Investment Grade Multi-Asset Income Long-Term, 32
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.
An investment 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.
One of the securities invests in a real estate investment trust (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 economic recession.
Certain of the securities in the trust are covered by insurance policies obtained by the issuer or underwriter
of the bonds from insurance companies. There can be no assurance that any insurer will be able to satisfy its
commitments in the event claims are made in the future.
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
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.
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. The markets for credit instruments, including corporate
and municipal securities, have experienced periods of extreme illiquidity and volatility.