|
First
Trust
Exchange-Traded
Fund VI |
Prospectus
|
FUND
NAME |
TICKER
SYMBOL |
EXCHANGE |
|
First
Trust Dorsey Wright Momentum & Low Volatility
ETF |
DVOL |
Nasdaq |
|
First
Trust Dorsey Wright Momentum & Value ETF |
DVLU |
Nasdaq |
|
First
Trust SMID Cap Rising Dividend Achievers ETF |
SDVY |
Nasdaq |
Each
of the funds listed above (each a “Fund,” and collectively,
the “Funds”) lists and
principally trades its shares on The Nasdaq Stock Market LLC (“Nasdaq” or the “Exchange”). Market prices may
differ to some degree from the net asset value of the shares. Unlike mutual
funds, each Fund issues and redeems shares at net asset value, only in large
blocks of shares called "Creation
Units."
Each
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 Funds.
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
February 1,
2022
Summary
Information
First Trust Dorsey Wright Momentum & Low Volatility ETF (DVOL)
First Trust Dorsey Wright Momentum & Low Volatility ETF (DVOL)
(fees paid directly from your investment)
|
Maximum
Sales Charge (Load) Imposed on Purchases (as a percentage of offering
price) |
|
(expenses that you pay each year as a percentage of the value of your investment)
|
Management
Fees |
|
|
Distribution
and Service (12b-1) Fees |
|
|
Other
Expenses |
|
|
Total
Annual Fund Operating Expenses |
|
|
1
Year |
3
Years |
5
Years |
10
Years |
|
$ |
$ |
$ |
$ |
3
First
Trust Dorsey Wright Momentum & Low Volatility ETF (DVOL)
4
First
Trust Dorsey Wright Momentum & Low Volatility ETF (DVOL)
5
First
Trust Dorsey Wright Momentum & Low Volatility ETF (DVOL)
6
First
Trust Dorsey Wright Momentum & Low Volatility ETF (DVOL)
7
First
Trust Dorsey Wright Momentum & Low Volatility ETF (DVOL)
Calendar Year Total Returns as of 12/31
|
|
|
|
|
|
|
|
|
|
|
|
1
Year |
Since
Inception |
Inception
Date |
|
Return Before
Taxes |
|
|
|
|
Return After
Taxes on Distributions |
|
|
|
|
Return After
Taxes on Distributions and Sale of Fund Shares |
|
|
|
|
Dorsey Wright
Momentum Plus Low VolatilityTM Index
(reflects no deduction
for fees,
expenses or taxes) |
|
|
|
|
S&P
500® Index
(reflects no deduction for fees, expenses or taxes) |
|
|
|
Management
Investment
Advisor
First
Trust Advisors L.P. (“First
Trust”
or the “Advisor”)
8
First
Trust Dorsey Wright Momentum & Low Volatility ETF (DVOL)
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
•
Jon C. Erickson,
Senior Vice President of First Trust
•
David G. McGarel,
Chief Investment Officer, Chief Operating Officer and Managing Director 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 2018, except Erik Russo, who has served as a part of the portfolio
management team of the Fund since 2020.
Purchase
and Sale of Fund Shares
The Fund issues and
redeems shares on a continuous basis, at net asset value, only in large blocks
of shares called “Creation Units.” Individual shares of the Fund
may only be purchased and sold on the secondary market through a broker-dealer.
Since shares of the Fund trade on securities exchanges in the secondary market
at their market price rather than their net asset value, the Fund’s shares may
trade at a price greater than (premium) or less than (discount) the Fund’s net
asset value. An investor may incur costs attributable to the difference between
the highest price a buyer is willing to pay to purchase shares of the Fund (bid)
and the lowest price a seller is willing to accept for shares of the Fund (ask)
when buying or selling shares in the secondary market (the “bid-ask
spread”). Recent
information, including the Fund’s net asset value, market price, premiums and
discounts, bid-ask spreads and the median bid-ask spread for the Fund’s most
recent fiscal year, is available online at
https://www.ftportfolios.com/Retail/etf/home.aspx.
Tax
Information
The
Fund’s distributions are taxable and will generally be taxed as ordinary income
or capital gains. Distributions on shares held in a
tax-deferred account, while not immediately taxable, will be subject to tax when
the shares are no longer held in a tax-deferred account.
Payments
to Broker-Dealers and Other Financial Intermediaries
If
you purchase shares of the Fund through a broker-dealer or other financial
intermediary (such as a bank), 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.
9
Summary
Information
First Trust Dorsey Wright Momentum & Value ETF (DVLU)
First Trust Dorsey Wright Momentum & Value ETF (DVLU)
(fees paid directly from your investment)
|
Maximum
Sales Charge (Load) Imposed on Purchases (as a percentage of offering
price) |
|
(expenses that you pay each year as a percentage of the value of your investment)
|
Management
Fees |
|
|
Distribution
and Service (12b-1) Fees |
|
|
Other
Expenses |
|
|
Total
Annual Fund Operating Expenses |
|
|
1
Year |
3
Years |
5
Years |
10
Years |
|
$ |
$ |
$ |
$ |
10
First
Trust Dorsey Wright Momentum & Value ETF (DVLU)
11
First
Trust Dorsey Wright Momentum & Value ETF (DVLU)
12
First
Trust Dorsey Wright Momentum & Value ETF (DVLU)
13
First
Trust Dorsey Wright Momentum & Value ETF (DVLU)
Calendar Year Total Returns as of 12/31
14
First
Trust Dorsey Wright Momentum & Value ETF (DVLU)
|
|
|
|
|
|
|
|
|
|
|
|
1
Year |
Since
Inception |
Inception
Date |
|
Return Before
Taxes |
|
|
|
|
Return After
Taxes on Distributions |
|
|
|
|
Return After
Taxes on Distributions and Sale of Fund Shares |
|
|
|
|
Dorsey Wright
Momentum Plus ValueTM Index
(reflects no deduction for fees,
expenses or
taxes) |
|
|
|
|
S&P
500® Index
(reflects no deduction for fees, expenses or taxes) |
|
|
|
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
•
Jon C. Erickson,
Senior Vice President of First Trust
•
David G. McGarel,
Chief Investment Officer, Chief Operating Officer and Managing Director 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 2018, except Erik Russo, who has served as a part of the portfolio
management team of the Fund since 2020.
Purchase
and Sale of Fund Shares
The
Fund issues and redeems shares on a continuous basis, at net asset value, only
in large blocks of shares called “Creation Units.” Individual
shares of the Fund may only be purchased and sold on the secondary market
through a broker-dealer. Since shares of the Fund trade on securities exchanges
in the secondary market at their market price rather than their net asset value,
the Fund’s shares may trade at a price greater than (premium) or less than
(discount) the Fund’s net asset value. An investor may incur costs attributable
to the difference between the highest price a buyer is willing to pay to
purchase shares
15
First
Trust Dorsey Wright Momentum & Value ETF (DVLU)
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 or other financial
intermediary (such as a bank), 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.
16
Summary
Information
First Trust SMID Cap Rising Dividend Achievers ETF (SDVY)
First Trust SMID Cap Rising Dividend Achievers ETF (SDVY)
(fees paid directly from your investment)
|
Maximum
Sales Charge (Load) Imposed on Purchases (as a percentage of offering
price) |
|
(expenses that you pay each year as a percentage of the value of your investment)
|
Management
Fees |
|
|
Distribution
and Service (12b-1) Fees |
|
|
Other
Expenses |
|
|
Total
Annual Fund Operating Expenses |
|
|
1
Year |
3
Years |
5
Years |
10
Years |
|
$ |
$ |
$ |
$ |
17
First
Trust SMID Cap Rising Dividend Achievers ETF (SDVY)
18
First
Trust SMID Cap Rising Dividend Achievers ETF (SDVY)
19
First
Trust SMID Cap Rising Dividend Achievers ETF (SDVY)
20
First
Trust SMID Cap Rising Dividend Achievers ETF (SDVY)
21
First
Trust SMID Cap Rising Dividend Achievers ETF (SDVY)
Calendar Year Total Returns as of 12/31
|
|
|
|
|
|
|
|
|
|
|
|
1
Year |
Since
Inception |
Inception
Date |
|
Return Before
Taxes |
|
|
|
|
Return After
Taxes on Distributions |
|
|
|
|
Return After
Taxes on Distributions and Sale of Fund Shares |
|
|
|
|
Nasdaq US
Small Mid Cap Rising Dividend AchieversTM Index
(reflects no
deduction
for fees, expenses or taxes) |
|
|
|
|
S&P
1000® Index
(reflects no deduction for fees, expenses or taxes) |
|
|
|
Management
Investment
Advisor
First
Trust Advisors L.P. (“First
Trust”
or the “Advisor”)
22
First
Trust SMID Cap Rising Dividend Achievers ETF (SDVY)
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
•
Jon C. Erickson,
Senior Vice President of First Trust
•
David G. McGarel,
Chief Investment Officer, Chief Operating Officer and Managing Director 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 2017, except Erik Russo, who has served as a part of the portfolio
management team of the Fund since 2020.
Purchase
and Sale of Fund Shares
The Fund issues and
redeems shares on a continuous basis, at net asset value, only in large blocks
of shares called “Creation Units.” Individual shares of the Fund
may only be purchased and sold on the secondary market through a broker-dealer.
Since shares of the Fund trade on securities exchanges in the secondary market
at their market price rather than their net asset value, the Fund’s shares may
trade at a price greater than (premium) or less than (discount) the Fund’s net
asset value. An investor may incur costs attributable to the difference between
the highest price a buyer is willing to pay to purchase shares of the Fund (bid)
and the lowest price a seller is willing to accept for shares of the Fund (ask)
when buying or selling shares in the secondary market (the “bid-ask
spread”). Recent
information, including the Fund’s net asset value, market price, premiums and
discounts, bid-ask spreads and the median bid-ask spread for the Fund’s most
recent fiscal year, is available online at
https://www.ftportfolios.com/Retail/etf/home.aspx.
Tax
Information
The
Fund’s distributions are taxable and will generally be taxed as ordinary income
or capital gains. Distributions on shares held in a
tax-deferred account, while not immediately taxable, will be subject to tax when
the shares are no longer held in a tax-deferred account.
Payments
to Broker-Dealers and Other Financial Intermediaries
If
you purchase shares of the Fund through a broker-dealer or other financial
intermediary (such as a bank), 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.
23
Additional
Information on the Funds' Investment Objectives and Strategies
Each
Fund is a series of First Trust Exchange-Traded Fund VI and is regulated as an
“investment company” under the 1940 Act. Each Fund
operates as an index fund and is not actively managed by First Trust. As such,
each Fund’s investment objective is to provide investment results that
correspond generally to the price and yield (before the Fund’s fees and
expenses) of its Index. In seeking to achieve this objective, each Fund will
normally invest at least 90% of its net assets (including investment borrowings)
in the securities that comprise its Index. Nasdaq, Inc. serves as the index
provider for the indices tracked by the First Trust Dorsey Wright Momentum &
Low Volatility ETF, First Trust Dorsey Wright Momentum & Value ETF and First
Trust SMID Cap Rising Dividend Achievers ETF. Nasdaq, Inc. may be referred to
throughout this prospectus as an “Index
Provider.”
Each
Fund will generally employ a full replication strategy, meaning that it will
normally invest in all of the securities comprising its 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, a Fund may purchase a sample of securities in its Index.
There may also be instances in which First Trust may choose to overweight
certain securities in an Index, purchase securities not in an 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 an Index. Each Fund may sell securities
that are represented in its 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.
Each
Fund’s investment objective, its 90% 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 upon 60 days’ prior written notice to shareholders. Certain fundamental
policies of the Funds are set forth in the Statement of Additional Information
(“SAI”) under “Investment
Objective and Policies.”
While
it is not expected that the Funds 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 Funds have adopted a policy that they 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.
Dorsey
Wright Momentum Plus Low VolatilityTM
Index
The Dorsey Wright
Momentum Plus Low VolatilityTM Index is a rules-based equity index
that tracks the overall performance of 50 stocks within the Nasdaq US Large Mid
Cap IndexTM that exhibit the lowest levels of
volatility while maintaining high levels of relative strength. The Index is
rebalanced and reconstituted quarterly in January, April, July and
October.
Dorsey
Wright Momentum Plus ValueTM
Index
The Dorsey Wright
Momentum Plus ValueTM Index is a rules-based equity index
that tracks the overall performance of the 50 most undervalued stocks within the
Nasdaq US Large Mid Cap IndexTM that maintain high levels of
relative strength. The Index is rebalanced and reconstituted quarterly in
January, April, July and October.
Nasdaq
US Small Mid Cap Rising Dividend AchieversTM
Index
The Nasdaq US Small Mid Cap Rising
Dividend AchieversTM Index is a modified equal weighted
index designed to provide exposure to a portfolio of income-producing small and
mid cap U.S. companies. The Index is reconstituted annually and rebalanced
quarterly.
More
information regarding each Index, including additional detail on the Index
methodology, may be found on an Index Provider’s website.
Neither the Fund, the Board, First Trust, or any of their affiliates, are
responsible for the information set forth on an Index Provider’s website.
Information from an 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.
Fund
Investments
Principal
Investments
Equity
Securities
The Funds invest in
equity securities, including common stocks, depositary receipts and REITs.
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
24
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. REITs typically own and operate
income-producing real estate, such as residential or commercial buildings, or
real-estate related assets, including mortgages.
Non-Principal
Investments
Cash
Equivalents and Short-Term Investments
Each
Fund may invest in securities with maturities of less than one year or cash
equivalents, or it may hold cash. The percentage of a 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, a 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, a Fund may not be able to achieve its investment objective.
A Fund may adopt a defensive strategy when the portfolio managers believe
securities in which such 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 Funds may invest
up to 15% of their net assets in securities 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, certain restricted securities
(securities the disposition of which is restricted under the federal securities
laws), certain securities that may only be resold pursuant to Rule 144A under
the Securities Act, and certain repurchase agreements, among
others.
Disclosure
of Portfolio Holdings
Each
Fund’s portfolio holdings are available on the Funds' website at
www.ftportfolios.com. A description of the policies and procedures with
respect to the disclosure of the Funds' portfolio securities is included in the
Funds' SAI, which is also available on the Funds' website.
Risks
of Investing in the Funds
Principal
Risks
Risk
is inherent in all investing. Investing in a Fund involves risk, including the
risk that you may lose all or part of your investment. There can be no
assurance that a Fund will meet its stated objectives. Before you invest, you
should consider the following 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.
AUTHORIZED
PARTICIPANT CONCENTRATION RISK. Only an authorized
participant may engage in creation or redemption transactions directly with a
Fund. A limited number of institutions act as authorized participants for a
Fund. Although participants are not obligated to make a market in a 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, a Fund’s shares may trade at a
premium or discount to the Fund’s net asset value and possibly face
delisting.
CYBER
SECURITY RISK. The Funds are
susceptible to operational risks through breaches in cyber security. A breach in
cyber security refers to both intentional and unintentional events that may
cause a Fund to lose proprietary information, suffer data corruption or lose
operational capacity. Such events could cause a 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
25
issuers
of securities in which a Fund invests, have the ability to cause disruptions and
impact business operations, potentially resulting in:
financial losses; interference with a 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 a 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 a Fund in order to resolve or
prevent cyber incidents in the future. While the Funds have 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
Funds cannot control the cyber security plans and systems put in place by
service providers to the Funds, issuers in which the Funds invest, market makers
or authorized participants. However, there is no guarantee that such efforts
will succeed, and the Funds and their shareholders could be negatively impacted
as a result.
DIVIDENDS
RISK.
Certain Funds invest in dividend-paying securities. A Fund’s investment in
dividend-paying securities could cause the Fund to underperform similar funds
that invest without consideration of an issuer’s track record of paying
dividends. Companies that issue dividend-yielding securities are not required to
continue to pay dividends on such securities. Therefore, there is the
possibility that such companies could reduce or eliminate the payment of
dividends in the future especially if the companies are facing an economic
downturn, which could negatively affect a Fund’s performance.
EQUITY
SECURITIES RISK. The value of a
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.
FINANCIAL
COMPANIES RISK. Certain Funds invest
significantly in financial companies. Financial companies are subject to
extensive governmental regulation and intervention, which may adversely affect
the scope of their activities, the prices they can charge, the amount and types
of capital they must maintain and, potentially, their size. Governmental
regulation may change frequently and may have significant adverse consequences
for financial companies, including effects not intended by such regulation. The
impact of more stringent capital requirements, or recent or future regulation in
various countries, on any individual financial company or on financial companies
as a whole cannot be predicted. Certain risks may impact the value of
investments in financial companies more severely than those of investments in
other issuers, including the risks associated with companies that operate with
substantial financial leverage. Financial companies may also be adversely
affected by volatility in interest rates, loan losses and other customer
defaults, decreases in the availability of money or asset valuations, credit
rating downgrades and adverse conditions in other related markets. Insurance
companies in particular may be subject to severe price competition and/or rate
regulation, which may have an adverse impact on their profitability. Financial
companies are also a target for cyber attacks and may experience technology
malfunctions and disruptions as a result.
INDEX
CONCENTRATION RISK. A
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 a 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 a Fund were more broadly diversified. A
significant exposure makes a Fund more susceptible to any single occurrence and
may subject a 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 a 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, a 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. Each Fund may be a
constituent of one or more indices or ETF models. As a result, a 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 a
Fund, the size of the Fund and the market volatility of the Fund’s shares.
Inclusion in an index could increase demand for a Fund and removal from an index
could result in outsized selling activity in
26
a
relatively short period of time. As a result, a 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, a 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 an Index accurately, or that an 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 an
Index, and do not guarantee that an Index will be calculated in accordance with
its stated methodology. The Advisor’s mandate as described in this prospectus is
to manage each 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
an Index accurately. Therefore, losses or costs associated with any Index
Provider or agent errors generally will be borne by a Fund and its shareholders.
To correct any such error, the Index Provider or its agents may carry out an
unscheduled rebalance of an Index or other modification of Index constituents or
weightings. When a Fund in turn rebalances its portfolio, any transaction costs
and market exposure arising from such portfolio rebalancing will be borne by a
Fund and its shareholders. Unscheduled rebalances also expose a Fund to
additional tracking error risk. Errors in respect of the quality, accuracy and
completeness of the data used to compile an 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 an Index is less commonly used as a benchmark
by funds or advisors. For example, during a period where an Index contains
incorrect constituents, a 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 a Fund and its shareholders. The Index
Provider and its agents rely on various sources of information to assess the
criteria of issuers included in an Index, including information that may be
based on assumptions and estimates. Neither a Fund nor the Advisor can offer
assurances that an Index’s calculation methodology or sources of information
will provide an accurate assessment of included issuers. Unusual market
conditions may cause the Index Provider to postpone a scheduled rebalance, which
could cause an 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 an 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 an Index due to unusual
market conditions or in order, for example, to correct an error in the selection
of index constituents.
INDUSTRIALS
COMPANIES RISK. Certain Funds invest
significantly in industrials companies. The value of securities issued by
industrials companies may be adversely affected by supply and demand related to
their specific products or services and industrials sector products in general.
The products of manufacturing companies may face obsolescence due to rapid
technological developments and frequent new product introduction. World events
and changes in government regulations, import controls, economic conditions and
exchange rates may adversely affect the performance of companies in the
industrials sector. Industrials companies may be adversely affected by liability
for environmental damage and product liability claims. Industrials companies may
also be adversely affected by changes or trends in commodity prices, which may
be influenced by unpredictable factors. Industrials companies, particularly
aerospace and defense companies, may also be adversely affected by government
spending policies because companies in this sector tend to rely to a significant
extent on government demand for their products and services.
INFLATION
RISK.
Inflation risk is the risk that the value of assets or income from investments
will be less in the future as inflation decreases the value of money. As
inflation increases, the present value of a Fund’s assets and distributions may
decline. Inflation creates uncertainty over the future real value (after
inflation) of an investment. Inflation rates may change frequently and
drastically as a result of various factors, including unexpected shifts in the
domestic or global economy, and a Fund’s investments may not keep pace with
inflation, which may result in losses to Fund investors.
LOW
VOLATILITY RISK. Certain Funds seek
to invest in low volatility stocks. Although subject to the risks of common
stocks, low volatility stocks are seen as having a lower risk profile than the
overall markets. However, a portfolio comprised of low volatility stocks may not
produce investment exposure that has lower variability to changes in such
stocks’ price levels. Low volatility stocks are likely to underperform the
broader market during periods of rapidly rising stock prices and may reduce a
Fund’s participation in market gains.
MARKET
CAPITALIZATION DEVIATION RISK. Certain Funds seek
to hold securities with a market capitalization that falls within a specific
range. However, because of possible corporate action or market movement, there
can be no assurance that
27
the
securities held by a Fund will stay within the Fund’s intended market
capitalization range. As a result, a Fund may be exposed to additional risk or
investors may not be given the opportunity to invest fully in a certain market
capitalization range.
MARKET
MAKER RISK. The Funds face
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 a Fund’s portfolio securities and the Fund’s market price. A Fund may rely on
a small number of third-party market makers to provide a market for the purchase
and sale of shares. Any trading halt or other problem relating to the trading
activity of these market makers could result in a dramatic change in the spread
between a 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 security, or shares of a Fund in general, may fall in
value. Securities are subject to market fluctuations caused by such factors as
economic, political, regulatory or market developments, changes in interest
rates and perceived trends in securities prices. Shares of a Fund could decline
in value or underperform other investments due to short-term market movements or
any longer periods during more prolonged market downturns. In addition, local,
regional or global events such as war, acts of terrorism, spread of infectious
diseases or other public health issues, recessions, or other events could have a
significant negative impact on a Fund and its investments. For example, the
coronavirus disease 2019 (COVID-19) global pandemic and the aggressive responses
taken by many governments, including closing borders, restricting international
and domestic travel, and the imposition of prolonged quarantines or similar
restrictions, had negative impacts, and in many cases severe impacts, on markets
worldwide. While the development of vaccines has slowed the spread of the virus
and allowed for the resumption of reasonably normal business activity in the
United States, many countries continue to impose lockdown measures in an attempt
to slow the spread. Additionally, there is no guarantee that vaccines will be
effective against emerging variants of the disease. As this global pandemic
illustrated, such events may affect certain geographic regions, countries,
sectors and industries more significantly than others. These events also
adversely affect the prices and liquidity of a Fund’s portfolio securities or
other instruments and could result in disruptions in the trading markets. Any of
such circumstances could have a materially negative impact on the value of a
Fund’s shares and result in increased market volatility. During any such events,
a Fund’s shares may trade at increased premiums or discounts to their net asset
value.
MOMENTUM
INVESTING RISK. Certain Funds
utilize a “momentum” style of investing that emphasizes selecting stocks that
have had higher recent price performance compared to other stocks. Momentum can
change quickly and stocks that previously exhibited high momentum
characteristics may not experience positive momentum or may experience more
volatility than the market as a whole. In addition, there may be periods when
the momentum style of investing is out of favor and the investment performance
of a Fund may suffer.
NON-CORRELATION
RISK. A
Fund’s return may not match the return of its Index for a number of reasons. A
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, a Fund’s portfolio holdings may not exactly replicate the securities
included in its Index or the ratios between the securities included in the
Index.
OPERATIONAL
RISK. Each Fund is
subject to risks arising from various operational factors, including, but not
limited to, human error, processing and communication errors, errors of a Fund’s
service providers, counterparties or other third-parties, failed or inadequate
processes and technology or systems failures. Each 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 each Fund's ability to
meet its investment objective. Although the Funds and the Funds’ 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 Funds are not
actively managed. Each Fund invests in securities included in or representative
of its Index regardless of investment merit. The Funds generally will not
attempt to take defensive positions in declining markets. In the event that an
Index is no longer calculated, the corresponding Index license is terminated or
the identity or character of an Index is materially changed, the applicable Fund
will seek to engage a replacement index.
PORTFOLIO
TURNOVER RISK. Certain Funds have
an investment strategy that may frequently involve buying and selling portfolio
securities. High portfolio turnover may result in a Fund paying higher levels of
transaction costs, including brokerage commissions, dealer mark-ups and other
costs and may generate greater tax liabilities for shareholders. Portfolio
turnover risk may cause a Fund’s performance to be less than expected.
28
PREMIUM/DISCOUNT
RISK.
The market price of a 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 a 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 a
Fund’s shares may become less liquid in response to deteriorating liquidity in
the market for a Fund’s underlying portfolio holdings, which could in turn lead
to differences between the market price of a Fund’s shares and their net asset
value.
REAL
ESTATE COMPANIES RISK. Certain Funds invest significantly in
real estate companies. Real estate companies include REITs and other companies
involved in the operation and development of commercial, residential and
industrial real estate. An investment in a real estate company may be subject to
risks similar to those associated with direct ownership of real estate,
including the possibility of declines in the value of real estate, losses from
casualty or condemnation, and changes in local and general economic conditions,
supply and demand, interest rates, environmental liability, zoning laws,
regulatory limitations on rents, property taxes, and operating expenses. Some
real property companies have limited diversification because they invest in a
limited number of properties, a narrow geographic area, or a single type of
property. The performance of real estate companies has historically been
cyclical and particularly sensitive to the overall economy and market changes,
including declines in the value of real estate or, conversely, saturation of the
real estate market, economic downturns and defaults by borrowers or tenants
during such periods, increases in competition, possible lack of mortgage funds
or other limits to accessing the credit or capital markets, and changes in
interest rates.
REIT RISK.
Certain Funds invest in
REITs. REITs typically own and operate income-producing real estate, such as
residential or commercial buildings, or real-estate related assets, including
mortgages. As a result, investments in REITs are subject to the risks associated
with investing in real estate, which may include, but are not limited to:
fluctuations in the value of underlying properties; defaults by borrowers or
tenants; market saturation; changes in general and local operating expenses; and
other economic, political or regulatory occurrences affecting companies in the
real estate sector. Additionally, investing in REITs involves certain other
risks related to their structure and focus, which include, but are not limited
to, dependency upon management skills, limited diversification, the risks of
locating and managing financing for projects, heavy cash flow dependency,
possible default by borrowers, the costs and potential losses of
self-liquidation of one or more holdings, the risk of a possible lack of
mortgage funds and associated interest rate risks, overbuilding, property
vacancies, increases in property taxes and operating expenses, changes in zoning
laws, losses due to environmental damages, changes in neighborhood values and
appeal to purchasers, the possibility of failing to maintain exemptions from
registration under the 1940 Act, failure to satisfy the requirements of the
Internal Revenue Code of 1986 for maintaining REIT status and, in many cases,
relatively small market capitalization, which may result in less market
liquidity and greater price volatility for a REIT’s shares. REITs are also
subject to the risk that the real estate market may experience an economic
downturn generally, which may have a material effect on the real estate in which
the REITs invest and their underlying portfolio securities.
SMALLER
COMPANIES RISK. Certain Funds invest
in the securities of small and/or mid capitalization companies. The stock price
of small and/or mid capitalization companies may be more volatile than those of
larger companies and therefore a 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 a 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
29
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 a Fund will
continue to be met or will remain unchanged. A Fund may have difficulty
maintaining its listing on the Exchange in the event a 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.
VALUE
STOCKS INVESTMENT RISK. Certain Funds
utilize a value style of investing. A value style of investing focuses on
undervalued companies with characteristics for improved valuations. Value stocks
are subject to the risk that valuations never improve or that the returns on
value stocks are less than returns on other styles of investing or the overall
stock market. As a result, the value of a Fund’s investments will vary and at
times may be lower or higher than that of other types of investments.
Historically, value investments have performed best during periods of economic
recovery. Therefore, the value investing style may over time go in and out of
favor and may trail the returns of other styles of investing. Value stocks also
may decline in price, even though in theory they are already
underpriced.
Non-Principal
Risks
BORROWING
AND LEVERAGE RISK. If a
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, a 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. A 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 Funds may, under
certain circumstances, effect a portion of their creations and redemptions for
cash rather than in-kind. As a result, an investment in such a 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 a 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 Funds intend 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 a Fund sold and redeemed its shares 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 a 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, a
Fund fails to qualify as a regulated investment company under the applicable tax
laws, that Fund would be taxed as an ordinary corporation. In such
circumstances, a 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.
INTELLECTUAL
PROPERTY RISK. Each Fund relies on
a license and related sublicense that permits a Fund to use its Index and
associated trade names, trademarks and service marks (the “Intellectual
Property”) in connection with
the Fund’s name and investment strategies. Such license and related sublicense
may be terminated by the Index Provider, and, as a result, a Fund may lose its
ability to use the Intellectual Property. There is also no guarantee that the
Index Provider has all rights to license the Intellectual Property for use by a
Fund. Accordingly, in the event the license is terminated or the Index Provider
does not have rights to license the Intellectual Property, it may have a
significant effect on the operation of a Fund.
INTERNATIONAL
CLOSED MARKET TRADING RISK. Because securities
held by the Funds may trade on non-U.S. exchanges that are closed when the
Funds' 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), resulting in premiums or discounts to the
Funds' net asset value that may be greater than those experienced by other
exchange-traded funds. However, because shares can be created and redeemed in
Creation Units at the Fund’s net asset value, it is not expected that large
discounts or premiums to the net asset value of the Funds will be sustained over
the long term (unlike shares of many closed-end funds, which frequently trade at
appreciable discounts from, and sometimes at premiums to, their net asset
values).
30
ISSUER
SPECIFIC CHANGES RISK. Changes in the
financial condition of an issuer or counterparty, changes in specific economic
or political conditions that affect a particular type of security or issuer, and
changes in general economic or political conditions can affect a security’s or
instrument’s value. The value of securities of smaller, less well-known issuers
can be more volatile than that of larger issuers. Issuer specific events can
have a negative impact on the value of a Fund.
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 a Fund invests. In addition, litigation regarding any of the issuers of
the securities owned by a Fund, or industries represented by these issuers, may
negatively impact the value of the securities. Such legislation or litigation
may cause a Fund to lose value or may result in higher portfolio turnover if the
Advisor determines to sell such a holding.
Fund
Organization
Each
Fund is a series of the Trust, an investment company registered under the 1940
Act. Each 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, custodian and fund
administrative and accounting agent.
Management
of the Funds
First
Trust Advisors L.P., 120 East Liberty Drive, Wheaton, Illinois 60187, is the
investment advisor to the Funds. In this capacity, First Trust is
responsible for the selection and ongoing monitoring of the securities in each
Fund’s portfolio and certain other services necessary for the management of the
portfolios.
First
Trust is a limited partnership with one limited partner, Grace Partners of
DuPage L.P., and one general partner, The Charger Corporation. Grace
Partners of DuPage L.P. is a limited partnership with one general partner, The
Charger Corporation, and a number of limited partners. The Charger Corporation
is an Illinois corporation controlled by James A. Bowen, the Chief Executive
Officer of First Trust. First Trust discharges its responsibilities subject to
the policies of the Board.
First Trust serves
as advisor or sub-advisor for 8 mutual fund portfolios, 10 exchange-traded funds
consisting of 193 series
and 16 closed-end funds. It is also the portfolio supervisor of certain unit
investment trusts sponsored by First Trust Portfolios L.P. (“FTP”), an affiliate of First Trust, 120
East Liberty Drive, Wheaton, Illinois 60187. FTP specializes in the
underwriting, trading and distribution of unit investment trusts and other
securities. FTP is the principal underwriter of the shares of the
Funds.
There
is no one individual primarily responsible for portfolio management decisions
for the Funds. Investments are made under the direction of the
Investment Committee. The Investment Committee consists of of Daniel J.
Lindquist, Jon C. Erickson, David G. McGarel, 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. 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. 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. 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.
31
•
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 20 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 Funds, see the Funds' 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 Funds is provided in the
SAI.
Management
Fee
Pursuant
to investment management agreements between First Trust and the Trust, on behalf
of the Funds (the “Investment
Management Agreements”), First Trust
manages the investment of each Fund’s assets. First Trust is paid an annual
unitary management fee of each Fund’s average daily net assets at the rate set
forth in the table below and is responsible for such Fund's expenses, including
the cost of transfer agency, custody, fund administration, legal, audit and
other services and license fees, but excluding fee payments under the Investment
Management Agreements, interest, taxes, brokerage commissions and other expenses
connected with the execution of portfolio transactions, distribution and service
fees payable pursuant to a Rule 12b-1 plan, if any, and extraordinary
expenses.
|
Fund |
Unitary
Management Fee |
|
First
Trust Dorsey Wright Momentum & Low Volatility
ETF |
0.60% |
|
First
Trust Dorsey Wright Momentum & Value ETF |
0.60% |
|
First
Trust SMID Cap Rising Dividend Achievers ETF |
0.60% |
A discussion
regarding the Board’s approval of the continuation of the Investment Management
Agreements is available in the Funds’ Annual Report to
Shareholders for the fiscal year ended September 30, 2021.
How
to Buy and Sell Shares
Most
investors buy and sell shares of a Fund in secondary market transactions through
brokers. Shares of each 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 an 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, a Fund will pay out redemption proceeds to a redeeming
authorized participant within two days after the authorized
participant’s redemption request is received, in accordance with the process set
forth in a Fund’s SAI and in the agreement between the authorized participant
and the Fund’s distributor. However, each 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 a 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, a Fund may take up to 15 days after the
receipt of the redemption request to deliver such investments to the authorized
participant.
32
For
purposes of the 1940 Act, each Fund is treated as a registered investment
company, and, absent an available exemption or exemptive relief,
the acquisition of shares by other registered investment companies and companies
relying on Section 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. The Trust, on behalf of the
Funds, has received an exemptive order from the Securities and Exchange
Commission that permits certain registered investment companies to invest in a
Fund beyond the limits set forth in Section 12(d)(1), subject to certain terms
and conditions, including that any such investment companies enter into
agreements with a Fund regarding the terms of any investment.
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 a 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 a Fund on the secondary market is based on market
price and may differ from such 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 Funds' Shares
The
Funds impose 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 Funds' shareholders. The Board considered that
the Funds' shares can only be purchased and redeemed directly from the Funds 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 Funds' shares occurs on the secondary market. Because
the secondary market trades do not involve the Funds 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 Funds' 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 a 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 a Fund and increased
transaction costs, which could negatively impact the Funds' ability to achieve
its investment objectives. 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 Funds impose fixed and variable transaction fees on purchases and
redemptions of Creation Units to cover the custodial and other costs incurred by
the Funds in effecting trades. Finally, the Advisor monitors purchase and
redemption orders from APs for patterns of abusive trading and the Funds reserve
the right to not accept orders from APs that the Advisor has determined may be
disruptive to the management of the Funds, or otherwise not in the Funds' best
interests.
Dividends,
Distributions and Taxes
Dividends
from net investment income, if any, are declared and paid quarterly by the
Funds. Each 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 Funds. 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
33
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 Funds. The Internal
Revenue Service could disagree with any conclusions set
forth in this section. In addition, counsel to the Funds may not have been asked
to review, and may not have reached a conclusion with respect to, the federal
income tax treatment of the assets to be included in the Funds. 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
Each
Fund intends to continue to qualify as a “regulated investment company” under
the federal tax laws. If a Fund qualifies as a regulated
investment company and distributes its income as required by the tax law, the
Fund generally will not pay federal income taxes.
Distributions
The
Funds’ distributions are generally taxable. After the end of each year, you will
receive a tax statement that separates the distributions of a
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 a Fund may be taxed at the capital gains tax
rates.Some portion of the ordinary income distributions that are attributable to
dividends received by a Fund from shares in certain real estate investment
trusts may be designated by the Fund as eligible for a deduction for qualified
business income, provided certain holding period requirements are satisfied.
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 Funds 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 a Fund is not affected by whether you reinvest
your distributions in additional shares or receive them in cash. The income from
a Fund that you must take into account for federal income tax purposes is not
reduced by amounts used to pay a deferred sales fee, if any. 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.
Income
from a 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 a Fund
because the dividends received deduction is generally not available for
distributions from regulated investment companies. However, certain ordinary
income dividends on shares that are attributable to qualifying dividends
received by the Funds from certain corporations may be reported by the Funds 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
federal tax rate. Capital gain received from assets held for more than one year
that is considered “unrecaptured section 1250 gain” (which may be the case, for
example, with some capital gains attributable to equity interests in real estate
investment trusts that constitute interests in entities treated as real estate
investment trusts for federal income tax purposes) is taxed at a maximum
marginal stated federal tax rate of 25%. In the case of capital gain dividends,
the determination of which portion of the capital gain dividend, if any, is
subject to the 25% tax
34
rate,
will be made based on rules prescribed by the United States Treasury. 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 a Fund and sell your shares at a loss after holding
it 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 regulated investment
companies such as the Funds 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 Funds themselves.
Distributions with respect to shares in real estate investment trusts and
foreign corporations are qualifying dividends only in limited circumstances.
Each 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 sales charges. 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 Internal
Revenue Service, 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 Funds will generally not be treated as income taxable to
you.
Non-U.S.
Tax Credit
If a
Fund invests in in non-U.S. securities, the tax statement that you receive may
include an item showing non-U.S. taxes a 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 a Fund will be characterized as dividends for federal income
tax purposes (other than dividends which a 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 a Fund that are properly
reported by a Fund as capital gain dividends may not be subject to U.S. federal
income taxes, including withholding taxes, provided that a Fund makes certain
elections and certain other conditions are met. Distributions from a 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
35
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.
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.
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 a
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, a 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. A Fund will not be able to pass
through to its shareholders any credit or deduction for such taxes. A Fund may
be able to make an election that could ameliorate these adverse tax
consequences. In this case, a 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, a 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 Funds 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
Funds are authorized to pay an amount up to 0.25% of their 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.
The Funds do not
currently pay 12b-1 fees, and pursuant to a contractual arrangement, the Funds
will not pay 12b-1 fees any time before January 31, 2023.
However, in the event 12b-1 fees are charged in the future, because these fees
are paid out of the Funds' 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
Each Fund's net
asset value is determined as of the close of trading (normally 4:00 p.m.,
Eastern Time) on each day the New York Stock Exchange is open for
business. If the NYSE closes early on a valuation day, the Fund's net asset
value will be determined as of that time. Net asset value is calculated for a
Fund by taking the market price of the Fund’s total assets, including interest
or dividends accrued but not yet collected, less all liabilities (including
accrued expenses and dividends declared but unpaid), and dividing such amount by
the total number of shares outstanding. The result, rounded to the nearest cent,
is the net asset value per share. All valuations are subject to review by the
Board or its delegate.
Each
Fund's investments are valued daily at market value or, in the absence of market
value with respect to any portfolio securities, at fair
value, in accordance with valuation procedures adopted by the Board and in
accordance with the 1940 Act. Portfolio securities listed on any exchange other
than Nasdaq and the London Stock Exchange Alternative Investment Market
(“AIM”) are valued at the
last sale price on the business day as of which such value is being determined.
Securities listed on
36
Nasdaq
or the AIM are valued at the official closing price on the business day as of
which such value is being determined. If there has been no
sale on such day, or no official closing price in the case of securities traded
on Nasdaq or the AIM, the securities are fair valued at the mean of the most
recent bid and ask prices on such day. Portfolio securities traded on more than
one securities exchange are valued at the last sale price or official closing
price, as applicable, on the business day as of which such value is being
determined at the close of the exchange representing the principal market for
such securities. Portfolio securities traded in the over-the-counter market, but
excluding securities trading on Nasdaq or the AIM, are fair valued at the mean
of the most recent bid and asked price, if available, and otherwise at the
closing bid price. Short-term investments that mature in less than 60 days when
purchased are fair valued at cost adjusted for amortization of premiums and
accretion of discount, provided the Advisor’s Pricing Committee has determined
that the use of amortized cost is an appropriate reflection of fair value given
market and issuer-specific conditions existing at the time of determination. Net
asset value may change on days when investors may not sell or redeem Fund
shares.
Certain
securities in which a Fund may invest are not listed on any securities exchange
or board of trade. Such securities are typically bought and
sold by institutional investors in individually negotiated private transactions
that function in many respects like an over-the-counter secondary market,
although typically no formal market makers exist. Certain securities,
particularly debt securities, have few or no trades, or trade infrequently, and
information regarding a specific security may not be widely available or may be
incomplete. Accordingly, determinations of the fair value of debt securities may
be based on infrequent and dated information. Because there is less reliable,
objective data available, elements of judgment may play a greater role in
valuation of debt securities than for other types of securities. Typically, debt
securities are valued using information provided by a third-party pricing
service. The third-party pricing service primarily uses broker quotes to value
such securities.
Certain
securities may not be able to be priced by pre-established pricing methods. Such
securities may be valued by the Board or its delegate, the
Advisor’s Pricing Committee, at fair value. The use of fair value pricing by a
Fund is governed by valuation procedures adopted by the Board and in accordance
with the provisions of the 1940 Act. These securities generally include, but are
not limited to, certain restricted securities (securities which may not be
publicly sold without registration under the Securities Act) for which a pricing
service is unable to provide a market price; securities whose trading has been
formally suspended; a security whose market or fair value price is not available
from a pre-established pricing source; a security with respect to which an event
has occurred that is likely to materially affect the value of the security after
the market has closed but before the calculation of the Fund's net asset value
or make it difficult or impossible to obtain a reliable market quotation; and a
security whose price, as provided by the pricing service, does not reflect the
security’s fair value. As a general principle, the current fair value of a
security would appear to be the amount which the owner might reasonably expect
to receive for the security upon its current sale. When fair value prices are
used, generally they will differ from the current market quotations or official
closing prices on the applicable exchange. A variety of factors may be
considered in determining the fair value of such securities. See the Funds' SAI
for details.
Because
foreign securities exchanges may be open on different days than the days during
which an investor may purchase or sell shares of a
Fund, the value of such Fund's securities may change on days when investors are
not able to purchase or sell shares of the Fund. The value of securities
denominated in foreign currencies is converted into U.S. dollars at the exchange
rates in effect at the time of valuation. Any use of a different rate from the
rates used by the Index may adversely affect each Fund’s ability to track the
Index.
Fund
Service Providers
Brown Brothers
Harriman & Co., 50 Post Office Square, Boston, Massachusetts 02110, acts as
the administrator, accounting agent, custodian and transfer agent
for the Funds. Chapman and Cutler LLP, 320 S. Canal St., Chicago, Illinois
60606, serves as legal counsel to the Funds. First Trust serves as the fund
reporting agent for the Funds.
Index
Provider
The
Indices are compiled by the Index Providers. The Index Providers are not
affiliated with the Funds, FTP or First Trust. Each Fund is entitled to
use the applicable Index pursuant to a sublicensing arrangement by and among the
Fund, Index Provider, First Trust and FTP, which in turn has a license agreement
with the Index Provider. Each Index Provider, or its agent, also serves as the
index calculation agent for each Index. The index calculation agent intends to
calculate and disseminate the values of the Indices at least once every 15
seconds.
37
Disclaimers
First Trust does not
guarantee the accuracy and/or the completeness of the Indices 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 Funds, owners of the shares of the Funds or any other person or
entity from the use of the Indices 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 Indices 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 Indices, even if notified of the
possibility of such damages.
First
Trust Dorsey Wright Momentum & Low Volatility ETF
First Trust Dorsey Wright Momentum & Value ETF
First Trust SMID Cap Rising Dividend Achievers ETF
First Trust Dorsey Wright Momentum & Value ETF
First Trust SMID Cap Rising Dividend Achievers ETF
The Dorsey Wright
Momentum Plus Low VolatilityTM Index, Dorsey Wright Momentum Plus
ValueTM Index and Nasdaq US Small Mid Cap
Rising Dividend AchieversTM Index are determined, composed and
calculated by Nasdaq, Inc. (the "Nasdaq
Indices," and the Funds
that seek to track the Nasdaq Indices, the "Nasdaq
Funds"). The Nasdaq
Funds are not sponsored, endorsed, sold or promoted by Nasdaq, Inc., or its
affiliates (Nasdaq, with its affiliates, are referred to as the “Corporations”). The Corporations have not passed
on the legality or suitability of, or the accuracy or adequacy of descriptions
and disclosures relating to, the Nasdaq Funds. The Corporations make no
representation or warranty, express or implied to the owners of the Nasdaq Funds
or any member of the public regarding the advisability of investing in
securities generally or in the Nasdaq Funds particularly, or the ability of the
Nasdaq Indices to track general stock market performance. The Corporations' only
relationship to First Trust is in the licensing of Nasdaq, Inc. and certain
trade names of the Corporations and the use of the Nasdaq Indices which are
determined, composed and calculated by Nasdaq, Inc. without regard to First
Trust or the Nasdaq Funds. Nasdaq, Inc. has no obligation to take the needs of
First Trust or the owners of the Nasdaq Funds into consideration in determining,
composing or calculating the Nasdaq Indices. The Corporations are not
responsible for and have not participated in the determination of the timing of,
prices at, or quantities of the Nasdaq Funds to be issued or in the
determination or calculation of the equation by which the Nasdaq Funds are to be
converted into cash. The Corporations have no liability in connection with the
administration, marketing or trading of the Nasdaq Funds.
THE
CORPORATIONS DO NOT GUARANTEE THE ACCURACY AND/OR UNINTERRUPTED CALCULATION OF
THE NASDAQ INDICES OR ANY DATA
INCLUDED THEREIN. THE CORPORATIONS MAKE NO WARRANTY, EXPRESS OR IMPLIED, AS TO
RESULTS TO BE OBTAINED BY FIRST TRUST, OWNERS OF THE NASDAQ FUNDS, OR ANY OTHER
PERSON OR ENTITY FROM THE USE OF THE NASDAQ INDICES OR ANY DATA INCLUDED
THEREIN. THE CORPORATIONS MAKE NO EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY
DISCLAIM ALL WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE
OR USE WITH RESPECT TO THE NASDAQ INDICES OR ANY DATA INCLUDED THEREIN. WITHOUT
LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL THE CORPORATIONS HAVE ANY
LIABILITY FOR ANY LOST PROFITS OR SPECIAL, INCIDENTAL, PUNITIVE, INDIRECT, OR
CONSEQUENTIAL DAMAGES, EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH
DAMAGES.
Premium/Discount
Information
Information
showing the number of days the market price of each Fund's shares was greater
(at a premium) and less (at a discount) than each
Fund's net asset value for the most recently completed year, and the most
recently completed calendar quarters since that year (or life of a Fund, if
shorter), is available at
https://www.ftportfolios.com/Retail/etf/home.aspx.
Total
Return Information
The tables below compare the total return
of each Fund to the total return of the Index on which it is based and each
Fund's benchmark indices. The information presented for each Fund is for the
period indicated.
“Average
annual total returns” represent the average annual change in the value of an
investment over the period indicated. “Cumulative total
returns” represent the total change in value of an investment over the period
indicated. The return information shown under “Annual Total Return” in a Fund’s
summary prospectus represents the average annual total returns of the Fund as of
the calendar year end, while the information presented below is as of the Fund’s
fiscal year end. The net asset value per share of a Fund is the value of one
share of the Fund and is computed by dividing the value of all assets of the
Fund (including
38
accrued
interest and dividends), less liabilities (including accrued expenses and
dividends declared but unpaid), by the total number of outstanding
shares. The net asset value return is based on the net asset value per share of
a Fund and the market return is based on the market price per share of a Fund.
The price used to calculate market return (“Market
Price”)
is determined by using the midpoint of the national best bid and offer price
(“NBBO”) as of the time that
a Fund’s net asset value is calculated. Under SEC rules, the NBBO consists of
the highest displayed buy and lowest sell prices among the various exchanges
trading a Fund at the time a Fund's net asset value is calculated. Prior to
January 1, 2019, the price used was the midpoint between the highest bid and the
lowest offer on the stock exchange on which shares of a Fund were listed for
trading as of the time that a Fund's net asset value was calculated. Since the
shares of each Fund typically do not trade in the secondary market until several
days after a Fund's inception, for the period from inception to the first day of
secondary market trading in shares of a Fund, the net asset value of a Fund is
used as a proxy for the secondary market trading price to calculate market
returns. Market and net asset value returns assume that all distributions have
been reinvested in a Fund at Market Price and net asset value, respectively. An
index is a statistical composite that tracks a specified financial market or
sector. Unlike each Fund, an index does not actually hold a portfolio of
securities and therefore does not incur the expenses incurred by a Fund. These
expenses negatively impact the performance of each Fund. Also, market returns do
not include brokerage commissions that may be payable on secondary market
transactions. If brokerage commissions were included, market returns would be
lower. The total returns reflect the reinvestment of dividends on securities in
the index. The returns shown in the table below do not reflect the deduction of
taxes that a shareholder would pay on Fund distributions or the redemption or
sale of shares of a Fund. The investment return and principal value of shares of
a Fund will vary with changes in market conditions. Shares of a Fund may be
worth more or less than their original cost when they are redeemed or sold in
the market. A Fund's past performance is no guarantee of future
results.
First
Trust Dorsey Wright Momentum & Low Volatility ETF (DVOL)
Total Returns as of September 30, 2021
Total Returns as of September 30, 2021
|
|
|
Average
Annual |
Cumulative |
|
|
1
Year |
Inception
(9/5/2018) |
Inception
(9/5/2018) |
|
Fund
Performance |
|
|
|
|
Net Asset
Value |
22.98% |
12.21% |
42.39% |
|
Market
Price |
22.98% |
12.21% |
42.39% |
|
Index
Performance |
|
|
|
|
Dorsey
Wright Momentum Plus Low VolatilityTM
Index |
23.72% |
12.93% |
45.24% |
|
S&P
500®
Index |
30.00% |
15.99% |
57.64% |
First
Trust Dorsey Wright Momentum & Value ETF (DVLU)
Total Returns as of September 30, 2021
Total Returns as of September 30, 2021
|
|
|
Average
Annual |
Cumulative |
|
|
1
Year |
Inception
(9/5/2018) |
Inception
(9/5/2018) |
|
Fund
Performance |
|
|
|
|
Net Asset
Value |
57.98% |
7.13% |
23.55% |
|
Market
Price |
57.98% |
7.13% |
23.55% |
|
Index
Performance |
|
|
|
|
Dorsey
Wright Momentum Plus ValueTM
Index |
59.19% |
7.78% |
25.86% |
|
S&P
500®
Index |
30.00% |
15.99% |
57.64% |
39
First
Trust SMID Cap Rising Dividend Achievers ETF (SDVY)
Total Returns as of September 30, 2021
Total Returns as of September 30, 2021
|
|
|
Average
Annual |
Cumulative |
|
|
1
Year |
Inception
(11/1/2017) |
Inception
(11/1/2017) |
|
Fund
Performance |
|
|
|
|
Net Asset
Value |
56.77% |
11.05% |
50.69% |
|
Market
Price |
56.90% |
11.09% |
50.90% |
|
Index
Performance |
|
|
|
|
Nasdaq US
Small Mid Cap Rising Dividend AchieversTM
Index |
57.92% |
11.74% |
54.39% |
|
S&P
1000®
Index |
47.66% |
11.70% |
54.15% |
40
Financial
Highlights
The financial
highlights table is intended to help you understand the Funds' financial
performance for the periods shown. Certain information reflects
financial results for a single share of the Funds. The total returns represent
the rate that an investor would have earned (or lost) on an investment in a 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 Funds' financial
statements, is included in the Funds' Annual Report to Shareholders dated
September 30, 2021 and is incorporated by reference in the Funds' 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 Dorsey Wright Momentum & Low Volatility ETF (DVOL)
|
|
Year
Ended September 30, |
Period
Ended
9/30/2018(a)
| ||
|
|
2021 |
2020 |
2019 | |
|
Net
asset value, beginning of period |
$22.46 |
$22.81 |
$19.94 |
$19.97 |
|
Income
from investment operations: |
|
|
|
|
|
Net
investment income (loss) |
0.10 |
0.28 |
0.29 |
0.03 |
|
Net
realized and unrealized gain (loss) |
5.06 |
(0.30) |
2.85 |
(0.06) |
|
Total
from investment operations |
5.16 |
(0.02) |
3.14 |
(0.03) |
|
Distributions
paid to shareholders from: |
|
|
|
|
|
Net
investment income |
(0.09) |
(0.33) |
(0.27) |
— |
|
Net
asset value, end of period |
$27.53 |
$22.46 |
$22.81 |
$19.94 |
|
Total
Return(b) |
22.98% |
0.03% |
15.93% |
(0.15)% |
|
Ratios
to average net assets/supplemental data: |
|
|
|
|
|
Net assets,
end of period (in 000’s) |
$121,114 |
$124,674 |
$131,169 |
$13,960 |
|
Ratio of
total expenses to average net assets |
0.60% |
0.60% |
0.60% |
(c)0.60%
|
|
Ratio of
net investment income (loss) to average net assets |
0.36% |
1.21% |
2.37% |
(c)3.81%
|
|
Portfolio
turnover rate(d)
|
136% |
187% |
81% |
0% |
(a)
Inception
date is September 5, 2018, which is consistent with the commencement of
investment operations and is the date the initial creation units were
established.
(b)
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.
(c)
Annualized.
(d)
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.
41
First
Trust Exchange-Traded Fund VI
Financial
Highlights
For a share outstanding throughout each period
For a share outstanding throughout each period
First
Trust Dorsey Wright Momentum & Value ETF (DVLU)
|
|
Year
Ended September 30, |
Period
Ended
9/30/2018(a)
| ||
|
|
2021 |
2020 |
2019 | |
|
Net
asset value, beginning of period |
$15.07 |
$18.52 |
$19.46 |
$19.98 |
|
Income
from investment operations: |
|
|
|
|
|
Net
investment income (loss) |
0.29 |
0.25 |
0.33 |
0.02 |
|
Net
realized and unrealized gain (loss) |
8.42 |
(3.44) |
(0.94) |
(0.54) |
|
Total
from investment operations |
8.71 |
(3.19) |
(0.61) |
(0.52) |
|
Distributions
paid to shareholders from: |
|
|
|
|
|
Net
investment income |
(0.27) |
(0.26) |
(0.33) |
— |
|
Net
asset value, end of period |
$23.51 |
$15.07 |
$18.52 |
$19.46 |
|
Total
Return(b) |
57.98% |
(17.19)% |
(3.04)% |
(2.60)% |
|
Ratios
to average net assets/supplemental data: |
|
|
|
|
|
Net assets,
end of period (in 000’s) |
$25,864 |
$14,320 |
$19,451 |
$13,625 |
|
Ratio of
total expenses to average net assets |
0.60% |
0.60% |
0.60% |
(c)0.60%
|
|
Ratio of
net investment income (loss) to average net assets |
1.68% |
1.56% |
2.01% |
(c)3.61%
|
|
Portfolio
turnover rate(d)
|
195% |
205% |
152% |
0% |
(a)
Inception
date is September 5, 2018, which is consistent with the commencement of
investment operations and is the date the initial creation units were
established.
(b)
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.
(c)
Annualized.
(d)
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.
42
First
Trust Exchange-Traded Fund VI
Financial
Highlights
For a share outstanding throughout each period
For a share outstanding throughout each period
First
Trust SMID Cap Rising Dividend Achievers ETF (SDVY)
|
|
Year
Ended September 30, |
Period
Ended
9/30/2018(a)
| ||
|
|
2021 |
2020 |
2019 | |
|
Net
asset value, beginning of period |
$18.27 |
$20.37 |
$21.28 |
$19.94 |
|
Income
from investment operations: |
|
|
|
|
|
Net
investment income (loss) |
0.36 |
0.33 |
0.35 |
0.26 |
|
Net
realized and unrealized gain (loss) |
9.99 |
(2.08) |
(0.92) |
1.31 |
|
Total
from investment operations |
10.35 |
(1.75) |
(0.57) |
1.57 |
|
Distributions
paid to shareholders from: |
|
|
|
|
|
Net
investment income |
(0.34) |
(0.35) |
(0.34) |
(0.23) |
|
Net
asset value, end of period |
$28.28 |
$18.27 |
$20.37 |
$21.28 |
|
Total
Return(b) |
56.77% |
(8.56)% |
(2.59)% |
7.92% |
|
Ratios
to average net assets/supplemental data: |
|
|
|
|
|
Net assets,
end of period (in 000’s) |
$210,673 |
$10,050 |
$7,128 |
$4,257 |
|
Ratio of
total expenses to average net assets |
0.60% |
0.60% |
0.60% |
(c)0.60%
|
|
Ratio of
net investment income (loss) to average net assets |
1.77% |
1.83% |
1.95% |
(c)1.49%
|
|
Portfolio
turnover rate(d)
|
36% |
76% |
78% |
72% |
(a)
Inception
date is November 1, 2017, which is consistent with the commencement of
investment operations and is the date the initial creation units were
established.
(b)
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.
(c)
Annualized.
(d)
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.
43
Other
Information
Continuous
Offering
Each
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 a Fund on an ongoing basis, a
“distribution,” as such term is used in the Securities Act of 1933, as amended
(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.
44
|
First
Trust
Exchange-Traded
Fund VI |
First Trust Dorsey Wright Momentum & Low Volatility ETF
First Trust Dorsey Wright Momentum & Value ETF
First Trust SMID Cap Rising Dividend Achievers ETF
For
More Information
For
more detailed information on the Funds, several additional sources of
information are available to you. The SAI, incorporated by
reference into this prospectus, contains detailed information on the Funds'
policies and operation. Additional information about the Funds' 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 Funds' performance during
the last fiscal year. A Fund's most recent SAI, annual and semi-annual reports
and certain other information are available free of charge by calling the Funds
at (800) 621-1675, on the Funds' 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 Funds, 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 Funds 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
811-22717