Interest Rate Hedge Portfolio, Series 128
Like stock returns, economic growth, and inflation, interest rates are one of those variables that you can’t
control. As an investor, however, you can control how your investment dollars are allocated.
The Interest Rate Hedge Portfolio invests in common stocks of companies with a history of dividend
growth, as well as closed-end funds (CEFs) which invest in convertible securities, Treasury Inflation
Protected Securities (TIPS), master limited partnerships (MLPs), limited duration bonds and real estate
investment trusts (REITs).
This unit investment trust seeks above-average total return; however, there is no
assurance the objective will be met.
|Not FDIC Insured Not Bank Guaranteed May Lose Value
You should carefully consider the portfolio investment objective, 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 involved with an investment in a portfolio of common
stocks and closed-end funds.
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 the fund’s net
asset value, closed-end funds frequently
trade at a discount to their net asset value
in the secondary market. Certain of the
closed-end funds in the portfolio employ
the use of leverage, which increases the
volatility of such funds.
Common stocks are subject to certain 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 stock market.
Certain of the closed-end funds invest in convertible securities. Convertible securities are bonds, preferred stocks and other securities that pay a fixed rate of interest (or dividends) and will repay principal at a fixed date in the future. However, these securities may be converted into a specific number of common stocks at a specified time. As such, an investment in convertible securities entails some of the risks associated with both common stocks and bonds.
Certain of the closed-end funds invest in limited duration bonds. Limited duration bonds are subject
to interest rate risk, which is the risk that the value of a security will fall if interest rates increase.
While limited duration bonds are generally subject to less interest rate sensitivity than longer
duration bonds, there can be no assurance that interest rates will rise during the life of the trust.
Certain of the closed-end funds invest in 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 trust's investments.
Certain of the closed-end funds invest in 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
TIPS. TIPS are subject to numerous risks
including changes in interest rates,
economic recession and deterioration of
the bond market or investors’ perception
Certain of the closed-end funds invest in U.S.
Treasury obligations which are subject to numerous risks including higher interest rates,
economic recession and deterioration of the bond market or investors’ perceptions thereof.
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
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.
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
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.
For a discussion of additional risks of investing in the trust see the “Risk Factors” section of