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First Trust Short Duration High Income Fund (FDHAX)
Investment Objective/Strategy - The First Trust Short Duration High Income Fund seeks to provide a high level of current income and as a secondary objective, capital appreciation. There can be no assurance the Fund's investment objectives will be achieved. Under normal market conditions, the Fund invests at least 80% of its net assets (including investment borrowings) in high yield debt securities and bank loans that are rated below-investment grade ("junk bonds") or unrated. The Fund may invest up to 15% of its net assets in non-U.S. securities denominated in non-U.S. currencies. The Fund may also invest in investment grade debt securities and convertible bonds.
There can be no assurance that the Fund's investment objectives will be achieved. The Fund may not be appropriate for all investors.
Fund Overview
Fund TypeHigh Yield Bond and Loan Participation
Investment AdvisorFirst Trust Advisors L.P.
Investor Servicing AgentBNY Mellon Investment Servicing (US) Inc.
Share ClassClass A
Fiscal Year-End10/31
Inception Date11/1/2012
Minimum Investment Amount$2,500
Minimum Subsequent Investment Amount$50
Maximum Initial Sales Charge3.50%
Gross Expense Ratio*1.18%
Net Expense Ratio*1.18%
* As of 3/1/2019
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 1.00% per year, excluding 12b-1 distribution and service fees, acquired fund fees and expenses and certain other expenses as described in the prospectus, through 2/28/2020, and to not exceed 1.35% per year from 3/01/2020 through 2/28/2029. Net expense ratio shown above includes 12b-1 service fees, acquired fund fees and certain other expenses as described in the prospectus.
Current Fund Data (as of 4/18/2019)
Net Asset Value1$19.69
Total Net Assets$186,922,261
Outstanding Shares1,733,172
NAV 52-Week High/Low$19.80 / $18.79
Top 10 Issuers (as of 3/29/2019)10
Holding Percent
Bausch Health Companies, Inc. (Valeant) 4.28%
Stars Group Holdings B.V. (Amaya) 2.71%
ClubCorp Club Operations, Inc. 2.47%
Amwins Group, Inc. 2.42%
Vistra Operations Company LLC (TEX/TXU) 2.38%
CHG Healthcare Services, Inc. 2.22%
Reynolds Group Holdings, Inc. 2.13%
Tenet Healthcare 2.03%
Duff & Phelps Corp. (Deerfield Dakota) 1.94%
Asurion LLC (fka Assurion Corp.) 1.90%
Asset Type Breakdown (as of 3/29/2019)10
  Asset Percent
Senior Loan 83.90%
High Yield 15.81%
Equity 0.29%
Portfolio Characteristics (as of 3/29/2019)10
Weighted Average Effective Duration60.75 Years
Weighted Average Maturity5.20 Years
Weighted Average Price$97.54
Weighted Average Coupon5.57%
Weighted Average Yield-To-Maturity76.08%
Days to Reset838.40 Days
3-Month LIBOR92.60%
Percent of Assets with LIBOR floors37.11%
Please note: Weighted average maturity excludes defaulted assets.
NAV History (Since Inception)
Past performance is not indicative of future results.
Distribution Information
Dividend FrequencyMonthly
Dividend per Share Amt (as of 4/22/2019)2$0.0709
30-Day SEC Yield (as of 3/29/2019)34.34%
Unsubsidized 30-Day SEC Yield (as of 3/29/2019)44.34%
Distribution Rate (as of 3/29/2019)54.36%
Top 10 Industries (as of 3/29/2019)10
Industry Percent
Health Care Providers & Services 15.15%
Hotels, Restaurants & Leisure 14.12%
Software 12.64%
Pharmaceuticals 8.54%
Media 7.46%
Insurance 4.90%
Diversified Financial Services 4.59%
Life Sciences Tools & Services 3.53%
Food & Staples Retailing 2.71%
Containers & Packaging 2.46%
Credit Quality Breakdown (as of 3/29/2019)10
  Credit Quality Percent
BBB- 6.08%
BB+ 4.18%
BB 7.12%
BB- 16.51%
B+ 24.22%
B 24.00%
B- 11.44%
CCC+ 3.95%
CCC 1.85%
CCC- 0.05%
NR 0.60%
The ratings are by Standard & Poor's except where otherwise indicated. A credit rating is an assessment provided by a nationally recognized statistical rating organization (NRSRO) of the creditworthiness of an issuer with respect to debt obligations except for those debt obligations that are only privately rated. Ratings are measured on a scale that generally ranges from AAA (highest) to D (lowest). Investment grade is defined as those issuers that have a long-term credit rating of BBB- or higher. "NR" indicates no rating. The credit ratings shown relate to the creditworthiness of the issuers of the underlying securities in the Fund, and not to the Fund or its shares. Credit ratings are subject to change.
Month End Performance (as of 3/29/2019)
  3 Mos YTD 1 Year 3 Year 5 Year 10 Year Since
Fund Performance *
Without Sales Charge 4.75% 4.75% 3.09% 4.74% 3.17% N/A 3.99%
With Sales Charge 1.10% 1.10% -0.53% 3.51% 2.44% N/A 3.41%
Index Performance **
ICE BofAML US High Yield Constrained Index 7.38% 7.38% 5.93% 8.68% 4.70% N/A 5.65%
S&P/LSTA Leveraged Loan Index 3.96% 3.96% 2.96% 5.65% 3.61% N/A 4.00%
Blended Benchmark 5.66% 5.66% 4.45% 7.17% 4.17% N/A 4.84%
Quarter End Performance (as of 3/29/2019)
  3 Mos YTD 1 Year 3 Year 5 Year 10 Year Since
Fund Performance *
Without Sales Charge 4.75% 4.75% 3.09% 4.74% 3.17% N/A 3.99%
With Sales Charge 1.10% 1.10% -0.53% 3.51% 2.44% N/A 3.41%
Index Performance **
ICE BofAML US High Yield Constrained Index 7.38% 7.38% 5.93% 8.68% 4.70% N/A 5.65%
S&P/LSTA Leveraged Loan Index 3.96% 3.96% 2.96% 5.65% 3.61% N/A 4.00%
Blended Benchmark 5.66% 5.66% 4.45% 7.17% 4.17% N/A 4.84%

*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.

**Index performance information is for illustrative purposes only. Indexes do not charge management fees or brokerage expenses and no such fees or expenses were deducted from the performance shown. All Index returns assume that dividends are reinvested when they are received. Indexes are unmanaged and an investor cannot invest directly in an index.

ICE BofAML US High Yield Constrained Index - The Index tracks the performance of U.S. dollar denominated below investment grade corporate debt publicly issued in the U.S. domestic market but caps issuer exposure at 2%.

S&P/LSTA Leveraged Loan Index - The Index is a leveraged loan index which covers the U.S. Loan market. The Index reflects the market-weighted performance of institutional leveraged loans in the U.S. loan market based upon real-time market weightings, spreads and interest payments.

Blended Benchmark - The Benchmark consists of the following two indexes: 50% ICE BofAML U.S. High Yield Constrained Index / 50% S&P/LSTA Leveraged Loan 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 fund's most recent ordinary distribution paid or declared, on an annualized basis, by the NAV price. 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. It accounts for the likelihood of changes in the timing of cash flows in response to interest rate movements. Senior loans have an effective duration close to zero. For purposes of calculating an effective duration for senior loans, a duration of 0.25 is assumed.
7 The annualized return that would be earned on a debt security if held to maturity, weighted by the value of each debt security in the fund's portfolio. The calculation does not include the effect of fund fees and expenses.
8 The average number of days until the floating component of a loan resets.
9 A short-term funding rate estimated by banks in London that they would be charged if borrowing from other banks assuming a three month maturity.
10 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-PORT Part F) that are based on trade date recording of security transactions. Holdings are subject to change.
11 Inception Date is 11/1/2012

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. An investment in the Fund is not a deposit of a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other governmental agency.

BANK LOANS RISK . An investment in bank loans subjects the Fund to credit risk, which is heightened for bank loans in which the Fund invests because companies that issue such loans tend to be highly leveraged and thus are more susceptible to the risks of interest deferral, default and/or bankruptcy. Senior floating-rate loans, in which the Fund may invest, are usually rated below investment grade but may also be unrated. As a result, the risks associated with these senior floating-rate loans are similar to the risks of high-yield fixed income instruments. An economic downturn would generally lead to a higher non-payment rate, and a senior floating-rate loan may lose significant market value before a default occurs. Moreover, any specific collateral used to secure a senior floating-rate loan may decline in value or become illiquid, which would adversely affect the senior floating-rate loan's value. Unlike the securities markets, there is no central clearinghouse for loan trades, and the loan market has not established enforceable settlement standards or remedies for failure to settle. Therefore, portfolio transactions in senior floating-rate loans may have uncertain settlement time periods. Senior floating-rate loans are subject to a number of risks as described in the prospectus, including liquidity risk and the risk of investing in below investment-grade fixed income instruments.

CALL RISK. If an issuer calls higher-yielding securities held by the Fund, performance could be adversely impacted. During periods of falling interest rates, issuers of callable securities may call (redeem) securities with higher coupon rates or interest rates before their maturity dates. The Fund would then lose any price appreciation above the bond's call price and would be forced to reinvest the unanticipated proceeds at lower interest rates, resulting in a decline in the Fund's income. Such redemptions and subsequent reinvestments would also increase the Fund's portfolio turnover rate.

CONVERTIBLE BONDS RISK. The market values of convertible bonds tend to decline as interest rates increase and, conversely, to increase as interest rates decline. A convertible bond's market value also tends to reflect the market price of the common stock of the issuing company.

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 for the Fund because it invests a substantial portion of its net assets in high yield or "junk" debt. 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. Credit risk is heightened for loans in which the Fund invests because companies that issue such loans tend to be highly leveraged and thus are more susceptible to the risks of interest deferral, default and/or bankruptcy.

CURRENCY RISK. Because the Fund's net asset value is determined on the basis of U.S. dollars and the Fund invests in non-U.S. dollar-denominated securities, you may lose money if the local currency of a foreign market depreciates against the U.S. dollar, even if the local currency value of the Fund's holdings goes up. The Fund may hedge certain of its non-U.S. dollar holdings.

CYBER SECURITY RISK. As the use of Internet technology has become more prevalent in the course of business, the Fund has become more susceptible to potential operational risks through breaches in cyber security. A breach in cyber security refers to both intentional and unintentional events that may cause the Fund to lose proprietary information, suffer data corruption or lose operational capacity. Such events could cause the Fund to incur regulatory penalties, reputational damage, additional compliance costs associated with corrective measures and/or financial loss. Cyber security breaches may involve unauthorized access to the Fund's digital information systems through "hacking" or malicious software coding, but may also result from outside attacks such as denial-of-service attacks through efforts to make network services unavailable to intended users. In addition, cyber security breaches of the Fund's third party service providers, such as its administrator, transfer agent, custodian, or sub-advisor, as applicable, or issuers in which the Fund invests, can also subject the Fund to many of the same risks associated with direct cyber security breaches. The Fund has established risk management systems designed to reduce the risks associated with cyber security. However, there is no guarantee that such efforts will succeed, especially because the Fund does not directly control the cyber security systems of issuers or third party service providers.

EXTENSION RISK. Extension risk is the risk that, when interest rates rise, certain obligations will be paid off by the issuer (or obligor) more slowly than anticipated, causing the value of these securities to fall. Rising interest rates tend to extend the duration of securities, making them more sensitive to changes in interest rates. The value of longer-term securities generally changes more in response to changes in interest rates than shorter-term securities. As a result, in a period of rising interest rates, securities may exhibit additional volatility and may lose value.

HIGH YIELD SECURITIES RISK. High-yield securities, or "junk" bonds, are subject to greater market fluctuations and risk of loss than securities with higher ratings, and therefore, are considered to be highly speculative. 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. In general, high-yield securities may have a greater risk of default than other types of securities.

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 values the securities.

INCOME RISK. If interest rates fall, the income from the Fund's portfolio will likely decline if the Fund holds floating-rate debt that will adjust lower with falling interest rates. For loans, interest rates typically reset periodically.

INTEREST RATE RISK. Interest rate risk is the risk that the value of the debt securities in 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. Duration is a measure of the expected price volatility of a debt instrument as a result of changes in market rates of interest, based on, among other factors, the weighted average timing of the instrument's expected principal and interest payments. In general, duration represents the expected percentage change in the value of a security for an immediate 1% change in interest rates. Therefore, prices of debt securities with shorter durations tend to be less sensitive to interest rate changes than debt securities with longer durations. As the value of a debt security changes over time, so will its duration.

LIQUIDITY RISK. The Fund invests a substantial portion of its assets in lower-quality debt issued by companies that are highly leveraged. Lower-quality debt tends to be less liquid than higher-quality debt. Moreover, smaller debt issues tend to be less liquid than larger debt issues. If the economy experiences a sudden downturn, or if the debt markets for such companies become distressed, the Fund may have particular difficulty selling its assets in sufficient amounts, at reasonable prices and in a sufficiently timely manner to raise the cash necessary to meet any potentially heavy redemption requests by Fund shareholders.

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.

OTHER DEBT SECURITIES RISK. Secured loans that are not first lien loans, unsecured loans and other debt securities are subject to many of the same risks that affect Senior Loans; however they are often unsecured and/or lower in the issuer's capital structure than Senior Loans, and thus may be exposed to greater risk of default and lower recoveries in the event of a default. This risk can be further heightened in the case of below investment-grade instruments. Additionally, most fixed-income securities are fixed-rate and thus are generally more susceptible than floating-rate loans to price volatility related to changes in prevailing interest rates.

PORTFOLIO TURNOVER RISK. The Fund's strategy may frequently involve buying and selling portfolio securities to rebalance the Fund's exposure to various market sectors. 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.

PREPAYMENT RISK. Loans and other fixed-income investments are subject to prepayment risk. The degree to which borrowers prepay loans, whether as a contractual requirement or at their election, may be affected by general business conditions, the financial condition of the borrower and competitive conditions among loan investors, among others. As such, prepayments cannot be predicted with accuracy. Upon a prepayment, either in part or in full, the actual outstanding debt on which the Fund derives interest income will be reduced. The Fund may not be able to reinvest the proceeds received on terms as favorable as the prepaid loan.

Not FDIC Insured • Not Bank Guaranteed • May Lose Value
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, the Internal Revenue Code or any other regulatory framework. Financial advisors are responsible for evaluating investment risks independently and for exercising independent judgment in determining whether investments are appropriate for their clients.
First Trust Portfolios L.P.  Member SIPC and FINRA.
First Trust Advisors L.P.
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