|
First
Trust
Exchange-Traded
Fund II |
Prospectus
First Trust Nasdaq
Lux Digital Health Solutions ETF
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Ticker
Symbol: |
EKG |
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Exchange: |
Nasdaq |
The First Trust Nasdaq Lux Digital Health
Solutions ETF (the “Fund”) lists and principally trades its
shares on Nasdaq, Inc. ("Nasdaq" or the “Exchange”). Market prices may differ to some
degree from the net asset value of the shares. Unlike mutual funds, the Fund
issues and redeems shares at net asset value, only in large blocks of shares
called "Creation
Units."
The
Fund is a series of First Trust Exchange-Traded Fund II (the “Trust”) and an
exchange-traded index fund organized as a separate series of a registered
management investment company.
Except
when aggregated in Creation Units, the shares are not redeemable securities of
the Fund.
The
Securities and Exchange Commission has not approved or disapproved of these
securities or passed upon
the adequacy or accuracy of this prospectus. Any representation to the contrary
is a criminal offense.
NOT
FDIC INSURED MAY
LOSE VALUE NO
BANK GUARANTEE
February
1, 2024
Summary
Information
(fees paid directly from your investment)
|
Maximum
Sales Charge (Load) Imposed on Purchases (as a percentage of offering
price) |
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(expenses that you pay each year as a percentage of the value of your investment)
|
Management
Fees |
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Distribution
and Service (12b-1) Fees |
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Other
Expenses |
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Total Annual
Fund Operating Expenses |
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|
1
Year |
3
Years |
5
Years |
10
Years |
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$ |
$ |
$ |
$ |
3
4
5
6
7
8
Calendar Year Total Returns as of 12/31
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|
|
|
|
|
|
|
|
|
|
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1
Year |
Since
Inception |
Inception
Date |
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Return Before
Taxes |
|
- |
|
|
Return After
Taxes on Distributions |
|
- |
|
|
Return After
Taxes on Distributions and Sale of Fund Shares |
|
- |
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|
Nasdaq Lux
Health TechTM Index
(reflects no deduction for fees, expenses or
taxes) |
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- |
|
|
S&P
Composite 1500® Health Care
Index (reflects no deduction for fees,
expenses or
taxes) |
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|
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Management
Investment
Advisor
First Trust Advisors
L.P. (“First
Trust”
or the “Advisor”)
9
Portfolio
Managers
The Fund’s portfolio
is managed by a team (the “Investment
Committee”) consisting
of:
•
Daniel J. Lindquist,
Chairman of the Investment Committee and Managing Director of First
Trust
•
David G. McGarel,
Chief Investment Officer, Chief Operating Officer and Managing Director of First
Trust
•
Jon C. Erickson, Senior Vice
President of First Trust
•
Roger F. Testin,
Senior Vice President of First Trust
•
Stan Ueland, Senior
Vice President of First Trust
•
Chris A. Peterson,
Senior Vice President of First Trust
•
Erik Russo, Vice
President of First Trust
The
Investment Committee members are primarily and jointly responsible for the
day-to-day management of the Fund. Each Investment
Committee member has served as a part of the portfolio management team of the
Fund since March 2022.
Purchase
and Sale of Fund Shares
The
Fund issues and redeems shares on a continuous basis, at net asset value, only
in large blocks of shares called “Creation Units.” Individual
shares of the Fund may only be purchased and sold on the secondary market
through a broker-dealer. Since shares of the Fund trade on securities exchanges
in the secondary market at their market price rather than their net asset value,
the Fund’s shares may trade at a price greater than (premium) or less than
(discount) the Fund’s net asset value. An investor may incur costs attributable
to the difference between the highest price a buyer is willing to pay to
purchase shares of the Fund (bid) and the lowest price a seller is willing to
accept for shares of the Fund (ask) when buying or selling shares in the
secondary market (the “bid-ask
spread”). Recent
information, including the Fund’s net asset value, market price, premiums and
discounts, bid-ask spreads and the median bid-ask spread for the Fund’s most
recent fiscal year,is available online at
https://www.ftportfolios.com/Retail/etf/home.aspx.
Tax
Information
The
Fund’s distributions are taxable and will generally be taxed as ordinary income
or capital gains. Distributions on shares held in a
tax-deferred account, while not immediately taxable, will be subject to tax when
the shares are no longer held in a tax-deferred account.
Payments
to Broker-Dealers and Other Financial Intermediaries
If
you purchase shares of the Fund through a broker-dealer, registered investment
adviser, bank or other financial intermediary (collectively,
“intermediaries”), First Trust and First Trust Portfolios L.P., the Fund’s
distributor, may pay the intermediary for the sale of Fund shares and related
services. These payments may create a conflict of interest by influencing the
broker-dealer or other intermediary and your salesperson to recommend the Fund
over another investment. Ask your salesperson or visit your financial
intermediary’s website for more information.
10
Additional
Information on the Fund's Investment Objective and Strategies
The
Fund is a series of First Trust Exchange-Traded Fund II and is regulated as an
“investment company” under the 1940 Act. The Fund operates as
an index fund and is not actively managed by First Trust. As such, the Fund’s
investment objective is to seek investment results that correspond generally to
the price and yield (before the Fund’s fees and expenses) of the Index. In
seeking to achieve this objective, the Fund will normally invest at least 80% of
its net assets (plus any borrowings for investment purposes) in the securities
that comprise the Index. Nasdaq, Inc. serves as the index provider for the index
tracked by the Fund and may be referred to throughout this prospectus as the
“Index Provider.” The Index Provider is not affiliated with the Fund, the Fund’s
investment advisor or the Fund’s distributor. The Fund will generally employ a
full replication strategy, meaning that it will normally invest in all of the
securities comprising the Index in proportion to their weightings in the
Index.
The
Fund’s investment objective, its 80% investment strategy and each of the
policies described herein are non-fundamental policies that may be
changed by the Board of Trustees of the Trust (the “Board”) without shareholder
approval. Certain fundamental policies of the Fund are set forth in the
Statement of Additional Information (“SAI”) under “Investment
Objective and Policies.” While it is not expected that the Fund will invest in
the securities of other investment companies, any such investments would be
subject to limitations imposed by the 1940 Act and the related rules and
interpretations. The Fund has adopted a policy that it will not invest in other
investment companies in excess of 1940 Act limits in reliance on Sections
12(d)(1)(F) or 12(d)(1)(G) of the 1940 Act.
Nasdaq
Lux Health TechTM
Index
The Nasdaq Lux
Health TechTM Index seeks to provide exposure to
companies that are engaged in and involved at the intersection of healthcare and
technology, as determined by Lux Capital. Companies comprising the health
technology industry include those companies focused on healthcare technology in
medical and surgical devices, clinical diagnostics, healthcare-related
business/productivity software or some other healthcare technology identified as
digital health. The Index is reconstituted and rebalanced
semi-annually.
The
Index Provider may, from time to time, exercise reasonable discretion as it
deems appropriate in order to ensure the integrity of the
Index.
More
information regarding the Index, including additional detail on the Index
methodology, may be found on the Index Provider’s website.
Neither the Fund, the Board, First Trust, or any of their affiliates, are
responsible for the information set forth on the Index Provider’s website.
Information from the Index Provider’s website and any other information not
expressly included in this prospectus is not incorporated by reference in, and
should not be considered part of, this prospectus.
Fund
Investments
Principal
Investments
Equity
Securities
The
Fund invests in equity securities, including common stocks and depositary
receipts. Common stock represents an equity ownership interest in
issuers. Holders of common stock are entitled to the income and increase in the
value of the assets and business of the issuers after all debt obligations and
obligations to preferred stockholders are satisfied. Depositary receipts are
certificates typically issued by a bank or trust company that represent
ownership interests in securities of non-U.S. companies. Depositary receipts may
or may not be jointly sponsored by the underlying issuer.
Non-Principal
Investments
Cash
Equivalents and Short-Term Investments
Normally,
the Fund invests substantially all of its assets to meet its investment
objectives. The Fund may invest the remainder of its assets in
securities with maturities of less than one year or cash equivalents, or it may
hold cash. The percentage of the Fund invested in such holdings varies and
depends on several factors, including market conditions. For temporary defensive
purposes and during periods of high cash inflows or outflows, the Fund may
depart from its principal investment strategies and invest part or all of its
assets in these securities, or it may hold cash. During such periods, the Fund
may not be able to achieve its investment objectives. The Fund may adopt a
temporary defensive strategy when the portfolio managers believe securities in
which the Fund normally invests have elevated risks due to political or economic
factors and in other extraordinary circumstances. For more information on
eligible short-term investments, see the SAI.
11
Illiquid
Investments
The
Fund may invest up to 15% of its net assets in investments and other instruments
that are, at the time of investment, illiquid (determined
using the Securities and Exchange Commission's standard applicable to investment
companies, i.e., any investment that
the Fund reasonably expects cannot be sold or disposed of in current market
conditions in seven calendar days or less without the sale or disposition
significantly changing the market value of the investment). For this purpose,
illiquid investments may include, but are not limited to, restricted securities
(securities the disposition of which is restricted under the federal securities
laws), securities that may only be resold pursuant to Rule 144A under the
Securities Act of 1933, as amended (the “Securities
Act”),
that are deemed to be illiquid, and certain repurchase
agreements.
Disclosure
of Portfolio Holdings
The
Fund’s portfolio holdings are available on the Fund's website at
www.ftportfolios.com. A description of the policies and procedures with
respect to the disclosure of the Fund's portfolio securities is included in the
Fund's SAI, which is also available on the Fund's website.
Risks
of Investing in the Fund
Risk
is inherent in all investing. Investing in the Fund involves risk, including the
risk that you may lose all or part of your investment. There can
be no assurance that the Fund will meet its stated objective. Before you invest,
you should consider the following supplemental disclosure pertaining to the
Principal Risks set forth above as well as additional Non-Principal Risks set
forth below in this prospectus. The order of the below risk factors does not
indicate the significance of any particular risk factor.
Principal
Risks
AUTHORIZED
PARTICIPANT CONCENTRATION RISK. Only an authorized
participant may engage in creation or redemption transactions directly with the
Fund. A limited number of institutions act as authorized participants for the
Fund. However, participants are not obligated to make a market in the Fund’s
shares or submit purchase and redemption orders for creation units. To the
extent that these institutions exit the business, reduce their role or are
unable to proceed with creation and/or redemption orders and no other authorized
participant steps forward to create or redeem, the Fund’s shares may trade at a
premium or discount to the Fund’s net asset value and possibly face delisting
and the bid/ask spread on the Fund’s shares may widen.
CURRENT
MARKET CONDITIONS RISK.
Current market conditions risk is the risk that a particular investment, or
shares of the Fund in general, may fall in value due to current market
conditions.
As a means to fight
inflation, which remains at elevated levels, the Federal Reserve and certain
foreign central banks have raised interest rates and expect to
continue to do so, and the Federal Reserve has announced that it intends to
reverse previously implemented quantitative easing. U.S. regulators have
proposed several changes to market and issuer regulations which would directly
impact the Fund. While it is hard to predict whether any of these regulations
will be adopted, due to the current scope of proposed regulations, any
regulatory changes could adversely impact the Fund’s ability to achieve its
investment strategies or make certain investments. Regulatory changes may also
increase Fund operational costs, which could impact overall performance. Certain
market factors may result in central banks changing their approach in the
future. Recent and potential future bank failures could result in disruption to
the broader banking industry or markets generally and reduce confidence in
financial institutions and the economy as a whole, which may also heighten
market volatility and reduce liquidity.
The ongoing
adversarial political climate in the United States, as well as political and
diplomatic events both domestic and abroad, such as presidential,
congressional and gubernatorial elections in the U.S., global elections and
governmental changes and the U.S. government’s failure to agree on a long-term
budget and deficit reduction plan, have and may continue to have an adverse
impact on the U.S. regulatory landscape, markets and investor behavior, which
could have a negative impact on the Fund’s investments and operations. The
potential result of a U.S. federal government shutdown may also significantly
impact investor and consumer behavior, which may adversely impact the markets
and global economy. Global and domestic authorities and regulators have
previously responded to serious economic disruptions with ranging fiscal and
monetary policy changes, including but not limited to, direct capital infusions
into companies, new monetary programs and dramatically lower interest rates. Any
change in these policies, or the ineffectiveness of these policies, could
increase volatility in securities markets, which may adversely impact the Fund’s
investments and performance. Any market disruptions could also delay the Fund
from making sound investment decisions in a timely manner. If the Fund
concentrates its investments in a region enduring geopolitical market
disruption, it may face higher risk of loss, although the increasing
interconnectivity between global economies and
12
financial markets
can lead to events or conditions in one country, region or financial market
adversely impacting a different country, region or financial
market.
Other unexpected
political, regulatory and diplomatic events within the U.S. and abroad may
affect investor and consumer confidence and may adversely impact
financial markets and the broader economy. For example, ongoing armed conflicts
between Russia and Ukraine in Europe and among Israel, Hamas and other militant
groups in the Middle East, have caused and could continue to cause significant
market disruptions and volatility within the markets in Russia, Europe, the
Middle East and the United States. The hostilities and sanctions resulting from
those hostilities have and could continue to have a significant impact on
certain Fund investments as well as Fund performance and liquidity. The
economies of the United States and its trading partners, as well as the
financial markets generally, may be adversely impacted by trade disputes and
other matters. For example, the United States has imposed trade barriers and
restrictions on China. In addition, the Chinese government is engaged in a
longstanding dispute with Taiwan, continually threatening an invasion. If the
political climate between the United States and China does not improve or
continues to deteriorate, if China were to attempt invading Taiwan, or if other
geopolitical conflicts develop or worsen, economies, markets and individual
securities may be adversely affected, and the value of the Fund’s assets may go
down. The COVID-19 global pandemic, or any future public health crisis, and the
ensuing policies enacted by governments and central banks have caused and may
continue to cause significant volatility and uncertainty in global financial
markets, negatively impacting global growth prospects. While vaccines have been
developed, there is no guarantee that vaccines will be effective against
emerging future variants of the disease. As this global pandemic illustrated,
such events may affect certain geographic regions, countries, sectors and
industries more significantly than others.
Advancements in
technology may also adversely impact markets and the overall performance of the
Fund. For instance, the economy may be significantly impacted
by the advanced development and increased regulation of artificial intelligence.
As the use of technology grows, liquidity and market movements may be affected.
As artificial intelligence is used more widely, the profitability and growth of
Fund holdings may be impacted, which could significantly impact the overall
performance of the Fund.
These events, and
any other future events, may adversely affect the prices and liquidity of the
Fund’s portfolio investments and could result in disruptions in
the trading markets.
CYBER
SECURITY RISK. The Fund is
susceptible to operational risks through breaches in cyber security. A breach in
cyber security refers to both intentional and unintentional events that may
cause the Fund to lose proprietary information, suffer data corruption or lose
operational capacity. Such events could cause the Fund to incur regulatory
penalties, reputational damage, additional compliance costs associated with
corrective measures and/or financial loss. These risks typically are not covered
by insurance. In general, cyber incidents can result from deliberate attacks or
unintentional events. Cyber incidents include, but are not limited to, gaining
unauthorized access to digital systems (e.g., through “hacking”
or malicious software coding) for purposes of misappropriating assets or
sensitive information, corrupting data or causing operational disruption. Cyber
attacks may also be carried out in a manner that does not require gaining
unauthorized access, such as causing denial-of-service attacks on websites
(i.e., efforts to make
network services unavailable to intended users). Cyber security failures by or
breaches of the systems of the Advisor, distributor and other service providers
(including, but not limited to, sub-advisors, index providers, fund accountants,
custodians, transfer agents and administrators), market makers, authorized
participants or the issuers of securities in which the Fund invests, have the
ability to cause disruptions and impact business operations, potentially
resulting in: financial losses; interference with the Fund’s ability to
calculate its net asset value; disclosure of confidential trading information;
impediments to trading; submission of erroneous trades or erroneous creation or
redemption orders; the inability of the Fund or its service providers to
transact business; violations of applicable privacy and other laws; regulatory
fines penalties, reputational damage, reimbursement or other compensation costs;
or additional compliance costs. Substantial costs may be incurred by the Fund in
order to resolve or prevent cyber incidents in the future. While the Fund has
established business continuity plans in the event of, and risk management
systems to prevent, such cyber attacks, there are inherent limitations in such
plans and systems, including the possibility that certain risks have not been
identified and that prevention and remediation efforts will not be successful.
Furthermore, the Fund cannot control the cyber security plans and systems put in
place by service providers to the Fund, issuers in which the Fund invests,
market makers or authorized participants. However, there is no guarantee that
such efforts will succeed, and the Fund and its shareholders could be negatively
impacted as a result.
DEPOSITARY
RECEIPTS RISK. The Fund may invest
in depositary receipts. Depositary receipts are securities issued by a bank or
trust company reflecting ownership of underlying securities issued by a foreign
company. An investment in depositary receipts involves further risks due to
certain unique features. Any distributions paid to the holders of depositary
receipts are usually subject to a fee charged by the depositary. Holders of
depositary receipts may have limited voting rights pursuant to
13
a
deposit agreement between the underlying issuer and the depositary. In certain
cases, the depositary will vote the shares deposited with it as
directed by the underlying issuer’s board of directors. Furthermore, investment
restrictions in certain countries may adversely impact the value of depositary
receipts because such restrictions may limit the ability to convert shares into
depositary receipts and vice versa. Such restrictions may cause shares of the
underlying issuer to trade at a discount or premium to the market price of the
depositary receipt. Moreover, if depositary receipts are converted into shares,
the laws in certain countries may limit the ability of a non-resident to trade
the shares and to reconvert the shares to depositary receipts. Depositary
receipts may be “sponsored” or “unsponsored.” Sponsored depositary receipts are
established jointly by a depositary and the underlying issuer, whereas
unsponsored depositary receipts may be established by a depositary without
participation by the underlying issuer. Holders of unsponsored depositary
receipts generally bear all the costs associated with establishing the
unsponsored depositary receipts. In addition, the issuers of the securities
underlying unsponsored depositary receipts are not obligated to disclose
material information in the U.S. and, therefore, there may be less information
available regarding such issuers and there may not be a correlation between such
information and the market value of the depositary receipts.
EQUITY
SECURITIES RISK. The value of the
Fund’s shares will fluctuate with changes in the value of the equity securities
in which it invests.
Equity
securities prices fluctuate for several reasons, including changes in investors'
perceptions of the financial condition of an issuer or the general condition of
the relevant equity market, such as market volatility, or when political or
economic events affecting the issuers occur. Common stock prices may be
particularly sensitive to rising interest rates, as the cost of capital rises
and borrowing costs increase. Equity securities may decline significantly in
price over short or extended periods of time, and such declines may occur in the
equity market as a whole, or they may occur in only a particular country,
company, industry or sector of the market. Additionally, holders of an issuer's
common stock may be subject to greater risks than holders of its preferred stock
and debt securities because common stockholders' claims are subordinated to
those of holders of preferred stocks and debt securities upon the bankruptcy of
an issuer.
HEALTH
CARE COMPANIES RISK. The Fund invests
significantly in health care companies. Health care companies, such as companies
providing medical and health care goods and services, companies engaged in
manufacturing medical equipment, supplies and pharmaceuticals, as well as
operating healthcare facilities and the provision of managed healthcare, may be
affected by government regulations and government health care programs,
increases or decreases in the cost of medical products and services and product
liability claims, among other factors. Many health care companies are heavily
dependent on patent protection, and the expiration of a company’s patent may
adversely affect that company’s profitability. Research and development costs of
bringing new drugs to market are substantial, and there is no guarantee that a
proposed product will ever come to market. Health care companies are also
subject to competitive forces that may result in price discounting, may be
thinly capitalized and susceptible to product obsolescence.
HEALTH
CARE TECHNOLOGY COMPANIES RISK. Health care
technology companies have the potential to grow within the health care
technology space through innovation and market adoption of such companies’
products and services. Companies in health care technology may be susceptible to
risks which include, but are not limited to, small or limited markets for such
securities, changes in business cycles, world economic growth, technological
progress, rapid obsolescence, and government regulation. Health care technology
companies may have limited product lines, markets, financial resources or
personnel. Securities of health care technology companies, especially smaller,
start-up companies, tend to be more volatile than securities of companies that
do not rely heavily on technology. Rapid changes to technology that affect a
company’s products could have a material adverse effect on such company’s
operating results. Additionally, health care technology companies rely heavily
on a combination of patents, copyrights, trademarks and trade secret laws to
establish and protect their proprietary rights in their products and
technologies. There can be no assurance that the steps taken by these companies
to protect their proprietary rights will be adequate to prevent the
misappropriation of their technology or that competitors will not independently
develop technologies that are significantly equivalent or superior to such
companies’ technology. Health care technology companies typically engage in
spending significant amounts on research and development, and there is no
guarantee that the products or services produced by these companies will be
successful in the future.
INDEX
CONCENTRATION RISK. The Fund will be
concentrated in an industry or a group of industries to the extent that the
Index is so concentrated. To the extent that the Fund invests a significant
percentage of its assets in a single asset class or the securities of issuers
within the same country, state, region, industry or sector, an adverse economic,
business or political development may affect the value of the Fund’s investments
more than if the Fund were more broadly diversified. A significant exposure
makes the Fund more susceptible to any single occurrence and may subject the
Fund to greater market risk than a fund that is more broadly diversified. There
may be instances in which the Index, for a variety of reasons including changes
in the prices of individual securities held by the Fund, has a larger exposure
to a small number of stocks or a single stock relative to the rest of the stocks
in the Index. Under such circumstances, the Fund will not deviate from the Index
except in rare
14
circumstances
or in an immaterial way and therefore the Fund’s returns would be more greatly
influenced by the returns of the stock(s) with the
larger exposure.
INDEX
OR MODEL CONSTITUENT RISK. The Fund may be a
constituent of one or more indices or ETF models. As a result, the Fund may be
included in one or more index-tracking ETFs or mutual funds. Being a component
security of such a vehicle could greatly affect the trading activity involving
the Fund's shares, the size of the Fund and the market volatility of the Fund’s
shares. Inclusion in an index could increase demand for the Fund and removal
from an index could result in outsized selling activity in a relatively short
period of time. As a result, the Fund’s net asset value could be negatively
impacted and the Fund’s market price may be below the Fund’s net asset value
during certain periods. In addition, index rebalances may potentially result in
increased trading activity. To the extent buying or selling activity increases,
the Fund can be exposed to increased brokerage costs and adverse tax
consequences and the market price of the Fund can be negatively
affected.
INDEX
PROVIDER RISK. There is
no assurance that the Index Provider, or any agents that act on its behalf, will
compile the Index accurately, or that the Index will be determined, maintained,
constructed, reconstituted, rebalanced, composed, calculated or disseminated
accurately. The Index Provider and its agents do not provide any representation
or warranty in relation to the quality, accuracy or completeness of data in the
Index, and do not guarantee that the Index will be calculated in accordance with
its stated methodology. The Advisor’s mandate as described in this prospectus is
to manage the Fund consistently with the Index provided by the Index Provider.
The Advisor relies upon the Index provider and its agents to accurately compile,
maintain, construct, reconstitute, rebalance, compose, calculate and disseminate
the Index accurately. Therefore, losses or costs associated with any Index
Provider or agent errors generally will be borne by the Fund and its
shareholders. To correct any such error, the Index Provider or its agents may
carry out an unscheduled rebalance of the Index or other modification of Index
constituents or weightings. When the Fund in turn rebalances its portfolio, any
transaction costs and market exposure arising from such portfolio rebalancing
will be borne by the Fund and its shareholders. Unscheduled rebalances also
expose the Fund to additional tracking error risk. Errors in respect of the
quality, accuracy and completeness of the data used to compile the Index may
occur from time to time and may not be identified and corrected by the Index
Provider for a period of time or at all, particularly where the Index is less
commonly used as a benchmark by funds or advisors. For example, during a period
where the Index contains incorrect constituents, the Fund tracking the Index
would have market exposure to such constituents and would be underexposed to the
Index’s other constituents. Such errors may negatively impact the Fund and its
shareholders. The Index Provider and its agents rely on various sources of
information to assess the criteria of issuers included in the Index, including
information that may be based on assumptions and estimates. Neither the Fund nor
the Advisor can offer assurances that the Index’s calculation methodology or
sources of information will provide an accurate assessment of included issuers.
Unusual market conditions or issuer-specific events may cause the Index Provider
to postpone a scheduled rebalance, exclude a security from the Index or
undertake other measures which could cause the Index to vary from its normal or
expected composition. The postponement of a scheduled rebalance in a time of
market volatility could mean that constituents that would otherwise be removed
at rebalance due to changes in market capitalizations, issuer credit ratings, or
other reasons may remain, causing the performance and constituents of the Index
to vary from those expected under normal conditions. Apart from scheduled
rebalances, the Index Provider or its agents may carry out additional ad hoc
rebalances to the Index due to unusual market conditions or in order, for
example, to correct an error in the selection of index
constituents.
LARGE
CAPITALIZATION COMPANIES RISK. Large capitalization
companies may grow at a slower rate and be less able to adapt to changing market
conditions than smaller capitalization companies. Thus, the return on investment
in securities of large capitalization companies may be less than the return on
investment in securities of small and/or mid capitalization companies. The
performance of large capitalization companies also tends to trail the overall
market during different market cycles.
MARKET
MAKER RISK. The Fund faces
numerous market trading risks, including the potential lack of an active market
for Fund shares due to a limited number of market markers. Decisions by market
makers or authorized participants to reduce their role or step away from these
activities in times of market stress could inhibit the effectiveness of the
arbitrage process in maintaining the relationship between the underlying values
of the Fund’s portfolio securities and the Fund’s market price. The Fund may
rely on a small number of third-party market makers to provide a market for the
purchase and sale of shares. Any trading halt or other problem relating to the
trading activity of these market makers could result in a dramatic change in the
spread between the Fund’s net asset value and the price at which the Fund’s
shares are trading on the Exchange, which could result in a decrease in value of
the Fund’s shares. This reduced effectiveness could result in Fund shares
trading at a discount to net asset value and also in greater than normal
intraday bid-ask spreads for Fund shares.
15
MARKET
RISK. Market risk is the
risk that a particular investment, or shares of the Fund in general, may fall in
value. Securities are subject to market fluctuations caused by real or perceived
adverse economic, political, and regulatory factors or market developments,
changes in interest rates and perceived trends in securities prices. Shares of
the Fund could decline in value or underperform other investments. In addition,
local, regional or global events such as war, acts of terrorism, market
manipulation, government defaults, government shutdowns, regulatory actions, political
changes, diplomatic developments, the imposition of sanctions and other
similar measures, spread of infectious diseases or other public health issues,
recessions, natural disasters, or other events could have a significant
negative impact on the Fund and its investments. Any of such circumstances could
have a materially negative impact on the value of the Fund’s shares, the liquidity of an investment, and
may result in increased market volatility. During any such events, the Fund’s
shares may trade at increased premiums or discounts to their net asset
value, the bid/ask spread on the Fund’s
shares may widen and the returns on investment may fluctuate.
MID
CAPITALIZATION COMPANIES RISK. Mid capitalization companies may be
more vulnerable to adverse general market or economic developments and thus may
experience greater price volatility than more established large capitalization
companies. Securities of mid capitalization companies may also be less liquid
than securities of large capitalization companies and may have more limited
trading volumes. Accordingly, such companies are generally subject to greater
market risk than larger, more established companies.
NON-CORRELATION
RISK. The Fund’s return
may not match the return of its Index for a number of reasons. The Fund incurs
operating expenses not applicable to its Index and may incur costs in buying and
selling securities, especially when rebalancing the Fund’s portfolio holdings to
reflect changes in the composition of the Index. In addition, the Fund’s
portfolio holdings may not exactly replicate the securities included in its
Index or the ratios between the securities included in the Index. Accordingly,
the Fund's return may underperform the return of the Index.
NON-DIVERSIFICATION
RISK. As
a “non-diversified” fund, the Fund may hold a smaller number of portfolio
securities than many other funds and may be more sensitive to any single
economic, business, political or regulatory occurrence than a diversified fund.
To the extent the Fund invests in a relatively small number of issuers due to
the high percentage of the Fund’s assets invested in that security, a decline in
the market value of a particular security held by the Fund may affect its value
more than if it invested in a larger number of issuers. The value of the Fund’s
shares may be more volatile than the values of shares of more diversified
funds.
OPERATIONAL
RISK.
The Fund is subject to risks arising from various operational factors,
including, but not limited to, human error, processing and communication errors,
errors of the Fund’s service providers, counterparties or other third-parties,
failed or inadequate processes and technology or systems failures. The Fund
relies on third-parties for a range of services, including custody. Any delay or
failure relating to engaging or maintaining such service providers may affect
the Fund’s ability to meet its investment objective. Although the Fund and the
Fund’s investment advisor seek to reduce these operational risks through
controls and procedures, there is no way to completely protect against such
risks.
PASSIVE
INVESTMENT RISK. The Fund is not
actively managed. The Fund invests in securities included in or representative
of its Index regardless of investment merit. The Fund generally will not attempt
to take defensive positions in declining markets. In the event that the Index is
no longer calculated, the Index license is terminated or the identity or
character of the Index is materially changed, the Fund will seek to engage a
replacement index.
PREMIUM/DISCOUNT
RISK.
The market price of the Fund’s shares will generally fluctuate in accordance
with changes in the Fund’s net asset value as well as the relative supply of and
demand for shares on the Exchange. First Trust cannot predict whether shares
will trade below, at or above their net asset value because the shares trade on
the Exchange at market prices and not at net asset value. Price differences may
be due, in large part, to the fact that supply and demand forces at work in the
secondary trading market for shares will be closely related, but not identical,
to the same forces influencing the prices of the holdings of the Fund trading
individually or in the aggregate at any point in time. However, given that
shares can only be purchased and redeemed in Creation Units, and only to and
from broker-dealers and large institutional investors that have entered into
participation agreements (unlike shares of closed-end funds, which frequently
trade at appreciable discounts from, and sometimes at premiums to, their net
asset value), First Trust believes that large discounts or premiums to the net
asset value of shares should not be sustained absent disruptions to the creation
and redemption mechanism, extreme market volatility or potential lack of
authorized participants. During stressed market conditions, the market for the
Fund’s shares may become less liquid in response to deteriorating liquidity in
the market for the Fund’s underlying portfolio holdings, which could in turn
lead to differences between the market price of the Fund’s shares and their net
asset value and the bid/ask spread on the Fund’s shares may widen.
16
SMALL
CAPITALIZATION COMPANIES RISK. Small capitalization companies may
be more vulnerable to adverse general market or economic developments, and their
securities may be less liquid and may experience
greater price volatility than large and mid capitalization companies as a result
of several factors, including limited trading volumes, fewer products or financial
resources, management inexperience and less
publicly available information. Accordingly, such companies are generally subject
to greater market risk than large and mid capitalization companies.
TRADING
ISSUES RISK. Trading in Fund
shares on the Exchange may be halted due to market conditions or for reasons
that, in the view of the Exchange, make trading in shares inadvisable. In
addition, trading in Fund shares on the Exchange is subject to trading halts
caused by extraordinary market volatility pursuant to the Exchange’s “circuit
breaker” rules. There can be no assurance that the requirements of the Exchange
necessary to maintain the listing of the Fund will continue to be met or will
remain unchanged. The Fund may have difficulty maintaining its listing on the
Exchange in the event the Fund’s assets are small, the Fund does not have enough
shareholders, or if the Fund is unable to proceed with creation and/or
redemption orders.
Non-Principal
Risks
BORROWING
AND LEVERAGE RISK. If the Fund borrows
money, it must pay interest and other fees, which may reduce the Fund’s returns.
Any such borrowings are intended to be temporary. However, under certain market
conditions, including periods of decreased liquidity, such borrowings might be
outstanding for longer periods of time. As prescribed by the 1940 Act, the Fund
will be required to maintain specified asset coverage of at least 300% with
respect to any bank borrowing immediately following such borrowing and at all
times thereafter. The Fund may be required to dispose of assets on unfavorable
terms if market fluctuations or other factors reduce the Fund’s asset coverage
to less than the prescribed amount.
CASH
TRANSACTIONS RISK. The Fund may, under
certain circumstances, effect a portion of creations and redemptions for cash,
rather than in-kind securities. As a result, an investment in the Fund may be
less tax-efficient than an investment in an ETF that effects its creations and
redemptions only in-kind. ETFs are able to make in-kind redemptions and avoid
being taxed on gains on the distributed portfolio securities at the fund level.
A Fund that effects redemptions for cash may be required to sell portfolio
securities in order to obtain the cash needed to distribute redemption proceeds.
Any recognized gain on these sales by the Fund will generally cause the Fund to
recognize a gain it might not otherwise have recognized, or to recognize such
gain sooner than would otherwise be required if it were to distribute portfolio
securities only in-kind. The Fund intends to distribute these gains to
shareholders to avoid being taxed on this gain at the fund level and otherwise
comply with the special tax rules that apply to it. This strategy may cause
shareholders to be subject to tax on gains they would not otherwise be subject
to, or at an earlier date than if they had made an investment in a different
ETF. Moreover, cash transactions may have to be carried out over several days if
the securities market is relatively illiquid and may involve considerable
brokerage fees and taxes. These brokerage fees and taxes, which will be higher
than if the Fund sold and redeemed its shares entirely in-kind, will be passed
on to those purchasing and redeeming Creation Units in the form of creation and
redemption transaction fees. In addition, these factors may result in wider
spreads between the bid and the offered prices of the Fund’s shares than for
ETFs that distribute portfolio securities in-kind.
FAILURE
TO QUALIFY AS A REGULATED INVESTMENT COMPANY RISK. If, in any year, the Fund fails to
qualify as a regulated investment company under the applicable tax laws, the
Fund would be taxed as an ordinary corporation. In such circumstances, the
Fund's taxable income would be subject to tax at the Fund level and to a further
tax at the shareholder level when such income is distributed and the Fund could
be required to recognize unrealized gains, pay substantial taxes and interest
and make substantial distributions before requalifying as a regulated investment
company that is accorded special tax treatment. This would cause investors to incur
higher tax liabilities than they otherwise would have incurred and would have a
negative impact on Fund returns. If the Fund fails to qualify as a regulated
investment company, distributions to the Fund's shareholders generally would be
eligible (i) for treatment as qualified dividend income in the case of
individual shareholders and (ii) for the dividends received deduction in the
case of corporate shareholders. See "Federal Tax Matters."
INTELLECTUAL
PROPERTY RISK. The Fund relies on a
sublicense from First Trust that permits the Fund to use the associated trade
names, trademarks and/or service marks (the “Intellectual
Property”) in connection with
the name and/or investment strategies of the Fund. Such license may be
terminated by the owners of the Intellectual Property and, as a result, the Fund
may lose its ability to use the Intellectual Property. There is also no
guarantee that the owners of the Intellectual Property have all rights to
license the Intellectual Property to First Trust for use by the Fund.
Accordingly, in the event the license is terminated or the owners of the
Intellectual Property do not have rights to license the Intellectual Property,
it may have a significant effect on the operation of the
Fund.
ISSUER
SPECIFIC CHANGES RISK. The value of an
individual security or particular type of security can be more volatile than the
market as a whole and can perform differently from the value of the market as a
whole.
17
LEGISLATION/LITIGATION
RISK.
From time to time, various legislative initiatives are proposed in the United
States and abroad, which may have a negative impact on certain companies in
which the Fund invests. In addition, litigation regarding any of the issuers of
the securities owned by the Fund, or industries represented by these issuers,
may negatively impact the value of the securities. Such legislation or
litigation may cause the Fund to lose value or may result in higher portfolio
turnover if the Advisor determines to sell such a holding.
NON-U.S.
SECURITIES RISK. An investment in
securities of non-U.S. companies involves risks not associated with domestic
issuers. Investment in non-U.S. securities may involve higher costs than
investment in U.S. securities, including higher transaction and custody costs as
well as the imposition of additional taxes by non-U.S. governments. Non-U.S.
investments may also involve risks associated with the level of currency
exchange rates, less complete financial information about the issuers, less
market liquidity, more market volatility and political instability. Future
political and economic developments, the possible imposition of withholding
taxes on dividend income, the possible seizure or nationalization of non-U.S.
holdings, the imposition of sanctions by foreign governments, the possible
establishment of capital controls, exchange controls or freezes on the
convertibility of currency or the adoption of other governmental restrictions
might adversely affect an investment in non-U.S. securities. Additionally,
non-U.S. issuers may be subject to less stringent regulation, and to different
accounting, auditing and recordkeeping requirements. The U.S. and non-U.S.
markets often rise and fall at different times or by different amounts due to
economic or other regional developments particular to a given country or
region.
Fund
Organization
The
Fund is a series of the Trust, an investment company registered under the 1940
Act. The Fund is treated as a separate fund with its own
investment objectives and policies. The Trust is organized as a Massachusetts
business trust. The Board is responsible for the overall management and
direction of the Trust. The Board elects the Trust’s officers and approves all
significant agreements, including those with the Advisor, distributor, custodian
and fund administrative and accounting agent.
Management
of the Fund
First
Trust Advisors L.P., 120 East Liberty Drive, Wheaton, Illinois 60187, is the
investment advisor to the Fund. In this capacity, First Trust is
responsible for the selection and ongoing monitoring of the securities in the
Fund's portfolio and certain other services necessary for the management of the
Fund.
First
Trust is a limited partnership with one limited partner, Grace Partners of
DuPage L.P., and one general partner, The Charger Corporation. Grace
Partners of DuPage L.P. is a limited partnership with one general partner, The
Charger Corporation, and a number of limited partners. The Charger Corporation
is an Illinois corporation controlled by James A. Bowen, the Chief Executive
Officer of First Trust. First Trust discharges its responsibilities subject to
the policies of the Fund.
First Trust serves
as advisor or sub-advisor for 11 mutual fund portfolios, 10
exchange-traded funds consisting of 234 series and 13 closed-end funds. It is
also the portfolio supervisor of certain unit investment trusts sponsored by
First Trust Portfolios L.P. (“FTP”), an affiliate of First Trust, 120
East Liberty Drive, Wheaton, Illinois 60187. FTP specializes in the
underwriting, trading and distribution of unit investment trusts and other
securities. FTP is the principal underwriter of the shares of the
Fund.
The members of the
Investment Committee are jointly and primarily responsible for the management of
the Fund. Investments are made under the direction of the
Investment Committee. The Investment Committee consists of Daniel J. Lindquist,
David G. McGarel, Jon C. Erickson, Roger F. Testin, Stan
Ueland, Chris A. Peterson and Erik Russo.
•
Mr. Lindquist is
Chairman of the Investment Committee and presides over Investment Committee
meetings. Mr. Lindquist is responsible for overseeing the implementation of the
Fund’s investment strategy. Mr. Lindquist was a Senior Vice President of First
Trust and FTP from September 2005 to July 2012 and is now a Managing Director of
First Trust and FTP. Mr. Lindquist is a recipient of the Chartered Financial
Analyst designation.
•
Mr. McGarel is the
Chief Investment Officer, Chief Operating Officer and a Managing Director of
First Trust and FTP. As First Trust’s Chief Investment Officer, Mr. McGarel
consults with the other members of the Investment Committee on market conditions
and First Trust’s general investment philosophy. Mr. McGarel was a Senior Vice
President of First Trust and FTP from January 2004 to July 2012. Mr. McGarel is
a recipient of the Chartered Financial Analyst designation.
18
•
Mr. Erickson joined First Trust in
1994 and is a Senior Vice President of First Trust and FTP. As the head of First
Trust’s Equity Research Group, Mr. Erickson is responsible for determining the
securities to be purchased and sold by funds that do not utilize quantitative
investment strategies. Mr. Erickson is a recipient of the Chartered Financial
Analyst designation.
•
Mr. Testin is a
Senior Vice President of First Trust and FTP. Mr. Testin is the head of First
Trust’s Portfolio Management Group. Mr. Testin has been a Senior Vice President
of First Trust and FTP since November 2003. Mr. Testin is a recipient of the
Chartered Financial Analyst designation.
•
Mr. Ueland joined
First Trust as a Vice President in August 2005 and has been a Senior Vice
President of First Trust and FTP since September 2012. At First Trust, he plays
an important role in executing the investment strategies of each portfolio of
exchange-traded funds advised by First Trust.
•
Mr. Peterson is a Senior Vice
President and head of First Trust’s strategy research group. He joined First
Trust in January of 2000. Mr. Peterson is responsible for developing and
implementing quantitative equity investment strategies. Mr. Peterson received
his B.S. in Finance from Bradley University in 1997 and his M.B.A. from the
University of Chicago Booth School of Business in 2005. He has over 26 years of
financial services industry experience and is a recipient of the Chartered
Financial Analyst designation.
•
Mr. Russo is a Vice
President of First Trust. He is responsible for implementing the investment
strategies of each portfolio of exchange-traded funds advised by First Trust in
his role as a Portfolio Manager. Mr. Russo joined First Trust in January of
2010.
For
additional information concerning First Trust, including a description of the
services provided to the Fund, see the Fund's SAI. Additional
information about the compensation of Investment Committee members, other
accounts managed by members of the Investment Committee and ownership by members
of the Investment Committee of shares of the Fund is provided in the
SAI.
Management
Fee
Pursuant
to an investment management agreement between First Trust and the Trust, on
behalf of the Fund (the “Investment
Management Agreement”), First Trust
manages the investment of the Fund's assets. First Trust is paid an annual
unitary management fee by the Fund equal to 0.65% of the Fund's average daily
net assets and is responsible for the Fund's expenses, including the cost of
transfer agency, custody, fund administration, legal, audit and other services,
but excluding fee payments under the Investment Management Agreement, interest,
taxes, acquired fund fees and expenses, if any, brokerage commissions and other
expenses connected with the execution of portfolio transactions, expenses
associated with short sales transactions, distribution and service fees payable
pursuant to a Rule 12b-1 plan, if any, and extraordinary expenses.
As approved by the Trust’s Board of
Trustees, the management fee paid to First Trust will be reduced at certain
levels of Fund net assets (“breakpoints”). See the Fund's Statement of
Additional Information for more information on the breakpoints.
A discussion
regarding the Board’s approval of the continuation of the Investment
Management Agreement is available in the Fund’s Annual Report to Shareholders
for the period ended September 30, 2023.
How
to Buy and Sell Shares
Most
investors buy and sell shares of the Fund in secondary market transactions
through brokers. Shares of the Fund are listed for trading on the
secondary market on one or more national securities exchanges. Shares can be
bought and sold throughout the trading day like other publicly traded shares.
There is no minimum investment when buying shares on the Exchange. Although
shares are generally purchased and sold in “round lots” of 100 shares, brokerage
firms typically permit investors to purchase or sell shares in smaller “odd
lots,” at no per-share price differential. When buying or selling shares through
a broker, investors should expect to pay brokerage commissions, investors may
receive less than the net asset value of the shares because shares are bought
and sold at market prices rather than at net asset value, and investors may pay
some or all of the bid-ask spread for each transaction (purchase or sale) of
Fund shares. Share prices are reported in dollars and cents per
share.
Under
normal circumstances, the Fund will pay out redemption proceeds to a redeeming
authorized participant within two days after the
authorized participant’s redemption request is received, in accordance with the
process set forth in the Fund’s SAI and in the agreement between the authorized
participant and the Fund’s distributor. However, the Fund reserves the right,
including under stressed market conditions, to take up to seven days after the
receipt of a redemption request to pay an authorized participant, all as
permitted by the 1940 Act. If the Fund has foreign investments in a country
where a local market holiday, or series of consecutive holidays, or the extended
delivery cycles for transferring foreign investments to redeeming
19
authorized
participants prevents the Fund from delivering such foreign investments to an
authorized participant in response to a redemption
request, the Fund may take up to 15 days after the receipt of the redemption
request to deliver such investments to the authorized participant.
For
purposes of the 1940 Act, the Fund is treated as a registered investment
company, and the acquisition of shares by other registered investment
companies and companies relying on Sections 3(c)(1) and 3(c)(7) of the 1940 Act
is subject to the restrictions of Section 12(d)(1) of the 1940 Act and the
related rules and interpretations.
Book
Entry
Shares
are held in book-entry form, which means that no share certificates are issued.
The Depository Trust Company (“DTC”) or its nominee is
the record owner of all outstanding shares of the Fund and is recognized as the
owner of all shares for all purposes.
Investors
owning shares are beneficial owners as shown on the records of DTC or its
participants. DTC serves as the securities depository for all
shares. Participants in DTC include securities brokers and dealers, banks, trust
companies, clearing corporations and other institutions that directly or
indirectly maintain a custodial relationship with DTC. As a beneficial owner of
shares, you are not entitled to receive physical delivery of share certificates
or to have shares registered in your name, and you are not considered a
registered owner of shares. Therefore, to exercise any right as an owner of
shares, you must rely upon the procedures of DTC and its participants. These
procedures are the same as those that apply to any other stocks that you hold in
book-entry or “street name” form.
Share
Trading Prices
The
trading price of shares of the Fund on the secondary market is based on market
price and may differ from the Fund’s daily net asset value and
can be affected by market forces of supply and demand, economic conditions and
other factors.
Frequent
Purchases and Redemptions of the Fund's Shares
The
Fund imposes no restrictions on the frequency of purchases and redemptions
(“market
timing”). In determining not
to approve a written, established policy, the Board evaluated the risks of
market timing activities by the Fund's shareholders. The Board considered that
the Fund's shares can only be purchased and redeemed directly from the Fund in
Creation Units by broker-dealers and large institutional investors that have
entered into participation agreements (i.e., authorized
participants (“APs”)) and that the vast
majority of trading in the Fund's shares occurs on the secondary market. Because
the secondary market trades do not involve the Fund directly, it is unlikely
those trades would cause many of the harmful effects of market timing, including
dilution, disruption of portfolio management, increases in the Fund's trading
costs and the realization of capital gains. With respect to trades directly with
the Fund, to the extent effected in-kind (i.e., for securities),
those trades do not cause any of the harmful effects that may result from
frequent cash trades. To the extent that the Fund may effect the purchase or
redemption of Creation Units in exchange wholly or partially for cash, the Board
noted that such trades could result in dilution to the Fund and increased
transaction costs, which could negatively impact the Fund's ability to achieve
its investment objective. However, the Board noted that direct trading by APs is
critical to ensuring that the shares trade at or close to net asset value. In
addition, the Fund imposes fixed and variable transaction fees on purchases and
redemptions of Creation Units to cover the custodial and other costs incurred by
the Fund in effecting trades. Finally, the Advisor monitors purchase and
redemption orders from APs for patterns of abusive trading and the Fund reserves
the right to not accept orders from APs that the Advisor has determined may be
disruptive to the management of the Fund.
Dividends,
Distributions and Taxes
Dividends
from net investment income, if any, are declared and paid quarterly by the Fund.
The Fund distributes its net realized capital gains, if
any, to shareholders at least annually.
Distributions
in cash may be reinvested automatically in additional whole shares only if the
broker through whom you purchased shares makes such
option available. Such shares will generally be reinvested by the broker based
upon the market price of those shares and investors may be subject to customary
brokerage commissions charged by the broker.
Federal
Tax Matters
This
section summarizes some of the main U.S. federal income tax consequences of
owning shares of the Fund. This section is current as of the
date of this prospectus. Tax laws and interpretations change frequently, and
these summaries do not describe
20
all
of the tax consequences to all taxpayers. For example, these summaries generally
do not describe your situation if you are a corporation, a
non-U.S. person, a broker-dealer, or other investor with special circumstances.
In addition, this section does not describe your state, local or non-U.S. tax
consequences.
This
federal income tax summary is based in part on the advice of counsel to the
Fund. The Internal Revenue Service ("IRS") could disagree with
any conclusions set forth in this section. The following disclosure may not be
sufficient for you to use for the purpose of avoiding penalties under federal
tax law.
As with any
investment, you should seek advice based on your individual circumstances from
your own tax advisor.
Fund
Status
The
Fund intends to continue to qualify as a “regulated investment company” (a
“RIC”) under the federal
tax laws. If the Fund qualifies as a RIC and distributes its income as required
by the tax law, the Fund generally will not pay federal income
taxes.
Distributions
The
Fund’s distributions are generally taxable. After the end of each year, you will
receive a tax statement that separates the distributions of the
Fund into two categories, ordinary income distributions and capital gain
dividends. Ordinary income distributions are generally taxed at your ordinary
tax rate, however, as further discussed below certain ordinary income
distributions received from the Fund may be taxed at the capital gains tax
rates. Generally, you will treat all capital gain dividends as long-term capital
gains regardless of how long you have owned your shares.
To determine your
actual tax liability for your capital gain dividends, you must calculate your
total net capital gain or loss for the tax year after considering all of
your other taxable transactions, as described below. In addition, the Fund may
make distributions that represent a return of capital for tax purposes and thus
will generally not be taxable to you; however, such distributions may reduce
your tax basis in your shares, which could result in you having to pay higher
taxes in the future when shares are sold, even if you sell the shares at a loss
from your original investment. A “return of capital” is a return, in whole or in
part, of the funds that you previously invested in the Fund. A return of capital
distribution should not be considered part of a Fund’s dividend yield or total
return of an investment in Fund shares. The tax status of your distributions
from the Fund is not affected by whether you reinvest your distributions in
additional shares or receive them in cash. The tax laws may require you to treat
distributions made to you in January as if you had received them on December 31
of the previous year.
Income
from the Fund may also be subject to a 3.8% “Medicare tax.” This tax generally
applies to your net investment income if your adjusted
gross income exceeds certain threshold amounts, which are $250,000 in the case
of married couples filing joint returns and $200,000 in the case of single
individuals.
Dividends
Received Deduction
A
corporation that owns shares generally will not be entitled to the dividends
received deduction with respect to many dividends received from the
Fund because the dividends received deduction is generally not available for
distributions from RICs. However, certain ordinary income dividends on shares
that are attributable to qualifying dividends received by the Fund from certain
corporations may be reported by the Fund as being eligible for the dividends
received deduction.
Capital
Gains and Losses and Certain Ordinary Income Dividends
If
you are an individual, the maximum marginal stated federal tax rate for net
capital gain is generally 20% (15% or 0% for taxpayers with
taxable incomes below certain thresholds). Some capital gains, including some
portion of your capital gain dividends may be taxed at a higher maximum stated
tax rate. Capital gains may also be subject to the Medicare tax described
above.
Net
capital gain equals net long-term capital gain minus net short-term capital loss
for the taxable year. Capital gain or loss is long-term if the
holding period for the asset is more than one year and is short-term if the
holding period for the asset is one year or less. You must exclude the date you
purchase your shares to determine your holding period. However, if you receive a
capital gain dividend from the Fund and sell your share 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.
21
An
election may be available to you to defer recognition of the gain attributable
to a capital gain dividend if you make certain qualifying
investments within a limited time. You should talk to your tax advisor about the
availability of this deferral election and its requirements.
Ordinary
income dividends received by an individual shareholder from a RIC such as the
Fund are generally taxed at the same rates that apply to
net capital gain (as discussed above), provided certain holding period
requirements are satisfied and provided the dividends are attributable to
qualifying dividends received by the Fund itself. The Fund will provide notice
to its shareholders of the amount of any distribution which may be taken into
account as a dividend which is eligible for the capital gains tax
rates.
Sale
of Shares
If
you sell or redeem your shares, you will generally recognize a taxable gain or
loss. To determine the amount of this gain or loss, you must
subtract your tax basis in your shares from the amount you receive in the
transaction. Your tax basis in your shares is generally equal to the cost of
your shares, generally including brokerage fees, if any. In some cases, however,
you may have to adjust your tax basis after you purchase your shares. An
election may be available to you to defer recognition of capital gain if you
make certain qualifying investments within a limited time. You should talk to
your tax advisor about the availability of this deferral election and its
requirements.
Taxes
on Purchase and Redemption of Creation Units
If
you exchange securities for Creation Units, you will generally recognize a gain
or a loss. The gain or loss will be equal to the difference between
the market value of the Creation Units at the time and your aggregate basis in
the securities surrendered and the cash component paid. If you exchange Creation
Units for securities, you will generally recognize a gain or loss equal to the
difference between your basis in the Creation Units and the aggregate market
value of the securities received and the cash redemption amount. The IRS,
however, may assert that a loss realized upon an exchange of securities for
Creation Units or Creation Units for securities cannot be deducted currently
under the rules governing “wash sales,” or on the basis that there has been no
significant change in economic position.
Treatment
of Fund Expenses
Expenses incurred and
deducted by the Fund will generally not be treated as income taxable to
you.
Non-U.S.
Tax Credit
Because
the Fund may invest in non-U.S. securities, the tax statement that you receive
may include an item showing non-U.S. taxes the Fund paid
to other countries. In this case, dividends taxed to you will include your share
of the taxes the Fund paid to other countries. You may be able to deduct or
receive a tax credit for your share of these taxes.
Non-U.S.
Investors
If
you are a non-U.S. investor (i.e., an investor other
than a U.S. citizen or resident or a U.S. corporation, partnership, estate or
trust), you should be aware that, generally, subject to applicable tax treaties,
distributions from the Fund will be characterized as dividends for federal
income tax purposes (other than dividends which the Fund properly reports as
capital gain dividends) and will be subject to U.S. federal income taxes,
including withholding taxes, subject to certain exceptions described below.
However, distributions received by a non-U.S. investor from the Fund that are
properly reported by the Fund as capital gain dividends may not be subject to
U.S. federal income taxes, including withholding taxes, provided that the Fund
makes certain elections and certain other conditions are met. Distributions from
the Fund that are properly reported by the Fund as an interest-related dividend
attributable to certain interest income received by the Fund or as a short-term
capital gain dividend attributable to certain net short-term capital gain income
received by the Fund may not be subject to U.S. federal income taxes, including
withholding taxes when received by certain non-U.S. investors, provided that the
Fund makes certain elections and certain other conditions are met. For tax years
after December 31, 2022, amounts paid to or recognized by a non-U.S. affiliate
that are excluded from tax under the portfolio interest, capital gain dividends,
short-term capital gains or tax-exempt interest dividend exceptions or
applicable treaties, may be taken into consideration in determining whether a
corporation is an “applicable corporation” subject to a 15% minimum tax on
adjusted financial statement income.
Distributions
may be subject to a U.S. withholding tax of 30% in the case of distributions to
(i) certain non-U.S. financial institutions that
have not entered into an agreement with the U.S. Treasury to collect and
disclose certain information and are not resident in a jurisdiction that has
entered into such an agreement with the U.S. Treasury and (ii) certain other
non-U.S. entities that do not provide certain certifications and information
about the entity’s U.S. owners. This withholding tax is also
22
currently
scheduled to apply to the gross proceeds from the disposition of securities that
produce U.S. source interest ordividends. However,
proposed regulations may eliminate the requirement to withhold on payments of
gross proceeds from dispositions.
Investments
in Certain Non-U.S. Corporations
If
the Fund holds an equity interest in any “passive foreign investment companies”
(“PFICs”), which are
generally certain non-U.S. corporations that receive at least 75% of their
annual gross income from passive sources (such as interest, dividends, certain
rents and royalties or capital gains) or that hold at least 50% of their assets
in investments producing such passive income, the Fund could be subject to U.S.
federal income tax and additional interest charges on gains and certain
distributions with respect to those equity interests, even if all the income or
gain is timely distributed to its shareholders. The Fund will not be able to
pass through to its shareholders any credit or deduction for such taxes. The
Fund may be able to make an election that could ameliorate these adverse tax
consequences. In this case, the Fund would recognize as ordinary income any
increase in the value of such PFIC shares, and as ordinary loss any decrease in
such value to the extent it did not exceed prior increases included in income.
Under this election, the Fund might be required to recognize in a year income in
excess of its distributions from PFICs and its proceeds from dispositions of
PFIC stock during that year, and such income would nevertheless be subject to
the distribution requirement and would be taken into account for purposes of the
4% excise tax. Dividends paid by PFICs are not treated as qualified dividend
income.
Distribution
Plan
FTP
serves as the distributor of Creation Units for the Fund on an agency basis. FTP
does not maintain a secondary market in shares.
The
Board has adopted a Distribution and Service Plan pursuant to Rule 12b-1 under
the 1940 Act. In accordance with the Rule 12b-1 plan, the
Fund is authorized to pay an amount up to 0.25% of 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 Fund does not
currently pay 12b-1 fees, and pursuant to a contractual arrangement, the Fund
will not pay 12b-1 fees any time before January 31, 2025.
However, in the event 12b-1 fees are charged in the future, because these fees
are paid out of the Fund's assets, over time these fees will increase the cost
of your investment and may cost you more than certain other types of sales
charges.
Net
Asset Value
The Fund’s net asset value (“NAV”) is determined as of the close of
regular trading (normally 4:00 p.m., Eastern Time) on each day the New York
Stock Exchange (“NYSE”) is open for trading. If the NYSE
closes early on a valuation day, the Fund’s NAV will be determined as of that
time. The Fund’s NAV is calculated by dividing the value of
the net assets of the Fund (i.e., the value of its total assets less
total liabilities) by the total number of outstanding
shares of the Fund, generally rounded to the
nearest cent.
Section 2(a)(41) of the 1940 Act provides that when a
market quotation is readily available for a fund’s portfolio investment, it must
be valued at the market value. Rule 2a-5 under the 1940 Act (“Rule
2a-5”) defines a readily available market
quotation as “a quoted price
(unadjusted) in active markets for identical
investments that the fund can access at the measurement date, provided
that a quotation will not be readily
available if it is not reliable.” If a market quotation is not “readily available,” then the portfolio investment must be
fair valued as determined in good faith by a fund’s board of
trustees.
Rule 2a-5 permits a
fund’s board of trustees to designate the fund’s investment adviser as its
“valuation designee” to perform fair value determinations, subject to
certain conditions. Accordingly, the Fund’s Board has designated First Trust as
its valuation designee (the “Valuation
Designee”) pursuant to
Rule 2a-5 and has directed the Valuation Designee to perform the functions
required in Rule 2a-5(a) subject to the requirements of Rule 2a-5(b) on behalf
of all portfolio investments of the Fund, subject to the Board’s oversight.
First Trust has established a pricing committee (the “Pricing
Committee”) to assist in
the administration of the duties of the Valuation Designee. The Valuation
Designee has adopted valuation procedures for the First Trust Funds (the
“Valuation
Procedures”), a brief
summary of which is set forth below.
23
The Pricing
Committee has identified certain portfolio investments that are routinely
categorized as having a readily available market quotation. The market value of
an investment with a readily available market quotation is typically determined
on the basis of official closing prices or last reported sale prices or
equivalent price, although this can vary based on investment type and/or the
availability of such prices.
The Pricing
Committee has also identified certain portfolio investments that are routinely
categorized as fair valued investments. In general, for such investments, the
Fund’s accounting agent will obtain all pricing data for use in valuing such
investments from a pricing service provider approved by the Pricing Committee
(each, a “Pricing Service
Provider”), subject to
the oversight of the Pricing Committee. Pricing Service Providers typically
value non-exchange-traded instruments utilizing a range of market-based inputs
and assumptions. For example, when available, Pricing Service Providers may
utilize inputs such as benchmark yields, reported trades, broker-dealer quotes,
spreads, and transactions for comparable instruments. In pricing certain
instruments, a Pricing Service Provider may consider information about an
instrument’s issuer or market activity. Pricing Service Provider valuations of
non-exchange-traded instruments generally represent the service’s good faith
opinion as to what the holder of an instrument would receive in an orderly
transaction for an institutional round lot position under current market
conditions. Certain exchange-traded options, such as FLEX Options, are typically
valued using a model-based price provided by a Pricing Service
Provider.
Portfolio
investments trading on foreign exchanges or over-the-counter markets that close
prior to the close of the NYSE may be fair valued using a systematic
fair valuation model provided by a Pricing Service Provider. If these foreign
securities meet certain criteria in relation to the valuation model, their
valuation is systematically adjusted to reflect the impact of movement in the
U.S. market after the close of certain foreign markets.
If no price is
available from a Pricing Service Provider or if the Pricing Committee has reason
to question the accuracy or the reliability of a price supplied for a
portfolio investment or the use of amortized cost, the Pricing Committee will
determine the fair value of such portfolio investment in a manner that it
believes most appropriately reflects the fair value of the portfolio investment
on the valuation date (a “Special Fair
Value Pricing Situation”). In a Special Fair Value Pricing
Situation, the Pricing Committee will determine a fair value price subject to
the process outlined in the Valuation Procedures and based on a consideration of
all available information to the Pricing Committee at the time of the
determination.
Additionally, for
foreign securities, if an extraordinary market event occurs between the time the
last “current” market quotation is available for a security in the
Fund’s portfolio and the time the Fund’s NAV is determined that calls into doubt
whether that earlier market quotation represents fair value at the time the
Fund’s NAV is determined, the Pricing Committee will determine the fair
valuation as set forth in the Valuation Procedures.
Fair value represents a good faith approximation
of the value of a portfolio investment and is the amount the Fund might
reasonably expect to receive from the current sale of that investment in an
arm’s-length transaction. Valuing the Fund’s
investments using fair value pricing will result
in prices that may differ from current market valuations, if any, and that may not be the prices at
which those investments could have been sold during the period in which the
particular fair values were used. While the Valuation Procedures and Valuation
Designee’s processes are intended to result in the Fund’s NAV calculation that
fairly reflects the values as of the time of pricing, the fair value determined
for a portfolio instrument may be materially different from the value that could
be realized upon the sale of that instrument.
Foreign currencies are translated
into U.S. dollars at the exchange rate of such
currencies against the U.S. dollar as provided by a Pricing Service Provider.
All assets denominated in foreign currencies will be converted into U.S. dollars
at the exchange rates in effect at the time of valuation.
Fund
Service Providers
The Bank of New York
Mellon, 240 Greenwich Street, New York, New York 10286, acts as the
administrator, custodian and fund accounting and transfer agent
for the Fund. Chapman and Cutler LLP, 320 South Canal St., Chicago, Illinois
60606, serves as legal counsel to the Fund. First Trust serves as the fund
reporting agent for the Fund.
Index
Provider
The
Index is compiled by the Index Provider. The Index Provider is not affiliated
with the Fund, First Trust or FTP. The Fund is entitled to use the
Index pursuant to a sublicensing arrangement with First Trust, which in turn has
a licensing agreement with the Index Provider. The Index Provider or its agent
also serves as calculation agent for the Index (the “Index
Calculation Agent”). The Index
Calculation Agent is responsible for the management of the day-to-day operations
of the Index, including calculating
24
the
value of the Index every 15 seconds, widely disseminating the Index values every
15 seconds and tracking corporate actions, some of which result
in Index adjustments.
Disclaimers
First
Trust does not guarantee the accuracy and/or the completeness of the Index or
any data included therein, and First Trust shall have no
liability for any errors, omissions or interruptions therein. First Trust makes
no warranty, express or implied, as to results to be obtained by the Fund,
owners of the shares of the Fund or any other person or entity from the use of
the Index or any data included therein. First Trust makes no express or implied
warranties, and expressly disclaims all warranties of merchantability or fitness
for a particular purpose or use with respect to the Index or any data included
therein. Without limiting any of the foregoing, in no event shall First Trust
have any liability for any special, punitive, direct, indirect or consequential
damages (including lost profits) arising out of matters relating to the use of
the Index, even if notified of the possibility of such
damages.
The
Fund is not sponsored, endorsed, sold or promoted by 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 Fund. The Corporations make no
representation or warranty, express or implied to the owners of the Fund or any
member of the public regarding the advisability of investing in securities
generally or in the Fund particularly, or the ability of the Index to track
general stock market performance. The Corporations' only relationship to First
Trust (“Licensee”) is in the licensing
of Nasdaq, Inc. and certain trade names of the Corporations and the use of the
Index which are determined, composed and calculated by Nasdaq, Inc. without
regard to Licensee or the Fund. Nasdaq, Inc. has no obligation to take the needs
of the Licensee or the owners of the Fund into consideration in determining,
composing or calculating the Indices. The Corporations are not responsible for
and have not participated in the determination of the timing of, prices at, or
quantities of the Fund to be issued or in the determination or calculation of
the equation by which the Fund are to be converted into cash. The Corporations
have no liability in connection with the administration, marketing or trading of
the Fund.
THE
CORPORATIONS DO NOT GUARANTEE THE ACCURACY AND/OR UNINTERRUPTED CALCULATION OF
THE INDEX OR ANY DATA INCLUDED
THEREIN. THE CORPORATIONS MAKE NO WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS TO
BE OBTAINED BY LICENSEE, OWNERS OF THE FUND, OR ANY OTHER PERSON OR ENTITY FROM
THE USE OF THE INDEX 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
INDEX 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 the Fund's shares was greater (at
a premium) and less (at a discount) than the Fund's net
asset value for the most recently completed year, and the most recently
completed calendar quarters since that year (or life of the Fund, if shorter),
is available at
https://www.ftportfolios.com/Retail/etf/home.aspx.
Total
Return Information
The
table below compares the total return of the Fund to the total return of the
Index on which it is based and a market index. The information
presented for the 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 the 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 the Fund is the value of one share of the Fund
and is computed by dividing the value of all assets of the Fund (including
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 the Fund
and the market return is based on the market price per share of the 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 the 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
25
exchanges
trading the Fund at the time the Fund's net asset value is calculated. Since the
shares of the Fund typically do not trade in the
secondary market until several days after the Fund's inception, for the period
from inception to the first day of secondary market trading in shares of the
Fund, the net asset value of the 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 the Fund at Market
Price and net asset value, respectively. An index is a statistical composite
that tracks a specified financial market or sector. Unlike the Fund, an index
does not actually hold a portfolio of securities and therefore does not incur
the expenses incurred by the Fund. These expenses negatively impact the
performance of the 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 the Fund. The investment return and principal value of shares of the Fund
will vary with changes in market conditions. Shares of the Fund may be worth
more or less than their original cost when they are redeemed or sold in the
market. The Fund's past performance is no guarantee of future
results.
First
Trust Nasdaq Lux Digital Health Solutions ETF (EKG)
Total Returns as of September 30, 2023
Total Returns as of September 30, 2023
|
|
|
Average
Annual |
Cumulative |
|
|
1
Year |
Inception
(3/22/2022) |
Inception
(3/22/2022) |
|
Fund
Performance |
|
|
|
|
Net Asset
Value |
-0.56% |
-21.63% |
-31.07% |
|
Market
Price |
-0.78% |
-21.67% |
-31.12% |
|
Index
Performance |
|
|
|
|
Nasdaq Lux
Health TechTM
Index |
0.12% |
-21.14% |
-30.40% |
|
S&P
Composite 1500® Health
Care Index |
7.38% |
-2.93% |
-4.44% |
26
Financial
Highlights
The financial
highlights table is intended to help you understand the Fund's financial
performance for the periods shown. Certain information
reflects financial results for a single share of the Fund. The total returns
represent the rate that an investor would have earned (or lost) on an investment
in the Fund (assuming reinvestment of all dividends and distributions). The
information for the periods indicated has been derived from financial statements
audited by Deloitte & Touche LLP, whose report, along with the Fund's
financial statements, is included in the Annual Report to Shareholders dated
September 30, 2023 and is incorporated by reference in the Fund's SAI, which is
available upon request.
First
Trust Exchange-Traded Fund II
Financial
Highlights
For a share outstanding throughout each period
For a share outstanding throughout each period
First
Trust Nasdaq Lux Digital Health Solutions ETF (EKG)
|
|
Year
Ended
September
30, |
Period
Ended
9/30/2022(a) |
|
|
2023 | |
|
Net
asset value, beginning of period |
$14.17 |
$20.44 |
|
Income
from investment operations: |
|
|
|
Net
investment income (loss) |
(0.10
)(b) |
(0.10
) |
|
Net
realized and unrealized gain (loss) |
0.02 |
(6.17
) |
|
Total
from investment operations |
(0.08
) |
(6.27
) |
|
Net
asset value, end of period |
$14.09 |
$14.17 |
|
Total
Return(c) |
(0.56
)% |
(30.68
)% |
|
Ratios/supplemental
data: |
|
|
|
Net
assets, end of period (in 000’s) |
$705 |
$708 |
|
Ratios
to average net assets: |
|
|
|
Ratio of
total expenses to average net assets |
0.65
% |
0.65
%(d) |
|
Ratio of
net investment income (loss) to average net assets |
(0.58
)% |
(0.61
)%(d) |
|
Portfolio
turnover rate(e) |
18
% |
5
% |
(a)
Inception
date is March 22, 2022, which is consistent with the Fund’s commencement of
investment operations and is the date the initial creation units were
established.
(b)
Based on
average shares outstanding.
(c)
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.
(d)
Annualized.
(e)
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.
27
Other
Information
Continuous
Offering
The
Fund issues, on a continuous offering basis, its shares in one or more groups of
a fixed number of Fund shares (each such group of such
specified number of individual Fund shares, a “Creation
Unit Aggregation”). The method by
which Creation Unit Aggregations of Fund shares are created and traded may raise
certain issues under applicable securities laws. Because new Creation Unit
Aggregations of shares are issued and sold by the Fund on an ongoing basis, a
“distribution,” as such term is used in the Securities Act, may occur at any
point. Broker-dealers and other persons are cautioned that some activities on
their part may, depending on the circumstances, result in their being deemed
participants in a distribution in a manner which could render them statutory
underwriters and subject them to the prospectus delivery requirement and
liability provisions of the Securities Act.
For
example, a broker-dealer firm or its client may be deemed a statutory
underwriter if it takes Creation Unit Aggregations after placing an
order with FTP, breaks them down into constituent shares and sells such shares
directly to customers, or if it chooses to couple the creation of a supply of
new shares with an active selling effort involving solicitation of secondary
market demand for shares. A determination of whether one is an underwriter for
purposes of the Securities Act must take into account all the facts and
circumstances pertaining to the activities of the broker-dealer or its client in
the particular case, and the examples mentioned above should not be considered a
complete description of all the activities that could lead to a characterization
as an underwriter.
Broker-dealer
firms should also note that dealers who are not “underwriters” but are effecting
transactions in shares, whether or not participating
in the distribution of shares, are generally required to deliver a prospectus.
This is because the prospectus delivery exemption in Section 4(a)(3) of the
Securities Act is not available in respect of such transactions as a result of
Section 24(d) of the 1940 Act. As a result, broker-dealer firms should note that
dealers who are not underwriters but are participating in a distribution (as
contrasted with ordinary secondary market transactions) and thus dealing with
the shares that are part of an overallotment within the meaning of Section
4(a)(3)(C) of the Securities Act would be unable to take advantage of the
prospectus delivery exemption provided by Section 4(a)(3) of the Securities Act.
Firms that incur a prospectus delivery obligation with respect to shares are
reminded that, under the Securities Act Rule 153, a prospectus delivery
obligation under Section 5(b)(2) of the Securities Act owed to a broker-dealer
in connection with a sale on the Exchange is satisfied by the fact that the
prospectus is available from the Exchange upon request. The prospectus delivery
mechanism provided in Rule 153 is available with respect to transactions on a
national securities exchange, a trading facility or an alternative trading
system.
28
|
First
Trust
Exchange-Traded
Fund II |
First
Trust Nasdaq Lux Digital Health Solutions ETF
For
More Information
For
more detailed information on the Fund, several additional sources of information
are available to you. The SAI, incorporated by
reference into this prospectus, contains detailed information on the Fund's
policies and operation. Additional information about the Fund's investments is
available in the annual and semi-annual reports to shareholders. In the Fund's
annual report, you will find a discussion of the market conditions and
investment strategies that significantly impacted the Fund's performance during
the last fiscal year. The Fund's most recent SAI, annual and semi-annual reports
and certain other information are available free of charge by calling the Fund
at (800) 621-1675, on the Fund's website at www.ftportfolios.com or through your
financial advisor. Shareholders may call the toll-free number above with any
inquiries.
You
may obtain this and other information regarding the Fund, including the SAI and
the Codes of Ethics adopted by First Trust, FTP
and the Trust, directly from the Securities and Exchange Commission (the
"SEC"). Information on
the SEC’s website is free of charge. Visit the SEC’s online EDGAR database at
www.sec.gov. You may also request information regarding the Fund by sending a
request (along with a duplication fee) to the SEC by sending an electronic
request to [email protected].
First Trust
Advisors L.P.
120 East Liberty Drive, Suite 400
Wheaton, Illinois 60187
(800) 621-1675
120 East Liberty Drive, Suite 400
Wheaton, Illinois 60187
(800) 621-1675
www.ftportfolios.com
SEC
File #: 333-143964
811-21944