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Clean Energy Portfolio, Series 4

Clean energy is developed from renewable, zero-emissions sources, as well as energy that is stored through energy efficiency measures. As opposed to coal and oil, clean energy does not pollute the atmosphere. The clean energy industry generates hundreds of billions in economic activity and is anticipated to grow rapidly in the coming years.1 The potential for economic opportunity may exist for companies that invent, manufacture and export clean energy technologies.

Consider The following

  • Renewable energy is estimated to be the fastest growing source of energy over the next 30 years, supported by a significant increase in the development and investment of new wind and solar capacity.2

  • The renewables share of U.S. generation is anticipated to increase from 20% in 2020 to 21% in 2021 and to 22% in 2022. The increase is a result of planned additions to wind and solar generating capacity.3

  • To revive economic growth in the wake of the COVID-19 pandemic, governments around the world are planning to commit trillions in fiscal stimulus to this effort, much of which is going toward clean and renewable energy projects.4

  • A successful clean energy transition has the potential to generate approximately 65 million new jobs worldwide and result in approximately $26 trillion in financial benefits by 2030.5

  • Water scarcity is anticipated to increase in the future, with approximately 52% of the world's population living in water-stressed regions by 2050.6

1 U.S. Department of Energy
2 BP Energy Outlook
3 U.S. Energy Information Administration
4 Bloomberg
5 Choose Energy
6 United Nations World Water Department Report



Portfolio Objective

This unit investment trust seeks above-average capital appreciation; however, there is no assurance the objective will be met.

Portfolio Selection Process

An initial universe of stocks is created by selecting clean energy stocks that are involved in the development, manufacturing, distribution and installation of clean energy technologies such as solar, wind, water, bioenergy, nuclear and hydrogen & fuel cells. All of the stocks selected trade on a U.S. stock exchange and have adequate liquidity for investment.

Next the historical financial results of the stocks from the initial universe are examined. The stocks are then evaluated using fundamental factors such as sales, earnings and cash flow growth; valuation factors such as price/earnings, price/cash flow, price/sales and price/book; and technical factors such as price momentum and earnings surprises.

An estimated value is calculated for each of the companies utilizing a Cash Flow Return on Investment (CFROI) method. A secondary valuation is also made employing a concept called Economic Margin. The companies which currently trade at an attractive market price relative to their estimated value are favored over companies that do not.

The final portfolio is then selected by a team of equity analysts who evaluate each stock by examining the stock’s relative valuation and other qualitative factors such as (third party) analyst ratings, competitive advantages and quality of management. The stocks go through a committee meeting and final selections, which best reflect the consensus, are most in-keeping with portfolio objectives, trade at attractive valuations and in our opinion, are likely to exceed market expectations.

The final portfolio is comprised of 30 approximately equally weighted clean energy stocks.

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 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 involved with owning common stocks, 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.

You should be aware that the portfolio is concentrated in stocks in both the industrials and information technology sectors which involves additional risks, including limited diversification. The companies engaged in the industrials sector are subject to certain risks, including a deterioration in the general state of the economy, intense competition, domestic and international politics, excess capacity and changing spending trends. The companies engaged in the information technology sector are subject to fierce competition, high research and development costs, and their products and services may be subject to rapid obsolescence. Technology company stocks, especially those which are Internet-related, may experience extreme price and volume fluctuations that are often unrelated to their operating performance. There is no assurance that the projections stated herein will be realized.

Renewable and alternative energy companies can be significantly affected by obsolescence of existing technology, short product cycles, legislation resulting in more strict government regulations and enforcement policies, fluctuations in energy prices and supply and demand of alternative energy fuels, energy conservation, the success of exploration projects, the supply of and demand for oil and gas, world events and economic conditions. Shares of clean energy companies have been significantly more volatile than shares of companies operating in other more established industries. This industry is relatively nascent and under-researched in comparison to more established and mature sectors.

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.

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.

Large capitalization companies may grow at a slower rate than the overall market.

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.

The COVID-19 global pandemic has resulted in major disruptions to economies and markets around the world. Financial markets have experienced extreme volatility and severe losses, negatively impacting global economic growth prospects. The duration of the COVID-19 outbreak and its effects cannot be determined with certainty and may exacerbate other political, social and economic risks.

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.

 
The information in the prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. The prospectus is not an offer to sell these securities and is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.
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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, the Internal Revenue Code or any other regulatory framework. Financial professionals are responsible for evaluating investment risks independently and for exercising independent judgment in determining whether investments are appropriate for their clients.
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