MLP Closed-End Fund Portfolio, Series 27
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 closed-end
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.
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 MLPs.2
- U.S. crude oil production reached a record 11 million barrels per day (b/d) in 2018. Production is
anticipated to reach 12.2 million b/d in 2019 and 13.2 million b/d in 2020. The previous record of 9.6 million b/d was
set in 1970.3
- The percentage of dry natural gas production from oil formations increased from 8% in 2013 to 17% in
2018 and is anticipated to remain near that level through 2050.4
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
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.
|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 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. All
of the closed-end funds 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.
All of the closed-end funds invest in common stocks. 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
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.
One of the closed-end funds invests 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.
All 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.
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
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.
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.
For a discussion of additional risks of investing in the trust see
the “Risk Factors” section of the prospectus.