Tax Exempt Municipal Income Trust, Series 333
Municipal Bond Basics
A municipal bond is a debt obligation of a state and/or local government entity which is used
to help build America’s infrastructure by raising money to finance public projects such as new
hospitals, schools and road improvements. In return, investors in tax-exempt municipal bonds
receive earnings which are free from federal income taxes and, in some cases, state and local
income taxes. Because of their low correlation to many other fixed-income and equity assets,
municipal bonds can also provide diversification benefits within an investor’s portfolio.
Municipal bonds have historically had a very low overall default rate as compared to corporate
bonds. According to data from Moody’s, the historical default rate of Moody’s-rated municipal
bonds is lower than that of corporate bonds in every rating category. In fact, despite the economic
struggles facing many states and municipalities, investment-grade municipal bonds have
experienced significantly lower default rates than even the highest rated corporate bonds.
One reason for the historically lower default rates has been the relatively more stable revenue
streams of municipalities, which have the ability to levy taxes to offset declining revenues.
Corporate revenues, on the other hand, can be more volatile as corporations have fewer ways
to increase revenues during difficult economic periods. Of course, given the current economic
environment, there can be no assurance that the default rate for municipal bonds will not rise or
that volatility will not increase.
Tax-exempt municipal bonds provide investors with significant tax savings. For investors in
higher tax brackets, municipals can offer greater after-tax yields than taxable debt securities
of similar maturities and credit quality, including Treasuries and corporate bonds. Taxable-equivalent
yields represent the amount of pre-tax return an investor would need to earn in
a taxable investment in order to equal that of a tax-exempt investment. The chart to the right
illustrates the taxable-equivalent yield at five different federal income tax levels using a tax-exempt
municipal bond with a 4.00% yield as an example. As you can see, if an investor is in
the 22% federal tax bracket, the 4.00% yield has a taxable-equivalent yield of 5.13%. In other
words, an investor would need to get a 5.13% yield from a taxable bond to equal the 4.00%
payout of the tax-free municipal bond.
The objectives of this unit investment trust are to distribute income that is exempt
from federal and, in certain instances, state and local income taxes and to preserve
capital by investing in a portfolio of investment grade tax-exempt municipal bonds.
There is, however, 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 professional
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 municipal bonds.
Municipal bonds are subject to numerous risks including rising interest rates, economic
recession, deterioration of the municipal bond market, possible downgrades, increased volatility,
reduced liquidity and defaults of interest and/or principal.
This UIT is a buy and hold strategy and investors should consider their ability to hold the trust
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. The markets for credit instruments,
including municipal securities, have experienced periods of extreme illiquidity and volatility.
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 cybersecurity.
Ongoing armed conflicts between Russia and Ukraine in Europe and among Israel, Hamas and other militant
groups in the Middle East, have caused and could continue to cause significant market disruptions and volatility
within the markets in Russia, Europe, the Middle East and the United States. The hostilities and sanctions
resulting from those hostilities could have a significant impact on certain investments as well as performance.
The ongoing effects of the COVID-19 global pandemic, or the potential impacts of any future public health crisis, may cause significant volatility and uncertainty in global financial markets. While vaccines have been developed, there is no guarantee that vaccines will be effective against future variants of the disease.