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Electric and Future Vehicle and Technology Portfolio, Series 3

The automobile industry is undergoing fundamental transformations as consumers shift away from traditional fuel-powered vehicles to all-electric and hybrid electric vehicles. With the price of gasoline near record highs; an increasingly global focus on sustainability concerns around oil dependence; advances in the technologies behind vehicle and battery materials to improve drivable range; and growing access to vehicle charging stations via infrastructural initiatives, there may be continued demand for electric and autonomous vehicle technologies as these innovative technologies grow and evolve. This unit investment trust (UIT) provides exposure to companies that are engaged in the development and sales of electric and autonomous vehicle technologies.

Consider The Following

  • The global electric vehicle (EV) market size is expected to reach $1 trillion by 2026 with a compound annual growth rate (CAGR) of more than 23% from 2021-2026.1

  • In 2021, new EV sales in the U.S. nearly doubled that of 2020 reaching 608,000, 73% of which were all-electric vehicles.2

  • The worldwide transition from internal combustion engines (ICE) to low-emission vehicles is increasing. By 2040, EVs are projected to account for approximately 54% of global new car sales.3

1 Statista - February 2022
2 U.S. Department of Energy - 3/1/22
3 Arcadis, Global Electric Vehicle Catalyst Index 2021

Portfolio Objective

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

Portfolio Selection Process

The initial universe of stocks is selected from an initial universe of Electric and Future Vehicle companies and Technology companies in the S-Network Electric & Future Vehicle Ecosystem Index as well as other companies that have devoted material resources or made material commitments to the development and sale of electric and autonomous vehicle technologies.

Next, we examine the historical financial results of the stocks from the initial universe. 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; technical factors such as price momentum and earnings surprises; and qualitative factors such as competitive advantages, new products and quality of management.

An estimated value is calculated for each of the companies utilizing a Cash Flow Return on Investment (“CFROI”) method. The CFROI method compares an estimate of a company’s internal rate of return against an estimate of a company’s cost of capital. Companies that generate returns in excess of their capital costs are favored over companies that do not. A secondary valuation is also made employing a concept called Economic Margin (“EM”). EM measures the return a company earns versus its cost of capital to determine if a company is generating wealth. The companies which currently trade at an attractive market price relative to their estimated value are favored over companies that do not.

After considering the above factors together, equity analysts make a final determination and select the stocks with the best prospects for above-average capital appreciation by identifying those that meet our investment objective, trade at attractive valuations, and, in our opinion, are likely to exceed market expectations of future cash flows.

The final portfolio consists of 25 approximately equally weighted 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 the consumer discretionary sector which involves additional risks, including limited diversification. The companies engaged in the consumer discretionary sector are subject to global competition, changing government regulations and trade policies, currency fluctuations, and the financial and political risks inherent in producing products for foreign markets.

The automotive industry can be highly cyclical, and companies in the industry may suffer periodic operating losses. The industry can be significantly affected by labor relations and fluctuating component prices. While most of the major automotive manufacturers are large companies, others may be non-diversified in both product line and customer base and may be more vulnerable to events that negatively impact the industry.

Electric vehicle technology is a relatively new technology and is subject to risks associated with a developing industry including intense competition, delays or other complications with production, rapid product obsolescence, increased government regulation, market volatility, and uncertainty of the ability of new products to penetrate established industries, among other factors. Many electric vehicle companies are heavily dependent on patent protection, and the expiration of a company’s patent may adversely affect that company’s profitability. Electric vehicle companies are also subject to competitive forces that may result in price discounting, may be thinly capitalized and susceptible to product obsolescence.

Under normal circumstances, the Trust will invest at least 80% of its assets in Electric and Future Vehicle companies and Technology companies. Electric and Future Vehicle companies are companies that are principally engaged, i.e., have at least 50% of their assets in, or derive at least 50% of their revenues or profits from, one of the following business segments: (1) electric and autonomous vehicle manufacturing; (2) electric and autonomous vehicle enabling technologies (i.e., companies that manufacture batteries for energy storage, provide the sensors for autonomous driving capabilities and manufacture semiconductors); (3) electric and autonomous vehicle enabling materials (i.e., companies that mine rare earth metals used for energy storage and conversion); and (4) the development and manufacture of future automotive technology and products. Technology companies are companies that are principally engaged, i.e., have at least 50% of their assets in, or derive at least 50% of their revenues or profits from, the information technology sector.

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.

In February 2022, Russia invaded Ukraine which has caused and could continue to cause significant market disruptions and volatility within the markets in Russia, Europe, 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 COVID-19 global pandemic has caused significant volatility and declines in global financial markets, causing losses for investors. The development of vaccines has slowed the spread of the virus and allowed for the resumption of “reasonably” normal business activity in the United States, although many countries continue to impose lockdown measures. Additionally, there is no guarantee that vaccines will be effective against emerging 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.

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.

S-Network and S-Network Electric & Future Vehicle Ecosystem Index are service marks of S-Network Global Indexes, Inc. (collectively, with its affiliates “S-Network”) and have been licensed for use by First Trust Portfolios L.P. The portfolio is based on the S-Network Electric & Future Vehicle Ecosystem Index and is not sponsored, endorsed, sold or promoted by S-Network and S-Network makes no representation regarding the advisability of trading in such product.

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.

CUSIP identifiers have been provided by CUSIP Global Services, managed on behalf of the American Bankers Association by FactSet Research Systems Inc. and are not for use or dissemination in a manner that would serve as a substitute for any CUSIP service. The CUSIP Database, ©2022 CUSIP Global Services. "CUSIP" is a registered trademark of the American Bankers Association.

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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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