Rule 497(k)
Registration Nos. 333-168727 and 811-22452
First Trust Series Fund
SUMMARY PROSPECTUS
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FIRST TRUST MANAGED MUNICIPAL FUND
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TICKER SYMBOL
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CLASS I
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CWAIX
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Before you invest, you may want to review the Fund’s prospectus, which contains more information about the Fund and its risks. You can find the Fund’s statutory prospectus and other information about the Fund, including the statement of additional information and most recent reports to shareholders, online at www.ftportfolios.com/Retail/MF/MFFundNews.aspx?Ticker=CWAIX. You can also get this information at no cost by calling (800) 621-1675 or by sending an e-mail request to info@ftportfolios.com. If you purchase shares through a financial intermediary (such as a broker/dealer or bank), you can obtain the Fund’s prospectus and other information from that financial intermediary. The Fund’s prospectus and statement of additional information, both dated March 1, 2024, are all incorporated by reference into this Summary Prospectus.
April 22, 2024
Investment Objectives
The First Trust Managed Municipal Fund’s (the “Fund”) primary investment objective is to generate current income that is exempt from federal income taxes and its secondary objective is long term capital appreciation.
Fees and Expenses of the Fund
This table describes the fees and expenses that you may pay if you buy, hold and sell
shares of the Fund. Investors purchasing Class I shares as “clean shares” may pay other fees, such as brokerage commissions and other fees to financial intermediaries, which are not reflected in the table below. You may qualify for sales charge discounts if you and your family invest, or agree
to invest in the future, at least $50,000 in the Fund or in other First Trust Advisors L.P. mutual funds. More information about these and other discounts, as well as eligibility requirements for each share class, is available from your financial advisor and in “Share Classes” on page 29 of this prospectus, “Investment in Fund Shares” on page 30 of this prospectus and “Purchase and Redemption of Fund Shares” on page 31 of the Fund’s statement of additional information (“SAI”).
Shareholder Fees
(fees paid directly from your investment)
(fees paid directly from your investment)
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Class I
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Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price)
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None
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Maximum Deferred Sales Charge (Load) (as a percentage of the lesser of purchase price
or redemption proceeds)
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None
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Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your investment)
(expenses that you pay each year as a percentage of the value of your investment)
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Class I
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Management Fees
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0.50%
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Distribution and Service (12b-1) Fees
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N/A
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Other Expenses
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0.33%
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Total Annual Fund Operating Expenses
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0.83%
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Fee Waiver and Expense Reimbursement(1)
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0.18%
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Total Annual Fund Operating Expenses After Fee Waivers and Expense Reimbursements(2)
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0.65%
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(1)
The Fund’s investment advisor has agreed to waive fees and reimburse expenses through March 1, 2025 so that Total Annual Fund Operating Expenses (excluding interest expenses, taxes, fees incurred in acquiring and disposing
of portfolio securities, acquired fund fees and expenses and extraordinary expenses) do not exceed 0.65% of the average daily net assets of Class I shares. Fees waived or expenses borne by the Fund’s investment advisor are subject to reimbursement by the Fund for up to three years
from the date the fee was waived or expense was incurred, but no reimbursement payment will be made by the Fund at any time if it would result in the Fund’s expenses exceeding (i) the applicable expense limitation in place for the most recent fiscal year for which such expense limitation
was in place, (ii) the applicable expense limitation in place at the time the fees were waived, or (iii) the current expense limitation. Expense limitations
may be terminated or modified prior to their expiration only with the approval of the Board of Trustees of the First Trust Series Fund.
(2)
Expenses have been restated to reflect the current fiscal year.
Example
The following example is intended to help you compare the cost of investing in the
Fund with the cost of investing in other mutual funds. The example assumes that you invest $10,000 in the Fund for the time periods
indicated and then hold or sell all of your shares at the end of those periods. The example also assumes that your investment has a 5% return each year and that the Fund’s annual operating expenses (excluding interest expense, taxes, fees incurred in acquiring
and disposing of portfolio securities, acquired fund fees and expenses and extraordinary expenses) remain at current levels through March
1, 2025, and then are estimated to be 0.83% after March 1, 2025. Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
Redemption
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Share Class
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I
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1 Year
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$66
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3 Years
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247
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5 Years
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443
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10 Years
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1,009
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No Redemption
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Share Class
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I
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1 Year
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$66
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3 Years
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247
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5 Years
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443
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10 Years
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1,009
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Portfolio Turnover
The Fund pays transaction costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and may result in higher taxes
when Fund shares are held in a taxable account. These costs, which are not reflected in annual fund operating expenses or in the example, affect the Fund’s performance. During the most recent fiscal year, the Fund’s portfolio turnover rate was 57% of the average value of its portfolio.
Principal Investment Strategies
Under normal market conditions, the Fund seeks to achieve its investment objectives
by investing at least 80% of its net assets (plus any borrowings for investment purposes) in municipal debt securities that pay interest
that is exempt from federal income taxes. Municipal securities are generally issued by or on behalf of states, territories or
possessions of the United States and the District of Columbia and their political subdivisions, agencies, authorities and other instrumentalities.
The types of municipal securities in which the Fund may invest include municipal lease obligations (and certificates of participation
in such obligations), municipal general obligation bonds, municipal revenue bonds, municipal notes, municipal cash equivalents, private
activity bonds (including without limitation industrial development bonds), zero coupon bonds and pre-refunded and escrowed-to-maturity
bonds. In addition, municipal securities include securities issued by tender option bond (“TOB”) trusts and custodial receipt trusts. The Fund may also invest up to 20% of its net assets (measured by notional value) in derivative instruments, other than TOB
and custodial receipts trusts, to obtain net long or short exposures to selected interest rates or to hedge risks, including interest rate risks and credit risks, associated with the Fund’s portfolio investments. The Fund may invest in municipal securities of any duration
or maturity.
The Fund’s investment advisor selects the securities for the Fund by implementing an investment process that is comprised of the following components:
1.
Total return scenario analysis: Evaluate individual bonds and portfolios of securities that are exposed to interest
rate, yield curve and credit spread movements or shifts.
2.
Sector analysis: Perform top-down review of core sectors based on bottom-up analysis of individual
credits to determine the sectors in which the Fund will be overweight, neutral weight and underweight.
3.
New issue credit analysis: Evaluate new bond offerings to determine portfolio suitability based on fundamental
credit research on each borrower and individual bond security features.
4.
Trading: Analyze how a bond might trade in the secondary market by reviewing total bond issuance
size, underwriter willingness to make secondary markets and bond structural features, such as coupon,
maturity, call dates and sinking fund payments.
5.
Surveillance: Analyze holdings on a systematic basis to monitor any changes in credit trend. The Fund’s advisor monitors the credit rating momentum of each bond.
6.
Performance attribution: Perform granular total return analysis by reviewing key portfolio attributes such
as duration, credit rating, sector and state. The portfolio’s performance is also compared to various benchmarks.
The Fund invests at least 65% of its net assets in investment grade securities, which
are securities that are rated at the time of investment in one of the four highest credit quality categories by at least one nationally recognized
statistical rating organization rating that security or, if unrated, determined by the Fund’s investment advisor to be of comparable quality. The Fund considers pre-refunded or escrowed-to-maturity bonds, regardless of rating, to be investment grade securities.
The Fund may invest up to 35% of its net assets in securities that are, at the time of investment, rated below investment grade (or
securities that are unrated and determined by the Fund’s investment advisor to be of comparable quality), commonly referred to as “high yield” or “junk” bonds. When determining whether
a security is classified as below investment grade, the Fund's investment advisor
will consider the highest rating available from a nationally recognized statistical rating organization. If, subsequent to purchase by the Fund,
a security held by the Fund experiences a decline in credit quality and falls below investment grade, the Fund may continue to hold
the security and it will not cause the Fund to violate the 35% investment limitation; however, the security will be taken into account for
purposes of determining whether purchases of additional securities will cause the Fund to violate such limitation. Furthermore,
the Fund may invest up to 10% of its net assets in taxable municipal securities. The Fund may invest in fixed and floating-rate securities.
Certain investors may be subject to federal alternative minimum tax on dividends attributable
to Fund investments in private activity bonds. Additionally, the Fund may invest up to 100% of its net assets in municipal
securities that pay interest that generates income subject to federal alternative minimum tax.
The Fund is classified as “non-diversified” under the Investment Company Act of 1940, as amended (the “1940 Act”).
Principal 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. The order of the below risk factors does not indicate the significance of any particular
risk factor.
ALTERNATIVE MINIMUM TAX RISK. Although the interest received from municipal securities is generally exempt from
federal income tax, the Fund may invest in municipal securities subject to the federal alternative
minimum tax on individuals. For tax years beginning after December 31, 2022, interest on the bonds may affect the corporate alternative
minimum tax for certain corporations. Therefore, all or a portion of the Fund’s otherwise exempt interest, may be taxable to shareholders subject to (or result in an increased liability under) the federal alternative minimum tax.
CALL RISK. Some debt securities may be redeemed, or “called,” at the option of the issuer before their stated maturity date. In general, an issuer will call its debt securities if they can be refinanced by issuing new debt
securities which bear a lower interest rate. The Fund is subject to the possibility that during periods of falling interest rates an issuer
will call its high yielding debt securities. The Fund would then be forced to invest the proceeds at lower interest rates, likely resulting in a decline in the Fund’s income.
COUNTERPARTY RISK. Fund transactions involving a counterparty are subject to the risk that the counterparty
will not fulfill its obligation to the Fund. Counterparty risk may arise because of the counterparty’s financial condition (i.e., financial difficulties, bankruptcy, or insolvency), market activities and developments, or other reasons, whether foreseen or not. A counterparty’s inability to fulfill its obligation may result in significant financial loss to the Fund. The
Fund may be unable to recover its investment from the counterparty or may obtain a limited recovery, and/or recovery may be delayed.
CREDIT RATING AGENCY RISK. Credit ratings are determined by credit rating agencies such as S&P Global Ratings, Moody’s Investors Services, Inc. and Fitch Inc., and are only the opinions of such entities. Ratings
assigned by a rating agency are not absolute standards of credit quality and do not evaluate market risk or the liquidity of securities.
First Trust makes no warranty whatsoever regarding the ability of such ratings to accurately reflect the credit worthiness of an issuer.
Any shortcomings, changes to or inefficiencies in credit rating agencies’ processes for determining credit ratings may adversely affect the credit ratings of securities held by the Fund or securities in which the Fund would otherwise invest and, as a result, may adversely affect those securities’ perceived or actual credit risk, as well as the Fund’s performance.
CREDIT RISK. An issuer or other obligated party of a debt security may be unable or unwilling
to make dividend, interest and/or principal payments when due. In addition, the value of a debt security may decline because of concerns about the issuer’s ability or unwillingness to make such payments.
CREDIT SPREAD RISK. From time to time, spreads (i.e., the difference in yield between debt securities that have different credit qualities
or other differences) may increase, which may reduce the market value of some of the Fund’s debt securities. While the Fund may employ strategies to mitigate credit spread risk, these strategies may not be successful.
CURRENT MARKET CONDITIONS RISK. Current market conditions risk is the risk that a particular investment, or shares
of the Fund in general, may fall in value due to current market conditions. As a means to fight
inflation, which remains at elevated levels, the Federal Reserve and certain foreign central banks have raised interest rates, and the Federal
Reserve has begun the process to reverse previously implemented quantitative easing. U.S. regulators have proposed several changes to
market and issuer regulations which would directly impact the Fund, and any regulatory changes could adversely impact the Fund’s ability to achieve its investment strategies or make certain investments. Recent and potential future bank failures could result in disruption
to the broader banking industry or markets generally and reduce confidence in financial institutions and the economy as a whole,
which may also heighten market volatility and reduce liquidity. The ongoing adversarial political climate in the United States,
as well as political and diplomatic events both domestic and abroad, have and may continue to have an adverse impact the U.S. regulatory landscape,
markets and investor behavior, which could have a negative impact on the Fund’s investments and operations. Other unexpected political, regulatory and diplomatic events within the U.S. and abroad may affect investor and consumer confidence and may adversely
impact financial markets and the broader economy. For example, ongoing armed conflicts between Russia and Ukraine in Europe
and among Israel, Hamas and other militant groups in the Middle East, have caused and could continue to cause significant market
disruptions and volatility within the markets
in Russia, Europe, the Middle East and the United States. The hostilities and sanctions
resulting from those hostilities have and could continue to have a significant impact on certain Fund investments as well as Fund
performance and liquidity. The economies of the United States and its trading partners, as well as the financial markets generally,
may be adversely impacted by trade disputes and other matters. For example, the United States has imposed trade barriers and restrictions
on China. In addition, the Chinese government is engaged in a longstanding dispute with Taiwan, continually threatening an invasion.
If the political climate between the United States and China does not improve or continues to deteriorate, if China were to attempt invading
Taiwan, or if other geopolitical conflicts develop or worsen, economies, markets and individual securities may be adversely affected, and the value of the Fund’s assets may go down. The COVID-19 global pandemic, or any future public health crisis, and the
ensuing policies enacted by governments and central banks have caused and may continue to cause significant volatility and uncertainty
in global financial markets, negatively impacting global growth prospects. While vaccines have been developed, there is no
guarantee that vaccines will be effective against emerging future variants of the disease. As this global pandemic illustrated, such
events may affect certain geographic regions, countries, sectors and industries more significantly than others. Advancements in technology
may also adversely impact markets and the overall performance of the Fund. For instance, the economy may be significantly impacted by
the advanced development and increased regulation of artificial intelligence. These events, and any other future events, may adversely affect the prices and liquidity of the Fund’s portfolio investments and could result in disruptions in the trading markets.
CUSTODIAL RECEIPTS TRUST RISK. Custodial receipts are financial instruments sold through private placements that
represent the right to receive future principal and interest payments on underlying municipal obligations.
As such, a custodial receipt represents ownership of a security owned by a trust and not ownership of the security itself.
Nonetheless, a custodial receipt is subject to the same risks as those applicable to the underlying security. The interest rate on custodial
receipts is generally expected to be lower than the coupon rate on the underlying security and is generally set at a level comparable
to municipal securities of similar quality having a maturity equal to the rate adjustment period rather than the maturity date of the
underlying obligation. Custodial receipt trusts may also issue inverse floater securities. If the Fund was to hold inverse floaters issued
by custodial receipt trusts, the Fund would be subject to the risks of inverse floaters described herein. In particular, because the instruments
may be leveraged, their market values may be more volatile than other types of debt securities. Also, as custodial receipts are
privately placed, they may be less liquid than securities trading on an exchange.
CYBER SECURITY RISK. The Fund is susceptible to 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 issuers of securities in which the Fund invests or the Fund’s third-party service providers, such as its administrator, transfer agent, custodian, or sub-advisor, as applicable, can also subject the Fund to many
of the same risks associated with direct cyber security breaches. Although the Fund has established risk management systems designed to reduce
the risks associated with cyber security, 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.
DEBT SECURITIES RISK. Investments in debt securities subject the holder to the credit risk of the issuer.
Credit risk refers to the possibility that the issuer or other obligor of a security will not be able or willing
to make payments of interest and principal when due. Generally, the value of debt securities will change inversely with changes in interest
rates. To the extent that interest rates rise, certain underlying obligations may be paid off substantially slower than originally anticipated
and the value of those securities may fall sharply. During periods of falling interest rates, the income received by the Fund may decline.
If the principal on a debt security is prepaid before expected, the prepayments of principal may have to be reinvested in obligations
paying interest at lower rates. Debt securities generally do not trade on a securities exchange making them generally less liquid
and more difficult to value than common stock.
DERIVATIVES RISK. The use of derivative instruments involves risks different from, or possibly greater
than, the risks associated with investing directly in securities and other traditional investments. These risks include:
(i) the risk that the counterparty to a derivative transaction may not fulfill its contractual obligations; (ii) risk of mispricing or
improper valuation; and (iii) the risk that changes in the value of the derivative may not correlate perfectly with the underlying asset. Derivative
prices are highly volatile and may fluctuate substantially during a short period of time. Such prices are influenced by numerous
factors that affect the markets, including, but not limited to: changing supply and demand relationships; government programs and policies;
national and international political and economic events, changes in interest rates, inflation and deflation and changes in
supply and demand relationships. Trading derivative instruments involves risks different from, or possibly greater than, the risks associated
with investing directly in securities. Derivative contracts ordinarily have leverage inherent in their terms. The low margin deposits
normally required in trading derivatives, including futures contracts, permit a high degree of leverage. Accordingly, a relatively small
price movement may result in an immediate and substantial loss. The use of leverage may also cause an underlying fund to liquidate
portfolio positions when it would not be advantageous to do so. The use of leveraged derivatives can magnify potential for gain or loss
and, therefore, amplify the effects of market volatility on share price.
EXTENSION RISK. Extension risk is the risk that, when interest rates rise, certain obligations will
be paid off by the issuer (or other obligated party) more slowly than anticipated, causing the value of these debt securities
to fall. Rising interest rates tend to extend
the duration of debt securities, making their market value more sensitive to changes
in interest rates. The value of longer-term debt securities generally changes more in response to changes in interest rates than shorter-term
debt securities. As a result, in a period of rising interest rates, securities may exhibit additional volatility and may lose
value.
FLOATING RATE SECURITIES RISK. Floating rate securities are structured so that the security’s coupon rate fluctuates based upon the level of a reference rate. As a result, the coupon on floating rate securities
will generally decline in a falling interest rate environment, causing an underlying Fund to experience a reduction in the income it receives from the security. A floating rate security’s coupon rate resets periodically according to the terms of the security. Consequently, in
a rising interest rate environment, floating rate securities with coupon rates that reset infrequently may lag behind the changes in market interest
rates. Floating rate securities may also contain terms that impose a maximum coupon rate the issuer will pay, regardless of the level
of the reference rate which would decrease the value of the security.
HIGH YIELD SECURITIES RISK. High yield securities, or “junk” bonds, are subject to greater market fluctuations, are less liquid and provide a greater risk of loss than investment grade securities, and therefore, are
considered to be highly speculative. In general, high yield securities may have a greater risk of default than other types of securities
and could cause income and principal losses for the Fund.
INCOME RISK. The Fund’s income may decline when interest rates fall or if there are defaults in its portfolio. This decline can occur because the Fund may subsequently invest in lower-yielding securities as debt securities
in its portfolio mature, are near maturity or are called, or the Fund otherwise needs to purchase additional debt securities.
INDUSTRIAL DEVELOPMENT BOND RISK. Industrial development bonds are revenue bonds issued by or on behalf of public authorities
to obtain funds to finance various public and/or privately operated facilities, including
those for business and manufacturing, housing, sports, pollution control, airport, mass transit, port and parking facilities. To
the extent that investments in the industrial development sector represent a significant portion of the Fund’s portfolio, the Fund will be sensitive to changes in, and its performance may depend to a greater extent on, the overall condition of the industrial development sector.
These bonds are normally secured only by the revenues from the project and are not general obligations of the issuer or otherwise secured
by state or local government tax receipts. Generally, the value and credit quality of these bonds are sensitive to the risks related to
an economic slowdown.
INFLATION RISK. Inflation risk is the risk that the value of assets or income from investments will
be less in the future as inflation decreases the value of money. As inflation increases, the present value of the Fund’s assets and distributions may decline.
INTEREST RATE RISK. Interest rate risk is the risk that the value of the debt securities in the Fund’s portfolio will decline because of rising market interest rates. Interest rate risk is generally lower for shorter term
debt securities and higher for longer-term debt securities. The Fund may be subject to a greater risk of rising interest rates than would normally
be the case during periods of low interest rates. Duration is a reasonably accurate measure of a debt security’s price sensitivity to changes in interest rates and a common measure of interest rate risk. Duration measures a debt security’s expected life on a present value basis, taking into account the debt security’s yield, interest payments and final maturity. In general, duration represents the expected
percentage change in the value of a security for an immediate 1% change in interest rates. For example, the price of a debt security
with a three-year duration would be expected to drop by approximately 3% in response to a 1% increase 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. Higher sensitivity to interest rates is generally correlated with higher levels of volatility and, therefore, greater risk. As the value
of a debt security changes over time, so will its duration.
LEVERAGE RISK. Leverage may result in losses that exceed the amount originally invested and may
accelerate the rates of losses. Leverage tends to magnify, sometimes significantly, the effect of any increase or decrease in the Fund’s exposure to an asset or class of assets and may cause the value of the Fund’s shares to be volatile and sensitive to market swings.
LIBOR TRANSITION RISK. As of June 30, 2023, nearly all LIBOR publications ceased. While some LIBOR rates
will continue to be published for a short period of time after June 30, 2023, it is only on an unrepresentative
synthetic basis. Transitioning to a new reference rate 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. In the United States, the Secured Overnight Financing Rate (“SOFR”) has been identified as the preferred alternative to LIBOR. There is no assurance
that the composition or characteristics of SOFR, or any alternative reference rate, will be
similar to or produce the same value or economic equivalence as LIBOR or that instruments using an alternative rate will have the same
volume or liquidity. As a result, the transition process might lead to increased volatility and reduced liquidity in markets that currently
rely on LIBOR to determine interest rates; a reduction in the value of some LIBOR-based investments; increased difficulty in borrowing
or refinancing and diminished effectiveness of any applicable hedging strategies against instruments whose terms currently include
LIBOR; and/or costs incurred in connection with temporary borrowings and closing out positions and entering into new agreements.
Any such effects (as well as other unforeseen effects) of the transition away from LIBOR and the adoption of alternative reference
rates could result in losses to the Fund.
LIQUIDITY RISK. 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. Accordingly, the Fund may not be
able to sell or close out of such investments at
favorable times or prices (or at all), or at the prices approximating those at which
the Fund currently values them. Illiquid securities may trade at a discount from comparable, more liquid investments and may be subject
to wide fluctuations in market value.
MANAGEMENT RISK. The Fund is subject to management risk because it is an actively managed portfolio. In managing the Fund’s investment portfolio, the portfolio managers will apply investment techniques and
risk analyses that may not produce the desired result. There can be no guarantee that the Fund will meet its investment objective.
MARKET RISK. Market risk is the risk that a particular investment, or shares of the Fund in general,
may fall in value. Securities are subject to market fluctuations caused by real or perceived adverse economic, political,
and regulatory factors 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. In addition, local, regional or global events such as war, acts of terrorism,
market manipulation, government defaults, government shutdowns, regulatory actions, political changes, diplomatic developments,
the imposition of sanctions and other similar measures, spread of infectious diseases or other public health issues, recessions,
natural disasters, or other events could have a significant negative impact on the Fund and its investments. Any of such circumstances could have
a materially negative impact on the value of the Fund’s shares, the liquidity of an investment, and may result in increased market volatility. During any such events, the Fund’s shares may trade at increased premiums or discounts to their net asset value, the bid/ask spread on the Fund’s shares may widen and the returns on investment may fluctuate.
MUNICIPAL LEASE PARTICIPATIONS RISK. Participation interests in municipal leases pose special risks because many leases
and contracts contain “non-appropriation” clauses that provide that the governmental issuer has no obligation to make future payments under the lease or contract unless money is appropriated for this purpose by the appropriate
legislative body.
MUNICIPAL SECURITIES MARKET LIQUIDITY RISK. From time to time, inventories of municipal securities held by brokers and dealers
may decrease, lessening their ability to make a market in these securities. Any reduction
in market making capacity has the potential to decrease the Fund’s ability to buy or sell municipal securities, and increase price volatility and trading costs, particularly during periods of economic or market stress. As a result, the Fund may be forced to accept a lower
price to sell a municipal security, to sell other securities to raise cash, or to give up an investment opportunity, any of which could
have a negative effect on performance.
MUNICIPAL SECURITIES RISK. Issuers, including governmental issuers, may be unable to pay their obligations as
they come due. The values of municipal securities that depend on a specific revenue source to fund their
payment obligations may fluctuate as a result of actual or anticipated changes in the cash flows generated by the revenue source or
changes in the priority of the municipal obligation to receive the cash flows generated by the revenue source. The values of municipal
securities held by the Fund may be adversely affected by local political and economic conditions and developments. Adverse conditions in
an industry significant to a local economy could have a correspondingly adverse effect on the financial condition of local issuers.
In addition, income from municipal securities held by the Fund could be declared taxable because of, among other things, unfavorable
changes in tax laws, adverse interpretations by the Internal Revenue Service or state tax authorities, or noncompliant conduct of
an issuer or other obligated party. Loss of tax-exempt status may cause interest received and distributed to shareholders by the Fund to
be taxable and may result in a significant decline in the values of such municipal securities. Due to the COVID-19 pandemic, the risks
of the municipal securities market have been magnified. The costs associated with combating the pandemic and the negative impact
on tax revenues has adversely affected the financial condition of many states and political subdivisions. These risks may also
adversely affect several sectors of the municipal bond market, such as airports, toll roads, hospitals and colleges, among many others.
The full impact of the COVID-19 pandemic on state and political subdivisions’ ability to make payments on debt obligations is impossible to predict, but could negatively impact the value of bonds, the ability of state and political subdivisions to make payments when
due and the performance of the Fund.
NON-DIVERSIFICATION RISK. The Fund is classified as “non-diversified” under the 1940 Act. As a result, the Fund is only limited as to the percentage of its assets which may be invested in the securities of any one
issuer by the diversification requirements imposed by the Internal Revenue Code of 1986, as amended ("Internal Revenue Code"). The Fund may invest a relatively high percentage of its assets in a limited number of issuers. As a result, the Fund may be more susceptible
to a single adverse economic or regulatory occurrence affecting one or more of these issuers, experience increased volatility
and be highly invested in certain issuers.
OPERATIONAL RISK. The Fund is subject to risks arising from various operational factors, including,
but not limited to, human error, processing and communication errors, errors of the Fund’s service providers, counterparties or other third-parties, failed or inadequate processes and technology or systems failures. The Fund relies on third-parties for
a range of services, including custody. Any delay or failure relating to engaging or maintaining such service providers may affect the Fund’s ability to meet its investment objective. Although the Fund and the Fund's investment advisor seek to reduce these operational risks
through controls and procedures, there is no way to completely protect against such risks.
PREPAYMENT RISK. Prepayment risk is the risk that the issuer of a debt security will repay principal
prior to the scheduled maturity date. Debt securities allowing prepayment may offer less potential for gains during
a period of declining interest rates, as the Fund may be required to reinvest the proceeds of any prepayment at lower interest rates.
These factors may cause the value of an investment in the Fund to change.
PRE-REFUNDED BONDS RISK. Pre-refunded bonds are bonds that have been refunded to a call date prior to the
final maturity of principal, or, in the case of pre-refunded bonds commonly referred to as “escrowed-to-maturity bonds,” to the final maturity of principal,
and remain outstanding in the municipal market. The payment of principal and interest
of the pre-refunded bonds held by the Fund is funded from securities held in a designated escrow account where such securities
are obligations of and carry the full faith and credit of the U.S. Department of the Treasury. The securities held in the escrow fund pledged
to pay the principal and interest of the pre-refunded bond do not guarantee the price of the bond. Investment in pre-refunded
municipal bonds held by the Fund may subject the Fund to interest rate risk, market risk and credit risk.
PRIVATE ACTIVITY BONDS RISK. Municipalities and other public authorities issue private activity bonds to finance
development of industrial facilities for use by a private enterprise. The private enterprise is responsible
for the payment of principal and interest on the bond and the issuer ordinarily does not pledge its full faith, credit and taxing
power for repayment. The private enterprise can have a substantially different credit profile than the issuer. The private activity
bonds in which the Fund may invest may be negatively impacted by conditions affecting either the general credit of the private enterprise or the project itself. The Fund’s private activity bond holdings may also pay interest subject to the alternative minimum tax on individuals.
For tax years beginning after December 31, 2022, interest on the bonds may affect the corporate alternative minimum tax for certain
corporations.
SIGNIFICANT EXPOSURE RISK. To the extent that the Fund invests a significant percentage of its assets in a single
asset class or the securities of issuers within the same country, state, region, industry or sector,
an adverse economic, business or political development may affect the value of the Fund’s investments more than if the Fund were more broadly diversified. A significant exposure makes the Fund more susceptible to any single occurrence and may subject the Fund to greater
market risk than a fund that is more broadly diversified.
TENDER OPTION BOND RISK. Tender option bond investments involve leverage and credit risk, and generally involve
greater risk than investments in fixed rate municipal bonds, including the risk of loss of principal.
Tender option bond investments may also subject the Fund to the risks of inverse floaters described herein. In particular, because
the instruments may be leveraged, their market values may be more volatile than other types of debt securities.
VALUATION RISK. The sale price the Fund could receive for a security may differ from the Fund’s valuation of the security, particularly for securities that trade in low volume or volatile markets or that are valued using
a fair value methodology. Unlike publicly traded securities that trade on national securities exchanges, there is no central place
or exchange for trading most debt securities. Debt securities generally trade on an “over-the-counter” market. Due to the lack of centralized information and trading, and variations in lot sizes of certain debt securities, the valuation of debt securities may carry more
uncertainty and risk than that of publicly traded securities. Debt securities are commonly valued by third-party pricing services that
utilize a range of market-based inputs and assumptions, including readily available market quotations obtained from broker-dealers
making markets in such securities, cash flows and transactions for comparable instruments. However, because the available information
is less reliable and more subjective, elements of judgment may play a greater role in valuation of debt securities than for other
types of securities. Different pricing services may incorporate different assumptions and inputs into their valuation methodologies, potentially
resulting in different values for the same securities. As a result, if the Advisor were to change its valuation policies, or
if the Fund were to change pricing services, or if a pricing service were to change its valuation methodology, there could be a material impact, either positive or negative, on the Fund’s net asset value. Additionally, pricing services generally price debt securities assuming orderly transactions of an institutional “round lot” size, but some trades may occur in smaller, “odd lot” sizes, often at lower prices than institutional round lot trades. There is no assurance that the Fund will be able to sell a portfolio security at the price established by
the pricing service, which could result in a loss to the Fund. In addition, the value of the debt securities in the Fund's portfolio may change
on days or during time periods when shareholders will not be able to purchase or sell the Fund's shares. Authorized Participants who
purchase or redeem Fund shares on days when the Fund is holding fair-valued securities may receive fewer or more shares, or lower
or higher redemption proceeds, than they would have received had the Fund not fair-valued securities or used a different valuation
methodology. Net asset value calculation may also be impacted by operational risks arising from factors such as failures in systems
and technology.
VOLATILITY RISK. Volatility is the characteristic of a security, an index or a market to fluctuate
significantly in price within a short time period. The Fund may invest in securities or financial instruments that exhibit
more volatility than the market as a whole. Such exposures could cause the Fund’s net asset value to experience significant increases or declines in value over short periods of time.
ZERO COUPON BOND RISK. Zero coupon bonds do not pay interest on a current basis and may be highly volatile
as interest rates rise or fall. Although zero coupon bonds generate income for accounting purposes,
they do not produce cash flow, and thus the Fund could be forced to liquidate securities at an inopportune time in order to generate
cash to distribute to shareholders as required by tax laws.
Annual Total Return
The bar chart and table below illustrate the calendar year returns of the Fund’s Class I shares based on net asset value as well as the average annual Fund returns. The bar chart and table provide an indication of the risks of investing in the Fund
by showing changes in the Fund’s performance from year-to-year and by showing how the Fund’s Class I shares’ average annual total returns compared to those of two market indices. See “Total Return Information” for additional performance information regarding the Fund. The Fund’s performance information is accessible on the Fund’s website at www.ftportfolios.com.
Imposition of the Fund’s sales load is not reflected in the bar chart below. If the sales load was reflected, returns would be less than those shown.
First Trust Managed Municipal Fund—Class I Shares
Calendar Year Total Returns as of 12/31
Calendar Year Total Returns as of 12/31
During the period shown in the chart above:
|
|
Return
|
Period Ended
|
|
Best Quarter
|
6.78%
|
December 31, 2023
|
|
Worst Quarter
|
-2.68%
|
September 30, 2023
|
The Fund’s past performance (before and after taxes) is not necessarily an indication of how the Fund will perform in the future.
All after-tax returns are calculated using the historical highest individual federal
marginal income tax rates and do not reflect the impact of any state or local tax. Returns after taxes on distributions reflect the taxed return on the payment of dividends
and capital gains. Returns after taxes on distributions and sale of shares assume you sold your shares
at period end, and, therefore, are also adjusted for any capital gains or losses incurred. Returns for the market indices does not
include expenses, which are deducted from Fund returns, or taxes.
Your own actual after-tax returns will depend on your specific tax situation and may
differ from what is shown here. After-tax returns are not relevant to investors who hold Fund shares in tax-deferred accounts such as
individual retirement accounts (IRAs) or employee-sponsored retirement plans.
Average Annual Total Returns for the Periods Ended December 31, 2023
|
|
1 Year
|
Since
Inception
|
Inception
Date
|
|
Class I – Return Before Taxes
|
6.76%
|
5.03%
|
6/15/2022
|
|
Class I – Return After Taxes on Distributions
|
6.76%
|
4.74%
|
6/15/2022
|
|
Class I – Return After Taxes on Distributions and Sale of Shares
|
5.44%
|
4.24%
|
6/15/2022
|
|
Bloomberg Municipal Bond 5-15 Year Index(1) (reflects no deduction for fees, expenses
or taxes)
|
5.84%
|
5.35%
|
6/15/2022
|
|
Bloomberg Municipal Bond Index(1) (reflects no deduction for fees, expenses or taxes)
|
6.40%
|
5.26%
|
6/15/2022
|
(1)
Since inception return is based on the Class I Shares inception date.
Management
Investment Advisor
First Trust Advisors L.P. (“First Trust” or the “Advisor”)
Portfolio Managers
•
Johnathan N. Wilhelm, Senior Vice President, Senior Portfolio Manager of First Trust
•
Tom Byron, Senior Vice President, Senior Portfolio Manager of First Trust
•
Shawn P. O’Leary, Senior Vice President, Senior Portfolio Manager of First Trust
The portfolio managers are primarily and jointly responsible for the day-to-day management
of the Fund. Johnathan N. Wilhelm and Tom Byron have each served as a part of the portfolio management team of the Fund
since 2022 and Shawn P. O'Leary has served as part of the portfolio management team of the Fund since 2024.
Purchase and Sale of Fund Shares
You may purchase, redeem or exchange shares of the Fund only through a financial advisor
on any day the New York Stock Exchange (“NYSE”) is open for business. Certain financial advisors may impose investment minimums
on purchases or exchanges into the Fund. Class I shares are subject to higher minimums for certain investors. There are no
minimums for purchases or exchanges into the Fund through employer-sponsored retirement plans.
Tax Information
The Fund intends to make interest income distributions that are exempt from federal
income tax. All or a portion of these distributions, however, may be subject to the federal alternative minimum tax on individuals and
state and local taxes, and may have other tax consequences (e.g., they may affect the amount of your social security benefits that are taxed). For
tax years beginning after December 31, 2022, exempt-interest dividends may affect the corporate alternative
minimum tax for certain corporations. The Fund may make other distributions that are subject to federal income tax.
Payments to Broker-Dealers and Other Financial Intermediaries
If you purchase shares of the Fund through a broker-dealer, registered investment
adviser, bank or other financial intermediary (collectively, “intermediaries”), First Trust and First Trust Portfolios L.P., the Fund’s distributor, may pay the intermediary for the sale of Fund shares and related services. These payments may create a conflict of interest
by influencing the broker-dealer or other intermediary and your salesperson to recommend the Fund over another investment. Ask
your salesperson or visit your financial intermediary’s website for more information.
You can find the Fund’s statutory prospectus and other information about the Fund, including the statement of additional information and most recent reports to shareholders, online at www.ftportfolios.com/Retail/MF/MFFundNews.aspx?Ticker=CWAIX.
MFMMSP042224