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.
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.
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.
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.
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.
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.
of the Fund
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.
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.