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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
TickerFDHAX
Fund TypeHigh Yield Bond and Loan Participation
Investment AdvisorFirst Trust Advisors L.P.
Investor Servicing AgentBNY Mellon Investment Servicing (US) Inc.
CUSIP33738F601
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*1.25%
Net Expense Ratio*1.25%
* As of 3/1/2021
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 2/28/2022, and to not exceed 1.35% per year from 3/01/2022 through 2/28/2031. 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 10/15/2021)
Net Asset Value1$19.62
Total Net Assets$169,788,383
Outstanding Shares925,872
NAV 52-Week High/Low$19.78 / $18.91
Top 10 Issuers (as of 9/30/2021)10
Holding Percent
Alliant Holdings I, LLC 2.79%
Internet Brands, Inc. (WebMD/MH Sub I, LLC) 2.79%
Endo, LLC 2.37%
Hyland Software, Inc. 2.30%
Caesars Resort Collection, LLC 2.26%
Verscend Technologies, Inc. 2.21%
athenahealth, Inc. (VVC Holding Corp.) 2.12%
Applied Systems, Inc. 2.10%
SolarWinds Holdings, Inc. 2.08%
HUB International Limited 1.92%
Asset Type Breakdown (as of 9/30/2021)10
  Asset Percent
Senior Loan 82.25%
High Yield 17.34%
Equity 0.41%
Portfolio Characteristics (as of 10/13/2021)
Weighted Average Effective Duration60.68 Years
Weighted Average Maturity4.84 Years
Weighted Average Price$99.06
Weighted Average Coupon4.57%
Weighted Average Yield-To-Maturity74.37%
Days to Reset830.47 Days
3-Month LIBOR90.12%
Percent of Assets with LIBOR floors50.78%
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 10/17/2021)2$0.0544
30-Day SEC Yield (as of 9/30/2021)32.89%
Unsubsidized 30-Day SEC Yield (as of 9/30/2021)42.89%
Distribution Rate (as of 9/30/2021)53.32%
Top 10 Industries (as of 9/30/2021)10
Industry Percent
Software 21.09%
Health Care Providers & Services 17.02%
Pharmaceuticals 10.37%
Hotels, Restaurants & Leisure 8.49%
Insurance 7.42%
Health Care Technology 6.19%
Media 5.09%
Diversified Telecommunication Services 3.84%
Containers & Packaging 2.99%
Commercial Services & Supplies 2.15%
Credit Quality Breakdown (as of 9/30/2021)10
  Credit Quality Percent
BB+ 0.25%
BB 2.62%
BB- 5.12%
B+ 15.75%
B 41.02%
B- 22.15%
CCC+ 6.60%
CCC 1.50%
CCC- 2.37%
CC 0.29%
D 2.09%
NR 0.24%
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 9/30/2021)
  3 Month YTD 1 Year 3 Year 5 Year 10 Year Since
Fund
Inception11
Fund Performance *
Without Sales Charge 0.48% 2.88% 6.76% 3.83% 3.87% N/A 4.06%
With Sales Charge -3.06% -0.73% 3.02% 2.59% 3.13% N/A 3.65%
Index Performance **
ICE BofA US High Yield Constrained Index 0.95% 4.68% 11.46% 6.61% 6.34% N/A 6.02%
S&P/LSTA Leveraged Loan Index 1.11% 4.42% 8.40% 4.15% 4.58% N/A 4.24%
Blended Benchmark 1.03% 4.56% 9.93% 5.39% 5.47% N/A 5.14%
Quarter End Performance (as of 9/30/2021)
  3 Month YTD 1 Year 3 Year 5 Year 10 Year Since
Fund
Inception11
Fund Performance *
Without Sales Charge 0.48% 2.88% 6.76% 3.83% 3.87% N/A 4.06%
With Sales Charge -3.06% -0.73% 3.02% 2.59% 3.13% N/A 3.65%
Index Performance **
ICE BofA US High Yield Constrained Index 0.95% 4.68% 11.46% 6.61% 6.34% N/A 6.02%
S&P/LSTA Leveraged Loan Index 1.11% 4.42% 8.40% 4.15% 4.58% N/A 4.24%
Blended Benchmark 1.03% 4.56% 9.93% 5.39% 5.47% N/A 5.14%

*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 BofA 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 BofA U.S. High Yield Constrained Index / 50% S&P/LSTA Leveraged Loan Index. The Blended Benchmark returns are calculated by using the monthly return of the two indices during each period shown above. At the beginning of each month the two indices are rebalanced to a 50-50 ratio to account for divergence from that ratio that occurred during the course of each month. The monthly returns are then compounded for each period shown above, giving the performance for the Blended Benchmark for each period shown above.

Footnotes
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. 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.

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.

The Fund and the Fund’s advisor may seek to reduce various operational risks through controls and procedures, but it is not possible to completely protect against such risks.

A fund’s shares will change in value, and you could lose money by investing in a fund. One of the principal risks of investing in a fund is market risk. Market risk is the risk that a particular stock owned by a fund, fund shares or stocks in general may fall in value. There can be no assurance that a fund’s investment objective will be achieved. The outbreak of the respiratory disease designated as COVID-19 in December 2019 has caused significant volatility and declines in global financial markets, which have caused losses for investors. While the development of vaccines has slowed the spread of the virus and allowed for the resumption of "reasonably" normal business activity in the United States, many countries continue to impose lockdown measures in an attempt to slow the spread. Additionally, there is no guarantee that vaccines will be effective against emerging variants of the disease.

Actively managed funds are subject to the risk that the advisor or sub-advisor will apply investment techniques that may not have the desired result.

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 securities issued by companies concentrated in a particular asset, sector, industry or region which involves additional risks including limited diversification.

The Fund is subject to call risk, credit risk, income risk, inflation risk, interest rate risk, extension risk, and prepayment risk. Certain securities held by the Fund are subject to call, credit, inflation, income, interest rate, extension, and prepayment risks. These risks could result in a decline in a security’s value and/or income, increased volatility as interest rates rise or fall and an adverse impact on the fund’s performance.

To the extent a fund invests in floating or variable rate obligations that use the London Interbank Offered Rate (“LIBOR”) as a reference interest rate, it is subject to LIBOR Risk. The United Kingdom’s Financial Conduct Authority, which regulates LIBOR, will cease making LIBOR available as a reference rate over a phase-out period that will begin immediately after December 31, 2021. The unavailability or replacement of LIBOR may affect the value, liquidity or return on certain fund investments and may result in costs incurred in connection with closing out positions and entering into new trades. Any potential effects of the transition away from LIBOR on the fund or on certain instruments in which the fund invests can be difficult to ascertain, and they may vary depending on a variety of factors, and they could result in losses to the fund.

Companies that issue loans tend to be highly leveraged and thus are more susceptible to the risk 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.

Covenant-lite loans contain fewer or no maintenance covenants which may hinder the Fund’s ability to reprice credit risk associated with the borrower. This may reduce the Fund’s ability to mitigate potential loss especially during a downturn in the credit cycle.

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 or principal at maturity.

Distressed debt securities involve additional risks. Generally, the Fund will not receive interest payments from the distressed securities it holds, and there is substantial risk that the principal will not be repaid.

There is no central place or exchange for trading most debt securities. Debt securities generally trade on an “over-the-counter” market and therefore, the valuation of debt securities may carry more uncertainty and risk than that of publicly traded securities.

A counterparty may not be able to fulfill its obligation to the Fund which may result in significant financial loss to the Fund.

The Fund may hold certain investments that may be subject to restrictions on resale, trade over-the-counter or in limited volume, or lack an active trading market. The Fund may not be able to sell or close out of such investments at favorable times or prices (or at all). Illiquid securities may trade at a discount than more liquid investments and may be subject to wide fluctuations in market value.

As the use of Internet technology has become more prevalent in the course of business, the Fund has become more susceptible to potential operational risk through breaches in cyber security.

Please see the Fund’s prospectus for a complete description of the risks of investing in the Fund.

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 professionals 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. (Form CRS)   •  First Trust Advisors L.P. (Form CRS)
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