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S&P Target SMid 60 Portfolio, 2nd Quarter 2017 Series

S&P Target SMid 60 Strategy

S&P Target SMid 60 2Q '17 - Term 7/9/18 (S&P Target SMid 60 Portfolio) is a unit investment trust which invests in a fixed portfolio of stocks for approximately 15 months. The stocks are selected by applying a disciplined investment strategy which adheres to pre-determined screens and factors. The strategy is designed to identify small and mid-capitalization stocks with improving fundamental performance and market sentiment.

The strategy focuses on small and mid-size companies because we believe they 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, in our opinion. The portfolio seeks above-average total return; however, there is no assurance the objective will be met.


Portfolio Selection Process

The strategy is based on these important steps:

  • Begin with the stocks that comprise the S&P MidCap 400 and the S&P SmallCap 600 Indices.
  • Rank the stocks in each index by price-to-book value. Select the best quartile from each index - 100 stocks from the S&P MidCap 400 Index and 150 stocks from the S&P SmallCap 600 Index with the lowest, but positive, price-to-book ratio.
  • Rank each stock on three factors:
    • Price to cash flow
    • 12 month change in return on assets
    • 3 month price appreciation
  • Eliminate any regulated investment companies, limited partnerships, business development companies, and stocks with a market capitalization of less than $250 million and with an average daily trading volume of less than $250,000.
  • The 30 stocks from each index with the highest combined ranking on the three factors are selected for the portfolio.
  • The stocks selected from the S&P MidCap 400 Index are given approximately twice the weight of the stocks selected from the S&P SmallCap 600 Index.

As you can see in the adjacent charts, if this strategy had been applied since 1995, investors would have realized higher total returns than by investing in the S&P 1000 Index. It is important to note that the past performance of the strategy is hypothetical and it is not indicative of the future performance of the S&P Target SMid 60 Portfolio. Although this unit investment trust 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.

Not FDIC Insured • Not Bank Guaranteed • May Lose Value

Mountain Chart


Standard Deviations* Average Annual Total Returns*
S&P 1000
Index
Strategy S&P 1000
Index
Strategy
Since 1995 17.34% 19.81% 12.24% 13.19%
20 years 17.88% 20.61% 11.03% 12.61%
15 years 16.97% 20.79% 9.86% 9.43%
10 years 18.36% 22.11% 9.09% 6.29%
5 years 12.34% 15.32% 15.73% 14.24%
3 years 13.07% 16.22% 9.18% 5.56%
*Through 12/30/16

Annual Total Returns
Year S&P 1000
Index


Strategy

1995 30.69% 24.12%
1996 19.85% 13.23%
1997 30.26% 42.12%
1998 13.20% 4.88%
1999 14.11% 23.91%
2000 15.86% 14.08%
2001 1.45% 32.04%
2002 -14.54% -5.28%
2003 36.61% 45.40%
2004 18.39% 23.52%
2005 10.93% 3.09%
2006 11.89% 19.70%
2007 5.18% -9.65%
2008 -34.67% -37.66%
2009 33.48% 60.02%
2010 26.55% 15.08%
2011 -0.92% -8.82%
2012 17.40% 20.39%
2013 35.87% 37.41%
2014 8.54% -0.28%
2015 -2.11% -8.90%
2016 22.49% 30.77%
05/31/17 2.92% -9.65%

Past performance is no guarantee of future results and the actual current performance of the portfolio may be lower or higher than the hypothetical performance of the strategy. Hypothetical returns for the strategy in certain years were significantly higher than the returns of the S&P 1000 Index. Hypothetical strategy returns were the result of certain market factors and events which may not be replicated in the future. You can obtain performance information which is current through the most recent month-end by calling First Trust Portfolios L.P. at 1-800-621-1675 option 2. Investment return and principal value of the portfolio will fluctuate causing units of the portfolio, when redeemed, to be worth more or less than their original cost.

Simulated strategy returns are hypothetical, meaning that they do not represent actual trading, and, thus, may not reflect material economic and market factors, such as liquidity constraints, that may have had an impact on actual decision making. The hypothetical performance is the retroactive application of the strategy designed with the full benefit of hindsight. Strategy returns reflect a sales charge of 2.95% in the first year, 1.95% in subsequent years, estimated annual operating expenses of 0.187%, plus organization costs, but not taxes or commissions paid by the portfolio to purchase securities. Strategy returns assume that all dividends are reinvested semi-annually while index returns assume dividends are reinvested when they are received. Actual portfolio performance will vary from that of investing in the strategy stocks because it may not be invested equally in these stocks and may not be fully invested at all times. It is important to note that the strategy may underperform the S&P 1000 Index in certain years and may produce negative results.

The S&P 1000 Index is an unmanaged index of 1000 stocks used to measure small and mid-cap U.S. stock market performance by combining the S&P MidCap 400 and S&P SmallCap 600 indices. An index cannot be purchased directly by investors.

Standard Deviation is a measure of price variability (risk). A higher degree of variability indicates more volatility and therefore greater risk.

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.

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 consumer products sector which involves additional risks, including limited diversification. The companies engaged in the consumer products industry are subject to global competition, changing government regulations and trade policies, currency fluctuations, and the financial and political risks inherent in producing products for 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.

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.

Certain of the securities in the portfolio are issued by Real Estate Investment Trusts (REITs). Companies involved in the real estate industry are subject to changes in the real estate market, vacancy rates and competition, volatile interest rates and economic recession.

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.

"S&P", "S&P MidCap 400", "S&P SmallCap 600", and "Standard & Poor's" are trademarks of Standard & Poor's Financial Services LLC ("S&P") and have been licensed for use by First Trust Portfolios L.P. The S&P Target SMid 60 Portfolio is not sponsored, endorsed, sold, or promoted by Standard & Poor's and Standard & Poor's makes no representation regarding the advisability of investing in such products.

 
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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 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 particular investments are appropriate for their clients. First Trust believes the financial advisor is a fiduciary, is capable of evaluating investment risks independently and is responsible for exercising independent judgment with respect to its retirement plan clients.
First Trust Portfolios L.P.  Member SIPC and FINRA.
First Trust Advisors L.P.
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