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MLP Closed-End Fund Portfolio, Series 16

Energy infrastructure 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, 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

The MLP Closed-End Portfolio is a professionally selected unit investment trust which invests in closedend funds that invest in master limited partnerships (MLPs) from the energy infrastructure industry. MLPs are limited partnerships that are publicly traded on a U.S. securities exchange, which combine the tradeability 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.

Portfolio Objectives

This unit investment trust seeks high current monthly income, with capital appreciation as a secondary objective; however, there is no assurance that the objectives will be achieved.

Consider These Factors

  • Many oil and gas shale formations are located outside traditional production basins • which require infrastructure to transport the oil and gas to market. This has led to billions of dollars of investment and a boom in financing infrastructure through MLPs2
  • U.S. crude oil production averaged an estimated 8.9 million barrels per day (b/d) in 2016. The estimates for 2017 and 2018 are 9.3 million b/d and nearly 10.0 million b/d, respectively.3
  • Natural gas production is anticipated to account for nearly 40% of the U.S. energy production by 2040.44

Of course, there can be no guarantee that any of these projections will be realized, or that they will benefit the securities in the closed-end funds.

1 Standard & Poor's
2 Oil & Gas Financial Journal
3,4 U.S. Energy Information Administration

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.

Risk Considerations:
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 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. Certain closed-end funds may employ the use of leverage, which increases the volatility of such funds.

You should be aware that an investment in closed-end funds that invest 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.

Common stocks are subject to 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.

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 available information.

All 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 call options. Options are subject to various risks including that their value may be adversely affected if the market for the option becomes less liquid or smaller. In addition, options will be affected by changes in the value and dividend rates of the stock subject to the option, an increase in interest rates, a change in the actual and perceived volatility of the stock market and the common stock and the remaining time to expiration.

Certain of the closed-end funds invest in securities issued by foreign issuers. Such securities are subject to certain risks, including currency and interest rate fluctuations, nationalization or other adverse political or economic developments, lack of liquidity of certain foreign markets, withholding, the lack of adequate financial information, and exchange control restrictions impacting foreign issuers.

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 qualified plan.

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 the prospectus.

 
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The information presented is not intended to constitute an investment recommendation for, or advice to, any specific person. By providing this information, First Trust is not undertaking to give advice in any fiduciary capacity within the meaning of ERISA and the Internal Revenue Code. First Trust has no knowledge of and has not been provided any information regarding any investor. Financial advisors must determine whether particular investments are appropriate for their clients. First Trust believes the financial advisor is a fiduciary, is capable of evaluating investment risks independently and is responsible for exercising independent judgment with respect to its retirement plan clients.
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