Emerging Markets Strength Portfolio, Series 44
What are Emerging Markets?
Emerging markets are countries that are attempting to change and improve their current economies.
Size itself is not a factor for determining an emerging market, as evidenced by China. The objective of an
emerging market is to raise economic performance and, as a result, become a more advanced nation.
Collectively, developing economies are anticipated to grow faster than the economies of countries which
are already developed. According to the International Monetary Fund, GDP growth for emerging
economies is estimated to be 4.5% in 2019 and 4.9% in 2020 compared to 2.0% in 2019 and 1.7% in
2020 for advanced economies.
By investing a portion of your portfolio outside the U.S., you may significantly expand your investment
choices and participate in the long-term growth potential of foreign companies. To predict which
countries will emerge and reward those for taking on the risk to invest in them is a difficult task. Through
our selection process we seek to find the emerging markets stocks that we believe have the best
prospects for above-average capital appreciation.
This unit investment trust seeks above-average capital appreciation; however, there is
no assurance the objective will be met.
Portfolio Selection Process
Identify the Universe
We begin by selecting stocks that are based in an emerging
market or have significant business operations in emerging markets, trade on a U.S. stock exchange either
directly or through an American Depositary Receipt, and have adequate liquidity for investment.
Screen for Financial Strength
We then evaluate companies based on multiple
factors. These factors are designed to identify those stocks which exhibit strong fundamental
characteristics and to eliminate those that do not meet our investment criteria.
Examine Historical Financial Results
The next step in our process is to look
for those companies that have earned a net cash flow return on investment that is above the average of
their peers. Historically, companies that have increased their cash flows at a higher rate have rewarded
shareholders with superior total returns.
Select Companies with Attractive Valuations
The final step in our process
is to select companies based on the fundamental analysis of our team of research analysts. The stocks
selected for the portfolio are those that meet our investment objectives, trade at attractive valuations and,
in our opinion, are likely to exceed market expectations of future cash flows.
|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 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
communication services and consumer products sectors making it subject to additional
risks, including limited diversification. The companies engaged in the communication
services sector are subject to rapidly changing technology, rapid product obsolescence,
loss of patent protection, cyclical market patterns, governmental regulation, evolving
industry standards and frequent new product introductions. Certain companies may be
particularly susceptible to cybersecurity threats, which could have an adverse effect on
their business.The companies engaged in the consumer products industry are subject
to global competition, changing government regulations and trade policies, currency
fluctuations, and the financial and political risks inherent in producing products for
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.
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 liquid, less regulated and more volatile than the U.S. and
developed foreign markets.
Because the portfolio is concentrated in companies
headquartered or incorporated in China, the portfolio may present more risks than a portfolio
which is broadly diversified over several regions. China’s emerging market economy may be
subject to over-extension of credit, currency devaluations and restrictions, decreased exports,
economic recession, a reversal of economic liberalization, political unrest or changes in China’s
trading status. A deterioration of the relationship between China and the United States could
have negative implications on issuers from China.
A significant percentage of securities held by the portfolio are issued by companies in the Asia
Pacific region, making the portfolio more susceptible to the economic, market, regulatory,
political, natural disasters and local risks of the Asia Pacific region. The region has historically
been highly dependent on global trade which creates a risk with this dependency on global
growth. The stock markets tend to have a larger prevalence of smaller companies that are
inherently more volatile and less liquid than larger companies.
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.
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 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.