|
First
Trust
Exchange-Traded
Fund VI |
Prospectus
First Trust Indxx
Medical Devices ETF
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Ticker
Symbol: |
MDEV |
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Exchange: |
Cboe
BZX |
First
Trust Indxx Medical Devices ETF (the “Fund”) lists and
principally trades its shares on Cboe BZX Exchange, Inc.
(“Cboe
BZX" or
the “Exchange”). Market prices may
differ to some degree from the net asset value of the shares.
Unlike mutual funds, the Fund issues and redeems shares at net asset value, only
in large blocks of shares called
"Creation
Units."
The
Fund is a series of First Trust Exchange-Traded Fund VI (the “Trust”) and an
exchange-traded index fund organized as a separate series of a registered
management investment company.
Except
when aggregated in Creation Units, the shares are not redeemable securities of
the Fund.
The
Securities and Exchange Commission has not approved or disapproved of these
securities or passed upon the adequacy or accuracy of this prospectus. Any
representation to the contrary is a criminal offense.
NOT
FDIC INSURED MAY
LOSE VALUE NO
BANK GUARANTEE
August 1,
2024
Summary
Information
(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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(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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Distribution
and Service (12b-1) Fees |
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Other
Expenses |
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Total
Annual Fund Operating Expenses |
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1
Year |
3
Years |
5
Years |
10
Years |
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$ |
$ |
$ |
$ |
3
4
5
6
7
Calendar Year Total Returns as of 12/31 (1)
8
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1
Year |
Since
Inception |
Inception
Date |
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Return Before
Taxes |
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- |
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Return After
Taxes on Distributions |
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- |
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Return After
Taxes on Distributions and Sale of Fund Shares |
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- |
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Indxx Medical
Devices Index (reflects no deduction for fees, expenses or
taxes) |
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- |
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MSCI World
Health Care Index (reflects no deduction for fees, expenses or
taxes) |
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MSCI World
Index (reflects no deduction for fees, expenses or
taxes) |
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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 June 2021.
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
9
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.
10
Additional
Information on the Fund's Investment Objective and Strategies
The
Fund is a series of First Trust Exchange-Traded Fund VI and is regulated as an
“investment company” under the 1940 Act. The Fund operates as an index fund and
is not actively managed by First Trust. As such, the Fund’s investment objective
is to seek investment results that correspond generally to the price and yield
(before the Fund’s fees and expenses) of the Index. In seeking to achieve this
objective, the Fund will invest, under normal market conditions, at least 80% of
its net assets (plus any borrowings for investment purposes) in the securities
that comprise the Index. Indxx, Inc. serves as the index provider for the index
tracked by the Fund and may be referred to throughout this prospectus as the
“Index
Provider.” The Index Provider
is not affiliated with the Fund, the Fund's investment advisor or the Fund's
distributor.
The
Fund will generally employ a full replication strategy, meaning that it will
normally invest in all of the securities comprising the Index in proportion to
their weightings in the Index. However, under various circumstances, full
replication of the Index may not be possible or practicable. In those
circumstances, the Fund may purchase a sample of securities in the Index. The
Fund may utilize sampling when there are practical difficulties or substantial
costs involved in replicating the Index, including to address tax and regulatory
issues and respond to trading halts and other issues related to the liquidity of
Index constituents. There may also be instances in which First Trust may choose
to overweight certain securities in the Index, purchase securities not in the
Index which First Trust believes are appropriate to substitute for certain
securities in the Index, use futures or derivative instruments or utilize
various combinations of the above techniques in seeking to track the Index. The
Fund may sell securities that are represented in the Index in anticipation of
their removal from the Index or purchase securities not represented in the
Index in anticipation of their addition to the Index.
The
Fund’s investment objective, its 80% investment strategy and each of the
policies described herein are non-fundamental policies that may be changed by
the Board of Trustees of the Trust (the “Board”) without shareholder
approval. Certain fundamental
policies of the Fund are set forth in the Statement of Additional Information
(“SAI”) under “Investment
Objective and Policies.”
While
it is not expected that the Fund will invest in the securities of other
investment companies, any such investments would be subject to limitations
imposed by the 1940 Act and the related rules and interpretations. The Fund has
adopted a policy that it will not invest in other investment companies in excess
of 1940 Act limits in reliance on Sections 12(d)(1)(F) or 12(d)(1)(G) of the
1940 Act.
Indxx
Medical Devices Index
Indxx Medical Devices Index is
designed to track the performance of companies that are associated with the
medical equipment industry, as
determined by the Index Provider. According to the Index Provider, companies
comprising the medical equipment industry are those
companies involved in
the design, manufacture, sale, and provision of medical equipment, which
includes, but is not limited to, products used for examination, diagnosis,
monitoring, treatment, surgery, and medical research including lab
procedures. Companies
providing ancillary services regarding such equipment are also considered for
inclusion in the Index. The Index’s starting
universe consists of all medical equipment companies listed in a
developed market or emerging market, as defined by the
Index Provider. In addition, a company’s stock must meet the Index Provider's
size, float and liquidity requirements.
According to the Index Provider, eligible medical equipment companies that derive a
minimum of 50% of their total revenue from
business activities related to the design, manufacture,
sale, and provision of medical equipment form the Index’s selection
list, of which the top 50 companies by market capitalization form the Index. The
constituents are equally-weighted within the Index. The Index is rebalanced
semi-annually and reconstituted annually. The Index Provider may, from time to time, exercise
reasonable discretion as it deems appropriate in order to maintain Index
integrity.
More
information regarding the Index, including additional detail on the Index
methodology, may be found on the Index Provider’s website. Neither the Fund, the
Board, First Trust, or any of their affiliates, are responsible for the
information set forth on the Index Provider’s website. Information from the
Index Provider’s website and any other information not expressly included in this
prospectus is not incorporated by reference in, and should not be considered
part of, this prospectus.
11
Fund
Investments
Principal
Investments
Equity
Securities
The
Fund invests in equity securities, including common stocks and depositary
receipts. Common stock represents an equity ownership interest in issuers.
Holders of common stock are entitled to the income and increase in the value of
the assets and business of the issuers after all debt obligations and
obligations to preferred stockholders are satisfied. Depositary receipts are
certificates typically issued by a bank or trust company that represent
ownership interests in securities of non-U.S. companies. Depositary
receipts may or may not be jointly sponsored by the underlying
issuer.
Non-Principal
Investments
Cash
Equivalents and Short-Term Investments
Normally,
the Fund invests substantially all of its assets to meet its investment
objectives. The Fund may invest the remainder of its assets in securities with
maturities of less than one year or in cash equivalents, or it may hold cash.
The percentage of the Fund invested in such holdings varies and depends on
several factors, including market conditions. For temporary defensive purposes
and during periods of high cash inflows or outflows, the Fund may depart from
its principal investment strategies and invest part or all of its assets in
these securities, or it may hold cash. During such periods, the Fund may not be
able to achieve its investment objectives. The Fund may adopt a defensive
strategy when the portfolio managers believe securities in which the Fund
normally invests have elevated risks due to political or economic factors and in
other extraordinary circumstances. For
more information on eligible short-term investments, see the
SAI.
Illiquid
Investments
The
Fund may invest up to 15% of its net assets in investments and other instruments
that are, at the time of investment, illiquid (determined using the Securities
and Exchange Commission's standard applicable to investment companies,
i.e., any investment
that the Fund reasonably expects cannot be sold or disposed of in current market
conditions in seven calendar days or less without the sale or disposition
significantly changing the market value of the investment). For this purpose,
illiquid investments may include, but are not limited to, restricted securities
(securities the disposition of which is restricted under the federal securities
laws), securities that may only be resold pursuant to Rule 144A under the
Securities Act of 1933, as amended (the
"Securities
Act"),
that are deemed to be illiquid, and certain repurchase
agreements.
Disclosure
of Portfolio Holdings
The
Fund’s portfolio holdings are available on the Fund's website at
www.ftportfolios.com. A description of the policies and procedures with respect
to the disclosure of the Fund's portfolio securities is included in the Fund's
SAI, which is also available on the Fund's
website.
Risks
of Investing in the Fund
Risk
is inherent in all investing. Investing in the Fund involves risk, including the
risk that you may lose all or part of your investment. There can be no assurance
that the Fund will meet its stated objective. Before you invest, you should
consider the following supplemental disclosure pertaining to the Principal Risks
set forth above as well as additional Non-Principal Risks set forth below in
this prospectus. The order of the below risk factors does not indicate the
significance of any particular risk factor.
Principal
Risks
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. However, participants are not obligated to make a
market in the Fund’s shares or submit purchase and redemption orders for
creation units. To the extent that these institutions exit the business, reduce
their role 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 to the Fund’s net asset value and
possibly face delisting and the bid/ask spread on the Fund’s shares may
widen.
12
CURRENCY
RISK.
Changes in currency exchange rates affect the value of investments denominated
in a foreign currency, the
value of dividends and interest earned from such securities and gains and losses
realized on the sale of such securities. The Fund’s net asset value could
decline if a currency to which the Fund has exposure depreciates against the
U.S. dollar or if there are delays or limits on repatriation of such currency.
Currency exchange rates can be very volatile and can change quickly and
unpredictably. Changes in currency exchange rates may affect the Fund's net
asset value, the value of dividends and interest earned, and gains and losses
realized on the sale of securities. An increase in the strength of the U.S.
dollar relative to other currencies may cause the value of the Fund to decline.
Certain non-U.S. currencies may be particularly volatile, and non-U.S.
governments may intervene in the currency markets, causing a decline in value or
liquidity in the Fund's non-U.S. holdings whose value is tied to the affected
non-U.S. currency. Additionally, the prices of non-U.S. securities that are
traded in U.S. dollars are
often indirectly influenced by currency fluctuations.
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. While it is hard to predict whether any of these regulations
will be adopted, due to the current scope of proposed regulations, any
regulatory changes could adversely impact the Fund’s ability to achieve its
investment strategies or make certain investments. Regulatory changes may also
increase Fund operational costs, which could impact overall performance. Certain
market factors may result in central banks changing their approach in the
future. 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, such as presidential,
congressional and gubernatorial elections in the U.S., global elections and
governmental changes and the U.S. government’s failure to agree on a long-term
budget and deficit reduction plan, have and may continue to have an adverse
impact on the U.S. regulatory landscape, markets and investor behavior, which
could have a negative impact on the Fund’s investments and operations. The
potential result of a U.S. federal government shutdown may also significantly
impact investor and consumer behavior, which may adversely impact the markets
and global economy. Global and domestic authorities and regulators have
previously responded to serious economic disruptions with ranging fiscal and
monetary policy changes, including but not limited to, direct capital infusions
into companies, new monetary programs and dramatically lower interest rates. Any
change in these policies, or the ineffectiveness of these policies, could
increase volatility in securities markets, which may adversely impact the Fund’s
investments and performance. Any market disruptions could also delay the Fund
from making sound investment decisions in a timely manner. If the Fund
concentrates its investments in a region enduring geopolitical market
disruption, it may face higher risk of loss, although the increasing
interconnectivity between global economies and financial markets can lead to
events or conditions in one country, region or financial market adversely
impacting a different country, region or
financial market.
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.
13
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. As the
use of technology grows, liquidity and market movements may be affected. As
artificial intelligence is used more widely, the profitability and growth of
Fund holdings may be impacted, which could significantly impact the overall
performance of the Fund.
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. These risks typically are not covered by
insurance. In general, cyber incidents can result from deliberate attacks or
unintentional events. Cyber incidents include, but are not limited to, gaining
unauthorized access to digital systems (e.g., through “hacking”
or malicious software coding)
for purposes of misappropriating assets or sensitive information, corrupting
data or causing operational disruption. Cyber attacks may also be carried out in
a manner that does not require gaining unauthorized access, such as causing
denial-of-service attacks on websites (i.e., efforts to make
network services unavailable to intended users). Cyber security failures
by or breaches of the systems of the Advisor, distributor and other service
providers (including, but not limited to, sub-advisors, index providers, fund
accountants, custodians, transfer agents and administrators), market makers,
authorized participants or the issuers of securities in which the Fund invests,
have the ability to cause disruptions and impact business operations,
potentially resulting in: financial losses; interference with the Fund’s ability
to calculate its net asset value; disclosure of confidential trading
information; impediments to trading; submission of erroneous trades or erroneous
creation or redemption orders; the inability of the Fund or its service
providers to transact business; violations of applicable privacy and other laws;
regulatory fines penalties, reputational damage, reimbursement or other
compensation costs; or additional compliance costs. Substantial costs may be
incurred by the Fund in order to resolve or prevent cyber incidents in the
future. While the Fund has established business continuity plans in the event
of, and risk management systems to prevent, such cyber attacks, there are
inherent limitations in such plans and systems, including the possibility that
certain risks have not been identified and that prevention and remediation
efforts will not be successful. Furthermore, the Fund cannot control the cyber
security plans and systems put in place by service providers to the Fund,
issuers in which the Fund invests, market makers or authorized participants.
However, there is no guarantee that such efforts will succeed, and the Fund and
its shareholders could be negatively
impacted as a result.
DEPOSITARY
RECEIPTS RISK. Depositary receipts
are securities issued by a bank or trust company reflecting ownership of
underlying
securities issued by a foreign company. An investment in depositary receipts
involves further risks due to certain unique features. 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
pursuant to a deposit agreement between the underlying issuer and the
depositary. In certain cases, the depositary will vote the shares deposited with
it as directed by the underlying issuer’s board of directors. Furthermore,
investment restrictions in certain countries may adversely impact the value of
depositary receipts because such restrictions may limit the ability to convert
shares into depositary receipts and vice versa. Such restrictions may cause
shares of the underlying issuer to trade at a discount or premium to the market
price of the depositary receipt. Moreover, if depositary receipts are converted
into shares, the laws in certain countries may limit the ability of a
non-resident to trade the shares and to reconvert the shares to depositary
receipts. Depositary receipts may be “sponsored” or “unsponsored.” Sponsored
depositary receipts are established jointly by a depositary and the underlying
issuer, whereas unsponsored depositary receipts may be established by a
depositary without participation by the underlying issuer. Holders of
unsponsored depositary receipts generally bear all the costs associated with
establishing the unsponsored depositary receipts. In addition, the issuers of
the securities underlying unsponsored depositary receipts are not obligated to
disclose material information in the U.S. and, therefore, there may be less
information available regarding such issuers and there may not be a correlation
between such information and the market value of the depositary
receipts.
EMERGING
MARKETS RISK.
Investments in securities issued by governments and companies operating in
emerging market countries involve
additional risks relating to political, economic, or regulatory conditions not
associated with investments in securities and instruments issued by U.S.
companies or by companies operating in other developed market countries. This is
due to, among other things, the potential for greater market volatility, lower
trading volume, a lack of liquidity, potential for market manipulation, higher
levels of inflation, political and economic instability, greater risk of a
market shutdown and more governmental limitations on foreign investments in
emerging market countries than are typically found in more developed market
countries. Also, certain
regions, countries or asset types may suffer periods of relative illiquidity.
Moreover, emerging
14
market
countries often have less uniformity in accounting and reporting requirements,
unsettled securities laws, less reliable securities valuations and greater risks
associated with custody of securities than developed markets. In addition, the
Public Company Accounting Oversight Board, which regulates auditors of U.S.
public companies, is unable to inspect audit work papers in certain emerging
market countries. Emerging market countries often have greater risk of capital
controls through such measures as taxes or interest rate control than developed
markets. Certain emerging market countries may also lack the infrastructure
necessary to attract large amounts of foreign trade and investment. Local
securities markets in emerging market countries may trade a small number of
securities and may be unable to respond effectively to increases in trading
volume, potentially making prompt liquidation of holdings difficult or
impossible. Settlement procedures in emerging market countries are frequently
less developed and reliable than those in the U.S. and other developed market
countries. In addition, significant delays may occur in registering the transfer
of securities. Settlement or registration problems may make it more difficult
for the Fund to value its portfolio securities and could cause the Fund to miss
attractive investment opportunities. Investing in emerging market countries
involves a higher risk of expropriation, nationalization, confiscation of assets
and property or the imposition of restrictions on foreign investments and on
repatriation of capital invested by certain emerging market countries. Enforcing
legal rights may be made difficult, costly and slow in emerging markets as there
may be additional problems enforcing claims against non-U.S. governments. As
such, the rights and remedies associated with emerging market investment
securities may be different than those available for investments in more
developed markets. For example, it may be more difficult for shareholders to
bring derivative litigation or for U.S. regulators to bring enforcement actions
against issuers in emerging markets.
In
addition, due to the differences in regulatory, accounting, audit and financial
recordkeeping standards, including financial disclosures, less information about
emerging market companies is publicly available and information that is
available may be unreliable or outdated. This may affect the Index Provider’s
ability to compute and construct the Index and may further impede the Advisor’s
ability to accurately evaluate the index data provided. This potential for error
in index construction and index data could affect the
overall performance of the Fund.
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 the issuers
occur. Common stock prices may be particularly sensitive to rising interest
rates, as the cost of capital rises and borrowing costs increase. Equity
securities may decline significantly in price over short or extended periods of
time, and such declines may occur in the equity market as a whole, or they may
occur in only a particular country, company, industry or sector of the market.
Additionally, holders of an issuer's common stock may be subject to greater
risks than holders of its preferred stock and debt securities because common
stockholders' claims are subordinated to those of holders of preferred
stocks and debt securities upon the bankruptcy of an issuer.
EUROPE
RISK. First Trust Indxx
Medical Devices ETF invests significantly in the securities of European issuers.
Therefore, in addition
to the risks associated with investments in non-U.S. securities generally, the
Fund is subject to certain risks associated specifically with investments in
securities of European issuers. Political or economic disruptions in European
countries, even in countries in which the Fund is not invested, may adversely
affect security values and thus the Fund's holdings. A significant number of
countries in Europe are member states in the EU, and the member states no longer
control their own monetary policies by directing independent interest rates for
their currencies. In these member states, the authority to direct monetary
policies, including money supply and official interest rates for the Euro, is
exercised by the European Central Bank. In a 2016 referendum, the United Kingdom
elected to withdraw from the EU. After years of negotiations between the United
Kingdom and the EU, a withdrawal agreement was reached whereby the United
Kingdom formally left the EU. As the second largest economy among EU members,
the implications of the United Kingdom’s withdrawal are difficult to gauge and
cannot be fully known. Trade between the United Kingdom and the EU is highly
integrated through supply chains and trade in services, as well as through
multinational companies. The United Kingdom’s departure may negatively impact
the EU and Europe as a whole by causing volatility within the EU, triggering
prolonged economic downturns in certain European countries or sparking
additional member
states to contemplate departing the EU (thereby perpetuating political
instability in the region).
HEALTH
CARE COMPANIES RISK. The Fund invests
significantly in health care companies. Health care companies, such as
companies
providing medical and health care goods and services, companies engaged in
manufacturing medical equipment, supplies and pharmaceuticals, as well as
operating healthcare facilities and the provision of managed healthcare, may be
affected by government regulations and government health care programs,
increases or decreases in the cost of medical products and services and product
liability claims, among other factors. Many health care companies are heavily
dependent on patent protection, and the expiration of a company’s patent may
adversely affect that company’s profitability. Research and development costs of
bringing new drugs to market are substantial, and there is no guarantee that a
proposed product
15
will
ever come to market. Health care companies are also subject to competitive
forces that may result in price discounting, may be thinly
capitalized and susceptible to product obsolescence.
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
OR MODEL CONSTITUENT RISK. The Fund may be a
constituent of one or more indices or ETF models. As a result, the
Fund may be included in one or more index-tracking ETFs or mutual funds. Being a
component security of such a vehicle could greatly affect the trading activity
involving the Fund's shares, the size of the Fund and the market volatility of
the Fund’s shares. Inclusion in an index could increase demand for the Fund and
removal from an index could result in outsized selling activity in a relatively
short period of time. As a result, the Fund’s net asset value could be
negatively impacted and the Fund’s market price may be below the Fund’s net
asset value during certain periods. In addition, index rebalances may
potentially result in increased trading activity. To the extent buying or
selling activity increases, the Fund can be exposed to increased brokerage costs and
adverse tax consequences and the market price of the Fund can be negatively
affected.
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 from 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.
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
16
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.
NON-CORRELATION
RISK.
The Fund’s return may not match the return of its Index for a number of reasons.
The Fund incurs operating
expenses not applicable to its 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 its 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. An investment in
securities of non-U.S. companies involves risks not associated with domestic
issuers.
Investment in non-U.S. securities may involve higher costs than investment in
U.S. securities, including higher transaction and custody costs as well as the
imposition of additional taxes by non-U.S. governments. Non-U.S. investments may
also involve risks associated with the level of currency exchange rates, less
complete financial information about the issuers, less market liquidity, more
market volatility and political instability. Future political and economic
developments, the possible imposition of withholding taxes on dividend income,
the possible seizure or nationalization of non-U.S. holdings, the imposition of
sanctions by foreign governments, the possible establishment of capital
controls, exchange controls or freezes on the convertibility of currency or the
adoption of other governmental restrictions might adversely affect an investment
in non-U.S. securities. Additionally, non-U.S. issuers may be subject to less
stringent regulation, and to different accounting, auditing and recordkeeping
requirements. The U.S. and non-U.S. markets often rise and fall at different
times or by different amounts due to
economic or other regional developments particular to a given country or
region.
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
its 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.
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. First Trust 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), First Trust believes that large discounts or premiums to the net asset
value of shares should not be sustained absent disruptions to the creation and
redemption mechanism, extreme market volatility or potential lack of authorized
participants. During stressed market conditions, the market for the Fund’s
shares may
17
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.
SMALLER
COMPANIES RISK. The stock price of
small and/or mid capitalization companies may be more volatile than those
of
larger companies and therefore the Fund’s share price may be more volatile than
those of funds that invest a larger percentage of their assets in stocks issued
by large capitalization companies. Stock prices of small and/or mid
capitalization companies are also generally more vulnerable than those of large
capitalization companies to adverse business and economic developments.
Securities of small and/or mid capitalization companies may be thinly traded,
making it difficult for the Fund to buy and sell them. In addition, small and/or
mid capitalization companies are typically less financially stable than larger,
more established companies and may reinvest a high proportion of their earnings
in their business and may not pay dividends. Small and/or mid capitalization
companies may also depend on a small number of essential personnel who may also
be less experienced than the management of larger companies, making these
companies more vulnerable to experiencing adverse effects due to the loss or
inexperience of personnel. Small and/or mid capitalization companies also
normally have less diverse product lines than those of large capitalization
companies and are more susceptible to adverse developments concerning
their
products.
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.
Non-Principal
Risks
BORROWING
AND LEVERAGE RISK. If the Fund borrows
money, it must pay interest and other fees, which may reduce the Fund’s
returns. Any such borrowings are intended to be temporary. However, under
certain market conditions, including periods of decreased liquidity, such
borrowings might be outstanding for longer periods of time. As prescribed by the
1940 Act, the Fund will be required to maintain specified asset coverage of at
least 300% with respect to any bank borrowing immediately following such
borrowing and at all times thereafter. The Fund may be required to dispose of
assets on unfavorable terms if market fluctuations
or other factors reduce the Fund’s asset coverage to less than the prescribed
amount.
CASH
TRANSACTIONS RISK. The Fund may, under
certain circumstances, effect a portion of creations and redemptions for
cash,
rather than in-kind securities. As a result, an investment in the Fund may be
less tax-efficient than an investment in an ETF that effects its creations and
redemptions only in-kind. ETFs are able to make in-kind redemptions and avoid
being taxed on gains on the distributed portfolio securities at the fund level.
A Fund that effects redemptions for cash may be required to sell portfolio
securities in order to obtain the cash needed to distribute redemption proceeds.
Any recognized gain on these sales by the Fund will generally cause the Fund to
recognize a gain it might not otherwise have recognized, or to recognize such
gain sooner than would otherwise be required if it were to distribute portfolio
securities only in-kind. The Fund intends to distribute these gains to
shareholders to avoid being taxed on this gain at the fund level and otherwise
comply with the special tax rules that apply to it. This strategy may cause
shareholders to be subject to tax on gains they would not otherwise be subject
to, or at an earlier date than if they had made an investment in a different
ETF. Moreover, cash transactions may have to be carried out over several days if
the securities market is relatively illiquid and may involve considerable
brokerage fees and taxes. These brokerage fees and taxes, which will be higher
than if the Fund sold and redeemed its shares entirely in-kind, will be passed
on to those purchasing and redeeming Creation Units in the form of creation and
redemption transaction fees. In addition, these factors may result in wider
spreads between the bid and the offered prices of the Fund’s shares than
for ETFs
that distribute portfolio securities in-kind.
FAILURE
TO QUALIFY AS A REGULATED INVESTMENT COMPANY RISK. If, in any year, the Fund fails to
qualify as a regulated investment company
under the applicable tax laws, the Fund would be taxed as an ordinary
corporation. In such circumstances, the Fund's taxable income would be subject to
tax at the Fund level and to a further tax at the shareholder level when such
income
is distributed and the Fund could be required to recognize
unrealized gains, pay substantial taxes and interest and make substantial
distributions before requalifying as a regulated investment company that is
accorded special tax treatment. This would cause
investors to incur higher tax liabilities than they otherwise would have
incurred and would have a negative impact on Fund returns. If the Fund fails to
qualify as a regulated investment company, distributions to the Fund's
shareholders generally would be eligible (i) for treatment as qualified dividend
income in the case of individual shareholders and (ii) for the dividends received deduction in the
case of corporate shareholders. See "Federal Tax Matters."
18
INTELLECTUAL
PROPERTY RISK. The Fund relies on a
sublicense from First Trust that permits the Fund to use the associated
trade
names, trademarks and/or service marks (the “Intellectual
Property”) in connection with
the name and/or investment strategies
of the Fund. Such license may be terminated by the owners of the Intellectual
Property and, as a result, the Fund may lose its ability to use the Intellectual
Property. There is also no guarantee that the owners of the Intellectual
Property have all rights to license the Intellectual Property to First Trust for
use by the Fund. Accordingly, in the event the license is terminated or the
owners of the Intellectual Property do not have rights to license the
Intellectual Property, it may have a significant effect on
the operation of the Fund.
INTERNATIONAL
CLOSED MARKET TRADING RISK. Because securities
held by the Fund trade on non-U.S. exchanges that are
closed when the Fund’s primary listing exchange is open, there are likely to be
deviations between the current price of an underlying security and the last
quoted price for the underlying security (i.e., the Fund’s quote
from the closed foreign market) used
for purposes of calculating the Fund's net asset value, resulting in premiums or
discounts to the Fund’s net asset value that may be greater than those
experienced by other exchange-traded funds. In addition, shareholders may not be
able to purchase and sell shares of the Fund on days when the net asset value of
the Fund could be significantly affected by events in the relevant
foreign markets.
ISSUER
SPECIFIC CHANGES RISK. The value of an
individual security or particular type of security can be more volatile than the
market as a whole and can perform differently from the value of the market as a
whole.
LEGISLATION/LITIGATION
RISK.
From time to time, various legislative initiatives are proposed in the United
States and abroad, which
may have a negative impact on certain companies in which the Fund invests. In
addition, litigation regarding any of the issuers of the securities owned by the
Fund, or industries represented by these issuers, may negatively impact the
value of the securities. Such legislation or litigation may cause the Fund to
lose value or may result in higher portfolio turnover if the Advisor determines to
sell such a holding.
RESTRICTED
SECURITIES RISK. Restricted
securities are securities that cannot be offered for public resale unless
registered under
the applicable securities laws or that have a contractual restriction that
prohibits or limits their resale. Restricted securities include private
placement securities that have not been registered under the applicable
securities laws, such as Rule 144A securities, and securities of U.S. and
non-U.S. issuers that are issued pursuant to Regulation S. Private placements
are generally subject to strict restrictions on resale. Restricted securities
may be illiquid as they generally are not listed on an exchange and may have no
active trading market. The Fund may be unable to sell a restricted security on
short notice or may be able to sell them only at a price below current value. It
may be more difficult to determine a market value for a restricted security.
Also, the Fund may get limited information about the issuer of a restricted
security, so it may be less able to predict a loss. In addition, if Fund
management receives material non-public information about the issuer, the Fund
may as a result be unable to sell the securities. Certain restricted securities
may involve a high degree of business and financial risk and may result in
substantial losses.
SECURITIES
LENDING RISK. The Fund may engage
in securities lending. Securities lending involves exposure to certain risks,
including
counterparty risk, collateral risk and operational risk. Counterparty risk is
the risk that the borrower may fail to return the securities in a timely manner
or at all. As a result, to the extent the Fund engages in securities lending, in
such transactions it may suffer a loss and experience delays in recovering the
lent securities. Any delay in the return of securities on loan may restrict the
ability of the Fund to meet delivery or payment obligations. Collateral risk is
the risk that the collateral received may be realized at a value lower than the
value of the securities lent, whether due to inaccurate pricing of the
collateral, adverse market movements in the value of the collateral, intra-day
increases in the value of the securities lent, a deterioration in the credit
rating of the collateral issuer, or the illiquidity of the market in which the
collateral is traded. Securities lending also entails operational risks, such as
settlement failures or delays in the settlement of instructions. Such failures
or delays may restrict the ability of the Fund to meet delivery or payment
obligations. Lastly, securities lending activities may result in adverse tax
consequences for the Fund and its shareholders. For instance, substitute
payments for dividends received by the Fund for securities loaned out by the
Fund will not be considered qualified dividend income. The Fund could lose money
if its short-term investment
of the collateral declines in value over the period of the
loan.
Fund
Organization
The Fund is a series
of the Trust, an investment company registered under the 1940 Act. The Fund is
treated as a separate fund with its own investment objective and policies. The Trust is
organized as a Massachusetts business trust. The Board is responsible for the
overall management and direction of the Trust. The Board elects the Trust’s
officers and approves all significant agreements, including those with the
Advisor, distributor, custodian and fund administrative and accounting
agent.
19
Management
of the Fund
First
Trust Advisors L.P., 120 East Liberty Drive, Wheaton, Illinois 60187, is the
investment advisor to the Fund. In this capacity, First Trust is responsible for
the selection and ongoing monitoring of the securities in the Fund's portfolio
and certain other services necessary
for the management of the Fund.
First
Trust is a limited partnership with one limited partner, Grace Partners of
DuPage L.P., and one general partner, The Charger Corporation. Grace Partners of
DuPage L.P. is a limited partnership with one general partner, The Charger
Corporation, and a number of limited partners. The Charger Corporation is an
Illinois corporation controlled by James A. Bowen, the Chief Executive Officer of
First Trust. First Trust discharges its responsibilities subject to the policies
of the Fund.
First Trust serves
as advisor or sub-advisor for 11 mutual fund portfolios, 10
exchange-traded funds consisting of 256 series and 9 closed-end funds. It is also the
portfolio supervisor of certain unit investment trusts sponsored by First Trust
Portfolios L.P. (“FTP”), an affiliate of First Trust, 120
East Liberty Drive, Wheaton, Illinois 60187. FTP specializes in the
underwriting, trading and
distribution of unit investment trusts and other securities. FTP is the
principal underwriter of the shares of the Fund.
The members of the
Investment Committee are jointly and primarily responsible for the management of
the Fund. Investments are made under the direction of the Investment Committee.
The Investment Committee consists of Daniel J. Lindquist, David G. McGarel, Jon C. Erickson,
Roger F. Testin, Stan Ueland, Chris A. Peterson and Erik
Russo.
●
Mr. Lindquist is
Chairman of the Investment Committee and presides over Investment Committee
meetings. Mr. Lindquist is responsible for overseeing the implementation of the
Fund’s investment strategy. Mr. Lindquist was a Senior Vice President of First
Trust and FTP from September 2005 to July 2012 and is now a Managing Director of
First Trust and FTP. Mr. Lindquist is a recipient of the Chartered Financial
Analyst designation.
●
Mr. McGarel is the
Chief Investment Officer, Chief Operating Officer and a Managing Director of
First Trust and FTP. As First Trust’s Chief Investment Officer, Mr. McGarel
consults with the other members of the Investment Committee on market conditions
and First Trust’s general investment philosophy. Mr. McGarel was a Senior Vice
President of First Trust and FTP from January 2004 to July 2012. Mr. McGarel is
a recipient of the Chartered Financial Analyst designation.
●
Mr. Erickson joined
First Trust in 1994 and is a Senior Vice President of First Trust and FTP. As
the head of First Trust’s Equity Research Group, Mr. Erickson is responsible for
determining the securities to be purchased and sold by funds that do not utilize
quantitative investment strategies. Mr. Erickson is a recipient of the Chartered
Financial Analyst designation.
●
Mr. Testin is a
Senior Vice President of First Trust and FTP. Mr. Testin is the head of First
Trust’s Portfolio Management Group. Mr. Testin has been a Senior Vice President
of First Trust and FTP since November 2003. Mr. Testin is a recipient of the
Chartered Financial Analyst designation.
●
Mr. Ueland joined
First Trust as a Vice President in August 2005 and has been a Senior Vice
President of First Trust and FTP since September 2012. At First Trust, he plays
an important role in executing the investment strategies of each portfolio of
exchange-traded funds advised by First Trust.
●
Mr. Peterson is a Senior Vice
President and head of First Trust’s strategy research group. He joined First
Trust in January of 2000. Mr. Peterson is responsible for developing and
implementing quantitative equity investment strategies. Mr. Peterson received
his B.S. in Finance from Bradley University in 1997 and his M.B.A. from the
University of Chicago Booth School of Business in 2005. He has over 26 years of
financial services industry experience and is a recipient of the Chartered
Financial Analyst designation.
●
Mr. Russo is a Vice
President of First Trust. He is responsible for implementing the investment
strategies of each portfolio of exchange-traded funds advised by First Trust in
his role as a Portfolio Manager. Mr. Russo joined First Trust in January of
2010.
For
additional information concerning First Trust, including a description of the
services provided to the Fund, see the Fund's SAI. Additional information about
the compensation of Investment Committee members, other accounts managed by
members of the Investment Committee and ownership by members of the Investment
Committee of shares of the Fund is provided in the
SAI.
Management
Fee
Pursuant
to an investment management agreement between First Trust and the Trust, on
behalf of the Fund (the “Investment
Management
Agreement”), First Trust
manages the investment of the Fund's assets. First Trust is paid an annual
unitary
20
management
fee by the Fund equal to 0.70% of the Fund's average daily net assets and is
responsible for the Fund's expenses, including the cost of transfer agency,
custody, fund administration, legal, audit and other services, but excluding fee
payments under the Investment Management Agreement, interest, taxes, acquired
fund fees and expenses, if any, brokerage commissions and other expenses
connected with the execution of portfolio transactions, expenses associated with
short sales transactions, distribution and
service fees payable pursuant to a Rule 12b-1 plan, if any, and extraordinary
expenses.
As approved by the
Trust’s Board of Trustees, the management fee paid to First Trust will be
reduced at certain levels of Fund net assets (“breakpoints”). See the Fund's Statement of
Additional Information for more information on the
breakpoints.
How
to Buy and Sell Shares
Most
investors buy and sell shares of the Fund in secondary market transactions
through brokers. Shares of the Fund are listed for trading on the secondary
market on one or more national securities exchanges. Shares can be bought and
sold throughout the trading day like other publicly traded shares. There is no
minimum investment when buying shares on the Exchange. Although shares are
generally purchased and sold in “round lots” of 100 shares, brokerage firms
typically permit investors to purchase or sell shares in smaller “odd lots,” at
no per-share price differential. When buying or selling shares through a broker,
investors should expect to pay brokerage commissions, investors may receive less
than the net asset value of the shares because shares are bought and sold at
market prices rather than at net asset value, and investors may pay some or all
of the bid-ask spread for each
transaction (purchase or sale) of Fund shares. Share prices are reported in
dollars and cents per share.
Under normal
circumstances, the Fund will pay out redemption proceeds to a redeeming
authorized participant within one day after the authorized participant’s
redemption request is received, in accordance with the process set forth in the
Fund’s SAI and in the
agreement between the authorized participant and the Fund’s distributor.
However, the Fund reserves the right, including under stressed market
conditions, to take up to seven days after the receipt of a redemption request
to pay an authorized participant, all as permitted by the 1940 Act. If the Fund
has foreign investments in a country where a local market holiday, or series of
consecutive holidays, or the extended delivery cycles for transferring foreign
investments to redeeming authorized participants prevents the Fund from
delivering such foreign investments to an authorized participant in response to
a redemption request, the Fund may take up to 15 days after the receipt of the
redemption request to deliver such investments to the authorized
participant.
For
purposes of the 1940 Act, the Fund is treated as a registered investment
company, and the acquisition of shares by other registered investment companies
and companies relying on Sections 3(c)(1) and 3(c)(7) of the 1940 Act is subject
to the restrictions of
Section 12(d)(1) of the 1940 Act and the related rules and
interpretations.
Book
Entry
Shares
are held in book-entry form, which means that no share certificates are issued.
The Depository Trust Company (“DTC”) or
its nominee is the record owner of all outstanding shares of the Fund and is
recognized as the owner of all shares for all purposes.
Investors
owning shares are beneficial owners as shown on the records of DTC or its
participants. DTC serves as the securities depository for all shares.
Participants in DTC include securities brokers and dealers, banks, trust
companies, clearing corporations and other institutions that directly or
indirectly maintain a custodial relationship with DTC. As a beneficial owner of
shares, you are not entitled to receive physical delivery of share certificates
or to have shares registered in your name, and you are not considered a
registered owner of shares. Therefore, to exercise any right as an owner of
shares, you must rely upon the procedures of DTC and its participants. These
procedures are the same as those that apply to any other stocks that
you hold
in book-entry or “street name” form.
Share
Trading Prices
The
trading price of shares of the Fund on the secondary market is based on market
price and may differ from the Fund’s daily net asset value and
can be affected by market forces of supply and demand, economic conditions and
other factors.
Frequent
Purchases and Redemptions of the Fund's Shares
The
Fund imposes no restrictions on the frequency of purchases and redemptions
(“market
timing”). In determining not
to approve
a written, established policy, the Board evaluated the risks of market timing
activities by the Fund's shareholders. The Board considered that the Fund's
shares can only be purchased and redeemed directly from the Fund in Creation
Units by broker-dealers and large institutional investors that have entered into
participation agreements (i.e., authorized
participants (“APs”)) and that the vast
majority of trading in the Fund's shares occurs on the secondary market. Because
the secondary
21
market
trades do not involve the Fund directly, it is unlikely those trades would cause
many of the harmful effects of market timing, including dilution, disruption of
portfolio management, increases in the Fund's trading costs and the realization
of capital gains. With respect to trades directly with the Fund, to the extent
effected in-kind (i.e., for securities),
those trades do
not cause any of the harmful effects that may result from frequent cash trades.
To the extent that the Fund may effect the purchase or redemption of Creation
Units in exchange wholly or partially for cash, the Board noted that such trades
could result in dilution to the Fund and increased transaction costs, which
could negatively impact the Fund's ability to achieve its investment objective.
However, the Board noted that direct trading by APs is critical to ensuring that
the shares trade at or close to net asset value. In addition, the Fund imposes
fixed and variable transaction fees on purchases and redemptions of Creation
Units to cover the custodial and other costs incurred by the Fund in effecting
trades. Finally, the Advisor monitors purchase and redemption orders from APs
for patterns of abusive trading and the Fund reserves the right to not accept
orders from APs that the
Advisor has determined may be disruptive to the management of the
Fund.
Dividends,
Distributions and Taxes
Dividends
from net investment income, if any, are declared and paid quarterly by the Fund.
The Fund distributes its net realized capital gains, if
any, to shareholders at least annually.
Distributions
in cash may be reinvested automatically in additional whole shares only if the
broker through whom you purchased shares makes such option available. Such
shares will generally be reinvested by the broker based upon the market price of
those
shares and investors may be subject to customary brokerage commissions charged
by the broker.
Federal
Tax Matters
This
section summarizes some of the main U.S. federal income tax consequences of
owning shares of the Fund. This section is current as of the date of this
prospectus. Tax laws and interpretations change frequently, and these summaries
do not describe all of the tax consequences to all taxpayers. For example, these
summaries generally do not describe your situation if you are a corporation, a
non-U.S. person, a broker-dealer, or other investor with special circumstances.
In addition, this section does not describe your
state, local or non-U.S. tax consequences.
This
federal income tax summary is based in part on the advice of counsel to the
Fund. The Internal Revenue Service ("IRS") could
disagree with any conclusions set forth in this section. The following
disclosure may not be sufficient for you to use for the purpose of
avoiding penalties under federal tax law.
As with any
investment, you should seek advice based on your individual circumstances from
your own tax advisor.
Fund
Status
The
Fund intends to continue to qualify as a “regulated investment company” (a
“RIC”) under the federal
tax laws. If the Fund qualifies as a RIC and distributes its income as required
by the tax law, the Fund generally will not pay federal income
taxes.
Distributions
The
Fund’s distributions are generally taxable. After the end of each year, you will
receive a tax statement that separates the distributions of the Fund into two
categories, ordinary income distributions and capital gain dividends. Ordinary
income distributions are generally taxed at your ordinary tax rate, however, as
further discussed below certain ordinary income distributions received from the
Fund may be taxed at the capital gains tax rates. Generally, you will treat all
capital gain dividends as long-term capital
gains regardless of how long you have owned your shares.
To determine your
actual tax liability for your capital gain dividends, you must calculate your
total net capital gain or loss for the tax year after considering all of your
other taxable transactions, as described below. In addition, the Fund may make
distributions that represent a return of capital for tax purposes and thus will
generally not be taxable to you; however, such distributions may reduce your tax
basis in your shares, which could result in you having to pay higher taxes in
the future when shares are sold, even if you sell the shares at a loss from your
original investment. A “return of capital” is a return, in whole or in part, of
the funds that you previously invested in the Fund. A return of capital
distribution should not be considered part of a Fund’s dividend yield or total
return of an investment in Fund shares. The tax status of your distributions
from the Fund is not affected by whether you reinvest your distributions in
additional shares or receive them in cash. The tax laws may require you to treat
distributions made to you in January as if you had received them on December 31
of the previous year.
22
Income
from the Fund may also be subject to a 3.8% “Medicare tax.” This tax generally
applies to your net investment income if your adjusted gross income exceeds
certain threshold amounts, which are $250,000 in the case of married couples
filing joint returns and
$200,000 in the case of single individuals.
Dividends
Received Deduction
A
corporation that owns shares generally will not be entitled to the dividends
received deduction with respect to many dividends received from the Fund because
the dividends received deduction is generally not available for distributions
from RICs. However, certain ordinary income dividends on shares that are
attributable to qualifying dividends received by the Fund from certain
corporations may be
reported by the Fund as being eligible for the dividends received
deduction.
Capital
Gains and Losses and Certain Ordinary Income Dividends
If
you are an individual, the maximum marginal stated federal tax rate for net
capital gain is generally 20% (15% or 0% for taxpayers with taxable incomes
below certain thresholds). Some capital gains, including some portion of your
capital gain dividends may be taxed at a higher maximum stated tax rate. Capital
gains may also be subject to the Medicare tax described above.
Net
capital gain equals net long-term capital gain minus net short-term capital loss
for the taxable year. Capital gain or loss is long-term if the holding period
for the asset is more than one year and is short-term if the holding period for
the asset is one year or less. You must exclude the date you purchase your
shares to determine your holding period. However, if you receive a capital gain
dividend from the Fund and sell your shares at a loss after holding them for six
months or less, the loss will be recharacterized as long-term capital loss to
the extent of the capital gain dividend received. The tax rates for capital
gains realized from assets held for one year or less are generally the same as
for ordinary income. The Internal Revenue Code of 1986, as amended,
treats certain capital gains as ordinary income in special
situations.
An
election may be available to you to defer recognition of the gain attributable
to a capital gain dividend if you make certain qualifying investments within a
limited time. You should talk to your tax advisor about the availability of this
deferral election and its
requirements.
Ordinary
income dividends received by an individual shareholder from a RIC such as the
Fund are generally taxed at the same rates that apply to net capital gain (as
discussed above), provided certain holding period requirements are satisfied and
provided the dividends are attributable to qualifying dividends received by the
Fund itself. The Fund will provide notice to its shareholders of the amount of any
distribution which may be taken into account as a dividend which is eligible for
the capital gains tax rates.
Sale
of Shares
If
you sell or redeem your shares, you will generally recognize a taxable gain or
loss. To determine the amount of this gain or loss, you must subtract your tax
basis in your shares from the amount you receive in the transaction. Your tax
basis in your shares is generally equal to the cost of your shares, generally
including brokerage fees, if any. In some cases, however, you may have to adjust
your tax basis after you purchase your shares. An election may be available to
you to defer recognition of capital gain if you make certain qualifying
investments within a limited time. You should talk to your tax advisor about the
availability of this
deferral election and its requirements.
Taxes
on Purchase and Redemption of Creation Units
If
you exchange securities for Creation Units, you will generally recognize a gain
or a loss. The gain or loss will be equal to the difference between the market
value of the Creation Units at the time and your aggregate basis in the
securities surrendered and the cash component paid. If you exchange Creation
Units for securities, you will generally recognize a gain or loss equal to the
difference between your basis in the Creation Units and the aggregate market
value of the securities received and the cash redemption amount. The IRS,
however, may assert that a loss realized upon an exchange of securities for
Creation Units or Creation Units for securities cannot be deducted currently
under the rules governing “wash sales,” or on the basis that there has been no
significant change in economic position.
Treatment
of Fund Expenses
Expenses incurred and
deducted by the Fund will generally not be treated as income taxable to
you.
23
Non-U.S.
Tax Credit
Because
the Fund may invest in non-U.S. securities, the tax statement that you receive
may include an item showing non-U.S. taxes the Fund paid to other countries. In
this case, dividends taxed to you will include your share of the taxes the Fund
paid to
other countries. You may be able to deduct or receive a tax credit for your
share of these taxes.
Non-U.S.
Investors
If
you are a non-U.S. investor (i.e., an investor other
than a U.S. citizen or resident or a U.S. corporation, partnership, estate
or
trust), you should be aware that, generally, subject to applicable tax treaties,
distributions from the Fund will be characterized as dividends for federal
income tax purposes (other than dividends which the Fund properly reports as
capital gain dividends) and will be subject to U.S. federal income taxes,
including withholding taxes, subject to certain exceptions described below.
However, distributions received by a non-U.S. investor from the Fund that are
properly reported by the Fund as capital gain dividends may not be subject to
U.S. federal income taxes, including withholding taxes, provided that the Fund
makes certain elections and certain other conditions are met. Distributions from
the Fund that are properly reported by the Fund as an interest-related dividend
attributable to certain interest income received by the Fund or as a short-term
capital gain dividend attributable to certain net short-term capital gain income
received by the Fund may not be subject to U.S. federal income taxes, including
withholding taxes when received by certain non-U.S. investors, provided that the
Fund makes certain elections and certain other conditions are met. For tax years
after December 31, 2022, amounts paid to or recognized by a non-U.S. affiliate
that are excluded from tax under the portfolio interest, capital gain dividends,
short-term capital gains or tax-exempt interest dividend exceptions or
applicable treaties, may be taken into consideration in determining whether a
corporation is an “applicable
corporation” subject to a 15% minimum tax on adjusted financial statement
income.
Distributions
may be subject to a U.S. withholding tax of 30% in the case of distributions to
(i) certain non-U.S. financial institutions that have not entered into an
agreement with the U.S. Treasury to collect and disclose certain information and
are not resident in a jurisdiction that has entered into such an agreement with
the U.S. Treasury and (ii) certain other non-U.S. entities that do not provide
certain certifications and information about the entity’s U.S. owners. This
withholding tax is also currently scheduled to apply to the gross proceeds from
the disposition of securities that produce U.S. source interest or dividends.
However, proposed regulations may eliminate the requirement to withhold on
payments of gross proceeds from dispositions.
It is the
responsibility of the entity through which you hold your shares to determine the
applicable withholding.
Investments
in Certain Non-U.S. Corporations
If
the Fund holds an equity interest in any “passive foreign investment companies”
(“PFICs”), which are
generally certain non-U.S. corporations
that receive at least 75% of their annual gross income from passive sources
(such as interest, dividends, certain rents and royalties or capital gains) or
that hold at least 50% of their assets in investments producing such passive
income, the Fund could be subject to U.S. federal income tax and additional
interest charges on gains and certain distributions with respect to those equity
interests, even if all the income or gain is timely distributed to its
shareholders. The Fund will not be able to pass through to its shareholders any
credit or deduction for such taxes. The Fund may be able to make an election
that could ameliorate these adverse tax consequences. In this case, the Fund
would recognize as ordinary income any increase in the value of such PFIC
shares, and as ordinary loss any decrease in such value to the extent it did not
exceed prior increases included in income. Under this election, the Fund might
be required to recognize in a year income in excess of its distributions from
PFICs and its proceeds from dispositions of PFIC stock during that year, and
such income would nevertheless be subject to the distribution requirement and
would be taken into account for purposes of the 4% excise tax. Dividends paid by
PFICs are not treated as
qualified dividend income.
Distribution
Plan
FTP
serves as the distributor of Creation Units for the Fund on an agency basis. FTP
does not maintain a secondary market in shares.
The
Board has adopted a Distribution and Service Plan pursuant to Rule 12b-1 under
the 1940 Act. In accordance with the Rule 12b-1 plan, the Fund is authorized to
pay an amount up to 0.25% of its average daily net assets each year to reimburse
FTP for amounts expended to finance activities primarily intended to result in
the sale of Creation Units or the provision of investor services. FTP may also
use this amount to compensate securities dealers or other persons that are APs
for providing distribution
assistance, including broker-dealer and shareholder support and educational and
promotional services.
24
The Fund does not
currently pay 12b-1 fees, and pursuant to a contractual arrangement, the Fund
will not pay 12b-1 fees any time before July 31, 2025. However, in the event 12b-1
fees are charged in the future, because these fees are paid out of the Fund's
assets, over time these fees will increase the cost of your investment and may
cost you more than certain other types of sales charges.
Net
Asset Value
The
Fund’s net asset value (“NAV”) is determined as of
the close of regular trading (normally 4:00 p.m., Eastern Time) on each
day
the New York Stock Exchange (“NYSE”) is open for
trading. If the NYSE closes early on a valuation day, the Fund’s NAV
will
be determined as of that time. The Fund’s NAV is calculated by dividing the
value of the net assets of the Fund (i.e., the value
of its total assets less total liabilities) by the total number of outstanding
shares of the Fund, generally rounded to the nearest
cent.
Section
2(a)(41) of the 1940 Act provides that when a market quotation is readily
available for a fund’s portfolio investment, it must be valued at the market
value. Rule 2a-5 under the 1940 Act (“Rule
2a-5”)
defines a readily available market quotation as
“a quoted price (unadjusted) in active markets for identical investments that
the fund can access at the measurement date, provided that a quotation will not
be readily available if it is not reliable.” If a market quotation is not
“readily available,” then the portfolio
investment must be fair valued as determined in good faith by a fund’s board of
trustees.
Rule
2a-5 permits a fund’s board of trustees to designate the fund’s investment
adviser as its “valuation designee” to perform fair value determinations,
subject to certain conditions. Accordingly, the Fund’s Board has designated
First Trust as its valuation designee (the “Valuation
Designee”) pursuant to Rule
2a-5 and has directed the Valuation Designee to perform the functions
required
in Rule 2a-5(a) subject to the requirements of Rule 2a-5(b) on behalf of all
portfolio investments of the Fund, subject to the Board’s oversight. First Trust
has established a pricing committee (the “Pricing
Committee”) to assist in the
administration of
the duties of the Valuation Designee. The Valuation Designee has adopted
valuation procedures for the First Trust Funds (the “Valuation
Procedures”), a brief summary of
which is set forth below.
The
Pricing Committee has identified certain portfolio investments that are
routinely categorized as having a readily available market quotation. The market
value of an investment with a readily available market quotation is typically
determined on the basis of official closing prices or last reported sale prices
or equivalent price, although this can vary based on investment type
and/or
the availability of such prices.
The
Pricing Committee has also identified certain portfolio investments that are
routinely categorized as fair valued investments. In general, for such
investments, the Fund’s accounting agent will obtain all pricing data for use in
valuing such investments from a pricing service provider approved by the Pricing
Committee (each, a “Pricing
Service Provider”), subject to the
oversight of
the Pricing Committee. Pricing Service Providers typically value
non-exchange-traded instruments utilizing a range of market-based inputs and
assumptions. For example, when available, Pricing Service Providers may utilize
inputs such as benchmark yields, reported trades, broker-dealer quotes, spreads,
and transactions for comparable instruments. In pricing certain instruments, a
Pricing Service Provider may consider information about an instrument’s issuer
or market activity. Pricing Service Provider valuations of non-exchange-traded
instruments generally represent the service’s good faith opinion as to what the
holder of an instrument would receive in an orderly transaction for an
institutional round lot position under current market conditions. Certain
exchange-traded options, such as FLEX Options, are typically valued using a
model-based price provided by a Pricing
Service Provider.
Portfolio
investments trading on foreign exchanges or over-the-counter markets that close
prior to the close of the NYSE may be fair valued using a systematic fair
valuation model provided by a Pricing Service Provider. If these foreign
securities meet certain criteria in relation to the valuation model, their
valuation is systematically adjusted to reflect the impact of movement
in the
U.S. market after the close of certain foreign markets.
If
no price is available from a Pricing Service Provider or if the Pricing
Committee has reason to question the accuracy or the reliability of a price
supplied for a portfolio investment or the use of amortized cost, the Pricing
Committee will determine the fair value of such portfolio investment in a manner
that it believes most appropriately reflects the fair value of the portfolio
investment on the valuation date (a “Special
Fair Value Pricing Situation”). In a Special Fair
Value Pricing Situation, the Pricing Committee
will determine a fair value price subject to the process outlined in the
Valuation Procedures and based on a consideration of all
available information to the Pricing Committee at the time of the
determination.
Additionally,
for foreign securities, if an extraordinary market event occurs between the time
the last “current” market quotation is available for a security in the Fund’s
portfolio and the time the Fund’s NAV is determined that calls into doubt
whether that
25
earlier
market quotation represents fair value at the time the Fund’s NAV is determined,
the Pricing Committee will determine the fair valuation as
set forth in the Valuation Procedures.
Fair
value represents a good faith approximation of the value of a portfolio
investment and is the amount the Fund might reasonably expect to receive from
the current sale of that investment in an arm’s-length transaction. Valuing the
Fund’s investments using fair value pricing will result in prices that may
differ from current market valuations, if any, and that may not be the prices at
which those investments could have been sold during the period in which the
particular fair values were used. While the Valuation Procedures and Valuation
Designee’s processes are intended to result in the Fund’s NAV calculation that
fairly reflects the values as of the time of pricing, the fair value determined
for a portfolio instrument may be materially different from the
value that could be realized upon the sale of that instrument.
Foreign
currencies are translated into U.S. dollars at the exchange rate of such
currencies against the U.S. dollar as provided by a Pricing Service Provider.
All assets denominated in foreign currencies will be converted into U.S. dollars
at the exchange rates in effect at
the time of valuation.
Fund
Service Providers
The Bank of New York
Mellon, 240 Greenwich Street, New York, New York 10286, acts as administrator,
accounting agent, custodian and transfer agent for the Fund. Chapman and Cutler
LLP, 320 South Canal
St., Chicago, Illinois 60606, serves as legal counsel to the Fund. First Trust
serves as the fund reporting agent for the Fund.
Index
Provider
The
Index is compiled by the Index Provider. The Index Provider is not affiliated
with the Fund, First Trust or FTP. The Fund is entitled to use the Index
pursuant to a sublicensing arrangement with First Trust, which in turn has a
licensing agreement with the Index Provider. The Index Provider or its agent
also serves as calculation agent for the Index (the “Index
Calculation Agent”). The
Index Calculation Agent is responsible for the management of the day-to-day
operations of the Index, including calculating the value of the Index every 15
seconds, widely disseminating the Index values every second and tracking
corporate actions, some of which result
in Index adjustments.
Disclaimers
First
Trust does not guarantee the accuracy and/or the completeness of the Index or
any data included therein, and First Trust shall have no liability for any
errors, omissions or interruptions therein. First Trust makes no warranty,
express or implied, as to results to be obtained by the Fund, owners of the
shares of the Fund or any other person or entity from the use of the Index or
any data included therein. First Trust makes no express or implied warranties,
and expressly disclaims all warranties of merchantability or fitness for a
particular purpose or use with respect to the Index or any data included
therein. Without limiting any of the foregoing, in no event shall First Trust
have any liability for any special, punitive, direct, indirect or consequential
damages (including lost profits) arising out of matters relating to the use of
the Index, even if notified of the possibility of such
damages.
The Fund is not
sponsored, endorsed, sold or promoted by Indxx, Inc. Indxx,Inc. makes no
representation or warranty, express or implied, to the owners of the Fund or any
member of the public regarding the advisability of trading in the Fund. Indxx,
Inc.’s only relationship to First Trust is the licensing of certain trademarks
and trade names of Indxx, Inc. and of the Indxx Medical Devices Index, which is
determined, composed and calculated by Indxx, Inc. without regard to First Trust
or the Fund. Indxx, Inc. has no
obligation to take the needs of First Trust or the owners of the Fund into
consideration in determining, composing or calculating the Indxx Medical Devices Index. Indxx, Inc. is
not responsible for and has not participated in the determination of the
timing of, prices at, or quantities of the Fund to be listed or in the
determination or calculation of the equation by which the Fund is to be
converted into cash. Indxx, Inc. has no obligation or liability in connection
with the administration,
marketing or trading of the Fund.
INDXX, INC. DOES NOT
GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE INDXX MEDICAL DEVICES INDEX OR ANY DATA INCLUDED
THEREIN AND INDXX, INC. SHALL HAVE NO LIABILITY FOR ANY ERRORS, OMISSIONS, OR
INTERRUPTIONS THEREIN. INDXX, INC. MAKES NO WARRANTY, EXPRESS OR IMPLIED, AS TO
RESULTS TO BE OBTAINED BY FIRST TRUST, OWNERS OF THE FUND, OR ANY OTHER PERSON
OR ENTITY FROM THE USE OF THE INDXX MEDICAL DEVICES INDEX OR ANY DATA
INCLUDED THEREIN. INDXX, INC. MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND
EXPRESSLY DISCLAIMS
ALL WARRANTIES, OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE
WITH RESPECT TO THE INDXX MEDICAL DEVICES INDEX OR ANY DATA
INCLUDED THEREIN. WITHOUT LIMITING ANY OF THE
26
FOREGOING,
IN NO EVENT SHALL INDXX, INC. HAVE ANY LIABILITY FOR ANY LOST PROFITS OR
INDIRECT, PUNITIVE, SPECIAL OR CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS),
EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES. THERE ARE NO THIRD PARTY
BENEFICIARIES OF ANY AGREEMENTS OR ARRANGEMENTS BETWEEN INDXX, INC. AND FIRST
TRUST.
Premium/Discount
Information
Information
showing the number of days the market price of the Fund's shares was greater (at
a premium) and less (at a discount) than the Fund's net asset value for the most
recently completed year, and the most recently completed calendar quarters
since
that year (or life of the Fund, if shorter), is available at
https://www.ftportfolios.com/Retail/etf/home.aspx.
27
Financial
Highlights
The financial
highlights table is intended to help you understand the Fund's financial
performance for the periods shown. Certain information reflects financial
results for a single share of the Fund. The total returns represent the rate
that an investor would have earned (or lost) on an investment in the Fund
(assuming reinvestment of all dividends and distributions). The information for
the periods indicated has been derived from financial statements audited by
Deloitte & Touche LLP, whose report, along with the Fund's financial
statements, is included in the Annual Report to Shareholders dated March 31,
2024 and is incorporated
by reference in the Fund's SAI, which is available upon
request.
First
Trust Exchange-Traded Fund VI
Financial
Highlights
For a share outstanding throughout each period
For a share outstanding throughout each period
First
Trust Indxx Medical Devices ETF (MDEV)
|
|
Year
Ended March 31, |
|
Period
Ended
March
31, | |
|
|
2024 |
2023 |
|
2022(a) |
|
Net
asset value, beginning of period |
$20.39 |
$22.42 |
|
$25.17 |
|
Income
from investment operations: |
|
|
|
|
|
Net
investment income (loss) |
(0.00
)(b)(c) |
0.01 |
|
(0.46
) |
|
Net
realized and unrealized gain (loss) |
0.93 |
(2.04
) |
|
(2.29
) |
|
Total
from investment operations |
0.93 |
(2.03
) |
|
(2.75
) |
|
Net asset
value, end of period |
$21.32 |
$20.39 |
|
$22.42 |
|
Total
Return(d) |
4.56
% |
(9.05
)% |
|
(10.93
)% |
|
Ratios
to average net assets/supplemental data: |
|
|
|
|
|
Net
assets, end of period (in 000’s) |
$3,198 |
$2,039 |
|
$2,242 |
|
Ratio of
total expenses to average net assets |
0.70
% |
0.70
% |
|
0.70
%(e) |
|
Ratio of
net investment income (loss) to average net assets |
(0.02
)% |
0.04
% |
|
(0.36
)%(e) |
|
Portfolio
turnover rate(f) |
17
% |
22
% |
|
13
% |
(a)
Inception
date is June 22, 2021, which is consistent with the commencement of investment
operations and is the date the initial creation units were
established.
(b)
Amount
represents less than $0.01.
(c)
Based on
average shares outstanding.
(d)
Total return is
calculated assuming an initial investment made at the net asset value at the
beginning of the period, reinvestment of all distributions at net asset value
during the period, and redemption at net asset value on the last day of the
period. The returns presented do not reflect the deduction of taxes that a
shareholder would pay on Fund distributions or the redemption or sale of Fund
shares. Total return is calculated for the time period presented and is not
annualized for periods of less than a year.
(e)
Annualized.
(f)
Portfolio
turnover is calculated for the time period presented and is not annualized for
periods of less than a year and does not include securities received or
delivered from processing creations or redemptions and in-kind
transactions.
28
Other
Information
Continuous
Offering
The
Fund issues, on a continuous offering basis, its shares in one or more groups of
a fixed number of Fund shares (each such group of such specified number of
individual Fund shares, a “Creation
Unit Aggregation”). The method by
which Creation Unit Aggregations
of Fund shares are created and traded may raise certain issues under applicable
securities laws. Because new Creation Unit Aggregations of shares are issued and
sold by the Fund on an ongoing basis, a “distribution,” as such term is used in
the Securities Act, may occur at any point. Broker-dealers and other persons are
cautioned that some activities on their part may, depending on the
circumstances, result in their being deemed participants in a distribution in a
manner which could render them statutory underwriters and subject them to the
prospectus delivery requirement and liability provisions of the Securities
Act.
For
example, a broker-dealer firm or its client may be deemed a statutory
underwriter if it takes Creation Unit Aggregations after placing an order with
FTP, breaks them down into constituent shares and sells such shares directly to
customers, or if it chooses to couple the creation of a supply of new shares
with an active selling effort involving solicitation of secondary market demand
for shares. A determination of whether one is an underwriter for purposes of the
Securities Act must take into account all the facts and circumstances pertaining
to the activities of the broker-dealer or its client in the particular case, and
the examples mentioned above should not be considered a complete description of
all the activities that could lead to a characterization as
an underwriter.
Broker-dealer
firms should also note that dealers who are not “underwriters” but are effecting
transactions in shares, whether or not participating in the distribution of
shares, are generally required to deliver a prospectus. This is because the
prospectus delivery exemption in Section 4(a)(3) of the Securities Act is not
available in respect of such transactions as a result of Section
24(d) of
the 1940 Act. As a result, broker-dealer firms should note that dealers who are
not underwriters but are participating
in a distribution (as contrasted with ordinary secondary market transactions)
and thus dealing with the shares that are part of an overallotment within the
meaning of Section 4(a)(3)(C) of
the Securities Act would be unable to take advantage
of the prospectus delivery exemption provided by Section 4(a)(3) of
the Securities Act. Firms that incur a prospectus delivery
obligation with respect to shares are reminded that, under the Securities Act
Rule 153, a prospectus delivery obligation under Section 5(b)(2) of
the Securities Act owed to a broker-dealer in connection with a sale on the
Exchange is satisfied by the
fact that the prospectus is available from the Exchange upon request. The
prospectus delivery mechanism provided in Rule 153 is available with respect to
transactions on a national securities exchange, a trading facility or an
alternative trading system.
FTP, or its
affiliates, or a fund or unit investment trust for which FTP or an affiliate
serves as sponsor or investment advisor, may purchase shares of the Fund through
a broker-dealer or other investors, including in secondary market transactions,
and because FTP or its affiliates may be deemed affiliates of the Fund, the
shares are being registered to permit the resale of these shares from time to
time after any such purchase. The Fund will not receive any of the proceeds from
the resale of such shares.
29
|
First
Trust
Exchange-Traded
Fund VI |
First Trust Indxx
Medical Devices ETF
For
More Information
For
more detailed information on the Fund, several additional sources of information
are available to you. The SAI, incorporated by reference into this prospectus,
contains detailed information on the Fund's policies and operation. Additional
information about the Fund's investments is available in the annual and
semi-annual reports to shareholders. In the Fund's annual report, you will find
a discussion of the market conditions and investment strategies that
significantly impacted the Fund's performance during the last fiscal year. The
Fund's most recent SAI, annual and semi-annual reports and certain other
information are available free of charge by calling the Fund at (800) 621-1675,
on the Fund's website at www.ftportfolios.com or through your financial advisor.
Shareholders may call the toll-free number above with
any inquiries.
You
may obtain this and other information regarding the Fund, including the SAI and
the Codes of Ethics adopted by First Trust, FTP and the Trust, directly from the
Securities and Exchange Commission (the "SEC"). Information on
the
SEC’s website is free of charge. Visit the SEC’s online EDGAR database at
www.sec.gov. You may also request information regarding the Fund by sending a
request (along with a duplication fee) to the SEC by sending an electronic
request to
[email protected].
First Trust
Advisors L.P.
120 East Liberty Drive, Suite 400
Wheaton, Illinois 60187
(800) 621-1675
120 East Liberty Drive, Suite 400
Wheaton, Illinois 60187
(800) 621-1675
www.ftportfolios.com
SEC
File #: 333-182308
811-22717