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First Trust Advisors L.P. ("FTA") announced today that the Board of Trustees of EquityCompass Tactical Risk Manager ETF (NYSE Arca: TERM) and Equity Compass Risk Manager ETF (NYSE Arca: ERM), each, an actively managed exchange-traded fund ("ETF") managed by FTA and sub-advised by EquityCompass Investment Management, LLC ("EquityCompass"), approved the reorganization of TERM into ERM. ERM will be the surviving fund.
Under the terms of the proposed transaction, which is expected to be tax‑free, the assets of TERM would be transferred to, and the liabilities of TERM would be assumed by, ERM, and shareholders of TERM would receive shares of ERM with an aggregate net asset value equal to the aggregate net asset value of the TERM shares held by them. It is currently expected that the transaction will be consummated no later than the second quarter of 2021, subject to requisite shareholder approval of TERM and ERM and satisfaction of applicable regulatory requirements and approvals and customary closing conditions. There is no assurance when or whether such approvals, or any other approvals required for the transaction, will be obtained. More information on the proposed transaction will be contained in a registration statement/proxy materials that will be filed with the SEC in the coming weeks. Upon completion of the proposed transaction, the investment objectives and strategies of ERM will continue to be the investment objectives and strategies of the combined fund after the reorganization. FTA and EquityCompass will continue to serve in their respective roles with respect to the combined fund after the reorganization. The costs of the reorganization, other than portfolio repositioning costs (which are expected to be limited), will be borne by FTA and EquityCompass.
TERM is an actively managed ETF that seeks to provide long term capital appreciation with capital preservation as a secondary objective. TERM pursues these investment objectives by investing in equity securities of companies domiciled in the United States or listed on a U.S. securities exchange. TERM may also invest all or a portion of its assets in cash, cash equivalents and short-term fixed income exchange-traded funds. TERM may also invest all or a significant portion of its assets in securities designed to provide short exposure to broad U.S. market indices including by investing in inverse ETFs.
ERM is an actively managed ETF that seeks to provide long term capital appreciation with capital preservation as a secondary objective. ERM pursues these investment objectives by investing in equity securities of companies domiciled in the United States or listed on a U.S. securities exchange. ERM may also invest all or a portion of its assets in cash, cash equivalents and short-term fixed income exchange-traded funds.
FTA is a federally registered investment advisor and serves as the investment advisor of TERM and ERM. FTA and its affiliate First Trust Portfolios L.P. ("FTP"), a FINRA registered broker-dealer, are privately-held companies that provide a variety of investment services. FTA has collective assets under management or supervision of approximately $164 billion as of November 30, 2020 through unit investment trusts, exchange-traded funds, closed-end funds, mutual funds and separate managed accounts. FTA is the supervisor of the First Trust unit investment trusts, while FTP is the sponsor. FTP is also a distributor of mutual fund shares and exchange-traded fund creation units. FTA and FTP are based in Wheaton, Illinois.
EquityCompass, located at 1 South Street, 16th Floor, Baltimore, Maryland 21202, serves as each Fund’s investment sub-advisor. In this capacity, EquityCompass is responsible for providing recommendations regarding the selection and allocation of the securities in each Fund’s investment portfolio. EquityCompass is a Securities and Exchange Commission registered investment adviser offering a comprehensive range of investment portfolios and products to institutional and individual investors primarily through Stifel Nicolaus & Company, Incorporated.
Additional Information about the Proposed Reorganization and Where to Find It
This press release is not intended to, and shall not, constitute an offer to purchase or sell shares of TERM or ERM; nor is this press release intended to solicit a proxy from any shareholder of TERM or ERM. The solicitation of the purchase or sale of securities or of proxies to effect the transaction may only be made by a final, effective Registration Statement, which includes a definitive Proxy Statement/Prospectus, after the Registration Statement is declared effective by the SEC.
This press release references a Registration Statement, which includes a Proxy Statement/Prospectus, to be filed by ERM. This Registration Statement has yet to be filed with the SEC. After the Registration Statement is filed with the SEC, it may be amended or withdrawn and the Proxy Statement/Prospectus will not be distributed to shareholders of TERM or ERM unless and until the Registration Statement is declared effective by the SEC.
TERM, ERM, FTA, FTP and their respective trustees, officers and employees, and other persons may be deemed to be participants in the solicitation of proxies with respect to the proposed reorganization. Investors and shareholders may obtain more detailed information regarding the direct and indirect interests of TERM’s, ERM’s, FTA’s and FTP’s respective directors, trustees, officers and employees by reading the Proxy Statement/Prospectus regarding the proposed reorganization when it is filed with the SEC.
Investors and security holders of TERM and ERM are urged to read the Proxy Statement/Prospectus and other documents filed with the SEC carefully in their entirety when they become available because they will contain important information about the proposed reorganization. Investors should consider the investment objectives, risks, charges and expenses of TERM and ERM carefully. The Proxy Statement/Prospectus will contain information with respect to the investment objectives, risks, charges and expenses of the funds and other important information about TERM and ERM. The Proxy Statement/Prospectus will constitute neither an offer to sell securities, nor will it constitute a solicitation of an offer to buy securities, in any state where such offer or sale is not permitted.
Investors may obtain free copies of the Registration Statement and Proxy Statement/Prospectus and other documents (when they become available) filed with the SEC at the SEC’s web site at www.sec.gov. In addition, free copies of the Proxy Statement/Prospectus and other documents filed with the SEC may also be obtained after the Registration Statement becomes effective by calling FTA toll-free at (800) 621-1675.
The information presented is not intended to constitute an investment recommendation for, or advice to, any specific person. By providing this information, First Trust is not undertaking to give advice in any fiduciary capacity within the meaning of ERISA and the Internal Revenue Code. First Trust has no knowledge of and has not been provided any information regarding any investor. Financial advisors must determine whether particular investments are appropriate for their clients. First Trust believes the financial advisor is a fiduciary, is capable of evaluating investment risks independently and is responsible for exercising independent judgment with respect to its retirement plan clients.
Forward Looking Statements
Certain statements made in this press release that are not historical facts are referred to as "forward‑looking statements" under the U.S. federal securities laws. Actual future results or occurrences may differ significantly from those anticipated in any forward‑looking statements due to numerous factors. Generally, the words "believe," "expect," "intend," "estimate," "anticipate," "project," "will" and similar expressions identify forward‑looking statements, which generally are not historical in nature. Forward‑looking statements are subject to certain risks and uncertainties that could cause actual results to differ from those anticipated in any forward-looking statements. You should not place undue reliance on forward‑looking statements, which speak only as of the date they are made. FTA, TERM and ERM undertake no responsibility to update publicly or revise any forward‑looking statements.
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Ryan Issakainen – (630) 765-8689
Jim Dykas – (630) 517-7665