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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
Fund TypePreferred Income
Investment AdvisorFirst Trust Advisors L.P.
Portfolio Manager/Sub-AdvisorStonebridge Advisors LLC
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*1.49%
Net Expense Ratio*1.40%
* As of 3/1/2016
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 and certain other expenses as described in the prospectus, through 2/28/2017, and to not exceed 1.50% per year from 3/01/2017 through 2/28/2026. Net expense ratio shown above includes 12b-1 service fees and certain other expenses as described in the prospectus.
Current Fund Data (as of 5/27/2016)
Net Asset Value1$21.11
Total Net Assets$167,890,761
Outstanding Shares1,444,786
NAV 52-Week High/Low$21.38 / $20.02
Top 10 Holdings (as of 4/29/2016)9
Holding Percent
Farm Credit Bank of Texas, Series 1, 10.00% 3.04%
Liberty Mutual Group, Inc., 10.75%, 6/15/58 2.96%
Aquarius + Investments PLC for Swiss Reinsurance Co., Ltd., 8.25% 2.83%
Zions Bancorporation, Series J, 7.20% 2.62%
Land O'Lakes Capital Trust I, 7.45%, 3/15/28 2.42%
PartnerRe Ltd., Series E, 7.25% 2.42%
General Electric Capital Co., Series D, 5.00% 2.25%
Friends Life Holdings PLC, 7.88% 2.24%
Enel SpA, 8.75%, 9/24/73 2.14%
CoBank ACB, Series F, 6.25% 2.06%
Industry Breakdown (as of 4/29/2016)9
Industry Percent
Banks 43.47%
Insurance 27.08%
Food Products 5.43%
Electric Utilities 4.59%
Real Estate Investment Trusts (REITS) 4.13%
Capital Markets 3.45%
Diversified Telecommunication Services 3.37%
Diversified Financial Services 3.19%
Industrial Conglomerates 2.25%
Consumer Finance 1.31%
Independent Power and Renewable Electricity Producers 0.69%
Internet Software & Services 0.52%
Wireless Telecommunication Services 0.52%
Security Type Breakdown (as of 4/29/2016)9
Security Percent
Fixed-to-Floating Rate Securities 70.21%
Fixed Rate Securities 27.88%
Step-up Rate Securities 1.67%
Floating Rate Securities 0.24%
Fund Characteristics (as of 4/29/2016)9
Weighted Average Effective Duration64.51 Years
% Institutional Securities (e.g. $1000 par)775.47%
% Retail Securities (e.g. $25 par)824.53%
NAV History (Since Inception)
Past performance is not indicative of future results.
Distribution Information
Dividend FrequencyMonthly
Dividend per Share Amt2$0.0956
30-Day SEC Yield (as of 4/29/2016)35.15%
Unsubsidized 30-Day SEC Yield (as of 4/29/2016)44.98%
Distribution Rate (as of 4/29/2016)55.49%
Credit Quality Breakdown (as of 4/29/2016)9
  Credit Quality Percent
AA- 2.25%
A 2.83%
A- 2.24%
BBB+ 16.60%
BBB 17.05%
BBB- 17.00%
BB+ 18.62%
BB 5.84%
BB- 9.16%
B+ 3.35%
B 0.77%
NR 4.29%
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 4/29/2016)9
Country Percent
United States 59.20%
France 9.18%
United Kingdom 6.84%
Bermuda 4.72%
Italy 3.00%
Ireland 2.83%
Australia 2.72%
Netherlands 2.29%
Cayman Islands 2.08%
Spain 1.92%
Luxembourg 1.56%
Switzerland 1.24%
Germany 0.73%
Chile 0.69%
Belgium 0.66%
Jersey 0.34%
Month End Performance (as of 4/29/2016)
  3 Mos YTD 1 Year 3 Year 5 Year 10 Year Since
Fund Performance *
Without Sales Charge 1.55% 1.09% 2.79% 2.64% 6.07% N/A 6.28%
With Sales Charge -3.02% -3.46% -1.84% 1.08% 5.10% N/A 5.34%
Index Performance **
Bank of America Merrill Lynch Fixed Rate Preferred Securities Index 2.53% 2.49% 6.69% 5.63% 6.73% N/A 7.09%
Bank of America Merrill Lynch U.S. Capital Securities Index 3.05% 2.52% -0.19% 4.32% 6.50% N/A 6.76%
Blended Index 2.80% 2.51% 3.21% 4.99% 6.64% N/A 6.95%
Quarter End Performance (as of 3/31/2016)
  3 Mos YTD 1 Year 3 Year 5 Year 10 Year Since
Fund Performance *
Without Sales Charge -0.05% -0.05% 2.12% 2.67% 6.06% N/A 6.14%
With Sales Charge -4.54% -4.54% -2.48% 1.10% 5.08% N/A 5.19%
Index Performance **
Bank of America Merrill Lynch Fixed Rate Preferred Securities Index 1.60% 1.60% 5.72% 5.75% 6.78% N/A 7.02%
Bank of America Merrill Lynch U.S. Capital Securities Index 0.75% 0.75% -0.95% 4.32% 6.53% N/A 6.51%
Blended Index 1.18% 1.18% 2.35% 5.05% 6.68% N/A 6.79%

*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 1.49%. 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 service fees and certain other expenses described in the prospectus, through 2/28/2017, and 1.50% per year from 3/01/2017 through 2/28/2026.

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.

1 The NAV represents the fund's net assets (assets less liabilities) divided by the fund's outstanding shares .
2 Most recent distribution paid or declared to today's date. Subject to change in the future. There is no guarantee that the fund will declare dividends.
3 The 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 and includes the effects of fee waivers and expense reimbursements, if applicable.
4 The unsubsidized 30-day SEC yield is calculated the same as the 30-day SEC yield, however it excludes contractual fee waivers and expense reimbursements.
5 Distribution rate is calculated by dividing the most recent annualized distribution paid or declared by the Net Asset Value. Distribution rates may vary.
6 A measure of a bond's sensitivity to interest rate changes that reflects the change in a bond's price given a change in yield.
7 Institutional Securities are predominantly $1000 par securities and only trade over-the-counter.
8 Retail Securities are predominantly $25 par securities but also include exchange-traded $20, $50, and $100 par securities.
9 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.
10 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:

You could lose money by investing in the Fund. There can be no assurance that the Fund will achieve its investment objectives. A mutual fund's share price and investment return will vary with market conditions, and the principal value of an investment when you sell your shares may be more or less than the original cost.

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.

CONTINGENT CAPITAL SECURITIES RISK. Contingent capital securities, also known as "CoCos," are debt or preferred securities typically issued by non-U.S. financial institutions with loss absorption characteristics built into the terms of the security. Such characteristics may include a mandatory conversion into common stock of the issuer under certain circumstances, such as the issuer's capital ratio falling below a certain level. Since the common stock of the issuer may not pay a dividend, investors in these instruments could experience a reduced income rate, potentially to zero, and conversion would depend the subordination of the investor, hence worsening the Fund's standing in a bankruptcy. Some CoCos provide for a reduction in the value or principal amount of the security under certain circumstances. In addition, most CoCos are considered to be high yield or "junk" securities and are therefore subject to the risks of investing in below investment-grade securities.

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. Credit risk may be heightened if the Fund invests in high yield or "junk" securities. Such securities, while generally offering higher yields than investment grade debt with similar maturities, involve greater risks, including the possibility of dividend or interest deferral, default or bankruptcy, and are regarded as predominantly speculative with respect to the issuer's capacity to pay dividends or interest and repay principal.

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 the equity shares into depositary receipts and vice versa. Such restrictions may cause the equity 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. 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. Income from the Fund's fixed income investments could decline during periods of falling interest rates.

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. Securities 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. Shares of the Fund could decline in value or underperform other investments.

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.

PORTFOLIO TURNOVER RISK. The Fund's investment strategy tracking the Index may frequently involve buying and selling portfolio securities. High portfolio turnover may result in the Fund paying higher levels of transaction costs and generating greater tax liabilities for shareholders. Portfolio turnover risk may cause the Fund's performance to be less than you expect.

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 INVESTMENT RISK. Because the Fund invests in REITs, 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
First Trust Portfolios L.P.  Member SIPC and FINRA.
First Trust Advisors L.P.
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