SMid Capital Strength Opportunity Portfolio, Series 5
Because smaller companies are often less reliant on the capital markets for credit, they can be more nimble and better able to adjust in periods of economic change, than large companies.
Additionally, this results in generally better balance sheet integrity than large companies. The SMid Capital Strength Opportunity Portfolio invests in small and mid-size companies. These companies are more
likely to be in an earlier stage of their economic life cycle than mature large-cap companies. In addition, the ability to take advantage of share price discrepancies is likely to be greater with smaller
stocks than with more widely followed large-cap stocks. Our goal with the trust is to invest in undervalued companies with strong market positions that, in our opinion, have strong balance sheets,
skilled management, high liquidity, the ability to generate earnings growth, and a record of financial strength and profit growth.
This unit investment trust seeks above-average capital appreciation; however, there is
no assurance the objective will be met.
Portfolio Selection Process
Through our selection process we seek to find the stocks that we believe have
the best prospects for above-average capital appreciation.
Identify the Universe
We begin by selecting the companies listed in the S&P MidCap
400 and S&P SmallCap 600 Indexes.
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 for the Portfolio
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 objective, 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.
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.
Although this portfolio terminates in
approximately 15 months, the strategy is longterm.
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
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.
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.