Corporate Investment Grade Laddered Portfolio, Series 11
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.
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.
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.
- 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.
|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 corporate bonds in the consumer products sector
which involves additional risks, including limited diversification. The companies engaged in the consumer
products industry are subject to global competition, changing government regulations and trade policies,
currency fluctuations, and the financial and political risks inherent in producing products for foreign markets.
One of the securities in the trust is issued by a REIT. Companies involved in the real estate industry are
subject to changes in the real estate market, vacancy rates and competition, volatile interest rates and
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.
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.
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.