As filed with the Securities and Exchange Commission on September 24,October 17, 2014.
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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[X][ ] Preliminary proxy statement.
[ ] Confidential, for use of the Commission only (as permitted by
Rule 14a-6(e)(2)).
[ ][X] Definitive proxy statement.
[ ] Definitive additional materials.
[ ] Soliciting material pursuant to Section 240.14a-12
FIRST TRUST EXCHANGE-TRADED FUND
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement if Other Than the Registrant)
Payment of filing fee (check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(4) Date Filed:
PRELIMINARY--DATED SEPTEMBER 24, 2014
FIRST TRUST EXCHANGE-TRADED FUND
FIRST TRUST VALUE LINE(R) EQUITY ALLOCATION INDEX FUND
120 EAST LIBERTY DRIVE, SUITE 400
WHEATON, ILLINOIS 60187
October __,17, 2014
Dear Shareholders:
The accompanying materials relate to the Special Meeting of Shareholders
(referred to as the "Meeting") of First Trust Value Line(R) Equity Allocation
Index Fund (the "Fund"), a series of First Trust Exchange-Traded Fund (the
"Trust"). The Meeting will be held at the offices of First Trust Advisors L.P.,
120 East Liberty Drive, Suite 400, Wheaton, Illinois 60187, on ____________December 8, 2014,
at _____ p.m.12:00 noon Central Time.
At the Meeting, you will be asked (1) to consider and vote on a proposal
to approve a change to the Fund's investment objective that would result in the
replacement of its current underlying index with a new underlying index, (2) to
consider and vote on a proposal to change the classification of the Fund's
investment objective from a "fundamental" investment policy to a
"non-fundamental" investment policy and (3) to transact such other business as
may properly come before the Meeting and any adjournments or postponements
thereof. The Board of Trustees of the Trust recommends that shareholders approve
both proposals, which are described in the enclosed materials.
YOUR VOTE IS IMPORTANT. Please take a moment now to vote, either by
completing and returning your proxy card in the enclosed postage-paid return
envelope, by telephone or over the Internet. Your prompt response will be much
appreciated.
We appreciate your participation in this important Meeting.
Thank you.
Sincerely,
/s/ James A. Bowen
James A. Bowen
Chairman of the Board
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IF YOU NEED ANY ASSISTANCE, OR HAVE ANY QUESTIONS REGARDING THE PROPOSALS OR HOW
TO VOTE YOUR SHARES, PLEASE CALL THE FUND'S PROXY SOLICITOR, AST FUND SOLUTIONS,
LLC, AT (866) ___________(877) 536-1555 WEEKDAYS FROM 9:00 A.M. TO 10:00 P.M. EASTERN TIME.
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FIRST TRUST EXCHANGE-TRADED FUND
FIRST TRUST VALUE LINE(R) EQUITY ALLOCATION INDEX FUND
IMPORTANT INFORMATION FOR SHAREHOLDERS
Shareholders of First Trust Value Line(R) Equity Allocation Index Fund
(the "Fund"), a series of First Trust Exchange-Traded Fund (the "Trust"), are
being asked to consider the following proposals:
1. To approve a change to the Fund's investment objective that would
replace its current underlying index, the "Value Line(R) Equity Allocation
Index," with a new underlying index, the "NASDAQ AlphaDEX(R) Total US
Market Index."
2. To approve the reclassification of the Fund's investment
objective from a "fundamental" investment policy to a "non-fundamental"
investment policy.
While we encourage you to read all of the proxy materials, you will find a
brief overview of the proposals in the "Questions and Answers" ("Q&A") below.
The Q&A contains limited information and should be read in conjunction with, and
is qualified by reference to, the more detailed information contained elsewhere
in the Proxy Statement.
QUESTIONS AND ANSWERS
Q. WHEN WILL THE SPECIAL MEETING BE HELD? WHO CAN VOTE?
A. The special meeting will be held on ______________,December 8, 2014 at _____12:00 noon Central
Time at the offices of First Trust Advisors L.P., 120 East Liberty Drive,
Suite 400, Wheaton, Illinois 60187. If you owned shares of the Fund at the
close of business on ____________,September 29, 2014, you are entitled to vote, even if
you later sold the shares.
Q. WHAT IS THE PROPOSED CHANGE TO THE FUND'S INVESTMENT OBJECTIVE?
A. The Fund is an index-based exchange-traded fund and, as such, it tracks a
specified index. Currently, 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 an equity index called the Value
Line(R) Equity Allocation Index" and the Fund pursues its investment
objective by normally investing at least 90% of its net assets plus the
amount of any borrowings for investment purposes in common stocks that
comprise such index. If approved by shareholders, the Fund's new
investment objective will be to seek "investment results that correspond
generally to the price and yield (before the Fund's fees and expenses) of
an equity index called the NASDAQ AlphaDEX(R) Total US Market Index."
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Q. WHY IS THE CHANGE TO THE FUND'S INVESTMENT OBJECTIVE BEING PROPOSED?
A. Since the Fund's inception, it has underperformed its benchmark, the
Russell 3000(R) Index, and has experienced, on an ongoing basis, thin
trading activity and declines in its shares outstanding. To address these
issues, First Trust Advisors L.P., the Fund's investment adviser (the
"Advisor"), is recommending that the Fund's investment objective be
changed to permit it to track a new index. The Trust's Board
of Trustees (the "Board") has approved the change. Because the Fund's
investment objective is a "fundamental" investment policy, the change must
also be approved by shareholders in order to be implemented. If approved
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by shareholders, the Fund's new investment objective will be to seek
"investment results that correspond generally to the price and yield
(before the Fund's fees and expenses) of an equity index called the NASDAQ
AlphaDEX(R) Total US Market Index." The Advisor believes that
changing the Fund's underlying index (and, accordingly, its investment
objective) may lead to improvements in the Fund's performance and trading
activity, as well as growth in the Fund's assets. Additionally, the
Advisor believes that it is possible that the Fund may benefit from
potential cost savings in the future in light of the effect that replacing
the index may have on certain related fees. Of course, no assurance can be
given that the proposed change will achieve any of these desired results.
The Trust's Board of Trustees (the "Board") has approved the change and
recommends that shareholders approve the proposal to change the Fund's
investment objective.
Q. WILL THE FUND'S NAME AND TICKER SYMBOL CHANGE IF THE FUND'S INVESTMENT
OBJECTIVE IS CHANGED AS PROPOSED?
A. Yes. If the proposal is approved, to reflect its new underlying index, the
name of the Fund will be changed to the First Trust Total US Market
AlphaDEX(R) ETF. In addition, the Fund's shares, which are currently
listed and traded on NYSE Arca, Inc. under the ticker symbol "FVI", will
be listed and traded on The NASDAQ Stock Market LLC under the ticker
symbol "TUSA." The Board
recommends that shareholders approve the proposal to change the Fund's
investment objective.
Q. HOW WILL CHANGING THE INVESTMENT OBJECTIVE AFFECT THE FUND'S INVESTMENTS?
A. The Fund normally invests at least 90% of its net assets plus the amount
of any borrowings for investment purposes in common stocks that comprise
its underlying index. Changing the investment objective will change the
index that the Fund tracks and, therefore, the securities in which it
invests. As described in the Proxy Statement, the current and proposed
indexes share certain similarities -- both are equity indexes that, in
general terms, provide broad U.S. exposure, include stocks from companies
of all market capitalization levels, incorporate daily trading volume
criteria, and focus on growth and value and the potential for capital
appreciation. Additionally, as of their most recent rebalance dates, both
indexes included stocks of companies from various market sectors and
emphasized, in particular, allocations to the consumer discretionary,
financials, energy, industrials and information technology sectors
(although sector allocations are subject to change on an index's rebalance
date). Accordingly, the Fund would continue to invest in U.S. equity
securities issued by large-cap, mid-cap and small-cap companies from
various market sectors. Each index, however, employs a different methodologydistinct
methodology. As discussed in selecting
its component securities.the Proxy Statement, these methodologies
differ in various ways, including with respect to how stocks are selected
for the index and weighted in relation to other stocks, and how frequently
the index is rebalanced and reconstituted and changes thereto are
effected. Moreover, the proposed index is comprised of significantly more
stocks than the current index, which means that the Fund would be expected
to invest in a significantly greater number of stocks.
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Q. WILL THE CHANGE TO THE FUND'S INVESTMENT OBJECTIVE RESULT IN ANY CHANGES
TO THE FEES AND EXPENSES PAID BY THE FUND OR ITS SHAREHOLDERS?
A. Yes. IfAs described in more detail in the Proxy Statement, assuming the
Fund's investment objective is changed, thecurrent asset level, and taking into account decreases and
increases in certain specific fees paid by the
Fund to license its new underlying index, list its shares on a different
national securities exchange and have the intra-day value of its shares
disseminated throughout the trading day by a new service providerthat will change, and the Fund will no longer pay a separate "index calculation" fee
for the managementoccur in light of the day-to-day operations of its underlying index.
In addition, youchange
to the proposed index, it is anticipated that, initially, the Fund's total
annual fund operating expenses (before fee waivers and expense
reimbursements) will, in the aggregate, decrease (but will still exceed
the current expense cap). You should be aware, however, that the rate of
the management fees that the Fund pays to the Advisor will not change. As describedIn
addition, in more detail
in the Proxy Statement, assuming the Fund's current asset level, its total
annual fund operating expenses (before fee waivers and expense
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reimbursements) would, in the aggregate, decrease initially (but would
still exceed the current expense cap). The Advisor believes that, over
time, the Fund may benefit from having a license fee that will change from
a variable fee of 0.15%light of the Fund's net assets (the license fee for the
current index)additional efforts that are expected to one that has a small fixed component of $7,500 plus a
variable component of 0.01% of the Fund's net assets (the license fee for
the proposed index). Of course, no assurance can be
providedrequired to effect more complex creation and redemption transactions given
that the Fund will realize any cost savings that are attributableis expected to the changeinvest in its
license fee.
In addition to the above changes in Fund-level fees,significantly more securities, the
Fund's standard "transaction fee"fees" (which isare typical for exchange-traded
funds), imposed to create and redeem "creation units" (i.e, blocks of
50,000 of the Fund's shares) will increase iffrom the Fund's investment objectivecurrent amount, which
is changed as
proposed.$1,000, to $1,500. These fees are paid to the Fund's custodian by
"authorized participants" (i.e., broker-dealers and large institutional
investors that have entered into "participation agreements" with First
Trust Portfolios L.P., the Fund's principal underwriter, authorizing them
to purchase and redeem shares directly from the Fund);. They are then
passed along to investors buying and selling shares in the authorized participants then
passsecondary
market as a component of the "bid-ask spread." As described in more detail
in the Proxy Statement, the bid-ask spread is one of the costs along tothat
investors incur when they buy or sell shares of an exchange-traded fund
and is built into the investors on whose behalf they act. As
indicated above, if the Fund tracks the proposed new index, the number of
securities in which the Fund invests would significantly increase
(assuming, as expected, that the Fund generally invests in all of such
securities rather than a sample thereof) and therefore, in lightmarket price of the additional efforts that are expectedshares. Accordingly, higher
standard transaction fees may cause the Fund's investors to be required to effect more complex
creation and redemption transactions, these standard fees would increase
from the current amount, which is $1,000, to $1,500.incur higher
bid-ask spreads.
Q. WHY AM I BEING ASKED TO APPROVE THE RECLASSIFICATION OF THE INVESTMENT
OBJECTIVE FROM A "FUNDAMENTAL" INVESTMENT POLICY TO A "NON-FUNDAMENTAL"
INVESTMENT POLICY?
A. In order to enhance the Fund's flexibility, shareholders are also being
asked to approve the reclassification of the Fund's investment objective
from "fundamental" to "non-fundamental," which means that the Board will
be able to change the Fund's investment objective (e.g., its underlying
index) in the future without shareholder approval. This would permit the
Board to change the investment objective if the Board believes it is in
the best interests of the Fund, including in any instance where the
license agreement to use the new index is terminated. However,terminated and, therefore,
shareholders would no longer have input on any decision to change the
Fund's investment objective. The Fund, however, would notify shareholders
at least 60 days before implementing changes to the investment objective.
Reclassifying the Fund's investment objective as a "non-fundamental"
investment policy would make it consistent with the investment objectives
of most of the other index-based exchange-traded funds in the First Trust
fund complex.
Q. HOW DOES THE BOARD RECOMMEND THAT SHAREHOLDERS VOTE ON THE PROPOSALS?
A. At a meeting held on September 15, 2014, the Board unanimously approved
and recommended that shareholders vote "FOR" the proposals. If your
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properly executed proxy card is returned without instructions, the
representatives holding proxies will vote for the proposals in accordance
with the recommendation of the Board.
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Q. WHAT HAPPENS IF A PROPOSAL IS NOT APPROVED?
A. If only one proposal is approved by the shareholders of the Fund, the Fund
will implement the proposal that was approved. The approval of one
proposal is not contingent upon the approval of the other proposal. If the
proposal to change the Fund's investment objective is not approved by the
Fund's shareholders, then the Fund's current underlying index will not be
replaced with the proposed index and the Board will consider all
alternatives available to the Fund and will take such action as it deems
necessary and in the best interests of the Fund. If the proposal to change
the classification of the Fund's investment objective from a fundamental
investment policy to a non-fundamental investment policy is not approved
by shareholders, then the Fund's investment objective will continue to be
classified as a fundamental investment policy.
Q. MY HOLDINGS IN THE FUND ARE SMALL. WHY SHOULD I VOTE?
A. Your vote makes a difference. If enough shareholders do not vote their
proxies, the Fund may not receive sufficient votes to go forward with the
special meeting. This means that additional costs will be incurred to
solicit votes to determine the outcome of the proposals.
Q. HOW DO I CAST MY VOTE?
A. You may vote over the Internet, by phone, by mail or in person at the
special meeting. To vote over the Internet or by phone, please follow the
directions on your proxy card. To vote by mail, please complete, sign and
send the enclosed proxy card in the enclosed postage-paid envelope. You
also may vote in person at the special meeting.
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IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE SPECIAL MEETING. IN ORDER
TO AVOID DELAY AND TO ENSURE THAT YOUR SHARES ARE REPRESENTED, PLEASE VOTE AS
PROMPTLY AS POSSIBLE. IF YOU NEED ANY ASSISTANCE, OR HAVE ANY QUESTIONS
REGARDING THE PROPOSALS OR HOW TO VOTE YOUR SHARES, PLEASE CALL THE FUND'S PROXY
SOLICITOR, AST FUND SOLUTIONS, LLC, AT (866) __________(877) 536-1555 WEEKDAYS FROM 9:00 A.M. TO
10:00 P.M. EASTERN TIME.
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-iv-
FIRST TRUST EXCHANGE-TRADED FUND
FIRST TRUST VALUE LINE(R) EQUITY ALLOCATION INDEX FUND
120 EAST LIBERTY DRIVE, SUITE 400
WHEATON, ILLINOIS 60187
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ____________
____________,DECEMBER 8, 2014
October 17, 2014
To the Shareholders of First Trust Value Line(R) Equity Allocation Index Fund:
Notice is hereby given that a Special Meeting of Shareholders (referred to
as the "Meeting") of First Trust Value Line(R) Equity Allocation Index Fund (the
"Fund"), a series of First Trust Exchange-Traded Fund, a Massachusetts business
trust, will be held at the offices of First Trust Advisors L.P., 120 East
Liberty Drive, Suite 400, Wheaton, Illinois 60187, on _______, ________2014,Monday, December 8, 2014,
at [_____ p.m.12:00 noon Central Time],Time, for the following purposes:
1. To approve changing the Fund's investment objective from one that
"seeks investment results that correspond generally to the price and yield
(before the Fund's fees and expenses) of an equity index called the Value
Line(R) Equity Allocation Index" to one that "seeks investment results
that correspond generally to the price and yield (before the Fund's fees
and expenses) of an equity index called the NASDAQ AlphaDEX(R) Total US
Market Index."
2. To approve the reclassification of the Fund's investment
objective from a "fundamental" investment policy to a "non-fundamental"
investment policy.
3. To transact such other business as may properly come before the
Meeting (including any adjournments or postponements).
The close of business on _____,September 29, 2014 has been fixed as the record
date for the determination of shareholders entitled to notice of and to vote at
the Meeting and any adjournments or postponements thereof.
By Order of the Board of Trustees,
/s/ W. Scott Jardine
W. Scott Jardine
Secretary
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FIRST TRUST EXCHANGE-TRADED FUND
FIRST TRUST VALUE LINE(R) EQUITY ALLOCATION INDEX FUND
SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON __________DECEMBER 8, 2014
120 EAST LIBERTY DRIVE, SUITE 400
WHEATON, ILLINOIS 60187
PROXY STATEMENT
______,OCTOBER 17, 2014
THIS PROXY STATEMENT AND THE ENCLOSED PROXY CARD WILL FIRST BE MAILED TO
SHAREHOLDERS ON OR ABOUT ___________,OCTOBER 24, 2014.
This Proxy Statement is being furnished by the Board of Trustees (the
"Board") of First Trust Exchange-Traded Fund, a Massachusetts business trust
(the "Trust"), in connection with the solicitation by the Board of proxies to be
voted at a special meeting of the shareholders of First Trust Value Line(R)
Equity Allocation Index Fund (the "Fund"), a series of the Trust, that will be
held at _____ p.m.12:00 noon Central Time on _________,December 8, 2014, at the offices of First
Trust Advisors L.P. ("First Trust Advisors" or the "Advisor"), located at 120 East Liberty Drive, Suite 400, Wheaton,
Illinois 60187, and at any and all adjournments or postponements thereof
(referred to collectively as the "Meeting"). A Notice of Special Meeting of
Shareholders and a proxy card accompany this Proxy Statement.
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE
SPECIAL MEETING OF SHAREHOLDERS TO BE HELD ON _________,DECEMBER 8, 2014. THIS PROXY
STATEMENT IS AVAILABLE ON THE INTERNET AT:
HTTP://WWW.FTPORTFOLIOS.COM/LOADCONTENT/______.8YHDCC3TGC. THE FUND'S MOST RECENT
ANNUAL AND SEMI-ANNUAL REPORTS ARE ALSO AVAILABLE ON THE INTERNET AT:
HTTP://WWW.FTPORTFOLIOS.COM/______________.RETAIL/ETF/ETFFUNDNEWS.ASPX?TICKER=FVI. THE FUND
WILL FURNISH, WITHOUT CHARGE, COPIES OF ITS MOST RECENT ANNUAL AND SEMI-ANNUAL
REPORTS TO ANY SHAREHOLDER UPON REQUEST. TO REQUEST A COPY, PLEASE WRITE TO
THE ADVISORFIRST TRUST ADVISORS L.P. AT 120 EAST LIBERTY DRIVE, SUITE 400, WHEATON,
ILLINOIS 60187, OR CALL (800) 621-1675.
YOU MAY CALL (800) 621-1675 FOR INFORMATION ON HOW TO OBTAIN DIRECTIONS TO
BE ABLE TO ATTEND THE MEETING AND VOTE IN PERSON.
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TABLE OF CONTENTS
SECTION HEADING PAGE
SUMMARY OF PURPOSE OF THE MEETING AND VOTING...................................3
Purpose of the Meeting..................................................3
Required Vote...........................................................3
How to Vote.............................................................3
PROPOSAL 1: CHANGE TO INVESTMENT OBJECTIVE.....................................4
PROPOSAL 2: RECLASSIFICATION OF THE FUND'S INVESTMENT OBJECTIVE
FROM A FUNDAMENTAL INVESTMENT POLICY TO A NON-FUNDAMENTAL
INVESTMENT POLICY............................................................14POLICY.................................................15
OTHER INFORMATION.............................................................15INFORMATION.............................................................16
General Information....................................................15Information....................................................16
Date, Time and Place of the Meeting....................................15Meeting....................................16
Use and Revocation of Proxies..........................................15Proxies..........................................16
Voting Rights and Required Votes.......................................15Votes.......................................16
Shares Outstanding.....................................................16Outstanding.....................................................17
Share Ownership of Certain Beneficial Owners...........................17Owners...........................18
Share Ownership of Trustees and Officers...............................18Officers...............................19
Service Providers......................................................18Providers......................................................19
Delivery of Certain Documents..........................................18Documents..........................................19
Submission of Shareholder Proposals....................................19Proposals....................................20
OTHER MATTERS TO COME BEFORE THE MEETING......................................19MEETING......................................20
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SUMMARY OF PURPOSE OF THE MEETING AND VOTING
The following is a summary of certain information set forth in this Proxy
Statement. This summary is qualified in its entirety by reference to the
information contained elsewhere in this Proxy Statement.
PURPOSE OF THE MEETING
The purpose of the Meeting is to consider and vote on the following
proposals (each, a "Proposal" and collectively, the "Proposals"):
1. To approve changing the Fund's investment objective from one that
"seeks investment results that correspond generally to the price and
yield (before the Fund's fees and expenses) of an equity index called
the Value Line(R) Equity Allocation Index" to one that "seeks
investment results that correspond generally to the price and yield
(before the Fund's fees and expenses) of an equity index called the
NASDAQ AlphaDEX(R) Total US Market Index."
2. To approve the reclassification of the Fund's investment objective
from a "fundamental" investment policy to a "non-fundamental"
investment policy.
In addition, such other business (if any) as may properly come before the
Meeting will be transacted.
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REQUIRED VOTE
To become effective, each Proposal must be approved by a vote of the
lesser of (i) 67% or more of the shares of the Fund present at the Meeting if
the holders of more than 50% of the outstanding shares of the Fund are present
in person or represented by proxy; or (ii) more than 50% of the outstanding
shares of the Fund. For purposes of determining the approval of a Proposal,
abstentions and broker non-votes will have the effect of a vote against the
Proposal.
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HOW TO VOTE
Shareholders may vote by telephone or over the Internet by following the
instructions on the enclosed proxy card. Shareholders may also vote by mail by
returning the enclosed proxy card or in person by attending the Meeting.
THE BOARD RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" EACH PROPOSAL.
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PROPOSAL 1: CHANGE TO INVESTMENT OBJECTIVE
Background and Reason for Vote
The Fund's current investment objective, which is a fundamental investment
policy (i.e., requires shareholder approval to be changed), is to seek
investment results that correspond generally to the price and yield (before the
Fund's fees and expenses) of an equity index called the Value Line(R) Equity
Allocation Index (the "Current Index"). At the recommendation of First Trust
Advisors L.P., the Fund's investment adviser (the "Advisor"), the Board has
unanimously approved, and recommends that shareholders approve, a change to the
Fund's investment objective that would replace the Current Index with the NASDAQ
AlphaDEX(R) Total US Market Index (the "Proposed Index"), a newly created equity
index described in further detail below under "Additional Information Regarding
the Proposed Index and Impact on Fund Investments."
Currently, to pursue its investment objective, the Fund normally invests
at least 90% of its net assets plus the amount of any borrowings for investment
purposes in common stocks that comprise the Current Index. The Fund, using an
"indexing" investment approach, attempts to replicate, before fees and expenses,
the performance of the Current Index. In this regard, the Fund generally invests
in all of the securities comprising the Current Index, in proportion to their
weightings in such Index.
Since its inception in 2006, the Fund has consistently underperformed the
Russell 3000(R) Index, its benchmark index. In addition, for the past seven
calendar years, the Fund has exhibited, on an ongoing basis, thin trading
activity and declines in its shares outstanding. The Advisor believes that the
Fund's underperformance relative to its benchmark has contributed to its thin
trading activity and ongoing decline in shares outstanding, and that the Fund
and its shareholders may benefit if the Current Index is replaced with the
Proposed Index. Accordingly, at a meeting held on September 15, 2014 (the "Board
Meeting"), the Advisor recommended that the Board approve changing the Fund's
investment objective to one that seeks investment results that track the
Proposed Index. To support its recommendation, the Advisor prepared, and
provided to the Board, materials pertaining to the Proposed Index, including,
among other things, information about its methodology, expected component
securities and sector allocations, hypothetical performance data, and
information outlining the expected impact that implementing the Proposed Index
would have on the Fund's fees and expenses at various asset levels.
If the Proposed Index is implemented, then the Fund will normally invest
at least 90% of its net assets plus the amount of any borrowings for investment
purposes in common stocks that comprise the Proposed Index, and will generally
invest in all of the securities comprising the Proposed Index in proportion to
their weightings in such Index. Although it is impossible to predict the future,
based on its analysis, the Advisor believes that replacing the Current Index
with the Proposed Index may cause the Fund's performance to improve, which, over
time, may generate increased trading activity and growth in the Fund's assets
and shares outstanding. Of course, no assurance can be provided that
implementing the Proposed Index will lead to improvements in the Fund's
performance or that any of the other desired results will be achieved.
-4-
In addition to the potential benefits described above, the Advisor
believes that replacing the Current Index with the Proposed Index may, over
time, benefit shareholders from a cost perspective in light of differences in
license fees. While the license fee for the Current Index is 0.15% of the Fund's
net assets, the license fee for the Proposed Index would be comprised of a fixed
component equal to $7,500 plus a variable component equal to 0.01% of the Fund's
net assets. Although initially, based on the Fund's current asset levels, the
Fund would not benefit from the new license fee (which, initially, would
increase), assuming that the Fund experiences growth in its assets over time,
the Fund may benefit from potential cost savings in the future, to the extent
the Fund's expense ratio becomes lower than the then-current expense cap
limitation agreed to by the Advisor. Of course, no assurance can be provided
that, if the Proposal is approved, the Fund's assets will increase in the future
or that the Fund will realize any cost savings based on the license fee for the
Proposed Index. (See "Additional Information Regarding the Impact of the
Proposal on the Fund's Expenses and Standard Transaction Fees" below.)
In addition to the change to the Fund's investment objective, at the Board
Meeting, the Advisor also recommended to the Board, and the Board approved,
certain additional changes that are expected to be implemented if the Proposal
is approved by shareholders. First, the Fund's name will be changed to reflect
the Proposed Index. Second, to be consistent with other index-based funds in the
First Trust fund complex for which The NASDAQ OMX Group, Inc. ("NASDAQ Group")
is the index provider, the primary listing exchange for the Fund's shares will
be changed from NYSE Arca, Inc. ("NYSE Arca") to The NASDAQ Stock Market LLC
("NASDAQ") and the Fund's ticker symbol will change from "FVI" to "TUSA."
As a result of the change to NASDAQ, certain related fees paid by the
feesFund, described briefly below, will change. These include the following:
o The fee paid by the Fund to list its shares on a national securities
exchange (the "listing fee") and to have the intra-day value of its shares disseminated
throughout the trading day (the "indicative value fee") also will change.. Currently, the Fund pays the listing fee
and indicative value fee to NYSE Arca; however, if the Proposed IndexProposal is approved, and implemented, then such feesthe listing fee
will be paid to NASDAQ. Assuming current asset levels,NASDAQ and is initially the listing fee is expected to decrease and the indicative valuedecrease.
o The fee is expected to increase.
Moreover, currently,paid by the Fund paysto an additional fee (the "index calculation fee") to NYSE Arca for serving as index calculation agent. As index calculation
agent, NYSE Arca is responsibleagent" for the
management of the day-to-day operations of the Current Index,
including calculating the value of such Index every 15
seconds,at regular intervals,
widely disseminating the Index values every 15 secondsat regular intervals and
tracking corporate actions resulting in Index adjustments. Ifadjustments (the "index
calculation fee"). Currently, the Fund pays the index calculation fee
to NYSE Arca for serving as index calculation agent; however, if the
Proposal is approved, then NASDAQ will perform the functions of the
index calculation agent, but it will not impose a separate fee for
serving as such.such and the index calculation fee will be eliminated.
Assuming the Fund's current asset level, taking into account the fee
changes described above, it is anticipated that, initially, the Fund's total
-5-
annual fund operating expenses (before fee waivers and expense reimbursements)
will, in the aggregate, decrease (but will still exceed the Fund's current
expense cap). (See "Additional Information Regarding the Impact of the Proposal
on the Fund's Expenses and Standard Transaction Fees" below.)
Finally, if the Proposal is approved, then the Fund's standard
"transaction fee"fees" (which isare typical for exchange-traded funds ("ETFs")),
imposed to create and redeem "creation units" (blocks of 50,000 shares) will
increase.
These fees are paid by "authorized participants" (i.e., broker-dealers and large
institutional investors who purchase and redeem shares directly from the Fund)
to The Bank of New York Mellon Corporation, the Fund's custodian (the
"Custodian"); the authorized participants then pass the costs along to the
investors on whose behalf they act. As described in the Fund's prospectus, the Fund's creation units are
issued and redeemed "in kind" for securities in which the Fund invests and/or
cash. If the Proposal is approved and the Fund invests in the component
securities of the Proposed Index, the number of securities in -5-
which the Fund is
expected to invest would significantly increase. Therefore, in light of the
additional efforts that are expected to be required to effect more complex
creation and redemption transactions, thesethe standard transaction fees would increasebe
raised from the current amount, which is $1,000, to $1,500. Standard transaction
fees are paid to The Bank of New York Mellon Corporation, the Fund's custodian
(the "Custodian"), by "authorized participants" (i.e., broker-dealers and large
institutional investors that have entered into "participation agreements" with
First Trust Portfolios L.P., the Fund's principal underwriter, authorizing them
to purchase and redeem shares directly from the Fund) ("Authorized
Participants"), and are then passed along to investors buying and selling shares
in the secondary market as a component of the "bid-ask spread." As described in
more detail below, the bid-ask spread, which is built into the market price of
an ETF's shares, is one of the costs that investors incur when they buy or sell
shares of an ETF. Accordingly, higher standard transaction fees may cause the
Fund's investors to incur higher bid-ask spreads. (See "Additional Information
Regarding the Impact of the Proposal on the Fund's Expenses and Standard
Transaction Fees" below.)
Summarized in the following table are the proposed change to the Fund's
investment objective and the additional related changes that are contemplated if
the Proposal is approved by shareholders.
--------------------------------------------------------------- ---------------------------------------- -----------------------------------------------------------------------------------------
CURRENT IF PROPOSAL IS APPROVED BY SHAREHOLDERS
--------------------------------------------------------------- ---------------------------------------- -----------------------------------------------------------------------------------------
Fund Name First Trust Value Line(R) Equity First Trust Total US Market AlphaDEX(R)
ETF
Allocation Index Fund --------------------------------ETF
------------------------------- ---------------------------------------- -----------------------------------------------------------------------------------------
Listing Exchange NYSE Arca NASDAQ
--------------------------------------------------------------- ---------------------------------------- -----------------------------------------------------------------------------------------
Ticker Symbol FVI TUSA
--------------------------------------------------------------- ---------------------------------------- -----------------------------------------------------------------------------------------
-6-
------------------------------- ---------------------------------------- ------------------------------------------
CURRENT IF PROPOSAL IS APPROVED BY SHAREHOLDERS
------------------------------- ---------------------------------------- ------------------------------------------
Index Provider Value Line(R) Publishing, Inc. ("Value NASDAQ Group
Line")
"AlphaDEX(R)" is a registered trademark of
First Trust Portfolios L.P. ("FTP"), the
Fund's principal underwriter. FTP has
licensed to the NASDAQ Group, free of
charge, the right to use certain
intellectual property owned by FTP,
including the AlphaDEX(R) trademark and the
AlphaDEX(R) stock selection method, in
connection with the creation of the
Proposed Index. FTP has received a
patent on the AlphaDEX(R) stock selection
method from the United States Patent and
Trademark Office.
Notwithstanding the license referenced
above, the NASDAQ Group is solely
responsible for the creation, compilation
and administration of the Proposed Index
and has the exclusive right to determine
the stocks included in the Proposed Index
and its methodology.
--------------------------------------------------------------- ---------------------------------------- -----------------------------------------------------------------------------------------
Investment Objective To seek investment results that To seek investment results that
correspond generally to the price and correspond generally to the price and
yield (before the Fund's fees and yield (before the Fund's fees and
expenses) of an equity index called the expenses) of an equity index called the
Value Line(R) Equity Allocation Index NASDAQ AlphaDEX(R) Total US Market Index
--------------------------------------------------------------- ---------------------------------------- -----------------------------------------------------------------------------------------
Annual License Fee 0.15% of the Fund's net assets $7,500 plus 0.01% of the Fund's net
assets
--------------------------------------------------------------- ---------------------------------------- -----------------------------------------------------------------------------------------
Annual Listing Fee $5,000 (based on shares of the Fund $23 --------------------------------(allocated to the Fund based on its
currently outstanding) current allocable percent of aggregate
shares outstanding in the First Trust fund
complex that are listed on NASDAQ)
------------------------------- ---------------------------------------- -----------------------------------------------
Annual Indicative Value Fee $2,677 $5,000
-------------------------------- ---------------------------------------- -----------------------------------------------------------------------------------------
Annual Index Calculation Fee $15,000 $0
--------------------------------------------------------------- ---------------------------------------- -----------------------------------------------------------------------------------------
Standard Creation/Redemption Fee $1,000 (as of September 15, 2014) $1,500 --------------------------------(flat fee)
Redemption Fee (based on number of securities in a
creation unit)
------------------------------- ---------------------------------------- -----------------------------------------------------------------------------------------
Additional Information Regarding the Proposed Index and Impact on Fund
Investments
As described above, the Fund normally invests at least 90% of its net
assets plus the amount of any borrowings for investment purposes in common
stocks that comprise its underlying index. Changing the investment objective
will change the index that the Fund tracks and, therefore, the securities in
which it invests. The Current Index and the Proposed Index share certain
similarities -- both are equity indexes that, in general terms, provide broad
U.S. exposure, include stocks from companies of all market capitalization
-7-
levels, incorporate daily trading volume criteria and focus on growth and value
and the potential for capital appreciation. Additionally, as of their most
recent rebalance dates, both indexes included stocks of companies from various
market sectors and emphasized, in particular, allocations to the consumer
-6-
discretionary, financial, industrialfinancials, energy, industrials and information technology
sectors (although sector allocations are subject to change on an index's
rebalance date). Accordingly, if shareholders approve the Proposal, the Fund
would continue to invest in stocks issued by large-cap, mid-cap and small-cap
companies from various market sectors, and, therefore, the principal investment
risks associated with an investment in the Fund are not expected to
significantly change.
Each index, however, employs a different methodologyAs indicated below, the methodologies for selecting its component securities.the Proposed Index and Current
Index differ in certain ways, including with respect to (i) how the eligible
universe of stocks is constructed; (ii) how stocks are divided into market
capitalization categories; (iii) how stocks are excluded from eligibility based
on certain criteria, such as trading volume; (iv) how stocks are ranked using
growth and value factors and how such factors are defined and implemented in the
selection process; and (v) how stocks are weighted in the index. In particular,
with respect to selection and weighting, the Current Index equally weights all
of the stocks within each of the six "style classifications" described below
(which include Large Cap Value, Mid Cap Value, Small Cap Value, Large Cap
Growth, Mid Cap Growth and Small Cap Growth). In contrast, the Proposed Index
separates stocks in each of the three portfolios described below (which include
the US Large Cap Portfolio, US Mid Cap Portfolio and US Small Cap Portfolio)
into quintiles based on their selection score; higher ranked quintiles are
weighted more heavily, and stocks are equally weighted within each quintile.
There are also differences in approaches to, and frequency of, rebalancing,
reconstituting and effecting changes to, each index. Moreover, the Proposed
Index is comprised of significantly more component securities than the Current
Index, which means that the Fund would be expected to invest in a significantly
greater number of stocks.
Set forth below is a comparison of certain key features of the Current
Index and the Proposed Index and their respective methodologies.methodologies:
----------------------- --------------------------------------------------- ------------------------------------------------------------------ -------------------------------------------- ------------------------------------------------
CURRENT INDEX PROPOSED INDEX
----------------------- --------------------------------------------------- ------------------------------------------------------------------ -------------------------------------------- ------------------------------------------------
Brief Description The Current Index is designed to objectively The Proposed Index is designed to objectively
objectively identify and select those stocks from the Value identify and select stocks across market
stocks from the Value Line universe across market capitalizations and capitalizations (including large-cap, mid-cap
market capitalizations and investment and small-cap companies) that exhibit growth
styles for growth and value that appear and small-cap companies) that exhibit growth
to have the greatest potential for capital and value factors and appear to have the
have the greatest potential for capital greatest potential for capital appreciation.
appreciation. The Current Index is a modified greatest potential for capital appreciation.
equal-dollar weighted index comprised of U.S. The Proposed Index is a modified equal-dollar
modified equal-dollar weighted index weighted index comprised of U.S.
comprised of U.S. exchange-listed exchange-listed securities of companies with
weighted index comprised of U.S.
capital appreciation potential. exchange-listed securities of companies with capital capital appreciation potential.
----------------------- --------------------------------------------------- ----------------------------------------------appreciation potential.
-------------------- -------------------------------------------- ------------------------------------------------
Inception Date May 1, 2006 September 8, 2014
----------------------- --------------------------------------------------- ------------------------------------------------------------------ -------------------------------------------- ------------------------------------------------
Description of The Index begins with the Value Line universe of The methodology for the Proposed Index is based
Methodology universe of approximately 1,700 stocks that Value Line gives a based on three sub-portfolios: U.S. Large Cap
Value Line gives a "Timeliness" (i.e., focusing on expected price Portfolio (50% of the total portfolio); U.S.
focusing on expected price performance for Mid Cap Portfolio (30% of the total portfolio);
-8-
-------------------- -------------------------------------------- ------------------------------------------------
CURRENT INDEX PROPOSED INDEX
-------------------- -------------------------------------------- ------------------------------------------------
the coming six to 12 months), Mid"Safety" and U.S. Small Cap Portfolio (30%(20% of the total
"Safety"
(i.e., focusing on total risk), or portfolio); and U.S. Small Cap Portfolio (20%. The foregoing ratios exist at the
"Technical" (i.e., focusing on short-term quarterly rebalance date and will change
(three- of the total portfolio). The foregoing to six-month) future price returns) thereafter.
ranking of #1 ratios exist at the quarterly rebalance date or #2 using the Value Line
Ranking Systems. In and will change thereafter.
each case, rankings Each sub-portfolio is constructed by
vary from #1 (highest) to #5 (lowest). All implementing the following four steps.
registered investment companies, Each sub-portfolio is constructed by
non-U.S.
companiessecurities not listed in the United States implementing the following four steps.Step 1 -- Universe:
and limited partnerships are removed from
the universe. Step 1:
The stocks are separated into large, mid and small For the US Large Cap Portfolio, start with cap categories based on specified capitalization all
companies in the NASDAQ US Large Cap ranges. To determine a company's market Index and
Capitalization Categories and Daily Trading exclude stocks with an average capitalization category, the market capitalization daily dollar
Volume Criteria: volume over any rolling five-day
of all the stocks listed on the New York Stock period during
the latest 60-day trading Exchange (subject to certain exceptions) are period (U.S. markets) of less than
$500,000.
divided into various deciles. Large
capitalizationThe stocks are companies fallingseparated into large, mid $500,000.
and small cap categories based on specified
capitalization ranges. To determine a For the US Mid Cap Portfolio, start with all
deciles 1-2, mid-capitalization stocks arecompany's market capitalization category, companies in the NASDAQ US Mid Cap Index and
companies in deciles 3-5 and smallthe market capitalization of all the stocks exclude stocks with an average daily dollar
listed on the New York Stock Exchange volume over any rolling five-day period during
(subject to certain exceptions) are divided the latest 60-day trading period of less than
into various deciles. Large capitalization $500,000.
stocks are companies falling into deciles
1-2, mid-capitalization stocks are For the US Small Cap Portfolio, start with all
companies in deciles 3-5 and small companies in the NASDAQ US Small Cap Index and
capitalization stocks are companies in exclude stocks with an average daily dollar
deciles 6-8. volume over any rolling five-day period during
the latest 60-day trading period (USof less than
Within the capitalization ranges described above, markets) of less than $500,000. ----------------------- --------------------------------------------------- ----------------------------------------------
-7-
----------------------- --------------------------------------------------- ----------------------------------------------
CURRENT INDEX PROPOSED INDEX
----------------------- --------------------------------------------------- ----------------------------------------------Of the remaining stocks, the 1,000
above, stocks which do not meet certain largest by market capitalization comprise the
daily trading volume amounts are eligible universe.
eliminated. For large For the US Small Cap Portfolio, start with capitalization
stocks, stocks with a three-month all companies in the NASDAQ US Small Cap
average Step 2 -- Ranking:
daily trading volume of less than $5
Index and exclude stocks with an average
million are eliminated. For For each sub-portfolio, rank all remaining
mid-capitalization daily dollar volume over any rolling five-day stocks, stocks with a three-month average daily period during the latest 60-day trading
trading volume of less than $2 million are period (US markets) of less than $500,00. Of
eliminated. Small-capitalization stocks with a the remaining stocks, the 1,000 largest by
three-month average daily trading volume of less market capitalization comprise the eligible
than $2 million are eliminated. universe.
Small-capitalization stocks with a market
capitalization of less than $250 million or with a Step 2:
market capitalization of less than $1 billion and
a Timeliness ranking of #1 also are eliminated. For each portfolio, rank all remaining stocks in the universe on both growth and value
The remaining stocks are then divided into growththree-month average daily trading volume of factors. The five growth factors are 3, 6 and
value universes by reference to the stock's andless than $2 million are eliminated. 12 month price appreciation, sales to price to book ratio. Accordingly, there are six price and
Small-capitalization stocks with a one-year sales growth. The three style classifications: Large Cap Value; Mid Cap value factors
three-month average daily trading volume of are book value to price, cash Value; Small Cap Value; Large Cap Growth; Mid Cap flow to price and
less than $2 million are eliminated. return on assets. All Growth;stocks are ranked on the
Small-capitalization stocks with a market sum of ranks for the growth factors and,
Small Cap Growth. Value Linecapitalization of less than $250 million or separately, all stocks are ranked on the sum of
ranks for the
determines the equity allocations among the style growth factors and, separately, all stocks
classifications. are ranked on the sumwith a market capitalization of less than ranks for the value factors. A stock must have
$1 billion and a Timeliness ranking of #1 data for all
The stocks in each style classification are then growth and/or value factors to
also are eliminated. receive a rank ranked using a three-factor model. For growth for that style.
portfolios, the three-factor model incorporates
cash flow to price ratio, return on assetsGrowth and theValue Universes: Step 3:
stock's three-month price appreciation. For value
portfolios, the three-factor model incorporates3 -- Selection Scores:
The remaining stocks are then divided into For each portfolio,sub-portfolio, for all stocks NASDAQ
the one-year change in return on assets, bookgrowth and value universes by reference to Group classifies as growth, they receive the
price ratio and the stock's three-month price to book ratio. growth rank from Step 2 as their selection
Accordingly, there are six style score, and for all stocks NASDAQ Group
classifications: Large Cap Value; Mid Cap classifies as value, they receive the value
Value; Small Cap Value; Large Cap Growth; rank from Step 2 as their selection score.
Mid Cap Growth; and Small Cap Growth.
Value Line determines the equity
allocations among the style
classifications.
-9-
-------------------- -------------------------------------------- ------------------------------------------------
CURRENT INDEX PROPOSED INDEX
-------------------- -------------------------------------------- ------------------------------------------------
Ranking and Weighting: Step 4 -- Selection and Weighting:
The stocks in each style classification are For the US Large Cap Portfolio, the top 200
then ranked using a three-factor model. stocks based on the selection score determined
For growth portfolios, the three-factor in Step 3 are selected for the portfolio. For
model incorporates cash flow to price the US Mid Cap Portfolio, the top 400 stocks
ratio, return on assets and the stock's based on the selection score determined in Step
three-month price appreciation. For value 3 are selected for the portfolio. For the US
portfolios, the three-factor model Small Cap Portfolio, the top 600 stocks based
incorporates the one-year change in return on the selection score determined in Step 3 are
on assets, book to price ratio and the selected for the portfolio. Then, for each
stock's three-month price appreciation. portfolio, the selected stocks are split into
The sum of the ranks of the three score, and for all stocks NASDAQ Group
factors quintiles based on their selection score. The
is used to rank each stock. Each factor classifies as value, they receive the value
is top ranked quintile receives 5/15 (33.3%) of
equally weighted; however, in the event of the portfolio weight with successive quintiles
a rank from Step 2 as their selection score. tie, the price appreciation factor will receiving 4/15 (26.7%), 3/15 (20.0%), 2/15
be used as the tie breaker. The 25 highest (13.3%) and 1/15 (6.7%), respectively. Stocks
ranked stocks Step 4: (lowest total sum of ranks) are equally weighted within each quintile.
in each of the six style classifications
are selected. The stocks For the Large Cap Portfolio, the top 200
are equally
weighted within each classification.
stocks based on the selection score
determined in Step 3 are selected for theRemoval/Replacement of Securities
After the initial selection of securities,
on a weekly basis, stocks portfolio. Forin the Mid Cap Portfolio, theIndex may
be removed and replaced based on certain
top 400 stocks basedcriteria.
-------------------- -------------------------------------------- ------------------------------------------------
Rebalancing and The Index is rebalanced and reconstituted The Index is rebalanced and reconstituted as of
Reconstitution on a semi-annual basis and additions to or the last business day of each calendar quarter.
subtractions from the Index occur following Changes are effective on the selection score
criteria. determined in Step 3 are selected for the
portfolio. For the Small Cap Portfolio, the
top 600 stocks based on the selection score
determined in Step 3 are selected for the
portfolio. Then, for each portfolio, the
selected stocks are split into quintiles
based on their selection score.6th business day
this review. The top
ranked quintile receives 5/15 (33.3%)Fund will make changes to of the following month.
its portfolio weight with successive quintiles
receiving 4/15 (26.7%), 3/15 (20.0%), 2/15
(13.3%) and 1/15 (6.7%), respectively.
Stocksshortly after changes to the
Index are equally weighted within each
quintile.
Acquiredreleased to the public. In addition, acquired companies are deleted at
the close on the day the applicable merger
closes for ----------------------- --------------------------------------------------- ----------------------------------------------
-8-
----------------------- --------------------------------------------------- ----------------------------------------------
CURRENT INDEX PROPOSED INDEX
----------------------- --------------------------------------------------- ----------------------------------------------
both cash and stock deals. An
acquired company's weight in the indexIndex is
reallocated pro rata among the remaining indexIndex
constituents. Spin-offs are not included in
the index.Index. The value of the spin-off is
reallocated to the parent company.
----------------------- --------------------------------------------------- ------------------------------------------------------------------ -------------------------------------------- ------------------------------------------------
Top Five Sector As of September 15, 2014: As of September 15, 2014:
Allocations
Consumer Discretionary (20.40%) Consumer Discretionary (15.79%)
Information Technology (20.25%) Financials (15.57%)
Energy (16.24%) Energy (14.54%)
Financials (15.39%) Information Technology (13.18%)
Industrials (7.80%) Industrials (12.25%)
----------------------- --------------------------------------------------- ------------------------------------------------------------------ -------------------------------------------- ------------------------------------------------
-10-
-------------------- -------------------------------------------- ------------------------------------------------
CURRENT INDEX PROPOSED INDEX
-------------------- -------------------------------------------- ------------------------------------------------
Market Capitalization As of September 15, 20142014: As of September 15, 20142014:
Capitalization
Allocations 51.99 % Large Cap 51.11% Large Cap
(Based on Index 29.89% Mid Cap 29.70% Mid Cap
Methodology) 18.11% Small Cap 19.19% Small Cap
----------------------- --------------------------------------------------- ------------------------------------------------------------------ -------------------------------------------- ------------------------------------------------
Number of Component As of September 15, 2014: 150 component securities As of September 15, 2014: 1189 component
Securities securities ----------------------- --------------------------------------------------- ----------------------------------------------
Rebalancing and The Index is reconstituted and rebalanced on a The Index is rebalanced and reconstituted as
Reconstitution semi-annual basis. The Fund will make changes to of the last business day of each calendar
its portfolio shortly after changes to the Index quarter. Changes are effective on the 6th business
are released to the public. day of the following month.
----------------------- --------------------------------------------------- ----------------------------------------------securities
-------------------- -------------------------------------------- ------------------------------------------------
Additional Information Regarding the Impact of the Proposal on the Fund's
Expenses and Standard Transaction Fees
OPERATING EXPENSES
As indicated above, if the Proposal is approved and the Proposed Index is
implemented, certain related changes to the Fund's license fee, listing fee, indicative value fee and
index calculation fee -- all of which comprise a portion of the Fund's operating
expenses -- will occur. Initially, it is anticipated that the listing fee would
decrease, the license fee would increase,
the indicative value fee would increase and the index calculation fee would be
eliminated, resulting in an overall decrease in total operating expenses before
fee waivers and expense reimbursements. The Fund's management fee rate would
remain the same.
The tables and examples below are intended to illustrate the expected
impact of the Proposal on the Fund's fees and expenses.
A. CURRENT AND PRO FORMA FEES
The table below compares the Fund's operating expenses for the fiscal year
ended December 31, 2013 to the Fund's hypothetical operating expenses for the
same period if the Proposed Index had been in place for the entire fiscal year.
The hypothetical "pro forma" fees assume the implementation of the new license
fee listing fee and indicative valuelisting fee, and the elimination of the index
-9-
calculation fee, as
described under this Proposal. As indicated below, the Fund's total annual fund
operating expenses (before fee waivers and expense reimbursements) would, in the
aggregate, decrease (but would still be higher than the Current Expense Cap (as
defined below)).
CURRENT PRO FORMA
Management Fees 0.50% 0.50%
Distribution and Service (12b-1) Fees(1) 0.00% 0.00%
Other Expenses 1.51% 1.14%
----- -----
TOTAL ANNUAL FUND OPERATING EXPENSES 2.01% 1.64%
Fee Waiver and Expense Reimbursement(2) 1.31% 0.94%CURRENT PRO FORMA
Management Fees 0.50% 0.50%
Distribution and Service (12b-1) Fees(1) 0.00% 0.00%
Other Expenses 1.51% 1.09%
----- -----
TOTAL ANNUAL FUND OPERATING EXPENSES 2.01% 1.59%
Fee Waiver and Expense Reimbursement(2) 1.31% 0.89%
----- -----
TOTAL NET ANNUAL FUND OPERATING EXPENSES AFTER FEE WAIVER 0.70% 0.70%
AND EXPENSE REIMBURSEMENT
-----------------
(1) Although the Fund has adopted a 12b-1 plan that permits it to pay up to
0.25% per annum, it will not pay 12b-1 fees at any time before April 30, 2015.
-11-
(2) The Advisor has agreed to waive fees and/or pay the Fund's expenses to the
extent necessary to prevent the operating expenses of the Fund (excluding
interest expense, brokerage commissions and other trading expenses, taxes, and
extraordinary expenses) from exceeding 0.70% of its average daily net assets per
year at least until April 30, 2015 (the "Current Expense Cap"). Expenses borne
or fees waived by the Advisor are subject to reimbursement by the Fund for up to
three years from the date the fee was waived or expense was incurred, but no
reimbursement payment will be made by the Fund at any time if it would result in
the Fund's expenses exceeding 0.70% of its average daily net assets per year.
The agreement may be terminated by the Trust on behalf of the Fund at any time
and by the Advisor only after April 30, 2015 upon 60 days' written notice.
EXAMPLES
These examples assume that on January 1, 2014, you investinvested $10,000 in the Fund
for the time periods indicated and that your investment has a 5% return each
year. The tables first show an expense example for the Fund assuming that the
Fund's total operating expenses remain at current levels. The table then shows
the effect on expenses if the Proposed Index is approved and implemented.implemented and
assumes that the pro forma operating expenses remain the same. Additionally, the
tables assume that the Advisor's agreement to waive fees and/or pay the Fund's
expenses to the extent necessary to prevent the operating expenses of the Fund
(excluding interest expense, brokerage commissions and other trading expenses,
taxes, and extraordinary expenses) from exceeding 0.70% of average daily net
assets per year will be terminated following April 30, 2015. Although your
actual costs may be higher or lower, based on these assumptions, your costs
would be:
------------ -------- -------- -------- --------
1 Year 3 Years 5 Years 10 Years
------------ -------- -------- -------- --------
CURRENT $72 $503 $1,017 $2,430
------------ -------- -------- -------- --------
PRO FORMA $72 $438 $872 $2,080
------------ -------- -------- -------- --------
-10-
------------------------ ---------------------- --------------------- ---------------------- ---------------------
1 Year 3 Years 5 Years 10 Years
------------------------ ---------------------- --------------------- ---------------------- ---------------------
CURRENT $72 $503 $1,017 $2,430
------------------------ ---------------------- --------------------- ---------------------- ---------------------
PRO FORMA $72 $429 $852 $2,032
------------------------ ---------------------- --------------------- ---------------------- ---------------------
B. ACTUAL AND PRO FORMA LICENSE FEE, LISTING FEE, INDICATIVE VALUE FEE AND INDEX CALCULATION FEE
The following table sets forth (i) the actual license fee, listing fee,
indicative value fee, and
index calculation fee paid by the Fund during the fiscal year ended December 31,
2013; (ii) the pro forma license fee, listing
fee, indicative value fee, and index calculation fee the
Fund would have paid during such period if the Proposed Index had been in
effect; and (iii) the difference between actual and pro forma fees as a
percentage of actual fees.
------------------------------ --------------------------- --------------------------- ---------------------------
Actual Fees Paid During Pro Forma Fee PaidFees During Difference Between Actual
Fiscal Year Ended Fiscal Year Ended and Pro Forma Fees
December 31, 2013 December 31, 2013 (Increase/Decrease as a %
of Actual Fees)
------------------------------ --------------------------- --------------------------- ---------------------------
License Fee $7,003 $7,953 13.57%
------------------------------ --------------------------- --------------------------- ---------------------------
Listing Fee $5,000 $23 (99.54%)
------------------------------ --------------------------- --------------------------- ---------------------------
Indicative Value Fee $2,677 $5,000 86.78%
------------------------------ --------------------------- --------------------------- ---------------------------
Index Calculation Fee $15,000 $0 (100%)
------------------------------ --------------------------- --------------------------- ---------------------------
-11--12-
LICENSE FEE EXAMPLES
The Advisor believes that, over time, the Fund may benefit from having a
license fee that will change from a fee that varies based on the Fund's net
assets to one that has a small fixed component and a variable component;
however, as indicated below, at current asset levels, the Fund would not realize
cost savings from the new license fee and, although total annual fund operating
expenses would decrease assuming the Proposal is approved, the amount of the
license fee would increase. The following table includes examples to illustrate,
at various asset levels, the annual license fees and total annual fund operating
expenses that the Fund would be expected to pay assuming the Fund's current
investment objective is retained, as compared to such amounts that the Fund
would be expected to pay if the Proposal is approved. Of course, no assurance
can be provided that the Fund will realize any cost savings that are
attributable to the change in its license fee.
-------------------------- --------------------- -------------------- ---------------------- ---------------------
Assets License Fee Under License Fee Under Total Annual Fund Total Annual Fund
Current Index Proposed Index Operating Expenses Operating Expenses
Under Current Index* Under Proposed
Index**
-------------------------- --------------------- -------------------- ---------------------- ---------------------
CurrentApproximately $5,211,000 $7,816 $8,021 $94,229 $74,457
(based on average
year-to-date net assets
as of September $7,816 $8,021 $94,231 $76,780August 15, 2014 (approximately
$5,211,000)2014)
-------------------------- --------------------- -------------------- ---------------------- ---------------------
$25,000,000 $37,500 $10,000 $242,007 $194,438$242,005 $192,115
-------------------------- --------------------- -------------------- ---------------------- ---------------------
$50,000,000 $75,000 $12,500 $431,130 $346,171$431,128 $343,848
-------------------------- --------------------- -------------------- ---------------------- ---------------------
$100,000,000 $150,000 $17,500 $809,372 $649,633$809,370 $647,310
-------------------------- --------------------- -------------------- ---------------------- ---------------------
* Total*Total Annual Fund Operating Expenses would exceed the Current Expense Cap at
all asset levels.
**Total Annual Fund Operating Expenses would exceed the Current Expense Cap at
all asset levels except $50,000,000 and $100,000,000.
STANDARD CREATION TRANSACTION FEE AND REDEMPTION TRANSACTION FEE
As indicated above, if the Fund's investment objective is changed to one
that seeks investment results that track the Proposed Index, the Fund's standard
creation transaction fee and redemption transaction fee, which are typical for
ETFs, will increase. The Fund issues and redeems shares on a continuous basis,
only in "creation units" consisting of 50,000 shares, and creation units are
issued and redeemed "in kind" for securities in which the Fund invests and/or
cash. The Fund's shares can only be purchased and redeemed directly from the
Fund by authorized participants (i.e., broker-dealers and large institutional
investors that have entered into "participation agreements" with First Trust
Portfolios L.P., the Fund's principal underwriter, authorizing them to purchase
and redeem shares directly from the Fund).Authorized Participants. In connection with purchases and redemptions of
shares of the Fund, authorized participantsAuthorized Participants are required to pay a standard
creation transaction fee (the "Creation Transaction Fee") to the
-12-
Custodian,
regardless of the number of creation units. Similarly, a standard redemption
transaction fee (the "Redemption Transaction Fee") is imposed and paid to the
Custodian to offset transfer and other transaction costs that may be incurred by
the Fund in connection with redemption transactions.
The authorized
participants pass the-13-
Creation Transaction Fees and Redemption Transaction Fees (collectively,
"Transaction Fees") are passed along to investors when they buy and sell Fund
shares in the secondary market as a component of the "bid-ask spread" -- one of
the costs that investors on whose behalf they act.in ETFs incur. The bid-ask spread, which is generally
the difference between the "bid price" and the "ask price" of a security, is
built into the market price of an ETF's shares. The bid price is generally the
highest price that a market maker (for example, an Authorized Participant) is
willing to pay to buy a security from an investor. Conversely, the ask price is
generally the lowest price that a market maker will accept to sell a security to
an investor. Transaction Fees are typically one of the factors that will
influence an ETF's bid-ask spread.
Currently, the Fund's standard Creation Transaction Fee and standard
Redemption Transaction Fee are based on the number of different securities in a
creation unit and are each $1,000. As indicated above, the Proposed Index is
comprised of significantly more securities than the Current Index, which means
that, if the Proposed Index is implemented and, as expected, the Fund generally
invests in all of such securities (rather than a sample thereof), the Fund would
invest in a greater number of stocks, thereby introducing increased complexity
to creation and redemption transactions. Accordingly, in light of the additional
efforts that are expected to be required to effect more complex creation and
redemption transactions, the standard Creation Transaction Fee and the standard
Redemption Transaction Fee will each be increased to $1,500. The new fees,Transaction
Fees, however, would each be a flat fee and would remain the same regardless of
the number of securities in a creation unit. Higher standard Transaction Fees
may cause the Fund's investors to incur higher bid-ask spreads, which will be
built into the prices at which they buy and sell shares of the Fund on the
applicable securities exchange (i.e., NASDAQ).
Conclusion
The Advisor has recommended, and the Board has approved, changing the
Fund's investment objective to one that seeks investment results that track the
Proposed Index. In this regard, as discussed above, the Advisor and the Board
have considered, among other things (1) the Fund's performance and trading
history, (2) differences and similarities between the Current Index and the
Proposed Index, (3) the expected impact of the Proposed Index on the Fund's
investments and (4) the expected impact of the Proposed Index on the Fund's fees
and expenses.
If shareholders do not approve this Proposal, then the Current Index will
not be replaced with the Proposed Index and the Board will consider all
alternatives available to the Fund and will take such action as it deems
necessary and in the best interests of the Fund.
THE BOARD OF TRUSTEES RECOMMENDS THAT YOU VOTE "FOR" THE PROPOSED CHANGE TO THE
FUND'S INVESTMENT OBJECTIVE.
-13--14-
PROPOSAL 2: RECLASSIFICATION OF THE FUND'S INVESTMENT OBJECTIVE FROM A
FUNDAMENTAL INVESTMENT POLICY TO A NON-FUNDAMENTAL INVESTMENT POLICY
Under applicable law, a fund's investment objective is not required to be
"fundamental." As indicated in Proposal 1, the Fund's current investment
objective is a fundamental investment policy, which means that changes to the
investment objective must be approved by shareholders. In order to enhance the
Fund's flexibility, it is proposed that the Fund's investment objective be
reclassified as a "non-fundamental" investment policy, which means that the
Board would be able to change the Fund's investment objective in the future
without shareholder approval. This would permit the Board to change the
investment objective if the Board believes it is in the best interests of the
Fund. Reclassifying the investment objective as a non-fundamental investment
policy would alleviate the time and expense associated with holding a
shareholder meeting and soliciting proxies in conjunction with any future change
to the Fund's investment objective and would conform the Fund's investment
objective to that of most of the other index-based exchange-traded funds in the
First Trust fund complex, which have non-fundamental investment objectives.
TheAlthough shareholders would no longer have input on any decision to change the
Fund's investment objective, the Fund would be required to provide shareholders
with at least 60 days' prior written notice before effecting any change to the Fund's investment objective.such change. If
shareholders approve this Proposal, the Fund also would disclose in its
prospectus that its investment objective is non-fundamental and may be changed
by the Board without shareholder approval. The Board currently does not intend
to change the Fund's investment objective other than as described in Proposal 1.
If shareholders do not approve this Proposal, the Fund's investment
objective will continue to be fundamental and the Board will be required to seek
shareholder approval if, in the future, it decides either to change the
investment objective or to reclassify the investment objective from a
fundamental to a non-fundamental investment policy.
THE BOARD OF TRUSTEES RECOMMENDS THAT YOU VOTE "FOR" THE RECLASSIFICATION OF
THE FUND'S INVESTMENT OBJECTIVE FROM FUNDAMENTAL TO NON-FUNDAMENTAL.
-14--15-
OTHER INFORMATION
GENERAL INFORMATION
This Proxy Statement is being furnished in connection with the
solicitation of proxies by the Board. The solicitation of proxies will be
largely by mail, but may include telephonic, electronic or oral communication by
officers and service providers of the Trust, as well as affiliates of such
service providers. A proxy solicitation firm, AST Fund Solutions, LLC, has also
been engaged to solicit proxies at a cost which is expected to be a total of
approximately $5,000. The expense of preparing, printing and mailing the
enclosed proxy, accompanying notice and this Proxy Statement, and all other
costs in connection with the solicitation of proxies to be voted at the Meeting
(collectively, "solicitation costs"), will be borne by the Fund. The Fund will
also reimburse brokerage firms and others for their expenses in forwarding proxy
solicitation materials to the person(s) for whom they hold shares of the Fund.
Since the Fund's total annual operating expenses, taking into account
solicitation costs and reimbursements of forwarding expenses, are expected to
exceed the Fund's Current Expense Cap, in effect, the Advisor will bear such
costs and expenses.
DATE, TIME AND PLACE OF THE MEETING
The meeting will be held on ____________,Monday, December 8, 2014, at _____ p.m.12:00 noon
Central Time at the offices of First Trust Advisors L.P., located at 120 East
Liberty Drive, Suite 400, Wheaton, Illinois 60187.
USE AND REVOCATION OF PROXIES
For shareholders voting by mail, if the enclosed proxy card is properly
executed and returned in time to be voted at the Meeting, the shares represented
thereby will be voted in accordance with the instructions marked thereon, or, if
no instructions are marked thereon, will be voted at the discretion of the
persons named on the proxy card. Accordingly, unless instructions to the
contrary are marked thereon, a properly executed and returned proxy will be
voted FOR each Proposal, and at the discretion of the named proxies on any other
matters that may properly come before the Meeting, as deemed appropriate. Any
shareholder who has given a proxy has the right to revoke it at any time prior
to its exercise either by attending the Meeting and voting his or her or its
shares in person, or by timely submitting a letter of revocation or a
later-dated proxy to the Trust at the above address. A list of shareholders
entitled to notice of and to be present and to vote at the Meeting will be
available at the offices of the Trust, 120 East Liberty Drive, Suite 400,
Wheaton, Illinois 60187, for inspection by any shareholder during regular
business hours prior to the Meeting. Shareholders will need to show valid
identification and proof of share ownership to be admitted to the Meeting or to
inspect the list of shareholders.
VOTING RIGHTS AND REQUIRED VOTES
Each shareholder will be entitled to one vote for each share owned by the
shareholder, and each fractional share will be entitled to a proportionate
fractional vote.
-15--16-
A quorum of shareholders is necessary to hold a meeting of shareholders.
Under the Trust's By-Laws, the holders of shares representing thirty-three and a
third percent (33-1/3%) of the voting power of the outstanding shares entitled
to vote present in person or by proxy will generally constitute a quorum at any
meeting of shareholders; however, where a vote is to be taken by an individual
fund (as in case of each Proposal), then shares representing thirty-three and a
third percent (33-1/3%) of the voting power of the aggregate number of shares of
that fund will be necessary to constitute a quorum for the transaction of
business by that fund. For the purposes of establishing whether a quorum is
present, all shares present and entitled to vote, including abstentions and
broker non-votes (i.e., shares held by brokers or nominees as to which (i)
instructions have not been received from the beneficial owners or the persons
entitled to vote and (ii) the broker or nominee does not have discretionary
voting power), shall be counted. Any meeting of shareholders may be postponed
prior to the meeting with notice to the shareholders entitled to vote at that
meeting. Any meeting of shareholders may, by action of the person presiding
thereat, be adjourned without further notice with respect to one or more matters
to be considered at such meeting to a designated time and place, if a quorum is
not present with respect to such matter. Any meeting of shareholders may, by
motion of the person presiding thereat, be adjourned with respect to one or
matters to be considered at such meeting, even if a quorum is present with
respect to such matters, to a designated time and place, when such adjournment
is approved by the vote of holders of shares representing a majority of the
voting power of the shares present and entitled to vote with respect to the
matter or matters adjourned, and voting on the adjournment, without further
notice. Unless a proxy is otherwise limited in this regard, any shares present
and entitled to vote at a meeting, including broker non-votes, may, at the
discretion of the proxies named therein, be voted in favor of such an
adjournment.
Broker-dealer firms holding shares in "street name" for the benefit of
their customers and clients may request voting instructions from such customers
and clients. Because broker-dealers may be subject to rules which will not
permit them to vote your shares without instructions, you are encouraged to
contact your broker-dealer and record your voting instructions.
To become effective, each Proposal must be approved by a vote of a
majority of the outstanding voting securities of the Fund. The "vote of a
majority of the outstanding voting securities" of the Fund for this purpose, as
defined in the Investment Company Act of 1940, as amended (the "1940 Act"),
means the vote of the lesser of (i) 67% or more of the shares of the Fund
present at the Meeting if the holders of more than 50% of the outstanding shares
of the Fund are present in person or represented by proxy; or (ii) more than 50%
of the outstanding shares of the Fund. For purposes of determining the approval
of a Proposal, abstentions and broker non-votes will have the effect of a vote
against the Proposal.
SHARES OUTSTANDING
Only holders of record of shares at the close of business on ____________September 29,
2014 (the "Record Date") are entitled to vote on the Proposals at the Meeting.
As of the close of business on the Record Date, there were ____________200,002 shares
outstanding of the Fund.
-16--17-
SHARE OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
As of the Record Date, no person is known by the Trust to have
beneficially owned, more than 5% of the shares outstanding of the Fund except as
set forth in the chart below. A shareholder owning beneficially more than 25% of
the Fund's voting securities may be deemed to "control" (as defined in the 1940
Act) the Fund. The vote of any such person could have a more significant effect
on matters presented at a shareholder's meeting than votes of other
shareholders. Information as to beneficial ownership is based on securities
position listing reports as of the Record Date and reports filed with the
Securities and Exchange Commission.Date. The Trust does not have any
knowledge of who the ultimate beneficiaries are of the Fund's shares
outstanding.
PERCENTAGE OF
NAME AND ADDRESS OF SHARES BENEFICIALLY SHARES OUTSTANDING
NAME OF BENEFICIAL OWNER OWNED OWNED
-17-Charles Schwab & Co., Inc. 13,461 6.73%
2423 E. Lincoln Drive
Phoenix, AZ 85016
First Clearing, LLC 15,773 7.89%
2801 Market Street
St. Louis, MO 63103
Merrill Lynch, Pierce, 27,806 13.90%
Fenner & Smith Inc.
4804 Deer Lake Drive E.
Jacksonville, FL 32246
Morgan Stanley Smith Barney LLC 29,593 14.80%
1300 Thames Street
Baltimore, MD 21231
National Financial Services, LLC 25,037 12.52%
499 Washington Blvd.
Jersey City, NJ 07310
TD Ameritrade Clearing, Inc. 16,875 8.44%
1005 N. Ameritrade Place
Bellevue, NE 68005
-18-
SHARE OWNERSHIP OF TRUSTEES AND OFFICERS
The number of shares of the Fund beneficially owned as of December 31,
2013 by (a) the Trustees (including the Trustees who are not "interested
persons," as that term is defined in the 1940 Act, of the Trust (such Trustees,
the "Independent Trustees") and the Trustee who is not an Independent Trustee
(such Trustee, the "Interested Trustee") and (b) the Trustees and officers of
the Trust as a group, is set forth below.
----------------------------------------------- ---------------------------------------------- --------------------------------------------
NAME NUMBER OF SHARES
----------------------------------- --------------------------------------------
INTERESTED TRUSTEE
----------------------------------------------- ---------------------------------------------- --------------------------------------------
James A. Bowen 0
----------------------------------------------- ---------------------------------------------- --------------------------------------------
INDEPENDENT TRUSTEES
----------------------------------------------- ---------------------------------------------- --------------------------------------------
Richard E. Erickson 0
----------------------------------------------- ---------------------------------------------- --------------------------------------------
Thomas R. Kadlec 0
----------------------------------------------- ---------------------------------------------- --------------------------------------------
Robert F. Keith 0
----------------------------------------------- ---------------------------------------------- --------------------------------------------
Niel B. Nielson 200
----------------------------------------------- ---------------------------------------------- --------------------------------------------
TRUSTEES AND OFFICERS AS A GROUP 200
----------------------------------------------- ---------------------------------------------- --------------------------------------------
As of December 31, 2013, (a) the Trustees and (b) the Trustees and
officers of the Trust as a group, beneficially owned less than 1% of the total
shares outstanding of the Fund. The information as to beneficial ownership is
based on statements furnished by each Trustee and officer.
SERVICE PROVIDERS
First Trust Advisors L.P., the Fund's investment adviser, and First Trust
Portfolios L.P., the principal underwriter of the Fund's shares, are each
located at 120 East Liberty Drive, Suite 400, Wheaton, Illinois 60187. The Bank
of New York Mellon Corporation, the Fund's administrator, custodian and fund
accounting and transfer agent, is located at 101 Barclay St., New York, New York
10286.
DELIVERY OF CERTAIN DOCUMENTS
Annual reports will be sent to shareholders of record of the Fund. The
Trust will furnish, without charge, a copy of its annual report and/or
semi-annual report as available upon request. Such written or oral requests
should be directed to the Trust at 120 East Liberty Drive, Suite 400, Wheaton,
Illinois 60187 or by calling (800) 621-1675.
Please note that only one annual or semi-annual report, proxy statement or
Notice of Availability of Proxy Materials, as applicable, may be delivered to
two or more shareholders of the Fund who share an address, unless the Trust has
-19-
received instructions to the contrary. To request a separate copy of an annual
or semi-annual report, proxy statement or Notice of Availability of Proxy
Materials, as applicable, or for instructions as to how to request a separate
-18-
copy of such documents or as to how to request a single copy if multiple copies
of such documents are received, shareholders should contact the Trust at the
address and phone number set forth above. Pursuant to a request, a separate copy
will be delivered promptly.
SUBMISSION OF SHAREHOLDER PROPOSALS
The Trust is organized as a business trust under the laws of The
Commonwealth of Massachusetts. The Trust is not required to hold, and does not
hold, annual meetings. However, special meetings of shareholders of the Fund may
be called as required by the 1940 Act, or as required or permitted by the
Trust's Declaration of Trust and By-Laws.
Because the Fund does not hold annual shareholders' meetings, the
anticipated date of the next shareholders' meeting (if any) cannot be provided.
Shareholders who wish to present a proposal for inclusion in a future proxy
statement for a subsequent shareholders' meeting should send written proposals
to the Trust's Secretary, W. Scott Jardine, at 120 East Liberty Drive, Suite
400, Wheaton, Illinois 60187. Proposals must be received by a reasonable time
before the Fund begins to print and send its proxy materials for the meeting.
The timely submission of a proposal does not guarantee inclusion.
OTHER MATTERS TO COME BEFORE THE MEETING
No business other than the matters described above is expected to come
before the Meeting, but should any other matter requiring a vote of shareholders
arise, including any question as to an adjournment or postponement of the
Meeting, the persons named on the enclosed proxy card will vote thereon
according to their best judgment in the interests of the Fund.
--------------------------------------------------------------------------------
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE MEETING. IN ORDER TO
AVOID DELAY AND TO ENSURE THAT YOUR SHARES ARE REPRESENTED, PLEASE VOTE AS
PROMPTLY AS POSSIBLE. IF YOU NEED ANY ASSISTANCE, OR HAVE ANY QUESTIONS
REGARDING THE PROPOSALS OR HOW TO VOTE YOUR SHARES, PLEASE CALL THE FUND'S PROXY
SOLICITOR, AST FUND SOLUTIONS, LLC, AT (866) __________(877) 536-1555 WEEKDAYS FROM 9:00 A.M. TO
10:00 P.M. EASTERN TIME.
--------------------------------------------------------------------------------
-19-
FORM OF PROXY CARD
------------------
EVERY SHAREHOLDER'S VOTE IS IMPORTANT
EASY VOTING OPTIONS:
VOTE ON THE INTERNET
Log on to:
[ ]
Or scan the QR code
Follow the on-screen instructions
available 24 hours
VOTE BY PHONE
call [ ]
follow the recorded instructions
available 24 hours
VOTE BY MAIL
Vote, sign and date this Proxy
Card and return in the
postage-paid envelope
VOTE IN PERSON
Attend Shareholder Meeting
120 East Liberty Drive, Suite 400
Wheaton, Illinois 60187
on ________,December 8, 2014
Please detach at perforation before mailing.
PROXY PROXY
FIRST TRUST EXCHANGE-TRADED FUND
SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON [ ],DECEMBER 8, 2014
PROXY SOLICITED BY THE BOARD OF TRUSTEES
The undersigned holder of shares of the First Trust Value Line(R) Equity
Allocation Index Fund (the "Fund"), a series of First Trust Exchange-Traded
Fund, a Massachusetts business trust, hereby appoints W. Scott Jardine, Mark R.
Bradley, Kristi A. Maher, James M. Dykas and Erin E. Klassman as attorneys and
proxies for the undersigned, with full powers of substitution and revocation, to
represent the undersigned and to vote on behalf of the undersigned all shares of
the Fund that the undersigned is entitled to vote at the Special Meeting of
Shareholders of the Fund (the "Meeting") to be held at the offices of First
Trust Advisors L.P., 120 East Liberty Drive, Suite 400, Wheaton, Illinois 60187,
at [ ]12:00 noon Central time on the date indicated above, and any adjournments or
postponements thereof.
The undersigned hereby acknowledges receipt of the Notice of Special Meeting of
Shareholders and Proxy Statement dated [ ],October 17, 2014, and hereby instructs
said attorneys and proxies to vote said shares as indicated hereon. In their
discretion, the proxies are authorized to vote upon such other business as may
properly come before the Meeting and any adjournments or postponements thereof
(including, but not limited to, any questions as to adjournments or
postponements of the Meeting). A majority of the proxies present and acting at
the Meeting in person or by substitute (or, if only one shall be so present,
then that one) shall have and may exercise all of the power and authority of
said proxies hereunder. The undersigned hereby revokes any proxy previously
given. This proxy, if properly executed, will be voted in the manner directed by
the undersigned shareholder. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
FOR EACH PROPOSAL SET FORTH.
VOTE VIA THE INTERNET:
[ ]
VOTE VIA THE TELEPHONE:
[ ]
----------------------- -------------------
----------------------- -------------------
Please sign exactly as your name appears at left.
Joint owners each should sign. When signing as
attorney, executor, administrator, trustee or
guardian, please give full title as such. If a
corporation, please sign in full corporate name by
president or authorized officer. If a partnership,
please sign in partnership name by authorized person.
Please sign, date and return.
____________________________________________________
Signature
____________________________________________________
Signature (if held jointly)
____________________________________________________
Date
EVERY SHAREHOLDER'S VOTE IS IMPORTANT
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE
SPECIAL MEETING OF SHAREHOLDERS TO BE HELD ON [ ],DECEMBER 8, 2014
THE PROXY STATEMENT AND PROXY CARD FOR THIS MEETING ARE AVAILABLE AT:
[ ]
IF YOU VOTE ON THE INTERNET OR BY TELEPHONE,
YOU NEED NOT RETURN THIS PROXY CARD
Please detach at perforation before mailing.
THIS PROXY WILL BE VOTED AS DIRECTED, OR IF NO DIRECTION IS INDICATED, WILL BE
VOTED "FOR" THE PROPOSALS.
TO VOTE, FOR EACH PROPOSAL, MARK ONE BLOCK BELOW IN BLUE OR BLACK INK.
Example: [X]
THE BOARD OF TRUSTEES RECOMMENDS A VOTE "FOR" THE PROPOSALS.
PROPOSALS:
1. To approve changing the Fund's FOR AGAINST ABSTAIN
investment objective from one that [ ] [ ] [ ]
"seeks investment results that
correspond generally to the price
and yield (before the Fund's fees
and expenses) of an equity index
called the Value Line(R) Equity
Allocation Index" to one that "seeks
investment results that correspond
generally to the price and yield
(before the Fund's fees and
expenses) of an equity index called
the NASDAQ AlphaDEX(R) Total US
Market Index."
2. To approve the reclassification of FOR AGAINST ABSTAIN
the Fund's investment objective from [ ] [ ] [ ]
a "fundamental" investment policy to
a "non-fundamental" investment
policy.
MEETING ATTENDANCE -
Mark the box to the right if you plan to attend the Special Meeting. [ ]
CHANGE OF ADDRESS - Please print COMMENTS - Please print your
new address below. comments below.
------------------------------------ ------------------------------------
------------------------------------ ------------------------------------
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY USING THE
ENCLOSED ENVELOPE.