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WCM International Equity Portfolio, Series 3

The WCM International Equity Portfolio is a unit investment trust (UIT) which invests in stocks that are selected by WCM Investment Management, LLC (“WCM”). WCM uses a bottom-up approach that seeks to identify companies with attractive fundamentals, such as long-term growth in revenue, earnings, and show a high probability for future growth. They focus on industry-leading, non-U.S. organizations led by strong management teams with sound business strategies. WCM believes these companies are industry leaders and that they have the potential to lead their industries well into the future. Under normal circumstances, the portfolio will invest at least 80% in equity securities of non-U.S. companies or depositary receipts of non-U.S. companies. This UIT seeks above-average capital appreciation; however, there is no assurance the objective will be met.


Portfolio Selection Process

WCM is a privately-held firm focused on equity investing with a specific expertise in international and emerging markets. They strive to build and maintain an organization that nurtures excellence and innovation. WCM seeks to find companies they believe have the best prospects for above-average capital appreciation through the following selection process:

Identify the Universe | The first step in the process is to identify the investible universe, primarily comprised of non-U.S. companies. WCM considers a company to be non-U.S. if the company is organized under the laws of, has its principal offices in, or has its securities principally traded in, a country other than the U.S.; or if the company derives at least 50% of its revenues or net profits from, or has at least 50% of its assets or production in, a country other than the U.S.

Screen for Following Criteria | The next step is to evaluate companies based on multiple factors, including the following:

  • Market capitalization greater than $2 billion USD and average daily trading volume of more than $3 million USD per day.

  • Financial strength, indicated by strong cash flow generation and low financial leverage.

  • Returns on invested capital that exceed the cost of capital.

  • Attractive end markets with strong runways for growth.

Analyze Eligible Companies | From the remaining companies, WCM then analyzes eligible companies with bottom-up, fundamental research with a focus on the following factors:

  • Financial performance, which is assessed by analyzing a company’s key financials metrics including revenues, profit margin, returns, and leverage;

  • Competitive position, which is indicated by high/rising returns on investment capital (ROIC), market share gains resulting from revenue growth greater than the industry, and improving pricing power;

  • Future growth potential, indicated by favorable demographics, rising income levels, pricing power, innovation capabilities and opportunities for market share gains; and

  • Intrinsic value, which they determine using a discounted cash flow model (DCF), historical EV/EBITDA (compares a company’s Enterprise Value to its Earnings Before Interest, Taxes, Depreciation and Amortization), and next year price-to-earnings ratio (“P/E”).

Select the Portfolio | The final step is to select the portfolio of companies based on the criteria detailed above.

Portfolio Objective

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

Why Invest Internatonally Chart

WCM is a registered trademark of WCM Investment Management, LLC and is licensed for use by First Trust Portfolios L.P. The trust is not sponsored, endorsed, sold or promoted by WCM. WCM makes no representation or warranty, express or implied, to the owners of the trust or any member of the public regarding the advisability of investing in securities generally or in the trust. WCM has no obligation to take the needs of First Trust Portfolios L.P. or the owners of the trust into consideration in selecting the securities for the trust. WCM is not responsible for and has not participated in the determination of the prices and amount of the trust or the timing of the issuance or sale of the trust or in the determination or calculation of the equation by which the trust is to be converted into cash. WCM has no obligation or liability in connection with the administration, marketing or trading of the trust.

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.

Not FDIC Insured • Not Bank Guaranteed • May Lose Value

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 financials sector which involves additional risks, including limited diversification. The companies engaged in the financials sector are subject to the adverse effects of volatile interest rates, economic recession, decreases in the availability of capital, increased competition from new entrants in the field, and potential increased regulation.

A significant percentage of the securities held in the trust are issued by companies headquartered or incorporated in Europe, which may present more risks than a portfolio which is broadly diversified over several regions.

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.

Securities of non-U.S. issuers are subject to additional risks, including currency fluctuations, political risks, withholding, the lack of adequate financial information, and exchange control restrictions impacting non-U.S. issuers. Risks associated with investing in non-U.S. 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 non-U.S. 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.

Ongoing armed conflicts between Russia and Ukraine in Europe and among Israel, Hamas and other militant groups in the Middle East have caused and could continue to cause significant market disruptions and volatility within the markets in Russia, Europe, the Middle East 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 ongoing effects of the COVID-19 global pandemic, or the potential impacts of any future public health crisis, may cause significant volatility and uncertainty in global financial markets. While vaccines have been developed, there is no guarantee that vaccines will be effective against future 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.

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.

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, ©2024 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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