingdom and Europe.
Please see the reverse side for
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
This UIT is a buy and hold strategy and
investors should consider their ability to hold
the trust until maturity. There may be tax
consequences unless units are purchased in an
IRA or other qualified plan.
As the use of Internet technology has become
more prevalent in the course of business, the
trust has become more susceptible to
potential operational risks through breaches in
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.
Local, regional or global events such as war, acts of terrorism, spread of infectious diseases or other public
health issues, recessions, or other events could have a significant negative impact on the portfolio and its
investments. Such events may affect certain geographic regions, countries, sectors and industries more
significantly than others. The recent outbreak of a respiratory disease designated as COVID-19 was first
detected in China in December 2019. The global economic impact of the COVID-19 outbreak is impossible
to predict but is expected to disrupt manufacturing, supply chains and sales in affected areas, negatively
impact global economic growth prospects, and could result in a substantial economic downturn or recession.
For a discussion of additional risks of
investing in the trust see the “Risk Factors”
section of the prospectus.