Investment Grade Multi-Asset Income Long-Term, 31
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.
Taxable Municipal Bond Basics
A taxable municipal bond is a fixed-income security issued by a local government entity that seeks to
raise money to finance private development. The municipality issues taxable municipal bonds when it
hopes to attract a business and the jobs it might bring to the area, especially when the business may be
otherwise unable to obtain financing. Taxable municipal bonds typically offer yields more comparable to
those of other taxable fixed-income securities, such as corporate bonds or bonds issued by U.S.
governmental agencies, than to those of tax-exempt municipals.
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.
- A diversified portfolio of investment grade corporate bonds and taxable
- Estimated weighted average maturity of approximately 25 to 30 years.
- Minimum call protection of approximately 5 years.
- 3.50% up-front maximum sales charge. In addition to the sales charge, the trust is
subject to annual operating expenses and organization costs.
This unit investment trust seeks current income and capital preservation by investing in a
diversified portfolio of investment grade corporate and taxable 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 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.
in this unmanaged unit investment trust
should be made with an understanding of the
risks associated with both investment grade
corporate bonds and taxable municipal bonds.
These bonds are subject to numerous risks
including rising interest rates, economic
recession, deterioration of the corporate or
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 until maturity. There may be tax
consequences unless units are purchased in
an IRA or other qualified plan.
One of the securities held by the trust is
issued by a foreign entity. An investment in a
portfolio containing equity 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 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. The markets for
credit instruments, including corporate and
municipal securities, have experienced
periods of extreme illiquidity and volatility.