First Trust High Income ETF (FTHI) First Trust Low Beta Income ETF (FTLB)

Transcription

1 As of 6/30/16 First Trust High Income ETF (FTHI) First Trust Low Beta Income ETF (FTLB)» 2nd Quarter Review For the second quarter of 2016, the First Trust High Income ETF ( FTHI ) returned 1.18% based on net asset value (NAV) and 1.18% based on market price. 1 The First Trust Low Beta Income ETF ( FTLB ) returned 0.86% based on NAV and -1.74% based on market price. The benchmark for FTHI, the CBOE S&P 500 BuyWrite Monthly Index, ( FTHI benchmark ) returned 3.20% for the quarter, while the benchmark for FTLB, the CBOE S&P Collar Index ( FTLB benchmark ) returned 0.34% for the quarter (see Table 1). The S&P 500 Index ( the index ) returned 2.46% for the quarter. Table 1: Fund Performance vs. Benchmark and S&P 500 Index (as of 6/30/16) Fund/Index 1-Yr Annualized Since Fund Inception 2 FTHI (NAV) 1.18% 2.39% 2.67% 4.64% CBOE S&P 500 BuyWrite Monthly Index 3.20% 2.43% 3.99% 5.40% FTLB (NAV) 0.86% 1.36% 1.23% 3.05% CBOE S&P Collar Index SM 0.34% -0.76% -3.70% 2.07% S&P 500 Index 2.46% 3.84% 3.99% 8.02% Past performance is no guarantee of future results. Market Commentary After a turbulent first quarter during which the index declined over 10% through February, and then rallied back to positive territory, the second quarter of 2016 appeared to be a return to normalcy. The market, as measured by the index, traded in a narrow price range between 2,040 and 2,100 for the months of April and May. The total return for the index through the first two months of the quarter was a solid 2.19%. The short period of calm did not last through the end of June, as United Kingdom voters surprised the world on June 23 by voting to leave the European Union ( EU ). The nonbinding referendum to leave the EU ( BREXIT ) passed with a 52% majority and a 71.8% voter turnout rate, the highest since the general election in Prior election polling and the UK betting markets, up to the day of the vote, had all indicated that the remain vote was the most likely outcome. Markets were caught off-guard by the vote and quickly adjusted themselves to the new political reality on Friday, June 24, and the following Monday, June 27. Equity markets dropped, with the FTSE 100 Index falling -5.62% on Friday through Monday. EU stocks, as represented by the Euro Stoxx 50 Index, dropped % over the same two days. U.S. markets were down as well, with the S&P 500 Index and the Russell 2000 Index down -5.34% and -7.04%, respectively. The British pound tumbled, falling from dollars per pound to , an %, two-day decline. U.S. Treasuries benefited as the flight to quality bid drove U.S. 10-year Treasury yields down by 0.30%, to 1.439%, a low for the year. The global effect of the vote was felt in all developed markets as demonstrated by the Japanese markets, where the Nikkei 225 Index fell -5.72%, and the yen surged 4.07% versus the U.S. dollar. As seen earlier in the year, investors took the short-term downside volatility as an opportunity to buy assets at cheap prices. Equity markets, particularly in the U.S., rallied over the final three days of the month, virtually eliminating any decline following BREXIT. For the month of May, and the second quarter, the index was up 1.80% and 2.46%, respectively. U.S. Government 10-year Treasury yields held onto their BREXIT gains, finishing the quarter at a yield of 1.47%, down 0.30% from the beginning of the quarter. Fund Commentary FTHI and FTLB hold almost the same underlying equity portfolios with only small differences due to their option overlay strategies (see Table 2). Unless otherwise specified, the funds will refer to the underlying equity portfolios of both FTHI and FTLB. FTHI and FTLB invest in equities of all market capitalizations traded on U.S. domestic exchanges. Additionally, the funds utilize an option strategy consisting of writing (selling) at-the-money ( ATM ) to slightly out-of-the-money ( OTM ) covered call options on the S&P 500 Index, seeking to generate additional cash flow in the form of option premiums. 3,4,5,6 In the case of FTLB, a portion of the call option premiums generated may be used to purchase OTM put options on the S&P 500 Index to potentially buffer the drawdown risk of the fund. 7 FTHI and FTLB tilt their equity holdings towards higher dividend-paying common stocks and attempt to limit the amount of overlap between their equity holdings and the S&P 500 Index. By limiting the overlap between the equity holdings and the index, the funds seek to maintain the favorable tax treatment for any gains/losses from the index options held in the portfolio. The portfolio managers believe that a portfolio tilted toward higher dividend-paying stocks and lower beta stocks will, over time, offer investors attractive risk-adjusted total returns relative to the S&P 500 Index. 8 During the quarter, FTHI and FTLB performed, relative to each other, as expected. During up markets, FTHI should outperform FTLB as the cost of the puts will drag on FTLB s performance. FTHI and FTLB underperformed their benchmarks for the quarter, as the underlying equities underperformed those of their benchmarks, in addition to FTHI s options underperforming those of their benchmark (see Table 3). Table 2: Top 10 Holdings (as of 6/30/16) FTHI Weight FTLB Weight Apple, Inc. 3.39% Apple, Inc. 3.27% Verizon Communications, Inc. 2.67% Verizon Communications, Inc. 2.55% Duke Energy Corp. 2.65% Duke Energy Corp. 2.53% Intel Corp. 2.62% Intel Corp. 2.51% Comcast Corp. 2.56% Comcast Corp. 2.45% United Parcel Service, Inc. 2.52% United Parcel Service, Inc. 2.40% Wal-Mart Stores, Inc. 2.51% Wal-Mart Stores, Inc. 2.40% Cisco Systems, Inc. 2.46% Waste Management, Inc. 2.37% The Boeing Company 2.39% Cisco Systems, Inc. 2.35% Waste Management, Inc. 2.38% The Boeing Company 2.28% Table 3: Attribution Analysis (as of 6/30/16) Equity Option Total Equity Option Total FTHI (NAV) 1.51% -0.33% 1.18% 3.92% -1.53% 2.39% CBOE S&P 500 BuyWrite Monthly Index 2.46% 0.74% 3.20% 3.84% -1.41% 2.43% FTLB (NAV) 1.49% -0.63% 0.86% 3.90% -2.54% 1.36% CBOE S&P Collar Index SM 2.46% -2.12% 0.34% 3.84% -4.60% -0.76% Past performance is no guarantee of future results. Numbers are approximations due to the effects of fees and cash holdings. Index definitions are listed on page 3. Indexes are unmanaged and do not pay management fees or brokerage expenses. An investor cannot invest directly in an index.

2 As of 6/30/16 Equity Performance Overall, the funds had strong stock selection within the consumer staples and financials sectors. Within the consumer staples sector, an overweight position in Wal-Mart Stores, Inc., and holdings in both Casey s General Stores, Inc. and Pilgrim s Pride Corp. aided performance. Casey s General Stores, Inc. moved higher on record earnings, while Pilgrim s Pride Corp. declared a special dividend to unlock shareholder value. Within the financials sector, positions in Blackrock, Inc., JP Morgan Chase & Co., and Senior Housing Properties Trust benefited performance. Senior Housing Properties Trust posted better than expected funds from operations, and was up over 14% for the quarter. From a sector allocation perspective, the fund s approximately 10% underweight to the financials sector also provided a small boost to performance (see Chart 1). Chart 1: Sector Weightings (as of 6/30/16) 25% 20% 15% 10% 5% 0% Source: Bloomberg. Energy was the worst-performing sector for the funds. The funds were each underweight the sector by approximately -2.26%, which hurt performance since energy was the best-performing sector of the S&P 500 Index. Additionally, holdings in smaller energy firms such as CVR Energy, Inc., Noble Energy Corp. Plc, and HollyFrontier Corp., hurt performance as they underperformed within the energy sector. CVR Energy, Inc. fell over -24%, while HollyFrontier Corp. was down over -12%. The funds stock selection within the consumer discretionary sector also detracted from performance. Target Corp. and DSW, Inc. both missed earnings estimates, and were down over -17%, and -22%, respectively, during the quarter. Option Performance FTHI Consumer Disc. Consumer Staples Energy Financials Health Care Industrials Info. Tech. Materials Telecom. Utilities FTLB S&P 500 Index The option strategy employed by FTHI is an index overwriting strategy that sells ATM to slightly OTM covered call options on the S&P 500 Index with expirations of less than one year. 9 The fund may overwrite anywhere from 25% to 75% of the fund s equity holdings with index options. At the end of the quarter, the fund overwrite was approximately 51.20% with call options on average 0.33% OTM. The FTHI overwrite strategy detracted -0.33% from the overall portfolio return versus the option strategy in the FTHI benchmark, for which options added 0.74%. The option strategy employed by FTLB is an index overwriting strategy that sells ATM to slightly OTM covered call options on the S&P 500 Index, with expirations of less than one year. Additionally, FTLB may use some of the proceeds from the writing of the call options to purchase OTM put options on the S&P 500 Index. At the end of the quarter, the fund call overwrite was approximately 55.30%. The put positions were established as put spreads 10 (to lessen their costs) and were approximately 34.00% of the portfolio s notional value with average strike prices 9.89% OTM. 11 The FTLB option strategy detracted approximately -0.63% for the quarter versus the option strategy embedded in the FTLB benchmark, for which options detracted -2.12%. Table 4: FTHI/FTLB 10 Best and Worst Portfolio Holdings Total While Held (2Q2016) Best Performing Worst Performing Shenandoah Telecommunication 33.63% Emergent Biosolutions, Inc % Manitowoc Company, Inc % Alaska Air Group, Inc % Huntington Ingalls Industries 23.11% Abercrombie & Fitch Co % Nu Skin Enterprises, Inc % CVR Energy, Inc % Dave & Buster s Entertainment 22.20% DSW, Inc % Pfizer, Inc % Jetblue Airways Corp % Albemarle Corp % Target Corp % Cracker Barrel Old Country Stores, Inc. First Trust High Income ETF (FTHI) First Trust Low Beta Income ETF (FTLB) 17.48% ManpowerGroup, Inc % Big Lots, Inc % Delta Airlines, Inc % Deckers Outdoor Corp % Allegiant Travel Co % Source: Bloomberg. Past performance is no guarantee of future results. The table shows the total return of the top and bottom performers while held by the funds. Table 5: 2016 Distribution History Month Payable Date FTHI Distribution Amount FTLB Distribution Amount January 01/29/2016 $ $ February 02/29/2016 $ $ March 03/31/2016 $ $ April 04/29/2016 $ $ May 05/31/2016 $ $ June 06/30/2016 $ $ The distribution history represents dividends that were paid by the funds and is not a guarantee of the funds future dividend-paying ability. Please see attached Fact Sheets for full standardized performance and additional information about the funds.

3 As of 6/30/16 First Trust High Income ETF (FTHI) First Trust Low Beta Income ETF (FTLB) Footnotes 1 NAV s and Market Price s: NAV returns are based on the fund s net asset value which represents the fund s net assets (assets less liabilities) divided by the fund s outstanding shares. Market Price returns are based on the midpoint of the bid/ask spread on the stock exchange on which shares of the fund are listed for trading as of the time that the fund s NAV is calculated. 2 Inception Date: 1/6/14 (for both funds) 3 Out-Of-The-Money (OTM): For a call option, when the option s strike price is above the market price of the underlying asset. For a put option, when the strike price of the option is below the market price of the underlying asset. 4 At-The-Money (ATM): A situation where an option s strike price is identical to the price of the underlying asset. 5 Call/Put Option: An agreement that gives the buyer of the option the right, but not the obligation, to purchase/sell an agreed upon quantity of an underlying asset from/to the writer (seller) of the option at a predetermined price (the strike price) within a certain window of time (until the option s expiration). 6 Option Premium: The income received by the party who sells or writes an option contract to another party. 7 Drawdown: The peak-to-trough decline during a specific record period of an investment, fund, or commodity. 8 Beta: A measure of price variability relative to the market. The higher the beta, the greater the price variability relative to the market. 9 Overwriting: An options strategy that involves the sale of call or put options on assets that are believed to be overpriced (for a call) or underpriced (for a put), with the assumption that the options will not be exercised. 10 Put Spread: A put spread is an option strategy that consists of buying one put and selling another put, with the same expiration but with a lower strike price, to offset some of the cost. 11 Notional: The equivalent value of the option based on the number of contracts owned multiplied by the price for immediate delivery of the underlying asset (spot price). Definitions The Euro Stoxx 50 Index is a market capitalization-weighted stock index of 50 large, blue-chip European companies operating within eurozone nations. The Russell 2000 Index is a benchmark index measuring the performance of 2000 small-capitalization stock. The Nikkei 225 Index is a price-weighted index comprised of Japan's top 225 blue-chip companies on the Tokyo Stock Exchange. The CBOE S&P 500 BuyWrite Monthly Index is a benchmark index designed to track the performance of a hypothetical buy-write strategy on the S&P 500 Index. It is a passive total return index based on buying an S&P 500 stock index portfolio, and writing (or selling) the near-term S&P 500 Index covered call option. The CBOE S&P Collar Index SM is a benchmark index designed to provide investors with insights as to how one might protect an investment in S&P 500 stocks against market declines at a reduced cost. This strategy accepts a ceiling or cap on S&P 500 gains in return for a floor on S&P 500 losses by holding the stocks in the S&P 500 Index, buying threemonth S&P 500 put options to protect this S&P 500 portfolio from market decreases and selling one-month S&P 500 call options to help finance the cost of the put options.

4 FTHI As of 6/30/16» Fund Objective This actively managed exchange-traded fund seeks to provide current income, with a secondary investment objective of capital appreciation.» Fund Facts Fund Ticker FTHI CUSIP 33738R308 Intraday NAV FTHIIV Fund Inception Date 1/6/14 Expense Ratio 0.85% 30-Day SEC Yield 1.59% Primary Listing Nasdaq» Fund Description First Trust High Income ETF» The First Trust High Income ETF seeks to pursue its investment objectives by combining a stock portfolio with an index option strategy. The fund will invest primarily in U.S. equity securities of all market capitalizations, favoring high dividend-paying common stocks. The fund will also utilize an options strategy in which it will write (sell) U.S. exchange-traded covered call options on the S&P 500 Index seeking to generate additional cash flow in the form of premiums on the options that may be distributed to shareholders on a monthly basis. A premium is the income received by an investor who sells the option contract to another party.» Through the investment process, the advisor seeks to maximize returns through a portfolio that is tactical and transparent. The Advisor selects the equity portion from a universe of U.S. exchange-listed common stocks of all market capitalizations, American Depositary Receipts and Global Depositary Receipts. The Advisor will then apply a mathematical optimization process which uses market capitalization, liquidity, operating cash flow, dividend yield, share repurchases, and debt issuance factor constraints to produce a diversified portfolio favoring higher dividend-paying stocks that will seek to have an approximate tracking error of basis points (3-5%) relative to the S&P 500 Index. The Advisor will apply a covered call strategy to potentially generate additional income and provide a degree of protection against short-term volatility. The equity portfolio will be rebalanced periodically at the discretion of the investment team. The option portfolio will be actively managed reflecting the underlying portfolio and market conditions and opportunities.» Fund Advisor» First Trust Advisors L.P. is the advisor to the fund and manages the fund s portfolio.» Daily investment decisions are made by: John Gambla, CFA, FRM, PRM, Senior Portfolio Manager, Alternatives Investment Team of First Trust Rob A. Guttschow, CFA, Senior Portfolio Manager, Alternatives Investment Team of First Trust» Performance Summary (%) Quarter 1 Year 3 Years 5 Years 10 Years Since Inception Fund Performance* Net Asset Value (NAV) After Tax Held After Tax Sold Market Price Index Performance** CBOE S&P 500 BuyWrite Monthly Index S&P 500 Index Performance data quoted represents past performance. Past performance is not a guarantee of future results and current performance may be higher or lower than performance quoted. Investment returns and principal value will fluctuate and shares when sold or redeemed, may be worth more or less than their original cost. You can obtain performance information which is current through the most recent month-end by visiting 30-day SEC yield is calculated by dividing the net investment income per share earned during the most recent 30-day period by the maximum offering price per share on the last day of the period. *After Tax Held returns represent return after taxes on distributions. Assumes shares have not been sold. After Tax Sold returns represent the return after taxes on distributions and the sale of fund shares. s do not represent the returns you would receive if you traded shares at other times. Market Price returns are based on the midpoint of the bid/ask spread. s are average annualized total returns, except those for periods of less than one year, which are cumulative. After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on the investor s tax situation and may differ from those shown. The after-tax returns shown are not relevant to investors who hold their fund shares through tax-deferred arrangements such as 401(k) plans or individual retirement accounts. **The CBOE S&P 500 BuyWrite Index is the fund s benchmark. Indexes do not charge management fees or brokerage expenses, and no such fees or expenses were deducted from the performance shown. Indexes are unmanaged and an investor cannot invest directly in an index.

5 First Trust High Income ETF As of 6/30/16» Portfolio Information¹ Number Of Holdings 111 Maximum Market Cap. $ Billion Median Market Cap. $5.14 Billion Minimum Market Cap. $1.13 Billion Price/Earnings Price/Book 2.18 Price/Cash Flow 8.48 Price/Sales 1.07» Portfolio Options Information % Portfolio with Call Options 51.20% Average Time Until Expiration of Calls 55 Days Average Call Moneyness (OTM)² 0.33%» Top Holdings (%) Apple, Inc Verizon Communications, Inc Duke Energy Corporation 2.65 Intel Corporation 2.62 Comcast Corporation 2.56 United Parcel Service, Inc Wal-Mart Stores, Inc Cisco Systems, Inc The Boeing Company 2.39 Waste Management, Inc. 2.38» Top Sector Exposure (%) Industrials Consumer Discretionary Information Technology Health Care Materials 7.64 Energy 6.69 Telecommunication Services 6.26 Consumer Staples 5.02 Utilities 3.85 Financials 2.52 ¹Portfolio information statistics exclude cash and options. ²Moneyness is how much an option contract s strike price is in-the-money (ITM) or out-of-the-money (OTM) expressed as a percentage of the price of the option contract s underlying asset. You should consider the 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 the fund. The prospectus or summary prospectus should be read carefully before investing. ETF Characteristics The fund lists and principally trades its shares on The Nasdaq Stock Market LLC. Investors buying or selling fund shares on the secondary market may incur customary brokerage commissions. Market prices may differ to some degree from the net asset value of the shares. 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 the fund by authorized participants, in very large creation/redemption units. Risk Considerations The fund s shares will change in value, and you could lose money by investing in the fund. One of the principal risks of investing in the fund is market risk. Market risk is the risk that a particular security owned by the fund, fund shares or securities in general may fall in value. The fund is subject to management risk because it is an actively managed portfolio. In managing the fund s investment portfolio, the advisor will apply investment techniques and risk analyses that may not have the desired result. There can be no assurance that the fund s investment objectives will be achieved. The 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. The fund may invest in depositary receipts which may be less liquid than the underlying shares in their primary trading market. 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 the fund s portfolio managers use derivatives to enhance the 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 the fund. Not FDIC Insured Not Bank Guaranteed May Lose Value The option positions employed may present additional risk. When selling a call option, the fund will receive a premium; however, this premium may not be enough to offset a loss incurred by the fund if the index level at the expiration of the call option is above the strike price by an amount equal to or greater than the premium. The value of an option may be adversely affected if the market for the option becomes less liquid or smaller, and will be affected by changes in the value and dividend rates of the stock or the index subject to the option, an increase in interest rates, a change in the actual and perceived volatility of the stock market and the common stock or the index and the remaining time to expiration. Additionally, the value of an option does not increase or decrease at the same rate as the underlying stock(s) or the index. The fund may effect a portion of creations and redemptions for cash, rather than in-kind securities. As a result, the fund may be less tax-efficient. The fund currently has fewer assets than larger funds, and like other relatively new funds, large inflows and outflows may impact the fund s market exposure for limited periods of time. The fund is classified as non-diversified and may invest a relatively high percentage of its assets in a limited number of issuers. As a result, the fund 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. First Trust Advisors L.P. is the adviser to the fund. First Trust Advisors L.P. is an affiliate of First Trust Portfolios L.P., the fund s distributor. Definitions The CBOE S&P 500 BuyWrite Index is a benchmark index designed to track the performance of a hypothetical buy-write strategy on the S&P 500 Index. It is a passive total return index based on buying an S&P 500 stock index portfolio, and writing (or selling) the near-term S&P 500 Index covered call option. The S&P 500 Index is an unmanaged index of 500 stocks used to measure large-cap U.S. stock market performance. FTHIFS071216

6 FTLB As of 6/30/16» Fund Objective This actively managed exchange-traded fund seeks to provide current income.» Fund Facts Fund Ticker FTLB CUSIP 33738R407 Intraday NAV FTLBIV Fund Inception Date 1/6/14 Expense Ratio 0.85% 30-Day SEC Yield 1.54% Primary Listing Nasdaq» Fund Description First Trust Low Beta Income ETF» The First Trust Low Beta Income ETF seeks to pursue its investment objective by combining a stock portfolio with an index option strategy. The fund will invest primarily in U.S. equity securities of all market capitalizations, favoring high dividend-paying common stocks. The fund will also utilize an options strategy in which it will write (sell) U.S. exchange-traded covered call options on the S&P 500 Index seeking to generate additional cash flow in the form of premiums on the options that may be distributed to shareholders on a monthly basis. A premium is the income received by an investor who sells the option contract to another party. The fund may use a portion of the option premiums to purchase U.S. exchange-traded put options on the S&P 500 Index. This hedging strategy will seek to provide this fund downside protection and reduce the fund s price sensitivity to declining markets.» Through the investment process, the advisor seeks to maximize returns through a portfolio that is tactical and transparent. The Advisor selects the equity portion from a universe of U.S. exchange-listed common stocks of all market capitalizations, American Depositary Receipts and Global Depositary Receipts. The Advisor will then apply a mathematical optimization process which uses market capitalization, liquidity, operating cash flow, dividend yield, share repurchases, and debt issuance factor constraints to produce a diversified portfolio favoring higher dividend-paying stocks that will seek to have an approximate tracking error of basis points (3-5%) relative to the S&P 500 Index. The Advisor will apply a covered call strategy to potentially generate additional income and also utilize an options hedging strategy using index put options. This hedging strategy will seek to provide the fund downside protection and reduce the fund s sensitivity to declining markets. The equity portfolio will be rebalanced periodically at the discretion of the investment team. The option portfolio will be actively managed reflecting the underlying portfolio and market conditions and opportunities.» Fund Advisor» First Trust Advisors L.P. is the advisor to the fund and manages the fund s portfolio.» Daily investment decisions are made by: John Gambla, CFA, FRM, PRM, Senior Portfolio Manager, Alternatives Investment Team of First Trust Rob A. Guttschow, CFA, Senior Portfolio Manager, Alternatives Investment Team of First Trust» Performance Summary (%) Quarter 1 Year 3 Years 5 Years 10 Years Since Inception Fund Performance* Net Asset Value (NAV) After Tax Held After Tax Sold Market Price Index Performance** CBOE S&P Collar Index S&P 500 Index Performance data quoted represents past performance. Past performance is not a guarantee of future results and current performance may be higher or lower than performance quoted. Investment returns and principal value will fluctuate and shares when sold or redeemed, may be worth more or less than their original cost. You can obtain performance information which is current through the most recent month-end by visiting 30-day SEC yield is calculated by dividing the net investment income per share earned during the most recent 30-day period by the maximum offering price per share on the last day of the period. *After Tax Held returns represent return after taxes on distributions. Assumes shares have not been sold. After Tax Sold returns represent the return after taxes on distributions and the sale of fund shares. s do not represent the returns you would receive if you traded shares at other times. Market Price returns are based on the midpoint of the bid/ask spread. s are average annualized total returns, except those for periods of less than one year, which are cumulative. After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on the investor s tax situation and may differ from those shown. The after-tax returns shown are not relevant to investors who hold their fund shares through tax-deferred arrangements such as 401(k) plans or individual retirement accounts. **The CBOE S&P Collar Index is the fund s benchmark. Indexes do not charge management fees or brokerage expenses, and no such fees or expenses were deducted from the performance shown. Indexes are unmanaged and an investor cannot invest directly in an index.

7 First Trust Low Beta Income ETF As of 6/30/16» Portfolio Information¹ Number Of Holdings 115 Maximum Market Cap. $ Billion Median Market Cap. $5.14 Billion Minimum Market Cap. $1.13 Billion Price/Earnings Price/Book 2.18 Price/Cash Flow 8.50 Price/Sales 1.07» Portfolio Options Information % Portfolio with Call Options 55.30% Average Time Until Expiration of Calls 60 Days Average Call Moneyness (OTM)² 0.60% % Portfolio with Put Options 34.00% Average Time Until Expiration of Puts 135 Days Average Put Moneyness (OTM)² 9.89%» Top Holdings (%) Apple, Inc Verizon Communications, Inc Duke Energy Corporation 2.53 Intel Corporation 2.51 Comcast Corporation 2.45 United Parcel Service, Inc Wal-Mart Stores, Inc Waste Management, Inc Cisco Systems, Inc The Boeing Company 2.28» Top Sector Exposure (%) Industrials Consumer Discretionary Information Technology Health Care Materials 7.72 Energy 6.65 Telecommunication Services 6.18 Consumer Staples 4.95 Utilities 3.77 Financials 2.54 ¹Portfolio information statistics exclude cash and options. ²Moneyness is how much an option contract s strike price is in-the-money (ITM) or out-of-the-money (OTM) expressed as a percentage of the price of the option contract s underlying asset. You should consider the 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 the fund. The prospectus or summary prospectus should be read carefully before investing. ETF Characteristics The fund lists and principally trades its shares on The Nasdaq Stock Market LLC. Investors buying or selling fund shares on the secondary market may incur customary brokerage commissions. Market prices may differ to some degree from the net asset value of the shares. 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 the fund by authorized participants, in very large creation/redemption units. Risk Considerations The fund s shares will change in value, and you could lose money by investing in the fund. One of the principal risks of investing in the fund is market risk. Market risk is the risk that a particular security owned by the fund, fund shares or securities in general may fall in value. The fund is subject to management risk because it is an actively managed portfolio. In managing the fund s investment portfolio, the advisor will apply investment techniques and risk analyses that may not have the desired result. There can be no assurance that the fund s investment objectives will be achieved. The 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. The fund may invest in depositary receipts which may be less liquid than the underlying shares in their primary trading market. 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 the fund s portfolio managers use derivatives to enhance the 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 the fund. The option positions employed may present additional risk. When selling a call option, the fund will receive a premium; however, this premium may not be enough to offset a loss incurred by the fund if the index level at the expiration of the call option is above the strike price by an amount equal to or greater than the premium. The value of an option may be adversely affected if the market for the option becomes less liquid or smaller, and will be affected by changes in the value and dividend rates of the stock or the index subject to the option, an increase in interest rates, a change in the actual and perceived volatility of the stock market and the common stock or the index and the remaining time to expiration. Additionally, the value of an option does not increase or decrease at the same rate as the underlying stock(s) or the index. The fund may effect a portion of creations and redemptions for cash, rather than in-kind securities. As a result, the fund may be less tax-efficient. The fund currently has fewer assets than larger funds, and like other relatively new funds, large inflows and outflows may impact the fund s market exposure for limited periods of time. The fund is classified as non-diversified and may invest a relatively high percentage of its assets in a limited number of issuers. As a result, the fund 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. First Trust Advisors L.P. is the adviser to the fund. First Trust Advisors L.P. is an affiliate of First Trust Portfolios L.P., the fund s distributor. Definitions The CBOE S&P Collar Index is a benchmark index designed to provide investors with insights as to how one might protect an investment in S&P 500 stocks against market declines at a reduced cost. This strategy accepts a ceiling or cap on S&P 500 gains in return for a floor on S&P 500 losses by holding the stocks in the S&P 500 Index, buying three-month S&P 500 put options to protect this S&P 500 portfolio from market decreases and selling onemonth S&P 500 call options to help finance the cost of the put options. The S&P 500 Index is an unmanaged index of 500 stocks used to measure large-cap U.S. stock market performance. Not FDIC Insured Not Bank Guaranteed May Lose Value FTLBFS071216