for
ETFs that distribute portfolio securities in-kind. The Fund’s use of cash for
creations and redemptions could also result in dilution to the Fund
and increased transaction costs, which could negatively impact the Fund’s
ability to achieve its investment objective.
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 could be required to recognize unrealized gains, pay substantial taxes
and interest and make substantial distributions before requalifying as a
regulated investment company that is accorded special tax
treatment.
INTELLECTUAL
PROPERTY RISK. The Fund relies on a
license and related sublicense that permits the Fund to use its Index and
associated trade names, trademarks and service marks (the “Intellectual
Property”) in connection with
the Fund’s name and investment strategies. Such license and related sublicense
may be terminated by the Index Provider, and, as a result, the Fund may lose its
ability to use the Intellectual Property. There is also no guarantee that the
Index Provider has all rights to license the Intellectual Property for use by
the Fund. Accordingly, in the event the license is terminated or the Index
Provider does not have rights to license the Intellectual Property, it may have
a significant effect on the operation of 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.
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.
Fund
Organization
The
Fund is a series of the Trust, an investment company registered under the 1940
Act. The Fund is treated as a separate fund with its own
investment objective and policies. The Trust is organized as a Massachusetts
business trust. The Board is responsible for the overall management and
direction of the Trust. The Board elects the Trust’s officers and approves all
significant agreements, including those with the Advisor, distributor, custodian
and fund administrative and accounting agent.
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 9 mutual fund portfolios, 10
exchange-traded funds consisting of 200 series and 15
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, Jon C. Erickson, David G. McGarel, Roger F. Testin, Stan
Ueland, Chris A. Peterson and Erik Russo.
•
Mr. Lindquist is
Chairman of the Investment Committee and presides over Investment Committee
meetings. Mr. Lindquist is responsible for overseeing the implementation of the
Fund’s investment strategy. Mr. Lindquist was a Senior Vice President of First
Trust and FTP from September 2005 to July 2012 and is now a Managing Director of
First Trust and FTP. Mr. Lindquist is a recipient of the Chartered Financial
Analyst designation.