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Digital Gaming and Technology Portfolio, Series 3

Over the years, gaming has evolved from single-player to multi-player and has become a popular way for friends and family to connect. It is estimated that three out of every four, or 244 million, U.S. consumers play video games, an increase of 32 million people since 2018.1 In the midst of the COVID-19 pandemic, this trend has continued to emerge in gaming engagement.

Consider The Following

  • Consumer spending on video gaming in the U.S. reached $11.2 billion in the third quarter of 2020, an increase of 24% compared to the third quarter of 2019. In addition, sales of video game content reached $10.04 billion in the third quarter of 2020, up 24% compared to the third quarter of 2019.2

  • Mobile gaming is expected to be the fastest growing segment of the market and is projected to have a compound average growth rate (CAGR) of 25.5% from 2017-2022. In addition, the digital games market is anticipated to have significant growth with a CAGR of 18.98% from 2017-2022. The global market size is predicted to reach $272.24 billion by 2022.3



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 selection process begins with an initial universe of Digital Gaming stocks that First Trust Analysts believe have significant business operations in digital gaming, have adequate liquidity for investment and that trade on a major U.S. stock exchange. To ensure adequate liquidity, the sponsor only selects those stocks that have enough daily liquidity to adequately support the buying and selling of the anticipated number of shares on any given day to meet the portfolio’s purchases and/or redemption requirements. Industries included in this universe are Consumer Electronics, Interactive Home Entertainment, Interactive Media & Services, Semiconductors, Technology Hardware, Storage & Peripherals, and Systems Software.

The final portfolio is then selected by a team of equity analysts who evaluate each stock by examining its relative valuation and other qualitative factors such as competitive advantages, new products and quality of management. Relative valuation uses price and enterprise value against underlying business metrics, such as cash flow or sales, and forecasted fundamentals to create multiples which enable cross company comparisons to understand how the market is pricing one equity verses another.

Our selection process attempts to find the stocks with the best prospects for above-average capital appreciation by identifying those that meet our investment objectives, trade at attractive valuations, and, in our opinion, are likely to exceed market expectations of future cash flows.

The final portfolio is comprised of 20 approximately equally weighted Digital Gaming and Technology stocks.

1,2The NPD Group, Inc.


Not FDIC Insured • Not Bank Guaranteed • May Lose Value

You should consider the portfolio's investment objective, 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 communication services and information technology sectors which involves 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 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.

The portfolio will invest at least 80% of its assets in digital gaming companies or technology companies. Digital gaming companies are companies which derive 50% of their revenue from (i) developing software or providing hardware for the entertainment, educational software, or virtual reality/simulation segments of the digital gaming industry, or (ii) providing intellectual property in support of digital gaming, educational software, or virtual reality/simulation segments.

Certain 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.

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.

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.

Fund Cusip Information
30319H642 (Cash)
30319H659 (Reinvest)
30319H667 (Cash-Fee)
30319H675 (Reinvest-Fee)
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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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