0001445546-12-002088.txt : 20120430
0001445546-12-002088.hdr.sgml : 20120430
20120430154224
ACCESSION NUMBER: 0001445546-12-002088
CONFORMED SUBMISSION TYPE: 497K
PUBLIC DOCUMENT COUNT: 1
FILED AS OF DATE: 20120430
DATE AS OF CHANGE: 20120430
EFFECTIVENESS DATE: 20120430
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: FIRST TRUST EXCHANGE-TRADED ALPHADEX FUND II
CENTRAL INDEX KEY: 0001510337
IRS NUMBER: 000000000
STATE OF INCORPORATION: MA
FILING VALUES:
FORM TYPE: 497K
SEC ACT: 1933 Act
SEC FILE NUMBER: 333-171759
FILM NUMBER: 12794744
BUSINESS ADDRESS:
STREET 1: 120 EAST LIBERTY DRIVE, SUITE 400
CITY: WHEATON
STATE: IL
ZIP: 60187
BUSINESS PHONE: 630-765-8000
MAIL ADDRESS:
STREET 1: 120 EAST LIBERTY DRIVE, SUITE 400
CITY: WHEATON
STATE: IL
ZIP: 60187
0001510337
S000031801
First Trust South Korea AlphaDEX Fund
C000099055
First Trust South Korea AlphaDEX Fund
FKO
497K
1
fko_497k.txt
SUMMARY PROSPECTUS
Rule 497 (k)
File No. 333-171759
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AlphaDEX(R)
Family of ETFs
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SUMMARY PROSPECTUS
ALPHADEX(R) FUND II
First Trust South Korea AlphaDEX(R) Fund
Ticker Symbol: FKO
Exchange: NYSE Arca, Inc.
Before you invest, you may want to review the Fund's prospectus, which contains
more information about the Fund and its risks. You can find the Fund's
prospectus and other information about the Fund, including the statement of
additional information and most recent reports to shareholders, online at
http:// www.ftportfolios.com/retail/ETF/ETFfundnews.aspx?Ticker=FKO. You can
also get this information at no cost by calling (800) 621-1675 or by sending an
e-mail request to info@ftportfolios.com. The Fund's prospectus and statement of
additional information, both dated April 30, 2012, are all incorporated by
reference into this Summary Prospectus.
INVESTMENT OBJECTIVE
The First Trust South Korea AlphaDEX(R) Fund (the "Fund") seeks investment
results that correspond generally to the price and yield (before the Fund's fees
and expenses) of an equity index called the Defined South Korea Index (the
"Index").
FIRST TRUST April 30, 2012
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FEES AND EXPENSES OF THE FUND
The following table describes the fees and expenses you may pay if you buy and
hold Shares of the Fund. Investors purchasing and selling Shares may be subject
to costs (including customary brokerage commissions) charged by their broker.
SHAREHOLDER FEES (fees paid directly from your investment)
Maximum Sales Charge (Load) Imposed on Purchases
(as a percentage of offering price) None
ANNUAL FUND OPERATING EXPENSES (Expenses that you pay each
year as a percentage of the value of your investment)
Management Fees 0.80%
Distribution and Service (12b-1) Fees (1) 0.00%
Other Expenses 0.00%
-----
Total Annual Fund Operating Expenses 0.80%
EXAMPLE
The example below is intended to help you compare the cost of investing in
the Fund with the cost of investing in other funds. This example does not
take into account customary brokerage commissions that you pay when
purchasing or selling Shares of the Fund in the secondary market.
The example assumes that you invest $10,000 in the Fund for the time periods
indicated and then you retain the Shares or redeem all of your Shares at the
end of those periods. The example also assumes that your investment has a 5%
return each year and that the Fund's annual operating expenses remain at
current levels until April 30, 2013 and thereafter at 1.05% to represent the
imposition of the 12b-1 fee of 0.25% per annum of the Fund's average daily
net assets. 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
------ ------- ------- --------
$82 $301 $547 $1,252
-------------------
(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,
2013.
PORTFOLIO TURNOVER
The Fund pays transaction costs, such as commissions, when it buys and sells
securities (or "turns over" its portfolio). A higher portfolio turnover rate
may indicate higher transaction costs and may result in higher taxes when
Fund Shares are held in a taxable account. These costs, which are not
reflected in annual fund operating expenses or in the example, affect the
Fund's performance. During the fiscal period April 18, 2011 (inception)
through December 31, 2011, the Fund's portfolio turnover rate was 123% of the
average value of its portfolio.
PRINCIPAL INVESTMENT STRATEGIES
The Fund will normally invest at least 90% of its net assets plus the amount of
any borrowings for investment purposes in stocks that comprise the Index. The
Fund, using an "indexing" investment approach, attempts to replicate, before
fees and expenses, the performance of the Index. First Trust seeks a correlation
of 0.95 or better (before fees and expenses) between the Fund's performance and
the performance of the Index; a figure of 1.00 would represent perfect
correlation. First Trust will regularly monitor the Fund's tracking accuracy and
will seek to maintain an appropriate correlation.
The Index is in the "Defined Index Series," a family of custom enhanced indices
developed, maintained and sponsored by Standard & Poor's Financial Services LLC
("S&P" or the "Index Provider"). The Index is a modified equal-dollar weighted
index designed by S&P to objectively identify and select stocks from the S&P
South Korea BMI Index (the "Base Index") that may generate positive alpha
relative to traditional passive-style indices through the use of the AlphaDEX(R)
selection methodology. The Base Index is a comprehensive, rules-based index
designed to measure stock market performance in South Korea. The Base Index
covers all publicly listed equities with float adjusted market values of $100
million or more and annual dollar value traded of at least $50 million. Alpha is
an indication of how much an investment outperforms or underperforms on a
risk-adjusted basis relative to its benchmark. As of March 31, 2012, the Index
was comprised of 50 securities. The Index is rebalanced and reconstituted as of
the last business day of the semi-annual periods ended June 30 and December 31.
Changes to the Index will be effective at the open of trading on the ninth
business day of the following month.
The Fund intends to invest entirely in the Index; however, there may also be
instances in which the Fund may be overweighted in certain stocks in the Index,
purchase securities not in the Index that are appropriate to substitute for
certain securities in the Index or utilize various combinations of the above
techniques in seeking to track the Index.
PRINCIPAL RISKS
You could lose money by investing in the Fund. An investment in the Fund is not
a deposit of a bank and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other governmental agency.
MARKET RISK. Market risk is the risk that a particular stock owned by the Fund,
Shares of the Fund or stocks in general may fall in value. Shares are subject to
market fluctuations caused by such factors as economic, political, regulatory or
market developments, changes in interest rates and perceived trends in stock
prices. Overall stock values could decline generally or could underperform other
investments.
NON-CORRELATION RISK. The Fund's return may not match the return of the Index
for a number of reasons. For example, the Fund incurs operating expenses not
applicable to the Index, and may incur costs in buying and selling securities,
especially when rebalancing the Fund's portfolio holdings to reflect changes in
the composition of the Index. In addition, the Fund's portfolio holdings may not
exactly replicate the securities included in the Index or the ratios between the
securities included in the Index.
REPLICATION MANAGEMENT RISK. The Fund is exposed to additional market risk due
to its policy of investing principally in the securities included in the Index.
As a result of this policy, securities held by the Fund will generally not be
bought or sold in response to market fluctuations, and the securities may be
issued by companies concentrated in a particular industry. Therefore, the Fund
will generally not sell a stock because the stock's issuer is in financial
trouble, unless that stock is removed or is anticipated to be removed from the
Index.
NON-DIVERSIFICATION RISK. The Fund is classified as "non-diversified" under the
Investment Company Act of 1940, as amended (the "1940 Act"). As a result, the
Fund is only limited as to the percentage of its assets which may be invested in
the securities of any one issuer by the diversification requirements imposed by
the Internal Revenue Code of 1986, as amended (the "Code"). The Fund 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.
NON-U.S. SECURITIES AND EMERGING MARKETS RISK. The Fund invests in securities of
non-U.S. issuers, including non-U.S. dollar-denominated securities traded
outside of the United States and U.S. dollar-denominated securities of non-U.S.
issuers traded in the United States. Such securities are subject to higher
volatility than securities of domestic issuers due to possible adverse
political, social or economic developments; restrictions on foreign investment
or exchange of securities; lack of liquidity; excessive taxation; government
seizure of assets; different legal or accounting standards; and less government
supervision and regulation of exchanges in foreign countries. These risks may be
heightened for securities of companies located in, or with significant
operations in, emerging market countries.
CASH TRANSACTIONS RISK. Unlike most exchange-traded funds, the Fund may effect a
portion of creations and redemptions for cash, rather than in-kind securities.
As a result, an investment in the Fund may be less tax-efficient than an
investment in a more conventional exchange-traded fund. Because the Fund may
effect a portion of redemptions for cash, rather than in-kind distributions, it
may be required to sell portfolio securities in order to obtain the cash needed
to distribute redemption proceeds. A sale of Shares may result in capital gains
or losses, and may also result in higher brokerage costs.
CURRENCY RISK. Because the Fund's NAV is determined on the basis of U.S. dollars
and the Fund invests in foreign securities, you may lose money if the local
currency of a foreign market depreciates against the U.S. dollar, even if the
local currency value of the Fund's holdings goes up.
SOUTH KOREA RISK. The Fund invests in the stock of companies that are domiciled
in South Korea. The South Korean economy is dependent on the economies of Asia
and the United States as key trading partners. Reduction in spending by these
economies on South Korean products and services or negative changes in any of
these economies, mainly in China or Southeast Asia, may cause an adverse impact
on the South Korean economy. Furthermore, South Korea's economy is also
dependent on the economies of other Asian countries and can be significantly
affected by currency fluctuations and increasing competition from Asia's other
low-cost emerging economies. Also, the political tensions with North Korea could
escalate and lead to further uncertainty in the political and economic climate
on the Korean peninsula. South Korean securities may also be subject to
restrictions on foreign investment or exchange of securities; lack of liquidity;
excessive taxation; government seizure of assets; different legal or accounting
standards and less government supervision and regulation of exchanges than in
the United States. These risks may be heightened for securities of companies
located in, or with significant operations in, an emerging market country like
South Korea.
ANNUAL TOTAL RETURN
The Fund has not yet operated for a full calendar year and, therefore,
performance information is not included in this section of the Prospectus. See
"Total Return Information" for performance information regarding the Fund.
MANAGEMENT
INVESTMENT ADVISOR
First Trust Advisors L.P. ("First Trust")
PORTFOLIO MANAGERS
The Fund's portfolio is managed by a team (the "Investment Committee")
consisting of:
o Daniel J. Lindquist, Chairman of the Investment Committee and Senior
Vice President of First Trust;
o Robert F. Carey, Chief Investment Officer and Senior Vice President
of First Trust;
o Jon C. Erickson, Senior Vice President of First Trust;
o David G. McGarel, Senior Vice President of First Trust;
o Roger F. Testin, Senior Vice President of First Trust; and
o Stan Ueland, Vice President of First Trust.
Each Investment Committee member has served as a part of the portfolio
management team of the Fund since inception.
PURCHASE AND SALE OF FUND SHARES
The Fund issues and redeems Shares on a continuous basis, at NAV, only in
Creation Units consisting of 50,000 Shares. The Fund's Creation Units are issued
and redeemed for cash or in-kind for securities included in the Fund's
portfolio. Individual Shares may only be purchased and sold on NYSE Arca through
a broker-dealer. Shares of the Fund will trade on NYSE Arca at market prices
rather than NAV, which may cause the Shares to trade at a price greater than NAV
(premium) or less than NAV (discount).
TAX INFORMATION
The Fund's distributions are taxable and will generally be taxed as ordinary
income or capital gains.
PAYMENTS TO BROKER-DEALERS AND OTHER FINANCIAL INTERMEDIARIES
If you purchase Shares of the Fund through a broker-dealer or other financial
intermediary (such as a bank), First Trust and First Trust Portfolios L.P., the
Fund's distributor, may pay the intermediary for the sale of Fund Shares and
related services. These payments may create a conflict of interest by
influencing the broker-dealer or other intermediary and your salesperson to
recommend the Fund over another investment. Ask your salesperson or visit your
financial intermediary's website for more information.
FKOSP0043012