UNITED STATES SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                                                             File No. 812-_____

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In the matter of

First Trust Exchange Traded Fund
First Trust Exchange Traded Fund II
First Trust Exchange Traded Fund III
First Trust Exchange Traded AlphaDEX  Fund
First Trust Advisors L.P.
and First Trust Portfolios L.P.
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Application for an Order under Section 6(c) of the Investment
Company Act of 1940, as amended (the "1940 Act"), for an exemption
from Sections 2(a)(32), 5(a)(1), 22(d) and 22(e) of the 1940 Act
and Rule 22c-1 under the 1940 Act and under Sections 6(c) and
17(b) of the 1940 Act for an exemption from Section 17(a) of the
1940 Act.

All communications, notices and orders to:

First Trust Exchange-Traded Fund                  Eric F. Fess
First Trust Exchange-Traded Fund II               Felice R. Foundos
First Trust Exchange-Traded Fund III              Suzanne M. Russell
First Trust Exchange-Traded AlphaDEX(R) Fund      Chapman and Cutler LLP
First Trust Advisors L.P.                         111 West Monroe
First Trust Portfolios L.P.                       Chicago, IL  60603
120 East Liberty Drive, Suite 400
Wheaton, IL  60187
Attn:  W. Scott Jardine



                    Page 1 of 44 sequentially numbered pages

     As filed with the Securities and Exchange Commission on July 15, 2010





                               TABLE OF CONTENTS

SECTION                        HEADING                                     PAGE

I.   INTRODUCTION                                                             3
     A.   Summary of Application                                              3
     B.   Comparability to Prior Commission Orders                            5

II.  THE APPLICANTS                                                           6
     A.   The Existing Trusts                                                 6
     B.   The Advisor and Fund Subadvisors                                    6
     C.   The Distributor                                                     7
     D.   Other Service Providers                                             7

III. APPLICANTS' PROPOSAL                                                     7
     A.   The Initial Fund                                                    7
     B.   Benefits of Funds to Investors.                                     7
     C.   Procedures to Address Potential Conflicts of Interest               8
     D.   Capital Structure and Voting Rights; Book Entry                     9
     E.   Exchange Listing                                                   10
     F.   Sales of Shares                                                    10
     G.   Pricing                                                            16
     H.   Redemption                                                         16
     I.   Settlement and Clearing Outside the Shares Clearing Process        19
     J.   Dividends, Distributions and Taxes                                 21
     K.   Shareholder Transaction and Operational Fees and Expenses.         21
     L.   Dividend Reinvestment Service                                      22
     M.   Availability of Information                                        22
     N.   Sales and Marketing Materials; Prospectus Disclosure               23
     O.   Third-Party Broker-Dealer Issues                                   24
     P.   Qualification as a Regulated Investment Company                    25

IV.  REQUEST FOR EXEMPTIVE RELIEF AND LEGAL ANALYSIS                         25
     A.   Sections 2(a)(32) and 5(a)(1) of the 1940 Act                      25
     B.   Section 22(d) of the 1940 Act and Rule 22c-1 Under the 1940 Act    26
     C.   Section 22(e) of the 1940 Act                                      28
     D.   Section 17(a) of the 1940 Act                                      29

V.   CONDITIONS                                                              31

VI.  NAMES AND ADDRESSES                                                     32

VII. AUTHORIZATION AND SIGNATURES                                            35

                                  Page 2 of 44



I.   INTRODUCTION

     A.   Summary of Application.

     In this application (this "Application"), First Trust Exchange-Traded Fund
(the "Initial Trust"), First Trust Exchange-Traded Fund II ("Trust II"), First
Trust Exchange-Traded Fund III ("Trust III"), First Trust Exchange-Traded
AlphaDEX(R) Fund (the "AlphaDEX Trust" and, together with the Initial Trust,
Trust II and Trust III, the "Existing Trusts"), First Trust Advisors L.P. (the
"Advisor"), and First Trust Portfolios L.P. (the "Distributor" and, together
with the Existing Trusts and the Advisor, the "Applicants") apply for and
request an order (the "Order") of the Securities and Exchange Commission (the
"Commission") under Section 6(c) of the Investment Company Act of 1940, as
amended (the "1940 Act") for an exemption from Sections 2(a)(32), 5(a)(1), 22(d)
and 22(e) of the 1940 Act and Rule 22c-1 under the 1940 Act and under Sections
6(c) and 17(b) of the 1940 Act for an exemption from Section 17(a) of the 1940
Act.(1)

     Applicants are seeking the Order to permit Trust III to create and operate
one series which will be a Fixed Income Fund as defined below (the "Initial
Fund") that offers exchange-traded shares ("Shares") with limited redeemability.
The Initial Fund is described in Section III.A below.

     Applicants request that the Order requested herein apply not only to the
Existing Trusts and the Initial Fund, but also to any other open-end management
company existing or created in the future (together with the Existing Trusts,
the "Trusts" and each a "Trust") and any existing(2) or future series of the
Trusts that may utilize active management investment strategies and invest (i)
in fixed income securities (including without limitation exchange-traded notes)
traded in the U.S. or non-U.S. markets (such securities, "Fixed Income
Securities" and each such series, a "Fixed Income Fund") or (ii) in a
combination of equity securities (which may include shares of other


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(1)   Pursuant to relief previously obtained, the Applicants may, in general
      terms, operate actively managed exchange-traded funds that invest
      primarily in equity securities ("Active Equity Funds"). In the Matter of
      First Trust Advisors L.P., et al., Investment Company Act Release Nos.
      28421 (September 29, 2008) (notice) and 28468 (October 27, 2008) (order).
      In addition, pursuant to relief previously obtained, the Applicants may,
      in general terms, operate exchange-traded funds that invest primarily in
      equity securities selected to correspond generally to the price and yield
      performance of a specified domestic or international equity securities
      index ("Index ETFs"). In the Matter of First Trust Exchange-Traded Fund,
      et al., Investment Company Act Release Nos. 27051 (August 26, 2005)
      (notice) and 27068 (September 20, 2005) (order) (the "Original Index ETF
      Order"), as amended by In the Matter of First Trust Exchange-Traded Fund,
      et al., Investment Company Act Release Nos. 27772 (March 30, 2007)
      (notice) and 27784 (April 25, 2007) (order) (the "International Index ETF
      Order;" the Original Index ETF Order and the International Index ETF Order
      are collectively referred to as the "Prior Index ETF Orders").

(2)   Applicants intend that any existing series (including any existing series
      that, as of the date of the filing of this Application, is operating as an
      Index ETF pursuant to the Prior Index ETF Orders) of the Trusts that may
      seek to operate as a Fund (as defined below) also would be permitted to
      rely on the Order.

                                  Page 3 of 44



exchange-traded funds, money market mutual funds or other investment
companies)(3) and Fixed Income Securities (each such series, a "Balanced
Fund"). The Initial Fund, together with the other series described in the
preceding sentence, are collectively referred to as the "Funds"; the Funds
other than the Initial Fund are collectively referred to as the "Future Funds."
Fixed Income Funds that invest all or a portion of their assets in securities
traded in international markets are referred to as "International Fixed Income
Funds." International Fixed Income Funds and Balanced Funds that invest all or
a portion of their assets in securities traded in international markets are
referred to as "International Funds." The Funds may also invest in various
other instruments, including but not limited to currencies, commodities, U.S.
money market securities and non-U.S. money market securities, all in accordance
with their investment objectives. International Funds also reserve the ability
to invest in American Depositary Receipts ("ADRs"), Global Depositary Receipts
("GDRs"), and European Depositary Receipts ("EDRs" and together with ADRs and
GDRs, "Depositary Receipts"). The Depositary Receipts will be negotiable
securities that represent ownership of a non-U.S. company's publicly-traded
stock.(4) No Fund relying on the Order will invest in options contracts, futures
contracts or swap agreements except to the extent permitted by the Commission
and/or its staff in the future. The securities in which a Fund will invest are
the "Portfolio Securities." Any Future Fund will (a) be advised by the Advisor
or an entity controlling, controlled by, or under common control with the
Advisor, and (b) comply with the terms and conditions of the Order. Each Fund
will operate as an exchange-traded fund (each an "ETF").

     Shares of each Fund will be purchased from a Trust only in large
aggregations of a specified number referred to as a "Creation Unit." Creation
Units will be separable upon issue into individual Shares, which will be listed
and traded at negotiated prices on a national securities exchange as defined in


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(3)   Any investments by a Fund in any other investment company shall be
      subject to the restrictions of Section 12(d)(1) of the 1940 Act except as
      permitted by an exemptive order or other applicable law, rule or
      regulation that permits investment companies to invest in such other
      investment company beyond those limitations.

(4)   Although the international stocks will be listed on a Foreign Exchange
      (as defined below), the Funds may invest in the Depositary Receipts (such
      as ADRs, GDRs and EDRs) representing such securities that are traded in
      the U.S. The Applicants do not believe that the investment in Depositary
      Receipts will adversely affect the Funds. The Depositary Receipts in which
      the Fund will invest will be listed on a Stock Exchange (as defined below)
      or a Foreign Exchange (as defined below). The Funds will not invest in any
      listed Depositary Receipts that the Advisor deems illiquid or for which
      pricing information is not readily available. The Funds will generally
      invest in sponsored Depositary Receipts, except for certain listed ADRs
      that remain unsponsored. The Advisor believes that holding a Depositary
      Receipt, rather than the underlying security, may benefit a Fund. This
      could occur where an investment in a Depositary Receipt offers greater
      liquidity or would otherwise improve the liquidity, tradability or
      settlement of the Fund's current Portfolio Deposit (as defined below). The
      Advisor, any Fund Subadvisor (as defined below) and their affiliated
      persons will not serve as the depositary bank for any Depositary Receipts
      held by a Fund. The identity of a depositary bank of any Depositary
      Receipt will not be a criterion used by the Advisor, any Fund Subadvisor
      (as defined below) or Fund in selecting Portfolio Securities or Deposit
      Securities (as defined below).

                                  Page 4 of 44



Section 2(a)(26) of the 1940 Act (each a "Stock Exchange").(5) The Shares
themselves will not be redeemable to a Trust unless combined into a Creation
Unit.(6)

     All entities that currently intend to rely on the order are named as
Applicants. Any other entity that relies on the order in the future will comply
with the terms and conditions of this Application.

     No form having been specifically prescribed for this Application, the
Applicants proceed under Rule 0-2 of the General Rules and Regulations of the
Commission.

     B.   Comparability to Prior Commission Orders.

     The requested relief is very similar to the relief granted by the
Commission to other actively managed ETFs.(7) Moreover, the requested relief is
substantially similar to relief previously granted to the Applicants.(8)

     The majority of previous Commission orders permitting ETFs generally have
involved Index ETFs. In this case, the ETFs that are the subject of this
Application will not attempt to track the performance of a specific securities
index. The relief requested herein would permit an ETF to hold securities
actively selected by its investment adviser or sub-adviser (if applicable)
unrelated to the performance of any securities index. Because the Applicants
seek exemptive relief for an actively managed fund to issue exchange-traded
shares, this application addresses not only the customary issues raised by an
Index ETF proposal, but also the additional issues the Commission raised
concerning the concept of an actively managed ETF.(9) Actively managed ETFs have


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(5)   The foreign equivalent of a Stock Exchange is referred to as a "Foreign
      Exchange."

(6)   The Initial Trust, Trust II, the AlphaDEX Trust, First Trust Advisors
      L.P. and First Trust Portfolios L.P. have received exemptive relief from
      Section 12(d)(1)(A) and (B) and Section 17(a) permitting, in part, certain
      investment companies and unit investment trusts to invest in shares of
      such Existing Trusts beyond the limits of Section 12(d)(1)(A) and (B) of
      the 1940 Act. See Investment Company Act Release Nos. 27812 (April 30,
      2007) (notice) and 27845 (May 30, 2007) (order) (the "Section 12(d)(1)
      Order"). The relief in the Section 12(d)(1) Order extends to any other
      registered open-end investment company created in the future and
      comprising part of the same "group of investment companies" within the
      meaning of Section 12(d)(1)(G)(ii) of the 1940 Act as such Existing Trusts
      and their series. Accordingly, the Funds will rely on the relief granted
      in the Section 12(d)(1) Order.

(7)   See, e.g., In the Matter of PowerShares Capital Management LLC, et al.,
      Investment Company Act Release Nos. 28140 (February 1, 2008) (notice) and
      28171 (February 27, 2008) (order), amended by In the Matter of Invesco
      PowerShares Capital Management LLC, et al., Investment Company Act Release
      Nos. 28411 (September 29, 2008) (notice) and 28467 (October 27, 2008)
      (order); In the Matter of WisdomTree Asset Management, Inc. and WisdomTree
      Trust, Investment Company Act Release Nos. 28419 (September 29, 2008)
      (notice) and 28471 (October 27, 2008) (order); and In the Matter of Grail
      Advisors, LLC, et al., Investment Company Act Release Nos. 28571 (December
      23, 2008) (notice) and 28604 (January 16, 2009) (order).

(8)   See supra note 1.

(9)   Investment Company Act Release No. 25258 (November 8, 2001).

                                  Page 5 of 44



been trading since 2008 and are no longer novel. The Applicants believe that the
relief sought does not raise any unique regulatory concerns and remains
appropriate.

II.  THE APPLICANTS

     A.   The Existing Trusts.

     The Existing Trusts are each open-end management investment companies
organized as Massachusetts business trusts. The Existing Trusts are, and each
future Trust will be, registered under the 1940 Act with the Commission as
open-end management investment companies and will offer and sell their
respective Shares pursuant to registration statements filed with the Commission
under the 1940 Act and the Securities Act of 1933 (the "Securities Act"). The
Existing Trusts are each organized to be able to offer a number of separate
investment portfolios (e.g., Funds). As of the date of the filing of this
Application, Trust III has no series with publicly outstanding shares.(10) The
Initial Trust, Trust II and the AlphaDEX Trust all currently have series with
publicly outstanding shares; however, pursuant to relief previously granted by
the Commission,(11) all of such series are Index ETFs as of the date of the
filing of this Application.

     B.   The Advisor and Fund Subadvisors.

     First Trust Advisors L.P. or an entity controlling, controlled by or under
common control with the Advisor will be the investment adviser to the Funds. The
Advisor is an Illinois limited partnership, with its principal office located at
120 East Liberty Drive, Suite 400, Wheaton, Illinois 60187. The Advisor is
registered as an "investment adviser" under Section 203 of the Investment
Advisers Act of 1940 (the "Advisers Act"). The Advisor has not yet entered, but
may in the future enter, into subadvisory agreements with one or more additional
investment advisers to act as "subadvisors" with respect to particular Funds
(each a "Fund Subadvisor"). Any Fund Subadvisor will be registered under the
Advisers Act.


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(10)  On January 29, 2010, however, Trust III filed a registration statement on
      Form N-1A (amended on February 24, 2010 and currently pending), in respect
      of two initial series, each of which is an Active Equity Fund.

(11)  See the Prior Index ETF Orders, supra note 1.

                                  Page 6 of 44



     C.   The Distributor.

     First Trust Portfolios L.P. (the "Distributor"), an Illinois limited
partnership, will serve as the principal underwriter and distributor for each of
the Funds. The Distributor is a broker-dealer registered under the Securities
Exchange Act of 1934 (the "Exchange Act") and a member in good standing of the
Financial Industry Regulatory Authority ("FINRA"). The Distributor will
distribute Shares on an agency basis. The Distributor is an affiliated person of
the Advisor within the meaning of Section 2(a)(3)(C) of the 1940 Act. The
Distributor will be identified as such in the current prospectus ("Prospectus")
for each Fund.(12)

     D.   Other Service Providers.

     Each Trust expects to appoint an entity or entities that are not affiliated
persons of the respective Trust to provide administrative, custodial, transfer
agency, fund accounting, dividend disbursing and securities lending (if
applicable) functions for the Funds. The identity of such service providers will
be disclosed in the Prospectus and/or statement of additional information
("SAI") for each Fund. Each Trust and any securities lending agent will comply
with the Commission staff's guidelines regarding the lending of portfolio
securities of an open-end investment company. The entity providing custodial
services is hereafter the "Custodian" and the entity serving as transfer agent
for the respective Funds is hereafter the "Transfer Agent."

III. APPLICANTS' PROPOSAL

     A.   The Initial Fund.

     The Applicants currently intend to name the Initial Fund the First Trust
2020 Target Term Corporate Bond Fund, although the Applicants may change the
name in the future. It is currently anticipated that the primary investment
objective of the Initial Fund will be to provide steady income from coupon
payments and return of principal at its target term date, currently expected to
be set at December 31, 2020, or such other date as may be set forth in the
Initial Fund's Prospectus. It is currently anticipated that the Initial Fund's
secondary investment objective will be to seek additional total return. The
Initial Fund is expected to invest primarily in investment-grade corporate bonds
traded in the U.S. markets. It is anticipated that the principal of bonds that
mature within approximately one year prior to the target term date will be
reinvested into high quality money market instruments.

     The Initial Fund may modify its investment objectives and the Advisor may
modify its methodology for the Initial Fund as it determines appropriate or
necessary in pursuing the Initial Fund's investment objectives.

     B.   Benefits of Funds to Investors.


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(12)  Each Fund will comply with the disclosure requirements adopted by the
      Commission in Investment Company Act Release No. 28584 (January 13, 2009)
      (the "Summary Prospectus Rule").

                                  Page 7 of 44



     Applicants expect that there will be several categories of market
participants who are likely to be interested in purchasing Creation Units. One
is the arbitrageur, who stands ready to take advantage of any slight premium or
discount in the market price of Shares on the Stock Exchange versus the cost of
depositing a Portfolio Deposit (defined below) and creating a Creation Unit to
be broken down into individual Shares. As described below, the Applicants
believe that arbitrageurs will purchase or redeem Creation Units in pursuit of
arbitrage profit, and in so doing will enhance the liquidity of the secondary
market. Applicants expect that arbitrage opportunities created by the ability to
continually purchase or redeem Creation Units at their net asset value ("NAV")
should ensure that the Shares will not trade at a material discount or premium
in relation to their NAV. Applicants also expect that the Stock Exchange
specialists or market makers, as applicable (collectively referred to as "Market
Makers"), acting in their unique role to provide a fair and orderly secondary
market for Shares, also may purchase Creation Units for use in their own market
making activities.

     Applicants expect that secondary market purchasers of Shares will include
both institutional and retail investors. Applicants believe that the Funds will
be particularly attractive to institutional and retail investors seeking returns
in excess of the respective Fund's benchmark index.

     As in the case of Index ETFs, the Funds can be bought or sold like stocks
any time throughout each trading day at market prices that should normally be
close to NAV; are relatively tax-efficient investment vehicles to the extent
that the Funds can minimize capital gains by eliminating from their portfolios
low cost basis securities through the in-kind redemption process; offer
relatively low expenses compared to other actively managed investment companies
with similar investment objectives and strategies; publish the composition of
their portfolios every day, giving them largely transparent investment
portfolios; and immediately reinvest dividends received on Portfolio Securities.

     C.   Procedures to Address Potential Conflicts of Interest.

     As described below, the material aspects of the Advisor's or any Fund
Subadvisor's investment methodology, and the mechanics and timing of
reconstituting or rebalancing, or other principal strategies for a Fund will be
disclosed in the applicable Fund's Prospectus. In addition, on each Business Day
(as defined below), before commencement of trading in Shares on the Stock
Exchange, the Fund will disclose on the Distributor's website the identities and
quantities of the Portfolio Securities and other assets held by the Fund that
will form the basis for the Fund's calculation of NAV at the end of the Business
Day. Applicants will therefore be providing full and continuous disclosure of
the composition and characteristics of the Fund's Portfolio Securities. The
Advisor's and any Fund Subadvisor's Code of Ethics or policies and procedures
will prohibit them from informing other clients of any changes in the
methodology or Portfolio Securities of a Fund until such information is made
available to the public. As a result, the Advisor's (or a Fund Subadvisor's)
clients will not have access to information which serves as the basis for
management of the Funds and therefore will not have any trading advantage over
other investors. Applicants further believe that the disclosure of a Fund's
Portfolio Securities would be unlikely to lead to "front running" or
"free-riding" (where other persons mirror the Fund's investment strategies
without paying the Fund's advisory fees) any more than is the case with Index

                                  Page 8 of 44



ETFs now trading. Similarly, given the liquid nature of the Portfolio
Securities, the Applicants believe that it is unlikely that the announcement of
a Fund's Portfolio Securities or Creation List (as defined below) will lead to
any market disruption.

     The investment personnel of the Advisor's quantitative equity research
group and portfolio management group will be involved in the final preparation
and updating of the methodology and in determining whether to make any changes
in Portfolio Securities. In addition to investment personnel of the Advisor,
officers of the respective Trust and certain technology personnel (such as staff
responsible for putting information on the Fund's website) may have access to
information respecting changes to be made in Portfolio Securities prior to
public announcement of such changes. The Advisor's Code of Ethics or policies
and procedures, however, will prohibit the disclosure by its officers and
employees of changes in the methodology and in Portfolio Securities prior to the
public announcement of changes in Portfolio Securities or methodology, as
applicable.

     Pursuant to Rule 206(4)-7 under the Advisers Act, the Advisor has, and any
Fund Subadvisor will have, written policies and procedures designed to prevent
violations of the Advisers Act and the rules thereunder. The Advisor and any
Fund Subadvisor have also adopted or will adopt policies and procedures to
detect and prevent insider trading, as required under Section 204A of the
Advisers Act, that, taking into account the nature of their business, are
reasonably designed to prevent the misuse of material non-public information in
violation of the Advisers Act, Exchange Act and rules thereunder. In addition,
like the Advisor, the Distributor has adopted a Code of Ethics as required by
Rule 17j-1 under the 1940 Act that contains provisions reasonably necessary to
prevent Access Persons (as defined in Rule 17j-1) from engaging in any conduct
prohibited by the rule.

     D.   Capital Structure and Voting Rights; Book Entry.

     Shareholders of a Fund will have one vote per share with respect to matters
regarding the respective Trust or the respective Fund for which a shareholder
vote is required consistent with the requirements of the 1940 Act, the rules
promulgated thereunder and state laws applicable to Massachusetts business
trusts.

     Shares will be registered in book-entry form only and the Funds will not
issue Share certificates. The Depository Trust Company, a limited purpose trust
company organized under the laws of the State of New York ("DTC"), or its
nominee, will be the record or registered owner of all outstanding Shares.
Beneficial ownership of Shares (owners of such beneficial interests referred to
herein as "Beneficial Owners") will be shown on the records of DTC or DTC
participants ("DTC and DTC Participants"). Shareholders will exercise their
rights in such securities indirectly through the DTC and DTC Participants. The
references herein to owners or holders of such Shares shall reflect the rights
of persons holding an interest in such securities as they may indirectly
exercise such rights through the DTC and DTC Participants, except as otherwise
specified. No shareholder shall have the right to receive a certificate
representing Shares. Delivery of all notices, statements, shareholder reports
and other communications will be at the respective Fund's expense through the
customary practices and facilities of the DTC and DTC Participants.

                                  Page 9 of 44



     E.   Exchange Listing.

     Shares will be listed on a Stock Exchange and trade in the secondary market
in the same manner as other equity securities. Except as permitted by the relief
requested from Section l7(a), no promoter, principal underwriter (e.g., the
Distributor) or affiliated person of the Fund or any affiliated person of such
person will be an Authorized Participant, as defined below, or make a market in
Shares. Neither the principal underwriter (e.g., the Distributor) nor any other
affiliated person of the Fund, the Advisor, any Fund Subadvisor, or its promoter
will maintain a secondary market in Shares. One or more Market Makers will be
assigned to the Shares.(13) As long as the Funds operate in reliance on the
requested Order, the Shares will be listed on a Stock Exchange. None of the
Trusts, the Advisor, the Fund Subadvisors or the Distributor is an affiliate of
a Stock Exchange.

     F.   Sales of Shares.

     Each Fund will sell Shares to investors through Authorized Participants (as
defined below) only in Creation Units through the Distributor on a continuous
basis at the NAV per share next determined after an order in proper form is
received. In order to keep costs at a low level and permit each Fund to be as
fully invested as possible, Shares generally will be purchased utilizing an
"in-kind" process in Creation Units in exchange for the deposit, by the
purchaser through Authorized Participants, of a particular portfolio of
securities (the "Deposit Securities" and each a "Deposit Security") designated
by the Advisor, together with the deposit or refund of a specified cash payment
as the case may be ("Cash Component"-collectively with the Deposit Securities, a
"Portfolio Deposit"). A Trust will issue and sell Creation Units of the
applicable Fund on any day that the Trust is open for business, including as
required by Section 22(e) of the 1940 Act (each, a "Business Day"). The NAV of
each Fund will normally be determined as of the close of the regular trading
session on the New York Stock Exchange (ordinarily 4:00 p.m. Eastern Time) on
each Business Day. However, the NAV of certain Funds may be determined prior to
4:00 p.m. Eastern Time on each Business Day. Information regarding the
determination of a Fund's NAV will be disclosed in its Prospectus and SAI.

     For Funds that utilize an "in-kind" process, a Creation Unit will generally
be purchased or redeemed from the Funds for a basket of Deposit Securities or
Fund Securities (as defined below) that corresponds pro rata, to the extent
practicable, to the securities held by the Funds plus a specified cash payment;
however, in certain cases, there may be differences between a basket of Deposit
Securities or Fund Securities (as defined below) and a true pro rata slice of a


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(13)  If Shares are listed on The NASDAQ Stock Market LLC ("Nasdaq") or a
      similar electronic Stock Exchange (including NYSE Arca, Inc. ("NYSE
      Arca")), one or more member firms of that Stock Exchange will act as
      Market Maker and maintain a market for Shares trading on that Stock
      Exchange. On Nasdaq, no particular Market Maker would be contractually
      obligated to make a market in Shares. However, the listing requirements on
      Nasdaq, for example, stipulate that at least two Market Makers must be
      registered in Shares to maintain a listing. In addition, on Nasdaq and
      NYSE Arca, registered Market Makers are required to make a continuous
      two-sided market or subject themselves to regulatory sanctions.

                                 Page 10 of 44



Fund's portfolio.(14) Fund Securities (as defined below) received on redemption
of a Creation Unit may not be identical to Deposit Securities deposited in
connection with purchases of Creation Units for the same day.

     In addition to the Cash Component, the Funds may substitute a cash-in-lieu
amount to replace any Deposit Security or Fund Security (as defined below) of a
Fund that is a "to-be-announced transaction" or "TBA Transaction." A TBA
Transaction is a method of trading mortgage-backed securities. In a TBA
Transaction, the buyer and seller agree upon general trade parameters such as
agency, settlement date, par amount and price. The actual pools delivered
generally are determined two days prior to the settlement date. The amount of
the substituted cash-in-lieu amount in the case of TBA Transactions will be
equivalent to the value of the TBA Transaction listed as a Deposit Security or
Fund Security (as defined below).(15)

     The Funds' "in-kind" policy will minimize portfolio turnover and brokerage
expenses. However, over time, the Trust may conclude that operating on an
exclusively "in-kind" basis for one or more Funds may present operational
problems for such Funds. Those circumstances may include situations when a
Deposit Security may not be available in sufficient quantity for delivery, may
not be eligible for transfer through the Shares Clearing Process (defined
below), may not be eligible for trading by an Authorized Participant (defined
below) or the party for which it is acting (including due to local trading
restrictions such as requirements that securities be traded only for cash in
local currency) or other circumstances. Therefore, each Fund may permit or
require, under certain circumstances, an in-kind purchaser to substitute a
cash-in-lieu amount or a different security in lieu of depositing some or all of
the Deposit Securities.

     In order for the Trusts to preserve maximum efficiency and flexibility, the
Trusts reserve the right to determine in the future that Shares of one or more
of the Funds may be purchased in Creation Units on a cash-only basis. The
decision to permit cash-only purchases of Creation Units, to the extent made at
all in the future, would be made if the respective Trust and the Advisor or Fund
Subadvisor (if any) believed such method would substantially minimize such
Trust's transactional costs or would enhance such Trust's operational
efficiencies. For example, on days when a rebalancing of a Fund's portfolio is
required, the Advisor might prefer to receive payment for the Creation Units in
cash rather than in-kind securities so that it has the liquid resources at hand
for the Trust to make the necessary purchases. If a Fund were to receive in-kind
securities on such a day, it would have to then sell many of such securities and
acquire different securities, thus incurring transaction costs which could have
been avoided (or at least minimized) if the Fund had received payment for the
Creation Units in cash.


--------------
(14)  For example, in certain instances, a security may not be readily
      available. In addition, it is often impossible to break up Fixed Income
      Securities beyond certain minimum sizes needed for transfer and
      settlement, which may account for certain differences between a basket of
      Deposit Securities or Fund Securities and a true pro rata slice of a
      Fund's portfolio.

(15)  Applicants expect that a cash-in-lieu amount would replace any TBA
      Transaction that is listed as a Deposit Security or Fund Security (as
      defined below) of any Fund.

                                 Page 11 of 44



     In order to defray the transaction expenses, including brokerage and
operational processing costs and part or all of the spread between the expected
bid and offer side of the market related to such Deposit Securities and/or
substitute securities, that will be incurred by a Fund when investors purchase
or redeem Creation Units, and other expenses, such as custody fees, stamp taxes
and the like, each Fund will impose purchase and redemption transaction fees
("Transaction Fees") to be borne only by such purchasers or redeemers. Where a
Fund permits an in-kind purchaser to substitute cash or a different security in
lieu of depositing a portion of the Deposit Securities, the purchaser may be
assessed a higher Transaction Fee to cover the cost of purchasing those
securities and/or disposing of the substituted securities. The exact amounts of
such Transaction Fees will be determined separately for each Fund. The
Transaction Fee is designed to protect the continuing shareholders of a Fund
against the dilutive costs associated with the transfer or purchase of Portfolio
Securities in connection with the purchase of Creation Units and with the
transfer or sale of Portfolio Securities in connection with the redemption of
Creation Units. The Transaction Fees relevant to each Fund and the method of
calculating these Transaction Fees will be fully disclosed in the Prospectus
and/or SAI of such Fund. Transaction Fees will be limited to amounts that have
been determined by the Advisor or the Fund Subadvisor (if any) to be appropriate
and will take into account transaction and operational processing costs
associated with the relevant Deposit Securities and Fund Securities (as defined
below) of the Funds. Variations in the Transaction Fees may be imposed as
disclosed in each Fund's Prospectus and/or SAI, in accordance with Rule 22d-1
under the 1940 Act, and the method of determining such variations will be
disclosed in each Fund's Prospectus and/or SAI. Applicants may determine to
increase, decrease or otherwise modify a Transaction Fee. Such changes and
variations will be effected by an amendment or supplement to the then current
registration statement. In all cases, such Transaction Fees will be limited in
accordance with requirements of the Commission applicable to management
investment companies offering redeemable securities.

     Creation Units will be aggregations of at least 25,000 Shares. The
Applicants recognize that each Share is issued by an investment company and,
accordingly, the acquisition of any Shares by an investment company, whether
acquired from the Fund or in the secondary market, shall be subject to the
restrictions of Section 12(d)(1) of the 1940 Act except as permitted by an
exemptive order or other applicable law, rule or regulation that permits
investment companies to invest in a Fund beyond those limitations.(16)

     The Funds' Custodian, in consultation with the Advisor and/or the Fund
Subadvisor (if any), will make available on each Business Day, immediately prior
to the opening of trading on the Stock Exchange, a list of the names and the
required number of shares of each Deposit Security included in the current
Portfolio Deposit (based on information at the end of the previous Business Day)
for the relevant Fund. Such Portfolio Deposit will be applicable, subject to any
adjustments as described below, in order to effect purchases of Creation Units
of a given Fund until such time as the next-announced Portfolio Deposit
composition is made available. In the same manner, the Applicants or the
Custodian will make available the previous day's Cash Component as well as the
estimated Cash Component for the current day.


--------------
(16)  See note 6, supra, regarding the Section 12(d)(1) Order received by First
      Trust Exchange-Traded Fund, et al.

                                 Page 12 of 44



     Creation Units may be purchased through an "Authorized Participant" which
is either (1) a "Participating Party," i.e., a broker-dealer or other
participant in the Shares Clearing Process (defined below) through the
Continuous Net Settlement System of the National Securities Clearing
Corporation, a clearing agency that is registered with the Commission (the
"NSCC"), or (2) a DTC Participant, which in either case has executed an
agreement with the Distributor and the Transfer Agent, with respect to purchases
and redemptions of Creation Units (a "Participant Agreement"). In connection
with International Funds, the Distributor and Transfer Agent will enter into one
or more Participant Agreements with DTC Participants that have international
operational capabilities. An investor does not have to be an Authorized
Participant to purchase Creation Units, but must place an order through, and
make appropriate arrangements with, an Authorized Participant. The Distributor
will be responsible for transmitting orders it receives to the respective Fund's
Transfer Agent. Authorized Participants making payment for Creation Units must
either (1) initiate instructions through the Continuous Net Settlement System of
the NSCC as such processes have been enhanced to effect purchases and
redemptions of Creation Units (the "Shares Clearing Process") or (2) deposit the
Portfolio Deposit with the respective Trust "outside" the Shares Clearing
Process through the facilities of DTC, subject to the following. The Shares
Clearing Process is not currently available for purchases (or redemptions) of
Creation Units of Shares issued by International Funds or by other Funds with
respect to which one or more Deposit Securities or Fund Securities (as defined
below), as applicable, are ineligible for clearing and settlement through DTC or
would otherwise cause the Creation Unit to be ineligible for the Shares Clearing
Process (International Funds, together with such other Funds, "Ineligible
Funds"); hence, an entity purchasing (or redeeming) such Shares must do so
"outside" the Shares Clearing Process. (See Section III.I below.) Once the
Custodian has been notified of an order to purchase Shares of an International
Fund, the Custodian will provide such information to the relevant
sub-custodian(s) of each such International Fund.

     All standard orders to purchase a Creation Unit must be received by a
Fund's Transfer Agent or Distributor, as applicable, no later than the order
cut-off time as described in the Participant Agreement (ordinarily 4:00 p.m.
Eastern Time) (the "Order Cut-Off Time") on the date such order is placed, in
order for the creation of the Creation Units to be effected based on the NAV of
the Shares as next determined on such date. In the case of custom orders,(17)
the purchase order must be received by the Fund's Transfer Agent or Distributor,
as applicable, no later than one hour prior to the Order Cut-Off Time (or such
other time as specified in the Fund's Prospectus and/or SAI). Once a purchase
order has been placed with the Distributor and received by the Transfer Agent,
the Distributor shall cause the Advisor, Fund Subadvisor (if any) and Custodian


--------------
(17)  A custom order may be placed by an Authorized Participant in the event
      that the applicable Trust permits or requires the substitution of an
      amount of cash to be added to the Cash Component to replace any Deposit
      Security which may not be available in sufficient quantity for delivery or
      which may not be eligible for trading by such Authorized Participant or
      the investor for which it is acting. A Fund may require custom orders for
      the purchase of Creation Units to be placed earlier in the day (for
      example, on days when the generally accepted close of the Stock Exchange
      or the applicable fixed income security market occurs earlier than normal
      (such as the day before a holiday)). In addition, it is possible that
      orders to purchase a Creation Unit of a Fund may not be accepted on any
      day when the applicable fixed income security markets are closed.

                                 Page 13 of 44



to be informed. With respect to International Funds, the Custodian will then
inform the appropriate sub-custodian(s). The Authorized Participant will deliver
to appropriate sub-custodian(s), on behalf of itself or the Beneficial Owner,
the relevant Deposit Securities (or cash-in-lieu amount and any substitute
securities), minus any Transaction Fee. Deposit Securities must be delivered to
the accounts maintained at the applicable sub-custodians; provided, however,
that if a Deposit Security is an ADR or similar domestic instrument, it may be
delivered to the Fund's Custodian.

     The Distributor may reject any order to purchase Shares that is not
submitted in proper form. In addition, a Fund may reject a purchase order
transmitted to it if: (1) the purchaser or group of related purchasers, upon
obtaining the Shares ordered, would own 80% or more of the outstanding Shares of
such Fund; (2) the required Portfolio Deposit is not delivered; (3) the
acceptance of the Portfolio Deposit would have certain adverse tax consequences,
such as causing the Fund (if it has elected to be treated as a regulated
investment company ("RIC") for U.S. federal income tax purposes) to no longer
meet the requirements of a RIC under the Internal Revenue Code of 1986, as
amended (the "Code"); (4) the acceptance of the Portfolio Deposit would, in the
opinion of the applicable Trust, be unlawful, as in the case of a purchaser who
was banned from trading in securities; (5) the acceptance of the Portfolio
Deposit would otherwise, in the discretion of the Trust or the Distributor, have
an adverse effect on the applicable Trust, relevant Fund or the rights of
Beneficial Owners of the Fund; or (6) there exist circumstances outside the
control of the Trust or the Fund that make it impossible to process purchases of
Shares for all practical purposes. Examples of such circumstances include: acts
of God or public service or utility problems such as fires, floods, extreme
weather conditions and power outages resulting in telephone, telecopy and
computer failures; market conditions or activities causing trading halts;
systems failures involving computer or other information systems affecting the
Fund, the Advisor, the Distributor, the Custodian, any relevant sub-custodian,
the Transfer Agent, a Fund Subadvisor, NSCC or any other participant in the
purchase process; the imposition by a foreign government or a regulatory body of
controls, or other monetary, currency or trading restrictions which directly
affect an International Fund's Portfolio Securities; and similar extraordinary
events.

     The Distributor will issue or cause the issuance of confirmations of
acceptance, and will be responsible for delivering a Prospectus or summary
prospectus,(18) if applicable, to those persons purchasing Creation Units and
for maintaining records of both the orders placed with it and the confirmations
of acceptance furnished by it.

     In general, Shares in a Creation Unit will be delivered to the purchaser
upon the deposit of a Portfolio Deposit in payment for a Creation Unit.
Notwithstanding the foregoing, to the extent contemplated by a Participant
Agreement, Creation Units will be issued to an Authorized Participant despite
the fact that the corresponding Portfolio Deposits have not been received in
part or in whole, in reliance on the undertaking of such Authorized Participant
to deliver the missing Deposit Securities as soon as possible, which undertaking
shall be secured by such Authorized Participant's delivery and maintenance of
sufficient collateral pending delivery of the missing Deposit Securities, as


--------------
(18)  As defined in the Summary Prospectus Rule (a "Summary Prospectus").

                                 Page 14 of 44



described in the applicable Participant Agreement. The Participant Agreement
will permit the Fund to buy the missing Deposit Securities at any time and will
subject the Authorized Participant to liability for any shortfall between the
cost to the applicable Trust of acquiring such Deposit Securities and the value
of the collateral. The Prospectus and/or SAI of the relevant Fund may contain
further details relating to such collateral procedures.

     1.   Creation Procedures Applicable to the Funds. Other than for Ineligible
Funds, an entity purchasing Creation Units may use the Shares Clearing Process
which has been designed to provide trade instructions and the transfer of the
requisite Portfolio Deposit to the respective Trust, along with the appropriate
Transaction Fee. Upon the deposit of such Portfolio Deposit in payment for such
Creation Units placed through the Distributor, such Creation Units will be
delivered to the purchaser thereof.

     An entity purchasing Creation Units outside the Shares Clearing Process
will be using a manual line-by-line position movement of each Deposit Security
and hence may be required to pay a higher Transaction Fee than would have been
charged had the creation been effected through the Shares Clearing Process. The
higher Transaction Fee and the method of calculating such Transaction Fee will
be disclosed in the relevant Fund's Prospectus and/or SAI. Upon the deposit of
the requisite Portfolio Deposit in payment for Creation Units placed through the
Distributor, such Creation Units will be delivered to the purchasers thereof.
(See Section III.I below regarding settlement and clearing procedures for
Ineligible Funds outside of the Shares Clearing Process.)

     Subject to the conditions that (i) a properly completed irrevocable
purchase order has been submitted by the Authorized Participant (either on its
own or on another investor's behalf) not later than the Order Cut-Off Time on
the date such request is submitted, and (ii) arrangements satisfactory to the
applicable Trust are in place for payment of the Cash Component and any other
cash amounts which may be due, the respective Trust will accept the order,
subject to its right (and the right of the Distributor or Advisor) to reject any
order not submitted in proper form.

     Once the applicable Trust has accepted an order, upon the next
determination of the NAV per Share of the relevant Fund, such Trust will confirm
the issuance, against receipt of payment, of a Creation Unit at such NAV per
Share. The Distributor will then transmit or cause the transmission of a
confirmation of acceptance to the Authorized Participant that placed the order.

     Upon the deposit of a Portfolio Deposit in payment for a Creation Unit,
Shares in a Creation Unit will be delivered to the purchaser.(19) When the
Custodian has confirmed that the required Deposit Securities included in the
Portfolio Deposit (or the cash value thereof) have been delivered to the


--------------
(19)  As indicated above, to the extent contemplated by a Participant
      Agreement, Creation Units will be issued to such Authorized Participant
      notwithstanding the fact that the corresponding Portfolio Deposit has not
      been received in part or in whole, in reliance on the undertaking of the
      Authorized Participant to deliver the missing Deposit Securities as soon
      as possible, which undertaking shall be secured by such Authorized
      Participant's delivery and maintenance of collateral.

                                 Page 15 of 44



Custodian, the Custodian shall notify the Distributor, and the applicable Trust
will issue and cause delivery of the Creation Unit of the Fund.

     With respect to International Funds, the sub-custodian(s) will confirm to
the Custodian that the required Deposit Securities have been delivered, and the
Custodian will then notify the Advisor and Distributor. The Custodian will cause
the sub-custodian(s) of each International Fund to maintain an account into
which the Authorized Participant shall deliver, on behalf of itself or the party
on whose behalf it is acting, the Deposit Securities included in the designated
Portfolio Deposit (or the cash value of all or a part of such Deposit
Securities, in the case of a permitted or required cash purchase or cash-in-lieu
amount). Deposit Securities must be maintained at the applicable local
sub-custodian(s).

     G.   Pricing.

     The price of Shares trading on the Stock Exchange will be based on a
current bid/offer market. The price of Shares of any Fund, like the price of all
publicly traded securities, is subject to factors such as supply and demand, as
well as the current value of the Portfolio Securities held by such Fund. No
secondary sales will be made to brokers at a concession by the Distributor or by
a Fund. Transactions involving the sale of Shares on the Stock Exchange will be
subject to customary brokerage commissions and charges. Although, based on
conventional trading ranges, Applicants currently expect that the initial price
per Share of Shares of the Initial Fund will fall in the range of $20 to $200,
Applicants have not yet established the initial value per Share for the Initial
Fund.

     H.   Redemption.

     Beneficial Owners of Shares may sell their shares in the secondary market
but must accumulate enough Shares to constitute a Creation Unit in order to
redeem through a Trust. An order to redeem Creation Units of a Fund may only be
effected by or through an Authorized Participant. Creation Units will be
redeemable at the NAV next determined after receipt of a request for redemption
by a Trust. If the "in-kind" process is being utilized, Shares generally will be
redeemed in Creation Units in exchange for a particular portfolio of securities
("Fund Securities" and individually a "Fund Security").(20) The Trust will
redeem Shares of each Fund on any Business Day. Consistent with the provisions
of Section 22(e) of the 1940 Act and Rule 22e-2 under the 1940 Act, the right to
redeem will not be suspended, nor payment upon redemption delayed, except as
provided by Section 22(e) of the 1940 Act and as provided by the relief for


--------------
(20)  A Fund will comply with the federal securities laws in accepting Deposit
      Securities and satisfying redemptions with Fund Securities, including that
      the Deposit Securities and Fund Securities are sold in transactions that
      would be exempt from registration under the Securities Act. In accepting
      Deposit Securities and satisfying redemptions with Fund Securities that
      are restricted securities eligible for resale pursuant to Rule 144A under
      the Securities Act, the Fund will comply with the conditions of Rule 144A,
      including in satisfying redemptions with such Rule 144A eligible
      restricted Fund Securities. The Prospectus and/or SAI for a Fund will also
      state that an Authorized Participant that is not a Qualified Institutional
      Buyer ("QIB") as defined in Rule 144A under the Securities Act will not be
      able to receive, as part of a redemption, restricted securities eligible
      for resale under Rule 144A.

                                 Page 16 of 44



International Funds requested herein. Redemption requests must be received by
the Order Cut-Off Time (ordinarily 4:00 p.m. Eastern Time) to be redeemed that
day. In the case of custom redemptions(21) the order must be received by the
Transfer Agent or Distributor, as applicable, no later than 3:00 p.m. Eastern
Time (or such other time as specified in the Fund's Prospectus and/or SAI). The
applicable Trust's Custodian, through the NSCC, will make available immediately
prior to the opening of business on the Stock Exchange (currently 9:30 a.m.
Eastern Time) on each Business Day, the list of Deposit Securities (the
"Creation List") which will be applicable to a purchase and the list of Fund
Securities (the "Redemption List") that will be applicable to redemption
requests received in proper form on that day (each subject to possible amendment
or correction). In some instances, the Creation List may differ from the
Redemption List. The Creation List and the Redemption List may differ in order
to assist the Advisor in rebalancing a Fund or as the result of corporate
actions.

     Each Fund will have the right to make redemption payments in cash, in-kind
or a combination of each, provided the value of its redemption payments equals
the NAV per Share. At the discretion of the Fund, a Beneficial Owner might also
receive the cash equivalent of a Fund Security upon request because, for
instance, it was restrained by regulation or policy from transacting in the
securities perhaps because of another transaction with or for the issuer of
those securities. A specific example might be the presence of the securities on
an investment banking firm's restricted list. With respect to International
Funds, this could also occur under certain circumstances, such as where it may
not be permissible under current law or foreign stock exchange regulations to
operate on an in-kind basis. In addition, certain holders of Shares of
International Funds may be subject to unfavorable income tax treatment if they
are entitled to receive in-kind redemption proceeds, in which case the
International Fund may adopt a policy that such holders may redeem Creation
Units solely for cash. The Applicants currently contemplate that unless cash
redemptions are available or specified for a Fund, the redemption proceeds for a
Creation Unit generally will consist of Fund Securities plus or minus a "Cash
Redemption Amount" as the case may be (collectively a "Fund Redemption"). The
Cash Redemption Amount is cash in an amount equal to the difference between the
NAV of the Creation Unit being redeemed and the market value of the Fund
Securities. Accordingly, to the extent that the Fund Securities on the
Redemption List have a value greater than the NAV of the Shares being redeemed,
a cash payment equal to the differential is required to be paid by the redeeming
investor to the respective Fund. A redeeming investor also will pay a
Transaction Fee calculated in the same manner as a Transaction Fee payable in
connection with the purchase of a Creation Unit. To the extent that any amounts
payable to a Fund by the redeeming investor exceed the amount of the Cash
Redemption Amount, the investor will be required to deliver payment to the Fund.

     To the extent contemplated by a Participant Agreement, in the event the
Authorized Participant has submitted a redemption request in proper form and is
unable to transfer all of part of the Creation Unit to be redeemed to the
Transfer Agent, on behalf of a Fund, at or prior to the Order Cut-Off Time on


--------------
(21)  Custom redemption orders may be placed by an Authorized Participant in
      the event that the applicable Trust permits or requires the substitution
      of an amount of cash to replace any Fund Securities which may not be
      eligible for trading by such Authorized Participant or the investor for
      which it is effecting the transaction or otherwise at the discretion of
      the applicable Trust.

                                 Page 17 of 44



the date such redemption request is submitted, the Transfer Agent may
nonetheless accept the redemption request in reliance on the undertaking by the
Authorized Participant to deliver the missing Shares as soon as possible, which
undertaking shall be secured by the Authorized Participant's delivery and
maintenance of collateral pending delivery of the missing Shares. The
Participant Agreement will permit the applicable Trust, on behalf of the Fund,
to purchase the missing Shares at any time and will subject the Authorized
Participant to liability for any shortfall between the cost to the applicable
Trust of acquiring such Shares and the value of the collateral. The Prospectus
and/or SAI of the relevant Fund may contain further details relating to such
collateral procedures.

     1.   Redemption Procedures Applicable to the Funds. Other than for
International Funds and other Ineligible Funds, Creation Units may generally be
redeemed through the Shares Clearing Process. Procedures for such redemptions
are analogous (in reverse) to those for purchases of Creation Units through the
Shares Clearing Process. Creation Units may also be redeemed outside the Shares
Clearing Process; however, a higher Transaction Fee may be charged. As noted
above, redemptions of Creation Units of International Funds and other Ineligible
Funds will be made only outside the Shares Clearing Process. (See Section III.I
below regarding settlement and clearing procedures for Ineligible Funds outside
of the Shares Clearing Process.) As also discussed above, a redeemer will pay a
Transaction Fee to offset the Fund's trading costs, operation processing costs,
brokerage commissions and other similar costs incurred in transferring the Fund
Securities from its account to the account of the redeeming investor.(22) An
entity redeeming Shares outside the Shares Clearing Process may be required to
pay a higher Transaction Fee than would have been charged had the redemption
been effected through the Shares Clearing Process. A redeemer receiving cash in
lieu of one or more Fund Securities may also be assessed a higher Transaction
Fee on the cash-in-lieu portion to cover the costs of selling such securities,
including all the costs listed above plus all or part of the spread between the
expected bid and offer side of the market relating to such Fund Securities. This
higher Transaction Fee will be assessed in the same manner as the Transaction
Fee incurred in purchasing Creation Units using a cash-in-lieu portion as
described above and will be calculated in the manner as disclosed in the Fund's
Prospectus and/or SAI. In the case of Shares of International Funds, upon
redemption of Creation Units and taking delivery of the Fund Securities into the
securities account of the Beneficial Owner or the Authorized Participant acting
on behalf of such Beneficial Owner, such person must maintain appropriate
security arrangements with a broker-dealer, bank or other custody provider in
each jurisdiction in which any of such Fund Securities are customarily traded.
If neither the Beneficial Owner nor the Authorized Participant acting on behalf
of such Beneficial Owner has appropriate arrangements to take delivery of the
Fund Securities in the applicable jurisdiction(s) and it is not possible to make
other such arrangements, or if it is not possible to effect deliveries of the


--------------
(22)  As indicated above, to the extent contemplated by the Participant
      Agreement, in the event the Authorized Participant has submitted a
      redemption request in proper form and is unable to transfer all or part of
      the Creation Unit to be redeemed to the Transfer Agent, on behalf of the
      Fund, at or prior to Order Cut-Off Time on the date such redemption
      request is submitted, the Transfer Agent may nonetheless accept the
      redemption request in reliance on the undertaking by the Authorized
      Participant to deliver the missing Shares as soon as possible, which
      undertaking shall be secured by the Authorized Participant's delivery and
      maintenance of collateral pending delivery of the missing Shares.

                                 Page 18 of 44



Fund Securities in such jurisdiction(s) and in certain other circumstances,(23)
the International Fund may in its discretion exercise its option to redeem such
Shares for cash, and the redeeming Beneficial Owner will be required to receive
its redemption proceeds in cash. In such case, the investor will receive a cash
payment equal to the NAV (next determined after receipt of the redemption
request) times the number of Shares in a Creation Unit of the relevant
International Fund, minus the Transaction Fee.

     A redemption request outside the Shares Clearing Process will be considered
to be in proper form if (i) a duly completed request form is received by the
Transfer Agent from the Authorized Participant on behalf of itself or another
redeeming investor at a time specified by the respective Trust, and (ii)
arrangements satisfactory to the respective Trust are in place for the
Authorized Participant to transfer or cause to be transferred to such Trust the
Creation Unit being redeemed through the book-entry system of the DTC on or
before contractual settlement of the redemption request. As discussed above, in
certain circumstances, each Fund in its discretion may require or permit cash to
be substituted for a Fund Security.

     Because each Fund will redeem Creation Units in-kind (except as otherwise
specified in this Application), the Funds generally will not have to maintain
significant cash reserves for redemptions. This will allow the assets of the
Funds, under normal circumstances, to be as fully invested as possible.
Accordingly, the Funds will be able to be more fully invested than certain other
investment products that must allocate a greater portion of their assets for
cash redemptions.

     I.   Settlement and Clearing Outside the Shares Clearing Process.

     It is anticipated that Ineligible Funds settling and clearing outside of
the Shares Clearing Process will generally settle and clear as follows. In
particular, (i) U.S. government securities and any cash will clear and settle
through the Federal Reserve System, (ii) Shares of the Funds, U.S. equity
securities, and U.S. corporate and non-corporate (other than U.S. government)
Fixed Income Securities will generally clear and settle through DTC and (iii)
non-U.S. Fixed Income Securities, non-U.S. equity securities and non-U.S. money
market securities will clear and settle through the appropriate foreign
sub-custodian and Euroclear or another standard clearance and settlement
mechanism of the applicable non-U.S. jurisdiction. The Custodian will monitor
the movement of the Deposit Securities and will instruct the movement of the
Shares only upon validation that the Deposit Securities have settled correctly
or that required collateral is in place. More specifically, purchases of
Creation Units of Ineligible Funds are expected to settle as follows: on the
settlement date, an Authorized Participant will transfer Deposit Securities that
are U.S. corporate and non-corporate Fixed Income Securities (other than U.S.


--------------
(23)  The Applicants note that certain holders of Shares of particular
      International Funds may be subject to unfavorable income tax treatment if
      they are entitled to receive in-kind redemption proceeds. In such cases, a
      Trust may adopt a policy with respect to such International Fund that such
      holders of Shares may redeem Creation Units solely for cash.

                                 Page 19 of 44



government securities) or U.S. equity securities through DTC to a DTC account
maintained by the Ineligible Funds' Custodian or foreign sub-custodian, Deposit
Securities that are U.S. government securities, together with any Cash
Component, to the Custodian through the Federal Reserve System, and Deposit
Securities that are non-U.S. Fixed Income Securities, non-U.S. equity securities
and non-U.S. money market securities through the appropriate foreign
sub-custodian and Euroclear or another standard clearance and settlement
mechanism of the applicable non-U.S. jurisdiction. Once the Custodian has
verified the receipt of all the Deposit Securities (or in the case of failed
delivery of one or more of the missing Deposit Securities, required collateral),
and the receipt of the Cash Component, the Custodian will notify the Distributor
and the Advisor. The Trust will issue Creation Units and the Custodian will
deliver the Shares representing the Creation Unit to the Authorized Participant
through DTC. DTC will then credit the Authorized Participant's DTC account. The
clearance and settlement of a redemption transaction essentially reverses the
process described above. After a Fund has received a tender for redemption of a
Creation Unit in proper form and the Authorized Participant transfers Shares
representing the Creation Unit to the Custodian through DTC, the Fund will cause
the Custodian to initiate procedures to transfer the requisite Fund Securities
and any Cash Redemption Amount. On the settlement date, assuming the Custodian
has verified receipt of the Shares representing the Creation Units, the
Custodian will transfer Fund Securities through the appropriate channels.

     Shares of each Ineligible Fund will be debited or credited by the Custodian
directly to the DTC accounts of the Authorized Participants. Pending delivery of
the missing Deposit Securities, Authorized Participants will be required to
provide collateral to cover the failed delivery of missing Deposit Securities in
connection with an "in-kind" creation of Shares. In case of a failed delivery of
one or more Deposit Securities, the Funds will hold the collateral until the
delivery of such Deposit Securities. The Funds will be protected from failure to
receive the Deposit Securities because the Custodian will not effect the Fund's
side of the transaction (the issuance of Shares) until the Custodian has
received confirmation of receipt of the Authorized Participant's incoming
Deposit Securities (or has received collateral to cover the failed delivery of
missing Deposit Securities) and the Cash Component. In the case of redemption
transactions, the Funds will be protected from failure to receive Creation Units
because the Custodian will not effect the Fund's side of the transaction (the
delivery of Fund Securities and the Cash Redemption Amount) until the Fund's
Transfer Agent has received confirmation of receipt of the Authorized
Participant's incoming Creation Units. In order to simplify the transfer agency
process and align the settlement of Shares with the settlement of the Deposit
Securities and Fund Securities, the Funds plan to settle transactions in U.S.
equity securities, U.S. government securities, corporate Fixed Income Securities
and non-corporate Fixed Income Securities (other than U.S. government
securities) and Shares on the same T+3 (as described below) settlement cycle.

     Applicants do not believe that the clearing and settlement process
described above for Ineligible Funds outside the Shares Clearing Process will
affect the arbitrage of Shares of the Ineligible Funds.(24)


--------------
(24)  The Applicants note that Shares of the Ineligible Funds typically will
      trade and settle on a trade date plus three business days ("T+3") basis.
      Where this occurs, the Applicants believe that Shares of each Ineligible
      Fund will trade in the secondary market at prices that reflect interest
      and coupon payments on Portfolio Securities through the Shares' T+3
      settlement date. As with other investment companies, the 1940 Act requires
      the Funds to calculate NAV based on the current market value of portfolio
      investments, and does not permit the Funds to reflect in NAV interest and
      coupon payments not due and payable. Therefore, to the extent that Shares
      of the Funds may trade in the secondary market at a price that reflects

                                 Page 20 of 44



     J.   Dividends, Distributions and Taxes.

     Dividends from net investment income will be declared and paid at least
annually by each Fund in the same manner as by other open-end investment
companies. Certain of the Funds may pay dividends, if any, on a quarterly or
more frequent basis. Dividends will be paid to Beneficial Owners of record in
the manner described below. Distributions of realized capital gains, if any,
generally will be declared and paid once per year, but a Fund may make
distributions on a more frequent basis to comply with the distribution
requirements of the Code, in all events in a manner consistent with the
provisions of the 1940 Act. Dividends and other distributions on Shares of each
Fund will be distributed on a pro rata basis to Beneficial Owners of Shares.
Dividend payments will be made through the DTC and the DTC Participants to
Beneficial Owners of record with amounts received from each Fund.

     Each Fund that elects to be treated as a RIC for U.S. federal income tax
purposes intends to make additional distributions to the extent necessary (i) to
distribute the annual investment company taxable income of the Fund, plus any
net capital gains, and (ii) to avoid imposition of the excise tax imposed by
Section 4982 of the Code. The Board will reserve the right to declare special
dividends if, in its reasonable discretion, such action is necessary or
advisable to preserve the status of a Fund as a RIC or to avoid imposition of
income or excise taxes on undistributed income.

     K.   Shareholder Transaction and Operational Fees and Expenses.

     No sales charges for purchases of Shares of any Fund will be imposed. Each
Fund will charge a Transaction Fee, calculated and imposed as described above,
in connection with purchase and redemption of Creation Units of its Shares. From
time to time and for such periods as the Applicants may determine, the
Transaction Fees for purchase or redemption of Creation Units of any Fund may be
increased, decreased or otherwise modified, not to exceed amounts approved by
the Board and disclosed in the relevant Prospectus and/or SAI or a supplement or
amendment to the then current registration statement.

     All other expenses incurred in the operation of a Trust will be borne by
the applicable Trust and allocated among the various Funds, except to the extent
specifically assumed by the Advisor, any Fund Subadvisor, or some other party.
Operational fees and expenses incurred by a Trust that are directly attributable
to a specific Fund will be allocated and charged to that Fund. Such expenses may
include, but will not be limited to, the following: investment advisory fees
(including subadvisory fees), custody fees, brokerage commissions, Commission
registration fees, licensing fees, Stock Exchange listing fees, fees associated


--------------
      interest and coupon payments due on a T+3 settlement date, the Applicants
      anticipate that such Shares may trade in the secondary market at a slight
      premium to NAV that reflects these interest and coupon payments. The
      Applicants do not believe that this apparent premium will have any impact
      on arbitrage activity or the operations of the Ineligible Funds. The
      Market Makers and other institutional investors who would take advantage
      of arbitrage activity have full access to this information and regularly
      consider such information when buying an individual Fixed Income Security
      or baskets of Fixed Income Securities.

                                 Page 21 of 44



with securities lending, 12b-1 fees(25) and other costs properly payable by each
Fund. Common expenses and expenses which are not readily attributable to a
specific Fund will be allocated on a pro rata basis or in such other manner as
deemed equitable, taking into consideration the nature and type of expense and
the relative sizes of each Fund. Such expenses may include, but will not be
limited to, the following: fees and expenses of the Trustees who are not
"interested persons" (as defined in the 1940 Act) of the Trust; legal and audit
fees; certain licensing fees; administration and accounting fees; costs of
preparing, printing and mailing Prospectuses, Summary Prospectuses (if any) and
SAIs; costs of preparing, printing and mailing semi-annual and annual reports
(together, "Shareholder Reports"); costs of preparing, printing and mailing
proxy statements and other documents required for regulatory purposes and for
their distribution to existing shareholders; Transfer Agent fees; and insurance
premiums. All operational fees and expenses incurred by a Trust will be accrued
and allocated to each Fund on a daily basis, except to the extent expenses are
specifically assumed by the Advisor or some other party.

     L.   Dividend Reinvestment Service.

     The Trusts will not make the DTC book entry Dividend Reinvestment Service
available for use by Beneficial Owners for reinvestment of their dividends.
Brokers may, however, offer a dividend reinvestment service which uses dividends
to purchase Shares on the secondary market at market value in which case
brokerage commissions, if any, incurred in purchasing such Shares will be an
expense borne by the individual Beneficial Owners participating in such a
service.

     M.   Availability of Information.

     The Applicants believe that a great deal of information will be available
to prospective investors about the Funds. The Distributor's website
(www.ftportfolios.com), which will be publicly available prior to the public
offering of Shares, will include the current Prospectus and Summary Prospectus
(if any) for each Fund that may be downloaded. The website will include
additional quantitative information updated on a daily basis, including, for
each Fund, (1) daily trading volume, the prior Business Day's reported NAV,
either the mid-point of the bid/ask spread at the time of calculation of such
NAV (the "Bid/Ask Price")(26) or the closing price, and a calculation of the
premium and discount of the Bid/Ask Price or closing price against the NAV, and
(2) data in chart format displaying the frequency distribution of discounts and
premiums of the daily Bid/Ask Price or closing price against the NAV, within
appropriate ranges, for each of the four previous calendar quarters. On each
Business Day, before commencement of trading in Shares on the Stock Exchange,
the Fund will disclose on the website the identities and quantities of the
Portfolio Securities and other assets held by the Fund that will form the basis


--------------
(25)  A Trust may be authorized to implement a plan under Rule 12b-1 under the
      1940 Act on behalf of a Fund and to assess a 12b-1 fee of up to 25 basis
      points, such fee to be calculated on the average daily NAV of the
      respective Fund. Such plan, if implemented, will be disclosed in the
      Fund's Prospectus.

(26)  The Bid/Ask Price of a Fund is determined using the highest bid and the
      lowest offer on the Stock Exchange as of the time of calculation of such
      Fund's NAV. The records relating to Bid/Ask Prices will be retained by the
      Funds and their service providers.

                                 Page 22 of 44



for the Fund's calculation of NAV at the end of the Business Day. The website
and information will be publicly available at no charge.(27)

     Investors interested in a particular Fund can also obtain the applicable
Trust's SAI, each Fund's Shareholder Reports and its Form N-CSR. The respective
Trust's SAI and Shareholder Reports are available free upon request from the
Trust, and those documents and the Form N-CSR may be viewed on-screen or
downloaded from the Commission's website at http://www.sec.gov.

     In addition, because the Shares are listed on a Stock Exchange, prospective
investors have access to information about the product over and above what is
normally available about a security of an open-end investment company.
Information regarding market price and volume is and will be continually
available on a real-time basis throughout the day on brokers' computer screens
and other electronic services. The Stock Exchange or a major market data vendor
will disseminate widely every 15 seconds throughout the trading day an amount
representing, on a per Share basis, the sum of the current value of the Deposit
Securities and the estimated Cash Component. The Applicants are not involved in,
or responsible for, the calculation or dissemination of any such amount and make
no warranty as to its accuracy.

     N.   Sales and Marketing Materials; Prospectus Disclosure.

     The Applicants will take appropriate steps as may be necessary to avoid
confusion in the public's mind between a Fund and a conventional "open-end
investment company" or "mutual fund." Although each Trust is or will be
classified and registered under the 1940 Act as an open-end management
investment company, neither the Trusts nor any Fund will be marketed or
otherwise held out as a "mutual fund" in light of the features, described in
this Application, that make each Fund significantly different from what the
investing public associates with a conventional mutual fund. Instead, each Fund
will be marketed as an "actively managed exchange-traded fund." No Fund
marketing materials (other than as required by Form N-1A) will reference an
"open-end fund" or "mutual fund," except to compare and contrast a Fund with
conventional mutual funds. Further, in all marketing materials where the
features or method of obtaining, buying or selling Shares traded on the Stock
Exchange are described, there will be an appropriate statement or statements to
the effect that Shares are not individually redeemable.

     With respect to the Prospectus, Summary Prospectus (if any), SAI,
Shareholder Reports, and any marketing or advertising materials, the same
approach will be followed. For example, with respect to disclosure in the
Prospectus and Summary Prospectus (if any), concerning the description of a Fund
and its Shares, each Fund will observe the following policies: (1) the term
"mutual fund" will not be used except to compare and contrast a Fund with
conventional mutual funds; (2) the term "open-end investment company" will be
used in the Fund's Prospectus only to the extent required by Form N-1A or other
securities laws requirements, and this phrase will not be included on the cover


--------------
(27)  Under accounting procedures followed by the Funds, trades made on the
      prior Business Day ("T") will be booked and reflected in NAV on the
      current Business Day ("T+1"). Accordingly, the Funds will be able to
      disclose at the beginning of the Business Day the portfolio that will form
      the basis for the NAV calculation at the end of the Business Day.

                                 Page 23 of 44



page of the Fund's Prospectus; (3) the Fund's Prospectus or Summary Prospectus
(if any) will set forth the fact that the Shares will be listed on the Stock
Exchange and will be redeemable in Creation Units only; (4) the Fund's
Prospectus will disclose that the owners of Shares may acquire Shares from a
Fund and tender those Shares for redemption to a Fund in Creation Units only;
and (5) the Fund's Prospectus will disclose that the secondary market price of a
Share may be less, more, or equal in value to the NAV of such Share. The
detailed explanation of the purchase and redemption procedures for Creation
Units will be included in the Fund's SAI.

     Neither a Trust nor any of the Funds will be advertised or marketed as
open-end investment companies, i.e., as mutual funds, which offer individually
redeemable securities. Any advertising material in which features of obtaining,
buying or selling Creation Units are described or in which there is reference to
redeemability will prominently disclose that Shares are not individually
redeemable and that owners of Shares may acquire Shares from a Fund and tender
those Shares for redemption to a Fund in Creation Units only.

     Each Fund's Prospectus and/or SAI will also state that, while Creation
Units of Shares may be redeemed, brokerage commissions and other costs may be
associated with aggregating a sufficient number of Shares to redeem them in a
Creation Unit. After a Fund's Shares have traded for twelve months or more, the
Fund's Prospectus and annual report (or website) will provide supplementary
information on market premiums or discounts relative to the NAV to enable
present Beneficial Owners and prospective investors to evaluate the relative
desirability of the Shares' intraday marketability versus a conventional mutual
fund's redeemability at NAV.

     O.   Third-Party Broker-Dealer Issues.

     Each Fund's Prospectus and/or SAI will indicate that the proposed method by
which Shares will be purchased and traded may raise certain issues under
applicable securities laws. Creation Units will be offered continuously to the
public. Because new Shares may be created and issued on an ongoing basis, at any
point during the life of a Fund, a "distribution," as such term is used in the
Securities Act, may be occurring. Broker-dealers and other persons will be
cautioned in the Prospectus and/or SAI that some activities on their part may,
depending on the circumstances, result in their being deemed participants in a
distribution in a manner which could render them statutory underwriters and
subject them to the prospectus delivery and liability provisions of the
Securities Act.

     For example, a broker-dealer firm and/or its client may be deemed a
statutory underwriter if it takes Creation Units after placing an order with the
Distributor, breaks them down into the constituent Shares and sells the Shares
directly to customers, or if it chooses to couple the purchase of a supply of
new Shares with an active selling effort involving solicitation of secondary
market demand for Shares. The applicable Fund's Prospectus and/or SAI will state
that a determination of whether one is an underwriter must take into account all
the facts and circumstances pertaining to the activities of the broker or its
client in the particular case, and that the examples mentioned above should not
be considered a complete description of all the activities that could lead to a
categorization as a statutory underwriter.

                                 Page 24 of 44



     The relevant Prospectus and/or SAI will also state that dealers who are not
"underwriters" but are participating in a distribution (as contrasted to
ordinary secondary trading transactions), and thus dealing with Shares that are
part of an "unsold allotment" within the meaning of Section 4(3)(C) of the
Securities Act, would be unable to rely on the prospectus-delivery exemption
provided by Section 4(3) of the Securities Act. Firms that do incur a
prospectus-delivery obligation with respect to Shares will be reminded that
under Securities Act Rule 153, a prospectus-delivery obligation under Section
5(b)(2) of the Securities Act owed to a member of the Stock Exchange in
connection with a sale on the Stock Exchange is satisfied by the fact that the
Fund's Prospectus is available from the Stock Exchange upon request. The
Prospectus and/or SAI also will note that the prospectus delivery mechanism
provided in Rule 153 is only available with respect to transactions on a Stock
Exchange. Applicants also note that Section 24(d) of the 1940 Act provides that
the exemption provided by Section 4(3) of the Securities Act shall not apply to
any transaction in a redeemable security issued by an open-end management
investment company.

          P.   Qualification as a Regulated Investment Company.

     If a Fund qualifies for, and elects treatment as, a RIC for U.S. federal
income tax purposes, then such Fund will generally not be subject to U.S.
federal income tax on its income to the extent it distributes substantially all
of its investment company taxable income and net capital gains and satisfies
other applicable requirements of the Code.

IV.  REQUEST FOR EXEMPTIVE RELIEF AND LEGAL ANALYSIS

     The Applicants request a Commission order under Section 6(c) of the 1940
Act, for an exemption from Sections 2(a)(32), 5(a)(1), 22(d) and 22(e) of the
1940 Act and Rule 22c-1 under the 1940 Act and under Sections 6(c) and 17(b) of
the 1940 Act for an exemption from Section 17(a) of the 1940 Act.

     Section 6(c) of the 1940 Act provides that the Commission may exempt any
person, security, or transaction, or any class of persons, securities, or
transactions, if and to the extent that such exemption is necessary or
appropriate in the public interest and consistent with the protection of
investors and the purposes fairly intended by the policy and provisions of the
1940 Act.

     A.   Sections 2(a)(32) and 5(a)(1) of the 1940 Act.

     Section 5(a)(1) of the 1940 Act defines an "open-end company" as a
management investment company that is offering for sale or has outstanding any
redeemable security of which it is the issuer. Section 2(a)(32) of the 1940 Act
defines a redeemable security as any security, other than short-term paper,
under the terms of which the holder, upon its presentation to the issuer, is
entitled to receive approximately his proportionate share of the issuer's
current net assets, or the cash equivalent. Because Shares will not be
individually redeemable, a possible question arises as to whether the
definitional requirements of a "redeemable security" or an "open-end company"
under the 1940 Act would be met if such Shares are viewed as non-redeemable
securities. In light of this possible analysis, the Applicants request an order

                                 Page 25 of 44



under Section 6(c) granting an exemption from Sections 5(a)(1) and 2(a)(32) that
would permit each Trust to register as an open-end management investment company
and redeem Shares in Creation Units only.

     Investors may purchase Shares in Creation Units from each Fund. Creation
Units are always redeemable in accordance with the provisions of the 1940 Act.
Owners of Shares may purchase the requisite number of Shares and tender the
resulting Creation Unit for redemption. Moreover, listing on a Stock Exchange
will afford all holders of Shares the ability to buy and sell Shares throughout
the day in the secondary market. Because the market price of Creation Units will
be disciplined by arbitrage opportunities, investors should be able to sell
Shares in the secondary market at prices that do not vary substantially from
their NAV.

     Applicants believe that the Funds will not present any new issues with
respect to the exemptions which allow for current Index ETFs and actively
managed ETFs(28) to redeem their shares only in Creation Units. While Applicants
recognize that the potential for more significant deviations between market
price and NAV exists with actively managed ETFs, that is not the case here since
each Fund's portfolio holdings will be fully transparent. As noted above, each
Fund intends to disclose on its website on each Business Day, before
commencement of trading of Shares on the Stock Exchange, the identities and
quantities of the Portfolio Securities and other assets held by the Fund that
will form the basis for the Fund's calculation of NAV at the end of the Business
Day. Since market participants will be aware, at all times, of each Fund's
Portfolio Securities and other assets which form the basis for its NAV
calculation, the risk of significant deviations between NAV and market price is
similar to that which exists in the case of Index ETFs. Further, as mentioned
herein, Applicants believe that the current disclosure requirements are
sufficient to safeguard against investor confusion. Thus, the Applicants believe
that a Fund issuing Shares as proposed is appropriate in the public interest and
consistent with the protection of investors and the purposes fairly intended by
the policy and provisions of the 1940 Act.

     B.   Section 22(d) of the 1940 Act and Rule 22c-1 under the 1940 Act.

     Section 22(d) of the 1940 Act, among other things, prohibits a dealer from
selling a redeemable security that is being currently offered to the public by
or through an underwriter, except at a current public offering price described
in the prospectus. Rule 22c-1 under the 1940 Act generally requires that a
dealer selling, redeeming, or repurchasing a redeemable security do so only at
a price based on the NAV next computed after receipt of a tender of such
security for redemption or of an order to purchase or sell such security.

     Secondary market trading in Shares will take place at negotiated prices,
not at a current offering price described in the Prospectus, and not at a price
based on NAV. Shares of each Fund will be listed on a Stock Exchange. The


--------------
(28)  See note 7, supra.

                                 Page 26 of 44



Shares will trade on and away from the Stock Exchange(29) at all times on the
basis of current bid/ask prices. Thus, purchases and sales of Shares in the
secondary market will not comply with Section 22(d) and Rule 22c-1. The
Applicants request an exemption under Section 6(c) from Section 22(d) and Rule
22c-1 to permit the Shares to trade at negotiated prices.

     The concerns sought to be addressed by Section 22(d) and Rule 22c-1 with
respect to pricing are equally satisfied by the proposed method of pricing
Shares. While there is little legislative history regarding Section 22(d), its
provisions, as well as those of Rule 22c-1, appear to have been designed to (i)
prevent dilution caused by certain riskless-trading schemes by principal
underwriters and contract dealers, (ii) prevent unjust discrimination or
preferential treatment among buyers resulting from sales at different prices,
and (iii) assure an orderly distribution of investment company shares by
eliminating price competition from brokers offering Shares at less than the
published sales price and repurchasing Shares at more than the published
redemption price.

     The Applicants believe that none of these purposes will be thwarted by
permitting Shares to trade in the secondary market at negotiated prices.
Secondary market trading in Shares does not involve the Trusts or Funds as
parties and cannot result in dilution of an investment in Shares. To the extent
different prices exist during a given trading day, or from day to day, such
variances occur as a result of third-party market forces, such as supply and
demand, not as a result of unjust or discriminatory manipulation. In light of
these constraints, Applicants do not believe that the Funds could be managed or
manipulated to produce benefits for one group of purchasers or sellers to the
detriment of others. Accordingly, the Applicants believe that secondary market
transactions in Shares will not lead to discrimination or preferential treatment
among purchasers. The Applicants contend that the proposed distribution system
also will be orderly. Shares may be sold or acquired by purchasing them on a
Stock Exchange or by creating or redeeming a Creation Unit. Therefore, no dealer
should have an advantage over another broker or dealer in the sale of Shares. In
addition, as described above, Applicants believe that in light of the fact that
the Funds will be fully transparent, arbitrage activity should ensure that
differences between NAV and market prices remain low.

     Furthermore, the Applicants believe that the ability to execute a
transaction in Shares at an intraday trading price will be a highly attractive
feature to many investors and offers a key advantage to investors over the
once-daily pricing mechanisms of conventional mutual funds. This feature would
be fully disclosed to investors, and the investors would trade in Shares in
reliance on the efficiency of the market.

     Applicants also believe that the Funds will not present any new issues with
respect to the exemptions which allow ETF shares to trade at negotiated prices.
With proper disclosure to all parties, the Funds do not create any new potential
for discrimination or preferential treatment among investors purchasing and
selling Shares in the secondary market and those purchasing and redeeming
Creation Units. The Applicants, therefore, believe that buying and selling


--------------
(29)  Consistent with Rule 19c-3 under the Exchange Act, Stock Exchange members
      are not required to effect transactions in Shares through the facilities
      of the Stock Exchange.

                                 Page 27 of 44



Shares at negotiated prices is appropriate in the public interest and consistent
with the protection of investors and the purposes fairly intended by the policy
and provisions of the 1940 Act.

     C.   Section 22(e) of the 1940 Act.

     Section 22(e) of the 1940 Act provides that:

     No registered company shall suspend the right of redemption, or postpone
the date of payment or satisfaction upon redemption of any redeemable security
in accordance with its terms for more than seven days after the tender of such
security to the company or its agent designated for that purpose for redemption,
except-

     (1)  for any period (A) during which the New York Stock
Exchange is closed other than customary weekend and holiday
closings or (B) during which trading on the New York Stock
Exchange is restricted;

     (2)  for any period during which an emergency exists as a
result of which (A) disposal by the company of securities owned by
it is not reasonably practicable or (B) it is not reasonably
practicable for such company fairly to determine the value of its
net assets; or

     (3)  for such other periods as the Commission may by order
permit for the protection of security holders of the company.

     The settlement of redemptions of Creation Units for transferring Portfolio
Securities held by the International Funds is contingent not only on the
settlement cycle of the U.S. securities markets but also on the delivery cycles
present in markets where those International Funds invest. The Applicants have
been advised that, under certain circumstances, the delivery cycles for
transferring Fund Securities into the securities accounts of redeeming
Authorized Participants or the Beneficial Owners on whose behalf they are
acting, coupled with local foreign market holiday schedules, will require a
delivery process that is longer than the seven calendar days required by Section
22(e). The Applicants therefore request relief from Section 22(e) in order to
pay in-kind redemption proceeds within the maximum number of calendar days
required for such payment or satisfaction in the principal local foreign markets
where transactions in the Portfolio Securities of each International Fund
customarily clear and settle.

     Based on information available to the Applicants, although certain holidays
may occur on different dates in subsequent years, the number of days required to
deliver redemption proceeds is not expected to exceed fifteen calendar days for
any of the Funds requiring relief from Section 22(e). Of course, it is possible
that the introduction of new or special holidays,(30) the treatment by market
participants of certain days as "informal holidays" (e.g., days on which no or


--------------
(30)  Previously unscheduled holidays are sometimes added to a country's
      calendar, and existing holidays are sometimes moved, with little advance
      notice. Any such future changes could increase the number of days
      necessary to satisfy a redemption request.

                                 Page 28 of 44



limited securities transactions occur, as a result of substantially shortened
trading hours),(31) or changes in local securities delivery practices(32) could
affect the information set forth herein at some time in the future. The SAI for
each International Fund will disclose (i) the holidays (over the period of at
least one year following the date of the SAI), if any, that are expected to
prevent the delivery of redemption proceeds in seven calendar days, and (ii) the
maximum number of days needed to deliver the proceeds for each such
International Fund. The Applicants also intend to disclose in the SAI that
redemption payments will be effected within the specified number of calendar
days following the date on which a request for redemption is made in proper
form. The Applicants expect that each International Fund will deliver redemption
proceeds within seven calendar days, except as otherwise disclosed in such
International Fund's SAI.

     The Applicants propose that allowing redemption payments for Creation Units
of an International Fund to be made within the number of days indicated above
would not be inconsistent with the intent of Section 22(e) and would adequately
afford investor protection. Congress adopted Section 22(e) to prevent
unreasonable, undisclosed or unforeseen delays in the actual payment of
redemption proceeds. Under the Applicants' proposal, the Applicants would
disclose in each International Fund's SAI that redemption payments will be
effected within a certain number of calendar days following the date on which a
request for redemption in proper form is made. Given the facts as described
above and the explanation of the reasons for what amounts to a delay typically
of a few days in the redemption process on certain occasions, the Applicants
believe that the redemption mechanism described above will not lead to
unreasonable, undisclosed or unforeseen delays in the redemption process.

     On the basis of the foregoing, the Applicants believe that (i) the
protections intended to be afforded by Section 22(e) are adequately addressed by
the proposed redemption cycles and (ii) the relief requested is appropriate in
the public interest and consistent with the protection of investors and the
purposes fairly intended by the policies and provisions of the 1940 Act.
Applicants further acknowledge that no relief obtained from the requirements of
Section 22(e) will affect any obligations the Applicants may otherwise have
under Rule 15c6-1 under the Exchange Act. Rule 15c6-1 requires that most
securities transactions be settled within three business days of the trade date.
See Investment Company Act Release No. 23860.

     D.   Section 17(a) of the 1940 Act.

     Section 17(a) of the 1940 Act generally prohibits an affiliated person of a
registered investment company, or an affiliated person of such person ("second
tier affiliates"), from selling any security to or purchasing any security from


--------------
(31)  A typical "informal holiday" includes a trading day in the relevant
      market that is immediately prior to a regularly scheduled holiday, in
      which early closures of the market or of the offices of key market
      participants may occur with little advance notice. Any shortening of
      regular trading hours on such a day could impact the analysis of the
      number of days necessary to satisfy a redemption request.

(32)  The Applicants observe that the trend internationally in local securities
      delivery practices has been a reduction in each market's standard
      settlement cycles (e.g., the U.S. markets' change to T+3 in 1995). It
      remains possible, although unlikely, that a particular market's settlement
      cycles for securities transfers could be lengthened in the future.

                                 Page 29 of 44



the company. The definition of "affiliated person" in Section 2(a)(3) of the
1940 Act includes any person that owns or controls 5% or more of an issuer's
outstanding voting securities (Section 2(a)(3)(A)), any person 5% or more of
whose outstanding voting securities are owned or controlled by another person
(Section 2(a)(3)(B)) and any person controlling, controlled by or under common
control with another person (Section 2(a)(3)(C)). Section 2(a)(9) of the 1940
Act defines "control" as the power to exercise a controlling influence and
provides that any person who owns more than 25% of the voting securities of a
company shall be presumed to control the company. The Funds may be deemed to be
controlled by the Advisor or an entity controlling, controlled by or under
common control with the Advisor and hence affiliated persons of each other. In
addition, the Funds may be deemed to be under common control with any other
registered investment company (or series thereof) advised by the Advisor or an
entity controlling, controlled by or under common control with the Advisor (an
"Affiliated Fund").

     Section 17(a) prohibits persons who are affiliated persons of a Fund under
Section 2(a)(3)(A) or (C) of the 1940 Act, by virtue of owning, respectively, 5%
or more, or more than 25% of a Fund, from purchasing or redeeming Creation Units
through in-kind transactions.

     Applicants request an exemption under Sections 6(c) and 17(b) of the 1940
Act from Section 17(a) of the 1940 Act in order to permit in-kind purchases and
redemptions of Creation Units from the Funds by persons that are affiliated
persons or second tier affiliates of the Funds solely by virtue of one or more
of the following: (i) holding 5% or more, or more than 25% of the Shares of the
respective Trust or one or more Funds; (ii) an affiliation with a person with an
ownership interest described in (i); or (iii) holding 5% or more, or more than
25%, of the shares of one or more Affiliated Funds.

     Section 17(b) authorizes the Commission to exempt a proposed transaction
from Section 17(a) if evidence establishes that the terms of the transaction,
including the consideration to be paid or received, are reasonable and fair and
do not involve overreaching, and the proposed transaction is consistent with the
policies of the registered investment company and the general provisions of the
1940 Act. Because Section 17(b) could be interpreted to exempt only a single
transaction from Section 17(a) and there may be a number of transactions by
persons who may be deemed to be affiliates, the Applicants are also requesting
an exemption from Section l7(a) under Section 6(c). See, e.g., Keystone
Custodian Funds, Inc., 21 S.E.C. 295 (l945). Applicants believe that with
respect to the relief requested pursuant to Section 17(b), the proposed
transactions are reasonable and fair and do not involve overreaching on the part
of any person concerned, the proposed transactions are consistent with the
policy of each Fund, and that the proposed transactions are consistent with the
general purposes of the 1940 Act, and with respect to the relief requested
pursuant to Section 6(c), the requested exemption for the proposed transactions
is appropriate in the public interest and consistent with the protection of
investors and the purposes fairly intended by the policy and provisions of the
1940 Act.

     Section 17(a) is intended to prohibit affiliated persons in a position of
influence or control over an investment company from furthering their own
interests by selling property that they own to an investment company at an
inflated price, purchasing property from an investment company at less than fair

                                 Page 30 of 44



value or selling or purchasing property on terms that involve overreaching. For
the reasons set forth above, the Applicants contend that no useful purpose would
be served by prohibiting the transactions described above. The composition of a
Portfolio Deposit made by a purchaser or Fund Redemption given to a redeeming
investor will be the same regardless of the investor's identity, and will be
valued under the same objective standards applied to valuing the Portfolio
Securities. It is immaterial to the Trust whether 15 or 1,500 Creation Units
exist for a given Fund. The Applicants believe that in-kind purchases and
redemptions will afford no opportunity for an affiliated person or a second tier
affiliate of a Fund described above to effect a transaction detrimental to the
other holders of its Shares. Further, any such in-kind transactions will be
based on the NAV of the relevant Fund in accordance with procedures set forth in
the Fund's registration statement.

     The Applicants also note that the ability to take deposits and make
redemptions in-kind will aid in achieving a Fund's objective(s). The Applicants
do not believe that in-kind purchases and redemptions will result in abusive
self-dealing or overreaching but rather assert that such procedures will be
implemented consistently with a Fund's objective(s) and with the general
purposes of the 1940 Act. The method of valuing Portfolio Securities held by a
Fund is the same as that used for calculating in-kind purchase or redemption
values. Therefore, no opportunity is created for the affiliates of the Funds
described above to effect a transaction detrimental to the other holders of
Shares of a Fund.

     The Applicants believe that the Funds will not present any new issues with
respect to the exemptions which allow for in-kind transactions between an ETF
and certain affiliates. All shareholders, regardless of affiliation, will be
given the same opportunities with respect to creations and redemptions in-kind.
As a result, there would not be any increased opportunity for an affiliate of a
Trust to effect a transaction detrimental to a Trust. Consequently, the
Applicants believe that the requested relief meets the standards of Sections
6(c) and 17(b) of the 1940 Act.

V.   CONDITIONS

     The Applicants agree that any order of the Commission granting the
requested relief will be subject to the following conditions:

     1.   Each Prospectus will clearly disclose that, for purposes of the 1940
Act, Shares are issued by the Fund, which is a registered investment company and
that the acquisition of Shares by investment companies and companies relying on
Sections 3(c)(1) or 3(c)(7) of the 1940 Act is subject to the restrictions of
Section 12(d)(1) of the 1940 Act, except as permitted by an exemptive order that
permits registered investment companies to invest in a Fund beyond the limits in
Section 12(d)(1), subject to certain terms and conditions, including that the
registered investment company enter into an agreement with the Fund regarding
the terms of the investment.

     2.   As long as the Funds operate in reliance on the requested order, the
Shares of the Funds will be listed on a Stock Exchange.

                                 Page 31 of 44



     3.   Neither the Trusts nor any Fund will be advertised or marketed as an
open-end investment company or a mutual fund. Each Fund's Prospectus will
prominently disclose that the Fund is an actively managed exchange-traded fund.
Each Prospectus will prominently disclose that the Shares are not individually
redeemable shares and will disclose that the owners of the Shares may acquire
those Shares from the Fund and tender those Shares for redemption to the Fund in
Creation Units only. Any advertising material that describes the purchase or
sale of Creation Units or refers to redeemability will prominently disclose that
the Shares are not individually redeemable and that owners of the Shares may
acquire those Shares from the Fund and tender those Shares for redemption to the
Fund in Creation Units only.

     4.   The website for the Funds, which is and will be publicly accessible at
no charge, will contain the following information, on a per Share basis, for
each Fund: (a) the prior Business Day's NAV, the Bid/Ask Price or closing price,
and a calculation of the premium or discount of the Bid/Ask Price or closing
price against such NAV; and (b) data in chart format displaying the frequency
distribution of discounts and premiums of the daily Bid/Ask Price or closing
price against the NAV, within appropriate ranges, for each of the four previous
calendar quarters (or for the life of the Fund, if shorter).

     5.   The Prospectus and annual report (or website) for each Fund will
include: (a) the information listed in condition 4(b), (i) in the case of the
Prospectus (or website), for the most recently completed year (and the most
recently completed quarter or quarters, as applicable) and (ii) in the case of
the annual report (or website), for the immediately preceding five years (or for
the life of the Fund, if shorter) and (b) the cumulative total return and the
average annual total return based on NAV and Bid/Ask Price or closing price
calculated on a per Share basis for one-, five- and ten-year periods (or for the
life of the Fund, if shorter).

     6.   On each Business Day, before commencement of trading in Shares on the
Stock Exchange, the Fund will disclose on its website the identities and
quantities of the Portfolio Securities and other assets held by the Fund that
will form the basis for the Fund's calculation of NAV at the end of the Business
Day.

     7.   The Advisor or Fund Subadvisor (if any), directly or indirectly, will
not cause any Authorized Participant (or any investor on whose behalf an
Authorized Participant may transact with the Fund) to acquire any Deposit
Security for the Fund through a transaction in which the Fund could not engage
directly.

     8.   The requested order will expire on the effective date of any
Commission rule under the 1940 Act that provides relief permitting the
operation of actively managed exchange-traded funds.

VI.  NAMES AND ADDRESSES

     The following are the names and addresses of the Applicants:

                                 Page 32 of 44



            First Trust Advisors L.P.
            First Trust Portfolios L.P.
            First Trust Exchange-Traded Fund
            First Trust Exchange-Traded Fund II
            First Trust Exchange-Traded Fund III
            First Trust Exchange-Traded AlphaDEX(R) Fund
            120 East Liberty Drive
            Suite 400
            Wheaton, Illinois  60187

     All questions concerning this Application should be directed to the persons
listed on the facing page of this Application.

                                 Page 33 of 44



                                    FIRST TRUST EXCHANGE-TRADED FUND

                                    By: /s/  James A. Bowen
                                        ------------------------------
                                        Name:  James A. Bowen
                                        Title:  President


                                    FIRST TRUST EXCHANGE-TRADED FUND II

                                    By: /s/  James A. Bowen
                                        ------------------------------
                                        Name:  James A. Bowen
                                        Title:  President


                                    FIRST TRUST EXCHANGE-TRADED FUND III

                                    By: /s/  James A. Bowen
                                        ------------------------------
                                        Name:  James A. Bowen
                                        Title:  President


                                    FIRST TRUST EXCHANGE-TRADED ALPHADEX(R) FUND

                                    By: /s/  James A. Bowen
                                        ------------------------------
                                        Name:  James A. Bowen
                                        Title:  President


                                    FIRST TRUST ADVISORS L.P.

                                    By: /s/  James A. Bowen
                                        ------------------------------
                                        Name:  James A. Bowen
                                        Title:  President


                                    FIRST TRUST PORTFOLIOS L.P.

                                    By: /s/  James A. Bowen
                                        ------------------------------
                                        Name:  James A. Bowen
                                        Title:  President


Dated:  July 15, 2010

                                 Page 34 of 44



VII. AUTHORIZATION AND SIGNATURES

     In accordance with Rule 0-2(c) under the 1940 Act, the Applicants state
that all actions necessary to authorize the execution and filing of this
Application have been taken, and the person signing and filing this document is
authorized to do so on behalf of First Trust Advisors L.P. James A. Bowen is
authorized to sign and file this document on behalf of First Trust Advisors L.P.
pursuant to the general authority vested in him as President.


                                    FIRST TRUST ADVISORS L.P.

                                    By: /s/  James A. Bowen
                                        ------------------------------
                                        Name:  James A. Bowen
                                        Title:  President

Dated as of:  July 15, 2010

                                 Page 35 of 44



     In accordance with Rule 0-2(c) under the 1940 Act, the Applicants state
that all actions necessary to authorize the execution and filing of this
Application have been taken, and the person signing and filing this document is
authorized to do so on behalf of the First Trust Exchange-Traded Fund, First
Trust Exchange-Traded Fund II, First Trust Exchange-Traded Fund III ("Trust
III") and First Trust Exchange-Traded AlphaDEX(R) Fund (collectively, the
"Trusts"). James A. Bowen is authorized to sign and file this document on behalf
of the Trusts pursuant to (a) the general authority vested in him as President
and (b)(1) for the Trusts other than Trust III, resolutions adopted by the
respective Boards of Trustees, which are attached hereto as Appendix A-1 and (2)
for Trust III, the written consent of the sole initial trustee, which is
attached hereto as Appendix A-2.


                                    FIRST TRUST EXCHANGE-TRADED FUND

                                    FIRST TRUST EXCHANGE-TRADED FUND II

                                    FIRST TRUST EXCHANGE-TRADED FUND III

                                    FIRST TRUST EXCHANGE-TRADED ALPHADEX(R)
                                      FUND

                                    By: /s/  James A. Bowen
                                        ------------------------------
                                        Name:  James A. Bowen
                                        Title:  President

Dated as of:  July 15, 2010

                                 Page 36 of 44



     In accordance with Rule 0-2(c) under the 1940 Act, the Applicants state
that all actions necessary to authorize the execution and filing of this
Application have been taken, and the person signing and filing this document is
authorized to do so on behalf of First Trust Portfolios L.P. James A. Bowen is
authorized to sign and file this document on behalf of First Trust Portfolios
L.P. pursuant to the general authority vested in him as President.


                                    FIRST TRUST PORTFOLIOS L.P.

                                    By: /s/  James A. Bowen
                                        ------------------------------
                                        Name:  James A. Bowen
                                        Title:  President

Dated as of:  July 15, 2010

                                 Page 37 of 44



               VERIFICATION OF APPLICATION AND STATEMENT OF FACT

     In accordance with Rule 0-2(d) under the 1940 Act, the undersigned states
that he has duly executed the attached Application for an order, for and on
behalf of FIRST TRUST ADVISORS L.P.; that he is President of such company; and
that all actions taken by the stockholders, directors and other bodies necessary
to authorize the undersigned to execute and file such instrument have been
taken. The undersigned further states that he is familiar with such instrument,
and the contents thereof, and that the facts therein set forth are true to the
best of his knowledge, information and belief.


                                    By: /s/  James A. Bowen
                                        ------------------------------
                                        Name:  James A. Bowen
                                        Title:  President

                                 Page 38 of 44



               VERIFICATION OF APPLICATION AND STATEMENT OF FACT

     In accordance with Rule 0-2(d) under the 1940 Act, the undersigned states
that he has duly executed the attached Application for an order, for and on
behalf of FIRST TRUST EXCHANGE-TRADED FUND, FIRST TRUST EXCHANGE-TRADED FUND II,
FIRST TRUST EXCHANGE-TRADED FUND III and FIRST TRUST EXCHANGE-TRADED ALPHADEX(R)
FUND; that he is President of such companies; and that all actions taken by the
stockholders, directors and other bodies necessary to authorize the undersigned
to execute and file such instrument have been taken. The undersigned further
states that he is familiar with such instrument, and the contents thereof, and
that the facts therein set forth are true to the best of his knowledge,
information and belief.


                                    By: /s/  James A. Bowen
                                        ------------------------------
                                        Name:  James A. Bowen
                                        Title:  President

                                 Page 39 of 44



               VERIFICATION OF APPLICATION AND STATEMENT OF FACT

     In accordance with Rule 0-2(d) under the 1940 Act, the undersigned states
that he has duly executed the attached Application for an order, for and on
behalf of FIRST TRUST PORTFOLIOS L.P.; that he is President of such company; and
that all actions taken by the stockholders, directors and other bodies necessary
to authorize the undersigned to execute and file such instrument have been
taken. The undersigned further states that he is familiar with such instrument,
and the contents thereof, and that the facts therein set forth are true to the
best of his knowledge, information and belief.


                                    By: /s/  James A. Bowen
                                        ------------------------------
                                        Name:  James A. Bowen
                                        Title:  President

                                 Page 40 of 44



                                  APPENDIX A-1

        THE BOARDS OF TRUSTEES OF THE FIRST TRUST EXCHANGE-TRADED FUND,
  THE FIRST TRUST EXCHANGE-TRADED FUND II, AND THE FIRST TRUST EXCHANGE-TRADED
            ALPHADEX(R) FUND EACH ADOPTED THE FOLLOWING RESOLUTIONS

              WHEREAS, the First Trust Exchange-Traded Fund III (the
         "Initial Trust") previously received an order (the "Prior
         Order") from the Securities and Exchange Commission (the
         "Commission") granting an exemption from various provisions
         of the Investment Company Act of 1940 (the "1940 Act") to
         permit, among other things (a) series of certain open-end
         management investment companies (each, a "Fund") to issue
         shares ("Shares") redeemable in large aggregations only
         ("Creation Units"); (b) secondary market transactions in
         Shares to occur at negotiated market prices; (c) certain
         series to pay redemption proceeds, under certain
         circumstances, more than seven days after the tender of
         Shares for redemption; and (d) certain affiliated persons of
         the series to deposit securities into, and receive
         securities from, the series in connection with the purchase
         and redemption of Creation Units; and

              WHEREAS, the Prior Order granted relief not only to the
         Initial Trust and series thereof, but also to any other
         open-end management company existing or created in the
         future and existing or future series thereof that may use
         active management investment strategies; and

              WHEREAS, the Prior Order requires that the Funds
         relying on it invest primarily in equity securities traded
         in the United States markets and/or foreign equity
         securities (collectively, "Equity Securities"); and

              WHEREAS, the Initial Trust, the First Trust
         Exchange-Traded Fund, the First Trust Exchange-Traded Fund
         II, and the First Trust Exchange-Traded AlphaDEX(R) Fund
         (collectively, the "Trusts") seek additional exemptive
         relief to establish Funds that may also invest primarily in
         securities other than Equity Securities, including, without
         limitation, fixed-income securities and investment company
         securities (collectively, "Other Securities"), or in a
         combination of Equity Securities and Other Securities;

              NOW THEREFORE BE IT

              RESOLVED, that James A. Bowen and any other appropriate
         officer of each Trust be, and each hereby is, authorized to

                                 Page 41 of 44



         prepare, execute and submit to the Securities and Exchange
         Commission, on behalf of the respective Trust and in its
         name, an Application or Applications in such form as such
         officers, or any one of them, deems necessary or appropriate
         seeking exemptions from certain provisions of the 1940 Act
         to the extent necessary to, among other things, permit Funds
         to invest primarily in Other Securities or in a combination
         of Equity Securities and Other Securities (as described in
         such Application or Applications); and it is further

              RESOLVED, that James A. Bowen and any other appropriate
         officer of the respective Trust be, and each hereby is,
         authorized and directed to take such additional actions and
         to execute and deliver on behalf of the respective Trust
         such other documents or instruments as they deem necessary
         or appropriate in furtherance of the above resolution,
         including, without limitation, the preparation, execution
         and filing of any necessary or appropriate amendment(s) or
         supplement(s) to the above-described Application or
         Applications, his or her authority therefor to be
         conclusively evidenced by the taking of any such actions or
         the execution or delivery of any such document; and it is
         further

              RESOLVED, that upon issuance of an Order of Exemption
         by the Commission in accordance with the terms and
         conditions of any Application described above, the
         respective Trust is authorized to act in accordance with the
         provisions of such Application and the related Order of
         Exemption.

                                 Page 42 of 44



                                  APPENDIX A-2

  THE SOLE INITIAL TRUSTEE OF FIRST TRUST EXCHANGE-TRADED FUND III ADOPTED THE
                    FOLLOWING RESOLUTIONS BY WRITTEN CONSENT

              WHEREAS, the First Trust Exchange-Traded Fund III ("ETF
         III") previously received an order (the "Prior Order") from
         the Securities and Exchange Commission (the "Commission")
         granting an exemption from various provisions of the
         Investment Company Act of 1940 (the "1940 Act") to permit,
         among other things (a) series of certain open-end management
         investment companies (each, a "Fund") to issue shares
         ("Shares") redeemable in large aggregations only ("Creation
         Units"); (b) secondary market transactions in Shares to
         occur at negotiated market prices; (c) certain series to pay
         redemption proceeds, under certain circumstances, more than
         seven days after the tender of Shares for redemption; and
         (d) certain affiliated persons of the series to deposit
         securities into, and receive securities from, the series in
         connection with the purchase and redemption of Creation
         Units; and

              WHEREAS, the Prior Order granted relief not only to ETF
         III and series thereof, but also to any other open-end
         management company existing or created in the future and
         existing or future series thereof that may use active
         management investment strategies; and

              WHEREAS, the Prior Order requires that the Funds
         relying on it invest primarily in equity securities traded
         in the United States markets and/or foreign equity
         securities (collectively, "Equity Securities"); and

              WHEREAS, ETF III, the First Trust Exchange-Traded Fund,
         the First Trust Exchange-Traded Fund II, and the First Trust
         Exchange-Traded AlphaDEX(R) Fund seek additional exemptive
         relief to establish Funds that may also invest primarily in
         securities other than Equity Securities, including, without
         limitation, fixed-income securities and investment company
         securities (collectively, "Other Securities"), or in a
         combination of Equity Securities and Other Securities;

              NOW THEREFORE BE IT RESOLVED, that James A. Bowen and
         any other appropriate officer of ETF III be, and each hereby
         is, authorized to prepare, execute and submit to the
         Securities and Exchange Commission, on behalf of ETF III and
         in its name, an Application or Applications in such form as
         such officers, or any one of them, deems necessary or

                                 Page 43 of 44



         appropriate seeking exemptions from certain provisions of
         the 1940 Act to the extent necessary to, among other things,
         permit Funds to invest primarily in Other Securities or in a
         combination of Equity Securities and Other Securities (as
         described in such Application or Applications); and

              FURTHER RESOLVED, that James A. Bowen and any other
         appropriate officer of ETF III be, and each hereby is,
         authorized and directed to take such additional actions and
         to execute and deliver on behalf of ETF III such other
         documents or instruments as they deem necessary or
         appropriate in furtherance of the above resolution,
         including, without limitation, the preparation, execution
         and filing of any necessary or appropriate amendment(s) or
         supplement(s) to the above-described Application or
         Applications, his or her authority therefor to be
         conclusively evidenced by the taking of any such actions or
         the execution or delivery of any such document; and

              FURTHER RESOLVED, that upon issuance of an Order of
         Exemption by the Commission in accordance with the terms and
         conditions of any Application described above, ETF III is
         authorized to act in accordance with the provisions of such
         Application and the related Order of Exemption.

                                 Page 44 of 44