Corporate Investment Grade, 3-7 Year, Series 8
Corporate Bond Basics
A corporate bond is a debt obligation issued by a corporation. Issuing bonds can be an alternative to offering
equity ownership by issuing stock. Payments to bondholders have priority over payments to stockholders.
Why Investment Grade
Within the bond market, there is a category of bonds considered “investment grade.” Investment grade
bonds are rated BBB/Baa or higher by major credit rating agencies. The designation of a bond as
investment grade is based upon an evaluation by a credit rating agency of the corporation’s credit
history and ability to repay obligations. This rating of investment grade generally signifies that a credit
rating agency considers the quality of a particular bond to be sufficient to provide reasonable assurance
of the issuer’s ability to meet their obligations to bondholders. There is, however, no assurance that the
securities selected for the trust will continue to receive an investment grade rating in the future or that
such rating will ensure an issuer’s ability to satisfy its obligations to bondholders.
Investment grade bonds generally are a high credit quality asset class with historically low default rates.
The chart to the right illustrates that the average default rates for investment grade bonds have been
significantly lower than for speculative grade bonds based on the most recent data available from
Moody’s Investors Service. Current default rates may vary from that of their historical averages and there
can be no assurance that the default rate for investment grade bonds will not rise in the future.
- Potential for current monthly income.
- Diversified portfolio of investment grade corporate bonds.
- Estimated weighted average maturity of approximately 3 to 7 years.
- 1.95% up-front maximum sales charge. In addition to the sales charge, the trust is
subject to annual operating expenses and organization costs.
The objectives of this unit investment trust are to distribute current monthly income
and to preserve capital by investing in a portfolio of investment grade corporate
bonds. There is, however, no assurance that the objectives will be achieved.
|Not FDIC Insured Not Bank Guaranteed May Lose Value
You should carefully consider the portfolio's investment objectives,
risks, and charges and expenses 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 investment grade corporate bonds, including higher interest rates,
economic recession, deterioration of the bond market or investors' perception thereof, possible
downgrades and defaults of interest and/or principal.
You should be aware that the portfolio is concentrated in debt
obligations of financial companies 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 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
An investment in a portfolio containing 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. 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 securities in the portfolio are issued by 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.
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
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.
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