U.S. Equity Closed-End Portfolio, Series 33
Portfolio Selection Process
When selecting closed-end funds for this portfolio, we generally look at several factors including:
- PREMIUM OR DISCOUNT | We favor funds which are trading at a discount to net asset value.
- CONSISTENT DIVIDEND | We favor funds which have a history of paying a consistent
dividend. There is, however, no guarantee that the issuers of the securities included in the portfolio will
declare dividends in the future.
- EXPENSE RATIO | We favor funds which have a lower than average expense ratio relative to
- DIVERSIFICATION | We provide a diversified exposure of funds from a variety of companies
Why Closed-End Funds?
Since closed-end funds maintain a relatively fixed pool of investment capital, portfolio managers are
better able to 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 redemptions.
Because they are not subjected to cash inflows and outflows, which can dilute distributions over time,
closed-end funds can generally provide a more stable income stream than other managed investment
products. However, stable income cannot be assured.
This unit investment trust seeks current income with total return as a secondary
objective; however, there is no assurance that the objectives 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 which invest in common stocks.
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 employ the use of leverage, which
increases the volatility of such funds.
All of the closed-end funds invest in common stocks. Common
stocks are subject to 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
Certain of the closed-end funds invest in master limited
partnerships (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 after-tax income
available for distribution by the MLPs and/or the value of the
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.
Certain of the closed-end funds invest in preferred securities.
Preferred securities are equity securities of the issuing company
which pay income in the form of dividends. Preferred securities
are typically subordinated to bonds and other debt instruments
in a company’s capital structure, and therefore will be subject
to greater credit risk than those debt instruments.
Certain of the closed-end funds invest in real estate investment
trusts (REITs). 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 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.
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 available information.
For a discussion of additional risks of investing in the trust see
the “Risk Factors” section of the prospectus.
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
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 cyber security.
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.
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.