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First Trust Preferred Securities and Income Fund (FPEAX)
Investment Objective/Strategy - The First Trust Preferred Securities and Income Fund seeks to provide current income and total return by investing, under normal market conditions, at least 80% of its net assets (including investment borrowings) in preferred securities and other securities with similar economic characteristics.
There can be no assurance that the Fund's investment objectives will be achieved.
Fund Overview
TickerFPEAX
Fund TypePreferred Income
Investment AdvisorFirst Trust Advisors L.P.
Portfolio Manager/Sub-AdvisorStonebridge Advisors LLC
CUSIP33738A107
Share ClassClass A
Fiscal Year-End10/31
Inception Date2/25/2011
Minimum Investment Amount$2,500
Minimum Subsequent Investment Amount$50
Maximum Initial Sales Charge4.50%
Gross Expense Ratio*1.40%
Net Expense Ratio*1.40%
* As of 4/30/2014
Pursuant to contract, First Trust has agreed to waive fees and/or pay fund expenses to prevent the net expense ratio of any class of shares of the fund from exceeding 1.15% per year, excluding 12b-1 distribution and service fees, through 2/28/2016, and to not exceed 1.50% per year from 3/01/2016 through 2/28/2025. Net expense ratio shown above includes 12b-1 distribution and service fees.
Current Fund Data (as of 10/29/2014)
Net Asset Value1$21.20
Total Net Assets$152,364,270
Outstanding Shares1,555,065
NAV 52-Week High/Low$21.35 / $20.03
Top 10 Holdings (as of 9/30/2014)5
Holding Percent
Liberty Mutual Group, Inc., 10.75%, 6/15/58 3.41%
Aquarius + Investments PLC for Swiss Reinsurance Co., Ltd., 8.25% 3.09%
Ares Capital Corp., 7.75%, 10/15/40 2.28%
CoBank ACB, Series F, 6.25% 2.11%
CHS, Inc., Series 2, 7.10% 2.10%
SCANA Corp., 7.70%, 1/30/65 2.09%
Land O'Lakes Capital Trust I, 7.45%, 3/15/28 2.07%
Principal Financial Group, Inc., Series A, 5.63% 2.05%
Stifel Financial Corp., 6.70%, 1/15/22 1.87%
CNP Assurances, 7.50% 1.86%
Industry Breakdown (as of 9/30/2014)5
Industry Percent
Banks 30.81%
Insurance 30.61%
Capital Markets 14.16%
Diversified Financial Services 5.71%
Food Products 5.10%
Electric Utilities 4.60%
Multi-Utilities 4.42%
Real Estate Investment Trusts (REITS) 2.18%
Diversified Telecommunication Services 1.88%
Wireless Telecommunication Services 0.53%
Security Type Breakdown (as of 9/30/2014)5
Security Percent
Fixed-to-Floating Rate Securities 62.19%
Fixed Rate Securities 35.26%
Floating Rate Securities 2.55%
NAV History (Since Inception)
Past performance is not indicative of future results.
Distribution Information
Dividend FrequencyMonthly
Dividend per Share Amt2$0.0931
30-Day SEC Yield (as of 9/30/2014)34.31%
Distribution Rate (as of 9/30/2014)45.29%
Credit Quality Breakdown (as of 9/30/2014)5
  Credit Quality Percent
A- 2.70%
BBB+ 19.38%
BBB 12.67%
BBB- 28.62%
BB+ 9.85%
BB 15.33%
BB- 3.81%
B+ 0.83%
NR 6.81%
The credit quality and ratings information presented above reflect the ratings assigned by one or more nationally recognized statistical rating organizations (NRSROs), including Standard & Poor's Rating Group, a division of the McGraw Hill Companies, Inc., Moody's Investors Service, Inc., Fitch Ratings, or a comparably rated NRSRO. For situations in which a security is rated by more than one NRSRO and the ratings are not equivalent, the highest ratings are used. Sub-investment grade ratings are those rated BB+/Ba1 or lower. Investment grade ratings are those rated BBB-/Baa3 or higher. The credit ratings shown relate to the credit worthiness of the issuers of the underlying securities in the Fund, and not to the Fund or its shares. Credit ratings are subject to change.
Country Breakdown (as of 9/30/2014)5
Country Percent
United States 64.06%
United Kingdom 6.13%
Bermuda 5.14%
France 4.47%
Netherlands 4.27%
Ireland 3.09%
Luxembourg 2.73%
Jersey 2.46%
Spain 1.70%
Germany 1.45%
Guernsey 1.42%
Italy 1.36%
Brazil 1.30%
Cayman Islands 0.42%
Month End Performance (as of 9/30/2014)
  3 Mos YTD 1 Year 3 Year 5 Year 10 Year Since
Fund
Inception6
Fund Performance *
Without Sales Charge 0.53% 9.59% 10.57% 7.87% N/A N/A 6.96%
With Sales Charge -4.00% 4.66% 5.59% 6.23% N/A N/A 5.60%
Index Performance **
BofA Merrill Lynch Fixed Rate Preferred Securities Index 0.31% 12.39% 12.47% 7.84% N/A N/A 6.60%
BofA Merrill Lynch U.S. Capital Securities Index 0.29% 8.29% 11.72% 12.34% N/A N/A 8.68%
Blended Index 0.19% 7.44% 8.39% 7.36% N/A N/A 5.63%
Quarter End Performance (as of 9/30/2014)
  3 Mos YTD 1 Year 3 Year 5 Year 10 Year Since
Fund
Inception6
Fund Performance *
Without Sales Charge 0.53% 9.59% 10.57% 7.87% N/A N/A 6.96%
With Sales Charge -4.00% 4.66% 5.59% 6.23% N/A N/A 5.60%
Index Performance **
BofA Merrill Lynch Fixed Rate Preferred Securities Index 0.31% 12.39% 12.47% 7.84% N/A N/A 6.60%
BofA Merrill Lynch U.S. Capital Securities Index 0.29% 8.29% 11.72% 12.34% N/A N/A 8.68%
Blended Index 0.19% 7.44% 8.39% 7.36% N/A N/A 5.63%

*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. Returns are average annualized total returns, except those for periods of less than one year, which are cumulative.

**Indexes are unmanaged and an investor cannot invest directly in an index.

The gross expense ratio for this share class is 1.40%. Pursuant to contract, First Trust has agreed to waive fees and/or pay fund expenses to prevent the net expense ratio of any class of shares of the fund from exceeding 1.15% per year, excluding 12b-1 distribution and service fees, through 2/28/2016, and 1.50% per year from 3/01/2016 through 2/28/2025.

The Blended benchmark consists of 50% BofA Merrill Lynch Fixed Rate Preferred Securities Index and 50% BofA Merrill Lynch U.S. Capital Securities Index.

The BofA Merrill Lynch Fixed Rate Preferred Securities Index tracks the performance of fixed-rate US dollar denominated preferred securities issued in the US domestic market.

The BofA Merrill Lynch U.S. Capital Securities Index is a subset of the BofA Merrill Lynch US Corporate Index including all fixed-to-floating rate, perpetual callable and capital securities.

Indexes are unmanaged and an investor cannot invest directly in an index.

Footnotes
1 The NAV represents the fund's net assets (assets less liabilities) divided by the fund's shares outstanding.
2 Most recent distribution paid or declared through today's date. Subject to change in the future.
3 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.
4 Distribution rate is calculated by dividing the most recent annualized distribution paid or declared by the Net Asset Value. Distribution rates may vary.
5 Market value information used in calculating the percentages is based upon trade date plus one recording of transactions, which can differ from regulatory financial reports (Forms N-CSR and N-Q) that are based on trade date recording of security transactions. Holdings are subject to change.
6 Inception Date is 2/25/2011

You should consider the fund's investment objectives, risks, and charges and expenses carefully before investing. You can download a prospectus or summary prospectus, or contact First Trust Portfolios L.P. at 1-800-621-1675 to request 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.

The Fund is subject to the following risks:

CONCENTRATION RISK. A fund concentrated in a single industry or sector is likely to present more risks than a fund that is broadly diversified over several industries or sectors. Compared to the broad market, an individual industry or sector may be more strongly affected by changes in the economic climate, broad market shifts, moves in a particular dominant stock, or regulatory changes.

CREDIT RISK. Credit risk is the risk that an issuer of a security may be unable or unwilling to make dividend, interest and principal payments when due and the related risk that the value of a security may decline because of concerns about the issuer's ability or willingness to make such payments. In addition, parties to other financial contracts with the Fund could default on their obligations.

DEPOSITARY RECEIPTS RISK. Depositary receipts may be less liquid than the underlying shares in their primary trading market. Any distributions paid to the holders of depositary receipts are usually subject to a fee charged by the depositary. Holders of depositary receipts may have limited voting rights, and investment restrictions in certain countries may adversely impact the value of depositary receipts because such restrictions may limit the ability to convert shares into depositary receipts and vice versa. Such restrictions may cause shares of the underlying issuer to trade at a discount or premium to the market price of the depositary receipts.

FINANCIAL COMPANIES RISK. Financial companies are especially subject to the adverse effects of economic recession, currency exchange rates, government regulation, decreases in the availability of capital, volatile interest rates, portfolio concentrations in geographic markets and in commercial and residential real estate loans, and competition from new entrants in their fields of business.

HIGH YIELD SECURITIES RISK. High yield securities, or "junk bonds," are subject to greater market fluctuations and risk of loss than securities with higher investment ratings. These securities are issued by companies that may have limited operating history, narrowly focused operations, and/or other impediments to the timely payment of periodic interest and principal at maturity. If the economy slows down or dips into recession, the issuers of high yield securities may not have sufficient resources to continue making timely payment of periodic interest and principal at maturity. The market for high yield securities is smaller and less liquid than that for investment grade securities. High yield securities are generally not listed on a national securities exchange but trade in the over-the-counter markets. Due to the smaller, less liquid market for high yield securities, the bid-offer spread on such securities is generally greater than it is for investment grade securities and the purchase or sale of such securities may take longer to complete.

ILLIQUID SECURITIES RISK. Some securities held by the Fund may be illiquid. Illiquid securities involve the risk that the securities will not be able to be sold at the time desired by the Fund or at prices approximately the value at which the Fund is carrying the securities on its books.

INCOME RISK. If interest rates fall, the income from the Fund's portfolio will decline as the Fund invests the proceeds from new share sales, or from matured or called debt securities, at interest rates that are below the portfolio's current earnings rate.

INTEREST RATE RISK. Interest rate risk is the risk that the value of the fixed-income securities held by the Fund will decline because of rising market interest rates. Interest rate risk is generally lower for shorter term investments and higher for longer term investments.

MARKET RISK. Market risk is the risk that a particular security owned by the Fund or shares of the Fund in general may fall in value. Shares are subject to market fluctuations caused by such factors as economic, political, regulatory or market developments, changes in interest rates and perceived trends in securities prices. Overall Fund share values could decline generally or could underperform other investments.

NON-DIVERSIFICATION RISK. The Fund is classified as "non-diversified" under the 1940 Act. As a result, the Fund is only limited as to the percentage of its assets which may be invested in the securities of any one issuer by the diversification requirements imposed by the Code. The Fund 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.

NON-U.S. SECURITIES RISK. Non-U.S. securities are subject to higher volatility than securities of domestic issuers due to possible adverse political, social or economic developments; restrictions on foreign investment or exchange of securities; lack of liquidity; currency exchange rates; excessive taxation; government seizure of assets; different legal or accounting standards; and less government supervision and regulation of exchanges in foreign countries.

PREFERRED SECURITIES RISK. 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. Preferred securities are also subject to credit risk, interest rate risk and income risk.

REIT RISK. The Fund invests in REITs, and as a result, the Fund is subject to the risks associated with investing in real estate, which may include, but are not limited to, fluctuations in the value of underlying properties; defaults by borrowers or tenants; market saturation; changes in general and local operating expenses; and other economic, political or regulatory occurrences affecting companies in the real estate industry. In addition to risks related to investments in real estate generally, investing in REITs involves certain other risks related to their structure and focus, which include, but are not limited to, dependency upon management skills, limited diversification, the risks of locating and managing financing for projects, heavy cash flow dependency, possible default by borrowers, the costs and potential losses of self-liquidation of one or more holdings, the risk of a possible lack of mortgage funds and associated interest rate risks, overbuilding, property vacancies, increases in property taxes and operating expenses, changes in zoning laws, losses due to environmental damages, changes in neighborhood values and appeal to purchasers, the possibility of failing to maintain exemptions from registration under the 1940 Act and, in many cases, relatively small market capitalization, which may result in less market liquidity and greater price volatility. REITs are also subject to the risk that the real estate market may experience an economic downturn generally, which may have a material effect on the real estate in which the REITs invest and their underlying portfolio securities.

Not FDIC Insured • Not Bank Guaranteed • May Lose Value
 
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