Rule 497(k)
File No. 333-182308
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First Trust
Exchange-Traded Fund VI
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SUMMARY PROSPECTUS
Multi-Asset Diversified Income Index Fund
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Ticker Symbol:
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MDIV
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Exchange:
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Nasdaq, Inc.
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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/ETF/ETFfundnews.aspx?Ticker=MDIV. 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. The Fund’s prospectus and statement of additional information, both dated February 1, 2024, are all incorporated by reference into this Summary Prospectus.
February 1, 2024
Investment Objective
The Multi-Asset Diversified Income Index Fund (the “Fund”) seeks investment results that correspond generally to the price and yield (before the Fund’s fees and expenses) of an index called the Nasdaq US Multi-Asset Diversified IncomeTM Index (the “Index”).
Fees and Expenses of the Fund
The following table describes the fees and expenses you may pay if you buy, hold and
sell shares of the Fund. Investors may pay other fees, such as brokerage commissions and other fees to financial intermediaries, which
are not reflected in the table and example below.
Shareholder Fees
(fees paid directly from your investment)
(fees paid directly from your investment)
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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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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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Management Fees
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0.60%
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Distribution and Service (12b-1) Fees
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0.00%
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Other Expenses
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0.00%
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Acquired Fund Fees and Expenses
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0.20%
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Total Annual Fund Operating Expenses
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0.80%
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Fee Waiver and Expense Reimbursement(1)
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0.12%
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Total Annual Fund Operating Expenses After Fee Waiver
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0.68%
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(1)
Pursuant to a contractual agreement between the Trust, on behalf of the Fund, and First Trust Advisors, L.P., the Fund’s investment advisor, the management fees paid to the Fund’s investment advisor will be reduced by the proportional amount of the management fees earned by the Fund on assets invested in other investment companies advised by the Fund’s investment advisor. This contractual agreement shall continue until the earliest of (i) January 31, 2025, (ii) its termination at the direction of the Board of Trustees or (iii) upon the
termination of the investment management agreement by and between the Fund, the Trust and the Fund’s investment advisor.
Example
The example below is intended to help you compare the cost of investing in the Fund
with the cost of investing in other 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 operating expenses remain at current levels. The example assumes that the Fund's investment
advisor's agreement to waive certain acquired fund fees and expenses will be terminated following January 31, 2025. Although your
actual costs may be higher or lower, based on these assumptions your costs would be:
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1 Year
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3 Years
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5 Years
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10 Years
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$69
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$243
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$432
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$979
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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 76% of the average value of its portfolio.
Principal Investment Strategies
The Fund will normally invest at least 90% of its net assets (including investment
borrowings) in the common stocks and/or depositary receipts, real estate investment trusts (“REITs”), preferred securities, master limited partnerships (“MLPs”) and exchange-traded fund (“ETF”) that comprise the Index. The Fund, using an indexing investment approach, attempts
to replicate, before fees and expenses, the performance of the Index. The Index is owned, developed, calculated and maintained
by Nasdaq, Inc. (the “Index Provider”). The Index Provider may, from time to time, exercise reasonable discretion as it deems
appropriate in order to ensure Index integrity. The ETF in which the Fund invests may be advised by First Trust Advisors L.P., the Fund’s investment advisor.
According to the Index Provider, the Index is designed to provide exposure to five
asset segments, each selected to result in a consistent and high yield for the Index. These five asset segments are: equity securities, REITs,
preferred securities, MLPs and high yield corporate bonds. The Index allocates 20% of its weight to the equity securities segment, 20%
of its weight to the REIT segment, 20% of its weight to the preferred stocks segment, 20% of its weight to the MLP segment and 20%
of its weight to the high yield corporate
bond segment. The Index provides exposure to the high yield corporate bond segment
through an ETF that invests in high yield corporate debt securities. The Index methodology utilizes separate and distinct eligibility
and selection rules for each asset segment that are set forth below. The Fund may invest in floating-rate securities and non-U.S. securities.
Equity Securities
According to the Index Provider, to be eligible for inclusion as part of the equity
securities segment of the Index, a security must meet the following criteria: (i) be a member of the Nasdaq US BenchmarkTM Index (the “Nasdaq BenchmarkTM Index”); (ii) not be classified as a Real Estate Investment Trust by the Industry Classification Benchmark (“ICB”); (iii) meet the minimum size requirements of the Index; (iv) meet the minimum liquidity requirements of the Index; (v) have paid a
regular dividend for each of the last three consecutive years and have not suspended or discontinued its dividend payment; (vi) have positive
total earnings over the trailing twelve month period; (vii) have a dividend payout ratio less than or equal to 80%; and (viii) have
one year realized volatility less than the Nasdaq US BenchmarkTM Index one-year realized volatility plus 15%.
Of the eligible companies, 50 securities are selected and weighted by dividend yield.
If less than 50 securities are eligible, securities will be added back based on the volatility screen such that the securities which were
next eligible based on that screen will be added. If 50 securities are still not eligible, the process will be repeated with each of
the previous eligibility criterion until 50 securities are achieved. Within the equity securities segment, no single security can have a weight
greater than 8%.
REITs
According to the Index Provider, to be eligible for inclusion as part of the REIT
segment of the Index, a security must meet the following criteria: (i) be a member of the Nasdaq US BenchmarkTM Index; (ii) be classified as a Real Estate Investment Trust by the ICB; (iii) meet
the minimum size requirements of the Index; (iv) meet the minimum liquidity requirements
of the Index; (v) have paid a regular dividend for each of the last three consecutive years and have not suspended or discontinued
its dividend payment; (vi) have positive total earnings over the trailing twelve month period; (vii) have a dividend payout ratio
less than or equal to 150%; and (viii) have one year realized volatility less than the Nasdaq US BenchmarkTM Index one-year realized volatility plus 15%.
Of the eligible companies, 25 securities are selected and weighted by dividend yield.
If less than 25 securities are eligible, securities will be added back based on the volatility screen such that the securities which were
next eligible based on that screen will be added. If 25 securities are still not eligible, the process will be repeated with each of
the previous eligibility criterion until 25 securities are achieved. Within the REIT segment, no single security can have a weight greater than
8%.
Preferred Securities
According to the Index Provider, to be eligible for inclusion as part of the preferred
securities segment of the Index, a security must meet the following criteria: (i) be a member of the Nasdaq US Preferred SecurityTM Index (the “Nasdaq PreferredTM Index”); (ii) meet the minimum size requirements of the Index; (iii) meet the minimum liquidity requirements;
(iv) have not suspended or discontinued its dividend payment; and (v) have one year realized volatility less than the Nasdaq
PreferredTM Index one-year realized volatility plus 15%.
All eligible components of the Nasdaq PreferredTM Index are then ranked based on highest dividend yield and lowest realized volatility
over the trailing 12-month period. The 25 securities with the lowest combined score
based on both highest dividend and lowest realized volatility are selected. Within the preferred securities segment, no single security
can have a weight greater than 8%.
MLPs
According to the Index Provider, to be eligible for inclusion as part of the MLP segment
of the Index, a security must meet the following criteria: (i) be classified as a limited partnership; (ii) be classified as Energy
or Industrials by the ICB; (iii) meet the minimum size requirements of the Index; (iii) meet the minimum liquidity requirements of the Index;
(iv) have not suspended or discontinued its dividend payment; and (v) have one year realized volatility less than the DWA MLP
Select Index one-year realized volatility plus 15%.
Each eligible security will be scored by yield and realized volatility with the highest
yielding security scoring 1 and least volatile security a 1. The scores are added and the 25 securities with the lowest scores are selected
for inclusion in the Index. If less than 25 securities remain after the screens, securities will be added back based on the volatility screen
such that the securities which were next eligible based on that screen will be added. If 25 securities are still not eligible, the process
will be repeated with each of the previous eligibility criterion until 25 securities are achieved or until there are no more eligible securities,
whichever comes first. The securities are then weighted according to their yield. Within the MLP segment, no single security can
have a weight greater than 8%.
High Yield Corporate Bonds
According to the Index Provider, to be included as part of the high yield corporate
bonds segment of the Index, a security must be a U.S.-listed ETF that invests in high yield corporate bonds and have assets under management
of at least $100 million. To the extent that an ETF advised by First Trust Advisors L.P. meets these criteria, it will be
selected for inclusion in the Index.
The Index is reconstituted and rebalanced quarterly and the Fund will make corresponding
changes to its portfolio shortly after the Index changes are made public. The Index’s quarterly rebalance and reconstitution schedule may cause the Fund to experience a higher rate of portfolio turnover. The Fund will be concentrated in an industry or a group of industries to the extent
that the Index is so
concentrated. As of December 31, 2023, the Index was composed of 121 securities. As of December 31, 2023, the Fund had significant investments in energy companies and financial companies, although this may change
from time to time. The Fund's investments will change as the Index changes and, as a result, the Fund may have significant investments
in jurisdictions or investment sectors that it may not have had as of December 31, 2023. To the extent the Fund invests a significant
portion of its assets in a given jurisdiction or investment sector, the Fund may be exposed to the risks associated with that jurisdiction
or investment sector.
Principal 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. There can be no assurance that the Fund’s investment objective will be achieved. The order of the below risk factors does not indicate
the significance of any particular risk factor.
AUTHORIZED PARTICIPANT CONCENTRATION RISK. Only an authorized participant may engage in creation or redemption transactions directly with the Fund. A limited number of institutions act as authorized
participants for the Fund. To the extent that these institutions exit the business or are unable to proceed with creation and/or
redemption orders and no other authorized participant steps forward to create or redeem, the Fund’s shares may trade at a premium or discount (the difference between the market price of the Fund's shares and the Fund's net asset value) and possibly face delisting and
the bid/ask spread (the difference between the price that someone is willing to pay for shares of the Fund at a specific point in
time versus the price at which someone is willing to sell) on the Fund’s shares may widen.
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.
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.
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 expect to
continue to do so, and the Federal Reserve has announced that it intends 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.
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.
DEPOSITARY RECEIPTS RISK. Depositary receipts represent equity interests in a foreign company that trade on
a local stock exchange. Depositary receipts may be less liquid than the underlying shares in their primary
trading market. Any distributions paid to the holders of depositary receipts are usually subject to a fee charged by the depositary. Holders
of depositary receipts may have limited voting rights, and investment restrictions in certain countries may adversely impact the
value of depositary receipts because such restrictions may limit the ability to convert the equity shares into depositary receipts and vice
versa. Such restrictions may cause the equity shares of the underlying issuer to trade at a discount or premium to the market price of
the depositary receipts.
DIVIDENDS RISK. The Fund’s investment in dividend-paying securities could cause the Fund to underperform similar funds that invest without consideration of an issuer’s track record of paying dividends. Companies that issue dividend-paying securities are not required to continue to pay dividends on such securities. Therefore, there is the possibility
that such companies could reduce or eliminate the payment of dividends in the future, which could negatively affect the Fund’s performance.
ENERGY COMPANIES RISK. The success of energy companies may be cyclical and highly dependent on energy prices.
The market value of securities issued by energy companies may decline for many reasons, including,
among other things, changes in the levels and volatility of global energy prices, energy supply and demand, capital expenditures
on exploration and production of energy sources, exchange rates, interest rates, economic conditions, tax treatment, energy conservation
efforts, increased competition and technological advances. Energy companies may be subject to substantial government
regulation and contractual fixed pricing, which may increase the cost of doing business and limit the earnings of these companies.
A significant portion of the revenues of energy companies may depend on a relatively small number of customers, including governmental
entities and utilities. As a result, governmental budget constraints may have a material adverse effect on the stock prices
of energy companies. Energy companies may also operate in, or engage in transactions involving, countries with less developed
regulatory regimes or a history of expropriation, nationalization or other adverse policies. Energy companies also face a significant
risk of liability from accidents resulting in injury or loss of life or property, pollution or other environmental problems, equipment malfunctions
or mishandling of materials and a risk of loss from terrorism, political strife or natural disasters.
EQUITY SECURITIES RISK. The value of the Fund’s shares will fluctuate with changes in the value of the equity securities in which it invests. Equity securities prices fluctuate for several reasons, including changes in investors’ perceptions of the financial condition of an issuer or the general condition of the relevant equity market, such as market volatility,
or when political or economic events affecting an issuer 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’s investment in shares of ETFs subjects it to the risks of owning the securities underlying the ETF, as well as the same structural risks faced by an investor purchasing shares of the Fund, including
authorized participant concentration risk, market maker risk, premium/discount risk and trading issues risk. As a shareholder in another
ETF, the Fund bears its proportionate share of the ETF’s expenses, subjecting Fund shareholders to duplicative expenses.
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.
FINANCIAL COMPANIES RISK. Financial companies, such as retail and commercial banks, insurance companies and
financial services companies, are especially subject to the adverse effects of economic recession, currency
exchange rates, extensive government regulation, decreases in the availability of capital, volatile interest rates, portfolio
concentrations in geographic markets, industries or products (such as commercial and residential real estate loans), competition from
new entrants and blurred distinctions in their fields of business.
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 the 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.
INDEX CONCENTRATION RISK. The Fund will be concentrated in an industry or a group of industries to the extent
that the Index is so concentrated. 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. There may be instances in which the Index, for a variety of reasons including changes
in the prices of individual securities held by the Fund, has a larger exposure to a small number of stocks or a single stock relative
to the rest of the stocks in the Index. Under such circumstances, the Fund will not deviate from the Index except in rare circumstances or in an immaterial way and therefore the Fund’s returns would be more greatly influenced by the returns of the stock(s) with the larger
exposure.
INDEX PROVIDER RISK. There is no assurance that the Index Provider, or any agents that act on its behalf,
will compile the Index accurately, or that the Index will be determined, maintained, constructed, reconstituted,
rebalanced, composed, calculated or disseminated accurately. The Index Provider and its agents do not provide any representation
or warranty in relation to the quality, accuracy or completeness of data in the Index, and do not guarantee that the Index
will be calculated in accordance with its stated methodology. The Advisor’s mandate as described in this prospectus is to manage the Fund consistently with the Index provided by the Index Provider. The Advisor relies upon the Index provider and its agents to accurately
compile, maintain, construct, reconstitute, rebalance, compose, calculate and disseminate the Index accurately. Therefore, losses
or costs associated with any Index Provider or agent errors generally will be borne by the Fund and its shareholders. To correct
any such error, the Index Provider or its agents may carry out an unscheduled rebalance of the Index or other modification of Index constituents
or weightings. When the Fund in turn rebalances its portfolio, any transaction costs and market exposure arising from such
portfolio rebalancing will be borne by the Fund and its shareholders. Unscheduled rebalances also expose the Fund to additional tracking
error risk. Errors in respect of the quality, accuracy and completeness of the data used to compile the Index may occur from time
to time and may not be identified and corrected by the Index Provider for a period of time or at all, particularly where the Index
is less commonly used as a benchmark by funds or advisors. For example, during a period where the Index contains incorrect constituents,
the Fund tracking the Index would have market exposure to such constituents and would be underexposed to the Index’s other constituents. Such errors may negatively impact the Fund and its shareholders. The Index Provider and its agents rely on various sources
of information to assess the criteria of issuers included in the Index, including information that may be based on assumptions and
estimates. Neither the Fund nor the Advisor can offer assurances that the Index’s calculation methodology or sources of information will provide an accurate assessment of included issuers. Unusual market conditions or issuer-specific events may cause the Index Provider
to postpone a scheduled rebalance, exclude or substitute a security in the Index or undertake other measures which could cause
the Index to vary from its normal or expected composition. The postponement of a scheduled rebalance in a time of market volatility
could mean that constituents that would otherwise be removed at rebalance due to changes in market capitalizations, issuer
credit ratings, or other reasons may remain, causing the performance and constituents of the Index to vary from those expected under normal
conditions. Apart from scheduled rebalances, the Index Provider or its agents may carry out additional ad hoc rebalances to the
Index due to unusual market conditions or in order, for example, to correct an error in the selection of index constituents.
INDEX REBALANCE RISK. Pursuant to the methodology that the Index Provider uses to calculate and maintain
the Index, the Fund may own a significant portion of the First Trust ETFs included in the Fund. Any such
ETF may be removed from the Index in the event that it does not comply with the eligibility requirements of the Index. As a result,
the Fund may be forced to sell shares of certain First Trust ETFs at inopportune times or for prices other than at current market values
or may elect not to sell such shares on the day that they are removed from the Index, due to market conditions or otherwise. Due to these factors, the variation between the Fund’s annual return and the return of the Index may increase significantly. Apart from scheduled
rebalances, the Index Provider may carry out additional ad hoc rebalances to the Index to, for example, correct an error in the
selection of constituents. When the Fund in turn rebalances its portfolio, any transaction costs and market exposure arising from such
portfolio rebalancing will be borne by the Fund and its shareholders. Unscheduled rebalances may also expose the Fund to additional
tracking error risk. Therefore, errors and additional ad hoc rebalances carried out by the Index Provider may increase the Fund’s costs and market exposure.
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.
LIBOR TRANSITION RISK. The United Kingdom’s Financial Conduct Authority (“FCA”), which regulates LIBOR, intends to cease making LIBOR available as a reference rate over a phase-out period that began on January
1, 2022. However, subsequent announcements by the FCA, the LIBOR administrators, and other regulators indicate that it is possible
that the most widely used LIBOR rates may continue until mid-2023. 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. In the United States, it is anticipated
that in many instances the Secured Overnight Financing Rate (“SOFR”) will replace LIBOR as the reference rate for many of the floating rate instruments
held by the Fund. 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 and the bid/ask spread on the Fund's shares may widen.
MARKET MAKER RISK. The Fund faces numerous market trading risks, including the potential lack of an
active market for Fund shares due to a limited number of market markers. Decisions by market makers or authorized
participants to reduce their role or step away from these activities in times of market stress could inhibit the effectiveness of
the arbitrage process in maintaining the relationship between the underlying values of the Fund’s portfolio securities and the Fund’s market price. The Fund may rely on a small number of third-party market makers to provide a market for the purchase and sale of shares.
Any trading halt or other problem relating to the trading activity of these market makers could result in a dramatic change in the spread between the Fund’s net asset value and the price at which the Fund’s shares are trading on the Exchange, which could result in a decrease in value of the Fund’s shares. This reduced effectiveness could result in Fund shares trading at a discount to net asset
value and also in greater than normal intraday bid-ask spreads for Fund shares.
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.
MLP RISK. Investments in securities of MLPs involve certain risks different from or in addition
to the risks of investing in common stocks. MLP common units can be affected by macro-economic factors and other factors
unique to the partnership or company and the industry or industries in which the MLP operates. Certain MLP securities may trade
in relatively low volumes due to their smaller capitalizations or other factors, which may cause them to have a high degree of price
volatility and illiquidity. The structures of MLPs create certain risks, including, for example, risks related to the limited ability
of investors to control an MLP and to vote on matters affecting the MLP, risks related to potential conflicts of interest between an MLP
and the MLP's general partner, the risk that an MLP will generate insufficient cash flow to meet its current operating requirements, the
risk that an MLP will issue additional securities or engage in other transactions that will have the effect of diluting the interests of
existing investors, and risks related to the general partner's right to require unit-holders to sell their common units at an undesirable
time or price. On March 15, 2018, the Federal Energy Regulatory Commission (“FERC”) changed its long-standing tax allowance policy which no longer permits MLPs to include
in their cost of service an income tax allowance. This has had a negative impact on the performance
of some MLPs affected by this decision. This policy change and any similar policy changes in the future could adversely impact an MLP’s business, financial condition, results of operations and cash flows and ability to pay cash distributions or dividends.
MLP TAX RISK. The Fund’s ability to meet its investment objective relies in part upon the level of taxable income it receives from the MLPs in which it invests, a factor over which the Fund has no control. The benefit
the Fund derives from its investment in MLPs is largely dependent on their being treated as partnerships for U.S. federal income tax
purposes. Partnerships do not pay U.S. federal income tax at the partnership level. Rather, each partner is allocated a share of the partnership’s income, gains, losses, deductions and expenses. A change in current tax law or a change in the underlying business mix
of a given MLP could result in an MLP being treated as a corporation for U.S. federal income tax purposes, which would result
in the MLP being required to pay U.S. federal income tax (as well as state and local income taxes) on its taxable income at the applicable
corporate tax rate. This would have the effect of reducing the amount of cash available for distribution by an MLP and could result in a significant reduction in the value of the Fund’s investment. The classification of an MLP as a corporation for U. S. federal income
tax purposes would have the effect of reducing the amount of cash available for distribution by the MLP and causing any such distributions
received by the Fund to be taxed as dividend income to the extent of the MLP’s current or accumulated earnings and profits. To the extent a distribution received by the Fund from an MLP is treated as a return of capital, the Fund’s adjusted tax basis in the interests of the MLP may be reduced, which will result in an increase in the amount of income or gain (or decrease in the amount of loss) that
will be recognized by the Fund for tax purposes upon the sale of any such interests or upon subsequent distributions in respect of
such interests. Furthermore, any return of capital distribution received from an MLP may require the Fund to restate the character of
its distributions and amend any shareholder tax reporting previously issued.
NON-CORRELATION RISK. The Fund’s return may not match the return of the Index for a number of reasons. The Fund incurs operating expenses not applicable to the Index, and may incur costs in buying and selling securities, especially when rebalancing the Fund’s portfolio holdings to reflect changes in the composition of the Index. In addition, the Fund’s portfolio holdings may not exactly replicate the securities included in the Index or the ratios between the securities included in
the Index. Additionally, in order to comply with its investment strategies and policies, the Fund portfolio may deviate from the composition
of the Index. Accordingly, the Fund's return may underperform the return of the Index.
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, capital controls, lack of liquidity, currency exchange rates, excessive taxation, government seizure of assets,
the imposition of sanctions by foreign governments, different legal or accounting standards, and less government supervision
and regulation of securities exchanges in foreign countries.
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.
PASSIVE INVESTMENT RISK. The Fund is not actively managed. The Fund invests in securities included in or representative
of the Index regardless of investment merit. The Fund generally will not attempt to take
defensive positions in declining markets. In the event that the Index is no longer calculated, the Index license is terminated or the identity
or character of the Index is materially changed, the Fund will seek to engage a replacement index.
PORTFOLIO TURNOVER RISK. High portfolio turnover may result in the Fund paying higher levels of transaction
costs and may generate greater tax liabilities for shareholders. Portfolio turnover risk may cause the Fund’s performance to be less than expected.
PREFERRED SECURITIES RISK. Preferred securities combine some of the characteristics of both common stocks and
bonds. Preferred securities are typically subordinated to bonds and other debt securities in a company’s capital structure in terms of priority to corporate income, subjecting them to greater credit risk than those debt securities. Generally,
holders of preferred securities have no voting rights with respect to the issuing company unless preferred dividends have been in
arrears for a specified number of periods, at which time the preferred security holders may obtain limited rights. In certain circumstances,
an issuer of preferred securities may defer payment on the securities and, in some cases, redeem the securities prior to a specified
date. Preferred securities may also be substantially less liquid than other securities, including common stock.
PREMIUM/DISCOUNT RISK. The market price of the Fund’s shares will generally fluctuate in accordance with changes in the Fund’s net asset value as well as the relative supply of and demand for shares on the Exchange. The Fund’s investment advisor cannot predict whether shares will trade below, at or above their net asset value because the shares
trade on the Exchange at market prices and not at net asset value. Price differences may be due, in large part, to the fact that
supply and demand forces at work in the secondary trading market for shares will be closely related, but not identical, to the same
forces influencing the prices of the holdings of the Fund trading individually or in the aggregate at any point in time. However, given that
shares can only be purchased and redeemed in Creation Units, and only to and from broker-dealers and large institutional investors that
have entered into participation agreements (unlike shares of closed-end funds, which frequently trade at appreciable discounts from,
and sometimes at premiums to, their net asset value), the Fund’s investment advisor believes that large discounts or premiums to the net asset value of shares should not be sustained. During stressed market conditions, the market for the Fund’s shares may become less liquid in response to deteriorating liquidity in the market for the Fund’s underlying portfolio holdings, which could in turn lead to differences between the market price of the Fund’s shares and their net asset value and the bid/ask spread on the Fund’s shares may widen.
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.
REIT RISK. REITs typically own and operate income-producing real estate, such as residential
or commercial buildings, or real-estate related assets, including mortgages. As a result, investments in REITs are subject
to the risks associated with investing in real estate, which may include, but are not limited to: fluctuations in the value of underlying
properties; defaults by borrowers or tenants; market saturation; changes in general and local operating expenses; and other economic, political
or regulatory occurrences affecting companies in the real estate sector. REITs are also subject to the risk that the real estate
market may experience an economic downturn generally, which may have a material effect on the real estate in which the REITs invest and
their underlying portfolio securities. REITs may have also a relatively small market capitalization which may result in their shares experiencing
less market liquidity and greater price volatility than larger companies. Increases in interest rates typically lower the present value
of a REIT's future earnings stream, and may make financing property purchases and improvements more costly. Because the market price
of REIT stocks may change based upon investors' collective perceptions of future earnings, the value of the Fund will generally decline
when investors anticipate or experience rising interest rates.
SMALLER COMPANIES RISK. Small and/or mid capitalization companies may be more vulnerable to adverse general
market or economic developments, and their securities may be less liquid and may experience greater price
volatility than larger, more established companies as a result of several factors, including limited trading volumes, fewer products
or financial resources, management inexperience and less publicly available information. Accordingly, such companies are generally subject
to greater market risk than larger, more established companies.
TRADING ISSUES RISK. Trading in Fund shares on the Exchange may be halted due to market conditions or
for reasons that, in the view of the Exchange, make trading in shares inadvisable. In addition, trading in
Fund shares on the Exchange is subject to trading halts caused by extraordinary market volatility pursuant to the Exchange’s “circuit breaker” rules. There can be no assurance that the requirements of the Exchange necessary to maintain the listing of the Fund will continue
to be met or will remain unchanged. The Fund may have difficulty maintaining its listing on the Exchange in the event the Fund’s assets are small, the Fund does not have enough shareholders, or if the Fund is unable to proceed with creation and/or redemption
orders.
VALUATION RISK. The Fund invests in an ETF that holds securities or other assets that may be valued
on the basis of factors other than market quotations. This may occur because the asset or security does not trade
on a centralized exchange, or in times of market turmoil or reduced liquidity. There are multiple methods that can be used to value
a portfolio holding when market quotations are not readily available. The value established for any portfolio holding at a point in time
might differ from what would be produced using a different methodology or if it had been priced using market quotations. Portfolio
holdings that are valued using techniques other than market quotations, including “fair valued” assets or securities, may be subject to greater fluctuation in their valuations from one day to the next than if market quotations were used. In addition, there is no assurance
that the Fund could sell or close out a portfolio position for the value established for it at any time, and it is possible that the
Fund would incur a loss because a portfolio position is sold or closed out at a discount to the valuation established by the Fund at that time. The Fund’s ability to value investments may be impacted by technological issues or errors by pricing services or other third-party
service providers.
Annual Total Return
The bar chart and table below illustrate the annual calendar year returns of the Fund
based on net asset value as well as the average annual Fund and Index 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 average annual total returns based on net asset value compared to those of the Index, a broad-based market index and a market index. 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.
Multi-Asset Diversified Income Index Fund
Calendar Year Total Returns as of 12/31
Calendar Year Total Returns as of 12/31
During the periods shown in the chart above:
|
|
Return
|
Period Ended
|
|
Best Quarter
|
18.70%
|
June 30, 2020
|
|
Worst Quarter
|
-36.45%
|
March 31, 2020
|
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 do 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
|
5 Years
|
10 Years
|
Since
Inception
|
Inception
Date
|
|
Return Before Taxes
|
11.43%
|
4.69%
|
3.34%
|
3.95%
|
8/13/2012
|
|
Return After Taxes on Distributions
|
8.57%
|
2.13%
|
0.72%
|
1.37%
|
|
|
Return After Taxes on Distributions and Sale of Fund Shares
|
6.64%
|
2.46%
|
1.34%
|
1.84%
|
|
|
Nasdaq US Multi-Asset Diversified IncomeTM Index (reflects
no deduction for fees, expenses or taxes)
|
12.10%
|
5.27%
|
3.97%
|
4.59%
|
|
|
S&P 500® Index (reflects no deduction for fees, expenses
or taxes)
|
26.29%
|
15.69%
|
12.03%
|
13.50%
|
|
|
Dow Jones U.S. Select DividendTM Index(1) (reflects no
deduction for fees, expenses or taxes)
|
1.53%
|
10.05%
|
9.26%
|
10.71%
|
|
(1)
The Dow Jones U.S. Select DividendTM Index represents 100 of the United States’ leading stocks by dividend yield.
Management
Investment Advisor
First Trust Advisors L.P. (“First Trust” or the “Advisor”)
Portfolio Managers
The Fund’s portfolio is managed by a team (the “Investment Committee”) consisting of:
•
Daniel J. Lindquist, Chairman of the Investment Committee and Managing Director of
First Trust
•
David G. McGarel, Chief Investment Officer, Chief Operating Officer and Managing Director
of First Trust
•
Jon C. Erickson, Senior Vice President of First Trust
•
Roger F. Testin, Senior Vice President of First Trust
•
Stan Ueland, Senior Vice President of First Trust
•
Chris A. Peterson, Senior Vice President of First Trust
•
Erik Russo, Vice President of First Trust
The Investment Committee members are primarily and jointly responsible for the day-to-day
management of the Fund. Each Investment Committee member has served as a part of the portfolio management team
of the Fund since 2012, except for Chris A. Peterson, who has served as a part of the portfolio management team of the Fund since
2016 and Erik Russo, who has served as a part of the portfolio management team of the Fund since 2020.
Purchase and Sale of Fund Shares
The Fund issues and redeems shares on a continuous basis, at net asset value, only in large blocks of shares called “Creation Units.” Individual shares of the Fund may only be purchased and sold on the secondary market
through a broker-dealer. Since shares of the Fund trade on securities exchanges in the secondary market at their market price rather than their net asset value, the Fund’s shares may trade at a price greater than (premium) or less than (discount) the Fund’s net asset value. An investor may incur costs attributable to the difference between the highest price a buyer is willing to pay to purchase
shares of the Fund (bid) and the lowest price a seller is willing to accept for shares of the Fund (ask) when buying or selling shares in
the secondary market (the “bid-ask spread”). Recent information, including the Fund’s net asset value, market price, premiums and discounts, bid-ask spreads and the median bid-ask spread for the Fund’s most recent fiscal year, is available online at https://www.ftportfolios.com/Retail/etf/home.aspx.
Tax Information
The Fund’s distributions are taxable and will generally be taxed as ordinary income or capital gains. Distributions on shares held in a tax-deferred account, while not immediately taxable, will be subject to tax when the
shares are no longer held in a tax-deferred account.
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/ETF/ETFfundnews.aspx?Ticker=MDIV.
MDIVSP020124