or
when political or economic events affecting the issuers occur. Common stock
prices may be particularly sensitive to rising interest rates, as
the cost of capital rises and borrowing costs increase. Equity securities may
decline significantly in price over short or extended periods of time, and such
declines may occur in the equity market as a whole, or they may occur in only a
particular country, company, industry or sector of the market.
UNDERLYING
ETF RISK. The Fund invests in
FLEX Options that reference an ETF, which subjects the Fund to certain of the
risks of owning shares of an ETF as well as the types of instruments in which
the Underlying ETF invests. The value of an ETF will fluctuate over time based
on fluctuations in the values of the securities held by the ETF, which may be
affected by changes in general economic conditions, expectations for future
growth and profits, interest rates and the supply and demand for those
securities. In addition, ETFs are subject to absence of an active market risk,
premium/discount risk, tracking error risk and trading issues risk. Brokerage,
tax and other expenses may negatively impact the performance of the Underlying
ETF and, in turn, the value of the Fund’s shares. An ETF that tracks an index
may not exactly match the performance of the index due to cash drag, differences
between the portfolio of the ETF and the components of the index, expenses and
other factors.
Non-Principal
Risks
BORROWING
AND LEVERAGE RISK. If the Fund borrows
money, it must pay interest and other fees, which may reduce the Fund’s returns.
Any such borrowings are intended to be temporary. However, under certain market
conditions, including periods of low demand or decreased liquidity, such
borrowings might be outstanding for longer periods of time. As prescribed by the
1940 Act, the Fund will be required to maintain specified asset coverage of at
least 300% with respect to any bank borrowing immediately following such
borrowing and at all times thereafter. The Fund may be required to dispose of
assets on unfavorable terms if market fluctuations or other factors reduce the
Fund’s asset coverage to less than the prescribed amount.
DEPENDENCE
ON KEY PERSONNEL RISK. The Sub-Advisor is
dependent upon the experience and expertise of the Fund's portfolio managers in
providing advisory services with respect to the Fund's investments. If the
Sub-Advisor were to lose the services of any of these portfolio managers, its
ability to service the Fund could be adversely affected. There can be no
assurance that a suitable replacement could be found for any of the portfolio
managers in the event of their death, resignation, retirement or inability to
act on behalf of the Sub-Advisor.
FAILURE
TO QUALIFY AS A REGULATED INVESTMENT COMPANY RISK. If, in any year, the
Fund fails to qualify as a regulated investment company under the applicable tax
laws, the Fund would be taxed as an ordinary corporation. In such circumstances,
the Fund could be required to recognize unrealized gains, pay substantial taxes
and interest and make substantial distributions before requalifying as a
regulated investment company that is accorded special tax
treatment.
Fund
Organization
The
Fund is a series of the Trust, an investment company registered under the 1940
Act. The Fund is treated as a separate fund with its own
investment objectives and policies. The Trust is organized as a Massachusetts
business trust. The Board is responsible for the overall management and
direction of the Trust. The Board elects the Trust’s officers and approves all
significant agreements, including those with the Advisor, Sub-Advisor, custodian
and fund administrative and accounting agent.
Management
of the Fund
First
Trust Advisors L.P., 120 East Liberty Drive, Wheaton, Illinois 60187, is the
investment advisor to the Fund. In this capacity, First Trust is
responsible for overseeing the Sub-Advisor in the selection and ongoing
monitoring of the securities in the Fund's portfolio and certain other services
necessary for the management of the portfolio.
First
Trust is a limited partnership with one limited partner, Grace Partners of
DuPage L.P., and one general partner, The Charger Corporation. Grace
Partners of DuPage L.P. is a limited partnership with one general partner, The
Charger Corporation, and a number of limited partners. The Charger Corporation
is an Illinois corporation controlled by James A. Bowen, the Chief Executive
Officer of First Trust. First Trust discharges its responsibilities subject to
the policies of the Board.
First
Trust serves as advisor or sub-advisor for 8 mutual fund portfolios, 10
exchange-traded funds consisting of 193 series and 16
closed-end funds. It is also the portfolio supervisor of certain unit investment
trusts sponsored by First Trust Portfolios L.P. (“FTP”), an affiliate of
First Trust, 120 East Liberty Drive, Wheaton, Illinois 60187. FTP specializes in
the underwriting, trading and distribution of unit investment trusts and other
securities. FTP is the principal underwriter of the shares of the
Fund.