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First Trust Emerging Markets Small Cap AlphaDEX® Fund (FEMS)
  • Important Notice Regarding Change in Investment Objective. On or about April 14, 2015, the Fund will 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® Emerging Markets Small Cap Index (the "New Index"). The New Index is a modified equal-dollar weighted index calculated by The NASDAQ OMX Group, Inc. based on select small cap securities from the NASDAQ Emerging Markets Index that may generate positive alpha relative to traditional passive-style indices through the use of the AlphaDEX® selection methodology. Accordingly, the Fund's Index Provider will change to NASDAQ.
  • 2014 Estimated Capital Gain Distributions
    The First Trust Exchange-Traded Funds are not expecting to pay long-term capital gain distributions during the remainder of 2014.  Short-term capital gain distributions, if any, are expected to be nominal and are taxed like ordinary income.  Final determination of the source and tax status of all distributions paid in the current year are to be made after year-end and could differ from the expectations indicated above.
Investment Objective/Strategy - The First Trust Emerging Markets Small Cap AlphaDEX® Fund is an exchange-traded fund. The investment objective of the Fund 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 Defined Emerging Markets Small Cap Index.
There can be no assurance that the Fund's investment objectives will be achieved.
  • The Defined Emerging Markets Small Cap Index is an "enhanced" index created and administered by Standard & Poor's which employs the AlphaDEX® stock selection methodology to select small cap stocks from the S&P Emerging Markets BMI universe that meet certain criteria.
  • Standard & Poor's constructs the Defined Emerging Markets Small Cap Index by ranking the eligible small cap stocks from the S&P Emerging Markets BMI universe on growth factors including 3-, 6- and 12-month price appreciation, sales to price and one year sales growth, and separately on value factors including book value to price, cash flow to price and return on assets. All stocks are ranked on the sum of ranks for the growth factors and, separately, all stocks are ranked on the sum of ranks for the value factors. A stock must have data for all growth and/or value factors to receive a rank for that style.
  • Each stock receives the best style rank from the previous step as its selection score.
  • The top 200 stocks based on the selection score determined in the previous step comprise the "selected stocks". The selected stocks are divided into quintiles based on their rankings and the top ranked quintiles receive a higher weight within the index. The stocks are equally-weighted within each quintile.
  • Each stock is then tested in order of its selection score rank to check if the weight assigned to that stock is outside the country/sector weighting constraints, which are set at 15% above the benchmark weight.
    • If the weight assigned to the stock, when added with the weight assigned to all higher ranking stocks in its country/sector, is greater than the constraint, then the stock is lowered to the highest ranking position in the next lowest quintile. Stocks previously lower in rank move up one rank, as necessary. Such stocks in the lowest quintile that violate a constraint are removed from the portfolio and replaced by the highest scoring stock not originally selected, subject to country/sector constraints. This process continues until all the country/sector weightings meet the constraint.
  • The index is reconstituted and rebalanced semi-annually.
Fund Overview
TickerFEMS
Fund TypeInternational Equity
Investment AdvisorFirst Trust Advisors L.P.
Investor Servicing AgentBrown Brothers Harriman
CUSIP33737J307
Intraday NAVFEMSIV
Fiscal Year-End12/31
ExchangeNYSE Arca
Inception2/15/2012
Inception Price$30.27
Inception NAV$30.27
Rebalance FrequencySemi-Annual
Expense Ratio0.80%
Current Fund Data (as of 11/26/2014)
Closing NAV1$35.31
Closing Share Price2$35.19
Bid/Ask Midpoint$35.17
Bid/Ask Discount0.42%
Total Net Assets$52,968,189
Outstanding Shares1,500,002
Daily Volume26,512
Average 30-Day Daily Volume81,957
Closing Share Price 52-Week High/Low$39.47 / $33.40
Closing NAV 52-Week High/Low$39.18 / $33.75
Number of Holdings205
Fund Characteristics (as of 10/31/2014)7
Median Market Cap.$795
Maximum Market Cap.$4,362
Minimum Market Cap.$303
Price/Earnings6.95
Price/Book1.05
Price/Cash Flow1.02
Price/Sales0.72
Top Holdings (as of 11/26/2014)
Holding Percent
Lewis Group Ltd. 1.17%
Sunac China Holdings Ltd. 1.01%
Xiamen International Port Company Ltd. (H Shares) 0.99%
Elswedy Cables Holding Co 0.98%
Tianjin Port Dvlp Hlds Ltd 0.98%
Hydoo International Holding 0.95%
Astral Foods Limited 0.93%
Hortifrut SA 0.93%
Torunlar Gayrimenkul Yatirim Ortakligi AS 0.93%
PT Pembangunan Perumahan Persero Tbk 0.92%

Holdings are subject to change.

Top Country Exposure (as of 11/26/2014)
Country Percent
China 35.05%
Taiwan 11.56%
Turkey 7.81%
South Africa 7.62%
Malaysia 7.55%
Thailand 7.26%
Brazil 5.58%
Indonesia 4.82%
Philippines 3.80%
Egypt 2.21%
NAV History (Since Inception)
Past performance is not indicative of future results.
Distribution Information
Dividend per Share Amt3$0.4244
30-Day SEC Yield (as of 10/31/2014)43.04%
12-Month Distribution Rate (as of 10/31/2014)52.39%
Index Yield (as of 10/31/2014)63.54%
Bid/Ask Midpoint vs. NAV (as of 9/30/2014)
Number of Days Bid/Ask Midpoint Above NAV
Quarter Ended 0-49
Basis Points
50-99
Basis Points
100-199
Basis Points
>=200
Basis Points
9/30/2014 20 20 7 0
6/30/2014 18 28 10 0
3/31/2014 25 16 3 0
12/31/2013 16 28 16 1
Number of Days Bid/Ask Midpoint Below NAV
Quarter Ended 0-49
Basis Points
50-99
Basis Points
100-199
Basis Points
>=200
Basis Points
9/30/2014 10 6 1 0
6/30/2014 5 2 0 0
3/31/2014 11 5 1 0
12/31/2013 3 0 0 0

The price used to calculate market return is determined by using the midpoint between the highest bid and the lowest offer on the stock exchange, on which shares of the Fund are listed for trading, as of the time that the Fund's NAV is calculated.

Top Sector Exposure (as of 11/26/2014)
Financials 28.52%
Consumer Discretionary 16.19%
Materials 13.76%
Industrials 13.48%
Information Technology 12.58%
Consumer Staples 7.14%
Utilities 4.52%
Health Care 1.56%
Energy 1.28%
Telecommunication Services 0.97%
Month End Performance (as of 10/31/2014)
  3 Mos YTD 1 Year 3 Year 5 Year 10 Year Since
Fund
Inception8
Fund Performance *
NAV -5.65% 0.93% 1.66% N/A N/A N/A 8.01%
After Tax Held -6.13% 0.11% 0.65% N/A N/A N/A 7.04%
After Tax Sold -3.19% 0.54% 0.96% N/A N/A N/A 5.76%
Market Price -6.29% -1.41% 0.59% N/A N/A N/A 7.67%
Index Performance **
Defined Emerging Markets Small Cap Index -5.32% 2.66% 3.22% N/A N/A N/A 9.37%
MSCI Emerging Markets Small Cap Index -3.78% 5.59% 3.18% N/A N/A N/A 3.53%
S&P Emerging Markets Small Cap Index -3.61% 4.14% 2.85% N/A N/A N/A 4.14%
Quarter End Performance (as of 9/30/2014)
  3 Mos YTD 1 Year 3 Year 5 Year 10 Year Since
Fund
Inception8
Fund Performance *
NAV -1.52% 4.03% 8.47% N/A N/A N/A 9.54%
After Tax Held -2.02% 3.19% 7.40% N/A N/A N/A 8.53%
After Tax Sold -0.86% 2.28% 4.79% N/A N/A N/A 6.92%
Market Price -0.69% 2.67% 8.02% N/A N/A N/A 9.60%
Index Performance **
Defined Emerging Markets Small Cap Index -1.29% 5.05% 9.87% N/A N/A N/A 10.65%
MSCI Emerging Markets Small Cap Index -1.37% 7.48% 8.84% N/A N/A N/A 4.36%
S&P Emerging Markets Small Cap Index -3.32% 4.78% 7.52% N/A N/A N/A 4.53%

*Performance data quoted represents past performance. Past performance is not a guarantee of future results and current performance may be higher or lower than performance quoted. Investment returns and principal value will fluctuate and shares when sold or redeemed, may be worth more or less than their original cost.

After Tax Held returns represent return after taxes on distributions. Assumes shares have not been sold. After Tax Sold returns represent the return after taxes on distributions and the sale of fund shares. Returns do not represent the returns you would receive if you traded shares at other times. Market Price returns are based on the midpoint of the bid/ask spread. Returns are average annualized total returns, except those for periods of less than one year, which are cumulative. The fund's performance reflects fee waivers and expense reimbursements, absent which performance would have been lower.

After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on the investor’s tax situation and may differ from those shown. The after-tax returns shown are not relevant to investors who hold their fund shares through tax-deferred arrangements such as 401(k) plans or individual retirement accounts.

**Performance information for the Defined Emerging Markets Small Cap Index is for illustrative purposes only and does not represent actual fund performance. The Index does not charge management fees or brokerage expenses, and no such fees or expenses were deducted from the performance shown. Indexes are unmanaged and an investor cannot invest directly in an index.

The expense ratio for this fund is 0.80%.

The MSCI Emerging Markets Small Cap Index is a free float-adjusted market capitalization index that is designed to measure equity market performance of all investable small cap securities in emerging markets.

The S&P Emerging Markets Small Cap Index is a comprehensive, rules-based index measuring performance of the small capitalization segment of emerging markets.

Footnotes
1 The NAV represents the fund's net assets (assets less liabilities) divided by the fund's shares outstanding.
2 Fund shares are purchased and sold on an exchange at their share price rather than net asset value (NAV), which may cause the shares to trade at a price greater than NAV (premium) or less than NAV (discount).
3 Most recent distribution paid or declared through today's date. Subject to change in the future.
4 30-day SEC yield is calculated by dividing the net investment income per share earned during the most recent 30-day period by the maximum offering price per share on the last day of the period.
5 12-Month Distribution Rate is calculated by dividing the sum of the fund's trailing 12-month ordinary distributions paid or declared by the NAV price. Distribution rates may vary.
6 Index yield represents the weighted average trailing 12-month dividend of the constituents of the Defined Emerging Markets Small Cap Index
7 All market capitalization numbers are in USD$ Millions.
8 Inception Date is 2/15/2012

You should consider the fund's investment objectives, risks, and charges and expenses carefully before investing. You can download a prospectus or summary prospectus, or contact First Trust Portfolios L.P. at 1-800-621-1675 to request a prospectus or summary prospectus which contains this and other information about the fund. The prospectus or summary prospectus should be read carefully before investing.

ETF Characteristics

The fund lists and principally trades its shares on the NYSE Arca, Inc.

The fund's return may not match the return of the Defined Emerging Markets Small Cap Index.  Securities held by the fund will generally not be bought or sold in response to market fluctuations.

Investors buying or selling fund shares on the secondary market may incur customary brokerage commissions. Market prices may differ to some degree from the net asset value of the shares. Investors who sell fund shares may receive less than the share's net asset value. Shares may be sold throughout the day on the exchange through any brokerage account. However, unlike mutual funds, shares may only be redeemed directly from the fund by authorized participants, in very large creation/redemption units.

Risk Considerations

The fund's shares will change in value, and you could lose money by investing in the fund. One of the principal risks of investing in the fund is market risk. Market risk is the risk that a particular stock owned by the fund, fund shares or stocks in general may fall in value. There can be no assurance that the fund's investment objective will be achieved.

The fund may invest in securities issued by companies concentrated in a particular industry or country. The fund invests in small capitalization and mid capitalization companies. Such companies may experience greater price volatility than larger, more established companies.

An investment in a fund containing securities of non-U.S. issuers is subject to additional risks, including currency fluctuations, political risks, withholding, the lack of adequate financial information, and exchange control restrictions impacting non-U.S. issuers. These risks may be heightened for securities of companies located in, or with significant operations in, emerging market countries.

The fund may invest in depositary receipts which may be less liquid than the underlying shares in their primary trading market. The fund may effect a portion of creations and redemptions for cash, rather than in-kind securities. As a result, the fund may be less tax-efficient.

The fund is classified as "non-diversified" and may invest a relatively high percentage of its assets in a limited number of issuers. As a result, the fund may be more susceptible to a single adverse economic or regulatory occurrence affecting one or more of these issuers, experience increased volatility and be highly concentrated in certain issuers.

First Trust Advisors L.P. is the adviser to the fund. First Trust Advisors L.P. is an affiliate of First Trust Portfolios L.P., the fund's distributor.

The Defined Emerging Markets Small Cap Index is the exclusive property of Standard and Poor's, a division of the McGraw-Hill Companies, Inc. ("S&P"). First Trust Portfolios L.P. has contracted with S&P to create, calculate and maintain the Index. STANDARD & POOR'S and S&P are trademarks of The McGraw-Hill Companies, Inc. and have been licensed for use by First Trust Portfolios L.P. The fund is not sponsored, endorsed, sold or promoted by Standard & Poor's and Standard & Poor's does not make any representation regarding the advisability of investing in the fund.

"AlphaDEX®" is a registered trademark of First Trust Portfolios L.P. First Trust Portfolios L.P. has obtained a patent for the AlphaDEX® stock selection methodology from the United States Patent and Trademark Office.

Not FDIC Insured • Not Bank Guaranteed • May Lose Value
 
First Trust Portfolios L.P.  Member SIPC and FINRA.
First Trust Advisors L.P.
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