MLP Closed-End Fund and Energy Portfolio, Series 71
The energy infrastructure of the United States provides the backbone of our economy and way of life.
Energy infrastructure includes an elaborate network of systems that transport, store, gather, process and
deliver crude oil, refined petroleum products, natural gas or electric power generation, including
renewable energy. The performance of companies in the energy infrastructure industry is not highly
correlated with the price of oil and other types of energy, but rather with the demand for energy. The
demand for energy generally increases steadily over time and is much less volatile than commodity
energy prices, which often results in steady, predictable cash flows for companies in these industries.1
1 Standard & Poor's
The MLP Closed-End Fund and Energy Portfolio is a professionally selected unit investment trust which
invests approximately 50% in closed-end funds that invest in master limited partnerships (MLPs) from
the energy infrastructure industry. Approximately 50% of the portfolio invests in common stocks of
MLPs are limited partnerships that are publicly traded on a U.S. securities exchange. They combine the
tradability of common stocks with the corporate structure of a limited partnership. MLPs are traditionally
high cash flow businesses that pay out a majority of that cash to investors. Investing in MLPs through
closed-end funds provides an efficient alternative to investing directly in MLPs. Unlike individual
partnership investments, a closed-end fund provides one Form 1099 per shareholder at the end of the
year, rather than multiple K-1s and potential state filings.
The common stocks held in the portfolio generate cash flow through the gathering, processing,
transportation, storage, and distribution of oil and natural gas.
With continuing geo-political and long-term supply concerns, we believe this investment may represent
an attractive alternative for investors seeking oil and gas exposure and high current income potential. Advantages include:
- High current income potential
- Capital appreciation potential
This unit investment trust seeks a high rate of current monthly income and growth of
principal; however, there is no assurance the objectives will be met.
|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 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 a current determination of the
fund’s net asset value, closed-end funds frequently trade at a
discount to their net asset value in the secondary market. All of
the closed-end funds 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.
You should be aware that an investment that is concentrated in
stocks in the energy sector involves additional risks, including
limited diversification. The companies engaged in the energy
sector, which includes MLPs, are subject to certain risks,
including price and supply fluctuations caused by international
politics, energy conservation, taxes, price controls, and other
regulatory policies of various governments. Falling oil and gas
prices may negatively impact the profitability and business
prospects of certain energy companies. U.S. taxing authorities
could challenge the trust’s treatment of the MLPs for federal 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 floating-rate securities. A floating-rate security is an instrument in which the interest rate payable on the obligation fluctuates on a periodic basis based upon changes in an interest rate
benchmark. As a result, the yield on such a security will generally decline in a falling interest rate environment, causing the trust to experience a reduction in the income it receives from such securities. Certain of the floatingrate
securities pay interest based on LIBOR. The United Kingdom’s Financial Conduct Authority, which regulates LIBOR, intends to cease making LIBOR available as a reference rate over a phase-out period that is currently
expected to begin after the end of 2021 although the specific timing of the phase out of LIBOR continues to be discussed and negotiated across the industry and in various jurisdictions. The unavailability or replacement of
LIBOR may affect the value, liquidity or return on certain portfolio investments. Any potential effects of the transition away from LIBOR can be difficult to ascertain, and they may vary depending on a variety of factors and
they could result in losses to the portfolio.
A significant percentage of the common stocks held by the trust
are issued by companies headquartered in Canada and therefore
the portfolio may present more risks than a portfolio which is
broadly diversified over several regions.
An investment in foreign equities should be made with an
understanding of the additional risks involved with foreign
issuers, such as currency fluctuations, political risk, withholding,
the lack of adequate financial information, and exchange control
restrictions impacting foreign issuers.
About one year after the United Kingdom officially departed the European Union (commonly referred to as “Brexit”), the United Kingdom and the European Union reached a trade agreement that became effective on
December 31, 2020. It is not currently possible to determine the extent of the impact the Brexit trade agreement may have on the portfolio’s investments and this certainly could negatively impact current and future economic
conditions in the United Kingdom and other countries, which could negatively impact the value of the portfolio’s investments.
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.
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.
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 COVID-19 global pandemic has resulted in major disruptions to economies and markets around the world. Financial markets have experienced extreme volatility and severe losses, negatively impacting global economic
growth prospects. The duration of the COVID-19 outbreak and its effects cannot be determined with certainty and may exacerbate other political, social and economic risks.
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
For a discussion of additional risks of investing
in the trust see the “Risk Factors” section of the prospectus.