Strategic Income Advantage Opportunity, Closed-End Portfolio, Series 5
The Multi-Sector Approach
The Strategic Income Advantage Opportunity 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
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 closedend 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 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 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 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 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.
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. 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.
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, mortgagebacked
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 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.
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
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.
Although this portfolio terminates in approximately 15 months, the strategy is long-term.
Investors should consider their ability to pursue investing in successive portfolios, if available.
There may be tax consequences unless units are purchased in an IRA or other qualified plan.