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As Of Filer Filing For·On·As Docs:Size Issuer Agent 8/11/17 First Trust Exchange-Traded Fund 485BXT 1:938K Fitzgerald Marke… LLC/FA → First Trust Dorsey Wright People’s Portfolio ETF ⇒ DWPP |
Document/Exhibit Description Pages Size 1: 485BXT Post-Effective Amendment to Designate a New HTML 552K Effective Date
As filed with the Securities and Exchange Commission on August 11, 2017
1933 Act Registration No. 333-125751
1940 Act Registration No. 811-21774
United States
Securities and Exchange Commission
Washington, D.C. 20549
Form N-1A
Registration Statement Under the Securities Act of 1933 | [ ] |
Pre-Effective Amendment No. __ | [ ] |
Post-Effective Amendment No. 99 | [X] |
and/or | |
Registration Statement Under the Investment Company Act of 1940 | [ ] |
Amendment No. 99 | [X] |
First Trust Exchange-Traded Fund
(Exact name of registrant as specified in charter)
120 East Liberty Drive, Suite 400
(Address of Principal Executive Offices) (Zip Code)
Registrant’s Telephone Number, including Area Code: (800) 621-1675
W. Scott Jardine, Esq., Secretary
First Trust Exchange-Traded Fund
First Trust Advisors L.P.
120 East Liberty Drive, Suite 400
(Name and Address of Agent for Service)
Copy to:
Eric F. Fess, Esq.
Chapman and Cutler LLP
111 West Monroe Street
It is proposed that this filing will become effective (check appropriate box):
[ ] immediately upon filing pursuant to paragraph (b)
[X] on August 18, 2017 pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1)
[ ] on (date) pursuant to paragraph (a)(1)
[ ] 75 days after filing pursuant to paragraph (a)(2)
[ ] on (date) pursuant to paragraph (a)(2) of Rule 485.
If appropriate, check the following box:
[X] this post-effective amendment designates a new effective date for a previously filed post-effective amendment.
Contents of Post-Effective Amendment No. 99
This Registration Statement comprises the following papers and contents:
The Facing Sheet
Part A - Prospectus for First Trust Dorsey Wright People’s Portfolio ETF
Part B - Statement of Additional Information for First Trust Dorsey Wright People’s Portfolio ETF
Part C of the Registrant’s Post-Effective Amendment No. 95 under the Securities Act of 1933 as it relates to First Trust Dorsey Wright People’s Portfolio ETF, a series of the Registrant, filed on June 14, 2017, are incorporated by reference herein.
Signatures
First Trust Exchange-Traded Fund |
FUND NAME | TICKER SYMBOL | EXCHANGE |
First Trust Dorsey Wright People’s Portfolio ETF (formerly First Trust CBOE® S&P 500® VIX® Tail Hedge Fund) | DWPP | Nasdaq |
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price) | None |
Management Fees | 0.60% |
Distribution and Service (12b-1) Fees(1) | 0.00% |
Other Expenses | 0.00% |
Total Annual Fund Operating Expenses | 0.60% |
(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 _________. |
1 Year | 3 Years | 5 Years | 10 Years |
$61 | $246 | $447 | $1,026 |
Best Quarter | Worst Quarter | ||
9.33% | December 31, 2014 | -6.19% | September 30, 2015 |
1 Year | Since Inception | Inception Date | |
Return Before Taxes | 0.54% | 5.85% | 8/29/2012 |
Return After Taxes on Distributions | -0.22% | 5.14% | |
Return After Taxes on Distributions and Sale of Shares | 0.28% | 4.21% | |
S&P 500® Index (reflects no deduction for fees, expenses or taxes) | 11.96% | 13.63% | |
Nasdaq Dorsey Wright People's Portfolio Index(1) (reflects no deduction for fees, expenses or taxes) | _______ | ________________ |
(1) | On___, 2017, the Fund's underlying index changed from the CBOE® VIX® Tail Hedge Index to the Nasdaq Dorsey Wright People's Portfolio Index. Because the Fund's new underlying index had an inception date of ________, performance information is not included above. |
• | Daniel J. Lindquist, Chairman of the Investment Committee and Managing Director of First Trust |
• | Jon C. Erickson, Senior Vice President of First Trust |
• | David G. McGarel, Chief Investment Officer, Chief Operating Officer and Managing Director of First Trust |
• | Roger F. Testin, Senior Vice President of First Trust |
• | Stan Ueland, Senior Vice President of First Trust |
• | Chris A. Peterson, Senior Vice President of First Trust |
• | Mr. Lindquist is Chairman of the Investment Committee and presides over Investment Committee meetings. Mr. Lindquist is responsible for overseeing the implementation of the Fund’s investment strategy. Mr. Lindquist was a Senior Vice President of First Trust and FTP from September 2005 to July 2012 and is now a Managing Director of First Trust and FTP. |
• | Mr. Erickson joined First Trust in 1994 and is a Senior Vice President of First Trust and FTP. As the head of First Trust’s Equity Research Group, Mr. Erickson is responsible for determining the securities to be purchased and sold by funds that do not utilize quantitative investment strategies. |
• | Mr. McGarel is the Chief Investment Officer, Chief Operating Officer and a Managing Director of First Trust and FTP. As First Trust’s Chief Investment Officer, Mr. McGarel consults with the other members of the Investment Committee on market conditions and First Trust’s general investment philosophy. Mr. McGarel was a Senior Vice President of First Trust and FTP from January 2004 to July 2012. |
• | Mr. Testin is a Senior Vice President of First Trust and FTP. Mr. Testin is the head of First Trust’s Portfolio Management Group. Mr. Testin has been a Senior Vice President of First Trust and FTP since November 2003. |
• | Mr. Ueland joined First Trust as a Vice President in August 2005 and has been a Senior Vice President of First Trust and FTP since September 2012. At First Trust, he plays an important role in executing the investment strategies of each portfolio of exchange-traded funds advised by First Trust. |
• | Mr. Peterson is a Senior Vice President and head of First Trust’s strategy research group. He joined First Trust in January of 2000. Mr. Peterson is responsible for developing and implementing quantitative equity investment strategies. Mr. Peterson received his B.S. in Finance from Bradley University in 1997 and his M.B.A. from the University of Chicago Booth School of Business in 2005. He has over 18 years of financial services industry experience and is a recipient of the Chartered Financial Analyst designation. |
• | The price return index (NQDWAPP) is ordinarily calculated without regard to cash dividends on Index Securities. |
• | The total return index (NQDWAPPT) reinvests cash dividends on the ex-date. |
• | The net total return index (NQDWAPPN) reinvests cash dividends on the ex-date based on the securities incorporation withholding rate. |
• | be a member of the the Nasdaq US 500 Large Cap Index (NQUS500LC), the Nasdaq US 500 Large Cap Equal Weight Index (NQUS500LCE) or the Nasdaq US T-Bill Index (NQCASH); |
• | the effective date of the Nasdaq US 500 Large Cap Index and the Nasdaq US 500 Large Cap Equal Weight Index, which occurs semi-annually on the 3rd Friday of March and September; |
(1) | For purposes of this document, Last Sale Price refers to the last regular way trade reported on such security’s Index Market. The Index Market is the listing market for which prices are received and used by Nasdaq in the Index calculation and generally will represent the most liquid trading market of the Index Security. If a security does not trade on its Index Market on a given day or the Index Market has not opened for trading, the most recent last sale price from the Index Market (adjusted for corporate actions, if any) is used. For securities where Nasdaq is the Index Market, the Last Sale Price may be the Nasdaq Official Closing Price (NOCP) when Nasdaq is closed. |
• | any US trading holiday or abbreviated trading day associated with a trading holiday (ie. Christmas Eve, the Friday after Thanksgiving, the day before the observed July 4th holiday). |
(i) | On a daily basis, DWA computes the ratio of the closing price of each index to the closing price of another index. |
(ii) | As a result of on-going calculations, a Point & Figure Relative Strength chart is created. A Point & Figure Relative Strength chart is a variation of a Point & Figure chart using the input value as computed in the previous step, instead of individual security prices. |
0.00%–0.49% | 0.50%–0.99% | 1.00%–1.99% | >=2.00% | |
12 Months Ended 12/31/2016 | 76 | 3 | 0 | 0 |
3 Months Ended 3/31/2017 | 49 | 0 | 0 | 0 |
0.00%–0.49% | 0.50%–0.99% | 1.00%–1.99% | >=2.00% | |
12 Months Ended 12/31/2016 | 168 | 4 | 1 | 0 |
3 Months Ended 3/31/2017 | 13 | 0 | 0 | 0 |
Average Annual | Cumulative | |||
1 Year | Inception (8/29/2012) | Inception (8/29/2012) | ||
Fund Performance | ||||
Net Asset Value | 0.54% | 5.85% | 27.97% | |
Market Price | 0.67% | 5.88% | 28.13% | |
Index Performance | ||||
Nasdaq Dorsey Wright People's Portfolio Index(1) | ________ | ________ | ________ | |
S&P 500® Index | 11.96% | 13.63% | 74.14% |
(1) | On___, 2017, the Fund's underlying index changed from the CBOE® VIX® Tail Hedge Index to the Nasdaq Dorsey Wright People's Portfolio Index. Because the Fund's new underlying index had an inception date of ________, performance information is not included above. |
First Trust Exchange-Traded Fund |
FUND NAME | TICKER SYMBOL | EXCHANGE | ||
First Trust Dorsey Wright People’s Portfolio ETF (formerly First Trust CBOE® S&P 500® VIX® Tail Hedge Fund) | DWPP | Nasdaq |
1 | |
3 | |
3 | |
4 | |
7 | |
8 | |
8 | |
10 | |
18 | |
20 | |
21 | |
22 | |
23 | |
24 | |
28 | |
32 | |
34 | |
35 | |
35 | |
A-1 | |
B-1 |
(1) | The Fund may not issue senior securities, except as permitted under the 1940 Act. |
(2) | The Fund may not borrow money, except that the Fund may (i) borrow money from banks for temporary or emergency purposes (but not for leverage or the purchase of investments) and (ii) engage in other transactions permissible under the 1940 Act that may involve a borrowing (such as obtaining short-term credits as are necessary for the clearance of transactions, engaging in delayed-delivery transactions, or purchasing certain futures, forward contracts and options), provided that the combination of (i) and (ii) shall not exceed 33⅓% of the value of the Fund's total assets (including the amount borrowed), less the Fund's liabilities (other than borrowings). |
(3) | The Fund will not underwrite the securities of other issuers except to the extent the Fund may be considered an underwriter under the Securities Act of 1933, as amended (the “1933 Act”), in connection with the purchase and sale of portfolio securities. |
(4) | The Fund will not purchase or sell real estate or interests therein, unless acquired as a result of ownership of securities or other instruments (but this shall not prohibit the Fund from purchasing or selling securities or other instruments backed by real estate or of issuers engaged in real estate activities). |
(5) | The Fund may not make loans to other persons, except through (i) the purchase of debt securities permissible under the Fund's investment policies, (ii) repurchase agreements, or (iii) the lending of portfolio securities, provided that no such loan of portfolio securities may be made by the Fund if, as a result, the aggregate of such loans would exceed 33⅓% of the value of the Fund's total assets. |
(6) | The Fund may not purchase or sell physical commodities unless acquired as a result of ownership of securities or other instruments (but this shall not prevent the Fund from purchasing or selling options, futures contracts, forward contracts or other derivative instruments, or from investing in securities or other instruments backed by physical commodities). |
(7) | The Fund may not invest 25% or more of the value of its total assets in securities of issuers in any one industry or group of industries, except to the extent that the Fund’s Index is based on concentrations in an industry or a group of industries. This restriction does not apply to obligations issued or guaranteed by the U.S. government, its agencies or instrumentalities. |
Fund | Index |
First Trust Dorsey Wright People’s Portfolio ETF | Nasdaq Dorsey Wright People’s Portfolio Index |
(1) | The Fund may invest in U.S. government securities, including bills, notes and bonds differing as to maturity and rates of interest, which are either issued or guaranteed by the U.S. Treasury or by U.S. government agencies or instrumentalities. U.S. government securities include securities that are issued or guaranteed by the U.S. Treasury, by various agencies of the U.S. government, or by various instrumentalities that have been established or sponsored by the U.S. government. U.S. Treasury securities are backed by the “full faith and credit” of the United States. Securities issued or guaranteed by federal agencies and U.S. government-sponsored instrumentalities may or may not be backed by the full faith and credit of the United States. Some of the U.S. government agencies that issue or guarantee securities include the Export-Import Bank of the United States, the Farmers Home Administration, the Federal Housing Administration, the Maritime Administration, the Small Business Administration and The Tennessee Valley Authority. An instrumentality of the U.S. government is a government agency organized under federal charter with government supervision. Instrumentalities issuing or guaranteeing securities include, among others, the Federal Home Loan Banks, the Federal Land Banks, the Central Bank for Cooperatives, Federal Intermediate Credit Banks and the Federal National Mortgage Association (“Fannie Mae”). In the case of those U.S. government securities not backed by the full faith and credit of the United States, the investor must look principally to the agency or instrumentality issuing or guaranteeing the security for ultimate repayment and may not be able to assert a claim against the United States itself in the event that the agency or instrumentality does not meet its commitment. The U.S. government, its agencies and instrumentalities do not guarantee the market value of their securities; consequently, the value of such securities may fluctuate. |
(2) | The Fund may invest in certificates of deposit issued against funds deposited in a bank or savings and loan association. Such certificates are for a definite period of time, earn a specified rate of return and are normally negotiable. If such certificates of deposit are non-negotiable, they will be considered illiquid securities and be subject to the Fund's 15% restriction on investments in illiquid securities. Pursuant to the certificate of deposit, the issuer agrees to pay the amount deposited plus interest to the bearer of the certificate on the date specified thereon. Under current FDIC regulations, the maximum insurance payable as to any one certificate of deposit is $250,000; therefore, certificates of deposit purchased by the Fund may not be fully insured. The Fund may only invest in certificates of deposit issued by U.S. banks with at least $1 billion in assets. |
(3) | The Fund may invest in bankers’ acceptances, which are short-term credit instruments used to finance commercial transactions. Generally, an acceptance is a time draft drawn on a bank by an exporter or an importer to obtain a stated amount of funds to pay for specific merchandise. The draft is then “accepted” by a bank that, in effect, unconditionally guarantees to pay the face value of the instrument on its maturity date. The acceptance may then be held by the accepting bank as an asset or it may be sold in the secondary market at the going rate of interest for a specific maturity. |
(4) | The Fund may invest in repurchase agreements, which involve purchases of debt securities with counterparties that are deemed by the Advisor to present acceptable credit risks. In such an action, at the time the Fund purchases the security, it simultaneously agrees to resell and redeliver the security to the seller, who also simultaneously agrees to buy back the security at a fixed price and time. This assures a predetermined yield for the Fund during its holding period since the resale price is always greater than the purchase price and reflects an agreed-upon market rate. Such actions afford an opportunity for the Fund to invest temporarily available cash. The Fund may enter into repurchase agreements only with respect to obligations of the U.S. government, its agencies or instrumentalities, certificates of deposit or bankers’ acceptances in which the Fund may invest. Repurchase agreements may be considered loans to the seller, collateralized by the underlying securities. The risk to the Fund is limited to the ability of the seller to pay the agreed-upon sum on the repurchase date; in the event of default, the repurchase agreement provides that the affected Fund is entitled to sell the underlying collateral. If the value of the collateral declines after the agreement is entered into, however, and if the seller defaults |
under a repurchase agreement when the value of the underlying collateral is less than the repurchase price, the Fund could incur a loss of both principal and interest. The portfolio managers monitor the value of the collateral at the time the action is entered into and at all times during the term of the repurchase agreement. The portfolio managers do so in an effort to determine that the value of the collateral always equals or exceeds the agreed-upon repurchase price to be paid to the Fund. If the seller were to be subject to a federal bankruptcy proceeding, the ability of the Fund to liquidate the collateral could be delayed or impaired because of certain provisions of the bankruptcy laws. | |
(5) | The Fund may invest in bank time deposits, which are monies kept on deposit with banks or savings and loan associations for a stated period of time at a fixed rate of interest. There may be penalties for the early withdrawal of such time deposits, in which case the yields of these investments will be reduced. |
(6) | The Fund may invest in commercial paper, which are short-term unsecured promissory notes, including variable rate master demand notes issued by corporations to finance their current operations. Master demand notes are direct lending arrangements between the Fund and a corporation. There is no secondary market for the notes. However, they are redeemable by the Fund at any time. The Fund's portfolio managers will consider the financial condition of the corporation (e.g., earning power, cash flow and other liquidity ratios) and will continuously monitor the corporation’s ability to meet all of its financial obligations, because the Fund's liquidity might be impaired if the corporation were unable to pay principal and interest on demand. The Fund may invest in commercial paper rated at the day of purchase “Prime-1” by Moody’s Investors Service, Inc. or “A-1+” or “A-1” by Standard & Poor’s Ratings Group, Inc., or, if unrated, of comparable quality as determined by First Trust. |
(7) | The Fund may invest in shares of money market funds, as consistent with its investment objective and policies. Shares of money market funds are subject to management fees and other expenses of those funds. Therefore, investments in money market funds will cause the Fund to bear proportionately the costs incurred by the money market funds’ operations. At the same time, the Fund will continue to pay its own management fees and expenses with respect to all of its assets, including any portion invested in the shares of other investment companies. It is possible for the Fund to lose money by investing in money market funds. |
Portfolio Turnover Rate | |
Fiscal Year Ended December 31, | |
2016 | 2015 |
4% | 7% |
Fund | Index | Index Provider |
First Trust Dorsey Wright People’s Portfolio ETF | Nasdaq Dorsey Wright People’s Portfolio Index | Nasdaq, Inc. |
Name, Address and Date of Birth | Position and Offices with Trust | Term of Office and Year First Elected or Appointed | Principal Occupations During Past 5 Years | Number of Portfolios in the First Trust Fund Complex Overseen by Trustee | Other Trusteeships or Directorships Held by Trustee During the Past 5 Years |
TRUSTEE WHO IS AN INTERESTED PERSON OF THE TRUST | |||||
James A. Bowen (1) 120 East Liberty Drive, Suite 400 Wheaton, IL 60187 D.O.B.: 09/55 | Chairman of the Board and Trustee | • Indefinite term • Since inception | Chief Executive Officer, First Trust Advisors L.P. and First Trust Portfolios L.P.; Chairman of the Board of Directors, BondWave LLC (Software Development Company) and Stonebridge Advisors LLC (Investment Advisor) | 149 Portfolios | None |
INDEPENDENT TRUSTEES | |||||
Richard E. Erickson c/o First Trust Advisors L.P. 120 East Liberty Drive, Suite 400 Wheaton, IL 60187 D.O.B.: 04/51 | Trustee | • Indefinite term • Since inception | Physician and Officer, Wheaton Orthopedics; Limited Partner, Gundersen Real Estate Limited Partnership (June 1992 to December 2016); Member, Sportsmed LLC (April 2007 to November 2015) | 149 Portfolios | None |
Thomas R. Kadlec c/o First Trust Advisors L.P. 120 East Liberty Drive, Suite 400 Wheaton, IL 60187 D.O.B.: 11/57 | Trustee | • Indefinite term • Since inception | President, ADM Investor Services, Inc. (Futures Commission Merchant) | 149 Portfolios | Director of ADM Investor Services, Inc., ADM Investor Services International, and Futures Industry Association |
Name, Address and Date of Birth | Position and Offices with Trust | Term of Office and Year First Elected or Appointed | Principal Occupations During Past 5 Years | Number of Portfolios in the First Trust Fund Complex Overseen by Trustee | Other Trusteeships or Directorships Held by Trustee During the Past 5 Years |
INDEPENDENT TRUSTEES | |||||
Robert F. Keith c/o First Trust Advisors L.P. 120 East Liberty Drive, Suite 400 Wheaton, IL 60187 D.O.B.: 11/56 | Trustee | • Indefinite term • Since inception | President, Hibs Enterprises (Financial and Management Consulting) | 149 Portfolios | Director of Trust Company of Illinois |
Niel B. Nielson c/o First Trust Advisors L.P. 120 East Liberty Drive, Suite 400 Wheaton, IL 60187 D.O.B.: 03/54 | Trustee | • Indefinite term • Since inception | Managing Director and Chief Operating Officer (January 2015 to present), Pelita Harapan Educational Foundation (Educational Products and Services); President and Chief Executive Officer (June 2012 to September 2014), Servant Interactive LLC (Educational Products and Services); President and Chief Executive Officer (June 2012 to September 2014), Dew Learning LLC (Educational Products and Services); President (June 2002 to June 2012), Covenant College | 149 Portfolios | Director of Covenant Transport Inc. (May 2003 to May 2014) |
OFFICERS OF THE TRUST | |||||
James M. Dykas 120 East Liberty Drive, Suite 400 Wheaton, IL 60187 D.O.B.: 01/66 | President and Chief Executive Officer | • Indefinite term • Since January 2016 | Managing Director and Chief Financial Officer (January 2016 to present), Controller (January 2011 to January 2016), Senior Vice President (April 2007 to January 2016), First Trust Advisors L.P. and First Trust Portfolios L.P.; Chief Financial Officer, BondWave LLC (Software Development Company) (January 2016 to present) and Stonebridge Advisors LLC (Investment Advisor) (January 2016 to present) | N/A | N/A |
W. Scott Jardine 120 East Liberty Drive, Suite 400 Wheaton, IL 60187 D.O.B.: 05/60 | Secretary and Chief Legal Officer | • Indefinite term • Since inception | General Counsel, First Trust Advisors L.P. and First Trust Portfolios L.P.; Secretary and General Counsel, BondWave LLC (Software Development Company) and Secretary, Stonebridge Advisors LLC (Investment Advisor) | N/A | N/A |
Daniel J. Lindquist 120 East Liberty Drive, Suite 400 Wheaton, IL 60187 D.O.B.: 02/70 | Vice President | • Indefinite term • Since inception | Managing Director (July 2012 to present), Senior Vice President (September 2005 to July 2012), First Trust Advisors L.P. and First Trust Portfolios L.P. | N/A | N/A |
Kristi A. Maher 120 East Liberty Drive, Suite 400 Wheaton, IL 60187 D.O.B.: 12/66 | Chief Compliance Officer and Assistant Secretary | • Indefinite term • CCO since January 2011, Assistant Secretary since Inception | Deputy General Counsel, First Trust Advisors L.P. and First Trust Portfolios L.P. | N/A | N/A |
Donald P. Swade 120 E. Liberty Drive Suite 400 Wheaton, IL 60187 D.O.B.: 08/72 | Treasurer, Chief Financial Officer and Chief Accounting Officer | • Indefinite term • Since January 2016 | Senior Vice President (July 2016 to Present), Vice President (April 2012 to July 2016), First Trust Advisors L.P. and First Trust Portfolios L.P., Vice President (September 2006 to April 2012), Guggenheim Funds Investment Advisors, LLC/Claymore Securities, Inc. | N/A | N/A |
Roger F. Testin 120 East Liberty Drive, Suite 400 Wheaton, IL 60187 D.O.B.: 06/66 | Vice President | • Indefinite term • Since inception | Senior Vice President, First Trust Advisors L.P. and First Trust Portfolios L.P. | N/A | N/A |
Name, Address and Date of Birth | Position and Offices with Trust | Term of Office and Year First Elected or Appointed | Principal Occupations During Past 5 Years | Number of Portfolios in the First Trust Fund Complex Overseen by Trustee | Other Trusteeships or Directorships Held by Trustee During the Past 5 Years |
OFFICERS OF THE TRUST | |||||
Stan Ueland 120 East Liberty Drive, Suite 400 Wheaton, IL 60187 D.O.B.: 11/70 | Vice President | • Indefinite term • Since inception | Senior Vice President (September 2012 to present), Vice President (August 2005 to September 2012) First Trust Advisors L.P. and First Trust Portfolios L.P. | N/A | N/A |
(1) | Mr. Bowen is deemed an “interested person” of the Trust due to his position as Chief Executive Officer of First Trust, investment advisor of the Fund. |
Name of Trustee | Total Compensation from the Fund (1) | Total Compensation from the First Trust Fund Complex (2) |
Richard E. Erickson | $2,062 | $370,744 |
Thomas R. Kadlec | $2,064 | $391,203 |
Robert F. Keith | $2,063 | $381,412 |
Niel B. Nielson | $2,063 | $381,482 |
(1) | The compensation paid by the Fund to the Independent Trustees for the fiscal year ended December 31, 2016 for services to the Fund. |
(2) | The total compensation paid to the Independent Trustees for the calendar year ended December 31, 2016 for services to the 137 portfolios existing in 2016, which consisted of 7 open-end mutual funds, 16 closed-end funds and 114 exchange-traded funds. |
Trustee | Dollar Range of Equity Securities in the Fund (Number of Shares Held) | Aggregate Dollar Range of Equity Securities in All Registered Investment Companies Overseen by Trustee in the First Trust Fund Complex |
Interested Trustee | ||
James A. Bowen | None | Over $100,000 |
Independent Trustees | ||
Richard E. Erickson | None | Over $100,000 |
Thomas R. Kadlec | None | Over $100,000 |
Robert F. Keith | None | Over $100,000 |
Niel B. Nielson | None | Over $100,000 |
Fiscal Year Ended December 31, | ||||
Fund | 2016 | 2015 | 2014 | |
First Trust Dorsey Wright People’s Portfolio ETF | $21,199 | $22,673 | $31,633 |
Name | Position with First Trust | Length of Service with First Trust | Principal Occupation During Past Five Years |
Daniel J. Lindquist | Chairman of the Investment Committee and Managing Director | Since 2004 | Managing Director (2012 to present), Senior Vice President (2005 to 2012), First Trust Advisors L.P. and First Trust Portfolios L.P. |
Jon C. Erickson | Senior Vice President | Since 1994 | Senior Vice President, First Trust Advisors L.P. and First Trust Portfolios L.P. |
David G. McGarel | Chief Operating Officer Chief Investment Officer and Managing Director | Since 1997 | Chief Operating Officer (2016 to present), Chief Investment Officer (2012 to present), Managing Director (2012 to present), Senior Vice President (2005 to 2012), First Trust Advisors L.P. and First Trust Portfolios L.P. |
Roger F. Testin | Senior Vice President | Since 2001 | Senior Vice President, First Trust Advisors L.P. and First Trust Portfolios L.P. |
Stan Ueland | Senior Vice President | Since 2005 | Senior Vice President (2012 to present), Vice President (2005 to 2012), First Trust Advisors L.P. and First Trust Portfolios L.P. |
Name | Position with First Trust | Length of Service with First Trust | Principal Occupation During Past Five Years |
Chris A. Peterson | Senior Vice President | Since 2000 | Senior Vice President, First Trust Advisors L.P. and First Trust Portfolios L.P. |
Investment Committee Member | Registered Investment Companies Number of Accounts ($ Assets) | Other Pooled Investment Vehicles Number of Accounts ($ Assets) | Other Accounts Number of Accounts ($ Assets) |
Dan Lindquist | 92 ($31,532,897,121) | 28 ($506,276,324) | 1,830 ($582,404,615) |
David McGarel | 92 ($31,532,897,121) | 28 ($506,276,324) | 1,830 ($582,404,615) |
Jon Erickson | 92 ($31,532,897,121) | 28 ($506,276,324) | 1,830 ($582,404,615) |
Roger Testin | 92 ($31,532,897,121) | 28 ($506,276,324) | 1,830 ($582,404,615) |
Stan Ueland | 88 ($30,927,042,900) | 27 ($475,167,451) | N/A |
Chris Peterson | 92 ($31,532,897,121) | 9 ($225,458,201) | 1,830 ($582,404,615) |
Aggregate Amount of Brokerage Commissions | ||
Fiscal Year Ended December 31, | ||
2016 | 2015 | 2014 |
$6,165 | $5,778 | $3,787 |
Fund | Index Provider |
First Trust Dorsey Wright People’s Portfolio ETF | Nasdaq, Inc. |
Total Non-Expiring Capital Loss Available |
$1,061,356 |
(1) | Common stocks, real estate investment trusts and other equity securities listed on any national or foreign exchange other than The Nasdaq Stock Market LLC ("Nasdaq") and the London Stock Exchange Alternative Investment Market (“AIM”) will be valued at the last sale price on the exchange on which they are principally traded, or the official closing price for Nasdaq and AIM securities. Portfolio securities traded on more than one securities exchange are valued at the last sale price or official closing price, as applicable, on the Business Day as of which such value is being determined at the close of the exchange representing the principal market for such securities. |
(2) | Shares of open-end funds are valued at fair value which is based on NAV per share. |
(3) | Securities traded in the OTC market are fair valued at the mean of their most recent bid and asked price, if available, and otherwise at their closing bid price. |
(4) | Exchange-traded options and futures contracts are valued at the closing price in the market where such contracts are principally traded. If no closing price is available, they will be fair valued at the mean of their most recent bid and asked price, if available, and otherwise at their closing bid price. OTC options and futures contracts are fair valued at the mean of their most recent bid and asked price, if available, and otherwise at their closing bid price. |
(5) | Forward foreign currency contracts are fair valued at the current day’s interpolated foreign exchange rate, as calculated using the current day’s spot rate, and the 30-, 60-, 90- and 180-day forward rates provided by an independent pricing service or by certain independent dealers in such contracts. |
(1) | Fixed-income securities, convertible securities, interest rate swaps, credit default swaps, total return swaps, currency swaps, currency-linked notes, credit-linked notes and other similar instruments will be fair valued using a pricing service. |
(2) | Fixed-income and other debt securities having a remaining maturity of 60 days or less when purchased are fair valued at cost adjusted for amortization of premiums and accretion of discounts (amortized cost), provided the Advisor’s Pricing Committee has determined that the use of amortized cost is an appropriate reflection of fair value given market and issuer specific conditions existing at the time of the determination. Factors that may be considered in determining the appropriateness of the use of amortized cost include, but are not limited to, the following: |
(i) | the credit conditions in the relevant market and changes thereto; |
(ii) | the liquidity conditions in the relevant market and changes thereto; |
(iii) | the interest rate conditions in the relevant market and changes thereto (such as significant changes in interest rates); |
(iv) | issuer-specific conditions (such as significant credit deterioration); and |
(v) | any other market-based data the Advisor’s Pricing Committee considers relevant. In this regard, the Advisor’s Pricing Committee may use last-obtained market-based data to assist it when valuing portfolio securities using amortized cost. |
(3) | Repurchase agreements will be valued as follows. Overnight repurchase agreements will be fair valued at cost when it represents the best estimate of fair value. Term repurchase agreements (i.e., those whose maturity exceeds seven days) will be fair valued by the Advisor's Pricing Committee at the average of the bid quotations obtained daily from at least two recognized dealers. |
NAME OF BENEFICIAL OWNER | % OF OUTSTANDING SHARES OWNED |
FIRST TRUST DORSEY WRIGHT PEOPLE’S PORTFOLIO ETF | |
Merrill Lynch, Pierce, Fenner & Smith Incorporated | |
Pershing LLC | |
National Financial Services LLC | |
Charles Schwab & Co., Inc. | |
TD Ameritrade Clearing, Inc. | |
RBC Capital Markets, LLC |
(1) | Charles Schwab & Co. Inc.: 2423 East Lincoln Drive, Phoenix, Arizona 85016 |
(2) | Merrill Lynch, Pierce, Fenner & Smith Incorporated: 4804 Deer Lake Dr. E., Jacksonville, Florida 32246 |
(3) | National Financial Services: 499 Washington Boulevard, Jersey City, New Jersey 07310 |
(4) | Pershing LLC: One Pershing Plaza, Jersey City, New Jersey 07399 |
(5) | RBC Capital Markets, LLC: 60 S. 6th– P09 Street, Minneapolis, Minnesota, 55402 |
(6) | TD Ameritrade Clearing Inc.: 1005 N. Ameritrade Place, Bellevue, Nebraska 68005 |
➤ | General Recommendation: Generally vote for director nominees, except under the following circumstances: |
1.1. | The board is classified, and a continuing director responsible for a problematic governance issue at the board/committee level that would warrant a withhold/against vote recommendation is not up for election. All appropriate nominees (except new) may be held accountable. |
1.2. | The board lacks accountability and oversight, coupled with sustained poor performance relative to peers. Sustained poor performance is measured by one- and three-year total shareholder returns in the bottom half of a company’s four-digit GICS industry group (Russell 3000 companies only). Take into consideration the company’s five-year total shareholder return and operational metrics. Problematic provisions include but are not limited to: |
➤ | A classified board structure; |
➤ | A supermajority vote requirement; |
➤ | Either a plurality vote standard in uncontested director elections or a majority vote standard with no plurality carve-out for contested elections; |
➤ | The inability of shareholders to call special meetings; |
➤ | The inability of shareholders to act by written consent; |
➤ | A dual-class capital structure; and/or |
➤ | A non-shareholder-approved poison pill. |
(1) | In general, companies with a plurality vote standard use “Withhold” as the contrary vote option in director elections; companies with a majority vote standard use “Against”. However, it will vary by company and the proxy must be checked to determine the valid contrary vote option for the particular company. |
(2) | A “new nominee” is any current nominee who has not already been elected by shareholders and who joined the board after the problematic action in question transpired. If ISS cannot determine whether the nominee joined the board before or after the problematic action transpired, the nominee will be considered a “new nominee” if he or she joined the board within the 12 months prior to the upcoming shareholder meeting. |
1.3. | The company’s poison pill has a “dead-hand” or “modified dead-hand” feature. Vote against or withhold from nominees every year until this feature is removed; |
1.4. | The board adopts a poison pill with a term of more than 12 months (“long-term pill”), or renews any existing pill, including any “short-term pill” (12 months or less), without shareholder approval. A commitment or policy that puts a newly adopted pill to a binding shareholder vote may potentially offset an adverse vote recommendation. Review such companies with classified boards every year, and such companies with annually elected boards at least once every three years, and vote against or withhold votes from all nominees if the company still maintains a non-shareholder-approved poison pill; or |
1.5. | The board makes a material adverse change to an existing poison pill without shareholder approval. |
1.6. | The board adopts a poison pill with a term of 12 months or less (“short-term pill”) without shareholder approval, taking into account the following factors: |
➤ | The date of the pill‘s adoption relative to the date of the next meeting of shareholders—i.e. whether the company had time to put the pill on the ballot for shareholder ratification given the circumstances; |
➤ | The issuer’s rationale; |
➤ | The issuer’s governance structure and practices; and |
➤ | The issuer’s track record of accountability to shareholders. Restricting Binding Shareholder Proposals |
1.7. | The company’s charter imposes undue restrictions on shareholders’ ability to amend the bylaws. Such restrictions include, but are not limited to: outright prohibition on the submission of binding shareholder proposals, or share ownership requirements or time holding requirements in excess of SEC Rule 14a-8. Vote against on an ongoing basis. |
1.8. | The non-audit fees paid to the auditor are excessive (see discussion under “Auditor Ratification”); |
1.9. | The company receives an adverse opinion on the company’s financial statements from its auditor; or |
1.10. | There is persuasive evidence that the Audit Committee entered into an inappropriate indemnification agreement with its auditor that limits the ability of the company, or its shareholders, to pursue legitimate legal recourse against the audit firm. |
1.11. | Poor accounting practices are identified that rise to a level of serious concern, such as: fraud; misapplication of GAAP; and material weaknesses identified in Section 404 disclosures. Examine the severity, breadth, chronological sequence, and duration, as well as the company’s efforts at remediation or corrective actions, in determining whether withhold/against votes are warranted. |
1.12. | There is a significant misalignment between CEO pay and company performance (pay for performance); |
1.13. | The company maintains significant problematic pay practices; |
1.14. | The board exhibits a significant level of poor communication and responsiveness to shareholders; |
1.15. | The company fails to submit one-time transfers of stock options to a shareholder vote; or |
1.16. | The company fails to fulfill the terms of a burn rate commitment made to shareholders. |
1.17. | The company’s previous say-on-pay received the support of less than 70 percent of votes cast, taking into account: |
➤ | The company's response, including: |
➤ | Disclosure of engagement efforts with major institutional investors regarding the issues that contributed to the low level of support; |
➤ | Specific actions taken to address the issues that contributed to the low level of support; |
➤ | Other recent compensation actions taken by the company; |
➤ | Whether the issues raised are recurring or isolated; |
➤ | The company's ownership structure; and |
➤ | Whether the support level was less than 50 percent, which would warrant the highest degree of responsiveness. |
1.18. | Generally vote against or withhold from directors individually, committee members, or the entire board (except new nominees, who should be considered case-by-case) if the board amends the company's bylaws or charter without shareholder approval in a manner that materially diminishes shareholders' rights or that could adversely impact shareholders, considering the following factors: |
➤ | The board's rationale for adopting the bylaw/charter amendment without shareholder ratification; |
➤ | Disclosure by the company of any significant engagement with shareholders regarding the amendment; |
➤ | The level of impairment of shareholders' rights caused by the board's unilateral amendment to the bylaws/charter; |
➤ | The board's track record with regard to unilateral board action on bylaw/charter amendments or other entrenchment provisions; |
➤ | The company's ownership structure; |
➤ | The company's existing governance provisions; |
➤ | The timing of the board's amendment to the bylaws/charter in connection with a significant business development; and, |
➤ | Other factors, as deemed appropriate, that may be relevant to determine the impact of the amendment on shareholders. |
➤ | Classified the board; |
➤ | Adopted supermajority vote requirements to amend the bylaws or charter; or |
➤ | Eliminated shareholders' ability to amend bylaws. |
1.19. | For newly public companies, generally vote against or withhold from directors individually, committee members, or the entire board (except new nominees, who should be considered case-by-case) if, prior to or in connection with the company's public offering, the company or its board adopted bylaw or charter provisions materially adverse to shareholder rights, or implemented a multi-class capital structure in which the classes have unequal voting rights considering the following factors: |
➤ | The level of impairment of shareholders' rights; |
➤ | The disclosed rationale; |
➤ | The ability to change the governance structure (e.g., limitations on shareholders’ right to amend the bylaws or charter, or supermajority vote requirements to amend the bylaws or charter); |
➤ | The ability of shareholders to hold directors accountable through annual director elections, or whether the company has a classified board structure; |
➤ | Any reasonable sunset provision; and |
➤ | Other relevant factors. |
1.20. | Material failures of governance, stewardship, risk oversight(3), or fiduciary responsibilities at the company; |
1.21. | Failure to replace management as appropriate; or |
1.22. | Egregious actions related to a director’s service on other boards that raise substantial doubt about his or her ability to effectively oversee management and serve the best interests of shareholders at any company. |
2.1. | The board failed to act on a shareholder proposal that received the support of a majority of the shares cast in the previous year. Factors that will be considered are: |
➤ | Disclosed outreach efforts by the board to shareholders in the wake of the vote; |
➤ | Rationale provided in the proxy statement for the level of implementation; |
➤ | The subject matter of the proposal; |
➤ | The level of support for and opposition to the resolution in past meetings; |
➤ | Actions taken by the board in response to the majority vote and its engagement with shareholders; |
(3) | Examples of failure of risk oversight include, but are not limited to: bribery; large or serial fines or sanctions from regulatory bodies; significant adverse legal judgments or settlements; hedging of company stock; or significant pledging of company stock. |
➤ | The continuation of the underlying issue as a voting item on the ballot (as either shareholder or management proposals); and |
➤ | Other factors as appropriate. |
2.2. | The board failed to act on takeover offers where the majority of shares are tendered; |
2.3. | At the previous board election, any director received more than 50 percent withhold/against votes of the shares cast and the company has failed to address the issue(s) that caused the high withhold/against vote; |
2.4. | The board implements an advisory vote on executive compensation on a less frequent basis than the frequency that received the majority of votes cast at the most recent shareholder meeting at which shareholders voted on the say-on-pay frequency; or |
➤ | The board's rationale for selecting a frequency that is different from the frequency that received a plurality; |
➤ | The company's ownership structure and vote results; |
➤ | ISS' analysis of whether there are compensation concerns or a history of problematic compensation practices; and |
➤ | The previous year's support level on the company's say-on-pay proposal. |
3.1. | Generally vote against or withhold from directors (except new nominees, who should be considered case-by-case(4) who attend less than 75 percent of the aggregate of their board and committee meetings for the period for which they served, unless an acceptable reason for absences is disclosed in the proxy or another SEC filing. Acceptable reasons for director absences are generally limited to the following: |
➤ | Medical issues/illness; |
➤ | Family emergencies; and |
➤ | Missing only one meeting (when the total of all meetings is three or fewer). |
3.2. | If the proxy disclosure is unclear and insufficient to determine whether a director attended at least 75 percent of the aggregate of his/her board and committee meetings during his/her period of service, vote against or withhold from the director(s) in question. |
3.4. | CEOs of public companies who sit on the boards of more than two public companies besides their own— withhold only at their outside boards(5). |
(4) | For new nominees only, schedule conflicts due to commitments made prior to their appointment to the board are considered if disclosed in the proxy or another SEC filing. |
(5) | Although all of a CEO’s subsidiary boards will be counted as separate boards, ISS will not recommend a withhold vote from the CEO of a parent company board or any of the controlled (>50 percent ownership) subsidiaries of that parent, but may do so at subsidiaries that are less than 50 percent controlled and boards outside the parent/subsidiary relationships. |
4.1. | The inside or affiliated outside director serves on any of the three key committees: audit, compensation, or nominating; |
4.2. | The company lacks an audit, compensation, or nominating committee so that the full board functions as that committee; |
4.3. | The company lacks a formal nominating committee, even if the board attests that the independent directors fulfill the functions of such a committee; or |
4.4. | Independent directors make up less than a majority of the directors. |
➤ | General Recommendation: Generally vote for shareholder proposals requiring that the chairman’s position be filled by an independent director, taking into consideration the following: |
➤ | The scope of the proposal; |
➤ | The company's current board leadership structure; |
➤ | The company's governance structure and practices; |
➤ | Company performance; and |
➤ | Any other relevant factors that may be applicable. |
➤ | General Recommendation: Generally vote for management and shareholder proposals for proxy access with the following provisions: |
➤ | Ownership threshold: maximum requirement not more than three percent (3%) of the voting power; |
➤ | Ownership duration: maximum requirement not longer than three (3) years of continuous ownership for each member of the nominating group; |
➤ | Aggregation: minimal or no limits on the number of shareholders permitted to form a nominating group; |
➤ | Cap: cap on nominees of generally twenty-five percent (25%) of the board. |
➤ | General Recommendation: Vote case-by-case on the election of directors in contested elections, considering the following factors: |
➤ | Long-term financial performance of the company relative to its industry; |
➤ | Management’s track record; |
➤ | Background to the contested election; |
➤ | Nominee qualifications and any compensatory arrangements; |
➤ | Strategic plan of dissident slate and quality of the critique against management; |
➤ | Likelihood that the proposed goals and objectives can be achieved (both slates); and |
➤ | Stock ownership positions. |
➤ | General Recommendation: Vote for proposals to increase the number of authorized common shares where the primary purpose of the increase is to issue shares in connection with a transaction on the same ballot that warrants support. |
➤ | Past Board Performance: |
➤ | The company's use of authorized shares during the last three years |
➤ | The Current Request: |
➤ | Disclosure in the proxy statement of the specific purposes of the proposed increase; |
➤ | Disclosure in the proxy statement of specific and severe risks to shareholders of not approving the request; and |
➤ | The dilutive impact of the request as determined relative to an allowable increase calculated by ISS (typically 100 percent of existing authorized shares) that reflects the company's need for shares and total shareholder returns. |
A. | Most companies: 100 percent of existing authorized shares. |
B. | Companies with less than 50 percent of existing authorized shares either outstanding or reserved for issuance: 50 percent of existing authorized shares. |
C. | Companies with one- and three-year total shareholder returns (TSRs) in the bottom 10 percent of the U.S. market as of the end of the calendar quarter that is closest to their most recent fiscal year end: 50 percent of existing authorized shares. |
D. | Companies at which both conditions (B and C) above are both present: 25 percent of existing authorized shares. |
➤ | General Recommendation: Vote case-by-case on mergers and acquisitions. Review and evaluate the merits and drawbacks of the proposed transaction, balancing various and sometimes countervailing factors including: |
➤ | Valuation - Is the value to be received by the target shareholders (or paid by the acquirer) reasonable? While the fairness opinion may provide an initial starting point for assessing valuation reasonableness, emphasis is placed on the offer premium, market reaction, and strategic rationale. |
➤ | Market reaction - How has the market responded to the proposed deal? A negative market reaction should cause closer scrutiny of a deal. |
➤ | Strategic rationale - Does the deal make sense strategically? From where is the value derived? Cost and revenue synergies should not be overly aggressive or optimistic, but reasonably achievable. Management should also have a favorable track record of successful integration of historical acquisitions. |
➤ | Negotiations and process - Were the terms of the transaction negotiated at arm's-length? Was the process fair and equitable? A fair process helps to ensure the best price for shareholders. Significant negotiation "wins" can also signify the deal makers' competency. The comprehensiveness of the sales process (e.g., full auction, partial auction, no auction) can also affect shareholder value. |
➤ | Conflicts of interest - Are insiders benefiting from the transaction disproportionately and inappropriately as compared to non-insider shareholders? As the result of potential conflicts, the directors and officers of the company may be more likely to vote to approve a merger than if they did not hold these interests. Consider whether these interests |
may have influenced these directors and officers to support or recommend the merger. The CIC figure presented in the "ISS Transaction Summary" section of this report is an aggregate figure that can in certain cases be a misleading indicator of the true value transfer from shareholders to insiders. Where such figure appears to be excessive, analyze the underlying assumptions to determine whether a potential conflict exists. | |
➤ | Governance - Will the combined company have a better or worse governance profile than the current governance profiles of the respective parties to the transaction? If the governance profile is to change for the worse, the burden is on the company to prove that other issues (such as valuation) outweigh any deterioration in governance. |
1. | Maintain appropriate pay-for-performance alignment, with emphasis on long-term shareholder value: This principle encompasses overall executive pay practices, which must be designed to attract, retain, and appropriately motivate the key employees who drive shareholder value creation over the long term. It will take into consideration, among other factors, the link between pay and performance; the mix between fixed and variable pay; performance goals; and equity-based plan costs; |
2. | Avoid arrangements that risk “pay for failure”: This principle addresses the appropriateness of long or indefinite contracts, excessive severance packages, and guaranteed compensation; |
3. | Maintain an independent and effective compensation committee: This principle promotes oversight of executive pay programs by directors with appropriate skills, knowledge, experience, and a sound process for compensation decision-making (e.g., including access to independent expertise and advice when needed); |
4. | Provide shareholders with clear, comprehensive compensation disclosures: This principle underscores the importance of informative and timely disclosures that enable shareholders to evaluate executive pay practices fully and fairly; |
5. | Avoid inappropriate pay to non-executive directors: This principle recognizes the interests of shareholders in ensuring that compensation to outside directors does not compromise their independence and ability to make appropriate judgments in overseeing managers’ pay and performance. At the market level, it may incorporate a variety of generally accepted best practices. |
➤ | General Recommendation: Vote case-by-case on ballot items related to executive pay and practices, as well as certain aspects of outside director compensation. |
Vote against Advisory Votes on Executive Compensation (Management Say-on-Pay or “MSOP”) if: |
➤ | There is a significant misalignment between CEO pay and company performance (pay for performance); |
➤ | The company maintains significant problematic pay practices; |
➤ | The board exhibits a significant level of poor communication and responsiveness to shareholders. |
➤ | There is no MSOP on the ballot, and an against vote on an MSOP is warranted due to pay-for-performance misalignment, problematic pay practices, or the lack of adequate responsiveness on compensation issues raised previously, or a combination thereof; |
➤ | The board fails to respond adequately to a previous MSOP proposal that received less than 70 percent support of votes cast; |
➤ | The company has recently practiced or approved problematic pay practices, including option repricing or option backdating; or |
➤ | The situation is egregious. |
➤ | Primary Evaluation Factors for Executive Pay |
1. | Peer Group(7) Alignment: |
➤ | The degree of alignment between the company's annualized TSR rank and the CEO's annualized total pay rank within a peer group, each measured over a three-year period. |
➤ | The multiple of the CEO's total pay relative to the peer group median. |
2. | Absolute Alignment(8)– the absolute alignment between the trend in CEO pay and company TSR over the prior five fiscal years –i.e., the difference between the trend in annual pay changes and the trend in annualized TSR during the period. |
(6) | The Russell 3000E Index includes approximately 4,000 of the largest U.S. equity securities. |
(7) | The revised peer group is generally comprised of 14-24 companies that are selected using market cap, revenue (or assets for certain financial firms), GICS industry group, and company's selected peers' GICS industry group, with size constraints, via a process designed to select peers that are comparable to the subject company in terms of revenue/assets and industry, and also within a market-cap bucket that is reflective of the company's. For Oil, Gas & Consumable Fuels companies, market cap is the only size determinant. |
(8) | Only Russell 3000 Index companies are subject to the Absolute Alignment analysis. |
➤ | The ratio of performance- to time-based equity awards; |
➤ | The overall ratio of performance-based compensation; |
➤ | The completeness of disclosure and rigor of performance goals; |
➤ | The company's peer group benchmarking practices; |
➤ | Actual results of financial/operational metrics, such as growth in revenue, profit, cash flow, etc., both absolute and relative to peers; |
➤ | Special circumstances related to, for example, a new CEO in the prior FY or anomalous equity grant practices (e.g., bi-annual awards); |
➤ | Realizable pay compared to grant pay; and |
➤ | Any other factors deemed relevant. |
(9) | ISS research reports include realizable pay for S&P1500 companies. |
➤ | Problematic practices related to non-performance-based compensation elements; |
➤ | Incentives that may motivate excessive risk-taking; and |
➤ | Options Backdating. |
➤ | Repricing or replacing of underwater stock options/SARS without prior shareholder approval (including cash buyouts and voluntary surrender of underwater options); |
➤ | Excessive perquisites or tax gross-ups, including any gross-up related to a secular trust or restricted stock vesting; |
➤ | New or extended agreements that provide for: |
➤ | CIC payments exceeding 3 times base salary and average/target/most recent bonus; |
➤ | CIC severance payments without involuntary job loss or substantial diminution of duties ("single" or "modified single" triggers); |
➤ | CIC payments with excise tax gross-ups (including "modified" gross-ups); |
➤ | Insufficient executive compensation disclosure by externally-managed issuers (EMIs) such that a reasonable assessment of pay programs and practices applicable to the EMI's executives is not possible. |
➤ | Multi-year guaranteed bonuses; |
➤ | A single or common performance metric used for short- and long-term plans; |
➤ | Lucrative severance packages; |
➤ | High pay opportunities relative to industry peers; |
➤ | Disproportionate supplemental pensions; or |
➤ | Mega annual equity grants that provide unlimited upside with no downside risk. |
➤ | Factors that potentially mitigate the impact of risky incentives include rigorous claw-back provisions and robust stock ownership/holding guidelines. |
➤ | Reason and motive for the options backdating issue, such as inadvertent vs. deliberate grant date changes; |
➤ | Duration of options backdating; |
➤ | Size of restatement due to options backdating; |
➤ | Corrective actions taken by the board or compensation committee, such as canceling or re-pricing backdated options, the recouping of option gains on backdated grants; and |
➤ | Adoption of a grant policy that prohibits backdating, and creates a fixed grant schedule or window period for equity grants in the future. |
➤ | Failure to respond to majority-supported shareholder proposals on executive pay topics; or |
➤ | Failure to adequately respond to the company's previous say-on-pay proposal that received the support of less than 70 percent of votes cast, taking into account: |
➤ | The company's response, including: |
➤ | Disclosure of engagement efforts with major institutional investors regarding the issues that contributed to the low level of support; |
➤ | Specific actions taken to address the issues that contributed to the low level of support; |
➤ | Other recent compensation actions taken by the company; |
➤ | Whether the issues raised are recurring or isolated; |
➤ | The company's ownership structure; and |
➤ | Whether the support level was less than 50 percent, which would warrant the highest degree of responsiveness. |
➤ | General Recommendation: Vote case-by-case on certain equity-based compensation plans(11) depending on a combination of certain plan features and equity grant practices, where positive factors may counterbalance negative factors, and vice versa, as evaluated using an "equity plan scorecard" (EPSC) approach with three pillars: |
➤ | Plan Cost: The total estimated cost of the company’s equity plans relative to industry/market cap peers, measured by the company's estimated Shareholder Value Transfer (SVT) in relation to peers and considering both: |
➤ | SVT based on new shares requested plus shares remaining for future grants, plus outstanding unvested/unexercised grants; and |
➤ | SVT based only on new shares requested plus shares remaining for future grants. |
➤ | Plan Features: |
➤ | Automatic single-triggered award vesting upon a change in control (CIC); |
➤ | Discretionary vesting authority; |
➤ | Liberal share recycling on various award types; |
➤ | Lack of minimum vesting period for grants made under the plan. |
➤ | Grant Practices: |
(11) | Proposals evaluated under the EPSC policy generally include those to approve or amend (1) stock option plans for employees and/or employees and directors, (2) restricted stock plans for employees and/or employees and directors, and (3) omnibus stock incentive plans for employees and/or employees and directors. |
➤ | The company’s three year burn rate relative to its industry/market cap peers; |
➤ | Vesting requirements in most recent CEO equity grants (3-year look-back); |
➤ | The estimated duration of the plan (based on the sum of shares remaining available and the new shares requested, divided by the average annual shares granted in the prior three years); |
➤ | The proportion of the CEO's most recent equity grants/awards subject to performance conditions; |
➤ | Whether the company maintains a claw-back policy; |
➤ | Whether the company has established post exercise/vesting share-holding requirements. |
➤ | Awards may vest in connection with a liberal change-of-control definition; |
➤ | The plan would permit repricing or cash buyout of underwater options without shareholder approval (either by expressly permitting it—for NYSE and Nasdaq listed companies—or by not prohibiting it when the company has a history of repricing—for non-listed companies); |
➤ | The plan is a vehicle for problematic pay practices or a significant pay-for-performance disconnect under certain circumstances; or |
➤ | Any other plan features are determined to have a significant negative impact on shareholder interests. |
➤ | General Recommendation: Generally vote case-by-case, taking into consideration whether implementation of the proposal is likely to enhance or protect shareholder value, and in addition the following will also be considered: |
➤ | If the issues presented in the proposal are more appropriately or effectively dealt with through legislation or government regulation; |
➤ | If the company has already responded in an appropriate and sufficient manner to the issue(s) raised in the proposal; |
➤ | Whether the proposal's request is unduly burdensome (scope or timeframe) or overly prescriptive; |
➤ | The company's approach compared with any industry standard practices for addressing the issue(s) raised by the proposal; |
➤ | If the proposal requests increased disclosure or greater transparency, whether or not reasonable and sufficient information is currently available to shareholders from the company or from other publicly available sources; and |
➤ | If the proposal requests increased disclosure or greater transparency, whether or not implementation would reveal proprietary or confidential information that could place the company at a competitive disadvantage. |
➤ | General Recommendation: Generally vote for resolutions requesting that a company disclose information on the risks related to climate change on its operations and investments, such as financial, physical, or regulatory risks, considering: |
➤ | Whether the company already provides current, publicly-available information on the impact that climate change may have on the company as well as associated company policies and procedures to address related risks and/or opportunities; |
➤ | The company’s level of disclosure is at least comparable to that of industry peers; and |
➤ | There are no significant controversies, fines, penalties, or litigation associated with the company’s environmental performance. |
➤ | The company already discloses current, publicly-available information on the impacts that GHG emissions may have on the company as well as associated company policies and procedures to address related risks and/or opportunities; |
➤ | The company's level of disclosure is comparable to that of industry peers; and |
➤ | There are no significant, controversies, fines, penalties, or litigation associated with the company's GHG emissions. |
➤ | Whether the company provides disclosure of year-over-year GHG emissions performance data; |
➤ | Whether company disclosure lags behind industry peers; |
➤ | The company's actual GHG emissions performance; |
➤ | The company's current GHG emission policies, oversight mechanisms, and related initiatives; and |
➤ | Whether the company has been the subject of recent, significant violations, fines, litigation, or controversy related to GHG emissions. |
➤ | General Recommendation: Generally vote for requests for reports on a company's efforts to diversify the board, unless: |
➤ | The gender and racial minority representation of the company’s board is reasonably inclusive in relation to companies of similar size and business; and |
➤ | The board already reports on its nominating procedures and gender and racial minority initiatives on the board and within the company. |
➤ | The degree of existing gender and racial minority diversity on the company’s board and among its executive officers; |
➤ | The level of gender and racial minority representation that exists at the company’s industry peers; |
➤ | The company’s established process for addressing gender and racial minority board representation; |
➤ | Whether the proposal includes an overly prescriptive request to amend nominating committee charter language; |
➤ | The independence of the company’s nominating committee; |
➤ | Whether the company uses an outside search firm to identify potential director nominees; and |
➤ | Whether the company has had recent controversies, fines, or litigation regarding equal employment practices. |
➤ | General Recommendation: Generally vote for proposals requesting that a company report on its policies, initiatives, and oversight mechanisms related to social, economic, and environmental sustainability, unless: |
➤ | The company already discloses similar information through existing reports or policies such as an environment, health, and safety (EHS) report; a comprehensive code of corporate conduct; and/or a diversity report; or |
➤ | The company has formally committed to the implementation of a reporting program based on Global Reporting Initiative (GRI) guidelines or a similar standard within a specified time frame. |
➤ | General Recommendation: Vote case-by-case on proposals to link, or report on linking, executive compensation to sustainability (environmental and social) criteria, considering: |
➤ | Whether the company has significant and/or persistent controversies or regulatory violations regarding social and/or environmental issues; |
➤ | Whether the company has management systems and oversight mechanisms in place regarding its social and environmental performance; |
➤ | The degree to which industry peers have incorporated similar non-financial performance criteria in their executive compensation practices; and |
➤ | The company's current level of disclosure regarding its environmental and social performance. |
Signatures
Pursuant to the requirements of the Securities Act of 1933 and the Investment Company Act of 1940, the Registrant certifies that it meets all of the requirements for effectiveness of this Registration Statement under rule 485(b) under the Securities Act and has duly caused this Registration Statement to be signed on its behalf by the undersigned, duly authorized, in the City of Wheaton, and State of Illinois, on the 11th day of August, 2017.
First Trust Exchange-Traded Fund | ||
By: | /s/ James M. Dykas | |
James M. Dykas, President and Chief Executive Officer |
Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed below by the following persons in the capacities and on the date indicated:
Signature | Title | Date | |
/s/ James M. Dykas | President and Chief Executive Officer |
August 11, 2017 | |
James M. Dykas | |||
/s/ Donald P. Swade | Treasurer, Chief Financial Officer and Chief Accounting Officer |
August 11, 2017 | |
Donald P. Swade | |||
James A. Bowen* | ) Trustee ) |
||
) | |||
Richard E. Erickson* | ) Trustee ) |
||
) | |||
Thomas R. Kadlec* | ) Trustee ) |
||
) | By: | /s/ W. Scott Jardine | |
Robert F. Keith* | ) Trustee ) |
W. Scott Jardine Attorney-In-Fact | |
) | August 11, 2017 | ||
Niel B. Nielson * | ) Trustee ) |
||
) |
* | Original powers of attorney authorizing W. Scott Jardine, James M. Dykas, Eric F. Fess and Kristi A. Maher to execute Registrant’s Registration Statement, and Amendments thereto, for each of the trustees of the Registrant on whose behalf this Registration Statement is filed, were previously executed, and are filed herewith. |
This ‘485BXT’ Filing | Date | Other Filings | ||
---|---|---|---|---|
12/31/18 | ||||
4/30/18 | ||||
8/18/17 | ||||
8/14/17 | ||||
Filed on: | 8/11/17 | |||
7/31/17 | ||||
7/24/17 | 485APOS | |||
6/14/17 | 485APOS, 497 | |||
3/9/17 | N-CSR | |||
2/1/17 | ||||
1/17/17 | ||||
1/1/17 | ||||
12/31/16 | 24F-2NT, N-CSR, NSAR-B | |||
6/30/16 | N-CSRS, N-PX, NSAR-A | |||
1/1/16 | ||||
12/31/15 | 24F-2NT, N-CSR, NSAR-B | |||
9/30/15 | N-Q | |||
12/31/14 | 24F-2NT, 25, 8-A12B, N-CSR, NSAR-B | |||
12/22/10 | ||||
8/8/03 | ||||
List all Filings |