Senior Loan and Limited Duration ETF Portfolio, Series 13

Interest rates remain low from a historical perspective, but the current environment has made it challenging to invest for income. Many investors are seeking alternative sources of income, including those which tend to be less rate-sensitive than other segments of the bond market, such as senior loans and limited duration bonds.

Consider These Factors

• While senior loans are generally loans which have been made to companies whose debt is typically rated below investment grade, they are senior in the asset structure of a company and historical recovery rates in the event of a default tend to be much higher relative to junior high-yield corporate debt.


• We believe that senior loans can be used as an effective means to aid portfolio diversification because of their low correlation to other fixed-income asset classes. Correlation is a statistical measure that provides a way to evaluate the potential diversification benefits of combining different assets. The historical correlation between senior loans and other asset classes, including investment-grade corporate bonds and equities, is low. Because senior loans are not highly correlated with other asset classes, they can potentially decrease portfolio volatility, enhance overall return and provide meaningful diversification to an asset allocation strategy. It is important to note that diversification does not guarantee a profit or protect against loss.


• Limited duration exchange-traded funds (ETFs) provide investors with the potential for high income but with less interest rate sensitivity. The duration of a bond is a measure of its price sensitivity to interest rate movements based on the weighted average term to maturity of its interest and principal cash flows.


• Limited duration ETFs are typically diversified across several different segments of the fixed-income market. This multi-sector income approach primarily helps to reduce volatility and also has the potential to enhance your returns because different sectors within the debt market often react differently to economic and market changes.

What Is An ETF?

ETFs offer investors the opportunity to buy and sell an entire basket of securities with a single transaction throughout the trading day. ETFs combine the characteristics of a mutual fund with the convenience and trading flexibility of stocks. Below is a list of other ETF features.

Diversification | ETFs hold a basket of securities which helps to mitigate single security risk. It is important to note that diversification does not guarantee a profit or protect against loss.

Transparency | ETF holdings are available daily so investors know what they own.

Tax Efficiency | The ETF structure allows for increased tax efficiency.

Fully Invested | Unlike a traditional mutual fund, ETFs do not need to hold cash in order to satisfy investor redemptions which allows them to better adhere to their investment objective.

Portfolio Objective

This unit investment trust seeks high current income by investing in a portfolio of ETFs which invest in senior loan and limited duration fixed-income securities; however, there is no assurance the objective will be met.

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.

Risk Considerations
An investment in this unmanaged unit investment trust should be made with an understanding of the risks associated with senior loan and limited duration ETFs.

ETFs 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 ETFs 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, ETFs frequently trade at a discount from their net asset value in the secondary market.

Limited duration bonds are subject to interest rate risk, which is the risk that the value of a security will fall if interest rates increase. While limited duration bonds are generally subject to less interest rate sensitivity than longer duration bonds, there can be no assurance that interest rates will not rise during the life of the trust.

The yield on funds which invest in senior loans will generally decline in a falling interest rate environment and increase in a rising interest rate environment. Senior loans are generally below investment grade quality (“junk” bonds). An investment in senior loans involves the risk that the borrowers may default on their obligations to pay principal or interest when due.

Covenant-lite loans contain fewer or no maintenance covenants and may hinder the exchange-traded funds’ ability to reprice credit risk and mitigate potential loss especially during a downturn in the credit cycle.

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.

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. Highyield security prices tend to fluctuate more than higher rated securities and are affected by short-term credit developments to a greater degree.

Investment grade securities are subject to numerous risks including higher interest rates, economic recession, deterioration of the investment grade security market or investors’ perception thereof, possible downgrades and defaults of interest and/or principal.

Securities of non-U.S. issuers are subject to additional risks, including currency fluctuations, political risks, withholding, the lack of adequate financial information, and exchange control restrictions impacting non-U.S. 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.

Ongoing armed conflicts between Russia and Ukraine in Europe and among Israel, Hamas and other militant groups in the Middle East, have caused and could continue to cause significant market disruptions and volatility within the markets in Russia, Europe, the Middle East and the United States. The hostilities and sanctions resulting from those hostilities could have a significant impact on certain investments as well as performance.

The ongoing effects of the COVID-19 global pandemic, or the potential impacts of any future public health crisis, may cause significant volatility and uncertainty in global financial markets. While vaccines have been developed, there is no guarantee that vaccines will be effective against future variants of the disease.

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.

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.

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.

For a discussion of additional risks of investing in the trust see the “Risk Factors” section of the prospectus.