0001445546-18-001376.txt : 20180312
0001445546-18-001376.hdr.sgml : 20180312
20180312172728
ACCESSION NUMBER: 0001445546-18-001376
CONFORMED SUBMISSION TYPE: DEF 14A
PUBLIC DOCUMENT COUNT: 1
CONFORMED PERIOD OF REPORT: 20171031
FILED AS OF DATE: 20180312
DATE AS OF CHANGE: 20180312
EFFECTIVENESS DATE: 20180312
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: FIRST TRUST EXCHANGE-TRADED FUND IV
CENTRAL INDEX KEY: 0001517936
IRS NUMBER: 000000000
STATE OF INCORPORATION: MA
FILING VALUES:
FORM TYPE: DEF 14A
SEC ACT: 1934 Act
SEC FILE NUMBER: 811-22559
FILM NUMBER: 18684509
BUSINESS ADDRESS:
STREET 1: 120 EAST LIBERTY DRIVE, SUITE 400
CITY: WHEATON
STATE: IL
ZIP: 60187
BUSINESS PHONE: 630-765-8000
MAIL ADDRESS:
STREET 1: 120 EAST LIBERTY DRIVE, SUITE 400
CITY: WHEATON
STATE: IL
ZIP: 60187
0001517936
S000051581
First Trust Heitman Global Prime Real Estate ETF
C000162279
First Trust Heitman Global Prime Real Estate ETF
PRME
DEF 14A
1
etf4_def14a.txt
DEFINITIVE PROXY STATEMENT
As filed with the Securities and Exchange Commission on March 12, 2018.
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SCHEDULE 14A
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material under ss. 240.14a-12
First Trust Exchange-Traded Fund IV
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
[X] No Fee Required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:(1)
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
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(2) Form, schedule or registration statement no.:
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(3) Filing party:
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(4) Date filed:
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(1) Set forth the amount on which the filing fee is calculated and state how
it was determined.
FIRST TRUST EXCHANGE-TRADED FUND IV
First Trust Heitman Global Prime Real Estate ETF (PRME)
120 East Liberty Drive, Suite 400
Wheaton, Illinois 60187
March 12, 2018
Dear Shareholders:
I am writing to notify you of an important special meeting (referred to as
the "Meeting") of the shareholders of the First Trust Heitman Global Prime Real
Estate ETF (the "Fund"), a series of First Trust Exchange-Traded Fund IV (the
"Trust"). The Meeting will be held at the Austin, Texas offices of First Trust
Advisors L.P., 500 W. 5th Street, Suite 9202, Austin, Texas 78701, on Monday,
April 23, 2018, at 12:30 p.m. Central Time.
At the Meeting, you will be asked (1) to consider and vote on a proposal to
approve a new investment sub-advisory agreement (the "New Sub-Advisory
Agreement") among the Trust, First Trust Advisors L.P. ("First Trust Advisors"),
the Fund's investment adviser, and Heitman Real Estate Securities LLC ("HRES"),
the Fund's investment sub-adviser; (2) to consider and vote on a proposal to
approve a new investment sub-sub-advisory agreement (the "New Heitman HK
Sub-Sub-Advisory Agreement") among the Trust, First Trust Advisors, HRES and
Heitman International Real Estate Securities HK Limited ("Heitman HK"), one of
the Fund's investment sub-sub-advisers; (3) to consider and vote on a proposal
to approve a new investment sub-sub-advisory agreement (the "New Heitman GmbH
Sub-Sub-Advisory Agreement" and, together with the New Sub-Advisory Agreement
and the New Heitman HK Sub-Sub-Advisory Agreement, the "New Agreements") among
the Trust, First Trust Advisors, HRES and Heitman International Real Estate
Securities GmbH ("Heitman GmbH"), one of the Fund's investment sub-sub-advisers;
and (4) to transact such other business as may properly come before the Meeting
and any adjournments or postponements thereof.
As described in the accompanying Proxy Statement, on January 5, 2018, OMAM
(HFL) Inc. redeemed its membership interests in Heitman LLC, the parent company
of HRES, Heitman HK and Heitman GmbH (the "Transaction"). As a result of the
Transaction, the then-effective sub-advisory agreement with HRES and the
then-effective sub-sub-advisory agreements with Heitman HK and Heitman GmbH,
respectively, automatically terminated. HRES, Heitman HK and Heitman GmbH
continue to provide services to the Fund on an interim basis, as permitted by
the Investment Company Act of 1940 pursuant to interim agreements that will
expire after June 4, 2018. In order for them to continue to provide services to
the Fund beyond the interim period, shareholders will be asked at the Meeting to
vote to approve each New Agreement. It is important to note that the Transaction
will not impact the day-to-day operations of the Fund, and the portfolio
managers of the Fund will remain the same. The Board of Trustees of the Fund is
recommending that shareholders of the Fund approve each New Agreement. The
approval of each New Agreement will be contingent on the approval of the other
New Agreements. Therefore, unless each New Agreement is approved by
shareholders, none of the New Agreements will become effective.
YOUR VOTE IS IMPORTANT. Please take a moment now to vote, either by
completing and returning your proxy card in the enclosed postage-paid return
envelope, by telephone or through the Internet. Your prompt response will be
much appreciated.
We appreciate your participation in this important Meeting.
Sincerely,
/s/ James A. Bowen
James A. Bowen
Chairman of the Board
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IF YOU NEED ANY ASSISTANCE, OR HAVE ANY QUESTIONS REGARDING THE PROPOSALS OR HOW
TO VOTE YOUR SHARES, PLEASE CALL THE FUND'S PROXY SOLICITOR, AST FUND SOLUTIONS,
LLC, AT (800) 284-1755 WEEKDAYS FROM 9:00 A.M. TO 10:00 P.M. EASTERN TIME.
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FIRST TRUST EXCHANGE-TRADED FUND IV
First Trust Heitman Global Prime Real Estate ETF (PRME)
120 East Liberty Drive, Suite 400
Wheaton, Illinois 60187
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To be held on April 23, 2018
at
500 W. 5th Street
Suite 9202
Austin, Texas 78701
March 12, 2018
To the Shareholders of First Trust Heitman Global Prime Real Estate ETF:
Notice is hereby given that a Special Meeting of Shareholders (referred to
as the "Meeting") of First Trust Heitman Global Prime Real Estate ETF (the
"Fund"), a series of First Trust Exchange-Traded Fund IV, a Massachusetts
business trust, will be held at the Austin, Texas offices of First Trust
Advisors L.P., 500 W. 5th Street, Suite 9202, Austin, Texas 78701, on Monday,
April 23, 2018, at 12:30 p.m. Central Time, for the following purposes:
1. To approve a new investment sub-advisory agreement among the
Trust, First Trust Advisors L.P. ("First Trust Advisors"), the Fund's
investment adviser, and Heitman Real Estate Securities LLC ("HRES"), the
Fund's investment sub-adviser ("Proposal 1");
2. To approve a new investment sub-sub-advisory agreement among the
Trust, First Trust Advisors, HRES and Heitman International Real Estate
Securities HK Limited, one of the Fund's investment sub-sub-advisers
("Proposal 2");
3. To approve a new investment sub-sub-advisory agreement among the
Trust, First Trust Advisors, HRES and Heitman International Real Estate
Securities GmbH, one of the Fund's investment sub-sub-advisers ("Proposal
3"); and
4. To transact such other business as may properly come before the
Meeting (including any adjournments or postponements).
Approval of each of Proposal 1, Proposal 2 and Proposal 3 (collectively,
the "Proposals") will be contingent on the approval of the other such Proposals.
The close of business on December 28, 2017 has been fixed as the record
date for the determination of shareholders entitled to notice of and to vote at
the Meeting and any adjournments or postponements thereof.
By Order of the Board of Trustees,
/s/ W. Scott Jardine
W. Scott Jardine
Secretary
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IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE MEETING. IN ORDER TO
AVOID DELAY AND TO ENSURE THAT YOUR SHARES ARE REPRESENTED, PLEASE VOTE AS
PROMPTLY AS POSSIBLE. YOU MAY VOTE EASILY AND QUICKLY BY MAIL, TELEPHONE OR
THROUGH THE INTERNET. TO VOTE BY MAIL, PLEASE COMPLETE AND MAIL YOUR PROXY CARD
IN THE ENCLOSED POSTAGE-PAID RETURN ENVELOPE. ALTERNATIVELY, SHAREHOLDERS MAY
VOTE BY TELEPHONE OR THROUGH THE INTERNET BY FOLLOWING THE INSTRUCTIONS ON THE
PROXY CARD. IF YOU NEED ANY ASSISTANCE, OR HAVE ANY QUESTIONS REGARDING THE
PROPOSALS OR HOW TO VOTE YOUR SHARES, PLEASE CALL THE FUND'S PROXY SOLICITOR,
AST FUND SOLUTIONS, LLC, AT (800) 284-1755 WEEKDAYS FROM 9:00 A.M. TO 10:00 P.M.
EASTERN TIME.
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FIRST TRUST EXCHANGE-TRADED FUND IV
First Trust Heitman Global Prime Real Estate ETF
(PRME)
120 East Liberty Drive, Suite 400
Wheaton, Illinois 60187
SPECIAL MEETING OF SHAREHOLDERS
to be held on April 23, 2018
at
500 W. 5th Street
Suite 9202
Austin, Texas 78701
PROXY STATEMENT
March 12, 2018
THIS PROXY STATEMENT AND THE ENCLOSED PROXY CARD WILL FIRST BE MAILED TO
SHAREHOLDERS ON OR ABOUT MARCH 19, 2018.
This Proxy Statement is furnished by the Board of Trustees (the "Board") of
First Trust Exchange-Traded Fund IV, a Massachusetts business trust (the
"Trust"), in connection with the solicitation by the Board of proxies to be
voted at the Special Meeting of Shareholders of the First Trust Heitman Global
Prime Real Estate ETF (the "Fund") to be held on Monday, April 23, 2018, at the
Austin, Texas offices of First Trust Advisors L.P. ("First Trust Advisors" or
the "Adviser"), located at 500 W. 5th Street, Suite 9202, Austin, Texas 78701,
at 12:30 p.m. Central time and at any and all adjournments or postponements
thereof (referred to collectively as the "Meeting"). A Notice of Special Meeting
of Shareholders and a proxy card accompany this Proxy Statement.
THE PROPOSALS
As discussed more fully below, shareholders of the Fund are being asked to
vote on each proposal below (each, a "Proposal" and collectively, the
"Proposals"):
1. To approve a new investment sub-advisory agreement (the "New
Sub-Advisory Agreement") among the Trust, First Trust Advisors L.P. ("First
Trust Advisors" or the "Adviser"), the Fund's investment adviser, and
Heitman Real Estate Securities LLC ("HRES" or the "Sub-Adviser"), the
Fund's investment sub-adviser;
2. To approve a new investment sub-sub-advisory agreement (the "New
Heitman HK Sub-Sub-Advisory Agreement") among the Trust, First Trust
Advisors, HRES and Heitman International Real Estate Securities HK Limited
("Heitman HK"), one of the Fund's investment sub-sub-advisers; and
3. To approve a new investment sub-sub-advisory agreement (the "New
Heitman GmbH Sub-Sub-Advisory Agreement") among the Trust, First Trust
Advisors, HRES and Heitman International Real Estate Securities GmbH
("Heitman GmbH"), one of the Fund's investment sub-sub-advisers.
In addition, such other business (if any) as may properly come before the
Meeting will be transacted.
-1-
THE BOARD RECOMMENDS THAT SHAREHOLDERS OF THE FUND VOTE "FOR" EACH
OF THE PROPOSALS.
Approval of each of Proposals 1, 2 and 3 will be contingent on the approval
of the other such Proposals.
HOW TO VOTE
Shareholders may vote by telephone or over the Internet by following the
instructions on the enclosed proxy card. Shareholders may also vote by mail by
returning the enclosed proxy card or in person by attending the Meeting.
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE
SHAREHOLDER MEETING TO BE HELD ON APRIL 23, 2018. THIS PROXY STATEMENT IS
AVAILABLE ON THE INTERNET AT:
HTTPS://WWW.FTPORTFOLIOS.COM/LOADCONTENT/GRHUOQBOGC5O. THE FUND'S MOST RECENT
ANNUAL AND SEMI-ANNUAL REPORTS ARE ALSO AVAILABLE ON THE INTERNET AT:
HTTPS://WWW.FTPORTFOLIOS.COM/RETAIL/ETF/ETFFUNDNEWS.ASPX?TICKER=PRME. THE FUND
WILL FURNISH, WITHOUT CHARGE, COPIES OF ITS MOST RECENT ANNUAL AND SEMI-ANNUAL
REPORTS TO ANY SHAREHOLDER UPON REQUEST. TO REQUEST A COPY, PLEASE WRITE TO THE
ADVISER AT 120 EAST LIBERTY DRIVE, SUITE 400, WHEATON, ILLINOIS 60187, OR CALL
(800) 621-1675.
YOU MAY CALL (800) 621-1675 FOR INFORMATION ON HOW TO OBTAIN DIRECTIONS TO
BE ABLE TO ATTEND THE MEETING AND VOTE IN PERSON.
-2-
BACKGROUND AND REASON FOR MEETING
Previously, (1) HRES served as investment sub-adviser to the Fund pursuant
to an investment sub-advisory agreement dated October 27, 2015 (the "Prior
Sub-Advisory Agreement") among the Trust, the Adviser and the Sub-Adviser; (2)
Heitman HK served as an investment sub-sub-adviser to the Fund pursuant to an
investment sub-sub-advisory agreement dated October 27, 2015 (the "Prior Heitman
HK Sub-Sub-Advisory Agreement") among the Trust, the Adviser, the Sub-Adviser
and Heitman HK; and (3) Heitman GmbH served as an investment sub-sub-adviser to
the Fund pursuant to an investment sub-sub-advisory agreement dated October 27,
2015 (the "Prior Heitman GmbH Sub-Sub-Advisory Agreement" and, together with the
Prior Sub-Advisory Agreement and the Prior Heitman HK Sub-Sub-Advisory
Agreement, the "Prior Agreements") among the Trust, the Adviser, the Sub-Adviser
and Heitman GmbH. However, as a result of the Transaction (as defined and
described below), the Prior Agreements automatically terminated. Currently,
HRES, Heitman HK and Heitman GmbH continue to provide services to the Fund on an
interim basis, as permitted by the Investment Company Act of 1940, as amended
(the "1940 Act"), pursuant to interim agreements that will expire after June 4,
2018. To permit them to continue to provide services to the Fund beyond the
interim period, at the Meeting, shareholders of the Fund will be asked to
approve the New Sub-Advisory Agreement, New Heitman HK Sub-Sub-Advisory
Agreement and New Heitman GmbH Sub-Sub-Advisory Agreement (collectively, the
"New Agreements").
Heitman LLC, a Delaware limited liability company, is a global real estate
investment management firm located at 191 North Wacker Drive, Suite 2500,
Chicago, Illinois 60606. Its operating affiliates, including HRES, Heitman HK
and Heitman GmbH (collectively referred to as "Heitman Securities Group";
Heitman HK and Heitman GmbH are collectively referred to as the
"Sub-Sub-Advisers"), each of which is a wholly-owned subsidiary of Heitman LLC,
provide investment management services in locations around the world.
Prior to the Transaction (as defined and described below), Heitman LLC had
two members: OMAM (HFL) Inc. ("OMAM") (which held 50% of the membership
interests in Heitman LLC) and KE I LLC ("KE I") (which held 50% of the
membership interests in Heitman LLC). OMAM is a wholly-owned subsidiary of OMAM
Inc., whose address is 200 Clarendon Street, 53rd Floor, Boston, Massachusetts
02116. OMAM Inc. is an indirect wholly-owned subsidiary of OM Asset Management
plc, whose address is Ground Floor, Millennium Bridge House, 2 Lambeth Hill,
London EC4V 4GG. KE I is a Delaware limited liability company whose address is
191 North Wacker Drive, Suite 2500, Chicago, Illinois 60606, and its 40 members
consist of senior officers and investment personnel of Heitman LLC and its
operating subsidiaries, including the members of the Heitman Securities Group.
On November 17, 2017, OMAM Inc. entered into a Redemption Agreement (the
"Redemption Agreement") with OMAM and Heitman LLC. Pursuant to the Redemption
Agreement, among other things, Heitman LLC agreed to redeem all of OMAM's
interests in Heitman LLC (the "Transaction") for cash consideration totaling
$110 million, payable as set forth in the Redemption Agreement. On January 5,
2018 (the "Closing Date"), the Transaction was completed. KE I now holds 99.95%
of the membership interests in Heitman LLC. No one individual holds a 10% or
more controlling interest in KE I. In conjunction with the Transaction, another
entity, KE 2 LLC ("KE 2"), a Delaware limited liability company whose address is
191 North Wacker Drive, Suite 2500, Chicago, Illinois 60606, and whose members
consist of the same individuals who are members of KE I, became a member of
Heitman LLC. KE 2 holds a nominal non-voting 0.05% of the membership interests
in Heitman LLC. Accordingly, as a result of the Transaction, Heitman LLC is
wholly owned by the members of KE I, which consist of senior officers and
-3-
investment personnel of Heitman LLC and its operating subsidiaries, including
the members of the Heitman Securities Group. As indicated above, HRES, Heitman
HK and Heitman GmbH are each a wholly-owned subsidiary of Heitman LLC. The
Transaction will not result in any changes with respect to the day-to-day
management of Heitman LLC, or to the management of Heitman Securities Group.
The consummation of the Transaction resulted in an "assignment," as that
term is used in the 1940 Act, of each of the Prior Agreements. Section 15 of the
1940 Act requires, among other things, that any investment advisory agreement,
which includes an investment sub-advisory agreement and an investment
sub-sub-advisory agreement, provide for its automatic termination in the event
of its "assignment." Accordingly, the Prior Agreements automatically terminated
on the Closing Date in accordance with their terms and the requirements of the
1940 Act. Since the Closing Date, HRES has served as investment sub-adviser to
the Fund, and Heitman HK and Heitman GmbH have each served as an investment
sub-sub-adviser to the Fund, pursuant to the Interim Agreements (as defined and
described below).
In anticipation of the completion of the Transaction and the termination of
the Prior Agreements, at the quarterly Board meeting held on December 10-11,
2017 (the "Board Meeting"), the Trustees, after careful consideration, including
discussions with representatives of the Heitman Securities Group, determined
that, following the Transaction, it would be in the best interests of the Fund
for HRES to continue to act as investment sub-adviser, and for Heitman HK and
Heitman GmbH to each continue to act as an investment sub-sub-adviser, to the
Fund. Accordingly, to ensure the continuation of portfolio management services
to the Fund after the Closing Date, as permitted by the 1940 Act and Rule 15a-4
thereunder ("Rule 15a-4"), the Board, including a majority of the Trustees who
are not "interested persons" (as defined in the 1940 Act) (the "Independent
Trustees"), approved: (1) an interim sub-advisory agreement (the "Interim
Sub-Advisory Agreement") among the Trust, First Trust Advisors and HRES; (2) an
interim sub-sub-advisory agreement (the "Interim Heitman HK Sub-Sub-Advisory
Agreement") among the Trust, First Trust Advisors, HRES and Heitman HK; and (3)
an interim sub-sub-advisory agreement (the "Interim Heitman GmbH
Sub-Sub-Advisory Agreement" and, together with the Interim Sub-Advisory
Agreement and the Interim Heitman HK Sub-Sub-Advisory Agreement, the "Interim
Agreements") among the Trust, First Trust Advisors, HRES and Heitman GmbH. The
Interim Agreements have been in effect since the Closing Date and, pursuant to
Rule 15a-4 under the 1940 Act, will be in effect no longer than through June 4,
2018 (i.e., 150 days after the Closing Date).
In addition, at the Board Meeting, the Board, including a majority of the
Independent Trustees, approved, subject to shareholder approval, each New
Agreement. Under the terms and provisions of the New Agreements, the Fund will
continue to be managed in the same manner as under the corresponding Prior
Agreements. As described in further detail in each of the Proposals, most of the
terms and provisions of each New Agreement are the same as the corresponding
terms and provisions of the applicable Prior Agreement; however, each New
Agreement will have a new effective date and initial term, and in Proposal 1, an
adjustment has been made to the provisions relating to calculation of
compensation to reflect that the Fund has been operating for more than one year.
The approval of each New Agreement is contingent on the approval of each of
the other New Agreements. Therefore, if any one of them is not approved by
shareholders, then none of them will become effective.
-4-
PORTFOLIO MANAGEMENT
The closing of the Transaction did not result in any changes to the
portfolio managers serving the Fund. The portfolio managers identified below are
currently primarily and jointly responsible for the day-to-day management of the
Fund under the applicable Interim Agreement and were also responsible for
providing such services under the applicable Prior Agreement. They will continue
to serve as portfolio managers to the Fund if shareholders approve each
applicable New Agreement.
(For purposes of the description of the portfolio management team below, HRES,
Heitman HK and Heitman GmbH are collectively referred to as "Heitman.")
JEROME W. EHLINGER, CFA
MANAGING DIRECTOR OF HRES AND LEAD PORTFOLIO MANAGER IN HEITMAN'S NORTH AMERICAN
PUBLIC REAL ESTATE SECURITIES GROUP
Jerome W. Ehlinger, CFA, has served on the Fund's portfolio management team
since 2015. Mr. Ehlinger is Managing Director of HRES and the Lead Portfolio
Manager in Heitman's North American Public Real Estate Securities group. He also
serves as a Portfolio Manager for the firm's global real estate securities
strategies. Throughout his career, Mr. Ehlinger has held a number of related
investment positions in the real estate investment trust (REIT) industry. Before
joining Heitman in 2013, Mr. Ehlinger was Lead Portfolio Manager and Head of
Real Estate Securities, Americas at DB/RREEF Real Estate. Mr. Ehlinger served as
Senior Vice President and Portfolio Manager of Heitman's real estate securities
group from 2000 to 2004. He began his career at Morgan Stanley in 1996 where he
primarily covered the REIT sector both as a sell-side analyst and as a senior
research associate at Morgan Stanley Asset Management. Mr. Ehlinger received an
MS in Finance, Investment and Banking from the University of Wisconsin-Madison
and a BS in Finance from the University of Wisconsin-Whitewater. Among other
professional affiliations, Mr. Ehlinger is a member of the National Multi
Housing Council, International Council of Shopping Centers, the CFA Institute,
the CFA Society of Chicago, and the National Association of Real Estate
Investment Trusts.
JOHN WHITE
MANAGING DIRECTOR OF HEITMAN HK AND LEAD PORTFOLIO MANAGER IN HEITMAN'S
ASIA-PACIFIC PUBLIC REAL ESTATE SECURITIES GROUP
John White has served on the Fund's portfolio management team since 2015. He is
Managing Director of Heitman HK and the Lead Portfolio Manager in Heitman's
Asia-Pacific Public Real Estate Securities group. He is an equity owner of the
firm and a member of Heitman's Management Committee. He also serves as a
Portfolio Manager for the firm's global real estate securities strategies. Mr.
White has over 20 years of experience in the public and private equity and debt
real estate markets across the Asia-Pacific region. Prior to joining Heitman in
2010, Mr. White was co-head of real estate securities at Challenger (Heitman's
Asian joint venture partner for real estate securities) for five years; he was
also senior investment manager, real estate securities at HSBC Asset Management
from 2001. Before moving to investment management, Mr. White worked in
investment banking as a senior property analyst at HSBC and as a manager -- real
estate credit at ANZ Banking Group in Australia and in South-East Asia. He began
his career as a real estate valuer at Landauer and Chesterton. Mr. White
received a BBus in Land Economy from University of Western Sydney-Hawkesbury and
a Graduate Diploma in Applied Finance and Investment from the Securities
Institute of Australia. He is a member of the Royal Institute of Chartered
Surveyors, the Asian Public Real Estate Association, the Australian Property
Institute and the Financial Services Institute of Australasia.
-5-
JACQUES PERDRIX
SENIOR VICE PRESIDENT IN HEITMAN'S EUROPEAN PUBLIC REAL ESTATE SECURITIES GROUP
Jacques Perdrix has served on the Fund's portfolio management team since 2017.
He is a Senior Vice President in Heitman's European Public Real Estate
Securities group. His role with Heitman focuses on portfolio management,
including fundamental company and market analysis. Prior to joining Heitman, Mr.
Perdrix was at Griffin Capital Management where he worked as an analyst and
assistant portfolio manager on long-only and long/short equity and fixed income
funds covering mid/large-caps on a broad range of sectors and geographies.
Previously, Mr. Perdrix worked at equity long/short hedge fund Gugner Partners
as a senior analyst and back-up trader focusing on European small/mid-caps
across all sectors. Mr. Perdrix started his career within Citigroup's Investment
Banking Division, M&A Financial Institutions Group, in both Paris and London.
Mr. Perdrix, a French national, received a Specialised Master's in Corporate
Finance from EM Lyon School of Management and a Master of Science in Management
from ESC Grenoble School of Management. He is FSA qualified.
ANDREAS WELTER
SENIOR VICE PRESIDENT IN HEITMAN'S EUROPEAN PUBLIC REAL ESTATE EQUITY GROUP
Andreas Welter has served on the Fund's portfolio management team since 2017. He
is a Senior Vice President in Heitman's European Public Real Estate Equity
group. His role with Heitman focuses on portfolio construction, fundamental
company and market analysis supporting the Portfolio Management team. Prior to
joining the firm, Mr. Welter was at Deutsche Bank AG, where he was a senior
sell-side equity research analyst for three years. In that time, Mr. Welter
covered companies in various industry sectors in Germany (e.g., real estate,
financials, construction, logistics). Previously, Mr. Welter worked at the
Middle Office & Advisory Desk of B. Metzler seel. Sohn & Co., one of Germany's
largest family-owned investment managers. Mr. Welter earned the title of
Bankkaufmann (apprenticeship in banking) from the Chamber of Commerce and
Industry Frankfurt and holds a Diploma in International Business Administration
(Diplom-Betriebswirt) from one of the top-ranked universities in Europe
(Hochschule Darmstadt).
SECTION 15(F) OF THE 1940 ACT
Section 15(f) of the 1940 Act is a safe harbor that provides in substance
that, when a sale of a controlling interest in an investment adviser occurs, the
investment adviser or any of its affiliated persons may receive any amount or
benefit in connection with the sale as long as two conditions are met. If either
condition of Section 15(f) is not met, the safe harbor is not available. The
first condition specifies that, during the three-year period immediately
following consummation of the transaction, at least 75% of the investment
company's board of directors/trustees must not be "interested persons" (as
defined in the 1940 Act) of the investment adviser or predecessor adviser.
During the three-year period immediately following the consummation of the
Transaction, it is anticipated that at least 75% of the Trustees will not be
"interested persons" (as defined in the 1940 Act) of the Sub-Adviser or either
Sub-Sub-Adviser. The second condition specifies that no "unfair burden" may be
imposed on the investment company as a result of the transaction relating to the
sale of the controlling interest in the investment adviser, or any express or
implied terms, conditions or understandings applicable thereto. The term "unfair
burden," as defined in the 1940 Act, includes any arrangement, during the
two-year period after the transaction occurs, whereby the investment adviser (or
predecessor or successor adviser), or any interested person of any such
investment adviser, receives or is entitled to receive any compensation,
directly or indirectly (i) from any person in connection with the purchase or
sale of securities or other property, to, from or on behalf of the investment
company (other than bona fide ordinary compensation as principal underwriter for
the investment company) or (ii) from the investment company or its security
holders for other than bona fide investment advisory or other services. The
Sub-Adviser and Sub-Sub-Advisers will not impose or seek to impose on the Fund
any "unfair burden" as a result of the Transaction.
-6-
PROPOSAL 1: APPROVAL OF THE PROPOSED NEW SUB-ADVISORY
AGREEMENT
HRES has served as the investment sub-adviser to the Fund since its
inception in 2015. The Prior Sub-Advisory Agreement was approved by the initial
shareholder of the Fund on November 9, 2015 and, most recently, was approved by
the Board for continuation on June 11-12, 2017. As discussed above under
"Background and Reason for Meeting," the Transaction resulted in the automatic
termination of the Prior Sub-Advisory Agreement. Currently, HRES provides
sub-advisory services to the Fund under the Interim Sub-Advisory Agreement,
which is briefly described below.
ADDITIONAL INFORMATION ABOUT HRES
HRES is responsible for the selection and ongoing monitoring of the
securities in the Fund's investment portfolio and for overseeing Heitman HK and
Heitman GmbH in the investment of the Fund's assets. HRES, located at 191 N.
Wacker Drive, 25th Floor, Chicago, Illinois 60606, is a leading global real
estate investment management firm with total assets under management of
approximately U.S. $4.6 billion as of November 30, 2017.
The names, positions with HRES and principal occupations of the persons who
are principal executive officers, managers and directors of HRES are listed
below:
--------------------------- --------------------------------------------------
NAME POSITION(S) WITH HRES AND PRINCIPAL OCCUPATION
--------------------------- --------------------------------------------------
Maury R. Tognarelli Chief Executive Officer of Heitman LLC; Manager of
HRES
--------------------------- --------------------------------------------------
Katherine M. Sandstrom Manager and Senior Managing Director of HRES;
Senior Managing Director, Heitman Public Real
Estate Securities Group; Executive Vice President
of Heitman LLC
--------------------------- --------------------------------------------------
Jerome W. Ehlinger Managing Director of HRES; Lead Portfolio Manager,
HRES
--------------------------- --------------------------------------------------
Lawrence J. Christensen Chief Financial Officer, Manager, Treasurer and
Secretary of HRES; Chief Financial Officer of
Heitman LLC
--------------------------- --------------------------------------------------
Anthony G. Stamato Executive Vice President and Chief Legal Officer
of Heitman LLC; Chief Legal Officer and Chief
Compliance Officer of HRES
--------------------------- --------------------------------------------------
The business address for each of the above is 191 N. Wacker Drive, Suite 2500,
Chicago, IL 60606.
THE INTERIM SUB-ADVISORY AGREEMENT
HRES currently provides sub-advisory services to the Fund under the Interim
Sub-Advisory Agreement. Many of the terms of the Interim Sub-Advisory Agreement
are substantially similar to those of the Prior Sub-Advisory Agreement; however,
there are some differences, including differences in provisions relating to the
effective date (which was the Closing Date), termination (not later than June 4,
2018), and compensation arrangements (to provide that compensation is to be held
in an escrow account).
-7-
The Interim Sub-Advisory Agreement is currently in effect and, unless
terminated sooner in accordance with its terms, will continue to be in effect
through the earlier of June 4, 2018 (i.e., 150 days after the completion of the
Transaction; the "Interim Termination Date") or the date on which shareholders
of the Fund approve the Fund's New Sub-Advisory Agreement. If shareholders of
the Fund do not approve the New Sub-Advisory Agreement, the Board will take such
action as it deems to be in the best interests of the Fund. In addition, the
Interim Sub-Advisory Agreement may be terminated by the Fund by action of the
Board or by a vote of a majority of the outstanding voting securities (as
defined in the 1940 Act) of the Fund upon 10 calendar days' written notice.
The rate of compensation paid to HRES is the same under the Interim
Sub-Advisory Agreement, Prior Sub-Advisory Agreement and New Sub-Advisory
Agreement. However, the compensation accrued under the Interim Sub-Advisory
Agreement is to be held in an interest-bearing escrow account with the Fund's
custodian or another bank designated by the Fund. If the New Sub-Advisory
Agreement is approved by shareholders on or before the Interim Termination Date,
the amount in the escrow account (including the interest earned) will be paid to
HRES. However, if shareholders of the Fund do not approve the New Sub-Advisory
Agreement by such date, HRES will be paid, out of the escrow account, the lesser
of: (i) any costs incurred by HRES in performing the Interim Sub-Advisory
Agreement (plus interest earned on that amount while in escrow); or (ii) the
total amount in the escrow account (plus interest earned).
COMPARISON OF CERTAIN TERMS OF THE NEW SUB-ADVISORY AGREEMENT AND PRIOR
SUB-ADVISORY AGREEMENT
Below is a brief comparison of certain terms of the Prior Sub-Advisory
Agreement to the corresponding terms of the New Sub-Advisory Agreement. Most of
the terms of the New Sub-Advisory Agreement (including, among others, those
relating to services and, subject to an adjustment to reflect the fact that the
Fund has been in existence for more than a year, fees) and the Prior
Sub-Advisory Agreement are the same. However, the New Sub-Advisory Agreement
will have a new effective date and initial term. If approved by shareholders,
the New Sub-Advisory Agreement will be effective as of the date of such approval
and will remain in effect for two years (unless sooner terminated in accordance
with its terms); thereafter, it may be continued for successive one-year periods
as described below under "Continuance." The form of New Sub-Advisory Agreement
is attached to this Proxy Statement as Exhibit A-1.
Sub-Advisory Services. As was the case under the Prior Sub-Advisory
Agreement, under the New Sub-Advisory Agreement, the Sub-Adviser will act as
sub-adviser for, and manage on a discretionary basis the investment and
reinvestment of the assets of the Fund, furnish an investment program in respect
of, make investment decisions for, and place all orders (either directly or
through the Adviser) for the purchase and sale of securities and other assets
for the Fund's investment portfolio. Under both the Prior Sub-Advisory Agreement
and the New Sub-Advisory Agreement, to the extent the Sub-Adviser retains
sub-sub-advisers at its own cost and expense as permitted under such Agreements,
the Sub-Adviser is required to (i) allocate and reallocate the Fund's assets
among the sub-sub-advisers as the Sub-Adviser determines to be appropriate, (ii)
recommend the termination of a sub-sub-adviser when appropriate and (iii)
monitor and evaluate each sub-sub-adviser's performance and report to the
Adviser on the sub-sub-adviser's performance periodically, but at least
quarterly. Additionally, as was the case under the Prior Sub-Advisory Agreement,
under the New Sub-Advisory Agreement, in the performance of its duties, the
Sub-Adviser is required, in all material respects, to do the following: (a)
satisfy any applicable fiduciary duties it may have to the Fund; (b) monitor the
-8-
Fund's investments or other instruments; (c) comply with the provisions of the
Trust's Declaration of Trust and By-laws, as amended from time to time and
communicated by the Fund or the Adviser to the Sub-Adviser in writing; (d)
comply with (i) the investment objective, policies and restrictions stated in
the Fund's most recently effective prospectus and statement of additional
information that are applicable to the Fund's investment portfolio, (ii) such
other investment policies, restrictions or instructions as the Adviser or the
Board may communicate to the Sub-Adviser in writing and (iii) any changes to the
objective, policies, restrictions or instructions required under the foregoing
(i) and (ii) as communicated to the Sub-Adviser in writing; and (e) assist in
the valuation of portfolio assets held by the Fund as reasonably requested by
the Adviser or the Fund. Further, under both the Prior Sub-Advisory Agreement
and the New Sub-Advisory Agreement, the Sub-Adviser is responsible for voting in
respect of securities held in the Fund's portfolio and agrees to exercise or not
exercise a right to vote in accordance with the Sub-Adviser's proxy voting
policy.
Brokers, Dealers, Futures Commission Merchants, Banks and Other Agents and
Counterparties. As was the case under the Prior Sub-Advisory Agreement, under
the New Sub-Advisory Agreement, unless otherwise provided by the Adviser, the
Sub-Adviser is authorized to select the brokers, dealers, futures commission
merchants, banks or any other agent or counterparty that will execute the
purchases and sales of portfolio investments for the Fund, and the Sub-Adviser
is directed to use its commercially reasonable efforts to obtain best execution,
which includes most favorable net results and execution of the Fund's orders,
taking into account all appropriate factors, including, among other things,
price, dealer spread or commission, size and difficulty of the transaction and
research or other services provided.
Fees. The New Sub-Advisory Agreement will not result in changes to the
sub-advisory fees paid to the Sub-Adviser, nor will it result in changes to any
of the Fund's other fees. Under the terms of the investment management agreement
dated October 27, 2015 between the Trust and the Adviser (the "Investment
Management Agreement"), the Adviser receives a "unitary" management fee and, in
exchange for such fee, subject to certain exclusions, the Adviser is generally
responsible for the expenses of the Fund (such expenses, the "Fund Expenses").
The Prior Sub-Advisory Agreement provided that the Adviser would pay the
Sub-Adviser a sub-advisory fee equal to 50% monthly in arrears of any remaining
monthly investment management fee paid to the Adviser for the average daily net
assets allocated to the Sub-Adviser after the average Fund Expenses for the
average daily net assets allocated to the Sub-Adviser accrued during the most
recent twelve months (or shorter period during the first eleven months of the
Agreement) are subtracted from the investment management fee for that month. The
corresponding provision of the New Sub-Advisory Agreement is the same, except
that the parenthetical reference to a shorter period during the first eleven
months of the Agreement has been omitted given that the Fund has been in
existence (and has therefore accrued Fund Expenses) for more than a year. The
Prior Sub-Advisory Agreement and New Sub-Advisory Agreement both specify that if
the average accrued Fund Expenses for any rolling average twelve-month period
are greater than the investment management fee for the twelfth month of such
period, no sub-advisory fee will be due to the Sub-Adviser for such month.
Accordingly, in general terms, (taking into account the allocation and averages
referred to above), the Sub-Adviser's compensation depends on the amount of the
Adviser's unitary management fee that remains after payment of Fund Expenses.
For the Fund's last fiscal year, after subtracting Fund Expenses as
described above, the Adviser did not retain any of its investment management
fee. Accordingly, the aggregate amount of the sub-advisory fees paid by the
Adviser to the Sub-Adviser was $0.
Payment of Expenses. As was the case under the Prior Sub-Advisory
Agreement, under the New Sub-Advisory Agreement, the Sub-Adviser agrees to pay
all expenses it incurs in connection with its activities under such Agreement
-9-
other than the cost of securities and other assets (including interest, taxes,
brokerage commissions, if any, dividend and distribution expenses from
securities sold short and/or other investment related costs and other expenses
incurred in connection with the execution of transactions) purchased for the
Fund and any extraordinary expenses incurred by the Fund, all of which shall be
paid or reimbursed by the Fund.
Limitation of Liability. As was the case under the Prior Sub-Advisory
Agreement, the New Sub-Advisory Agreement provides that the Sub-Adviser will not
be liable for, and the Trust and the Adviser will not take any action against
the Sub-Adviser to hold the Sub-Adviser liable for, any error of judgment or
mistake of law or for any loss suffered by the Fund or the Adviser in connection
with the performance of the Sub-Adviser's duties under the Agreement, except for
a loss resulting from willful misfeasance, bad faith or gross negligence on the
part of the Sub-Adviser in the performance of its duties under such Agreement,
or by reason of its reckless disregard of its obligations and duties under such
Agreement.
Continuance. The Prior Sub-Advisory Agreement became effective on the same
date as the Investment Management Agreement, was originally in effect for an
initial term of two years, and could be continued thereafter for successive
one-year periods if such continuance was specifically approved at least annually
in the manner required by the 1940 Act (which, in general terms, requires, among
other things, approval by a majority of the Independent Trustees at an in-person
meeting) and the rules and regulations thereunder (after taking into effect any
exemptive order, no-action assurances, or other relief, rule or regulation upon
which the Fund may rely). If the shareholders of the Fund approve the New
Sub-Advisory Agreement, the New Sub-Advisory Agreement will remain in effect for
two years (unless sooner terminated in accordance with such Agreement).
Thereafter, the New Sub-Advisory Agreement may be continued for successive
one-year periods if such continuance is specifically approved at least annually
in the manner required by the 1940 Act and the rules and regulations thereunder
(after taking into effect any exemptive order, no-action assurances, or other
relief, rule or regulation upon which the Fund may rely).
Termination. The Prior Sub-Advisory Agreement terminated on the Closing
Date. If the New Sub-Advisory Agreement is approved by shareholders on April 23,
2018, it will expire on April 23, 2020 unless it is continued as described in
the foregoing paragraph (assuming it has not otherwise terminated prior to such
date). As was the case under the Prior Sub-Advisory Agreement, the New
Sub-Advisory Agreement provides for termination: (1) automatically in the event
of its assignment (as defined in the 1940 Act and rules and regulations
thereunder); (2) at any time without the payment of any penalty by the Adviser
or the Sub-Adviser upon 60 days' written notice to the other parties; and (3) by
action of the Board or by a vote of a majority of the outstanding voting
securities (as defined in the 1940 Act and rules and regulations thereunder) of
the Fund upon 60 days' written notice to the Sub-Adviser without the payment of
any penalty. In addition, the Prior Sub-Advisory Agreement was, and the New
Sub-Advisory Agreement is, terminable at any time without the payment of any
penalty by the Adviser, the Board or by vote of a majority of the outstanding
voting securities (as defined in the 1940 Act and rules and regulations
thereunder) of the Fund in the event that it is established by a court of
competent jurisdiction that the Sub-Adviser or any of its officers or directors
have taken any action that results in a breach of the material covenants of the
Sub-Adviser set forth in the Agreement. Further, as was the case under the Prior
Sub-Advisory Agreement, the New Sub-Advisory Agreement will automatically
terminate in the event the Investment Management Agreement is terminated,
assigned or not renewed.
-10-
BOARD'S RECOMMENDATION
Based on its review, and after consideration of such factors and
information it considered relevant, the Board, including a majority of the
Independent Trustees, approved the New Sub-Advisory Agreement and voted to
recommend to shareholders that they approve Proposal 1. The Board is therefore
recommending that shareholders vote "FOR" Proposal 1. For more information on
the factors considered by the Board, please see the section entitled "Board
Considerations" below.
SHAREHOLDER APPROVAL AND REQUIRED VOTE
To become effective for the Fund, the New Sub-Advisory Agreement must be
approved by a vote of a majority of the outstanding voting securities of the
Fund. The "vote of a majority of the outstanding voting securities" of the Fund
is defined in the 1940 Act as the vote of the lesser of (i) 67% or more of the
shares of the Fund present at the Meeting if the holders of more than 50% of the
outstanding shares of the Fund are present in person or represented by proxy; or
(ii) more than 50% of the outstanding shares of the Fund. For purposes of
determining the approval of the New Sub-Advisory Agreement, abstentions and
broker non-votes will have the effect of a vote against the Proposal.
As noted above, approval of each of the New Agreements is contingent upon
approval of the others. Therefore, if any New Agreement is not approved by
shareholders, then none of them will become effective.
IF YOU NEED ANY ASSISTANCE, OR HAVE ANY QUESTIONS REGARDING THE PROPOSAL OR
HOW TO VOTE YOUR SHARES, PLEASE CALL THE FUND'S PROXY SOLICITOR, AST FUND
SOLUTIONS, LLC AT (800) 284-1755 WEEKDAYS FROM 9:00 A.M. TO 10:00 P.M. EASTERN
TIME.
THE BOARD OF TRUSTEES OF THE FUND RECOMMENDS THAT SHAREHOLDERS OF THE FUND
VOTE TO APPROVE THE NEW SUB-ADVISORY AGREEMENT.
-11-
PROPOSAL 2: APPROVAL OF THE PROPOSED NEW
HEITMAN HK SUB-SUB-ADVISORY AGREEMENT
Heitman HK has served as an investment sub-sub-adviser to the Fund since
its inception in 2015. The Prior Heitman HK Sub-Sub-Advisory Agreement was
approved by the initial shareholder of the Fund on November 9, 2015 and, most
recently, was approved by the Board for continuation on June 11-12, 2017. As
discussed above under "Background and Reason for Meeting," the Transaction
resulted in the automatic termination of the Prior Heitman HK Sub-Sub-Advisory
Agreement. Currently, Heitman HK provides sub-advisory services to the Fund
under the Interim Heitman HK Sub-Sub-Advisory Agreement, which is briefly
described below.
ADDITIONAL INFORMATION ABOUT HEITMAN HK
Heitman HK selects and monitors real estate securities located in the
Asia-Pacific region for the Fund's investment portfolio. Heitman HK is a
registered investment adviser with the Securities and Exchange Commission.
Heitman HK, a company whose liability is limited by shares domiciled in Hong
Kong, is located at 15F LHT Tower, 31 Queens Road, Central, Hong Kong, with
total assets under management of approximately U.S. $1.0 billion as of November
30, 2017.
The names, positions with Heitman HK and principal occupations of the
persons who are principal executive officers, managers and directors of Heitman
HK are listed below:
--------------------------- ---------------------------------------------------
NAME POSITION(S) WITH HEITMAN HK AND PRINCIPAL
OCCUPATION
--------------------------- ---------------------------------------------------
Maury R. Tognarelli Director of Heitman HK; Chief Executive Officer,
Heitman LLC
--------------------------- ---------------------------------------------------
John R. White Director, Compliance Officer and Managing Director
of Heitman HK; Lead Portfolio Manager, Heitman HK
--------------------------- ---------------------------------------------------
Lawrence J. Christensen Chief Financial Officer and Director of Heitman HK;
Chief Financial Officer of Heitman LLC
--------------------------- ---------------------------------------------------
Jerome W. Ehlinger Director of Heitman HK; Lead Portfolio Manager,
Heitman North American Public Real Estate
Securities Group
--------------------------- ---------------------------------------------------
Anthony G. Stamato Chief Compliance Officer of Heitman HK; Executive
Vice President and Chief Legal Officer of
Heitman LLC
--------------------------- ---------------------------------------------------
Except for John R. White, the business address for each of the above is 191 N.
Wacker Drive, Suite 2500, Chicago, IL 60606. For John R. White, the business
address is 15F LHT Tower, 31 Queens Road, Central, Hong Kong.
THE INTERIM HEITMAN HK SUB-SUB-ADVISORY AGREEMENT
Heitman HK currently provides sub-sub-advisory services to the Fund under
the Interim Heitman HK Sub-Sub-Advisory Agreement. Many of the terms of the
Interim Heitman HK Sub-Sub-Advisory Agreement are substantially similar to those
of the Prior Heitman HK Sub-Sub-Advisory Agreement; however, there are some
differences, including differences in provisions relating to the effective date
-12-
(which was the Closing Date), termination (not later than June 4, 2018), and
compensation arrangements (to provide that compensation is to be held in an
escrow account).
The Interim Heitman HK Sub-Sub-Advisory Agreement is currently in effect
and, unless terminated sooner in accordance with its terms, will continue to be
in effect through the earlier of the Interim Termination Date or the date on
which shareholders of the Fund approve the Fund's New Heitman HK
Sub-Sub-Advisory Agreement. If shareholders of the Fund do not approve the New
Heitman HK Sub-Sub-Advisory Agreement, the Board will take such action as it
deems to be in the best interests of the Fund. In addition, the Interim Heitman
HK Sub-Sub-Advisory Agreement may be terminated by the Fund by action of the
Board or by a vote of a majority of the outstanding voting securities (as
defined in the 1940 Act) of the Fund upon 10 calendar days' written notice.
The rate of compensation paid to Heitman HK is the same under the Interim
Heitman HK Sub-Sub-Advisory Agreement, Prior Heitman HK Sub-Sub-Advisory
Agreement and New Heitman HK Sub-Sub-Advisory Agreement. However, the
compensation accrued under the Interim Heitman HK Sub-Sub-Advisory Agreement is
to be held in an interest-bearing escrow account with the Fund's custodian or
another bank designated by the Fund. If the New Heitman HK Sub-Sub-Advisory
Agreement is approved by shareholders on or before the Interim Termination Date,
the amount in the escrow account (including the interest earned) will be paid to
Heitman HK. However, if shareholders of the Fund do not approve the New Heitman
HK Sub-Sub-Advisory Agreement by such date, Heitman HK will be paid, out of the
escrow account, the lesser of: (i) any costs incurred by Heitman HK in
performing the Interim Heitman HK Sub-Sub-Advisory Agreement (plus interest
earned on that amount while in escrow); or (ii) the total amount in the escrow
account (plus interest earned).
COMPARISON OF CERTAIN TERMS OF THE NEW HEITMAN HK SUB-SUB-ADVISORY AGREEMENT AND
PRIOR HEITMAN HK SUB-SUB-ADVISORY AGREEMENT
Below is a brief comparison of certain terms of the Prior Heitman HK
Sub-Sub-Advisory Agreement to the corresponding terms of the New Heitman HK
Sub-Sub-Advisory Agreement. Most of the terms of the New Heitman HK
Sub-Sub-Advisory Agreement and the Prior Heitman HK Sub-Sub-Advisory Agreement
(including, among other things, those relating to services and fees), are the
same. However, the New Heitman HK Sub-Sub-Advisory Agreement will have a new
effective date and initial term. If approved by shareholders, the New Heitman HK
Sub-Sub-Advisory Agreement will be effective as of the date of such approval and
will remain in effect for two years (unless sooner terminated in accordance with
its terms); thereafter, it may be continued for successive one-year periods as
described below under "Continuance." The form of New Heitman HK Sub-Sub-Advisory
Agreement is attached to this Proxy Statement as Exhibit A-2.
Sub-Sub-Advisory Services. As was the case under the Prior Heitman HK
Sub-Sub-Advisory Agreement, under the New Heitman HK Sub-Sub-Advisory Agreement,
Heitman HK will act as sub-adviser for, and manage on a discretionary basis the
investment and reinvestment of the securities and other assets of the Fund
allocated to Heitman HK from time to time by the Sub-Adviser (the "Heitman HK
Sub-Sub-Advised Assets"), furnish an investment program in respect of, make
investment decisions for, and place all orders (either directly or through the
Adviser) for the purchase and sale of the Heitman HK Sub-Sub-Advised Assets.
Additionally, as was the case under the Prior Heitman HK Sub-Sub-Advisory
Agreement, under the New Heitman HK Sub-Sub-Advisory Agreement, in the
performance of its duties, Heitman HK is required, in all material respects, to
do the following: (a) satisfy any applicable fiduciary duties it may have to the
Fund; (b) monitor the Fund's investments or other instruments allocated to it;
-13-
(c) comply with the provisions of the Trust's Declaration of Trust and By-laws,
as amended from time to time and communicated by the Fund, the Adviser or the
Sub-Adviser to Heitman HK in writing; (d) comply with (i) the investment
objective, policies and restrictions stated in the Fund's most recently
effective prospectus and statement of additional information that are applicable
to the Fund's investment portfolio, (ii) such other investment policies,
restrictions or instructions as the Adviser, the Board or the Sub-Adviser may
communicate to Heitman HK in writing and (iii) any changes to the objective,
policies, restrictions or instructions required under the foregoing (i) and (ii)
as communicated to Heitman HK in writing; and (e) assist in the valuation of
portfolio assets held by the Fund as reasonably requested by the Adviser, the
Fund or the Sub-Adviser. Further, under both the Prior Heitman HK
Sub-Sub-Advisory Agreement and the New Heitman HK Sub-Sub-Advisory Agreement,
Heitman HK is responsible for voting in respect of securities held in the Fund's
portfolio and agrees to exercise or not exercise a right to vote in accordance
with Heitman HK's proxy voting policy.
Brokers, Dealers, Futures Commission Merchants, Banks and Other Agents and
Counterparties. As was the case under the Prior Heitman HK Sub-Sub-Advisory
Agreement, under the New Heitman HK Sub-Sub-Advisory Agreement, unless otherwise
provided by the Adviser or the Sub-Adviser, Heitman HK is authorized to select
the brokers, dealers, futures commission merchants, banks or any other agent or
counterparty that will execute the purchases and sales of the Heitman HK
Sub-Sub-Advised Assets, and Heitman HK is directed to use its commercially
reasonable efforts to obtain best execution, which includes most favorable net
results and execution of the Fund's orders, taking into account all appropriate
factors, including, among other things, price, dealer spread or commission, size
and difficulty of the transaction and research or other services provided.
Fees. The New Heitman HK Sub-Sub-Advisory Agreement will not result in
changes to the sub-sub-advisory fees paid to Heitman HK, nor will it result in
changes to any of the Fund's other fees. As was the case under the Prior Heitman
HK Sub-Sub-Advisory Agreement, under the New Heitman HK Sub-Sub-Advisory
Agreement, the Sub-Adviser will pay Heitman HK a sub-sub-advisory fee equal to
the percentage of the average daily net assets of the Fund allocated to Heitman
HK times the sub-advisory fee received by the Sub-Adviser (if any).
As described under Proposal 1, for the Fund's last fiscal year, the amount
of the sub-advisory fee received by the Sub-Adviser was $0. Accordingly, for the
Fund's last fiscal year, the aggregate amount of the sub-sub-advisory fees paid
by the Sub-Adviser to Heitman HK was also $0.
Payment of Expenses. As was the case under the Prior Heitman HK
Sub-Sub-Advisory Agreement, under the New Heitman HK Sub-Sub-Advisory Agreement,
Heitman HK agrees to pay all expenses it incurs in connection with its
activities under such Agreement other than the cost of securities and other
assets (including interest, taxes, brokerage commissions, if any, dividend and
distribution expenses from securities sold short and/or other investment related
costs and other expenses incurred in connection with the execution of
transactions) purchased for the Fund and any extraordinary expenses incurred by
the Fund, all of which shall be paid or reimbursed by the Fund.
Limitation of Liability. As was the case under the Prior Heitman HK
Sub-Sub-Advisory Agreement, the New Heitman HK Sub-Sub-Advisory Agreement
provides that Heitman HK will not be liable for, and the Trust, the Adviser and
the Sub-Adviser will not take any action against Heitman HK to hold Heitman HK
liable for, any error of judgment or mistake of law or for any loss suffered by
the Fund, the Adviser or the Sub-Adviser in connection with the performance of
Heitman HK's duties under the Agreement, except for a loss resulting from
willful misfeasance, bad faith or gross negligence on the part of Heitman HK in
-14-
the performance of its duties under such Agreement, or by reason of its reckless
disregard of its obligations and duties under such Agreement.
Continuance. The Prior Heitman HK Sub-Sub-Advisory Agreement was originally
in effect for an initial term of two years and could be continued thereafter for
successive one-year periods if such continuance was specifically approved at
least annually in the manner required by the 1940 Act (which, in general terms,
requires, among other things, approval by a majority of the Independent
Trustees at an in-person meeting) and the rules and regulations thereunder
(after taking into effect any exemptive order, no-action assurances, or other
relief, rule or regulation upon which the Fund may rely). If the shareholders of
the Fund approve the New Heitman HK Sub-Sub-Advisory Agreement, the New Heitman
HK Sub-Sub-Advisory Agreement will remain in effect for two years (unless sooner
terminated in accordance with such Agreement). Thereafter, the New Heitman HK
Sub-Sub-Advisory Agreement may be continued for successive one-year periods if
such continuance is specifically approved at least annually in the manner
required by the 1940 Act and the rules and regulations thereunder (after taking
into effect any exemptive order, no-action assurances, or other relief, rule or
regulation upon which the Fund may rely).
Termination. The Prior Heitman HK Sub-Sub-Advisory Agreement terminated on
the Closing Date. If it is approved by shareholders on April 23, 2018, the New
Heitman HK Sub-Sub-Advisory Agreement will expire on April 23, 2020 unless it is
continued as described in the foregoing paragraph (assuming it has not otherwise
terminated prior to such date). As was the case under the Prior Heitman HK
Sub-Sub-Advisory Agreement, the New Heitman HK Sub-Sub-Advisory Agreement
provides for termination: (1) automatically in the event of its assignment (as
defined in the 1940 Act and rules and regulations thereunder); (2) at any time
without the payment of any penalty by the Adviser or Heitman HK upon 60 days'
written notice to the other parties; and (3) by action of the Board or by a vote
of a majority of the outstanding voting securities (as defined in the 1940 Act
and rules and regulations thereunder) of the Fund upon 60 days' written notice
to Heitman HK without the payment of any penalty. In addition, the Prior Heitman
HK Sub-Sub-Advisory Agreement was, and the New Heitman HK Sub-Sub-Advisory
Agreement is, terminable at any time without the payment of any penalty by the
Adviser, the Board or by vote of a majority of the outstanding voting securities
(as defined in the 1940 Act and rules and regulations thereunder) of the Fund in
the event that it is established by a court of competent jurisdiction that
Heitman HK or any of its officers or directors have taken any action that
results in a breach of the material covenants of Heitman HK set forth in the
Agreement. Further, consistent with the Prior Heitman HK Sub-Sub-Advisory
Agreement, the New Heitman HK Sub-Sub-Advisory Agreement will automatically
terminate in the event the Investment Management Agreement or the New
Sub-Advisory Agreement is terminated, assigned or not renewed.
BOARD'S RECOMMENDATION
Based on its review, and after consideration of such factors and
information it considered relevant, the Board, including a majority of the
Independent Trustees, approved the New Heitman HK Sub-Sub-Advisory Agreement and
voted to recommend to shareholders that they approve Proposal 2. The Board is
therefore recommending that shareholders vote "FOR" Proposal 2. For more
information on the factors considered by the Board, please see the section
entitled "Board Considerations" below.
SHAREHOLDER APPROVAL AND REQUIRED VOTE
To become effective for the Fund, the New Heitman HK Sub-Sub-Advisory
Agreement must be approved by a vote of a majority of the outstanding voting
securities of the Fund. The "vote of a majority of the outstanding voting
-15-
securities" of the Fund is defined in the 1940 Act as the vote of the lesser of
(i) 67% or more of the shares of the Fund present at the Meeting if the holders
of more than 50% of the outstanding shares of the Fund are present in person or
represented by proxy; or (ii) more than 50% of the outstanding shares of the
Fund. For purposes of determining the approval of the New Heitman HK
Sub-Sub-Advisory Agreement, abstentions and broker non-votes will have the
effect of a vote against the Proposal.
As noted above, approval of each of the New Agreements is contingent upon
approval of the others. Therefore, if any New Agreement is not approved by
shareholders, then none of them will become effective.
IF YOU NEED ANY ASSISTANCE, OR HAVE ANY QUESTIONS REGARDING THE PROPOSAL OR
HOW TO VOTE YOUR SHARES, PLEASE CALL THE FUND'S PROXY SOLICITOR, AST FUND
SOLUTIONS, LLC AT (800) 284-1755 WEEKDAYS FROM 9:00 A.M. TO 10:00 P.M. EASTERN
TIME.
THE BOARD OF TRUSTEES OF THE FUND RECOMMENDS THAT SHAREHOLDERS OF THE FUND
VOTE TO APPROVE THE NEW HEITMAN HK SUB-SUB-ADVISORY AGREEMENT.
-16-
PROPOSAL 3: APPROVAL OF THE PROPOSED NEW
HEITMAN GMBH SUB-SUB-ADVISORY AGREEMENT
Heitman GmbH has served as an investment sub-sub-adviser to the Fund since
its inception in 2015. The Prior Heitman GmbH Sub-Sub-Advisory Agreement was
approved by the initial shareholder of the Fund on November 9, 2015 and, most
recently, was approved by the Board for continuation on June 11-12, 2017. As
discussed above under "Background and Reason for Meeting," the Transaction
resulted in the automatic termination of the Prior Heitman GmbH Sub-Sub-Advisory
Agreement. Currently, Heitman GmbH provides sub-advisory services to the Fund
under the Interim Heitman GmbH Sub-Sub-Advisory Agreement, which is briefly
described below.
ADDITIONAL INFORMATION ABOUT HEITMAN GMBH
Heitman GmbH provides recommendations regarding the selection and ongoing
monitoring of real estate securities located in Europe for the Fund's investment
portfolio. Heitman GmbH is a registered investment adviser with the Securities
and Exchange Commission. Heitman GmbH, a company with limited liability
domiciled in Germany, is located at Maximilianstrasse 35A, Munich, Germany
80539, with total assets under management of approximately U.S. $712 million as
of November 30, 2017.
The names, positions with Heitman GmbH and principal occupations of the
persons who are principal executive officers, managers and directors of Heitman
GmbH are listed below:
--------------------------- ---------------------------- ----------------------
NAME POSITION(S) WITH HEITMAN GMBH AND PRINCIPAL
OCCUPATION
--------------------------- ---------------------------- ----------------------
Roger E. Smith Managing Director of Heitman GmbH; Executive Vice
President, Heitman LLC
--------------------------- ---------------------------- ----------------------
Lawrence J. Christensen Chief Financial Officer of Heitman GmbH; Chief
Financial Officer of Heitman LLC
--------------------------- ---------------------------- ----------------------
Anthony G. Stamato Chief Compliance Officer of Heitman GmbH; Executive
Vice President and Chief Legal Officer of
Heitman LLC
--------------------------- ---------------------------- ----------------------
Jacques Perdrix Senior Vice President, Heitman European Public Real
Estate Securities Group; Lead Portfolio Manager,
Heitman GmbH
--------------------------- ---------------------------- ----------------------
Andreas Welter Senior Vice President, Heitman European Public Real
Estate Equity Group; Lead Portfolio Manager,
Heitman GmbH
--------------------------- ---------------------------- ----------------------
Except for Jacques Perdrix and Andreas Welter, the business address for each of
the above is 191 N. Wacker Drive, Suite 2500, Chicago, IL 60606. For Jacques
Perdrix and Andreas Welter, the business address is Maximilianstrasse 35A,
Munich, Germany 80539.
THE INTERIM HEITMAN GMBH SUB-SUB-ADVISORY AGREEMENT
Heitman GmbH currently provides sub-sub-advisory services to the Fund under
the Interim Heitman GmbH Sub-Sub-Advisory Agreement. Many of the terms of the
Interim Heitman GmbH Sub-Sub-Advisory Agreement are substantially similar to
those of the Prior Heitman GmbH Sub-Sub-Advisory Agreement; however, there are
some differences, including differences in provisions relating to the effective
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date (which was the Closing Date), termination (not later than June 4, 2018),
and compensation arrangements (to provide that compensation is to be held in an
escrow account).
The Interim Heitman GmbH Sub-Sub-Advisory Agreement is currently in effect
and, unless terminated sooner in accordance with its terms, will continue to be
in effect through the earlier of the Interim Termination Date or the date on
which shareholders of the Fund approve the Fund's New Heitman GmbH
Sub-Sub-Advisory Agreement. If shareholders of the Fund do not approve the New
Heitman GmbH Sub-Sub-Advisory Agreement, the Board will take such action as it
deems to be in the best interests of the Fund. In addition, the Interim Heitman
GmbH Sub-Sub-Advisory Agreement may be terminated by the Fund by action of the
Board or by a vote of a majority of the outstanding voting securities (as
defined in the 1940 Act) of the Fund upon 10 calendar days' written notice.
The rate of compensation paid to Heitman GmbH is the same under the Interim
Heitman GmbH Sub-Sub-Advisory Agreement, Prior Heitman GmbH Sub-Sub-Advisory
Agreement and New Heitman GmbH Sub-Sub-Advisory Agreement. However, the
compensation accrued under the Interim Heitman GmbH Sub-Sub-Advisory Agreement
is to be held in an interest-bearing escrow account with the Fund's custodian or
another bank designated by the Fund. If the New Heitman GmbH Sub-Sub-Advisory
Agreement is approved by shareholders on or before the Interim Termination Date,
the amount in the escrow account (including the interest earned) will be paid to
Heitman GmbH. However, if shareholders of the Fund do not approve the New
Heitman GmbH Sub-Sub-Advisory Agreement by such date, Heitman GmbH will be paid,
out of the escrow account, the lesser of: (i) any costs incurred by Heitman GmbH
in performing the Interim Heitman GmbH Sub-Sub-Advisory Agreement (plus interest
earned on that amount while in escrow); or (ii) the total amount in the escrow
account (plus interest earned).
COMPARISON OF CERTAIN TERMS OF THE NEW HEITMAN GMBH SUB-SUB-ADVISORY AGREEMENT
AND PRIOR HEITMAN GMBH SUB-SUB-ADVISORY AGREEMENT
Below is a brief comparison of certain terms of the Prior Heitman GmbH
Sub-Sub-Advisory Agreement to the corresponding terms of the New Heitman GmbH
Sub-Sub-Advisory Agreement. Most of the terms of the New Heitman GmbH
Sub-Sub-Advisory Agreement and the Prior Heitman GmbH Sub-Sub-Advisory Agreement
(including, among other things, those relating to services and fees) are the
same. However, the New Heitman GmbH Sub-Sub-Advisory Agreement will have a new
effective date and initial term. If approved by shareholders, the New Heitman
GmbH Sub-Sub-Advisory Agreement will be effective as of the date of such
approval and will remain in effect for two years (unless sooner terminated in
accordance with its terms); thereafter, it may be continued for successive
one-year periods as described below under "Continuance." The form of New Heitman
GmbH Sub-Sub-Advisory Agreement is attached to this Proxy Statement as Exhibit
A-3.
Sub-Sub-Advisory Services. As was the case under the Prior Heitman GmbH
Sub-Sub-Advisory Agreement, under the New Heitman GmbH Sub-Sub-Advisory
Agreement, Heitman GmbH will act as sub-adviser for, and manage on a
discretionary basis the investment and reinvestment of the securities and other
assets of the Fund allocated to Heitman GmbH from time to time by the
Sub-Adviser (the "Heitman GmbH Sub-Sub-Advised Assets"), furnish an investment
program in respect of, make investment decisions for, and place all orders
(either directly or through the Adviser) for the purchase and sale of the
Heitman GmbH Sub-Sub-Advised Assets. Additionally, as was the case under the
Prior Heitman GmbH Sub-Sub-Advisory Agreement, under the New Heitman GmbH
Sub-Sub-Advisory Agreement, in the performance of its duties, Heitman GmbH is
required, in all material respects, to do the following: (a) satisfy any
applicable fiduciary duties it may have to the Fund; (b) monitor the Fund's
-18-
investments or other instruments allocated to it; (c) comply with the provisions
of the Trust's Declaration of Trust and By-laws, as amended from time to time
and communicated by the Fund, the Adviser or the Sub-Adviser to Heitman GmbH in
writing; (d) comply with (i) the investment objective, policies and restrictions
stated in the Fund's most recently effective prospectus and statement of
additional information that are applicable to the Fund's investment portfolio,
(ii) such other investment policies, restrictions or instructions as the
Adviser, the Board or the Sub-Adviser may communicate to Heitman GmbH in writing
and (iii) any changes to the objective, policies, restrictions or instructions
required under the foregoing (i) and (ii) as communicated to Heitman GmbH in
writing; and (e) assist in the valuation of portfolio assets held by the Fund as
reasonably requested by the Adviser, the Fund or the Sub-Adviser. Further, under
both the Prior Heitman GmbH Sub-Sub-Advisory Agreement and the New Heitman GmbH
Sub-Sub-Advisory Agreement, Heitman GmbH is responsible for voting in respect of
securities held in the Fund's portfolio and agrees to exercise or not exercise a
right to vote in accordance with Heitman GmbH's proxy voting policy.
Brokers, Dealers, Futures Commission Merchants, Banks and Other Agents and
Counterparties. As was the case under the Prior Heitman GmbH Sub-Sub-Advisory
Agreement, under the New Heitman GmbH Sub-Sub-Advisory Agreement, unless
otherwise provided by the Adviser or the Sub-Adviser, Heitman GmbH is authorized
to select the brokers, dealers, futures commission merchants, banks or any other
agent or counterparty that will execute the purchases and sales of the Heitman
GmbH Sub-Sub-Advised Assets, and Heitman GmbH is directed to use its
commercially reasonable efforts to obtain best execution, which includes most
favorable net results and execution of the Fund's orders, taking into account
all appropriate factors, including, among other things, price, dealer spread or
commission, size and difficulty of the transaction and research or other
services provided.
Fees. The New Heitman GmbH Sub-Sub-Advisory Agreement will not result in
changes to the sub-sub-advisory fees paid to Heitman GmbH, nor will it result in
changes to any of the Fund's other fees. As was the case under the Prior Heitman
GmbH Sub-Sub-Advisory Agreement, under the New Heitman GmbH Sub-Sub-Advisory
Agreement, the Sub-Adviser will pay Heitman GmbH a sub-sub-advisory fee equal to
the percentage of the average daily net assets of the Fund allocated to Heitman
GmbH times the sub-advisory fee received by the Sub-Adviser (if any).
As described under Proposal 1, for the Fund's last fiscal year, the amount
of the sub-advisory fee received by the Sub-Adviser was $0. Accordingly, for the
Fund's last fiscal year, the aggregate amount of the sub-sub-advisory fees paid
by the Sub-Adviser to Heitman GmbH was also $0.
Payment of Expenses. As was the case under the Prior Heitman GmbH
Sub-Sub-Advisory Agreement, under the New Heitman GmbH Sub-Sub-Advisory
Agreement, Heitman GmbH agrees to pay all expenses it incurs in connection with
its activities under such Agreement other than the cost of securities and other
assets (including interest, taxes, brokerage commissions, if any, dividend and
distribution expenses from securities sold short and/or other investment related
costs and other expenses incurred in connection with the execution of
transactions) purchased for the Fund and any extraordinary expenses incurred by
the Fund, all of which shall be paid or reimbursed by the Fund.
Limitation of Liability. As was the case under the Prior Heitman GmbH
Sub-Sub-Advisory Agreement, the New Heitman GmbH Sub-Sub-Advisory Agreement
provides that Heitman GmbH will not be liable for, and the Trust, the Adviser
and the Sub-Adviser will not take any action against Heitman GmbH to hold
Heitman GmbH liable for, any error of judgment or mistake of law or for any loss
suffered by the Fund, the Adviser or the Sub-Adviser in connection with the
performance of Heitman GmbH's duties under the Agreement, except for a loss
-19-
resulting from willful misfeasance, bad faith or gross negligence on the part of
Heitman GmbH in the performance of its duties under such Agreement, or by reason
of its reckless disregard of its obligations and duties under such Agreement.
Continuance. The Prior Heitman GmbH Sub-Sub-Advisory Agreement was
originally in effect for an initial term of two years and could be continued
thereafter for successive one-year periods if such continuance was specifically
approved at least annually in the manner required by the 1940 Act (which, in
general terms, requires, among other things, approval by a majority of the
Independent Trustees at an in-person meeting) and the rules and regulations
thereunder (after taking into effect any exemptive order, no-action assurances,
or other relief, rule or regulation upon which the Fund may rely). If the
shareholders of the Fund approve the New Heitman GmbH Sub-Sub-Advisory
Agreement, the New Heitman GmbH Sub-Sub-Advisory Agreement will remain in effect
for two years (unless sooner terminated in accordance with such Agreement).
Thereafter, the New Heitman GmbH Sub-Sub-Advisory Agreement may be continued for
successive one-year periods if such continuance is specifically approved at
least annually in the manner required by the 1940 Act and the rules and
regulations thereunder (after taking into effect any exemptive order, no-action
assurances, or other relief, rule or regulation upon which the Fund may rely).
Termination. The Prior Heitman GmbH Sub-Sub-Advisory Agreement terminated
on the Closing Date. If it is approved by shareholders on April 23, 2018, the
New Heitman GmbH Sub-Sub-Advisory Agreement will expire on April 23, 2020 unless
it is continued as described in the foregoing paragraph (assuming it has not
otherwise terminated prior to such date). As was the case under the Prior
Heitman GmbH Sub-Sub-Advisory Agreement, the New Heitman GmbH Sub-Sub-Advisory
Agreement provides for termination: (1) automatically in the event of its
assignment (as defined in the 1940 Act and rules and regulations thereunder);
(2) at any time without the payment of any penalty by the Adviser or Heitman
GmbH upon 60 days' written notice to the other parties; and (3) by action of the
Board or by a vote of a majority of the outstanding voting securities (as
defined in the 1940 Act and rules and regulations thereunder) of the Fund upon
60 days' written notice to Heitman GmbH without the payment of any penalty. In
addition, the Prior Heitman GmbH Sub-Sub-Advisory Agreement was, and the New
Heitman GmbH Sub-Sub-Advisory Agreement is, terminable at any time without the
payment of any penalty by the Adviser, the Board or by vote of a majority of the
outstanding voting securities (as defined in the 1940 Act and rules and
regulations thereunder) of the Fund in the event that it is established by a
court of competent jurisdiction that Heitman GmbH or any of its officers or
directors have taken any action that results in a breach of the material
covenants of Heitman GmbH set forth in the Agreement. Further, consistent with
the Prior Heitman GmbH Sub-Sub-Advisory Agreement, the New Heitman GmbH
Sub-Sub-Advisory Agreement will automatically terminate in the event the
Investment Management Agreement or the New Sub-Advisory Agreement is terminated,
assigned or not renewed.
BOARD'S RECOMMENDATION
Based on its review, and after consideration of such factors and
information it considered relevant, the Board, including a majority of the
Independent Trustees, approved the New Heitman GmbH Sub-Sub-Advisory Agreement
and voted to recommend to shareholders that they approve Proposal 3. The Board
is therefore recommending that shareholders vote "FOR" Proposal 3. For more
information on the factors considered by the Board, please see the section
entitled "Board Considerations" below.
-20-
SHAREHOLDER APPROVAL AND REQUIRED VOTE
To become effective for the Fund, the New Heitman GmbH Sub-Sub-Advisory
Agreement must be approved by a vote of a majority of the outstanding voting
securities of the Fund. The "vote of a majority of the outstanding voting
securities" of the Fund is defined in the 1940 Act as the vote of the lesser of
(i) 67% or more of the shares of the Fund present at the Meeting if the holders
of more than 50% of the outstanding shares of the Fund are present in person or
represented by proxy; or (ii) more than 50% of the outstanding shares of the
Fund. For purposes of determining the approval of the New Heitman GmbH
Sub-Sub-Advisory Agreement, abstentions and broker non-votes will have the
effect of a vote against the Proposal.
As noted above, approval of each of the New Agreements is contingent upon
approval of the others. Therefore, if any New Agreement is not approved by
shareholders, then none of them will become effective.
IF YOU NEED ANY ASSISTANCE, OR HAVE ANY QUESTIONS REGARDING THE PROPOSAL OR
HOW TO VOTE YOUR SHARES, PLEASE CALL THE FUND'S PROXY SOLICITOR, AST FUND
SOLUTIONS, LLC AT (800) 284-1755 WEEKDAYS FROM 9:00 A.M. TO 10:00 P.M. EASTERN
TIME.
THE BOARD OF TRUSTEES OF THE FUND RECOMMENDS THAT SHAREHOLDERS OF THE FUND
VOTE TO APPROVE THE NEW HEITMAN GMBH SUB-SUB-ADVISORY AGREEMENT.
-21-
BOARD CONSIDERATIONS
The Board of Trustees of the Trust, including the Independent Trustees,
unanimously approved (i) each of the Interim Agreements; and (ii) each of the
New Agreements. The Interim Agreements and the New Agreements are collectively
referred to as the "Agreements." The Board approved the Agreements at a meeting
held on December 10-11, 2017. The Board of Trustees determined that each
Agreement is in the best interests of the Fund in light of the extent and
quality of the services expected to be provided and such other matters as the
Board considered to be relevant in the exercise of its reasonable business
judgment.
In November 2017, the Board was informed that Heitman LLC, the parent
company of the Heitman Securities Group, had entered into a redemption agreement
with OMAM Inc. and OMAM pursuant to which Heitman LLC would redeem all of OMAM's
membership interests in Heitman LLC for $110 million in cash consideration (as
previously defined, the "Transaction"). The Board was also informed that, if the
Transaction were consummated, each of the Prior Agreements would terminate
pursuant to its terms and the requirements of the 1940 Act. On November 24,
2017, counsel to the Independent Trustees provided the Heitman Securities Group
with a request for information regarding the Transaction and its expected impact
on the Heitman Securities Group. At an executive session held on December 7,
2017, the Independent Trustees reviewed materials provided by the Heitman
Securities Group in response to the request, which materials included written
responses to questions regarding the Transaction and its expected impact on the
Heitman Securities Group and its management of the Fund, a copy of the
redemption agreement and organizational charts. Following the executive session,
independent legal counsel on behalf of the Independent Trustees requested
certain supplements to the materials provided, including pro forma financial
information for Heitman LLC reflecting the expected impact of the Transaction.
The Heitman Securities Group provided information in response to the follow-up
request by e-mail in advance of the December 2017 Board meeting.
To reach its determination in approving the Agreements, the Board
considered its duties under the 1940 Act, as well as under the general
principles of state law in reviewing and approving advisory contracts; the
requirements of the 1940 Act in such matters; the fiduciary duty of investment
advisors with respect to advisory agreements and compensation; the standards
used by courts in determining whether investment company boards have fulfilled
their duties; and the factors to be considered by the Board in voting on such
agreements. In connection with its deliberations regarding the Agreements, the
Board noted that, based on the information provided by the Adviser and the
Heitman Securities Group, apart from the effective and termination dates and any
provisions of the Interim Agreements required by Rule 15a-4 under the 1940 Act,
any differences in the terms and conditions of each Agreement and the terms and
conditions of the corresponding Prior Agreement were immaterial. The Board
considered that the information provided by the Heitman Securities Group in
response to the Independent Trustees' request for information included
statements that there would be no changes in day-to-day management of Heitman
LLC and no changes in the management of the Heitman Securities Group; that there
would be no changes resulting from the Transaction with respect to senior
management at Heitman LLC or the Heitman Securities Group or as to key personnel
who work on matters relating to the Fund, including the portfolio management
team and compliance personnel; that the Transaction would have no adverse impact
on the Heitman Securities Group's ability to provide sub-advisory and
sub-sub-advisory services to the Fund; and that the Transaction would not result
in any diminution in the nature, quality and extent of the services provided to
the Fund by the Heitman Securities Group. In addition, representatives of the
Heitman Securities Group joined the December 2017 Board meeting by telephone and
discussed the Transaction and the Agreements with the Board.
-22-
The Board also considered that it had last approved the Prior Agreements
for the Fund during the annual contract renewal process that concluded at the
Board's June 11-12, 2017 meeting. Given the Heitman Securities Group's
representations that there would be no changes in the services provided to the
Fund as a result of the Transaction, that any differences in the terms of the
Prior Agreements and the New Agreements were immaterial and that, except as
discussed in the response to the Independent Trustees' November 24, 2017 request
relating to the Transaction, the Board could continue to rely on the materials
provided by the Heitman Securities Group in connection with the June 2017
renewal of the Prior Agreements, the Board determined that its prior
considerations in approving the renewal of the Prior Agreements remained
relevant. The Board noted that, in reviewing and renewing the Prior Agreements:
o The Board considered the nature, extent and quality of the services
provided by the Sub-Adviser and the Sub-Sub-Advisers and that the
Sub-Adviser and the Sub-Sub-Advisers actively manage the Fund's
investments. In considering the management of the Fund by the
Sub-Adviser and the Sub-Sub-Advisers, the Board noted the background
and experience of the Sub-Adviser's and the Sub-Sub-Advisers' portfolio
management team and the Board's prior meetings with members of the
portfolio management team. The Board noted the prior explanation by the
Sub-Adviser of the reason for structuring the sub-advisory relationship
with two sub-sub-advisers, noting that both Sub-Sub-Advisers are U.S.
registered investment advisers that use the same Chief Compliance
Officer as the Sub-Adviser, and that the structure was created so that
the Sub-Adviser could achieve best execution by using its affiliates to
execute certain portfolio transactions. In light of the information
presented and the considerations made, the Board concluded that the
nature, extent and quality of the services provided to the Fund by the
Sub-Adviser and the Sub-Sub-Advisers under the Prior Agreements were
satisfactory and that the Sub-Adviser and the Sub-Sub-Advisers, under
the oversight of the Adviser, have managed the Fund consistent with the
Fund's investment objective and policies.
o The Board noted that the sub-advisory fee is paid by the Adviser from
the unitary fee payable under the Fund's investment advisory agreement,
and that the Sub-Adviser pays each Sub-Sub-Adviser a pro-rata portion
of the sub-advisory fee received from the Adviser based on the
proportion of assets managed by each. The Board received and reviewed
information showing the advisory fee rates charged by the Sub-Adviser
and the Sub-Sub-Advisers to other fund (including exchange-traded
funds) and non-fund clients, as applicable.
o The Board considered performance information for the Fund. The Board
noted the process that it has established for monitoring the Fund's
performance and portfolio risk on an ongoing basis, which includes
quarterly performance reporting from the Sub-Adviser for the Fund
(which includes the Sub-Sub-Advisers). The Board determined that this
process continues to be effective for reviewing the Fund's performance.
The Board received and reviewed information comparing the Fund's
performance for the one-year period ended December 31, 2016 to the
performance of a peer group of funds (which were either mutual funds,
closed-end funds or exchange-traded funds) compiled by Management
Practice, Inc., an independent source, and to a benchmark index.
o The Board also considered the Sub-Adviser's statement that there are no
meaningful economies of scale to be achieved in connection with
providing sub-advisory and sub-sub-advisory services to the Fund. The
Board did not review the profitability of the Sub-Adviser or the
Sub-Sub-Advisers with respect to the Fund, noting that the Adviser pays
-23-
the Sub-Adviser from its advisory fee, and that the Sub-Adviser in turn
pays the Sub-Sub-Advisers from its sub-advisory fee, and its
understanding that the Fund's sub-advisory fee rate was the product of
an arm's length negotiation. The Board considered the potential
fall-out benefits to the Sub-Adviser and the Sub-Sub-Advisers from
being associated with the Adviser and the Fund. The Board noted that
the Sub-Adviser and its affiliates utilize research, research-related
products and other brokerage services that may be obtained through soft
dollar or commission sharing arrangements and that the Sub-Adviser may
utilize soft dollars in connection with its management of the Fund's
portfolio. The Board concluded that the character and amount of
potential fall-out benefits to the Sub-Adviser and the Sub-Sub-Advisers
were not unreasonable.
Based on all of the information considered and the conclusions reached,
including the information considered and conclusions reached in connection with
the June 2017 renewal of the Prior Agreements, the Board, including the
Independent Trustees, unanimously determined that the terms of the Agreements
were fair and reasonable and that the approval of the Agreements is in the best
interests of the Fund. No single factor was determinative in the Board's
analysis.
-24-
OTHER INFORMATION
GENERAL INFORMATION
This Proxy Statement is being furnished in connection with the solicitation
of proxies by the Board. The solicitation of proxies will be largely by mail,
but may include telephonic, electronic or oral communication by officers and
service providers of the Trust, as well as affiliates of such service providers.
A proxy solicitation firm, AST Fund Solutions, LLC, has also been engaged to
provide proxy solicitation services, including mail and tabulation services, as
well as services to facilitate mail, telephone and Internet voting, at a cost
which is expected to be a total of approximately $4,500. The expense of
preparing, printing and mailing the enclosed proxy, accompanying notice and this
Proxy Statement, and all other costs in connection with the solicitation of
proxies to be voted at the Meeting, will be borne by Heitman LLC. Heitman LLC
will also reimburse brokerage firms and others for their expenses in forwarding
proxy solicitation materials to the person(s) for whom they hold shares of the
Fund.
DATE, TIME AND PLACE OF THE MEETING
The Meeting will be held on Monday, April 23, 2018, at 12:30 p.m. Central
Time at the Austin, Texas offices of First Trust Advisors L.P., located at 500
W. 5th Street, Suite 9202, Austin, Texas 78701.
USE AND REVOCATION OF PROXIES
For shareholders voting by mail, if the enclosed proxy card is properly
executed and returned in time to be voted at the Meeting, the shares represented
thereby will be voted in accordance with the instructions marked thereon, or, if
no instructions are marked thereon, will be voted at the discretion of the
persons named on the proxy card. Accordingly, unless instructions to the
contrary are marked thereon, a properly executed and returned proxy will be
voted FOR each Proposal, and at the discretion of the named proxies on any other
matters that may properly come before the Meeting, as deemed appropriate.
However, if instructions are marked on a proxy, but the proxy is not signed, it
will be disregarded. Any shareholder who has given a proxy has the right to
revoke it at any time prior to its exercise either by attending the Meeting and
voting his or her or its shares in person, or by timely submitting a revocation
or a later-dated proxy. A list of shareholders entitled to notice of and to be
present and to vote at the Meeting will be available at the Adviser's Austin,
Texas offices located at 500 W. 5th Street, Austin, Texas 78701, for inspection
by any shareholder during regular business hours prior to the Meeting.
Shareholders will need to show valid identification and proof of share ownership
to be admitted to the Meeting or to inspect the list of shareholders.
QUORUM AND VOTING MATTERS
Each shareholder will be entitled to one vote for each share owned by the
shareholder, and each fractional share will be entitled to a proportionate
fractional vote.
A quorum of shareholders is necessary to hold a meeting of shareholders.
Under the Trust's By-Laws, the holders of shares representing thirty-three and a
third percent (33-1/3%) of the voting power of the outstanding shares entitled
to vote present in person or by proxy will generally constitute a quorum at any
meeting of shareholders; however, where a vote is to be taken by individual
funds (as in case of each Proposal), then shares representing thirty-three and a
third percent (33-1/3%) of the voting power of the aggregate number of shares of
that fund will be necessary to constitute a quorum for the transaction of
-25-
business by that fund. For the purposes of establishing whether a quorum is
present with respect to a fund, all shares present and entitled to vote,
including abstentions and broker non-votes (i.e., shares held by brokers or
nominees as to which (i) instructions have not been received from the beneficial
owners or the persons entitled to vote and (ii) the broker or nominee does not
have discretionary voting power), shall be counted. (However, as indicated
above, abstentions and broker non-votes will have the effect of a vote against
each Proposal.) Any meeting of shareholders may be postponed prior to the
meeting with notice to the shareholders entitled to vote at that meeting. Any
meeting of shareholders may, by action of the person presiding thereat, be
adjourned without further notice with respect to one or more matters to be
considered at such meeting to a designated time and place, if a quorum is not
present with respect to such matter. Any meeting of shareholders may, by motion
of the person presiding thereat, be adjourned with respect to one or matters to
be considered at such meeting, even if a quorum is present with respect to such
matters, to a designated time and place, when such adjournment is approved by
the vote of holders of shares representing a majority of the voting power of the
shares present and entitled to vote with respect to the matter or matters
adjourned, and voting on the adjournment, without further notice. Unless a proxy
is otherwise limited in this regard, any shares present and entitled to vote at
a meeting, including broker non-votes, may, at the discretion of the proxies
named therein, be voted in favor of such an adjournment.
Broker-dealer firms holding shares in "street name" for the benefit of
their customers and clients may request voting instructions from such customers
and clients. Pursuant to certain rules promulgated by the New York Stock
Exchange that govern voting by such broker-dealers, a broker-dealer holding
shares of record for a beneficial owner may not exercise discretionary voting
power with respect to certain non-routine matters, including the approval of a
new investment management agreement (such as each New Agreement).
As noted above, approval of each of the New Agreements is contingent upon
approval of the others. Therefore, if any New Agreement is not approved by
shareholders, then none of them will become effective.
SHARES OUTSTANDING
Only holders of record of shares at the close of business on December 28,
2017 (the "Record Date") are entitled to vote on the Proposals at the Meeting.
As of the close of business on the Record Date, there were 50,002 shares
outstanding of the Fund.
SHARE OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
As of the Record Date, no person is known by the Trust to have beneficially
owned more than 5% of the shares outstanding of the Fund except as set forth in
the chart below. A shareholder owning beneficially more than 25% of the Fund's
voting securities may be deemed to "control" (as defined in the 1940 Act) the
Fund. The vote of any such person could have a more significant effect on
matters presented at a shareholders' meeting than votes of other shareholders.
Information as to beneficial ownership is based on securities position listing
reports as of the Record Date. The Trust does not have any knowledge of who the
ultimate beneficiaries are of the Fund's shares outstanding.
-26-
PERCENTAGE OF
NAME AND ADDRESS OF SHARES BENEFICIALLY SHARES OUTSTANDING
BENEFICIAL OWNER OWNED OWNED
The Bank of New York Mellon/Mellon Trust of New 11,885 Shares 23.77%
England, National Association
525 William Penn Place
Suite 153-0400
Pittsburgh, PA 15259
Merrill Lynch, Pierce, Fenner & Smith 8,566 Shares 17.13%
Incorporated
4804 Deer Lake Dr. E.
Jacksonville, FL 32246
Pershing LLC 4,696 Shares 9.39%
One Pershing Plaza
Jersey City, NJ 07399
J.P. Morgan Securities LLC/JPMC 4,443 Shares 8.89%
500 Stanton Christiana Road, OPS 4
Floor: 03
Newark, DE 19713-2107
Credit Suisse Securities (USA) LLC 3,350 Shares 6.70%
7033 Louis Stevens Drive
Global Proxy Services
Research Triangle Park, NC 27560
National Financial Services, LLC 3,320 Shares 6.64%
499 Washington Blvd
Jersey City, NJ 07310
TD Ameritrade Clearing, Inc. 3,126 Shares 6.25%
200 S 108th Ave.
Omaha, NE 68154-2631
SHARE OWNERSHIP OF TRUSTEES AND EXECUTIVE OFFICERS
Information regarding the shares of the Fund beneficially owned as of
December 31, 2017 by (a) each of the Trustees (including the Independent
Trustees and the Trustee who is not an Independent Trustee (the "Interested
Trustee")), and (b) the Trustees and executive officers of the Trust as a group
is set forth below:
------------------------------------------ ------------ ------------------
NUMBER OF PERCENTAGE OF
NAME SHARES OUTSTANDING SHARES
------------------------------------------ ------------ ------------------
INTERESTED TRUSTEE
------------------------------------------ ------------ ------------------
James A. Bowen 0 Shares 0%
------------------------------------------ ------------ ------------------
INDEPENDENT TRUSTEES
------------------------------------------ ------------ ------------------
Richard E. Erickson 0 Shares 0%
------------------------------------------ ------------ ------------------
Thomas R. Kadlec 0 Shares 0%
------------------------------------------ ------------ ------------------
Robert F. Keith 0 Shares 0%
------------------------------------------ ------------ ------------------
Niel B. Nielson 0 Shares 0%
------------------------------------------ ------------ ------------------
TRUSTEES AND EXECUTIVE OFFICERS AS A GROUP 1,050 Shares 2.1%
------------------------------------------ ------------ ------------------
The information as to beneficial ownership is based on statements furnished
by each Trustee and executive officer of the Trust.
-27-
THE ADVISER
First Trust Advisors L.P., located at 120 East Liberty Drive, Suite 400,
Wheaton, Illinois 60187, is the investment adviser to the Fund and, as such, is
responsible overseeing the Sub-Adviser and the Sub-Sub-Advisers in the
investment and reinvestment of the Fund's assets and for certain other services
necessary for the management of its portfolio. The Adviser also provides fund
reporting services to the Fund. The Adviser is an Illinois limited partnership
with one limited partner, Grace Partners of DuPage L.P. ("Grace Partners"), and
one general partner, The Charger Corporation. Grace Partners is a limited
partnership with one general partner, The Charger Corporation, and a number of
limited partners. The Charger Corporation is an Illinois corporation controlled
by James A. Bowen, the Chief Executive Officer of the Adviser and the sole
Interested Trustee of the Trust.
OTHER SERVICE PROVIDERS
First Trust Portfolios L.P., the principal underwriter of the Fund's
shares, is located at 120 East Liberty Drive, Suite 400, Wheaton, Illinois
60187. Brown Brothers Harriman & Co., the Fund's custodian, administrator,
accounting agent and transfer agent, is located at 50 Post Office Square,
Boston, Massachusetts 02110.
DELIVERY OF CERTAIN DOCUMENTS
Annual reports will be sent to shareholders of record of the Fund. The
Trust will furnish, without charge, a copy of the Fund's annual report and/or
semi-annual report as available upon request. Such written or oral requests
should be directed to the Trust at 120 East Liberty Drive, Suite 400, Wheaton,
Illinois 60187 or by calling (800) 621-1675.
Please note that only one annual or semi-annual report or proxy statement,
as applicable, may be delivered to two or more shareholders of a Fund who share
an address, unless the Trust has received instructions to the contrary. To
request a separate copy of an annual or semi-annual report or proxy statement,
as applicable, or for instructions as to how to request a separate copy of such
documents or as to how to request a single copy if multiple copies of such
documents are received, shareholders should contact the Trust at the address and
phone number set forth above. Pursuant to a request, a separate copy will be
delivered promptly.
SUBMISSION OF SHAREHOLDER PROPOSALS
The Trust is organized as a business trust under the laws of The
Commonwealth of Massachusetts. The Trust is not required to hold, and does not
hold, annual meetings. However, special meetings of shareholders of the Fund may
be called as required by the 1940 Act, or as required or permitted by the
Trust's Declaration of Trust and By-Laws.
Because the Fund does not hold annual shareholders' meetings, the
anticipated date of the next shareholders' meeting (if any) cannot be provided.
Shareholders who wish to present a proposal for inclusion in a future proxy
statement for a subsequent shareholders' meeting should send written proposals
to the Trust's Secretary, W. Scott Jardine, at 120 East Liberty Drive, Suite
400, Wheaton, Illinois 60187. Proposals must be received by a reasonable time
before the Fund begins to print and send its proxy materials for the meeting.
The timely submission of a proposal does not guarantee inclusion.
-28-
OTHER MATTERS TO COME BEFORE THE MEETING
No business other than the matters described above is expected to come
before the Meeting, but should any other matter requiring a vote of shareholders
arise, including any question as to an adjournment of the Meeting, the persons
named on the enclosed proxy card will vote thereon according to their best
judgment in the interests of the Fund.
--------------------------------------------------------------------------------
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE MEETING. IN ORDER TO
AVOID DELAY AND TO ENSURE THAT YOUR SHARES ARE REPRESENTED, PLEASE VOTE AS
PROMPTLY AS POSSIBLE. YOU MAY VOTE EASILY AND QUICKLY BY MAIL, TELEPHONE OR
THROUGH THE INTERNET. TO VOTE BY MAIL, PLEASE COMPLETE AND MAIL YOUR PROXY CARD
IN THE ENCLOSED POSTAGE-PAID RETURN ENVELOPE. ALTERNATIVELY, SHAREHOLDERS MAY
VOTE BY TELEPHONE OR THROUGH THE INTERNET BY FOLLOWING THE INSTRUCTIONS ON THE
PROXY CARD. IF YOU NEED ANY ASSISTANCE, OR HAVE ANY QUESTIONS REGARDING THE
PROPOSALS OR HOW TO VOTE YOUR SHARES, PLEASE CALL THE FUND'S PROXY SOLICITOR,
AST FUND SOLUTIONS, LLC, AT (800) 284-1755 WEEKDAYS FROM 9:00 A.M. TO 10:00 P.M.
EASTERN TIME.
--------------------------------------------------------------------------------
-29-
EXHIBIT A-1
FORM OF NEW SUB-ADVISORY AGREEMENT
INVESTMENT SUB-ADVISORY AGREEMENT
INVESTMENT SUB-ADVISORY AGREEMENT made as of this ___ day of ___________,
201_ by and among the First Trust Exchange-Traded Fund IV, a Massachusetts
business trust (the "Trust"), First Trust Advisors L.P., an Illinois limited
partnership (the "Manager") and a registered investment adviser with the
Securities and Exchange Commission ("SEC"), and Heitman Real Estate Securities
LLC, a Delaware limited liability company and a registered investment adviser
with the SEC (the "Sub-Adviser").
WHEREAS, the First Trust Heitman Global Prime Real Estate ETF (the "Fund")
is a series of the Trust, an open-end management investment company registered
under the Investment Company Act of 1940, as amended (the "1940 Act");
WHEREAS, the Trust has retained the Manager to serve as the investment
adviser for the Fund pursuant to an Investment Management Agreement between the
Manager and the Trust dated October 27, 2015 (as such agreement may be modified
from time to time, the "Management Agreement");
WHEREAS, the Management Agreement provides that the Manager may, subject to
certain requirements, appoint a sub-adviser at its own cost and expense for the
purpose of furnishing certain services required under the Management Agreement;
WHEREAS, pursuant to the Management Agreement, the Fund will pay to the
Manager, at the end of each calendar month, and the Manager agrees to accept as
full compensation therefor, an investment management fee equal to an annual rate
of 0.95% of the Fund's average daily net assets (the "Investment Management
Fee"), and the Manager will pay all of the expenses of the Fund (including the
cost of transfer agency, custody, fund administration, legal, audit and other
services and license fees, if any) but excluding the fee payment under the
Management Agreement, interest, taxes, brokerage commissions and other expenses
connected with the execution of portfolio transactions, such as dividend and
distribution expenses from securities sold short and/or other investment related
costs, distribution and service fees payable pursuant to a Rule 12b-1 Plan, if
any, and extraordinary expenses (collectively, the "Fund Expenses"); and
WHEREAS, the Trust and the Manager desire to retain the Sub-Adviser to
furnish investment advisory services for the Fund's investment portfolio upon
the terms and conditions hereafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
the parties hereto agree as follows:
1. Appointment. The Trust and the Manager hereby appoint the Sub-Adviser
to provide certain investment advisory services to the Fund for the period and
on the terms set forth in this Agreement. The Sub-Adviser accepts such
appointment and agrees to furnish the services herein set forth for the
compensation herein provided. The Sub-Adviser shall, for all purposes herein
provided, be deemed an independent contractor and, unless otherwise expressly
provided or authorized, shall have no authority to act for nor represent the
Trust, the Fund or the Manager in any way, nor otherwise be deemed an agent of
the Trust, the Fund or the Manager.
A-1-1
2. Services to Be Performed. Subject always to the supervision of the
Trust's Board of Trustees (the "Board of Trustees") and the Manager, the
Sub-Adviser will act as sub-adviser for, and manage on a discretionary basis the
investment and reinvestment of the assets of the Fund, furnish an investment
program in respect of, make investment decisions for, and place all orders
(either directly or through the Manager) for the purchase and sale of securities
and other assets for the Fund's investment portfolio, all on behalf of the Fund
and consistent with the investment guidelines provided by the Manager to the
Sub-Adviser and the Fund's currently effective registration statement on Form
N-1A as they both may hereafter be amended from time to time and communicated by
the Fund or the Manager to the Sub-Adviser in writing. To the extent
Sub-Sub-Advisers (as defined below) are appointed to manage all or a portion of
the Fund's assets, the Sub-Adviser (i) shall allocate and reallocate the Fund's
assets among the Sub-Sub-Advisers as the Sub-Adviser determines to be
appropriate, (ii) recommend the termination of a Sub-Sub-Adviser when
appropriate and (iii) monitor and evaluate each Sub-Sub-Adviser's performance
and report to the Manager on the Sub-Sub-Adviser's performance periodically, but
at least quarterly. In the performance of its duties, the Sub-Adviser will in
all material respects (a) satisfy any applicable fiduciary duties it may have to
the Fund, (b) monitor the Fund's investments or other instruments, (c) comply
with the provisions of the Trust's Declaration of Trust and By-laws, as amended
from time to time and communicated by the Fund or the Manager to the Sub-Adviser
in writing, (d) comply with (i) the investment objective, policies and
restrictions stated in the Fund's most recently effective prospectus and
statement of additional information that are applicable to the Fund's investment
portfolio, (ii) such other investment policies, restrictions or instructions as
the Manager or the Trust's Board of Trustees may communicate to the Sub-Adviser
in writing, and (iii) any changes to the objective, policies, restrictions or
instructions required under the foregoing (i) and (ii) as communicated to the
Sub-Adviser in writing and (e) assist in the valuation of portfolio assets held
by the Fund as reasonably requested by the Manager or the Fund. The Fund or the
Manager shall provide the Sub-Adviser with current copies of the Trust's
Declaration of Trust, By-laws, the Fund's prospectus, the Fund's statement of
additional information and any amendments thereto, and any policies or
limitations not appearing therein as they may be relevant to the Sub-Adviser's
performance under this Agreement. If the Sub-Adviser has a question about
whether any proposed transaction with respect to the Fund would be in compliance
with such documentation, it may consult with the Manager, and the Manager will
provide instructions upon which the Sub-Adviser may rely in purchasing and
selling securities for the Fund.
The Sub-Adviser is responsible for voting in respect of securities held in
the Fund's portfolio and will exercise or not exercise a right to vote in
accordance with the Sub-Adviser's proxy voting policy, a copy of which has been
provided to the Manager. The Sub-Adviser shall promptly notify the Manager and
the Fund of any material change in the voting policy. The Sub-Adviser is
permitted to represent any holdings on behalf of the Fund at any ordinary or
special meeting of shareholders and has the right to exercise any voting rights
or any other similar or connected rights.
Unless otherwise provided by the Manager, the Sub-Adviser is authorized to
select the brokers, dealers, futures commission merchants, banks or any other
agent or counterparty that will execute the purchases and sales of portfolio
investments for the Fund, and is directed to use its commercially reasonable
efforts to obtain best execution, which includes most favorable net results and
execution of the Fund's orders, taking into account all appropriate factors,
including among other things, price, dealer spread or commission, size and
difficulty of the transaction and research or other services provided. Subject
to approval by the Board of Trustees and compliance with the policies and
procedures adopted by the Board of Trustees for the Fund and to the extent
permitted by and in conformance with applicable law (including if applicable
Rule 17e-1 under the 1940 Act), the Sub-Adviser may select brokers or dealers
affiliated with the Sub-Adviser. It is understood that the Sub-Adviser will not
A-1-2
be deemed to have acted unlawfully, or to have breached a fiduciary duty to the
Trust or the Fund, or be in breach of any obligation owing to the Trust or the
Fund under this Agreement, or otherwise, solely by reason of its having caused
the Fund to pay a member of a securities exchange, a broker or a dealer a
commission for effecting a securities transaction for the Fund in excess of the
amount of commission another member of an exchange, broker or dealer would have
charged if the Sub-Adviser determined in good faith that the commission paid was
reasonable in relation to the brokerage or research services provided by such
member, broker or dealer, viewed in terms of that particular transaction or the
Sub-Adviser's overall responsibilities with respect to its accounts, including
the Fund, as to which it exercises investment discretion.
In addition, the Sub-Adviser may, to the extent permitted by applicable
law, aggregate purchase and sale orders of securities or other instruments
placed with respect to the assets of the Fund with similar orders being made
simultaneously for other accounts managed by the Sub-Adviser or its affiliates,
if in the Sub-Adviser's reasonable judgment such aggregation shall result in an
overall economic benefit to the Fund, taking into consideration the selling or
purchase price, brokerage commissions and other expenses. In the event that a
purchase or sale of an asset of the Fund occurs as part of any aggregate sale or
purchase orders, the objective of the Sub-Adviser and any of its affiliates
involved in such transaction shall be to allocate the assets so purchased or
sold, as well as expenses incurred in the transaction, among the Fund and other
accounts in a fair and equitable manner. Nevertheless, the Fund and the Manager
acknowledge that under some circumstances, such allocation may adversely affect
the Fund with respect to, among other things, the price or size of the assets
obtainable or salable. Whenever the Fund and one or more other investment
advisory clients of the Sub-Adviser have available funds for investment,
investments suitable and appropriate for each will be allocated in a manner
believed by the Sub-Adviser to be equitable to each, although such allocation
may result in a delay in one or more client accounts being, or the inability of
one or more accounts to be, fully invested that would not occur if such an
allocation were not made. Moreover, it is possible that due to differing
investment objectives or for other reasons, the Sub-Adviser and its affiliates
may purchase securities or other instruments of an issuer for one client and at
approximately the same time recommend selling or sell the same or similar types
of securities, assets or instruments for another client.
The Sub-Adviser will not arrange purchases or sales of securities or other
assets between the Fund and other accounts advised by the Sub-Adviser or its
affiliates unless (a) such purchases or sales are in accordance with applicable
law (including if applicable Rule 17a-7 under the 1940 Act) and the Fund's
policies and procedures, (b) the Sub-Adviser determines the purchase or sale is
in the best interests of the Fund, and (c) the Board of Trustees has approved
these types of transactions.
The Fund may adopt policies and procedures that modify or restrict the
Sub-Adviser's authority regarding the execution of the Fund's portfolio
transactions provided herein, which policies and procedures will become binding
upon the Sub-Adviser upon delivery by the Fund or the Manager of written notice
thereof to the Sub-Adviser; provided that, notwithstanding the foregoing, (a)
the Manager shall provide not less than sixty (60) days' written notice to the
Sub-Adviser prior to adopting any policy or procedure that materially modifies
or restricts the investment strategy, investment guidelines or investment
policies and (b) the Sub-Adviser will not be deemed to be in breach of its
obligations hereunder as a result of any non-compliance with any policy or
procedure that otherwise modifies or restricts the execution of the Fund's
portfolio transactions if the Sub-Adviser uses commercially reasonable efforts
to conform to such policy and procedure as promptly as reasonably practicable
after receiving written notice thereof.
A-1-3
The Sub-Adviser will communicate to the officers and Trustees of the Trust
such information relating to transactions for the Fund as they may reasonably
request. In no instance will the Fund's portfolio assets be purchased from or
sold to the Manager, the Sub-Adviser or any affiliated person of either the
Trust, the Manager or the Sub-Adviser, except as may be permitted under the 1940
Act, and under no circumstances will the Sub-Adviser select brokers or dealers
for Fund transactions on the basis of Fund share sales by such brokers or
dealers.
To enable the Sub-Adviser to comply with the foregoing provision, the
Manager agrees that it will (a) provide the Sub-Adviser with a list of
affiliated persons of the Trust and the Manager and (b) from time to time,
update the list as necessary.
The Sub-Adviser further agrees that it:
(a) will use the same degree of skill and care in providing such
services as it uses in providing services to other fiduciary accounts for
which it has investment responsibilities;
(b) will (i) conform in all material respects to all applicable
rules and regulations of the SEC and Commodity Futures Trading Commission
("CFTC"), (ii) comply in all material respects with all policies and
procedures adopted by the Board of Trustees for the Fund and communicated
to the Sub-Adviser in writing, (iii) conduct its activities under this
Agreement in all material respects in accordance with any applicable law
and regulations of any governmental authority pertaining to its investment
advisory, commodity pool operator and commodity trading advisory activities
(provided that the parties hereto acknowledge that the Sub-Adviser is not a
commodity pool operator or commodity trading adviser with respect to the
Fund) and (iv) promptly notify the Manager and the Fund if the Sub-Adviser
intends to engage in any derivative transactions on behalf of the Fund's
portfolio);
(c) will report to the Manager and to the Board of Trustees on a
quarterly basis and will make appropriate persons available for the purpose
of reviewing with representatives of the Manager and the Board of Trustees
on a regular basis at such times as the Manager or the Board of Trustees
may reasonably request in writing regarding the management of the Fund,
including, without limitation, review of the general investment strategies
of the Fund, the performance of the Fund's investment portfolio in relation
to relevant standard industry indices and general conditions affecting the
marketplace and will provide various other reports from time to time as
reasonably requested by the Manager or the Board of Trustees;
(d) will prepare and maintain such books and records with respect to
the Fund's assets and other transactions for the Fund's investment
portfolio as required under applicable law, the Fund's compliance policies
and procedures (as communicated by the Fund or the Manager to the
Sub-Adviser in writing) or as otherwise requested by the Manager or the
Board of Trustees and will prepare and furnish the Manager and the Board of
Trustees such periodic and special reports as the Board or the Manager may
request. Such records prepared and maintained by the Sub-Adviser as
required hereunder shall be open to inspection at all reasonable times
(upon reasonable notice and during standard business hours) by the Manager
or the Fund and any appropriate regulatory authorities. The Sub-Adviser
further agrees that all records that it maintains for the Fund are the
property of the Fund and the Sub-Adviser will surrender promptly to the
Fund any such records upon the request of the Manager or the Fund
(provided, however, that the Sub-Adviser shall be permitted to retain
copies thereof); and shall be permitted to retain originals (with copies to
A-1-4
the Fund) to the extent required under Rule 204-2 of the Investment
Advisers Act of 1940 or other applicable law; and
(e) will use commercially reasonable efforts to monitor events
relating to the issuers of those assets and the markets in which the
securities or other assets trade in the ordinary course of managing the
portfolio investments of the Fund, and will use commercially reasonable
efforts to notify the Manager, as promptly as practical, of any
issuer-specific or market events or other situations of which it becomes
aware (such as those that may occur after the close of a foreign market in
which the investments may primarily trade but before the time at which the
Fund's investments are priced on a given day) that it believes are likely
to materially impact the pricing of one or more securities or other assets
in the Fund's portfolio sub-advised by the Sub-Adviser. In addition, the
Sub-Adviser will at the Manager's request assist the Manager in evaluating
the impact that such an event may have on the net asset value of the Fund
and in determining a recommended fair value of the affected investment or
investments.
3. Custody Responsibilities. The Manager shall identify to the Sub-Adviser
one or more custodians (the "Custodian") to hold the assets of the Fund. The
Custodian, as identified by the Manager, will be responsible for the custody,
receipt and delivery of securities and other assets of the Fund, and the
Sub-Adviser shall have no authority, responsibility or obligation with respect
to the custody, receipt or delivery of securities or other assets of the Fund.
In the event that any cash, securities or other assets of the Fund are delivered
to the Sub-Adviser, it will promptly deliver the same over to the Custodian, in
the name of the Fund, as permitted by applicable law. The Manager or the Fund
shall be responsible for all custodial arrangements, including the payment of
all fees and charges to Custodian. The Sub-Adviser shall not be responsible or
liable for any act or omission of Custodian.
Unless otherwise required by local custom, all portfolio transactions
for the Fund will be consummated by payment to or delivery by the Fund of cash,
securities or other assets due to or from the Fund. The Sub-Adviser will make
all reasonable efforts to notify the Custodian of all orders to brokers, dealers
or other market intermediaries for the Account by 9:00 a.m. Eastern Time on the
day following the trade date and will affirm the trade before the close of
business one (1) business day after the trade date (T+1).
4. Disclosure Documents. During the term of this Agreement, the Manager
shall provide the Sub-Adviser with an opportunity to review and comment on the
portions of prospectuses, statements of additional information, registration
statements, proxy statements, reports to shareholders, advertising and sales
literature or other material prepared for distribution to Fund shareholders or
the public, which refer to the Sub-Adviser in any way, prior to the first use
thereof, and the Manager shall not use any such materials if the Sub-Adviser
reasonably objects in writing identifying errors or omissions within seven (7)
calendar days (or such shorter period as may be necessary to comply with
regulatory filing deadlines, or such other time as may be mutually agreeable)
after receipt thereof; provided, however, that the final form and content of all
such documentation shall be acceptable to the Manager, the Fund and their
respective legal counsel. The Manager shall ensure that all materials described
in this Section 4 prepared by employees or agents of the Manager or its
Affiliates that refer to the Sub-Adviser in any way are consistent with
materials previously approved by the Sub-Adviser as referenced in the preceding
sentence.
5. Expenses. During the term of this Agreement, the Sub-Adviser will pay
all expenses incurred by it in connection with its activities under this
Agreement other than the cost of securities and other assets (including
interest, taxes, brokerage commissions, if any, dividend and distribution
A-1-5
expenses from securities sold short and/or other investment related costs and
other expenses incurred in connection with the execution of transactions)
purchased for the Fund and any extraordinary expenses incurred by the Fund, all
of which shall be paid or reimbursed by the Fund.
6. Additional Sub-Advisers. Subject to obtaining the initial and periodic
approvals required under Section 15 of the 1940 Act and the approval of the
Manager, the Sub-Adviser may retain one or more additional sub-advisers
("Sub-Sub-Advisers") at the Sub-Adviser's own cost and expense for the purpose
of furnishing one or more of the services described in Section 2 hereof with
respect to the Fund. Retention of a Sub-Sub-Adviser hereunder shall in no way
reduce the responsibilities or obligations of the Sub-Adviser under this
Agreement and the Sub-Adviser shall be responsible to the Fund for all acts or
omissions of any Sub-Sub-Adviser in connection with the performance of the
Sub-Adviser's duties hereunder.
7. Compensation. For the services provided pursuant to this Agreement, the
Manager will pay the Sub-Adviser, and the Sub-Adviser agrees to accept as full
compensation therefor, a sub-advisory fee (the "Sub-Advisory Fee") equal to 50%
monthly in arrears of any remaining monthly Investment Management Fee paid to
the Manager for the average daily net assets allocated to the Sub-Adviser after
the average Fund Expenses for the average daily net assets allocated to the
Sub-Adviser accrued during the most recent twelve months are subtracted from the
Investment Management Fee for that month. If the average accrued Fund Expenses
for any rolling average twelve-month period are greater than the Investment
Management Fee for the twelfth month of such period, no Sub-Advisory Fee will be
due the Sub-Adviser for such month. For the avoidance of doubt, any deficit will
not be carried forward for purposes of calculating the Sub-Advisory Fee in any
subsequent month. For the month and year in which this Agreement becomes
effective or terminates, there shall be an appropriate proration on the basis of
the number of days that the Agreement is in effect during the month and year,
respectively. At the request of the Sub-Adviser, the Manager shall provide the
Sub-Adviser with an accounting reasonably satisfactory to the Sub-Adviser of the
calculation of the Sub-Advisory Fee. The Manager shall provide prompt advance
notice to the Sub-Adviser of any change to the Manager's compensation agreements
with respect to the Fund, which change may require approval by the Board of
Trustees.
8. Services to Others. The Trust and the Manager acknowledge that the
Sub-Adviser now acts, or may in the future act, as an investment adviser to
other managed accounts and as investment adviser or investment sub-adviser to
one or more other investment companies that are not series of the Trust. In
addition, the Trust and the Manager acknowledge that the persons employed by the
Sub-Adviser to assist in the Sub-Adviser's duties under this Agreement will not
devote their full time to such efforts. It is also agreed that the Sub-Adviser
may use any supplemental research obtained for the benefit of the Fund in
providing investment advice to its other investment advisory accounts and for
managing its own accounts.
9. Limitation of Liability. The Sub-Adviser shall not be liable for, and
the Trust and the Manager will not take any action against the Sub-Adviser to
hold the Sub-Adviser liable for, any error of judgment or mistake of law or for
any loss suffered by the Fund or the Manager (including, without limitation, by
reason of the purchase, sale or retention of any security or other asset) in
connection with the performance of the Sub-Adviser's duties under this
Agreement, except for a loss resulting from willful misfeasance, bad faith or
gross negligence on the part of the Sub-Adviser in the performance of its duties
under this Agreement, or by reason of its reckless disregard of its obligations
and duties under this Agreement. Nothing in this Section 9 or elsewhere in this
Agreement shall constitute a waiver of any legal rights under applicable U.S.
federal securities laws or any other laws whose applicability is not permitted
to be contractually waived.
A-1-6
10. Term; Termination. This Agreement shall become effective on the date
first set forth above (the "Effective Date") provided that it has been approved
in the manner required by the 1940 Act (after taking into effect any exemptive
order, no-action assurances, or other relief, rule or regulation upon which the
Fund may rely), and shall remain in full force until the two year anniversary of
the Effective Date unless sooner terminated as hereinafter provided. This
Agreement shall continue in force from year to year thereafter, but only as long
as such continuance is specifically approved for the Fund at least annually in
the manner required by the 1940 Act and the rules and regulations thereunder
(after taking into effect any exemptive order, no-action assurances, or other
relief, rule or regulation upon which the Fund may rely); provided, however,
that if the continuation of this Agreement is not approved for the Fund, the
Sub-Adviser may continue to serve in such capacity for the Fund in the manner
and to the extent permitted by the 1940 Act and the rules and regulations
thereunder.
This Agreement shall automatically terminate in the event of its assignment
and may be terminated at any time without the payment of any penalty by the
Manager or the Sub-Adviser upon sixty (60) days' written notice to the other
parties. This Agreement may also be terminated by the Fund by action of the
Board of Trustees or by a vote of a majority of the outstanding voting
securities of the Fund upon sixty (60) days' written notice to the Sub-Adviser
by the Fund without payment of any penalty.
This Agreement may be terminated at any time without the payment of any
penalty by the Manager, the Board of Trustees or by vote of a majority of the
outstanding voting securities of the Fund in the event that it shall have been
established by a court of competent jurisdiction that the Sub-Adviser or any
officer or director of the Sub-Adviser has taken any action that results in a
breach of the material covenants of the Sub-Adviser set forth herein.
The terms "assignment" and "vote of a majority of the outstanding voting
securities" shall have the meanings set forth in the 1940 Act and the rules and
regulations thereunder.
This Agreement shall automatically terminate in the event the Management
Agreement between the Manager and the Trust on behalf of the Fund is terminated,
assigned or not renewed.
Termination of this Agreement shall not affect the right of the Sub-Adviser
to receive payments on any unpaid balance of the compensation described in
Section 7, earned or accrued prior to such termination and for any additional
period during which the Sub-Adviser serves as such for the Fund, subject to
applicable law.
11. Compliance Certification. From time to time the Sub-Adviser shall
provide such certifications with respect to Rule 38a-1 under the 1940 Act, as
are reasonably requested by the Fund or the Manager. In addition, the
Sub-Adviser will, from time to time, provide a written assessment of its
compliance program in conformity with current industry standards that is
reasonably acceptable to the Fund to enable the Fund to fulfill its obligations
under Rule 38a-1 under the 1940 Act.
12. Notice. Any notice under this Agreement shall be sufficient in all
respects if given in writing and delivered by commercial courier providing proof
of delivery and addressed as follows or addressed to such other person or
address as such party may designate for receipt of such notice.
A-1-7
If to the Manager or the Fund: If to the Sub-Adviser:
First Trust Exchange-Traded Fund IV Heitman Real Estate Securities LLC
on behalf of First Trust Heitman 191 N. Wacker Dr.
Global Prime Real Estate ETF Suite 2500
First Trust Advisors L.P. Chicago, IL 60606
120 E. Liberty Drive Attention: Katherine Sandstrom
Wheaton, Illinois 60187
Attention: Secretary
13. Limitations on Liability. All parties hereto are expressly put on
notice of the Trust's Declaration of Trust and all amendments thereto, a copy of
which is on file with the Secretary of the Commonwealth of Massachusetts, and
the limitation of shareholder and Trustee liability contained therein and a copy
of which has been provided to the Sub-Adviser prior to the date hereof. This
Agreement is executed by the Trust on behalf of the Fund by the Trust's officers
in their capacity as officers and not individually and is not binding upon any
of the Trustees, officers or shareholders of the Trust individually but the
obligations imposed upon the Trust or Fund by this Agreement are binding only
upon the assets and property of the Fund, and persons dealing with the Trust or
Fund must look solely to the assets of the Fund for the enforcement of any
claims.
14. Miscellaneous. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. This
Agreement will be binding upon and shall inure to the benefit of the parties
hereto and their respective successors.
15. Applicable Law. This Agreement shall be construed in accordance with
applicable federal law and (except as to Section 13 hereof, which shall be
construed in accordance with the laws of Massachusetts) the laws of the State of
Illinois.
16. Amendment, Etc. This Agreement may only be amended, or its provisions
modified or waived, in a writing signed by the party against which such
amendment, modification or waiver is sought to be enforced.
17. Authority. Each party represents to the others that it is duly
authorized and fully empowered to execute, deliver and perform this Agreement.
The Trust represents that engagement of the Sub-Adviser has been duly authorized
by the Trust and is in accordance with the Trust's Declaration of Trust and
other governing documents of the Fund.
18. Severability. Each provision of this Agreement is intended to be
severable from the others so that if any provision or term hereof is illegal or
invalid for any reason whatsoever, such illegality or invalidity shall not
affect the validity of the remaining provisions and terms hereof; provided,
however, that the provisions governing payment of the Sub-Advisory Fee described
in Section 7 are not severable.
19. Entire Agreement. This Agreement constitutes the sole and entire
agreement of the parties hereto with respect to the subject matter expressly set
forth herein.
A-1-8
IN WITNESS WHEREOF, the Trust on behalf of the Fund, the Manager and the
Sub-Adviser have caused this Agreement to be executed as of the day and year
first above written.
FIRST TRUST ADVISORS L.P. HEITMAN REAL ESTATE SECURITIES LLC
By__________________________________ By________________________________
Title:_________________________ Title:________________________
FIRST TRUST EXCHANGE-TRADED FUND IV
on behalf of First Trust Heitman
Global Prime Real Estate ETF
By__________________________________
Title:_________________________
A-1-9
EXHIBIT A-2
FORM OF NEW HEITMAN HK SUB-SUB-ADVISORY AGREEMENT
INVESTMENT SUB-SUB-ADVISORY AGREEMENT
INVESTMENT SUB-SUB-ADVISORY AGREEMENT made as of this ___ day of ________,
201_ by and among the First Trust Exchange-Traded Fund IV, a Massachusetts
business trust (the "Trust"), First Trust Advisors L.P., an Illinois limited
partnership (the "Manager") and a registered investment adviser with the
Securities and Exchange Commission ("SEC"), Heitman Real Estate Securities LLC,
a Delaware limited liability company and a registered investment adviser with
the SEC (the "Sub-Adviser") and Heitman International Real Estate Securities HK
Limited, a Hong Kong proprietary limited company and a registered investment
adviser with the SEC (the "Sub-Sub-Adviser").
WHEREAS, the First Trust Heitman Global Prime Real Estate ETF (the "Fund")
is a series of the Trust, an open-end management investment company registered
under the Investment Company Act of 1940, as amended (the "1940 Act");
WHEREAS, the Trust has retained the Manager to serve as the investment
adviser for the Fund pursuant to an Investment Management Agreement between the
Manager and the Trust dated October 27, 2015 (as such agreement may be modified
from time to time, the "Management Agreement");
WHEREAS, the Management Agreement provides that the Manager may, subject to
certain requirements, appoint a sub-adviser at its own cost and expense for the
purpose of furnishing certain services required under the Management Agreement;
WHEREAS, pursuant to the Management Agreement, the Fund will pay to the
Manager, at the end of each calendar month, and the Manager agrees to accept as
full compensation therefor, an investment management fee equal to an annual rate
of 0.95% of the Fund's average daily net assets (the "Investment Management
Fee"), and the Manager will pay all of the expenses of the Fund (including the
cost of transfer agency, custody, fund administration, legal, audit and other
services and license fees, if any) but excluding the fee payment under the
Management Agreement, interest, taxes, brokerage commissions and other expenses
connected with the execution of portfolio transactions, such as dividend and
distribution expenses from securities sold short and/or other investment-related
costs, distribution and service fees payable pursuant to a Rule 12b-1 Plan, if
any, and extraordinary expenses (collectively, the "Fund Expenses");
WHEREAS, the Manager and the Trust have retained the Sub-Adviser to serve
as the lead sub-adviser for the Fund pursuant to an investment sub-advisory
agreement among the Trust, the Manager and the Sub-Adviser (the "Sub-Advisory
Agreement");
WHEREAS, pursuant to the Sub-Advisory Agreement, the Manager will pay the
Sub-Adviser a Sub-Advisory Fee as such term is defined and calculated under the
Sub-Advisory Agreement (the "Sub-Advisory Fee");
A-2-1
WHEREAS, the Sub-Advisory Agreement provides that the Sub-Advisor may,
subject to certain requirements, retain at its own cost and expense additional
sub-advisers to provide certain sub-advisory services to the Fund required under
the Sub-Advisory Agreement; and
WHEREAS, the Sub-Adviser seeks to retain, and the Trust and the Manager
have approved the retention of, the Sub-Sub-Adviser to furnish investment
advisory services for the Fund's investment portfolio allocated to the
Sub-Sub-Adviser by the Sub-Adviser upon the terms and conditions hereafter set
forth;
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
the parties hereto agree as follows:
1. Appointment. The Trust, the Manager and the Sub-Adviser hereby appoint
the Sub-Sub-Adviser to provide certain investment advisory services to the
assets of the Fund allocated to the Sub-Sub-Adviser by the Sub-Adviser for the
period and on the terms set forth in this Agreement. The Sub-Sub-Adviser accepts
such appointment and agrees to furnish the services herein set forth for the
compensation herein provided. The Sub-Sub-Adviser shall, for all purposes herein
provided, be deemed an independent contractor and, unless otherwise expressly
provided or authorized, shall have no authority to act for nor represent the
Trust, the Fund, or the Manager in any way, nor otherwise be deemed an agent of
the Trust, the Fund or the Manager.
2. Services to Be Performed. Subject always to the supervision of the
Trust's Board of Trustees (the "Board of Trustees"), the Manager and the
Sub-Adviser, the Sub-Sub-Adviser will act as sub-adviser for, and manage on a
discretionary basis the investment and reinvestment of the securities and other
assets of the Fund allocated to the Sub-Sub-Adviser from time to time by the
Sub-Adviser (the "Sub-Sub-Advised Assets"), furnish an investment program in
respect of, make investment decisions for, and place all orders (either directly
or through the Manager) for the purchase and sale of the Sub-Sub-Advised Assets,
all on behalf of the Fund and consistent with the investment guidelines provided
by the Manager or the Sub-Adviser to the Sub-Sub-Adviser and the Fund's
currently effective registration statement on Form N-1A as they both may
hereafter be amended from time to time and communicated by the Fund, the Manager
or the Sub-Adviser to the Sub-Sub-Adviser in writing. In the performance of its
duties, the Sub-Sub-Adviser will in all material respects (a) satisfy any
applicable fiduciary duties it may have to the Fund, (b) monitor the Fund's
investments or other instruments allocated to it, (c) comply with the provisions
of the Trust's Declaration of Trust and By-laws, as amended from time to time
and communicated by the Fund, the Manager or the Sub-Adviser to the
Sub-Sub-Adviser in writing, (d) comply with (i) the investment objective,
policies and restrictions stated in the Fund's most recently effective
prospectus and statement of additional information that are applicable to the
Fund's investment portfolio, (ii) such other investment policies, restrictions
or instructions as the Manager, the Trust's Board of Trustees or the Sub-Adviser
may communicate to the Sub-Sub-Adviser in writing, and (iii) any changes to the
objective, policies, restrictions or instructions required under the foregoing
(i) and (ii) as communicated to the Sub-Sub-Adviser in writing and (e) assist in
the valuation of portfolio assets held by the Fund as reasonably requested by
the Manager, the Fund or the Sub-Adviser. The Fund, the Manager or the
Sub-Adviser shall provide the Sub-Sub-Adviser with current copies of the Trust's
Declaration of Trust, By-laws, the Fund's prospectus, the Fund's statement of
additional information and any amendments thereto, and any policies or
limitations not appearing therein as they may be relevant to the Sub-Adviser's
performance under this Agreement. If the Sub-Sub-Adviser has a question about
whether any proposed transaction with respect to the Fund would be in compliance
A-2-2
with such documentation, it may consult with the Manager or the Sub-Adviser, and
the Manager or the Sub-Adviser will provide instructions upon which the
Sub-Sub-Adviser may rely in purchasing and selling securities for the Fund.
The Sub-Sub-Adviser is responsible for voting in respect of securities held
in the Fund's portfolio and will exercise or not exercise a right to vote in
accordance with the Sub-Sub-Adviser's proxy voting policy, a copy of which has
been provided to the Manager. The Sub-Sub-Adviser shall promptly notify the
Manager and the Fund of any material change in the voting policy. The
Sub-Sub-Adviser is permitted to represent any holdings on behalf of the Fund at
any ordinary or special meeting of shareholders and has the right to exercise
any voting rights or any other similar or connected rights.
Unless otherwise provided by the Manager or the Sub-Adviser, the
Sub-Sub-Adviser is authorized to select the brokers, dealers, futures commission
merchants, banks or any other agent or counterparty that will execute the
purchases and sales of the Sub-Sub-Advised Assets, and is directed to use its
commercially reasonable efforts to obtain best execution, which includes most
favorable net results and execution of the Fund's orders, taking into account
all appropriate factors, including among other things, price, dealer spread or
commission, size and difficulty of the transaction and research or other
services provided. Subject to approval by the Board of Trustees and compliance
with the policies and procedures adopted by the Board of Trustees for the Fund
and to the extent permitted by and in conformance with applicable law (including
if applicable Rule 17e-1 under the 1940 Act), the Sub-Sub-Adviser may select
brokers or dealers affiliated with the Sub-Sub-Adviser. It is understood that
the Sub-Sub-Adviser will not be deemed to have acted unlawfully, or to have
breached a fiduciary duty to the Trust or the Fund, or be in breach of any
obligation owing to the Trust or the Fund under this Agreement, or otherwise,
solely by reason of its having caused the Fund to pay a member of a securities
exchange, a broker or a dealer a commission for effecting a securities
transaction for the Fund in excess of the amount of commission another member of
an exchange, broker or dealer would have charged if the Sub-Sub-Adviser
determined in good faith that the commission paid was reasonable in relation to
the brokerage or research services provided by such member, broker or dealer,
viewed in terms of that particular transaction or the Sub-Sub-Adviser's overall
responsibilities with respect to its accounts, including the Fund, as to which
it exercises investment discretion.
In addition, the Sub-Sub-Adviser may, to the extent permitted by applicable
law, aggregate purchase and sale orders of securities or other instruments
placed with respect to the assets of the Fund with similar orders being made
simultaneously for other accounts managed by the Sub-Sub-Adviser or its
affiliates, if in the Sub-Sub-Adviser's reasonable judgment such aggregation
shall result in an overall economic benefit to the Fund, taking into
consideration the selling or purchase price, brokerage commissions and other
expenses. In the event that a purchase or sale of an asset of the Fund occurs as
part of any aggregate sale or purchase orders, the objective of the
Sub-Sub-Adviser and any of its affiliates involved in such transaction shall be
to allocate the assets so purchased or sold, as well as expenses incurred in the
transaction, among the Fund and other accounts in a fair and equitable manner.
Nevertheless, the Fund, the Manager and Sub-Adviser acknowledge that under some
circumstances, such allocation may adversely affect the Fund with respect to,
among other things, the price or size of the assets obtainable or salable.
Whenever the Fund and one or more other investment advisory clients of the
Sub-Sub-Adviser have available funds for investment, investments suitable and
appropriate for each will be allocated in a manner believed by the
Sub-Sub-Adviser to be equitable to each, although such allocation may result in
a delay in one or more client accounts being, or the inability of one or more
accounts to be, fully invested that would not occur if such an allocation were
not made. Moreover, it is possible that due to differing investment objectives
or for other reasons, the Sub-Sub-Adviser and its affiliates may purchase
A-2-3
securities or other instruments of an issuer for one client and at approximately
the same time recommend selling or sell the same or similar types of securities,
assets or instruments for another client.
The Sub-Sub-Adviser will not arrange purchases or sales of securities or
other assets between the Fund and other accounts advised by the Sub-Sub-Adviser
or its affiliates unless (a) such purchases or sales are in accordance with
applicable law (including if applicable Rule 17a-7 under the 1940 Act) and the
Fund's policies and procedures, (b) the Sub-Sub-Adviser determines the purchase
or sale is in the best interests of the Fund, and (c) the Board of Trustees has
approved these types of transactions.
The Fund may adopt policies and procedures that modify or restrict the
Sub-Sub-Adviser's authority regarding the execution of the Fund's portfolio
transactions provided herein, which policies and procedures will become binding
upon the Sub-Sub-Adviser upon delivery by the Fund, the Manager or the
Sub-Adviser of written notice thereof to the Sub-Sub-Adviser; provided that,
notwithstanding the foregoing, (a) the Manager or Sub-Adviser, as applicable,
shall provide not less than sixty (60) days' written notice to the
Sub-Sub-Adviser prior to adopting any policy of procedure that materially
modifies or restricts the investment strategy, investment guidelines or
investment policies and (b) the Sub-Sub-Adviser will not be deemed to be in
breach of its obligations hereunder as a result of any non-compliance with any
policy or procedure that otherwise modifies or restricts the execution of the
Fund's portfolio transactions if the Sub-Sub-Adviser uses commercially
reasonable efforts to conform to such policy and procedure as promptly as
reasonably practicable after receiving written notice thereof.
The Sub-Sub-Adviser will communicate to the officers and Trustees of the
Trust and the Sub-Adviser such information relating to transactions for the Fund
as any of the foregoing may reasonably request. In no instance will the Fund's
portfolio assets be purchased from or sold to the Manager, the Sub-Adviser, the
Sub-Sub-Adviser or any affiliated person of the Trust, the Manager, the
Sub-Adviser or the Sub-Sub-Adviser, except as may be permitted under the 1940
Act and under no circumstances will the Sub-Sub-Adviser select brokers or
dealers for Fund transactions on the basis of Fund share sales by such brokers
or dealers.
To enable the Sub-Sub-Adviser to comply with the foregoing provision, the
Manager agrees that it will (a) provide the Sub-Sub-Adviser with a list of
affiliated persons of the Trust and the Manager and (b) from time to time,
update the list as necessary.
The Sub-Sub-Adviser further agrees that it:
(a) will use the same degree of skill and care in providing such
services as it uses in providing services to other fiduciary accounts for
which it has investment responsibilities;
(b) will (i) conform in all material respects to all applicable
rules and regulations of the SEC and Commodity Futures Trading Commission
("CFTC"), (ii) comply in all material respects with all policies and
procedures adopted by the Board of Trustees for the Fund and communicated
to the Sub-Sub-Adviser in writing, (iii) conduct its activities under this
Agreement in all material respects in accordance with any applicable law
and regulations of any governmental authority pertaining to its investment
advisory, commodity pool operator and commodity trading advisory activities
(provided that the parties hereto acknowledge that the Sub-Sub-Adviser is
not a commodity pool operator or commodity trading adviser with respect to
the Fund) and (iv) promptly notify the Manager and the Fund if the
Sub-Sub-Adviser intends to engage in any derivative transactions on behalf
of the Fund's portfolio);
A-2-4
(c) will report to the Manager and to the Board of Trustees on a
quarterly basis and to the Sub-Adviser as it may request and will make
appropriate persons available for the purpose of reviewing with
representatives of the Manager, the Board of Trustees and the Sub-Adviser
on a regular basis at such times as the Manager, the Board of Trustees or
the Sub-Adviser may reasonably request in writing regarding the management
of the Fund, including, without limitation, review of the general
investment strategies of the Fund applicable to the Sub-Sub-Advised Assets,
the performance of the Sub-Sub-Advised Assets in relation to relevant
standard industry indices and general conditions affecting the marketplace
and will provide various other reports from time to time as reasonably
requested by the Manager, the Board of Trustees or the Sub-Adviser;
(d) will prepare and maintain such books and records with respect to
the Sub-Sub-Advised Assets and other transactions for the Sub-Sub-Advised
Assets as required under applicable law, the Fund's compliance policies and
procedures (as communicated by the Fund, the Manager or the Sub-Adviser to
the Sub-Sub-Adviser in writing) or as otherwise requested by the Manager,
the Board of Trustees or the Sub-Adviser and will prepare and furnish the
Manager, the Board of Trustees or the Sub-Adviser such periodic and special
reports as the Board, the Manager or the Sub-Adviser may request. Such
records prepared and maintained by the Sub-Sub-Adviser as required
hereunder shall be open to inspection at all reasonable times (upon
reasonable notice and during standard business hours) by the Manager, the
Fund or the Sub-Adviser and any appropriate regulatory authorities. The
Sub-Sub-Adviser further agrees that all records that it maintains for the
Fund are the property of the Fund and the Sub-Sub-Adviser will surrender
promptly to the Fund any such records upon the request of the Manager or
the Fund (provided, however, that the Sub-Sub-Adviser shall be permitted to
retain copies thereof); and shall be permitted to retain originals (with
copies to the Fund) to the extent required under Rule 204-2 of the
Investment Advisers Act of 1940 or other applicable law; and
(e) will use commercially reasonable efforts to monitor events
relating to the issuers of those assets and the markets in which the
securities or other assets trade in the ordinary course of managing the
Sub-Sub-Advised Assets of the Fund, and will use commercially reasonable
efforts to notify the Manager as promptly as practical of any
issuer-specific or market events or other situations of which it becomes
aware (such as those that may occur after the close of a foreign market in
which the investments may primarily trade but before the time at which the
Fund's investments are priced on a given day) that it believes are likely
to materially impact the pricing of one or more of the Sub-Sub-Advised
Assets. In addition, the Sub-Sub-Adviser will at the Manager's request
assist the Manager in evaluating the impact that such an event may have on
the net asset value of the Fund and in determining a recommended fair value
of the affected investment or investments.
3. Custody Responsibilities. The Manager shall identify to the Sub-Adviser
one or more custodians (the "Custodian") to hold the assets of the Fund. The
Custodian, as identified by the Manager, will be responsible for the custody,
receipt and delivery of securities and other assets of the Fund, and the
Sub-Sub-Adviser shall have no authority, responsibility or obligation with
respect to the custody, receipt or delivery of securities or other assets of the
Fund. In the event that any cash, securities or other assets of the Fund are
delivered to the Sub-Sub-Adviser, it will promptly deliver the same over to the
Custodian, in the name of the Fund, as permitted by applicable law. The Manager
or the Fund shall be responsible for all custodial arrangements, including the
payment of all fees and charges to Custodian. The Sub-Sub-Adviser shall not be
responsible or liable for any act or omission of Custodian.
A-2-5
Unless otherwise required by local custom, all portfolio transactions
for the Fund will be consummated by payment to or delivery by the Fund of cash,
securities or other assets due to or from the Fund. The Sub-Sub-Adviser will
make all reasonable efforts to notify the Custodian of all orders to brokers,
dealers or other market intermediaries for the Account by 9:00 a.m. Eastern Time
on the day following the trade date and will affirm the trade before the close
of business one (1) business day after the trade date (T+1).
4. Disclosure Documents. During the term of this Agreement, the Manager
shall provide the Sub-Sub-Adviser with an opportunity to review and comment on
the portions of prospectuses, statements of additional information, registration
statements, proxy statements, reports to shareholders, advertising and sales
literature or other material prepared for distribution to Fund shareholders or
the public, which refer to the Sub-Sub-Adviser in any way, prior to the first
use thereof, and the Manager shall not use any such materials if the
Sub-Sub-Adviser reasonably objects in writing identifying errors or omissions
within seven (7) calendar days (or such shorter period as may be necessary to
comply with regulatory filing deadlines, or such other time as may be mutually
agreeable) after receipt thereof; provided, however, that the final form and
content of all such documentation shall be acceptable to the Manager, the Fund
and their respective legal counsel. The Manager shall ensure that all materials
described in this Section 4 prepared by employees or agents of the Manager or
its Affiliates that refer to the Sub-Sub-Adviser in any way are consistent with
materials previously approved by the Sub-Sub-Adviser as referenced in the
preceding sentence.
5. Expenses. During the term of this Agreement, the Sub-Sub-Adviser will
pay all expenses incurred by it in connection with its activities under this
Agreement other than the cost of securities and other assets (including
interest, taxes, brokerage commissions, if any, dividend and distribution
expenses from securities sold short and/or other investment related costs and
other expenses incurred in connection with the execution of transactions)
purchased for the Fund and any extraordinary expenses incurred by the Fund, all
of which shall be paid or reimbursed by the Fund.
6. Compensation. For the services provided pursuant to this Agreement, the
Sub-Adviser will pay the Sub-Sub-Adviser, and the Sub-Sub-Adviser agrees to
accept as full compensation therefor, a sub-advisory fee (the "Sub-Sub-Advisory
Fee") equal to the percentage of the average daily net assets of the Fund
allocated to the Sub-Sub-Adviser times the Sub-Advisory Fee received by the
Sub-Adviser (if any) pursuant to the Sub-Advisory Agreement. The
Sub-Sub-Advisory Fee shall be calculated monthly and payable in arrears on or
about the first day of each month during the term of this Agreement.
7. Services to Others. The Trust, the Manager and the Sub-Adviser
acknowledge that the Sub-Sub-Adviser now acts, or may in the future act, as an
investment adviser to other managed accounts and as investment adviser or
investment sub-adviser to one or more other investment companies that are not
series of the Trust. In addition, the Trust, the Manager and the Sub-Adviser
acknowledge that the persons employed by the Sub-Sub-Adviser to assist in the
Sub-Sub-Adviser's duties under this Agreement will not devote their full time to
such efforts. It is also agreed that the Sub-Sub-Adviser may use any
supplemental research obtained for the benefit of the Fund in providing
investment advice to its other investment advisory accounts and for managing its
own accounts.
8. Limitation of Liability. The Sub-Sub-Adviser shall not be liable for,
and the Trust, the Manager and the Sub-Adviser will not take any action against
the Sub-Sub-Adviser to hold the Sub-Sub-Adviser liable for, any error of
judgment or mistake of law or for any loss suffered by the Fund, the Manager or
the Sub-Adviser (including, without limitation, by reason of the purchase, sale
A-2-6
or retention of any security or other asset) in connection with the performance
of the Sub-Sub-Adviser's duties under this Agreement, except for a loss
resulting from willful misfeasance, bad faith or gross negligence on the part of
the Sub-Sub-Adviser in the performance of its duties under this Agreement, or by
reason of its reckless disregard of its obligations and duties under this
Agreement. Nothing in this Section 8 or elsewhere in this Agreement shall
constitute a waiver of any legal rights under applicable U.S. federal securities
laws or any other laws whose applicability is not permitted to be contractually
waived.
9. Term; Termination. This Agreement shall become effective on the date
first set forth above (the "Effective Date") provided that it has been approved
in the manner required by the 1940 Act (after taking into effect any exemptive
order, no-action assurances, or other relief, rule or regulation upon which the
Fund may rely), and shall remain in full force until the two year anniversary of
the Effective Date unless sooner terminated as hereinafter provided. This
Agreement shall continue in force from year to year thereafter, but only as long
as such continuance is specifically approved for the Fund at least annually in
the manner required by the 1940 Act and the rules and regulations thereunder
(after taking into effect any exemptive order, no-action assurances, or other
relief, rule or regulation upon which the Fund may rely); provided, however,
that if the continuation of this Agreement is not approved for the Fund, the
Sub-Sub-Adviser may continue to serve in such capacity for the Fund in the
manner and to the extent permitted by the 1940 Act and the rules and regulations
thereunder.
This Agreement shall automatically terminate in the event of its assignment
and may be terminated at any time without the payment of any penalty by the
Manager or the Sub-Sub-Adviser upon sixty (60) days' written notice to the other
parties. This Agreement may also be terminated by the Fund by action of the
Board of Trustees or by a vote of a majority of the outstanding voting
securities of the Fund upon sixty (60) days' written notice to the
Sub-Sub-Adviser by the Fund without payment of any penalty.
This Agreement may be terminated at any time without the payment of any
penalty by the Manager, the Board of Trustees or by vote of a majority of the
outstanding voting securities of the Fund in the event that it shall have been
established by a court of competent jurisdiction that the Sub-Sub-Adviser or any
officer or director of the Sub-Sub-Adviser has taken any action that results in
a breach of the material covenants of the Sub-Sub-Adviser set forth herein.
The terms "assignment" and "vote of a majority of the outstanding voting
securities" shall have the meanings set forth in the 1940 Act and the rules and
regulations thereunder.
This Agreement shall automatically terminate in the event that either the
Management Agreement between the Manager and the Trust on behalf of the Fund or
the Sub-Advisory Agreement among the Fund, the Manager and the Sub-Adviser is
terminated, assigned or not renewed.
Termination of this Agreement shall not affect the right of the
Sub-Sub-Adviser to receive payments on any unpaid balance of the compensation
described in Section 6, earned or accrued prior to such termination and for any
additional period during which the Sub-Adviser serves as such for the Fund,
subject to applicable law.
10. Compliance Certification. From time to time the Sub-Sub-Adviser shall
provide such certifications with respect to Rule 38a-1 under the 1940 Act, as
are reasonably requested by the Fund, the Manager or the Sub-Adviser. In
addition, the Sub-Sub-Adviser will, from time to time, provide a written
assessment of its compliance program in conformity with current industry
standards that is reasonably acceptable to the Fund to enable the Fund to
fulfill its obligations under Rule 38a-1 under the 1940 Act.
A-2-7
11. Notice. Any notice under this Agreement shall be sufficient in all
respects if given in writing and delivered by commercial courier providing proof
of delivery and addressed as follows or addressed to such other person or
address as such party may designate for receipt of such notice.
If to the Manager or the Fund: If to the Sub-Adviser or the
Sub-Sub-Adviser:
First Trust Exchange-Traded Fund IV Heitman Real Estate Securities LLC
on behalf of First Trust Heitman 191 N. Wacker Dr.
Global Prime Real Estate ETF Suite 2500
First Trust Advisors L.P. Chicago, IL 60606
120 E. Liberty Drive Attention: Katherine Sandstrom
Wheaton, Illinois 60187
Attention: Secretary
12. Limitations on Liability. All parties hereto are expressly put on
notice of the Trust's Declaration of Trust and all amendments thereto, a copy of
which is on file with the Secretary of the Commonwealth of Massachusetts, and
the limitation of shareholder and Trustee liability contained therein and a copy
of which has been provided to the Sub-Sub-Adviser prior to the date hereof. This
Agreement is executed by the Trust on behalf of the Fund by the Trust's officers
in their capacity as officers and not individually and is not binding upon any
of the Trustees, officers or shareholders of the Trust individually but the
obligations imposed upon the Trust or Fund by this Agreement are binding only
upon the assets and property of the Fund, and persons dealing with the Trust or
Fund must look solely to the assets of the Fund for the enforcement of any
claims.
13. Miscellaneous. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. This
Agreement will be binding upon and shall inure to the benefit of the parties
hereto and their respective successors.
14. Applicable Law. This Agreement shall be construed in accordance with
applicable federal law and (except as to Section 12 hereof, which shall be
construed in accordance with the laws of Massachusetts) the laws of the State of
Illinois.
15. Amendment, Etc. This Agreement may only be amended, or its provisions
modified or waived, in a writing signed by the party against which such
amendment, modification or waiver is sought to be enforced.
16. Authority. Each party represents to the others that it is duly
authorized and fully empowered to execute, deliver and perform this Agreement.
The Trust represents that engagement of the Sub-Sub-Adviser has been duly
authorized by the Trust and is in accordance with the Trust's Declaration of
Trust and other governing documents of the Fund.
17. Severability. Each provision of this Agreement is intended to be
severable from the others so that if any provision or term hereof is illegal or
invalid for any reason whatsoever, such illegality or invalidity shall not
affect the validity of the remaining provisions and terms hereof; provided,
however, that the provisions governing payment of the Sub-Sub-Advisory Fee
described in Section 6 are not severable.
18. Entire Agreement. This Agreement constitutes the sole and entire
agreement of the parties hereto with respect to the subject matter expressly set
forth herein.
A-2-8
IN WITNESS WHEREOF, the Trust on behalf of the Fund, the Manager, the
Sub-Adviser, the Sub-Sub-Adviser have caused this Agreement to be executed as of
the day and year first above written.
FIRST TRUST ADVISORS L.P. HEITMAN REAL ESTATE SECURITIES LLC
By__________________________________ By________________________________
Title:_________________________ Title:________________________
FIRST TRUST EXCHANGE-TRADED FUND IV HEITMAN INTERNATIONAL REAL ESTATE
on behalf of First Trust Heitman SECURITIES HK LIMITED
Global Prime Real Estate ETF
By__________________________________
Title:_________________________ By _______________________________
Title: _______________________
A-2-9
EXHIBIT A-3
FORM OF NEW HEITMAN GMBH SUB-SUB-ADVISORY AGREEMENT
INVESTMENT SUB-SUB-ADVISORY AGREEMENT
INVESTMENT SUB-SUB-ADVISORY AGREEMENT made as of this ____ day of
_________, 201_ by and among the First Trust Exchange-Traded Fund IV, a
Massachusetts business trust (the "Trust"), First Trust Advisors L.P., an
Illinois limited partnership (the "Manager") and a registered investment adviser
with the Securities and Exchange Commission ("SEC"), Heitman Real Estate
Securities LLC, a Delaware limited liability company and a registered investment
adviser with the SEC (the "Sub-Adviser") and Heitman International Real Estate
Securities GmbH, a German company of limited liability and a registered
investment adviser with the SEC (the "Sub-Sub-Adviser").
WHEREAS, the First Trust Heitman Global Prime Real Estate ETF (the "Fund")
is a series of the Trust, an open-end management investment company registered
under the Investment Company Act of 1940, as amended (the "1940 Act");
WHEREAS, the Trust has retained the Manager to serve as the investment
adviser for the Fund pursuant to an Investment Management Agreement between the
Manager and the Trust dated October 27, 2015 (as such agreement may be modified
from time to time, the "Management Agreement");
WHEREAS, the Management Agreement provides that the Manager may, subject to
certain requirements, appoint a sub-adviser at its own cost and expense for the
purpose of furnishing certain services required under the Management Agreement;
WHEREAS, pursuant to the Management Agreement, the Fund will pay to the
Manager, at the end of each calendar month, and the Manager agrees to accept as
full compensation therefor, an investment management fee equal to an annual rate
of 0.95% of the Fund's average daily net assets (the "Investment Management
Fee"), and the Manager will pay all of the expenses of the Fund (including the
cost of transfer agency, custody, fund administration, legal, audit and other
services and license fees, if any) but excluding the fee payment under the
Management Agreement, interest, taxes, brokerage commissions and other expenses
connected with the execution of portfolio transactions, such as dividend and
distribution expenses from securities sold short and/or other investment-related
costs, distribution and service fees payable pursuant to a Rule 12b-1 Plan, if
any, and extraordinary expenses (collectively, the "Fund Expenses");
WHEREAS, the Manager and the Trust have retained the Sub-Adviser to serve
as the lead sub-adviser for the Fund pursuant to an investment sub-advisory
agreement among the Trust, the Manager and the Sub-Adviser (the "Sub-Advisory
Agreement");
WHEREAS, pursuant to the Sub-Advisory Agreement, the Manager will pay the
Sub-Adviser a Sub-Advisory Fee as such term is defined and calculated under the
Sub-Advisory Agreement (the "Sub-Advisory Fee");
WHEREAS, the Sub-Advisory Agreement provides that the Sub-Advisor may,
subject to certain requirements, retain at its own cost and expense additional
sub-advisers to provide certain sub-advisory services to the Fund required under
the Sub-Advisory Agreement; and
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WHEREAS, the Sub-Adviser seeks to retain, and the Trust and the Manager
have approved the retention of, the Sub-Sub-Adviser to furnish investment
advisory services for the Fund's investment portfolio allocated to the
Sub-Sub-Adviser by the Sub-Adviser upon the terms and conditions hereafter set
forth;
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
the parties hereto agree as follows:
1. Appointment. The Trust, the Manager and the Sub-Adviser hereby appoint
the Sub-Sub-Adviser to provide certain investment advisory services to the
assets of the Fund allocated to the Sub-Sub-Adviser by the Sub-Adviser for the
period and on the terms set forth in this Agreement. The Sub-Sub-Adviser accepts
such appointment and agrees to furnish the services herein set forth for the
compensation herein provided. The Sub-Sub-Adviser shall, for all purposes herein
provided, be deemed an independent contractor and, unless otherwise expressly
provided or authorized, shall have no authority to act for nor represent the
Trust, the Fund, or the Manager in any way, nor otherwise be deemed an agent of
the Trust, the Fund or the Manager.
2. Services to Be Performed. Subject always to the supervision of the
Trust's Board of Trustees (the "Board of Trustees"), the Manager and the
Sub-Adviser, the Sub-Sub-Adviser will act as sub-adviser for, and manage on a
discretionary basis the investment and reinvestment of the securities and other
assets of the Fund allocated to the Sub-Sub-Adviser from time to time by the
Sub-Adviser (the "Sub-Sub-Advised Assets"), furnish an investment program in
respect of, make investment decisions for, and place all orders (either directly
or through the Manager) for the purchase and sale of the Sub-Sub-Advised Assets,
all on behalf of the Fund and consistent with the investment guidelines provided
by the Manager or the Sub-Adviser to the Sub-Sub-Adviser and the Fund's
currently effective registration statement on Form N-1A as they both may
hereafter be amended from time to time and communicated by the Fund, the Manager
or the Sub-Adviser to the Sub-Sub-Adviser in writing. In the performance of its
duties, the Sub-Sub-Adviser will in all material respects (a) satisfy any
applicable fiduciary duties it may have to the Fund, (b) monitor the Fund's
investments or other instruments allocated to it, (c) comply with the provisions
of the Trust's Declaration of Trust and By-laws, as amended from time to time
and communicated by the Fund, the Manager or the Sub-Adviser to the
Sub-Sub-Adviser in writing, (d) comply with (i) the investment objective,
policies and restrictions stated in the Fund's most recently effective
prospectus and statement of additional information that are applicable to the
Fund's investment portfolio, (ii) such other investment policies, restrictions
or instructions as the Manager, the Trust's Board of Trustees or the Sub-Adviser
may communicate to the Sub-Sub-Adviser in writing, and (iii) any changes to the
objective, policies, restrictions or instructions required under the foregoing
(i) and (ii) as communicated to the Sub-Sub-Adviser in writing and (e) assist in
the valuation of portfolio assets held by the Fund as reasonably requested by
the Manager, the Fund or the Sub-Adviser. The Fund, the Manager or the
Sub-Adviser shall provide the Sub-Sub-Adviser with current copies of the Trust's
Declaration of Trust, By-laws, the Fund's prospectus, the Fund's statement of
additional information and any amendments thereto, and any policies or
limitations not appearing therein as they may be relevant to the Sub-Adviser's
performance under this Agreement. If the Sub-Sub-Adviser has a question about
whether any proposed transaction with respect to the Fund would be in compliance
with such documentation, it may consult with the Manager or the Sub-Adviser, and
the Manager or the Sub-Adviser will provide instructions upon which the
Sub-Sub-Adviser may rely in purchasing and selling securities for the Fund.
The Sub-Sub-Adviser is responsible for voting in respect of securities held
in the Fund's portfolio and will exercise or not exercise a right to vote in
accordance with the Sub-Sub-Adviser's proxy voting policy, a copy of which has
A-3-2
been provided to the Manager. The Sub-Sub-Adviser shall promptly notify the
Manager and the Fund of any material change in the voting policy. The
Sub-Sub-Adviser is permitted to represent any holdings on behalf of the Fund at
any ordinary or special meeting of shareholders and has the right to exercise
any voting rights or any other similar or connected rights.
Unless otherwise provided by the Manager or the Sub-Adviser, the
Sub-Sub-Adviser is authorized to select the brokers, dealers, futures commission
merchants, banks or any other agent or counterparty that will execute the
purchases and sales of the Sub-Sub-Advised Assets, and is directed to use its
commercially reasonable efforts to obtain best execution, which includes most
favorable net results and execution of the Fund's orders, taking into account
all appropriate factors, including among other things, price, dealer spread or
commission, size and difficulty of the transaction and research or other
services provided. Subject to approval by the Board of Trustees and compliance
with the policies and procedures adopted by the Board of Trustees for the Fund
and to the extent permitted by and in conformance with applicable law (including
if applicable Rule 17e-1 under the 1940 Act), the Sub-Sub-Adviser may select
brokers or dealers affiliated with the Sub-Sub-Adviser. It is understood that
the Sub-Sub-Adviser will not be deemed to have acted unlawfully, or to have
breached a fiduciary duty to the Trust or the Fund, or be in breach of any
obligation owing to the Trust or the Fund under this Agreement, or otherwise,
solely by reason of its having caused the Fund to pay a member of a securities
exchange, a broker or a dealer a commission for effecting a securities
transaction for the Fund in excess of the amount of commission another member of
an exchange, broker or dealer would have charged if the Sub-Sub-Adviser
determined in good faith that the commission paid was reasonable in relation to
the brokerage or research services provided by such member, broker or dealer,
viewed in terms of that particular transaction or the Sub-Sub-Adviser's overall
responsibilities with respect to its accounts, including the Fund, as to which
it exercises investment discretion.
In addition, the Sub-Sub-Adviser may, to the extent permitted by applicable
law, aggregate purchase and sale orders of securities or other instruments
placed with respect to the assets of the Fund with similar orders being made
simultaneously for other accounts managed by the Sub-Sub-Adviser or its
affiliates, if in the Sub-Sub-Adviser's reasonable judgment such aggregation
shall result in an overall economic benefit to the Fund, taking into
consideration the selling or purchase price, brokerage commissions and other
expenses. In the event that a purchase or sale of an asset of the Fund occurs as
part of any aggregate sale or purchase orders, the objective of the
Sub-Sub-Adviser and any of its affiliates involved in such transaction shall be
to allocate the assets so purchased or sold, as well as expenses incurred in the
transaction, among the Fund and other accounts in a fair and equitable manner.
Nevertheless, the Fund, the Manager and Sub-Adviser acknowledge that under some
circumstances, such allocation may adversely affect the Fund with respect to,
among other things, the price or size of the assets obtainable or salable.
Whenever the Fund and one or more other investment advisory clients of the
Sub-Sub-Adviser have available funds for investment, investments suitable and
appropriate for each will be allocated in a manner believed by the
Sub-Sub-Adviser to be equitable to each, although such allocation may result in
a delay in one or more client accounts being, or the inability of one or more
accounts to be, fully invested that would not occur if such an allocation were
not made. Moreover, it is possible that due to differing investment objectives
or for other reasons, the Sub-Sub-Adviser and its affiliates may purchase
securities or other instruments of an issuer for one client and at approximately
the same time recommend selling or sell the same or similar types of securities,
assets or instruments for another client.
The Sub-Sub-Adviser will not arrange purchases or sales of securities or
other assets between the Fund and other accounts advised by the Sub-Sub-Adviser
or its affiliates unless (a) such purchases or sales are in accordance with
applicable law (including if applicable Rule 17a-7 under the 1940 Act) and the
A-3-3
Fund's policies and procedures, (b) the Sub-Sub-Adviser determines the purchase
or sale is in the best interests of the Fund, and (c) the Board of Trustees has
approved these types of transactions.
The Fund may adopt policies and procedures that modify or restrict the
Sub-Sub-Adviser's authority regarding the execution of the Fund's portfolio
transactions provided herein, which policies and procedures will become binding
upon the Sub-Sub-Adviser upon delivery by the Fund, the Manager or the
Sub-Adviser of written notice thereof to the Sub-Sub-Adviser; provided that,
notwithstanding the foregoing, (a) the Manager or Sub-Adviser, as applicable,
shall provide not less than sixty (60) days' written notice to the
Sub-Sub-Adviser prior to adopting any policy of procedure that materially
modifies or restricts the investment strategy, investment guidelines or
investment policies and (b) the Sub-Sub-Adviser will not be deemed to be in
breach of its obligations hereunder as a result of any non-compliance with any
policy or procedure that otherwise modifies or restricts the execution of the
Fund's portfolio transactions if the Sub-Sub-Adviser uses commercially
reasonable efforts to conform to such policy and procedure as promptly as
reasonably practicable after receiving written notice thereof.
The Sub-Sub-Adviser will communicate to the officers and Trustees of the
Trust and the Sub-Adviser such information relating to transactions for the Fund
as any of the foregoing may reasonably request. In no instance will the Fund's
portfolio assets be purchased from or sold to the Manager, the Sub-Adviser, the
Sub-Sub-Adviser or any affiliated person of the Trust, the Manager, the
Sub-Adviser or the Sub-Sub-Adviser, except as may be permitted under the 1940
Act and under no circumstances will the Sub-Sub-Adviser select brokers or
dealers for Fund transactions on the basis of Fund share sales by such brokers
or dealers.
To enable the Sub-Sub-Adviser to comply with the foregoing provision, the
Manager agrees that it will (a) provide the Sub-Sub-Adviser with a list of
affiliated persons of the Trust and the Manager and (b) from time to time,
update the list as necessary.
The Sub-Sub-Adviser further agrees that it:
(a) will use the same degree of skill and care in providing such
services as it uses in providing services to other fiduciary accounts for
which it has investment responsibilities;
(b) will (i) conform in all material respects to all applicable
rules and regulations of the SEC and Commodity Futures Trading Commission
("CFTC"), (ii) comply in all material respects with all policies and
procedures adopted by the Board of Trustees for the Fund and communicated
to the Sub-Sub-Adviser in writing, (iii) conduct its activities under this
Agreement in all material respects in accordance with any applicable law
and regulations of any governmental authority pertaining to its investment
advisory, commodity pool operator and commodity trading advisory activities
(provided that the parties hereto acknowledge that the Sub-Sub-Adviser is
not a commodity pool operator or commodity trading adviser with respect to
the Fund) and (iv) promptly notify the Manager and the Fund if the
Sub-Sub-Adviser intends to engage in any derivative transactions on behalf
of the Fund's portfolio);
(c) will report to the Manager and to the Board of Trustees on a
quarterly basis and to the Sub-Adviser as it may request and will make
appropriate persons available for the purpose of reviewing with
representatives of the Manager, the Board of Trustees and the Sub-Adviser
on a regular basis at such times as the Manager, the Board of Trustees or
the Sub-Adviser may reasonably request in writing regarding the management
of the Fund, including, without limitation, review of the general
A-3-4
investment strategies of the Fund applicable to the Sub-Sub-Advised Assets,
the performance of the Sub-Sub-Advised Assets in relation to relevant
standard industry indices and general conditions affecting the marketplace
and will provide various other reports from time to time as reasonably
requested by the Manager, the Board of Trustees or the Sub-Adviser;
(d) will prepare and maintain such books and records with respect to
the Sub-Sub-Advised Assets and other transactions for the Sub-Sub-Advised
Assets as required under applicable law, the Fund's compliance policies and
procedures (as communicated by the Fund, the Manager or the Sub-Adviser to
the Sub-Sub-Adviser in writing) or as otherwise requested by the Manager,
the Board of Trustees or the Sub-Adviser and will prepare and furnish the
Manager, the Board of Trustees or the Sub-Adviser such periodic and special
reports as the Board, the Manager or the Sub-Adviser may request. Such
records prepared and maintained by the Sub-Sub-Adviser as required
hereunder shall be open to inspection at all reasonable times (upon
reasonable notice and during standard business hours) by the Manager, the
Fund or the Sub-Adviser and any appropriate regulatory authorities. The
Sub-Sub-Adviser further agrees that all records that it maintains for the
Fund are the property of the Fund and the Sub-Sub-Adviser will surrender
promptly to the Fund any such records upon the request of the Manager or
the Fund (provided, however, that the Sub-Sub-Adviser shall be permitted to
retain copies thereof); and shall be permitted to retain originals (with
copies to the Fund) to the extent required under Rule 204-2 of the
Investment Advisers Act of 1940 or other applicable law; and
(e) will use commercially reasonable efforts to monitor events
relating to the issuers of those assets and the markets in which the
securities or other assets trade in the ordinary course of managing the
Sub-Sub-Advised Assets of the Fund, and will use commercially reasonable
efforts to notify the Manager as promptly as practical of any
issuer-specific or market events or other situations of which it becomes
aware (such as those that may occur after the close of a foreign market in
which the investments may primarily trade but before the time at which the
Fund's investments are priced on a given day) that it believes are likely
to materially impact the pricing of one or more of the Sub-Sub-Advised
Assets. In addition, the Sub-Sub-Adviser will at the Manager's request
assist the Manager in evaluating the impact that such an event may have on
the net asset value of the Fund and in determining a recommended fair value
of the affected investment or investments.
3. Custody Responsibilities. The Manager shall identify to the Sub-Adviser
one or more custodians (the "Custodian") to hold the assets of the Fund. The
Custodian, as identified by the Manager, will be responsible for the custody,
receipt and delivery of securities and other assets of the Fund, and the
Sub-Sub-Adviser shall have no authority, responsibility or obligation with
respect to the custody, receipt or delivery of securities or other assets of the
Fund. In the event that any cash, securities or other assets of the Fund are
delivered to the Sub-Sub-Adviser, it will promptly deliver the same over to the
Custodian, in the name of the Fund, as permitted by applicable law. The Manager
or the Fund shall be responsible for all custodial arrangements, including the
payment of all fees and charges to Custodian. The Sub-Sub-Adviser shall not be
responsible or liable for any act or omission of Custodian.
Unless otherwise required by local custom, all portfolio transactions
for the Fund will be consummated by payment to or delivery by the Fund of cash,
securities or other assets due to or from the Fund. The Sub-Sub-Adviser will
make all reasonable efforts to notify the Custodian of all orders to brokers,
dealers or other market intermediaries for the Account by 9:00 a.m. Eastern Time
A-3-5
on the day following the trade date and will affirm the trade before the close
of business one (1) business day after the trade date (T+1).
4. Disclosure Documents. During the term of this Agreement, the Manager
shall provide the Sub-Sub-Adviser with an opportunity to review and comment on
the portions of prospectuses, statements of additional information, registration
statements, proxy statements, reports to shareholders, advertising and sales
literature or other material prepared for distribution to Fund shareholders or
the public, which refer to the Sub-Sub-Adviser in any way, prior to the first
use thereof, and the Manager shall not use any such materials if the
Sub-Sub-Adviser reasonably objects in writing identifying errors or omissions
within seven (7) calendar days (or such shorter period as may be necessary to
comply with regulatory filing deadlines, or such other time as may be mutually
agreeable) after receipt thereof; provided, however, that the final form and
content of all such documentation shall be acceptable to the Manager, the Fund
and their respective legal counsel. The Manager shall ensure that all materials
described in this Section 4 prepared by employees or agents of the Manager or
its Affiliates that refer to the Sub-Sub-Adviser in any way are consistent with
materials previously approved by the Sub-Sub-Adviser as referenced in the
preceding sentence.
5. Expenses. During the term of this Agreement, the Sub-Sub-Adviser will
pay all expenses incurred by it in connection with its activities under this
Agreement other than the cost of securities and other assets (including
interest, taxes, brokerage commissions, if any, dividend and distribution
expenses from securities sold short and/or other investment related costs and
other expenses incurred in connection with the execution of transactions)
purchased for the Fund and any extraordinary expenses incurred by the Fund, all
of which shall be paid or reimbursed by the Fund.
6. Compensation. For the services provided pursuant to this Agreement, the
Sub-Adviser will pay the Sub-Sub-Adviser, and the Sub-Sub-Adviser agrees to
accept as full compensation therefor, a sub-advisory fee (the "Sub-Sub-Advisory
Fee") equal to the percentage of the average daily net assets of the Fund
allocated to the Sub-Sub-Adviser times the Sub-Advisory Fee received by the
Sub-Adviser (if any) pursuant to the Sub-Advisory Agreement. The
Sub-Sub-Advisory Fee shall be calculated monthly and payable in arrears on or
about the first day of each month during the term of this Agreement.
7. Services to Others. The Trust, the Manager and the Sub-Adviser
acknowledge that the Sub-Sub-Adviser now acts, or may in the future act, as an
investment adviser to other managed accounts and as investment adviser or
investment sub-adviser to one or more other investment companies that are not
series of the Trust. In addition, the Trust, the Manager and the Sub-Adviser
acknowledge that the persons employed by the Sub-Sub-Adviser to assist in the
Sub-Sub-Adviser's duties under this Agreement will not devote their full time to
such efforts. It is also agreed that the Sub-Sub-Adviser may use any
supplemental research obtained for the benefit of the Fund in providing
investment advice to its other investment advisory accounts and for managing its
own accounts.
8. Limitation of Liability. The Sub-Sub-Adviser shall not be liable for,
and the Trust, the Manager and the Sub-Adviser will not take any action against
the Sub-Sub-Adviser to hold the Sub-Sub-Adviser liable for, any error of
judgment or mistake of law or for any loss suffered by the Fund, the Manager or
the Sub-Adviser (including, without limitation, by reason of the purchase, sale
or retention of any security or other asset) in connection with the performance
of the Sub-Sub-Adviser's duties under this Agreement, except for a loss
resulting from willful misfeasance, bad faith or gross negligence on the part of
the Sub-Sub-Adviser in the performance of its duties under this Agreement, or by
reason of its reckless disregard of its obligations and duties under this
Agreement. Nothing in this Section 8 or elsewhere in this Agreement shall
A-3-6
constitute a waiver of any legal rights under applicable U.S. federal securities
laws or any other laws whose applicability is not permitted to be contractually
waived.
9. Term; Termination. This Agreement shall become effective on the date
first set forth above (the "Effective Date") provided that it has been approved
in the manner required by the 1940 Act (after taking into effect any exemptive
order, no-action assurances, or other relief, rule or regulation upon which the
Fund may rely), and shall remain in full force until the two year anniversary of
the Effective Date unless sooner terminated as hereinafter provided. This
Agreement shall continue in force from year to year thereafter, but only as long
as such continuance is specifically approved for the Fund at least annually in
the manner required by the 1940 Act and the rules and regulations thereunder
(after taking into effect any exemptive order, no-action assurances, or other
relief, rule or regulation upon which the Fund may rely); provided, however,
that if the continuation of this Agreement is not approved for the Fund, the
Sub-Sub-Adviser may continue to serve in such capacity for the Fund in the
manner and to the extent permitted by the 1940 Act and the rules and regulations
thereunder.
This Agreement shall automatically terminate in the event of its assignment
and may be terminated at any time without the payment of any penalty by the
Manager or the Sub-Sub-Adviser upon sixty (60) days' written notice to the other
parties. This Agreement may also be terminated by the Fund by action of the
Board of Trustees or by a vote of a majority of the outstanding voting
securities of the Fund upon sixty (60) days' written notice to the
Sub-Sub-Adviser by the Fund without payment of any penalty.
This Agreement may be terminated at any time without the payment of any
penalty by the Manager, the Board of Trustees or by vote of a majority of the
outstanding voting securities of the Fund in the event that it shall have been
established by a court of competent jurisdiction that the Sub-Sub-Adviser or any
officer or director of the Sub-Sub-Adviser has taken any action that results in
a breach of the material covenants of the Sub-Sub-Adviser set forth herein.
The terms "assignment" and "vote of a majority of the outstanding voting
securities" shall have the meanings set forth in the 1940 Act and the rules and
regulations thereunder.
This Agreement shall automatically terminate in the event that either the
Management Agreement between the Manager and the Trust on behalf of the Fund or
the Sub-Advisory Agreement among the Fund, the Manager and the Sub-Adviser is
terminated, assigned or not renewed.
Termination of this Agreement shall not affect the right of the
Sub-Sub-Adviser to receive payments on any unpaid balance of the compensation
described in Section 6, earned or accrued prior to such termination and for any
additional period during which the Sub-Adviser serves as such for the Fund,
subject to applicable law.
10. Compliance Certification. From time to time the Sub-Sub-Adviser shall
provide such certifications with respect to Rule 38a-1 under the 1940 Act, as
are reasonably requested by the Fund, the Manager or the Sub-Adviser. In
addition, the Sub-Sub-Adviser will, from time to time, provide a written
assessment of its compliance program in conformity with current industry
standards that is reasonably acceptable to the Fund to enable the Fund to
fulfill its obligations under Rule 38a-1 under the 1940 Act.
11. Notice. Any notice under this Agreement shall be sufficient in all
respects if given in writing and delivered by commercial courier providing proof
of delivery and addressed as follows or addressed to such other person or
address as such party may designate for receipt of such notice.
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If to the Manager or the Fund: If to the Sub-Adviser or the
Sub-Sub-Adviser:
First Trust Exchange-Traded Fund IV Heitman Real Estate Securities LLC
on behalf of First Trust Heitman 191 N. Wacker Dr.
Global Prime Real Estate ETF Suite 2500
First Trust Advisors L.P. Chicago, IL 60606
120 E. Liberty Drive Attention: Katherine Sandstrom
Wheaton, Illinois 60187
Attention: Secretary
12. Limitations on Liability. All parties hereto are expressly put on
notice of the Trust's Declaration of Trust and all amendments thereto, a copy of
which is on file with the Secretary of the Commonwealth of Massachusetts, and
the limitation of shareholder and Trustee liability contained therein and a copy
of which has been provided to the Sub-Sub-Adviser prior to the date hereof. This
Agreement is executed by the Trust on behalf of the Fund by the Trust's officers
in their capacity as officers and not individually and is not binding upon any
of the Trustees, officers or shareholders of the Trust individually but the
obligations imposed upon the Trust or Fund by this Agreement are binding only
upon the assets and property of the Fund, and persons dealing with the Trust or
Fund must look solely to the assets of the Fund for the enforcement of any
claims.
13. Miscellaneous. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. This
Agreement will be binding upon and shall inure to the benefit of the parties
hereto and their respective successors.
14. Applicable Law. This Agreement shall be construed in accordance with
applicable federal law and (except as to Section 12 hereof, which shall be
construed in accordance with the laws of Massachusetts) the laws of the State of
Illinois.
15. Amendment, Etc. This Agreement may only be amended, or its provisions
modified or waived, in a writing signed by the party against which such
amendment, modification or waiver is sought to be enforced.
16. Authority. Each party represents to the others that it is duly
authorized and fully empowered to execute, deliver and perform this Agreement.
The Trust represents that engagement of the Sub-Sub-Adviser has been duly
authorized by the Trust and is in accordance with the Trust's Declaration of
Trust and other governing documents of the Fund.
17. Severability. Each provision of this Agreement is intended to be
severable from the others so that if any provision or term hereof is illegal or
invalid for any reason whatsoever, such illegality or invalidity shall not
affect the validity of the remaining provisions and terms hereof; provided,
however, that the provisions governing payment of the Sub-Sub-Advisory Fee
described in Section 6 are not severable.
18. Entire Agreement. This Agreement constitutes the sole and entire
agreement of the parties hereto with respect to the subject matter expressly set
forth herein.
A-3-8
IN WITNESS WHEREOF, the Trust on behalf of the Fund, the Manager, the
Sub-Adviser, the Sub-Sub-Adviser have caused this Agreement to be executed as of
the day and year first above written.
FIRST TRUST ADVISORS L.P. HEITMAN REAL ESTATE SECURITIES LLC
By__________________________________ By________________________________
Title:_________________________ Title:________________________
FIRST TRUST EXCHANGE-TRADED FUND IV HEITMAN INTERNATIONAL REAL ESTATE
on behalf of First Trust Heitman SECURITIES GMBH
Global Prime Real Estate ETF
By__________________________________
Title:_________________________ By _______________________________
Title: _______________________
A-3-9
FORM OF PROXY CARD
------------------
FIRST TRUST
PROXY CARD
SIGN, DATE AND VOTE ON THE REVERSE SIDE
YOUR VOTE IS IMPORTANT NO MATTER PROXY VOTING OPTIONS
HOW MANY SHARES YOU OWN. PLEASE
CAST YOUR PROXY VOTE TODAY! 1. MAIL your signed and voted proxy back in
the postage paid envelope provided
2. ONLINE at PROXYONLINE.COM using your
proxy control number found below
SHAREHOLDER NAME
AND ADDRESS HERE 3. By PHONE when you dial toll-free 1-888-
227-9349 to reach an automated touchtone
voting line
4. By PHONE with a live operator when you
call toll-free 1-800-284-1755 Monday
through Friday 9 a.m. to 10 p.m. Eastern
time
CONTROL
PLEASE CAST YOUR PROXY VOTE TODAY! NUMBER
FIRST TRUST EXCHANGE-TRADED FUND IV
FIRST TRUST HEITMAN GLOBAL PRIME REAL ESTATE ETF (PRME)
PROXY FOR A SPECIAL MEETING OF SHAREHOLDERS TO BE HELD ON APRIL 23, 2018
The undersigned holder of shares of the First Trust Heitman Global Prime Real
Estate ETF (the "Fund"), a series of First Trust Exchange-Traded Fund IV, a
Massachusetts business trust, hereby appoints W. Scott Jardine, Kristi A. Maher,
James M. Dykas, Donald P. Swade and Erin E. Klassman as attorneys and proxies
for the undersigned, with full powers of substitution and revocation, to
represent the undersigned and to vote on behalf of the undersigned all shares of
the Fund that the undersigned is entitled to vote at the Special Meeting of
Shareholders (the "Meeting") to be held at the Austin, Texas offices of First
Trust Advisors L.P., 500 W. 5th Street, Suite 9202, Austin, TX 78701, on April
23, 2018, at 12:30 p.m. Central time, and any adjournments or postponements
thereof.
The undersigned hereby acknowledges receipt of the Notice of Special Meeting of
Shareholders and Proxy Statement dated March 12, 2018, and hereby instructs said
attorneys and proxies to vote said shares as indicated hereon. In their
discretion, the proxies are authorized to vote upon such other business as may
properly come before the Meeting and any adjournments or postponements thereof
(including, but not limited to, any questions as to adjournments or
postponements of the Meeting). A majority of the proxies present and acting at
the Meeting in person or by substitute (or, if only one shall be so present,
then that one) shall have and may exercise all of the power and authority of
said proxies hereunder. The undersigned hereby revokes any proxy previously
given. THIS PROXY, IF PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED BY
THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
FOR EACH OF THE FUND'S PROPOSALS SET FORTH ON THE REVERSE SIDE OF THIS PROXY
CARD.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES, AND EACH PROPOSAL
FOR THE FUND (SET FORTH ON THE REVERSE SIDE OF THIS PROXY CARD) HAS BEEN
APPROVED BY THE BOARD OF TRUSTEES AND RECOMMENDED FOR APPROVAL BY SHAREHOLDERS.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN.
IF NO SUCH DIRECTION IS MADE, THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE
BOARD OF TRUSTEES' RECOMMENDATION.
DO YOU HAVE QUESTIONS? If you have any questions about how to vote your proxy or
about the Meeting in general, please call toll-free 1-800-284- 1755.
REPRESENTATIVES ARE AVAILABLE TO ASSIST YOU Monday through Friday 9 a.m. to 10
p.m. Eastern Time. IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY
MATERIALS FOR THE SPECIAL MEETING OF SHAREHOLDERS TO BE HELD ON APRIL 23, 2018.
The proxy statement of the Fund is available at:
www.proxyonline.com/docs/firsttrustheitmanglobalprimerealestate2018.pdf
--------------------------------------------------------------------------------
[PROXY ID NUMBER HERE] [BAR CODE HERE] [CUSIP HERE]
FIRST TRUST HEITMAN GLOBAL PRIME REAL ESTATE ETF
PROXY CARD
YOUR SIGNATURE IS REQUIRED FOR YOUR VOTE TO BE
COUNTED. The signer(s) acknowledges receipt of
the Proxy Statement of the Fund. Your _____________________________
signature(s) on this Proxy should be exactly SIGNATURE (AND TITLE DATE
as your name(s) appear on this Proxy (reverse IF APPLICABLE)
side). If the shares are held jointly, each
holder should sign this Proxy.
Attorneys-in-fact, executors, administrators, ______________________________
trustees or guardians should indicate the full SIGNATURE (IF DATE
title and capacity in which they are signing. HELD JOINTLY)
--------------------------------------------------------------------------------
IF YOU VOTE ONLINE OR BY PHONE, YOU NEED NOT RETURN THIS PROXY CARD.
THIS PROXY WILL BE VOTED AS FORTH BELOW.
TO VOTE, FOR EACH PROPOSAL, MARK ONE CIRCLE BELOW IN BLUE OR BLACK INK AS
FOLLOWS. Example: [X]
THE BOARD OF TRUSTEES RECOMMENDS A VOTE "FOR" EACH PROPOSAL SET FORTH BELOW.
FOR AGAINST ABSTAIN
1 To approve, with respect to the Fund, a new
investment sub-advisory agreement among First Trust
Exchange-Traded Fund IV (the "Trust"), First Trust [ ] [ ] [ ]
Advisors L.P. ("First Trust Advisors"), the Fund's
investment adviser, and Heitman Real Estate
Securities LLC ("HRES"), the Fund's investment
sub-adviser.
2 To approve, with respect to the Fund, a new
investment sub-sub-advisory agreement among the
Trust, First Trust Advisors, HRES and Heitman [ ] [ ] [ ]
International Real Estate Securities HK Limited,
one of the Fund's investment sub-sub-advisers.
3 To approve, with respect to the Fund, a new
investment sub-sub-advisory agreement among the
Trust, First Trust Advisors, HRES and Heitman [ ] [ ] [ ]
International Real Estate Securities GmbH, one of
the Fund's investment sub-sub-advisers.
THANK YOU FOR VOTING
[PROXY ID NUMBER HERE] [BAR CODE HERE] [CUSIP HERE]