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Corporate Investment Grade Laddered Portfolio, Series 10

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.

Portfolio Objectives

The objectives of this unit investment trust are to distribute high current monthly income and to preserve capital by investing in a laddered portfolio of investment grade corporate bonds. There is, however, no assurance that the objectives will be achieved.

Portfolio Selection

Our analysts use a multiple factor approach when assessing the credit strength of the corporate bonds that are selected for inclusion in the trust. The analysis includes the issuer’s credit rating and financial outlook in conjunction with an evaluation of fundamental characteristics of the issuer which may include leverage, liquidity and profitability as well as industry specific and geographic risk. Factors considered at the security level include an analysis of the issuer’s capital structure, the subordination of the security, coupon type, liquidity and the amount of an issue outstanding. These factors in combination with the duration, yield, price, call features and maturity result in an overall determination of relative value.

Portfolio Summary

  • Potential for high current monthly income.
  • Diversified portfolio of investment grade corporate bonds.
  • Estimated weighted average maturity of approximately 6 to 8 years.
  • 2.50% up-front maximum sales charge. In addition to the sales charge, the trust is subject to annual operating expenses and organization costs.

Chart

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.

Risk Considerations
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 corporate bonds 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 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.

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.

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.

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.

 
Fund Cusip Information
30311H426 (Cash)
30311H434 (Cash-Wrap)
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The information presented is not intended to constitute an investment recommendation for, or advice to, any specific person. By providing this information, First Trust is not undertaking to give advice in any fiduciary capacity within the meaning of ERISA, the Internal Revenue Code or any other regulatory framework. Financial advisors are responsible for evaluating investment risks independently and for exercising independent judgment in determining whether investments are appropriate for their clients.
First Trust Portfolios L.P.  Member SIPC and FINRA.
First Trust Advisors L.P.
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