S T R AT E G I C F O C U S M O D E L P O R T F O L I O S

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1 S T R AT E G I C F O C U S M O D E L P O R T F O L I O S Q A L L O C AT I O N S MODELS OVERVIEW The First Trust Strategic Focus Model Portfolios are six model portfolios created by the First Trust Advisors Investment Committee which consist of First Trust ETFs. These models are designed to provide financial advisors with core equity and core fixed income foundations on which to potentially build scalable asset allocation solutions for their clients. ASSET ALLOCATION VIEWS AND RATIONALE EQUITY ALLOCATION Macro Positioning Favor U.S. Equities At the macro level, we continue to expect robust U.S. economic growth driven by the U.S. consumer, as the tightening labor market buttresses wage growth. Additionally, we believe improvement in business sentiment, and tax policy measures encouraging investment, such as the allowance of accelerated depreciation, should lead to greater willingness on the part of firms to increase capital spending in Consequently, we continue to favor U.S. equities, although internationally, we hold a preference for European equities. Style Positioning Sector Positioning International Positioning Equity Income Style Positioning Equity Income Satellite Positioning Favor Small and Mid-Cap U.S. Equities Favor Information Technology and Financial Services vs. Other Sectors Favor European Equities Favor Dividend Payers and Value Stocks Favor Energy Infrastructure, Technology, and Banking Small and mid-cap equities still look attractively valued to us relative to large-cap equities and should benefit from increased confidence in the U.S. economy over time, as investors may rotate out of more defensive holdings. Additionally, we are reducing our weighting in core large-cap value in the All Equity Model in order to increase our more focused satellite position in the banking industry. Information technology is a pro-cyclical sector trading at what we still believe is a reasonable level, and that we expect to benefit from broad economic growth, especially increased capital spending on the part of firms. Within financial services, the potential for higher interest rates and less regulation may increase estimates of banking industry profitability. Consequently, we are increasing our weighting to the industry in the All Equity Model this quarter. We believe the European economy will continue to steadily improve in 2018, as a recovering labor market may drive consumption growth, while firming business confidence, improved access to commercial credit, and healthy corporate profits could drive robust investment growth. In addition, European equities still appear reasonably valued, in our view. Consequently, we continue to favor European markets internationally. Multiple ETF holdings within the domestic portion of the model emphasize dividend paying stocks, while a large-cap value ETF is also a core holding. We are increasing our weighting to European dividend paying equities, as we expect solid economic growth in the region, and we believe that European equities are attractively priced. In our view, an investment in energy infrastructure currently offers decent income potential, with less exposure to changes in commodity prices than oil and gas exploration and production firms. We believe the information technology sector is reasonably priced, and offers pro-cyclical exposure to broad economic growth. We believe a potentially steepening yield curve should allow the banking industry to achieve higher profitability, as banks are able to earn higher net interest margin on loans. This information is as of 3/29/18, is subject to change, and does not guarantee future results. 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 and the Internal Revenue Code. First Trust has no knowledge of and has not been provided any information regarding any investor. Financial advisors must determine whether or not the allocations are appropriate for their clients as First Trust does not consider customer specific suitability when determining the portfolio allocations. First Trust believes the financial advisor is a fiduciary, is capable of evaluating investment risks

2 S T R AT E G I C F O C U S M O D E L P O R T F O L I O S ASSET ALLOCATION VIEWS AND RATIONALE CONTINUED FIXED INCOME ALLOCATION Duration Positioning Favor Short Duration vs. Broad Fixed Income Market The Federal Reserve continued its path toward normalizing short-term interest rates in March, as continued labor market strength and an improved global economic outlook bolstered the Federal Open Market Committees view that inflation will reach target levels over the medium term. We believe inflationary pressures will indeed accelerate as the U.S. approaches full employment. We also believe economic growth has the potential to be surprisingly strong given our expectation for robust consumption growth, driven by the strong labor market, and the outlook for increasing business investment in the wake of tax reform. Sector Positioning Ultra-Short Maturity We favor a position in ultra-short maturity securities in order to lower the overall duration of our fixed income allocation models. We expect ultra-short maturity securities to exhibit lower volatility than other fixed income sectors, while offering the potential for enhanced income relative to an investment in cash. Mortgage-Backed Securities Senior Loans High Yield Bonds Emerging Market Bonds We favor a position in mortgage-backed securities in the Diversified Low Duration Fixed Income Model and the High Income Model in order to lower the overall duration of the models, with less expected volatility than many fixed income market sectors. We believe an active mortgage-backed portfolio that can adjust duration, curve positioning, convexity risk and credit quality can potentially offer a higher yield to duration ratio than a passive mortgage-backed strategy. In our opinion, senior loans currently offer an attractive yield, with less credit risk exposure than high yield bonds. Loans are also relatively protected from the risk of potentially rising interest rates due to their short duration and floating rate structure. We currently hold a position in high yield bonds within both the Diversified Low Duration Fixed Income Model and the High Income Model given their high level of current income, and the strengthening U.S. macroeconomic backdrop. We continue to believe emerging market bonds will benefit from improving global macroeconomic growth, and emerging market bond valuation levels remain attractive. Additionally, in our view, longer term fundamentals are favorable due to healthier demographics and higher growth rates relative to developed markets. This information is as of 3/29/18, is subject to change, and does not guarantee future results. 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 and the Internal Revenue Code. First Trust has no knowledge of and has not been provided any information regarding any investor. Financial advisors must determine whether or not the allocations are appropriate for their clients as First Trust does not consider customer specific suitability when determining the portfolio allocations. First Trust believes the financial advisor is a fiduciary, is capable of evaluating investment risks

3 M O D E L A L L O C AT I O N S & C H A N G E S A S O F 3 / 2 9 / 1 8 ALL EQUITY MODEL DOMESTIC CORE First Trust Large Cap Growth AlphaDEX Fund FTC 16.0% 16.0% First Trust Large Cap Value AlphaDEX Fund FTA 13.0% 16.0% -3.0% First Trust US Equity Opportunities ETF FPX 7.0% 7.0% First Trust Mid Cap Core AlphaDEX Fund FNX 5.5% 5.5% First Trust Small Cap Core AlphaDEX Fund FYX 5.5% 5.5% INTERNATIONAL CORE First Trust Europe AlphaDEX Fund FEP 16.0% 15.0% +1.0% First Trust Japan AlphaDEX Fund FJP 7.5% 7.5% First Trust Emerging Markets AlphaDEX Fund FEM 3.5% 3.5% SATELLITE First Trust Technology AlphaDEX Fund FXL 7.0% 7.0% First Trust Health Care AlphaDEX Fund FXH 3.0% 3.0% First Trust Nasdaq Bank ETF FTXO 8.0% 6.0% +2.0% First Trust NYSE Arca Biotechnology Index Fund FBT 3.0% 3.0% First Trust Dow Jones Internet Index Fund FDN 3.0% 3.0% First Trust Energy AlphaDEX Fund FXN 2.0% 2.0% EQUITY INCOME MODEL DOMESTIC First Trust Large Cap Value AlphaDEX Fund FTA 12.0% 12.0% First Trust Value Line Dividend Index Fund FVD 13.0% 13.0% First Trust BuyWrite Income ETF FTHI 8.0% 10.0% -2.0% First Trust RBA Quality Income ETF QINC 7.0% 10.0% -3.0% First Trust Rising Dividend Achievers ETF RDVY 15.0% 13.0% +2.0% INTERNATIONAL First Trust STOXX European Select Dividend Index Fund FDD 22.0% 19.0% +3.0% First Trust Dow Jones Global Select Dividend Index Fund FGD 5.0% 5.0% SATELLITE First Trust North American Energy Infrastructure Fund EMLP 6.0% 6.0% First Trust NASDAQ Technology Dividend Index Fund TDIV 6.0% 6.0% First Trust Nasdaq Bank ETF FTXO 6.0% 6.0% This information is not personalized investment advice, research or an investment recommendation from any First Trust entity regarding (i) the funds that make up the model portfolios, (ii) the use or suitability of the model portfolios, or (iii) any security in particular, and is intended for use only by a third party financial advisor, with other information, as a resource to help build a portfolio or as an input in the development of investment advice for its own clients. Financial advisors are responsible for making their own independent judgment as to how to use this information. Only an investor and their financial advisor know enough about their circumstances to make an investment decision. First Trust does not have investment discretion over, nor does it place trade orders for, any non-first Trust portfolios or accounts derived from this information. There is no guarantee that any investment strategy illustrated will be successful or achieve any particular result. Investing involves risk, including possible loss of principal. Asset allocation and diversification may not protect against market risk, loss of principal or volatility of returns. This information is subject to change and does not guarantee future results. 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 and the Internal Revenue Code. First Trust has no knowledge of and has not been provided any information regarding any investor. Financial advisors must determine whether or not the allocations are appropriate for their clients as First Trust does not consider customer specific suitability when determining the portfolio allocations. First Trust believes the financial advisor is a fiduciary, is capable of evaluating investment risks

4 M O D E L A L L O C AT I O N S & C H A N G E S A S O F 3 / 2 9 / 1 8 DIVERSIFIED LOW DURATION FIXED INCOME MODEL First Trust Enhanced Short Maturity ETF FTSM 17.5% 17.5% First Trust Low Duration Opportunities ETF LMBS 40.0% 40.0% First Trust Senior Loan Fund FTSL 20.0% 20.0% First Trust Tactical High Yield ETF HYLS 5.0% 5.0% U.S. OPPORTUNISTIC CORE First Trust TCW Opportunistic Fixed Income ETF FIXD 7.5% 7.5% First Trust Emerging Markets Local Currency Bond ETF FEMB 10.0% 10.0% DIVERSIFIED LOW DURATION FIXED INCOME TAX-SENSITIVE MODEL FUND TICKER MUNICIPAL ishares Short Maturity Municipal Bond ETF MEAR 30.0% +30.0% U.S. CORE MUNICIPAL ishares Short-Term National Muni Bond ETF SUB 20.0% 10.0% +10.0% First Trust Managed Municipal ETF FMB 35.0% 40.0% -5.0% U.S. HIGH YIELD MUNICIPAL First Trust Municipal High Income ETF FMHI 10.0% +10.0% VanEck Vectors Short High-Yield Municipal Index ETF SHYD 5.0% +5.0% First Trust Enhanced Short Maturity ETF FTSM 5.0% -5.0% First Trust Low Duration Opportunities ETF LMBS 20.0% -20.0% First Trust Senior Loan Fund FTSL 20.0% -20.0% First Trust Emerging Markets Local Currency Bond ETF FEMB 5.0% -5.0% This information is not personalized investment advice, research or an investment recommendation from any First Trust entity regarding (i) the funds that make up the model portfolios, (ii) the use or suitability of the model portfolios, or (iii) any security in particular, and is intended for use only by a third party financial advisor, with other information, as a resource to help build a portfolio or as an input in the development of investment advice for its own clients. Financial advisors are responsible for making their own independent judgment as to how to use this information. Only an investor and their financial advisor know enough about their circumstances to make an investment decision. First Trust does not have investment discretion over, nor does it place trade orders for, any non-first Trust portfolios or accounts derived from this information. There is no guarantee that any investment strategy illustrated will be successful or achieve any particular result. Investing involves risk, including possible loss of principal. Asset allocation and diversification may not protect against market risk, loss of principal or volatility of returns. This information is subject to change and does not guarantee future results. 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 and the Internal Revenue Code. First Trust has no knowledge of and has not been provided any information regarding any investor. Financial advisors must determine whether or not the allocations are appropriate for their clients as First Trust does not consider customer specific suitability when determining the portfolio allocations. First Trust believes the financial advisor is a fiduciary, is capable of evaluating investment risks

5 M O D E L A L L O C AT I O N S & C H A N G E S A S O F 3 / 2 9 / 1 8 HIGH INCOME MODEL First Trust Enhanced Short Maturity ETF FTSM 7.5% 7.5% First Trust Low Duration Opportunities ETF LMBS 22.5% 22.5% First Trust Senior Loan Fund FTSL 20.0% 20.0% First Trust Tactical High Yield ETF HYLS 15.0% 15.0% U.S. OPPORTUNISTIC CORE First Trust TCW Opportunistic Fixed Income ETF FIXD 5.0% 5.0% First Trust Emerging Markets Local Currency Bond ETF FEMB 15.0% 15.0% HYBRID FIXED INCOME First Trust Preferred Securities and Income ETF FPE 10.0% 10.0% First Trust SSI Strategic Convertible Securities ETF FCVT 5.0% 5.0% HIGH INCOME TAX-SENSITIVE MODEL FUND TICKER MUNICIPAL ishares Short Maturity Municipal Bond ETF MEAR 15.0% +15.0% U.S. CORE MUNICIPAL ishares Short-Term National Muni Bond ETF SUB 15.0% +15.0% First Trust Managed Municipal ETF FMB 25.0% 20.0% +5.0% U.S. HIGH YIELD MUNICIPAL First Trust Municipal High Income ETF FMHI 30.0% 25.0% +5.0% VanEck Vectors Short High-Yield Municipal Index ETF SHYD 10.0% +10.0% U.S. MUNICIPAL CLOSED-END FUNDS First Trust Municipal CEF Income Opportunity ETF MCEF 5.0% 5.0% First Trust Enhanced Short Maturity ETF FTSM 5.0% -5.0% First Trust Low Duration Opportunities ETF LMBS 5.0% -5.0% First Trust Senior Loan Fund FTSL 15.0% -15.0% First Trust Tactical High Yield ETF HYLS 5.0% -5.0% First Trust Emerging Markets Local Currency Bond ETF FEMB 10.0% -10.0% HYBRID FIXED INCOME First Trust Preferred Securities and Income ETF FPE 5.0% -5.0% First Trust SSI Strategic Convertible Securities ETF FCVT 5.0% -5.0% This information is not personalized investment advice, research or an investment recommendation from any First Trust entity regarding (i) the funds that make up the model portfolios, (ii) the use or suitability of the model portfolios, or (iii) any security in particular, and is intended for use only by a third party financial advisor, with other information, as a resource to help build a portfolio or as an input in the development of investment advice for its own clients. Financial advisors are responsible for making their own independent judgment as to how to use this information. Only an investor and their financial advisor know enough about their circumstances to make an investment decision. First Trust does not have investment discretion over, nor does it place trade orders for, any non-first Trust portfolios or accounts derived from this information. There is no guarantee that any investment strategy illustrated will be successful or achieve any particular result. Investing involves risk, including possible loss of principal. Asset allocation and diversification may not protect against market risk, loss of principal or volatility of returns. This information is subject to change and does not guarantee future results. 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 and the Internal Revenue Code. First Trust has no knowledge of and has not been provided any information regarding any investor. Financial advisors must determine whether or not the allocations are appropriate for their clients as First Trust does not consider customer specific suitability when determining the portfolio allocations. First Trust believes the financial advisor is a fiduciary, is capable of evaluating investment risks

6 You should consider a fund s investment objectives, risks, and charges and expenses carefully before investing. Contact First Trust Portfolios L.P. at or visit to obtain a prospectus or summary prospectus which contains this and other information about a First Trust fund. The prospectus or summary prospectus should be read carefully before investing. FUND RISK CONSIDERATIONS An index fund s return may not match the return of the applicable index. Securities held by an index fund will generally not be bought or sold in response to market fluctuations. Investors buying or selling fund shares on the secondary market may incur customary brokerage commissions. Investors who sell fund shares may receive less than the share s net asset value. Shares may be sold throughout the day on the exchange through any brokerage account. However, unlike mutual funds, shares may only be redeemed directly from a fund by authorized participants, in very large creation/redemption units. If a fund s authorized participants are unable to proceed with creation/redemption orders and no other authorized participant is able to step forward to create or redeem, fund shares may trade at a discount to the fund s net asset value and possibly face delisting. A fund s shares will change in value, and you could lose money by investing in a fund. One of the principal risks of investing in a fund is market risk. Market risk is the risk that a particular security owned by a fund, fund shares or securities in general may fall in value. There can be no assurance that a fund s investment objective will be achieved. A fund may invest in securities issued by companies concentrated in a particular industry or sector which involves additional risks including limited diversification. An investment in a fund concentrated in a single country or region may be subject to greater risks of adverse events and may experience greater volatility than a fund that is more broadly diversified geographically. A fund may invest in small capitalization and mid capitalization companies. Such companies may experience greater price volatility than larger, more established companies. An investment in a fund containing securities of non-u.s. issuers is 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. These risks may be heightened for securities of companies located in, or with significant operations in, emerging market countries. A fund may invest in depositary receipts which may be less liquid than the underlying shares in their primary trading market. Because a fund s NAV is determined on the basis of U.S. dollars, if a fund invests in non-u.s. securities, you may lose money if the local currency of a non-u.s. market depreciates against the U.S. dollar. An investment in MLP units involves risks which differ from an investment in common stock of a corporation. Holders of MLP units have limited control and voting rights. In addition, there is the risk that a MLP could be taxed as a corporation, resulting in decreased returns from such MLP. Rising interest rates could adversely impact the financial performance of MLPs, MLPrelated entities and energy companies. The stocks of companies that have recently conducted an initial public offering have exhibited above-average price appreciation in connection with the initial public offering prior to inclusion in a fund, which may not continue, and these investments may be subject to additional risks, price volatility and speculative trading. Certain securities held by the funds are subject to credit risk, call risk, income risk, interest rate risk, prepayment risk, extension risk and zero coupon risk. Credit risk is the risk that an issuer of a security will be unable or unwilling to make dividend, interest and/or principal payments when due and that the value of a security may decline as a result. Credit risk is heightened for floating-rate loans and high-yield securities, because companies that issue loans tend to be highly leveraged and thus are more susceptible to the risks of interest deferral, default and/or bankruptcy. Call risk is the risk that if an issuer calls higher-yielding debt instruments held by a fund, performance could be adversely impacted. Income risk is the risk that income from a fund s fixed-income investments could decline during periods of falling interest rates. Interest rate risk is the risk that the value of the fixed-income securities in a fund will decline because of rising market interest rates. Prepayment risk is the risk that during periods of falling interest rates, an issuer may exercise its right to pay principal on an obligation earlier than expected. This may result in a decline in a fund s income. Extension risk is the risk that the average life of a mortgage-related security may extend if the rate of prepayments decreases, which increases interest rate exposure. Zero coupon bonds may be highly volatile as interest rates rise and fall. Municipal securities issuers may be unable to pay their obligations as they come due. Income from municipal bonds could be declared taxable because of, among other things, unfavorable changes in tax laws, adverse interpretations by the Internal Revenue Service or state tax authorities, or noncompliant conduct of a bond issuer. All or a portion of a fund s otherwise exempt-interest dividends may be taxable to those shareholders subject to the federal alternative minimum tax. Participation interests in municipal leases pose special risks because many leases and contracts contain non-appropriation clauses that provide that the governmental issuer has no obligation to make future payments under the lease or contract unless money is appropriated for this purpose by the appropriate legislative body. MCEF s investment in CEFs is restricted by the Investment Company Act of 1940 and the fund s associated exemptive relief which limits the amount of any single CEF that can be owned by the fund. Because the shares of CEFs cannot be redeemed upon demand, shares of many CEFs will trade on exchanges at market prices rather than net asset value, which may cause the shares to trade at a price greater than NAV (premium) or less than NAV (discount). There can be no assurance that the market discount on shares of any CEF purchased by the fund will ever The NYSE Arca Biotechnology Index is a trademark of the NYSE Group, Inc. or its affiliates ( NYSE ) and is licensed for use by First Trust. The fund is not sponsored or endorsed by NYSE. NYSE makes no representation or warranty, express or implied, to the owners of the fund or any member of the public regarding the advisability of investing in the fund or the ability of the fund to track the performance of the various sectors represented in the stock market. NYSE has no obligation to take the needs of the owners of the fund into consideration in determining, composing or calculating the Index. NYSE is not responsible for and has not participated in any determination or calculation made with respect to issuance or redemption of the fund. Nasdaq, NASDAQ US Rising Dividend Achievers Index, Nasdaq US Smart Banks Index and NASDAQ Technology Dividend Index are registered trademarks and service marks of Nasdaq, Inc. (which with its affiliates is referred to as the Corporations ) and are licensed for use by First Trust Advisors L.P. The funds have not been passed on by the Corporations as to their legality or suitability. The funds are not issued, endorsed, sold, or promoted by the Corporations. THE CORPORATIONS MAKE NO WARRANTIES AND BEAR NO LIABILITY WITH RESPECT TO THE FUNDS. Value Line and Value Line Dividend Index are trademarks or registered trademarks of Value Line, Inc. ( Value Line ) in the United States and other countries and have been licensed for use for certain purposes by First Trust Advisors L.P. This product is not sponsored, endorsed, recommended, sold or promoted by Value Line and Value Line makes no representation regarding the advisability of investing in products utilizing such strategy. First Trust Advisors L.P. is not affiliated with any Value Line company. QINC is not sponsored, endorsed, sold or promoted by RBA. RBA makes no representation or warranty, express or implied, to the owners of the fund or any member of the public regarding the advisability of trading in the fund. RBA s only relationship to First Trust Advisors L.P. ( First Trust ) is the licensing of certain trademarks and trade names of RBA and of the index, which is determined, composed and calculated by RBA without regard to First Trust or the fund. Licensor has no obligation to take the needs of First Trust or the owners of the fund into consideration in determining, composing or calculating the index. Licensor is not responsible for and has not participated in the determination of the timing of, prices at, or quantities of the fund to be listed or in the determination or calculation of the equation by which the fund is to be converted into cash. Licensor has no obligation or liability in connection with the administration, marketing or trading of the fund. The Dow Jones Internet Composite Index and Dow Jones Global Select Dividend Index are products of S&P Dow Jones Indices LLC ( SPDJI ), and have been licensed for use by First Trust. Dow Jones, Dow Jones Internet Composite Index, and Dow Jones Global decrease or that when the fund seeks to sell shares of a CEF it can receive the NAV for those shares. The fund may also be exposed to higher volatility in the market due to indirect use of leverage through its investment in CEFs. CEFs may issue senior securities in an attempt to enhance returns. An underlying CEF may invest in inverse floating rate securities which create effective leverage and thus, the value of the inverse floater will increase and decrease to a significantly greater extent. Custodial receipt trusts may issue inverse floater securities and if an underlying fund were to hold inverse floaters issued by custodial receipt trusts, the underlying fund would be subject to the risks of inverse floaters. Collateralized loan obligations (CLOs) carry additional risks, including, the possibility that distributions from collateral securities will not be adequate to make interest or other payments, the quality of the collateral may decline in value or default, and the complex structure of the security may not be fully understood at the time of investment and may produce disputes with the issuer or unexpected investment results. Investments in sovereign bonds involve special risks because the governmental authority that controls the repayment of the debt may be unwilling or unable to repay the principal and/or interest when due. Senior floating rate loans are usually rated below investment grade but may also be unrated. As a result, the risks associated with these loans are similar to the risks of high yield fixed income instruments. High yield securities, or junk bonds, are subject to greater market fluctuations and risk of loss than securities with higher ratings, and therefore, may be highly speculative. The market for high yield securities is smaller and less liquid than that for investment grade securities. Illiquid securities involve the risk that the securities will not be able to be sold at the time desired by a fund or at prices approximately the value at which a fund is carrying the securities on its books. Certain of the fixed-income securities in a fund may not have the benefit of covenants which could reduce the ability of the issuer to meet its payment obligations and might result in increased credit risk. If a counterparty defaults on its payment obligations, a fund will lose money and the value of fund shares may decrease. A fund s investment in repurchase agreements may be subject to market and credit risk with respect to the collateral securing the agreements. Convertible securities have characteristics of both equity and debt securities and, as a result, are exposed to certain additional risks. The values of certain synthetic convertible securities will respond differently to market fluctuations than a traditional convertible security because such synthetic convertibles are composed of two or more separate securities or instruments, each with its own market value. A fund is subject to the credit risk associated with the counterparty creating the synthetic convertible instrument. Synthetic convertible securities may also be subject to the risks associated with derivatives. Preferred securities combine some of the characteristics of both common stocks and bonds. Preferred securities are typically subordinated to bonds and other debt instruments in a company s capital structure, in terms of priority to corporate income, and therefore will be subject to greater credit risk than those debt instruments. Securities issued or guaranteed by federal agencies and U.S. government sponsored instrumentalities may or may not be backed by the full faith and credit of the U.S. government. The use of options and other derivatives can lead to losses because of adverse movements in the price or value of the underlying asset, index or rate, which may be magnified by certain features of the derivatives. These risks are heightened when a fund s portfolio managers use derivatives to enhance a fund s returns or as a substitute for a position or security, rather than solely to hedge (or offset) the risk of a position or security held by a fund. Short selling creates special risks which could result in increased volatility of returns. In times of unusual or adverse market, economic, regulatory or political conditions, a fund may not be able, fully or partially, to implement its short selling strategy. Certain funds have fewer assets than larger funds, and like other relatively small funds, large inflows and outflows may impact a fund s market exposure for limited periods of time. A fund may effect a portion of creations and redemptions for cash, rather than in-kind securities. As a result, a fund may be less tax-efficient. A fund may invest in the shares of other investment companies, which involves additional expenses that would not be present in a direct investment in the underlying funds. In addition, a fund s investment performance and risks may be related to the investment performance and risks of the underlying funds. Certain funds are classified as non-diversified and may invest a relatively high percentage of their assets in a limited number of issuers. As a result, the funds may be more susceptible to a single adverse economic or regulatory occurrence affecting one or more of these issuers, experience increased volatility and be highly concentrated in certain issuers. Actively managed funds are subject to management risk because the advisor or sub-advisor will apply investment techniques and risk analyses that may not have the desired result. First Trust Advisors L.P. is the adviser to the funds. First Trust Advisors L.P. is an affiliate of First Trust Portfolios L.P., the funds distributor. Please visit for the holdings of each fund and to read a full description of each fund s specific risks before investing. Select Dividend Index are trademarks of Dow Jones Trademark Holdings LLC ( Dow Jones ) and have been licensed to SPDJI and have been sublicensed for use for certain purposes by First Trust on behalf of the Funds. The First Trust Dow Jones Internet Index Fund and First Trust Dow Jones Global Select Dividend Index Fund are not sponsored, endorsed, sold or promoted by SPDJI, Dow Jones or their respective affiliates and none of them makes any representation regarding the advisability of investing in such products. AlphaDEX is a registered trademark of First Trust Portfolios L.P. First Trust Portfolios L.P. has obtained a patent for the AlphaDEX stock selection methodology from the United States Patent and Trademark Office. The STOXX Europe Select Dividend 30 Index and the trademarks used in the index name are the intellectual property of STOXX Limited, Zurich, Switzerland and/or its licensors. The index is used under license from STOXX. The ETF based on the index are in no way sponsored, endorsed, sold or promoted by STOXX and/or its licensors and neither STOXX nor its licensors shall have any liability with respect thereto. A patent with respect to the IPOX index methodology has been issued (U.S. Pat. No. 7,698,197). IPOX is a registered international trademark of IPOX Schuster LLC ( First Trust Portfolios L.P. First Trust Advisors L.P.