Strategic Income Advantage Select, Closed-End Portfolio, Series 87
The Multi-Sector Approach
The Strategic Income Advantage Select Closed-End Portfolio seeks to provide a high rate of current
monthly income and to reduce some of the volatility typically associated with high-income investments.
To accomplish this, the portfolio is diversified across a broad range of closed-end funds that invest in U.S.
and foreign common stocks and taxable bonds. Because different sectors follow different cycles and
react differently to changes in global economies and interest rates, spreading assets across this spectrum
of closed-end funds has the potential to reduce the overall risk of the portfolio. In addition, based on
current publicly available information, none of the closed-end funds selected for the portfolio are
reporting the use of structural leverage.
Unlike open-end mutual funds, closed-end funds maintain a relatively
fixed pool of investment capital. This allows portfolio managers to better adhere to their investment
philosophies through greater flexibility and control. In addition, closed-end funds don’t have to manage
fund liquidity to meet potentially large redemptions.
The portfolio offers investors diversification by investing in a broad range of
closed-end funds that are further diversified across hundreds of individual securities. Diversification does
not guarantee a profit or protect against loss.
Closed-end funds are structured to generally provide a more
stable income stream than other managed investment products because they are not subjected to cash
inflows and outflows, which can dilute dividends over time. However, stable income cannot be assured.
This unit investment trust seeks a high rate of current monthly income, with capital
appreciation as a secondary objective. There is, however, no assurance that the objectives of the portfolio 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 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.
Based on current publicly available information, none of the
closed-end funds selected for the portfolio are reporting the
use of structural leverage. Structural leverage creates a
systematic level of additional investment exposure through a
closed-end fund’s issuance of preferred shares or debt
securities, or through borrowing money. Closed-end funds
which employ structural leverage are more volatile than those
that do not. However, certain or all of these closed-end funds
may have utilized structural leverage in the past and may elect
to utilize structural leverage in the future.
Certain of the closed-end funds invest in common stocks.
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.
Certain of the closed-end funds invest in
convertible securities. Convertible securities are bonds, preferred stocks and other securities that
pay a fixed rate of interest (or dividends) and will repay principal at a fixed date in the future.
However, these securities may be converted into a specific number of common stocks at a
specified time. As such, an investment in convertible securities entails some of the risks
associated with both common stocks and bonds.
Certain of the closed-end funds invest in high-yield securities or
“junk” bonds. Investing in high-yield securities should be viewed
as speculative and you should review your ability to assume the
risks associated with investments which utilize such securities.
High-yield securities are subject to numerous risks, including
higher interest rates, economic recession, deterioration of the
junk bond market, possible downgrades and defaults of interest
and/or principal. High-yield security prices tend to fluctuate
more than higher rated securities and are affected by short-term
credit developments to a greater degree.
Certain of the closed-end funds invest in investment grade
securities. Investment grade securities are subject to numerous
risks including higher interest rates, economic recession,
deterioration of the investment grade bond market or
investors’ perception thereof, possible downgrades and
defaults of interest and/or principal.
Certain of the closed-end funds invest in mortgage-backed
securities. Rising interest rates tend to extend the duration of
mortgage-backed securities, making them more sensitive to
changes in interest rates, and may reduce the market value of
the securities. In addition, mortgage-backed securities are
subject to prepayment risk, the risk that borrowers may pay off
their mortgages sooner than expected, particularly when
interest rates decline.
Certain of the closed-end funds invest in
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 U.S. Treasury obligations which are subject to numerous
risks including higher interest rates, economic recession and deterioration of the bond market or
investors’ perceptions thereof.
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. Risks associated with
investing in foreign securities may be more pronounced in emerging markets where the securities
markets are substantially smaller, less developed, less liquid, less regulated, and more volatile
than the U.S. and developed foreign markets.
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 cyber security.
For a discussion of additional risks of investing in the trust see the “Risk Factors” section of