N-CSR 1 etf1_ncsr.txt ANNUAL REPORT TO SHAREHOLDERS UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number 811-21774 ----------- First Trust Exchange-Traded Fund ------------------------------------------------------------- (Exact name of registrant as specified in charter) Exact name of registrant as specified in charter) 120 East Liberty Drive, Suite 400 Wheaton, IL 60187 ------------------------------------------------------------- (Address of principal executive offices) (Zip code) W. Scott Jardine, Esq. First Trust Portfolios L.P. 120 East Liberty Drive, Suite 400 Wheaton, IL 60187 ------------------------------------------------------------- (Name and address of agent for service) Registrant's telephone number, including area code: (630) 765-8000 ---------------- Date of fiscal year end: December 31 ------------- Date of reporting period: December 31, 2018 ------------------- Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspection, and policymaking roles. A registrant is required to disclose the information specified by Form N-CSR, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-CSR unless the Form displays a currently valid Office of Management and Budget ("OMB") control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 100 F Street, NE, Washington, DC 20549-0609. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. ss. 3507. ITEM 1. REPORT TO STOCKHOLDERS. The registrant's annual report transmitted to shareholders pursuant to Rule 30e-1 under the Investment Company Act of 1940 is as follows: FIRST TRUST First Trust Exchange-Traded Fund Book 1 First Trust Dow Jones Select MicroCap Index Fund (FDM) First Trust Morningstar Dividend Leaders Index Fund (FDL) First Trust US Equity Opportunities ETF (FPX) First Trust NYSE Arca Biotechnology Index Fund (FBT) First Trust Dow Jones Internet Index Fund (FDN) First Trust Capital Strength ETF (FTCS) First Trust Value Line(R) Dividend Index Fund (FVD) First Trust Value Line(R) 100 Exchange-Traded Fund (FVL) Annual Report December 31, 2018 -------------------------------------------------------------------------------- TABLE OF CONTENTS -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND ANNUAL REPORT DECEMBER 31, 2018 Shareholder Letter.......................................................... 2 Market Overview............................................................. 3 Fund Performance Overview First Trust Dow Jones Select MicroCap Index Fund (FDM)................... 4 First Trust Morningstar Dividend Leaders Index Fund (FDL)................ 6 First Trust US Equity Opportunities ETF (FPX)............................ 8 First Trust NYSE Arca Biotechnology Index Fund (FBT)..................... 10 First Trust Dow Jones Internet Index Fund (FDN).......................... 12 First Trust Capital Strength ETF (FTCS).................................. 14 First Trust Value Line(R) Dividend Index Fund (FVD)...................... 16 First Trust Value Line(R) 100 Exchange-Traded Fund (FVL)................. 18 Notes to Fund Performance Overview.......................................... 20 Understanding Your Fund Expenses............................................ 21 Portfolio of Investments First Trust Dow Jones Select MicroCap Index Fund (FDM)................... 23 First Trust Morningstar Dividend Leaders Index Fund (FDL)................ 28 First Trust US Equity Opportunities ETF (FPX)............................ 30 First Trust NYSE Arca Biotechnology Index Fund (FBT)..................... 33 First Trust Dow Jones Internet Index Fund (FDN).......................... 35 First Trust Capital Strength ETF (FTCS).................................. 37 First Trust Value Line(R) Dividend Index Fund (FVD)...................... 39 First Trust Value Line(R) 100 Exchange-Traded Fund (FVL)................. 42 Statements of Assets and Liabilities........................................ 44 Statements of Operations.................................................... 46 Statements of Changes in Net Assets......................................... 48 Financial Highlights........................................................ 52 Notes to Financial Statements............................................... 56 Report of Independent Registered Public Accounting Firm..................... 66 Additional Information...................................................... 67 Board of Trustees and Officers.............................................. 71 Privacy Policy.............................................................. 73 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- CAUTION REGARDING FORWARD-LOOKING STATEMENTS This report contains certain forward-looking statements within the meaning of the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended. Forward-looking statements include statements regarding the goals, beliefs, plans or current expectations of First Trust Advisors L.P. ("First Trust" or the "Advisor") and its representatives, taking into account the information currently available to them. Forward-looking statements include all statements that do not relate solely to current or historical fact. For example, forward-looking statements include the use of words such as "anticipate," "estimate," "intend," "expect," "believe," "plan," "may," "should," "would" or other words that convey uncertainty of future events or outcomes. Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of any series of First Trust Exchange-Traded Fund (the "Trust") described in this report (each such series is referred to as a "Fund" and collectively, as the "Funds") to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. When evaluating the information included in this report, you are cautioned not to place undue reliance on these forward-looking statements, which reflect the judgment of the Advisor and its representatives only as of the date hereof. We undertake no obligation to publicly revise or update these forward-looking statements to reflect events and circumstances that arise after the date hereof. PERFORMANCE AND RISK DISCLOSURE There is no assurance that any Fund described in this report will achieve its investment objective. Each Fund is subject to market risk, which is the possibility that the market values of securities owned by the Fund will decline and that the value of the Fund shares may therefore be less than what you paid for them. Accordingly, you can lose money by investing in a Fund. See "Risk Considerations" in the Additional Information Section of this report for a discussion of other risks of investing in the Funds. Performance data quoted represents past performance, which is no guarantee of future results, and current performance may be lower or higher than the figures shown. For the most recent month-end performance figures, please visit www.ftportfolios.com or speak with your financial advisor. Investment returns, net asset value and share price will fluctuate and Fund shares, when sold, may be worth more or less than their original cost. The Advisor may also periodically provide additional information on Fund performance on each Fund's webpage at www.ftportfolios.com. HOW TO READ THIS REPORT This report contains information that may help you evaluate your investment. It includes details about each Fund and presents data and analysis that provide insight into each Fund's performance and investment approach. By reading the market overview by Robert F. Carey, Chief Market Strategist of the Advisor, you may obtain an understanding of how the market environment affected the performance of each Fund. The statistical information that follows may help you understand each Fund's performance compared to that of relevant market benchmarks. It is important to keep in mind that the opinions expressed by personnel of the Advisor are just that: informed opinions. They should not be considered to be promises or advice. The opinions, like the statistics, cover the period through the date on the cover of this report. The material risks of investing in each Fund are spelled out in its prospectus, statement of additional information, and other Fund regulatory filings. Page 1 -------------------------------------------------------------------------------- SHAREHOLDER LETTER -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND ANNUAL LETTER FROM THE CHAIRMAN AND CEO DECEMBER 31, 2018 Dear Shareholders: First Trust is pleased to provide you with the annual report for certain funds in the First Trust Exchange-Traded Fund (the "Funds"), which contains detailed information about the Funds for the twelve months ended December 31, 2018, including a market overview and performance analyses. We encourage you to read this report carefully and discuss it with your financial advisor. As I wrote in my June 2018 letter, investors were hoping for another strong year in the markets for 2018. For the entire year, however, increased market volatility was the norm for U.S. and global markets. Despite the volatility, August was a strong month for stocks, and the Dow Jones Industrial Average ("DJIA") finished the month just under its previous high in January 2018. At the close of the third quarter in September, the markets had moved higher into positive territory. In fact, all three major U.S. indices (the Nasdaq Composite Index, the DJIA and the S&P 500(R) Index) hit record levels during the third quarter. Yet, in October, markets were again very volatile, surprising analysts and investors alike. Both global markets and U.S. markets fell on fears of slowing growth, trade wars and higher interest rates. The DJIA was down 5% for October and the MSCI EAFE Index, an index of stocks in 21 developed markets (excluding the U.S. and Canada), was down 9% for the month. However, investors cheered as November ended, and the DJIA climbed 617 points (2.5%) to its biggest one-day gain in eight months. The MSCI EAFE Index ended November down slightly. December held its own shocks as it became the worst December for stocks since the Great Depression. The DJIA and the MSCI EAFE Index ended December with year-to-date returns of -3.48% and -13.79%, respectively. Based on continued strong job growth and the economic outlook in the U.S., the Federal Reserve (the "Fed") raised interest rates in March, June and September. At their September meeting, the Fed indicated the possibility of one additional rate hike in 2018 and three more in 2019. At their November meeting, the Fed did not raise interest rates. However, at their December 19th meeting, the Fed did raise interest rates by 25 basis points. Analysts and investors will be watching to see what the Fed does with rates in 2019. While trade tensions have had an impact on markets around the world and could continue to do so in the future, our First Trust economists believe that the long-term impact of U.S. tariffs will be to encourage countries to come back to the table and talk about more equal trade. Despite market volatility, we continue to believe that the combination of low interest rates, low inflation and strong corporate earnings still point to a positive economic environment and further growth, though we understand that past performance can never guarantee future performance. We continue to believe that you should invest for the long term and be prepared for market movements, which can happen at any time. You can do this by keeping current on your portfolio and by speaking regularly with your investment professional. Markets go up and they also go down, but savvy investors are prepared for either through careful attention to investment goals. Thank you for giving First Trust the opportunity to be a part of your financial plan. We value our relationship with you and will report on the Funds again in six months. Sincerely, /s/ James A. Bowen James A. Bowen Chairman of the Board of Trustees Chief Executive Officer of First Trust Advisors L.P. Page 2 -------------------------------------------------------------------------------- MARKET OVERVIEW -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND ANNUAL REPORT DECEMBER 31, 2018 (UNAUDITED) ROBERT F. CAREY, CFA SENIOR VICE PRESIDENT AND CHIEF MARKET STRATEGIST FIRST TRUST ADVISORS L.P. Mr. Carey is responsible for the overall management of research and analysis of the First Trust product line. Mr. Carey has over 25 years of experience as an Equity and Fixed-Income Analyst and is a recipient of the Chartered Financial Analyst ("CFA") designation. He is a graduate of the University of Illinois at Champaign-Urbana with a B.S. in Physics. He is also a member of the Investment Analysts Society of Chicago and the CFA Institute. Mr. Carey has appeared as a guest on such programs as Bloomberg TV, CNBC, and WBBM Radio, and has been quoted by several publications, including The Wall Street Journal, The Wall Street Reporter, Bloomberg News Service, and Registered Rep. STATE OF THE ECONOMY/INVESTING In its latest forecast, the International Monetary Fund ("IMF") is calling for the world real gross domestic product ("GDP") growth rate to dip from an estimated 3.7% in 2018 to an estimated 3.5% in 2019, according to its own release. The IMF cited the ongoing trade dispute between the U.S. and China as being partly responsible for the small downward revision in growth. The U.S. real GDP growth rate is expected to decrease from an estimated 2.9% in 2018 to an estimated 2.5% in 2019. The growth rate for Emerging Market and Developing Economies is expected to dip from an estimated 4.6% in 2018 to an estimated 4.5% in 2019. As indicated by the growth forecasts, we believe there is no imminent threat of a global economic recession. We believe that concerns over the extent to which interest rates could trend higher in 2019 and the potential for trade tariffs escalating to an all-out trade war were largely behind the spikes in volatility in the stock market in 2018. For those investors who fear that higher interest rates could dampen the prospects for stocks in 2019, Federal Reserve (the "Fed") Chairman Jerome Powell announced on January 4, 2019 that the Fed will be adopting a "patient" approach to tightening monetary policy. With respect to trade, the Trump Administration sent trade representatives to China on January 7, 2019 to set up future trade policy talks. The two countries also agreed to a 90-day truce freezing tariffs until March 1, 2019. We believe stock prices would move higher on a U.S.-China trade deal. ETFGI, an independent research and consultancy firm, reported that total assets invested in exchange-traded funds ("ETFs") and other exchange-traded products ("ETPs") listed globally stood at $4.79 trillion at the close of 2018, down from $4.84 trillion the previous year, according to its own release. The dip in assets under management was due to performance rather than capital flows. December 2018 marked the 59th consecutive month of net inflows into ETFs/ETPs listed globally. The U.S.'s share of the global market was approximately 70% at year-end. U.S. STOCKS AND BONDS The three major Standard & Poor's stock indices finished 2018 in the red. The S&P 500(R) Index, S&P MidCap 400(R) Index and S&P SmallCap 600(R) Index posted total returns of -4.38%, -11.08%, and -8.48%, respectively, according to Bloomberg. Only three of the 11 major S&P 500(R) Index sectors posted positive total returns. The top-performing sectors were Health Care, Utilities and Consumer Discretionary, up 6.47%, 4.11% and 0.82%, respectively, on a total return basis. The sectors that posted the biggest losses were Energy, Materials and Industrials, down 18.10%, 14.70% and 13.32%, respectively. We believe that some of the downside in stock prices late in the year could be attributed to profit taking and tax selling. Keep in mind, the S&P 500(R) Index posted a total return of 21.83% in 2017, more than double its 9.98% average annual total return from 1926-2018, according to Ibbotson Associates/Morningstar. Dividend growth has historically been a barometer of strength for Corporate America. The S&P Dow Jones Indices announced that total dividend distributions for U.S. common stocks increased by a net (increases less decreases) $7.4 billion in the third quarter of 2018, up from $4.5 billion from the third quarter of 2017, according to its own release. Net dividend increases totaled a record $58.4 billion in 2018, up from $37.1 billion in 2017. Currently, 82.2% of the companies in the S&P 500(R) Index pay a dividend, compared to 69.8% of the companies in the S&P MidCap 400(R) Index and 51.9% of the companies in the S&P SmallCap 600(R) Index. Total global dividend payouts are expected to rise 6.0% year-over-year to a record $1.81 trillion in 2019, according to business information provider IHS Markit, a London-based global information provider. Dividend-paying companies in the U.S. are expected to increase distributions by 8.1%, according to IHS Markit. In the U.S. bond market, the top-performing major debt group we track was intermediate-term Treasuries. The Bloomberg Barclays U.S. Treasury: Intermediate Index posted a total return of 1.41% in 2018. The worst-performing debt group that we track was high yield corporates. The Bloomberg Barclays U.S. Corporate High Yield Index posted a total return of -2.08%. The yield on the benchmark 10-Year Treasury note (T-note) rose by 28 basis points to 2.69% in 2018, according to Bloomberg. For comparative purposes, the average yield on the 10-year T-note was 2.51% for the 10-year period ended December 31, 2018. FOREIGN STOCKS AND BONDS The U.S. dollar registered a gain of 4.40% against a basket of major currencies in 2018, as measured by the U.S. Dollar Index (DXY). With respect to U.S. investors, a stronger U.S. dollar can negatively impact returns on unhedged foreign securities. We believe the dollar strengthened due to the escalating trade/tariff battle between the U.S. and its major trading partners, particularly China. Both foreign stocks and bonds succumbed to selling pressure in 2018. The Bloomberg Barclays Global Aggregate Index of higher quality debt posted a total return of -1.20% (USD), while the Bloomberg Barclays EM Hard Currency Aggregate Index of emerging markets debt fell 3.02%, according to Bloomberg Barclays. With respect to equities, the MSCI Daily Total Return Net World Index (excluding the U.S.) posted a total return of -14.09% (USD), compared to -14.58% (USD) for the MSCI Daily Total Return Net Emerging Markets Index. Page 3 -------------------------------------------------------------------------------- FUND PERFORMANCE OVERVIEW (UNAUDITED) -------------------------------------------------------------------------------- FIRST TRUST DOW JONES SELECT MICROCAP INDEX FUND (FDM) The First Trust Dow Jones Select MicroCap Index Fund (the "Fund") seeks investment results that correspond generally to the price and yield (before the Fund's fees and expenses) of an equity index called the Dow Jones Select MicroCap Index(SM) (the "Index"). The Fund will normally invest at least 80% of its net assets (including investment borrowings) in common stocks of U.S. micro-capitalization companies which are publicly traded in the United States. The Fund will normally invest at least 90% of its net assets (including investment borrowings) in common stocks that comprise the Index. The Index is comprised of selected U.S. micro-capitalization companies chosen from all common stocks traded on the New York Stock Exchange ("NYSE"), the NYSE American and The Nasdaq Stock Market LLC ("Nasdaq"), excluding limited partnerships that are comparatively liquid and have strong fundamentals relative to the micro-capitalization segment as a whole. The Fund's shares are listed for trading on the NYSE Arca, Inc. ("NYSE Arca"). The first day of secondary market trading in shares of the Fund was September 30, 2005.
------------------------------------------------------------------------------------------------------------------------------------ PERFORMANCE ------------------------------------------------------------------------------------------------------------------------------------ AVERAGE ANNUAL TOTAL RETURNS CUMULATIVE TOTAL RETURNS 1 Year 5 Years 10 Years Inception 5 Years 10 Years Inception Ended Ended Ended (9/27/05) Ended Ended (9/27/05) 12/31/18 12/31/18 12/31/18 to 12/31/18 12/31/18 12/31/18 to 12/31/18 FUND PERFORMANCE NAV -12.68% 5.86% 11.85% 6.50% 32.94% 206.36% 130.37% Market Value -13.05% 5.93% 11.87% 6.48% 33.37% 206.90% 130.00% INDEX PERFORMANCE Dow Jones Select MicroCap Index(SM) -12.21% 6.46% 12.54% 7.19% 36.77% 225.84% 151.12% Russell 2000(R) Index -11.01% 4.41% 11.97% 6.99% 24.09% 209.83% 145.03% ------------------------------------------------------------------------------------------------------------------------------------
(See Notes to Fund Performance Overview on page 20.) PERFORMANCE REVIEW The Fund generated a net asset value ("NAV") return of -12.68% during the 12-month period covered by this report. During the same period, the Russell 2000(R) Index ("benchmark") generated a return of -11.01%. The Fund's largest allocated sector over the period was the Financials sector with a 39.6% allocation. This sector contributed -4.1% to the Fund's return due to its -11.1% return. The top contributing sector in the Fund was the Consumer Staples sector with a 0.9% contributing, stemming from its 2.8% allocation and 56.1% return. The least contributing sector in the Fund was the Consumer Discretionary sector with a -4.5% contribution, stemming from its 15.5% allocation and -26.5% return. On a relative basis, the Fund underperformed the benchmark. The primary cause of the underperformance is due to the Fund underperforming the benchmark among Consumer Discretionary securities by -16.2%, which created -2.7% of relative underperformance. The Fund outperformed the benchmark by 67.1% among the Consumer Staples sector, which created 1.3% of relative outperformance. ----------------------------- Dow Jones and Dow Jones Select MicroCap Index(SM) are products of S&P Dow Jones Indices LLC ("SPDJI"), and have been licensed for use by First Trust on behalf of the Fund. The Fund, based on the Dow Jones Select MicroCap Index(SM), is not sponsored, endorsed, sold or promoted by SPDJI, Dow Jones Trademark Holdings LLC ("Dow Jones") or their respective affiliates, and SPDJI, Dow Jones and their respective affiliates make no representation regarding the advisability of trading in the Fund. Page 4 -------------------------------------------------------------------------------- FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST DOW JONES SELECT MICROCAP INDEX FUND (FDM) (CONTINUED) ----------------------------------------------------------- % OF TOTAL SECTOR CLASSIFICATION LONG-TERM INVESTMENTS ----------------------------------------------------------- Financials 40.45% Consumer Discretionary 16.33 Industrials 14.14 Information Technology 6.64 Real Estate 5.87 Energy 5.43 Materials 3.46 Consumer Staples 3.11 Health Care 2.67 Communication Services 1.39 Utilities 0.51 ------- Total 100.00% ======= ----------------------------------------------------------- % OF TOTAL TOP TEN HOLDINGS LONG-TERM INVESTMENTS ----------------------------------------------------------- PennyMac Financial Services, Inc. 1.68% CVR Energy, Inc. 1.32 Renewable Energy Group, Inc. 1.25 K12, Inc. 1.21 TPG RE Finance Trust, Inc. 1.00 NexPoint Residential Trust, Inc. 0.97 Marcus & Millichap, Inc. 0.96 Arbor Realty Trust, Inc. 0.93 World Acceptance Corp. 0.90 Addus HomeCare Corp. 0.90 ------- Total 11.12% =======
PERFORMANCE OF A $10,000 INITIAL INVESTMENT DECEMBER 31, 2008 - DECEMBER 31, 2018 First Trust Dow Jones Select MicroCap Dow Jones Select Russell 2000(R) Index Fund MicroCap Index(SM) Index 12/08 $10,000 $10,000 $10,000 06/09 9,790 9,820 10,264 12/09 12,084 12,189 12,717 06/10 11,747 11,877 12,469 12/10 15,197 15,410 16,132 06/11 15,708 15,985 17,134 12/11 13,878 14,153 15,460 06/12 14,772 15,114 16,779 12/12 16,081 16,515 17,987 06/13 18,693 19,255 20,840 12/13 23,047 23,822 24,970 06/14 22,893 23,736 25,767 12/14 23,756 24,695 26,192 06/15 24,991 26,053 27,436 12/15 23,889 24,993 25,035 06/16 24,486 25,688 25,591 12/16 32,358 34,037 30,371 06/17 32,559 34,326 31,887 12/17 35,092 37,113 34,821 06/18 37,945 40,245 37,488 12/18 30,636 32,584 30,983
Performance figures assume reinvestment of all distributions and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. An index is a statistical composite that tracks a specified financial market or sector. Unlike the Fund, the indices do not actually hold a portfolio of securities and therefore do not incur the expenses incurred by the Fund. These expenses negatively impact the performance of the Fund. The Fund's past performance does not predict future performance. FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS BID/ASK MIDPOINT VS. NAV AS OF DECEMBER 31, 2018 The following Frequency Distribution of Discounts and Premiums charts are provided to show the frequency at which the bid/ask midpoint price for the Fund was at a discount or premium to the daily NAV. The following tables are for comparative purposes only and represent the period January 1, 2014 through December 31, 2018. Shareholders may pay more than NAV when they buy Fund shares and receive less than NAV when they sell those shares because shares are bought and sold at current market price. Data presented represents past performance and cannot be used to predict future results. -------------------------------------------------------------------------------- NUMBER OF DAYS BID/ASK MIDPOINT AT/ABOVE NAV -------------------------------------------------------------------------------- FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00% 01/01/14 - 12/31/14 93 1 0 0 01/01/15 - 12/31/15 112 0 0 0 01/01/16 - 12/31/16 133 0 0 0 01/01/17 - 12/31/17 180 0 0 0 01/01/18 - 12/31/18 164 4 0 1 -------------------------------------------------------------------------------- NUMBER OF DAYS BID/ASK MIDPOINT BELOW NAV -------------------------------------------------------------------------------- FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00% 01/01/14 - 12/31/14 158 0 0 0 01/01/15 - 12/31/15 140 0 0 0 01/01/16 - 12/31/16 119 0 0 0 01/01/17 - 12/31/17 71 0 0 0 01/01/18 - 12/31/18 81 1 0 0 Page 5 -------------------------------------------------------------------------------- FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST MORNINGSTAR DIVIDEND LEADERS INDEX FUND (FDL) The First Trust Morningstar Dividend Leaders Index Fund (the "Fund") seeks investment results that correspond generally to the price and yield (before the Fund's fees and expenses) of an equity index called the Morningstar(R) Dividend Leaders Index(SM) (the "Index"). The Fund will normally invest at least 90% of its net assets (including investment borrowings) in common stocks that comprise the Index. The objective of the Index is to offer investors a benchmark for dividend portfolios as well as a means to invest in a portfolio of stocks that have a consistent record of growing dividends as well as the ability to sustain them. The Index consists of the top 100 stocks, based on dividend yield, in the Morningstar(R) US Market Index that have been selected through the application of Morningstar, Inc.'s proprietary multi-step screening process. The Index is rebalanced annually in June. The Fund's shares are listed for trading on the NYSE Arca. The first day of secondary market trading in shares of the Fund was March 15, 2006.
------------------------------------------------------------------------------------------------------------------------------------ PERFORMANCE ------------------------------------------------------------------------------------------------------------------------------------ AVERAGE ANNUAL TOTAL RETURNS CUMULATIVE TOTAL RETURNS 1 Year 5 Years 10 Years Inception 5 Years 10 Years Inception Ended Ended Ended (3/9/06) Ended Ended (3/9/06) 12/31/18 12/31/18 12/31/18 to 12/31/18 12/31/18 12/31/18 to 12/31/18 FUND PERFORMANCE NAV -5.87% 8.10% 11.61% 6.39% 47.60% 199.91% 121.05% Market Value -6.00% 8.09% 11.57% 6.38% 47.54% 198.88% 120.89% INDEX PERFORMANCE Morningstar(R) Dividend Leaders Index(SM) -5.47% 8.62% 12.17% 6.91% 51.19% 215.38% 135.33% S&P 500(R) Index -4.38% 8.49% 13.12% 7.68% 50.33% 243.04% 158.02% ------------------------------------------------------------------------------------------------------------------------------------
(See Notes to Fund Performance Overview on page 20.) PERFORMANCE REVIEW The Fund generated a NAV return of -5.87% during the 12-month period covered by this report. During the same period, the S&P 500(R) Index ("benchmark") generated a return of -4.38%. The Fund's largest allocation was among the Consumer Staples sector with a 20.4% allocation. These securities had a return of -12.0% and contributed -2.1% to the Fund's return, the lowest among all sectors represented in the Fund. The Health Care sector was the top performing sector in the Fund with a 15.9% return, a 9.6% allocation, and a 1.6% contribution. On a relative basis, the Fund underperformed the benchmark. The primary cause of the underperformance is attributable to the Fund underperforming the benchmark amongst Consumer Discretionary securities by -20.1%, which created -1.3% of relative underperformance. The Fund's holdings among the Health Care sector reversed 1.2% of underperformance as the Fund outperformed the benchmark by 9.9%. ----------------------------- Morningstar(R) is a service mark of Morningstar, Inc. and has been licensed for use by First Trust on behalf of the Fund. The Fund is not sponsored, endorsed, issued, sold or promoted by Morningstar, Inc., nor does this company make any representation regarding the advisability of investing in the Fund. Page 6 -------------------------------------------------------------------------------- FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST MORNINGSTAR DIVIDEND LEADERS INDEX FUND (FDL) (CONTINUED) ----------------------------------------------------------- % OF TOTAL SECTOR CLASSIFICATION LONG-TERM INVESTMENTS ----------------------------------------------------------- Consumer Staples 22.26% Communication Services 16.83 Energy 15.58 Utilities 13.20 Health Care 13.17 Information Technology 6.93 Consumer Discretionary 5.39 Financials 3.92 Materials 1.47 Industrials 1.19 Real Estate 0.06 ------- Total 100.00% ======= ----------------------------------------------------------- % OF TOTAL TOP TEN HOLDINGS LONG-TERM INVESTMENTS ----------------------------------------------------------- AT&T, Inc. 9.44% Exxon Mobil Corp. 8.54 Verizon Communications, Inc. 6.70 Chevron Corp. 5.52 Pfizer, Inc. 5.33 Procter & Gamble (The) Co. 4.79 AbbVie, Inc. 4.12 Coca-Cola (The) Co. 3.94 Philip Morris International, Inc. 3.87 Altria Group, Inc. 3.82 ------- Total 56.07% =======
PERFORMANCE OF A $10,000 INITIAL INVESTMENT DECEMBER 31, 2008 - DECEMBER 31, 2018 First Trust Morningstar Morningstar(R) Dividend Leaders Dividend S&P 500(R) Index Fund Leaders Index(SM) Index 12/08 $10,000 $10,000 $10,000 06/09 9,444 9,470 10,316 12/09 11,423 11,480 12,645 06/10 10,906 10,984 11,804 12/10 13,256 13,393 14,551 06/11 14,293 14,479 15,426 12/11 15,171 15,406 14,857 06/12 16,426 16,737 16,267 12/12 16,557 16,909 17,235 06/13 18,868 19,322 19,617 12/13 20,319 20,860 22,817 06/14 22,410 23,073 24,446 12/14 22,952 23,687 25,942 06/15 22,257 23,019 26,261 12/15 23,579 24,439 26,300 06/16 27,050 28,120 27,310 12/16 28,465 29,653 29,449 06/17 29,296 30,602 32,203 12/17 31,862 33,365 35,884 06/18 30,804 32,341 36,838 12/18 29,991 31,538 34,304
Performance figures assume reinvestment of all distributions and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. An index is a statistical composite that tracks a specified financial market or sector. Unlike the Fund, the indices do not actually hold a portfolio of securities and therefore do not incur the expenses incurred by the Fund. These expenses negatively impact the performance of the Fund. The Fund's past performance does not predict future performance. FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS BID/ASK MIDPOINT VS. NAV AS OF DECEMBER 31, 2018 The following Frequency Distribution of Discounts and Premiums charts are provided to show the frequency at which the bid/ask midpoint price for the Fund was at a discount or premium to the daily NAV. The following tables are for comparative purposes only and represent the period January 1, 2014 through December 31, 2018. Shareholders may pay more than NAV when they buy Fund shares and receive less than NAV when they sell those shares because shares are bought and sold at current market price. Data presented represents past performance and cannot be used to predict future results. -------------------------------------------------------------------------------- NUMBER OF DAYS BID/ASK MIDPOINT AT/ABOVE NAV -------------------------------------------------------------------------------- FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00% 01/01/14 - 12/31/14 190 0 0 0 01/01/15 - 12/31/15 151 0 0 0 01/01/16 - 12/31/16 161 0 0 0 01/01/17 - 12/31/17 131 0 0 0 01/01/18 - 12/31/18 140 1 0 0 -------------------------------------------------------------------------------- NUMBER OF DAYS BID/ASK MIDPOINT BELOW NAV -------------------------------------------------------------------------------- FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00% 01/01/14 - 12/31/14 62 0 0 0 01/01/15 - 12/31/15 101 0 0 0 01/01/16 - 12/31/16 91 0 0 0 01/01/17 - 12/31/17 120 0 0 0 01/01/18 - 12/31/18 108 2 0 0 Page 7 -------------------------------------------------------------------------------- FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST US EQUITY OPPORTUNITIES ETF (FPX) The First Trust US Equity Opportunities ETF (the "Fund") seeks investment results that correspond generally to the price and yield (before the Fund's fees and expenses) of an equity index called the IPOX(R)-100 U.S. Index (the "Index"). The Fund will normally invest at least 90% of its net assets (including investment borrowings) in common stocks that comprise the Index. The Index is an applied market-cap weighted price index measuring the performance of the top U.S. companies ranked quarterly by market capitalization in the IPOX(R) U.S. Composite Index, a sub-index of the IPOX(R) Global Composite Index. The Index utilizes a 10% capping on all constituents and includes the 100 largest public offerings ("IPOs") in the IPOX(R) U.S. Composite Index, adjusted for liquidity. In general, eligible constituents are added on the sixth day of trading and remain eligible to be included in the Index for approximately four years. The Index includes the securities of small, mid and large companies. The Fund's shares are listed for trading on the NYSE Arca. The first day of secondary market trading in shares of the Fund was April 13, 2006.
------------------------------------------------------------------------------------------------------------------------------------ PERFORMANCE ------------------------------------------------------------------------------------------------------------------------------------ AVERAGE ANNUAL TOTAL RETURNS CUMULATIVE TOTAL RETURNS 1 Year 5 Years 10 Years Inception 5 Years 10 Years Inception Ended Ended Ended (4/12/06) Ended Ended (4/12/06) 12/31/18 12/31/18 12/31/18 to 12/31/18 12/31/18 12/31/18 to 12/31/18 FUND PERFORMANCE NAV -8.22% 7.29% 17.07% 10.22% 42.20% 383.51% 244.94% Market Value -8.33% 7.28% 17.07% 10.22% 42.09% 383.70% 244.84% INDEX PERFORMANCE IPOX(R)-100 U.S. Index -7.78% 7.87% 17.76% 10.87% 46.07% 413.01% 271.68% S&P 500(R) Index -4.38% 8.49% 13.12% 7.62% 50.33% 243.04% 154.49% Russell 3000(R) Index -5.24% 7.91% 13.18% 7.52% 46.34% 244.95% 151.58% ------------------------------------------------------------------------------------------------------------------------------------
(See Notes to Fund Performance Overview on page 20.) PERFORMANCE REVIEW The Fund generated a NAV return of -8.22% during the 12-month period covered by this report. During the same period, the Russell 3000(R) Index ("benchmark") generated a return of -5.24%. The largest allocated sector in the Fund over the period was the Information Technology sector with a 29% allocation. The sector with the highest contribution was Health Care with a contribution of 1.3%. The top performing sector in the Fund was the Information Technology sector with a 6.0% return. The Consumer Staples sector was the least contributing sector. With a return of -30.3% and weight of 10.6%, this sector contributed -3.6% to the Fund's overall return. On a relative basis, the Fund underperformed the benchmark. The greatest source of underperformance was the Consumer Staples sector, which created -2.7% underperformance against the benchmark. The Fund over allocated and outperformed the benchmark among the Health Care sector, creating 2.8% of relative outperformance. ----------------------------- The Fund is not sponsored, endorsed, sold or promoted by IPOX(R). IPOX(R) makes no representation or warranty, express or implied, to the owners of the Fund or any member of the public regarding the advisability of trading in the Fund. Page 8 -------------------------------------------------------------------------------- FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST US EQUITY OPPORTUNITIES ETF (FPX) (CONTINUED) ----------------------------------------------------------- % OF TOTAL SECTOR CLASSIFICATION LONG-TERM INVESTMENTS ----------------------------------------------------------- Information Technology 33.69% Health Care 20.57 Communication Services 14.47 Consumer Staples 11.66 Consumer Discretionary 6.60 Industrials 5.99 Real Estate 1.87 Energy 1.84 Utilities 1.64 Financials 1.02 Materials 0.65 ------- Total 100.00% ======= ----------------------------------------------------------- % OF TOTAL TOP TEN HOLDINGS LONG-TERM INVESTMENTS ----------------------------------------------------------- PayPal Holdings, Inc. 8.98% Verizon Communications, Inc. 5.27 Shire PLC, ADR 4.82 Thermo Fisher Scientific, Inc. 4.08 Kraft Heinz (The) Co. 3.90 Eli Lilly & Co. 2.91 salesforce.com, Inc. 2.85 Stryker Corp. 2.66 Fiat Chrysler Automobiles N.V. 2.57 Square, Inc., Class A 2.10 ------- Total 40.14% =======
PERFORMANCE OF A $10,000 INITIAL INVESTMENT DECEMBER 31, 2008 - DECEMBER 31, 2018 First Trust US Equity IPOX(R)-100 S&P 500(R) Russell 3000(R) Opportunities ETF U.S. Index Index Index 12/08 $10,000 $10,000 $10,000 $10,000 06/09 11,336 11,385 10,316 10,420 12/09 14,493 14,597 12,645 12,834 06/10 13,634 13,775 11,803 12,058 12/10 17,142 17,383 14,550 15,007 06/11 18,839 19,170 15,426 15,960 12/11 17,673 18,041 14,857 15,160 06/12 20,066 20,545 16,267 16,573 12/12 22,978 23,592 17,235 17,649 06/13 26,836 27,622 19,617 20,130 12/13 34,004 35,124 22,817 23,570 06/14 36,252 37,565 24,446 25,206 12/14 38,054 39,548 25,942 26,529 06/15 41,342 43,092 26,261 27,044 12/15 38,886 40,653 26,300 26,657 06/16 38,633 40,482 27,309 27,622 12/16 41,492 43,595 29,451 30,056 06/17 45,927 48,373 32,202 32,740 12/17 52,678 55,629 35,879 36,407 06/18 55,433 58,661 36,830 37,579 12/18 48,349 51,299 34,304 34,495
Performance figures assume reinvestment of all distributions and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. An index is a statistical composite that tracks a specified financial market or sector. Unlike the Fund, the indices do not actually hold a portfolio of securities and therefore do not incur the expenses incurred by the Fund. These expenses negatively impact the performance of the Fund. The Fund's past performance does not predict future performance. FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS BID/ASK MIDPOINT VS. NAV AS OF DECEMBER 31, 2018 The following Frequency Distribution of Discounts and Premiums charts are provided to show the frequency at which the bid/ask midpoint price for the Fund was at a discount or premium to the daily NAV. The following tables are for comparative purposes only and represent the period January 1, 2014 through December 31, 2018. Shareholders may pay more than NAV when they buy Fund shares and receive less than NAV when they sell those shares because shares are bought and sold at current market price. Data presented represents past performance and cannot be used to predict future results. -------------------------------------------------------------------------------- NUMBER OF DAYS BID/ASK MIDPOINT AT/ABOVE NAV -------------------------------------------------------------------------------- FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00% 01/01/14 - 12/31/14 158 0 0 0 01/01/15 - 12/31/15 172 0 0 0 01/01/16 - 12/31/16 118 0 0 0 01/01/17 - 12/31/17 179 0 0 0 01/01/18 - 12/31/18 157 3 1 0 -------------------------------------------------------------------------------- NUMBER OF DAYS BID/ASK MIDPOINT BELOW NAV -------------------------------------------------------------------------------- FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00% 01/01/14 - 12/31/14 94 0 0 0 01/01/15 - 12/31/15 80 0 0 0 01/01/16 - 12/31/16 134 0 0 0 01/01/17 - 12/31/17 72 0 0 0 01/01/18 - 12/31/18 87 3 0 0 Page 9 -------------------------------------------------------------------------------- FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST NYSE ARCA BIOTECHNOLOGY INDEX FUND (FBT) The First Trust NYSE Arca Biotechnology Index Fund (the "Fund") seeks investment results that correspond generally to the price and yield (before the Fund's fees and expenses) of an equity index called the NYSE Arca Biotechnology Index(SM) (the "Index"). The Fund will normally invest at least 90% of its net assets (including investment borrowings) in common stocks that comprise the Index. The Index is an equal-dollar weighted index designed to measure the performance of a cross section of companies in the biotechnology industry that are primarily involved in the use of biological processes to develop products or provide services. Such processes include, but are not limited to, recombinant DNA technology, molecular biology, genetic engineering, monoclonal antibody-based technology, lipid/liposome technology and genomics. This Index is rebalanced quarterly based on closing prices on the third Friday in January, April, July and October to ensure that each component stock continues to represent approximately equal weight in the Index. The Fund's shares are listed for trading on the NYSE Arca. The first day of secondary market trading in shares of the Fund was June 23, 2006.
------------------------------------------------------------------------------------------------------------------------------------ PERFORMANCE ------------------------------------------------------------------------------------------------------------------------------------ AVERAGE ANNUAL TOTAL RETURNS CUMULATIVE TOTAL RETURNS 1 Year 5 Years 10 Years Inception 5 Years 10 Years Inception Ended Ended Ended (6/19/06) Ended Ended (6/19/06) 12/31/18 12/31/18 12/31/18 to 12/31/18 12/31/18 12/31/18 to 12/31/18 FUND PERFORMANCE NAV -0.21% 12.48% 20.24% 15.81% 80.05% 531.74% 529.71% Market Value -0.20% 12.48% 20.29% 15.81% 80.07% 534.37% 529.76% INDEX PERFORMANCE NYSE Arca Biotechnology Index(SM) 0.27% 12.96% 20.84% 16.43% 83.92% 564.00% 573.13% S&P Composite 1500(R) Health Care Index 6.71% 11.40% 15.16% 11.20% 71.57% 310.38% 278.31% NASDAQ(R) Biotechnology Index -8.86% 5.54% 15.71% 12.50% 30.97% 330.29% 337.55% S&P 500(R) Index -4.38% 8.49% 13.12% 8.03% 50.33% 243.04% 163.42% ------------------------------------------------------------------------------------------------------------------------------------
(See Notes to Fund Performance Overview on page 20.) PERFORMANCE REVIEW The Fund generated a NAV return of -0.21% during the 12-month period covered by this report. During the same period, the S&P Composite 1500(R) Health Care Index ("benchmark") generated a return of 6.71%. The Fund was fully allocated to the Pharmaceuticals, Biotechnology & Life Sciences Tools & Services industry during the period. The top performing and contributing security in the Fund was Intercept Pharmaceuticals, Inc. with a 72.5% return and a 1.8% contribution, stemming from its 3.7% allocation. The worst performing and contributing security was Bluebird Bio, Inc. with a -54.8% return. This security was given a 2.6% allocation, leading to a contribution of -2.1% to the Fund's return. On a relative basis, the Fund underperformed the benchmark. The benchmark did not have any exposure to Bluebird Bio, Inc., which created -2.2% of relative drag versus the benchmark. The benchmark also did not have any exposure to Intercept Pharmaceuticals, Inc., which created 1.7% of relative outperformance. ----------------------------- The NYSE Arca Biotechnology Index(SM) is a trademark of NYSE Group, Inc. or its affiliates ("NYSE Group, Inc.") and is licensed for use by First Trust. The Fund is not sponsored or endorsed by NYSE Group, Inc. NYSE Group, Inc. makes no representation or warranty, express or implied, to the owners of the Fund or any member of the public regarding the advisability of investing in the Fund or the ability of the Fund to track the performance of the various sectors represented in the stock market. Page 10 -------------------------------------------------------------------------------- FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST NYSE ARCA BIOTECHNOLOGY INDEX FUND (FBT) (CONTINUED) ----------------------------------------------------------- % OF TOTAL INDUSTRY CLASSIFICATION LONG-TERM INVESTMENTS ----------------------------------------------------------- Biotechnology 79.73% Life Sciences Tools & Services 7.64 Pharmaceuticals 2.63 ------- Total 100.00% ======= ----------------------------------------------------------- % OF TOTAL TOP TEN HOLDINGS LONG-TERM INVESTMENTS ----------------------------------------------------------- Exelixis, Inc. 4.66% Ionis Pharmaceuticals, Inc. 4.61 Intercept Pharmaceuticals, Inc. 4.06 Amgen, Inc. 3.72 Incyte Corp. 3.71 QIAGEN N.V. 3.70 Regeneron Pharmaceuticals, Inc. 3.70 Illumina, Inc. 3.69 Alnylam Pharmaceuticals, Inc. 3.67 Grifols S.A., ADR 3.66 ------- Total 39.18% =======
PERFORMANCE OF A $10,000 INITIAL INVESTMENT DECEMBER 31, 2008 - DECEMBER 31, 2018 First Trust NYSE NYSE Arca NASDAQ(R) S&P Composite Arca Biotechnology Biotechnology Biotechnology S&P 500(R) 1500(R) Health Index Fund Index(SM) Index Index Care Index 12/08 $10,000 $10,000 $10,000 $10,000 $10,000 06/09 10,756 10,773 10,285 10,316 10,094 12/09 14,487 14,559 11,584 12,646 12,075 06/10 15,679 15,810 10,995 11,805 11,198 12/10 19,831 20,053 13,351 14,552 12,703 06/11 22,252 22,572 15,266 15,428 14,506 12/11 16,587 16,866 14,964 14,859 14,213 06/12 22,256 22,703 18,678 16,269 15,846 12/12 23,373 23,906 19,796 17,237 16,822 06/13 29,504 30,243 25,117 19,619 20,289 12/13 35,083 36,050 32,856 22,819 23,919 06/14 41,784 42,982 37,295 24,448 26,359 12/14 51,795 53,323 44,160 25,944 29,849 06/15 63,024 64,990 53,784 26,263 32,894 12/15 57,472 59,394 49,357 26,302 32,062 06/16 45,506 47,171 37,635 27,312 32,248 12/16 46,207 48,020 38,821 29,448 31,403 06/17 57,934 60,356 45,553 32,198 36,575 12/17 63,299 66,120 47,220 35,875 38,459 06/18 71,199 74,524 48,703 36,826 39,720 12/18 63,174 66,400 43,029 34,304 41,038
Performance figures assume reinvestment of all distributions and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. An index is a statistical composite that tracks a specified financial market or sector. Unlike the Fund, the indices do not actually hold a portfolio of securities and therefore do not incur the expenses incurred by the Fund. These expenses negatively impact the performance of the Fund. The Fund's past performance does not predict future performance. FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS BID/ASK MIDPOINT VS. NAV AS OF DECEMBER 31, 2018 The following Frequency Distribution of Discounts and Premiums charts are provided to show the frequency at which the bid/ask midpoint price for the Fund was at a discount or premium to the daily NAV. The following tables are for comparative purposes only and represent the period January 1, 2014 through December 31, 2018. Shareholders may pay more than NAV when they buy Fund shares and receive less than NAV when they sell those shares because shares are bought and sold at current market price. Data presented represents past performance and cannot be used to predict future results. -------------------------------------------------------------------------------- NUMBER OF DAYS BID/ASK MIDPOINT AT/ABOVE NAV -------------------------------------------------------------------------------- FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00% 01/01/14 - 12/31/14 183 0 0 0 01/01/15 - 12/31/15 159 0 0 0 01/01/16 - 12/31/16 129 1 0 0 01/01/17 - 12/31/17 136 0 0 0 01/01/18 - 12/31/18 156 1 2 1 -------------------------------------------------------------------------------- NUMBER OF DAYS BID/ASK MIDPOINT BELOW NAV -------------------------------------------------------------------------------- FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00% 01/01/14 - 12/31/14 69 0 0 0 01/01/15 - 12/31/15 93 0 0 0 01/01/16 - 12/31/16 122 0 0 0 01/01/17 - 12/31/17 115 0 0 0 01/01/18 - 12/31/18 88 3 0 0 Page 11 -------------------------------------------------------------------------------- FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST DOW JONES INTERNET INDEX FUND (FDN) The First Trust Dow Jones Internet Index Fund (the "Fund") seeks investment results that correspond generally to the price and yield (before the Fund's fees and expenses) of an equity index called the Dow Jones Internet Composite Index(SM) (the "Index"). The Fund will normally invest at least 90% of its net assets (including investment borrowings) in common stocks that comprise the Index. The Index is designed to include only companies whose primary focus is Internet-related. To be eligible for inclusion in the Index, a company must generate at least 50% of its revenue from Internet commerce or services. Internet commerce companies are defined as those that derive the majority of their revenues from providing goods and services through an open network, whereas Internet services companies are defined as those that derive the majority of their revenues from providing access to the Internet or providing services to people using the Internet. The Fund's shares are listed for trading on the NYSE Arca. The first day of secondary market trading in shares of the Fund was June 23, 2006.
------------------------------------------------------------------------------------------------------------------------------------ PERFORMANCE ------------------------------------------------------------------------------------------------------------------------------------ AVERAGE ANNUAL TOTAL RETURNS CUMULATIVE TOTAL RETURNS 1 Year 5 Years 10 Years Inception 5 Years 10 Years Inception Ended Ended Ended (6/19/06) Ended Ended (6/19/06) 12/31/18 12/31/18 12/31/18 to 12/31/18 12/31/18 12/31/18 to 12/31/18 FUND PERFORMANCE NAV 6.23% 14.28% 23.63% 15.15% 94.94% 734.11% 485.77% Market Value 6.23% 14.28% 23.63% 15.15% 94.95% 734.32% 485.92% INDEX PERFORMANCE Dow Jones Internet Composite Index(SM) 6.77% 14.84% 24.30% 15.76% 99.72% 780.37% 526.31% S&P 500(R) Index -4.38% 8.49% 13.12% 8.03% 50.33% 243.04% 163.42% S&P Composite 1500(R) Information Technology Index -0.75% 14.46% 18.17% 11.81% 96.47% 431.01% 305.12% ------------------------------------------------------------------------------------------------------------------------------------
(See Notes to Fund Performance Overview on page 20.) PERFORMANCE REVIEW The Fund generated a NAV return of 6.23% during the 12-month period covered by this report. During the same period, the S&P Composite 1500(R) Information Technology Index ("benchmark") generated a return of -0.75%. The Information Technology sector was the heaviest weighted sector in the Fund over the period with a 39.4% allocation. This sector was also the Fund's largest contributing sector with a 3.4% contribution, stemming from its 8.9% return. The least contributing sector was the Financials sector with a 0.1% contribution. On a relative basis, the Fund outperformed the benchmark. The primary cause of the outperformance is due to the Fund over allocating the benchmark amongst the relatively well performing Communication Services securities by 18.7%, which created 3.4% of relative outperformance. There was no single sector that contributed negatively to the Fund relative to the performance against the benchmark. ----------------------------- Dow Jones and Dow Jones Internet Composite Index(SM) are products of S&P Dow Jones Indices ("SPDJI") and have been licensed for use by First Trust. The Fund, based on the Dow Jones Internet Composite Index(SM), is not sponsored, endorsed, sold or promoted by SPDJI, Dow Jones Trademark Holdings LLC ("Dow Jones") or their respective affiliates and SPDJI, Dow Jones and their respective affiliates make no representation regarding the advisability of trading in the Fund. Page 12 -------------------------------------------------------------------------------- FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST DOW JONES INTERNET INDEX FUND (FDN) (CONTINUED) ----------------------------------------------------------- % OF TOTAL SECTOR CLASSIFICATION LONG-TERM INVESTMENTS ----------------------------------------------------------- Information Technology 41.20% Communication Services 32.22 Consumer Discretionary 18.38 Financials 5.84 Health Care 2.36 ------- Total 100.00% ======= ----------------------------------------------------------- % OF TOTAL TOP TEN HOLDINGS LONG-TERM INVESTMENTS ----------------------------------------------------------- Amazon.com, Inc. 9.63% Facebook, Inc., Class A 7.43 Netflix, Inc. 5.57 salesforce.com, Inc. 5.32 PayPal Holdings, Inc. 5.17 Alphabet, Inc., Class C 5.12 Alphabet, Inc., Class A 5.02 eBay, Inc. 3.38 Twitter, Inc. 2.77 VeriSign, Inc. 2.75 ------- Total 52.16% =======
PERFORMANCE OF A $10,000 INITIAL INVESTMENT DECEMBER 31, 2008 - DECEMBER 31, 2018 First Trust Dow Jones S&P Composite 1500(R) Dow Jones Internet Internet Composite S&P 500(R) Information Technology Index Fund Index(SM) Index Index 12/08 $10,000 $10,000 $10,000 $10,000 06/09 13,348 13,387 10,316 12,460 12/09 17,924 18,027 12,646 16,103 06/10 17,060 17,179 11,805 14,489 12/10 24,490 24,742 14,552 18,055 06/11 25,898 26,229 15,428 18,499 12/11 23,083 23,476 14,859 18,257 06/12 25,264 25,773 16,269 20,579 12/12 27,897 28,555 17,237 20,949 06/13 32,439 33,296 19,619 22,359 12/13 42,794 44,077 22,819 27,023 06/14 42,589 43,943 24,448 29,306 12/14 43,833 45,309 25,944 32,143 06/15 48,037 49,791 26,263 32,561 12/15 53,374 55,459 26,302 33,942 06/16 51,570 53,718 27,312 33,962 12/16 57,062 59,589 29,448 38,961 06/17 67,744 70,935 32,198 45,436 12/17 78,529 82,441 35,875 53,487 06/18 98,436 103,595 36,826 59,125 12/18 83,411 88,037 34,304 53,101
Performance figures assume reinvestment of all distributions and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. An index is a statistical composite that tracks a specified financial market or sector. Unlike the Fund, the indices do not actually hold a portfolio of securities and therefore do not incur the expenses incurred by the Fund. These expenses negatively impact the performance of the Fund. The Fund's past performance does not predict future performance. FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS BID/ASK MIDPOINT VS. NAV AS OF DECEMBER 31, 2018 The following Frequency Distribution of Discounts and Premiums charts are provided to show the frequency at which the bid/ask midpoint price for the Fund was at a discount or premium to the daily NAV. The following tables are for comparative purposes only and represent the period January 1, 2014 through December 31, 2018. Shareholders may pay more than NAV when they buy Fund shares and receive less than NAV when they sell those shares because shares are bought and sold at current market price. Data presented represents past performance and cannot be used to predict future results. -------------------------------------------------------------------------------- NUMBER OF DAYS BID/ASK MIDPOINT AT/ABOVE NAV -------------------------------------------------------------------------------- FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00% 01/01/14 - 12/31/14 148 0 0 0 01/01/15 - 12/31/15 201 0 0 0 01/01/16 - 12/31/16 124 0 0 0 01/01/17 - 12/31/17 129 0 0 0 01/01/18 - 12/31/18 116 4 2 0 -------------------------------------------------------------------------------- NUMBER OF DAYS BID/ASK MIDPOINT BELOW NAV -------------------------------------------------------------------------------- FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00% 01/01/14 - 12/31/14 104 0 0 0 01/01/15 - 12/31/15 51 0 0 0 01/01/16 - 12/31/16 128 0 0 0 01/01/17 - 12/31/17 122 0 0 0 01/01/18 - 12/31/18 125 4 0 0 Page 13 -------------------------------------------------------------------------------- FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST CAPITAL STRENGTH ETF (FTCS) The First Trust Capital Strength ETF (the "Fund") seeks investment results that correspond generally to the price and yield (before the Fund's fees and expenses) of an equity index called The Capital Strength Index(SM) (the "Index"). The Fund will normally invest at least 90% of its net assets (including investment borrowings) in common stocks that comprise the Index. In constructing the Index, NASDAQ begins with the largest 500 U.S. companies included in the NASDAQ US Benchmark Index and excludes (i) companies with less than $1 billion in cash and short term investments; (ii) companies with long-term debt divided by the market capitalization greater than 30%; and (iii) companies with return on equity less than 15%. NASDAQ then ranks all remaining stocks in the universe by one-year and three-month daily volatility (one-year and three-month daily volatility factors are equally weighted), and selects the top 50 companies with the lowest combined volatility score, subject to a maximum weight of 30% from any one of the ten Industry Classification Benchmark industries. The stocks in the Index are equally weighted initially and on each quarterly reconstituting and rebalancing effective date. The Fund's shares are listed for trading on the Nasdaq. The first day of secondary market trading in shares of the Fund was July 11, 2006.
------------------------------------------------------------------------------------------------------------------------------------ PERFORMANCE ------------------------------------------------------------------------------------------------------------------------------------ AVERAGE ANNUAL TOTAL RETURNS CUMULATIVE TOTAL RETURNS 1 Year 5 Years 10 Years Inception 5 Years 10 Years Inception Ended Ended Ended (7/6/06) Ended Ended (7/6/06) 12/31/18 12/31/18 12/31/18 to 12/31/18 12/31/18 12/31/18 to 12/31/18 FUND PERFORMANCE NAV -4.09% 9.10% 14.30% 8.95% 54.56% 280.74% 191.82% Market Value -4.24% 9.08% 14.38% 8.96% 54.39% 283.20% 191.94% INDEX PERFORMANCE The Capital Strength Index(SM)* -3.53% 9.81% N/A N/A 59.63% N/A N/A S&P 500(R) Index -4.38% 8.49% 13.12% 7.82% 50.33% 243.04% 156.14% ------------------------------------------------------------------------------------------------------------------------------------
* On June 4, 2013, the Fund's underlying index changed from the Credit Suisse U.S. Value Index, Powered by HOLT(TM) to The Capital Strength Index(SM). On June 18, 2010, the Fund's underlying index changed from the Deutsche Bank CROCI(R) US+ Index(TM) to the Credit Suisse U.S. Value Index, Powered by HOLT(TM). Since the Fund's current underlying index had an inception date of March 20, 2013, it was not in existence for some of the periods disclosed. (See Notes to Fund Performance Overview on page 20.) PERFORMANCE REVIEW The Fund generated a NAV return of -4.09% during the 12-month period covered by this report. During the same period, the S&P 500(R) Index ("benchmark") generated a return of -4.38%. The Industrials sector was the Fund's largest allocated sector over the period with a 33.2% allocation. This sector had a -12.5% return and contributed -4.2% to the Fund's return, the least amongst all sectors. The top performing and largest contributing sector in the Fund was the Information Technology sector with a 4.1% return, 0.5% contribution, and 15.9% allocation. On a relative basis, the Fund outperformed the benchmark. The primary cause of the outperformance is attributable to the Fund under allocating the benchmark amongst the relatively poor performing Financials sector by -7.1%, creating 1.2% of relative outperformance. The Fund over allocated the benchmark amongst the poor performing Industrials sector by 23.4%, which created -1.9% of relative underperformance. ----------------------------- NASDAQ(R) and the Capital Strength Index(SM) are trademarks (the "Marks") of Nasdaq, Inc. (collectively with its affiliates, "NASDAQ"). The Marks are licensed for use by First Trust. The Fund has not been passed on by NASDAQ as to its legality or suitability. The Fund is not issued, endorsed, sold or promoted by NASDAQ. The Fund should not be construed in any way as investment advice by NASDAQ. NASDAQ MAKES NO WARRANTIES AND BEARS NO LIABILITY WITH RESPECT TO THE FUND. Page 14 -------------------------------------------------------------------------------- FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST CAPITAL STRENGTH ETF (FTCS) (CONTINUED) ----------------------------------------------------------- % OF TOTAL SECTOR CLASSIFICATION LONG-TERM INVESTMENTS ----------------------------------------------------------- Industrials 22.21% Financials 20.66 Information Technology 19.59 Consumer Discretionary 10.39 Health Care 10.19 Consumer Staples 8.65 Real Estate 2.29 Materials 2.20 Communication Services 2.01 Energy 1.81 ------- Total 100.00% ======= ----------------------------------------------------------- % OF TOTAL TOP TEN HOLDINGS LONG-TERM INVESTMENTS ----------------------------------------------------------- Starbucks Corp. 2.39% Procter & Gamble (The) Co. 2.31 American Tower Corp. 2.28 Estee Lauder (The) Cos., Inc., Class A 2.24 Expeditors International of Washington, Inc. 2.23 CME Group, Inc. 2.23 Aflac, Inc. 2.22 Garmin Ltd. 2.22 Intercontinental Exchange, Inc. 2.21 PPG Industries, Inc. 2.20 ------- Total 22.53% =======
PERFORMANCE OF A $10,000 INITIAL INVESTMENT DECEMBER 31, 2008 - DECEMBER 31, 2018 First Trust Capital S&P 500(R) Strength ETF Index 12/08 $10,000 $10,000 06/09 11,272 10,316 12/09 13,941 12,646 06/10 12,890 11,805 12/10 15,897 14,552 06/11 17,148 15,428 12/11 15,430 14,859 06/12 16,268 16,269 12/12 18,123 17,237 06/13 21,140 19,619 12/13 24,628 22,819 06/14 26,002 24,448 12/14 28,436 25,944 06/15 28,388 26,263 12/15 28,905 26,302 06/16 30,449 27,312 12/16 31,384 29,448 06/17 35,272 32,198 12/17 39,695 35,875 06/18 40,024 36,826 12/18 38,074 34,304
Performance figures assume reinvestment of all distributions and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. An index is a statistical composite that tracks a specified financial market or sector. Unlike the Fund, the index does not actually hold a portfolio of securities and therefore do not incur the expenses incurred by the Fund. These expenses negatively impact the performance of the Fund. The Fund's past performance does not predict future performance. FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS BID/ASK MIDPOINT VS. NAV AS OF DECEMBER 31, 2018 The following Frequency Distribution of Discounts and Premiums charts are provided to show the frequency at which the bid/ask midpoint price for the Fund was at a discount or premium to the daily NAV. The following tables are for comparative purposes only and represent the period January 1, 2014 through December 31, 2018. Shareholders may pay more than NAV when they buy Fund shares and receive less than NAV when they sell those shares because shares are bought and sold at current market price. Data presented represents past performance and cannot be used to predict future results. -------------------------------------------------------------------------------- NUMBER OF DAYS BID/ASK MIDPOINT AT/ABOVE NAV -------------------------------------------------------------------------------- FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00% 01/01/14 - 12/31/14 108 9 0 0 01/01/15 - 12/31/15 190 2 0 0 01/01/16 - 12/31/16 194 0 0 0 01/01/17 - 12/31/17 197 0 0 0 01/01/18 - 12/31/18 161 3 0 1 -------------------------------------------------------------------------------- NUMBER OF DAYS BID/ASK MIDPOINT BELOW NAV -------------------------------------------------------------------------------- FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00% 01/01/14 - 12/31/14 131 4 0 0 01/01/15 - 12/31/15 57 3 0 0 01/01/16 - 12/31/16 58 0 0 0 01/01/17 - 12/31/17 54 0 0 0 01/01/18 - 12/31/18 84 1 1 0 Page 15 -------------------------------------------------------------------------------- FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST VALUE LINE(R) DIVIDEND INDEX FUND (FVD) The First Trust Value Line(R) Dividend Index Fund (the "Fund") seeks investment results that correspond generally to the price and yield (before the Fund's fees and expenses) of an equity index called the Value Line(R) Dividend Index (the "Index"). The Fund will normally invest at least 90% of its net assets (including investment borrowings) in common stocks that comprise the Index. The Index is a modified equal-dollar weighted index comprised of U.S. exchange-listed securities of companies that pay above-average dividends and have potential for capital appreciation. The Index is designed to objectively identify and select those stocks from the universe of stocks which Value Line Publishing LLC gives a Safety(TM) Ranking of #1 or #2 in the Value Line(R) Safety(TM) Ranking System and have the potential to pay above-average dividends and achieve capital appreciation. The Index is rebalanced on a monthly basis. The Fund's shares are listed for trading on the NYSE Arca.
------------------------------------------------------------------------------------------------------------------------------------ PERFORMANCE ------------------------------------------------------------------------------------------------------------------------------------ AVERAGE ANNUAL TOTAL RETURNS CUMULATIVE TOTAL RETURNS 1 Year 5 Years 10 Years Inception 5 Years 10 Years Inception Ended Ended Ended (8/19/03) Ended Ended (8/19/03) 12/31/18 12/31/18 12/31/18 to 12/31/18 12/31/18 12/31/18 to 12/31/18 FUND PERFORMANCE NAV -3.44% 8.87% 12.53% 9.17% 52.94% 225.72% 284.93% Market Value -3.50% 8.85% 12.62% 9.17% 52.79% 228.28% 284.92% INDEX PERFORMANCE Value Line(R) Dividend Index* -2.73% 9.73% 13.43% N/A 59.09% 252.49% N/A S&P 500(R) Index -4.38% 8.49% 13.12% 8.35% 50.33% 243,04% 242.92% Dow Jones U.S. Select Dividend Index(SM)* -5.94% 8.49% 12.26% N/A 50.28% 217.75% N/A ------------------------------------------------------------------------------------------------------------------------------------
On December 15, 2006, the Fund acquired the assets and adopted the financial and performance history of First Trust Value Line(R) Dividend Fund (the "Predecessor FVD Fund," a closed-end fund), which had an inception date of August 19, 2003. The inception date total returns at net asset value ("NAV") include the sales load of $0.675 per share on the initial offering. The investment goals, strategies and policies of the Fund are substantially similar to those of the Predecessor FVD Fund. The inception date of the Index was July 3, 2006. Returns for the Index are only disclosed for those periods in which the Index was in existence for the entire period. The cumulative total returns for the period from the reorganization date (December 15, 2006) through period end (December 31, 2018) were 137.98% and 139.12% at NAV and Market Value, respectively. That compares to an Index return of 179.64% for the same period. The average annual total returns for the period from the reorganization date (December 15, 2006) through period end (December 31, 2018) were 7.46% and 7.51% at NAV and Market Value, respectively. That compares to an Index return of 8.85% for the same period. NAV and Market Value returns assume that all distributions have been reinvested in the Fund at NAV and Market Value, respectively. Prior to December 15, 2006, NAV and Market Value returns assumed that all distributions were reinvested at prices obtained by the Dividend Reinvestment Plan of the Predecessor FVD Fund and the price used to calculate Market Value return was the AMEX (now known as the NYSE MKT) closing market price of the Predecessor FVD Fund. * Performance data is not available for all the periods shown in the table for the index because performance data does not exist for some of the entire periods. (See Notes to Fund Performance Overview on page 20.) PERFORMANCE REVIEW The Fund generated a NAV return of -3.44% during the 12-month period covered by this report. During the same period, the S&P 500(R) Index ("benchmark") generated a return of -4.38%. The Utilities sector was the Fund's largest allocated sector over the period with a 21.7% allocation. This sector was also the largest contributing sector with a 0.6% contribution and a 3.4% return. The top performing sector was the Health Care sector with a 5.6% return. This sector contributed 0.4% to the Fund's return and had a 6.7% allocation. The Fund's least contributing sector was the Consumer Staples sector with a -1.7% contribution, stemming from its 13.5% allocation and -12.6% return. On a relative basis, the Fund outperformed the benchmark. The primary cause of the outperformance is attributable to the Fund overweighting the benchmark among the relatively well performing Utilities securities by 18.9%, which created 1.6% of relative outperformance. The Fund underperformed the benchmark among the Information Technology sector, which created -1.3% of relative drag. ----------------------------- Value Line(R) and Safety(TM) are trademarks of Value Line, Inc. that are licensed to First Trust. The Fund is not sponsored, recommended, sold, or promoted by Value Line Publishing LLC, Value Line, Inc. or any of their affiliates. Page 16 -------------------------------------------------------------------------------- FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST VALUE LINE(R) DIVIDEND INDEX FUND (FVD) (CONTINUED) ----------------------------------------------------------- % OF TOTAL SECTOR CLASSIFICATION LONG-TERM INVESTMENTS ----------------------------------------------------------- Utilities 20.35% Financials 19.87 Industrials 13.89 Consumer Staples 12.91 Information Technology 6.65 Health Care 6.07 Consumer Discretionary 5.53 Real Estate 4.83 Materials 3.34 Energy 3.31 Communication Services 3.25 ------- Total 100.00% ======= ----------------------------------------------------------- % OF TOTAL TOP TEN HOLDINGS LONG-TERM INVESTMENTS ----------------------------------------------------------- Williams-Sonoma, Inc. 0.58% Phillips 66 0.57 Boeing (The) Co. 0.57 Amgen, Inc. 0.57 Hartford Financial Services Group (The), Inc. 0.57 DowDuPont, Inc. 0.57 T. Rowe Price Group, Inc. 0.57 Caterpillar, Inc. 0.57 Home Depot (The), Inc. 0.57 BlackRock, Inc. 0.57 ------- Total 5.71% =======
PERFORMANCE OF A $10,000 INITIAL INVESTMENT DECEMBER 31, 2008 - DECEMBER 31, 2018 First Trust Value Line(R) Value Line(R) S&P 500(R) Dow Jones U.S. Select Dividend Index Fund Dividend Index Index Dividend Index(SM) 12/08 $10,000 $10,000 $10,000 $10,000 06/09 9,880 9,910 10,316 8,746 12/09 11,959 12,052 12,645 11,113 06/10 11,615 11,746 11,804 10,970 12/10 13,883 14,100 14,551 13,149 06/11 15,012 15,308 15,427 14,252 12/11 15,137 15,493 14,858 14,782 06/12 16,096 16,554 16,268 15,749 12/12 16,829 17,365 17,236 16,385 06/13 19,167 19,864 19,618 18,655 12/13 21,301 22,156 22,818 21,147 06/14 23,117 24,154 24,447 23,233 12/14 24,698 25,905 25,943 24,395 06/15 24,184 25,465 26,262 23,524 12/15 25,006 26,448 26,301 23,997 06/16 28,527 30,304 27,311 27,729 12/16 29,993 31,983 29,447 29,274 06/17 31,625 33,854 32,197 31,057 12/17 33,738 36,244 35,874 33,793 06/18 33,475 36,103 36,825 34,138 12/18 32,572 35,251 34,304 31,775
Performance figures assume reinvestment of all distributions and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. An index is a statistical composite that tracks a specified financial market or sector. Unlike the Fund, the indices do not actually hold a portfolio of securities and therefore do not incur the expenses incurred by the Fund. These expenses negatively impact the performance of the Fund. The Fund's past performance does not predict future performance. FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS BID/ASK MIDPOINT VS. NAV AS OF DECEMBER 31, 2018 The following Frequency Distribution of Discounts and Premiums charts are provided to show the frequency at which the bid/ask midpoint price for the Fund was at a discount or premium to the daily NAV. The following tables are for comparative purposes only and represent the period January 1, 2014 through December 31, 2018. Shareholders may pay more than NAV when they buy Fund shares and receive less than NAV when they sell those shares because shares are bought and sold at current market price. Data presented represents past performance and cannot be used to predict future results. -------------------------------------------------------------------------------- NUMBER OF DAYS BID/ASK MIDPOINT AT/ABOVE NAV -------------------------------------------------------------------------------- FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00% 01/01/14 - 12/31/14 223 0 0 0 01/01/15 - 12/31/15 179 0 0 0 01/01/16 - 12/31/16 182 0 0 0 01/01/17 - 12/31/17 185 0 0 0 01/01/18 - 12/31/18 143 1 0 0 -------------------------------------------------------------------------------- NUMBER OF DAYS BID/ASK MIDPOINT BELOW NAV -------------------------------------------------------------------------------- FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00% 01/01/14 - 12/31/14 29 0 0 0 01/01/15 - 12/31/15 73 0 0 0 01/01/16 - 12/31/16 70 0 0 0 01/01/17 - 12/31/17 66 0 0 0 01/01/18 - 12/31/18 106 1 0 0 Page 17 -------------------------------------------------------------------------------- FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST VALUE LINE(R) 100 EXCHANGE-TRADED FUND (FVL) The First Trust Value Line(R) 100 Exchange-Traded Fund (the "Fund") seeks investment results that correspond generally to the price and yield (before the Fund's fees and expenses) of an equity index called the Value Line(R) 100 Index (the "Index"). The Fund will normally invest at least 90% of its net assets (including investment borrowings) in common stocks that comprise the Index. The Index is an equal-dollar weighted index that is designed to objectively identify and select 100 stocks from the universe of stocks to which Value Line Publishing LLC assigns a #1 ranking in the Value Line(R) Timeliness(TM) Ranking System (the "Ranking System"). At any one time only 100 stocks are assigned a #1 ranking in the Ranking System. The Fund's shares are listed for trading on the NYSE Arca.
------------------------------------------------------------------------------------------------------------------------------------ PERFORMANCE ------------------------------------------------------------------------------------------------------------------------------------ AVERAGE ANNUAL TOTAL RETURNS CUMULATIVE TOTAL RETURNS 1 Year 5 Years 10 Years Inception 5 Years 10 Years Inception Ended Ended Ended (6/12/03) Ended Ended (6/12/03) 12/31/18 12/31/18 12/31/18 to 12/31/18 12/31/18 12/31/18 to 12/31/18 FUND PERFORMANCE NAV -18.83% 1.01% 7.90% 4.36% 5.14% 113.92% 94.26% Market Value -18.95% 0.98% 7.94% 4.35% 4.97% 114.63% 94.05% INDEX PERFORMANCE Value Line(R) 100 Index* -18.18% 1.95% 8.92% N/A 10.16% 134.92% N/A Russell 3000(R) Index -5.24% 7.91% 13.18% 8.49% 46.34% 244.95% 255.30% ------------------------------------------------------------------------------------------------------------------------------------
On June 15, 2007, the Fund acquired the assets and adopted the financial and performance history of First Trust Value Line(R) 100 Fund (the "Predecessor FVL Fund," a closed-end fund), which had an inception date of June 12, 2003. The inception date total returns at NAV include the sales load of $0.675 per share on the initial offering. The investment goals, strategies and policies of the Fund are substantially similar to those of the Predecessor FVL Fund. The inception date of the Index was January 16, 2007. Returns for the Index are only disclosed for those periods in which the Index was in existence for the entire period. The cumulative total returns for the period from the reorganization date (June 15, 2007) through period end (December 31, 2018) were 17.91% and 17.79% at NAV and Market Value, respectively. That compares to an Index return of 38.96% for that same period. The average annual total returns for the period from the reorganization date (June 15, 2007) through period end (December 31, 2018) were 1.44% and 1.43% at NAV and Market Value, respectively. That compares to an Index return of 2.87% for the same period. NAV and Market Value returns assume that all distributions have been reinvested in the Fund at NAV and Market Value, respectively. Prior to June 15, 2007, NAV and Market Value returns assumed that all distributions were reinvested at prices obtained by the Dividend Reinvestment Plan of the Predecessor FVL Fund and the price used to calculate Market Value return was the AMEX (now known as the NYSE MKT) closing market price of the Predecessor FVL Fund. * Performance data is not available for all the periods shown in the table for the index because performance data does not exist for some of the entire periods. (See Notes to Fund Performance Overview on page 20.) PERFORMANCE REVIEW The Fund generated a NAV return of -18.83% during the 12-month period covered by this report. During the same period, the Russell 3000(R) Index ("benchmark") generated a return of -5.24%. The Information Technology sector was the largest allocation in the Fund over the period with a 22.5% allocation. This sector had a -18.5% return and contributed -3.4% to the Fund's return. The Health Care sector was the largest contributing sector in the Fund with a 1.0% contribution, stemming from its 8.7% allocation and 19.2% return. The Fund's least contributing sector was the Industrials sector with a -4.5% contribution, stemming from its 16.2% allocation and -27.0% return. On a relative basis, the Fund underperformed the benchmark. The leading cause of the underperformance is attributable to the Fund underperforming the benchmark amongst the Information Technology sector by -21.5%, creating -3.6% of relative drag. The Fund outperformed the benchmark amongst the Health Care sector by 14.75%, creating 0.5% of relative outperformance. ----------------------------- Value Line(R) and Timeliness(TM) are trademarks of Value Line, Inc. that are licensed to First Trust. The Fund is not sponsored, recommended, sold, or promoted by Value Line Publishing LLC, Value Line, Inc. or any of their affiliates. Page 18 -------------------------------------------------------------------------------- FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST VALUE LINE(R) 100 EXCHANGE-TRADED FUND (FVL) (CONTINUED) ----------------------------------------------------------- % OF TOTAL SECTOR CLASSIFICATION LONG-TERM INVESTMENTS ----------------------------------------------------------- Information Technology 16.08% Health Care 13.34 Utilities 10.38 Consumer Discretionary 9.58 Consumer Staples 9.28 Materials 9.05 Energy 9.02 Communication Services 7.30 Financials 7.12 Industrials 4.78 Real Estate 4.07 ------- Total 100.00% ======= ----------------------------------------------------------- % OF TOTAL TOP TEN HOLDINGS LONG-TERM INVESTMENTS ----------------------------------------------------------- Zebra Technologies Corp., Class A 1.79% HCA Healthcare, Inc. 1.56 Ameren Corp. 1.27 Marcus (The) Corp. 1.24 Burlington Stores, Inc. 1.22 Abbott Laboratories 1.18 Eli Lilly & Co. 1.15 WD-40 Co. 1.15 Merck & Co., Inc. 1.14 CDW Corp. 1.13 ------- Total 12.83% =======
PERFORMANCE OF A $10,000 INITIAL INVESTMENT DECEMBER 31, 2008 - DECEMBER 31, 2018 First Trust Value Line(R) 100 Value Line(R) Russell 3000(R) Exchange-Traded Fund 100 Index Index 12/08 $10,000 $10,000 $10,000 06/09 9,611 9,654 10,419 12/09 11,274 11,382 12,833 06/10 11,177 11,342 12,057 12/10 14,601 14,881 15,006 06/11 15,429 15,839 15,959 12/11 13,445 13,832 15,160 06/12 13,820 14,275 16,572 12/12 14,591 15,130 17,648 06/13 16,765 17,475 20,129 12/13 20,346 21,323 23,570 06/14 22,547 23,739 25,206 12/14 22,653 23,955 26,530 06/15 23,253 24,702 27,045 12/15 21,944 23,400 26,657 06/16 22,699 24,310 27,622 12/16 24,168 26,038 30,050 06/17 23,941 25,965 32,733 12/17 26,369 28,699 36,399 06/18 25,947 28,355 37,571 12/18 21,392 24,492 34,495
Performance figures assume reinvestment of all distributions and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. An index is a statistical composite that tracks a specified financial market or sector. Unlike the Fund, the indices do not actually hold a portfolio of securities and therefore do not incur the expenses incurred by the Fund. These expenses negatively impact the performance of the Fund. The Fund's past performance does not predict future performance. FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS BID/ASK MIDPOINT VS. NAV AS OF DECEMBER 31, 2018 The following Frequency Distribution of Discounts and Premiums charts are provided to show the frequency at which the bid/ask midpoint price for the Fund was at a discount or premium to the daily NAV. The following tables are for comparative purposes only and represent the period January 1, 2014 through December 31, 2018. Shareholders may pay more than NAV when they buy Fund shares and receive less than NAV when they sell those shares because shares are bought and sold at current market price. Data presented represents past performance and cannot be used to predict future results. -------------------------------------------------------------------------------- NUMBER OF DAYS BID/ASK MIDPOINT AT/ABOVE NAV -------------------------------------------------------------------------------- FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00% 01/01/14 - 12/31/14 165 0 0 0 01/01/15 - 12/31/15 130 0 0 0 01/01/16 - 12/31/16 140 1 0 0 01/01/17 - 12/31/17 137 1 0 0 01/01/18 - 12/31/18 182 4 0 1 -------------------------------------------------------------------------------- NUMBER OF DAYS BID/ASK MIDPOINT BELOW NAV -------------------------------------------------------------------------------- FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00% 01/01/14 - 12/31/14 87 0 0 0 01/01/15 - 12/31/15 122 0 0 0 01/01/16 - 12/31/16 111 0 0 0 01/01/17 - 12/31/17 113 0 0 0 01/01/18 - 12/31/18 63 1 0 0 Page 19 -------------------------------------------------------------------------------- NOTES TO FUND PERFORMANCE OVERVIEW (UNAUDITED) -------------------------------------------------------------------------------- Total returns for the periods since inception are calculated from the inception date of each Fund. "Average Annual Total Returns" represent the average annual change in value of an investment over the periods indicated. "Cumulative Total Returns" represent the total change in value of an investment over the periods indicated. The total returns would have been lower if certain fees had not been waived and expenses reimbursed by the Advisor. Each Fund's per share net asset value ("NAV") is the value of one share of the Fund and is computed by dividing the value of all assets of the Fund (including accrued interest and dividends), less all liabilities (including accrued expenses and dividends declared but unpaid), by the total number of outstanding shares. The price used to calculate market return ("Market Price") is determined by using the midpoint between the highest bid and the lowest offer on the stock exchange on which shares of the Fund are listed for trading as of the time that the Fund's NAV is calculated. Since shares of each Fund did not trade in the secondary market until after the Fund's inception, for the period from inception to the first day of secondary market trading in shares of the Fund, the NAV of each Fund is used as a proxy for the secondary market trading price to calculate market returns. NAV and market returns assume that all distributions have been reinvested in each Fund at NAV and Market Price, respectively. An index is a statistical composite that tracks a specified financial market or sector. Unlike each Fund, the indices do not actually hold a portfolio of securities and therefore do not incur the expenses incurred by each Fund. These expenses negatively impact the performance of each Fund. Also, market returns do not include brokerage commissions that may be payable on secondary market transactions. If brokerage commissions were included, market returns would be lower. The total returns presented reflect the reinvestment of dividends on securities in the indices. The returns presented do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. The investment return and principal value of shares of each Fund will vary with changes in market conditions. Shares of each Fund may be worth more or less than their original cost when they are redeemed or sold in the market. Each Fund's past performance is no guarantee of future performance. Page 20 FIRST TRUST EXCHANGE-TRADED FUND UNDERSTANDING YOUR FUND EXPENSES DECEMBER 31, 2018 (UNAUDITED) As a shareholder of First Trust Dow Jones Select MicroCap Index Fund, First Trust Morningstar Dividend Leaders Index Fund, First Trust US Equity Opportunities ETF, First Trust NYSE Arca Biotechnology Index Fund, First Trust Dow Jones Internet Index Fund, First Trust Capital Strength ETF, First Trust Value Line(R) Dividend Index Fund or First Trust Value Line(R) 100 Exchange-Traded Fund (each a "Fund" and collectively, the "Funds"), you incur two types of costs: (1) transaction costs; and (2) ongoing costs, including management fees, distribution and/or service fees, if any, and other Fund expenses. This Example is intended to help you understand your ongoing costs of investing in the Funds and to compare these costs with the ongoing costs of investing in other funds. The Example is based on an investment of $1,000 invested at the beginning of the period and held through the six-month period ended December 31, 2018. ACTUAL EXPENSES The first line in the following table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled "Expenses Paid During the Six-Month Period" to estimate the expenses you paid on your account during this six-month period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second line in the following table provides information about hypothetical account values and hypothetical expenses based on each Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not each Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Funds and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs such as brokerage commissions. Therefore, the second line in the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
-------------------------------------------------------------------------------------------------------------------------- ANNUALIZED EXPENSE RATIO EXPENSES PAID BEGINNING ENDING BASED ON THE DURING THE ACCOUNT VALUE ACCOUNT VALUE SIX-MONTH SIX-MONTH JULY 1, 2018 DECEMBER 31, 2018 PERIOD (a) PERIOD (b) -------------------------------------------------------------------------------------------------------------------------- FIRST TRUST DOW JONES SELECT MICROCAP INDEX FUND (FDM) Actual $1,000.00 $ 807.50 0.60% $2.73 Hypothetical (5% return before expenses) $1,000.00 $1,022.18 0.60% $3.06 FIRST TRUST MORNINGSTAR DIVIDEND LEADERS INDEX FUND (FDL) Actual $1,000.00 $ 973.60 0.45% $2.24 Hypothetical (5% return before expenses) $1,000.00 $1,022.94 0.45% $2.29 FIRST TRUST US EQUITY OPPORTUNITIES ETF (FPX) Actual $1,000.00 $ 872.20 0.59% $2.78 Hypothetical (5% return before expenses) $1,000.00 $1,022.23 0.59% $3.01 FIRST TRUST NYSE ARCA BIOTECHNOLOGY INDEX FUND (FBT) Actual $1,000.00 $ 887.20 0.57% $2.71 Hypothetical (5% return before expenses) $1,000.00 $1,022.33 0.57% $2.91 FIRST TRUST DOW JONES INTERNET INDEX FUND (FDN) Actual $1,000.00 $ 847.40 0.52% $2.42 Hypothetical (5% return before expenses) $1,000.00 $1,022.58 0.52% $2.65 FIRST TRUST CAPITAL STRENGTH ETF (FTCS) Actual $1,000.00 $ 951.10 0.61% $3.00 Hypothetical (5% return before expenses) $1,000.00 $1,022.13 0.61% $3.11
Page 21 FIRST TRUST EXCHANGE-TRADED FUND UNDERSTANDING YOUR FUND EXPENSES (CONTINUED) DECEMBER 31, 2018 (UNAUDITED)
-------------------------------------------------------------------------------------------------------------------------- ANNUALIZED EXPENSE RATIO EXPENSES PAID BEGINNING ENDING BASED ON THE DURING THE ACCOUNT VALUE ACCOUNT VALUE SIX-MONTH SIX-MONTH JULY 1, 2018 DECEMBER 31, 2018 PERIOD (a) PERIOD (b) -------------------------------------------------------------------------------------------------------------------------- FIRST TRUST VALUE LINE(R) DIVIDEND INDEX FUND (FVD) Actual $1,000.00 $ 973.20 0.70% $3.48 Hypothetical (5% return before expenses) $1,000.00 $1,021.68 0.70% $3.57 FIRST TRUST VALUE LINE(R) 100 EXCHANGE-TRADED FUND (FVL) Actual $1,000.00 $ 824.90 0.70% $3.22 Hypothetical (5% return before expenses) $1,000.00 $1,021.68 0.70% $3.57
(a) These expense ratios reflect expense caps for certain Funds. See Note 3 in Notes to Financial Statements. (b) Expenses are equal to the annualized expense ratio as indicated in the table multiplied by the average account value over the period (July 1, 2018 through December 31, 2018), multiplied by 184/365 (to reflect the six-month period). Page 22 FIRST TRUST DOW JONES SELECT MICROCAP INDEX FUND (FDM) PORTFOLIO OF INVESTMENTS DECEMBER 31, 2018 SHARES DESCRIPTION VALUE ------------------------------------------------------------- COMMON STOCKS -- 99.2% AEROSPACE & DEFENSE -- 2.2% 18,717 Ducommun, Inc. (a) $ 679,801 32,649 Engility Holdings, Inc. (a) 929,191 9,059 National Presto Industries, Inc. 1,059,178 20,298 Vectrus, Inc. (a) 438,031 -------------- 3,106,201 -------------- AUTO COMPONENTS -- 0.3% 26,570 Shiloh Industries, Inc. (a) 154,903 41,488 Superior Industries International, Inc. 199,557 -------------- 354,460 -------------- BANKS -- 24.5% 11,212 1st Constitution Bancorp 223,455 26,033 Access National Corp. 555,284 20,851 Allegiance Bancshares, Inc. (a) 674,947 26,054 Arrow Financial Corp. 834,249 47,060 Atlantic Capital Bancshares, Inc. (a) 770,372 27,960 Bar Harbor Bankshares 627,143 48,413 Blue Hills Bancorp, Inc. 1,033,133 28,143 Byline Bancorp, Inc. (a) 468,862 5,869 C&F Financial Corp. 312,290 6,662 Cambridge Bancorp (b) 554,612 23,368 Capital City Bank Group, Inc. 542,371 8,979 CB Financial Services, Inc. (b) 222,500 25,541 Civista Bancshares, Inc. 444,924 25,832 CNB Financial Corp. 592,844 25,903 Equity Bancshares, Inc., Class A (a) 913,081 39,817 Fidelity Southern Corp. 1,036,038 28,709 Financial Institutions, Inc. 737,821 22,199 First Bancshares (The), Inc. 671,520 27,770 First Bank 336,572 25,830 First Community Bankshares, Inc. 813,128 12,792 First Community Corp. 248,549 19,436 First Financial Corp. 780,355 14,955 First Financial Northwest, Inc. 231,354 17,435 First Internet Bancorp 356,371 18,972 First Mid-Illinois Bancshares, Inc. 605,586 41,807 First of Long Island (The) Corp. 834,050 12,764 First United Corp. 203,203 21,994 Franklin Financial Network, Inc. (a) 579,982 47,824 Green Bancorp, Inc. 819,703 70,210 Heritage Commerce Corp. 796,181 30,275 HomeTrust Bancshares, Inc. 792,600 43,451 Independent Bank Corp. 913,340 29,910 Mercantile Bank Corp. 845,257 11,389 Metropolitan Bank Holding Corp. (a) 351,351 36,317 Midland States Bancorp, Inc. 811,322 19,606 MidWestOne Financial Group, Inc. 486,817 31,679 National Commerce Corp. (a) 1,140,444 13,395 Nicolet Bankshares, Inc. (a) 653,676 12,407 Northrim BanCorp, Inc. 407,818 6,900 Ohio Valley Banc Corp. (b) 244,191 26,641 Old Line Bancshares, Inc. 701,191 47,203 Old Second Bancorp, Inc. 613,639 39,000 Opus Bank 764,010 SHARES DESCRIPTION VALUE ------------------------------------------------------------- BANKS (CONTINUED) 9,370 Origin Bancorp, Inc. $ 319,330 14,431 Parke Bancorp, Inc. 270,076 28,785 Peapack-Gladstone Financial Corp. 724,806 29,692 People's Utah Bancorp 895,214 24,017 QCR Holdings, Inc. 770,706 18,373 RBB Bancorp 322,814 18,087 Reliant Bancorp, Inc. 416,724 18,530 Republic Bancorp, Inc., Class A 717,482 11,480 SB One Bancorp 234,651 25,343 Sierra Bancorp 608,992 17,833 SmartFinancial, Inc. (a) 325,809 12,352 Southern First Bancshares, Inc. (a) 396,129 35,119 Southern National Bancorp of Virginia, Inc. 464,273 43,668 Veritex Holdings, Inc. (a) 933,622 -------------- 33,946,764 -------------- BUILDING PRODUCTS -- 1.1% 60,926 Griffon Corp. 636,677 63,387 Quanex Building Products Corp. 861,429 -------------- 1,498,106 -------------- CAPITAL MARKETS -- 1.6% 5,885 Diamond Hill Investment Group, Inc. 879,513 33,794 GAIN Capital Holdings, Inc. 208,171 17,102 Oppenheimer Holdings, Inc., Class A 436,956 25,929 Victory Capital Holdings, Inc., Class A (a) 264,995 14,631 Westwood Holdings Group, Inc. 497,454 -------------- 2,287,089 -------------- CHEMICALS -- 2.1% 48,093 American Vanguard Corp. 730,533 46,519 FutureFuel Corp. 737,791 39,697 Kronos Worldwide, Inc. 457,309 80,896 OMNOVA Solutions, Inc. (a) 592,968 37,120 Trecora Resources (a) 289,536 48,906 Valhi, Inc. 94,389 -------------- 2,902,526 -------------- COMMERCIAL SERVICES & SUPPLIES -- 2.1% 47,446 Ennis, Inc. 913,335 66,073 Kimball International, Inc., Class B 937,576 54,275 Quad/Graphics, Inc. 668,668 15,488 VSE Corp. 463,246 -------------- 2,982,825 -------------- COMMUNICATIONS EQUIPMENT -- 0.5% 52,222 Casa Systems, Inc. (a) 685,675 -------------- CONSTRUCTION & ENGINEERING -- 2.2% 33,285 Ameresco, Inc., Class A (a) 469,319 29,856 MYR Group, Inc. (a) 841,044 16,871 NV5 Global, Inc. (a) 1,021,539 52,215 Orion Group Holdings, Inc. (a) 224,002 See Notes to Financial Statements Page 23 FIRST TRUST DOW JONES SELECT MICROCAP INDEX FUND (FDM) PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2018 SHARES DESCRIPTION VALUE ------------------------------------------------------------- COMMON STOCKS (CONTINUED) CONSTRUCTION & ENGINEERING (CONTINUED) 46,353 Sterling Construction Co., Inc. (a) $ 504,784 -------------- 3,060,688 -------------- CONSUMER FINANCE -- 2.0% 24,042 Curo Group Holdings Corp. (a) 228,159 32,701 Elevate Credit, Inc. (a) 146,501 93,036 EZCORP, Inc., Class A (a) 719,168 17,215 Regional Management Corp. (a) 414,021 12,094 World Acceptance Corp. (a) 1,236,732 -------------- 2,744,581 -------------- CONTAINERS & PACKAGING -- 0.7% 63,724 Myers Industries, Inc. 962,870 -------------- DISTRIBUTORS -- 0.4% 18,725 Funko, Inc., Class A (a) 246,234 11,326 Weyco Group, Inc. 330,379 -------------- 576,613 -------------- DIVERSIFIED CONSUMER SERVICES -- 1.9% 48,921 Bridgepoint Education, Inc. (a) 342,936 26,615 Carriage Services, Inc. 412,532 14,210 Collectors Universe, Inc. 161,426 67,376 K12, Inc. (a) 1,670,251 -------------- 2,587,145 -------------- DIVERSIFIED FINANCIAL SERVICES -- 0.3% 16,986 Marlin Business Services Corp. 379,297 -------------- ELECTRIC UTILITIES -- 0.1% 33,771 Genie Energy Ltd., Class B 203,639 -------------- ELECTRICAL EQUIPMENT -- 1.2% 137,992 Enphase Energy, Inc. (a) (b) 652,702 4,881 Preformed Line Products Co. 264,794 32,969 TPI Composites, Inc. (a) 810,378 -------------- 1,727,874 -------------- ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS -- 2.5% 48,142 Control4 Corp. (a) 847,299 47,379 Kimball Electronics, Inc. (a) 733,901 20,760 Napco Security Technologies, Inc. (a) 326,970 20,717 PC Connection, Inc. 615,916 15,549 PCM, Inc. (a) 273,818 22,434 Vishay Precision Group, Inc. (a) 678,180 -------------- 3,476,084 -------------- ENERGY EQUIPMENT & SERVICES -- 0.7% 59,093 FTS International, Inc. (a) 420,151 22,590 Mammoth Energy Services, Inc. 406,168 58,932 Profire Energy, Inc. (a) 85,452 -------------- 911,771 -------------- SHARES DESCRIPTION VALUE ------------------------------------------------------------- ENTERTAINMENT -- 0.3% 29,615 Reading International, Inc., Class A (a) $ 430,602 -------------- EQUITY REAL ESTATE INVESTMENT TRUSTS -- 4.0% 16,390 BRT Apartments Corp. 187,502 71,281 City Office REIT, Inc. 730,630 21,537 CorEnergy Infrastructure Trust, Inc. 712,444 57,431 MedEquities Realty Trust, Inc. 392,828 148,073 New Senior Investment Group, Inc. 610,061 38,124 NexPoint Residential Trust, Inc. 1,336,246 26,211 One Liberty Properties, Inc. 634,830 20,775 Saul Centers, Inc. 980,996 -------------- 5,585,537 -------------- FOOD & STAPLES RETAILING -- 0.8% 25,478 Ingles Markets, Inc., Class A 693,511 14,532 Village Super Market, Inc., Class A 388,586 -------------- 1,082,097 -------------- FOOD PRODUCTS -- 1.6% 50,024 Landec Corp. (a) 592,284 26,433 Limoneira Co. 516,765 33,417 Tootsie Roll Industries, Inc. (b) 1,116,128 -------------- 2,225,177 -------------- HEALTH CARE EQUIPMENT & SUPPLIES -- 0.2% 11,457 FONAR Corp. (a) 231,890 -------------- HEALTH CARE PROVIDERS & SERVICES -- 2.0% 21,288 AAC Holdings, Inc. (a) 29,803 18,180 Addus HomeCare Corp. (a) 1,234,058 28,078 Civitas Solutions, Inc. (a) 491,646 16,558 CorVel Corp. (a) 1,021,960 -------------- 2,777,467 -------------- HOTELS, RESTAURANTS & LEISURE -- 3.9% 116,188 BBX Capital Corp. 665,757 33,165 Bojangles', Inc. (a) 533,293 30,555 Chuy's Holdings, Inc. (a) 542,046 63,308 Del Taco Restaurants, Inc. (a) 632,447 48,721 Lindblad Expeditions Holdings, Inc. (a) 655,785 21,290 Monarch Casino & Resort, Inc. (a) 812,000 16,291 RCI Hospitality Holdings, Inc. 363,778 23,397 Red Robin Gourmet Burgers, Inc. (a) 625,168 20,610 Speedway Motorsports, Inc. 335,325 45,077 Town Sports International Holdings, Inc. (a) 288,493 -------------- 5,454,092 -------------- HOUSEHOLD DURABLES -- 2.3% 18,027 Bassett Furniture Industries, Inc. 361,261 44,539 Ethan Allen Interiors, Inc. 783,441 13,216 Flexsteel Industries, Inc. 291,809 43,881 Green Brick Partners, Inc. (a) 317,698 Page 24 See Notes to Financial Statements FIRST TRUST DOW JONES SELECT MICROCAP INDEX FUND (FDM) PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2018 SHARES DESCRIPTION VALUE ------------------------------------------------------------- COMMON STOCKS (CONTINUED) HOUSEHOLD DURABLES (CONTINUED) 9,336 Hamilton Beach Brands Holding Co., Class A $ 219,023 21,243 Hooker Furniture Corp. 559,541 12,831 Turtle Beach Corp. (a) (b) 183,098 50,100 ZAGG, Inc. (a) 489,978 -------------- 3,205,849 -------------- INSURANCE -- 1.0% 18,189 FedNat Holding Co. 362,325 22,071 Health Insurance Innovations, Inc., Class A (a) (b) 589,958 2,412 Investors Title Co. 426,152 -------------- 1,378,435 -------------- IT SERVICES -- 1.3% 47,885 Hackett Group (The), Inc. 766,639 91,976 Unisys Corp. (a) 1,069,681 -------------- 1,836,320 -------------- LEISURE PRODUCTS -- 1.3% 10,536 Johnson Outdoors, Inc., Class A 618,885 33,739 MasterCraft Boat Holdings, Inc. (a) 630,919 53,689 Nautilus, Inc. (a) 585,210 -------------- 1,835,014 -------------- MACHINERY -- 1.4% 25,038 Blue Bird Corp. (a) 455,441 11,380 Hurco Cos., Inc. 406,266 15,571 Park-Ohio Holdings Corp. 477,874 55,793 Spartan Motors, Inc. 403,384 17,928 Twin Disc, Inc. (a) 264,438 -------------- 2,007,403 -------------- MEDIA -- 1.1% 44,865 Emerald Expositions Events, Inc. 553,634 93,629 Lee Enterprises, Inc. (a) 197,557 112,436 National CineMedia, Inc. 728,586 -------------- 1,479,777 -------------- METALS & MINING -- 0.6% 104,041 Gold Resource Corp. 416,164 16,470 Olympic Steel, Inc. 235,027 14,869 Synalloy Corp. 246,677 -------------- 897,868 -------------- MORTGAGE REAL ESTATE INVESTMENT TRUSTS -- 4.2% 126,954 Arbor Realty Trust, Inc. 1,278,427 47,593 Ares Commercial Real Estate Corp. 620,613 26,557 Cherry Hill Mortgage Investment Corp. 465,810 107,591 Dynex Capital, Inc. 615,421 30,250 Great Ajax Corp. 364,512 31,209 Ready Capital Corp. 431,620 74,992 TPG RE Finance Trust, Inc. 1,370,854 86,733 Western Asset Mortgage Capital Corp. 723,353 -------------- 5,870,610 -------------- SHARES DESCRIPTION VALUE ------------------------------------------------------------- OIL, GAS & CONSUMABLE FUELS -- 4.7% 300,318 Abraxas Petroleum Corp. (a) $ 327,347 52,553 CVR Energy, Inc. 1,812,028 115,879 Overseas Shipholding Group, Inc., Class A (a) 192,359 50,445 Par Pacific Holdings, Inc. (a) 715,310 67,232 Renewable Energy Group, Inc. (a) 1,727,862 10,266 REX American Resources Corp. (a) 699,217 11,170 SilverBow Resources, Inc. (a) 264,059 100,879 VAALCO Energy, Inc. (a) 148,292 165,547 W&T Offshore, Inc. (a) 682,054 -------------- 6,568,528 -------------- PERSONAL PRODUCTS -- 0.4% 23,106 Lifevantage Corp. (a) 304,768 13,125 Natural Health Trends Corp. 242,681 -------------- 547,449 -------------- PHARMACEUTICALS -- 0.5% 14,943 ANI Pharmaceuticals, Inc. (a) 672,734 -------------- PROFESSIONAL SERVICES -- 1.7% 15,566 BG Staffing, Inc. 321,438 14,600 CRA International, Inc. 621,230 53,447 Resources Connection, Inc. 758,947 16,952 Willdan Group, Inc. (a) 592,981 -------------- 2,294,596 -------------- REAL ESTATE MANAGEMENT & DEVELOPMENT -- 1.8% 9,944 Consolidated-Tomoka Land Co. 522,060 38,320 Marcus & Millichap, Inc. (a) 1,315,525 12,583 RMR Group (The), Inc., Class A 667,906 -------------- 2,505,491 -------------- ROAD & RAIL -- 0.6% 22,201 Covenant Transportation Group, Inc., Class A (a) 426,259 3,979 PAM. Transportation Services, Inc. (a) 156,812 14,832 Universal Logistics Holdings, Inc. 268,311 -------------- 851,382 -------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT -- 1.5% 63,426 AXT, Inc. (a) 275,903 123,270 Photronics, Inc. (a) 1,193,253 22,411 SMART Global Holdings, Inc. (a) 665,607 -------------- 2,134,763 -------------- SOFTWARE -- 0.4% 49,283 American Software, Inc., Class A 515,007 -------------- SPECIALTY RETAIL -- 5.5% 51,066 Boot Barn Holdings, Inc. (a) 869,654 41,180 Cato (The) Corp., Class A 587,639 21,985 Citi Trends, Inc. 448,274 27,330 Container Store Group, (The), Inc. (a) 130,364 34,205 Haverty Furniture Cos., Inc. 642,370 33,447 Hibbett Sports, Inc. (a) 478,292 See Notes to Financial Statements Page 25 FIRST TRUST DOW JONES SELECT MICROCAP INDEX FUND (FDM) PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2018 SHARES DESCRIPTION VALUE ------------------------------------------------------------- COMMON STOCKS (CONTINUED) SPECIALTY RETAIL (CONTINUED) 25,236 J. Jill, Inc. (a) $ 134,508 26,780 Kirkland's, Inc. (a) 255,213 103,349 Party City Holdco, Inc. (a) 1,031,423 53,753 RTW RetailWinds, Inc. (a) 152,121 18,086 Shoe Carnival, Inc. 606,062 42,638 Sonic Automotive, Inc., Class A 586,699 68,108 Sportsman's Warehouse Holdings, Inc. (a) 298,313 70,372 Tile Shop Holdings, Inc. 385,639 38,819 Tilly's, Inc., Class A 421,574 34,054 Zumiez, Inc. (a) 652,815 -------------- 7,680,960 -------------- TECHNOLOGY HARDWARE, STORAGE & PERIPHERALS -- 0.4% 55,521 Immersion Corp. (a) 497,468 -------------- TEXTILES, APPAREL & LUXURY GOODS -- 0.6% 13,461 Lakeland Industries, Inc. (a) (b) 140,533 12,174 Rocky Brands, Inc. 316,524 38,877 Vera Bradley, Inc. (a) 333,176 -------------- 790,233 -------------- THRIFTS & MORTGAGE FINANCE -- 6.6% 26,651 BankFinancial Corp. 398,432 55,839 Dime Community Bancshares, Inc. 948,146 12,422 Entegra Financial Corp. (a) 257,756 36,773 First Defiance Financial Corp. 901,306 6,835 FS Bancorp, Inc. 293,085 12,647 Home Bancorp, Inc. 447,704 28,447 Merchants Bancorp 567,802 200,349 Ocwen Financial Corp. (a) 268,468 69,705 Oritani Financial Corp. 1,028,149 108,950 PennyMac Financial Services, Inc. 2,316,277 89,636 United Community Financial Corp. 793,279 51,964 Waterstone Financial, Inc. 870,917 -------------- 9,091,321 -------------- TOBACCO -- 0.3% 15,506 Turning Point Brands, Inc. 422,073 -------------- TRADING COMPANIES & DISTRIBUTORS -- 1.4% 103,525 Nexeo Solutions, Inc. (a) (b) 889,280 26,195 Systemax, Inc. 625,798 12,203 Transcat, Inc. (a) 232,101 5,595 Willis Lease Finance Corp. (a) 193,587 -------------- 1,940,766 -------------- WATER UTILITIES -- 0.4% 14,173 Artesian Resources Corp., Class A 494,212 -------------- TOTAL COMMON STOCKS -- 99.2% 137,699,329 (Cost $163,367,737) -------------- SHARES DESCRIPTION VALUE ------------------------------------------------------------- MONEY MARKET FUNDS -- 0.7% 919,140 Goldman Sachs Financial Square Treasury Obligations Fund - Institutional Class - 2.61% (c) (d) $ 919,140 (Cost $919,140) -------------- PRINCIPAL VALUE DESCRIPTION VALUE ------------------------------------------------------------- REPURCHASE AGREEMENTS -- 1.3% $ 405,554 BNP Paribas S.A., 2.95% (c), dated 12/31/18, due 01/02/19, with a maturity value of $405,621. Collateralized by U.S. Treasury Note, interest rate of 2.375%, due 04/30/20. The value of the collateral including accrued interest is $415,306. (d) 405,554 1,459,602 JPMorgan Chase & Co., 2.85% (c), dated 12/31/18, due 01/02/19, with a maturity value of $1,459,833. Collateralized by U.S. Treasury Bill, interest rate of 0.000%, due 05/09/19. The value of the collateral is $1,488,765. (d) 1,459,602 -------------- TOTAL REPURCHASE AGREEMENTS -- 1.3% 1,865,156 (Cost $1,865,156) -------------- TOTAL INVESTMENTS -- 101.2% 140,483,625 (Cost $166,152,033) (e) NET OTHER ASSETS AND LIABILITIES -- (1.2)% (1,706,813) -------------- NET ASSETS -- 100.0% $ 138,776,812 ============== (a) Non-income producing security. (b) All or a portion of this security is on loan (see Note 2D - Securities Lending in the Notes to Financial Statements). The aggregate value of such securities is $2,727,760 and the total value of the collateral held by the Fund is $2,781,006. (c) Rate shown reflects yield as of December 31, 2018. (d) This security serves as collateral for securities on loan. (e) Aggregate cost for federal income tax purposes is $167,651,203. As of December 31, 2018, the aggregate gross unrealized appreciation for all investments in which there was an excess of value over tax cost was $1,975,484 and the aggregate gross unrealized depreciation for all investments in which there was an excess of tax cost over value was $29,143,062. The net unrealized depreciation was $27,167,578. Page 26 See Notes to Financial Statements FIRST TRUST DOW JONES SELECT MICROCAP INDEX FUND (FDM) PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2018 ----------------------------- VALUATION INPUTS A summary of the inputs used to value the Fund's investments as of December 31, 2018 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial Statements): Level 1 - Quoted Prices Level 2 - Other Significant Observable Inputs Level 3 - Significant Unobservable Inputs LEVEL 1 LEVEL 2 LEVEL 3 ----------------------------------------------------- Common Stocks* $ 137,699,329 $ -- $ -- Money Market Funds 919,140 -- -- Repurchase Agreements -- 1,865,156 -- ----------------------------------------------------- Total Investments $ 138,618,469 $ 1,865,156 $ -- ===================================================== * See Portfolio of Investments for industry breakout. --------------------------------- OFFSETTING ASSETS AND LIABILITIES -------------------------------------------------------------------------------- Offsetting assets and liabilities requires entities to disclose both gross and net information about instruments and transactions eligible for offset, and to disclose instruments and transactions subject to master netting or similar agreements (see Note 2C - Offsetting on the Statements of Assets and Liabilities in the Notes to Financial Statements). The Fund's loaned securities were all subject to an enforceable Securities Lending Agency Agreement. Securities lent in accordance with the Securities Lending Agency Agreement on a gross basis were as follows: SECURITIES LENDING AGENCY AGREEMENT -------------------------------------------------------------------------------- Total gross amount presented on the Statements of Assets and Liabilities(1) $ 2,727,760 Non-cash Collateral(2) (2,727,760) -------------- Net Amount $ -- ============== (1) The amount presented on the Statements of Assets and Liabilities, which is included in "Investments, at value", is not offset and is shown on a gross basis. (2) At December 31, 2018, the value of the collateral received from each borrower exceeded the value of the related securities loaned. This amount is disclosed on the Portfolio of Investments. The Fund's investments in repurchase agreements were all subject to an enforceable Master Repurchase Agreement. Repurchase Agreements on a gross basis were as follows: REPURCHASE AGREEMENTS -------------------------------------------------------------------------------- Total gross amount presented on the Statements of Assets and Liabilities(3) $ 1,865,156 Non-cash Collateral(4) (1,865,156) -------------- Net Amount $ -- ============== (3) The amount is included in "Investments, at value" on the Statements of Assets and Liabilities. (4) At December 31, 2018, the value of the collateral received from each seller exceeded the value of the repurchase agreements. See Notes to Financial Statements Page 27 FIRST TRUST MORNINGSTAR DIVIDEND LEADERS INDEX FUND (FDL) PORTFOLIO OF INVESTMENTS DECEMBER 31, 2018 SHARES DESCRIPTION VALUE ------------------------------------------------------------- COMMON STOCKS -- 99.8% AUTOMOBILES -- 1.6% 2,573,793 Ford Motor Co. $ 19,689,516 63,466 Harley-Davidson, Inc. 2,165,460 -------------- 21,854,976 -------------- BANKS -- 0.7% 133,752 F.N.B. Corp. 1,316,120 78,203 PacWest Bancorp 2,602,596 5,459 Park National Corp. 463,742 158,731 People's United Financial, Inc. 2,290,488 98,925 Umpqua Holdings Corp. 1,572,907 39,987 United Bankshares, Inc. 1,243,996 -------------- 9,489,849 -------------- BEVERAGES -- 7.3% 1,151,773 Coca-Cola (The) Co. 54,536,451 424,597 PepsiCo, Inc. 46,909,477 -------------- 101,445,928 -------------- BIOTECHNOLOGY -- 4.1% 618,436 AbbVie, Inc. 57,013,615 -------------- CAPITAL MARKETS -- 0.4% 7,361 Cohen & Steers, Inc. 252,630 39,090 Federated Investors, Inc., Class B 1,037,839 265,441 Invesco Ltd. 4,443,482 -------------- 5,733,951 -------------- CHEMICALS -- 0.8% 139,715 LyondellBasell Industries N.V., Class A 11,618,699 -------------- COMMERCIAL SERVICES & SUPPLIES -- 0.1% 188,408 Pitney Bowes, Inc. 1,113,491 -------------- CONTAINERS & PACKAGING -- 0.5% 173,615 International Paper Co. 7,007,101 -------------- DIVERSIFIED CONSUMER SERVICES -- 0.1% 69,531 H&R Block, Inc. 1,764,002 -------------- DIVERSIFIED TELECOMMUNICATION SERVICES -- 16.1% 4,578,232 AT&T, Inc. 130,662,741 1,650,025 Verizon Communications, Inc. 92,764,406 -------------- 223,427,147 -------------- ELECTRIC UTILITIES -- 8.3% 65,353 Alliant Energy Corp. 2,761,164 157,648 American Electric Power Co., Inc. 11,782,612 280,007 Duke Energy Corp. 24,164,604 125,619 Edison International 7,131,391 70,349 Entergy Corp. 6,054,939 87,432 Eversource Energy 5,686,577 269,971 Exelon Corp. 12,175,692 32,948 Hawaiian Electric Industries, Inc. 1,206,556 67,060 OGE Energy Corp. 2,628,081 34,421 Pinnacle West Capital Corp. 2,932,669 365,078 PPL Corp. 10,342,660 498,283 Southern (The) Co. 21,884,589 SHARES DESCRIPTION VALUE ------------------------------------------------------------- ELECTRIC UTILITIES (CONTINUED) 139,999 Xcel Energy, Inc. $ 6,897,751 -------------- 115,649,285 -------------- ELECTRICAL EQUIPMENT -- 0.8% 152,634 Eaton Corp. PLC 10,479,851 -------------- ENTERTAINMENT -- 0.1% 32,029 Cinemark Holdings, Inc. 1,146,638 -------------- FOOD PRODUCTS -- 1.5% 38,521 B&G Foods, Inc. 1,113,642 65,842 Campbell Soup Co. 2,172,128 64,231 Flowers Foods, Inc. 1,186,346 287,488 General Mills, Inc. 11,194,783 88,244 Kellogg Co. 5,030,790 -------------- 20,697,689 -------------- GAS UTILITIES -- 0.1% 29,853 South Jersey Industries, Inc. 829,913 -------------- HEALTH CARE PROVIDERS & SERVICES -- 0.4% 100,216 Cardinal Health, Inc. 4,469,634 35,022 Patterson Cos., Inc. 688,532 -------------- 5,158,166 -------------- HOTELS, RESTAURANTS & LEISURE -- 0.9% 11,433 Brinker International, Inc. 502,823 189,074 Las Vegas Sands Corp. 9,841,302 39,928 Wyndham Destinations, Inc. 1,431,020 -------------- 11,775,145 -------------- HOUSEHOLD DURABLES -- 0.6% 36,670 Garmin Ltd. 2,321,945 50,079 Leggett & Platt, Inc. 1,794,831 159,081 Newell Brands, Inc. 2,957,316 35,042 Tupperware Brands Corp. 1,106,276 -------------- 8,180,368 -------------- HOUSEHOLD PRODUCTS -- 5.7% 115,345 Kimberly-Clark Corp. 13,142,409 721,051 Procter & Gamble (The) Co. 66,279,008 -------------- 79,421,417 -------------- INDEPENDENT POWER AND RENEWABLE ELECTRICITY PRODUCERS -- 0.2% 205,598 AES Corp. 2,972,947 -------------- INSURANCE -- 2.8% 397,444 MetLife, Inc. 16,319,051 97,225 Old Republic International Corp. 1,999,918 126,080 Principal Financial Group, Inc. 5,568,953 15,455 ProAssurance Corp. 626,855 170,234 Prudential Financial, Inc. 13,882,583 -------------- 38,397,360 -------------- IT SERVICES -- 4.3% 446,841 International Business Machines Corp. 50,792,417 99,689 Paychex, Inc. 6,494,738 172,189 Western Union (The) Co. 2,937,544 -------------- 60,224,699 -------------- Page 28 See Notes to Financial Statements FIRST TRUST MORNINGSTAR DIVIDEND LEADERS INDEX FUND (FDL) PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2018 SHARES DESCRIPTION VALUE ------------------------------------------------------------- COMMON STOCKS (CONTINUED) MEDIA -- 0.6% 128,037 Interpublic Group of Cos. (The), Inc. $ 2,641,403 14,760 Meredith Corp. 766,635 65,758 Omnicom Group, Inc. 4,816,116 -------------- 8,224,154 -------------- METALS & MINING -- 0.1% 19,693 Compass Minerals International, Inc. 821,001 -------------- MULTILINE RETAIL -- 1.5% 59,711 Kohl's Corp. 3,961,228 136,690 Macy's, Inc. 4,070,628 186,937 Target Corp. 12,354,666 -------------- 20,386,522 -------------- MULTI-UTILITIES -- 4.6% 15,389 Black Hills Corp. 966,121 182,669 CenterPoint Energy, Inc. 5,156,746 102,467 Consolidated Edison, Inc. 7,834,627 276,366 Dominion Energy, Inc. 19,749,114 51,304 DTE Energy Co. 5,658,831 16,327 NorthWestern Corp. 970,477 154,891 Public Service Enterprise Group, Inc. 8,062,077 79,663 Sempra Energy 8,618,740 89,546 WEC Energy Group, Inc. 6,201,956 -------------- 63,218,689 -------------- OIL, GAS & CONSUMABLE FUELS -- 15.5% 702,331 Chevron Corp. 76,406,590 1,732,862 Exxon Mobil Corp. 118,163,860 341,632 Occidental Petroleum Corp. 20,969,372 -------------- 215,539,822 -------------- PAPER & FOREST PRODUCTS -- 0.1% 26,074 Domtar Corp. 915,980 -------------- PHARMACEUTICALS -- 8.7% 607,120 Merck & Co., Inc. 46,390,039 1,688,731 Pfizer, Inc. 73,713,108 -------------- 120,103,147 -------------- PROFESSIONAL SERVICES -- 0.3% 180,836 Nielsen Holdings PLC 4,218,904 -------------- REAL ESTATE MANAGEMENT & DEVELOPMENT -- 0.1% 45,635 Kennedy-Wilson Holdings, Inc. 829,188 -------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT -- 2.0% 494,053 QUALCOMM, Inc. 28,116,556 -------------- SPECIALTY RETAIL -- 0.6% 26,080 DSW, Inc., Class A 644,176 111,108 GameStop Corp., Class A 1,402,183 71,549 Gap (The), Inc. 1,843,102 165,199 L Brands, Inc. 4,240,658 21,150 Signet Jewelers Ltd. 671,936 -------------- 8,802,055 -------------- SHARES DESCRIPTION VALUE ------------------------------------------------------------- TECHNOLOGY HARDWARE, STORAGE & PERIPHERALS -- 0.5% 155,647 Seagate Technology PLC $ 6,006,418 78,130 Xerox Corp. 1,543,849 -------------- 7,550,267 -------------- TEXTILES, APPAREL & LUXURY GOODS -- 0.1% 138,914 Hanesbrands, Inc. 1,740,592 -------------- THRIFTS & MORTGAGE FINANCE -- 0.0% 38,629 Northwest Bancshares, Inc. 654,375 -------------- TOBACCO -- 7.7% 1,069,554 Altria Group, Inc. 52,825,272 802,236 Philip Morris International, Inc. 53,557,276 -------------- 106,382,548 -------------- TRADING COMPANIES & DISTRIBUTORS -- 0.0% 35,839 Aircastle Ltd. 617,864 -------------- TOTAL INVESTMENTS -- 99.8% 1,383,523,901 (Cost $1,450,286,273) (a) NET OTHER ASSETS AND LIABILITIES -- 0.2% 2,959,197 -------------- NET ASSETS -- 100.0% $1,386,483,098 ============== (a) Aggregate cost for federal income tax purposes is $1,473,853,073. As of December 31, 2018, the aggregate gross unrealized appreciation for all investments in which there was an excess of value over tax cost was $71,620,556 and the aggregate gross unrealized depreciation for all investments in which there was an excess of tax cost over value was $161,949,728. The net unrealized depreciation was $90,329,172. ----------------------------- VALUATION INPUTS A summary of the inputs used to value the Fund's investments as of December 31, 2018 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial Statements): Level 1 - Quoted Prices Level 2 - Other Significant Observable Inputs Level 3 - Significant Unobservable Inputs LEVEL 1 LEVEL 2 LEVEL 3 ----------------------------------------------------- Common Stocks* $ 1,383,523,901 $ -- $ -- ===================================================== * See Portfolio of Investments for industry breakout. See Notes to Financial Statements Page 29 FIRST TRUST US EQUITY OPPORTUNITIES ETF (FPX) PORTFOLIO OF INVESTMENTS DECEMBER 31, 2018 SHARES DESCRIPTION VALUE ------------------------------------------------------------- COMMON STOCKS -- 100.0% AUTOMOBILES -- 2.6% 1,622,035 Fiat Chrysler Automobiles N.V. (a) $ 23,454,626 -------------- BEVERAGES -- 1.6% 574,921 Keurig Dr Pepper, Inc. 14,740,974 -------------- BIOTECHNOLOGY -- 5.3% 34,858 Allakos, Inc. (a) 1,822,027 100,558 Allogene Therapeutics, Inc. (a) (b) 2,708,027 252,969 Shire PLC, ADR 44,026,725 -------------- 48,556,779 -------------- CAPITAL MARKETS -- 0.4% 156,643 Virtu Financial, Inc., Class A 4,035,124 -------------- CHEMICALS -- 0.6% 34,741 Ingevity Corp. (a) 2,907,474 155,753 Valvoline, Inc. 3,013,821 -------------- 5,921,295 -------------- COMMERCIAL SERVICES & SUPPLIES -- 0.4% 626,270 ADT, Inc. (b) 3,763,883 -------------- COMMUNICATIONS EQUIPMENT -- 0.3% 61,515 Lumentum Holdings, Inc. (a) 2,584,245 -------------- CONSUMER FINANCE -- 0.6% 297,454 Santander Consumer USA Holdings, Inc. 5,232,216 -------------- DIVERSIFIED TELECOMMUNICATION SERVICES -- 5.3% 855,076 Verizon Communications, Inc. 48,072,373 -------------- ELECTRIC UTILITIES -- 1.6% 263,935 Evergy, Inc. 14,983,590 -------------- ELECTRICAL EQUIPMENT -- 0.1% 92,586 Sunrun, Inc. (a) 1,008,262 -------------- ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS -- 2.3% 124,151 CDW Corp. 10,062,439 177,968 Keysight Technologies, Inc. (a) 11,048,253 -------------- 21,110,692 -------------- ENTERTAINMENT -- 1.7% 19,660 Madison Square Garden (The) Co., Class A (a) 5,262,982 86,442 Spotify Technology S.A. (a) 9,811,167 -------------- 15,074,149 -------------- EQUITY REAL ESTATE INVESTMENT TRUSTS -- 1.6% 100,091 JBG SMITH Properties 3,484,168 228,683 MGM Growth Properties LLC, Class A 6,039,518 176,179 STORE Capital Corp. 4,987,627 -------------- 14,511,313 -------------- SHARES DESCRIPTION VALUE ------------------------------------------------------------- FOOD & STAPLES RETAILING -- 1.2% 113,269 BJ's Wholesale Club Holdings, Inc. (a) $ 2,510,041 87,047 Performance Food Group Co. (a) 2,809,007 179,877 US Foods Holding Corp. (a) 5,691,308 -------------- 11,010,356 -------------- FOOD PRODUCTS -- 8.8% 173,669 Hershey (The) Co. 18,613,844 827,757 Kraft Heinz (The) Co. 35,626,661 121,229 Lamb Weston Holdings, Inc. 8,917,605 328,627 Tyson Foods, Inc., Class A 17,548,682 -------------- 80,706,792 -------------- HEALTH CARE EQUIPMENT & SUPPLIES -- 3.2% 29,823 Glaukos Corp. (a) 1,675,158 28,561 Penumbra, Inc. (a) 3,490,154 154,867 Stryker Corp. 24,275,402 -------------- 29,440,714 -------------- HEALTH CARE PROVIDERS & SERVICES -- 0.6% 70,984 Guardant Health, Inc. (a) (b) 2,668,288 51,641 HealthEquity, Inc. (a) 3,080,386 -------------- 5,748,674 -------------- HEALTH CARE TECHNOLOGY -- 0.3% 58,032 Teladoc Health, Inc. (a) 2,876,646 -------------- HOTELS, RESTAURANTS & LEISURE -- 0.8% 86,913 Planet Fitness, Inc., Class A (a) 4,660,275 45,526 Wingstop, Inc. 2,922,314 -------------- 7,582,589 -------------- INTERACTIVE MEDIA & SERVICES -- 3.5% 73,980 CarGurus, Inc. (a) 2,495,345 230,188 Match Group, Inc. 9,845,141 1,071,876 Snap, Inc., Class A (a) (b) 5,906,037 467,269 Twitter, Inc. (a) 13,429,311 -------------- 31,675,834 -------------- INTERNET & DIRECT MARKETING RETAIL -- 1.4% 99,712 Etsy, Inc. (a) 4,743,300 82,394 Stitch Fix, Inc., Class A (a) (b) 1,408,113 74,783 Wayfair, Inc., Class A (a) 6,736,453 -------------- 12,887,866 -------------- IT SERVICES -- 18.5% 123,665 Black Knight, Inc. (a) 5,572,345 67,161 Evo Payments, Inc., Class A (a) 1,656,862 772,899 First Data Corp., Class A (a) 13,069,722 143,628 GoDaddy, Inc., Class A (a) 9,424,869 44,370 MongoDB, Inc. (a) (b) 3,715,544 91,416 Okta, Inc. (a) 5,832,341 975,094 PayPal Holdings, Inc. (a) 81,995,654 136,139 Perspecta, Inc. 2,344,313 342,275 Square, Inc., Class A (a) 19,198,205 81,830 Twilio, Inc., Class A (a) 7,307,419 Page 30 See Notes to Financial Statements FIRST TRUST US EQUITY OPPORTUNITIES ETF (FPX) PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2018 SHARES DESCRIPTION VALUE ------------------------------------------------------------- COMMON STOCKS (CONTINUED) IT SERVICES (CONTINUED) 249,862 Worldpay, Inc., Class A (a) $ 19,096,953 -------------- 169,214,227 -------------- LIFE SCIENCES TOOLS & SERVICES -- 6.9% 163,933 IQVIA Holdings, Inc. (a) 19,044,097 29,473 Medpace Holdings, Inc. (a) 1,560,006 53,783 PRA Health Sciences, Inc. (a) 4,945,885 166,617 Thermo Fisher Scientific, Inc. 37,287,218 -------------- 62,837,206 -------------- MACHINERY -- 2.1% 276,440 Fortive Corp. 18,703,930 -------------- MEDIA -- 4.1% 634,944 Altice USA, Inc., Class A 10,489,275 5,568 Cable One, Inc. 4,566,317 149,745 Liberty Latin America Ltd., Class C (a) 2,181,785 271,180 Liberty Media Corp.-Liberty SiriusXM, Class A (a) 9,979,424 271,180 Liberty Media Corp.-Liberty SiriusXM, Class C (a) 10,028,236 -------------- 37,245,037 -------------- MULTILINE RETAIL -- 0.4% 52,051 Ollie's Bargain Outlet Holdings, Inc. (a) 3,461,912 -------------- OIL, GAS & CONSUMABLE FUELS -- 1.8% 212,638 Cheniere Energy, Inc. (a) 12,586,043 210,473 Equitrans Midstream Corp. (a) 4,213,670 -------------- 16,799,713 -------------- PHARMACEUTICALS -- 4.2% 73,846 Akcea Therapeutics, Inc. (a) 2,225,718 302,649 Elanco Animal Health, Inc. (a) 9,542,523 229,316 Eli Lilly & Co. 26,536,448 -------------- 38,304,689 -------------- PROFESSIONAL SERVICES -- 2.7% 326,271 IHS Markit Ltd. (a) 15,651,220 153,382 TransUnion 8,712,098 -------------- 24,363,318 -------------- REAL ESTATE MANAGEMENT & DEVELOPMENT -- 0.3% 178,835 Cushman & Wakefield PLC (a) 2,587,742 -------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT -- 0.3% 90,254 Versum Materials, Inc. 2,501,841 -------------- SOFTWARE -- 10.3% 39,736 Alarm.com Holdings, Inc. (a) 2,061,106 58,215 Altair Engineering, Inc., Class A (a) 1,605,570 50,810 Alteryx, Inc., Class A (a) 3,021,671 103,439 Anaplan, Inc. (a) (b) 2,745,271 52,705 Appian Corp., Class A (a) (b) 1,407,751 45,232 Blackline, Inc. (a) 1,852,250 SHARES DESCRIPTION VALUE ------------------------------------------------------------- SOFTWARE (CONTINUED) 49,207 Coupa Software, Inc. (a) $ 3,093,152 336,501 Dropbox, Inc., Class A (a) 6,874,715 32,476 HubSpot, Inc. (a) 4,083,208 47,149 New Relic, Inc. (a) 3,817,655 148,282 Nutanix, Inc., Class A (a) 6,167,048 48,518 Paycom Software, Inc. (a) 5,941,029 111,806 Pluralsight, Inc., Class A (a) 2,633,031 72,668 SailPoint Technologies Holding, Inc. (a) 1,706,971 189,606 salesforce.com, Inc. (a) 25,970,334 39,202 SendGrid, Inc. (a) 1,692,350 85,520 Smartsheet, Inc., Class A (a) (b) 2,126,027 256,557 SolarWinds Corp. (a) 3,548,183 35,793 Trade Desk (The), Inc., Class A (a) 4,154,136 88,605 Zendesk, Inc. (a) 5,171,874 101,194 Zscaler, Inc. (a) 3,967,817 -------------- 93,641,149 -------------- SPECIALTY RETAIL -- 1.4% 55,797 Burlington Stores, Inc. (a) 9,076,498 115,947 Carvana Co. (a) (b) 3,792,626 -------------- 12,869,124 -------------- TECHNOLOGY HARDWARE, STORAGE & PERIPHERALS -- 2.0% 1,157,763 Hewlett Packard Enterprise Co. 15,294,049 200,000 Pure Storage, Inc., Class A (a) 3,216,000 -------------- 18,510,049 -------------- TRADING COMPANIES & DISTRIBUTORS -- 0.8% 67,135 United Rentals, Inc. (a) 6,883,352 -------------- TOTAL COMMON STOCKS -- 100.0% 912,902,281 (Cost $869,657,197) -------------- MONEY MARKET FUNDS -- 0.8% 6,892,077 Goldman Sachs Financial Square Treasury Obligations Fund - Institutional Class - 2.61% (c) (d) 6,892,077 (Cost $6,892,077) -------------- PRINCIPAL VALUE DESCRIPTION VALUE ------------------------------------------------------------- REPURCHASE AGREEMENTS -- 1.5% $ 3,041,010 BNP Paribas S.A., 2.95% (c), dated 12/31/18, due 01/02/19, with a maturity value of $3,041,508. Collateralized by U.S. Treasury Note, interest rate of 2.375%, due 04/30/20. The value of the collateral including accrued interest is $3,114,127. (d) 3,041,010 See Notes to Financial Statements Page 31 FIRST TRUST US EQUITY OPPORTUNITIES ETF (FPX) PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2018 PRINCIPAL VALUE DESCRIPTION VALUE ------------------------------------------------------------- REPURCHASE AGREEMENTS (CONTINUED) $ 10,944,672 JPMorgan Chase & Co., 2.85% (c), dated 12/31/18, due 01/02/19, with a maturity value of $10,946,405. Collateralized by U.S. Treasury Bill, interest rate of 0.000%, due 05/09/19. The value of the collateral is $11,163,352. (d) $ 10,944,672 -------------- TOTAL REPURCHASE AGREEMENTS -- 1.5% 13,985,682 (Cost $13,985,682) -------------- TOTAL INVESTMENTS -- 102.3% 933,780,040 (Cost $890,534,956) (e) NET OTHER ASSETS AND LIABILITIES -- (2.3)% (21,301,380) -------------- NET ASSETS -- 100.0% $ 912,478,660 ============== (a) Non-income producing security. (b) All or a portion of this security is on loan (see Note 2D - Securities Lending in the Notes to Financial Statements). The aggregate value of such securities is $20,126,810 and the total value of the collateral held by the Fund is $20,853,085. (c) Rate shown reflects yield as of December 31, 2018. (d) This security serves as collateral for securities on loan. (e) Aggregate cost for federal income tax purposes is $897,935,868. As of December 31, 2018, the aggregate gross unrealized appreciation for all investments in which there was an excess of value over tax cost was $115,558,291 and the aggregate gross unrealized depreciation for all investments in which there was an excess of tax cost over value was $79,714,119. The net unrealized appreciation was $35,844,172. ADR - American Depositary Receipt ----------------------------- VALUATION INPUTS A summary of the inputs used to value the Fund's investments as of December 31, 2018 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial Statements): Level 1 - Quoted Prices Level 2 - Other Significant Observable Inputs Level 3 - Significant Unobservable Inputs LEVEL 1 LEVEL 2 LEVEL 3 ----------------------------------------------------- Common Stocks* $ 912,902,281 $ -- $ -- Money Market Funds 6,892,077 -- -- Repurchase Agreements -- 13,985,682 -- ----------------------------------------------------- Total Investments $ 919,794,358 $ 13,985,682 $ -- ===================================================== * See Portfolio of Investments for industry breakout. --------------------------------- OFFSETTING ASSETS AND LIABILITIES -------------------------------------------------------------------------------- Offsetting assets and liabilities requires entities to disclose both gross and net information about instruments and transactions eligible for offset, and to disclose instruments and transactions subject to master netting or similar agreements (see Note 2C - Offsetting on the Statements of Assets and Liabilities in the Notes to Financial Statements). The Fund's loaned securities were all subject to an enforceable Securities Lending Agency Agreement. Securities lent in accordance with the Securities Lending Agency Agreement on a gross basis were as follows: SECURITIES LENDING AGENCY AGREEMENT -------------------------------------------------------------------------------- Total gross amount presented on the Statements of Assets and Liabilities(1) $ 20,126,810 Non-cash Collateral(2) (20,126,810) -------------- Net Amount $ -- ============== (1) The amount presented on the Statements of Assets and Liabilities, which is included in "Investments, at value", is not offset and is shown on a gross basis. (2) At December 31, 2018, the value of the collateral received from each borrower exceeded the value of the related securities loaned. This amount is disclosed on the Portfolio of Investments. The Fund's investments in repurchase agreements were all subject to an enforceable Master Repurchase Agreement. Repurchase Agreements on a gross basis were as follows: REPURCHASE AGREEMENTS -------------------------------------------------------------------------------- Total gross amount presented on the Statements of Assets and Liabilities(3) $ 13,985,682 Non-cash Collateral(4) (13,985,682) -------------- Net Amount $ -- ============== (3) The amount is included in "Investments, at value" on the Statements of Assets and Liabilities. (4) At December 31, 2018, the value of the collateral received from each seller exceeded the value of the repurchase agreements. Page 32 See Notes to Financial Statements FIRST TRUST NYSE ARCA BIOTECHNOLOGY INDEX FUND (FBT) PORTFOLIO OF INVESTMENTS DECEMBER 31, 2018 SHARES DESCRIPTION VALUE ------------------------------------------------------------- COMMON STOCKS -- 100.0% BIOTECHNOLOGY -- 79.7% 4,066,656 ACADIA Pharmaceuticals, Inc. (a) $ 65,757,828 1,350,227 Agios Pharmaceuticals, Inc. (a) 62,258,967 717,699 Alexion Pharmaceuticals, Inc. (a) 69,875,175 2,249,241 Alkermes PLC (a) 66,375,102 1,178,044 Alnylam Pharmaceuticals, Inc. (a) 85,891,188 447,245 Amgen, Inc. 87,065,184 282,160 Biogen, Inc. (a) 84,907,587 875,069 BioMarin Pharmaceutical, Inc. (a) 74,512,125 747,922 Bluebird Bio, Inc. (a) 74,193,862 1,095,970 Celgene Corp. (a) 70,240,717 5,551,138 Exelixis, Inc. (a) 109,190,884 1,707,422 FibroGen, Inc. (a) 79,019,490 1,232,369 Gilead Sciences, Inc. 77,084,681 4,667,603 Grifols S.A., ADR 85,697,191 1,367,195 Incyte Corp. (a) 86,939,930 943,300 Intercept Pharmaceuticals, Inc. (a) 95,075,207 6,475,656 Intrexon Corp. (a) (b) 42,350,790 1,998,959 Ionis Pharmaceuticals, Inc. (a) 108,063,724 806,073 Neurocrine Biosciences, Inc. (a) 57,561,673 231,727 Regeneron Pharmaceuticals, Inc. (a) 86,550,035 1,257,987 Seattle Genetics, Inc. (a) 71,277,543 1,427,658 Ultragenyx Pharmaceutical, Inc. (a) 62,074,570 734,772 United Therapeutics Corp. (a) 80,016,671 513,879 Vertex Pharmaceuticals, Inc. (a) 85,154,889 -------------- 1,867,135,013 -------------- LIFE SCIENCES TOOLS & SERVICES -- 17.7% 509,186 Bio-Techne Corp. 73,689,398 738,678 Charles River Laboratories International, Inc. (a) 83,603,576 288,312 Illumina, Inc. (a) 86,473,418 711,543 IQVIA Holdings, Inc. (a) 82,659,951 2,515,214 QIAGEN N.V. (a) 86,649,122 -------------- 413,075,465 -------------- PHARMACEUTICALS -- 2.6% 1,874,041 Nektar Therapeutics (a) 61,599,728 -------------- TOTAL COMMON STOCKS -- 100.0% 2,341,810,206 (Cost $2,827,529,335) -------------- MONEY MARKET FUNDS -- 0.6% 13,098,698 Goldman Sachs Financial Square Treasury Obligations Fund - Institutional Class - 2.61% (c) (d) 13,098,698 (Cost $13,098,698) -------------- PRINCIPAL VALUE DESCRIPTION VALUE ------------------------------------------------------------- REPURCHASE AGREEMENTS -- 1.1% $ 5,779,574 BNP Paribas S.A., 2.95% (c), dated 12/31/18, due 01/02/19, with a maturity value of $5,780,521. Collateralized by U.S. Treasury Note, interest rate of 2.375%, due 04/30/20. The value of the collateral including accrued interest is $5,918,537. (d) $ 5,779,574 20,800,836 JPMorgan Chase & Co., 2.85% (c), dated 12/31/18, due 01/02/19, with a maturity value of $20,804,130. Collateralized by U.S. Treasury Bill, interest rate of 0.000%, due 05/09/19. The value of the collateral is $21,216,446. (d) 20,800,836 -------------- TOTAL REPURCHASE AGREEMENTS -- 1.1% 26,580,410 (Cost $26,580,410) -------------- TOTAL INVESTMENTS -- 101.7% 2,381,489,314 (Cost $2,867,208,443) (e) NET OTHER ASSETS AND LIABILITIES -- (1.7)% (39,276,504) -------------- NET ASSETS -- 100.0% $2,342,212,810 ============== (a) Non-income producing security. (b) All or a portion of this security is on loan (see Note 2D - Securities Lending in the Notes to Financial Statements). The aggregate value of such securities is $37,090,302 and the total value of the collateral held by the Fund is $39,632,215. (c) Rate shown reflects yield as of December 31, 2018. (d) This security serves as collateral for securities on loan. (e) Aggregate cost for federal income tax purposes is $2,946,177,240. As of December 31, 2018, the aggregate gross unrealized appreciation for all investments in which there was an excess of value over tax cost was $18,175,212 and the aggregate gross unrealized depreciation for all investments in which there was an excess of tax cost over value was $582,863,138. The net unrealized depreciation was $564,687,926. ADR - American Depositary Receipt See Notes to Financial Statements Page 33 FIRST TRUST NYSE ARCA BIOTECHNOLOGY INDEX FUND (FBT) PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2018 ----------------------------- VALUATION INPUTS A summary of the inputs used to value the Fund's investments as of December 31, 2018 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial Statements): Level 1 - Quoted Prices Level 2 - Other Significant Observable Inputs Level 3 - Significant Unobservable Inputs LEVEL 1 LEVEL 2 LEVEL 3 ----------------------------------------------------- Common Stocks* $ 2,341,810,206 $ -- $ -- Money Market Funds 13,098,698 -- -- Repurchase Agreements -- 26,580,410 -- ----------------------------------------------------- Total Investments $ 2,354,908,904 $ 26,580,410 $ -- ===================================================== * See Portfolio of Investments for industry breakout. --------------------------------- OFFSETTING ASSETS AND LIABILITIES -------------------------------------------------------------------------------- Offsetting assets and liabilities requires entities to disclose both gross and net information about instruments and transactions eligible for offset, and to disclose instruments and transactions subject to master netting or similar agreements (see Note 2C - Offsetting on the Statements of Assets and Liabilities in the Notes to Financial Statements). The Fund's loaned securities were all subject to an enforceable Securities Lending Agency Agreement. Securities lent in accordance with the Securities Lending Agency Agreement on a gross basis were as follows: SECURITIES LENDING AGENCY AGREEMENT -------------------------------------------------------------------------------- Total gross amount presented on the Statements of Assets and Liabilities(1) $ 37,090,302 Non-cash Collateral(2) (37,090,302) -------------- Net Amount $ -- ============== (1) The amount presented on the Statements of Assets and Liabilities, which is included in "Investments, at value", is not offset and is shown on a gross basis. (2) At December 31, 2018, the value of the collateral received from each borrower exceeded the value of the related securities loaned. This amount is disclosed on the Portfolio of Investments. The Fund's investments in repurchase agreements were all subject to an enforceable Master Repurchase Agreement. Repurchase Agreements on a gross basis were as follows: REPURCHASE AGREEMENTS -------------------------------------------------------------------------------- Total gross amount presented on the Statements of Assets and Liabilities(3) $ 26,580,410 Non-cash Collateral(4) (26,580,410) -------------- Net Amount $ -- ============== (3) The amount is included in "Investments, at value" on the Statements of Assets and Liabilities. (4) At December 31, 2018, the value of the collateral received from each seller exceeded the value of the repurchase agreements. Page 34 See Notes to Financial Statements FIRST TRUST DOW JONES INTERNET INDEX FUND (FDN) PORTFOLIO OF INVESTMENTS DECEMBER 31, 2018 SHARES DESCRIPTION VALUE ------------------------------------------------------------- COMMON STOCKS -- 99.9% CAPITAL MARKETS -- 5.8% 2,299,415 Blucora, Inc. (a) $ 61,256,416 3,797,347 E*TRADE Financial Corp. 166,627,586 3,703,066 TD Ameritrade Holding Corp. 181,302,111 -------------- 409,186,113 -------------- COMMUNICATIONS EQUIPMENT -- 5.5% 760,535 Arista Networks, Inc. (a) 160,244,725 5,647,067 Juniper Networks, Inc. 151,962,573 1,405,135 NETGEAR, Inc. (a) 73,109,174 -------------- 385,316,472 -------------- DIVERSIFIED TELECOMMUNICATION SERVICES -- 2.1% 1,649,831 Cogent Communications Holdings, Inc. 74,588,859 8,323,986 Vonage Holdings Corp. (a) 72,668,398 -------------- 147,257,257 -------------- ENTERTAINMENT -- 6.7% 1,458,023 Netflix, Inc. (a) 390,254,436 9,722,066 Pandora Media, Inc. (a) 78,651,514 -------------- 468,905,950 -------------- HEALTH CARE TECHNOLOGY -- 2.3% 1,853,341 Veeva Systems, Inc., Class A (a) 165,540,418 -------------- INTERACTIVE MEDIA & SERVICES -- 23.4% 336,783 Alphabet, Inc., Class A (a) 351,924,764 346,572 Alphabet, Inc., Class C (a) 358,913,429 3,971,938 Facebook, Inc., Class A (a) 520,681,353 18,576,712 Snap, Inc., Class A (a) (b) 102,357,683 2,136,147 TripAdvisor, Inc. (a) 115,223,769 6,755,692 Twitter, Inc. (a) 194,158,588 -------------- 1,643,259,586 -------------- INTERNET & DIRECT MARKETING RETAIL -- 18.4% 449,591 Amazon.com, Inc. (a) 675,272,194 8,442,949 eBay, Inc. (a) 236,993,578 1,574,541 Expedia Group, Inc. 177,372,044 20,357,283 Groupon, Inc. (a) 65,143,306 1,748,910 GrubHub, Inc. (a) 134,333,777 -------------- 1,289,114,899 -------------- IT SERVICES -- 14.7% 2,493,729 Akamai Technologies, Inc. (a) 152,316,967 5,917,155 Endurance International Group Holdings, Inc. (a) 39,349,081 2,582,394 GoDaddy, Inc., Class A (a) 169,456,694 1,822,134 Okta, Inc. (a) 116,252,149 4,307,742 PayPal Holdings, Inc. (a) 362,238,025 1,298,331 VeriSign, Inc. (a) 192,529,504 -------------- 1,032,142,420 -------------- SOFTWARE -- 21.0% 1,699,922 2U, Inc. (a) 84,520,122 3,941,570 8x8, Inc. (a) 71,105,923 4,773,802 Box, Inc., Class A (a) 80,581,778 SHARES DESCRIPTION VALUE ------------------------------------------------------------- SOFTWARE (CONTINUED) 1,716,003 Citrix Systems, Inc. $ 175,821,667 1,734,587 Cornerstone OnDemand, Inc. (a) 87,475,222 1,411,527 DocuSign, Inc. (a) 56,574,002 3,569,453 Dropbox, Inc., Class A (a) 72,923,925 1,303,122 Ebix, Inc. 55,460,872 878,066 HubSpot, Inc. (a) 110,399,238 1,406,526 j2 Global, Inc. 97,584,774 1,299,850 LogMeIn, Inc. 106,028,765 1,239,267 New Relic, Inc. (a) 100,343,449 2,721,183 salesforce.com, Inc. (a) 372,720,436 -------------- 1,471,540,173 -------------- TOTAL COMMON STOCKS -- 99.9% 7,012,263,288 (Cost $6,714,454,236) -------------- MONEY MARKET FUNDS -- 0.6% 32,783,250 Goldman Sachs Financial Square Treasury Obligations Fund - Institutional Class - 2.61% (c) (d) 32,783,250 10,022,043 Morgan Stanley Institutional Liquidity Funds - Treasury Portfolio - Institutional Class - 2.33% (c) 10,022,043 -------------- TOTAL MONEY MARKET FUNDS -- 0.6% 42,805,293 (Cost $42,805,293) -------------- PRINCIPAL VALUE DESCRIPTION VALUE ------------------------------------------------------------- REPURCHASE AGREEMENTS -- 1.0% $ 14,465,042 BNP Paribas S.A., 2.95% (c), dated 12/31/18, due 01/02/19, with a maturity value of $14,467,413. Collateralized by U.S. Treasury Note, interest rate of 2.375%, due 04/30/20. The value of the collateral including accrued interest is $14,812,836. (d) 14,465,042 52,060,063 JPMorgan Chase & Co., 2.85% (c), dated 12/31/18, due 01/02/19, with a maturity value of $52,068,305. Collateralized by U.S. Treasury Bill, interest rate of 0.000%, due 05/09/19. The value of the collateral is $53,100,244. (d) 52,060,063 -------------- TOTAL REPURCHASE AGREEMENTS -- 1.0% 66,525,105 (Cost $66,525,105) -------------- TOTAL INVESTMENTS -- 101.5% 7,121,593,686 (Cost $6,823,784,634) (e) NET OTHER ASSETS AND LIABILITIES -- (1.5)% (104,786,471) -------------- NET ASSETS -- 100.0% $7,016,807,215 ============== See Notes to Financial Statements Page 35 FIRST TRUST DOW JONES INTERNET INDEX FUND (FDN) PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2018 (a) Non-income producing security. (b) All or a portion of this security is on loan (see Note 2D - Securities Lending in the Notes to Financial Statements). The aggregate value of such securities is $92,071,747 and the total value of the collateral held by the Fund is $99,190,991. (c) Rate shown reflects yield as of December 31, 2018. (d) This security serves as collateral for securities on loan. (e) Aggregate cost for federal income tax purposes is $7,028,557,022. As of December 31, 2018, the aggregate gross unrealized appreciation for all investments in which there was an excess of value over tax cost was $712,375,306 and the aggregate gross unrealized depreciation for all investments in which there was an excess of tax cost over value was $619,338,642. The net unrealized appreciation was $93,036,664. ----------------------------- VALUATION INPUTS A summary of the inputs used to value the Fund's investments as of December 31, 2018 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial Statements): Level 1 - Quoted Prices Level 2 - Other Significant Observable Inputs Level 3 - Significant Unobservable Inputs LEVEL 1 LEVEL 2 LEVEL 3 ----------------------------------------------------- Common Stocks* $ 7,012,263,288 $ -- $ -- Money Market Funds 42,805,293 -- -- Repurchase Agreements -- 66,525,105 -- ----------------------------------------------------- Total Investments $ 7,055,068,581 $ 66,525,105 $ -- ===================================================== * See Portfolio of Investments for industry breakout. --------------------------------- OFFSETTING ASSETS AND LIABILITIES -------------------------------------------------------------------------------- Offsetting assets and liabilities requires entities to disclose both gross and net information about instruments and transactions eligible for offset, and to disclose instruments and transactions subject to master netting or similar agreements (see Note 2C - Offsetting on the Statements of Assets and Liabilities in the Notes to Financial Statements). The Fund's loaned securities were all subject to an enforceable Securities Lending Agency Agreement. Securities lent in accordance with the Securities Lending Agency Agreement on a gross basis were as follows: SECURITIES LENDING AGENCY AGREEMENT -------------------------------------------------------------------------------- Total gross amount presented on the Statements of Assets and Liabilities(1) $ 92,071,747 Non-cash Collateral(2) (92,071,747) -------------- Net Amount $ -- ============== (1) The amount presented on the Statements of Assets and Liabilities, which is included in "Investments, at value", is not offset and is shown on a gross basis. (2) At December 31, 2018, the value of the collateral received from each borrower exceeded the value of the related securities loaned. This amount is disclosed on the Portfolio of Investments. The Fund's investments in repurchase agreements were all subject to an enforceable Master Repurchase Agreement. Repurchase Agreements on a gross basis were as follows: REPURCHASE AGREEMENTS -------------------------------------------------------------------------------- Total gross amount presented on the Statements of Assets and Liabilities(3) $ 66,525,105 Non-cash Collateral(4) (66,525,105) -------------- Net Amount $ -- ============== (3) The amount is included in "Investments, at value" on the Statements of Assets and Liabilities. (4) At December 31, 2018, the value of the collateral received from each seller exceeded the value of the repurchase agreements. Page 36 See Notes to Financial Statements FIRST TRUST CAPITAL STRENGTH ETF (FTCS) PORTFOLIO OF INVESTMENTS DECEMBER 31, 2018 SHARES DESCRIPTION VALUE ------------------------------------------------------------- COMMON STOCKS -- 99.9% AEROSPACE & DEFENSE -- 8.8% 156,373 General Dynamics Corp. $ 24,583,399 138,443 L3 Technologies, Inc. 24,042,012 91,076 Lockheed Martin Corp. 23,847,340 156,286 Raytheon Co. 23,966,458 232,440 United Technologies Corp. 24,750,211 -------------- 121,189,420 -------------- AIR FREIGHT & LOGISTICS -- 5.7% 451,095 Expeditors International of Washington, Inc. 30,715,059 135,859 FedEx Corp. 21,918,132 257,632 United Parcel Service, Inc., Class B 25,126,849 -------------- 77,760,040 -------------- BEVERAGES -- 2.2% 271,271 PepsiCo, Inc. 29,970,020 -------------- CAPITAL MARKETS -- 12.6% 74,124 BlackRock, Inc. 29,117,390 163,118 CME Group, Inc. 30,685,758 403,594 Intercontinental Exchange, Inc. 30,402,736 193,243 MSCI, Inc. 28,489,815 158,888 S&P Global, Inc. 27,001,427 297,324 T. Rowe Price Group, Inc. 27,448,952 -------------- 173,146,078 -------------- CHEMICALS -- 2.2% 295,674 PPG Industries, Inc. 30,226,753 -------------- COMMUNICATIONS EQUIPMENT -- 2.1% 180,002 F5 Networks, Inc. (a) 29,165,724 -------------- ELECTRICAL EQUIPMENT -- 1.8% 413,245 Emerson Electric Co. 24,691,389 -------------- ENTERTAINMENT -- 2.0% 252,520 Walt Disney (The) Co. 27,688,818 -------------- EQUITY REAL ESTATE INVESTMENT TRUSTS -- 2.3% 198,586 American Tower Corp. 31,414,319 -------------- FOOD & STAPLES RETAILING -- 1.9% 129,915 Costco Wholesale Corp. 26,464,985 -------------- HEALTH CARE PROVIDERS & SERVICES -- 6.0% 106,659 Anthem, Inc. 28,011,853 142,376 Cigna Corp. 27,040,050 112,704 UnitedHealth Group, Inc. 28,076,821 -------------- 83,128,724 -------------- HOTELS, RESTAURANTS & LEISURE -- 2.4% 509,514 Starbucks Corp. 32,812,702 -------------- HOUSEHOLD DURABLES -- 2.2% 482,089 Garmin Ltd. 30,525,875 -------------- HOUSEHOLD PRODUCTS -- 2.3% 345,591 Procter & Gamble (The) Co. 31,766,725 -------------- SHARES DESCRIPTION VALUE ------------------------------------------------------------- INDUSTRIAL CONGLOMERATES -- 2.1% 149,884 3M Co. $ 28,558,897 -------------- INSURANCE -- 8.1% 670,442 Aflac, Inc. 30,545,337 306,487 Allstate (The) Corp. 25,325,021 371,533 Marsh & McLennan Cos., Inc. 29,629,757 422,886 Progressive (The) Corp. 25,512,712 -------------- 111,012,827 -------------- IT SERVICES -- 11.9% 189,675 Accenture PLC, Class A 26,746,072 208,048 Automatic Data Processing, Inc. 27,279,254 146,069 FleetCor Technologies, Inc. (a) 27,127,935 230,835 International Business Machines Corp. 26,239,014 146,274 Mastercard, Inc., Class A 27,594,590 213,070 Visa, Inc., Class A 28,112,456 -------------- 163,099,321 -------------- MACHINERY -- 1.8% 374,709 Fortive Corp. 25,352,811 -------------- OIL, GAS & CONSUMABLE FUELS -- 1.8% 289,529 Phillips 66 24,942,923 -------------- PERSONAL PRODUCTS -- 2.2% 236,610 Estee Lauder (The) Cos., Inc., Class A 30,782,961 -------------- PHARMACEUTICALS -- 4.1% 668,547 Pfizer, Inc. 29,182,076 325,683 Zoetis, Inc. 27,858,924 -------------- 57,041,000 -------------- ROAD & RAIL -- 2.0% 201,170 Union Pacific Corp. 27,807,729 -------------- SOFTWARE -- 4.0% 140,945 Intuit, Inc. 27,745,023 274,586 Microsoft Corp. 27,889,700 -------------- 55,634,723 -------------- SPECIALTY RETAIL -- 5.8% 165,785 Home Depot (The), Inc. 28,485,179 314,278 Ross Stores, Inc. 26,147,929 554,834 TJX (The) Cos., Inc. 24,823,273 -------------- 79,456,381 -------------- TECHNOLOGY HARDWARE, STORAGE & PERIPHERALS -- 1.6% 136,313 Apple, Inc. 21,502,013 -------------- TOTAL INVESTMENTS -- 99.9% 1,375,143,158 (Cost $1,435,374,826) (b) NET OTHER ASSETS AND LIABILITIES -- 0.1% 987,939 -------------- NET ASSETS -- 100.0% $1,376,131,097 ============== See Notes to Financial Statements Page 37 FIRST TRUST CAPITAL STRENGTH ETF (FTCS) PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2018 (a) Non-income producing security. (b) Aggregate cost for federal income tax purposes is $1,440,138,474. As of December 31, 2018, the aggregate gross unrealized appreciation for all investments in which there was an excess of value over tax cost was $27,834,429 and the aggregate gross unrealized depreciation for all investments in which there was an excess of tax cost over value was $92,829,745. The net unrealized depreciation was $64,995,316. ----------------------------- VALUATION INPUTS A summary of the inputs used to value the Fund's investments as of December 31, 2018 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial Statements): Level 1 - Quoted Prices Level 2 - Other Significant Observable Inputs Level 3 - Significant Unobservable Inputs LEVEL 1 LEVEL 2 LEVEL 3 ----------------------------------------------------- Common Stocks* $ 1,375,143,158 $ -- $ -- ===================================================== * See Portfolio of Investments for industry breakout. Page 38 See Notes to Financial Statements FIRST TRUST VALUE LINE(R) DIVIDEND INDEX FUND (FVD) PORTFOLIO OF INVESTMENTS DECEMBER 31, 2018 SHARES DESCRIPTION VALUE ------------------------------------------------------------- COMMON STOCKS -- 99.9% AEROSPACE & DEFENSE -- 2.2% 77,564 Boeing (The) Co. $ 25,014,390 153,932 General Dynamics Corp. 24,199,649 93,039 Lockheed Martin Corp. 24,361,332 223,537 United Technologies Corp. 23,802,220 -------------- 97,377,591 -------------- AIR FREIGHT & LOGISTICS -- 1.1% 288,577 C.H. Robinson Worldwide, Inc. 24,266,440 253,803 United Parcel Service, Inc., Class B 24,753,407 -------------- 49,019,847 -------------- AUTOMOBILES -- 0.5% 204,053 Toyota Motor Corp., ADR 23,686,472 -------------- BANKS -- 7.6% 356,933 Bank of Hawaii Corp. 24,028,730 359,223 Bank of Montreal 23,475,223 464,462 Bank of Nova Scotia (The) 23,162,720 552,821 BB&T Corp. 23,948,206 307,886 Canadian Imperial Bank of Commerce 22,949,822 247,605 JPMorgan Chase & Co. 24,171,200 168,078 M&T Bank Corp. 24,057,004 287,816 Park National Corp. 24,449,969 1,653,234 People's United Financial, Inc. 23,856,167 207,954 PNC Financial Services Group (The), Inc. 24,311,902 343,799 Royal Bank of Canada 23,557,107 472,257 Toronto-Dominion (The) Bank 23,480,618 521,357 U.S. Bancorp 23,826,015 523,276 Wells Fargo & Co. 24,112,558 -------------- 333,387,241 -------------- BEVERAGES -- 2.1% 348,690 Anheuser-Busch InBev S.A/N.V., ADR 22,947,289 496,404 Coca-Cola (The) Co. 23,504,730 164,778 Diageo PLC, ADR 23,365,520 215,158 PepsiCo, Inc. 23,770,656 -------------- 93,588,195 -------------- BIOTECHNOLOGY -- 0.6% 127,878 Amgen, Inc. 24,894,010 -------------- CAPITAL MARKETS -- 2.2% 512,799 Bank of New York Mellon (The) Corp. 24,137,449 63,065 BlackRock, Inc. 24,773,193 821,854 Franklin Resources, Inc. 24,376,190 268,563 T. Rowe Price Group, Inc. 24,793,736 -------------- 98,080,568 -------------- CHEMICALS -- 1.7% 152,228 Air Products and Chemicals, Inc. 24,364,091 464,746 DowDuPont, Inc. 24,854,616 432,023 Sensient Technologies Corp. 24,128,485 -------------- 73,347,192 -------------- SHARES DESCRIPTION VALUE ------------------------------------------------------------- COMMUNICATIONS EQUIPMENT -- 0.6% 566,400 Cisco Systems, Inc. $ 24,542,112 -------------- CONSUMER FINANCE -- 0.6% 414,143 Discover Financial Services 24,426,154 -------------- CONTAINERS & PACKAGING -- 1.7% 272,275 Avery Dennison Corp. 24,458,463 522,798 Bemis Co., Inc. 23,996,428 452,756 Sonoco Products Co. 24,054,927 -------------- 72,509,818 -------------- DISTRIBUTORS -- 0.5% 248,399 Genuine Parts Co. 23,851,272 -------------- DIVERSIFIED TELECOMMUNICATION SERVICES -- 1.6% 833,870 AT&T, Inc. 23,798,650 698,338 TELUS Corp. 23,142,921 430,064 Verizon Communications, Inc. 24,178,198 -------------- 71,119,769 -------------- ELECTRIC UTILITIES -- 10.7% 309,605 ALLETE, Inc. 23,598,093 553,622 Alliant Energy Corp. 23,390,529 310,193 American Electric Power Co., Inc. 23,183,825 464,182 Avangrid, Inc. 23,250,876 271,890 Duke Energy Corp. 23,464,107 465,990 El Paso Electric Co. 23,360,079 408,067 Evergy, Inc. 23,165,964 359,973 Eversource Energy 23,412,644 636,580 FirstEnergy Corp. 23,903,579 710,735 Fortis, Inc. 23,710,120 643,036 Hawaiian Electric Industries, Inc. 23,547,978 250,322 IDACORP, Inc. 23,294,965 135,734 NextEra Energy, Inc. 23,593,284 596,924 OGE Energy Corp. 23,393,451 479,598 Otter Tail Corp. 23,807,245 269,654 Pinnacle West Capital Corp. 22,974,521 516,294 Portland General Electric Co. 23,672,080 826,923 PPL Corp. 23,426,729 530,325 Southern (The) Co. 23,291,874 469,438 Xcel Energy, Inc. 23,129,210 -------------- 468,571,153 -------------- ELECTRICAL EQUIPMENT -- 2.8% 1,254,249 ABB Ltd., ADR 23,843,274 351,755 Eaton Corp. PLC 24,151,498 411,157 Emerson Electric Co. 24,566,631 245,960 Hubbell, Inc. 24,433,666 160,920 Rockwell Automation, Inc. 24,215,242 -------------- 121,210,311 -------------- ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS -- 0.6% 322,603 TE Connectivity Ltd. 24,398,465 -------------- ENERGY EQUIPMENT & SERVICES -- 0.5% 648,323 Schlumberger Ltd. 23,391,494 -------------- See Notes to Financial Statements Page 39 FIRST TRUST VALUE LINE(R) DIVIDEND INDEX FUND (FVD) PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2018 SHARES DESCRIPTION VALUE ------------------------------------------------------------- COMMON STOCKS (CONTINUED) EQUITY REAL ESTATE INVESTMENT TRUSTS -- 4.8% 135,128 AvalonBay Communities, Inc. $ 23,519,028 358,271 Equity Residential 23,649,469 197,826 Federal Realty Investment Trust 23,351,381 247,365 Mid-America Apartment Communities, Inc. 23,672,831 116,013 Public Storage 23,482,191 378,546 Realty Income Corp. 23,863,540 142,002 Simon Property Group, Inc. 23,854,916 997,140 Washington Real Estate Investment Trust 22,934,220 351,809 WP Carey, Inc. 22,987,200 -------------- 211,314,776 -------------- FOOD & STAPLES RETAILING -- 1.7% 380,556 Sysco Corp. 23,845,639 349,594 Walgreens Boots Alliance, Inc. 23,887,758 265,838 Walmart, Inc. 24,762,810 -------------- 72,496,207 -------------- FOOD PRODUCTS -- 4.8% 575,832 Archer-Daniels-Midland Co. 23,591,837 682,669 Campbell Soup Co. 22,521,250 1,088,494 Conagra Brands, Inc. 23,250,232 606,942 General Mills, Inc. 23,634,322 220,704 Hershey (The) Co. 23,655,055 244,891 J.M. Smucker (The) Co. 22,894,860 408,723 Kellogg Co. 23,301,298 536,309 Kraft Heinz (The) Co. 23,082,739 577,880 Mondelez International, Inc., Class A 23,132,536 -------------- 209,064,129 -------------- GAS UTILITIES -- 2.2% 515,929 New Jersey Resources Corp. 23,562,478 385,577 Northwest Natural Holding Co. 23,311,985 851,931 South Jersey Industries, Inc. 23,683,682 320,664 Spire, Inc. 23,754,789 -------------- 94,312,934 -------------- HEALTH CARE PROVIDERS & SERVICES -- 1.1% 362,590 CVS Health Corp. 23,756,897 286,076 Quest Diagnostics, Inc. 23,821,548 -------------- 47,578,445 -------------- HOTELS, RESTAURANTS & LEISURE -- 1.6% 143,575 Cracker Barrel Old Country Store, Inc. 22,951,900 133,992 McDonald's Corp. 23,792,959 376,727 Starbucks Corp. 24,261,219 -------------- 71,006,078 -------------- HOUSEHOLD DURABLES -- 0.6% 671,612 Leggett & Platt, Inc. 24,070,574 -------------- HOUSEHOLD PRODUCTS -- 2.2% 156,940 Clorox (The) Co. 24,190,731 393,094 Colgate-Palmolive Co. 23,396,955 SHARES DESCRIPTION VALUE ------------------------------------------------------------- HOUSEHOLD PRODUCTS (CONTINUED) 213,522 Kimberly-Clark Corp. $ 24,328,697 261,160 Procter & Gamble (The) Co. 24,005,827 -------------- 95,922,210 -------------- INDUSTRIAL CONGLOMERATES -- 1.1% 127,721 3M Co. 24,335,959 182,771 Honeywell International, Inc. 24,147,705 -------------- 48,483,664 -------------- INSURANCE -- 8.3% 538,972 Aflac, Inc. 24,555,564 295,257 Allstate (The) Corp. 24,397,086 330,698 Arthur J. Gallagher & Co. 24,372,443 276,045 Assurant, Inc. 24,689,465 464,840 Axis Capital Holdings Ltd. 24,004,338 189,821 Chubb Ltd. 24,521,077 316,212 Cincinnati Financial Corp. 24,481,133 542,684 CNA Financial Corp. 23,959,498 183,049 Erie Indemnity Co., Class A 24,402,262 110,884 Everest Re Group Ltd. 24,146,100 770,765 Fidelity National Financial, Inc. 24,232,851 536,182 First American Financial Corp. 23,935,164 559,733 Hartford Financial Services Group (The), Inc. 24,880,132 467,700 Mercury General Corp. 24,184,767 202,557 Travelers (The) Cos., Inc. 24,256,201 -------------- 365,018,081 -------------- IT SERVICES -- 2.8% 187,079 Automatic Data Processing, Inc. 24,529,799 2,512,636 Infosys Ltd., ADR 23,920,295 212,084 International Business Machines Corp. 24,107,588 451,418 Leidos Holdings, Inc. 23,798,757 370,128 Paychex, Inc. 24,113,839 -------------- 120,470,278 -------------- MACHINERY -- 3.9% 195,085 Caterpillar, Inc. 24,789,451 181,799 Cummins, Inc. 24,295,618 342,925 Dover Corp. 24,330,529 191,807 Illinois Tool Works, Inc. 24,300,029 425,088 PACCAR, Inc. 24,289,528 167,600 Snap-on, Inc. 24,350,604 205,075 Stanley Black & Decker, Inc. 24,555,681 -------------- 170,911,440 -------------- MEDIA -- 1.6% 330,366 Omnicom Group, Inc. 24,196,006 1,282,445 Shaw Communications, Inc., Class B 23,199,430 430,708 WPP PLC, ADR 23,602,798 -------------- 70,998,234 -------------- MULTI-UTILITIES -- 6.9% 360,766 Ameren Corp. 23,532,766 530,325 Avista Corp. 22,528,206 377,923 Black Hills Corp. 23,726,006 472,842 CMS Energy Corp. 23,476,605 302,909 Consolidated Edison, Inc. 23,160,422 Page 40 See Notes to Financial Statements FIRST TRUST VALUE LINE(R) DIVIDEND INDEX FUND (FVD) PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2018 SHARES DESCRIPTION VALUE ------------------------------------------------------------- COMMON STOCKS (CONTINUED) MULTI-UTILITIES (CONTINUED) 320,799 Dominion Energy, Inc. $ 22,924,297 209,414 DTE Energy Co. 23,098,364 989,794 MDU Resources Group, Inc. 23,596,689 393,229 NorthWestern Corp. 23,373,532 457,302 Public Service Enterprise Group, Inc. 23,802,569 212,435 Sempra Energy 22,983,343 318,643 Vectren Corp. 22,935,923 337,394 WEC Energy Group, Inc. 23,367,908 -------------- 302,506,630 -------------- OIL, GAS & CONSUMABLE FUELS -- 2.8% 225,909 Chevron Corp. 24,576,640 348,267 Exxon Mobil Corp. 23,748,327 290,641 Phillips 66 25,038,722 402,380 Royal Dutch Shell PLC, Class B, ADR 24,118,657 454,297 TOTAL S.A., ADR 23,705,218 -------------- 121,187,564 -------------- PERSONAL PRODUCTS -- 0.5% 447,614 Unilever PLC, ADR 23,387,831 -------------- PHARMACEUTICALS -- 4.4% 467,891 Bristol-Myers Squibb Co. 24,320,974 213,722 Eli Lilly and Co. 24,731,910 612,649 GlaxoSmithKline PLC, ADR 23,409,318 185,731 Johnson & Johnson 23,968,586 320,664 Merck & Co., Inc. 24,501,936 276,576 Novartis AG, ADR 23,732,987 562,633 Pfizer, Inc. 24,558,930 550,021 Sanofi, ADR 23,876,412 -------------- 193,101,053 -------------- PROFESSIONAL SERVICES -- 0.5% 489,802 Thomson Reuters Corp. 23,662,335 -------------- ROAD & RAIL -- 0.6% 177,947 Union Pacific Corp. 24,597,614 -------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT -- 2.2% 283,691 Analog Devices, Inc. 24,349,199 523,394 Intel Corp. 24,562,880 646,494 Taiwan Semiconductor Manufacturing Co., Ltd., ADR 23,862,094 259,843 Texas Instruments, Inc. 24,555,163 -------------- 97,329,336 -------------- SPECIALTY RETAIL -- 1.7% 144,271 Home Depot (The), Inc. 24,788,643 307,433 Tiffany & Co. 24,751,431 500,974 Williams-Sonoma, Inc. 25,274,138 -------------- 74,814,212 -------------- TECHNOLOGY HARDWARE, STORAGE & PERIPHERALS -- 0.5% 863,866 Canon, Inc., ADR 23,842,702 -------------- SHARES DESCRIPTION VALUE ------------------------------------------------------------- TEXTILES, APPAREL & LUXURY GOODS -- 0.6% 338,905 VF Corp. $ 24,177,483 -------------- THRIFTS & MORTGAGE FINANCE -- 1.1% 1,853,350 Capitol Federal Financial, Inc. 23,667,279 1,422,370 Northwest Bancshares, Inc. 24,094,948 -------------- 47,762,227 -------------- TOBACCO -- 1.6% 479,698 Altria Group, Inc. 23,692,284 724,282 British American Tobacco PLC, ADR 23,075,625 345,836 Philip Morris International, Inc. 23,088,011 -------------- 69,855,920 -------------- TRADING COMPANIES & DISTRIBUTORS -- 1.6% 462,218 Fastenal Co. 24,169,379 309,856 MSC Industrial Direct Co., Inc., Class A 23,834,123 172,068 Watsco, Inc. 23,941,542 -------------- 71,945,044 -------------- WATER UTILITIES -- 0.6% 704,592 Aqua America, Inc. 24,090,000 -------------- TOTAL INVESTMENTS -- 99.9% 4,371,308,665 (Cost $4,477,103,469) (a) NET OTHER ASSETS AND LIABILITIES -- 0.1% 3,174,229 -------------- NET ASSETS -- 100.0% $4,374,482,894 ============== (a) Aggregate cost for federal income tax purposes is $4,585,534,336. As of December 31, 2018, the aggregate gross unrealized appreciation for all investments in which there was an excess of value over tax cost was $151,807,970 and the aggregate gross unrealized depreciation for all investments in which there was an excess of tax cost over value was $366,033,641. The net unrealized depreciation was $214,225,671. ADR - American Depositary Receipt ----------------------------- VALUATION INPUTS A summary of the inputs used to value the Fund's investments as of December 31, 2018 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial Statements): Level 1 - Quoted Prices Level 2 - Other Significant Observable Inputs Level 3 - Significant Unobservable Inputs LEVEL 1 LEVEL 2 LEVEL 3 ----------------------------------------------------- Common Stocks* $ 4,371,308,665 $ -- $ -- ===================================================== * See Portfolio of Investments for industry breakout. See Notes to Financial Statements Page 41 FIRST TRUST VALUE LINE(R) 100 EXCHANGE-TRADED FUND (FVL) PORTFOLIO OF INVESTMENTS DECEMBER 31, 2018 SHARES DESCRIPTION VALUE ------------------------------------------------------------- COMMON STOCKS -- 99.8% BANKS -- 1.0% 7,552 Popular, Inc. $ 356,605 -------------- BEVERAGES -- 0.9% 7,425 Coca-Cola European Partners PLC 340,436 -------------- CAPITAL MARKETS -- 1.0% 1,914 CME Group, Inc. 360,062 -------------- CHEMICALS -- 7.0% 2,574 Air Products and Chemicals, Inc. 411,969 3,815 Balchem Corp. 298,905 9,264 CF Industries Holdings, Inc. 403,077 2,592 Ecolab, Inc. 381,931 2,706 International Flavors & Fragrances, Inc. 363,334 12,229 Mosaic (The) Co. 357,209 2,011 Quaker Chemical Corp. 357,375 -------------- 2,573,800 -------------- COMMERCIAL SERVICES & SUPPLIES -- 2.8% 6,289 Clean Harbors, Inc. (a) 310,362 4,889 Republic Services, Inc. 352,448 4,040 Waste Management, Inc. 359,520 -------------- 1,022,330 -------------- COMMUNICATIONS EQUIPMENT -- 2.2% 8,957 Cisco Systems, Inc. 388,107 3,519 Motorola Solutions, Inc. 404,825 -------------- 792,932 -------------- CONTAINERS & PACKAGING -- 2.0% 7,984 Ball Corp. 367,105 6,710 Sonoco Products Co. 356,502 -------------- 723,607 -------------- DIVERSIFIED CONSUMER SERVICES -- 2.1% 3,458 Bright Horizons Family Solutions, Inc. (a) 385,394 9,189 Service Corp. International 369,949 -------------- 755,343 -------------- DIVERSIFIED TELECOMMUNICATION SERVICES -- 2.0% 10,349 TELUS Corp. 342,966 6,898 Verizon Communications, Inc. 387,805 -------------- 730,771 -------------- ELECTRIC UTILITIES -- 7.0% 8,205 Alliant Energy Corp. 346,661 5,374 American Electric Power Co., Inc. 401,653 5,335 Eversource Energy 346,988 10,856 Hawaiian Electric Industries, Inc. 397,547 4,126 IDACORP, Inc. 383,966 3,996 Pinnacle West Capital Corp. 340,459 7,652 Portland General Electric Co. 350,844 -------------- 2,568,118 -------------- SHARES DESCRIPTION VALUE ------------------------------------------------------------- ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS -- 2.9% 5,099 CDW Corp. $ 413,274 4,096 Zebra Technologies Corp., Class A (a) 652,206 -------------- 1,065,480 -------------- ENTERTAINMENT -- 2.2% 11,409 Marcus (The) Corp. 450,655 3,369 Walt Disney (The) Co. 369,411 -------------- 820,066 -------------- EQUITY REAL ESTATE INVESTMENT TRUSTS -- 4.1% 2,202 American Tower Corp. 348,334 3,766 Crown Castle International Corp. 409,101 1,411 Essex Property Trust, Inc. 345,991 2,258 Simon Property Group, Inc. 379,322 -------------- 1,482,748 -------------- FOOD & STAPLES RETAILING -- 1.0% 1,860 Costco Wholesale Corp. 378,900 -------------- FOOD PRODUCTS -- 5.0% 7,791 Archer-Daniels-Midland Co. 319,197 3,271 Hershey (The) Co. 350,586 8,930 Hormel Foods Corp. 381,132 2,199 Lancaster Colony Corp. 388,915 2,820 McCormick & Co., Inc. 392,657 -------------- 1,832,487 -------------- GAS UTILITIES -- 1.0% 4,897 Southwest Gas Holdings, Inc. 374,620 -------------- HEALTH CARE EQUIPMENT & SUPPLIES -- 2.2% 5,932 Abbott Laboratories 429,062 3,606 STERIS PLC 385,301 -------------- 814,363 -------------- HEALTH CARE PROVIDERS & SERVICES -- 4.6% 1,382 Anthem, Inc. 362,955 5,881 Encompass Health Corp. 362,858 4,557 HCA Healthcare, Inc. 567,118 10,469 Premier, Inc., Class A (a) 391,017 -------------- 1,683,948 -------------- HOTELS, RESTAURANTS & LEISURE -- 2.0% 3,701 Darden Restaurants, Inc. 369,582 5,707 Dunkin' Brands Group, Inc. 365,933 -------------- 735,515 -------------- HOUSEHOLD DURABLES -- 2.1% 5,584 Garmin Ltd. 353,579 3,088 Helen of Troy Ltd. (a) 405,084 -------------- 758,663 -------------- HOUSEHOLD PRODUCTS -- 2.3% 6,218 Church & Dwight Co., Inc. 408,896 2,293 WD-40 Co. 420,215 -------------- 829,111 -------------- Page 42 See Notes to Financial Statements FIRST TRUST VALUE LINE(R) 100 EXCHANGE-TRADED FUND (FVL) PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2018 SHARES DESCRIPTION VALUE ------------------------------------------------------------- COMMON STOCKS (CONTINUED) INSURANCE -- 5.1% 13,081 Brown & Brown, Inc. $ 360,512 4,686 Cincinnati Financial Corp. 362,790 3,061 Erie Indemnity Co., Class A 408,062 5,236 RLI Corp. 361,232 5,209 W.R. Berkley Corp. 384,997 -------------- 1,877,593 -------------- IT SERVICES -- 8.0% 2,773 Automatic Data Processing, Inc. 363,596 7,714 Booz Allen Hamilton Holding Corp. 347,670 2,304 CACI International, Inc., Class A (a) 331,845 5,607 Fiserv, Inc. (a) 412,058 2,748 Gartner, Inc. (a) 351,304 2,476 Jack Henry & Associates, Inc. 313,264 5,967 Paychex, Inc. 388,750 2,657 VeriSign, Inc. (a) 394,007 -------------- 2,902,494 -------------- LIFE SCIENCES TOOLS & SERVICES -- 2.1% 3,414 IQVIA Holdings, Inc. (a) 396,605 1,622 Thermo Fisher Scientific, Inc. 362,987 -------------- 759,592 -------------- MACHINERY -- 1.0% 8,306 Donaldson Co., Inc. 360,397 -------------- MEDIA -- 1.0% 427 Cable One, Inc. 350,183 -------------- MULTI-UTILITIES -- 2.3% 7,117 Ameren Corp. 464,242 3,393 DTE Energy Co. 374,248 -------------- 838,490 -------------- OIL, GAS & CONSUMABLE FUELS -- 9.0% 19,376 Alliance Resource Partners, L.P. (b) 335,980 8,833 BP PLC, ADR 334,947 11,392 Cheniere Energy Partners, L.P. (b) 411,251 5,888 ConocoPhillips 367,117 15,538 Enterprise Products Partners, L.P. (b) 382,079 5,303 Exxon Mobil Corp. 361,612 13,539 Imperial Oil Ltd. 342,808 8,504 Phillips 66 Partners, L.P. (b) 358,103 7,455 TOTAL S.A., ADR 389,002 -------------- 3,282,899 -------------- PHARMACEUTICALS -- 4.4% 3,632 Eli Lilly & Co. 420,295 2,752 Johnson & Johnson 355,146 5,411 Merck & Co., Inc. 413,454 9,418 Pfizer, Inc. 411,096 -------------- 1,599,991 -------------- SHARES DESCRIPTION VALUE ------------------------------------------------------------- PROFESSIONAL SERVICES -- 1.0% 3,266 Verisk Analytics, Inc. (a) $ 356,125 -------------- SOFTWARE -- 3.0% 3,395 Check Point Software Technologies Ltd. (a) 348,497 3,721 Citrix Systems, Inc. 381,254 3,592 Microsoft Corp. 364,839 -------------- 1,094,590 -------------- SPECIALTY RETAIL -- 3.4% 2,727 Burlington Stores, Inc. (a) 443,601 1,163 O'Reilly Automotive, Inc. (a) 400,456 8,851 TJX (The) Cos., Inc. 395,994 -------------- 1,240,051 -------------- WIRELESS TELECOMMUNICATION SERVICES -- 2.1% 8,208 China Mobile Ltd., ADR 393,984 8,239 Shenandoah Telecommunications Co. 364,576 -------------- 758,560 -------------- TOTAL INVESTMENTS -- 99.8% 36,420,870 (Cost $37,798,359) (c) NET OTHER ASSETS AND LIABILITIES -- 0.2% 85,337 -------------- NET ASSETS -- 100.0% $ 36,506,207 ============== (a) Non-income producing security. (b) Security is a Master Limited Partnership ("MLP"). (c) Aggregate cost for federal income tax purposes is $37,801,658. As of December 31, 2018, the aggregate gross unrealized appreciation for all investments in which there was an excess of value over tax cost was $431,605 and the aggregate gross unrealized depreciation for all investments in which there was an excess of tax cost over value was $1,812,393. The net unrealized depreciation was $1,380,788. ADR - American Depositary Receipt ----------------------------- VALUATION INPUTS A summary of the inputs used to value the Fund's investments as of December 31, 2018 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial Statements): Level 1 - Quoted Prices Level 2 - Other Significant Observable Inputs Level 3 - Significant Unobservable Inputs LEVEL 1 LEVEL 2 LEVEL 3 ----------------------------------------------------- Common Stocks* $ 36,420,870 $ -- $ -- ===================================================== * See Portfolio of Investments for industry breakout. See Notes to Financial Statements Page 43 FIRST TRUST EXCHANGE-TRADED FUND STATEMENTS OF ASSETS AND LIABILITIES DECEMBER 31, 2018
FIRST TRUST FIRST TRUST FIRST TRUST DOW JONES SELECT MORNINGSTAR US EQUITY MICROCAP DIVIDEND LEADERS OPPORTUNITIES INDEX FUND INDEX FUND ETF (FDM) (FDL) (FPX) ---------------- ----------------- ---------------- ASSETS: Investments, at value............................................... $ 140,483,625 $ 1,383,523,901 $ 933,780,040 Cash................................................................ 716,708 222,899 1,861,875 Receivables: Investment securities sold.................................... -- 664,711 9,252,073 Capital shares sold........................................... 18,229,591 5,433,236 -- Dividends..................................................... 370,913 3,767,609 546,117 Securities lending income..................................... 8,403 -- 14,532 Reclaims...................................................... -- -- -- Prepaid expenses.................................................... 1,173 12,159 9,528 -------------- --------------- -------------- Total Assets.................................................. 159,810,413 1,393,624,515 945,464,165 -------------- --------------- -------------- LIABILITIES: Due to custodian.................................................... -- -- -- Due to securities lending agent..................................... 3,290 -- 24,674 Payables: Investment securities purchased............................... 18,122,589 6,094,225 1,985,719 Capital shares redeemed....................................... -- -- 9,246,721 Collateral for securities on loan............................. 2,781,006 -- 20,853,085 Investment advisory fees...................................... 32,714 350,435 333,026 Audit and tax fees............................................ 22,925 22,925 22,925 Licensing fees................................................ 12,481 328,353 253,060 Shareholder reporting fees.................................... 11,229 56,233 48,081 Trustees' fees................................................ 55 29 93 Other liabilities................................................... 47,312 289,217 218,121 -------------- --------------- -------------- Total Liabilities............................................. 21,033,601 7,141,417 32,985,505 -------------- --------------- -------------- NET ASSETS.......................................................... $ 138,776,812 $ 1,386,483,098 $ 912,478,660 ============== =============== ============== NET ASSETS CONSIST OF: Paid-in capital..................................................... $ 182,203,124 $ 1,559,310,016 $ 980,728,544 Par value........................................................... 34,050 509,000 147,000 Accumulated distributable earnings (loss)........................... (43,460,362) (173,335,918) (68,396,884) -------------- --------------- -------------- NET ASSETS.......................................................... $ 138,776,812 $ 1,386,483,098 $ 912,478,660 ============== =============== ============== NET ASSET VALUE, per share.......................................... $ 40.76 $ 27.24 $ 62.07 ============== =============== ============== Number of shares outstanding (unlimited number of shares authorized, par value $0.01 per share)........................... 3,405,000 50,900,002 14,700,002 ============== =============== ============== Investments, at cost................................................ $ 166,152,033 $ 1,450,286,273 $ 890,534,956 ============== =============== ============== Securities on loan, at value........................................ $ 2,727,760 $ -- $ 20,126,810 ============== =============== ==============
Page 44 See Notes to Financial Statements
FIRST TRUST FIRST TRUST FIRST TRUST FIRST TRUST FIRST TRUST NYSE ARCA DOW JONES CAPITAL VALUE LINE(R) VALUE LINE(R) 100 BIOTECHNOLOGY INTERNET STRENGTH DIVIDEND EXCHANGE-TRADED INDEX FUND INDEX FUND ETF INDEX FUND FUND (FBT) (FDN) (FTCS) (FVD) (FVL) ---------------- ---------------- ---------------- ---------------- ---------------- $2,381,489,314 $7,121,593,686 $1,375,143,158 $4,371,308,665 $ 36,420,870 2,838,303 -- 573,212 -- 136,580 18,214,403 15,464,957 -- -- -- -- 5,832,675 26,424,841 34,764,240 -- -- 20,874 1,371,246 9,357,082 39,827 43,199 41,189 -- -- -- 78,704 -- -- 449,455 5,481 27,446 73,787 10,199 36,747 413 -------------- -------------- -------------- -------------- -------------- 2,402,691,369 7,143,027,168 1,403,522,656 4,415,916,189 36,603,171 -------------- -------------- -------------- -------------- -------------- -- -- -- 667,858 -- 46,893 117,364 -- -- -- -- 8,730,811 26,407,636 36,295,048 -- 18,217,714 11,573,736 -- -- -- 39,632,215 99,190,991 -- -- -- 864,590 2,479,066 568,544 1,793,153 9,657 22,925 22,925 22,925 22,925 22,925 988,077 2,571,640 32,078 1,697,433 17,123 65,984 287,169 41,692 148,001 7,895 -- 556 -- -- 57 640,161 1,245,695 318,684 808,877 39,307 -------------- -------------- -------------- -------------- -------------- 60,478,559 126,219,953 27,391,559 41,433,295 96,964 -------------- -------------- -------------- -------------- -------------- $2,342,212,810 $7,016,807,215 $1,376,131,097 $4,374,482,894 $ 36,506,207 ============== ============== ============== ============== ============== $3,043,128,872 $7,074,006,003 $1,484,722,296 $4,656,747,215 $ 51,276,409 188,500 601,500 285,000 1,504,880 19,400 (701,104,562) (57,800,288) (108,876,199) (283,769,201) (14,789,602) -------------- -------------- -------------- -------------- -------------- $2,342,212,810 $7,016,807,215 $1,376,131,097 $4,374,482,894 $ 36,506,207 ============== ============== ============== ============== ============== $ 124.26 $ 116.66 $ 48.29 $ 29.07 $ 18.82 ============== ============== ============== ============== ============== 18,850,002 60,150,002 28,500,002 150,487,986 1,939,982 ============== ============== ============== ============== ============== $2,867,208,443 $6,823,784,634 $1,435,374,826 $4,477,103,469 $ 37,798,359 ============== ============== ============== ============== ============== $ 37,090,302 $ 92,071,747 $ -- $ -- $ -- ============== ============== ============== ============== ==============
See Notes to Financial Statements Page 45 FIRST TRUST EXCHANGE-TRADED FUND STATEMENTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2018
FIRST TRUST FIRST TRUST FIRST TRUST DOW JONES SELECT MORNINGSTAR US EQUITY MICROCAP DIVIDEND LEADERS OPPORTUNITIES INDEX FUND INDEX FUND ETF (FDM) (FDL) (FPX) ---------------- ----------------- ---------------- INVESTMENT INCOME: Dividends........................................................... $ 2,252,275 $ 62,498,636 $ 13,521,753 Securities lending income (net of fees)............................. 83,480 -- 1,134,116 Foreign withholding tax............................................. -- -- (14,199) -------------- --------------- -------------- Total investment income....................................... 2,335,755 62,498,636 14,641,670 -------------- --------------- -------------- EXPENSES: Investment advisory fees............................................ 617,813 4,514,600 4,422,222 Licensing fees...................................................... 74,706 1,360,097 1,105,555 Accounting and administration fees.................................. 68,201 703,443 543,747 Custodian fees...................................................... 67,457 151,402 145,845 Audit and tax fees.................................................. 23,131 23,131 23,131 Shareholder reporting fees.......................................... 17,749 103,292 93,888 Trustees' fees and expenses......................................... 7,110 8,790 8,369 Registration and filing fees........................................ 6,841 -- 14,311 Listing fees........................................................ 6,239 11,239 4,176 Transfer agent fees................................................. 6,179 62,622 52,556 Legal fees.......................................................... 4,308 48,931 38,710 Other expenses...................................................... 4,429 40,707 24,897 -------------- --------------- -------------- Total expenses................................................ 904,163 7,028,254 6,477,407 Less fees waived and expenses reimbursed by the investment advisor.................................................... (162,786) (256,355) -- -------------- --------------- -------------- Net expenses.................................................. 741,377 6,771,899 6,477,407 -------------- --------------- -------------- NET INVESTMENT INCOME (LOSS)........................................ 1,594,378 55,726,737 8,164,263 -------------- --------------- -------------- REALIZED AND UNREALIZED GAIN (LOSS): Net realized gain (loss) on: Investments................................................... (3,519,897) (63,665,040) (30,919,280) In-kind redemptions........................................... 16,752,209 127,729,596 74,262,668 Foreign currency transactions................................. -- -- -- -------------- --------------- -------------- Net realized gain (loss)............................................ 13,232,312 64,064,556 43,343,388 -------------- --------------- -------------- Net change in unrealized appreciation (depreciation) on: Investments................................................... (35,961,521) (213,401,301) (144,486,852) Foreign currency translation.................................. -- -- -- -------------- --------------- -------------- Net change in unrealized appreciation (depreciation)................ (35,961,521) (213,401,301) (144,486,852) -------------- --------------- -------------- NET REALIZED AND UNREALIZED GAIN (LOSS)............................. (22,729,209) (149,336,745) (101,143,464) -------------- --------------- -------------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS.................................................. $ (21,134,831) $ (93,610,008) $ (92,979,201) ============== =============== ==============
Page 46 See Notes to Financial Statements
FIRST TRUST FIRST TRUST FIRST TRUST FIRST TRUST FIRST TRUST NYSE ARCA DOW JONES CAPITAL VALUE LINE(R) VALUE LINE(R) 100 BIOTECHNOLOGY INTERNET STRENGTH DIVIDEND EXCHANGE-TRADED INDEX FUND INDEX FUND ETF INDEX FUND FUND (FBT) (FDN) (FTCS) (FVD) (FVL) ---------------- ---------------- ---------------- ---------------- ---------------- $ 6,005,487 $ 18,787,369 $ 18,828,681 $ 133,982,399 $ 647,686 1,118,073 1,110,405 -- -- -- (268,387) -- -- (2,253,411) (6,363) -------------- -------------- -------------- -------------- -------------- 6,855,173 19,897,774 18,828,681 131,728,988 641,323 -------------- -------------- -------------- -------------- -------------- 7,821,079 31,572,428 4,943,539 21,218,970 254,453 1,564,217 4,753,370 106,273 6,418,893 80,417 875,000 2,502,288 486,853 1,625,331 26,950 241,956 874,714 119,995 416,834 17,522 23,131 23,131 23,131 23,131 23,131 131,959 600,837 84,900 306,021 11,027 9,260 17,323 8,130 12,149 7,021 201,972 206,944 89,663 60,353 -- 6,240 11,239 758 29,173 22,000 73,888 222,346 47,234 131,095 2,545 67,193 289,184 33,387 139,640 1,780 34,347 131,366 16,101 91,105 4,358 -------------- -------------- -------------- -------------- -------------- 11,050,242 41,205,170 5,959,964 30,472,695 451,204 -- -- -- (768,292) (94,969) -------------- -------------- -------------- -------------- -------------- 11,050,242 41,205,170 5,959,964 29,704,403 356,235 -------------- -------------- -------------- -------------- -------------- (4,195,069) (21,307,396) 12,868,717 102,024,585 285,088 -------------- -------------- -------------- -------------- -------------- (15,734,651) (154,734,379) (33,678,343) (76,510,741) (9,694,117) 231,851,897 1,089,289,048 77,942,429 272,443,971 2,036,354 -- -- -- (9,321) -- -------------- -------------- -------------- -------------- -------------- 216,117,246 934,554,669 44,264,086 195,923,909 (7,657,763) -------------- -------------- -------------- -------------- -------------- (565,874,934) (796,446,658) (141,037,098) (464,992,294) (2,046,617) -- -- -- (1,285) (118) -------------- -------------- -------------- -------------- -------------- (565,874,934) (796,446,658) (141,037,098) (464,993,579) (2,046,735) -------------- -------------- -------------- -------------- -------------- (349,757,688) 138,108,011 (96,773,012) (269,069,670) (9,704,498) -------------- -------------- -------------- -------------- -------------- $ (353,952,757) $ 116,800,615 $ (83,904,295) $ (167,045,085) $ (9,419,410) ============== ============== ============== ============== ==============
See Notes to Financial Statements Page 47 FIRST TRUST EXCHANGE-TRADED FUND STATEMENTS OF CHANGES IN NET ASSETS
FIRST TRUST FIRST TRUST DOW JONES SELECT MORNINGSTAR MICROCAP DIVIDEND LEADERS INDEX FUND INDEX FUND (FDM) (FDL) ------------------------------- ------------------------------- Year Ended Year Ended Year Ended Year Ended 12/31/2018 12/31/2017 12/31/2018 12/31/2017 -------------- -------------- -------------- -------------- OPERATIONS: Net investment income (loss)................................ $ 1,594,378 $ 812,905 $ 55,726,737 $ 55,003,112 Net realized gain (loss).................................... 13,232,312 9,434,698 64,064,556 159,135,760 Net change in unrealized appreciation (depreciation)........ (35,961,521) (4,670,191) (213,401,301) (19,118,314) -------------- -------------- -------------- -------------- Net increase (decrease) in net assets resulting from operations.......................................... (21,134,831) 5,577,412 (93,610,008) 195,020,558 -------------- -------------- -------------- -------------- DISTRIBUTIONS TO SHAREHOLDERS FROM: Investment operations....................................... (1,417,591) (55,170,342) -------------- -------------- Net investment income....................................... (908,212) (56,593,922) -------------- -------------- SHAREHOLDER TRANSACTIONS: Proceeds from shares sold................................... 140,816,685 20,308,722 387,762,741 664,561,022 Cost of shares redeemed..................................... (76,499,080) (44,741,959) (571,798,626) (862,152,243) -------------- -------------- -------------- -------------- Net increase (decrease) in net assets resulting from shareholder transactions............................ 64,317,605 (24,433,237) (184,035,885) (197,591,221) -------------- -------------- -------------- -------------- Total increase (decrease) in net assets..................... 41,765,183 (19,764,037) (332,816,235) (59,164,585) NET ASSETS: Beginning of period......................................... 97,011,629 116,775,666 1,719,299,333 1,778,463,918 -------------- -------------- -------------- -------------- End of period............................................... $ 138,776,812 $ 97,011,629 $1,386,483,098 $1,719,299,333 ============== ============== ============== ============== Accumulated net investment income (loss) at end of period......................................... $ -- $ (91,063) ============== ============== CHANGES IN SHARES OUTSTANDING: Shares outstanding, beginning of period..................... 2,055,000 2,655,000 57,200,002 64,100,002 Shares sold................................................. 2,850,000 450,000 13,450,000 22,900,000 Shares redeemed............................................. (1,500,000) (1,050,000) (19,750,000) (29,800,000) -------------- -------------- -------------- -------------- Shares outstanding, end of period........................... 3,405,000 2,055,000 50,900,002 57,200,002 ============== ============== ============== ==============
Page 48 See Notes to Financial Statements
FIRST TRUST FIRST TRUST FIRST TRUST US EQUITY NYSE ARCA DOW JONES OPPORTUNITIES BIOTECHNOLOGY INTERNET ETF INDEX FUND INDEX FUND (FPX) (FBT) (FDN) ----------------------------- ------------------------------- ------------------------------- Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended 12/31/2018 12/31/2017 12/31/2018 12/31/2017 12/31/2018 12/31/2017 ------------- ------------- -------------- -------------- -------------- -------------- $ 8,164,263 $ 5,726,923 $ (4,195,069) $ (806,724) $ (21,307,396) $ (14,212,652) 43,343,388 55,915,695 216,117,246 32,801,434 934,554,669 493,372,496 (144,486,852) 130,247,878 (565,874,934) 267,489,817 (796,446,658) 912,068,438 ------------- ------------- -------------- -------------- -------------- -------------- (92,979,201) 191,890,496 (353,952,757) 299,484,527 116,800,615 1,391,228,282 ------------- ------------- -------------- -------------- -------------- -------------- (8,618,366) -- -- ------------- -------------- -------------- (6,231,361) -- -- ------------- -------------- -------------- 314,592,694 442,823,110 2,320,112,972 186,132,148 4,019,193,398 2,369,979,673 (282,248,146) (260,774,732) (831,758,091) (82,190,788) (2,610,007,206) (1,757,121,476) ------------- ------------- -------------- -------------- -------------- -------------- 32,344,548 182,048,378 1,488,354,881 103,941,360 1,409,186,192 612,858,197 ------------- ------------- -------------- -------------- -------------- -------------- (69,253,019) 367,707,513 1,134,402,124 403,425,887 1,525,986,807 2,004,086,479 981,731,679 614,024,166 1,207,810,686 804,384,799 5,490,820,408 3,486,733,929 ------------- ------------- -------------- -------------- -------------- -------------- $ 912,478,660 $ 981,731,679 $2,342,212,810 $1,207,810,686 $7,016,807,215 $5,490,820,408 ============= ============= ============== ============== ============== ============== $ -- $ -- $ -- ============= ============== ============== 14,400,002 11,350,002 9,700,002 8,850,002 50,000,002 43,700,002 4,400,000 7,250,000 15,450,000 1,600,000 30,750,000 24,150,000 (4,100,000) (4,200,000) (6,300,000) (750,000) (20,600,000) (17,850,000) ------------- ------------- -------------- -------------- -------------- -------------- 14,700,002 14,400,002 18,850,002 9,700,002 60,150,002 50,000,002 ============= ============= ============== ============== ============== ==============
See Notes to Financial Statements Page 49 FIRST TRUST EXCHANGE-TRADED FUND STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
FIRST TRUST FIRST TRUST CAPITAL STRENGTH VALUE LINE(R) DIVIDEND ETF INDEX FUND (FTCS) (FVD) ------------------------------- ------------------------------- Year Ended Year Ended Year Ended Year Ended 12/31/2018 12/31/2017 12/31/2018 12/31/2017 -------------- -------------- -------------- -------------- OPERATIONS: Net investment income (loss)................................ $ 12,868,717 $ 5,948,746 $ 102,024,585 $ 79,934,330 Net realized gain (loss).................................... 44,264,086 36,081,254 195,923,909 187,060,882 Net change in unrealized appreciation (depreciation)........ (141,037,098) 63,244,829 (464,993,579) 160,582,654 -------------- -------------- -------------- -------------- Net increase (decrease) in net assets resulting from operations.......................................... (83,904,295) 105,274,829 (167,045,085) 427,577,866 -------------- -------------- -------------- -------------- DISTRIBUTIONS TO SHAREHOLDERS FROM: Investment operations....................................... (13,023,451) (102,072,326) -------------- -------------- Net investment income....................................... (5,933,462) (82,356,171) -------------- -------------- SHAREHOLDER TRANSACTIONS: Proceeds from shares sold................................... 1,360,944,668 517,169,745 2,031,003,840 2,713,663,936 Cost of shares redeemed..................................... (511,985,305) (312,601,674) (1,582,233,890) (1,757,036,859) -------------- -------------- -------------- -------------- Net increase (decrease) in net assets resulting from shareholder transactions............................ 848,959,363 204,568,071 448,769,950 956,627,077 -------------- -------------- -------------- -------------- Total increase (decrease) in net assets..................... 752,031,617 303,909,438 179,652,539 1,301,848,772 NET ASSETS: Beginning of period......................................... 624,099,480 320,190,042 4,194,830,355 2,892,981,583 -------------- -------------- -------------- -------------- End of period............................................... $1,376,131,097 $ 624,099,480 $4,374,482,894 $4,194,830,355 ============== ============== ============== ============== Accumulated net investment income (loss) at end of period......................................... $ 15,284 $ -- ============== ============== CHANGES IN SHARES OUTSTANDING: Shares outstanding, beginning of period..................... 12,250,002 7,850,002 136,037,986 103,237,986 Shares sold................................................. 26,050,000 11,250,000 66,050,000 92,200,000 Shares redeemed............................................. (9,800,000) (6,850,000) (51,600,000) (59,400,000) -------------- -------------- -------------- -------------- Shares outstanding, end of period........................... 28,500,002 12,250,002 150,487,986 136,037,986 ============== ============== ============== ==============
Page 50 See Notes to Financial Statements
FIRST TRUST VALUE LINE(R) 100 EXCHANGE-TRADED FUND (FVL) ----------------------------- Year Ended Year Ended 12/31/2018 12/31/2017 ------------- ------------- $ 285,088 $ 392,778 (7,657,763) 3,981,719 (2,046,735) 364,913 ------------- ------------- (9,419,410) 4,739,410 ------------- ------------- (292,079) ------------- (463,929) ------------- 39,520,882 39,249,030 (49,060,514) (40,410,393) ------------- ------------- (9,539,632) (1,161,363) ------------- ------------- (19,251,121) 3,114,118 55,757,328 52,643,210 ------------- ------------- $ 36,506,207 $ 55,757,328 ============= ============= $ -- ============= 2,389,982 2,439,982 1,650,000 1,700,000 (2,100,000) (1,750,000) ------------- ------------- 1,939,982 2,389,982 ============= =============
See Notes to Financial Statements Page 51 FIRST TRUST EXCHANGE-TRADED FUND FINANCIAL HIGHLIGHTS FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
FIRST TRUST DOW JONES SELECT MICROCAP INDEX FUND (FDM) YEAR ENDED DECEMBER 31, ------------------------------------------------------------------------ 2018 2017 2016 2015 2014 ------------ ------------ ------------ ------------ ------------ Net asset value, beginning of period $ 47.21 $ 43.98 $ 32.92 $ 33.21 $ 32.47 ------------ ------------ ------------ ------------ ------------ INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) 0.56 0.42 0.49 0.49 0.23 Net realized and unrealized gain (loss) (6.50) 3.27 11.07 (0.30) 0.76 ------------ ------------ ------------ ------------ ------------ Total from investment operations (5.94) 3.69 11.56 0.19 0.99 ------------ ------------ ------------ ------------ ------------ DISTRIBUTIONS PAID TO SHAREHOLDERS FROM: Net investment income (0.51) (0.46) (0.50) (0.48) (0.25) ------------ ------------ ------------ ------------ ------------ Net asset value, end of period $ 40.76 $ 47.21 $ 43.98 $ 32.92 $ 33.21 ============ ============ ============ ============ ============ TOTAL RETURN (a) (12.68)% 8.44% 35.45% 0.55% 3.08% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in 000's) $ 138,777 $ 97,012 $ 116,776 $ 49,551 $ 51,648 RATIOS TO AVERAGE NET ASSETS: Ratio of total expenses to average net assets 0.73% 0.71% 0.75% 0.73% 0.70% Ratio of net expenses to average net assets 0.60% 0.60% 0.60% 0.60% 0.60% Ratio of net investment income (loss) to average net assets 1.29% 0.89% 1.52% 1.46% 0.71% Portfolio turnover rate (b) 75% 55% 48% 63% 49% FIRST TRUST MORNINGSTAR DIVIDEND LEADERS INDEX FUND (FDL) YEAR ENDED DECEMBER 31, ------------------------------------------------------------------------ 2018 2017 2016 2015 2014 ------------ ------------ ------------ ------------ ------------ Net asset value, beginning of period $ 30.06 $ 27.75 $ 23.69 $ 23.94 $ 21.93 ------------ ------------ ------------ ------------ ------------ INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) 1.09 0.93 0.82 0.86 0.80 Net realized and unrealized gain (loss) (2.83) 2.34 4.05 (0.25) 2.01 ------------ ------------ ------------ ------------ ------------ Total from investment operations (1.74) 3.27 4.87 0.61 2.81 ------------ ------------ ------------ ------------ ------------ DISTRIBUTIONS PAID TO SHAREHOLDERS FROM: Net investment income (1.08) (0.96) (0.81) (0.86) (0.80) ------------ ------------ ------------ ------------ ------------ Net asset value, end of period $ 27.24 $ 30.06 $ 27.75 $ 23.69 $ 23.94 ============ ============ ============ ============ ============ TOTAL RETURN (a) (5.87)% 11.93% 20.72% 2.73% 12.96% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in 000's) $ 1,386,483 $ 1,719,299 $ 1,778,464 $ 875,294 $ 985,151 RATIOS TO AVERAGE NET ASSETS: Ratio of total expenses to average net assets 0.47% 0.47% 0.48% 0.48% 0.49% Ratio of net expenses to average net assets 0.45% 0.45% 0.45% 0.45% 0.45% Ratio of net investment income (loss) to average net assets 3.70% 3.18% 3.27% 3.59% 3.55% Portfolio turnover rate (b) 39% 43% 50% 61% 40%
(a) Total return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all distributions at net asset value during the period, and redemption at net asset value on the last day of the period. The returns presented do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. Total return is calculated for the time period presented and is not annualized for periods of less than a year. The total returns would have been lower if certain fees had not been waived and expenses reimbursed by the investment advisor. (b) Portfolio turnover is calculated for the time period presented and is not annualized for periods of less than a year and does not include securities received or delivered from processing creations or redemptions and in-kind transactions. Page 52 See Notes to Financial Statements FIRST TRUST EXCHANGE-TRADED FUND FINANCIAL HIGHLIGHTS (CONTINUED) FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
FIRST TRUST US EQUITY OPPORTUNITIES ETF (FPX) YEAR ENDED DECEMBER 31, ------------------------------------------------------------------------ 2018 2017 2016 2015 2014 ------------ ------------ ------------ ------------ ------------ Net asset value, beginning of period $ 68.18 $ 54.10 $ 51.11 $ 50.32 $ 45.34 ------------ ------------ ------------ ------------ ------------ INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) 0.52 0.43 0.31 0.31 0.41 Net realized and unrealized gain (loss) (6.08) 14.12 3.10 0.80 4.97 ------------ ------------ ------------ ------------ ------------ Total from investment operations (5.56) 14.55 3.41 1.11 5.38 ------------ ------------ ------------ ------------ ------------ DISTRIBUTIONS PAID TO SHAREHOLDERS FROM: Net investment income (0.55) (0.47) (0.42) (0.32) (0.40) ------------ ------------ ------------ ------------ ------------ Net asset value, end of period $ 62.07 $ 68.18 $ 54.10 $ 51.11 $ 50.32 ============ ============ ============ ============ ============ TOTAL RETURN (a) (8.22)% 26.96% 6.70% 2.19% 11.91% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in 000's) $ 912,479 $ 981,732 $ 614,024 $ 789,693 $ 535,943 RATIOS TO AVERAGE NET ASSETS: Ratio of total expenses to average net assets 0.59% 0.59% 0.60% 0.60% 0.60% Ratio of net expenses to average net assets 0.59% 0.59% 0.60% 0.60% 0.60% Ratio of net investment income (loss) to average net assets 0.74% 0.71% 0.58% 0.61% 0.89% Portfolio turnover rate (b) 57% 31% 41% 41% 46% FIRST TRUST NYSE ARCA BIOTECHNOLOGY INDEX FUND (FBT) YEAR ENDED DECEMBER 31, ------------------------------------------------------------------------ 2018 2017 2016 2015 2014 ------------ ------------ ------------ ------------ ------------ Net asset value, beginning of period $ 124.52 $ 90.89 $ 113.06 $ 101.99 $ 69.12 ------------ ------------ ------------ ------------ ------------ INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) (0.22) (0.08) (0.32) 0.09 0.04 Net realized and unrealized gain (loss) (0.04) 33.71 (21.85) 11.11 32.88 ------------ ------------ ------------ ------------ ------------ Total from investment operations (0.26) 33.63 (22.17) 11.20 32.92 ------------ ------------ ------------ ------------ ------------ DISTRIBUTIONS PAID TO SHAREHOLDERS FROM: Net investment income -- -- -- (0.13) (0.05) ------------ ------------ ------------ ------------ ------------ Net asset value, end of period $ 124.26 $ 124.52 $ 90.89 $ 113.06 $ 101.99 ============ ============ ============ ============ ============ TOTAL RETURN (a) (0.21)% 36.99% (19.60)% 10.97% 47.63% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in 000's) $ 2,342,213 $ 1,207,811 $ 804,385 $ 3,437,024 $ 2,126,581 RATIOS TO AVERAGE NET ASSETS: Ratio of total expenses to average net assets 0.57% 0.56% 0.56% 0.55% 0.58% Ratio of net expenses to average net assets 0.57% 0.56% 0.56% 0.55% 0.58% Ratio of net investment income (loss) to average net assets (0.21)% (0.08)% (0.27)% 0.08% 0.06% Portfolio turnover rate (b) 37% 36% 42% 30% 58%
(a) Total return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all distributions at net asset value during the period, and redemption at net asset value on the last day of the period. The returns presented do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. Total return is calculated for the time period presented and is not annualized for periods of less than a year. (b) Portfolio turnover is calculated for the time period presented and is not annualized for periods of less than a year and does not include securities received or delivered from processing creations or redemptions and in-kind transactions. See Notes to Financial Statements Page 53 FIRST TRUST EXCHANGE-TRADED FUND FINANCIAL HIGHLIGHTS (CONTINUED) FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
FIRST TRUST DOW JONES INTERNET INDEX FUND (FDN) YEAR ENDED DECEMBER 31, ------------------------------------------------------------------------ 2018 2017 2016 2015 2014 ------------ ------------ ------------ ------------ ------------ Net asset value, beginning of period $ 109.82 $ 79.79 $ 74.64 $ 61.30 $ 59.84 ------------ ------------ ------------ ------------ ------------ INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) (0.35) (0.28) (0.27) (0.14) (0.08) Net realized and unrealized gain (loss) 7.19 30.31 5.42 13.48 1.54 ------------ ------------ ------------ ------------ ------------ Total from investment operations 6.84 30.03 5.15 13.34 1.46 ------------ ------------ ------------ ------------ ------------ DISTRIBUTIONS PAID TO SHAREHOLDERS FROM: Net investment income -- -- -- -- -- ------------ ------------ ------------ ------------ ------------ Net asset value, end of period $ 116.66 $ 109.82 $ 79.79 $ 74.64 $ 61.30 ============ ============ ============ ============ ============ TOTAL RETURN (a) 6.23% 37.62% 6.91% 21.77% 2.42% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in 000's) $ 7,016,807 $ 5,490,820 $ 3,486,734 $ 4,914,821 $ 1,976,793 RATIOS TO AVERAGE NET ASSETS: Ratio of total expenses to average net assets 0.52% 0.53% 0.54% 0.54% 0.54% Ratio of net expenses to average net assets 0.52% 0.53% 0.54% 0.54% 0.54% Ratio of net investment income (loss) to average net assets (0.27)% (0.32)% (0.35)% (0.29)% (0.13)% Portfolio turnover rate (b) 21% 22% 21% 28% 27% FIRST TRUST CAPITAL STRENGTH ETF (FTCS) YEAR ENDED DECEMBER 31, ------------------------------------------------------------------------ 2018 2017 2016 2015 2014 ------------ ------------ ------------ ------------ ------------ Net asset value, beginning of period $ 50.95 $ 40.79 $ 38.12 $ 38.08 $ 33.70 ------------ ------------ ------------ ------------ ------------ INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) 0.60 0.59 0.58 0.57 0.72 Net realized and unrealized gain (loss) (2.65) 10.16 2.67 0.04 4.43 ------------ ------------ ------------ ------------ ------------ Total from investment operations (2.05) 10.75 3.25 0.61 5.15 ------------ ------------ ------------ ------------ ------------ DISTRIBUTIONS PAID TO SHAREHOLDERS FROM: Net investment income (0.61) (0.59) (0.58) (0.57) (0.77) ------------ ------------ ------------ ------------ ------------ Net asset value, end of period $ 48.29 $ 50.95 $ 40.79 $ 38.12 $ 38.08 ============ ============ ============ ============ ============ TOTAL RETURN (a) (4.09)% 26.49% 8.57% 1.64% 15.46% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in 000's) $ 1,376,131 $ 624,099 $ 320,190 $ 165,815 $ 85,686 RATIOS TO AVERAGE NET ASSETS: Ratio of total expenses to average net assets 0.60% 0.61% 0.64% 0.65% 0.66% Ratio of net expenses to average net assets 0.60% 0.61% 0.64% 0.65% 0.65% Ratio of net investment income (loss) to average net assets 1.30% 1.33% 1.55% 1.59% 2.07% Portfolio turnover rate (b) 117% 85% 85% 96% 89%
(a) Total return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all distributions at net asset value during the period, and redemption at net asset value on the last day of the period. The returns presented do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. Total return is calculated for the time period presented and is not annualized for periods of less than a year. The total returns would have been lower if certain fees had not been waived and expenses reimbursed by the investment advisor. (b) Portfolio turnover is calculated for the time period presented and is not annualized for periods of less than a year and does not include securities received or delivered from processing creations or redemptions and in-kind transactions. Page 54 See Notes to Financial Statements FIRST TRUST EXCHANGE-TRADED FUND FINANCIAL HIGHLIGHTS (CONTINUED) FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
FIRST TRUST VALUE LINE(R) DIVIDEND INDEX FUND (FVD) YEAR ENDED DECEMBER 31, ------------------------------------------------------------------------ 2018 2017 2016 2015 2014 ------------ ------------ ------------ ------------ ------------ Net asset value, beginning of period $ 30.84 $ 28.02 $ 23.86 $ 24.13 $ 21.36 ------------ ------------ ------------ ------------ ------------ INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) 0.73 0.63 0.56 0.55 0.58 Net realized and unrealized gain (loss) (1.77) 2.84 4.17 (0.26) 2.78 ------------ ------------ ------------ ------------ ------------ Total from investment operations (1.04) 3.47 4.73 0.29 3.36 ------------ ------------ ------------ ------------ ------------ DISTRIBUTIONS PAID TO SHAREHOLDERS FROM: Net investment income (0.73) (0.65) (0.57) (0.56) (0.59) ------------ ------------ ------------ ------------ ------------ Net asset value, end of period $ 29.07 $ 30.84 $ 28.02 $ 23.86 $ 24.13 ============ ============ ============ ============ ============ TOTAL RETURN (a) (3.44)% 12.48% 19.94% 1.26% 15.94% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in 000's) $ 4,374,483 $ 4,194,830 $ 2,892,982 $ 1,188,031 $ 1,089,299 RATIOS TO AVERAGE NET ASSETS: Ratio of total expenses to average net assets 0.72% 0.72% 0.73% 0.74% 0.75% Ratio of net expenses to average net assets 0.70% 0.70% 0.70% 0.70% 0.70% Ratio of net investment income (loss) to average net assets 2.40% 2.19% 2.31% 2.40% 2.63% Portfolio turnover rate (b) 58% 50% 60% 82% 63% FIRST TRUST VALUE LINE(R) 100 EXCHANGE-TRADED FUND (FVL) YEAR ENDED DECEMBER 31, --------------------------------------------------------------------------- 2018 2017 2016 2015 2014 ------------ ------------ ------------ ------------ ------------ Net asset value, beginning of period $ 23.33 $ 21.58 $ 19.71 $ 20.41 $ 18.44 ------------ ------------ ------------ ------------ ------------ INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) 0.13 0.16 0.12 0.07 0.11 Net realized and unrealized gain (loss) (4.51) 1.78 1.87 (0.71) (c) 1.98 ------------ ------------ ------------ ------------ ------------ Total from investment operations (4.38) 1.94 1.99 (0.64) 2.09 ------------ ------------ ------------ ------------ ------------ DISTRIBUTIONS PAID TO SHAREHOLDERS FROM: Net investment income (0.13) (0.19) (0.12) (0.06) (0.12) ------------ ------------ ------------ ------------ ------------ Net asset value, end of period $ 18.82 $ 23.33 $ 21.58 $ 19.71 $ 20.41 ============ ============ ============ ============ ============ TOTAL RETURN (a) (18.83)% 9.05% 10.14% (3.13)% (c) 11.33% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in 000's) $ 36,506 $ 55,757 $ 52,643 $ 53,013 $ 60,008 RATIOS TO AVERAGE NET ASSETS: Ratio of total expenses to average net assets 0.89% 0.85% 0.87% 0.84% 0.84% Ratio of net expenses to average net assets 0.70% 0.70% 0.70% 0.70% 0.70% Ratio of net investment income (loss) to average net assets 0.56% 0.73% 0.59% 0.32% 0.57% Portfolio turnover rate (b) 424% 466% 491% 404% 325%
(a) Total return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all distributions at net asset value during the period, and redemption at net asset value on the last day of the period. The returns presented do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. Total return is calculated for the time period presented and is not annualized for periods of less than a year. The total returns would have been lower if certain fees had not been waived and expenses reimbursed by the investment advisor. (b) Portfolio turnover is calculated for the time period presented and is not annualized for periods of less than a year and does not include securities received or delivered from processing creations or redemptions and in-kind transactions. (c) The Fund received a payment from the Advisor in the amount of $95,996 in connection with a trade error, which represents $0.03 per share. Since the Advisor reimbursed the Fund, there was no effect on the Fund's total return. See Notes to Financial Statements Page 55 -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND DECEMBER 31, 2018 1. ORGANIZATION First Trust Exchange-Traded Fund (the "Trust") is an open-end management investment company organized as a Massachusetts business trust on August 8, 2003, and is registered with the Securities and Exchange Commission under the Investment Company Act of 1940, as amended (the "1940 Act"). The Trust currently consists of twenty-one exchange-traded funds. This report covers the eight funds listed below: First Trust Dow Jones Select MicroCap Index Fund - (NYSE Arca, Inc. ("NYSE Arca") ticker "FDM") First Trust Morningstar Dividend Leaders Index Fund - (NYSE Arca ticker "FDL") First Trust US Equity Opportunities ETF - (NYSE Arca ticker "FPX") First Trust NYSE Arca Biotechnology Index Fund - (NYSE Arca ticker "FBT") First Trust Dow Jones Internet Index Fund - (NYSE Arca ticker "FDN") First Trust Capital Strength ETF - (The Nasdaq Stock Market LLC ("Nasdaq") ticker "FTCS") First Trust Value Line Dividend Index Fund - (NYSE Arca ticker "FVD") First Trust Value Line(R) 100 Exchange-Traded Fund - (NYSE Arca ticker "FVL") Each fund represents a separate series of shares of beneficial interest in the Trust (each a "Fund" and collectively, the "Funds"). Unlike conventional mutual funds, each Fund issues and redeems shares on a continuous basis, at net asset value ("NAV"), only in large specified blocks consisting of 50,000 shares called a "Creation Unit." Creation Units are generally issued and redeemed in-kind for securities in which a Fund invests and, in certain circumstances, for cash, and only to and from broker-dealers and large institutional investors that have entered into participation agreements. Except when aggregated in Creation Units, each Fund's shares are not redeemable securities. The investment objective of each Fund is to seek investment results that correspond generally to the price and yield (before the Fund's fees and expenses) of the following indices:
FUND INDEX First Trust Dow Jones Select MicroCap Index Fund Dow Jones Select MicroCap Index(SM) First Trust Morningstar Dividend Leaders Index Fund Morningstar(R) Dividend Leaders Index(SM) First Trust US Equity Opportunities ETF IPOX(R)-100 U.S. Index First Trust NYSE Arca Biotechnology Index Fund NYSE Arca Biotechnology Index(SM) First Trust Dow Jones Internet Index Fund Dow Jones Internet Composite Index(SM) First Trust Capital Strength ETF The Capital Strength Index(SM) First Trust Value Line(R) Dividend Index Fund Value Line(R) Dividend Index First Trust Value Line(R) 100 Exchange-Traded Fund Value Line(R) 100 Index
2. SIGNIFICANT ACCOUNTING POLICIES The Funds are each considered an investment company and follow accounting and reporting guidance under Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") Topic 946, "Financial Services-Investment Companies." The following is a summary of significant accounting policies consistently followed by the Funds in the preparation of the financial statements. The preparation of the financial statements in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates. A. PORTFOLIO VALUATION Each Fund's NAV is determined daily as of the close of regular trading on the New York Stock Exchange ("NYSE"), normally 4:00 p.m. Eastern time, on each day the NYSE is open for trading. If the NYSE closes early on a valuation day, the NAV is determined as of that time. Foreign securities are priced using data reflecting the earlier closing of the principal markets for those securities. Each Fund's NAV is calculated by dividing the value of all assets of each Fund (including accrued interest and dividends), less all liabilities (including accrued expenses and dividends declared but unpaid), by the total number of shares outstanding. Each Fund's investments are valued daily at market value or, in the absence of market value with respect to any portfolio securities, at fair value. Market value prices represent last sale or official closing prices from a national or foreign exchange (i.e., a regulated market) and are primarily obtained from third-party pricing services. Fair value prices represent any prices not considered market value prices and are either obtained from a third-party pricing service or are determined by the Pricing Committee of the Funds' investment advisor, First Trust Advisors L.P. ("First Trust" or the "Advisor"), in accordance with valuation procedures adopted by the Trust's Board of Trustees, and in accordance with provisions of the 1940 Act. Investments valued by the Advisor's Pricing Committee, if any, are footnoted as such in the footnotes to the Portfolio of Investments. Each Fund's investments are valued as follows: Page 56 -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND DECEMBER 31, 2018 Common stocks and other equity securities listed on any national or foreign exchange (excluding Nasdaq and the London Stock Exchange Alternative Investment Market ("AIM")) are valued at the last sale price on the exchange on which they are principally traded or, for Nasdaq and AIM securities, the official closing price. Securities traded on more than one securities exchange are valued at the last sale price or official closing price, as applicable, at the close of the securities exchange representing the principal market for such securities. Shares of open-end funds are valued at fair value which is based on NAV per share. Securities traded in an over-the-counter market are fair valued at the mean of their most recent bid and asked price, if available, and otherwise at their closing bid price. Overnight repurchase agreements are valued at amortized cost when it represents the best estimate of fair value. Certain securities may not be able to be priced by pre-established pricing methods. Such securities may be valued by the Trust's Board of Trustees or its delegate, the Advisor's Pricing Committee, at fair value. These securities generally include, but are not limited to, restricted securities (securities which may not be publicly sold without registration under the Securities Act of 1933, as amended) for which a third-party pricing service is unable to provide a market price; securities whose trading has been formally suspended; a security whose market or fair value price is not available from a pre-established pricing source; a security with respect to which an event has occurred that is likely to materially affect the value of the security after the market has closed but before the calculation of a Fund's NAV or make it difficult or impossible to obtain a reliable market quotation; and a security whose price, as provided by the third-party pricing service, does not reflect the security's fair value. As a general principle, the current fair value of a security would appear to be the amount which the owner might reasonably expect to receive for the security upon its current sale. When fair value prices are used, generally they will differ from market quotations or official closing prices on the applicable exchanges. A variety of factors may be considered in determining the fair value of such securities, including, but not limited to, the following: 1) the type of security; 2) the size of the holding; 3) the initial cost of the security; 4) transactions in comparable securities; 5) price quotes from dealers and/or third-party pricing services; 6) relationships among various securities; 7) information obtained by contacting the issuer, analysts, or the appropriate stock exchange; 8) an analysis of the issuer's financial statements; and 9) the existence of merger proposals or tender offers that might affect the value of the security. In addition, differences between the prices used to calculate a Fund's NAV and the prices used by such Fund's corresponding index could result in a difference between a Fund's performance and the performance of its underlying index. The Funds are subject to fair value accounting standards that define fair value, establish the framework for measuring fair value and provide a three-level hierarchy for fair valuation based upon the inputs to the valuation as of the measurement date. The three levels of the fair value hierarchy are as follows: o Level 1 - Level 1 inputs are quoted prices in active markets for identical investments. An active market is a market in which transactions for the investment occur with sufficient frequency and volume to provide pricing information on an ongoing basis. o Level 2 - Level 2 inputs are observable inputs, either directly or indirectly, and include the following: o Quoted prices for similar investments in active markets. o Quoted prices for identical or similar investments in markets that are non-active. A non-active market is a market where there are few transactions for the investment, the prices are not current, or price quotations vary substantially either over time or among market makers, or in which little information is released publicly. o Inputs other than quoted prices that are observable for the investment (for example, interest rates and yield curves observable at commonly quoted intervals, volatilities, prepayment speeds, loss severities, credit risks, and default rates). o Inputs that are derived principally from or corroborated by observable market data by correlation or other means. o Level 3 - Level 3 inputs are unobservable inputs. Unobservable inputs may reflect the reporting entity's own assumptions about the assumptions that market participants would use in pricing the investment. Page 57 -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND DECEMBER 31, 2018 The inputs or methodologies used for valuing investments are not necessarily an indication of the risk associated with investing in those investments. A summary of the inputs used to value each Fund's investments as of December 31, 2018, is included with each Fund's Portfolio of Investments. B. SECURITIES TRANSACTIONS AND INVESTMENT INCOME Securities transactions are recorded as of the trade date. Realized gains and losses from securities transactions are recorded on the identified cost basis. Dividend income is recorded on the ex-dividend date. Interest income, if any, is recorded on the accrual basis. Withholding taxes and tax reclaims on foreign dividends have been provided for in accordance with each Fund's understanding of the applicable country's tax rules and rates. Distributions received from a Fund's investments in real estate investment trust ("REITs") may be comprised of return of capital, capital gains and income. The actual character of the amounts received during the year is not known until after the REITs' fiscal year end. A Fund records the character of distributions received from REITs during the year based on estimates available. The characterization of distributions received by a Fund may be subsequently revised based on information received from the REITs after their tax reporting periods conclude. C. OFFSETTING ON THE STATEMENTS OF ASSETS AND LIABILITIES Offsetting Assets and Liabilities require entities to disclose both gross and net information about instruments and transactions eligible for offset on the Statements of Assets and Liabilities, and disclose instruments and transactions subject to master netting or similar agreements. These disclosure requirements are intended to help investors and other financial statement users better assess the effect or potential effect of offsetting arrangements on a fund's financial position. The transactions subject to offsetting disclosures are derivative instruments, repurchase agreements and reverse repurchase agreements, and securities borrowing and securities lending transactions. This disclosure, if applicable, is included within each Fund's Portfolio of Investments under the heading "Offsetting Assets and Liabilities." For financial reporting purposes, the Funds do not offset financial assets and financial liabilities that are subject to master netting arrangements ("MNAs") or similar agreements on the Statements of Assets and Liabilities. MNAs provide the right, in the event of default (including bankruptcy and insolvency), for the non-defaulting counterparty to liquidate the collateral and calculate the net exposure to the defaulting party or request additional collateral. D. SECURITIES LENDING The Funds may lend securities representing up to 33 1/3% of the value of their total assets to broker-dealers, banks and other institutions to generate additional income. When a Fund loans its portfolio securities, it will receive, at the inception of each loan, collateral equal to at least 102% (for domestic securities) or 105% (for international securities) of the market value of the loaned securities. The collateral amount is valued at the beginning of each business day and is compared to the market value of the loaned securities from the prior business day to determine if additional collateral is required. If additional collateral is required, a request is sent to the borrower. Securities lending involves the risk that the Fund may lose money because the borrower of the Fund's loaned securities fails to return the securities in a timely manner or at all. The Fund could also lose money in the event of (i) a decline in the value of the collateral provided for the loaned securities, (ii) a decline in the value of any investments made with cash collateral or (iii) an increase in the value of the loaned securities if the borrower does not increase the collateral accordingly and the borrower fails to return the securities. These events could also trigger adverse tax consequences for the Funds. Under the Funds' Securities Lending Agency Agreement, the securities lending agent will generally bear the risk that a borrower may default on its obligation to return loaned securities. Brown Brothers Harriman & Co. ("BBH") acts as the Funds' securities lending agent and is responsible for executing the lending of the portfolio securities to creditworthy borrowers. The Funds, however, will be responsible for the risks associated with the investment of cash collateral. A Fund may lose money on its investment of cash collateral, which may affect its ability to repay the collateral to the borrower without the use of other Fund assets. Each Fund that engages in securities lending receives compensation (net of any rebate and securities lending agent fees) for lending its securities. Compensation can be in the form of fees received from the securities lending agent or dividends or interest earned from the investment of cash collateral. The fees earned from the securities lending agent are accrued daily. The dividend and interest earned on the securities loaned is accounted for in the same manner as other dividend and interest income. At December 31, 2018, only FDM, FPX, FBT, and FDN had securities in the securities lending program. In the event of a default by a borrower with respect to any loan, BBH will exercise any and all remedies provided under the applicable borrower agreement to make the Funds whole. These remedies include purchasing replacement securities by applying the collateral held from the defaulting broker against the purchase cost of the replacement securities. If, despite such efforts by BBH Page 58 -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND DECEMBER 31, 2018 to exercise these remedies, a Fund sustains losses as a result of a borrower's default, BBH will indemnify the Fund by purchasing replacement securities at its own expense, or paying the Fund an amount equal to the market value of the replacement securities, subject to certain limitations which are set forth in detail in the Securities Lending Agency Agreement between the Trust on behalf of the Funds and BBH. E. REPURCHASE AGREEMENTS Repurchase agreements involve the purchase of securities subject to the seller's agreement to repurchase the securities at a mutually agreed upon date and price, under the terms of a Master Repurchase Agreement ("MRA"). During the term of a repurchase agreement, the value of the underlying securities held as collateral on behalf of a Fund, including accrued interest, is required to exceed the value of the repurchase agreement, including accrued interest. The underlying securities for all repurchase agreements are held at the Funds' custodian or designated sub-custodians under tri-party repurchase agreements. MRAs govern transactions between a Fund and select counterparties. The MRAs contain provisions for, among other things, initiation, income payments, events of default, and maintenance of collateral for repurchase agreements. Repurchase agreements received for lending securities are collateralized by U.S. Treasury securities. The U.S. Treasury securities are held in a joint custody account at BBH on behalf of the Funds participating in the securities lending program. In the event the counterparty defaults on the repurchase agreement, the U.S. Treasury securities can either be maintained as part of a Fund's portfolio or sold for cash. A Fund could suffer a loss to the extent that the proceeds from the sale of the underlying collateral held by the Fund is less than the repurchase price and the Fund's costs associated with the delay and enforcement of the MRA. While the Funds may invest in repurchase agreements, any repurchase agreements held by the Funds during the fiscal year ended December 31, 2018, were received as collateral for lending securities. F. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS Dividends from net investment income of each Fund, if any, are declared and paid quarterly or as the Board of Trustees may determine from time to time. Distributions of net realized gains earned by each Fund, if any, are distributed at least annually. Distributions from net investment income and realized capital gains are determined in accordance with federal income tax regulations, which may differ from U.S. GAAP. Certain capital accounts in the financial statements are periodically adjusted for permanent differences in order to reflect their tax character. These permanent differences are primarily due to the varying treatment of income and gain/loss on portfolio securities held by the Funds and have no impact on net assets or NAV per share. Temporary differences, which arise from recognizing certain items of income, expense and gain/loss in different periods for financial statement and tax purposes, will reverse at some time in the future. The tax character of distributions paid by each Fund during the fiscal year ended December 31, 2018 was as follows:
Distributions Distributions Distributions paid from paid from paid from Ordinary Income Capital Gains Return of Capital ------------------ ---------------- ----------------- First Trust Dow Jones Select MicroCap Index Fund $ 1,417,591 $ -- $ -- First Trust Morningstar Dividend Leaders Index Fund 55,170,342 -- -- First Trust US Equity Opportunities ETF 8,618,366 -- -- First Trust NYSE Arca Biotechnology Index Fund -- -- -- First Trust Dow Jones Internet Index Fund -- -- -- First Trust Capital Strength ETF 13,023,451 -- -- First Trust Value Line(R) Dividend Index Fund 102,072,326 -- -- First Trust Value Line(R) 100 Exchange-Traded Fund 292,079 -- --
Page 59 -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND DECEMBER 31, 2018 The tax character of distributions paid by each Fund during the fiscal year ended December 31, 2017 was as follows:
Distributions Distributions Distributions paid from paid from paid from Ordinary Income Capital Gains Return of Capital ------------------ ---------------- ----------------- First Trust Dow Jones Select MicroCap Index Fund $ 908,212 $ -- $ -- First Trust Morningstar Dividend Leaders Index Fund 56,593,922 -- -- First Trust US Equity Opportunities ETF 6,231,361 -- -- First Trust NYSE Arca Biotechnology Index Fund -- -- -- First Trust Dow Jones Internet Index Fund -- -- -- First Trust Capital Strength ETF 5,933,462 -- -- First Trust Value Line(R) Dividend Index Fund 82,356,171 -- -- First Trust Value Line(R) 100 Exchange-Traded Fund 463,929 -- --
As of December 31, 2018, the components of distributable earnings on a tax basis for each Fund were as follows:
Accumulated Undistributed Capital and Net Unrealized Ordinary Other Appreciation Income Gain (Loss) (Depreciation) ------------------ ---------------- ----------------- First Trust Dow Jones Select MicroCap Index Fund $ 200,386 $(16,493,170) $ (27,167,578) First Trust Morningstar Dividend Leaders Index Fund 135,366 (83,142,112) (90,329,172) First Trust US Equity Opportunities ETF -- (104,241,056) 35,844,172 First Trust NYSE Arca Biotechnology Index Fund -- (136,416,636) (564,687,926) First Trust Dow Jones Internet Index Fund -- (150,836,952) 93,036,664 First Trust Capital Strength ETF -- (43,880,883) (64,995,316) First Trust Value Line(R) Dividend Index Fund -- (69,543,177) (214,226,024) First Trust Value Line(R) 100 Exchange-Traded Fund -- (13,408,733) (1,380,869)
G. INCOME TAXES Each Fund intends to continue to qualify as a regulated investment company by complying with the requirements under Subchapter M of the Internal Revenue Code of 1986, as amended, which includes distributing substantially all of its net investment income and net realized gains to shareholders. Accordingly, no provision has been made for federal and state income taxes. However, due to the timing and amount of distributions, each Fund may be subject to an excise tax of 4% of the amount by which approximately 98% of each Fund's taxable income exceeds the distributions from such taxable income for the calendar year. The Funds are subject to accounting standards that establish a minimum threshold for recognizing, and a system for measuring, the benefits of a tax position taken or expected to be taken in a tax return. Taxable years ending 2015, 2016, 2017, and 2018 remain open to federal and state audit. As of December 31, 2018, management has evaluated the application of these standards to the Funds, and has determined that no provision for income tax is required in the Funds' financial statements for uncertain tax positions. Under the Regulated Investment Company Modernization Act of 2010 (the "Act"), net capital losses arising in taxable years beginning after December 22, 2010, may be carried forward indefinitely, and their character is retained as short-term and/or long-term losses. Previously, net capital losses were carried forward for up to eight years and treated as short-term losses. As a transition rule, the Act requires that post-enactment net capital losses be used before pre-enactment net capital losses. At December 31, 2018, the Funds had post-enactment net capital losses for federal income tax purposes as shown in the following table. To the extent that these loss carryforwards are used to offset future capital gains, it is probable that the capital gains so offset will not be distributed to Fund shareholders. The Funds are subject to certain limitations, under U.S. tax rules, on the use of capital loss carryforwards and net unrealized built-in losses. These limitations apply when there has been a 50% change in ownership. Page 60 -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND DECEMBER 31, 2018
Post-Enactment - No Expiration -------------------- First Trust Dow Jones Select MicroCap Index Fund $ 16,493,170 First Trust Morningstar Dividend Leaders Index Fund 83,142,112 First Trust US Equity Opportunities ETF 104,241,056 First Trust NYSE Arca Biotechnology Index Fund 136,416,636 First Trust Dow Jones Internet Index Fund 150,836,952 First Trust Capital Strength ETF 43,880,883 First Trust Value Line(R) Dividend Index Fund 69,543,177 First Trust Value Line(R) 100 Exchange-Traded Fund 13,408,733
During the taxable year ended December 31, 2018, the following Fund utilized capital loss carryforwards in the following amount:
Post-Enactment Capital Loss Carryforward Utilized -------------------- First Trust NYSE Arca Biotechnology Index Fund $ 66,225,459
At the taxable year ended December 31, 2018, the following Funds' capital loss carryforwards expired in the following amounts:
Capital Loss Carryforward Expired -------------------- First Trust Dow Jones Select MicroCap Index Fund $ 5,096,533 First Trust Morningstar Dividend Leaders Index Fund 473,435 First Trust US Equity Opportunities ETF 65,058 First Trust NYSE Arca Biotechnology Index Fund 1,039,054 First Trust Dow Jones Internet Index Fund -- First Trust Capital Strength ETF 1,367,556 First Trust Value Line(R) Dividend Index Fund 437,987 First Trust Value Line(R) 100 Exchange-Traded Fund --
In order to present paid-in capital and accumulated distributable earnings (loss) (which consists of accumulated net investment income (loss), accumulated net realized gain (loss) on investments and net unrealized appreciation (depreciation) on investments) on the Statements of Assets and Liabilities that more closely represent their tax character, certain adjustments have been made to paid-in capital, accumulated net investment income (loss) and accumulated net realized gain (loss) on investments. These adjustments are primarily due to the difference between book and tax treatments of income and gains on various investment securities held by the Funds and in-kind transactions. The results of operations and net assets were not affected by these adjustments. For the fiscal year ended December 31, 2018, the adjustments for each Fund were as follows:
Accumulated Accumulated Net Realized Net Investment Gain (Loss) Income (Loss) on Investments Paid-in Capital ------------------ ---------------- ----------------- First Trust Dow Jones Select MicroCap Index Fund $ 23,599 $ (10,832,182) $ 10,808,583 First Trust Morningstar Dividend Leaders Index Fund (336,035) (119,409,496) 119,745,531 First Trust US Equity Opportunities ETF 454,103 (69,391,076) 68,936,973 First Trust NYSE Arca Biotechnology Index Fund 4,195,069 (200,912,456) 196,717,387 First Trust Dow Jones Internet Index Fund 21,307,396 (1,053,785,383) 1,032,477,987 First Trust Capital Strength ETF 139,450 (74,295,350) 74,155,900 First Trust Value Line(R) Dividend Index Fund 47,741 (250,157,844) 250,110,103 First Trust Value Line(R) 100 Exchange-Traded Fund 6,991 (1,828,580) 1,821,589
Page 61 -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND DECEMBER 31, 2018 H. EXPENSES Expenses that are directly related to one of the Funds are charged directly to the respective Fund. General expenses of the Trust are allocated to all the Funds based upon the net assets of each Fund. First Trust has entered into licensing agreements with each of the following "Licensors" for the respective Funds:
FUND LICENSOR First Trust Dow Jones Select MicroCap Index Fund S&P Dow Jones Indices LLC First Trust Morningstar Dividend Leaders Index Fund Morningstar, Inc. First Trust US Equity Opportunities ETF IPOX(R) Schuster LLC First Trust NYSE Arca Biotechnology Index Fund ICE Data Indices, LLC First Trust Dow Jones Internet Index Fund S&P Dow Jones Indices LLC First Trust Capital Strength ETF Nasdaq, Inc. First Trust Value Line(R) Dividend Index Fund Value Line Publishing LLC First Trust Value Line(R) 100 Exchange-Traded Fund Value Line Publishing LLC
The respective license agreements allow for the use by First Trust of certain trademarks and trade names of the respective Licensors. The Funds are sub-licensees to the applicable license agreement. The respective Funds are required to pay licensing fees, which are shown on the Statements of Operations. I. NEW ACCOUNTING PRONOUNCEMENT On August 28, 2018, the FASB issued Accounting Standards Update ("ASU") 2018-13, "Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement," which amends the fair value measurement disclosure requirements of ASC 820. The amendments of ASU 2018-13 include new, eliminated, and modified disclosure requirements of ASC 820. In addition, the amendments clarify that materiality is an appropriate consideration of entities when evaluating disclosure requirements. The ASU is effective for fiscal years beginning after December 15, 2019, including interim periods therein. Early adoption is permitted for any eliminated or modified disclosures upon issuance of this ASU. The Funds have early adopted ASU 2018-13 for these financial statements, which did not result in a material impact. 3. INVESTMENT ADVISORY FEE, AFFILIATED TRANSACTIONS AND OTHER FEE ARRANGEMENTS First Trust, the investment advisor to the Funds, is a limited partnership with one limited partner, Grace Partners of DuPage L.P., and one general partner, The Charger Corporation. The Charger Corporation is an Illinois corporation controlled by James A. Bowen, Chief Executive Officer of First Trust. First Trust is responsible for the selection and ongoing monitoring of the securities in each Fund's portfolio, managing the Funds' business affairs and providing certain administrative services necessary for the management of the Funds. For these services, First Trust is entitled to receive monthly fees from each Fund calculated at the following annual rates:
% of Average Daily Net Assets ---------------- First Trust Dow Jones Select MicroCap Index Fund 0.50% First Trust Morningstar Dividend Leaders Index Fund 0.30% First Trust US Equity Opportunities ETF 0.40% First Trust NYSE Arca Biotechnology Index Fund 0.40% First Trust Dow Jones Internet Index Fund 0.40% First Trust Capital Strength ETF 0.50% First Trust Value Line(R) Dividend Index Fund 0.50% First Trust Value Line(R) 100 Exchange-Traded Fund 0.50%
The Trust and First Trust have entered into an Expense Reimbursement, Fee Waiver and Recovery Agreement ("Recovery Agreement") in which First Trust has agreed to waive fees and/or reimburse Fund expenses to the extent that the operating expenses of each Fund (excluding interest expense, brokerage commissions and other trading expenses, acquired fund fees and expenses, taxes and extraordinary expenses) exceed the below amount as a percentage of average daily net assets per year (the "Expense Cap"). The Expense Cap will be in effect until at least April 30, 2020. Page 62 -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND DECEMBER 31, 2018
Expense Cap ---------------- First Trust Dow Jones Select MicroCap Index Fund 0.60% First Trust Morningstar Dividend Leaders Index Fund 0.45% First Trust US Equity Opportunities ETF 0.60% First Trust NYSE Arca Biotechnology Index Fund 0.60% First Trust Dow Jones Internet Index Fund 0.60% First Trust Capital Strength ETF 0.65% First Trust Value Line(R) Dividend Index Fund 0.70% First Trust Value Line(R) 100 Exchange-Traded Fund 0.70%
Expenses reimbursed and fees waived by First Trust under the Recovery Agreement are subject to recovery by First Trust for up to three years from the date the fee was waived or expense was incurred, but no reimbursement payment will be made by a Fund if it results in the Fund exceeding an expense ratio equal to the Expense Cap in place at the time the expenses were reimbursed or fees waived by First Trust. These amounts would be included in "Expenses previously waived or reimbursed" on the Statements of Operations. The advisory fee waivers and expense reimbursements for the fiscal year ended December 31, 2018 and the fees waived or expenses borne by First Trust subject to recovery from the applicable Fund for the periods indicated were as follows:
Fees Waived or Expenses Borne by First Trust Subject to Recovery ------------------------------------------------ Advisory Year Year Year Fee Expense Ended Ended Ended Waivers Reimbursement 12/31/2016 12/31/2017 12/31/2018 Total --------- ------------- ---------- ---------- ---------- --------- First Trust Dow Jones Select MicroCap Index Fund $ 162,786 $ -- $ 76,424 $ 97,709 $ 162,786 $ 336,919 First Trust Morningstar Dividend Leaders Index Fund 256,355 -- 390,779 289,110 256,355 936,244 First Trust Value Line(R) Dividend Index Fund 768,292 -- 679,825 816,754 768,292 2,264,871 First Trust Value Line(R) 100 Exchange-Traded Fund 94,969 -- 85,239 82,527 94,969 262,735
First Trust US Equity Opportunities ETF, First Trust NYSE Arca Biotechnology Index Fund, First Trust Dow Jones Internet Index Fund and First Trust Capital Strength ETF do not have any remaining fees previously waived or expenses reimbursed that are subject to recovery. The Trust has multiple service agreements with The Bank of New York Mellon ("BNYM"). Under the service agreements, BNYM performs custodial, fund accounting, certain administrative services, and transfer agency services for each Fund. As custodian, BNYM is responsible for custody of each Fund's assets. As fund accountant and administrator, BNYM is responsible for maintaining the books and records of each Fund's securities and cash. As transfer agent, BNYM is responsible for maintaining shareholder records for each Fund. BNYM is a subsidiary of The Bank of New York Mellon Corporation, a financial holding company. Each Trustee who is not an officer or employee of First Trust, any sub-advisor or any of their affiliates ("Independent Trustees") is paid a fixed annual retainer that is allocated equally among each fund in the First Trust Fund Complex. Each Independent Trustee is also paid an annual per fund fee that varies based on whether the fund is a closed-end or other actively managed fund, or is an index fund. Additionally, the Lead Independent Trustee and the Chairmen of the Audit Committee, Nominating and Governance Committee and Valuation Committee are paid annual fees to serve in such capacities, with such compensation allocated pro rata among each fund in the First Trust Fund Complex based on net assets. Independent Trustees are reimbursed for travel and out-of-pocket expenses in connection with all meetings. The Lead Independent Trustee and Committee Chairmen rotate every three years. The officers and "Interested" Trustee receive no compensation from the Trust for acting in such capacities. Page 63 -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND DECEMBER 31, 2018 4. PURCHASES AND SALES OF SECURITIES For the fiscal year ended December 31, 2018, the cost of purchases and proceeds from sales of investments for each Fund, excluding short-term investments and in-kind transactions, were as follows:
Purchases Sales --------------- --------------- First Trust Dow Jones Select MicroCap Index Fund $ 92,561,226 $ 93,056,098 First Trust Morningstar Dividend Leaders Index Fund 580,060,631 582,191,194 First Trust US Equity Opportunities ETF 620,556,934 618,996,187 First Trust NYSE Arca Biotechnology Index Fund 716,091,647 714,162,096 First Trust Dow Jones Internet Index Fund 1,657,239,139 1,678,937,959 First Trust Capital Strength ETF 1,157,622,867 1,154,105,487 First Trust Value Line(R) Dividend Index Fund 2,459,298,445 2,448,182,884 First Trust Value Line(R) 100 Exchange-Traded Fund 213,101,175 213,209,220
For the fiscal year ended December 31, 2018, the cost of in-kind purchases and proceeds from in-kind sales for each Fund were as follows:
Purchases Sales --------------- --------------- First Trust Dow Jones Select MicroCap Index Fund $ 140,584,424 $ 76,430,063 First Trust Morningstar Dividend Leaders Index Fund 386,234,475 568,494,449 First Trust US Equity Opportunities ETF 312,377,376 281,186,502 First Trust NYSE Arca Biotechnology Index Fund 2,312,485,548 830,779,164 First Trust Dow Jones Internet Index Fund 4,017,170,269 2,610,905,311 First Trust Capital Strength ETF 1,357,903,955 513,110,174 First Trust Value Line(R) Dividend Index Fund 2,024,024,539 1,580,240,974 First Trust Value Line(R) 100 Exchange-Traded Fund 39,512,069 49,039,516
5. CREATION, REDEMPTION AND TRANSACTION FEES Shares are created and redeemed by each Fund only in Creation Unit size aggregations of 50,000 shares in transactions with broker-dealers or large institutional investors that have entered into a participation agreement (an "Authorized Participant"). Such transactions are generally permitted on an in-kind basis, with a balancing cash component to equate the transaction to the daily NAV per Share of each Fund on the transaction date times the number of Shares in a Creation Unit. Authorized Participants purchasing Creation Units must pay to BNYM, as transfer agent, a standard creation transaction fee (the "Creation Transaction Fee"), which is based on the number of different securities in a Creation Unit of each Fund according to the fee schedule set forth below: Number of Securities Creation in a Creation Unit Transaction Fee -------------------- --------------- 1-100 $ 500 101-499 $1,000 500 or more $1,500 The Creation Transaction Fee is applicable to each purchase transaction regardless of the number of Creation Units purchased in the transaction. An additional variable fee of up to three times the Creation Transaction Fee may be charged to approximate additional expenses incurred by a Fund with respect to transactions effected outside of the clearing process (i.e., through a DTC Participant) or to the extent that cash is used in lieu of securities to purchase Creation Units. The price for each Creation Unit will equal the daily NAV per Share of a Fund on the transaction date times the number of Shares in a Creation Unit plus the fees described above and, if applicable, any transfer taxes. Authorized Participants redeeming Creation Units must pay to BNYM, as transfer agent, a standard redemption transaction fee (the "Redemption Transaction Fee"), which is based on the number of different securities in a Creation Unit of each Fund according to the fee schedule set forth below: Number of Securities Redemption in a Creation Unit Transaction Fee -------------------- --------------- 1-100 $ 500 101-499 $1,000 500 or more $1,500 Page 64 -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND DECEMBER 31, 2018 The Redemption Transaction Fee is applicable to each redemption transaction regardless of the number of Creation Units redeemed in the transaction. An additional variable fee of up to three times the Redemption Transaction Fee may be charged to approximate additional expenses incurred by a Fund with respect to redemptions effected outside of the clearing process or to the extent that redemptions are for cash. Each Fund reserves the right to effect redemptions in cash. A shareholder may request cash redemption in lieu of securities; however, a Fund may, in its discretion, reject any such request. 6. DISTRIBUTION PLAN The Board of Trustees adopted a Distribution and Service Plan pursuant to Rule 12b-1 under the 1940 Act. In accordance with the Rule 12b-1 plan, the Funds are authorized to pay an amount up to 0.25% of their average daily net assets each year to reimburse First Trust Portfolios L.P. ("FTP"), the distributor of the Funds, for amounts expended to finance activities primarily intended to result in the sale of Creation Units or the provision of investor services. FTP may also use this amount to compensate securities dealers or other persons that are Authorized Participants for providing distribution assistance, including broker-dealer and shareholder support and educational and promotional services. No 12b-1 fees are currently paid by the Funds, and pursuant to a contractual arrangement, no 12b-1 fees will be paid any time before April 30, 2020. 7. INDEMNIFICATION The Trust, on behalf of the Funds, has a variety of indemnification obligations under contracts with its service providers. The Trust's maximum exposure under these arrangements is unknown. However, the Trust has not had prior claims or losses pursuant to these contracts and expects the risk of loss to be remote. 8. SUBSEQUENT EVENTS Management has evaluated the impact of all subsequent events on the Funds through the date the financial statements were issued, and has determined that there were no subsequent events requiring recognition or disclosure in the financial statements that have not already been disclosed. Page 65 -------------------------------------------------------------------------------- REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM -------------------------------------------------------------------------------- TO THE SHAREHOLDERS AND THE BOARD OF TRUSTEES OF FIRST TRUST EXCHANGE-TRADED FUND: OPINION ON THE FINANCIAL STATEMENTS AND FINANCIAL HIGHLIGHTS We have audited the accompanying statements of assets and liabilities, including the portfolios of investments, of First Trust Exchange-Traded Fund (the "Trust"), comprising the First Trust Dow Jones Select MicroCap Index Fund, First Trust Morningstar Dividend Leaders Index Fund, First Trust US Equity Opportunities ETF, First Trust NYSE Arca Biotechnology Index Fund, First Trust Dow Jones Internet Index Fund, First Trust Capital Strength ETF, First Trust Value Line(R) Dividend Index Fund, and First Trust Value Line(R) 100 Exchange-Traded Fund (the "Funds"), each a series of First Trust Exchange-Traded Fund, as of December 31, 2018, the related statements of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, the financial highlights for each of the five years in the period then ended, and the related notes. In our opinion, the financial statements and financial highlights present fairly, in all material respects, the financial position of each of the funds listed above included in First Trust Exchange-Traded Fund as of December 31, 2018, and the results of their operations for the year then ended, the changes in their net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. BASIS FOR OPINION These financial statements and financial highlights are the responsibility of the Funds' management. Our responsibility is to express an opinion on the Funds' financial statements and financial highlights based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Funds in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement, whether due to error or fraud. The Funds are not required to have, nor were we engaged to perform, an audit of their internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Funds' internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements and financial highlights, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements and financial highlights. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and financial highlights. Our procedures included confirmation of securities owned as of December 31, 2018, by correspondence with the custodian and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion. /s/ Deloitte & Touche LLP Chicago, Illinois February 25, 2019 We have served as the auditor of one or more First Trust investment companies since 2001. Page 66 -------------------------------------------------------------------------------- ADDITIONAL INFORMATION -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND DECEMBER 31, 2018 (UNAUDITED) PROXY VOTING POLICIES AND PROCEDURES A description of the policies and procedures that the Trust uses to determine how to vote proxies and information on how each Fund voted proxies relating to its portfolio securities during the most recent 12-month period ended June 30 is available (1) without charge, upon request, by calling (800) 988-5891; (2) on the Funds' website located at www.ftportfolios.com; and (3) on the Securities and Exchange Commission's ("SEC") website at www.sec.gov. PORTFOLIO HOLDINGS The Trust files its complete schedule of each Fund's portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The Trust's Form N-Qs are available (1) by calling (800) 988-5891; (2) on each Fund's website at www.ftportfolios.com; and (3) on the SEC's website at www.sec.gov. Beginning in April 2019, the Trust will cease to disclose each Fund's holdings on Form N-Q and will file Form N-PORT with the SEC on a monthly basis. Part F of Form N-PORT, which contains the complete schedule of each Fund's portfolio holdings, will be made available in the same manner as Form N-Q discussed above. FEDERAL TAX INFORMATION For the taxable year ended December 31, 2018, the following percentages of income dividends paid by the Funds qualify for the dividends received deduction available to corporations:
Dividends Received Deduction ---------------------------- First Trust Dow Jones Select MicroCap Index Fund 100.00% First Trust Morningstar Dividend Leaders Index Fund 100.00% First Trust US Equity Opportunities ETF 100.00% First Trust NYSE Arca Biotechnology Index Fund -- First Trust Dow Jones Internet Index Fund -- First Trust Capital Strength ETF 100.00% First Trust Value Line(R) Dividend Index Fund 98.69% First Trust Value Line(R)100 Exchange-Traded Fund 100.00%
For the taxable year ended December 31, 2018, the following percentages of income dividends paid by the Funds are hereby designated as qualified dividend income:
Qualified Dividend Income ---------------------------- First Trust Dow Jones Select MicroCap Index Fund 100.00% First Trust Morningstar Dividend Leaders Index Fund 100.00% First Trust US Equity Opportunities ETF 100.00% First Trust NYSE Arca Biotechnology Index Fund -- First Trust Dow Jones Internet Index Fund -- First Trust Capital Strength ETF 100.00% First Trust Value Line(R) Dividend Index Fund 100.00% First Trust Value Line(R)100 Exchange-Traded Fund 100.00%
RISK CONSIDERATIONS RISKS ARE INHERENT IN ALL INVESTING. CERTAIN GENERAL RISKS THAT MAY BE APPLICABLE TO A FUND ARE IDENTIFIED BELOW, BUT NOT ALL OF THE MATERIAL RISKS RELEVANT TO EACH FUND ARE INCLUDED IN THIS REPORT AND NOT ALL OF THE RISKS BELOW APPLY TO EACH FUND. THE MATERIAL RISKS OF INVESTING IN EACH FUND ARE SPELLED OUT IN ITS PROSPECTUS, STATEMENT OF ADDITIONAL INFORMATION AND OTHER REGULATORY FILINGS. BEFORE INVESTING, YOU SHOULD CONSIDER EACH FUND'S INVESTMENT OBJECTIVE, RISKS, CHARGES AND EXPENSES, AND READ EACH FUND'S PROSPECTUS AND STATEMENT OF ADDITIONAL INFORMATION CAREFULLY. YOU CAN DOWNLOAD EACH FUND'S PROSPECTUS AT WWW.FTPORTFOLIOS.COM OR CONTACT FIRST TRUST PORTFOLIOS L.P. AT (800) 621-1675 TO REQUEST A PROSPECTUS, WHICH CONTAINS THIS AND OTHER INFORMATION ABOUT EACH FUND. CONCENTRATION RISK. To the extent that a fund is able to invest a large percentage of its assets in a single asset class or the securities of issuers within the same country, state, region, industry or sector, an adverse economic, business or political development may affect the value of the fund's investments more than if the fund were more broadly diversified. A fund that tracks an index will be concentrated to the extent the fund's corresponding index is concentrated. A concentration makes a fund more susceptible to any single occurrence and may subject the fund to greater market risk than a fund that is not concentrated. Page 67 -------------------------------------------------------------------------------- ADDITIONAL INFORMATION (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND DECEMBER 31, 2018 (UNAUDITED) CREDIT RISK. Credit risk is the risk that an issuer of a security will be unable or unwilling to make dividend, interest and/or principal payments when due and the related risk that the value of a security may decline because of concerns about the issuer's ability to make such payments. CYBER SECURITY RISK. The funds are susceptible to potential operational risks through breaches in cyber security. A breach in cyber security refers to both intentional and unintentional events that may cause a fund to lose proprietary information, suffer data corruption or lose operational capacity. Such events could cause a fund to incur regulatory penalties, reputational damage, additional compliance costs associated with corrective measures and/or financial loss. In addition, cyber security breaches of a fund's third-party service providers, such as its administrator, transfer agent, custodian, or sub-advisor, as applicable, or issuers in which the fund invests, can also subject a fund to many of the same risks associated with direct cyber security breaches. DERIVATIVES RISK. To the extent a fund uses derivative instruments such as futures contracts, options contracts and swaps, the fund may experience losses because of adverse movements in the price or value of the underlying asset, index or rate, which may be magnified by certain features of the derivative. These risks are heightened when a fund's portfolio managers use derivatives to enhance the fund's return or as a substitute for a position or security, rather than solely to hedge (or offset) the risk of a position or security held by the fund. EQUITY SECURITIES RISK. To the extent a fund invests in equity securities, the value of the fund's shares will fluctuate with changes in the value of the equity securities. Equity securities prices fluctuate for several reasons, including changes in investors' perceptions of the financial condition of an issuer or the general condition of the relevant stock market, such as market volatility, or when political or economic events affecting the issuers occur. In addition, common stock prices may be particularly sensitive to rising interest rates, as the cost of capital rises and borrowing costs increase. Equity securities may decline significantly in price over short or extended periods of time, and such declines may occur in the equity market as a whole, or they may occur in only a particular country, company, industry or sector of the market. ETF RISK. The shares of an ETF trade like common stock and represent an interest in a portfolio of securities. The risks of owning an ETF generally reflect the risks of owning the underlying securities, although lack of liquidity in an ETF could result in it being more volatile and ETFs have management fees that increase their costs. Shares of an ETF trade on an exchange at market prices rather than net asset value, which may cause the shares to trade at a price greater than net asset value (premium) or less than net asset value (discount). In times of market stress, decisions by market makers to reduce or step away from their role of providing a market for an ETF's shares, or decisions by an ETF's authorized participants that they are unable or unwilling to proceed with creation and/or redemption orders of an ETF's shares, could result in shares of the ETF trading at a discount to net asset value and in greater than normal intraday bid-ask spreads. FIXED INCOME SECURITIES RISK. To the extent a fund invests in fixed income securities, the fund will be subject to credit risk, income risk, interest rate risk, liquidity risk and prepayment risk. Income risk is the risk that income from a fund's fixed income investments could decline during periods of falling interest rates. Interest rate risk is the risk that the value of a fund's fixed income securities will decline because of rising interest rates. Liquidity risk is the risk that a security cannot be purchased or sold at the time desired, or cannot be purchased or sold without adversely affecting the price. Prepayment risk is the risk that the securities will be redeemed or prepaid by the issuer, resulting in lower interest payments received by the fund. In addition to these risks, high yield securities, or "junk" bonds, are subject to greater market fluctuations and risk of loss than securities with higher ratings, and the market for high yield securities is generally smaller and less liquid than that for investment grade securities. INDEX CONSTITUENT RISK. Certain funds may be a constituent of one or more indices. As a result, such a fund may be included in one or more index-tracking exchange-traded funds or mutual funds. Being a component security of such a vehicle could greatly affect the trading activity involving a fund, the size of the fund and the market volatility of the fund. Inclusion in an index could significantly increase demand for the fund and removal from an index could result in outsized selling activity in a relatively short period of time. As a result, a fund's net asset value could be negatively impacted and the fund's market price may be significantly below its net asset value during certain periods. INDEX PROVIDER RISK. To the extent a fund seeks to track an index, it is subject to Index Provider Risk. There is no assurance that the Index Provider will compile the Index accurately, or that the Index will be determined, maintained, constructed, reconstituted, rebalanced, composed, calculated or disseminated accurately. To correct any such error, the Index Provider may carry out an unscheduled rebalance or other modification of the Index constituents or weightings, which may increase the fund's costs. The Index Provider does not provide any representation or warranty in relation to the quality, accuracy or completeness of data in the Index, and it does not guarantee that the Index will be calculated in accordance with its stated methodology. Losses or costs associated with any Index Provider errors generally will be borne by the fund and its shareholders. Page 68 -------------------------------------------------------------------------------- ADDITIONAL INFORMATION (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND DECEMBER 31, 2018 (UNAUDITED) INVESTMENT COMPANIES RISK. To the extent a fund invests in the securities of other investment vehicles, the fund will incur additional fees and expenses that would not be present in a direct investment in those investment vehicles. Furthermore, the fund's investment performance and risks are directly related to the investment performance and risks of the investment vehicles in which the fund invests. MANAGEMENT RISK. To the extent that a fund is actively managed, it is subject to management risk. In managing an actively-managed fund's investment portfolio, the fund's portfolio managers will apply investment techniques and risk analyses that may not have the desired result. There can be no guarantee that a fund will meet its investment objective. MARKET RISK. Securities held by a fund, as well as shares of a fund itself, are subject to market fluctuations caused by factors such as general economic conditions, political events, regulatory or market developments, changes in interest rates and perceived trends in securities prices. Shares of a fund could decline in value or underperform other investments as a result of the risk of loss associated with these market fluctuations. NON-U.S. SECURITIES RISK. To the extent a fund invests in non-U.S. securities, it is subject to additional risks not associated with securities of domestic issuers. Non-U.S. securities are subject to higher volatility than securities of domestic issuers due to: possible adverse political, social or economic developments; restrictions on foreign investment or exchange of securities; lack of liquidity; currency exchange rates; excessive taxation; government seizure of assets; different legal or accounting standards; and less government supervision and regulation of exchanges in foreign countries. Investments in non-U.S. securities may involve higher costs than investments in U.S. securities, including higher transaction and custody costs, as well as additional taxes imposed by non-U.S. governments. These risks may be heightened for securities of companies located, or with significant operations, in emerging market countries. PASSIVE INVESTMENT RISK. To the extent a fund seeks to track an index, the fund will invest in the securities included in, or representative of, the index regardless of their investment merit. A fund generally will not attempt to take defensive positions in declining markets. NOT FDIC INSURED NOT BANK GUARANTEED MAY LOSE VALUE REMUNERATION First Trust Advisors L.P. ("First Trust") is authorised and regulated by the U.S. Securities and Exchange Commission and is entitled to market shares of certain First Trust Exchange-Traded Fund funds it manages (the "Funds") in certain members states in the European Economic Area in accordance with the cooperation arrangements in Article 42 of the Alternative Investment Fund Managers Directive (the "Directive"). First Trust is required under the Directive to make disclosures in respect of remuneration. The following disclosures are made in line with First Trust's interpretation of currently available regulatory guidance on remuneration disclosures. During the year ended December 31,2018, the amount of remuneration paid (or to be paid) by First Trust Advisors L.P. in respect of the Funds is $8,108,839. This figure is comprised of $355,327 paid (or to be paid) in fixed compensation and $7,753,512 paid (or to be paid) in variable compensation. There were a total of 14 beneficiaries of the remuneration described above. Those amounts include $5,149,543 paid (or to be paid) to senior management of First Trust Advisors L.P. and $2,959,296 paid (or to be paid) to other employees whose professional activities have a material impact on the risk profiles of First Trust Advisors L.P. or the Funds (collectively, "Code Staff"). Code Staff included in the aggregated figures disclosed above are rewarded in line with First Trust's remuneration policy (the "Remuneration Policy") which is determined and implemented by First Trust's senior management. The Remuneration Policy reflects First Trust's ethos of good governance and encapsulates the following principal objectives: i. to provide a clear link between remuneration and performance of First Trust and to avoid rewarding for failure; ii. to promote sound and effective risk management consistent with the risk profiles of the Funds managed by First Trust; and iii. to remunerate staff in line with the business strategy, objectives, values and interests of First Trust and the Funds managed by First Trust in a manner that avoids conflicts of interest. Page 69 -------------------------------------------------------------------------------- ADDITIONAL INFORMATION (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND DECEMBER 31, 2018 (UNAUDITED) First Trust assesses various risk factors which it is exposed to when considering and implementing remuneration for Code Staff and considers whether any potential award to such person(s) would give rise to a conflict of interest. First Trust does not reward failure, or consider the taking of risk or failure to take risk in its remuneration of Code Staff. First Trust assesses performance for the purposes of determining payments in respect of performance-related remuneration of Code Staff by reference to a broad range of measures including (i) individual performance (using financial and non-financial criteria), and (ii) the overall performance of First Trust. Remuneration is not based upon the performance of the Funds. The elements of remuneration are balanced between fixed and variable and the senior management sets fixed salaries at a level sufficient to ensure that variable remuneration incentivises and rewards strong individual performance but does not encourage excessive risk taking. No individual is involved in setting his or her own remuneration. Page 70 -------------------------------------------------------------------------------- BOARD OF TRUSTEES AND OFFICERS -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND DECEMBER 31, 2018 (UNAUDITED) The following tables identify the Trustees and Officers of the Trust. Unless otherwise indicated, the address of all persons is 120 East Liberty Drive, Suite 400, Wheaton, IL 60187. The Trust's statement of additional information includes additional information about the Trustees and is available, without charge, upon request, by calling (800) 988-5891.
NUMBER OF OTHER PORTFOLIOS IN TRUSTEESHIPS OR TERM OF OFFICE THE FIRST TRUST DIRECTORSHIPS NAME, AND YEAR FIRST FUND COMPLEX HELD BY TRUSTEE YEAR OF BIRTH AND ELECTED OR PRINCIPAL OCCUPATIONS OVERSEEN BY DURING PAST POSITION WITH THE TRUST APPOINTED DURING PAST 5 YEARS TRUSTEE 5 YEARS ------------------------------------------------------------------------------------------------------------------------------------ INDEPENDENT TRUSTEES ------------------------------------------------------------------------------------------------------------------------------------ Richard E. Erickson, Trustee o Indefinite Term Physician, Officer, Wheaton Orthopedics; 161 None (1951) Limited Partner, Gundersen Real Estate o Since Inception Limited Partnership (June 1992 to December 2016); Member, Sportsmed LLC (April 2007 to November 2015) Thomas R. Kadlec, Trustee o Indefinite Term President, ADM Investors Services, Inc. 161 Director of ADM (1957) (Futures Commission Merchant) Investor Services, o Since Inception Inc., ADM Investor Services International, Futures Industry Association, and National Futures Association Robert F. Keith, Trustee o Indefinite Term President, Hibs Enterprises (Financial and 161 Director of Trust (1956) Management Consulting) Company of o Since Inception Illinois Niel B. Nielson, Trustee o Indefinite Term Senior Advisor (August 2018 to Present), 161 Director of (1954) Managing Director and Chief Operating Covenant o Since Inception Officer (January 2015 to August 2018), Transport Inc. Pelita Harapan Educational Foundation (May 2003 to (Educational Products and Services); May 2014) President and Chief Executive Officer (June 2012 to September 2014), Servant Interactive LLC (Educational Products and Services); President and Chief Executive Officer (June 2012 to September 2014), Dew Learning LLC (Educational Products and Services) ------------------------------------------------------------------------------------------------------------------------------------ INTERESTED TRUSTEE ------------------------------------------------------------------------------------------------------------------------------------ James A. Bowen(1), Trustee, o Indefinite Term Chief Executive Officer, First Trust 161 None Chairman of the Board Advisors L.P. and First Trust (1955) o Since Inception Portfolios L.P.; Chairman of the Board of Directors, BondWave LLC (Software Development Company) and Stonebridge Advisors LLC (Investment Advisor)
----------------------------- (1) Mr. Bowen is deemed an "interested person" of the Trust due to his position as Chief Executive Officer of First Trust Advisors L.P., investment advisor of the Trust. Page 71 -------------------------------------------------------------------------------- BOARD OF TRUSTEES AND OFFICERS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND DECEMBER 31, 2018 (UNAUDITED)
POSITION AND TERM OF OFFICE NAME AND OFFICES AND LENGTH OF PRINCIPAL OCCUPATIONS YEAR OF BIRTH WITH TRUST SERVICE DURING PAST 5 YEARS ------------------------------------------------------------------------------------------------------------------------------------ OFFICERS(2) ------------------------------------------------------------------------------------------------------------------------------------ James M. Dykas President and Chief o Indefinite Term Managing Director and Chief Financial Officer (1966) Executive Officer (January 2016 to Present), Controller (January 2011 to o Since January 2016 January 2016), Senior Vice President (April 2007 to January 2016), First Trust Advisors L.P. and First Trust Portfolios L.P.; Chief Financial Officer (January 2016 to Present), BondWave LLC (Software Development Company) and Stonebridge Advisors LLC (Investment Advisor) Donald P. Swade Treasurer, Chief Financial o Indefinite Term Senior Vice President (July 2016 to Present), Vice (1972) Officer and Chief President (April 2012 to July 2016), First Trust Accounting Officer o Since January 2016 Advisors L.P. and First Trust Portfolios L.P. W. Scott Jardine Secretary and Chief o Indefinite Term General Counsel, First Trust Advisors L.P. and First (1960) Legal Officer Trust Portfolios L.P.; Secretary and General Counsel, o Since Inception BondWave LLC; Secretary, Stonebridge Advisors LLC Daniel J. Lindquist Vice President o Indefinite Term Managing Director, First Trust Advisors L.P. and (1970) First Trust Portfolios L.P. o Since Inception Kristi A. Maher Chief Compliance Officer o Indefinite Term Deputy General Counsel, First Trust Advisors L.P. (1966) and Assistant Secretary and First Trust Portfolios L.P. o Chief Compliance Officer Since January 2011 o Assistant Secretary Since Inception Roger F. Testin Vice President o Indefinite Term Senior Vice President, First Trust Advisors L.P. (1966) and First Trust Portfolios L.P. o Since Inception Stan Ueland Vice President o Indefinite Term Senior Vice President, First Trust Advisors L.P. (1970) and First Trust Portfolios L.P. o Since Inception
----------------------------- (2) The term "officer" means the president, vice president, secretary, treasurer, controller or any other officer who performs a policy making function. Page 72 -------------------------------------------------------------------------------- PRIVACY POLICY -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND DECEMBER 31, 2018 (UNAUDITED) PRIVACY POLICY First Trust values our relationship with you and considers your privacy an important priority in maintaining that relationship. We are committed to protecting the security and confidentiality of your personal information. SOURCES OF INFORMATION We collect nonpublic personal information about you from the following sources: o Information we receive from you and your broker-dealer, investment advisor or financial representative through interviews, applications, agreements or other forms; o Information about your transactions with us, our affiliates or others; o Information we receive from your inquiries by mail, e-mail or telephone; and o Information we collect on our website through the use of "cookies". For example, we may identify the pages on our website that your browser requests or visits. INFORMATION COLLECTED The type of data we collect may include your name, address, social security number, age, financial status, assets, income, tax information, retirement and estate plan information, transaction history, account balance, payment history, investment objectives, marital status, family relationships and other personal information. DISCLOSURE OF INFORMATION We do not disclose any nonpublic personal information about our customers or former customers to anyone, except as permitted by law. In addition to using this information to verify your identity (as required under law), the permitted uses may also include the disclosure of such information to unaffiliated companies for the following reasons: o In order to provide you with products and services and to effect transactions that you request or authorize, we may disclose your personal information as described above to unaffiliated financial service providers and other companies that perform administrative or other services on our behalf, such as transfer agents, custodians and trustees, or that assist us in the distribution of investor materials such as trustees, banks, financial representatives, proxy services, solicitors and printers. o We may release information we have about you if you direct us to do so, if we are compelled by law to do so, or in other legally limited circumstances (for example to protect your account from fraud). In addition, in order to alert you to our other financial products and services, we may share your personal information within First Trust. USE OF WEBSITE ANALYTICS We currently use third party analytics tools, Google Analytics and AddThis, to gather information for purposes of improving First Trust's website and marketing our products and services to you. These tools employ cookies, which are small pieces of text stored in a file by your web browser and sent to websites that you visit, to collect information, track website usage and viewing trends such as the number of hits, pages visited, videos and PDFs viewed and the length of user sessions in order to evaluate website performance and enhance navigation of the website. We may also collect other anonymous information, which is generally limited to technical and web navigation information such as the IP address of your device, internet browser type and operating system for purposes of analyzing the data to make First Trust's website better and more useful to our users. The information collected does not include any personal identifiable information such as your name, address, phone number or email address unless you provide that information through the website for us to contact you in order to answer your questions or respond to your requests. To find out how to opt-out of these services click on: Google Analytics and AddThis. CONFIDENTIALITY AND SECURITY With regard to our internal security procedures, First Trust restricts access to your nonpublic personal information to those First Trust employees who need to know that information to provide products or services to you. We maintain physical, electronic and procedural safeguards to protect your nonpublic personal information. POLICY UPDATES AND INQUIRIES As required by federal law, we will notify you of our privacy policy annually. We reserve the right to modify this policy at any time, however, if we do change it, we will tell you promptly. For questions about our policy, or for additional copies of this notice, please go to www.ftportfolios.com, or contact us at 1-800-621-1675 (First Trust Portfolios) or 1-800-222-6822 (First Trust Advisors). May 2017 Page 73 This page intentionally left blank. This page intentionally left blank. This page intentionally left blank. FIRST TRUST First Trust Exchange-Traded Fund INVESTMENT ADVISOR First Trust Advisors L.P. 120 East Liberty Drive, Suite 400 Wheaton, IL 60187 ADMINISTRATOR, CUSTODIAN, FUND ACCOUNTANT & TRANSFER AGENT The Bank of New York Mellon 240 Greenwich Street New York, NY 10286 INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Deloitte & Touche LLP 111 S. Wacker Drive Chicago, IL 60606 LEGAL COUNSEL Chapman and Cutler LLP 111 W. Monroe Street Chicago, IL 60603 [BLANK BACK COVER] FIRST TRUST First Trust Exchange-Traded Fund Book 2 First Trust NASDAQ-100 Equal Weighted Index Fund (QQEW) First Trust NASDAQ-100-Technology Sector Index Fund (QTEC) First Trust NASDAQ-100 Ex-Technology Sector Index Fund (QQXT) First Trust NASDAQ(R) Clean Edge(R) Green Energy Index Fund (QCLN) First Trust S&P REIT Index Fund (FRI) First Trust Water ETF (FIW) First Trust Natural Gas ETF (FCG) First Trust Chindia ETF (FNI) First Trust NASDAQ(R) ABA Community Bank Index Fund (QABA) Annual Report December 31, 2018 -------------------------------------------------------------------------------- TABLE OF CONTENTS -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND ANNUAL REPORT DECEMBER 31, 2018 Shareholder Letter.......................................................... 2 Market Overview............................................................. 3 Fund Performance Overview First Trust NASDAQ-100 Equal Weighted Index Fund (QQEW).................. 4 First Trust NASDAQ-100-Technology Sector Index Fund (QTEC)............... 6 First Trust NASDAQ-100 Ex-Technology Sector Index Fund (QQXT)............ 8 First Trust NASDAQ(R) Clean Edge(R) Green Energy Index Fund (QCLN)....... 10 First Trust S&P REIT Index Fund (FRI).................................... 12 First Trust Water ETF (FIW).............................................. 14 First Trust Natural Gas ETF (FCG)........................................ 16 First Trust Chindia ETF (FNI)............................................ 18 First Trust NASDAQ(R) ABA Community Bank Index Fund (QABA)............... 20 Notes to Fund Performance Overview.......................................... 22 Understanding Your Fund Expenses............................................ 23 Portfolio of Investments First Trust NASDAQ-100 Equal Weighted Index Fund (QQEW).................. 25 First Trust NASDAQ-100-Technology Sector Index Fund (QTEC)............... 28 First Trust NASDAQ-100 Ex-Technology Sector Index Fund (QQXT)............ 29 First Trust NASDAQ(R) Clean Edge(R) Green Energy Index Fund (QCLN)....... 32 First Trust S&P REIT Index Fund (FRI).................................... 34 First Trust Water ETF (FIW).............................................. 37 First Trust Natural Gas ETF (FCG)........................................ 39 First Trust Chindia ETF (FNI)............................................ 41 First Trust NASDAQ(R) ABA Community Bank Index Fund (QABA)............... 44 Statements of Assets and Liabilities........................................ 48 Statements of Operations.................................................... 50 Statements of Changes in Net Assets......................................... 52 Financial Highlights........................................................ 56 Notes to Financial Statements............................................... 61 Report of Independent Registered Public Accounting Firm..................... 71 Additional Information...................................................... 72 Board of Trustees and Officers.............................................. 76 Privacy Policy.............................................................. 78 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- CAUTION REGARDING FORWARD-LOOKING STATEMENTS This report contains certain forward-looking statements within the meaning of the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended. Forward-looking statements include statements regarding the goals, beliefs, plans or current expectations of First Trust Advisors L.P. ("First Trust" or the "Advisor") and its representatives, taking into account the information currently available to them. Forward-looking statements include all statements that do not relate solely to current or historical fact. For example, forward-looking statements include the use of words such as "anticipate," "estimate," "intend," "expect," "believe," "plan," "may," "should," "would" or other words that convey uncertainty of future events or outcomes. Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of any series of First Trust Exchange-Traded Fund (the "Trust") described in this report (each such series is referred to as a "Fund" and collectively, as the "Funds") to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. When evaluating the information included in this report, you are cautioned not to place undue reliance on these forward-looking statements, which reflect the judgment of the Advisor and its representatives only as of the date hereof. We undertake no obligation to publicly revise or update these forward-looking statements to reflect events and circumstances that arise after the date hereof. PERFORMANCE AND RISK DISCLOSURE There is no assurance that any Fund described in this report will achieve its investment objective. Each Fund is subject to market risk, which is the possibility that the market values of securities owned by the Fund will decline and that the value of the Fund shares may therefore be less than what you paid for them. Accordingly, you can lose money by investing in a Fund. See "Risk Considerations" in the Additional Information section of this report for a discussion of other risks of investing in the Funds. Performance data quoted represents past performance, which is no guarantee of future results, and current performance may be lower or higher than the figures shown. For the most recent month-end performance figures, please visit www.ftportfolios.com or speak with your financial advisor. Investment returns, net asset value and share price will fluctuate and Fund shares, when sold, may be worth more or less than their original cost. The Advisor may also periodically provide additional information on Fund performance on each Fund's webpage at www.ftportfolios.com. HOW TO READ THIS REPORT This report contains information that may help you evaluate your investment. It includes details about each Fund and presents data and analysis that provide insight into each Fund's performance and investment approach. By reading the market overview by Robert F. Carey, Chief Market Strategist of the Advisor, you may obtain an understanding of how the market environment affected the performance of each Fund. The statistical information that follows may help you understand each Fund's performance compared to that of relevant market benchmarks. It is important to keep in mind that the opinions expressed by personnel of the Advisor are just that: informed opinions. They should not be considered to be promises or advice. The opinions, like the statistics, cover the period through the date on the cover of this report. The material risks of investing in each Fund are spelled out in its prospectus, statement of additional information, and other Fund regulatory filings. Page 1 -------------------------------------------------------------------------------- SHAREHOLDER LETTER -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND ANNUAL LETTER FROM THE CHAIRMAN AND CEO DECEMBER 31, 2018 Dear Shareholders: First Trust is pleased to provide you with the annual report for certain funds in the First Trust Exchange-Traded Fund (the "Funds"), which contains detailed information about the Funds for the twelve months ended December 31, 2018, including a market overview and performance analyses. We encourage you to read this report carefully and discuss it with your financial advisor. As I wrote in my June 2018 letter, investors were hoping for another strong year in the markets for 2018. For the entire year, however, increased market volatility was the norm for U.S. and global markets. Despite the volatility, August was a strong month for stocks, and the Dow Jones Industrial Average ("DJIA") finished the month just under its previous high in January 2018. At the close of the third quarter in September, the markets had moved higher into positive territory. In fact, all three major U.S. indices (the Nasdaq Composite Index, the DJIA and the S&P 500(R) Index) hit record levels during the third quarter. Yet, in October, markets were again very volatile, surprising analysts and investors alike. Both global markets and U.S. markets fell on fears of slowing growth, trade wars and higher interest rates. The DJIA was down 5% for October and the MSCI EAFE Index, an index of stocks in 21 developed markets (excluding the U.S. and Canada), was down 9% for the month. However, investors cheered as November ended, and the DJIA climbed 617 points (2.5%) to its biggest one-day gain in eight months. The MSCI EAFE Index ended November down slightly. December held its own shocks as it became the worst December for stocks since the Great Depression. The DJIA and the MSCI EAFE Index ended December with year-to-date returns of -3.48% and -13.79%, respectively. Based on continued strong job growth and the economic outlook in the U.S., the Federal Reserve (the "Fed") raised interest rates in March, June and September. At their September meeting, the Fed indicated the possibility of one additional rate hike in 2018 and three more in 2019. At their November meeting, the Fed did not raise interest rates. However, at their December 19th meeting, the Fed did raise interest rates by 25 basis points. Analysts and investors will be watching to see what the Fed does with rates in 2019. While trade tensions have had an impact on markets around the world and could continue to do so in the future, our First Trust economists believe that the long-term impact of U.S. tariffs will be to encourage countries to come back to the table and talk about more equal trade. Despite market volatility, we continue to believe that the combination of low interest rates, low inflation and strong corporate earnings still point to a positive economic environment and further growth, though we understand that past performance can never guarantee future performance. We continue to believe that you should invest for the long term and be prepared for market movements, which can happen at any time. You can do this by keeping current on your portfolio and by speaking regularly with your investment professional. Markets go up and they also go down, but savvy investors are prepared for either through careful attention to investment goals. Thank you for giving First Trust the opportunity to be a part of your financial plan. We value our relationship with you and will report on the Funds again in six months. Sincerely, /s/ James A. Bowen James A. Bowen Chairman of the Board of Trustees Chief Executive Officer of First Trust Advisors L.P. Page 2 -------------------------------------------------------------------------------- MARKET OVERVIEW -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND ANNUAL REPORT DECEMBER 31, 2018 ROBERT F. CAREY, CFA SENIOR VICE PRESIDENT AND CHIEF MARKET STRATEGIST FIRST TRUST ADVISORS L.P. Mr. Carey is responsible for the overall management of research and analysis of the First Trust product line. Mr. Carey has over 25 years of experience as an Equity and Fixed-Income Analyst and is a recipient of the Chartered Financial Analyst ("CFA") designation. He is a graduate of the University of Illinois at Champaign-Urbana with a B.S. in Physics. He is also a member of the Investment Analysts Society of Chicago and the CFA Institute. Mr. Carey has appeared as a guest on such programs as Bloomberg TV, CNBC, and WBBM Radio, and has been quoted by several publications, including The Wall Street Journal, The Wall Street Reporter, Bloomberg News Service, and Registered Rep. STATE OF THE ECONOMY/INVESTING In its latest forecast, the International Monetary Fund ("IMF") is calling for the world real gross domestic product ("GDP") growth rate to dip from an estimated 3.7% in 2018 to an estimated 3.5% in 2019, according to its own release. The IMF cited the ongoing trade dispute between the U.S. and China as being partly responsible for the small downward revision in growth. The U.S. real GDP growth rate is expected to decrease from an estimated 2.9% in 2018 to an estimated 2.5% in 2019. The growth rate for Emerging Market and Developing Economies is expected to dip from an estimated 4.6% in 2018 to an estimated 4.5% in 2019. As indicated by the growth forecasts, we believe there is no imminent threat of a global economic recession. We believe that concerns over the extent to which interest rates could trend higher in 2019 and the potential for trade tariffs escalating to an all-out trade war were largely behind the spikes in volatility in the stock market in 2018. For those investors who fear that higher interest rates could dampen the prospects for stocks in 2019, Federal Reserve (the "Fed") Chairman Jerome Powell announced on January 4, 2019 that the Fed will be adopting a "patient" approach to tightening monetary policy. With respect to trade, the Trump Administration sent trade representatives to China on January 7, 2019 to set up future trade policy talks. The two countries also agreed to a 90-day truce freezing tariffs until March 1, 2019. We believe stock prices would move higher on a U.S.-China trade deal. ETFGI, an independent research and consultancy firm, reported that total assets invested in exchange-traded funds ("ETFs") and other exchange-traded products ("ETPs") listed globally stood at $4.79 trillion at the close of 2018, down from $4.84 trillion the previous year, according to its own release. The dip in assets under management was due to performance rather than capital flows. December 2018 marked the 59th consecutive month of net inflows into ETFs/ETPs listed globally. The U.S.'s share of the global market was approximately 70% at year-end. U.S. STOCKS AND BONDS The three major Standard & Poor's stock indices finished 2018 in the red. The S&P 500(R) Index, S&P MidCap 400(R) Index and S&P SmallCap 600(R) Index posted total returns of -4.38%, -11.08%, and -8.48%, respectively, according to Bloomberg. Only three of the 11 major S&P 500(R) Index sectors posted positive total returns. The top-performing sectors were Health Care, Utilities and Consumer Discretionary, up 6.47%, 4.11% and 0.82%, respectively, on a total return basis. The sectors that posted the biggest losses were Energy, Materials and Industrials, down 18.10%, 14.70% and 13.32%, respectively. We believe that some of the downside in stock prices late in the year could be attributed to profit taking and tax selling. Keep in mind, the S&P 500(R) Index posted a total return of 21.83% in 2017, more than double its 9.98% average annual total return from 1926-2018, according to Ibbotson Associates/Morningstar. Dividend growth has historically been a barometer of strength for Corporate America. The S&P Dow Jones Indices announced that total dividend distributions for U.S. common stocks increased by a net (increases less decreases) $7.4 billion in the third quarter of 2018, up from $4.5 billion from the third quarter of 2017, according to its own release. Net dividend increases totaled a record $58.4 billion in 2018, up from $37.1 billion in 2017. Currently, 82.2% of the companies in the S&P 500(R) Index pay a dividend, compared to 69.8% of the companies in the S&P MidCap 400(R) Index and 51.9% of the companies in the S&P SmallCap 600(R) Index. Total global dividend payouts are expected to rise 6.0% year-over-year to a record $1.81 trillion in 2019, according to business information provider IHS Markit, a London-based global information provider. Dividend-paying companies in the U.S. are expected to increase distributions by 8.1%, according to IHS Markit. In the U.S. bond market, the top-performing major debt group we track was intermediate-term Treasuries. The Bloomberg Barclays U.S. Treasury: Intermediate Index posted a total return of 1.41% in 2018. The worst-performing debt group that we track was high yield corporates. The Bloomberg Barclays U.S. Corporate High Yield Index posted a total return of -2.08%. The yield on the benchmark 10-Year Treasury note (T-note) rose by 28 basis points to 2.69% in 2018, according to Bloomberg. For comparative purposes, the average yield on the 10-year T-note was 2.51% for the 10-year period ended December 31, 2018. FOREIGN STOCKS AND BONDS The U.S. dollar registered a gain of 4.40% against a basket of major currencies in 2018, as measured by the U.S. Dollar Index (DXY). With respect to U.S. investors, a stronger U.S. dollar can negatively impact returns on unhedged foreign securities. We believe the dollar strengthened due to the escalating trade/tariff battle between the U.S. and its major trading partners, particularly China. Both foreign stocks and bonds succumbed to selling pressure in 2018. The Bloomberg Barclays Global Aggregate Index of higher quality debt posted a total return of -1.20% (USD), while the Bloomberg Barclays EM Hard Currency Aggregate Index of emerging markets debt fell 3.02%, according to Bloomberg Barclays. With respect to equities, the MSCI Daily Total Return Net World Index (excluding the U.S.) posted a total return of -14.09% (USD), compared to -14.58% (USD) for the MSCI Daily Total Return Net Emerging Markets Index. Page 3 -------------------------------------------------------------------------------- FUND PERFORMANCE OVERVIEW (UNAUDITED) -------------------------------------------------------------------------------- FIRST TRUST NASDAQ-100 EQUAL WEIGHTED INDEX FUND (QQEW) The First Trust NASDAQ-100 Equal Weighted Index Fund (the "Fund") seeks investment results that correspond generally to the price and yield (before the Fund's fees and expenses) of an equity index called the NASDAQ-100 Equal Weighted Index(SM) (the "Index"). The Fund will normally invest at least 90% of its net assets (including investment borrowings) in common stocks that comprise the Index. The Index is the equal-weighted version of the NASDAQ-100 Index(R), which includes 100 of the largest non-financial companies listed on The Nasdaq Stock Market LLC ("Nasdaq") based on market capitalization. The Index contains the same securities as the NASDAQ-100 Index(R), but each of the securities is initially set at a weight of 1.00% of the Index which is rebalanced quarterly. The Fund's shares are listed for trading on the Nasdaq. The first day of secondary market trading in shares of the Fund was April 25, 2006.
------------------------------------------------------------------------------------------------------------------------------------ PERFORMANCE ------------------------------------------------------------------------------------------------------------------------------------ AVERAGE ANNUAL TOTAL RETURNS CUMULATIVE TOTAL RETURNS 1 Year 5 Years 10 Years Inception 5 Years 10 Years Inception Ended Ended Ended (4/19/06) Ended Ended (4/19/06) 12/31/18 12/31/18 12/31/18 to 12/31/18 12/31/18 12/31/18 to 12/31/18 FUND PERFORMANCE NAV -5.16% 9.27% 16.76% 8.78% 55.74% 370.82% 191.32% Market Value -5.22% 9.26% 16.77% 8.78% 55.67% 371.12% 191.26% INDEX PERFORMANCE NASDAQ-100 Equal Weighted Index(SM) -4.61% 9.93% 17.48% 9.46% 60.51% 400.84% 215.14% S&P 500(R) Index -4.38% 8.49% 13.12% 7.49% 50.33% 243.04% 150.23% NASDAQ-100 Index(R) 0.04% 13.34% 19.29% 11.82% 87.03% 483.57% 313.37% ------------------------------------------------------------------------------------------------------------------------------------
(See Notes to Fund Performance Overview on page 22.) PERFORMANCE REVIEW The Fund generated a net asset value ("NAV") return of -5.16% during the 12-month period covered by this report. During the same period, the NASDAQ-100 Index(R) ("benchmark") generated a return of 0.04%. The Information Technology sector was the Fund's top weighted sector over the period with a 34.1% allocation. This sector had a -0.7% return and -0.07% contribution to the Fund's return. The Fund's least contributing sector was the Communication Services sector with a -1.8% contribution, stemming from its 15.3% allocation and -12.5% return. There was no single sector that returned positive performance for the Fund over the period. On a relative basis, the Fund underperformed the benchmark. The Fund's holdings among the Consumer Discretionary sector were the primary cause of the underperformance as the Fund underperformed the benchmark by -18.5% among these securities, which created -2.7% of relative underperformance. The Fund under allocated the relatively poor performing Utilities sector, which created 0.03% of relative outperformance. ----------------------------- Nasdaq(R), Nasdaq-100(R), Nasdaq-100 Index(R), and Nasdaq-100 Equal Weighted Index(SM) are trademarks of Nasdaq, Inc. (which with its affiliates is referred to as the "Corporations") and are licensed for use by First Trust. The Fund has not been passed on by the Corporations as to its legality or suitability. The Fund is not issued, endorsed, sold, or promoted by the Corporations. THE CORPORATIONS MAKE NO WARRANTIES AND BEAR NO LIABILITY WITH RESPECT TO THE FUND. Page 4 -------------------------------------------------------------------------------- FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST NASDAQ-100 EQUAL WEIGHTED INDEX FUND (QQEW) (CONTINUED) ----------------------------------------------------------- % OF TOTAL SECTOR CLASSIFICATION LONG-TERM INVESTMENTS ----------------------------------------------------------- Information Technology 37.16% Consumer Discretionary 17.21 Health Care 16.21 Communication Services 13.79 Industrials 7.92 Consumer Staples 5.80 Financials 0.99 Utilities 0.92 ------- Total 100.00% ======= ----------------------------------------------------------- % OF TOTAL TOP TEN HOLDINGS LONG-TERM INVESTMENTS ----------------------------------------------------------- Workday, Inc., Class A 1.08% Netflix, Inc. 1.05 Amazon.com, Inc. 1.05 Incyte Corp. 1.05 Dollar Tree, Inc. 1.04 Regeneron Pharmaceuticals, Inc. 1.04 Ross Stores, Inc. 1.03 Align Technology, Inc. 1.03 Advanced Micro Devices, Inc. 1.03 JD.com, Inc., ADR 1.03 ------- Total 10.43% =======
PERFORMANCE OF A $10,000 INITIAL INVESTMENT DECEMBER 31, 2008 - DECEMBER 31, 2018 First Trust NASDAQ-100 Equal NASDAQ-100 Equal S&P 500(R) NASDAQ-100 Weighted Index Fund Weighted Index(SM) Index Index(R) 12/08 $10,000 $10,000 $10,000 $10,000 06/09 12,369 12,401 10,316 12,240 12/09 15,954 16,052 12,645 15,462 06/10 15,054 15,195 11,804 14,508 12/10 19,343 19,582 14,551 18,577 06/11 20,796 21,119 15,426 19,549 12/11 18,806 19,172 14,857 19,258 06/12 20,532 20,984 16,267 22,230 12/12 21,600 22,134 17,235 22,788 06/13 24,970 25,702 19,617 25,087 12/13 30,229 31,207 22,817 31,206 06/14 32,641 33,800 24,446 33,662 12/14 36,013 37,396 25,942 37,264 06/15 36,867 38,394 26,261 38,911 12/15 36,815 38,475 26,300 40,899 06/16 35,755 37,463 27,310 39,603 12/16 39,398 41,419 29,446 43,876 06/17 45,635 48,116 32,196 51,238 12/17 49,646 52,514 35,873 58,350 06/18 51,989 55,145 36,824 64,564 12/18 47,082 50,084 34,302 58,357
Performance figures assume reinvestment of all distributions and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. An index is a statistical composite that tracks a specified financial market or sector. Unlike the Fund, the indices do not actually hold a portfolio of securities and therefore do not incur the expenses incurred by the Fund. These expenses negatively impact the performance of the Fund. The Fund's past performance does not predict future performance. FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS BID/ASK MIDPOINT VS. NAV AS OF DECEMBER 31, 2018 The following Frequency Distribution of Discounts and Premiums charts are provided to show the frequency at which the bid/ask midpoint price for the Fund was at a discount or premium to the daily NAV. The following tables are for comparative purposes only and represent the period January 1, 2014 through December 31, 2018. Shareholders may pay more than NAV when they buy Fund shares and receive less than NAV when they sell those shares because shares are bought and sold at current market price. Data presented represents past performance and cannot be used to predict future results. -------------------------------------------------------------------------------- NUMBER OF DAYS BID/ASK MIDPOINT AT/ABOVE NAV -------------------------------------------------------------------------------- FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00% 01/01/14 - 12/31/14 161 3 0 0 01/01/15 - 12/31/15 126 1 0 0 01/01/16 - 12/31/16 107 0 0 0 01/01/17 - 12/31/17 178 0 0 0 01/01/18 - 12/31/18 148 2 0 0 -------------------------------------------------------------------------------- NUMBER OF DAYS BID/ASK MIDPOINT BELOW NAV -------------------------------------------------------------------------------- FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00% 01/01/14 - 12/31/14 87 1 0 0 01/01/15 - 12/31/15 122 3 0 0 01/01/16 - 12/31/16 145 0 0 0 01/01/17 - 12/31/17 73 0 0 0 01/01/18 - 12/31/18 99 2 0 0 Page 5 -------------------------------------------------------------------------------- FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST NASDAQ-100-TECHNOLOGY SECTOR INDEX FUND (QTEC) The First Trust NASDAQ-100-Technology Sector Index Fund (the "Fund") seeks investment results that correspond generally to the price and yield (before the Fund's fees and expenses) of an equity index called the NASDAQ-100 Technology Sector Index(SM) (the "Index"). The Fund will normally invest at least 90% of its net assets (including investment borrowings) in common stocks that comprise the Index. The Index is an equal-weighted index based on the securities of the NASDAQ-100 Index(R) that are classified as "technology" according to the Industry Classification Benchmark classification system. The NASDAQ-100 Index(R) includes 100 of the largest domestic and international non-financial companies listed on the Nasdaq based on market capitalization. The NASDAQ-100 Index(R) is rebalanced quarterly. The Fund's shares are listed for trading on the Nasdaq. The first day of secondary market trading in shares of the Fund was April 25, 2006.
------------------------------------------------------------------------------------------------------------------------------------ PERFORMANCE ------------------------------------------------------------------------------------------------------------------------------------ AVERAGE ANNUAL TOTAL RETURNS CUMULATIVE TOTAL RETURNS 1 Year 5 Years 10 Years Inception 5 Years 10 Years Inception Ended Ended Ended (4/19/06) Ended Ended (4/19/06) 12/31/18 12/31/18 12/31/18 to 12/31/18 12/31/18 12/31/18 to 12/31/18 FUND PERFORMANCE NAV -4.70% 15.17% 20.11% 10.80% 102.63% 524.91% 267.76% Market Value -4.74% 15.16% 20.25% 10.80% 102.51% 532.06% 267.86% INDEX PERFORMANCE NASDAQ-100 Technology Sector Index(SM) -4.14% 15.89% 20.87% 11.49% 109.07% 565.74% 298.29% S&P 500(R) Index -4.38% 8.49% 13.12% 7.49% 50.33% 243.04% 150.23% S&P 500 Information Technology Index -0.29% 14.93% 18.36% 10.79% 100.52% 439.66% 267.44% ------------------------------------------------------------------------------------------------------------------------------------
(See Notes to Fund Performance Overview on page 22.) PERFORMANCE REVIEW The Fund generated a NAV return of -4.70% during the 12-month period covered by this report. During the same period, the S&P 500 Information Technology Index ("benchmark") generated a return of -0.29%. The Semiconductors & Semiconductor Equipment industry was the Fund's largest allocated industry over the period with a 61.5% allocation. This sector was also the least contributing sector with a -3.7% contribution, stemming from its -9.6% return. The Fund's top contributing industry was the Software & Services industry with a 2.8% contribution, stemming from its 31.4% allocation and 11.7% return. On a relative basis, the Fund underperformed the benchmark. The primary cause of the underperformance is due to the Fund over allocating the relatively poor performing Semiconductors & Semiconductor Equipment industry securities by 24.9%, which created -2.0% of relative underperformance. There was no single sector that contributed positively to the Fund relative to the performance against the benchmark. ----------------------------- Nasdaq(R), Nasdaq-100(R), Nasdaq-100 Index(R), and Nasdaq-100 Technology Sector Index(SM) are trademarks of Nasdaq, Inc. (which with its affiliates is referred to as the "Corporations") and are licensed for use by First Trust. The Fund has not been passed on by the Corporations as to its legality or suitability. The Fund is not issued, endorsed, sold, or promoted by the Corporations. THE CORPORATIONS MAKE NO WARRANTIES AND BEAR NO LIABILITY WITH RESPECT TO THE FUND. Page 6 -------------------------------------------------------------------------------- FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST NASDAQ-100-TECHNOLOGY SECTOR INDEX FUND (QTEC) (CONTINUED) ----------------------------------------------------------- % OF TOTAL SECTOR CLASSIFICATION (1) LONG-TERM INVESTMENTS ----------------------------------------------------------- Information Technology 87.02% Communication Services 10.31 Health Care 2.67 ------- Total 100.00% ======= (1) The above sector classification is based on Standard & Poor's Global Industry Classification Standard ("GICS"), and is different than the industry sector classification system used by the Index to select securities, which is the Industry Classification Benchmark ("ICB") system, the joint classification system of Dow Jones Indexes and FTSE Group. ----------------------------------------------------------- % OF TOTAL TOP TEN HOLDINGS LONG-TERM INVESTMENTS ----------------------------------------------------------- Workday, Inc., Class A 2.82% Advanced Micro Devices, Inc. 2.71 Adobe, Inc. 2.71 Applied Materials, Inc. 2.70 Lam Research Corp. 2.69 Cadence Design Systems, Inc. 2.68 Autodesk, Inc. 2.68 Cerner Corp. 2.67 Microchip Technology, Inc. 2.67 Intuit, Inc. 2.66 ------- Total 26.99% =======
PERFORMANCE OF A $10,000 INITIAL INVESTMENT DECEMBER 31, 2008 - DECEMBER 31, 2018 First Trust NASDAQ-100- NASDAQ-100 Technology Sector Technology Sector S&P 500 Information S&P 500(R) Index Fund Index(SM) Technology Index Index 12/08 $10,000 $10,000 $10,000 $10,000 06/09 13,407 13,452 12,486 10,316 12/09 17,990 18,115 16,171 12,645 06/10 16,623 16,784 14,462 11,804 12/10 21,934 22,220 17,820 14,551 06/11 22,103 22,458 18,187 15,426 12/11 20,673 21,072 18,251 14,857 06/12 21,616 22,102 20,686 16,267 12/12 22,331 22,904 20,957 17,235 06/13 24,948 25,671 22,288 19,617 12/13 30,843 31,840 26,915 22,817 06/14 34,890 36,132 29,321 24,446 12/14 38,501 40,002 32,329 25,942 06/15 37,550 39,122 32,575 26,261 12/15 37,971 39,685 34,246 26,300 06/16 39,084 40,995 34,136 27,310 12/16 47,567 50,073 38,987 29,448 06/17 56,629 59,782 45,704 32,198 12/17 65,579 69,434 54,125 35,882 06/18 70,392 74,746 60,008 36,833 12/18 62,494 66,574 53,966 34,304
Performance figures assume reinvestment of all distributions and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. An index is a statistical composite that tracks a specified financial market or sector. Unlike the Fund, the indices do not actually hold a portfolio of securities and therefore do not incur the expenses incurred by the Fund. These expenses negatively impact the performance of the Fund. The Fund's past performance does not predict future performance. FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS BID/ASK MIDPOINT VS. NAV AS OF DECEMBER 31, 2018 The following Frequency Distribution of Discounts and Premiums charts are provided to show the frequency at which the bid/ask midpoint price for the Fund was at a discount or premium to the daily NAV. The following tables are for comparative purposes only and represent the period January 1, 2014 through December 31, 2018. Shareholders may pay more than NAV when they buy Fund shares and receive less than NAV when they sell those shares because shares are bought and sold at current market price. Data presented represents past performance and cannot be used to predict future results. -------------------------------------------------------------------------------- NUMBER OF DAYS BID/ASK MIDPOINT AT/ABOVE NAV -------------------------------------------------------------------------------- FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00% 01/01/14 - 12/31/14 171 4 0 0 01/01/15 - 12/31/15 164 2 0 0 01/01/16 - 12/31/16 147 0 0 0 01/01/17 - 12/31/17 146 0 0 0 01/01/18 - 12/31/18 132 3 1 0 -------------------------------------------------------------------------------- NUMBER OF DAYS BID/ASK MIDPOINT BELOW NAV -------------------------------------------------------------------------------- FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00% 01/01/14 - 12/31/14 76 1 0 0 01/01/15 - 12/31/15 85 1 0 0 01/01/16 - 12/31/16 105 0 0 0 01/01/17 - 12/31/17 105 0 0 0 01/01/18 - 12/31/18 111 4 0 0 Page 7 -------------------------------------------------------------------------------- FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST NASDAQ-100 EX-TECHNOLOGY SECTOR INDEX FUND (QQXT) The First Trust NASDAQ-100 Ex-Technology Sector Index Fund (the "Fund") seeks investment results that correspond generally to the price and yield (before the Fund's fees and expenses) of an equity index called the NASDAQ-100 Ex-Tech Sector Index(SM) (the "Index"). The Fund will normally invest at least 90% of its net assets (including investment borrowings) in common stocks that comprise the Index. The Index is an equal-weighted index based on the securities of the NASDAQ-100 Index(R) that are not classified as "technology" according to the Industry Classification Benchmark classification system and, as a result, is a subset of the NASDAQ-100 Index(R). The NASDAQ-100 Index(R) includes 100 of the largest domestic and international non-financial companies listed on the Nasdaq based on market capitalization. The Index is rebalanced quarterly. The Fund's shares are listed for trading on the Nasdaq. The first day of secondary market trading in shares of the Fund was February 15, 2007.
------------------------------------------------------------------------------------------------------------------------------------ PERFORMANCE ------------------------------------------------------------------------------------------------------------------------------------ AVERAGE ANNUAL TOTAL RETURNS CUMULATIVE TOTAL RETURNS 1 Year 5 Years 10 Years Inception 5 Years 10 Years Inception Ended Ended Ended (2/8/07) Ended Ended (2/8/07) 12/31/18 12/31/18 12/31/18 to 12/31/18 12/31/18 12/31/18 to 12/31/18 FUND PERFORMANCE NAV -5.58% 6.10% 14.87% 7.69% 34.45% 300.08% 141.23% Market Value -5.61% 6.10% 14.96% 7.69% 34.45% 303.10% 141.23% INDEX PERFORMANCE NASDAQ-100 Ex-Tech Sector Index(SM) -5.06% 6.72% 15.57% 8.35% 38.40% 325.12% 159.53% Russell 1000(R) Index -4.78% 8.21% 13.28% 6.99% 48.37% 247.98% 123.29% ------------------------------------------------------------------------------------------------------------------------------------
(See Notes to Fund Performance Overview on page 22.) PERFORMANCE REVIEW The Fund generated a NAV return of -5.58% during the 12-month period covered by this report. During the same period, the Russell 1000(R) Index ("benchmark") generated a return of -4.78%. The Fund's largest weighted sector over the period was the Health Care sector with a 26.4% allocation. This sector had a -4.8% return and a -1.2% contribution. The least contributing sector to the Fund's return was the Consumer Discretionary sector with a -1.9% contribution, stemming from its 26.3% allocation and -7.2% return. The top contributing sector to the Fund's return was the Information Technology sector with a 0.6% contribution, stemming from its 6.3% allocation and 10.1% return. On a relative basis, the Fund underperformed the benchmark. The primary cause of the underperformance is attributable to the Fund over allocating and underperforming the benchmark amongst the Health Care sector by 12.8% and -10.3%, respectively, creating -1.3% of relative underperformance. The Fund underweighted the Financials sector by 14.2%, which created 1.2% of relative outperformance as the Financial securities were relatively poor performers over the period. ----------------------------- Nasdaq(R), Nasdaq-100(R), Nasdaq-100 Index(R), and Nasdaq-100 Ex-Tech Sector Index(SM) are trademarks of Nasdaq, Inc. (which with its affiliates is referred to as the "Corporations") and are licensed for use by First Trust. The Fund has not been passed on by the Corporations as to its legality or suitability. The Fund is not issued, endorsed, sold, or promoted by the Corporations. THE CORPORATIONS MAKE NO WARRANTIES AND BEAR NO LIABILITY WITH RESPECT TO THE FUND. Page 8 -------------------------------------------------------------------------------- FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST NASDAQ-100 EX-TECHNOLOGY SECTOR INDEX FUND (QQXT) (CONTINUED) ----------------------------------------------------------- % OF TOTAL SECTOR CLASSIFICATION LONG-TERM INVESTMENTS ----------------------------------------------------------- Consumer Discretionary 27.78% Health Care 24.57 Communication Services 15.92 Industrials 12.80 Consumer Staples 9.37 Information Technology 6.46 Financials 1.62 Utilities 1.48 ------- Total 100.00% ======= ----------------------------------------------------------- % OF TOTAL TOP TEN HOLDINGS LONG-TERM INVESTMENTS ----------------------------------------------------------- Netflix, Inc. 1.70% Amazon.com, Inc. 1.69 Regeneron Pharmaceuticals, Inc. 1.69 Dollar Tree, Inc. 1.69 Incyte Corp. 1.68 Ross Stores, Inc. 1.67 JD.com, Inc., ADR 1.67 Align Technology, Inc. 1.66 Amgen, Inc. 1.66 Lululemon Athletica, Inc. 1.66 ------- Total 16.77% =======
PERFORMANCE OF A $10,000 INITIAL INVESTMENT DECEMBER 31, 2008 - DECEMBER 31, 2018 First Trust NASDAQ-100 NASDAQ-100 Ex-Technology Sector Ex-Tech Sector Russell 1000(R) Index Fund Index(SM) Index 12/08 $10,000 $10,000 $10,000 06/09 11,710 11,742 10,432 12/09 14,675 14,763 12,843 06/10 14,022 14,147 12,021 12/10 17,704 17,920 14,910 06/11 19,839 20,147 15,860 12/11 17,512 17,852 15,134 06/12 19,748 20,183 16,554 12/12 21,069 21,584 17,620 06/13 25,026 25,761 20,071 12/13 29,758 30,715 23,455 06/14 31,121 32,229 25,160 12/14 34,326 35,639 26,561 06/15 36,190 37,699 27,015 12/15 35,955 37,586 26,804 06/16 33,780 35,383 27,806 12/16 35,189 36,961 30,033 06/17 40,214 42,372 32,817 12/17 42,369 44,770 36,545 06/18 43,704 46,306 37,587 12/18 40,007 42,512 34,798
Performance figures assume reinvestment of all distributions and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. An index is a statistical composite that tracks a specified financial market or sector. Unlike the Fund, the indices do not actually hold a portfolio of securities and therefore do not incur the expenses incurred by the Fund. These expenses negatively impact the performance of the Fund. The Fund's past performance does not predict future performance. FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS BID/ASK MIDPOINT VS. NAV AS OF DECEMBER 31, 2018 The following Frequency Distribution of Discounts and Premiums charts are provided to show the frequency at which the bid/ask midpoint price for the Fund was at a discount or premium to the daily NAV. The following tables are for comparative purposes only and represent the period January 1, 2014 through December 31, 2018. Shareholders may pay more than NAV when they buy Fund shares and receive less than NAV when they sell those shares because shares are bought and sold at current market price. Data presented represents past performance and cannot be used to predict future results. -------------------------------------------------------------------------------- NUMBER OF DAYS BID/ASK MIDPOINT AT/ABOVE NAV -------------------------------------------------------------------------------- FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00% 01/01/14 - 12/31/14 151 14 0 0 01/01/15 - 12/31/15 201 6 0 0 01/01/16 - 12/31/16 80 0 0 0 01/01/17 - 12/31/17 44 0 0 0 01/01/18 - 12/31/18 96 2 0 0 -------------------------------------------------------------------------------- NUMBER OF DAYS BID/ASK MIDPOINT BELOW NAV -------------------------------------------------------------------------------- FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00% 01/01/14 - 12/31/14 79 7 1 0 01/01/15 - 12/31/15 42 3 0 0 01/01/16 - 12/31/16 172 0 0 0 01/01/17 - 12/31/17 207 0 0 0 01/01/18 - 12/31/18 150 3 0 0 Page 9 -------------------------------------------------------------------------------- FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST NASDAQ(R) CLEAN EDGE(R) GREEN ENERGY INDEX FUND (QCLN) The First Trust NASDAQ(R) Clean Edge(R) Green Energy Index Fund (the "Fund") seeks investment results that correspond generally to the price and yield (before the Fund's fees and expenses) of an equity index called the NASDAQ(R) Clean Edge(R) Green Energy Index(SM) (the "Index"). The Fund will normally invest at least 90% of its net assets (including investment borrowings) in common stocks that comprise the Index. The Index is a modified market capitalization weighted index in which larger companies receive a larger Index weighting and includes caps to prevent high concentrations among larger alternative energy stocks. The Index is an equity index designed to track the performance of clean-energy companies that are publicly traded in the United States and includes companies engaged in manufacturing, development, distribution, and installation of emerging clean-energy technologies including, but not limited to, solar photovoltaics, biofuels, and advanced batteries. The Index is reconstituted semi-annually in March and September and rebalanced quarterly. The Fund's shares are listed for trading on the Nasdaq. The first day of secondary market trading in shares of the Fund was February 14, 2007.
------------------------------------------------------------------------------------------------------------------------------------ PERFORMANCE ------------------------------------------------------------------------------------------------------------------------------------ AVERAGE ANNUAL TOTAL RETURNS CUMULATIVE TOTAL RETURNS 1 Year 5 Years 10 Years Inception 5 Years 10 Years Inception Ended Ended Ended (2/8/07) Ended Ended (2/8/07) 12/31/18 12/31/18 12/31/18 to 12/31/18 12/31/18 12/31/18 to 12/31/18 FUND PERFORMANCE NAV -12.22% 0.53% 5.28% -0.56% 2.68% 67.21% -6.44% Market Value -12.59% 0.48% 5.27% -0.58% 2.44% 67.15% -6.65% INDEX PERFORMANCE NASDAQ(R) Clean Edge(R) Green Energy Index(SM) -12.11% 0.49% 5.35% -0.38% 2.46% 68.42% -4.42% Russell 2000(R) Index -11.01% 4.41% 11.97% 5.76% 24.09% 209.83% 94.66% ------------------------------------------------------------------------------------------------------------------------------------
(See Notes to Fund Performance Overview on page 22.) PERFORMANCE REVIEW The Fund generated a NAV return of -12.22% during the 12-month period covered by this report. During the same period, the Russell 2000(R) Index ("benchmark") generated a return of -11.01%. The Fund's largest allocated sector over the period was the Information Technology sector with a 46.2% allocation. This sector contributed -7.8% to the Fund's return, due to its -18.7% return. The Energy sector was the Fund's top performing sector with a 119.4% return, but due to the sector's low allocation of 1.0%, its contribution to the Fund's return was limited to only 0.5%. On a relative basis, the Fund underperformed the benchmark. The primary cause of the underperformance is attributable to the Fund overweighting and underperforming the benchmark among the Information Technology sector by 31.9% and -16.9%, respectively, creating -5.4% of relative drag. The Energy sector reversed 2.1% of relative underperformance due to the Fund outperforming the benchmark by 159.1%. Nasdaq(R) and Clean Edge(R) are the registered trademarks (the "Marks") of Nasdaq, Inc. ("Nasdaq") and Clean Edge, Inc. ("Clean Edge(R)") respectively. Nasdaq and Clean Edge(R) are, collectively with their affiliates, the "Corporations." The Marks are licensed for use by First Trust. The Fund has not been passed on by the Corporations as to its legality or suitability. The Fund is not issued, endorsed, sold, or promoted by the Corporations. The Fund should not be construed in any way as investment advice by the Corporations. THE CORPORATIONS MAKE NO WARRANTIES AND BEAR NO LIABILITY WITH RESPECT TO THE FUND. Page 10 -------------------------------------------------------------------------------- FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST NASDAQ(R) CLEAN EDGE(R) GREEN ENERGY INDEX FUND (QCLN) (CONTINUED) ----------------------------------------------------------- % OF TOTAL SECTOR CLASSIFICATION LONG-TERM INVESTMENTS ----------------------------------------------------------- Information Technology 44.06% Industrials 18.68 Utilities 17.97 Materials 8.70 Consumer Discretionary 8.35 Real Estate 1.16 Energy 1.08 ------- Total 100.00% ======= ----------------------------------------------------------- % OF TOTAL TOP TEN HOLDINGS LONG-TERM INVESTMENTS ----------------------------------------------------------- Tesla, Inc. 8.35% ON Semiconductor Corp. 7.22 Albemarle Corp. 7.04 Integrated Device Technology, Inc. 6.49 Hexcel Corp. 5.13 Universal Display Corp. 4.48 Cree, Inc. 4.26 First Solar, Inc. 4.20 Brookfield Renewable Partners, L.P. 3.98 Littelfuse, Inc. 3.94 ------- Total 55.09% =======
PERFORMANCE OF A $10,000 INITIAL INVESTMENT DECEMBER 31, 2008 - DECEMBER 31, 2018 First Trust NASDAQ(R) NASDAQ(R) Clean Edge(R) Green Clean Edge(R) Russell 2000(R) Energy Index Fund Green Energy Index(SM) Index 12/08 $10,000 $10,000 $10,000 06/09 12,368 12,402 10,264 12/09 14,379 14,472 12,717 06/10 11,913 12,025 12,469 12/10 14,674 14,863 16,132 06/11 13,656 13,885 17,134 12/11 8,624 8,798 15,460 06/12 8,347 8,498 16,779 12/12 8,581 8,682 17,987 06/13 12,828 12,944 20,840 12/13 16,285 16,438 24,970 06/14 18,729 18,910 25,767 12/14 15,789 15,924 26,192 06/15 16,945 17,093 27,436 12/15 14,773 14,909 25,035 06/16 13,325 13,414 25,591 12/16 14,459 14,514 30,371 06/17 16,904 16,989 31,887 12/17 19,047 19,165 34,821 06/18 18,338 18,469 37,488 12/18 16,721 16,842 30,983
Performance figures assume reinvestment of all distributions and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. An index is a statistical composite that tracks a specified financial market or sector. Unlike the Fund, the indices do not actually hold a portfolio of securities and therefore do not incur the expenses incurred by the Fund. These expenses negatively impact the performance of the Fund. The Fund's past performance does not predict future performance. FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS BID/ASK MIDPOINT VS. NAV AS OF DECEMBER 31, 2018 The following Frequency Distribution of Discounts and Premiums charts are provided to show the frequency at which the bid/ask midpoint price for the Fund was at a discount or premium to the daily NAV. The following tables are for comparative purposes only and represent the period January 1, 2014 through December 31, 2018. Shareholders may pay more than NAV when they buy Fund shares and receive less than NAV when they sell those shares because shares are bought and sold at current market price. Data presented represents past performance and cannot be used to predict future results. -------------------------------------------------------------------------------- NUMBER OF DAYS BID/ASK MIDPOINT AT/ABOVE NAV -------------------------------------------------------------------------------- FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00% 01/01/14 - 12/31/14 122 3 0 0 01/01/15 - 12/31/15 160 1 0 0 01/01/16 - 12/31/16 68 0 0 0 01/01/17 - 12/31/17 164 0 0 0 01/01/18 - 12/31/18 151 2 1 0 -------------------------------------------------------------------------------- NUMBER OF DAYS BID/ASK MIDPOINT BELOW NAV -------------------------------------------------------------------------------- FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00% 01/01/14 - 12/31/14 124 3 0 0 01/01/15 - 12/31/15 89 2 0 0 01/01/16 - 12/31/16 184 0 0 0 01/01/17 - 12/31/17 87 0 0 0 01/01/18 - 12/31/18 95 2 0 0 Page 11 -------------------------------------------------------------------------------- FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST S&P REIT INDEX FUND (FRI) The First Trust S&P REIT Index Fund (the "Fund") seeks investment results that correspond generally to the price and yield (before the Fund's fees and expenses) of an equity index called the S&P United States REIT Index (the "Index"). The Fund will normally invest at least 90% of its net assets (including investment borrowings) in common stocks that comprise the Index. The Index is a subset of the S&P Developed REIT Index, which measures the performance of more than 200 REITs or REIT-like structures in 15 developed markets. The S&P Developed REIT Index is a sub-index of the S&P Global REIT Index. The S&P Developed REIT Index aims to represent an accurate measure of the REIT developed equity market, reflecting the risk and return characteristics of this broad universe on an on-going basis. The Index contains those constituents of the S&P Developed REIT Index that are domiciled in the United States. The Index includes the securities of small and mid cap companies. The Fund's shares are listed for trading on the NYSE Arca. The first day of secondary market trading in shares of the Fund was May 10, 2007.
------------------------------------------------------------------------------------------------------------------------------------ PERFORMANCE ------------------------------------------------------------------------------------------------------------------------------------ AVERAGE ANNUAL TOTAL RETURNS CUMULATIVE TOTAL RETURNS 1 Year 5 Years 10 Years Inception 5 Years 10 Years Inception Ended Ended Ended (5/8/07) Ended Ended (5/8/07) 12/31/18 12/31/18 12/31/18 to 12/31/18 12/31/18 12/31/18 to 12/31/18 FUND PERFORMANCE NAV -4.19% 7.24% 11.58% 3.42% 41.84% 199.07% 47.96% Market Value -4.18% 7.24% 11.64% 3.42% 41.84% 200.66% 47.97% INDEX PERFORMANCE S&P United States REIT Index* -3.79% 7.78% 12.16% N/A 45.46% 214.94% N/A FTSE EPRA/NAREIT North America Index -3.89% 7.24% 12.06% 3.67% 41.85% 212.32% 52.16% Russell 3000(R) Index -5.24% 7.91% 13.18% 6.66% 46.34% 244.95% 112.03% ------------------------------------------------------------------------------------------------------------------------------------
* On November 6, 2008, the Fund's underlying index changed from the S&P REIT Composite Index to the S&P United States REIT Index. Effective December 31, 2008, the S&P REIT Composite Index was discontinued. Therefore, the Fund's performance and historical returns shown for the periods prior to November 6, 2008 are not necessarily indicative of the performance that the Fund, based on its current Index, would have generated. The inception date of the Index was June 30, 2008. Returns for the Index are only disclosed for those periods in which the Index was in existence for the whole period. (See Notes to Fund Performance Overview on page 22.) PERFORMANCE REVIEW The Fund generated a NAV return of -4.19% during the 12-month period covered by this report. During the same period, the Russell 3000(R) Index ("benchmark") generated a return of -5.24%. Retail Real Estate Investment Trusts ("REITs") were given the highest allocation in the Fund over the period at 20.2%, but due to these securities' poor return of -4.6%, their contribution to the Fund's return was -1.0%. Health Care REITs were the Fund's top performing and contributing REITs with a 7.6% return and 0.7% contribution. Office REITs were the Fund's worst performing and contributing REITs with a -14.5% return and -1.7% contribution. On a relative basis, the Fund outperformed the benchmark. REITs accounted for 2.6% of the benchmark over the period and contributed -0.1% to the benchmark's return. The Fund's allocation to Residential REITs created 1.4% of relative outperformance as the Fund over allocated the benchmark these relatively well performing securities by 19.6%. The Fund over allocated the benchmark by 11.4% amongst Office REITs, which created -1.1% of relative underperformance. ----------------------------- The S&P United States REIT Index is a product of S&P Dow Jones Indices LLC ("SPDJI"). Standard & Poor's(R) and S&P(R) are registered trademarks of Standard & Poor's Financial Services LLC ("S&P"). The marks have been licensed for use by SPDJI and sub-licensed by First Trust. The Fund is not sponsored, endorsed, sold or promoted by SPDJI or its affiliates, and SPDJI and its affiliates make no representation, warranty or condition regarding the advisability of buying, selling or holding shares of the Fund. Page 12 -------------------------------------------------------------------------------- FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST S&P REIT INDEX FUND (FRI) (CONTINUED) ----------------------------------------------------------- % OF TOTAL REIT CLASSIFICATION LONG-TERM INVESTMENTS ----------------------------------------------------------- Retail 19.13% Residential 18.50 Specialized 15.95 Health Care 13.11 Office 12.84 Industrial 8.62 Hotel & Resort 6.07 Diversified 5.78 ------- Total 100.00% ======= ----------------------------------------------------------- % OF TOTAL TOP TEN HOLDINGS LONG-TERM INVESTMENTS ----------------------------------------------------------- Simon Property Group, Inc. 6.88% Prologis, Inc. 4.89 Public Storage 4.02 Welltower, Inc. 3.45 Equity Residential 3.22 AvalonBay Communities, Inc. 3.18 Digital Realty Trust, Inc. 2.91 Ventas, Inc. 2.77 Realty Income Corp. 2.46 Boston Properties, Inc. 2.30 ------- Total 36.08% =======
PERFORMANCE OF A $10,000 INITIAL INVESTMENT DECEMBER 31, 2008 - DECEMBER 31, 2018 First Trust S&P United States FTSE EPRA/NAREIT Russell 3000(R) S&P REIT Index Fund REIT Index North America Index Index 12/08 $10,000 $10,000 $10,000 $10,000 06/09 8,731 8,757 8,993 10,420 12/09 12,801 12,859 13,222 12,834 06/10 13,500 13,593 13,900 12,058 12/10 16,351 16,521 17,009 15,007 06/11 17,986 18,219 18,807 15,960 12/11 17,642 17,920 18,401 15,160 06/12 20,225 20,595 21,091 16,573 12/12 20,710 21,143 21,741 17,649 06/13 21,971 22,502 22,763 20,130 12/13 21,088 21,649 22,019 23,570 06/14 24,749 25,468 25,780 25,206 12/14 27,333 28,203 28,219 26,529 06/15 25,603 26,483 26,509 27,044 12/15 27,871 28,919 28,730 26,657 06/16 31,483 32,762 32,499 27,622 12/16 30,079 31,376 31,079 30,050 06/17 30,614 32,025 31,642 32,733 12/17 31,214 32,736 32,496 36,397 06/18 31,560 33,184 33,016 37,567 12/18 29,907 31,494 31,232 34,495
Performance figures assume reinvestment of all distributions and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. An index is a statistical composite that tracks a specified financial market or sector. Unlike the Fund, the indices do not actually hold a portfolio of securities and therefore do not incur the expenses incurred by the Fund. These expenses negatively impact the performance of the Fund. The Fund's past performance does not predict future performance. FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS BID/ASK MIDPOINT VS. NAV AS OF DECEMBER 31, 2018 The following Frequency Distribution of Discounts and Premiums charts are provided to show the frequency at which the bid/ask midpoint price for the Fund was at a discount or premium to the daily NAV. The following tables are for comparative purposes only and represent the period January 1, 2014 through December 31, 2018. Shareholders may pay more than NAV when they buy Fund shares and receive less than NAV when they sell those shares because shares are bought and sold at current market price. Data presented represents past performance and cannot be used to predict future results. -------------------------------------------------------------------------------- NUMBER OF DAYS BID/ASK MIDPOINT AT/ABOVE NAV -------------------------------------------------------------------------------- FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00% 01/01/14 - 12/31/14 193 0 0 0 01/01/15 - 12/31/15 130 0 0 0 01/01/16 - 12/31/16 156 0 0 0 01/01/17 - 12/31/17 106 0 0 0 01/01/18 - 12/31/18 86 3 1 0 -------------------------------------------------------------------------------- NUMBER OF DAYS BID/ASK MIDPOINT BELOW NAV -------------------------------------------------------------------------------- FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00% 01/01/14 - 12/31/14 59 0 0 0 01/01/15 - 12/31/15 122 0 0 0 01/01/16 - 12/31/16 96 0 0 0 01/01/17 - 12/31/17 145 0 0 0 01/01/18 - 12/31/18 160 0 1 0 Page 13 -------------------------------------------------------------------------------- FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST WATER ETF (FIW) The First Trust Water ETF (the "Fund") seeks investment results that correspond generally to the price and yield (before the Fund's fees and expenses) of an equity index called the ISE Clean Edge Water Index (the "Index"). The Fund will normally invest at least 90% of its net assets (including investment borrowings) in common stocks that comprise the Index. The Index is a modified market capitalization weighted index comprised of 36 stocks that derive a substantial portion of their revenues from the potable and wastewater industries. The Fund's shares are listed for trading on the NYSE Arca. The first day of secondary market trading in shares of the Fund was May 11, 2007.
------------------------------------------------------------------------------------------------------------------------------------ PERFORMANCE ------------------------------------------------------------------------------------------------------------------------------------ AVERAGE ANNUAL TOTAL RETURNS CUMULATIVE TOTAL RETURNS 1 Year 5 Years 10 Years Inception 5 Years 10 Years Inception Ended Ended Ended (5/8/07) Ended Ended (5/8/07) 12/31/18 12/31/18 12/31/18 to 12/31/18 12/31/18 12/31/18 to 12/31/18 FUND PERFORMANCE NAV -8.89% 6.26% 11.80% 7.86% 35.47% 205.14% 141.53% Market Value -8.99% 6.23% 11.84% 7.86% 35.29% 206.15% 141.41% INDEX PERFORMANCE ISE Clean Edge Water Index -8.59% 6.79% 12.49% 8.52% 38.89% 224.58% 159.26% Russell 3000(R) Index -5.24% 7.91% 13.18% 6.66% 46.34% 244.95% 112.03% ------------------------------------------------------------------------------------------------------------------------------------
(See Notes to Fund Performance Overview on page 22.) PERFORMANCE REVIEW The Fund generated a NAV return of -8.89% during the 12-month period covered by this report. During the same period, the Russell 3000(R) Index ("benchmark") generated a return of -5.24%. The Fund's largest allocated sector was the Industrials sector with a 56.3% allocation. This sector had a -14.3% return and -8.1% contribution to the Fund's return. The top performing sector was the Health Care sector with a 12.3% return and 1.3% contribution, stemming from its 12.2% allocation. The worst performing sector was the Materials sector with a -17.7% return. This sector had a 5.8% allocation and -1.0% contribution to the Fund's return. On a relative basis, the Fund underperformed the benchmark. The primary cause of the underperformance is due to the Fund over allocating the benchmark among the poor performing Industrials sector by 45.8%, creating -4.1% of relative underperformance. The Fund over allocated the benchmark among the relatively well performing Utilities securities by 18.1%, which created 1.2% of relative outperformance. ----------------------------- "International Securities Exchange(TM)", "ISE(TM)" and "ISE Clean Edge Water Index" are trademarks of the International Securities Exchange, LLC and have been licensed for use for certain purposes by First Trust. The Fund, based on the ISE Clean Edge Water Index, is not sponsored, endorsed, sold or promoted by the International Securities Exchange, LLC and the International Securities Exchange, LLC makes no representation regarding the advisability of trading in such product. Page 14 -------------------------------------------------------------------------------- FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST WATER ETF (FIW) (CONTINUED) ----------------------------------------------------------- % OF TOTAL SECTOR CLASSIFICATION LONG-TERM INVESTMENTS ----------------------------------------------------------- Industrials 53.73% Utilities 23.94 Health Care 12.62 Materials 5.17 Information Technology 4.54 ------- Total 100.00% ======= ----------------------------------------------------------- % OF TOTAL TOP TEN HOLDINGS LONG-TERM INVESTMENTS ----------------------------------------------------------- American Water Works Co., Inc. 4.80% Agilent Technologies, Inc. 4.62 Danaher Corp. 4.61 Ecolab, Inc. 4.53 Roper Technologies, Inc. 4.13 Xylem, Inc. 4.07 Pentair PLC 4.02 American States Water Co. 3.85 IDEX Corp. 3.81 Aqua America, Inc. 3.72 ------- Total 42.16% =======
PERFORMANCE OF A $10,000 INITIAL INVESTMENT DECEMBER 31, 2008 - DECEMBER 31, 2018 First Trust ISE Clean Edge Russell 3000(R) Water ETF Water Index Index 12/08 $10,000 $10,000 $10,000 06/09 10,320 10,362 10,420 12/09 12,031 12,121 12,834 06/10 11,357 11,479 12,058 12/10 14,376 14,591 15,007 06/11 15,049 15,329 15,960 12/11 13,568 13,868 15,160 06/12 14,914 15,306 16,573 12/12 17,209 17,720 17,649 06/13 18,429 19,056 20,130 12/13 22,529 23,372 23,570 06/14 23,171 24,104 25,206 12/14 22,610 23,598 26,529 06/15 21,113 22,102 27,044 12/15 20,391 21,415 26,657 06/16 23,937 25,227 27,622 12/16 26,958 28,486 30,050 06/17 29,433 31,115 32,733 12/17 33,495 35,512 36,399 06/18 33,227 35,256 37,571 12/18 30,517 32,460 34,495
Performance figures assume reinvestment of all distributions and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. An index is a statistical composite that tracks a specified financial market or sector. Unlike the Fund, the indices do not actually hold a portfolio of securities and therefore do not incur the expenses incurred by the Fund. These expenses negatively impact the performance of the Fund. The Fund's past performance does not predict future performance. FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS BID/ASK MIDPOINT VS. NAV AS OF DECEMBER 31, 2018 The following Frequency Distribution of Discounts and Premiums charts are provided to show the frequency at which the bid/ask midpoint price for the Fund was at a discount or premium to the daily NAV. The following tables are for comparative purposes only and represent the period January 1, 2014 through December 31, 2018. Shareholders may pay more than NAV when they buy Fund shares and receive less than NAV when they sell those shares because shares are bought and sold at current market price. Data presented represents past performance and cannot be used to predict future results. -------------------------------------------------------------------------------- NUMBER OF DAYS BID/ASK MIDPOINT AT/ABOVE NAV -------------------------------------------------------------------------------- FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00% 01/01/14 - 12/31/14 195 0 0 0 01/01/15 - 12/31/15 133 0 0 0 01/01/16 - 12/31/16 152 0 0 0 01/01/17 - 12/31/17 184 0 0 0 01/01/18 - 12/31/18 177 5 1 1 -------------------------------------------------------------------------------- NUMBER OF DAYS BID/ASK MIDPOINT BELOW NAV -------------------------------------------------------------------------------- FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00% 01/01/14 - 12/31/14 56 1 0 0 01/01/15 - 12/31/15 119 0 0 0 01/01/16 - 12/31/16 100 0 0 0 01/01/17 - 12/31/17 67 0 0 0 01/01/18 - 12/31/18 65 1 0 1 Page 15 -------------------------------------------------------------------------------- FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST NATURAL GAS ETF (FCG) The First Trust Natural Gas ETF (the "Fund") seeks investment results that correspond generally to the price and yield (before the Fund's fees and expenses) of an equity index called the ISE-Revere Natural Gas(TM) Index (the "Index"). The Fund will normally invest at least 90% of its net assets (including investment borrowings) in equity securities that comprise the Index. The Index is designed to track public companies that derive a substantial portion of their revenue from mid-stream securities and/or the exploration and production of natural gas. Equity securities are selected for inclusion in the Index using a quantitative ranking and screening system that begins with the universe of equity securities of issuers that are involved in the exploration and production of natural gas and that satisfy market capitalization, liquidity and weighting concentration requirements. After application of the screens, the remaining equity securities are divided into two groups, one for equity securities issued by master limited partnerships ("MLPs") and one for equity securities issued by entities that are not MLPs ("non-MLPs"). The Index is allocated 85% to equity securities issued by non-MLPs, and the remaining 15% consists of equity securities issued by MLPs. The Index uses a linear-based capitalization-weighted methodology for each of the MLP and non-MLP group of constituents that initially ranks the equity securities based on market capitalization and average daily trading volume, and then adjusts the combined rankings of each equity security by a factor relating to its market capitalization. The resulting linear weight distribution prevents a few large component stocks from dominating the Index while allowing smaller companies to adequately influence Index performance. The Fund's shares are listed for trading on the NYSE Arca. The first day of secondary market trading in shares of the Fund was May 11, 2007.
------------------------------------------------------------------------------------------------------------------------------------ PERFORMANCE ------------------------------------------------------------------------------------------------------------------------------------ AVERAGE ANNUAL TOTAL RETURNS CUMULATIVE TOTAL RETURNS 1 Year 5 Years 10 Years Inception 5 Years 10 Years Inception Ended Ended Ended (5/8/07) Ended Ended (5/8/07) 12/31/18 12/31/18 12/31/18 to 12/31/18 12/31/18 12/31/18 to 12/31/18 FUND PERFORMANCE NAV -34.77% -30.38% -12.08% -14.34% -83.65% -72.39% -83.53% Market Value -34.77% -30.37% -11.96% -14.34% -83.64% -72.04% -83.53% INDEX PERFORMANCE ISE-Revere Natural Gas(TM) Index -34.54% -30.40% -11.77% -14.02% -83.67% -71.41% -82.80% S&P Composite 1500(R) Energy Index -19.31% -6.56% 3.19% 0.57% -28.77% 36.85% 6.88% Russell 3000(R) Index -5.24% 7.91% 13.18% 6.66% 46.34% 244.95% 112.03% ------------------------------------------------------------------------------------------------------------------------------------
(See Notes to Fund Performance Overview on page 22.) PERFORMANCE REVIEW The Fund generated a NAV return of -34.77% during the 12-month period covered by this report. During the same period, the S&P Composite 1500(R) Energy Index ("benchmark") generated a return of -19.31%. The Oil, Gas & Consumable Fuels industry made up 92.2% of the Fund over the period. Anadarko Petroleum Corp. was the top performing security in the Fund with a 28.7% return, while Ultra Petroleum Corp. was the worst performing security in the Fund with a -77.6% return. On a relative basis, the Fund underperformed the benchmark. The primary cause of the underperformance is attributable to the Fund underperforming the benchmark amongst the Oil, Gas & Consumable Fuels securities by -20.3%, which created -18.8% of relative drag. The Fund outperformed the benchmark amongst the Energy Equipment & Services securities by 6.9%, which created 3.4% of relative outperformance. ----------------------------- "International Securities Exchange(TM)", "ISE(TM)" and "ISE-Revere Natural Gas(TM) Index" are trademarks of the International Securities Exchange, LLC and have been licensed for use for certain purposes by First Trust. The Fund, based on the ISE-Revere Natural Gas(TM) Index, is not sponsored, endorsed, sold or promoted by the International Securities Exchange, LLC and the International Securities Exchange, LLC makes no representation regarding the advisability of trading in such product. Page 16 -------------------------------------------------------------------------------- FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST NATURAL GAS ETF (FCG) (CONTINUED) ----------------------------------------------------------- % OF TOTAL SUB-INDUSTRY CLASSIFICATION LONG-TERM INVESTMENTS ----------------------------------------------------------- Oil & Gas Exploration & Production 77.87% Oil & Gas Storage & Transportation 16.79 Gas Utilities 4.31 Oil & Gas Drilling 1.03 ------- Total 100.00% ======= ----------------------------------------------------------- % OF TOTAL TOP TEN HOLDINGS LONG-TERM INVESTMENTS ----------------------------------------------------------- EQT Corp. 5.56% Cabot Oil & Gas Corp. 4.89 Continental Resources, Inc. 4.84 Encana Corp. 4.74 Devon Energy Corp. 4.60 Noble Energy, Inc. 4.35 Concho Resources, Inc. 4.35 National Fuel Gas Co. 4.31 Cimarex Energy Co. 4.14 Murphy Oil Corp. 3.91 ------- Total 45.69% =======
PERFORMANCE OF A $10,000 INITIAL INVESTMENT DECEMBER 31, 2008 - DECEMBER 31, 2018 First Trust ISE-Revere Natural Russell 3000(R) S&P Composite 1500(R) Natural Gas ETF Gas(TM) Index Index Energy Index 12/08 $10,000 $10,000 $10,000 $10,000 06/09 10,816 10,834 10,420 9,910 12/09 14,920 14,988 12,834 11,641 06/10 12,991 13,116 12,058 10,263 12/10 16,744 17,044 15,007 14,129 06/11 18,454 18,852 15,960 15,752 12/11 15,599 15,990 15,160 14,682 06/12 14,120 14,519 16,573 14,250 12/12 13,492 13,921 17,649 15,319 06/13 13,893 14,360 20,130 16,808 12/13 16,884 17,503 23,570 19,210 06/14 20,462 21,259 25,206 21,700 12/14 9,791 10,147 26,529 17,449 06/15 8,347 8,575 27,044 16,631 12/15 4,005 4,091 26,657 13,598 06/16 4,442 4,526 27,622 15,715 12/16 4,785 4,900 30,050 17,310 06/17 3,812 3,917 32,733 14,918 12/17 4,233 4,367 36,399 16,956 06/18 4,368 4,521 37,571 18,216 12/18 2,761 2,859 34,495 13,682
Performance figures assume reinvestment of all distributions and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. An index is a statistical composite that tracks a specified financial market or sector. Unlike the Fund, the indices do not actually hold a portfolio of securities and therefore do not incur the expenses incurred by the Fund. These expenses negatively impact the performance of the Fund. The Fund's past performance does not predict future performance. FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS BID/ASK MIDPOINT VS. NAV AS OF DECEMBER 31, 2018 The following Frequency Distribution of Discounts and Premiums charts are provided to show the frequency at which the bid/ask midpoint price for the Fund was at a discount or premium to the daily NAV. The following tables are for comparative purposes only and represent the period January 1, 2014 through December 31, 2018. Shareholders may pay more than NAV when they buy Fund shares and receive less than NAV when they sell those shares because shares are bought and sold at current market price. Data presented represents past performance and cannot be used to predict future results. -------------------------------------------------------------------------------- NUMBER OF DAYS BID/ASK MIDPOINT AT/ABOVE NAV -------------------------------------------------------------------------------- FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00% 01/01/14 - 12/31/14 140 1 0 0 01/01/15 - 12/31/15 155 1 0 0 01/01/16 - 12/31/16 156 6 1 0 01/01/17 - 12/31/17 116 0 0 0 01/01/18 - 12/31/18 104 6 2 0 -------------------------------------------------------------------------------- NUMBER OF DAYS BID/ASK MIDPOINT BELOW NAV -------------------------------------------------------------------------------- FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00% 01/01/14 - 12/31/14 111 0 0 0 01/01/15 - 12/31/15 93 3 0 0 01/01/16 - 12/31/16 88 1 0 0 01/01/17 - 12/31/17 135 0 0 0 01/01/18 - 12/31/18 137 2 0 0 Page 17 -------------------------------------------------------------------------------- FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST CHINDIA ETF (FNI) The First Trust Chindia ETF (the "Fund") seeks investment results that correspond generally to the price and yield (before the Fund's fees and expenses) of an equity index called the ISE ChIndia(TM) Index (the "Index"). The Fund will normally invest at least 90% of its net assets (including investment borrowings) in securities that comprise the Index. The Index is a modified market capitalization weighted portfolio of 50 American Depositary Receipts ("ADRs"), American Depositary Shares ("ADSs") and/or stocks selected from a universe of all listed ADRs, ADSs, and/or stocks of companies from China and India currently trading on a U.S. exchange. The Fund's shares are listed for trading on the NYSE Arca. The first day of secondary market trading in shares of the Fund was May 11, 2007.
------------------------------------------------------------------------------------------------------------------------------------ PERFORMANCE ------------------------------------------------------------------------------------------------------------------------------------ AVERAGE ANNUAL TOTAL RETURNS CUMULATIVE TOTAL RETURNS 1 Year 5 Years 10 Years Inception 5 Years 10 Years Inception Ended Ended Ended (5/8/07) Ended Ended (5/8/07) 12/31/18 12/31/18 12/31/18 to 12/31/18 12/31/18 12/31/18 to 12/31/18 FUND PERFORMANCE NAV -20.68% 3.14% 11.44% 4.99% 16.71% 195.36% 76.27% Market Value -20.84% 3.07% 11.34% 4.97% 16.31% 192.75% 76.04% INDEX PERFORMANCE ISE ChIndia(TM) Index -20.27% 3.64% 12.00% 5.53% 19.58% 210.56% 87.28% Russell 3000(R) Index -5.24% 7.91% 13.18% 6.66% 46.34% 244.95% 112.03% MSCI Emerging Markets Index -14.58% 1.65% 8.02% 2.17% 8.51% 116.29% 28.36% ------------------------------------------------------------------------------------------------------------------------------------
(See Notes to Fund Performance Overview on page 22.) PERFORMANCE REVIEW The Fund generated a NAV return of -20.68% during the 12-month period covered by this report. During the same period, the MSCI Emerging Markets Index ("benchmark") generated a return of -14.58%. Chinese securities were given the largest allocation in the Fund over the period with a 53.8% allocation. These securities returned -31.0% and contributed -17.2% to the Fund's return. Indian securities comprised the remainder of the Fund and had a -6.9% return and -2.8% contribution. On a relative basis, the Fund underperformed the benchmark. The underperformance can be attributed to the Fund allocating 27.0% more weighting to the poor performing Chinese securities, which created -8.7% of underperformance. The benchmark had a 14.6% allocation to South Korean securities versus the Fund's 0% allocation. South Korean securities returned -21.1% in the benchmark, which created 1.6% of relative outperformance for the Fund. ----------------------------- "International Securities Exchange(TM)", "ISE(TM)" and "ISE ChIndia(TM) Index" are trademarks of the International Securities Exchange, LLC and have been licensed for use for certain purposes by First Trust. The Fund, based on the ISE ChIndia(TM) Index, is not sponsored, endorsed, sold or promoted by the International Securities Exchange, LLC and the International Securities Exchange, LLC makes no representation regarding the advisability of trading in such product. Page 18 -------------------------------------------------------------------------------- FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST CHINDIA ETF (FNI) (CONTINUED) ----------------------------------------------------------- % OF TOTAL SECTOR CLASSIFICATION LONG-TERM INVESTMENTS ----------------------------------------------------------- Consumer Discretionary 37.20% Communication Services 19.97 Financials 17.66 Information Technology 13.65 Materials 4.38 Health Care 3.90 Energy 1.90 Industrials 1.34 ------- Total 100.00% ======= ----------------------------------------------------------- % OF TOTAL TOP TEN HOLDINGS LONG-TERM INVESTMENTS ----------------------------------------------------------- HDFC Bank Ltd., ADR 7.56% ICICI Bank Ltd., ADR 7.49 JD.com, Inc., ADR 7.30 Infosys Ltd., ADR 7.14 Alibaba Group Holding Ltd., ADR 6.31 Baidu, Inc., ADR 6.23 NetEase, Inc, ADR 4.38 Vedanta Ltd., ADR 4.38 Tata Motors Ltd., ADR 4.22 Wipro Ltd., ADR 4.16 ------- Total 59.17% =======
PERFORMANCE OF A $10,000 INITIAL INVESTMENT DECEMBER 31, 2008 - DECEMBER 31, 2018 First Trust ISE ChIndia(TM) Russell 3000(R) MSCI Emerging Chindia ETF Index Index Markets Index 12/08 $10,000 $10,000 $10,000 $10,000 06/09 13,956 14,012 10,420 13,601 12/09 18,157 18,288 12,834 17,850 06/10 17,661 17,851 12,058 16,749 12/10 21,508 21,842 15,007 21,219 06/11 21,861 22,325 15,960 21,406 12/11 15,913 16,199 15,160 17,311 06/12 16,871 17,200 16,573 17,991 12/12 18,634 19,037 17,649 20,465 06/13 18,863 19,328 20,130 18,506 12/13 25,305 25,969 23,570 19,931 06/14 26,887 27,652 25,206 21,155 12/14 25,906 26,684 26,529 19,496 06/15 27,748 28,635 27,044 20,071 12/15 25,822 26,725 26,657 16,587 06/16 24,882 25,822 27,622 17,650 12/16 25,268 26,318 30,050 18,442 06/17 32,437 33,869 32,733 21,841 12/17 37,234 38,949 36,399 25,318 06/18 36,515 38,283 37,571 23,632 12/18 29,533 31,055 34,495 21,626
Performance figures assume reinvestment of all distributions and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. An index is a statistical composite that tracks a specified financial market or sector. Unlike the Fund, the indices do not actually hold a portfolio of securities and therefore do not incur the expenses incurred by the Fund. These expenses negatively impact the performance of the Fund. The Fund's past performance does not predict future performance. FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS BID/ASK MIDPOINT VS. NAV AS OF DECEMBER 31, 2018 The following Frequency Distribution of Discounts and Premiums charts are provided to show the frequency at which the bid/ask midpoint price for the Fund was at a discount or premium to the daily NAV. The following tables are for comparative purposes only and represent the period January 1, 2014 through December 31, 2018. Shareholders may pay more than NAV when they buy Fund shares and receive less than NAV when they sell those shares because shares are bought and sold at current market price. Data presented represents past performance and cannot be used to predict future results. -------------------------------------------------------------------------------- NUMBER OF DAYS BID/ASK MIDPOINT AT/ABOVE NAV -------------------------------------------------------------------------------- QUARTER ENDED 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00% 01/01/14 - 12/31/14 96 0 0 0 01/01/15 - 12/31/15 147 0 0 0 01/01/16 - 12/31/16 132 0 0 0 01/01/17 - 12/31/17 189 0 0 0 01/01/18 - 12/31/18 143 1 0 1 -------------------------------------------------------------------------------- NUMBER OF DAYS BID/ASK MIDPOINT BELOW NAV -------------------------------------------------------------------------------- QUARTER ENDED 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00% 01/01/14 - 12/31/14 155 1 0 0 01/01/15 - 12/31/15 105 0 0 0 01/01/16 - 12/31/16 120 0 0 0 01/01/17 - 12/31/17 62 0 0 0 01/01/18 - 12/31/18 105 1 0 0 Page 19 -------------------------------------------------------------------------------- FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST NASDAQ(R) ABA COMMUNITY BANK INDEX FUND (QABA) The First Trust NASDAQ(R) ABA Community Bank Index Fund (the "Fund") seeks investment results that correspond generally to the price and yield (before the Fund's fees and expenses) of an equity index called the NASDAQ OMX(R) ABA Community Bank Index(SM) (the "Index"). The Fund will normally invest at least 90% of its net assets (including investment borrowings) in common stocks that comprise the Index. The Index is a market capitalization weighted index that includes all NASDAQ banks and thrifts or their holding companies excluding the 50 largest U.S. banks by asset size. Also excluded are banks that have an international specialization and those banks that have a credit-card specialization, as screened by the American Bankers Association ("ABA") based on the most recent data from the Federal Deposit Insurance Corporation. Banks with an international specialization are those institutions with assets greater than $10 billion and more than 25% of total assets in foreign offices. Banks with a credit-card specialization are those institutions with credit-card loans plus securitized receivables in excess of 50% of total assets plus securitized receivables. Securities in the Index must have a market capitalization of at least $200 million and a three-month average daily trading volume of at least $500 thousand. The Index is rebalanced quarterly and reconstituted semi-annually. The Fund's shares are listed for trading on the Nasdaq. The first day of secondary market trading in shares of the Fund was July 1, 2009.
------------------------------------------------------------------------------------------------------------------------------------ PERFORMANCE ------------------------------------------------------------------------------------------------------------------------------------ AVERAGE ANNUAL CUMULATIVE TOTAL RETURNS TOTAL RETURNS 1 Year 5 Years Inception 5 Years Inception Ended Ended (6/29/09) Ended (6/29/09) 12/31/18 12/31/18 to 12/31/18 12/31/18 to 12/31/18 FUND PERFORMANCE NAV -16.14% 5.15% 10.03% 28.54% 148.05% Market Value -16.39% 5.08% 10.02% 28.13% 147.95% INDEX PERFORMANCE NASDAQ OMX(R) ABA Community Bank Index(SM) -15.69% 5.79% 10.72% 32.51% 163.37% S&P Composite 1500(R) Financials Index -13.03% 8.31% 12.10% 49.05% 196.30% Russell 3000(R) Index -5.24% 7.91% 13.33% 46.34% 228.56% ------------------------------------------------------------------------------------------------------------------------------------
(See Notes to Fund Performance Overview on page 22.) PERFORMANCE REVIEW The Fund generated a NAV return of -16.14% during the 12-month period covered by this report. During the same period, the S&P Composite 1500(R) Financials Index ("benchmark") generated a return of -13.03%. The Fund was made up of 99.1% Financial securities over the period. More specifically, this 99.1% allocation was invested in the Banking industry. This industry had a -16.1% return and contributed -16.1% to the Fund's return. Popular, Inc. was the Fund's top performing security over the period with a 35.8% return, while Bank OZK was the Fund's worst performing security with a -52.0% return. On a relative basis, the Fund underperformed the benchmark. The primary cause of the underperformance is attributable to the Fund underperforming the benchmark amongst Financials securities by -2.6%, creating -3.1% of relative underperformance. ----------------------------- Nasdaq(R), OMX(R), Nasdaq OMX(R), and NASDAQ OMX(R) ABA Community Bank Index(SM) are trademarks of Nasdaq, Inc. ("Nasdaq") and American Bankers Association ("ABA") (Nasdaq and ABA, collectively with their affiliates, are referred to as the "Corporations") and are licensed for use by First Trust. The Fund has not been passed on by the Corporations as to its legality or suitability. The Fund is not issued, endorsed, sold, or promoted by the Corporations. THE CORPORATIONS MAKE NO WARRANTIES AND BEAR NO LIABILITY WITH RESPECT TO THE FUND. Page 20 -------------------------------------------------------------------------------- FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST NASDAQ(R) ABA COMMUNITY BANK INDEX FUND (QABA) (CONTINUED) ----------------------------------------------------------- % OF TOTAL INDUSTRY CLASSIFICATION LONG-TERM INVESTMENTS ----------------------------------------------------------- Banks 88.14% Thrifts & Mortgage Finance 11.50 IT Services 0.36 ------- Total 100.00% ======= ----------------------------------------------------------- % OF TOTAL TOP TEN HOLDINGS LONG-TERM INVESTMENTS ----------------------------------------------------------- East West Bancorp, Inc. 2.91% Commerce Bancshares, Inc. 2.90 BOK Financial Corp. 2.21 Popular, Inc. 2.18 TFS Financial Corp. 2.08 First Citizens BancShares, Inc., Class A 1.88 PacWest Bancorp 1.87 First Financial Bankshares, Inc. 1.80 Wintrust Financial Corp. 1.73 Pinnacle Financial Partners, Inc. 1.65 ------- Total 21.21% =======
PERFORMANCE OF A $10,000 INITIAL INVESTMENT JUNE 29, 2009 - DECEMBER 31, 2018 First Trust NASDAQ(R) ABA NASDAQ OMX(R) Community Bank ABA Community S&P Composite 1500(R) Russell 3000(R) Index Fund Bank Index(SM) Financials Index Index 06/09 $10,000 $10,000 $10,000 $10,000 12/09 11,280 11,318 12,112 12,224 06/10 11,438 11,505 11,744 11,484 12/10 12,721 12,846 13,722 14,293 06/11 12,520 12,688 13,420 15,201 12/11 11,898 12,095 11,662 14,439 06/12 13,081 13,343 13,227 15,785 12/12 13,507 13,817 14,806 16,809 06/13 16,006 16,427 17,584 19,172 12/13 19,302 19,873 19,879 22,448 06/14 19,296 19,929 20,907 24,006 12/14 19,827 20,537 22,839 25,266 06/15 21,637 22,484 22,892 25,756 12/15 21,390 22,288 22,677 25,388 06/16 21,026 21,976 22,310 26,307 12/16 29,426 30,865 28,184 28,619 06/17 28,402 29,883 29,940 31,175 12/17 29,581 31,239 34,069 34,674 06/18 31,092 32,931 32,917 35,790 12/18 24,805 26,338 29,629 32,855
Performance figures assume reinvestment of all distributions and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. An index is a statistical composite that tracks a specified financial market or sector. Unlike the Fund, the indices do not actually hold a portfolio of securities and therefore do not incur the expenses incurred by the Fund. These expenses negatively impact the performance of the Fund. The Fund's past performance does not predict future performance. FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS BID/ASK MIDPOINT VS. NAV AS OF DECEMBER 31, 2018 The following Frequency Distribution of Discounts and Premiums charts are provided to show the frequency at which the bid/ask midpoint price for the Fund was at a discount or premium to the daily NAV. The following tables are for comparative purposes only and represent the period January 1, 2014 through December 31, 2018. Shareholders may pay more than NAV when they buy Fund shares and receive less than NAV when they sell those shares because shares are bought and sold at current market price. Data presented represents past performance and cannot be used to predict future results. -------------------------------------------------------------------------------- NUMBER OF DAYS BID/ASK MIDPOINT AT/ABOVE NAV -------------------------------------------------------------------------------- FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00% 01/01/14 - 12/31/14 115 9 0 0 01/01/15 - 12/31/15 137 5 0 0 01/01/16 - 12/31/16 133 0 0 0 01/01/17 - 12/31/17 128 5 0 0 01/01/18 - 12/31/18 125 12 0 0 -------------------------------------------------------------------------------- NUMBER OF DAYS BID/ASK MIDPOINT BELOW NAV -------------------------------------------------------------------------------- FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00% 01/01/14 - 12/31/14 116 12 0 0 01/01/15 - 12/31/15 110 0 0 0 01/01/16 - 12/31/16 119 0 0 0 01/01/17 - 12/31/17 116 1 1 0 01/01/18 - 12/31/18 106 7 1 0 Page 21 -------------------------------------------------------------------------------- NOTES TO FUND PERFORMANCE OVERVIEW (UNAUDITED) -------------------------------------------------------------------------------- Total returns for the periods since inception are calculated from the inception date of each Fund. "Average Annual Total Returns" represent the average annual change in value of an investment over the periods indicated. "Cumulative Total Returns" represent the total change in value of an investment over the periods indicated. The total returns would have been lower if certain fees had not been waived and expenses reimbursed by the Advisor. Each Fund's per share net asset value ("NAV") is the value of one share of the Fund and is computed by dividing the value of all assets of the Fund (including accrued interest and dividends), less all liabilities (including accrued expenses and dividends declared but unpaid), by the total number of outstanding shares. The price used to calculate market return ("Market Price") is determined by using the midpoint between the highest bid and the lowest offer on the stock exchange on which shares of the Fund are listed for trading as of the time that the Fund's NAV is calculated. Since shares of each Fund did not trade in the secondary market until after the Fund's inception, for the period from inception to the first day of secondary market trading in shares of the Fund, the NAV of each Fund is used as a proxy for the secondary market trading price to calculate market returns. NAV and market returns assume that all distributions have been reinvested in each Fund at NAV and Market Price, respectively. An index is a statistical composite that tracks a specified financial market or sector. Unlike each Fund, the indices do not actually hold a portfolio of securities and therefore do not incur the expenses incurred by each Fund. These expenses negatively impact the performance of each Fund. Also, market returns do not include brokerage commissions that may be payable on secondary market transactions. If brokerage commissions were included, market returns would be lower. The total returns presented reflect the reinvestment of dividends on securities in the indices. The returns presented do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. The investment return and principal value of shares of each Fund will vary with changes in market conditions. Shares of each Fund may be worth more or less than their original cost when they are redeemed or sold in the market. Each Fund's past performance is no guarantee of future performance. Page 22 FIRST TRUST EXCHANGE-TRADED FUND UNDERSTANDING YOUR FUND EXPENSES DECEMBER 31, 2018 (UNAUDITED) As a shareholder of First Trust NASDAQ-100 Equal Weighted Index Fund, First Trust NASDAQ-100-Technology Sector Index Fund, First Trust NASDAQ-100 Ex-Technology Sector Index Fund, First Trust NASDAQ(R) Clean Edge(R) Green Energy Index Fund, First Trust S&P REIT Index Fund, First Trust Water ETF, First Trust Natural Gas ETF, First Trust Chindia ETF or First Trust NASDAQ(R) ABA Community Bank Index Fund (each a "Fund" and collectively, the "Funds"), you incur two types of costs: (1) transaction costs; and (2) ongoing costs, including management fees, distribution and/or service fees, if any, and other Fund expenses. This Example is intended to help you understand your ongoing costs of investing in the Funds and to compare these costs with the ongoing costs of investing in other funds. The Example is based on an investment of $1,000 invested at the beginning of the period and held through the six-month period ended December 31, 2018. ACTUAL EXPENSES The first line in the following table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled "Expenses Paid During the Six-Month Period" to estimate the expenses you paid on your account during this six-month period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second line in the following table provides information about hypothetical account values and hypothetical expenses based on each Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not each Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Funds and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs such as brokerage commissions. Therefore, the second line in the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
-------------------------------------------------------------------------------------------------------------------------- ANNUALIZED EXPENSE RATIO EXPENSES PAID BEGINNING ENDING BASED ON THE DURING THE ACCOUNT VALUE ACCOUNT VALUE SIX-MONTH SIX-MONTH JULY 1, 2018 DECEMBER 31, 2018 PERIOD (a) PERIOD (b) -------------------------------------------------------------------------------------------------------------------------- FIRST TRUST NASDAQ-100 EQUAL WEIGHTED INDEX FUND (QQEW) Actual $1,000.00 $ 905.70 0.59% $2.83 Hypothetical (5% return before expenses) $1,000.00 $1,022.23 0.59% $3.01 FIRST TRUST NASDAQ-100-TECHNOLOGY SECTOR INDEX FUND (QTEC) Actual $1,000.00 $ 887.80 0.58% $2.76 Hypothetical (5% return before expenses) $1,000.00 $1,022.28 0.58% $2.96 FIRST TRUST NASDAQ-100 EX-TECHNOLOGY SECTOR INDEX FUND (QQXT) Actual $1,000.00 $ 915.40 0.60% $2.90 Hypothetical (5% return before expenses) $1,000.00 $1,022.18 0.60% $3.06 FIRST TRUST NASDAQ(R) CLEAN EDGE(R) GREEN ENERGY INDEX FUND (QCLN) Actual $1,000.00 $ 911.70 0.60% $2.89 Hypothetical (5% return before expenses) $1,000.00 $1,022.18 0.60% $3.06 FIRST TRUST S&P REIT INDEX FUND (FRI) Actual $1,000.00 $ 947.70 0.50% $2.45 Hypothetical (5% return before expenses) $1,000.00 $1,022.68 0.50% $2.55 FIRST TRUST WATER ETF (FIW) Actual $1,000.00 $ 918.40 0.55% $2.66 Hypothetical (5% return before expenses) $1,000.00 $1,022.43 0.55% $2.80
Page 23 FIRST TRUST EXCHANGE-TRADED FUND UNDERSTANDING YOUR FUND EXPENSES (CONTINUED) DECEMBER 31, 2018 (UNAUDITED)
-------------------------------------------------------------------------------------------------------------------------- ANNUALIZED EXPENSE RATIO EXPENSES PAID BEGINNING ENDING BASED ON THE DURING THE ACCOUNT VALUE ACCOUNT VALUE SIX-MONTH SIX-MONTH JULY 1, 2018 DECEMBER 31, 2018 PERIOD (a) PERIOD (b) -------------------------------------------------------------------------------------------------------------------------- FIRST TRUST NATURAL GAS ETF (FCG) Actual $1,000.00 $ 632.10 0.60% $2.47 Hypothetical (5% return before expenses) $1,000.00 $1,022.18 0.60% $3.06 FIRST TRUST CHINDIA ETF (FNI) Actual $1,000.00 $ 808.80 0.59% $2.69 Hypothetical (5% return before expenses) $1,000.00 $1,022.23 0.59% $3.01 FIRST TRUST NASDAQ(R) ABA COMMUNITY BANK INDEX FUND (QABA) Actual $1,000.00 $ 797.80 0.60% $2.72 Hypothetical (5% return before expenses) $1,000.00 $1,022.18 0.60% $3.06
(a) These expense ratios reflect an expense cap for certain Funds. See Note 3 in Notes to Financial Statements. (b) Expenses are equal to the annualized expense ratio as indicated in the table multiplied by the average account value over the period (July 1, 2018 through December 31, 2018), multiplied by 184/365 (to reflect the six-month period). Page 24 FIRST TRUST NASDAQ-100 EQUAL WEIGHTED INDEX FUND (QQEW) PORTFOLIO OF INVESTMENTS DECEMBER 31, 2018 SHARES DESCRIPTION VALUE ------------------------------------------------------------- COMMON STOCKS -- 99.8% AIRLINES -- 2.0% 141,944 American Airlines Group, Inc. $ 4,557,822 53,461 United Continental Holdings, Inc. (a) 4,476,289 -------------- 9,034,111 -------------- AUTOMOBILES -- 1.0% 14,211 Tesla, Inc. (a) 4,729,421 -------------- BEVERAGES -- 1.9% 91,169 Monster Beverage Corp. (a) 4,487,338 40,048 PepsiCo, Inc. 4,424,503 -------------- 8,911,841 -------------- BIOTECHNOLOGY -- 9.1% 45,979 Alexion Pharmaceuticals, Inc. (a) 4,476,515 24,356 Amgen, Inc. 4,741,383 15,594 Biogen, Inc. (a) 4,692,546 54,790 BioMarin Pharmaceutical, Inc. (a) 4,665,369 72,399 Celgene Corp. (a) 4,640,052 69,959 Gilead Sciences, Inc. 4,375,935 75,770 Incyte Corp. (a) 4,818,214 12,851 Regeneron Pharmaceuticals, Inc. (a) 4,799,849 28,284 Vertex Pharmaceuticals, Inc. (a) 4,686,942 -------------- 41,896,805 -------------- COMMERCIAL SERVICES & SUPPLIES -- 1.0% 27,928 Cintas Corp. 4,691,625 -------------- COMMUNICATIONS EQUIPMENT -- 1.0% 105,065 Cisco Systems, Inc. 4,552,466 -------------- ELECTRIC UTILITIES -- 0.9% 85,910 Xcel Energy, Inc. 4,232,786 -------------- ENTERTAINMENT -- 5.9% 97,743 Activision Blizzard, Inc. 4,551,892 58,120 Electronic Arts, Inc. (a) 4,586,249 18,346 NetEase, Inc., ADR 4,318,098 18,107 Netflix, Inc. (a) 4,846,520 44,133 Take-Two Interactive Software, Inc. (a) 4,543,051 47,016 Twenty-First Century Fox, Inc., Class A 2,262,410 47,294 Twenty-First Century Fox, Inc., Class B 2,259,707 -------------- 27,367,927 -------------- FOOD & STAPLES RETAILING -- 2.0% 22,697 Costco Wholesale Corp. 4,623,606 66,414 Walgreens Boots Alliance, Inc. 4,538,069 -------------- 9,161,675 -------------- FOOD PRODUCTS -- 1.9% 99,779 Kraft Heinz (The) Co. 4,294,488 109,034 Mondelez International, Inc., Class A 4,364,631 -------------- 8,659,119 -------------- SHARES DESCRIPTION VALUE ------------------------------------------------------------- HEALTH CARE EQUIPMENT & SUPPLIES -- 3.0% 22,726 Align Technology, Inc. (a) $ 4,759,506 24,245 IDEXX Laboratories, Inc. (a) 4,510,055 9,884 Intuitive Surgical, Inc. (a) 4,733,645 -------------- 14,003,206 -------------- HEALTH CARE PROVIDERS & SERVICES -- 1.0% 246 Cigna Corp. 46,720 58,533 Henry Schein, Inc. (a) 4,596,011 -------------- 4,642,731 -------------- HEALTH CARE TECHNOLOGY -- 1.0% 89,857 Cerner Corp. (a) 4,712,101 -------------- HOTELS, RESTAURANTS & LEISURE -- 3.0% 43,400 Marriott International, Inc., Class A 4,711,504 72,314 Starbucks Corp. 4,657,021 46,626 Wynn Resorts Ltd. 4,611,778 -------------- 13,980,303 -------------- INSURANCE -- 1.0% 30,141 Willis Towers Watson PLC 4,577,212 -------------- INTERACTIVE MEDIA & SERVICES -- 3.0% 2,253 Alphabet, Inc., Class A (a) 2,354,295 2,274 Alphabet, Inc., Class C (a) 2,354,977 28,087 Baidu, Inc., ADR (a) 4,454,598 35,402 Facebook, Inc., Class A (a) 4,640,848 -------------- 13,804,718 -------------- INTERNET & DIRECT MARKETING RETAIL -- 7.0% 3,209 Amazon.com, Inc. (a) 4,819,822 2,702 Booking Holdings, Inc. (a) 4,653,979 169,177 Ctrip.com International Ltd., ADR (a) 4,577,930 164,661 eBay, Inc. (a) 4,622,034 39,819 Expedia Group, Inc. 4,485,610 227,040 JD.com, Inc., ADR (a) 4,751,947 14,906 MercadoLibre, Inc. (a) 4,365,222 -------------- 32,276,544 -------------- IT SERVICES -- 6.0% 35,056 Automatic Data Processing, Inc. 4,596,543 72,518 Cognizant Technology Solutions Corp., Class A 4,603,443 62,540 Fiserv, Inc. (a) 4,596,064 69,308 Paychex, Inc. 4,515,416 55,987 PayPal Holdings, Inc. (a) 4,707,947 31,149 VeriSign, Inc. (a) 4,619,085 -------------- 27,638,498 -------------- LEISURE PRODUCTS -- 1.0% 57,038 Hasbro, Inc. 4,634,338 -------------- LIFE SCIENCES TOOLS & SERVICES -- 1.0% 15,817 Illumina, Inc. (a) 4,743,993 -------------- See Notes to Financial Statements Page 25 FIRST TRUST NASDAQ-100 EQUAL WEIGHTED INDEX FUND (QQEW) PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2018 SHARES DESCRIPTION VALUE ------------------------------------------------------------- COMMON STOCKS (CONTINUED) MACHINERY -- 1.0% 80,798 PACCAR, Inc. $ 4,616,798 -------------- MEDIA -- 3.9% 15,558 Charter Communications, Inc., Class A (a) 4,433,563 129,740 Comcast Corp., Class A 4,417,647 104,558 Liberty Global PLC, Class A (a) 2,231,268 108,516 Liberty Global PLC, Class C (a) 2,239,770 789,598 Sirius XM Holdings, Inc. (b) 4,508,605 -------------- 17,830,853 -------------- MULTILINE RETAIL -- 1.0% 53,184 Dollar Tree, Inc. (a) 4,803,579 -------------- PHARMACEUTICALS -- 1.0% 170,450 Mylan N.V. (a) 4,670,330 -------------- PROFESSIONAL SERVICES -- 1.0% 41,793 Verisk Analytics, Inc. (a) 4,557,109 -------------- ROAD & RAIL -- 1.9% 72,534 CSX Corp. 4,506,537 48,146 J.B. Hunt Transport Services, Inc. 4,479,504 -------------- 8,986,041 -------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT -- 17.1% 257,727 Advanced Micro Devices, Inc. (a) 4,757,640 53,799 Analog Devices, Inc. 4,617,568 144,269 Applied Materials, Inc. 4,723,367 29,814 ASML Holding N.V. 4,639,655 18,208 Broadcom, Inc. 4,629,930 98,243 Intel Corp. 4,610,544 51,598 KLA-Tencor Corp. 4,617,505 34,578 Lam Research Corp. 4,708,486 91,333 Maxim Integrated Products, Inc. 4,644,283 65,144 Microchip Technology, Inc. 4,685,157 144,797 Micron Technology, Inc. (a) 4,594,409 34,004 NVIDIA Corp. 4,539,534 63,258 NXP Semiconductors N.V. 4,635,546 80,222 QUALCOMM, Inc. 4,565,434 68,300 Skyworks Solutions, Inc. 4,577,466 48,945 Texas Instruments, Inc. 4,625,303 54,315 Xilinx, Inc. 4,626,009 -------------- 78,797,836 -------------- SOFTWARE -- 10.1% 21,003 Adobe, Inc. (a) 4,751,719 36,481 Autodesk, Inc. (a) 4,691,821 108,269 Cadence Design Systems, Inc. (a) 4,707,536 44,231 Check Point Software Technologies Ltd. (a) 4,540,312 43,946 Citrix Systems, Inc. 4,502,707 23,811 Intuit, Inc. 4,687,195 44,933 Microsoft Corp. 4,563,845 237,338 Symantec Corp. 4,484,502 54,409 Synopsys, Inc. (a) 4,583,414 31,241 Workday, Inc., Class A (a) 4,988,563 -------------- 46,501,614 -------------- SHARES DESCRIPTION VALUE ------------------------------------------------------------- SPECIALTY RETAIL -- 3.1% 13,483 O'Reilly Automotive, Inc. (a) $ 4,642,601 57,258 Ross Stores, Inc. 4,763,866 19,248 Ulta Beauty, Inc. (a) 4,712,680 -------------- 14,119,147 -------------- TECHNOLOGY HARDWARE, STORAGE & PERIPHERALS -- 3.0% 29,053 Apple, Inc. 4,582,820 77,303 NetApp, Inc. 4,612,670 121,214 Western Digital Corp. 4,481,282 -------------- 13,676,772 -------------- TEXTILES, APPAREL & LUXURY GOODS -- 1.0% 39,022 Lululemon Athletica, Inc. (a) 4,745,465 -------------- TRADING COMPANIES & DISTRIBUTORS -- 1.0% 87,882 Fastenal Co. 4,595,350 -------------- WIRELESS TELECOMMUNICATION SERVICES -- 1.0% 70,716 T-Mobile US, Inc. (a) 4,498,245 -------------- TOTAL COMMON STOCKS -- 99.8% 460,650,559 (Cost $436,396,472) -------------- MONEY MARKET FUNDS -- 0.3% 1,400,245 Goldman Sachs Financial Square Treasury Obligations Fund - Institutional Class - 2.61% (c) (d) 1,400,245 (Cost $1,400,245) -------------- PRINCIPAL VALUE DESCRIPTION VALUE ------------------------------------------------------------- REPURCHASE AGREEMENTS -- 0.6% $ 617,834 BNP Paribas S.A., 2.95% (c), dated 12/31/18, due 01/02/19, with a maturity value of $617,935. Collateralized by U.S. Treasury Note, interest rate of 2.375%, due 04/30/20. The value of the collateral including accrued interest is $632,689. (d) 617,834 2,223,599 JPMorgan Chase & Co., 2.85% (c), dated 12/31/18, due 01/02/19, with a maturity value of $2,223,951. Collateralized by U.S. Treasury Bill, interest rate of 0.000%, due 05/09/19. The value of the collateral is $2,268,028. (d) 2,223,599 -------------- TOTAL REPURCHASE AGREEMENTS -- 0.6% 2,841,433 (Cost $2,841,433) -------------- TOTAL INVESTMENTS -- 100.7% 464,892,237 (Cost $440,638,150) (e) NET OTHER ASSETS AND LIABILITIES -- (0.7)% (3,427,746) -------------- NET ASSETS -- 100.0% $ 461,464,491 ============== Page 26 See Notes to Financial Statements FIRST TRUST NASDAQ-100 EQUAL WEIGHTED INDEX FUND (QQEW) PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2018 (a) Non-income producing security. (b) All or a portion of this security is on loan (see Note 2D - Securities Lending in the Notes to Financial Statements). The aggregate value of such securities is $4,057,743 and the total value of the collateral held by the Fund is $4,236,665. (c) Rate shown reflects yield as of December 31, 2018. (d) This security serves as collateral for securities on loan. (e) Aggregate cost for federal income tax purposes is $444,745,842. As of December 31, 2018, the aggregate gross unrealized appreciation for all investments in which there was an excess of value over tax cost was $62,869,451 and the aggregate gross unrealized depreciation for all investments in which there was an excess of tax cost over value was $42,723,056. The net unrealized appreciation was $20,146,395. ADR - American Depositary Receipt ----------------------------- VALUATION INPUTS A summary of the inputs used to value the Fund's investments as of December 31, 2018 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial Statements): Level 1 - Quoted Prices Level 2 - Other Significant Observable Inputs Level 3 - Significant Unobservable Inputs LEVEL 1 LEVEL 2 LEVEL 3 ----------------------------------------------------- Common Stocks* $ 460,650,559 $ -- $ -- Money Market Funds 1,400,245 -- -- Repurchase Agreements -- 2,841,433 -- ----------------------------------------------------- Total Investments $ 462,050,804 $ 2,841,433 $ -- ===================================================== * See Portfolio of Investments for industry breakout. --------------------------------- OFFSETTING ASSETS AND LIABILITIES ------------------------------------------------------------- Offsetting assets and liabilities requires entities to disclose both gross and net information about instruments and transactions eligible for offset, and to disclose instruments and transactions subject to master netting or similar agreements (see Note 2C - Offsetting on the Statements of Assets and Liabilities in the Notes to Financial Statements). The Fund's loaned securities were all subject to an enforceable Securities Lending Agency Agreement. Securities lent in accordance with the Securities Lending Agency Agreement on a gross basis were as follows: SECURITIES LENDING AGENCY AGREEMENT ------------------------------------------------------------- Total gross amount presented on the Statements of Assets and Liabilities(1) $ 4,057,743 Non-cash Collateral(2) (4,057,743) -------------- Net Amount $ -- ============== (1) The amount presented on the Statements of Assets and Liabilities which is included in "Investments, at value", is not offset and is shown on a gross basis (2) At December 31, 2018, the value of the collateral received from each borrower exceeded the value of the related securities loaned. This amount is disclosed on the Portfolio of Investments. The Fund's investments in repurchase agreements were all subject to an enforceable Master Repurchase Agreement. Repurchase Agreements on a gross basis were as follows: REPURCHASE AGREEMENTS ------------------------------------------------------------- Total gross amount presented on the Statements of Assets and Liabilities(3) $ 2,841,433 Non-cash Collateral(4) (2,841,433) -------------- Net Amount $ -- ============== (3) The amount is included in "Investments, at value" on the Statements of Assets and Liabilities. (4) At December 31, 2018, the value of the collateral received from each seller exceeded the value of the repurchase agreements. See Notes to Financial Statements Page 27 FIRST TRUST NASDAQ-100-TECHNOLOGY SECTOR INDEX FUND (QTEC) PORTFOLIO OF INVESTMENTS DECEMBER 31, 2018 SHARES DESCRIPTION VALUE ------------------------------------------------------------- COMMON STOCKS -- 99.8% COMMUNICATIONS EQUIPMENT -- 2.6% 1,162,867 Cisco Systems, Inc. $ 50,387,027 -------------- ENTERTAINMENT -- 2.5% 204,359 NetEase, Inc., ADR 48,099,978 -------------- HEALTH CARE TECHNOLOGY -- 2.7% 990,855 Cerner Corp. (a) 51,960,436 -------------- INTERACTIVE MEDIA & SERVICES -- 7.8% 24,892 Alphabet, Inc., Class A (a) 26,011,144 25,136 Alphabet, Inc., Class C (a) 26,031,093 311,697 Baidu, Inc., ADR (a) 49,435,144 390,462 Facebook, Inc., Class A (a) 51,185,664 -------------- 152,663,045 -------------- IT SERVICES -- 5.2% 805,167 Cognizant Technology Solutions Corp., Class A 51,112,001 343,733 VeriSign, Inc. (a) 50,972,167 -------------- 102,084,168 -------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT -- 44.8% 2,855,095 Advanced Micro Devices, Inc. (a) 52,705,054 595,737 Analog Devices, Inc. 51,132,107 1,607,378 Applied Materials, Inc. 52,625,556 330,805 ASML Holding N.V. 51,479,874 201,500 Broadcom, Inc. 51,237,420 1,091,822 Intel Corp. 51,239,206 571,897 KLA-Tencor Corp. 51,179,063 383,966 Lam Research Corp. 52,284,650 1,012,609 Maxim Integrated Products, Inc. 51,491,168 722,075 Microchip Technology, Inc. 51,931,634 1,605,816 Micron Technology, Inc. (a) 50,952,542 377,497 NVIDIA Corp. 50,395,849 702,332 NXP Semiconductors N.V. 51,466,889 891,273 QUALCOMM, Inc. 50,722,346 757,249 Skyworks Solutions, Inc. 50,750,828 541,230 Texas Instruments, Inc. 51,146,235 602,647 Xilinx, Inc. 51,327,445 -------------- 874,067,866 -------------- SOFTWARE -- 26.4% 232,714 Adobe, Inc. (a) 52,649,215 405,718 Autodesk, Inc. (a) 52,179,392 1,200,721 Cadence Design Systems, Inc. (a) 52,207,349 491,434 Check Point Software Technologies Ltd. (a) 50,445,700 487,954 Citrix Systems, Inc. 49,995,767 263,450 Intuit, Inc. 51,860,133 498,578 Microsoft Corp. 50,640,567 2,637,964 Symantec Corp. 49,844,330 603,279 Synopsys, Inc. (a) 50,820,223 343,905 Workday, Inc., Class A (a) 54,914,750 -------------- 515,557,426 -------------- SHARES DESCRIPTION VALUE ------------------------------------------------------------- TECHNOLOGY HARDWARE, STORAGE & PERIPHERALS -- 7.8% 323,592 Apple, Inc. $ 51,043,402 855,267 NetApp, Inc. 51,033,782 1,346,852 Western Digital Corp. 49,793,118 -------------- 151,870,302 -------------- TOTAL INVESTMENTS -- 99.8% 1,946,690,248 (Cost $1,923,885,604) (b) NET OTHER ASSETS AND LIABILITIES -- 0.2% 3,978,539 -------------- NET ASSETS -- 100.0% $1,950,668,787 ============== (a) Non-income producing security. (b) Aggregate cost for federal income tax purposes is $1,944,462,973. As of December 31, 2018, the aggregate gross unrealized appreciation for all investments in which there was an excess of value over tax cost was $158,358,392 and the aggregate gross unrealized depreciation for all investments in which there was an excess of tax cost over value was $156,131,117. The net unrealized appreciation was $2,227,275. ADR - American Depositary Receipt ----------------------------- VALUATION INPUTS A summary of the inputs used to value the Fund's investments as of December 31, 2018 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial Statements): Level 1 - Quoted Prices Level 2 - Other Significant Observable Inputs Level 3 - Significant Unobservable Inputs LEVEL 1 LEVEL 2 LEVEL 3 ----------------------------------------------------- Common Stocks* $ 1,946,690,248 $ -- $ -- ===================================================== * See Portfolio of Investments for industry breakout. Page 28 See Notes to Financial Statements FIRST TRUST NASDAQ-100 EX-TECHNOLOGY SECTOR INDEX FUND (QQXT) PORTFOLIO OF INVESTMENTS DECEMBER 31, 2018 SHARES DESCRIPTION VALUE ------------------------------------------------------------- COMMON STOCKS (a) -- 99.7% AIRLINES -- 3.2% 38,569 American Airlines Group, Inc. $ 1,238,451 14,536 United Continental Holdings, Inc. (b) 1,217,099 -------------- 2,455,550 -------------- AUTOMOBILES -- 1.7% 3,856 Tesla, Inc. (b) 1,283,277 -------------- BEVERAGES -- 3.1% 24,727 Monster Beverage Corp. (b) 1,217,063 10,860 PepsiCo, Inc. 1,199,813 -------------- 2,416,876 -------------- BIOTECHNOLOGY -- 14.6% 12,491 Alexion Pharmaceuticals, Inc. (b) 1,216,124 6,611 Amgen, Inc. 1,286,963 4,224 Biogen, Inc. (b) 1,271,086 14,887 BioMarin Pharmaceutical, Inc. (b) 1,267,628 19,599 Celgene Corp. (b) 1,256,100 18,942 Gilead Sciences, Inc. 1,184,822 20,485 Incyte Corp. (b) 1,302,641 3,495 Regeneron Pharmaceuticals, Inc. (b) 1,305,383 7,672 Vertex Pharmaceuticals, Inc. (b) 1,271,327 -------------- 11,362,074 -------------- COMMERCIAL SERVICES & SUPPLIES -- 1.6% 7,586 Cintas Corp. 1,274,372 -------------- ELECTRIC UTILITIES -- 1.5% 23,317 Xcel Energy, Inc. 1,148,829 -------------- ENTERTAINMENT -- 8.1% 26,537 Activision Blizzard, Inc. 1,235,828 15,736 Electronic Arts, Inc. (b) 1,241,728 4,905 Netflix, Inc. (b) 1,312,872 11,973 Take-Two Interactive Software, Inc. (b) 1,232,501 12,777 Twenty-First Century Fox, Inc., Class A 614,829 12,853 Twenty-First Century Fox, Inc., Class B 614,116 -------------- 6,251,874 -------------- FOOD & STAPLES RETAILING -- 3.2% 6,161 Costco Wholesale Corp. 1,255,057 18,055 Walgreens Boots Alliance, Inc. 1,233,698 -------------- 2,488,755 -------------- FOOD PRODUCTS -- 3.0% 27,076 Kraft Heinz (The) Co. 1,165,351 29,604 Mondelez International, Inc., Class A 1,185,048 -------------- 2,350,399 -------------- HEALTH CARE EQUIPMENT & SUPPLIES -- 4.9% 6,147 Align Technology, Inc. (b) 1,287,366 6,587 IDEXX Laboratories, Inc. (b) 1,225,314 SHARES DESCRIPTION VALUE ------------------------------------------------------------- HEALTH CARE EQUIPMENT & SUPPLIES (CONTINUED) 2,681 Intuitive Surgical, Inc. (b) $ 1,283,984 -------------- 3,796,664 -------------- HEALTH CARE PROVIDERS & SERVICES -- 1.7% 321 Cigna Corp. 60,964 15,897 Henry Schein, Inc. (b) 1,248,233 -------------- 1,309,197 -------------- HOTELS, RESTAURANTS & LEISURE -- 4.9% 11,770 Marriott International, Inc., Class A 1,277,751 19,618 Starbucks Corp. 1,263,399 12,645 Wynn Resorts Ltd. 1,250,717 -------------- 3,791,867 -------------- INSURANCE -- 1.6% 8,207 Willis Towers Watson PLC 1,246,315 -------------- INTERNET & DIRECT MARKETING RETAIL -- 11.3% 870 Amazon.com, Inc. (b) 1,306,714 733 Booking Holdings, Inc. (b) 1,262,534 45,928 Ctrip.com International Ltd., ADR (b) 1,242,811 44,653 eBay, Inc. (b) 1,253,410 10,812 Expedia Group, Inc. 1,217,972 61,642 JD.com, Inc., ADR (b) 1,290,167 4,026 MercadoLibre, Inc. (b) 1,179,014 -------------- 8,752,622 -------------- IT SERVICES -- 6.4% 9,525 Automatic Data Processing, Inc. 1,248,918 16,974 Fiserv, Inc. (b) 1,247,419 18,833 Paychex, Inc. 1,226,970 15,219 PayPal Holdings, Inc. (b) 1,279,766 -------------- 5,003,073 -------------- LEISURE PRODUCTS -- 1.6% 15,491 Hasbro, Inc. 1,258,644 -------------- LIFE SCIENCES TOOLS & SERVICES -- 1.7% 4,286 Illumina, Inc. (b) 1,285,500 -------------- MACHINERY -- 1.6% 21,920 PACCAR, Inc. 1,252,509 -------------- MEDIA -- 6.2% 4,231 Charter Communications, Inc., Class A (b) 1,205,708 35,301 Comcast Corp., Class A 1,201,999 28,359 Liberty Global PLC, Class A (b) 605,181 29,417 Liberty Global PLC, Class C (b) 607,167 213,982 Sirius XM Holdings, Inc. (c) 1,221,837 -------------- 4,841,892 -------------- MULTILINE RETAIL -- 1.7% 14,450 Dollar Tree, Inc. (b) 1,305,124 -------------- See Notes to Financial Statements Page 29 FIRST TRUST NASDAQ-100 EX-TECHNOLOGY SECTOR INDEX FUND (QQXT) PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2018 SHARES DESCRIPTION VALUE ------------------------------------------------------------- COMMON STOCKS (a) (CONTINUED) PHARMACEUTICALS -- 1.6% 46,155 Mylan N.V. (b) $ 1,264,647 -------------- PROFESSIONAL SERVICES -- 1.6% 11,349 Verisk Analytics, Inc. (b) 1,237,495 -------------- ROAD & RAIL -- 3.1% 19,681 CSX Corp. 1,222,781 13,074 J.B. Hunt Transport Services, Inc. 1,216,405 -------------- 2,439,186 -------------- SPECIALTY RETAIL -- 4.9% 3,648 O'Reilly Automotive, Inc. (b) 1,256,116 15,533 Ross Stores, Inc. 1,292,346 5,224 Ulta Beauty, Inc. (b) 1,279,044 -------------- 3,827,506 -------------- TEXTILES, APPAREL & LUXURY GOODS -- 1.7% 10,581 Lululemon Athletica, Inc. (b) 1,286,755 -------------- TRADING COMPANIES & DISTRIBUTORS -- 1.6% 23,872 Fastenal Co. 1,248,267 -------------- WIRELESS TELECOMMUNICATION SERVICES -- 1.6% 19,257 T-Mobile US, Inc. (b) 1,224,938 -------------- TOTAL COMMON STOCKS -- 99.7% 77,404,207 (Cost $74,933,686) -------------- MONEY MARKET FUNDS -- 0.9% 373,473 Goldman Sachs Financial Square Treasury Obligations Fund - Institutional Class - 2.61% (d) (e) 373,473 335,076 Morgan Stanley Institutional Liquidity Funds - Treasury Portfolio -Institutional Class - 2.33% (d) 335,076 -------------- TOTAL MONEY MARKET FUNDS -- 0.9% 708,549 (Cost $708,549) -------------- PRINCIPAL VALUE DESCRIPTION VALUE ------------------------------------------------------------- REPURCHASE AGREEMENTS -- 1.0% $ 164,788 BNP Paribas S.A., 2.95% (d), dated 12/31/18, due 01/02/19, with a maturity value of $164,815. Collateralized by U.S. Treasury Note, interest rate of 2.375%, due 04/30/20. The value of the collateral including accrued interest is $168,750. (e) $ 164,788 593,077 JPMorgan Chase & Co., 2.85% (d), dated 12/31/18, due 01/02/19, with a maturity value of $593,171. Collateralized by U.S. Treasury Bill, interest rate of 0.000%, due 05/09/19. The value of the collateral is $604,927. (e) 593,077 -------------- TOTAL REPURCHASE AGREEMENTS -- 1.0% 757,865 (Cost $757,865) -------------- TOTAL INVESTMENTS -- 101.6% 78,870,621 (Cost $76,400,100) (f) NET OTHER ASSETS AND LIABILITIES -- (1.6)% (1,252,417) -------------- NET ASSETS -- 100.0% $ 77,618,204 ============== (a) The industry allocation is based on Standard & Poor's Global Industry Classification Standard (GICS), and is different than the industry sector classification system used by the Index to select securities, which is the Industry Classification Benchmark (ICB) system, which is maintained by FTSE International Limited. (b) Non-income producing security. (c) All or a portion of this security is on loan (see Note 2D - Securities Lending in the Notes to Financial Statements). The aggregate value of such securities is $1,099,249 and the total value of the collateral held by the Fund is $1,130,001. (d) Rate shown reflects yield as of December 31, 2018. (e) This security serves as collateral for securities on loan. (f) Aggregate cost for federal income tax purposes is $77,051,599. As of December 31, 2018, the aggregate gross unrealized appreciation for all investments in which there was an excess of value over tax cost was $10,508,659 and the aggregate gross unrealized depreciation for all investments in which there was an excess of tax cost over value was $8,689,637. The net unrealized appreciation was $1,819,022. ADR - American Depositary Receipt Page 30 See Notes to Financial Statements FIRST TRUST NASDAQ-100 EX-TECHNOLOGY SECTOR INDEX FUND (QQXT) PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2018 ----------------------------- VALUATION INPUTS A summary of the inputs used to value the Fund's investments as of December 31, 2018 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial Statements): Level 1 - Quoted Prices Level 2 - Other Significant Observable Inputs Level 3 - Significant Unobservable Inputs LEVEL 1 LEVEL 2 LEVEL 3 ----------------------------------------------------- Common Stocks* $ 77,404,207 $ -- $ -- Money Market Funds 708,549 -- -- Repurchase Agreements -- 757,865 -- ----------------------------------------------------- Total Investments $ 78,112,756 $ 757,865 $ -- ===================================================== * See Portfolio of Investments for industry breakout. --------------------------------- OFFSETTING ASSETS AND LIABILITIES ------------------------------------------------------------- Offsetting assets and liabilities requires entities to disclose both gross and net information about instruments and transactions eligible for offset, and to disclose instruments and transactions subject to master netting or similar agreements (see Note 2C - Offsetting on the Statements of Assets and Liabilities in the Notes to Financial Statements). The Fund's loaned securities were all subject to an enforceable Securities Lending Agency Agreement. Securities lent in accordance with the Securities Lending Agency Agreement on a gross basis were as follows: SECURITIES LENDING AGENCY AGREEMENT ------------------------------------------------------------- Total gross amount presented on the Statements of Assets and Liabilities(1) $ 1,099,249 Non-cash Collateral(2) (1,099,249) -------------- Net Amount $ -- ============== (1) The amount presented on the Statements of Assets and Liabilities, which is included in "Investments, at value", is not offset and is shown on a gross basis. (2) At December 31, 2018, the value of the collateral received from each borrower exceeded the value of the related securities loaned. This amount is disclosed on the Portfolio of Investments. The Fund's investments in repurchase agreements were all subject to an enforceable Master Repurchase Agreement. Repurchase Agreements on a gross basis were as follows: REPURCHASE AGREEMENTS ------------------------------------------------------------- Total gross amount presented on the Statements of Assets and Liabilities(3) $ 757,865 Non-cash Collateral(4) (757,865) -------------- Net Amount $ -- ============== (3) The amount is included in "Investments, at value" on the Statements of Assets and Liabilities. (4) At December 31, 2018, the value of the collateral received from each seller exceeded the value of the repurchase agreements. See Notes to Financial Statements Page 31 FIRST TRUST NASDAQ(R) CLEAN EDGE(R) GREEN ENERGY INDEX FUND (QCLN) PORTFOLIO OF INVESTMENTS DECEMBER 31, 2018 SHARES DESCRIPTION VALUE ------------------------------------------------------------- COMMON STOCKS -- 99.8% AEROSPACE & DEFENSE -- 5.1% 74,689 Hexcel Corp. $ 4,282,667 -------------- AUTOMOBILES -- 8.3% 20,955 Tesla, Inc. (a) 6,973,824 -------------- CHEMICALS -- 8.7% 76,249 Albemarle Corp. 5,876,511 36,184 Sociedad Quimica y Minera de Chile S.A., ADR (b) 1,385,847 -------------- 7,262,358 -------------- CONSTRUCTION & ENGINEERING -- 0.5% 26,242 Ameresco, Inc., Class A (a) 370,012 -------------- ELECTRICAL EQUIPMENT -- 13.1% 28,243 Acuity Brands, Inc. 3,246,533 217,448 Ballard Power Systems, Inc. (a) (b) 519,701 39,536 EnerSys 3,068,389 99,737 Enphase Energy, Inc. (a) (b) 471,756 218,919 Plug Power, Inc. (a) (b) 271,459 104,919 Sunrun, Inc. (a) 1,142,568 32,372 TPI Composites, Inc. (a) 795,704 26,647 Vicor Corp. (a) 1,006,990 111,924 Vivint Solar, Inc. (a) (b) 426,430 -------------- 10,949,530 -------------- ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS -- 9.0% 158,332 AVX Corp. 2,414,563 36,973 Itron, Inc. (a) 1,748,453 19,191 Littelfuse, Inc. 3,290,873 43,025 Maxwell Technologies, Inc. (a) (b) 89,062 -------------- 7,542,951 -------------- EQUITY REAL ESTATE INVESTMENT TRUSTS -- 1.2% 50,693 Hannon Armstrong Sustainable Infrastructure Capital, Inc. 965,702 -------------- INDEPENDENT POWER AND RENEWABLE ELECTRICITY PRODUCERS -- 17.9% 94,005 Atlantica Yield PLC 1,842,498 128,308 Brookfield Renewable Partners, L.P. (c) 3,323,177 68,557 Clearway Energy, Inc., Class C 1,182,608 52,540 NextEra Energy Partners, L.P. (c) (d) 2,261,847 47,531 Ormat Technologies, Inc. 2,485,872 92,015 Pattern Energy Group, Inc., Class A 1,713,319 196,177 TerraForm Power, Inc., Class A 2,201,106 -------------- 15,010,427 -------------- OIL, GAS & CONSUMABLE FUELS -- 1.1% 34,988 Renewable Energy Group, Inc. (a) 899,192 -------------- SHARES DESCRIPTION VALUE ------------------------------------------------------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT -- 34.9% 36,103 Advanced Energy Industries, Inc. (a) $ 1,549,902 54,950 Canadian Solar, Inc. (a) (b) 787,983 83,194 Cree, Inc. (a) 3,558,623 9,449 Daqo New Energy Corp., ADR (a) (b) 221,106 82,613 First Solar, Inc. (a) 3,507,335 111,927 Integrated Device Technology, Inc. (a) 5,420,625 26,762 JinkoSolar Holding Co., Ltd., ADR (a) 264,676 365,164 ON Semiconductor Corp. (a) 6,028,858 27,511 Power Integrations, Inc. 1,677,621 42,916 SolarEdge Technologies, Inc. (a) 1,506,351 132,339 SunPower Corp. (a) (b) 657,725 39,984 Universal Display Corp. (b) 3,741,303 44,830 Veeco Instruments, Inc. (a) 332,190 -------------- 29,254,298 -------------- TOTAL COMMON STOCKS -- 99.8% 83,510,961 (Cost $81,909,794) -------------- MONEY MARKET FUNDS -- 2.4% 2,031,713 Goldman Sachs Financial Square Treasury Obligations Fund - Institutional Class - 2.61% (e) (f) 2,031,713 (Cost $2,031,713) -------------- PRINCIPAL VALUE DESCRIPTION VALUE ------------------------------------------------------------- REPURCHASE AGREEMENTS -- 4.9% $ 896,459 BNP Paribas S.A., 2.95% (e), dated 12/31/18, due 01/02/19, with a maturity value of $896,605. Collateralized by U.S. Treasury Note, interest rate of 2.375%, due 04/30/20. The value of the collateral including accrued interest is $918,013. (f) 896,459 3,226,377 JPMorgan Chase & Co., 2.85% (e), dated 12/31/18, due 01/02/19, with a maturity value of $3,226,888. Collateralized by U.S. Treasury Bill, interest rate of 0.000%, due 05/09/19. The value of the collateral is $3,290,842. (f) 3,226,377 -------------- TOTAL REPURCHASE AGREEMENTS -- 4.9% 4,122,836 (Cost $4,122,836) -------------- TOTAL INVESTMENTS -- 107.1% 89,665,510 (Cost $88,064,343) (g) NET OTHER ASSETS AND LIABILITIES -- (7.1)% (5,934,120) -------------- NET ASSETS -- 100.0% $ 83,731,390 ============== Page 32 See Notes to Financial Statements FIRST TRUST NASDAQ(R) CLEAN EDGE(R) GREEN ENERGY INDEX FUND (QCLN) PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2018 (a) Non-income producing security. (b) All or a portion of this security is on loan (see Note 2D - Securities Lending in the Notes to Financial Statements). The aggregate value of such securities is $5,971,190 and the total value of the collateral held by the Fund is $6,147,276. (c) Security is a Master Limited Partnership ("MLP"). (d) NextEra Energy Partners, L.P. is taxed as a "C" corporation for federal income tax purposes. (e) Rate shown reflects yield as of December 31, 2018. (f) This security serves as collateral for securities on loan. (g) Aggregate cost for federal income tax purposes is $89,766,503. As of December 31, 2018, the aggregate gross unrealized appreciation for all investments in which there was an excess of value over tax cost was $10,784,646 and the aggregate gross unrealized depreciation for all investments in which there was an excess of tax cost over value was $10,885,639. The net unrealized depreciation was $100,993. ADR - American Depositary Receipt ----------------------------- VALUATION INPUTS A summary of the inputs used to value the Fund's investments as of December 31, 2018 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial Statements): Level 1 - Quoted Prices Level 2 - Other Significant Observable Inputs Level 3 - Significant Unobservable Inputs LEVEL 1 LEVEL 2 LEVEL 3 ----------------------------------------------------- Common Stocks* $ 83,510,961 $ -- $ -- Money Market Funds 2,031,713 -- -- Repurchase Agreements -- 4,122,836 -- ----------------------------------------------------- Total Investments $ 85,542,674 $ 4,122,836 $ -- ===================================================== * See Portfolio of Investments for industry breakout. --------------------------------- OFFSETTING ASSETS AND LIABILITIES ------------------------------------------------------------- Offsetting assets and liabilities requires entities to disclose both gross and net information about instruments and transactions eligible for offset, and to disclose instruments and transactions subject to master netting or similar agreements (see Note 2C - Offsetting on the Statements of Assets and Liabilities in the Notes to Financial Statements). The Fund's loaned securities were all subject to an enforceable Securities Lending Agency Agreement. Securities lent in accordance with the Securities Lending Agency Agreement on a gross basis were as follows: SECURITIES LENDING AGENCY AGREEMENT ------------------------------------------------------------- Total gross amount presented on the Statements of Assets and Liabilities(1) $ 5,971,190 Non-cash Collateral(2) (5,971,190) -------------- Net Amount $ -- ============== (1) The amount presented on the Statements of Assets and Liabilities, which is included in "Investments, at value", is not offset and is shown on a gross basis. (2) At December 31, 2018, the value of the collateral received from each borrower exceeded the value of the related securities loaned. This amount is disclosed on the Portfolio of Investments. The Fund's investments in repurchase agreements were all subject to an enforceable Master Repurchase Agreement. Repurchase Agreements on a gross basis were as follows: REPURCHASE AGREEMENTS ------------------------------------------------------------- Total gross amount presented on the Statements of Assets and Liabilities(3) $ 4,122,836 Non-cash Collateral(4) (4,122,836) -------------- Net Amount $ -- ============== (3) The amount is included in "Investments, at value" on the Statements of Assets and Liabilities. (4) At December 31, 2018, the value of the collateral received from each seller exceeded the value of the repurchase agreements. See Notes to Financial Statements Page 33 FIRST TRUST S&P REIT INDEX FUND (FRI) PORTFOLIO OF INVESTMENTS DECEMBER 31, 2018 SHARES DESCRIPTION VALUE ------------------------------------------------------------- COMMON STOCKS -- 99.4% DIVERSIFIED REITS -- 5.7% 5,748 American Assets Trust, Inc. $ 230,897 74,601 Colony Capital, Inc. 349,133 21,322 Empire State Realty Trust, Inc., Class A 303,412 5,259 Essential Properties Realty Trust, Inc. 72,784 4,411 Gladstone Commercial Corp. 79,045 11,574 Global Net Lease, Inc. 203,934 31,995 Lexington Realty Trust 262,679 22,491 Liberty Property Trust 941,923 2,212 One Liberty Properties, Inc. 53,575 3,037 PS Business Parks, Inc. 397,847 28,821 STORE Capital Corp. 815,922 147,205 VEREIT, Inc. 1,052,516 12,149 Washington Real Estate Investment Trust 279,427 24,506 WP Carey, Inc. 1,601,222 -------------- 6,644,316 -------------- HEALTH CARE REITS -- 13.0% 12,763 CareTrust REIT, Inc. 235,605 2,679 Community Healthcare Trust, Inc. 77,236 2,949 Global Medical REIT, Inc. 26,217 72,650 HCP, Inc. 2,029,115 19,055 Healthcare Realty Trust, Inc. 541,924 31,486 Healthcare Trust of America, Inc., Class A 796,911 6,034 LTC Properties, Inc. 251,497 4,848 MedEquities Realty Trust, Inc. 33,160 55,526 Medical Properties Trust, Inc. 892,858 6,425 National Health Investors, Inc. 485,345 12,499 New Senior Investment Group, Inc. 51,496 30,536 Omega Healthcare Investors, Inc. 1,073,340 27,740 Physicians Realty Trust 444,672 27,126 Sabra Health Care REIT, Inc. 447,036 36,171 Senior Housing Properties Trust 423,924 1,924 Universal Health Realty Income Trust 118,076 54,237 Ventas, Inc. 3,177,746 57,154 Welltower, Inc. 3,967,059 -------------- 15,073,217 -------------- HOTEL & RESORT REITS -- 6.0% 32,720 Apple Hospitality REIT, Inc. 466,587 13,221 Ashford Hospitality Trust, Inc. 52,884 4,650 Braemar Hotels & Resorts, Inc. 41,525 7,077 Chatham Lodging Trust 125,121 9,189 Chesapeake Lodging Trust 223,752 31,635 DiamondRock Hospitality Co. 287,246 5,519 Hersha Hospitality Trust 96,803 25,020 Hospitality Properties Trust 597,478 112,905 Host Hotels & Resorts, Inc. 1,882,126 30,615 Park Hotels & Resorts, Inc. 795,378 19,478 Pebblebrook Hotel Trust 551,422 26,657 RLJ Lodging Trust 437,175 SHARES DESCRIPTION VALUE ------------------------------------------------------------- HOTEL & RESORT REITS (CONTINUED) 7,810 Ryman Hospitality Properties, Inc. $ 520,849 15,939 Summit Hotel Properties, Inc. 155,087 34,728 Sunstone Hotel Investors, Inc. 451,811 17,126 Xenia Hotels & Resorts, Inc. 294,567 -------------- 6,979,811 -------------- INDUSTRIAL REITS -- 8.6% 8,999 Americold Realty Trust 229,834 54,518 Duke Realty Corp. 1,412,016 5,484 EastGroup Properties, Inc. 503,047 19,218 First Industrial Realty Trust, Inc. 554,632 9,915 Industrial Logistics Properties Trust 195,028 1,487 Innovative Industrial Properties, Inc. 67,495 13,935 Monmouth Real Estate Investment Corp. 172,794 95,783 Prologis, Inc. 5,624,378 14,118 Rexford Industrial Realty, Inc. 416,057 16,568 STAG Industrial, Inc. 412,212 8,998 Terreno Realty Corp. 316,460 -------------- 9,903,953 -------------- OFFICE REITS -- 12.8% 16,360 Alexandria Real Estate Equities, Inc. 1,885,326 23,498 Boston Properties, Inc. 2,644,700 27,175 Brandywine Realty Trust 349,742 6,017 City Office REIT, Inc. 61,674 17,950 Columbia Property Trust, Inc. 347,332 16,562 Corporate Office Properties Trust 348,299 63,962 Cousins Properties, Inc. 505,300 24,563 Douglas Emmett, Inc. 838,335 9,254 Easterly Government Properties, Inc. 145,103 18,484 Equity Commonwealth 554,705 16,315 Franklin Street Properties Corp. 101,642 15,746 Highwoods Properties, Inc. 609,213 23,843 Hudson Pacific Properties, Inc. 692,878 16,558 JBG SMITH Properties 576,384 15,329 Kilroy Realty Corp. 963,887 13,742 Mack-Cali Realty Corp. 269,206 7,579 NorthStar Realty Europe Corp. 110,199 15,094 Office Properties Income Trust (a) 103,696 31,044 Paramount Group, Inc. 389,913 19,532 Piedmont Office Realty Trust, Inc., Class A 332,825 13,625 Select Income REIT 100,280 12,974 SL Green Realty Corp. 1,025,984 8,198 Tier REIT, Inc. 169,125 26,346 Vornado Realty Trust 1,634,242 -------------- 14,759,990 -------------- RESIDENTIAL REITS -- 18.4% 20,849 American Campus Communities, Inc. 862,940 39,168 American Homes 4 Rent, Class A 777,485 Page 34 See Notes to Financial Statements FIRST TRUST S&P REIT INDEX FUND (FRI) PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2018 SHARES DESCRIPTION VALUE ------------------------------------------------------------- COMMON STOCKS (CONTINUED) RESIDENTIAL REITS (CONTINUED) 23,681 Apartment Investment & Management Co., Class A $ 1,039,122 21,031 AvalonBay Communities, Inc. 3,660,446 3,607 Bluerock Residential Growth REIT, Inc. 32,535 1,383 BRT Apartments Corp. 15,821 14,171 Camden Property Trust 1,247,757 2,304 Clipper Realty, Inc. 30,113 13,655 Equity LifeStyle Properties, Inc. 1,326,310 56,058 Equity Residential 3,700,389 10,052 Essex Property Trust, Inc. 2,464,851 7,425 Front Yard Residential Corp. 64,820 13,529 Independence Realty Trust, Inc. 124,196 1,818 Investors Real Estate Trust 89,209 45,144 Invitation Homes, Inc. 906,492 17,320 Mid-America Apartment Communities, Inc. 1,657,524 3,218 NexPoint Residential Trust, Inc. 112,791 6,246 Preferred Apartment Communities, Inc., Class A 87,819 13,139 Sun Communities, Inc. 1,336,368 41,924 UDR, Inc. 1,661,029 5,272 UMH Properties, Inc. 62,420 -------------- 21,260,437 -------------- RETAIL REITS -- 19.0% 12,408 Acadia Realty Trust 294,814 5,246 Agree Realty Corp. 310,143 575 Alexander's, Inc. 175,225 8,152 American Finance Trust, Inc. 108,585 45,616 Brixmor Property Group, Inc. 670,099 26,272 CBL & Associates Properties, Inc. 50,442 13,424 Cedar Realty Trust, Inc. 42,151 11,238 Federal Realty Investment Trust 1,326,534 5,119 Getty Realty Corp. 150,550 64,115 Kimco Realty Corp. 939,285 12,737 Kite Realty Group Trust 179,464 16,096 Macerich (The) Co. 696,635 24,213 National Retail Properties, Inc. 1,174,573 9,756 Pennsylvania Real Estate Investment Trust 57,951 44,902 Realty Income Corp. 2,830,622 25,781 Regency Centers Corp. 1,512,829 17,343 Retail Opportunity Investments Corp. 275,407 32,782 Retail Properties of America, Inc., Class A 355,685 2,332 Retail Value, Inc. 59,676 12,195 RPT Realty 145,730 1,754 Saul Centers, Inc. 82,824 4,233 Seritage Growth Properties, Class A 136,853 47,059 Simon Property Group, Inc. 7,905,441 22,198 SITE Centers Corp. 245,732 6,543 Spirit MTA REIT 46,652 13,041 Spirit Realty Capital, Inc. 459,695 SHARES DESCRIPTION VALUE ------------------------------------------------------------- RETAIL REITS (CONTINUED) 14,288 Tanger Factory Outlet Centers, Inc. $ 288,903 9,291 Taubman Centers, Inc. 422,648 17,392 Urban Edge Properties 289,055 4,536 Urstadt Biddle Properties, Inc., Class A 87,182 28,311 Washington Prime Group, Inc. 137,591 18,158 Weingarten Realty Investors 450,500 6,051 Whitestone REIT 74,185 -------------- 21,983,661 -------------- SPECIALIZED REITS -- 15.9% 18,057 CoreCivic, Inc. 321,956 5,584 CoreSite Realty Corp. 487,092 28,347 CubeSmart 813,276 16,103 CyrusOne, Inc. 851,527 31,386 Digital Realty Trust, Inc. 3,344,178 11,311 EPR Properties 724,243 19,249 Extra Space Storage, Inc. 1,741,650 4,512 Farmland Partners, Inc. 20,485 10,309 Four Corners Property Trust, Inc. 270,096 30,620 Gaming and Leisure Properties, Inc. 989,332 18,531 GEO Group (The), Inc. 365,061 2,127 Gladstone Land Corp. 24,418 6,020 InfraREIT, Inc. 126,540 43,548 Iron Mountain, Inc. 1,411,391 7,090 Life Storage, Inc. 659,299 8,607 National Storage Affiliates Trust 227,741 22,815 Public Storage 4,617,984 7,761 QTS Realty Trust, Inc., Class A 287,545 1,304 Safety Income & Growth, Inc. 24,528 54,806 VICI Properties, Inc. 1,029,257 -------------- 18,337,599 -------------- TOTAL COMMON STOCKS -- 99.4% 114,942,984 (Cost $136,789,201) -------------- MONEY MARKET FUNDS -- 1.5% 1,788,634 Morgan Stanley Institutional Liquidity Funds - Treasury Portfolio - Institutional Class - 2.33% (b) 1,788,634 (Cost $1,788,634) -------------- TOTAL INVESTMENTS -- 100.9% 116,731,618 (Cost $138,577,835) (c) NET OTHER ASSETS AND LIABILITIES -- (0.9)% (1,035,766) -------------- NET ASSETS -- 100.0% $ 115,695,852 ============== See Notes to Financial Statements Page 35 FIRST TRUST S&P REIT INDEX FUND (FRI) PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2018 (a) Non-income producing security. (b) Rate shown reflects yield as of December 31, 2018. (c) Aggregate cost for federal income tax purposes is $139,942,420. As of December 31, 2018, the aggregate gross unrealized appreciation for all investments in which there was an excess of value over tax cost was $502,958 and the aggregate gross unrealized depreciation for all investments in which there was an excess of tax cost over value was $23,713,760. The net unrealized depreciation was $23,210,802. ----------------------------- VALUATION INPUTS A summary of the inputs used to value the Fund's investments as of December 31, 2018 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial Statements): Level 1 - Quoted Prices Level 2 - Other Significant Observable Inputs Level 3 - Significant Unobservable Inputs LEVEL 1 LEVEL 2 LEVEL 3 ----------------------------------------------------- Common Stocks* $ 114,942,984 $ -- $ -- Money Market Funds 1,788,634 -- -- ----------------------------------------------------- Total Investments $ 116,731,618 $ -- $ -- ===================================================== * See Portfolio of Investments for industry breakout. Page 36 See Notes to Financial Statements FIRST TRUST WATER ETF (FIW) PORTFOLIO OF INVESTMENTS DECEMBER 31, 2018 SHARES DESCRIPTION VALUE ------------------------------------------------------------- COMMON STOCKS -- 100.0% BUILDING PRODUCTS -- 5.2% 231,020 A.O. Smith Corp. $ 9,864,554 213,998 Advanced Drainage Systems, Inc. 5,189,451 -------------- 15,054,005 -------------- CHEMICALS -- 4.5% 89,165 Ecolab, Inc. 13,138,463 -------------- COMMERCIAL SERVICES & SUPPLIES -- 3.0% 168,201 Tetra Tech, Inc. 8,707,766 -------------- CONSTRUCTION & ENGINEERING -- 7.9% 349,003 AECOM (a) 9,248,580 268,783 Aegion Corp. (a) 4,386,538 83,621 Valmont Industries, Inc. 9,277,750 -------------- 22,912,868 -------------- CONSTRUCTION MATERIALS -- 0.7% 495,630 Forterra, Inc. (a) (b) 1,863,569 -------------- ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS -- 4.6% 122,090 Badger Meter, Inc. 6,008,049 151,555 Itron, Inc. (a) 7,167,036 -------------- 13,175,085 -------------- HEALTH CARE EQUIPMENT & SUPPLIES -- 8.0% 129,590 Danaher Corp. 13,363,321 52,817 IDEXX Laboratories, Inc. (a) 9,825,018 -------------- 23,188,339 -------------- INDUSTRIAL CONGLOMERATES -- 4.1% 44,971 Roper Technologies, Inc. 11,985,671 -------------- LIFE SCIENCES TOOLS & SERVICES -- 4.6% 198,663 Agilent Technologies, Inc. 13,401,806 -------------- MACHINERY -- 33.5% 432,717 Energy Recovery, Inc. (a) (b) 2,912,185 346,174 Evoqua Water Technologies Corp. (a) 3,323,270 225,257 Flowserve Corp. 8,564,271 205,793 Franklin Electric Co., Inc. 8,824,404 193,753 Gorman-Rupp (The) Co. 6,279,535 87,576 IDEX Corp. 11,057,346 70,052 Lindsay Corp. 6,742,505 209,848 Mueller Industries, Inc. 4,902,049 579,848 Mueller Water Products, Inc., Class A 5,276,617 308,595 Pentair PLC 11,658,719 346,650 Rexnord Corp. (a) 7,955,617 122,054 Watts Water Technologies, Inc., Class A 7,876,145 176,758 Xylem, Inc. 11,793,294 -------------- 97,165,957 -------------- SHARES DESCRIPTION VALUE ------------------------------------------------------------- WATER UTILITIES -- 23.9% 166,528 American States Water Co. $ 11,164,037 153,292 American Water Works Co., Inc. 13,914,315 315,773 Aqua America, Inc. 10,796,279 230,639 AquaVenture Holdings Ltd. (a) 4,356,771 163,034 California Water Service Group 7,770,200 697,674 Cia de Saneamento Basico do Estado de Sao Paulo, ADR 5,630,229 91,552 Middlesex Water Co. 4,884,299 115,850 SJW Group 6,443,577 139,303 York Water (The) Co. 4,466,054 -------------- 69,425,761 -------------- TOTAL COMMON STOCKS -- 100.0% 290,019,290 (Cost $290,829,940) -------------- MONEY MARKET FUNDS -- 0.7% 1,273,445 Goldman Sachs Financial Square Treasury Obligations Fund - Institutional Class - 2.61% (c) (d) 1,273,445 871,913 Morgan Stanley Institutional Liquidity Funds - Treasury Portfolio - Institutional Class - 2.33% (c) 871,913 -------------- TOTAL MONEY MARKET FUNDS -- 0.7% 2,145,358 (Cost $2,145,358) -------------- PRINCIPAL VALUE DESCRIPTION VALUE ------------------------------------------------------------- REPURCHASE AGREEMENTS -- 0.9% $ 561,886 BNP Paribas S.A., 2.95% (c), dated 12/31/18, due 01/02/19, with a maturity value of $561,978. Collateralized by U.S. Treasury Note, interest rate of 2.375%, due 04/30/20. The value of the collateral including accrued interest is $575,396. (d) 561,886 2,022,242 JPMorgan Chase & Co., 2.85% (c), dated 12/31/18, due 01/02/19, with a maturity value of $2,022,562. Collateralized by U.S. Treasury Bill, interest rate of 0.000%, due 05/09/19. The value of the collateral is $2,062,647. (d) 2,022,242 -------------- TOTAL REPURCHASE AGREEMENTS -- 0.9% 2,584,128 (Cost $2,584,128) -------------- TOTAL INVESTMENTS -- 101.6% 294,748,776 (Cost $295,559,426) (e) NET OTHER ASSETS AND LIABILITIES -- (1.6)% (4,641,333) -------------- NET ASSETS -- 100.0% $ 290,107,443 ============== See Notes to Financial Statements Page 37 FIRST TRUST WATER ETF (FIW) PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2018 (a) Non-income producing security. (b) All or a portion of this security is on loan (see Note 2D - Securities Lending in the Notes to Financial Statements). The aggregate value of such securities is $3,797,847 and the total value of the collateral held by the Fund is $3,853,014. (c) Rate shown reflects yield as of December 31, 2018. (d) This security serves as collateral for securities on loan. (e) Aggregate cost for federal income tax purposes is $298,276,817. As of December 31, 2018, the aggregate gross unrealized appreciation for all investments in which there was an excess of value over tax cost was $25,901,903 and the aggregate gross unrealized depreciation for all investments in which there was an excess of tax cost over value was $29,429,944. The net unrealized depreciation was $3,528,041. ADR - American Depositary Receipt ----------------------------- VALUATION INPUTS A summary of the inputs used to value the Fund's investments as of December 31, 2018 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial Statements): Level 1 - Quoted Prices Level 2 - Other Significant Observable Inputs Level 3 - Significant Unobservable Inputs LEVEL 1 LEVEL 2 LEVEL 3 ----------------------------------------------------- Common Stocks* $ 290,019,290 $ -- $ -- Money Market Funds 2,145,358 -- -- Repurchase Agreements -- 2,584,128 -- ----------------------------------------------------- Total Investments $ 292,164,648 $ 2,584,128 $ -- ===================================================== * See Portfolio of Investments for industry breakout. --------------------------------- OFFSETTING ASSETS AND LIABILITIES ------------------------------------------------------------- Offsetting assets and liabilities requires entities to disclose both gross and net information about instruments and transactions eligible for offset, and to disclose instruments and transactions subject to master netting or similar agreements (see Note 2C - Offsetting on the Statements of Assets and Liabilities in the Notes to Financial Statements). The Fund's loaned securities were all subject to an enforceable Securities Lending Agency Agreement. Securities lent in accordance with the Securities Lending Agency Agreement on a gross basis were as follows: SECURITIES LENDING AGENCY AGREEMENT ------------------------------------------------------------- Total gross amount presented on the Statements of Assets and Liabilities(1) $ 3,797,847 Non-cash Collateral(2) (3,797,847) -------------- Net Amount $ -- ============== (1) The amount presented on the Statements of Assets and Liabilities, which is included in "Investments, at value", is not offset and is shown on a gross basis. (2) At December 31, 2018, the value of the collateral received from each borrower exceeded the value of the related securities loaned. This amount is disclosed on the Portfolio of Investments. The Fund's investments in repurchase agreements were all subject to an enforceable Master Repurchase Agreement. Repurchase Agreements on a gross basis were as follows: REPURCHASE AGREEMENTS ------------------------------------------------------------- Total gross amount presented on the Statements of Assets and Liabilities(3) $ 2,584,128 Non-cash Collateral(4) (2,584,128) -------------- Net Amount $ -- ============== (3) The amount is included in "Investments, at value" on the Statements of Assets and Liabilities. (4) At December 31, 2018, the value of the collateral received from each seller exceeded the value of the repurchase agreements. Page 38 See Notes to Financial Statements FIRST TRUST NATURAL GAS ETF (FCG) PORTFOLIO OF INVESTMENTS DECEMBER 31, 2018 SHARES DESCRIPTION VALUE ------------------------------------------------------------- COMMON STOCKS -- 99.8% ENERGY EQUIPMENT & SERVICES -- 1.0% 63,750 Unit Corp. (a) $ 910,350 -------------- GAS UTILITIES -- 4.3% 74,725 National Fuel Gas Co. 3,824,425 -------------- OIL, GAS & CONSUMABLE FUELS -- 94.5% 360,545 Antero Resources Corp. (a) 3,385,518 194,214 Cabot Oil & Gas Corp. 4,340,683 59,604 Cimarex Energy Co. 3,674,587 55,860 CNX Midstream Partners, L.P. (b) 909,401 259,971 CNX Resources Corp. (a) 2,968,869 136,746 Comstock Resources, Inc. (a) (c) 619,459 37,490 Concho Resources, Inc. (a) 3,853,597 106,876 Continental Resources, Inc. (a) 4,295,346 77,464 DCP Midstream, L.P. (b) 2,052,021 180,782 Devon Energy Corp. 4,074,826 96,036 Enable Midstream Partners, L.P. (b) 1,299,367 727,154 Encana Corp. 4,202,950 285,151 Enerplus Corp. 2,212,772 62,984 EQM Midstream Partners, L.P. (b) 2,724,058 261,169 EQT Corp. 4,933,482 268,194 Gulfport Energy Corp. (a) 1,756,671 24,306 Hess Midstream Partners, L.P. (b) 412,716 145,348 Matador Resources Co. (a) 2,257,254 101,536 MPLX, L.P. (b) 3,076,541 148,400 Murphy Oil Corp. 3,471,076 205,831 Noble Energy, Inc. 3,861,390 101,825 PDC Energy, Inc. (a) 3,030,312 377,335 QEP Resources, Inc. (a) 2,124,396 335,121 Range Resources Corp. 3,207,108 176,372 SM Energy Co. 2,730,239 893,772 Southwestern Energy Co. (a) 3,047,762 352,858 SRC Energy, Inc. (a) 1,658,433 70,893 Summit Midstream Partners, L.P. (b) 712,475 58,244 TC PipeLines, L.P. (b) 1,870,797 127,491 Vermilion Energy, Inc. (c) 2,686,235 159,965 W&T Offshore, Inc. (a) 659,056 66,112 Western Gas Equity Partners, L.P. (b) 1,833,286 -------------- 83,942,683 -------------- TOTAL COMMON STOCKS -- 99.8% 88,677,458 (Cost $134,259,901) -------------- MONEY MARKET FUNDS -- 1.2% 678,795 Goldman Sachs Financial Square Treasury Obligations Fund - Institutional Class - 2.61% (d) (e) 678,795 406,127 Morgan Stanley Institutional Liquidity Funds - Treasury Portfolio - Institutional Class - 2.33% (d) 406,127 -------------- TOTAL MONEY MARKET FUNDS -- 1.2% 1,084,922 (Cost $1,084,922) -------------- PRINCIPAL VALUE DESCRIPTION VALUE ------------------------------------------------------------- REPURCHASE AGREEMENTS -- 1.5% $ 299,507 BNP Paribas S.A., 2.95% (d), dated 12/31/18, due 01/02/19, with a maturity value of $299,556. Collateralized by U.S. Treasury Note, interest rate of 2.375%, due 04/30/20. The value of the collateral including accrued interest is $306,708. (e) $ 299,507 1,077,933 JPMorgan Chase & Co., 2.85 % (d), dated 12/31/18, due 01/02/19, with a maturity value of $1,078,103. Collateralized by U.S. Treasury Bill, interest rate of 0.000%, due 05/09/19. The value of the collateral is $1,099,470. (e) 1,077,933 -------------- TOTAL REPURCHASE AGREEMENTS -- 1.5% 1,377,440 (Cost $1,377,440) -------------- TOTAL INVESTMENTS -- 102.5% 91,139,820 (Cost $136,722,263) (f) NET OTHER ASSETS AND LIABILITIES -- (2.5)% (2,265,832) -------------- NET ASSETS -- 100.0% $ 88,873,988 ============== (a) Non-income producing security. (b) Security is a Master Limited Partnership ("MLP"). (c) All or a portion of this security is on loan (see Note 2D - Securities Lending in the Notes to Financial Statements). The aggregate value of such securities is $2,043,121 and the total value of the collateral held by the Fund is $2,053,805. (d) Rate shown reflects yield as of December 31, 2018. (e) This security serves as collateral for securities on loan. (f) Aggregate cost for federal income tax purposes is $143,037,781. As of December 31, 2018, the aggregate gross unrealized appreciation for all investments in which there was an excess of value over tax cost was $393,937 and the aggregate gross unrealized depreciation for all investments in which there was an excess of tax cost over value was $52,291,898. The net unrealized depreciation was $51,897,961. See Notes to Financial Statements Page 39 FIRST TRUST NATURAL GAS ETF (FCG) PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2018 ----------------------------- VALUATION INPUTS A summary of the inputs used to value the Fund's investments as of December 31, 2018 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial Statements): Level 1 - Quoted Prices Level 2 - Other Significant Observable Inputs Level 3 - Significant Unobservable Inputs LEVEL 1 LEVEL 2 LEVEL 3 ----------------------------------------------------- Common Stocks* $ 88,677,458 $ -- $ -- Money Market Funds 1,084,922 -- -- Repurchase Agreements -- 1,377,440 -- ----------------------------------------------------- Total Investments $ 89,762,380 $ 1,377,440 $ -- ===================================================== * See Portfolio of Investments for industry breakout. --------------------------------- OFFSETTING ASSETS AND LIABILITIES ------------------------------------------------------------- Offsetting assets and liabilities requires entities to disclose both gross and net information about instruments and transactions eligible for offset, and to disclose instruments and transactions subject to master netting or similar agreements (see Note 2C - Offsetting on the Statements of Assets and Liabilities in the Notes to Financial Statements). The Fund's loaned securities were all subject to an enforceable Securities Lending Agency Agreement. Securities lent in accordance with the Securities Lending Agency Agreement on a gross basis were as follows: SECURITIES LENDING AGENCY AGREEMENT ------------------------------------------------------------- Total gross amount presented on the Statements of Assets and Liabilities(1) $ 2,043,121 Non-cash Collateral(2) (2,043,121) -------------- Net Amount $ -- ============== (1) The amount presented on the Statements of Assets and Liabilities, which is included in "Investments, at value", is not offset and is shown on a gross basis. (2) At December 31, 2018, the value of the collateral received from each borrower exceeded the value of the related securities loaned. This amount is disclosed on the Portfolio of Investments. The Fund's investments in repurchase agreements were all subject to an enforceable Master Repurchase Agreement. Repurchase Agreements on a gross basis were as follows: REPURCHASE AGREEMENTS ------------------------------------------------------------- Total gross amount presented on the Statements of Assets and Liabilities(3) $ 1,377,440 Non-cash Collateral(4) (1,377,440) -------------- Net Amount $ -- ============== (3) The amount is included in "Investments, at value" on the Statements of Assets and Liabilities. (4) At December 31, 2018, the value of the collateral received from each seller exceeded the value of the repurchase agreements. Page 40 See Notes to Financial Statements FIRST TRUST CHINDIA ETF (FNI) PORTFOLIO OF INVESTMENTS DECEMBER 31, 2018 SHARES DESCRIPTION VALUE ------------------------------------------------------------- COMMON STOCKS -- 100.1% AIR FREIGHT & LOGISTICS -- 0.7% 56,401 ZTO Express Cayman, Inc., ADR $ 892,828 -------------- AUTOMOBILES -- 4.8% 125,530 NIO, Inc., ADR (a) (b) 799,626 461,560 Tata Motors Ltd., ADR (b) 5,621,801 -------------- 6,421,427 -------------- BANKS -- 15.1% 97,163 HDFC Bank Ltd., ADR 10,065,115 968,959 ICICI Bank Ltd., ADR 9,970,588 -------------- 20,035,703 -------------- BIOTECHNOLOGY -- 1.3% 6,313 BeiGene Ltd., ADR (b) 885,462 11,797 China Biologic Products Holdings, Inc. (a) (b) 895,510 -------------- 1,780,972 -------------- CAPITAL MARKETS -- 0.6% 19,882 Noah Holdings Ltd., ADR (b) 861,288 -------------- CONSUMER FINANCE -- 0.6% 189,771 Qudian, Inc., ADR (a) (b) 814,117 -------------- DIVERSIFIED CONSUMER SERVICES -- 6.1% 49,257 New Oriental Education & Technology Group, Inc., ADR (b) 2,699,776 200,607 TAL Education Group, ADR (b) 5,352,195 -------------- 8,051,971 -------------- DIVERSIFIED TELECOMMUNICATION SERVICES -- 1.3% 17,930 China Telecom Corp., Ltd., ADR 909,589 82,439 China Unicom (Hong Kong) Ltd., ADR 878,800 -------------- 1,788,389 -------------- ENTERTAINMENT -- 6.9% 62,001 Bilibili, Inc., ADR (b) 904,594 106,006 Eros International PLC (a) (b) 878,790 56,041 HUYA, Inc., ADR (b) 867,515 47,653 iQIYI, Inc., ADR (a) (b) 708,600 24,799 NetEase, Inc., ADR 5,836,941 -------------- 9,196,440 -------------- HOTELS, RESTAURANTS & LEISURE -- 3.3% 30,686 Huazhu Group Ltd., ADR 878,540 53,560 Melco Resorts & Entertainment Ltd., ADR 943,727 78,580 Yum China Holdings, Inc. 2,634,788 -------------- 4,457,055 -------------- INSURANCE -- 1.4% 90,031 China Life Insurance Co., Ltd., ADR (a) 944,425 39,568 Fanhua, Inc., ADR 868,518 -------------- 1,812,943 -------------- SHARES DESCRIPTION VALUE ------------------------------------------------------------- INTERACTIVE MEDIA & SERVICES -- 11.0% 16,242 58.com, Inc., ADR (b) $ 880,479 11,754 Autohome, Inc., ADR (a) 919,515 52,339 Baidu, Inc., ADR (b) 8,300,965 52,429 Bitauto Holdings Ltd., ADR (a) (b) 1,298,666 30,872 Momo, Inc., ADR (b) 733,210 14,943 SINA Corp. (b) 801,543 15,198 Weibo Corp., ADR (b) 888,019 14,218 YY, Inc., ADR (b) 851,090 -------------- 14,673,487 -------------- INTERNET & DIRECT MARKETING RETAIL -- 23.0% 61,260 Alibaba Group Holding Ltd., ADR (b) 8,396,908 27,441 Baozun, Inc., ADR (a) (b) 801,552 195,183 Ctrip.com International Ltd., ADR (b) 5,281,652 464,169 JD.com, Inc., ADR (b) 9,715,057 112,666 MakeMyTrip Ltd. (b) 2,741,164 122,627 Pinduoduo, Inc., ADR (a) (b) 2,751,750 167,736 Vipshop Holdings Ltd., ADR (b) 915,838 -------------- 30,603,921 -------------- IT SERVICES -- 13.7% 32,819 GDS Holdings Ltd., ADR (b) 757,791 999,423 Infosys Ltd., ADR 9,514,507 1,078,742 Wipro Ltd., ADR 5,533,946 57,648 WNS (Holdings) Ltd., ADR (b) 2,378,557 -------------- 18,184,801 -------------- METALS & MINING -- 4.4% 505,026 Vedanta Ltd., ADR 5,828,000 -------------- OIL, GAS & CONSUMABLE FUELS -- 1.9% 11,341 China Petroleum & Chemical Corp., ADR 800,674 5,746 CNOOC Ltd., ADR 875,978 13,926 PetroChina Co., Ltd., ADR 857,145 -------------- 2,533,797 -------------- PHARMACEUTICALS -- 2.6% 73,244 Dr. Reddy's Laboratories Ltd., ADR 2,761,299 28,078 Hutchison China MediTech Ltd., ADR (b) 648,321 -------------- 3,409,620 -------------- PROFESSIONAL SERVICES -- 0.7% 14,216 51job, Inc., ADR (b) 887,647 -------------- WIRELESS TELECOMMUNICATION SERVICES -- 0.7% 19,458 China Mobile Ltd., ADR 933,984 -------------- TOTAL COMMON STOCKS -- 100.1% 133,168,390 (Cost $165,033,921) -------------- See Notes to Financial Statements Page 41 FIRST TRUST CHINDIA ETF (FNI) PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2018 SHARES DESCRIPTION VALUE ------------------------------------------------------------- MONEY MARKET FUNDS -- 1.6% 2,082,441 Goldman Sachs Financial Square Treasury Obligations Fund - Institutional Class - 2.61% (c) (d) $ 2,082,441 (Cost $2,082,441) -------------- PRINCIPAL VALUE DESCRIPTION VALUE ------------------------------------------------------------- REPURCHASE AGREEMENTS -- 3.2% $ 918,841 BNP Paribas S.A., 2.95% (c), dated 12/31/18, due 01/02/19, with a maturity value of $918,992. Collateralized by U.S. Treasury Note, interest rate of 2.375%, due 04/30/20. The value of the collateral including accrued interest is $940,934. (d) 918,841 3,306,934 JPMorgan Chase & Co., 2.85% (c), dated 12/31/18, due 01/02/19, with a maturity value of $3,307,457. Collateralized by U.S. Treasury Bill, interest rate of 0.000%, due 05/09/19. The value of the collateral is $3,373,008. (d) 3,306,934 -------------- TOTAL REPURCHASE AGREEMENTS -- 3.2% 4,225,775 (Cost $4,225,775) -------------- TOTAL INVESTMENTS -- 104.9% 139,476,606 (Cost $171,342,137) (e) NET OTHER ASSETS AND LIABILITIES -- (4.9)% (6,469,889) -------------- NET ASSETS -- 100.0% $ 133,006,717 ============== (a) All or a portion of this security is on loan (see Note 2D - Securities Lending in the Notes to Financial Statements). The aggregate value of such securities is $6,237,963 and the total value of the collateral held by the Fund is $6,300,761. (b) Non-income producing security. (c) Rate shown reflects yield as of December 31, 2018. (d) This security serves as collateral for securities on loan. (e) Aggregate cost for federal income tax purposes is $172,993,855. As of December 31, 2018, the aggregate gross unrealized appreciation for all investments in which there was an excess of value over tax cost was $3,402,566 and the aggregate gross unrealized depreciation for all investments in which there was an excess of tax cost over value was $36,919,815. The net unrealized depreciation was $33,517,249. ADR - American Depositary Receipt ----------------------------- VALUATION INPUTS A summary of the inputs used to value the Fund's investments as of December 31, 2018 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial Statements): Level 1 - Quoted Prices Level 2 - Other Significant Observable Inputs Level 3 - Significant Unobservable Inputs LEVEL 1 LEVEL 2 LEVEL 3 ----------------------------------------------------- Common Stocks* $ 133,168,390 $ -- $ -- Money Market Funds 2,082,441 -- -- Repurchase Agreements -- 4,225,775 -- ----------------------------------------------------- Total Investments $ 135,250,831 $ 4,225,775 $ -- ===================================================== * See Portfolio of Investments for industry breakout. Page 42 See Notes to Financial Statements FIRST TRUST CHINDIA ETF (FNI) PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2018 --------------------------------- OFFSETTING ASSETS AND LIABILITIES ------------------------------------------------------------- Offsetting assets and liabilities requires entities to disclose both gross and net information about instruments and transactions eligible for offset, and to disclose instruments and transactions subject to master netting or similar agreements (see Note 2C - Offsetting on the Statements of Assets and Liabilities in the Notes to Financial Statements). The Fund's loaned securities were all subject to an enforceable Securities Lending Agency Agreement. Securities lent in accordance with the Securities Lending Agency Agreement on a gross basis were as follows: SECURITIES LENDING AGENCY AGREEMENT ------------------------------------------------------------- Total gross amount presented on the Statements of Assets and Liabilities(1) $ 6,237,963 Non-cash Collateral(2) (6,237,963) -------------- Net Amount $ -- ============== (1) The amount presented on the Statements of Assets and Liabilities, which is included in "Investments, at value", is not offset and is shown on a gross basis. (2) At December 31, 2018, the value of the collateral received from each borrower exceeded the value of the related securities loaned. This amount is disclosed on the Portfolio of Investments. The Fund's investments in repurchase agreements were all subject to an enforceable Master Repurchase Agreement. Repurchase Agreements on a gross basis were as follows: REPURCHASE AGREEMENTS ------------------------------------------------------------- Total gross amount presented on the Statements of Assets and Liabilities(3) $ 4,225,775 Non-cash Collateral(4) (4,225,775) -------------- Net Amount $ -- ============== (3) The amount is included in "Investments, at value" on the Statements of Assets and Liabilities. (4) At December 31, 2018, the value of the collateral received from each seller exceeded the value of the repurchase agreements. See Notes to Financial Statements Page 43 FIRST TRUST NASDAQ(R) ABA COMMUNITY BANK INDEX FUND (QABA) PORTFOLIO OF INVESTMENTS DECEMBER 31, 2018 SHARES DESCRIPTION VALUE ------------------------------------------------------------- COMMON STOCKS -- 99.9% BANKS -- 88.0% 27,340 1st Source Corp. $ 1,102,896 22,981 Allegiance Bancshares, Inc. (a) 743,895 9,172 American National Bankshares, Inc. 268,831 50,015 Ameris Bancorp 1,583,975 27,494 Atlantic Capital Bancshares, Inc. (a) 450,077 34,492 BancFirst Corp. 1,721,151 59,433 Bancorp (The), Inc. (a) 473,087 14,684 Bank of Marin Bancorp 605,568 135,426 Bank OZK 3,091,776 37,386 Banner Corp. 1,999,403 11,445 Baycom Corp. (a) 264,265 68,899 BOK Financial Corp. 5,052,364 88,847 Boston Private Financial Holdings, Inc. 939,113 20,837 Bridge Bancorp, Inc. 531,135 84,752 Brookline Bancorp, Inc. 1,171,273 21,324 Bryn Mawr Bank Corp. 733,546 12,141 Business First Bancshares, Inc. 294,176 16,408 Camden National Corp. 590,196 23,767 Carolina Financial Corp. 703,265 85,373 Cathay General Bancorp 2,862,557 27,335 CBTX, Inc. 803,649 100,739 CenterState Bank Corp. 2,119,549 14,528 Central Valley Community Bancorp 274,143 75,226 Chemical Financial Corp. 2,754,024 16,203 City Holding Co. 1,095,161 16,217 Civista Bancshares, Inc. 282,500 77,135 Columbia Banking System, Inc. 2,799,229 117,446 Commerce Bancshares, Inc. 6,620,431 18,673 Community Trust Bancorp, Inc. 739,637 33,661 ConnectOne Bancorp, Inc. 621,719 147,765 CVB Financial Corp. 2,989,286 36,170 Eagle Bancorp, Inc. (a) 1,761,841 152,636 East West Bancorp, Inc. 6,644,245 24,297 Enterprise Financial Services Corp. 914,296 16,628 Equity Bancshares, Inc., Class A (a) 586,137 3,962 Fidelity D&D Bancorp, Inc. (b) 254,281 28,713 Fidelity Southern Corp. 747,112 16,770 Financial Institutions, Inc. 430,989 31,307 First Bancorp 1,022,487 51,451 First Busey Corp. 1,262,608 12,377 First Choice Bancorp 279,720 11,380 First Citizens BancShares, Inc., Class A 4,290,829 17,146 First Community Bankshares, Inc. 539,756 103,093 First Financial Bancorp 2,445,366 71,306 First Financial Bankshares, Inc. 4,113,643 12,902 First Financial Corp. 518,015 46,797 First Foundation, Inc. (a) 601,809 142,015 First Hawaiian, Inc. 3,196,758 10,722 First Internet Bancorp 219,158 40,124 First Interstate BancSystem, Inc., Class A 1,466,933 SHARES DESCRIPTION VALUE ------------------------------------------------------------- BANKS (CONTINUED) 52,291 First Merchants Corp. $ 1,792,013 17,528 First Mid-Illinois Bancshares, Inc. 559,494 112,015 First Midwest Bancorp, Inc. 2,219,017 26,838 First of Long Island (The) Corp. 535,418 29,486 Flushing Financial Corp. 634,834 185,424 Fulton Financial Corp. 2,870,363 14,412 FVCBankcorp, Inc. (a) 253,795 26,280 German American Bancorp, Inc. 729,796 88,998 Glacier Bancorp, Inc. 3,526,101 14,905 Great Southern Bancorp, Inc. 686,077 12,520 Guaranty Bancshares, Inc. 373,346 89,677 Hancock Whitney Corp. 3,107,308 33,461 Hanmi Financial Corp. 659,182 36,303 Heartland Financial USA, Inc. 1,595,517 45,570 Heritage Commerce Corp. 516,764 38,828 Heritage Financial Corp. 1,153,968 182,089 Home BancShares, Inc. 2,975,334 19,651 HomeTrust Bancshares, Inc. 514,463 135,599 Hope Bancorp, Inc. 1,608,204 40,401 Horizon Bancorp, Inc. 637,528 20,043 Howard Bancorp, Inc. (a) 286,615 58,483 IBERIABANK Corp. 3,759,287 29,008 Independent Bank Corp. 2,039,552 25,386 Independent Bank Corp./MI 533,614 32,089 Independent Bank Group, Inc. 1,468,714 69,660 International Bancshares Corp. 2,396,304 307,005 Investors Bancorp, Inc. 3,192,852 49,998 Lakeland Bancorp, Inc. 740,470 26,645 Lakeland Financial Corp. 1,070,063 51,058 LegacyTexas Financial Group, Inc. 1,638,451 37,381 Live Oak Bancshares, Inc. 553,613 17,472 Mercantile Bank Corp. 493,759 24,964 Midland States Bancorp, Inc. 557,696 12,873 MidWestOne Financial Group, Inc. 319,637 45,978 NBT Bancorp, Inc. 1,590,379 10,027 Nicolet Bankshares, Inc. (a) 489,318 7,252 Northrim BanCorp, Inc. 238,373 17,888 Old Line Bancshares, Inc. 470,812 184,407 Old National Bancorp 2,839,868 31,331 Old Second Bancorp, Inc. 407,303 37,970 Opus Bank 743,832 24,869 Origin Bancorp, Inc. 847,535 65,778 Pacific Premier Bancorp, Inc. (a) 1,678,655 128,220 PacWest Bancorp 4,267,162 20,259 Peapack-Gladstone Financial Corp. 510,122 20,594 Peoples Bancorp, Inc. 619,879 19,710 People's Utah Bancorp 594,256 82,011 Pinnacle Financial Partners, Inc. 3,780,707 105,666 Popular, Inc. 4,989,548 16,140 Preferred Bank 699,669 16,501 QCR Holdings, Inc. 529,517 19,874 RBB Bancorp 349,186 61,826 Renasant Corp. 1,865,909 19,679 Republic Bancorp, Inc., Class A 761,971 61,902 Republic First Bancorp, Inc. (a) 369,555 36,858 S&T Bancorp, Inc. 1,394,707 37,404 Sandy Spring Bancorp, Inc. 1,172,241 Page 44 See Notes to Financial Statements FIRST TRUST NASDAQ(R) ABA COMMUNITY BANK INDEX FUND (QABA) PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2018 SHARES DESCRIPTION VALUE ------------------------------------------------------------- COMMON STOCKS (CONTINUED) BANKS (CONTINUED) 53,988 Seacoast Banking Corp. of Florida (a) $ 1,404,768 56,118 ServisFirst Bancshares, Inc. 1,788,481 16,091 Sierra Bancorp 386,667 97,433 Simmons First National Corp., Class A 2,351,058 14,708 SmartFinancial, Inc. (a) 268,715 38,460 South State Corp. 2,305,677 25,325 Southern National Bancorp of Virginia, Inc. 334,796 37,024 Southside Bancshares, Inc. 1,175,512 23,949 Stock Yards Bancorp, Inc. 785,527 52,843 Texas Capital Bancshares, Inc. (a) 2,699,749 76,194 TowneBank 1,824,846 32,030 TriCo Bancshares 1,082,294 30,388 TriState Capital Holdings, Inc. (a) 591,350 27,672 Triumph Bancorp, Inc. (a) 821,858 70,646 Trustmark Corp. 2,008,466 52,522 UMB Financial Corp. 3,202,266 231,905 Umpqua Holdings Corp. 3,687,289 69,482 Union Bankshares Corp. 1,961,477 108,648 United Bankshares, Inc. 3,380,039 83,400 United Community Banks, Inc. 1,789,764 30,869 Univest Financial Corp. 665,844 349,050 Valley National Bancorp 3,099,564 25,507 Veritex Holdings, Inc. (a) 545,340 18,209 Washington Trust Bancorp, Inc. 865,474 57,493 WesBanco, Inc. 2,109,418 28,142 Westamerica Bancorporation 1,566,947 59,380 Wintrust Financial Corp. 3,948,176 -------------- 201,438,875 -------------- IT SERVICES -- 0.4% 15,528 Cass Information Systems, Inc. 821,742 -------------- THRIFTS & MORTGAGE FINANCE -- 11.5% 17,895 BankFinancial Corp. 267,530 31,653 Bridgewater Bancshares, Inc. (a) 333,939 148,718 Capitol Federal Financial, Inc. 1,899,129 122,028 Columbia Financial, Inc. (a) 1,865,808 38,376 Dime Community Bancshares, Inc. 651,625 21,479 First Defiance Financial Corp. 526,450 4,721 FS Bancorp, Inc. 202,436 28,422 HomeStreet, Inc. (a) 603,399 101,433 Kearny Financial Corp. 1,300,371 59,535 Luther Burbank Corp. 537,006 30,214 Merchants Bancorp 603,071 57,025 Meridian Bancorp, Inc. 816,598 41,498 Meta Financial Group, Inc. 804,646 52,168 Northfield Bancorp, Inc. 706,876 108,773 Northwest Bancshares, Inc. 1,842,615 50,962 OceanFirst Financial Corp. 1,147,155 47,901 Oritani Financial Corp. 706,540 55,816 Sterling Bancorp, Inc. 387,921 SHARES DESCRIPTION VALUE ------------------------------------------------------------- THRIFTS & MORTGAGE FINANCE (CONTINUED) 295,049 TFS Financial Corp. $ 4,759,140 101,779 TrustCo Bank Corp. NY 698,204 52,363 United Community Financial Corp. 463,413 53,722 United Financial Bancorp, Inc. 789,713 85,907 Washington Federal, Inc. 2,294,576 30,359 Waterstone Financial, Inc. 508,817 30,870 Western New England Bancorp, Inc. 309,935 33,027 WSFS Financial Corp. 1,252,054 -------------- 26,278,967 -------------- TOTAL COMMON STOCKS -- 99.9% 228,539,584 (Cost $281,289,722) -------------- MONEY MARKET FUNDS -- 0.0% 60,337 Goldman Sachs Financial Square Treasury Obligations Fund - Institutional Class - 2.61% (c) (d) 60,337 (Cost $60,337) -------------- PRINCIPAL VALUE DESCRIPTION VALUE ------------------------------------------------------------- REPURCHASE AGREEMENTS -- 0.1% $ 26,623 BNP Paribas S.A., 2.95% (c), dated 12/31/18, due 01/02/19, with a maturity value of $26,627. Collateralized by U.S. Treasury Note, interest rate of 2.375%, due 04/30/20. The value of the collateral including accrued interest is $27,263. (d) 26,623 95,816 JPMorgan Chase & Co., 2.85% (c), dated 12/31/18, due 01/02/19, with a maturity value of $95,831. Collateralized by U.S. Treasury Bill, interest rate of 0.000%, due 05/09/19. The value of the collateral is $97,730. (d) 95,816 -------------- TOTAL REPURCHASE AGREEMENTS -- 0.1% 122,439 (Cost $122,439) -------------- TOTAL INVESTMENTS -- 100.0% 228,722,360 (Cost $281,472,498) (e) NET OTHER ASSETS AND LIABILITIES 0.0% 39,647 -------------- NET ASSETS -- 100.0% $ 228,762,007 ============== See Notes to Financial Statements Page 45 FIRST TRUST NASDAQ(R) ABA COMMUNITY BANK INDEX FUND (QABA) PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2018 (a) Non-income producing security. (b) All or a portion of this security is on loan (see Note 2D - Securities Lending in the Notes to Financial Statements). The aggregate value of such securities is $179,704 and the total value of the collateral held by the Fund is $182,560. (c) Rate shown reflects yield as of December 31, 2018. (d) This security serves as collateral for securities on loan. (e) Aggregate cost for federal income tax purposes is $283,779,527. As of December 31, 2018, the aggregate gross unrealized appreciation for all investments in which there was an excess of value over tax cost was $1,748,906 and the aggregate gross unrealized depreciation for all investments in which there was an excess of tax cost over value was $56,806,073. The net unrealized depreciation was $55,057,167. ----------------------------- VALUATION INPUTS A summary of the inputs used to value the Fund's investments as of December 31, 2018 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial Statements): Level 1 - Quoted Prices Level 2 - Other Significant Observable Inputs Level 3 - Significant Unobservable Inputs LEVEL 1 LEVEL 2 LEVEL 3 ----------------------------------------------------- Common Stocks* $ 228,539,584 $ -- $ -- Money Market Funds 60,337 -- -- Repurchase Agreements -- 122,439 -- ----------------------------------------------------- Total Investments $ 228,599,921 $ 122,439 $ -- ===================================================== * See Portfolio of Investments for industry breakout. --------------------------------- OFFSETTING ASSETS AND LIABILITIES ------------------------------------------------------------- Offsetting assets and liabilities requires entities to disclose both gross and net information about instruments and transactions eligible for offset, and to disclose instruments and transactions subject to master netting or similar agreements (see Note 2C - Offsetting on the Statements of Assets and Liabilities in the Notes to Financial Statements). The Fund's loaned securities were all subject to an enforceable Securities Lending Agency Agreement. Securities lent in accordance with the Securities Lending Agency Agreement on a gross basis were as follows: SECURITIES LENDING AGENCY AGREEMENT ------------------------------------------------------------- Total gross amount presented on the Statements of Assets and Liabilities(1) $ 179,704 Non-cash Collateral(2) (179,704) -------------- Net Amount $ -- ============== (1) The amount presented on the Statements of Assets and Liabilities which is included in "Investments, at value", is not offset and is shown on a gross basis. (2) At December 31, 2018, the value of the collateral received from each borrower exceeded the value of the related securities loaned. This amount is disclosed on the Portfolio of Investments. The Fund's investments in repurchase agreements were all subject to an enforceable Master Repurchase Agreement. Repurchase Agreements on a gross basis were as follows: REPURCHASE AGREEMENTS ------------------------------------------------------------- Total gross amount presented on the Statements of Assets and Liabilities(3) $ 122,439 Non-cash Collateral(4) (122,439) -------------- Net Amount $ -- ============== (3) The amount is included in "Investments, at value" on the Statements of Assets and Liabilities. (4) At December 31, 2018, the value of the collateral received from each seller exceeded the value of the repurchase agreements. Page 46 See Notes to Financial Statements This page intentionally left blank. FIRST TRUST EXCHANGE-TRADED FUND STATEMENTS OF ASSETS AND LIABILITIES DECEMBER 31, 2018
FIRST TRUST FIRST TRUST NASDAQ-100 FIRST TRUST NASDAQ-100 EQUAL NASDAQ-100- EX-TECHNOLOGY WEIGHTED TECHNOLOGY SECTOR SECTOR INDEX FUND INDEX FUND INDEX FUND ---------------- ----------------- ---------------- ASSETS: Investments, at value............................................... $ 464,892,237 $ 1,946,690,248 $ 78,870,621 Cash................................................................ 646,097 4,109,651 -- Receivables: Investment securities sold.................................... -- 6,742,689 -- Capital shares sold........................................... -- -- -- Dividends..................................................... 603,349 1,685,691 121,141 Securities lending income..................................... 11,945 4,433 3,606 Prepaid expenses.................................................... 4,518 20,618 762 -------------- --------------- -------------- Total Assets.................................................. 466,158,146 1,959,253,330 78,996,130 -------------- --------------- -------------- LIABILITIES: Due to custodian.................................................... -- -- 146,475 Due to securities lending agent..................................... 5,013 -- 1,337 Payables: Investment securities purchased............................... -- -- -- Capital shares redeemed....................................... -- 6,757,072 -- Collateral for securities on loan............................. 4,236,665 -- 1,130,001 Investment advisory fees...................................... 164,438 707,166 23,563 Licensing fees................................................ 129,381 569,481 21,593 Shareholder reporting fees.................................... 28,027 101,983 10,383 Audit and tax fees............................................ 22,925 22,925 22,925 Trustees' fees ............................................... 67 150 57 Other liabilities................................................... 107,139 425,766 21,592 -------------- --------------- -------------- Total Liabilities............................................. 4,693,655 8,584,543 1,377,926 -------------- --------------- -------------- NET ASSETS.......................................................... $ 461,464,491 $ 1,950,668,787 $ 77,618,204 ============== =============== ============== NET ASSETS CONSIST OF: Paid-in capital..................................................... $ 478,220,941 $ 1,995,155,128 $ 90,738,855 Par value........................................................... 84,500 287,000 17,000 Accumulated distributable earnings (loss)........................... (16,840,950) (44,773,341) (13,137,651) -------------- --------------- -------------- NET ASSETS.......................................................... $ 461,464,491 $ 1,950,668,787 $ 77,618,204 ============== =============== ============== NET ASSET VALUE, per share.......................................... $ 54.61 $ 67.97 $ 45.66 ============== =============== ============== Number of shares outstanding (unlimited number of shares authorized, par value $0.01 per share)........................... 8,450,002 28,700,002 1,700,002 ============== =============== ============== Investments, at cost................................................ $ 440,638,150 $ 1,923,885,604 $ 76,400,100 ============== =============== ============== Securities on loan, at value........................................ $ 4,057,743 $ -- $ 1,099,249 ============== =============== ==============
Page 48 See Notes to Financial Statements
FIRST TRUST FIRST TRUST NASDAQ(R) FIRST TRUST NASDAQ(R) ABA CLEAN EDGE(R) S&P FIRST TRUST FIRST TRUST FIRST TRUST COMMUNITY GREEN ENERGY REIT WATER NATURAL GAS CHINDIA BANK INDEX FUND INDEX FUND ETF ETF ETF INDEX FUND (QCLN) (FRI) (FIW) (FCG) (FNI) (QABA) ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- $ 89,665,510 $ 116,731,618 $ 294,748,776 $ 91,139,820 $ 139,476,606 $ 228,722,360 202,607 -- -- -- 70,707 110,363 -- -- -- 2,932,590 -- 10,722,533 -- -- 4,351,786 -- -- -- 83,348 687,732 148,868 54,000 9,820 404,026 38,824 3,028 915 9,674 316 720 851 2,897 1,133 2,446 3,129 -------------- -------------- -------------- -------------- -------------- -------------- 89,991,009 117,420,201 299,255,355 94,128,458 139,569,253 239,962,727 -------------- -------------- -------------- -------------- -------------- -------------- -- 1,613,025 689,256 131,152 -- -- 7,273 -- 4,559 2,430 7,455 216 -- -- 4,350,240 -- 74,116 -- -- -- -- 2,938,728 -- 10,731,063 6,147,276 -- 3,853,014 2,053,805 6,300,761 182,560 24,264 28,021 100,484 33,361 47,464 85,940 22,279 20,894 40,146 30,137 41,677 71,344 13,122 11,689 23,324 16,085 20,160 26,661 22,925 22,925 22,925 22,925 22,925 22,925 56 58 61 59 108 76 22,424 27,737 63,903 25,788 47,870 79,935 -------------- -------------- -------------- -------------- -------------- -------------- 6,259,619 1,724,349 9,147,912 5,254,470 6,562,536 11,200,720 -------------- -------------- -------------- -------------- -------------- -------------- $ 83,731,390 $ 115,695,852 $ 290,107,443 $ 88,873,988 $ 133,006,717 $ 228,762,007 ============== ============== ============== ============== ============== ============== $ 118,691,108 $ 139,007,720 $ 300,285,901 $ 602,239,252 $ 231,383,764 $ 288,738,125 47,500 53,500 66,000 60,484 43,000 53,000 (35,007,218) (23,365,368) (10,244,458) (513,425,748) (98,420,047) (60,029,118) -------------- -------------- -------------- -------------- -------------- -------------- $ 83,731,390 $ 115,695,852 $ 290,107,443 $ 88,873,988 $ 133,006,717 $ 228,762,007 ============== ============== ============== ============== ============== ============== $ 17.63 $ 21.63 $ 43.96 $ 14.69 $ 30.93 $ 43.16 ============== ============== ============== ============== ============== ============== 4,750,002 5,350,002 6,600,002 6,048,365 4,300,002 5,300,002 ============== ============== ============== ============== ============== ============== $ 88,064,343 $ 138,577,835 $ 295,559,426 $ 136,722,263 $ 171,342,137 $ 281,472,498 ============== ============== ============== ============== ============== ============== $ 5,971,190 $ -- $ 3,797,847 $ 2,043,121 $ 6,237,963 $ 179,704 ============== ============== ============== ============== ============== ==============
See Notes to Financial Statements Page 49 FIRST TRUST EXCHANGE-TRADED FUND STATEMENTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2018
FIRST TRUST FIRST TRUST NASDAQ-100 FIRST TRUST NASDAQ-100 EQUAL NASDAQ-100- EX-TECHNOLOGY WEIGHTED TECHNOLOGY SECTOR SECTOR INDEX FUND INDEX FUND INDEX FUND (QQEW) (QTEC) (QQXT) ---------------- ----------------- ---------------- INVESTMENT INCOME: Dividends........................................................... $ 5,923,852 $ 34,551,559 $ 839,157 Securities lending income (net of fees)............................. 149,813 13,123 41,614 Foreign withholding tax............................................ (9,187) (115,806) -- -------------- --------------- -------------- Total investment income....................................... 6,064,478 34,448,876 880,771 -------------- --------------- -------------- EXPENSES: Investment advisory fees............................................ 2,180,073 9,748,449 375,251 Licensing fees...................................................... 545,351 2,438,217 93,920 Accounting and administration fees.................................. 273,988 1,071,797 48,281 Custodian fees...................................................... 74,895 252,083 17,135 Shareholder reporting fees.......................................... 51,650 205,427 15,704 Expenses previously waived or reimbursed............................ 27,809 -- -- Transfer agent fees................................................. 27,253 85,934 4,691 Audit and tax fees.................................................. 23,131 23,131 23,131 Legal fees.......................................................... 18,469 85,488 3,110 Trustees' fees and expenses......................................... 7,644 10,086 7,073 Listing fees........................................................ 5,424 3,804 6,038 Registration and filing fees........................................ (23) 24,792 -- Excise tax.......................................................... -- -- -- Other expenses...................................................... 14,200 50,532 4,436 -------------- --------------- -------------- Total expenses................................................ 3,249,864 13,999,740 598,770 Less fees waived and expenses reimbursed by the investment advisor.................................................... -- -- (35,900) -------------- --------------- -------------- Net expenses.................................................. 3,249,864 13,999,740 562,870 -------------- --------------- -------------- NET INVESTMENT INCOME (LOSS)........................................ 2,814,614 20,449,136 317,901 -------------- --------------- -------------- REALIZED AND UNREALIZED GAIN (LOSS): Net realized gain (loss) on: Investments................................................... (4,372,434) (49,736,717) (1,825,262) In-kind redemptions........................................... 41,032,692 308,178,446 8,144,763 Foreign currency transactions................................. -- -- -- -------------- --------------- -------------- Net realized gain (loss)............................................ 36,660,258 258,441,729 6,319,501 -------------- --------------- -------------- Net increase from payment by the advisor............................ 22,098 -- -- -------------- --------------- -------------- Net change in unrealized appreciation (depreciation) on: Investments................................................... (64,499,253) (404,848,814) (11,325,769) Foreign currency translation.................................. -- -- -- -------------- --------------- -------------- Net change in unrealized appreciation (depreciation)................ (64,499,253) (404,848,814) (11,325,769) -------------- --------------- -------------- NET REALIZED AND UNREALIZED GAIN (LOSS)............................. (27,816,897) (146,407,085) (5,006,268) -------------- --------------- -------------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS.................................................. $ (25,002,283) $ (125,957,949) $ (4,688,367) ============== =============== ==============
Page 50 See Notes to Financial Statements
FIRST TRUST FIRST TRUST NASDAQ(R) FIRST TRUST NASDAQ(R) ABA CLEAN EDGE(R) S&P FIRST TRUST FIRST TRUST FIRST TRUST COMMUNITY GREEN ENERGY REIT WATER NATURAL GAS CHINDIA BANK INDEX FUND INDEX FUND ETF ETF ETF INDEX FUND (QCLN) (FRI) (FIW) (FCG) (FNI) (QABA) ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- $ 696,182 $ 4,052,356 $ 3,920,618 $ 1,012,790 $ 5,347,656 $ 7,269,684 435,424 -- 129,908 6,508 510,860 16,208 (24,621) -- -- (43,923) (119,159) (13,046) -------------- -------------- -------------- -------------- -------------- -------------- 1,106,985 4,052,356 4,050,526 975,375 5,739,357 7,272,846 -------------- -------------- -------------- -------------- -------------- -------------- 371,144 342,821 1,273,325 578,363 1,392,775 1,388,067 92,852 91,419 159,207 144,816 279,045 312,349 48,003 59,235 160,619 73,691 175,985 176,410 16,217 31,957 41,978 23,266 48,685 62,570 23,739 17,077 44,604 27,934 39,875 45,117 -- -- -- -- 33,342 15,316 4,639 5,714 15,918 7,230 17,411 17,352 23,131 23,131 23,131 23,131 23,131 23,131 3,196 3,131 11,204 4,853 13,237 11,874 7,071 7,096 7,354 7,135 7,437 7,407 6,089 9,001 11,505 10,744 10,743 6,119 376 -- 4,060 -- 1,293 6,575 -- -- -- -- 10,048 -- 3,873 6,025 8,227 6,163 9,936 9,809 -------------- -------------- -------------- -------------- -------------- -------------- 600,330 596,607 1,761,132 907,326 2,062,943 2,082,096 (43,615) (25,848) -- (39,782) -- -- -------------- -------------- -------------- -------------- -------------- -------------- 556,715 570,759 1,761,132 867,544 2,062,943 2,082,096 -------------- -------------- -------------- -------------- -------------- -------------- 550,270 3,481,597 2,289,394 107,831 3,676,414 5,190,750 -------------- -------------- -------------- -------------- -------------- -------------- (3,194,184) (1,664,079) (1,464,625) (24,346,980) (17,075,684) (3,367,474) 1,809,542 (7,152,518) 27,458,537 8,144,776 39,313,711 6,432,597 -- -- -- (634) -- -- -------------- -------------- -------------- -------------- -------------- -------------- (1,384,642) (8,816,597) 25,993,912 (16,202,838) 22,238,027 3,065,123 -------------- -------------- -------------- -------------- -------------- -------------- -- -- -- -- -- -- -------------- -------------- -------------- -------------- -------------- -------------- (11,072,153) (5,846,287) (57,825,167) (34,785,346) (102,311,847) (67,237,070) -- -- -- 8 -- -- -------------- -------------- -------------- -------------- -------------- -------------- (11,072,153) (5,846,287) (57,825,167) (34,785,338) (102,311,847) (67,237,070) -------------- -------------- -------------- -------------- -------------- -------------- (12,456,795) (14,662,884) (31,831,255) (50,988,176) (80,073,820) (64,171,947) -------------- -------------- -------------- -------------- -------------- -------------- $ (11,906,525) $ (11,181,287) $ (29,541,861) $ (50,880,345) $ (76,397,406) $ (58,981,197) ============== ============== ============== ============== ============== ==============
See Notes to Financial Statements Page 51 FIRST TRUST EXCHANGE-TRADED FUND STATEMENTS OF CHANGES IN NET ASSETS
FIRST TRUST FIRST TRUST NASDAQ-100 NASDAQ-100- EQUAL WEIGHTED TECHNOLOGY SECTOR INDEX FUND INDEX FUND (QQEW) (QTEC) ------------------------------- ------------------------------- Year Ended Year Ended Year Ended Year Ended 12/31/2018 12/31/2017 12/31/2018 12/31/2017 -------------- -------------- -------------- -------------- OPERATIONS: Net investment income (loss)................................ $ 2,814,614 $ 2,257,216 $ 20,449,136 $ 15,361,504 Net realized gain (loss).................................... 36,660,258 39,948,494 258,441,729 251,008,897 Net increase from payment by the advisor.................... 22,098 -- -- -- Net change in unrealized appreciation (depreciation)........ (64,499,253) 66,809,610 (404,848,814) 347,761,259 -------------- -------------- -------------- -------------- Net increase (decrease) in net assets resulting from operations.......................................... (25,002,283) 109,015,320 (125,957,949) 614,131,660 -------------- -------------- -------------- -------------- DISTRIBUTIONS TO SHAREHOLDERS FROM: Investment operations....................................... (2,716,080) (19,564,271) Net investment income....................................... (2,664,196) (18,099,151) Return of capital........................................... -- -- -- -- -------------- -------------- -------------- -------------- Total distributions to shareholders......................... (2,716,080) (2,664,196) (19,564,271) (18,099,151) -------------- -------------- -------------- -------------- SHAREHOLDER TRANSACTIONS: Proceeds from shares sold................................... 79,723,310 186,618,945 936,219,196 900,379,473 Cost of shares redeemed..................................... (120,172,606) (167,382,228) (1,040,739,511) (866,555,377) -------------- -------------- -------------- -------------- Net increase (decrease) in net assets resulting from shareholder transactions............................ (40,449,296) 19,236,717 (104,520,315) 33,824,096 -------------- -------------- -------------- -------------- Total increase (decrease) in net assets..................... (68,167,659) 125,587,841 (250,042,535) 629,856,605 NET ASSETS: Beginning of period......................................... 529,632,150 404,044,309 2,200,711,322 1,570,854,717 -------------- -------------- -------------- -------------- End of period............................................... $ 461,464,491 $ 529,632,150 $1,950,668,787 $2,200,711,322 ============== ============== ============== ============== Accumulated net investment income (loss) at end of period......................................... $ -- $ -- ============== ============== CHANGES IN SHARES OUTSTANDING: Shares outstanding, beginning of period..................... 9,150,002 8,750,002 30,600,002 29,850,002 Shares sold................................................. 1,300,000 3,550,000 11,950,000 13,950,000 Shares redeemed............................................. (2,000,000) (3,150,000) (13,850,000) (13,200,000) -------------- -------------- -------------- -------------- Shares outstanding, end of period........................... 8,450,002 9,150,002 28,700,002 30,600,002 ============== ============== ============== ==============
Page 52 See Notes to Financial Statements
FIRST TRUST FIRST TRUST FIRST TRUST NASDAQ-100 NASDAQ(R) S&P FIRST TRUST EX-TECHNOLOGY SECTOR CLEAN EDGE(R) GREEN ENERGY REIT WATER INDEX FUND INDEX FUND INDEX FUND ETF (QQXT) (QCLN) (FRI) (FIW) ----------------------------- ------------------------------- ------------------------------- ------------------------------- Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended 12/31/2018 12/31/2017 12/31/2018 12/31/2017 12/31/2018 12/31/2017 12/31/2018 12/31/2017 ------------- ------------- -------------- -------------- -------------- -------------- -------------- -------------- $ 317,901 $ 245,092 $ 550,270 $ 157,651 $ 3,481,597 $ 5,789,030 $ 2,289,394 $ 3,176,313 6,319,501 5,246,103 (1,384,642) 203,014 (8,816,597) 2,507,384 25,993,912 19,374,705 -- -- -- -- -- -- -- -- (11,325,769) 13,165,675 (11,072,153) 17,631,024 (5,846,287) (285,345) (57,825,167) 32,146,174 ------------- ------------- -------------- -------------- -------------- -------------- -------------- -------------- (4,688,367) 18,656,870 (11,906,525) 17,991,689 (11,181,287) 8,011,069 (29,541,861) 54,697,192 ------------- ------------- -------------- -------------- -------------- -------------- -------------- -------------- (308,595) (510,967) (3,585,667) (2,110,505) (336,720) (353,370) (5,399,046) (3,256,646) -- -- (350,683) -- -- -- -- -- ------------- ------------- -------------- -------------- -------------- -------------- -------------- -------------- (308,595) (336,720) (861,650) (353,370) (3,585,667) (5,399,046) (2,110,505) (3,256,646) ------------- ------------- -------------- -------------- -------------- -------------- -------------- -------------- 10,002,377 20,432,764 11,063,662 29,586,328 60,347,868 26,735,727 110,251,184 101,855,142 (29,301,259) (39,956,628) (5,826,072) (7,799,880) (91,675,775) (103,982,757) (87,266,237) (76,311,985) ------------- ------------- -------------- -------------- -------------- -------------- -------------- -------------- (19,298,882) (19,523,864) 5,237,590 21,786,448 (31,327,907) (77,247,030) 22,984,947 25,543,157 ------------- ------------- -------------- -------------- -------------- -------------- -------------- -------------- (24,295,844) (1,203,714) (7,530,585) 39,424,767 (46,094,861) (74,635,007) (8,667,419) 76,983,703 101,914,048 103,117,762 91,261,975 51,837,208 161,790,713 236,425,720 298,774,862 221,791,159 ------------- ------------- -------------- -------------- -------------- -------------- -------------- -------------- $ 77,618,204 $ 101,914,048 $ 83,731,390 $ 91,261,975 $ 115,695,852 $ 161,790,713 $ 290,107,443 $ 298,774,862 ============= ============= ============== ============== ============== ============== ============== ============== $ -- $ -- $ 394,562 $ -- ============= ============== ============== ============== 2,100,002 2,550,002 4,500,002 3,350,002 6,950,002 10,250,002 6,150,002 5,600,002 200,000 450,000 550,000 1,550,000 2,550,000 1,150,000 2,250,000 2,350,000 (600,000) (900,000) (300,000) (400,000) (4,150,000) (4,450,000) (1,800,000) (1,800,000) ------------- ------------- -------------- -------------- -------------- -------------- -------------- -------------- 1,700,002 2,100,002 4,750,002 4,500,002 5,350,002 6,950,002 6,600,002 6,150,002 ============= ============= ============== ============== ============== ============== ============== ==============
See Notes to Financial Statements Page 53 FIRST TRUST EXCHANGE-TRADED FUND STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
FIRST TRUST FIRST TRUST NATURAL GAS CHINDIA ETF ETF (FCG) (FNI) ------------------------------- ------------------------------- Year Ended Year Ended Year Ended Year Ended 12/31/2018 12/31/2017 12/31/2018 12/31/2017 -------------- -------------- -------------- -------------- OPERATIONS: Net investment income (loss)................................ $ 107,831 $ (202,989) $ 3,676,414 $ 2,422,504 Net realized gain (loss).................................... (16,202,838) (4,939,862) 22,238,027 4,746,736 Net increase from payment by the advisor.................... -- -- -- -- Net change in unrealized appreciation (depreciation)........ (34,785,338) (21,923,961) (102,311,847) 80,982,652 -------------- -------------- -------------- -------------- Net increase (decrease) in net assets resulting from operations.......................................... (50,880,345) (27,066,812) (76,397,406) 88,151,892 -------------- -------------- -------------- -------------- DISTRIBUTIONS TO SHAREHOLDERS FROM: Investment operations....................................... -- (4,434,111) Net investment income....................................... (1,778,865) (7,008,527) Return of capital........................................... (1,420,088) (1,015,203) -- -- -------------- -------------- -------------- -------------- Total distributions to shareholders......................... (1,420,088) (2,794,068) (4,434,111) (7,008,527) -------------- -------------- -------------- -------------- SHAREHOLDER TRANSACTIONS: Proceeds from shares sold................................... 31,493,285 44,818,055 123,727,641 175,541,076 Cost of shares redeemed..................................... (74,580,615) (81,719,422) (285,804,842) (12,234,853) -------------- -------------- -------------- -------------- Net increase (decrease) in net assets resulting from shareholder transactions............................ (43,087,330) (36,901,367) (162,077,201) 163,306,223 -------------- -------------- -------------- -------------- Total increase (decrease) in net assets..................... (95,387,763) (66,762,247) (242,908,718) 244,449,588 NET ASSETS: Beginning of period......................................... 184,261,751 251,023,998 375,915,435 131,465,847 -------------- -------------- -------------- -------------- End of period............................................... $ 88,873,988 $ 184,261,751 $ 133,006,717 $ 375,915,435 ============== ============== ============== ============== Accumulated net investment income (loss) at end of period......................................... $ -- $ (2,371,548) ============== ============== CHANGES IN SHARES OUTSTANDING: Shares outstanding, beginning of period..................... 8,098,365 9,598,365 9,500,002 4,800,002 Shares sold................................................. 1,450,000 2,000,000 3,200,000 5,050,000 Shares redeemed............................................. (3,500,000) (3,500,000) (8,400,000) (350,000) -------------- -------------- -------------- -------------- Shares outstanding, end of period........................... 6,048,365 8,098,365 4,300,002 9,500,002 ============== ============== ============== ==============
Page 54 See Notes to Financial Statements
FIRST TRUST NASDAQ(R) ABA COMMUNITY BANK INDEX FUND (QABA) ----------------------------- Year Ended Year Ended 12/31/2018 12/31/2017 ------------- ------------- $ 5,190,750 $ 5,192,986 3,065,123 34,020,200 -- -- (67,237,070) (46,391,038) ------------- ------------- (58,981,197) (7,177,852) ------------- ------------- (5,212,126) (5,233,697) -- -- ------------- ------------- (5,212,126) (5,233,697) ------------- ------------- 115,204,523 129,887,132 (136,281,236) (207,466,414) ------------- ------------- (21,076,713) (77,579,282) ------------- ------------- (85,270,036) (89,990,831) 314,032,043 404,022,874 ------------- ------------- $ 228,762,007 $ 314,032,043 ============= ============= $ -- ============= 6,000,002 7,650,002 2,050,000 2,500,000 (2,750,000) (4,150,000) ------------- ------------- 5,300,002 6,000,002 ============= =============
See Notes to Financial Statements Page 55 FIRST TRUST EXCHANGE-TRADED FUND FINANCIAL HIGHLIGHTS FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
FIRST TRUST NASDAQ-100 EQUAL WEIGHTED INDEX FUND (QQEW) YEAR ENDED DECEMBER 31, --------------------------------------------------------------------------- 2018 2017 2016 2015 2014 ------------ ------------ ------------ ------------ ------------ Net asset value, beginning of period $ 57.88 $ 46.18 $ 43.48 $ 42.80 $ 36.35 ------------ ------------ ------------ ------------ ------------ INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) 0.32 0.24 0.31 0.22 0.41 Net realized and unrealized gain (loss) (3.29) (a) 11.74 2.73 0.73 6.49 ------------ ------------ ------------ ------------ ------------ Total from investment operations (2.97) 11.98 3.04 0.95 6.90 ------------ ------------ ------------ ------------ ------------ DISTRIBUTIONS PAID TO SHAREHOLDERS FROM: Net investment income (0.30) (0.28) (0.34) (0.27) (0.45) ------------ ------------ ------------ ------------ ------------ Net asset value, end of period $ 54.61 $ 57.88 $ 46.18 $ 43.48 $ 42.80 ============ ============ ============ ============ ============ TOTAL RETURN (b) (5.16)% (a) 26.00% 7.02% 2.22% 19.13% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in 000's) $ 461,464 $ 529,632 $ 404,044 $ 532,679 $ 577,828 RATIOS TO AVERAGE NET ASSETS: Ratio of total expenses to average net assets 0.60% 0.60% 0.61% 0.60% 0.61% Ratio of net expenses to average net assets 0.60% 0.60% 0.60% 0.60% 0.60% Ratio of net investment income (loss) to average net assets 0.52% 0.45% 0.72% 0.51% 1.10% Portfolio turnover rate (c) 27% 26% 29% 31% 27% FIRST TRUST NASDAQ-100-TECHNOLOGY SECTOR INDEX FUND (QTEC) YEAR ENDED DECEMBER 31, ------------------------------------------------------------------------ 2018 2017 2016 2015 2014 ------------ ------------ ------------ ------------ ------------ Net asset value, beginning of period $ 71.92 $ 52.62 $ 42.64 $ 43.67 $ 35.43 ------------ ------------ ------------ ------------ ------------ INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) 0.65 0.48 0.67 0.37 0.45 Net realized and unrealized gain (loss) (3.98) 19.39 9.99 (0.98) 8.32 ------------ ------------ ------------ ------------ ------------ Total from investment operations (3.33) 19.87 10.66 (0.61) 8.77 ------------ ------------ ------------ ------------ ------------ DISTRIBUTIONS PAID TO SHAREHOLDERS FROM: Net investment income (0.62) (0.57) (0.68) (0.42) (0.53) ------------ ------------ ------------ ------------ ------------ Net asset value, end of period $ 67.97 $ 71.92 $ 52.62 $ 42.64 $ 43.67 ============ ============ ============ ============ ============ TOTAL RETURN (b) (4.70)% 37.86% 25.27% (1.37)% 24.83% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in 000's) $ 1,950,669 $ 2,200,711 $ 1,570,855 $ 302,735 $ 366,869 RATIOS TO AVERAGE NET ASSETS: Ratio of total expenses to average net assets 0.57% 0.58% 0.60% 0.60% 0.61% Ratio of net expenses to average net assets 0.57% 0.58% 0.60% 0.60% 0.60% Ratio of net investment income (loss) to average net assets 0.84% 0.76% 1.40% 0.83% 1.32% Portfolio turnover rate (c) 21% 21% 27% 23% 20%
(a) The Fund received a reimbursement from the Advisor in the amount of $22,098 in connection with a trade error, which represents less than $0.01 per share. Since the Advisor reimbursed the Fund, there was no effect on the Fund's total return. (b) Total return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all distributions at net asset value during the period, and redemption at net asset value on the last day of the period. The returns presented do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. Total return is calculated for the time period presented and is not annualized for periods of less than a year. The total returns would have been lower if certain fees had not been waived and expenses reimbursed by the investment advisor. (c) Portfolio turnover is calculated for the time period presented and is not annualized for periods of less than a year and does not include securities received or delivered from processing creations or redemptions and in-kind transactions. Page 56 See Notes to Financial Statements FIRST TRUST EXCHANGE-TRADED FUND FINANCIAL HIGHLIGHTS (CONTINUED) FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
FIRST TRUST NASDAQ-100 EX-TECHNOLOGY SECTOR INDEX FUND (QQXT) YEAR ENDED DECEMBER 31, ------------------------------------------------------------------------ 2018 2017 2016 2015 2014 ------------ ------------ ------------ ------------ ------------ Net asset value, beginning of period $ 48.53 $ 40.44 $ 41.45 $ 39.73 $ 34.77 ------------ ------------ ------------ ------------ ------------ INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) 0.18 0.12 0.09 0.13 0.32 Net realized and unrealized gain (loss) (2.88) 8.13 (0.98) 1.75 4.97 ------------ ------------ ------------ ------------ ------------ Total from investment operations (2.70) 8.25 (0.89) 1.88 5.29 ------------ ------------ ------------ ------------ ------------ DISTRIBUTIONS PAID TO SHAREHOLDERS FROM: Net investment income (0.17) (0.16) (0.12) (0.16) (0.33) ------------ ------------ ------------ ------------ ------------ Net asset value, end of period $ 45.66 $ 48.53 $ 40.44 $ 41.45 $ 39.73 ============ ============ ============ ============ ============ TOTAL RETURN (a) (5.58)% 20.41% (2.13)% 4.75% 15.35% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in 000's) $ 77,618 $ 101,914 $ 103,118 $ 184,447 $ 117,195 RATIOS TO AVERAGE NET ASSETS: Ratio of total expenses to average net assets 0.64% 0.63% 0.64% 0.63% 0.64% Ratio of net expenses to average net assets 0.60% 0.60% 0.60% 0.60% 0.60% Ratio of net investment income (loss) to average net assets 0.34% 0.25% 0.23% 0.33% 0.90% Portfolio turnover rate (b) 26% 25% 30% 39% 23% FIRST TRUST NASDAQ(R) CLEAN EDGE(R) GREEN ENERGY INDEX FUND (QCLN) YEAR ENDED DECEMBER 31, ------------------------------------------------------------------------ 2018 2017 2016 2015 2014 ------------ ------------ ------------ ------------ ------------ Net asset value, beginning of period $ 20.28 $ 15.47 $ 16.01 $ 17.23 $ 17.90 ------------ ------------ ------------ ------------ ------------ INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) 0.12 0.05 0.17 0.11 0.13 Net realized and unrealized gain (loss) (2.59) 4.85 (0.52) (1.21) (0.66) ------------ ------------ ------------ ------------ ------------ Total from investment operations (2.47) 4.90 (0.35) (1.10) (0.53) ------------ ------------ ------------ ------------ ------------ DISTRIBUTIONS PAID TO SHAREHOLDERS FROM: Net investment income (0.11) (0.09) (0.19) (0.12) (0.14) Return of capital (0.07) -- -- -- -- ------------ ------------ ------------ ------------ ------------ Total distributions (0.18) (0.09) (0.19) (0.12) (0.14) ------------ ------------ ------------ ------------ ------------ Net asset value, end of period $ 17.63 $ 20.28 $ 15.47 $ 16.01 $ 17.23 ============ ============ ============ ============ ============ TOTAL RETURN (a) (12.22)% 31.73% (2.12)% (6.43)% (3.05)% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in 000's) $ 83,731 $ 91,262 $ 51,837 $ 69,655 $ 89,616 RATIOS TO AVERAGE NET ASSETS: Ratio of total expenses to average net assets 0.65% 0.66% 0.68% 0.65% 0.64% Ratio of net expenses to average net assets 0.60% 0.60% 0.60% 0.60% 0.60% Ratio of net investment income (loss) to average net assets 0.59% 0.23% 1.18% 0.65% 0.61% Portfolio turnover rate (b) 45% 32% 49% 35% 37%
(a) Total return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all distributions at net asset value during the period, and redemption at net asset value on the last day of the period. The returns presented do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. Total return is calculated for the time period presented and is not annualized for periods of less than a year. The total returns would have been lower if certain fees had not been waived and expenses reimbursed by the investment advisor. (b) Portfolio turnover is calculated for the time period presented and is not annualized for periods of less than a year and does not include securities received or delivered from processing creations or redemptions and in-kind transactions. See Notes to Financial Statements Page 57 FIRST TRUST EXCHANGE-TRADED FUND FINANCIAL HIGHLIGHTS (CONTINUED) FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
FIRST TRUST S&P REIT INDEX FUND (FRI) YEAR ENDED DECEMBER 31, ------------------------------------------------------------------------ 2018 2017 2016 2015 2014 ------------ ------------ ------------ ------------ ------------ Net asset value, beginning of period $ 23.28 $ 23.07 $ 22.07 $ 22.24 $ 17.54 ------------ ------------ ------------ ------------ ------------ INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) 0.69 0.71 0.62 0.55 0.41 Net realized and unrealized gain (loss) (1.65) 0.16 1.13 (0.13) 4.75 ------------ ------------ ------------ ------------ ------------ Total from investment operations (0.96) 0.87 1.75 0.42 5.16 ------------ ------------ ------------ ------------ ------------ DISTRIBUTIONS PAID TO SHAREHOLDERS FROM: Net investment income (0.69) (0.66) (0.75) (0.59) (0.46) ------------ ------------ ------------ ------------ ------------ Net asset value, end of period $ 21.63 $ 23.28 $ 23.07 $ 22.07 $ 22.24 ============ ============ ============ ============ ============ TOTAL RETURN (a) (4.19)% 3.79% 7.92% 1.97% 29.61% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in 000's) $ 115,696 $ 161,791 $ 236,426 $ 226,250 $ 339,130 RATIOS TO AVERAGE NET ASSETS: Ratio of total expenses to average net assets 0.52% 0.48% 0.49% 0.48% 0.50% Ratio of net expenses to average net assets 0.50% 0.48% 0.49% 0.48% 0.50% Ratio of net investment income (loss) to average net assets 3.05% 2.77% 2.52% 2.30% 2.35% Portfolio turnover rate (b) 10% 7% 6% 8% 11% FIRST TRUST WATER ETF (FIW) YEAR ENDED DECEMBER 31, ------------------------------------------------------------------------ 2018 2017 2016 2015 2014 ------------ ------------ ------------ ------------ ------------ Net asset value, beginning of period $ 48.58 $ 39.61 $ 30.13 $ 33.65 $ 33.79 ------------ ------------ ------------ ------------ ------------ INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) 0.35 0.54 0.20 0.23 0.25 Net realized and unrealized gain (loss) (4.65) 8.98 9.48 (3.52) (0.14) ------------ ------------ ------------ ------------ ------------ Total from investment operations (4.30) 9.52 9.68 (3.29) 0.11 ------------ ------------ ------------ ------------ ------------ DISTRIBUTIONS PAID TO SHAREHOLDERS FROM: Net investment income (0.32) (0.55) (0.20) (0.23) (0.25) ------------ ------------ ------------ ------------ ------------ Net asset value, end of period $ 43.96 $ 48.58 $ 39.61 $ 30.13 $ 33.65 ============ ============ ============ ============ ============ TOTAL RETURN (a) (8.89)% 24.25% 32.21% (9.81)% 0.36% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in 000's) $ 290,107 $ 298,775 $ 221,791 $ 102,432 $ 198,550 RATIOS TO AVERAGE NET ASSETS: Ratio of total expenses to average net assets 0.55% 0.56% 0.57% 0.57% 0.59% Ratio of net expenses to average net assets 0.55% 0.56% 0.57% 0.57% 0.59% Ratio of net investment income (loss) to average net assets 0.72% 1.26% 0.58% 0.70% 0.75% Portfolio turnover rate (b) 11% 24% 42% 17% 24%
(a) Total return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all distributions at net asset value during the period, and redemption at net asset value on the last day of the period. The returns presented do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. Total return is calculated for the time period presented and is not annualized for periods of less than a year. The total returns would have been lower if certain fees had not been waived and expenses reimbursed by the investment advisor. (b) Portfolio turnover is calculated for the time period presented and is not annualized for periods of less than a year and does not include securities received or delivered from processing creations or redemptions and in-kind transactions. Page 58 See Notes to Financial Statements FIRST TRUST EXCHANGE-TRADED FUND FINANCIAL HIGHLIGHTS (CONTINUED) FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
FIRST TRUST NATURAL GAS ETF (FCG) YEAR ENDED DECEMBER 31, ---------------------------------------------------------------------------- 2018 2017 2016 2015 (a) 2014 (a) ------------ ------------ ------------ ------------ ------------ Net asset value, beginning of period $ 22.75 $ 26.15 $ 22.30 $ 56.10 $ 97.65 ------------ ------------ ------------ ------------ ------------ INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) 0.02 (0.02) 0.13 1.00 0.70 Net realized and unrealized gain (loss) (7.86) (3.02) 4.16 (33.75) (41.50) ------------ ------------ ------------ ------------ ------------ Total from investment operations (7.84) (3.04) 4.29 (32.75) (40.80) ------------ ------------ ------------ ------------ ------------ DISTRIBUTIONS PAID TO SHAREHOLDERS FROM: Net investment income -- (0.23) (0.44) (1.05) (0.75) Return of capital (0.22) (0.13) -- -- -- ------------ ------------ ------------ ------------ ------------ Total distributions (0.22) (0.36) (0.44) (1.05) (0.75) ------------ ------------ ------------ ------------ ------------ Net asset value, end of period $ 14.69 $ 22.75 $ 26.15 $ 22.30 $ 56.10 ============ ============ ============ ============ ============ TOTAL RETURN (b) (34.77)% (11.53)% 19.48% (59.10)% (42.02)% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in 000's) $ 88,874 $ 184,262 $ 251,024 $ 153,042 $ 246,946 RATIOS TO AVERAGE NET ASSETS: Ratio of total expenses to average net assets 0.63% 0.64% (c) 0.64% (c) 0.62% 0.61% Ratio of net expenses to average net assets 0.60% 0.63% (c) 0.61% (c) 0.60% 0.60% Ratio of net investment income (loss) to average net assets 0.07% (0.11)% 0.54% 2.44% 0.74% Portfolio turnover rate (d) 47% 53% 103% 67% 42% FIRST TRUST CHINDIA ETF (FNI) YEAR ENDED DECEMBER 31, ------------------------------------------------------------------------ 2018 2017 2016 2015 2014 ------------ ------------ ------------ ------------ ------------ Net asset value, beginning of period $ 39.57 $ 27.39 $ 28.36 $ 28.63 $ 28.22 ------------ ------------ ------------ ------------ ------------ INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) 0.04 0.34 0.25 0.15 0.20 Net realized and unrealized gain (loss) (8.16) 12.61 (0.85) (0.24) 0.48 ------------ ------------ ------------ ------------ ------------ Total from investment operations (8.12) 12.95 (0.60) (0.09) 0.68 ------------ ------------ ------------ ------------ ------------ DISTRIBUTIONS PAID TO SHAREHOLDERS FROM: Net investment income (0.52) (0.77) (0.37) (0.18) (0.27) ------------ ------------ ------------ ------------ ------------ Net asset value, end of period $ 30.93 $ 39.57 $ 27.39 $ 28.36 $ 28.63 ============ ============ ============ ============ ============ TOTAL RETURN (b) (20.68)% 47.36% (2.15)% (0.32)% 2.37% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in 000's) $ 133,007 $ 375,915 $ 131,466 $ 221,188 $ 111,663 RATIOS TO AVERAGE NET ASSETS: Ratio of total expenses to average net assets 0.59% 0.60% 0.60% 0.62% 0.65% Ratio of net expenses to average net assets 0.59% 0.60% 0.60% 0.60% 0.60% Ratio of net investment income (loss) to average net assets 1.06% 0.91% 0.91% 0.64% 0.54% Portfolio turnover rate (d) 22% 35% 47% 68% 40%
(a) All per share amounts and net asset values have been adjusted to reflect the impact of the 1-for-5 reverse share split on May 2, 2016. The net asset values reported on December 31, 2015 and 2014 prior to the reverse share split restatement were $4.46 and $11.22, respectively. (b) Total return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all distributions at net asset value during the period, and redemption at net asset value on the last day of the period. The returns presented do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. Total return is calculated for the time period presented and is not annualized for periods of less than a year. The total returns would have been lower if certain fees had not been waived and expenses reimbursed by the investment advisor. (c) For the years ended December 31, 2017 and 2016, ratios reflect excise tax of 0.03% and 0.01%, respectively, which are not included in the expense cap. (d) Portfolio turnover is calculated for the time period presented and is not annualized for periods of less than a year and does not include securities received or delivered from processing creations or redemptions and in-kind transactions. See Notes to Financial Statements Page 59 FIRST TRUST EXCHANGE-TRADED FUND FINANCIAL HIGHLIGHTS (CONTINUED) FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
FIRST TRUST NASDAQ(R) ABA COMMUNITY BANK INDEX FUND (QABA) YEAR ENDED DECEMBER 31, ------------------------------------------------------------------------ 2018 2017 2016 2015 2014 ------------ ------------ ------------ ------------ ------------ Net asset value, beginning of period $ 52.34 $ 52.81 $ 38.94 $ 36.61 $ 36.11 ------------ ------------ ------------ ------------ ------------ INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) 0.81 0.74 0.58 0.56 0.47 Net realized and unrealized gain (loss) (9.17) (0.46) 13.89 2.31 0.50 ------------ ------------ ------------ ------------ ------------ Total from investment operations (8.36) 0.28 14.47 2.87 0.97 ------------ ------------ ------------ ------------ ------------ DISTRIBUTIONS PAID TO SHAREHOLDERS FROM: Net investment income (0.82) (0.75) (0.60) (0.54) (0.47) ------------ ------------ ------------ ------------ ------------ Net asset value, end of period $ 43.16 $ 52.34 $ 52.81 $ 38.94 $ 36.61 ============ ============ ============ ============ ============ TOTAL RETURN (a) (16.14)% 0.55% 37.57% 7.88% 2.72% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in 000's) $ 228,762 $ 314,032 $ 404,023 $ 223,902 $ 109,818 RATIOS TO AVERAGE NET ASSETS: Ratio of total expenses to average net assets 0.60% 0.60% 0.61% 0.62% 0.64% Ratio of net expenses to average net assets 0.60% 0.60% 0.60% 0.60% 0.60% Ratio of net investment income (loss) to average net assets 1.50% 1.37% 1.54% 1.52% 1.41% Portfolio turnover rate (b) 11% 14% 16% 19% 26%
(a) Total return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all distributions at net asset value during the period, and redemption at net asset value on the last day of the period. The returns presented do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. Total return is calculated for the time period presented and is not annualized for periods of less than a year. The total returns would have been lower if certain fees had not been waived and expenses reimbursed by the investment advisor. (b) Portfolio turnover is calculated for the time period presented and is not annualized for periods of less than a year and does not include securities received or delivered from processing creations or redemptions and in-kind transactions. Page 60 See Notes to Financial Statements -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND DECEMBER 31, 2018 1. ORGANIZATION First Trust Exchange-Traded Fund (the "Trust") is an open-end management investment company organized as a Massachusetts business trust on August 8, 2003, and is registered with the Securities and Exchange Commission under the Investment Company Act of 1940, as amended (the "1940 Act"). The Trust currently consists of twenty-one exchange-traded funds. This report covers the nine funds listed below: First Trust NASDAQ-100 Equal Weighted Index Fund - (The Nasdaq Stock Market LLC ("Nasdaq") ticker "QQEW") First Trust NASDAQ-100-Technology Sector Index Fund - (Nasdaq ticker "QTEC") First Trust NASDAQ-100 Ex-Technology Sector Index Fund - (Nasdaq ticker "QQXT") First Trust NASDAQ(R) Clean Edge(R) Green Energy Index Fund - (Nasdaq ticker "QCLN") First Trust S&P REIT Index Fund - (NYSE Arca, Inc. ("NYSE Arca") ticker "FRI") First Trust Water ETF - (NYSE Arca ticker "FIW") First Trust Natural Gas ETF - (NYSE Arca ticker "FCG") First Trust Chindia ETF - (NYSE Arca ticker "FNI") First Trust NASDAQ(R) ABA Community Bank Index Fund - (Nasdaq ticker "QABA") Each fund represents a separate series of shares of beneficial interest in the Trust (each a "Fund" and collectively, the "Funds"). Unlike conventional mutual funds, each Fund issues and redeems shares on a continuous basis, at net asset value ("NAV"), only in large specified blocks consisting of 50,000 shares called a "Creation Unit." Creation Units are generally issued and redeemed in-kind for securities in which a Fund invests and, in certain circumstances, for cash, and only to and from broker-dealer and large institutional investors that have entered into participation agreements. Except when aggregated in Creation Units, each Fund's shares are not redeemable securities. The investment objective of each Fund is to seek investment results that correspond generally to the price and yield (before the Fund's fees and expenses) of the following indices:
FUND INDEX First Trust NASDAQ-100 Equal Weighted Index Fund NASDAQ-100 Equal Weighted Index(SM) First Trust NASDAQ-100-Technology Sector Index Fund NASDAQ-100 Technology Sector Index(SM) First Trust NASDAQ-100 Ex-Technology Sector Index Fund NASDAQ-100 Ex-Tech Sector Index(SM) First Trust NASDAQ(R) Clean Edge(R) Green Energy Index Fund NASDAQ(R) Clean Edge(R) Green Energy Index(SM) First Trust S&P REIT Index Fund S&P United States REIT Index First Trust Water ETF ISE Clean Edge Water Index First Trust Natural Gas ETF ISE-Revere Natural Gas(TM) Index First Trust Chindia ETF ISE ChIndia(TM) Index First Trust NASDAQ(R) ABA Community Bank Index Fund NASDAQ OMX(R) ABA Community Bank Index(SM)
2. SIGNIFICANT ACCOUNTING POLICIES The Funds are each considered an investment company and follow accounting and reporting guidance under Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") Topic 946, "Financial Services-Investment Companies." The following is a summary of significant accounting policies consistently followed by the Funds in the preparation of the financial statements. The preparation of the financial statements in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates. A. PORTFOLIO VALUATION Each Fund's NAV is determined daily as of the close of regular trading on the New York Stock Exchange ("NYSE"), normally 4:00 p.m. Eastern time, on each day the NYSE is open for trading. If the NYSE closes early on a valuation day, the NAV is determined as of that time. Foreign securities are priced using the data reflecting the earlier closing of the principal markets for those securities. Each Fund's NAV is calculated by dividing the value of all assets of each Fund (including accrued interest and dividends), less all liabilities (including accrued expenses and dividends declared but unpaid), by the total number of shares outstanding. Each Fund's investments are valued daily at market value or, in the absence of market value with respect to any portfolio securities, at fair value. Market value prices represent last sale or official closing prices from a national or foreign exchange (i.e., a regulated market) and are primarily obtained from third-party pricing services. Fair value prices represent any prices not considered market value prices and are either obtained from a third-party pricing service or are determined by the Pricing Committee of the Funds' Page 61 -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND DECEMBER 31, 2018 investment advisor, First Trust Advisors L.P. ("First Trust" or the "Advisor"), in accordance with valuation procedures adopted by the Trust's Board of Trustees, and in accordance with the 1940 Act. Investments valued by the Advisor's Pricing Committee, if any, are footnoted as such in the footnotes to the Portfolio of Investments. Each Fund's investments are valued as follows: Common stocks, real estate investment trusts ("REITs"), master limited partnerships ("MLPs") and other equity securities listed on any national or foreign exchange (excluding Nasdaq and the London Stock Exchange Alternative Investment Market ("AIM")) are valued at the last sale price on the exchange on which they are principally traded or, for Nasdaq and AIM securities, the official closing price. Securities traded on more than one securities exchange are valued at the last sale price or official closing price, as applicable, at the close of the securities exchange representing the principal market for such securities. Shares of open-end funds are valued at fair value which is based on NAV per share. Securities traded in an over-the-counter market are fair valued at the mean of their most recent bid and asked price, if available, and otherwise at their closing bid price. Overnight repurchase agreements are valued at amortized cost when it represents the best estimate of fair value. Certain securities may not be able to be priced by pre-established pricing methods. Such securities may be valued by the Trust's Board of Trustees or its delegate, the Advisor's Pricing Committee, at fair value. These securities generally include, but are not limited to, restricted securities (securities which may not be publicly sold without registration under the Securities Act of 1933, as amended) for which a third-party pricing service is unable to provide a market price; securities whose trading has been formally suspended; a security whose market or fair value price is not available from a pre-established pricing source; a security with respect to which an event has occurred that is likely to materially affect the value of the security after the market has closed but before the calculation of a Fund's NAV or make it difficult or impossible to obtain a reliable market quotation; and a security whose price, as provided by the third-party pricing service, does not reflect the security's fair value. As a general principle, the current fair value of a security would appear to be the amount which the owner might reasonably expect to receive for the security upon its current sale. When fair value prices are used, generally they will differ from market quotations or official closing prices on the applicable exchanges. A variety of factors may be considered in determining the fair value of such securities, including, but not limited to, the following: 1) the type of security; 2) the size of the holding; 3) the initial cost of the security; 4) transactions in comparable securities; 5) price quotes from dealers and/or third-party pricing services; 6) relationships among various securities; 7) information obtained by contacting the issuer, analysts, or the appropriate stock exchange; 8) an analysis of the issuer's financial statements; and 9) the existence of merger proposals or tender offers that might affect the value of the security. In addition, differences between the prices used to calculate a Fund's NAV and the prices used by such Fund's corresponding index could result in a difference between a Fund's performance and the performance of its underlying index. The Funds are subject to fair value accounting standards that define fair value, establish the framework for measuring fair value and provide a three-level hierarchy for fair valuation based upon the inputs to the valuation as of the measurement date. The three levels of the fair value hierarchy are as follows: o Level 1 - Level 1 inputs are quoted prices in active markets for identical investments. An active market is a market in which transactions for the investment occur with sufficient frequency and volume to provide pricing information on an ongoing basis. o Level 2 - Level 2 inputs are observable inputs, either directly or indirectly, and include the following: o Quoted prices for similar investments in active markets. o Quoted prices for identical or similar investments in markets that are non-active. A non-active market is a market where there are few transactions for the investment, the prices are not current, or price quotations vary substantially either over time or among market makers, or in which little information is released publicly. o Inputs other than quoted prices that are observable for the investment (for example, interest rates and yield curves observable at commonly quoted intervals, volatilities, prepayment speeds, loss severities, credit risks, and default rates). o Inputs that are derived principally from or corroborated by observable market data by correlation or other means. o Level 3 - Level 3 inputs are unobservable inputs. Unobservable inputs may reflect the reporting entity's own assumptions about the assumptions that market participants would use in pricing the investment. Page 62 -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND DECEMBER 31, 2018 The inputs or methodologies used for valuing investments are not necessarily an indication of the risk associated with investing in those investments. A summary of the inputs used to value each Fund's investments as of December 31, 2018, is included with each Fund's Portfolio of Investments. B. SECURITIES TRANSACTIONS AND INVESTMENT INCOME Securities transactions are recorded as of the trade date. Realized gains and losses from securities transactions are recorded on the identified cost basis. Dividend income is recorded on the ex-dividend date. Interest income, if any, is recorded on the accrual basis. Withholding taxes and tax reclaims on foreign dividends have been provided for in accordance with each Fund's understanding of the applicable country's tax rules and rates. Distributions received from a Fund's investments in MLPs generally are comprised of return of capital and investment income. A Fund records estimated return of capital and investment income based on historical information available from each MLP. These estimates may subsequently be revised based on information received from the MLPs after their tax reporting periods are concluded. Distributions received from a Fund's investments in REITs may be comprised of return of capital, capital gains and income. The actual character of the amounts received during the year is not known until after the REITs' fiscal year end. A Fund records the character of distributions received from the REITs during the year based on estimates available. The characterization of distributions received by a Fund may be subsequently revised based on information received from the REITs after their tax reporting periods conclude. C. OFFSETTING ON THE STATEMENTS OF ASSETS AND LIABILITIES Offsetting Assets and Liabilities requires entities to disclose both gross and net information about instruments and transactions eligible for offset on the Statements of Assets and Liabilities, and disclose instruments and transactions subject to master netting or similar agreements. These disclosure requirements are intended to help investors and other financial statement users better assess the effect or potential effect of offsetting arrangements on a fund's financial position. The transactions subject to offsetting disclosures are derivative instruments, repurchase agreements and reverse repurchase agreements, and securities borrowing and securities lending transactions. This disclosure, if applicable, is included within each Fund's Portfolio of Investments under the heading "Offsetting Assets and Liabilities". For financial reporting purposes, the Funds do not offset financial assets and financial liabilities that are subject to master netting arrangements ("MNAs") or similar agreements on the Statements of Assets and Liabilities. MNAs provide the right, in the event of default (including bankruptcy and insolvency), for the non-defaulting counterparty to liquidate the collateral and calculate the net exposure to the defaulting party or request additional collateral. D. SECURITIES LENDING The Funds may lend securities representing up to 33 1/3% of the value of their total assets to broker-dealers, banks and other institutions to generate additional income. When a Fund loans its portfolio securities, it will receive, at the inception of each loan, collateral equal to at least 102% (for domestic securities) or 105% (for international securities) of the market value of the loaned securities. The collateral amount is valued at the beginning of each business day and is compared to the market value of the loaned securities from the prior business day to determine if additional collateral is required. If additional collateral is required, a request is sent to the borrower. Securities lending involves the risk that the Fund may lose money because the borrower of the Fund's loaned securities fails to return the securities in a timely manner or at all. The Fund could also lose money in the event of (i) a decline in the value of the collateral provided for the loaned securities, (ii) a decline in the value of any investments made with cash collateral or (iii) an increase in the value of the loaned securities if the borrower does not increase the collateral accordingly and the borrower fails to return the securities. These events could also trigger adverse tax consequences for the Funds. Under the Funds' Securities Lending Agency Agreement, the securities lending agent will generally bear the risk that a borrower may default on its obligation to return loaned securities. Brown Brothers Harriman & Co. ("BBH") acts as the Funds' securities lending agent and is responsible for executing the lending of the portfolio securities to creditworthy borrowers. The Funds, however, will be responsible for the risks associated with the investment of cash collateral. A Fund may lose money on its investment of cash collateral, which may affect its ability to repay the collateral to the borrower without the use of other Fund assets. Each Fund that engages in securities lending receives compensation (net of any rebate and securities lending agent fees) for lending its securities. Compensation can be in the form of fees received from the securities lending agent or dividends or interest earned from the investment of cash collateral. The fees received from the securities lending agent are accrued daily. The dividend and interest earned on the securities loaned is accounted for in the same manner as other dividend and interest income. At December 31, 2018, QQEW, QQXT, QCLN, FIW, FCG, FNI, and QABA had securities in the securities lending program. During the fiscal year ended December 31, 2018, QQEW, QTEC, QQXT, QCLN, FIW, FCG, FNI, and QABA participated in the securities lending program. Page 63 -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND DECEMBER 31, 2018 In the event of a default by a borrower with respect to any loan, BBH will exercise any and all remedies provided under the applicable borrower agreement to make the Funds whole. These remedies include purchasing replacement securities by applying the collateral held from the defaulting broker against the purchase cost of the replacement securities. If, despite such efforts by BBH to exercise these remedies, a Fund sustains losses as a result of a borrower's default, BBH will indemnify the Fund by purchasing replacement securities at its own expense, or paying the Fund an amount equal to the market value of the replacement securities, subject to certain limitations which are set forth in detail in the Securities Lending Agency Agreement between the Trust on behalf of the Funds and BBH. E. REPURCHASE AGREEMENTS Repurchase agreements involve the purchase of securities subject to the seller's agreement to repurchase the securities at a mutually agreed upon date and price, under the terms of a Master Repurchase Agreement ("MRA"). During the term of a repurchase agreement, the value of the underlying securities held as collateral on behalf of a Fund, including accrued interest, is required to exceed the value of the repurchase agreement, including accrued interest. The underlying securities for all repurchase agreements are held at the Funds' custodian or designated sub-custodians under tri-party repurchase agreements. MRAs govern transactions between a Fund and select counterparties. The MRAs contain provisions for, among other things, initiation, income payments, events of default, and maintenance of collateral for repurchase agreements. Repurchase agreements received for lending securities are collateralized by U.S. Treasury securities. The U.S. Treasury securities are held in a joint custody account at BBH on behalf of the Funds participating in the securities lending program. In the event the counterparty defaults on the repurchase agreement, the U.S. Treasury securities can either be maintained as part of a Fund's portfolio or sold for cash. A Fund could suffer a loss to the extent that the proceeds from the sale of the underlying collateral held by the Fund is less than the repurchase price and the Fund's costs associated with the delay and enforcement of the MRA. While the Funds may invest in repurchase agreements, any repurchase agreements held by the Funds during the fiscal year ended December 31, 2018, were received as collateral for lending securities. F. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS Dividends from net investment income of each Fund, if any, are declared and paid quarterly or as the Board of Trustees may determine from time to time. Distributions of net realized gains earned by each Fund, if any, are distributed at least annually. Distributions from net investment income and realized capital gains are determined in accordance with federal income tax regulations, which may differ from U.S. GAAP. Certain capital accounts in the financial statements are periodically adjusted for permanent differences in order to reflect their tax character. These permanent differences are primarily due to the varying treatment of income and gain/loss on portfolio securities held by the Funds and have no impact on net assets or NAV per share. Temporary differences, which arise from recognizing certain items of income, expense and gain/loss in different periods for financial statement and tax purposes, will reverse at some time in the future. The tax character of distributions paid by each Fund during the fiscal year ended December 31, 2018 was as follows:
Distributions Distributions Distributions paid from paid from paid from Ordinary Income Capital Gains Return of Capital ------------------ ---------------- ----------------- First Trust NASDAQ-100 Equal Weighted Index Fund $ 2,716,080 $ -- $ -- First Trust NASDAQ-100-Technology Sector Index Fund 19,564,271 -- -- First Trust NASDAQ-100 Ex-Technology Sector Index Fund 308,595 -- -- First Trust NASDAQ(R) Clean Edge(R) Green Energy Index Fund 510,967 -- 350,683 First Trust S&P REIT Index Fund 3,585,667 -- -- First Trust Water ETF 2,110,505 -- -- First Trust Natural Gas ETF -- -- 1,420,088 First Trust Chindia ETF 4,434,111 -- -- First Trust NASDAQ(R)ABA Community Bank Index Fund 5,212,126 -- --
Page 64 -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND DECEMBER 31, 2018 The tax character of distributions paid by each Fund during the fiscal year ended December 31, 2017 was as follows:
Distributions Distributions Distributions paid from paid from paid from Ordinary Income Capital Gains Return of Capital ------------------ ---------------- ----------------- First Trust NASDAQ-100 Equal Weighted Index Fund $ 2,664,196 $ -- $ -- First Trust NASDAQ-100-Technology Sector Index Fund 18,099,151 -- -- First Trust NASDAQ-100 Ex-Technology Sector Index Fund 336,720 -- -- First Trust NASDAQ(R) Clean Edge(R) Green Energy Index Fund 353,370 -- -- First Trust S&P REIT Index Fund 5,399,046 -- -- First Trust Water ETF 3,256,646 -- -- First Trust Natural Gas ETF 1,778,865 -- 1,015,203 First Trust Chindia ETF 7,008,527 -- -- First Trust NASDAQ(R)ABA Community Bank Index Fund 5,233,697 -- --
As of December 31, 2018, the components of distributable earnings on a tax basis for each Fund were as follows:
Accumulated Undistributed Capital and Net Unrealized Ordinary Other Appreciation Income Gain (Loss) (Depreciation) ------------------ ---------------- ----------------- First Trust NASDAQ-100 Equal Weighted Index Fund $ 42,934 $(37,030,279) $ 20,146,395 First Trust NASDAQ-100-Technology Sector Index Fund 202,049 (47,202,665) 2,227,275 First Trust NASDAQ-100 Ex-Technology Sector Index Fund 9,306 (14,965,979) 1,819,022 First Trust NASDAQ(R) Clean Edge(R) Green Energy Index Fund -- (34,906,225) (100,993) First Trust S&P REIT Index Fund 290,492 (445,058) (23,210,802) First Trust Water ETF 178,889 (6,895,306) (3,528,041) First Trust Natural Gas ETF -- (461,527,796) (51,897,952) First Trust Chindia ETF -- (64,902,798) (33,517,249) First Trust NASDAQ(R) ABA Community Bank Index Fund -- (4,971,951) (55,057,167)
G. INCOME TAXES Each Fund intends to continue to qualify as a regulated investment company by complying with the requirements under Subchapter M of the Internal Revenue Code of 1986, as amended, which includes distributing substantially all of its net investment income and net realized gains to shareholders. Accordingly, no provision has been made for federal and state income taxes. However, due to the timing and amount of distributions, each Fund may be subject to an excise tax of 4% of the amount by which approximately 98% of each Fund's taxable income exceeds the distributions from such taxable income for the calendar year. The Funds are subject to accounting standards that establish a minimum threshold for recognizing, and a system for measuring, the benefits of a tax position taken or expected to be taken in a tax return. Taxable years ending 2015, 2016, 2017, and 2018 remain open to federal and state audit. As of December 31, 2018, management has evaluated the application of these standards to the Funds, and has determined that no provision for income tax is required in the Funds' financial statements for uncertain tax positions. Under the Regulated Investment Company Modernization Act of 2010 (the "Act"), net capital losses arising in taxable years beginning after December 22, 2010, may be carried forward indefinitely, and their character is retained as short-term and/or long-term losses. Previously, net capital losses were carried forward for up to eight years and treated as short-term losses. As a transition rule, the Act requires that post-enactment net capital losses be used before pre-enactment net capital losses. At December 31, 2018, the Funds had post-enactment net capital losses for federal income tax purposes as shown in the following table. To the extent that these loss carryforwards are used to offset future capital gains, it is probable that the capital gains so offset will not be distributed to Fund shareholders. The Funds are subject to certain limitations, under U.S. tax rules, on the use of capital loss carryforwards and net unrealized built-in losses. These limitations apply when there has been a 50% change in ownership. Page 65 -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND DECEMBER 31, 2018
Post- Enactment - No Expiration ------------------ First Trust NASDAQ-100 Equal Weighted Index Fund $ 37,030,279 First Trust NASDAQ-100-Technology Sector Index Fund 47,202,665 First Trust NASDAQ-100 Ex-Technology Sector Index Fund 14,965,979 First Trust NASDAQ(R) Clean Edge(R) Green Energy Index Fund 34,906,225 First Trust S&P REIT Index Fund 445,058 First Trust Water ETF 6,895,306 First Trust Natural Gas ETF 461,527,796 First Trust Chindia ETF 64,902,798 First Trust NASDAQ(R) ABA Community Bank Index Fund 4,971,951
At the taxable year ended December 31, 2018, the following Funds' capital loss carryforwards expired in the following amounts:
Capital Loss Carryforward Expired ------------------ First Trust NASDAQ-100 Ex-Technology Sector Index Fund $ 80,899 First Trust NASDAQ(R) Clean Edge(R) Green Energy Index Fund 5,884,801 First Trust Water ETF 2,198,674 First Trust Natural Gas ETF 40,089,981 First Trust Chindia ETF 7,245,147 First Trust NASDAQ(R)ABA Community Bank Index Fund 116,604
In order to present paid-in capital and accumulated distributable earnings (loss) (which consists of accumulated net investment income (loss), accumulated net realized gain (loss) on investments and net unrealized appreciation (depreciation) on investments) on the Statements of Assets and Liabilities that more closely represent their tax character, certain adjustments have been made to paid-in capital, accumulated net investment income (loss) and accumulated net realized gain (loss) on investments. These adjustments are primarily due to the difference between book and tax treatments of income and gains on various investment securities held by the Funds and in-kind transactions. The results of operations and net assets were not affected by these adjustments. For the fiscal year ended December 31, 2018, the adjustments for each Fund were as follows:
Accumulated Accumulated Net Realized Net Investment Gain (Loss) Paid-in Income (Loss) on Investments Capital ------------------ ---------------- ----------------- First Trust NASDAQ-100 Equal Weighted Index Fund $ (55,600) $ (40,351,757) $ 40,407,357 First Trust NASDAQ-100-Technology Sector Index Fund (682,816) (300,403,738) 301,086,554 First Trust NASDAQ-100 Ex-Technology Sector Index Fund -- (7,807,005) 7,807,005 First Trust NASDAQ(R) Clean Edge(R) Green Energy Index Fund (39,303) 4,280,044 (4,240,741) First Trust S&P REIT Index Fund -- 8,122,992 (8,122,992) First Trust Water ETF -- (24,837,224) 24,837,224 First Trust Natural Gas ETF (107,831) 34,361,220 (34,253,389) First Trust Chindia ETF 3,064,562 (28,204,471) 25,139,909 First Trust NASDAQ(R)ABA Community Bank Index Fund 21,376 (4,461,474) 4,440,098
Page 66 -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND DECEMBER 31, 2018 H. EXPENSES Expenses that are directly related to one of the Funds are charged directly to the respective Fund. General expenses of the Trust are allocated to all the Funds based upon the net assets of each Fund. First Trust has entered into licensing agreements with each of the following "Licensors" for the respective Funds:
FUND LICENSOR First Trust NASDAQ-100 Equal Weighted Index Fund Nasdaq, Inc. First Trust NASDAQ-100-Technology Sector Index Fund Nasdaq, Inc. First Trust NASDAQ-100 Ex-Technology Sector Index Fund Nasdaq, Inc. First Trust NASDAQ(R) Clean Edge(R) Green Energy Index Fund Nasdaq, Inc. First Trust S&P REIT Index Fund S&P Dow Jones Indices LLC First Trust Water ETF International Securities Exchange, LLC First Trust Natural Gas ETF International Securities Exchange, LLC First Trust Chindia ETF International Securities Exchange, LLC First Trust NASDAQ(R)ABA Community Bank Index Fund Nasdaq, Inc. and American Bankers Association
The respective license agreements allow for the use by First Trust of certain trademarks and trade names of the respective Licensors. The Funds are sub-licensees to the applicable license agreement. The respective Funds are required to pay licensing fees, which are shown on the Statements of Operations. I. NEW ACCOUNTING PRONOUNCEMENT On August 28, 2018, the FASB issued Accounting Standards Update ("ASU") 2018-13, "Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement," which amends the fair value measurement disclosure requirements of ASC 820. The amendments of ASU 2018-13 include new, eliminated, and modified disclosure requirements of ASC 820. In addition, the amendments clarify that materiality is an appropriate consideration of entities when evaluating disclosure requirements. The ASU is effective for fiscal years beginning after December 15, 2019, including interim periods therein. Early adoption is permitted for any eliminated or modified disclosures upon issuance of this ASU. The Funds have early adopted ASU 2018-13 for these financial statements, which did not result in a material impact. 3. INVESTMENT ADVISORY FEE, AFFILIATED TRANSACTIONS AND OTHER FEE ARRANGEMENTS First Trust, the investment advisor to the Funds, is a limited partnership with one limited partner, Grace Partners of DuPage L.P., and one general partner, The Charger Corporation. The Charger Corporation is an Illinois corporation controlled by James A. Bowen, Chief Executive Officer of First Trust. First Trust is responsible for the selection and ongoing monitoring of the securities in each Fund's portfolio, managing the Funds' business affairs and providing certain administrative services necessary for the management of the Funds. For these services, First Trust is entitled to receive monthly fees from each Fund calculated at the following annual rates:
% of Average Daily Net Assets ---------------- First Trust NASDAQ-100 Equal Weighted Index Fund 0.40% First Trust NASDAQ-100-Technology Sector Index Fund 0.40% First Trust NASDAQ-100 Ex-Technology Sector Index Fund 0.40% First Trust NASDAQ(R) Clean Edge(R) Green Energy Index Fund 0.40% First Trust S&P REIT Index Fund 0.30% First Trust Water ETF 0.40% First Trust Natural Gas ETF 0.40% First Trust Chindia ETF 0.40% First Trust NASDAQ(R)ABA Community Bank Index Fund 0.40%
The Trust and the Advisor have entered into an Expense Reimbursement, Fee Waiver and Recovery Agreement ("Recovery Agreement") in which First Trust has agreed to waive fees and/or reimburse Fund expenses to the extent that the operating expenses of each Fund (excluding interest expense, brokerage commissions and other trading expenses, acquired fund fees and expenses, taxes and extraordinary expenses) exceed the below amount as a percentage of average daily net assets per year (the "Expense Cap"). The Expense Cap will be in effect until at least April 30, 2020. Page 67 -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND DECEMBER 31, 2018
Expense Cap ---------------- First Trust NASDAQ-100 Equal Weighted Index Fund 0.60% First Trust NASDAQ-100-Technology Sector Index Fund 0.60% First Trust NASDAQ-100 Ex-Technology Sector Index Fund 0.60% First Trust NASDAQ(R) Clean Edge(R) Green Energy Index Fund 0.60% First Trust S&P REIT Index Fund 0.50% First Trust Water ETF 0.60% First Trust Natural Gas ETF 0.60% First Trust Chindia ETF 0.60% First Trust NASDAQ(R)ABA Community Bank Index Fund 0.60%
Expenses reimbursed and fees waived by First Trust under the Recovery Agreement are subject to recovery by First Trust for up to three years from the date the fee was waived or expense was incurred, but no reimbursement payment will be made by a Fund if it results in the Fund exceeding an expense ratio equal to the Expense Cap in place at the time the expenses were reimbursed or fees were waived by First Trust. These amounts are included in "Expenses previously waived or reimbursed" on the Statements of Operations. The advisory fee waivers and expense reimbursements for the fiscal year ended December 31, 2018 and fees waived or expenses borne by First Trust subject to recovery from the applicable Fund for the periods indicated were as follows:
Fees Waived or Expenses Borne by First Trust Subject to Recovery ------------------------------------------------ Advisory Year Year Year Fee Expense Ended Ended Ended Waivers Reimbursement 12/31/2016 12/31/2017 12/31/2018 Total --------- ------------- ---------- ---------- ---------- --------- First Trust NASDAQ-100 Ex-Technology Sector Index Fund $ 35,900 $ -- $ 49,128 $ 26,900 $ 35,900 $ 111,928 First Trust NASDAQ(R) Clean Edge(R) Green Energy Index Fund 43,615 -- 44,163 39,255 43,615 127,033 First Trust S&P REIT Index Fund 25,848 -- -- -- 25,848 25,848 First Trust Natural Gas ETF 39,782 -- 54,736 25,164 39,782 119,682 First Trust NASDAQ(R) ABA Community Bank Index Fund -- -- 21,616 -- -- 21,616
During the fiscal year ended December 31, 2018, First Trust recovered fees that were previously waived from First Trust NASDAQ-100 Equal Weighted Index Fund, First Trust Chindia ETF and First Trust NASDAQ(R) ABA Community Bank Index Fund of $27,809, $33,342 and $15,316, respectively. First Trust NASDAQ-100 Equal Weighted Index Fund, First Trust NASDAQ-100-Technology Sector Index Fund, First Trust Water ETF and First Trust Chindia ETF do not have any remaining fees previously waived or expenses reimbursed that are subject to recovery. During the fiscal year ended December 31, 2018, First Trust NASDAQ-100 Equal Weighted Index Fund received a reimbursement from the Advisor of $22,098 in connection with a trade error. The Trust has multiple service agreements with The Bank of New York Mellon ("BNYM"). Under the service agreements, BNYM performs custodial, fund accounting, certain administrative services, and transfer agency services for each Fund. As custodian, BNYM is responsible for custody of each Fund's assets. As fund accountant and administrator, BNYM is responsible for maintaining the books and records of each Fund's securities and cash. As transfer agent, BNYM is responsible for maintaining shareholder records for each Fund. BNYM is a subsidiary of The Bank of New York Mellon Corporation, a financial holding company. Each Trustee who is not an officer or employee of First Trust, any sub-advisor or any of their affiliates ("Independent Trustees") is paid a fixed annual retainer that is allocated equally among each fund in the First Trust Fund Complex. Each Independent Trustee is also paid an annual per fund fee that varies based on whether the fund is a closed-end or other actively managed fund, or is an index fund. Additionally, the Lead Independent Trustee and the Chairmen of the Audit Committee, Nominating and Governance Committee and Valuation Committee are paid annual fees to serve in such capacities, with such compensation allocated pro rata among each fund in the First Trust Fund Complex based on net assets. Independent Trustees are reimbursed for travel and out-of-pocket expenses in connection with all meetings. The Lead Independent Trustee and Committee Chairmen rotate every three years. The officers and "Interested" Trustee receive no compensation from the Trust for acting in such capacities. Page 68 -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND DECEMBER 31, 2018 4. PURCHASES AND SALES OF SECURITIES For the fiscal year ended December 31, 2018, the cost of purchases and proceeds from sales of investments for each Fund, excluding short-term investments and in-kind transactions, were as follows:
Purchases Sales --------------- --------------- First Trust NASDAQ-100 Equal Weighted Index Fund $ 145,488,983 $ 146,262,108 First Trust NASDAQ-100-Technology Sector Index Fund 514,060,665 516,549,460 First Trust NASDAQ-100 Ex-Technology Sector Index Fund 24,036,039 24,248,463 First Trust NASDAQ(R) Clean Edge(R) Green Energy Index Fund 41,371,283 41,382,684 First Trust S&P REIT Index Fund 12,378,045 11,208,431 First Trust Water ETF 36,964,684 36,020,677 First Trust Natural Gas ETF 68,338,772 67,904,995 First Trust Chindia ETF 76,636,858 77,774,538 First Trust NASDAQ(R)ABA Community Bank Index Fund 38,235,776 38,199,697
For the fiscal year ended December 31, 2018, the cost of in-kind purchases and proceeds from in-kind sales for each Fund were as follows:
Purchases Sales --------------- --------------- First Trust NASDAQ-100 Equal Weighted Index Fund $ 79,705,846 $ 120,160,270 First Trust NASDAQ-100-Technology Sector Index Fund 935,532,788 1,041,426,747 First Trust NASDAQ-100 Ex-Technology Sector Index Fund 9,987,579 29,250,275 First Trust NASDAQ(R) Clean Edge(R) Green Energy Index Fund 11,039,990 5,819,573 First Trust S&P REIT Index Fund 60,148,169 91,192,195 First Trust Water ETF 109,995,279 87,624,344 First Trust Natural Gas ETF 31,479,644 74,550,721 First Trust Chindia ETF 123,517,711 285,086,605 First Trust NASDAQ(R)ABA Community Bank Index Fund 114,903,432 136,114,054
5. CREATION, REDEMPTION AND TRANSACTION FEES Shares are created and redeemed by each Fund only in Creation Unit size aggregations of 50,000 shares in transactions with broker-dealers or large institutional investors that have entered into a participation agreement (an "Authorized Participant"). Such transactions are generally permitted on an in-kind basis, with a balancing cash component to equate the transaction to the daily NAV per Share of each Fund on the transaction date times the number of Shares in a Creation Unit. Authorized Participants purchasing Creation Units must pay to BNYM, as transfer agent, a standard creation transaction fee (the "Creation Transaction Fee"), which is based on the number of different securities in a Creation Unit of each Fund according to the fee schedule set forth below: Number of Securities Creation in a Creation Unit Transaction Fee -------------------- --------------- 1-100 $ 500 101-499 $1,000 500 or more $1,500 The Creation Transaction Fee is applicable to each purchase transaction regardless of the number of Creation Units purchased in the transaction. An additional variable fee of up to three times the Creation Transaction Fee may be charged to approximate additional expenses incurred by a Fund with respect to transactions effected outside of the clearing process (i.e., through a DTC Participant) or to the extent that cash is used in lieu of securities to purchase Creation Units. The price for each Creation Unit will equal the daily NAV per Share of a Fund on the transaction date times the number of Shares in a Creation Unit plus the fees described above and, if applicable, any transfer taxes. Page 69 -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND DECEMBER 31, 2018 Authorized Participants redeeming Creation Units must pay to BNYM, as transfer agent, a standard redemption transaction fee (the "Redemption Transaction Fee"), which is based on the number of different securities in a Creation Unit of each Fund according to the fee schedule set forth below: Number of Securities Redemption in a Creation Unit Transaction Fee -------------------- --------------- 1-100 $ 500 101-499 $1,000 500 or more $1,500 The Redemption Transaction Fee is applicable to each redemption transaction regardless of the number of Creation Units redeemed in the transaction. An additional variable fee of up to three times the Redemption Transaction Fee may be charged to approximate additional expenses incurred by a Fund with respect to redemptions effected outside of the clearing process or to the extent that redemptions are for cash. Each Fund reserves the right to effect redemptions in cash. A shareholder may request cash redemption in lieu of securities; however, a Fund may, in its discretion, reject any such request. 6. DISTRIBUTION PLAN The Board of Trustees adopted a Distribution and Service Plan pursuant to Rule 12b-1 under the 1940 Act. In accordance with the Rule 12b-1 plan, the Funds are authorized to pay an amount up to 0.25% of their average daily net assets each year to reimburse First Trust Portfolios L.P. ("FTP"), the distributor of the Funds, for amounts expended to finance activities primarily intended to result in the sale of Creation Units or the provision of investor services. FTP may also use this amount to compensate securities dealers or other persons that are Authorized Participants for providing distribution assistance, including broker-dealer and shareholder support and educational and promotional services. No 12b-1 fees are currently paid by the Funds, and pursuant to a contractual arrangement, no 12b-1 fees will be paid any time before April 30, 2020. 7. INDEMNIFICATION The Trust, on behalf of the Funds, has a variety of indemnification obligations under contracts with its service providers. The Trust's maximum exposure under these arrangements is unknown. However, the Trust has not had prior claims or losses pursuant to these contracts and expects the risk of loss to be remote. 8. SUBSEQUENT EVENTS Management has evaluated the impact of all subsequent events on the Funds through the date the financial statements were issued, and has determined that there were no subsequent events requiring recognition or disclosure in the financial statements that have not already been disclosed. Page 70 -------------------------------------------------------------------------------- REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM -------------------------------------------------------------------------------- TO THE SHAREHOLDERS AND THE BOARD OF TRUSTEES OF FIRST TRUST EXCHANGE-TRADED FUND: OPINION ON THE FINANCIAL STATEMENTS AND FINANCIAL HIGHLIGHTS We have audited the accompanying statements of assets and liabilities, including the portfolios of investments, of First Trust Exchange-Traded Fund (the "Trust"), comprising the First Trust NASDAQ-100 Equal Weighted Index Fund, First Trust NASDAQ-100-Technology Sector Index Fund, First Trust NASDAQ-100 Ex-Technology Sector Index Fund, First Trust NASDAQ(R) Clean Edge(R) Green Energy Index Fund, First Trust S&P REIT Index Fund, First Trust Chindia ETF, First Trust Natural Gas ETF, First Trust Water ETF, and First Trust NASDAQ(R) ABA Community Bank Index Fund (the "Funds"), each a series of First Trust Exchange-Traded Fund, as of December 31, 2018, the related statements of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, the financial highlights for each of the five years in the period then ended, and the related notes. In our opinion, the financial statements and financial highlights present fairly, in all material respects, the financial position of each of the funds listed above included in First Trust Exchange-Traded Fund as of December 31, 2018, and the results of their operations for the year then ended, the changes in their net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. BASIS FOR OPINION These financial statements and financial highlights are the responsibility of the Funds' management. Our responsibility is to express an opinion on the Funds' financial statements and financial highlights based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Funds in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement, whether due to error or fraud. The Funds are not required to have, nor were we engaged to perform, an audit of their internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Funds' internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements and financial highlights, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements and financial highlights. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and financial highlights. Our procedures included confirmation of securities owned as of December 31, 2018, by correspondence with the custodian and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion. /s/ Deloitte & Touche LLP Chicago, Illinois February 25, 2019 We have served as the auditor of one or more First Trust investment companies since 2001. Page 71 -------------------------------------------------------------------------------- ADDITIONAL INFORMATION -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND DECEMBER 31, 2018 (UNAUDITED) PROXY VOTING POLICIES AND PROCEDURES A description of the policies and procedures that the Trust uses to determine how to vote proxies and information on how each Fund voted proxies relating to its portfolio securities during the most recent 12-month period ended June 30 is available (1) without charge, upon request, by calling (800) 988-5891; (2) on the Funds' website at www.ftportfolios.com; and (3) on the Securities and Exchange Commission's ("SEC") website at www.sec.gov. PORTFOLIO HOLDINGS The Trust files its complete schedule of each Fund's portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The Trust's Form N-Qs are available (1) by calling (800) 988-5891; (2) on each Fund's website at www.ftportfolios.com; and (3) on the SEC's website at www.sec.gov. Beginning in April 2019, the Trust will cease to disclose each Fund's holdings on Form N-Q and will file Form N-PORT with the SEC on a monthly basis. Part F of Form N-PORT, which contains the complete schedule of each Fund's portfolio holdings, will be made available in the same manner as Form N-Q discussed above. FEDERAL TAX INFORMATION For the taxable year ended December 31, 2018, the following percentages of income dividends paid by the Funds qualify for the dividends received deduction available to corporations:
Dividends Received Deduction ---------------------------- First Trust NASDAQ-100 Equal Weighted Index Fund 100.00% First Trust NASDAQ-100-Technology Sector Index Fund 100.00% First Trust NASDAQ-100 Ex-Technology Sector Index Fund 100.00% First Trust NASDAQ(R) Clean Edge(R) Green Energy Index Fund 75.24% First Trust S&P REIT Index Fund 0.00% First Trust Water ETF 100.00% First Trust Natural Gas ETF 0.00% First Trust Chindia ETF 0.00% First Trust NASDAQ(R) ABA Community Bank Index Fund 100.00%
For the taxable year ended December 31, 2018, the following percentages of income dividends paid by the Funds are hereby designated as qualified dividend income:
Qualified Dividend Income ---------------------------- First Trust NASDAQ-100 Equal Weighted Index Fund 100.00% First Trust NASDAQ-100-Technology Sector Index Fund 100.00% First Trust NASDAQ-100 Ex-Technology Sector Index Fund 100.00% First Trust NASDAQ(R) Clean Edge(R) Green Energy Index Fund 100.00% First Trust S&P REIT Index Fund 0.00% First Trust Water ETF 100.00% First Trust Natural Gas ETF 0.00% First Trust Chindia ETF 92.84% First Trust NASDAQ(R) ABA Community Bank Index Fund 100.00%
A portion of First Trust S&P REIT Index Fund's 2018 ordinary dividends (including short-term capital gains) paid to its shareholders during the taxable year ended December 31, 2018, may be eligible for the Qualified Business Income Deduction (QBI) under code section 199A for the aggregate dividends the Fund received from the underlying Real Estate Investment Trusts (REITs) it invests in. Page 72 -------------------------------------------------------------------------------- ADDITIONAL INFORMATION (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND DECEMBER 31, 2018 (UNAUDITED) RISK CONSIDERATIONS RISKS ARE INHERENT IN ALL INVESTING. CERTAIN GENERAL RISKS THAT MAY BE APPLICABLE TO A FUND ARE IDENTIFIED BELOW, BUT NOT ALL OF THE MATERIAL RISKS RELEVANT TO EACH FUND ARE INCLUDED IN THIS REPORT AND NOT ALL OF THE RISKS BELOW APPLY TO EACH FUND. THE MATERIAL RISKS OF INVESTING IN EACH FUND ARE SPELLED OUT IN ITS PROSPECTUS, STATEMENT OF ADDITIONAL INFORMATION AND OTHER REGULATORY FILINGS. BEFORE INVESTING, YOU SHOULD CONSIDER EACH FUND'S INVESTMENT OBJECTIVE, RISKS, CHARGES AND EXPENSES, AND READ EACH FUND'S PROSPECTUS AND STATEMENT OF ADDITIONAL INFORMATION CAREFULLY. YOU CAN DOWNLOAD EACH FUND'S PROSPECTUS AT WWW.FTPORTFOLIOS.COM OR CONTACT FIRST TRUST PORTFOLIOS L.P. AT (800) 621-1675 TO REQUEST A PROSPECTUS, WHICH CONTAINS THIS AND OTHER INFORMATION ABOUT EACH FUND. CONCENTRATION RISK. To the extent that a fund is able to invest a large percentage of its assets in a single asset class or the securities of issuers within the same country, state, region, industry or sector, an adverse economic, business or political development may affect the value of the fund's investments more than if the fund were more broadly diversified. A fund that tracks an index will be concentrated to the extent the fund's corresponding index is concentrated. A concentration makes a fund more susceptible to any single occurrence and may subject the fund to greater market risk than a fund that is not concentrated. CREDIT RISK. Credit risk is the risk that an issuer of a security will be unable or unwilling to make dividend, interest and/or principal payments when due and the related risk that the value of a security may decline because of concerns about the issuer's ability to make such payments. CYBER SECURITY RISK. The funds are susceptible to potential operational risks through breaches in cyber security. A breach in cyber security refers to both intentional and unintentional events that may cause a fund to lose proprietary information, suffer data corruption or lose operational capacity. Such events could cause a fund to incur regulatory penalties, reputational damage, additional compliance costs associated with corrective measures and/or financial loss. In addition, cyber security breaches of a fund's third-party service providers, such as its administrator, transfer agent, custodian, or sub-advisor, as applicable, or issuers in which the fund invests, can also subject a fund to many of the same risks associated with direct cyber security breaches. DERIVATIVES RISK. To the extent a fund uses derivative instruments such as futures contracts, options contracts and swaps, the fund may experience losses because of adverse movements in the price or value of the underlying asset, index or rate, which may be magnified by certain features of the derivative. These risks are heightened when a fund's portfolio managers use derivatives to enhance the fund's return or as a substitute for a position or security, rather than solely to hedge (or offset) the risk of a position or security held by the fund. EQUITY SECURITIES RISK. To the extent a fund invests in equity securities, the value of the fund's shares will fluctuate with changes in the value of the equity securities. Equity securities prices fluctuate for several reasons, including changes in investors' perceptions of the financial condition of an issuer or the general condition of the relevant stock market, such as market volatility, or when political or economic events affecting the issuers occur. In addition, common stock prices may be particularly sensitive to rising interest rates, as the cost of capital rises and borrowing costs increase. Equity securities may decline significantly in price over short or extended periods of time, and such declines may occur in the equity market as a whole, or they may occur in only a particular country, company, industry or sector of the market. ETF RISK. The shares of an ETF trade like common stock and represent an interest in a portfolio of securities. The risks of owning an ETF generally reflect the risks of owning the underlying securities, although lack of liquidity in an ETF could result in it being more volatile and ETFs have management fees that increase their costs. Shares of an ETF trade on an exchange at market prices rather than net asset value, which may cause the shares to trade at a price greater than net asset value (premium) or less than net asset value (discount). In times of market stress, decisions by market makers to reduce or step away from their role of providing a market for an ETF's shares, or decisions by an ETF's authorized participants that they are unable or unwilling to proceed with creation and/or redemption orders of an ETF's shares, could result in shares of the ETF trading at a discount to net asset value and in greater than normal intraday bid-ask spreads. FIXED INCOME SECURITIES RISK. To the extent a fund invests in fixed income securities, the fund will be subject to credit risk, income risk, interest rate risk, liquidity risk and prepayment risk. Income risk is the risk that income from a fund's fixed income investments could decline during periods of falling interest rates. Interest rate risk is the risk that the value of a fund's fixed income securities will decline because of rising interest rates. Liquidity risk is the risk that a security cannot be purchased or sold at the time desired, or cannot be purchased or sold without adversely affecting the price. Prepayment risk is the risk that the securities will be redeemed or prepaid by the issuer, resulting in lower interest payments received by the fund. In addition to these risks, high yield securities, or "junk" bonds, are subject to greater market fluctuations and risk of loss than securities with higher ratings, and the market for high yield securities is generally smaller and less liquid than that for investment grade securities. Page 73 -------------------------------------------------------------------------------- ADDITIONAL INFORMATION (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND DECEMBER 31, 2018 (UNAUDITED) INDEX CONSTITUENT RISK. Certain funds may be a constituent of one or more indices. As a result, such a fund may be included in one or more index-tracking exchange-traded funds or mutual funds. Being a component security of such a vehicle could greatly affect the trading activity involving a fund, the size of the fund and the market volatility of the fund. Inclusion in an index could significantly increase demand for the fund and removal from an index could result in outsized selling activity in a relatively short period of time. As a result, a fund's net asset value could be negatively impacted and the fund's market price may be significantly below its net asset value during certain periods. INDEX PROVIDER RISK. To the extent a fund seeks to track an index, it is subject to Index Provider Risk. There is no assurance that the Index Provider will compile the Index accurately, or that the Index will be determined, maintained, constructed, reconstituted, rebalanced, composed, calculated or disseminated accurately. To correct any such error, the Index Provider may carry out an unscheduled rebalance or other modification of the Index constituents or weightings, which may increase the fund's costs. The Index Provider does not provide any representation or warranty in relation to the quality, accuracy or completeness of data in the Index, and it does not guarantee that the Index will be calculated in accordance with its stated methodology. Losses or costs associated with any Index Provider errors generally will be borne by the fund and its shareholders. INVESTMENT COMPANIES RISK. To the extent a fund invests in the securities of other investment vehicles, the fund will incur additional fees and expenses that would not be present in a direct investment in those investment vehicles. Furthermore, the fund's investment performance and risks are directly related to the investment performance and risks of the investment vehicles in which the fund invests. MANAGEMENT RISK. To the extent that a fund is actively managed, it is subject to management risk. In managing an actively-managed fund's investment portfolio, the fund's portfolio managers will apply investment techniques and risk analyses that may not have the desired result. There can be no guarantee that a fund will meet its investment objective. MARKET RISK. Securities held by a fund, as well as shares of a fund itself, are subject to market fluctuations caused by factors such as general economic conditions, political events, regulatory or market developments, changes in interest rates and perceived trends in securities prices. Shares of a fund could decline in value or underperform other investments as a result of the risk of loss associated with these market fluctuations. NON-U.S. SECURITIES RISK. To the extent a fund invests in non-U.S. securities, it is subject to additional risks not associated with securities of domestic issuers. Non-U.S. securities are subject to higher volatility than securities of domestic issuers due to: possible adverse political, social or economic developments; restrictions on foreign investment or exchange of securities; lack of liquidity; currency exchange rates; excessive taxation; government seizure of assets; different legal or accounting standards; and less government supervision and regulation of exchanges in foreign countries. Investments in non-U.S. securities may involve higher costs than investments in U.S. securities, including higher transaction and custody costs, as well as additional taxes imposed by non-U.S. governments. These risks may be heightened for securities of companies located, or with significant operations, in emerging market countries. PASSIVE INVESTMENT RISK. To the extent a fund seeks to track an index, the fund will invest in the securities included in, or representative of, the index regardless of their investment merit. A fund generally will not attempt to take defensive positions in declining markets. NOT FDIC INSURED NOT BANK GUARANTEED MAY LOSE VALUE Page 74 -------------------------------------------------------------------------------- ADDITIONAL INFORMATION (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND DECEMBER 31, 2018 (UNAUDITED) REMUNERATION First Trust Advisors L.P. ("First Trust") is authorised and regulated by the U.S. Securities and Exchange Commission and is entitled to market shares of certain First Trust Exchange-Traded Fund funds it manages (the "Funds") in certain member states in the European Economic Area in accordance with the cooperation arrangements in Article 42 of the Alternative Investment Fund Managers Directive (the "Directive"). First Trust is required under the Directive to make disclosures in respect of remuneration. The following disclosures are made in line with First Trust's interpretation of currently available regulatory guidance on remuneration disclosures. During the year ended December 31,2018, the amount of remuneration paid (or to be paid) by First Trust Advisors L.P. in respect of the Funds is $2,015,725. This figure is comprised of $88,328 paid (or to be paid) in fixed compensation and $1,927,397 paid (or to be paid) in variable compensation. There were a total of 14 beneficiaries of the remuneration described above. Those amounts include $1,280,092 paid (or to be paid) to senior management of First Trust Advisors L.P. and $735,633 paid (or to be paid) to other employees whose professional activities have a material impact on the risk profiles of First Trust Advisors L.P. or the Funds (collectively, "Code Staff"). Code Staff included in the aggregated figures disclosed above are rewarded in line with First Trust's remuneration policy (the "Remuneration Policy") which is determined and implemented by First Trust's senior management. The Remuneration Policy reflects First Trust's ethos of good governance and encapsulates the following principal objectives: i. to provide a clear link between remuneration and performance of First Trust and to avoid rewarding for failure; ii. to promote sound and effective risk management consistent with the risk profiles of the Funds managed by First Trust; and iii. to remunerate staff in line with the business strategy, objectives, values and interests of First Trust and the Funds managed by First Trust in a manner that avoids conflicts of interest. First Trust assesses various risk factors which it is exposed to when considering and implementing remuneration for Code Staff and considers whether any potential award to such person(s) would give rise to a conflict of interest. First Trust does not reward failure, or consider the taking of risk or failure to take risk in its remuneration of Code Staff. First Trust assesses performance for the purposes of determining payments in respect of performance-related remuneration of Code Staff by reference to a broad range of measures including (i) individual performance (using financial and non-financial criteria), and (ii) the overall performance of First Trust. Remuneration is not based upon the performance of the Funds. The elements of remuneration are balanced between fixed and variable and the senior management sets fixed salaries at a level sufficient to ensure that variable remuneration incentivises and rewards strong individual performance but does not encourage excessive risk taking. No individual is involved in setting his or her own remuneration. Page 75 -------------------------------------------------------------------------------- BOARD OF TRUSTEES AND OFFICERS -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND DECEMBER 31, 2018 (UNAUDITED) The following tables identify the Trustees and Officers of the Trust. Unless otherwise indicated, the address of all persons is 120 East Liberty Drive, Suite 400, Wheaton, IL 60187. The Trust's statement of additional information includes additional information about the Trustees and is available, without charge, upon request, by calling (800) 988-5891.
NUMBER OF OTHER PORTFOLIOS IN TRUSTEESHIPS OR TERM OF OFFICE THE FIRST TRUST DIRECTORSHIPS NAME, AND YEAR FIRST FUND COMPLEX HELD BY TRUSTEE YEAR OF BIRTH AND ELECTED OR PRINCIPAL OCCUPATIONS OVERSEEN BY DURING PAST POSITION WITH THE TRUST APPOINTED DURING PAST 5 YEARS TRUSTEE 5 YEARS ------------------------------------------------------------------------------------------------------------------------------------ INDEPENDENT TRUSTEES ------------------------------------------------------------------------------------------------------------------------------------ Richard E. Erickson, Trustee o Indefinite Term Physician, Officer, Wheaton Orthopedics; 161 None (1951) Limited Partner, Gundersen Real Estate o Since Inception Limited Partnership (June 1992 to December 2016); Member, Sportsmed LLC (April 2007 to November 2015) Thomas R. Kadlec, Trustee o Indefinite Term President, ADM Investors Services, Inc. 161 Director of ADM (1957) (Futures Commission Merchant) Investor Services, o Since Inception Inc., ADM Investor Services International, Futures Industry Association, and National Futures Association Robert F. Keith, Trustee o Indefinite Term President, Hibs Enterprises (Financial and 161 Director of Trust (1956) Management Consulting) Company of o Since Inception Illinois Niel B. Nielson, Trustee o Indefinite Term Senior Advisor (August 2018 to Present), 161 Director of (1954) Managing Director and Chief Operating Covenant o Since Inception Officer (January 2015 to August 2018), Transport Inc. Pelita Harapan Educational Foundation (May 2003 to (Educational Products and Services); May 2014) President and Chief Executive Officer (June 2012 to September 2014), Servant Interactive LLC (Educational Products and Services); President and Chief Executive Officer (June 2012 to September 2014), Dew Learning LLC (Educational Products and Services) ------------------------------------------------------------------------------------------------------------------------------------ INTERESTED TRUSTEE ------------------------------------------------------------------------------------------------------------------------------------ James A. Bowen(1), Trustee, o Indefinite Term Chief Executive Officer, First Trust 161 None Chairman of the Board Advisors L.P. and First Trust (1955) o Since Inception Portfolios L.P.; Chairman of the Board of Directors, BondWave LLC (Software Development Company) and Stonebridge Advisors LLC (Investment Advisor)
----------------------------- (1) Mr. Bowen is deemed an "interested person" of the Trust due to his position as Chief Executive Officer of First Trust Advisors L.P., investment advisor of the Trust. Page 76 -------------------------------------------------------------------------------- BOARD OF TRUSTEES AND OFFICERS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND DECEMBER 31, 2018 (UNAUDITED)
POSITION AND TERM OF OFFICE NAME AND OFFICES AND LENGTH OF PRINCIPAL OCCUPATIONS YEAR OF BIRTH WITH TRUST SERVICE DURING PAST 5 YEARS ------------------------------------------------------------------------------------------------------------------------------------ OFFICERS(2) ------------------------------------------------------------------------------------------------------------------------------------ James M. Dykas President and Chief o Indefinite Term Managing Director and Chief Financial Officer (1966) Executive Officer (January 2016 to Present), Controller (January 2011 to o Since January 2016 January 2016), Senior Vice President (April 2007 to January 2016), First Trust Advisors L.P. and First Trust Portfolios L.P.; Chief Financial Officer (January 2016 to Present), BondWave LLC (Software Development Company) and Stonebridge Advisors LLC (Investment Advisor) Donald P. Swade Treasurer, Chief Financial o Indefinite Term Senior Vice President (July 2016 to Present), Vice (1972) Officer and Chief President (April 2012 to July 2016), First Trust Accounting Officer o Since January 2016 Advisors L.P. and First Trust Portfolios L.P. W. Scott Jardine Secretary and Chief o Indefinite Term General Counsel, First Trust Advisors L.P. and First (1960) Legal Officer Trust Portfolios L.P.; Secretary and General Counsel, o Since Inception BondWave LLC; Secretary, Stonebridge Advisors LLC Daniel J. Lindquist Vice President o Indefinite Term Managing Director, First Trust Advisors L.P. and (1970) First Trust Portfolios L.P. o Since Inception Kristi A. Maher Chief Compliance Officer o Indefinite Term Deputy General Counsel, First Trust Advisors L.P. (1966) and Assistant Secretary and First Trust Portfolios L.P. o Chief Compliance Officer Since January 2011 o Assistant Secretary Since Inception Roger F. Testin Vice President o Indefinite Term Senior Vice President, First Trust Advisors L.P. (1966) and First Trust Portfolios L.P. o Since Inception Stan Ueland Vice President o Indefinite Term Senior Vice President, First Trust Advisors L.P. (1970) and First Trust Portfolios L.P. o Since Inception
----------------------------- (2) The term "officer" means the president, vice president, secretary, treasurer, controller or any other officer who performs a policy making function. Page 77 -------------------------------------------------------------------------------- PRIVACY POLICY -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND DECEMBER 31, 2018 (UNAUDITED) PRIVACY POLICY First Trust values our relationship with you and considers your privacy an important priority in maintaining that relationship. We are committed to protecting the security and confidentiality of your personal information. SOURCES OF INFORMATION We collect nonpublic personal information about you from the following sources: o Information we receive from you and your broker-dealer, investment advisor or financial representative through interviews, applications, agreements or other forms; o Information about your transactions with us, our affiliates or others; o Information we receive from your inquiries by mail, e-mail or telephone; and o Information we collect on our website through the use of "cookies". For example, we may identify the pages on our website that your browser requests or visits. INFORMATION COLLECTED The type of data we collect may include your name, address, social security number, age, financial status, assets, income, tax information, retirement and estate plan information, transaction history, account balance, payment history, investment objectives, marital status, family relationships and other personal information. DISCLOSURE OF INFORMATION We do not disclose any nonpublic personal information about our customers or former customers to anyone, except as permitted by law. In addition to using this information to verify your identity (as required under law), the permitted uses may also include the disclosure of such information to unaffiliated companies for the following reasons: o In order to provide you with products and services and to effect transactions that you request or authorize, we may disclose your personal information as described above to unaffiliated financial service providers and other companies that perform administrative or other services on our behalf, such as transfer agents, custodians and trustees, or that assist us in the distribution of investor materials such as trustees, banks, financial representatives, proxy services, solicitors and printers. o We may release information we have about you if you direct us to do so, if we are compelled by law to do so, or in other legally limited circumstances (for example to protect your account from fraud). In addition, in order to alert you to our other financial products and services, we may share your personal information within First Trust. USE OF WEBSITE ANALYTICS We currently use third party analytics tools, Google Analytics and AddThis, to gather information for purposes of improving First Trust's website and marketing our products and services to you. These tools employ cookies, which are small pieces of text stored in a file by your web browser and sent to websites that you visit, to collect information, track website usage and viewing trends such as the number of hits, pages visited, videos and PDFs viewed and the length of user sessions in order to evaluate website performance and enhance navigation of the website. We may also collect other anonymous information, which is generally limited to technical and web navigation information such as the IP address of your device, internet browser type and operating system for purposes of analyzing the data to make First Trust's website better and more useful to our users. The information collected does not include any personal identifiable information such as your name, address, phone number or email address unless you provide that information through the website for us to contact you in order to answer your questions or respond to your requests. To find out how to opt-out of these services click on: Google Analytics and AddThis. CONFIDENTIALITY AND SECURITY With regard to our internal security procedures, First Trust restricts access to your nonpublic personal information to those First Trust employees who need to know that information to provide products or services to you. We maintain physical, electronic and procedural safeguards to protect your nonpublic personal information. POLICY UPDATES AND INQUIRIES As required by federal law, we will notify you of our privacy policy annually. We reserve the right to modify this policy at any time, however, if we do change it, we will tell you promptly. For questions about our policy, or for additional copies of this notice, please go to www.ftportfolios.com, or contact us at 1-800-621-1675 (First Trust Portfolios) or 1-800-222-6822 (First Trust Advisors). May 2017 Page 78 This page intentionally left blank. This page intentionally left blank. FIRST TRUST First Trust Exchange-Traded Fund INVESTMENT ADVISOR First Trust Advisors L.P. 120 East Liberty Drive, Suite 400 Wheaton, IL 60187 ADMINISTRATOR, CUSTODIAN, FUND ACCOUNTANT & TRANSFER AGENT The Bank of New York Mellon 240 Greenwich Street New York, NY 10286 INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Deloitte & Touche LLP 111 S. Wacker Drive Chicago, IL 60606 LEGAL COUNSEL Chapman and Cutler LLP 111 W. Monroe Street Chicago, IL 60603 [BLANK BACK COVER] FIRST TRUST First Trust Exchange-Traded Fund Book 3 First Trust Total US Market AlphaDEX(R) ETF (TUSA) First Trust Dorsey Wright People's Portfolio ETF (DWPP) First Trust Dow 30 Equal Weight ETF (EDOW) First Trust Lunt U.S. Factor Rotation ETF (FCTR) Annual Report December 31, 2018 -------------------------------------------------------------------------------- TABLE OF CONTENTS -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND ANNUAL REPORT DECEMBER 31, 2018 Shareholder Letter.......................................................... 2 Market Overview............................................................. 3 Fund Performance Overview First Trust Total US Market AlphaDEX(R) ETF (TUSA)....................... 4 First Trust Dorsey Wright People's Portfolio ETF (DWPP).................. 6 First Trust Dow 30 Equal Weight ETF (EDOW)............................... 8 First Trust Lunt U.S. Factor Rotation ETF (FCTR)......................... 10 Notes to Fund Performance Overview.......................................... 12 Understanding Your Fund Expenses............................................ 13 Portfolio of Investments First Trust Total US Market AlphaDEX(R) ETF (TUSA)....................... 14 First Trust Dorsey Wright People's Portfolio ETF (DWPP).................. 29 First Trust Dow 30 Equal Weight ETF (EDOW)............................... 36 First Trust Lunt U.S. Factor Rotation ETF (FCTR)......................... 37 Statements of Assets and Liabilities........................................ 41 Statements of Operations.................................................... 42 Statements of Changes in Net Assets......................................... 43 Financial Highlights........................................................ 45 Notes to Financial Statements............................................... 47 Report of Independent Registered Public Accounting Firm..................... 55 Additional Information...................................................... 56 Board of Trustees and Officers.............................................. 60 Privacy Policy.............................................................. 62 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- CAUTION REGARDING FORWARD-LOOKING STATEMENTS This report contains certain forward-looking statements within the meaning of the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended. Forward-looking statements include statements regarding the goals, beliefs, plans or current expectations of First Trust Advisors L.P. ("First Trust" or the "Advisor") and its representatives, taking into account the information currently available to them. Forward-looking statements include all statements that do not relate solely to current or historical fact. For example, forward-looking statements include the use of words such as "anticipate," "estimate," "intend," "expect," "believe," "plan," "may," "should," "would" or other words that convey uncertainty of future events or outcomes. Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of any series of First Trust Exchange-Traded Fund (the "Trust") described in this report (each such series is referred to as a "Fund" and collectively, as the "Funds") to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. When evaluating the information included in this report, you are cautioned not to place undue reliance on these forward-looking statements, which reflect the judgment of the Advisor and its representatives only as of the date hereof. We undertake no obligation to publicly revise or update these forward-looking statements to reflect events and circumstances that arise after the date hereof. PERFORMANCE AND RISK DISCLOSURE There is no assurance that any Fund described in this report will achieve its investment objective. Each Fund is subject to market risk, which is the possibility that the market values of securities owned by the Fund will decline and that the value of the Fund shares may therefore be less than what you paid for them. Accordingly, you can lose money by investing in a Fund. See "Risk Considerations" in the Additional Information Section of this report for a discussion of other risks of investing in the Funds. Performance data quoted represents past performance, which is no guarantee of future results, and current performance may be lower or higher than the figures shown. For the most recent month-end performance figures, please visit www.ftportfolios.com or speak with your financial advisor. Investment returns, net asset value and share price will fluctuate and Fund shares, when sold, may be worth more or less than their original cost. The Advisor may also periodically provide additional information on Fund performance on each Fund's webpage at www.ftportfolios.com. HOW TO READ THIS REPORT This report contains information that may help you evaluate your investment. It includes details about each Fund and presents data and analysis that provide insight into each Fund's performance and investment approach. By reading the market overview by Robert F. Carey, Chief Market Strategist of the Advisor, you may obtain an understanding of how the market environment affected the performance of each Fund. The statistical information that follows may help you understand each Fund's performance compared to that of relevant market benchmarks. It is important to keep in mind that the opinions expressed by personnel of the Advisor are just that: informed opinions. They should not be considered to be promises or advice. The opinions, like the statistics, cover the period through the date on the cover of this report. The material risks of investing in each Fund are spelled out in its prospectus, statement of additional information, and other Fund regulatory filings. Page 1 -------------------------------------------------------------------------------- SHAREHOLDER LETTER -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND ANNUAL LETTER FROM THE CHAIRMAN AND CEO DECEMBER 31, 2018 Dear Shareholders: First Trust is pleased to provide you with the annual report for certain funds in the First Trust Exchange-Traded Fund (the "Funds"), which contains detailed information about the Funds for the twelve months ended December 31, 2018, including a market overview and performance analyses. We encourage you to read this report carefully and discuss it with your financial advisor. As I wrote in my June 2018 letter, investors were hoping for another strong year in the markets for 2018. For the entire year, however, increased market volatility was the norm for U.S. and global markets. Despite the volatility, August was a strong month for stocks, and the Dow Jones Industrial Average ("DJIA") finished the month just under its previous high in January 2018. At the close of the third quarter in September, the markets had moved higher into positive territory. In fact, all three major U.S. indices (the Nasdaq Composite Index, the DJIA and the S&P 500(R) Index) hit record levels during the third quarter. Yet, in October, markets were again very volatile, surprising analysts and investors alike. Both global markets and U.S. markets fell on fears of slowing growth, trade wars and higher interest rates. The DJIA was down 5% for October and the MSCI EAFE Index, an index of stocks in 21 developed markets (excluding the U.S. and Canada), was down 9% for the month. However, investors cheered as November ended, and the DJIA climbed 617 points (2.5%) to its biggest one-day gain in eight months. The MSCI EAFE Index ended November down slightly. December held its own shocks as it became the worst December for stocks since the Great Depression. The DJIA and the MSCI EAFE Index ended December with year-to-date returns of -3.48% and -13.79%, respectively. Based on continued strong job growth and the economic outlook in the U.S., the Federal Reserve (the "Fed") raised interest rates in March, June and September. At their September meeting, the Fed indicated the possibility of one additional rate hike in 2018 and three more in 2019. At their November meeting, the Fed did not raise interest rates. However, at their December 19th meeting, the Fed did raise interest rates by 25 basis points. Analysts and investors will be watching to see what the Fed does with rates in 2019. While trade tensions have had an impact on markets around the world and could continue to do so in the future, our First Trust economists believe that the long-term impact of U.S. tariffs will be to encourage countries to come back to the table and talk about more equal trade. Despite market volatility, we continue to believe that the combination of low interest rates, low inflation and strong corporate earnings still point to a positive economic environment and further growth, though we understand that past performance can never guarantee future performance. We continue to believe that you should invest for the long term and be prepared for market movements, which can happen at any time. You can do this by keeping current on your portfolio and by speaking regularly with your investment professional. Markets go up and they also go down, but savvy investors are prepared for either through careful attention to investment goals. Thank you for giving First Trust the opportunity to be a part of your financial plan. We value our relationship with you and will report on the Funds again in six months. Sincerely, /s/ James A. Bowen James A. Bowen Chairman of the Board of Trustees Chief Executive Officer of First Trust Advisors L.P. Page 2 -------------------------------------------------------------------------------- MARKET OVERVIEW -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND ANNUAL REPORT DECEMBER 31, 2018 ROBERT F. CAREY, CFA SENIOR VICE PRESIDENT AND CHIEF MARKET STRATEGIST FIRST TRUST ADVISORS L.P. Mr. Carey is responsible for the overall management of research and analysis of the First Trust product line. Mr. Carey has over 25 years of experience as an Equity and Fixed-Income Analyst and is a recipient of the Chartered Financial Analyst ("CFA") designation. He is a graduate of the University of Illinois at Champaign-Urbana with a B.S. in Physics. He is also a member of the Investment Analysts Society of Chicago and the CFA Institute. Mr. Carey has appeared as a guest on such programs as Bloomberg TV, CNBC, and WBBM Radio, and has been quoted by several publications, including The Wall Street Journal, The Wall Street Reporter, Bloomberg News Service, and Registered Rep. STATE OF THE ECONOMY/INVESTING In its latest forecast, the International Monetary Fund ("IMF") is calling for the world real gross domestic product ("GDP") growth rate to dip from an estimated 3.7% in 2018 to an estimated 3.5% in 2019, according to its own release. The IMF cited the ongoing trade dispute between the U.S. and China as being partly responsible for the small downward revision in growth. The U.S. real GDP growth rate is expected to decrease from an estimated 2.9% in 2018 to an estimated 2.5% in 2019. The growth rate for Emerging Market and Developing Economies is expected to dip from an estimated 4.6% in 2018 to an estimated 4.5% in 2019. As indicated by the growth forecasts, we believe there is no imminent threat of a global economic recession. We believe that concerns over the extent to which interest rates could trend higher in 2019 and the potential for trade tariffs escalating to an all-out trade war were largely behind the spikes in volatility in the stock market in 2018. For those investors who fear that higher interest rates could dampen the prospects for stocks in 2019, Federal Reserve (the "Fed") Chairman Jerome Powell announced on January 4, 2019 that the Fed will be adopting a "patient" approach to tightening monetary policy. With respect to trade, the Trump Administration sent trade representatives to China on January 7, 2019 to set up future trade policy talks. The two countries also agreed to a 90-day truce freezing tariffs until March 1, 2019. We believe stock prices would move higher on a U.S.-China trade deal. ETFGI, an independent research and consultancy firm, reported that total assets invested in exchange-traded funds ("ETFs") and other exchange-traded products ("ETPs") listed globally stood at $4.79 trillion at the close of 2018, down from $4.84 trillion the previous year, according to its own release. The dip in assets under management was due to performance rather than capital flows. December 2018 marked the 59th consecutive month of net inflows into ETFs/ETPs listed globally. The U.S.'s share of the global market was approximately 70% at year-end. U.S. STOCKS AND BONDS The three major Standard & Poor's stock indices finished 2018 in the red. The S&P 500(R) Index, S&P MidCap 400(R) Index and S&P SmallCap 600(R) Index posted total returns of -4.38%, -11.08%, and -8.48%, respectively, according to Bloomberg. Only three of the 11 major S&P 500(R) Index sectors posted positive total returns. The top-performing sectors were Health Care, Utilities and Consumer Discretionary, up 6.47%, 4.11% and 0.82%, respectively, on a total return basis. The sectors that posted the biggest losses were Energy, Materials and Industrials, down 18.10%, 14.70% and 13.32%, respectively. We believe that some of the downside in stock prices late in the year could be attributed to profit taking and tax selling. Keep in mind, the S&P 500(R) Index posted a total return of 21.83% in 2017, more than double its 9.98% average annual total return from 1926-2018, according to Ibbotson Associates/Morningstar. Dividend growth has historically been a barometer of strength for Corporate America. The S&P Dow Jones Indices announced that total dividend distributions for U.S. common stocks increased by a net (increases less decreases) $7.4 billion in the third quarter of 2018, up from $4.5 billion from the third quarter of 2017, according to its own release. Net dividend increases totaled a record $58.4 billion in 2018, up from $37.1 billion in 2017. Currently, 82.2% of the companies in the S&P 500(R) Index pay a dividend, compared to 69.8% of the companies in the S&P MidCap 400(R) Index and 51.9% of the companies in the S&P SmallCap 600(R) Index. Total global dividend payouts are expected to rise 6.0% year-over-year to a record $1.81 trillion in 2019, according to business information provider IHS Markit, a London-based global information provider. Dividend-paying companies in the U.S. are expected to increase distributions by 8.1%, according to IHS Markit. In the U.S. bond market, the top-performing major debt group we track was intermediate-term Treasuries. The Bloomberg Barclays U.S. Treasury: Intermediate Index posted a total return of 1.41% in 2018. The worst-performing debt group that we track was high yield corporates. The Bloomberg Barclays U.S. Corporate High Yield Index posted a total return of -2.08%. The yield on the benchmark 10-Year Treasury note (T-note) rose by 28 basis points to 2.69% in 2018, according to Bloomberg. For comparative purposes, the average yield on the 10-year T-note was 2.51% for the 10-year period ended December 31, 2018. FOREIGN STOCKS AND BONDS The U.S. dollar registered a gain of 4.40% against a basket of major currencies in 2018, as measured by the U.S. Dollar Index (DXY). With respect to U.S. investors, a stronger U.S. dollar can negatively impact returns on unhedged foreign securities. We believe the dollar strengthened due to the escalating trade/tariff battle between the U.S. and its major trading partners, particularly China. Both foreign stocks and bonds succumbed to selling pressure in 2018. The Bloomberg Barclays Global Aggregate Index of higher quality debt posted a total return of -1.20% (USD), while the Bloomberg Barclays EM Hard Currency Aggregate Index of emerging markets debt fell 3.02%, according to Bloomberg Barclays. With respect to equities, the MSCI Daily Total Return Net World Index (excluding the U.S.) posted a total return of -14.09% (USD), compared to -14.58% (USD) for the MSCI Daily Total Return Net Emerging Markets Index. Page 3 -------------------------------------------------------------------------------- FUND PERFORMANCE OVERVIEW (UNAUDITED) -------------------------------------------------------------------------------- FIRST TRUST TOTAL US MARKET ALPHADEX(R) ETF (TUSA) The First Trust Total US Market AlphaDEX(R) ETF (the "Fund") seeks investment results that correspond generally to the price and yield (before the Fund's fees and expenses) of an equity index called the NASDAQ AlphaDEX(R) Total US Market Index (the "Index"). The Fund will normally invest at least 90% of its assets (including investment borrowings) in common stocks that comprise the Index. The Index is designed to quantitatively identify and select stocks across market capitalizations (including large-cap, mid-cap and small-cap companies) that exhibit growth and value factors and appear to have the greatest potential for capital appreciation. The Index is a modified equal-dollar weighted index. The Index is reconstituted and balanced on a quarterly basis. The Fund's shares are listed for trading on The Nasdaq Stock Market LLC. The first day of secondary market trading in shares of the Fund was December 7, 2006.
------------------------------------------------------------------------------------------------------------------------------------ PERFORMANCE ------------------------------------------------------------------------------------------------------------------------------------ AVERAGE ANNUAL TOTAL RETURNS CUMULATIVE TOTAL RETURNS 1 Year 5 Years 10 Years Inception 5 Years 10 Years Inception Ended Ended Ended (12/5/06) Ended Ended (12/5/06) 12/31/18 12/31/18 12/31/18 to 12/31/18 12/31/18 12/31/18 to 12/31/18 FUND PERFORMANCE NAV -10.13% 3.59% 9.77% 4.48% 19.28% 153.95% 69.66% Market Value -10.24% 3.58% 9.98% 4.47% 19.24% 158.84% 69.63% INDEX PERFORMANCE NASDAQ AlphaDEX(R) Total US Market Index* -9.55% N/A N/A N/A N/A N/A N/A Russell 3000(R) Index -5.24% 7.91% 13.18% 7.05% 46.34% 244.95% 127.56% ------------------------------------------------------------------------------------------------------------------------------------
* On January 9, 2015, the Fund's underlying index changed from the Value Line(R) Equity Allocation Index to the NASDAQ AlphaDEX(R) Total US Market Index. Therefore, the Fund's performance and total returns shown for the periods prior to January 9, 2015, are not necessarily indicative of the performance the Fund, based on its current index, would have generated. Since the Fund's current underlying index had an inception date of September 8, 2014, it was not in existence for all of the periods disclosed. (See Notes to Fund Performance Overview on page 12.) PERFORMANCE REVIEW The Fund generated a net asset value ("NAV") return of -10.13% during the 12-month period covered by this report. During the same period, the Russell 3000(R) Index ("benchmark") generated a return of -5.24%. The Consumer Discretionary sector was the Fund's largest allocated sector over the period with a 17.7% allocation. This sector had a -6.1% return leading to a contribution of -1.1%. The Fund's largest contributing sector was the Health Care sector with a 0.4% contribution, stemming from its 7.8% allocation and 9.6% return. The Fund's least contributing sector was the Industrials sector with a -2.2% contribution, stemming from its 15.5% allocation and -14.1% return. On a relative basis, the Fund underperformed the benchmark. The primary cause of the underperformance is attributable to the Fund underperforming the benchmark amongst Information Technology securities by -7.9%, creating -1.4% of relative drag. The Fund's holdings amongst the Utilities sector reversed 0.4% of relative drag as the Fund's Utilities sector holdings outperformed the benchmark's by 3.3%. ----------------------------- The NASDAQ AlphaDEX(R) Total US Market Index (the "Index") is a trademark of The Nasdaq OMX Group and has been licensed for use by First Trust Portfolios L.P. AlphaDEX(R) is a trademark owned by First Trust Portfolios L.P. and has been licensed to The Nasdaq OMX Group for use in the name of the Index. The First Trust Total US Market AlphaDEX(R) ETF is not sponsored, endorsed, sold or promoted by The Nasdaq OMX Group and The Nasdaq OMX Group makes no representation or warranty regarding the advisability of investing in the First Trust Total US Market AlphaDEX(R) ETF or as to the result to be obtained by any person from use of the Index in connection with the trading of the First Trust Total US Market AlphaDEX(R) ETF. Page 4 -------------------------------------------------------------------------------- FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST TOTAL US MARKET ALPHADEX(R) ETF (TUSA) (CONTINUED) ----------------------------------------------------------- % OF TOTAL SECTOR CLASSIFICATION LONG-TERM INVESTMENTS ----------------------------------------------------------- Consumer Discretionary 16.83% Information Technology 14.25 Industrials 13.59 Health Care 11.87 Financials 11.71 Energy 6.91 Consumer Staples 5.90 Materials 5.80 Utilities 5.51 Communication Services 5.17 Real Estate 2.46 ------- Total 100.00% ======= ----------------------------------------------------------- % OF TOTAL TOP TEN HOLDINGS LONG-TERM INVESTMENTS ----------------------------------------------------------- O'Reilly Automotive, Inc. 0.51% Comcast Corp., Class A 0.50 Kroger (The) Co. 0.49 Newell Brands, Inc. 0.47 Molson Coors Brewing Co., Class B 0.47 J.M. Smucker (The) Co. 0.47 Tyson Foods, Inc., Class A 0.46 IQVIA Holdings, Inc. 0.46 HCA Healthcare, Inc. 0.46 Dollar Tree, Inc. 0.46 ------- Total 4.75% =======
PERFORMANCE OF A $10,000 INITIAL INVESTMENT DECEMBER 31, 2008 - DECEMBER 31, 2018 First Trust Total US Market Russell 3000(R) AlphaDEX(R) ETF Index 12/08 $10,000 $10,000 06/09 10,533 10,420 12/09 13,415 12,834 06/10 13,219 12,058 12/10 16,078 15,007 06/11 16,430 15,960 12/11 14,541 15,160 06/12 14,794 16,573 12/12 15,812 17,649 06/13 18,094 20,130 12/13 21,291 23,570 06/14 22,364 25,206 12/14 21,794 26,529 06/15 22,051 27,044 12/15 20,490 26,657 06/16 21,158 27,622 12/16 23,661 30,050 06/17 25,447 32,733 12/17 28,259 36,397 06/18 29,511 37,567 12/18 25,397 34,490
Performance figures assume reinvestment of all distributions and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. An index is a statistical composite that tracks a specified financial market or sector. Unlike the Fund, the index does not actually hold a portfolio of securities and therefore does not incur the expenses incurred by the Fund. These expenses negatively impact the performance of the Fund. The Fund's past performance does not predict future performance. FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS BID/ASK MIDPOINT VS. NAV AS OF DECEMBER 31, 2018 The following Frequency Distribution of Discounts and Premiums charts are provided to show the frequency at which the bid/ask midpoint price for the Fund was at a discount or premium to the daily NAV. The following tables are for comparative purposes only and represent the period January 1, 2014 through December 31, 2018. Shareholders may pay more than NAV when they buy Fund shares and receive less than NAV when they sell those shares because shares are bought and sold at current market price. Data presented represents past performance and cannot be used to predict future results. -------------------------------------------------------------------------------- NUMBER OF DAYS BID/ASK MIDPOINT AT/ABOVE NAV -------------------------------------------------------------------------------- FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00% 01/01/14 - 12/31/14 178 0 0 0 01/01/15 - 12/31/15 115 15 0 0 01/01/16 - 12/31/16 121 0 0 0 01/01/17 - 12/31/17 216 0 0 0 01/01/18 - 12/31/18 168 2 0 0 -------------------------------------------------------------------------------- NUMBER OF DAYS BID/ASK MIDPOINT BELOW NAV -------------------------------------------------------------------------------- FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00% 01/01/14 - 12/31/14 68 6 0 0 01/01/15 - 12/31/15 110 12 0 0 01/01/16 - 12/31/16 131 0 0 0 01/01/17 - 12/31/17 35 0 0 0 01/01/18 - 12/31/18 79 1 1 0 Page 5 -------------------------------------------------------------------------------- FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST DORSEY WRIGHT PEOPLE'S PORTFOLIO ETF (DWPP) The First Trust Dorsey Wright People's Portfolio ETF (the "Fund") seeks investment results that correspond generally to the price and yield (before the Fund's fees and expenses) of an index called the Nasdaq Dorsey Wright People's Portfolio Index (the "Index"). The Fund will normally invest at least 80% of its total assets (including investment borrowings) in common stocks or U.S. Treasury Bills ("T-Bills") that comprise the Index. The Index is designed to provide exposure to either the U.S. equity market or T-Bills, based upon daily relative strength readings resulting from a wholly-quantitative process. The Index always holds exactly one of three possible positions: all the component securities of the Nasdaq US 500 Large Cap Index, all the component securities in the Nasdaq US 500 Large Cap Equal Weight Index or all the component securities of the Nasdaq US T-Bill Index. Each of the Nasdaq US 500 Large Cap Index and the Nasdaq US 500 Large Cap Equal Weight Index contains the same constituent securities - the 500 securities with the highest float market capitalization comprising the NASDAQ US Benchmark Index - but weights them differently. The Nasdaq US 500 Large Cap Index weights the securities according to their market capitalization and the Nasdaq US 500 Large Cap Equal Index weights them equally. The Nasdaq US T-Bill Index is designed to act as a US dollar-denominated cash position through the use of nine T-Bills ranging from 30 to 91 days in duration. A T-Bill is a short-term debt obligation backed by the U.S. government with a maturity of less than one year, sold in denominations of $1,000 up to a maximum purchase of $5 million. The Fund's shares are listed and trade on The Nasdaq Stock Market LLC under the ticker symbol "DWPP." The first day of secondary market trading in shares of the Fund was August 30, 2012.
------------------------------------------------------------------------------------------------------------------------------------ PERFORMANCE ------------------------------------------------------------------------------------------------------------------------------------ AVERAGE ANNUAL CUMULATIVE TOTAL RETURNS TOTAL RETURNS 1 Year 5 Years Inception 5 Years Inception Ended Ended (8/29/12) Ended (8/29/12) 12/31/18 12/31/18 to 12/31/18 12/31/18 to 12/31/18 FUND PERFORMANCE NAV -8.26% 4.01% 5.79% 21.74% 42.89% Market Value -8.29% 4.01% 5.81% 21.72% 43.05% INDEX PERFORMANCE Nasdaq Dorsey Wright People's Portfolio Index* -7.76% N/A N/A N/A N/A S&P 500(R) Index -4.38% 8.49% 11.80% 50.33% 102.85% Nasdaq US 500 Large Cap Index -4.75% N/A N/A N/A N/A ------------------------------------------------------------------------------------------------------------------------------------
* On August 18, 2017, the Fund's underlying index changed from the CBOE(R) VIX(R) Tail Hedge Index to the Nasdaq Dorsey Wright People's Portfolio Index (the "Index"). Therefore, the Fund's performance and total returns shown for the periods prior to August 18, 2017, are not necessarily indicative of the performance the Fund, based on its current index, would have generated. Since the Index had an inception date of July 24, 2017, it was not in existence for all of the periods disclosed. (See Notes to Fund Performance Overview on page 12.) PERFORMANCE REVIEW The Fund generated a NAV return of -8.26% during the 12-month period covered by this report. During the same period, the S&P 500(R) Index ("benchmark") generated a return of -4.38%. The Information Technology sector was given the largest allocation in the Fund over the period with a 14.8% allocation. This sector was also the largest contributing sector with a 0.1% contribution and 1.8% return. The Fund's least contributing sector was the Financials sector with a -1.9% contribution, stemming from its 14.1% allocation and -15.3% return. On a relative basis, the Fund underperformed the benchmark. The primary cause of the underperformance is attributable to the Fund underperforming the benchmark amongst Consumer Discretionary securities by -14.1%, creating -1.4% of relative drag. The Fund over allocated the relatively well performing Utilities securities, which created 0.2% of relative outperformance. ----------------------------- The Fund is not sponsored, endorsed, sold or promoted by Nasdaq, Inc. or its affiliates (Nasdaq, with its affiliates are referred to as the "Corporations"). The Corporations have not passed on the legality or suitability of, or the accuracy or descriptions and disclosure relating to, the Fund. The Corporations make no representation or warranty, express or implied to the owners of the Fund or any member of the public regarding the advisability of investing in securities generally or in the Fund particularly. Page 6 -------------------------------------------------------------------------------- FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST DORSEY WRIGHT PEOPLE'S PORTFOLIO ETF (DWPP) (CONTINUED) ----------------------------------------------------------- % OF TOTAL SECTOR CLASSIFICATION LONG-TERM INVESTMENTS ----------------------------------------------------------- Information Technology 15.47% Financials 13.70 Industrials 12.85 Health Care 12.83 Consumer Discretionary 11.76 Consumer Staples 6.82 Energy 5.98 Real Estate 5.37 Utilities 5.15 Materials 5.04 Communication Services 5.03 ------- Total 100.00% ======= ----------------------------------------------------------- % OF TOTAL TOP TEN HOLDINGS LONG-TERM INVESTMENTS ----------------------------------------------------------- ABIOMED, Inc. 0.22% Splunk, Inc. 0.22 Snap, Inc. 0.22 GrubHub, Inc. 0.22 Workday, Inc. 0.22 Zillow Group, Inc. 0.22 Kohl's Corp. 0.22 salesforce.com, Inc. 0.22 IAC/InterActiveCorp 0.21 XPO Logistics, Inc. 0.21 ------- Total 2.18% =======
PERFORMANCE OF A $10,000 INITIAL INVESTMENT AUGUST 29, 2012 - DECEMBER 31, 2018 First Trust Dorsey Wright S&P 500(R) People's Portfolio ETF Index 08/12 $10,000 $10,000 12/12 9,863 10,193 06/13 10,686 11,602 12/13 11,738 13,494 06/14 12,251 14,457 12/14 13,525 15,342 06/15 13,175 15,531 12/15 12,730 15,554 06/16 12,551 16,151 12/16 12,800 17,414 06/17 13,952 19,040 12/17 15,579 21,214 06/18 15,782 21,776 12/18 14,292 20,284
Performance figures assume reinvestment of all distributions and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. An index is a statistical composite that tracks a specified financial market or sector. Unlike the Fund, the index does not actually hold a portfolio of securities and therefore does not incur the expenses incurred by the Fund. These expenses negatively impact the performance of the Fund. The Fund's past performance does not predict future performance. FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS BID/ASK MIDPOINT VS. NAV AS OF DECEMBER 31, 2018 The following Frequency Distribution of Discounts and Premiums charts are provided to show the frequency at which the bid/ask midpoint price for the Fund was at a discount or premium to the daily NAV. The following tables are for comparative purposes only and represent the period January 1, 2014 through December 31, 2018. Shareholders may pay more than NAV when they buy Fund shares and receive less than NAV when they sell those shares because shares are bought and sold at current market price. Data presented represents past performance and cannot be used to predict future results. -------------------------------------------------------------------------------- NUMBER OF DAYS BID/ASK MIDPOINT AT/ABOVE NAV -------------------------------------------------------------------------------- FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00% 01/01/14 - 12/31/14 152 2 0 1 01/01/15 - 12/31/15 98 1 0 1 01/01/16 - 12/31/16 76 3 0 0 01/01/17 - 12/31/17 175 0 0 1 01/01/18 - 12/31/18 162 3 0 0 -------------------------------------------------------------------------------- NUMBER OF DAYS BID/ASK MIDPOINT BELOW NAV -------------------------------------------------------------------------------- FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00% 01/01/14 - 12/31/14 95 2 0 0 01/01/15 - 12/31/15 148 1 1 2 01/01/16 - 12/31/16 168 4 1 0 01/01/17 - 12/31/17 75 0 0 0 01/01/18 - 12/31/18 84 2 0 0 Page 7 -------------------------------------------------------------------------------- FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST DOW 30 EQUAL WEIGHT ETF (EDOW) The First Trust Dow 30 Equal Weight ETF (the "Fund") seeks investment results that correspond generally to the price and yield (before the Fund's fees and expenses) of an equity index called the Dow Jones Industrial Average Equal Weight Index (the "Index"). The Fund will normally invest at least 90% of its net assets (including investment borrowings) in common stocks that comprise the Index. The Index consists of an equally weighted portfolio of the 30 securities that comprise the Dow Jones Industrial Average(TM) (the "DJIA"). The 30 securities comprising the DJIA are domestic, blue-chip companies covering all industries. While inclusion in the DJIA is not governed by quantitative rules, a stock is typically only added if the company has an excellent reputation, demonstrates sustained growth and is of interest to a large number of investors. The Fund's shares are listed for trading on the NYSE Arca, Inc. The Index is rebalanced quarterly. The first day of secondary market trading in shares of the Fund was August 9, 2017.
------------------------------------------------------------------------------------------------------------------------------------ PERFORMANCE ------------------------------------------------------------------------------------------------------------------------------------ AVERAGE ANNUAL CUMULATIVE TOTAL RETURNS TOTAL RETURNS 1 Year Inception Inception Ended (8/8/17) (8/8/17) 12/31/18 to 12/31/18 to 12/31/17 FUND PERFORMANCE NAV -0.88% 7.09% 10.05% Market Value -1.15% 7.02% 9.94% INDEX PERFORMANCE Dow Jones Industrial Average Equal Weight Index -0.40% 7.61% 10.79% Dow Jones Industrial Average(TM) -3.48% 6.43% 9.09% ------------------------------------------------------------------------------------------------------------------------------------
(See Notes to Fund Performance Overview on page 12.) PERFORMANCE REVIEW The Fund generated a NAV return of -0.88% during the 12-month period covered by this report. During the same period, the Dow Jones Industrial Average(TM) ("benchmark") generated a return of -3.48%. The Information Technology sector was given the largest allocation in the Fund over the period with a 19.9% allocation. This sector had a 5.4% return and contributed 1.4% to the Fund's return. The top contributing sector in the Fund was the Health Care sector with a 2.2% contribution, stemming from its 13.6% allocation and 18.2% return. The Industrials sector detracted -2.2% from the Fund's performance, stemming from its 14.5% allocation and -13.6% return. On a relative basis, the Fund outperformed the benchmark. The primary cause of the outperformance is attributable to the Fund over allocating and outperforming the benchmark amongst the Information Technology sector by 2.0% and 5.1%, respectively, creating 1.2% of relative outperformance. The Fund underperformed the benchmark amongst Industrial securities by -6.9%, creating -0.9% of relative underperformance. ----------------------------- The Dow Jones Industrial Average Equal Weight Index is a product of S&P Dow Jones Indices LLC ("SPDJI"), and has been licensed for use by First Trust. Dow Jones(R) and Dow Jones Industrial Average Equal Weight Index are trademarks of Dow Jones Trademark Holdings LLC ("Dow Jones") and have been licensed to SPDJI and have been sublicensed for use for certain purposes by First Trust. The First Trust Dow 30 Equal Weight Index ETF is not sponsored, endorsed, sold or promoted by SPDJI, Dow Jones or their respective affiliates and none of them makes any representation regarding the advisability of investing in such fund. Page 8 -------------------------------------------------------------------------------- FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST DOW 30 EQUAL WEIGHT ETF (EDOW) (CONTINUED) ----------------------------------------------------------- % OF TOTAL SECTOR CLASSIFICATION LONG-TERM INVESTMENTS ----------------------------------------------------------- Information Technology 19.87% Health Care 13.47 Industrials 13.39 Financials 13.22 Consumer Staples 13.08 Consumer Discretionary 10.30 Communication Services 6.77 Energy 6.41 Materials 3.49 ------- Total 100.00% ======= ----------------------------------------------------------- % OF TOTAL TOP TEN HOLDINGS LONG-TERM INVESTMENTS ----------------------------------------------------------- NIKE, Inc., Class B 3.52% Walmart, Inc. 3.50 DowDuPont, Inc. 3.49 Boeing (The) Co. 3.49 Caterpillar, Inc. 3.46 Merck & Co., Inc. 3.45 Home Depot (The), Inc. 3.44 Pfizer, Inc. 3.44 Travelers (The) Cos., Inc. 3.43 Verizon Communications, Inc. 3.40 ------- Total 34.62% =======
PERFORMANCE OF A $10,000 INITIAL INVESTMENT AUGUST 8, 2017 - DECEMBER 31, 2018 Dow Jones Industrial First Trust Dow 30 Average Equal Dow Jones Industrial Equal Weight ETF Weight Index Average(TM) 08/17 $10,000 $10,000 $10,000 12/17 11,102 11,124 11,302 06/18 11,024 11,069 11,219 12/18 11,004 11,079 10,908
Performance figures assume reinvestment of all distributions and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. An index is a statistical composite that tracks a specified financial market or sector. Unlike the Fund, the indices do not actually hold a portfolio of securities and therefore do not incur the expenses incurred by the Fund. These expenses negatively impact the performance of the Fund. The Fund's past performance does not predict future performance. FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS BID/ASK MIDPOINT VS. NAV AS OF DECEMBER 31, 2018 The following Frequency Distribution of Discounts and Premiums charts are provided to show the frequency at which the bid/ask midpoint price for the Fund was at a discount or premium to the daily NAV. The following tables are for comparative purposes only and represent the period August 9, 2017 (commencement of trading) through December 31, 2018. Shareholders may pay more than NAV when they buy Fund shares and receive less than NAV when they sell those shares because shares are bought and sold at current market price. Data presented represents past performance and cannot be used to predict future results. -------------------------------------------------------------------------------- NUMBER OF DAYS BID/ASK MIDPOINT AT/ABOVE NAV -------------------------------------------------------------------------------- FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00% 08/09/17 - 12/31/17 94 0 0 0 01/01/18 - 12/31/18 171 4 0 0 -------------------------------------------------------------------------------- NUMBER OF DAYS BID/ASK MIDPOINT BELOW NAV -------------------------------------------------------------------------------- FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00% 08/09/17 - 12/31/17 6 0 0 0 01/01/18 - 12/31/18 74 2 0 0 Page 9 -------------------------------------------------------------------------------- FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST LUNT U.S. FACTOR ROTATION ETF (FCTR) The First Trust Lunt U.S. Factor Rotation ETF (the "Fund") seeks investment results that correspond generally to the price and yield (before the Fund's fees and expenses) of an equity index called the Lunt Capital Large Cap Factor Rotation Index (the "Index"). The Fund will normally invest at least 90% of its net assets (including investment borrowings) in common stocks that comprise the Index. The Index is owned and was developed by Lunt Capital Management, Inc. (the "Index Provider"). The Index is calculated and maintained by Nasdaq, Inc. The Index is designed to provide exposure to U.S. large cap equities grouped into four separate factors, with factors emphasized within the Index as they come into favor in the U.S. marketplace. The Index utilizes the Index Provider's risk-adjusted relative strength methodology to rotate among eight sub-indices, each of which exhibits characteristics of one of the four primary factors: momentum, value, quality and volatility. The Index Provider's risk-adjusted relative strength score is designed to identify the sub-indices with the greatest return potential with the least amount of risk and is calculated as the return per unit of risk for each sub-index, measured as the standard deviation of returns over the course of the prior 12-months for each sub-index. The Fund's shares are listed for trading on CBOE BZX, Inc. The first day of secondary market trading in shares of the Fund was July 26, 2018.
------------------------------------------------------------------------------------------------------------------------------------ PERFORMANCE ------------------------------------------------------------------------------------------------------------------------------------ CUMULATIVE TOTAL RETURNS Inception (7/25/18) to 12/31/18 FUND PERFORMANCE NAV -12.09% Market Value -12.10% INDEX PERFORMANCE Lunt Capital Large Cap Factor Rotation Index -11.87% Nasdaq US 500 Large Cap Index -11.31% ------------------------------------------------------------------------------------------------------------------------------------
(See Notes to Fund Performance Overview on page 12.) PERFORMANCE REVIEW The Fund generated a NAV return of -12.09% during the time period covered by this report, which is from inception of the Fund on July 25, 2018 to December 31, 2018. During the same period, the Nasdaq US 500 Large Cap Index ("benchmark") generated a return of -11.31%. The Fund's largest allocation over the period was the Information Technology sector with a 19.1% allocation. This sector had a -10.3% return and contributed -2.4% to the Fund's return. The least contributing sector was the Health Care sector with a -2.6% contribution, stemming from its 15.6% allocation and -16.1% return. The top contributing sector was the Utilities sector with a 0.2% contribution, stemming from its 4.5% allocation and 2.7% return. On a relative basis, the Fund underperformed the benchmark. The primary cause of the underperformance is attributable to the Fund underperforming the benchmark amongst Health Care securities by -14.1%, creating -2.2% of relative drag. The Energy sector reversed 0.7% of underperformance as the Fund under allocated this poor performing sector by -0.9%. ----------------------------- Lunt Capital Management, Inc. ("Licensor") and the Lunt Capital Large Cap Factor Rotation Index, ("Licensor Index") are trademarks of Licensor and have been licensed for use for certain purposes by First Trust Advisors L.P. The First Trust Lunt U.S. Factor Rotation ETF is based on the Licensor Index and is not sponsored, endorsed, sold or promoted by Licensor, and Licensor makes no representation regarding the advisability of trading in such fund. Page 10 -------------------------------------------------------------------------------- FUND PERFORMANCE OVERVIEW (UNAUDITED) (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST LUNT U.S. FACTOR ROTATION ETF (FCTR) (CONTINUED) ----------------------------------------------------------- % OF TOTAL SECTOR CLASSIFICATION LONG-TERM INVESTMENTS ----------------------------------------------------------- Financials 20.00% Information Technology 16.26 Health Care 13.54 Consumer Discretionary 13.16 Consumer Staples 9.26 Industrials 9.21 Real Estate 5.48 Materials 4.95 Communication Services 3.41 Utilities 2.40 Energy 2.33 ------- Total 100.00% ======= ----------------------------------------------------------- % OF TOTAL TOP TEN HOLDINGS LONG-TERM INVESTMENTS ----------------------------------------------------------- Fidelity National Information Services, Inc. 1.74% Newell Brands, Inc. 1.71 Verisk Analytics, Inc. 1.65 Aflac, Inc. 1.46 American Tower Corp. 1.31 Waste Management, Inc. 1.27 Paychex, Inc. 1.20 UnitedHealth Group, Inc. 1.17 Intuit, Inc. 1.14 McDonald's Corp. 1.14 ------- Total 13.79% =======
PERFORMANCE OF A $10,000 INITIAL INVESTMENT JULY 25, 2018 - DECEMBER 31, 2018 First Trust Lunt U.S. Lunt Capital Large Cap Nasdaq US 500 Factor Rotation ETF Factor Rotation Index Large Cap Index 07/18 $10,000 $10,000 $10,000 12/18 8,791 8,813 8,869
Performance figures assume reinvestment of all distributions and do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. An index is a statistical composite that tracks a specified financial market or sector. Unlike the Fund, the indices do not actually hold a portfolio of securities and therefore do not incur the expenses incurred by the Fund. These expenses negatively impact the performance of the Fund. The Fund's past performance does not predict future performance. FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS BID/ASK MIDPOINT VS. NAV AS OF DECEMBER 31, 2018 The following Frequency Distribution of Discounts and Premiums charts are provided to show the frequency at which the bid/ask midpoint price for the Fund was at a discount or premium to the daily NAV. The following tables are for comparative purposes only and represent the period July 26, 2018 (commencement of trading) through December 31, 2018. Shareholders may pay more than NAV when they buy Fund shares and receive less than NAV when they sell those shares because shares are bought and sold at current market price. Data presented represents past performance and cannot be used to predict future results. -------------------------------------------------------------------------------- NUMBER OF DAYS BID/ASK MIDPOINT AT/ABOVE NAV -------------------------------------------------------------------------------- FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00% 07/26/18 - 12/31/18 91 2 0 0 -------------------------------------------------------------------------------- NUMBER OF DAYS BID/ASK MIDPOINT BELOW NAV -------------------------------------------------------------------------------- FOR THE PERIOD 0.00%-0.49% 0.50%-0.99% 1.00%-1.99% >=2.00% 07/26/18 - 12/31/18 15 1 0 0 Page 11 -------------------------------------------------------------------------------- NOTES TO FUND PERFORMANCE OVERVIEW (UNAUDITED) -------------------------------------------------------------------------------- Total returns for the periods since inception are calculated from the inception date of each Fund. "Average Annual Total Returns" represent the average annual change in value of an investment over the periods indicated. "Cumulative Total Returns" represent the total change in value of an investment over the periods indicated. The total returns would have been lower if certain fees had not been waived and expenses reimbursed by the Advisor. Each Fund's per share net asset value ("NAV") is the value of one share of the Fund and is computed by dividing the value of all assets of the Fund (including accrued interest and dividends), less all liabilities (including accrued expenses and dividends declared but unpaid), by the total number of outstanding shares. The price used to calculate market return ("Market Price") is determined by using the midpoint between the highest bid and the lowest offer on the stock exchange on which shares of the Fund are listed for trading as of the time that the Fund's NAV is calculated. Since shares of each Fund did not trade in the secondary market until after the Fund's inception, for the period from inception to the first day of secondary market trading in shares of the Fund, the NAV of each Fund is used as a proxy for the secondary market trading price to calculate market returns. NAV and market returns assume that all distributions have been reinvested in each Fund at NAV and Market Price, respectively. An index is a statistical composite that tracks a specified financial market or sector. Unlike each Fund, the indices do not actually hold a portfolio of securities and therefore do not incur the expenses incurred by each Fund. These expenses negatively impact the performance of each Fund. Also, market returns do not include brokerage commissions that may be payable on secondary market transactions. If brokerage commissions were included, market returns would be lower. The total returns presented reflect the reinvestment of dividends on securities in the indices. The returns presented do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. The investment return and principal value of shares of each Fund will vary with changes in market conditions. Shares of each Fund may be worth more or less than their original cost when they are redeemed or sold in the market. Each Fund's past performance is no guarantee of future performance. Page 12 FIRST TRUST EXCHANGE-TRADED FUND UNDERSTANDING YOUR FUND EXPENSES DECEMBER 31, 2018 (UNAUDITED) As a shareholder of First Trust Total US Market AlphaDEX(R) ETF, First Trust Dorsey Wright People's Portfolio ETF, First Trust Dow 30 Equal Weight ETF or First Trust Lunt U.S. Factor Rotation ETF (each a "Fund" and collectively, the "Funds"), you incur two types of costs: (1) transaction costs; and (2) ongoing costs, including management fees, distribution and/or service fees, if any, and other Fund expenses. This Example is intended to help you understand your ongoing costs of investing in the Funds and to compare these costs with the ongoing costs of investing in other funds. The Example is based on an investment of $1,000 invested at the beginning of the period (or since inception) and held through the six-month (or shorter) period ended December 31, 2018. ACTUAL EXPENSES The first line in the following table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled "Expenses Paid During the Six-Month Period" to estimate the expenses you paid on your account during this six-month period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second line in the following table provides information about hypothetical account values and hypothetical expenses based on each Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not each Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Funds and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs such as brokerage commissions. Therefore, the second line in the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
------------------------------------------------------------------------------------------------------------------------------------ ANNUALIZED EXPENSE RATIO EXPENSES PAID BEGINNING ENDING BASED ON THE DURING THE ACCOUNT VALUE ACCOUNT VALUE SIX-MONTH SIX-MONTH JULY 1, 2018 DECEMBER 31, 2018 PERIOD PERIOD (b) ------------------------------------------------------------------------------------------------------------------------------------ FIRST TRUST TOTAL US MARKET ALPHADEX(R) ETF (TUSA) Actual $1,000.00 $ 860.60 0.70% (a) $3.28 Hypothetical (5% return before expenses) $1,000.00 $1,021.68 0.70% (a) $3.57 FIRST TRUST DORSEY WRIGHT PEOPLE'S PORTFOLIO ETF (DWPP) Actual $1,000.00 $ 905.60 0.60% $2.88 Hypothetical (5% return before expenses) $1,000.00 $1,022.18 0.60% $3.06 FIRST TRUST DOW 30 EQUAL WEIGHT ETF (EDOW) Actual $1,000.00 $ 998.20 0.50% $2.52 Hypothetical (5% return before expenses) $1,000.00 $1,022.68 0.50% $2.55
------------------------------------------------------------------------------------------------------------------------------------ ANNUALIZED EXPENSES PAID EXPENSE RATIO DURING THE PERIOD BEGINNING ENDING BASED ON THE JULY 25, 2018 (c) ACCOUNT VALUE ACCOUNT VALUE NUMBER OF DAYS TO JULY 25, 2018 (c) DECEMBER 31, 2018 IN THE PERIOD DECEMBER 31, 2018 (d) ------------------------------------------------------------------------------------------------------------------------------------ FIRST TRUST LUNT U.S. FACTOR ROTATION ETF (FCTR) Actual $1,000.00 $ 879.10 0.65% $2.68 Hypothetical (5% return before expenses) $1,000.00 $1,021.93 0.65% $3.31
(a) These expense ratios reflect an expense cap. See Note 3 in Notes to Financial Statements. (b) Expenses are equal to the annualized expense ratio as indicated in the table multiplied by the average account value over the period (July 1, 2018 through December 31, 2018), multiplied by 184/365 (to reflect the six-month period). (c) Inception date. (d) Actual expenses are equal to the annualized expense ratio as indicated in the table multiplied by the average account value over the period (July 25, 2018 through December 31, 2018), multiplied by 160/365. Hypothetical expenses are assumed for the most recent six-month period. Page 13 FIRST TRUST TOTAL US MARKET ALPHADEX(R) ETF (TUSA) PORTFOLIO OF INVESTMENTS DECEMBER 31, 2018 SHARES DESCRIPTION VALUE ------------------------------------------------------------- COMMON STOCKS -- 99.6% AEROSPACE & DEFENSE -- 0.8% 80 Aerovironment, Inc. (a) $ 5,436 177 Axon Enterprise, Inc. (a) 7,744 109 Boeing (The) Co. 35,152 59 Curtiss-Wright Corp. 6,025 20 Esterline Technologies Corp. (a) 2,429 176 HEICO Corp. 13,636 60 Hexcel Corp. 3,440 32 Huntington Ingalls Industries, Inc. 6,090 65 Mercury Systems, Inc. (a) 3,074 28 National Presto Industries, Inc. 3,274 88 Spirit AeroSystems Holdings, Inc., Class A 6,344 82 Teledyne Technologies, Inc. (a) 16,980 -------------- 109,624 -------------- AIR FREIGHT & LOGISTICS -- 0.6% 141 Atlas Air Worldwide Holdings, Inc. (a) 5,949 290 Echo Global Logistics, Inc. (a) 5,895 368 Expeditors International of Washington, Inc. 25,057 25 Forward Air Corp. 1,371 196 Hub Group, Inc., Class A (a) 7,266 472 XPO Logistics, Inc. (a) 26,923 -------------- 72,461 -------------- AIRLINES -- 1.3% 236 Alaska Air Group, Inc. 14,361 57 Allegiant Travel Co. 5,713 699 Delta Air Lines, Inc. 34,880 223 Hawaiian Holdings, Inc. 5,889 1,050 JetBlue Airways Corp. (a) 16,863 152 SkyWest, Inc. 6,759 867 Southwest Airlines Co. 40,298 153 Spirit Airlines, Inc. (a) 8,862 456 United Continental Holdings, Inc. (a) 38,181 -------------- 171,806 -------------- AUTO COMPONENTS -- 1.0% 308 Adient PLC 4,639 514 American Axle & Manufacturing Holdings, Inc. (a) 5,705 380 BorgWarner, Inc. 13,201 190 Cooper Tire & Rubber Co. 6,143 45 Cooper-Standard Holdings, Inc. (a) 2,795 288 Dana, Inc. 3,926 23 Dorman Products, Inc. (a) 2,071 128 Fox Factory Holding Corp. (a) 7,535 695 Goodyear Tire & Rubber (The) Co. 14,185 65 LCI Industries 4,342 467 Lear Corp. 57,376 361 Modine Manufacturing Co. (a) 3,902 60 Stoneridge, Inc. (a) 1,479 128 Tenneco, Inc., Class A 3,506 19 Visteon Corp. (a) 1,145 -------------- 131,950 -------------- SHARES DESCRIPTION VALUE ------------------------------------------------------------- AUTOMOBILES -- 0.7% 5,854 Ford Motor Co. $ 44,783 805 General Motors Co. 26,927 178 Harley-Davidson, Inc. 6,074 243 Thor Industries, Inc. 12,636 216 Winnebago Industries, Inc. 5,229 -------------- 95,649 -------------- BANKS -- 3.0% 34 1st Source Corp. 1,372 310 Associated Banc-Corp. 6,135 95 Banc of California, Inc. 1,264 55 BancorpSouth Bank 1,438 456 BankUnited, Inc. 13,653 277 BB&T Corp. 12,000 41 BOK Financial Corp. 3,006 43 Cathay General Bancorp 1,442 234 CIT Group, Inc. 8,955 1,048 Citizens Financial Group, Inc. 31,157 46 Columbia Banking System, Inc. 1,669 64 Commerce Bancshares, Inc. 3,608 29 Community Bank System, Inc. 1,691 39 Community Trust Bancorp, Inc. 1,545 75 ConnectOne Bancorp, Inc. 1,385 228 Customers Bancorp, Inc. (a) 4,150 35 Eagle Bancorp, Inc. (a) 1,705 134 East West Bancorp, Inc. 5,833 34 Enterprise Financial Services Corp. 1,279 951 F.N.B. Corp. 9,358 46 FB Financial Corp. 1,611 1,455 Fifth Third Bancorp 34,236 44 First Bancorp 1,437 18 First Citizens BancShares, Inc., Class A 6,787 111 First Commonwealth Financial Corp. 1,341 205 First Financial Bankshares, Inc. 11,826 297 First Hawaiian, Inc. 6,685 108 Fulton Financial Corp. 1,672 94 Glacier Bancorp, Inc. 3,724 32 Great Southern Bancorp, Inc. 1,473 42 Great Western Bancorp, Inc. 1,312 170 Hancock Whitney Corp. 5,890 144 Hanmi Financial Corp. 2,837 89 Hilltop Holdings, Inc. 1,587 184 Home BancShares, Inc. 3,007 222 Hope Bancorp, Inc. 2,633 50 IBERIABANK Corp. 3,214 40 International Bancshares Corp. 1,376 329 Investors Bancorp, Inc. 3,422 99 Lakeland Bancorp, Inc. 1,466 333 OFG Bancorp 5,481 65 Opus Bank 1,273 254 PacWest Bancorp 8,453 707 People's United Financial, Inc. 10,202 199 PNC Financial Services Group (The), Inc. 23,265 157 Popular, Inc. 7,413 Page 14 See Notes to Financial Statements FIRST TRUST TOTAL US MARKET ALPHADEX(R) ETF (TUSA) PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2018 SHARES DESCRIPTION VALUE ------------------------------------------------------------- COMMON STOCKS (CONTINUED) BANKS (CONTINUED) 116 Prosperity Bancshares, Inc. $ 7,227 732 Regions Financial Corp. 9,794 43 Renasant Corp. 1,298 46 Sandy Spring Bancorp, Inc. 1,442 71 Signature Bank 7,299 406 SunTrust Banks, Inc. 20,479 131 SVB Financial Group (a) 24,879 339 TCF Financial Corp. 6,607 195 TriState Capital Holdings, Inc. (a) 3,795 53 Trustmark Corp. 1,507 114 UMB Financial Corp. 6,951 582 Umpqua Holdings Corp. 9,254 111 United Bankshares, Inc. 3,453 68 Univest Financial Corp. 1,467 358 Valley National Bancorp 3,179 256 Wells Fargo & Co. 11,796 71 Western Alliance Bancorp (a) 2,804 95 Wintrust Financial Corp. 6,317 -------------- 395,816 -------------- BEVERAGES -- 0.6% 13 Boston Beer (The) Co., Inc., Class A (a) 3,131 10 Coca-Cola Consolidated, Inc. 1,774 1,101 Molson Coors Brewing Co., Class B 61,832 72 National Beverage Corp. 5,167 -------------- 71,904 -------------- BIOTECHNOLOGY -- 1.6% 31 Acceleron Pharma, Inc. (a) 1,350 187 Arrowhead Pharmaceuticals, Inc. (a) 2,323 235 BioCryst Pharmaceuticals, Inc. (a) 1,896 77 Biogen, Inc. (a) 23,171 299 Cara Therapeutics, Inc. (a) 3,887 124 CareDx, Inc. (a) 3,117 587 Dicerna Pharmaceuticals, Inc. (a) 6,275 82 Emergent BioSolutions, Inc. (a) 4,861 257 Exact Sciences Corp. (a) 16,217 220 Fate Therapeutics, Inc. (a) 2,823 77 Genomic Health, Inc. (a) 4,960 57 Heron Therapeutics, Inc. (a) 1,479 71 Intercept Pharmaceuticals, Inc. (a) 7,156 536 Invitae Corp. (a) 5,928 78 Ionis Pharmaceuticals, Inc. (a) 4,217 210 Karyopharm Therapeutics, Inc. (a) 1,968 74 Ligand Pharmaceuticals, Inc. (a) 10,042 68 Momenta Pharmaceuticals, Inc. (a) 751 78 Myriad Genetics, Inc. (a) 2,267 299 Natera, Inc. (a) 4,174 164 Neurocrine Biosciences, Inc. (a) 11,711 1,906 Novavax, Inc. (a) 3,507 191 PTC Therapeutics, Inc. (a) 6,555 95 REGENXBIO, Inc. (a) 3,985 97 Repligen Corp. (a) 5,116 SHARES DESCRIPTION VALUE ------------------------------------------------------------- BIOTECHNOLOGY (CONTINUED) 126 Sarepta Therapeutics, Inc. (a) $ 13,750 211 Seattle Genetics, Inc. (a) 11,955 158 Ultragenyx Pharmaceutical, Inc. (a) 6,870 159 United Therapeutics Corp. (a) 17,315 140 Vertex Pharmaceuticals, Inc. (a) 23,199 -------------- 212,825 -------------- BUILDING PRODUCTS -- 1.0% 174 Advanced Drainage Systems, Inc. 4,219 89 Allegion PLC 7,094 46 American Woodmark Corp. (a) 2,561 173 Apogee Enterprises, Inc. 5,164 116 Armstrong World Industries, Inc. 6,752 191 Continental Building Products, Inc. (a) 4,861 231 Fortune Brands Home & Security, Inc. 8,776 79 Gibraltar Industries, Inc. (a) 2,812 222 Griffon Corp. 2,320 1,155 Johnson Controls International PLC 34,246 37 Lennox International, Inc. 8,098 300 Owens Corning 13,194 61 Patrick Industries, Inc. (a) 1,806 249 PGT Innovations, Inc. (a) 3,947 99 Simpson Manufacturing Co., Inc. 5,359 264 Trex Co., Inc. (a) 15,671 203 Universal Forest Products, Inc. 5,270 -------------- 132,150 -------------- CAPITAL MARKETS -- 1.2% 149 Affiliated Managers Group, Inc. 14,519 531 Bank of New York Mellon (The) Corp. 24,994 134 Blucora, Inc. (a) 3,570 80 Evercore, Inc., Class A 5,725 54 FactSet Research Systems, Inc. 10,807 297 Federated Investors, Inc., Class B 7,885 888 Invesco Ltd. 14,865 84 Lazard Ltd., Class A 3,100 287 Legg Mason, Inc. 7,321 188 LPL Financial Holdings, Inc. 11,483 289 Morgan Stanley 11,459 65 Morningstar, Inc. 7,140 76 MSCI, Inc. 11,205 157 Stifel Financial Corp. 6,503 429 TCG BDC, Inc. (b) 5,320 47 Virtus Investment Partners, Inc. 3,733 338 Waddell & Reed Financial, Inc., Class A 6,111 -------------- 155,740 -------------- CHEMICALS -- 2.9% 211 AdvanSix, Inc. (a) 5,136 81 Air Products and Chemicals, Inc. 12,964 40 Albemarle Corp. 3,083 96 Ashland Global Holdings, Inc. 6,812 138 Axalta Coating Systems Ltd. (a) 3,232 See Notes to Financial Statements Page 15 FIRST TRUST TOTAL US MARKET ALPHADEX(R) ETF (TUSA) PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2018 SHARES DESCRIPTION VALUE ------------------------------------------------------------- COMMON STOCKS (CONTINUED) CHEMICALS (CONTINUED) 32 Balchem Corp. $ 2,507 118 Celanese Corp. 10,616 222 CF Industries Holdings, Inc. 9,659 409 Chemours (The) Co. 11,542 707 Eastman Chemical Co. 51,689 86 Ecolab, Inc. 12,672 464 FMC Corp. 34,317 69 H.B. Fuller Co. 2,944 746 Huntsman Corp. 14,390 160 Ingevity Corp. (a) 13,390 23 Innospec, Inc. 1,421 38 Kraton Corp. (a) 830 551 Kronos Worldwide, Inc. 6,348 660 LyondellBasell Industries N.V., Class A 54,886 106 Minerals Technologies, Inc. 5,442 124 Mosaic (The) Co. 3,622 10 NewMarket Corp. 4,121 791 Olin Corp. 15,907 1,304 Platform Specialty Products Corp. (a) 13,470 92 PolyOne Corp. 2,631 308 PQ Group Holdings, Inc. (a) 4,562 486 Rayonier Advanced Materials, Inc. 5,176 62 RPM International, Inc. 3,644 119 Sherwin-Williams (The) Co. 46,822 41 Stepan Co. 3,034 166 Tredegar Corp. 2,633 69 Trinseo S.A. 3,159 187 Valvoline, Inc. 3,618 -------------- 376,279 -------------- COMMERCIAL SERVICES & SUPPLIES -- 1.1% 167 ABM Industries, Inc. 5,362 634 ACCO Brands Corp. 4,299 1,718 ADT, Inc. (b) 10,325 66 Advanced Disposal Services, Inc. (a) 1,580 82 Brady Corp., Class A 3,564 173 Casella Waste Systems, Inc., Class A (a) 4,929 59 Cimpress N.V. (a) 6,102 137 Cintas Corp. 23,015 25 Clean Harbors, Inc. (a) 1,234 331 Covanta Holding Corp. 4,442 126 Deluxe Corp. 4,843 93 Herman Miller, Inc. 2,813 41 HNI Corp. 1,453 77 Interface, Inc. 1,097 203 KAR Auction Services, Inc. 9,687 153 Knoll, Inc. 2,521 107 Matthews International Corp., Class A 4,346 152 MSA Safety, Inc. 14,329 86 Multi-Color Corp. 3,018 SHARES DESCRIPTION VALUE ------------------------------------------------------------- COMMERCIAL SERVICES & SUPPLIES (CONTINUED) 253 Pitney Bowes, Inc. $ 1,495 258 Quad/Graphics, Inc. 3,179 98 SP Plus Corp. (a) 2,895 97 Steelcase, Inc., Class A 1,438 206 Stericycle, Inc. (a) 7,558 105 Tetra Tech, Inc. 5,436 21 UniFirst Corp. 3,004 73 US Ecology, Inc. 4,598 30 Viad Corp. 1,503 -------------- 140,065 -------------- COMMUNICATIONS EQUIPMENT -- 0.7% 121 Casa Systems, Inc. (a) 1,589 650 Ciena Corp. (a) 22,042 262 CommScope Holding Co., Inc. (a) 4,294 148 Comtech Telecommunications Corp. 3,602 193 EchoStar Corp., Class A (a) 7,087 61 F5 Networks, Inc. (a) 9,884 312 Motorola Solutions, Inc. 35,892 29 NETGEAR, Inc. (a) 1,509 213 NetScout Systems, Inc. (a) 5,033 -------------- 90,932 -------------- CONSTRUCTION & ENGINEERING -- 0.6% 247 AECOM (a) 6,545 159 Comfort Systems USA, Inc. 6,945 161 EMCOR Group, Inc. 9,610 69 Fluor Corp. 2,222 78 Granite Construction, Inc. 3,142 53 Jacobs Engineering Group, Inc. 3,098 424 KBR, Inc. 6,436 364 MasTec, Inc. (a) 14,764 103 NV5 Global, Inc. (a) 6,237 144 Primoris Services Corp. 2,755 487 Quanta Services, Inc. 14,659 477 Tutor Perini Corp. (a) 7,618 -------------- 84,031 -------------- CONSTRUCTION MATERIALS -- 0.1% 191 Eagle Materials, Inc. 11,657 296 Summit Materials, Inc., Class A (a) 3,670 78 US Concrete, Inc. (a) 2,752 -------------- 18,079 -------------- CONSUMER FINANCE -- 1.1% 615 Ally Financial, Inc. 13,936 285 Capital One Financial Corp. 21,543 37 Credit Acceptance Corp. (a) 14,125 100 Encore Capital Group, Inc. (a) 2,350 187 Enova International, Inc. (a) 3,639 98 FirstCash, Inc. 7,090 229 Green Dot Corp., Class A (a) 18,210 897 Navient Corp. 7,903 94 Nelnet, Inc., Class A 4,920 Page 16 See Notes to Financial Statements FIRST TRUST TOTAL US MARKET ALPHADEX(R) ETF (TUSA) PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2018 SHARES DESCRIPTION VALUE ------------------------------------------------------------- COMMON STOCKS (CONTINUED) CONSUMER FINANCE (CONTINUED) 360 OneMain Holdings, Inc. (a) $ 8,745 199 PRA Group, Inc. (a) 4,850 1,014 Santander Consumer USA Holdings, Inc. 17,836 362 SLM Corp. (a) 3,008 872 Synchrony Financial 20,457 -------------- 148,612 -------------- CONTAINERS & PACKAGING -- 1.1% 37 AptarGroup, Inc. 3,480 83 Berry Global Group, Inc. (a) 3,945 1,151 Graphic Packaging Holding Co. 12,247 100 Greif, Inc., Class A 3,711 1,102 International Paper Co. 44,477 77 Myers Industries, Inc. 1,163 95 Owens-Illinois, Inc. (a) 1,638 147 Packaging Corp. of America 12,268 193 Silgan Holdings, Inc. 4,559 145 Sonoco Products Co. 7,704 1,267 WestRock Co. 47,842 -------------- 143,034 -------------- DISTRIBUTORS -- 0.2% 382 LKQ Corp. (a) 9,065 97 Pool Corp. 14,419 -------------- 23,484 -------------- DIVERSIFIED CONSUMER SERVICES -- 0.7% 103 Bright Horizons Family Solutions, Inc. (a) 11,479 16 Graham Holdings Co., Class B 10,249 36 Grand Canyon Education, Inc. (a) 3,461 470 H&R Block, Inc. 11,924 768 Houghton Mifflin Harcourt Co. (a) 6,805 405 K12, Inc. (a) 10,040 580 Laureate Education, Inc., Class A (a) 8,839 263 Regis Corp. (a) 4,458 274 Service Corp. International 11,031 130 ServiceMaster Global Holdings, Inc. (a) 4,776 26 Strategic Education, Inc. 2,949 112 Weight Watchers International, Inc. (a) 4,318 -------------- 90,329 -------------- DIVERSIFIED FINANCIAL SERVICES -- 0.4% 253 Berkshire Hathaway, Inc., Class B (a) 51,658 184 Jefferies Financial Group, Inc. 3,194 -------------- 54,852 -------------- DIVERSIFIED TELECOMMUNICATION SERVICES -- 1.3% 2,016 AT&T, Inc. 57,537 49 ATN International, Inc. 3,505 SHARES DESCRIPTION VALUE ------------------------------------------------------------- DIVERSIFIED TELECOMMUNICATION SERVICES (CONTINUED) 2,554 CenturyLink, Inc. $ 38,693 32 Cogent Communications Holdings, Inc. 1,447 412 Consolidated Communications Holdings, Inc. 4,071 239 Iridium Communications, Inc. (a) 4,409 330 ORBCOMM, Inc. (a) 2,726 1,014 Verizon Communications, Inc. 57,007 253 Vonage Holdings Corp. (a) 2,209 116 Zayo Group Holdings, Inc. (a) 2,649 -------------- 174,253 -------------- ELECTRIC UTILITIES -- 2.7% 163 ALLETE, Inc. 12,424 284 Alliant Energy Corp. 11,999 380 American Electric Power Co., Inc. 28,401 337 Duke Energy Corp. 29,083 199 Edison International 11,297 63 El Paso Electric Co. 3,158 166 Entergy Corp. 14,288 219 Eversource Energy 14,244 1,240 Exelon Corp. 55,924 227 Hawaiian Electric Industries, Inc. 8,313 81 IDACORP, Inc. 7,538 28 MGE Energy, Inc. 1,679 448 OGE Energy Corp. 17,557 37 Otter Tail Corp. 1,837 589 PG&E Corp. (a) 13,989 153 Pinnacle West Capital Corp. 13,035 45 PNM Resources, Inc. 1,849 354 Portland General Electric Co. 16,231 1,388 PPL Corp. 39,322 621 Southern (The) Co. 27,274 571 Xcel Energy, Inc. 28,133 -------------- 357,575 -------------- ELECTRICAL EQUIPMENT -- 0.8% 78 Acuity Brands, Inc. 8,966 135 Atkore International Group, Inc. (a) 2,678 71 AZZ, Inc. 2,866 622 Eaton Corp. PLC 42,707 143 Encore Wire Corp. 7,176 127 Generac Holdings, Inc. (a) 6,312 30 Hubbell, Inc. 2,980 196 Regal Beloit Corp. 13,730 432 Sunrun, Inc. (a) 4,704 188 TPI Composites, Inc. (a) 4,621 117 Vicor Corp. (a) 4,421 -------------- 101,161 -------------- ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS -- 1.4% 51 Anixter International, Inc. (a) 2,770 221 Arrow Electronics, Inc. (a) 15,238 25 Belden, Inc. 1,044 609 CDW Corp. 49,359 144 Cognex Corp. 5,568 See Notes to Financial Statements Page 17 FIRST TRUST TOTAL US MARKET ALPHADEX(R) ETF (TUSA) PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2018 SHARES DESCRIPTION VALUE ------------------------------------------------------------- COMMON STOCKS (CONTINUED) ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS (CONTINUED) 24 Coherent, Inc. (a) $ 2,537 157 Control4 Corp. (a) 2,763 58 Dolby Laboratories, Inc., Class A 3,587 19 ePlus, Inc. (a) 1,352 77 Fabrinet (a) 3,951 84 FARO Technologies, Inc. (a) 3,414 197 FLIR Systems, Inc. 8,577 76 II-VI, Inc. (a) 2,467 66 Insight Enterprises, Inc. (a) 2,690 298 Jabil, Inc. 7,387 245 Keysight Technologies, Inc. (a) 15,210 216 Knowles Corp. (a) 2,875 99 Methode Electronics, Inc. 2,306 98 MTS Systems Corp. 3,933 138 PC Connection, Inc. 4,103 90 ScanSource, Inc. (a) 3,094 192 SYNNEX Corp. 15,521 75 Tech Data Corp. (a) 6,136 563 TTM Technologies, Inc. (a) 5,478 88 Vishay Intertechnology, Inc. 1,585 91 Zebra Technologies Corp., Class A (a) 14,490 -------------- 187,435 -------------- ENERGY EQUIPMENT & SERVICES -- 0.7% 294 Archrock, Inc. 2,202 431 C&J Energy Services, Inc. (a) 5,818 999 Covia Holdings Corp. (a) 3,417 179 Diamond Offshore Drilling, Inc. (a) 1,690 135 Exterran Corp. (a) 2,389 693 Forum Energy Technologies, Inc. (a) 2,862 456 FTS International, Inc. (a) 3,242 726 Helix Energy Solutions Group, Inc. (a) 3,928 295 Helmerich & Payne, Inc. 14,142 123 Mammoth Energy Services, Inc. 2,212 389 McDermott International, Inc. (a) 2,544 582 Nabors Industries Ltd. 1,164 346 Newpark Resources, Inc. (a) 2,377 195 Oceaneering International, Inc. (a) 2,359 1,188 Patterson-UTI Energy, Inc. 12,296 326 ProPetro Holding Corp. (a) 4,016 347 RPC, Inc. (b) 3,425 181 SEACOR Holdings, Inc. (a) 6,697 285 Solaris Oilfield Infrastructure, Inc., Class A 3,446 368 Superior Energy Services, Inc. (a) 1,233 476 U.S. Silica Holdings, Inc. (b) 4,846 344 Unit Corp. (a) 4,912 -------------- 91,217 -------------- SHARES DESCRIPTION VALUE ------------------------------------------------------------- ENTERTAINMENT -- 1.2% 87 AMC Entertainment Holdings, Inc., Class A $ 1,068 301 Cinemark Holdings, Inc. 10,776 1,203 Glu Mobile, Inc. (a) 9,708 373 Live Nation Entertainment, Inc. (a) 18,370 39 Madison Square Garden (The) Co., Class A (a) 10,440 213 Marcus (The) Corp. 8,414 36 Netflix, Inc. (a) 9,636 2,005 Viacom, Inc., Class B 51,529 346 Walt Disney (The) Co. 37,939 74 World Wrestling Entertainment, Inc., Class A 5,529 -------------- 163,409 -------------- EQUITY REAL ESTATE INVESTMENT TRUSTS -- 2.3% 395 Alexander & Baldwin, Inc. (a) 7,260 196 American Campus Communities, Inc. 8,112 43 Camden Property Trust 3,786 257 Chatham Lodging Trust 4,544 112 Chesapeake Lodging Trust 2,727 221 CoreCivic, Inc. 3,940 36 CoreSite Realty Corp. 3,140 127 CyrusOne, Inc. 6,716 461 DiamondRock Hospitality Co. 4,186 177 EPR Properties 11,333 507 Equity Commonwealth 15,215 42 Equity LifeStyle Properties, Inc. 4,080 70 Four Corners Property Trust, Inc. 1,834 449 Franklin Street Properties Corp. 2,797 71 GEO Group (The), Inc. 1,399 151 Healthcare Trust of America, Inc., Class A 3,822 158 Hersha Hospitality Trust 2,771 564 Hospitality Properties Trust 13,468 1,284 Host Hotels & Resorts, Inc. 21,404 234 Industrial Logistics Properties Trust 4,603 723 Kimco Realty Corp. 10,592 215 Kite Realty Group Trust 3,029 104 Lamar Advertising Co., Class A 7,195 289 Liberty Property Trust 12,103 253 Mack-Cali Realty Corp. 4,956 818 Medical Properties Trust, Inc. 13,153 80 Mid-America Apartment Communities, Inc. 7,656 127 NorthStar Realty Europe Corp. 1,847 476 Office Properties Income Trust (a) 3,270 123 Omega Healthcare Investors, Inc. 4,323 90 Outfront Media, Inc. 1,631 189 Piedmont Office Realty Trust, Inc., Class A 3,221 88 PotlatchDeltic Corp. 2,784 408 Preferred Apartment Communities, Inc., Class A 5,737 125 Regency Centers Corp. 7,335 Page 18 See Notes to Financial Statements FIRST TRUST TOTAL US MARKET ALPHADEX(R) ETF (TUSA) PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2018 SHARES DESCRIPTION VALUE ------------------------------------------------------------- COMMON STOCKS (CONTINUED) EQUITY REAL ESTATE INVESTMENT TRUSTS (CONTINUED) 549 RLJ Lodging Trust $ 9,004 527 RPT Realty 6,298 94 Ryman Hospitality Properties, Inc. 6,269 174 Sabra Health Care REIT, Inc. 2,868 689 Senior Housing Properties Trust 8,075 200 Spirit Realty Capital, Inc. 7,050 40 Sun Communities, Inc. 4,068 493 Sunstone Hotel Investors, Inc. 6,414 267 Uniti Group, Inc. 4,157 168 Urstadt Biddle Properties, Inc., Class A 3,229 1,666 VEREIT, Inc. 11,912 982 Washington Prime Group, Inc. 4,773 125 WP Carey, Inc. 8,168 227 Xenia Hotels & Resorts, Inc. 3,904 -------------- 302,158 -------------- FOOD & STAPLES RETAILING -- 1.4% 238 Andersons (The), Inc. 7,114 126 Casey's General Stores, Inc. 16,146 247 Chefs' Warehouse (The), Inc. (a) 7,899 2,325 Kroger (The) Co. 63,938 363 Performance Food Group Co. (a) 11,714 65 Sprouts Farmers Market, Inc. (a) 1,528 552 Sysco Corp. 34,588 299 United Natural Foods, Inc. (a) 3,166 527 US Foods Holding Corp. (a) 16,674 186 Walgreens Boots Alliance, Inc. 12,709 206 Weis Markets, Inc. 9,843 -------------- 185,319 -------------- FOOD PRODUCTS -- 3.2% 804 Archer-Daniels-Midland Co. 32,940 59 Bunge Ltd. 3,153 111 Cal-Maine Foods, Inc. 4,695 396 Conagra Brands, Inc. 8,459 371 Darling Ingredients, Inc. (a) 7,138 432 Flowers Foods, Inc. 7,979 106 Fresh Del Monte Produce, Inc. 2,997 244 Freshpet, Inc. (a) 7,847 631 General Mills, Inc. 24,571 344 Hormel Foods Corp. 14,682 809 Hostess Brands, Inc. (a) 8,850 154 Ingredion, Inc. 14,076 12 J&J Snack Foods Corp. 1,735 660 J.M. Smucker (The) Co. 61,703 25 John B. Sanfilippo & Son, Inc. 1,392 1,228 Kraft Heinz (The) Co. 52,853 121 Lamb Weston Holdings, Inc. 8,901 54 Lancaster Colony Corp. 9,550 307 McCormick & Co., Inc. 42,747 1,123 Pilgrim's Pride Corp. (a) 17,418 165 Post Holdings, Inc. (a) 14,706 87 Sanderson Farms, Inc. 8,638 61 Tootsie Roll Industries, Inc. (b) 2,037 SHARES DESCRIPTION VALUE ------------------------------------------------------------- FOOD PRODUCTS (CONTINUED) 1,137 Tyson Foods, Inc., Class A $ 60,716 -------------- 419,783 -------------- GAS UTILITIES -- 0.6% 129 Atmos Energy Corp. 11,961 21 Chesapeake Utilities Corp. 1,707 288 National Fuel Gas Co. 14,740 175 New Jersey Resources Corp. 7,992 98 ONE Gas, Inc. 7,801 153 Southwest Gas Holdings, Inc. 11,704 166 Spire, Inc. 12,297 293 UGI Corp. 15,632 -------------- 83,834 -------------- HEALTH CARE EQUIPMENT & SUPPLIES -- 3.8% 120 ABIOMED, Inc. (a) 39,005 138 Align Technology, Inc. (a) 28,901 82 AngioDynamics, Inc. (a) 1,651 153 AtriCure, Inc. (a) 4,682 52 Avanos Medical, Inc. (a) 2,329 704 Boston Scientific Corp. (a) 24,879 92 Cardiovascular Systems, Inc. (a) 2,621 746 Cerus Corp. (a) 3,782 45 CONMED Corp. 2,889 98 Cooper (The) Cos., Inc. 24,941 204 CryoLife, Inc. (a) 5,790 142 DexCom, Inc. (a) 17,012 155 Edwards Lifesciences Corp. (a) 23,741 110 Glaukos Corp. (a) 6,179 213 Globus Medical, Inc., Class A (a) 9,219 141 Haemonetics Corp. (a) 14,107 85 Hill-Rom Holdings, Inc. 7,527 197 Hologic, Inc. (a) 8,097 43 ICU Medical, Inc. (a) 9,874 163 IDEXX Laboratories, Inc. (a) 30,321 83 Inogen, Inc. (a) 10,306 152 Insulet Corp. (a) 12,057 86 Integer Holdings Corp. (a) 6,558 184 Integra LifeSciences Holdings Corp. (a) 8,298 94 Intuitive Surgical, Inc. (a) 45,018 76 iRhythm Technologies, Inc. (a) 5,281 130 Masimo Corp. (a) 13,958 117 Merit Medical Systems, Inc. (a) 6,530 171 Novocure Ltd. (a) 5,725 76 NuVasive, Inc. (a) 3,767 109 Penumbra, Inc. (a) 13,320 55 Quidel Corp. (a) 2,685 235 ResMed, Inc. 26,759 1,503 Senseonics Holdings, Inc. (a) 3,893 187 STAAR Surgical Co. (a) 5,967 72 Surmodics, Inc. (a) 3,403 126 Tactile Systems Technology, Inc. (a) 5,739 84 Tandem Diabetes Care, Inc. (a) 3,189 1,545 TransEnterix, Inc. (a) (b) 3,492 63 Varex Imaging Corp. (a) 1,492 See Notes to Financial Statements Page 19 FIRST TRUST TOTAL US MARKET ALPHADEX(R) ETF (TUSA) PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2018 SHARES DESCRIPTION VALUE ------------------------------------------------------------- COMMON STOCKS (CONTINUED) HEALTH CARE EQUIPMENT & SUPPLIES (CONTINUED) 766 ViewRay, Inc. (a) $ 4,650 98 West Pharmaceutical Services, Inc. 9,607 124 Wright Medical Group N.V. (a) 3,375 309 Zimmer Biomet Holdings, Inc. 32,049 -------------- 504,665 -------------- HEALTH CARE PROVIDERS & SERVICES -- 3.1% 462 Acadia Healthcare Co., Inc. (a) 11,878 128 Addus HomeCare Corp. (a) 8,689 72 Amedisys, Inc. (a) 8,432 248 American Renal Associates Holdings, Inc. (a) 2,857 49 Anthem, Inc. 12,869 139 BioTelemetry, Inc. (a) 8,301 374 Centene Corp. (a) 43,122 25 Chemed Corp. 7,082 209 Encompass Health Corp. 12,895 189 Ensign Group (The), Inc. 7,331 487 HCA Healthcare, Inc. 60,607 214 HealthEquity, Inc. (a) 12,765 52 LHC Group, Inc. (a) 4,882 99 Magellan Health, Inc. (a) 5,632 435 MEDNAX, Inc. (a) 14,355 137 Molina Healthcare, Inc. (a) 15,922 71 National HealthCare Corp. 5,570 293 Patterson Cos., Inc. 5,760 228 PetIQ, Inc. (a) 5,351 157 Premier, Inc., Class A (a) 5,864 27 Providence Service (The) Corp. (a) 1,621 125 Quest Diagnostics, Inc. 10,409 882 R1 RCM, Inc. (a) 7,012 195 Select Medical Holdings Corp. (a) 2,993 434 Surgery Partners, Inc. (a) 4,249 283 Tenet Healthcare Corp. (a) 4,851 204 UnitedHealth Group, Inc. 50,820 127 Universal Health Services, Inc., Class B 14,803 60 US Physical Therapy, Inc. 6,141 211 WellCare Health Plans, Inc. (a) 49,815 -------------- 412,878 -------------- HEALTH CARE TECHNOLOGY -- 0.5% 316 Evolent Health, Inc., Class A (a) 6,304 58 HealthStream, Inc. 1,401 218 HMS Holdings Corp. (a) 6,132 75 Omnicell, Inc. (a) 4,593 110 Tabula Rasa HealthCare, Inc. (a) 7,014 233 Teladoc Health, Inc. (a) 11,550 187 Veeva Systems, Inc., Class A (a) 16,703 147 Vocera Communications, Inc. (a) 5,784 -------------- 59,481 -------------- SHARES DESCRIPTION VALUE ------------------------------------------------------------- HOTELS, RESTAURANTS & LEISURE -- 2.8% 187 Aramark $ 5,417 966 BBX Capital Corp. 5,535 124 BJ's Restaurants, Inc. 6,271 238 Boyd Gaming Corp. 4,946 153 Brinker International, Inc. 6,729 1,982 Caesars Entertainment Corp. (a) 13,458 849 Carnival Corp. 41,856 33 Cheesecake Factory (The), Inc. 1,436 89 Chipotle Mexican Grill, Inc. (a) 38,429 97 Choice Hotels International, Inc. 6,943 82 Cracker Barrel Old Country Store, Inc. (b) 13,109 135 Dave & Buster's Entertainment, Inc. 6,016 66 Dine Brands Global, Inc. 4,444 55 Domino's Pizza, Inc. 13,639 221 Dunkin' Brands Group, Inc. 14,171 184 Eldorado Resorts, Inc. (a) 6,663 67 Fiesta Restaurant Group, Inc. (a) 1,039 108 Hilton Grand Vacations, Inc. (a) 2,850 45 Hyatt Hotels Corp., Class A 3,042 205 International Speedway Corp., Class A 8,991 1,940 MGM Resorts International 47,064 281 Norwegian Cruise Line Holdings Ltd. (a) 11,912 109 Penn National Gaming, Inc. (a) 2,052 299 Planet Fitness, Inc., Class A (a) 16,032 186 Playa Hotels & Resorts N.V. (a) 1,337 313 Royal Caribbean Cruises Ltd. 30,608 170 Ruth's Hospitality Group, Inc. 3,864 228 SeaWorld Entertainment, Inc. (a) 5,037 57 Shake Shack, Inc., Class A (a) 2,589 58 Six Flags Entertainment Corp. 3,227 175 Texas Roadhouse, Inc. 10,448 15 Vail Resorts, Inc. 3,162 235 Wendy's (The) Co. 3,668 111 Wingstop, Inc. 7,125 186 Wyndham Destinations, Inc. 6,666 383 Yum China Holdings, Inc. 12,842 -------------- 372,617 -------------- HOUSEHOLD DURABLES -- 2.2% 29 Cavco Industries, Inc. (a) 3,781 341 Century Communities, Inc. (a) 5,886 1,284 D.R. Horton, Inc. 44,503 192 Garmin Ltd. 12,157 82 iRobot Corp. (a) 6,867 225 KB Home 4,297 170 La-Z-Boy, Inc. 4,711 184 Leggett & Platt, Inc. 6,595 580 Lennar Corp., Class A 22,707 303 M.D.C. Holdings, Inc. 8,517 225 Meritage Homes Corp. (a) 8,262 309 Mohawk Industries, Inc. (a) 36,141 3,334 Newell Brands, Inc. 61,979 Page 20 See Notes to Financial Statements FIRST TRUST TOTAL US MARKET ALPHADEX(R) ETF (TUSA) PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2018 SHARES DESCRIPTION VALUE ------------------------------------------------------------- COMMON STOCKS (CONTINUED) HOUSEHOLD DURABLES (CONTINUED) 820 PulteGroup, Inc. $ 21,312 123 Roku, Inc. (a) 3,769 397 Taylor Morrison Home Corp., Class A (a) 6,312 615 Toll Brothers, Inc. 20,252 126 TopBuild Corp. (a) 5,670 723 TRI Pointe Group, Inc. (a) 7,902 -------------- 291,620 -------------- HOUSEHOLD PRODUCTS -- 0.3% 456 Church & Dwight Co., Inc. 29,987 69 Energizer Holdings, Inc. 3,115 162 Spectrum Brands Holdings, Inc. 6,844 21 WD-40 Co. 3,849 -------------- 43,795 -------------- INDEPENDENT POWER AND RENEWABLE ELECTRICITY PRODUCERS -- 0.2% 576 AES Corp. 8,329 435 NRG Energy, Inc. 17,226 361 Pattern Energy Group, Inc., Class A 6,722 -------------- 32,277 -------------- INDUSTRIAL CONGLOMERATES -- 0.1% 99 Carlisle Cos., Inc. 9,951 157 Raven Industries, Inc. 5,682 -------------- 15,633 -------------- INSURANCE -- 4.4% 1,150 Aflac, Inc. 52,394 6 Alleghany Corp. 3,740 410 Allstate (The) Corp. 33,878 351 Ambac Financial Group, Inc. (a) 6,051 101 American Equity Investment Life Holding Co. 2,822 36 American Financial Group, Inc. 3,259 157 American National Insurance Co. 19,977 75 Assurant, Inc. 6,708 481 Assured Guaranty Ltd. 18,413 315 Athene Holding Ltd., Class A (a) 12,547 273 Brown & Brown, Inc. 7,524 101 Chubb Ltd. 13,047 351 Cincinnati Financial Corp. 27,174 253 CNO Financial Group, Inc. 3,765 119 Employers Holdings, Inc. 4,994 19 Enstar Group Ltd. (a) 3,184 32 Erie Indemnity Co., Class A 4,266 71 FBL Financial Group, Inc., Class A 4,661 410 Fidelity National Financial, Inc. 12,890 313 First American Financial Corp. 13,972 33 Hanover Insurance Group (The), Inc. 3,853 145 Health Insurance Innovations, Inc., Class A (a) (b) 3,876 120 Horace Mann Educators Corp. 4,494 202 Kemper Corp. 13,409 84 Kinsale Capital Group, Inc. 4,667 SHARES DESCRIPTION VALUE ------------------------------------------------------------- INSURANCE (CONTINUED) 598 Lincoln National Corp. $ 30,683 268 Loews Corp. 12,199 671 MBIA, Inc. (a) 5,985 288 MetLife, Inc. 11,825 134 National General Holdings Corp. 3,244 17 National Western Life Group, Inc., Class A 5,112 540 Old Republic International Corp. 11,108 169 Primerica, Inc. 16,513 462 Principal Financial Group, Inc. 20,407 953 Progressive (The) Corp. 57,495 399 Prudential Financial, Inc. 32,539 141 Reinsurance Group of America, Inc. 19,772 46 RLI Corp. 3,174 63 Selective Insurance Group, Inc. 3,839 414 Third Point Reinsurance Ltd. (a) 3,991 233 Torchmark Corp. 17,366 104 Travelers (The) Cos., Inc. 12,454 50 Trupanion, Inc. (a) (b) 1,273 185 Universal Insurance Holdings, Inc. 7,015 413 Unum Group 12,134 101 W.R. Berkley Corp. 7,465 -------------- 581,158 -------------- INTERACTIVE MEDIA & SERVICES -- 0.4% 11 Alphabet, Inc., Class A (a) 11,495 153 ANGI Homeservices, Inc., Class A (a) 2,459 325 Cars.com, Inc. (a) 6,987 94 IAC/InterActiveCorp (a) 17,206 131 Match Group, Inc. 5,603 79 TripAdvisor, Inc. (a) 4,261 73 Yelp, Inc. (a) 2,554 -------------- 50,565 -------------- INTERNET & DIRECT MARKETING RETAIL -- 1.1% 456 1-800-Flowers.com, Inc., Class A (a) 5,577 34 Amazon.com, Inc. (a) 51,067 285 Duluth Holdings, Inc., Class B (a) 7,190 395 Etsy, Inc. (a) 18,790 147 GrubHub, Inc. (a) 11,291 152 Liberty Expedia Holdings, Inc., Class A (a) 5,945 116 Quotient Technology, Inc. (a) 1,239 915 Qurate Retail, Inc. (a) 17,861 98 Shutterstock, Inc. 3,529 18 Stamps.com, Inc. (a) 2,801 137 Wayfair, Inc., Class A (a) 12,341 -------------- 137,631 -------------- IT SERVICES -- 3.7% 180 Automatic Data Processing, Inc. 23,602 409 Booz Allen Hamilton Holding Corp. 18,434 See Notes to Financial Statements Page 21 FIRST TRUST TOTAL US MARKET ALPHADEX(R) ETF (TUSA) PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2018 SHARES DESCRIPTION VALUE ------------------------------------------------------------- COMMON STOCKS (CONTINUED) IT SERVICES (CONTINUED) 204 Broadridge Financial Solutions, Inc. $ 19,635 88 CACI International, Inc., Class A (a) 12,675 101 Carbonite, Inc. (a) 2,551 716 Conduent, Inc. (a) 7,611 45 CSG Systems International, Inc. 1,430 721 DXC Technology Co. 38,336 118 EPAM Systems, Inc. (a) 13,689 149 EVERTEC, Inc. 4,276 54 ExlService Holdings, Inc. (a) 2,841 494 First Data Corp., Class A (a) 8,354 59 FleetCor Technologies, Inc. (a) 10,957 427 Gartner, Inc. (a) 54,588 263 Genpact Ltd. 7,098 97 GoDaddy, Inc., Class A (a) 6,365 76 Jack Henry & Associates, Inc. 9,616 175 Leidos Holdings, Inc. 9,226 181 LiveRamp Holdings, Inc. (a) 6,992 85 ManTech International Corp., Class A 4,445 182 Mastercard, Inc., Class A 34,334 186 MAXIMUS, Inc. 12,107 121 NIC, Inc. 1,510 287 Okta, Inc. (a) 18,311 153 PayPal Holdings, Inc. (a) 12,866 134 Perficient, Inc. (a) 2,983 470 Presidio, Inc. 6,133 464 Sabre Corp. 10,041 100 Science Applications International Corp. 6,370 681 Square, Inc., Class A (a) 38,197 118 Sykes Enterprises, Inc. (a) 2,918 136 Total System Services, Inc. 11,055 234 Twilio, Inc., Class A (a) 20,896 439 Unisys Corp. (a) 5,106 133 Virtusa Corp. (a) 5,664 181 Visa, Inc., Class A 23,881 61 WEX, Inc. (a) 8,544 -------------- 483,637 -------------- LEISURE PRODUCTS -- 0.2% 131 Acushnet Holdings Corp. 2,760 231 American Outdoor Brands Corp. (a) 2,971 369 Callaway Golf Co. 5,646 77 Johnson Outdoors, Inc., Class A 4,523 164 Malibu Boats, Inc., Class A (a) 5,707 40 Polaris Industries, Inc. 3,067 26 Sturm Ruger & Co., Inc. 1,384 -------------- 26,058 -------------- LIFE SCIENCES TOOLS & SERVICES -- 1.9% 39 Bio-Rad Laboratories, Inc., Class A (a) 9,057 79 Bio-Techne Corp. 11,433 79 Cambrex Corp. (a) 2,983 SHARES DESCRIPTION VALUE ------------------------------------------------------------- LIFE SCIENCES TOOLS & SERVICES (CONTINUED) 121 Charles River Laboratories International, Inc. (a) $ 13,695 418 Codexis, Inc. (a) 6,981 184 Illumina, Inc. (a) 55,187 522 IQVIA Holdings, Inc. (a) 60,641 59 Luminex Corp. 1,363 150 Medpace Holdings, Inc. (a) 7,939 233 NeoGenomics, Inc. (a) 2,938 331 Pacific Biosciences of California, Inc. (a) 2,449 209 PerkinElmer, Inc. 16,417 183 PRA Health Sciences, Inc. (a) 16,829 166 Thermo Fisher Scientific, Inc. 37,149 -------------- 245,061 -------------- MACHINERY -- 2.6% 267 AGCO Corp. 14,864 39 Alamo Group, Inc. 3,015 90 Albany International Corp., Class A 5,619 391 Allison Transmission Holdings, Inc. 17,169 43 Altra Industrial Motion Corp. 1,081 114 Chart Industries, Inc. (a) 7,413 123 EnPro Industries, Inc. 7,392 53 ESCO Technologies, Inc. 3,495 134 Federal Signal Corp. 2,667 142 Gardner Denver Holdings, Inc. (a) 2,904 49 Global Brass & Copper Holdings, Inc. 1,232 49 Gorman-Rupp (The) Co. 1,588 87 Graco, Inc. 3,641 119 Greenbrier (The) Cos., Inc. 4,705 314 Harsco Corp. (a) 6,236 103 Hillenbrand, Inc. 3,907 29 Hyster-Yale Materials Handling, Inc. 1,797 54 IDEX Corp. 6,818 66 ITT, Inc. 3,186 135 John Bean Technologies Corp. 9,694 82 Kennametal, Inc. 2,729 43 Lincoln Electric Holdings, Inc. 3,391 166 Lydall, Inc. (a) 3,371 224 Manitowoc (The) Co., Inc. (a) 3,308 278 Meritor, Inc. (a) 4,701 31 Middleby (The) Corp. (a) 3,185 62 Mueller Industries, Inc. 1,448 311 Mueller Water Products, Inc., Class A 2,830 209 Navistar International Corp. (a) 5,424 59 Nordson Corp. 7,042 228 Oshkosh Corp. 13,979 822 PACCAR, Inc. 46,969 45 Proto Labs, Inc. (a) 5,076 81 RBC Bearings, Inc. (a) 10,619 342 REV Group, Inc. 2,568 66 Snap-on, Inc. 9,589 54 SPX Corp. (a) 1,513 Page 22 See Notes to Financial Statements FIRST TRUST TOTAL US MARKET ALPHADEX(R) ETF (TUSA) PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2018 SHARES DESCRIPTION VALUE ------------------------------------------------------------- COMMON STOCKS (CONTINUED) MACHINERY (CONTINUED) 33 Sun Hydraulics Corp. $ 1,095 324 Timken (The) Co. 12,092 67 Toro (The) Co. 3,744 59 TriMas Corp. (a) 1,610 770 Trinity Industries, Inc. 15,854 393 Wabash National Corp. 5,140 103 WABCO Holdings, Inc. (a) 11,056 194 Wabtec Corp. 13,629 22 Watts Water Technologies, Inc., Class A 1,420 50 Woodward, Inc. 3,715 506 Xylem, Inc. 33,760 -------------- 339,280 -------------- MARINE -- 0.1% 198 Kirby Corp. (a) 13,337 181 Matson, Inc. 5,796 -------------- 19,133 -------------- MEDIA -- 1.8% 896 Altice USA, Inc., Class A 14,802 54 AMC Networks, Inc., Class A (a) 2,964 18 Cable One, Inc. 14,762 1,912 Comcast Corp., Class A 65,104 568 DISH Network Corp., Class A (a) 14,183 435 Emerald Expositions Events, Inc. 5,368 1,134 Entercom Communications Corp., Class A 6,475 716 Gannett Co., Inc. 6,107 512 Gray Television, Inc. (a) 7,547 353 Interpublic Group of Cos. (The), Inc. 7,282 89 John Wiley & Sons, Inc., Class A 4,180 803 Liberty Broadband Corp., Class C (a) 57,840 70 Meredith Corp. 3,636 139 MSG Networks, Inc., Class A (a) 3,275 338 National CineMedia, Inc. 2,190 457 New Media Investment Group, Inc. 5,288 88 Nexstar Media Group, Inc., Class A 6,920 316 Sinclair Broadcast Group, Inc., Class A 8,323 599 TEGNA, Inc. 6,511 -------------- 242,757 -------------- METALS & MINING -- 1.5% 299 Alcoa Corp. (a) 7,947 122 Carpenter Technology Corp. 4,344 283 Cleveland-Cliffs, Inc. (a) 2,176 672 Coeur Mining, Inc. (a) 3,004 175 Commercial Metals Co. 2,804 4,863 Freeport-McMoRan, Inc. 50,138 1,285 Hecla Mining Co. 3,033 1,067 Nucor Corp. 55,281 238 Reliance Steel & Aluminum Co. 16,939 331 Schnitzer Steel Industries, Inc., Class A 7,133 SHARES DESCRIPTION VALUE ------------------------------------------------------------- METALS & MINING (CONTINUED) 268 Steel Dynamics, Inc. $ 8,051 771 SunCoke Energy, Inc. (a) 6,592 667 United States Steel Corp. 12,166 265 Warrior Met Coal, Inc. 6,389 124 Worthington Industries, Inc. 4,320 -------------- 190,317 -------------- MORTGAGE REAL ESTATE INVESTMENT TRUSTS -- 0.9% 380 Apollo Commercial Real Estate Finance, Inc. 6,331 624 Arbor Realty Trust, Inc. 6,284 319 ARMOUR Residential REIT, Inc. 6,539 120 Blackstone Mortgage Trust, Inc., Class A 3,823 680 Capstead Mortgage Corp. 4,536 1,121 Chimera Investment Corp. 19,976 186 Granite Point Mortgage Trust, Inc. 3,354 566 Invesco Mortgage Capital, Inc. 8,196 178 KKR Real Estate Finance Trust, Inc. 3,409 317 Ladder Capital Corp. 4,904 975 MFA Financial, Inc. 6,513 1,140 New Residential Investment Corp. 16,199 884 New York Mortgage Trust, Inc. 5,207 354 PennyMac Mortgage Investment Trust 6,591 441 Redwood Trust, Inc. 6,646 375 Starwood Property Trust, Inc. 7,391 480 Two Harbors Investment Corp. 6,163 -------------- 122,062 -------------- MULTILINE RETAIL -- 1.9% 172 Big Lots, Inc. 4,974 117 Dillard's, Inc., Class A (b) 7,056 248 Dollar General Corp. 26,804 664 Dollar Tree, Inc. (a) 59,973 726 Kohl's Corp. 48,163 1,949 Macy's, Inc. 58,041 135 Nordstrom, Inc. 6,292 210 Ollie's Bargain Outlet Holdings, Inc. (a) 13,967 307 Target Corp. 20,290 -------------- 245,560 -------------- MULTI-UTILITIES -- 1.8% 213 Ameren Corp. 13,894 93 Black Hills Corp. 5,839 1,958 CenterPoint Energy, Inc. 55,274 531 Consolidated Edison, Inc. 40,600 193 Dominion Energy, Inc. 13,792 248 DTE Energy Co. 27,354 471 MDU Resources Group, Inc. 11,229 324 NiSource, Inc. 8,213 122 NorthWestern Corp. 7,252 766 Public Service Enterprise Group, Inc. 39,870 70 Unitil Corp. 3,545 See Notes to Financial Statements Page 23 FIRST TRUST TOTAL US MARKET ALPHADEX(R) ETF (TUSA) PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2018 SHARES DESCRIPTION VALUE ------------------------------------------------------------- COMMON STOCKS (CONTINUED) MULTI-UTILITIES (CONTINUED) 203 WEC Energy Group, Inc. $ 14,060 -------------- 240,922 -------------- OIL, GAS & CONSUMABLE FUELS -- 6.2% 199 Anadarko Petroleum Corp. 8,724 1,147 Antero Resources Corp. (a) 10,770 848 Apache Corp. 22,260 100 Arch Coal, Inc., Class A 8,299 185 California Resources Corp. (a) 3,152 213 Carrizo Oil & Gas, Inc. (a) 2,405 738 Centennial Resource Development, Inc., Class A (a) 8,133 779 Cheniere Energy, Inc. (a) 46,109 898 Chesapeake Energy Corp. (a) 1,886 443 Chevron Corp. 48,194 219 Cimarex Energy Co. 13,501 1,420 CNX Resources Corp. (a) 16,216 875 ConocoPhillips 54,556 595 Continental Resources, Inc. (a) 23,913 134 CVR Energy, Inc. 4,620 383 Delek US Holdings, Inc. 12,451 1,445 Denbury Resources, Inc. (a) 2,471 211 EOG Resources, Inc. 18,401 476 Exxon Mobil Corp. 32,459 521 Green Plains, Inc. 6,830 861 Gulfport Energy Corp. (a) 5,640 2,005 Halcon Resources Corp. (a) (b) 3,409 757 Hess Corp. 30,659 968 HollyFrontier Corp. 49,484 575 Kosmos Energy Ltd. (a) 2,340 1,097 Laredo Petroleum, Inc. (a) 3,971 2,908 Marathon Oil Corp. 41,701 677 Marathon Petroleum Corp. 39,950 366 Matador Resources Co. (a) 5,684 363 Murphy Oil Corp. 8,491 559 Newfield Exploration Co. (a) 8,195 1,728 Noble Energy, Inc. 32,417 1,344 Northern Oil and Gas, Inc. (a) 3,037 284 Oasis Petroleum, Inc. (a) 1,571 164 Occidental Petroleum Corp. 10,066 351 Par Pacific Holdings, Inc. (a) 4,977 138 Parsley Energy, Inc., Class A (a) 2,205 407 PBF Energy, Inc., Class A 13,297 82 PDC Energy, Inc. (a) 2,440 570 Peabody Energy Corp. 17,374 89 Penn Virginia Corp. (a) 4,811 601 Phillips 66 51,776 475 QEP Resources, Inc. (a) 2,674 957 Range Resources Corp. 9,159 311 Renewable Energy Group, Inc. (a) 7,993 142 Resolute Energy Corp. (a) 4,115 163 SemGroup Corp., Class A 2,246 284 SM Energy Co. 4,396 1,753 Southwestern Energy Co. (a) 5,978 143 Targa Resources Corp. 5,151 SHARES DESCRIPTION VALUE ------------------------------------------------------------- OIL, GAS & CONSUMABLE FUELS (CONTINUED) 595 Valero Energy Corp. $ 44,607 929 W&T Offshore, Inc. (a) 3,828 380 Whiting Petroleum Corp. (a) 8,622 227 WildHorse Resource Development Corp. (a) 3,203 494 Williams (The) Cos., Inc. 10,893 1,002 WPX Energy, Inc. (a) 11,373 -------------- 813,083 -------------- PAPER & FOREST PRODUCTS -- 0.2% 195 Boise Cascade Co. 4,651 767 Louisiana-Pacific Corp. 17,043 188 P.H. Glatfelter Co. 1,835 94 Schweitzer-Mauduit International, Inc. 2,354 266 Verso Corp., Class A (a) 5,958 -------------- 31,841 -------------- PERSONAL PRODUCTS -- 0.3% 321 Coty, Inc., Class A 2,106 296 Herbalife Nutrition Ltd. (a) 17,449 111 Inter Parfums, Inc. 7,278 41 Medifast, Inc. 5,126 49 Nu Skin Enterprises, Inc., Class A 3,005 45 USANA Health Sciences, Inc. (a) 5,298 -------------- 40,262 -------------- PHARMACEUTICALS -- 0.9% 182 Amneal Pharmaceuticals, Inc. (a) 2,462 377 Eli Lilly and Co. 43,626 426 Endo International PLC (a) 3,110 183 Horizon Pharma PLC (a) 3,576 24 Jazz Pharmaceuticals PLC (a) 2,975 740 Mylan N.V. (a) 20,276 27 MyoKardia, Inc. (a) 1,319 198 Nektar Therapeutics (a) 6,508 109 Pacira Pharmaceuticals, Inc. (a) 4,689 114 Perrigo Co. PLC 4,418 305 Pfizer, Inc. 13,313 236 Prestige Consumer Healthcare, Inc. (a) 7,288 66 Reata Pharmaceuticals, Inc., Class A (a) 3,703 110 Theravance Biopharma, Inc. (a) 2,815 -------------- 120,078 -------------- PROFESSIONAL SERVICES -- 1.0% 153 ASGN, Inc. (a) 8,339 227 CBIZ, Inc. (a) 4,472 67 Exponent, Inc. 3,398 122 FTI Consulting, Inc. (a) 8,130 71 ICF International, Inc. 4,599 171 Insperity, Inc. 15,965 298 Kelly Services, Inc., Class A 6,103 191 Kforce, Inc. 5,906 82 Korn Ferry 3,242 188 ManpowerGroup, Inc. 12,182 389 Navigant Consulting, Inc. 9,355 Page 24 See Notes to Financial Statements FIRST TRUST TOTAL US MARKET ALPHADEX(R) ETF (TUSA) PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2018 SHARES DESCRIPTION VALUE ------------------------------------------------------------- COMMON STOCKS (CONTINUED) PROFESSIONAL SERVICES (CONTINUED) 231 Robert Half International, Inc. $ 13,213 183 TransUnion 10,394 215 TriNet Group, Inc. (a) 9,019 206 TrueBlue, Inc. (a) 4,584 112 Verisk Analytics, Inc. (a) 12,213 -------------- 131,114 -------------- REAL ESTATE MANAGEMENT & DEVELOPMENT -- 0.2% 42 HFF, Inc., Class A 1,393 56 Jones Lang LaSalle, Inc. 7,089 434 Realogy Holdings Corp. (b) 6,371 97 RMR Group (The), Inc., Class A 5,149 -------------- 20,002 -------------- ROAD & RAIL -- 2.1% 57 AMERCO 18,702 148 ArcBest Corp. 5,071 56 Avis Budget Group, Inc. (a) 1,259 366 CSX Corp. 22,740 222 Genesee & Wyoming, Inc., Class A (a) 16,432 363 Heartland Express, Inc. 6,643 439 Hertz Global Holdings, Inc. (a) 5,992 478 Kansas City Southern 45,625 589 Knight-Swift Transportation Holdings, Inc. 14,766 33 Landstar System, Inc. 3,157 426 Marten Transport Ltd. 6,897 224 Norfolk Southern Corp. 33,497 168 Old Dominion Freight Line, Inc. 20,746 276 Ryder System, Inc. 13,289 70 Saia, Inc. (a) 3,907 359 Schneider National, Inc., Class B 6,703 248 Union Pacific Corp. 34,281 243 Universal Logistics Holdings, Inc. 4,396 253 Werner Enterprises, Inc. 7,474 -------------- 271,577 -------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT -- 0.9% 104 Advanced Energy Industries, Inc. (a) 4,465 2,191 Advanced Micro Devices, Inc. (a) 40,446 1,212 Amkor Technology, Inc. (a) 7,951 153 Brooks Automation, Inc. 4,006 139 Cirrus Logic, Inc. (a) 4,612 71 Cohu, Inc. 1,141 54 Diodes, Inc. (a) 1,742 448 Lattice Semiconductor Corp. (a) 3,100 32 Monolithic Power Systems, Inc. 3,720 191 Nanometrics, Inc. (a) 5,220 193 NVIDIA Corp. 25,765 52 Qorvo, Inc. (a) 3,158 64 Semtech Corp. (a) 2,936 34 Universal Display Corp. 3,181 -------------- 111,443 -------------- SHARES DESCRIPTION VALUE ------------------------------------------------------------- SOFTWARE -- 6.0% 169 8x8, Inc. (a) $ 3,049 150 Adobe, Inc. (a) 33,936 125 Alarm.com Holdings, Inc. (a) 6,484 157 Alteryx, Inc., Class A (a) 9,337 73 ANSYS, Inc. (a) 10,435 91 Appfolio, Inc., Class A (a) 5,389 54 Appian Corp. (a) (b) 1,442 48 Apptio, Inc., Class A (a) 1,822 106 Aspen Technology, Inc. (a) 8,711 260 Autodesk, Inc. (a) 33,439 405 Avaya Holdings Corp. (a) 5,897 44 Benefitfocus, Inc. (a) 2,012 127 Blackline, Inc. (a) 5,201 99 Bottomline Technologies DE, Inc. (a) 4,752 75 Box, Inc., Class A (a) 1,266 427 Cision Ltd. (a) 4,996 26 CommVault Systems, Inc. (a) 1,536 95 Cornerstone OnDemand, Inc. (a) 4,791 257 Coupa Software, Inc. (a) 16,155 23 Ebix, Inc. 979 29 Envestnet, Inc. (a) 1,426 124 Everbridge, Inc. (a) 7,038 71 Fair Isaac Corp. (a) 13,277 164 Five9, Inc. (a) 7,170 220 Fortinet, Inc. (a) 15,495 120 Guidewire Software, Inc. (a) 9,628 135 HubSpot, Inc. (a) 16,973 179 Intuit, Inc. 35,236 49 j2 Global, Inc. 3,400 207 LivePerson, Inc. (a) 3,904 33 Manhattan Associates, Inc. (a) 1,398 473 Microsoft Corp. 48,043 44 MINDBODY, Inc., Class A (a) 1,602 86 New Relic, Inc. (a) 6,963 94 Nutanix, Inc., Class A (a) 3,909 188 OneSpan, Inc. (a) 2,435 180 Palo Alto Networks, Inc. (a) 33,903 131 Paycom Software, Inc. (a) 16,041 89 Paylocity Holding Corp. (a) 5,359 64 Pegasystems, Inc. 3,061 114 PTC, Inc. (a) 9,451 59 Q2 Holdings, Inc. (a) 2,923 95 QAD, Inc., Class A 3,736 40 Qualys, Inc. (a) 2,990 194 Rapid7, Inc. (a) 6,045 245 RealPage, Inc. (a) 11,806 217 RingCentral, Inc., Class A (a) 17,889 339 salesforce.com, Inc. (a) 46,433 367 SecureWorks Corp., Class A (a) 6,199 208 ServiceNow, Inc. (a) 37,034 448 Splunk, Inc. (a) 46,973 72 SPS Commerce, Inc. (a) 5,931 2,545 Symantec Corp. 48,088 275 Synopsys, Inc. (a) 23,166 108 Tableau Software, Inc., Class A (a) 12,960 288 TiVo Corp. 2,710 See Notes to Financial Statements Page 25 FIRST TRUST TOTAL US MARKET ALPHADEX(R) ETF (TUSA) PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2018 SHARES DESCRIPTION VALUE ------------------------------------------------------------- COMMON STOCKS (CONTINUED) SOFTWARE (CONTINUED) 60 Trade Desk (The), Inc., Class A (a) $ 6,964 33 Tyler Technologies, Inc. (a) 6,132 50 Ultimate Software Group (The), Inc. (a) 12,243 55 Upland Software, Inc. (a) 1,495 49 Varonis Systems, Inc. (a) 2,592 72 Verint Systems, Inc. (a) 3,046 277 Workday, Inc., Class A (a) 44,231 181 Workiva, Inc. (a) 6,496 302 Yext, Inc. (a) 4,485 284 Zendesk, Inc. (a) 16,577 -------------- 786,485 -------------- SPECIALTY RETAIL -- 4.8% 132 Aaron's, Inc. 5,551 339 Abercrombie & Fitch Co., Class A 6,797 48 Advance Auto Parts, Inc. 7,558 650 American Eagle Outfitters, Inc. 12,565 78 Asbury Automotive Group, Inc. (a) 5,200 1,176 Ascena Retail Group, Inc. (a) 2,952 489 AutoNation, Inc. (a) 17,457 70 AutoZone, Inc. (a) 58,684 597 Bed Bath & Beyond, Inc. 6,758 315 Boot Barn Holdings, Inc. (a) 5,364 311 Buckle (The), Inc. (b) 6,015 99 Burlington Stores, Inc. (a) 16,104 150 Caleres, Inc. 4,175 152 Carvana Co. (a) (b) 4,972 1,033 Chico's FAS, Inc. 5,805 202 Dick's Sporting Goods, Inc. 6,302 648 Express, Inc. (a) 3,311 155 Five Below, Inc. (a) 15,860 319 Foot Locker, Inc. 16,971 117 GameStop Corp., Class A 1,477 559 Gap (The), Inc. 14,400 138 Group 1 Automotive, Inc. 7,275 65 Home Depot (The), Inc. 11,168 399 L Brands, Inc. 10,242 88 Lithia Motors, Inc., Class A 6,717 590 Lowe's Cos., Inc. 54,492 63 Murphy USA, Inc. (a) 4,828 195 O'Reilly Automotive, Inc. (a) 67,144 2,233 Office Depot, Inc. 5,761 661 Party City Holdco, Inc. (a) 6,597 429 Penske Automotive Group, Inc. 17,297 27 RH (a) 3,235 683 Ross Stores, Inc. 56,826 97 Sally Beauty Holdings, Inc. (a) 1,654 49 Sleep Number Corp. (a) 1,555 463 Sonic Automotive, Inc., Class A 6,371 71 Tailored Brands, Inc. 968 104 Tiffany & Co. 8,373 1,209 TJX (The) Cos., Inc. 54,091 89 Tractor Supply Co. 7,426 240 Ulta Beauty, Inc. (a) 58,762 296 Urban Outfitters, Inc. (a) 9,827 SHARES DESCRIPTION VALUE ------------------------------------------------------------- SPECIALTY RETAIL (CONTINUED) 184 Williams-Sonoma, Inc. $ 9,283 -------------- 634,170 -------------- TECHNOLOGY HARDWARE, STORAGE & PERIPHERALS -- 1.6% 299 Apple, Inc. 47,164 4,150 Hewlett Packard Enterprise Co. 54,822 628 NetApp, Inc. 37,473 622 Pure Storage, Inc., Class A (a) 10,002 572 Seagate Technology PLC 22,073 694 Western Digital Corp. 25,657 448 Xerox Corp. 8,852 -------------- 206,043 -------------- TEXTILES, APPAREL & LUXURY GOODS -- 1.2% 123 Carter's, Inc. 10,039 130 Columbia Sportswear Co. 10,932 421 Crocs, Inc. (a) 10,938 61 Deckers Outdoor Corp. (a) 7,805 154 Fossil Group, Inc. (a) 2,422 37 G-III Apparel Group Ltd. (a) 1,032 320 NIKE, Inc., Class B 23,725 40 Oxford Industries, Inc. 2,842 281 PVH Corp. 26,119 433 Skechers U.S.A., Inc., Class A (a) 9,911 51 Steven Madden Ltd. 1,543 380 Under Armour, Inc., Class A (a) 6,715 577 VF Corp. 41,163 -------------- 155,186 -------------- THRIFTS & MORTGAGE FINANCE -- 0.6% 141 Capitol Federal Financial, Inc. 1,801 182 Essent Group Ltd. (a) 6,221 203 HomeStreet, Inc. (a) 4,310 1,527 MGIC Investment Corp. (a) 15,972 107 Mr Cooper Group, Inc. (a) 1,249 1,166 New York Community Bancorp, Inc. 10,972 396 NMI Holdings, Inc., Class A (a) 7,069 103 Northwest Bancshares, Inc. 1,745 115 Oritani Financial Corp. 1,696 73 Provident Financial Services, Inc. 1,761 983 Radian Group, Inc. 16,082 213 United Financial Bancorp, Inc. 3,131 112 Washington Federal, Inc. 2,991 -------------- 75,000 -------------- TOBACCO -- 0.1% 216 Turning Point Brands, Inc. 5,880 110 Universal Corp. 5,956 -------------- 11,836 -------------- TRADING COMPANIES & DISTRIBUTORS -- 1.3% 443 Air Lease Corp. 13,383 409 Aircastle Ltd. 7,051 Page 26 See Notes to Financial Statements FIRST TRUST TOTAL US MARKET ALPHADEX(R) ETF (TUSA) PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2018 SHARES DESCRIPTION VALUE ------------------------------------------------------------- COMMON STOCKS (CONTINUED) TRADING COMPANIES & DISTRIBUTORS (CONTINUED) 23 Applied Industrial Technologies, Inc. $ 1,241 149 Beacon Roofing Supply, Inc. (a) 4,726 384 BMC Stock Holdings, Inc. (a) 5,944 45 DXP Enterprises, Inc. (a) 1,253 467 Fastenal Co. 24,419 103 GATX Corp. 7,293 309 GMS, Inc. (a) 4,592 47 H&E Equipment Services, Inc. 960 94 HD Supply Holdings, Inc. (a) 3,527 140 Herc Holdings, Inc. (a) 3,639 95 MRC Global, Inc. (a) 1,162 183 MSC Industrial Direct Co., Inc., Class A 14,076 228 Rush Enterprises, Inc., Class A 7,861 54 SiteOne Landscape Supply, Inc. (a) 2,985 69 Systemax, Inc. 1,648 269 Triton International Ltd. 8,358 82 United Rentals, Inc. (a) 8,408 132 Univar, Inc. (a) 2,342 152 W.W. Grainger, Inc. 42,919 23 Watsco, Inc. 3,200 87 WESCO International, Inc. (a) 4,176 -------------- 175,163 -------------- TRANSPORTATION INFRASTRUCTURE -- 0.1% 440 Macquarie Infrastructure Corp. 16,086 -------------- WATER UTILITIES -- 0.1% 109 Aqua America, Inc. 3,727 37 Middlesex Water Co. 1,974 29 SJW Group 1,613 -------------- 7,314 -------------- WIRELESS TELECOMMUNICATION SERVICES -- 0.4% 205 Boingo Wireless, Inc. (a) 4,217 294 Telephone & Data Systems, Inc. 9,567 386 T-Mobile US, Inc. (a) 24,553 160 United States Cellular Corp. (a) 8,315 -------------- 46,652 -------------- TOTAL COMMON STOCKS -- 99.6% 13,096,208 (Cost $14,635,666) -------------- MONEY MARKET FUNDS -- 1.1% 25,890 Goldman Sachs Financial Square Treasury Obligations Fund - Institutional Class - 2.61% (c) (d) 25,890 117,659 Morgan Stanley Institutional Liquidity Funds - Treasury Portfolio - Institutional Class - 2.33% (c) 117,659 -------------- TOTAL MONEY MARKET FUNDS -- 1.1% 143,549 (Cost $143,549) -------------- PRINCIPAL VALUE DESCRIPTION VALUE ------------------------------------------------------------- REPURCHASE AGREEMENTS -- 0.4% $ 11,423 BNP Paribas S.A., 2.95% (c), dated 12/31/18, due 01/02/19, with a maturity value of $11,425. Collateralized by U.S. Treasury Note, interest rate of 2.375%, due 04/30/20. The value of the collateral including accrued interest is $11,698. (d) $ 11,423 41,113 JPMorgan Chase & Co., 2.85% (c), dated 12/31/18, due 01/02/19, with a maturity value of $41,120. Collateralized by U.S. Treasury Bill, interest rate of 0.000%, due 05/09/19. The value of the collateral is $41,934. (d) 41,113 -------------- TOTAL REPURCHASE AGREEMENTS -- 0.4% 52,536 (Cost $52,536) -------------- TOTAL INVESTMENTS -- 101.1% 13,292,293 (Cost $14,831,751) (e) NET OTHER ASSETS AND LIABILITIES -- (1.1)% (141,003) -------------- NET ASSETS -- 100.0% $ 13,151,290 ============== (a) Non-income producing security. (b) All or a portion of this security is on loan (see Note 2D - Securities Lending in the Notes to Financial Statements). The aggregate value of such securities is $75,985 and the total value of the collateral held by the Fund is $78,333. (c) Rate shown reflects yield as of December 31, 2018. (d) This security serves as collateral for securities on loan. (e) Aggregate cost for federal income tax purposes is $14,984,746. As of December 31, 2018, the aggregate gross unrealized appreciation for all investments in which there was an excess of value over tax cost was $506,059 and the aggregate gross unrealized depreciation for all investments in which there was an excess of tax cost over value was $2,198,512. The net unrealized depreciation was $1,692,453. See Notes to Financial Statements Page 27 FIRST TRUST TOTAL US MARKET ALPHADEX(R) ETF (TUSA) PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2018 ----------------------------- VALUATION INPUTS A summary of the inputs used to value the Fund's investments as of December 31, 2018 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial Statements): Level 1 - Quoted Prices Level 2 - Other Significant Observable Inputs Level 3 - Significant Unobservable Inputs LEVEL 1 LEVEL 2 LEVEL 3 ----------------------------------------------------- Common Stocks* $ 13,096,208 $ -- $ -- Money Market Funds 143,549 -- -- Repurchase Agreements -- 52,536 -- ----------------------------------------------------- Total Investments $ 13,239,757 $ 52,536 $ -- ===================================================== * See Portfolio of Investments for industry breakout. --------------------------------- OFFSETTING ASSETS AND LIABILITIES ------------------------------------------------------------- Offsetting assets and liabilities requires entities to disclose both gross and net information about instruments and transactions eligible for offset, and to disclose instruments and transactions subject to master netting or similar agreements (see Note 2C - Offsetting on the Statements of Assets and Liabilities in the Notes to Financial Statements). The Fund's loaned securities were all subject to an enforceable Securities Lending Agency Agreement. Securities lent in accordance with the Securities Lending Agency Agreement on a gross basis were as follows: SECURITIES LENDING AGENCY AGREEMENT ------------------------------------------------------------- Total gross amount presented on the Statements of Assets and Liabilities(1) $ 75,985 Non-cash Collateral(2) (75,985) -------------- Net Amount $ -- ============== (1) The amount presented on the Statements of Assets and Liabilities, which is included in "Investments, at value", is not offset and is shown on a gross basis. (2) At December 31, 2018, the value of the collateral received from each borrower exceeded the value of the related securities loaned. This amount is disclosed on the Portfolio of Investments. The Fund's investments in repurchase agreements were all subject to an enforceable Master Repurchase Agreement. Repurchase Agreements on a gross basis were as follows: REPURCHASE AGREEMENTS ------------------------------------------------------------- Total gross amount presented on the Statements of Assets and Liabilities(3) $ 52,536 Non-cash Collateral(4) (52,536) -------------- Net Amount $ -- ============== (3) The amount is included in "Investments, at value" on the Statements of Assets and Liabilities. (4) At December 31, 2018, the value of the collateral received from each seller exceeded the value of the repurchase agreements. Page 28 See Notes to Financial Statements FIRST TRUST DORSEY WRIGHT PEOPLE'S PORTFOLIO ETF (DWPP) PORTFOLIO OF INVESTMENTS DECEMBER 31, 2018 SHARES DESCRIPTION VALUE ------------------------------------------------------------- COMMON STOCKS -- 99.8% AEROSPACE & DEFENSE -- 2.6% 3,952 Arconic, Inc. $ 66,631 222 Boeing (The) Co. 71,595 446 General Dynamics Corp. 70,116 526 Harris Corp. 70,826 372 Huntington Ingalls Industries, Inc. 70,795 410 L3 Technologies, Inc. 71,201 263 Lockheed Martin Corp. 68,864 287 Northrop Grumman Corp. 70,286 444 Raytheon Co. 68,087 994 Spirit AeroSystems Holdings, Inc., Class A 71,657 1,494 Textron, Inc. 68,709 212 TransDigm Group, Inc. (a) 72,093 631 United Technologies Corp. 67,189 -------------- 908,049 -------------- AIR FREIGHT & LOGISTICS -- 1.0% 835 C.H. Robinson Worldwide, Inc. 70,215 1,045 Expeditors International of Washington, Inc. 71,154 436 FedEx Corp. 70,340 726 United Parcel Service, Inc., Class B 70,807 1,315 XPO Logistics, Inc. (a) 75,007 -------------- 357,523 -------------- AIRLINES -- 0.8% 2,174 American Airlines Group, Inc. 69,807 1,372 Delta Air Lines, Inc. 68,463 1,472 Southwest Airlines Co. 68,418 820 United Continental Holdings, Inc. (a) 68,659 -------------- 275,347 -------------- AUTO COMPONENTS -- 0.4% 2,024 BorgWarner, Inc. 70,314 582 Lear Corp. 71,504 -------------- 141,818 -------------- AUTOMOBILES -- 0.6% 8,399 Ford Motor Co. 64,252 2,038 General Motors Co. 68,171 217 Tesla, Inc. (a) 72,218 -------------- 204,641 -------------- BANKS -- 3.6% 2,877 Bank of America Corp. 70,889 1,593 BB&T Corp. 69,009 1,344 Citigroup, Inc. 69,969 2,371 Citizens Financial Group, Inc. 70,490 1,029 Comerica, Inc. 70,682 2,973 Fifth Third Bancorp 69,955 849 First Republic Bank 73,778 5,873 Huntington Bancshares, Inc. 70,006 714 JPMorgan Chase & Co. 69,701 4,761 KeyCorp 70,367 484 M&T Bank Corp. 69,275 597 PNC Financial Services Group (The), Inc. 69,795 SHARES DESCRIPTION VALUE ------------------------------------------------------------- BANKS (CONTINUED) 5,281 Regions Financial Corp. $ 70,660 1,400 SunTrust Banks, Inc. 70,616 367 SVB Financial Group (a) 69,701 1,517 U.S. Bancorp 69,327 1,499 Wells Fargo & Co. 69,074 1,733 Zions Bancorp N.A. 70,602 -------------- 1,263,896 -------------- BEVERAGES -- 1.4% 1,492 Brown-Forman Corp., Class B 70,989 1,428 Coca-Cola (The) Co. 67,616 418 Constellation Brands, Inc., Class A 67,223 2,706 Keurig Dr Pepper, Inc. 69,382 1,211 Molson Coors Brewing Co., Class B 68,010 1,395 Monster Beverage Corp. (a) 68,662 613 PepsiCo, Inc. 67,724 -------------- 479,606 -------------- BIOTECHNOLOGY -- 2.2% 795 AbbVie, Inc. 73,291 704 Alexion Pharmaceuticals, Inc. (a) 68,542 373 Amgen, Inc. 72,612 238 Biogen, Inc. (a) 71,619 835 BioMarin Pharmaceutical, Inc. (a) 71,100 1,110 Celgene Corp. (a) 71,140 1,073 Gilead Sciences, Inc. 67,116 1,156 Incyte Corp. (a) 73,510 198 Regeneron Pharmaceuticals, Inc. (a) 73,953 1,286 Seattle Genetics, Inc. (a) 72,865 434 Vertex Pharmaceuticals, Inc. (a) 71,918 -------------- 787,666 -------------- BUILDING PRODUCTS -- 0.4% 2,274 Johnson Controls International PLC 67,424 2,367 Masco Corp. 69,211 -------------- 136,635 -------------- CAPITAL MARKETS -- 4.4% 671 Ameriprise Financial, Inc. 70,032 1,513 Bank of New York Mellon (The) Corp. 71,217 184 BlackRock, Inc. 72,279 690 Cboe Global Markets, Inc. 67,503 1,741 Charles Schwab (The) Corp. 72,304 370 CME Group, Inc. 69,604 1,624 E*TRADE Financial Corp. 71,261 2,358 Franklin Resources, Inc. 69,938 421 Goldman Sachs Group (The), Inc. 70,328 936 Intercontinental Exchange, Inc. 70,509 4,174 Invesco Ltd. 69,873 3,578 KKR & Co., Inc., Class A 70,236 507 Moody's Corp. 71,000 1,786 Morgan Stanley 70,815 491 MSCI, Inc. 72,388 845 Nasdaq, Inc. 68,927 852 Northern Trust Corp. 71,219 959 Raymond James Financial, Inc. 71,359 417 S&P Global, Inc. 70,865 See Notes to Financial Statements Page 29 FIRST TRUST DORSEY WRIGHT PEOPLE'S PORTFOLIO ETF (DWPP) PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2018 SHARES DESCRIPTION VALUE ------------------------------------------------------------- COMMON STOCKS (CONTINUED) CAPITAL MARKETS (CONTINUED) 1,135 State Street Corp. $ 71,584 780 T. Rowe Price Group, Inc. 72,010 1,461 TD Ameritrade Holding Corp. 71,531 -------------- 1,556,782 -------------- CHEMICALS -- 2.8% 438 Air Products and Chemicals, Inc. 70,102 906 Albemarle Corp. 69,825 775 Celanese Corp. 69,727 1,675 CF Industries Holdings, Inc. 72,879 1,335 DowDuPont, Inc. 71,396 982 Eastman Chemical Co. 71,794 472 Ecolab, Inc. 69,549 957 FMC Corp. 70,780 529 International Flavors & Fragrances, Inc. 71,029 861 LyondellBasell Industries N.V., Class A 71,601 2,402 Mosaic (The) Co. 70,162 701 PPG Industries, Inc. 71,663 179 Sherwin-Williams (The) Co. 70,429 1,103 Westlake Chemical Corp. 72,986 -------------- 993,922 -------------- COMMERCIAL SERVICES & SUPPLIES -- 1.0% 428 Cintas Corp. 71,900 1,489 Copart, Inc. (a) 71,144 954 Republic Services, Inc. 68,774 1,963 Rollins, Inc. 70,864 777 Waste Management, Inc. 69,145 -------------- 351,827 -------------- COMMUNICATIONS EQUIPMENT -- 0.8% 351 Arista Networks, Inc. (a) 73,956 1,607 Cisco Systems, Inc. 69,631 438 F5 Networks, Inc. (a) 70,969 603 Motorola Solutions, Inc. 69,369 -------------- 283,925 -------------- CONSTRUCTION & ENGINEERING -- 0.2% 1,214 Jacobs Engineering Group, Inc. 70,970 -------------- CONSTRUCTION MATERIALS -- 0.4% 414 Martin Marietta Materials, Inc. 71,154 732 Vulcan Materials Co. 72,322 -------------- 143,476 -------------- CONSUMER FINANCE -- 1.0% 3,138 Ally Financial, Inc. 71,107 733 American Express Co. 69,869 932 Capital One Financial Corp. 70,450 1,197 Discover Financial Services 70,599 3,004 Synchrony Financial 70,474 -------------- 352,499 -------------- SHARES DESCRIPTION VALUE ------------------------------------------------------------- CONTAINERS & PACKAGING -- 1.0% 785 Avery Dennison Corp. $ 70,517 1,554 Ball Corp. 71,453 1,726 International Paper Co. 69,661 821 Packaging Corp. of America 68,521 1,827 WestRock Co. 68,987 -------------- 349,139 -------------- DISTRIBUTORS -- 0.4% 731 Genuine Parts Co. 70,191 2,877 LKQ Corp. (a) 68,271 -------------- 138,462 -------------- DIVERSIFIED FINANCIAL SERVICES -- 0.4% 4,388 AXA Equitable Holdings, Inc. 72,973 352 Berkshire Hathaway, Inc., Class B (a) 71,871 -------------- 144,844 -------------- DIVERSIFIED TELECOMMUNICATION SERVICES -- 0.6% 2,409 AT&T, Inc. 68,753 4,531 CenturyLink, Inc. 68,645 1,239 Verizon Communications, Inc. 69,656 -------------- 207,054 -------------- ELECTRIC UTILITIES -- 2.7% 1,549 Alliant Energy Corp. 65,445 876 American Electric Power Co., Inc. 65,472 768 Duke Energy Corp. 66,279 1,174 Edison International 66,648 782 Entergy Corp. 67,307 1,164 Evergy, Inc. 66,080 1,010 Eversource Energy 65,690 1,478 Exelon Corp. 66,658 1,818 FirstEnergy Corp. 68,266 388 NextEra Energy, Inc. 67,442 2,978 PG&E Corp. (a) 70,728 2,377 PPL Corp. 67,341 1,495 Southern (The) Co. 65,660 1,316 Xcel Energy, Inc. 64,839 -------------- 933,855 -------------- ELECTRICAL EQUIPMENT -- 0.8% 1,039 AMETEK, Inc. 70,340 1,019 Eaton Corp. PLC 69,965 1,195 Emerson Electric Co. 71,401 465 Rockwell Automation, Inc. 69,973 -------------- 281,679 -------------- ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS -- 1.0% 877 Amphenol Corp., Class A 71,054 873 CDW Corp. 70,757 2,359 Corning, Inc. 71,265 1,182 Keysight Technologies, Inc. (a) 73,379 951 TE Connectivity Ltd. 71,924 -------------- 358,379 -------------- Page 30 See Notes to Financial Statements FIRST TRUST DORSEY WRIGHT PEOPLE'S PORTFOLIO ETF (DWPP) PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2018 SHARES DESCRIPTION VALUE ------------------------------------------------------------- COMMON STOCKS (CONTINUED) ENERGY EQUIPMENT & SERVICES -- 0.8% 3,288 Baker Hughes a GE Co. $ 70,692 2,611 Halliburton Co. 69,400 2,665 National Oilwell Varco, Inc. 68,491 1,898 Schlumberger Ltd. 68,480 -------------- 277,063 -------------- ENTERTAINMENT -- 1.6% 1,492 Activision Blizzard, Inc. 69,483 886 Electronic Arts, Inc. (a) 69,914 2,400 Liberty Media Corp.-Liberty Formula One, Class C (a) 73,680 1,393 Live Nation Entertainment, Inc. (a) 68,605 277 Netflix, Inc. (a) 74,142 675 Take-Two Interactive Software, Inc. (a) 69,485 2,623 Viacom, Inc., Class B 67,411 645 Walt Disney (The) Co. 70,724 -------------- 563,444 -------------- EQUITY REAL ESTATE INVESTMENT TRUSTS -- 5.2% 583 Alexandria Real Estate Equities, Inc. 67,185 428 American Tower Corp. 67,705 377 AvalonBay Communities, Inc. 65,617 593 Boston Properties, Inc. 66,742 634 Crown Castle International Corp. 68,871 641 Digital Realty Trust, Inc. 68,299 2,538 Duke Realty Corp. 65,734 192 Equinix, Inc. 67,692 997 Equity Residential 65,812 264 Essex Property Trust, Inc. 64,736 727 Extra Space Storage, Inc. 65,779 2,371 HCP, Inc. 66,222 4,154 Host Hotels & Resorts, Inc. 69,247 3,354 Invitation Homes, Inc. 67,348 2,109 Iron Mountain, Inc. 68,353 693 Mid-America Apartment Communities, Inc. 66,320 1,139 Prologis, Inc. 66,882 332 Public Storage 67,200 1,061 Realty Income Corp. 66,886 1,177 Regency Centers Corp. 69,066 419 SBA Communications Corp. (a) 67,832 405 Simon Property Group, Inc. 68,036 1,655 UDR, Inc. 65,571 1,115 Ventas, Inc. 65,328 1,081 Vornado Realty Trust 67,055 957 Welltower, Inc. 66,425 3,147 Weyerhaeuser Co. 68,793 -------------- 1,810,736 -------------- FOOD & STAPLES RETAILING -- 1.0% 347 Costco Wholesale Corp. 70,687 2,465 Kroger (The) Co. 67,787 1,112 Sysco Corp. 69,678 SHARES DESCRIPTION VALUE ------------------------------------------------------------- FOOD & STAPLES RETAILING (CONTINUED) 1,020 Walgreens Boots Alliance, Inc. $ 69,697 777 Walmart, Inc. 72,378 -------------- 350,227 -------------- FOOD PRODUCTS -- 2.7% 1,673 Archer-Daniels-Midland Co. 68,543 1,269 Bunge Ltd. 67,815 1,845 Campbell Soup Co. 60,867 3,061 Conagra Brands, Inc. 65,383 1,746 General Mills, Inc. 67,989 636 Hershey (The) Co. 68,166 1,597 Hormel Foods Corp. 68,160 702 J.M. Smucker (The) Co. 65,630 1,182 Kellogg Co. 67,386 1,529 Kraft Heinz (The) Co. 65,808 925 Lamb Weston Holdings, Inc. 68,043 487 McCormick & Co., Inc. 67,810 1,672 Mondelez International, Inc., Class A 66,930 1,302 Tyson Foods, Inc., Class A 69,527 -------------- 938,057 -------------- GAS UTILITIES -- 0.2% 718 Atmos Energy Corp. 66,573 -------------- HEALTH CARE EQUIPMENT & SUPPLIES -- 3.9% 1,009 Abbott Laboratories 72,981 239 ABIOMED, Inc. (a) 77,685 345 Align Technology, Inc. (a) 72,253 1,090 Baxter International, Inc. 71,744 317 Becton, Dickinson and Co. 71,426 2,085 Boston Scientific Corp. (a) 73,684 289 Cooper (The) Cos., Inc. 73,550 690 Danaher Corp. 71,153 1,930 DENTSPLY SIRONA, Inc. 71,815 471 Edwards Lifesciences Corp. (a) 72,143 1,781 Hologic, Inc. (a) 73,199 370 IDEXX Laboratories, Inc. (a) 68,827 151 Intuitive Surgical, Inc. (a) 72,317 767 Medtronic PLC 69,766 642 ResMed, Inc. 73,105 448 Stryker Corp. 70,224 287 Teleflex, Inc. 74,184 635 Varian Medical Systems, Inc. (a) 71,952 686 Zimmer Biomet Holdings, Inc. 71,152 -------------- 1,373,160 -------------- HEALTH CARE PROVIDERS & SERVICES -- 3.2% 929 AmerisourceBergen Corp. 69,118 269 Anthem, Inc. 70,647 1,525 Cardinal Health, Inc. 68,015 606 Centene Corp. (a) 69,872 377 Cigna Corp. 71,600 1,063 CVS Health Corp. 69,648 1,366 DaVita, Inc. (a) 70,294 565 HCA Healthcare, Inc. 70,314 See Notes to Financial Statements Page 31 FIRST TRUST DORSEY WRIGHT PEOPLE'S PORTFOLIO ETF (DWPP) PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2018 SHARES DESCRIPTION VALUE ------------------------------------------------------------- COMMON STOCKS (CONTINUED) HEALTH CARE PROVIDERS & SERVICES (CONTINUED) 896 Henry Schein, Inc. (a) $ 70,354 245 Humana, Inc. 70,188 545 Laboratory Corp. of America Holdings (a) 68,866 630 McKesson Corp. 69,596 831 Quest Diagnostics, Inc. 69,197 284 UnitedHealth Group, Inc. 70,750 594 Universal Health Services, Inc., Class B 69,237 303 WellCare Health Plans, Inc. (a) 71,535 -------------- 1,119,231 -------------- HEALTH CARE TECHNOLOGY -- 0.2% 1,372 Cerner Corp. (a) 71,948 -------------- HOTELS, RESTAURANTS & LEISURE -- 3.4% 2,373 Aramark 68,746 1,413 Carnival Corp. 69,661 171 Chipotle Mexican Grill, Inc. (a) 73,836 687 Darden Restaurants, Inc. 68,604 284 Domino's Pizza, Inc. 70,429 1,029 Hilton Worldwide Holdings, Inc. 73,882 1,399 Las Vegas Sands Corp. 72,818 664 Marriott International, Inc., Class A 72,084 390 McDonald's Corp. 69,252 3,047 MGM Resorts International 73,920 1,659 Norwegian Cruise Line Holdings Ltd. (a) 70,325 724 Royal Caribbean Cruises Ltd. 70,800 1,108 Starbucks Corp. 71,355 331 Vail Resorts, Inc. 69,781 716 Wynn Resorts Ltd. 70,820 2,103 Yum China Holdings, Inc. 70,514 772 Yum! Brands, Inc. 70,962 -------------- 1,207,789 -------------- HOUSEHOLD DURABLES -- 1.2% 1,976 D.R. Horton, Inc. 68,488 1,099 Garmin Ltd. 69,588 1,713 Lennar Corp., Class A 67,064 599 Mohawk Industries, Inc. (a) 70,059 3,593 Newell Brands, Inc. 66,794 28 NVR, Inc. (a) 68,236 -------------- 410,229 -------------- HOUSEHOLD PRODUCTS -- 1.0% 1,051 Church & Dwight Co., Inc. 69,114 439 Clorox (The) Co. 67,667 1,130 Colgate-Palmolive Co. 67,258 590 Kimberly-Clark Corp. 67,225 743 Procter & Gamble (The) Co. 68,296 -------------- 339,560 -------------- SHARES DESCRIPTION VALUE ------------------------------------------------------------- INDEPENDENT POWER AND RENEWABLE ELECTRICITY PRODUCERS -- 0.4% 1,812 NRG Energy, Inc. $ 71,755 3,141 Vistra Energy Corp. (a) 71,898 -------------- 143,653 -------------- INDUSTRIAL CONGLOMERATES -- 0.8% 368 3M Co. 70,119 9,515 General Electric Co. 72,028 523 Honeywell International, Inc. 69,099 264 Roper Technologies, Inc. 70,361 -------------- 281,607 -------------- INSURANCE -- 4.0% 1,566 Aflac, Inc. 71,347 850 Allstate (The) Corp. 70,236 766 American Financial Group, Inc. 69,346 1,797 American International Group, Inc. 70,820 2,653 Arch Capital Group Ltd. (a) 70,888 952 Arthur J. Gallagher & Co. 70,162 544 Chubb Ltd. 70,274 898 Cincinnati Financial Corp. 69,523 2,234 Fidelity National Financial, Inc. 70,237 1,609 Hartford Financial Services Group (The), Inc. 71,520 1,370 Lincoln National Corp. 70,295 1,538 Loews Corp. 70,010 69 Markel Corp. (a) 71,625 873 Marsh & McLennan Cos., Inc. 69,622 1,749 MetLife, Inc. 71,814 1,607 Principal Financial Group, Inc. 70,981 1,140 Progressive (The) Corp. 68,776 860 Prudential Financial, Inc. 70,133 929 Torchmark Corp. 69,238 581 Travelers (The) Cos., Inc. 69,575 -------------- 1,406,422 -------------- INTERACTIVE MEDIA & SERVICES -- 1.3% 69 Alphabet, Inc., Class A (a) 72,102 539 Facebook, Inc., Class A (a) 70,658 410 IAC/InterActiveCorp (a) 75,046 14,020 Snap, Inc., Class A (a) 77,250 2,482 Twitter, Inc. (a) 71,333 2,391 Zillow Group, Inc., Class C (a) 75,508 -------------- 441,897 -------------- INTERNET & DIRECT MARKETING RETAIL -- 1.0% 49 Amazon.com, Inc. (a) 73,596 41 Booking Holdings, Inc. (a) 70,619 2,526 eBay, Inc. (a) 70,905 609 Expedia Group, Inc. 68,604 989 GrubHub, Inc. (a) 75,965 -------------- 359,689 -------------- IT SERVICES -- 5.0% 489 Accenture PLC, Class A 68,954 1,137 Akamai Technologies, Inc. (a) 69,448 456 Alliance Data Systems Corp. 68,437 Page 32 See Notes to Financial Statements FIRST TRUST DORSEY WRIGHT PEOPLE'S PORTFOLIO ETF (DWPP) PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2018 SHARES DESCRIPTION VALUE ------------------------------------------------------------- COMMON STOCKS (CONTINUED) IT SERVICES (CONTINUED) 537 Automatic Data Processing, Inc. $ 70,411 722 Broadridge Financial Solutions, Inc. 69,493 1,107 Cognizant Technology Solutions Corp., Class A 70,272 1,323 DXC Technology Co. 70,344 693 Fidelity National Information Services, Inc. 71,067 4,306 First Data Corp., Class A (a) 72,814 957 Fiserv, Inc. (a) 70,330 384 FleetCor Technologies, Inc. (a) 71,317 535 Gartner, Inc. (a) 68,394 706 Global Payments, Inc. 72,810 1,138 GoDaddy, Inc., Class A (a) 74,676 609 International Business Machines Corp. 69,225 547 Jack Henry & Associates, Inc. 69,206 1,315 Leidos Holdings, Inc. 69,327 383 Mastercard, Inc., Class A 72,253 1,060 Paychex, Inc. 69,059 860 PayPal Holdings, Inc. (a) 72,317 1,290 Square, Inc., Class A (a) 72,356 880 Total System Services, Inc. 71,535 475 VeriSign, Inc. (a) 70,438 544 Visa, Inc., Class A 71,775 934 Worldpay, Inc., Class A (a) 71,386 -------------- 1,767,644 -------------- LEISURE PRODUCTS -- 0.2% 875 Hasbro, Inc. 71,094 -------------- LIFE SCIENCES TOOLS & SERVICES -- 1.2% 1,066 Agilent Technologies, Inc. 71,912 241 Illumina, Inc. (a) 72,283 629 IQVIA Holdings, Inc. (a) 73,071 125 Mettler-Toledo International, Inc. (a) 70,698 314 Thermo Fisher Scientific, Inc. 70,270 386 Waters Corp. (a) 72,819 -------------- 431,053 -------------- MACHINERY -- 2.6% 566 Caterpillar, Inc. 71,922 527 Cummins, Inc. 70,428 478 Deere & Co. 71,303 980 Dover Corp. 69,531 1,051 Fortive Corp. 71,111 548 IDEX Corp. 69,190 551 Illinois Tool Works, Inc. 69,806 761 Ingersoll-Rand PLC 69,426 1,234 PACCAR, Inc. 70,511 466 Parker-Hannifin Corp. 69,499 594 Stanley Black & Decker, Inc. 71,126 1,001 Wabtec Corp. 70,320 1,080 Xylem, Inc. 72,058 -------------- 916,231 -------------- SHARES DESCRIPTION VALUE ------------------------------------------------------------- MEDIA -- 1.4% 1,567 CBS Corp., Class B $ 68,509 240 Charter Communications, Inc., Class A (a) 68,393 1,989 Comcast Corp., Class A 67,725 2,689 Discovery, Inc., Class A (a) 66,526 960 Liberty Broadband Corp., Class C (a) 69,149 951 Omnicom Group, Inc. 69,651 12,045 Sirius XM Holdings, Inc. 68,777 -------------- 478,730 -------------- METALS & MINING -- 0.8% 6,714 Freeport-McMoRan, Inc. 69,221 2,017 Newmont Mining Corp. 69,889 1,313 Nucor Corp. 68,027 2,266 Steel Dynamics, Inc. 68,071 -------------- 275,208 -------------- MORTGAGE REAL ESTATE INVESTMENT TRUSTS -- 0.2% 6,897 Annaly Capital Management, Inc. 67,729 -------------- MULTILINE RETAIL -- 1.0% 677 Dollar General Corp. 73,170 819 Dollar Tree, Inc. (a) 73,972 1,138 Kohl's Corp. 75,495 2,380 Macy's, Inc. 70,877 1,111 Target Corp. 73,426 -------------- 366,940 -------------- MULTI-UTILITIES -- 1.7% 1,008 Ameren Corp. 65,752 2,388 CenterPoint Energy, Inc. 67,413 1,322 CMS Energy Corp. 65,637 844 Consolidated Edison, Inc. 64,532 904 Dominion Energy, Inc. 64,600 593 DTE Energy Co. 65,408 1,286 Public Service Enterprise Group, Inc. 66,936 598 Sempra Energy 64,698 944 WEC Energy Group, Inc. 65,382 -------------- 590,358 -------------- OIL, GAS & CONSUMABLE FUELS -- 5.2% 1,571 Anadarko Petroleum Corp. 68,873 2,584 Apache Corp. 67,830 3,010 Cabot Oil & Gas Corp. 67,273 1,190 Cheniere Energy, Inc. (a) 70,436 656 Chevron Corp. 71,366 689 Concho Resources, Inc. (a) 70,822 1,141 ConocoPhillips 71,141 1,780 Continental Resources, Inc. (a) 71,538 3,099 Devon Energy Corp. 69,851 765 Diamondback Energy, Inc. 70,916 780 EOG Resources, Inc. 68,024 3,688 EQT Corp. 69,666 999 Exxon Mobil Corp. 68,122 1,621 Hess Corp. 65,651 1,405 HollyFrontier Corp. 71,824 See Notes to Financial Statements Page 33 FIRST TRUST DORSEY WRIGHT PEOPLE'S PORTFOLIO ETF (DWPP) PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2018 SHARES DESCRIPTION VALUE ------------------------------------------------------------- COMMON STOCKS (CONTINUED) OIL, GAS & CONSUMABLE FUELS (CONTINUED) 4,390 Kinder Morgan, Inc. $ 67,518 5,034 Marathon Oil Corp. 72,188 1,197 Marathon Petroleum Corp. 70,635 3,743 Noble Energy, Inc. 70,219 1,134 Occidental Petroleum Corp. 69,605 1,262 ONEOK, Inc. 68,085 832 Phillips 66 71,677 542 Pioneer Natural Resources Co. 71,284 1,865 Targa Resources Corp. 67,177 957 Valero Energy Corp. 71,746 3,138 Williams (The) Cos., Inc. 69,193 -------------- 1,812,660 -------------- PERSONAL PRODUCTS -- 0.4% 10,868 Coty, Inc., Class A 71,294 544 Estee Lauder (The) Cos., Inc., Class A 70,774 -------------- 142,068 -------------- PHARMACEUTICALS -- 2.0% 516 Allergan PLC 68,969 1,363 Bristol-Myers Squibb Co. 70,849 621 Eli Lilly and Co. 71,862 570 Jazz Pharmaceuticals PLC (a) 70,657 532 Johnson & Johnson 68,655 933 Merck & Co., Inc. 71,290 2,597 Mylan N.V. (a) 71,158 1,772 Perrigo Co. PLC 68,665 1,617 Pfizer, Inc. 70,582 830 Zoetis, Inc. 70,998 -------------- 703,685 -------------- PROFESSIONAL SERVICES -- 0.8% 212 CoStar Group, Inc. (a) 71,516 760 Equifax, Inc. 70,779 1,280 TransUnion 72,704 640 Verisk Analytics, Inc. (a) 69,785 -------------- 284,784 -------------- REAL ESTATE MANAGEMENT & DEVELOPMENT -- 0.2% 1,714 CBRE Group, Inc., Class A (a) 68,629 -------------- ROAD & RAIL -- 1.2% 1,108 CSX Corp. 68,840 736 J.B. Hunt Transport Services, Inc. 68,478 732 Kansas City Southern 69,869 468 Norfolk Southern Corp. 69,985 568 Old Dominion Freight Line, Inc. 70,142 506 Union Pacific Corp. 69,944 -------------- 417,258 -------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT -- 3.5% 3,959 Advanced Micro Devices, Inc. (a) 73,083 824 Analog Devices, Inc. 70,724 2,217 Applied Materials, Inc. 72,585 278 Broadcom, Inc. 70,690 SHARES DESCRIPTION VALUE ------------------------------------------------------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT (CONTINUED) 1,501 Intel Corp. $ 70,442 791 KLA-Tencor Corp. 70,787 530 Lam Research Corp. 72,170 4,572 Marvell Technology Group Ltd. 74,021 1,398 Maxim Integrated Products, Inc. 71,088 998 Microchip Technology, Inc. 71,776 2,221 Micron Technology, Inc. (a) 70,472 521 NVIDIA Corp. 69,553 1,172 Qorvo, Inc. (a) 71,175 1,227 QUALCOMM, Inc. 69,829 1,047 Skyworks Solutions, Inc. 70,170 748 Texas Instruments, Inc. 70,686 831 Xilinx, Inc. 70,776 -------------- 1,210,027 -------------- SOFTWARE -- 3.9% 321 Adobe, Inc. (a) 72,623 481 ANSYS, Inc. (a) 68,754 558 Autodesk, Inc. (a) 71,764 1,654 Cadence Design Systems, Inc. (a) 71,916 671 Citrix Systems, Inc. 68,751 1,028 Fortinet, Inc. (a) 72,402 363 Intuit, Inc. 71,457 687 Microsoft Corp. 69,779 1,531 Oracle Corp. 69,125 397 Palo Alto Networks, Inc. (a) 74,775 857 PTC, Inc. (a) 71,045 391 Red Hat, Inc. (a) 68,675 549 salesforce.com, Inc. (a) 75,196 420 ServiceNow, Inc. (a) 74,781 737 Splunk, Inc. (a) 77,274 1,606 SS&C Technologies Holdings, Inc. 72,447 3,629 Symantec Corp. 68,570 830 Synopsys, Inc. (a) 69,919 473 Workday, Inc., Class A (a) 75,529 -------------- 1,364,782 -------------- SPECIALTY RETAIL -- 2.7% 449 Advance Auto Parts, Inc. 70,699 83 AutoZone, Inc. (a) 69,582 1,380 Best Buy Co., Inc. 73,085 443 Burlington Stores, Inc. (a) 72,063 1,157 CarMax, Inc. (a) 72,579 2,754 Gap (The), Inc. 70,943 420 Home Depot (The), Inc. 72,164 771 Lowe's Cos., Inc. 71,210 206 O'Reilly Automotive, Inc. (a) 70,932 876 Ross Stores, Inc. 72,883 885 Tiffany & Co. 71,251 1,609 TJX (The) Cos., Inc. 71,987 295 Ulta Beauty, Inc. (a) 72,228 -------------- 931,606 -------------- TECHNOLOGY HARDWARE, STORAGE & PERIPHERALS -- 1.2% 446 Apple, Inc. 70,352 5,381 Hewlett Packard Enterprise Co. 71,083 Page 34 See Notes to Financial Statements FIRST TRUST DORSEY WRIGHT PEOPLE'S PORTFOLIO ETF (DWPP) PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2018 SHARES DESCRIPTION VALUE ------------------------------------------------------------- COMMON STOCKS (CONTINUED) TECHNOLOGY HARDWARE, STORAGE & PERIPHERALS (CONTINUED) 3,424 HP, Inc. $ 70,055 1,182 NetApp, Inc. 70,530 1,868 Seagate Technology PLC 72,086 1,863 Western Digital Corp. 68,875 -------------- 422,981 -------------- TEXTILES, APPAREL & LUXURY GOODS -- 0.8% 950 NIKE, Inc., Class B 70,433 760 PVH Corp. 70,642 2,068 Tapestry, Inc. 69,795 973 VF Corp. 69,414 -------------- 280,284 -------------- TOBACCO -- 0.4% 1,395 Altria Group, Inc. 68,899 986 Philip Morris International, Inc. 65,825 -------------- 134,724 -------------- TRADING COMPANIES & DISTRIBUTORS -- 0.6% 1,346 Fastenal Co. 70,383 681 United Rentals, Inc. (a) 69,823 248 W.W. Grainger, Inc. 70,025 -------------- 210,231 -------------- WATER UTILITIES -- 0.2% 732 American Water Works Co., Inc. 66,444 -------------- WIRELESS TELECOMMUNICATION SERVICES -- 0.2% 1,085 T-Mobile US, Inc. (a) 69,017 -------------- TOTAL INVESTMENTS -- 99.8% 34,967,446 (Cost $37,293,056) (b) NET OTHER ASSETS AND LIABILITIES -- 0.2% 74,403 -------------- NET ASSETS -- 100.0% $ 35,041,849 ============== (a) Non-income producing security. (b) Aggregate cost for federal income tax purposes is $37,454,486. As of December 31, 2018, the aggregate gross unrealized appreciation for all investments in which there was an excess of value over tax cost was $1,685,622 and the aggregate gross unrealized depreciation for all investments in which there was an excess of tax cost over value was $4,172,662. The net unrealized depreciation was $2,487,040. ----------------------------- VALUATION INPUTS A summary of the inputs used to value the Fund's investments as of December 31, 2018 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial Statements): Level 1 - Quoted Prices Level 2 - Other Significant Observable Inputs Level 3 - Significant Unobservable Inputs LEVEL 1 LEVEL 2 LEVEL 3 ----------------------------------------------------- Common Stocks* $ 34,967,446 $ -- $ -- ===================================================== * See Portfolio of Investments for industry breakout. See Notes to Financial Statements Page 35 FIRST TRUST DOW 30 EQUAL WEIGHT ETF (EDOW) PORTFOLIO OF INVESTMENTS DECEMBER 31, 2018 SHARES DESCRIPTION VALUE ------------------------------------------------------------- COMMON STOCKS -- 99.9% AEROSPACE & DEFENSE -- 6.6% 1,390 Boeing (The) Co. $ 448,275 3,728 United Technologies Corp. 396,957 -------------- 845,232 -------------- BANKS -- 3.4% 4,417 JPMorgan Chase & Co. 431,188 -------------- BEVERAGES -- 3.3% 8,977 Coca-Cola (The) Co. 425,061 -------------- CAPITAL MARKETS -- 3.3% 2,564 Goldman Sachs Group (The), Inc. 428,316 -------------- CHEMICALS -- 3.5% 8,392 DowDuPont, Inc. 448,804 -------------- COMMUNICATIONS EQUIPMENT -- 3.3% 9,667 Cisco Systems, Inc. 418,871 -------------- CONSUMER FINANCE -- 3.1% 4,191 American Express Co. 399,486 -------------- DIVERSIFIED TELECOMMUNICATION SERVICES -- 3.4% 7,760 Verizon Communications, Inc. 436,267 -------------- ENTERTAINMENT -- 3.4% 3,948 Walt Disney (The) Co. 432,898 -------------- FOOD & STAPLES RETAILING -- 6.5% 5,625 Walgreens Boots Alliance, Inc. 384,356 4,822 Walmart, Inc. 449,170 -------------- 833,526 -------------- HEALTH CARE PROVIDERS & SERVICES -- 3.2% 1,671 UnitedHealth Group, Inc. 416,280 -------------- HOTELS, RESTAURANTS & LEISURE -- 3.3% 2,417 McDonald's Corp. 429,187 -------------- HOUSEHOLD PRODUCTS -- 3.3% 4,583 Procter & Gamble (The) Co. 421,269 -------------- INDUSTRIAL CONGLOMERATES -- 3.3% 2,259 3M Co. 430,430 -------------- INSURANCE -- 3.4% 3,674 Travelers (The) Cos., Inc. 439,962 -------------- IT SERVICES -- 6.6% 3,694 International Business Machines Corp. 419,897 3,279 Visa, Inc., Class A 432,631 -------------- 852,528 -------------- MACHINERY -- 3.5% 3,494 Caterpillar, Inc. 443,983 -------------- OIL, GAS & CONSUMABLE FUELS -- 6.4% 3,891 Chevron Corp. 423,302 5,861 Exxon Mobil Corp. 399,661 -------------- 822,963 -------------- SHARES DESCRIPTION VALUE ------------------------------------------------------------- PHARMACEUTICALS -- 10.2% 3,330 Johnson & Johnson $ 429,737 5,792 Merck & Co., Inc. 442,567 10,113 Pfizer, Inc. 441,432 -------------- 1,313,736 -------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT -- 3.4% 9,255 Intel Corp. 434,337 -------------- SOFTWARE -- 3.3% 4,178 Microsoft Corp. 424,359 -------------- SPECIALTY RETAIL -- 3.4% 2,571 Home Depot (The), Inc. 441,749 -------------- TECHNOLOGY HARDWARE, STORAGE & PERIPHERALS -- 3.3% 2,677 Apple, Inc. 422,270 -------------- TEXTILES, APPAREL & LUXURY GOODS -- 3.5% 6,107 NIKE, Inc., Class B 452,773 -------------- TOTAL INVESTMENTS -- 99.9% 12,845,475 (Cost $14,304,771) (a) NET OTHER ASSETS AND LIABILITIES -- 0.1% 13,368 -------------- NET ASSETS -- 100.0% $ 12,858,843 ============== (a) Aggregate cost for federal income tax purposes is $14,357,754. As of December 31, 2018, the aggregate gross unrealized appreciation for all investments in which there was an excess of value over tax cost was $0 and the aggregate gross unrealized depreciation for all investments in which there was an excess of tax cost over value was $1,512,279. The net unrealized depreciation was $1,512,279. ----------------------------- VALUATION INPUTS A summary of the inputs used to value the Fund's investments as of December 31, 2018 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial Statements): Level 1 - Quoted Prices Level 2 - Other Significant Observable Inputs Level 3 - Significant Unobservable Inputs LEVEL 1 LEVEL 2 LEVEL 3 ----------------------------------------------------- Common Stocks* $ 12,845,475 $ -- $ -- ===================================================== * See Portfolio of Investments for industry breakout. Page 36 See Notes to Financial Statements FIRST TRUST LUNT U.S. FACTOR ROTATION ETF (FCTR) PORTFOLIO OF INVESTMENTS DECEMBER 31, 2018 SHARES DESCRIPTION VALUE ------------------------------------------------------------- COMMON STOCKS -- 99.8% AEROSPACE & DEFENSE -- 0.6% 216 Boeing (The) Co. $ 69,660 2,358 Textron, Inc. 108,444 -------------- 178,104 -------------- AIRLINES -- 0.4% 1,349 United Continental Holdings, Inc. (a) 112,952 -------------- AUTO COMPONENTS -- 1.0% 1,543 BorgWarner, Inc. 53,604 1,813 Lear Corp. 222,745 -------------- 276,349 -------------- AUTOMOBILES -- 1.5% 40,930 Ford Motor Co. 313,114 3,173 General Motors Co. 106,137 -------------- 419,251 -------------- BANKS -- 1.2% 3,004 Citizens Financial Group, Inc. 89,309 3,798 Fifth Third Bancorp 89,367 3,561 U.S. Bancorp 162,738 -------------- 341,414 -------------- BEVERAGES -- 1.0% 5,463 Keurig Dr Pepper, Inc. 140,071 2,601 Molson Coors Brewing Co., Class B 146,072 -------------- 286,143 -------------- BIOTECHNOLOGY -- 1.3% 1,626 Celgene Corp. (a) 104,211 4,087 Incyte Corp. (a) 259,892 -------------- 364,103 -------------- CAPITAL MARKETS -- 5.5% 2,098 Bank of New York Mellon (The) Corp. 98,753 305 BlackRock, Inc. 119,810 437 CME Group, Inc. 82,209 4,197 Franklin Resources, Inc. 124,483 976 Intercontinental Exchange, Inc. 73,522 16,366 Invesco Ltd. 273,967 1,105 MSCI, Inc. 162,910 821 Nasdaq, Inc. 66,969 1,692 Northern Trust Corp. 141,434 1,183 S&P Global, Inc. 201,039 876 State Street Corp. 55,249 1,529 T. Rowe Price Group, Inc. 141,157 -------------- 1,541,502 -------------- CHEMICALS -- 2.5% 1,095 Air Products and Chemicals, Inc. 175,255 670 Eastman Chemical Co. 48,984 1,357 Ecolab, Inc. 199,954 352 Sherwin-Williams (The) Co. 138,498 2,092 Westlake Chemical Corp. 138,427 -------------- 701,118 -------------- SHARES DESCRIPTION VALUE ------------------------------------------------------------- COMMERCIAL SERVICES & SUPPLIES -- 2.7% 784 Cintas Corp. $ 131,704 3,936 Republic Services, Inc. 283,746 4,013 Waste Management, Inc. 357,117 -------------- 772,567 -------------- COMMUNICATIONS EQUIPMENT -- 0.8% 489 F5 Networks, Inc. (a) 79,233 1,349 Motorola Solutions, Inc. 155,189 -------------- 234,422 -------------- CONSTRUCTION & ENGINEERING -- 0.3% 1,545 Jacobs Engineering Group, Inc. 90,321 -------------- CONSTRUCTION MATERIALS -- 0.4% 645 Martin Marietta Materials, Inc. 110,856 -------------- CONSUMER FINANCE -- 0.7% 4,405 Ally Financial, Inc. 99,817 1,366 Capital One Financial Corp. 103,256 -------------- 203,073 -------------- CONTAINERS & PACKAGING -- 0.4% 3,318 WestRock Co. 125,288 -------------- DISTRIBUTORS -- 1.0% 1,810 Genuine Parts Co. 173,796 4,010 LKQ Corp. (a) 95,157 -------------- 268,953 -------------- DIVERSIFIED FINANCIAL SERVICES -- 1.5% 7,773 AXA Equitable Holdings, Inc. 129,265 1,377 Berkshire Hathaway, Inc., Class B (a) 281,156 -------------- 410,421 -------------- DIVERSIFIED TELECOMMUNICATION SERVICES -- 0.8% 4,931 AT&T, Inc. 140,731 5,931 CenturyLink, Inc. 89,854 -------------- 230,585 -------------- ELECTRIC UTILITIES -- 1.8% 2,780 Exelon Corp. 125,378 1,733 NextEra Energy, Inc. 301,230 1,547 Southern (The) Co. 67,944 -------------- 494,552 -------------- ELECTRICAL EQUIPMENT -- 1.0% 4,287 AMETEK, Inc. 290,230 -------------- ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS -- 0.8% 1,893 Amphenol Corp., Class A 153,371 1,006 CDW Corp. 81,536 -------------- 234,907 -------------- See Notes to Financial Statements Page 37 FIRST TRUST LUNT U.S. FACTOR ROTATION ETF (FCTR) PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2018 SHARES DESCRIPTION VALUE ------------------------------------------------------------- COMMON STOCKS (CONTINUED) ENERGY EQUIPMENT & SERVICES -- 0.8% 3,638 Baker Hughes a GE Co. $ 78,217 3,245 Halliburton Co. 86,252 1,777 Schlumberger Ltd. 64,114 -------------- 228,583 -------------- ENTERTAINMENT -- 1.1% 4,795 Viacom, Inc., Class B 123,231 1,620 Walt Disney (The) Co. 177,633 -------------- 300,864 -------------- EQUITY REAL ESTATE INVESTMENT TRUSTS -- 5.5% 2,334 American Tower Corp. 369,216 1,597 Crown Castle International Corp. 173,482 1,428 Digital Realty Trust, Inc. 152,153 721 Essex Property Trust, Inc. 176,797 810 Extra Space Storage, Inc. 73,289 1,849 Mid-America Apartment Communities, Inc. 176,949 3,370 Realty Income Corp. 212,445 960 Simon Property Group, Inc. 161,270 2,328 Weyerhaeuser Co. 50,890 -------------- 1,546,491 -------------- FOOD & STAPLES RETAILING -- 1.0% 6,160 Kroger (The) Co. 169,400 1,743 Walgreens Boots Alliance, Inc. 119,099 -------------- 288,499 -------------- FOOD PRODUCTS -- 5.4% 7,757 Archer-Daniels-Midland Co. 317,804 2,170 Bunge Ltd. 115,965 4,119 Campbell Soup Co. 135,886 2,532 General Mills, Inc. 98,596 1,668 Hershey (The) Co. 178,776 1,138 J.M. Smucker (The) Co. 106,392 5,980 Kraft Heinz (The) Co. 257,379 5,648 Tyson Foods, Inc., Class A 301,603 -------------- 1,512,401 -------------- HEALTH CARE EQUIPMENT & SUPPLIES -- 3.9% 2,438 Abbott Laboratories 176,341 2,236 Baxter International, Inc. 147,174 692 Becton, Dickinson and Co. 155,921 1,636 Danaher Corp. 168,704 7,708 DENTSPLY SIRONA, Inc. 286,815 1,514 Zimmer Biomet Holdings, Inc. 157,032 -------------- 1,091,987 -------------- HEALTH CARE PROVIDERS & SERVICES -- 4.3% 1,491 AmerisourceBergen Corp. 110,930 2,772 Cardinal Health, Inc. 123,631 1,730 CVS Health Corp. 113,350 2,028 Laboratory Corp. of America Holdings (a) 256,258 SHARES DESCRIPTION VALUE ------------------------------------------------------------- HEALTH CARE PROVIDERS & SERVICES (CONTINUED) 1,456 McKesson Corp. $ 160,844 1,541 Quest Diagnostics, Inc. 128,319 1,323 UnitedHealth Group, Inc. 329,586 -------------- 1,222,918 -------------- HOTELS, RESTAURANTS & LEISURE -- 3.7% 2,601 Las Vegas Sands Corp. 135,382 1,810 McDonald's Corp. 321,402 4,558 MGM Resorts International 110,577 1,515 Wynn Resorts Ltd. 149,849 4,153 Yum China Holdings, Inc. 139,250 2,086 Yum! Brands, Inc. 191,745 -------------- 1,048,205 -------------- HOUSEHOLD DURABLES -- 4.3% 2,752 D.R. Horton, Inc. 95,384 3,636 Garmin Ltd. 230,232 5,199 Lennar Corp., Class A 203,541 1,317 Mohawk Industries, Inc. (a) 154,036 25,927 Newell Brands, Inc. 481,983 25 NVR, Inc. (a) 60,925 -------------- 1,226,101 -------------- HOUSEHOLD PRODUCTS -- 1.1% 532 Clorox (The) Co. 82,002 2,387 Procter & Gamble (The) Co. 219,413 -------------- 301,415 -------------- INDUSTRIAL CONGLOMERATES -- 2.2% 752 3M Co. 143,286 22,796 General Electric Co. 172,565 1,140 Honeywell International, Inc. 150,617 588 Roper Technologies, Inc. 156,714 -------------- 623,182 -------------- INSURANCE -- 10.1% 9,013 Aflac, Inc. 410,632 1,453 Allstate (The) Corp. 120,061 6,126 Arch Capital Group Ltd. (a) 163,687 2,707 Arthur J. Gallagher & Co. 199,506 836 Chubb Ltd. 107,994 2,354 Cincinnati Financial Corp. 182,247 2,360 Hartford Financial Services Group (The), Inc. 104,902 3,209 Lincoln National Corp. 164,654 3,849 Loews Corp. 175,207 172 Markel Corp. (a) 178,545 4,641 MetLife, Inc. 190,559 3,227 Principal Financial Group, Inc. 142,537 3,688 Progressive (The) Corp. 222,497 2,553 Prudential Financial, Inc. 208,197 2,243 Torchmark Corp. 167,171 879 Travelers (The) Cos., Inc. 105,260 -------------- 2,843,656 -------------- Page 38 See Notes to Financial Statements FIRST TRUST LUNT U.S. FACTOR ROTATION ETF (FCTR) PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2018 SHARES DESCRIPTION VALUE ------------------------------------------------------------- COMMON STOCKS (CONTINUED) INTERACTIVE MEDIA & SERVICES -- 1.5% 564 Facebook, Inc., Class A (a) $ 73,935 47,637 Snap, Inc., Class A (a) 262,480 2,969 Zillow Group, Inc., Class C (a) 93,761 -------------- 430,176 -------------- INTERNET & DIRECT MARKETING RETAIL -- 0.4% 3,496 eBay, Inc. (a) 98,133 -------------- IT SERVICES -- 7.9% 461 Accenture PLC, Class A 65,006 332 Alliance Data Systems Corp. 49,827 1,216 Automatic Data Processing, Inc. 159,442 4,788 Fidelity National Information Services, Inc. 491,009 3,969 Fiserv, Inc. (a) 291,682 2,340 Jack Henry & Associates, Inc. 296,057 1,616 Mastercard, Inc., Class A 304,858 5,214 Paychex, Inc. 339,692 1,914 Total System Services, Inc. 155,589 592 Visa, Inc., Class A 78,108 -------------- 2,231,270 -------------- LIFE SCIENCES TOOLS & SERVICES -- 0.2% 123 Mettler-Toledo International, Inc. (a) 69,566 -------------- METALS & MINING -- 1.6% 16,649 Freeport-McMoRan, Inc. 171,651 5,499 Newmont Mining Corp. 190,540 1,871 Nucor Corp. 96,937 -------------- 459,128 -------------- MORTGAGE REAL ESTATE INVESTMENT TRUSTS -- 1.1% 30,786 Annaly Capital Management, Inc. 302,318 -------------- MULTILINE RETAIL -- 0.8% 820 Dollar Tree, Inc. (a) 74,063 5,413 Macy's, Inc. 161,199 -------------- 235,262 -------------- MULTI-UTILITIES -- 0.6% 2,633 WEC Energy Group, Inc. 182,362 -------------- OIL, GAS & CONSUMABLE FUELS -- 1.5% 4,746 Cabot Oil & Gas Corp. 106,073 5,872 EQT Corp. 110,922 1,693 Marathon Petroleum Corp. 99,904 1,294 Phillips 66 111,478 -------------- 428,377 -------------- PERSONAL PRODUCTS -- 0.4% 17,907 Coty, Inc., Class A 117,470 -------------- PHARMACEUTICALS -- 3.8% 1,614 Eli Lilly and Co. 186,772 1,258 Johnson & Johnson 162,345 SHARES DESCRIPTION VALUE ------------------------------------------------------------- PHARMACEUTICALS (CONTINUED) 2,381 Merck & Co., Inc. $ 181,932 1,536 Perrigo Co. PLC 59,520 4,375 Pfizer, Inc. 190,969 3,389 Zoetis, Inc. 289,895 -------------- 1,071,433 -------------- PROFESSIONAL SERVICES -- 1.6% 4,263 Verisk Analytics, Inc. (a) 464,838 -------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT -- 1.9% 6,503 Applied Materials, Inc. 212,908 1,262 Lam Research Corp. 171,847 1,131 Microchip Technology, Inc. 81,342 681 Texas Instruments, Inc. 64,354 -------------- 530,451 -------------- SOFTWARE -- 3.6% 327 Adobe, Inc. (a) 73,980 1,117 CDK Global, Inc. 53,482 1,774 Citrix Systems, Inc. 181,764 1,633 Intuit, Inc. 321,456 1,104 Red Hat, Inc. (a) 193,907 9,652 Symantec Corp. 182,375 -------------- 1,006,964 -------------- SPECIALTY RETAIL -- 0.5% 5,431 Gap (The), Inc. 139,903 -------------- TECHNOLOGY HARDWARE, STORAGE & PERIPHERALS -- 1.2% 12,686 Hewlett Packard Enterprise Co. 167,582 4,928 Western Digital Corp. 182,188 -------------- 349,770 -------------- TOBACCO -- 0.4% 1,601 Philip Morris International, Inc. 106,883 -------------- TRADING COMPANIES & DISTRIBUTORS -- 0.2% 1,296 Fastenal Co. 67,768 -------------- TOTAL COMMON STOCKS -- 99.8% 28,213,485 (Cost $31,169,703) -------------- MONEY MARKET FUNDS -- 0.6% 171,578 Morgan Stanley Institutional Liquidity Funds - Treasury Portfolio - Institutional Class - 2.33% (b) 171,578 (Cost $171,578) -------------- TOTAL INVESTMENTS -- 100.4% 28,385,063 (Cost $31,341,281) (c) NET OTHER ASSETS AND LIABILITIES -- (0.4)% (116,560) -------------- NET ASSETS -- 100.0% $ 28,268,503 ============== See Notes to Financial Statements Page 39 FIRST TRUST LUNT U.S. FACTOR ROTATION ETF (FCTR) PORTFOLIO OF INVESTMENTS (CONTINUED) DECEMBER 31, 2018 (a) Non-income producing security. (b) Rate shown reflects yield as of December 31, 2018. (c) Aggregate cost for federal income tax purposes is $31,519,501. As of December 31, 2018, the aggregate gross unrealized appreciation for all investments in which there was an excess of value over tax cost was $300,661 and the aggregate gross unrealized depreciation for all investments in which there was an excess of tax cost over value was $3,435,099. The net unrealized depreciation was $3,134,438. ----------------------------- VALUATION INPUTS A summary of the inputs used to value the Fund's investments as of December 31, 2018 is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial Statements): Level 1 - Quoted Prices Level 2 - Other Significant Observable Inputs Level 3 - Significant Unobservable Inputs LEVEL 1 LEVEL 2 LEVEL 3 ----------------------------------------------------- Common Stocks* $ 28,213,485 $ -- $ -- Money Market Funds 171,578 -- -- ----------------------------------------------------- Total Investments $ 28,385,063 $ -- $ -- ===================================================== * See Portfolio of Investments for industry breakout. Page 40 See Notes to Financial Statements FIRST TRUST EXCHANGE-TRADED FUND STATEMENTS OF ASSETS AND LIABILITIES DECEMBER 31, 2018
FIRST TRUST FIRST TRUST FIRST TRUST FIRST TRUST TOTAL US MARKET DORSEY WRIGHT DOW 30 LUNT U.S. ALPHADEX(R) PEOPLE'S EQUAL WEIGHT FACTOR ROTATION ETF ETF PORTFOLIO ETF ETF (TUSA) (DWPP) (EDOW) (FCTR) ---------------- ---------------- ---------------- ---------------- ASSETS: Investments, at value............................... $ 13,292,293 $ 34,967,446 $ 12,845,475 $ 28,385,063 Cash................................................ -- 43,359 -- -- Receivables: Investment securities sold.................... 62,579 -- -- -- Dividends..................................... 20,292 49,570 43,233 47,949 Securities lending income..................... 6,046 -- -- -- From investment advisor....................... 5,514 -- -- -- Prepaid expenses.................................... 7,630 -- -- -- -------------- -------------- -------------- -------------- Total Assets.................................. 13,394,354 35,060,375 12,888,708 28,433,012 -------------- -------------- -------------- -------------- LIABILITIES: Due to custodian.................................... 53,055 -- 15,249 148,320 Due to securities lending agent..................... 93 -- -- -- Payables: Investment advisory fees...................... -- 18,526 14,616 16,189 Collateral for securities on loan............. 78,333 -- -- -- Audit and tax fees............................ 22,925 -- -- -- Shareholder reporting fees.................... 9,938 -- -- -- Licensing fees................................ 732 -- -- -- Trustees' fees................................ 55 -- -- -- Other liabilities................................... 77,933 -- -- -- -------------- -------------- -------------- -------------- Total Liabilities............................. 243,064 18,526 29,865 164,509 -------------- -------------- -------------- -------------- NET ASSETS.......................................... $ 13,151,290 $ 35,041,849 $ 12,858,843 $ 28,268,503 ============== ============== ============== ============== NET ASSETS CONSIST OF: Paid-in capital..................................... $ 15,500,509 $ 38,607,435 $ 14,428,908 $ 33,050,332 Par value........................................... 4,500 13,500 6,000 16,000 Accumulated distributable earnings (loss)........... (2,353,719) (3,579,086) (1,576,065) (4,797,829) -------------- -------------- -------------- -------------- NET ASSETS.......................................... $ 13,151,290 $ 35,041,849 $ 12,858,843 $ 28,268,503 ============== ============== ============== ============== NET ASSET VALUE, per share.......................... $ 29.22 $ 25.96 $ 21.43 $ 17.67 ============== ============== ============== ============== Number of shares outstanding (unlimited number of shares authorized, par value $0.01 per share).... 450,002 1,350,002 600,002 1,600,002 ============== ============== ============== ============== Investments, at cost................................ $ 14,831,751 $ 37,293,056 $ 14,304,771 $ 31,341,281 ============== ============== ============== ============== Securities on loan, at value........................ $ 75,985 $ -- $ -- $ -- ============== ============== ============== ==============
See Notes to Financial Statements Page 41 FIRST TRUST EXCHANGE-TRADED FUND STATEMENTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2018
FIRST TRUST FIRST TRUST FIRST TRUST FIRST TRUST TOTAL US MARKET DORSEY WRIGHT DOW 30 LUNT U.S. ALPHADEX(R) PEOPLE'S EQUAL WEIGHT FACTOR ROTATION ETF ETF PORTFOLIO ETF ETF (TUSA) (DWPP) (EDOW) (FCTR) (a) ---------------- ---------------- ---------------- ---------------- INVESTMENT INCOME: Dividends........................................... $ 258,875 $ 608,966 $ 298,877 $ 265,938 Securities lending income (net of fees)............. 9,320 -- -- -- Foreign withholding tax............................. (19) -- -- (464) -------------- -------------- -------------- -------------- Total investment income....................... 268,176 608,966 298,877 265,474 -------------- -------------- -------------- -------------- EXPENSES: Investment advisory fees............................ 77,425 203,932 (b) 52,765 (b) 80,837 (b) Custodian fees...................................... 73,602 -- -- -- Audit and tax fees.................................. 23,131 -- -- -- Listing fees........................................ 17,512 -- -- -- Accounting and administration fees.................. 15,210 -- -- -- Shareholder reporting fees.......................... 12,436 -- -- -- Licensing fees...................................... 10,596 -- -- -- Trustees' fees and expenses......................... 6,974 -- -- -- Legal fees.......................................... 842 -- -- -- Transfer agent fees................................. 774 -- -- -- Registration and filing fees........................ (14) -- -- -- Other expenses...................................... 5,240 -- -- -- -------------- -------------- -------------- -------------- Total expenses................................ 243,728 203,932 52,765 80,837 Less fees waived and expenses reimbursed by the investment advisor..................... (135,446) -- -- -- -------------- -------------- -------------- -------------- Net expenses.................................. 108,282 203,932 52,765 80,837 -------------- -------------- -------------- -------------- NET INVESTMENT INCOME (LOSS)........................ 159,894 405,034 246,112 184,637 -------------- -------------- -------------- -------------- REALIZED AND UNREALIZED GAIN (LOSS): Net realized gain (loss) on: Investments................................... (105,349) (193,846) (182,280) (1,898,570) In-kind redemptions........................... 1,826,565 972,996 (758,833) 1,151,628 -------------- -------------- -------------- -------------- Net realized gain (loss)............................ 1,721,216 779,150 (941,113) (746,942) Net change in unrealized appreciation (depreciation) on investments................................... (3,291,223) (4,614,714) (1,522,609) (2,956,218) -------------- -------------- -------------- -------------- NET REALIZED AND UNREALIZED GAIN (LOSS)...................................... (1,570,007) (3,835,564) (2,463,722) (3,703,160) -------------- -------------- -------------- -------------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS........................ $ (1,410,113) $ (3,430,530) $ (2,217,610) $ (3,518,523) ============== ============== ============== ==============
(a) Inception date is July 25, 2018, which is consistent with the commencement of investment operations and is the date the initial creation units were established. (b) Fund is subject to a Unitary Fee (see Note 3 in the Notes to Financial Statements). Page 42 See Notes to Financial Statements FIRST TRUST EXCHANGE-TRADED FUND STATEMENTS OF CHANGES IN NET ASSETS
FIRST TRUST FIRST TRUST TOTAL US MARKET DORSEY WRIGHT ALPHADEX(R) PEOPLE'S ETF PORTFOLIO ETF (TUSA) (DWPP) ------------------------------- ------------------------------- Year Ended Year Ended Year Ended Year Ended 12/31/2018 12/31/2017 12/31/2018 12/31/2017 -------------- -------------- -------------- -------------- OPERATIONS: Net investment income (loss)................................ $ 159,894 $ 97,872 $ 405,034 $ 161,735 Net realized gain (loss).................................... 1,721,216 639,673 779,150 1,618,196 Net change in unrealized appreciation (depreciation).. (3,291,223) 1,270,377 (4,614,714) 1,449,469 -------------- -------------- -------------- -------------- Net increase (decrease) in net assets resulting from operations.......................................... (1,410,113) 2,007,922 (3,430,530) 3,229,400 -------------- -------------- -------------- -------------- DISTRIBUTIONS TO SHAREHOLDERS FROM: Investment operations....................................... (155,286) (417,641) -------------- -------------- Net investment income....................................... (103,705) (163,136) -------------- -------------- SHAREHOLDER TRANSACTIONS: Proceeds from shares sold................................... 8,707,553 7,703,270 14,676,039 30,201,881 Cost of shares redeemed..................................... (8,774,262) (3,145,475) (5,857,923) (6,765,642) -------------- -------------- -------------- -------------- Net increase (decrease) in net assets resulting from shareholder transactions............................ (66,709) 4,557,795 8,818,116 23,436,239 -------------- -------------- -------------- -------------- Total increase (decrease) in net assets..................... (1,632,108) 6,462,012 4,969,945 26,502,503 NET ASSETS: Beginning of period......................................... 14,783,398 8,321,386 30,071,904 3,569,401 -------------- -------------- -------------- -------------- End of period............................................... $ 13,151,290 $ 14,783,398 $ 35,041,849 $ 30,071,904 ============== ============== ============== ============== Accumulated net investment income (loss) at end of period......................................... $ (256) $ -- ============== ============== CHANGES IN SHARES OUTSTANDING: Shares outstanding, beginning of period..................... 450,002 300,002 1,050,002 150,002 Shares sold................................................. 250,000 250,000 500,000 1,150,000 Shares redeemed............................................. (250,000) (100,000) (200,000) (250,000) -------------- -------------- -------------- -------------- Shares outstanding, end of period........................... 450,002 450,002 1,350,002 1,050,002 ============== ============== ============== ==============
See Notes to Financial Statements Page 43 FIRST TRUST EXCHANGE-TRADED FUND STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
FIRST TRUST FIRST TRUST DOW 30 LUNT U.S. EQUAL WEIGHT FACTOR ROTATION ETF ETF (EDOW) (FCTR) ------------------------------- -------------- Year Ended Period Ended Period Ended 12/31/2018 12/31/2017 (a) 12/31/2018 (a) -------------- -------------- -------------- OPERATIONS: Net investment income (loss)................................ $ 246,112 $ 16,796 $ 184,637 Net realized gain (loss).................................... (941,113) 150,879 (746,942) Net change in unrealized appreciation (depreciation)........ (1,522,609) 63,313 (2,956,218) -------------- -------------- -------------- Net increase (decrease) in net assets resulting from operations.......................................... (2,217,610) 230,988 (3,518,523) -------------- -------------- -------------- DISTRIBUTIONS TO SHAREHOLDERS FROM: Investment operations....................................... (235,451) (184,170) -------------- -------------- Net investment income....................................... (16,690) -------------- SHAREHOLDER TRANSACTIONS: Proceeds from shares sold................................... 69,038,254 4,099,141 51,620,840 Cost of shares redeemed..................................... (55,926,566) (2,113,223) (19,649,644) -------------- -------------- -------------- Net increase (decrease) in net assets resulting from shareholder transactions............................ 13,111,688 1,985,918 31,971,196 -------------- -------------- -------------- Total increase (decrease) in net assets..................... 10,658,627 2,200,216 28,268,503 NET ASSETS: Beginning of period......................................... 2,200,216 -- -- -------------- -------------- -------------- End of period............................................... $ 12,858,843 $ 2,200,216 $ 28,268,503 ============== ============== ============== Accumulated net investment income (loss) at end of period......................................... $ 106 ============== CHANGES IN SHARES OUTSTANDING: Shares outstanding, beginning of period..................... 100,002 -- -- Shares sold................................................. 3,050,000 200,002 2,550,002 Shares redeemed............................................. (2,550,000) (100,000) (950,000) -------------- -------------- -------------- Shares outstanding, end of period........................... 600,002 100,002 1,600,002 ============== ============== ==============
(a) Inception dates for EDOW and FCTR are August 8, 2017 and July 25, 2018, respectively, which are consistent with the respective Fund's commencement of investment operations and are the dates the initial creation units were established. Page 44 See Notes to Financial Statements FIRST TRUST EXCHANGE-TRADED FUND FINANCIAL HIGHLIGHTS FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
FIRST TRUST TOTAL US MARKET ALPHADEX(R) ETF (TUSA) YEAR ENDED DECEMBER 31, ------------------------------------------------------------------------ 2018 2017 2016 2015 2014 ------------ ------------ ------------ ------------ ------------ Net asset value, beginning of period $ 32.85 $ 27.74 $ 24.34 $ 26.13 $ 25.80 ------------ ------------ ------------ ------------ ------------ INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) 0.34 0.25 0.32 0.22 0.27 Net realized and unrealized gain (loss) (3.64) 5.12 3.43 (1.78) 0.34 ------------ ------------ ------------ ------------ ------------ Total from investment operations (3.30) 5.37 3.75 (1.56) 0.61 ------------ ------------ ------------ ------------ ------------ DISTRIBUTIONS PAID TO SHAREHOLDERS FROM: Net investment income (0.33) (0.26) (0.35) (0.23) (0.28) ------------ ------------ ------------ ------------ ------------ Net asset value, end of period $ 29.22 $ 32.85 $ 27.74 $ 24.34 $ 26.13 ============ ============ ============ ============ ============ TOTAL RETURN (a) (10.13)% 19.44% 15.48% (5.99)% 2.36% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in 000's) $ 13,151 $ 14,783 $ 8,321 $ 8,518 $ 5,225 RATIOS TO AVERAGE NET ASSETS: Ratio of total expenses to average net assets 1.57% 1.69% 1.96% 1.97% 3.17% Ratio of net expenses to average net assets 0.70% 0.70% 0.70% 0.70% 0.70% Ratio of net investment income (loss) to average net assets 1.03% 0.88% 1.17% 0.96% 1.05% Portfolio turnover rate (b) 110% 112% 113% 170% 183% FIRST TRUST DORSEY WRIGHT PEOPLE'S PORTFOLIO ETF (DWPP) YEAR ENDED DECEMBER 31, -------------------------------------------------------------------------- 2018 2017 2016 2015 2014 ------------ ------------ ------------ ------------ ------------ Net asset value, beginning of period $ 28.64 $ 23.80 $ 24.07 $ 25.97 $ 22.86 ------------ ------------ ------------ ------------ ------------ INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) 0.33 0.30 0.38 0.37 0.34 Net realized and unrealized gain (loss) (2.67) 4.84 (0.25) (1.89) 3.11 ------------ ------------ ------------ ------------ ------------ Total from investment operations (2.34) 5.14 0.13 (1.52) 3.45 ------------ ------------ ------------ ------------ ------------ DISTRIBUTIONS PAID TO SHAREHOLDERS FROM: Net investment income (0.34) (0.30) (0.40) (0.38) (0.34) ------------ ------------ ------------ ------------ ------------ Net asset value, end of period $ 25.96 $ 28.64 $ 23.80 $ 24.07 $ 25.97 ============ ============ ============ ============ ============ TOTAL RETURN (a) (8.26)% 21.71% 0.54% (5.88)% 15.22% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in 000's) $ 35,042 $ 30,072 $ 3,569 $ 3,610 $ 3,895 RATIOS TO AVERAGE NET ASSETS: Ratio of total expenses to average net assets 0.60% 0.60% 0.60% 0.60% 0.60% Ratio of net expenses to average net assets 0.60% 0.60% 0.60% 0.60% 0.60% Ratio of net investment income (loss) to average net assets 1.19% 1.29% 1.59% 1.46% 1.42% Portfolio turnover rate (b) 32% 30% (c) 4% 7% 7%
(a) Total return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all distributions at net asset value during the period, and redemption at net asset value on the last day of the period. The returns presented do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. Total return is calculated for the time period presented and is not annualized for periods of less than a year. The total returns for First Trust Total US Market AlphaDEX(R) ETF would have been lower if certain fees had not been waived and expenses reimbursed by the investment advisor. (b) Portfolio turnover is calculated for the time period presented and is not annualized for periods of less than a year and does not include securities received or delivered from processing creations or redemptions and in-kind transactions. (c) The variation in the portfolio turnover rate is due to the change in the Fund's underlying index effective August 18, 2017, which resulted in a complete rebalance of the Fund's portfolio. See Notes to Financial Statements Page 45 FIRST TRUST EXCHANGE-TRADED FUND FINANCIAL HIGHLIGHTS (CONTINUED) FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
FIRST TRUST DOW 30 EQUAL WEIGHT ETF (EDOW) YEAR ENDED PERIOD ENDED 12/31/2018 12/31/2017 (a) ------------ ------------ Net asset value, beginning of period $ 22.00 $ 19.97 ------------ ------------ INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) 0.40 0.17 Net realized and unrealized gain (loss) (0.58) 2.03 ------------ ------------ Total from investment operations (0.18) 2.20 ------------ ------------ DISTRIBUTIONS PAID TO SHAREHOLDERS FROM: Net investment income (0.39) (0.17) ------------ ------------ Net asset value, end of period $ 21.43 $ 22.00 ============ ============ TOTAL RETURN (b) (0.88)% 11.02% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in 000's) $ 12,859 $ 2,200 RATIOS TO AVERAGE NET ASSETS: Ratio of total expenses to average net assets 0.50% 0.50% (c) Ratio of net expenses to average net assets 0.50% 0.50% (c) Ratio of net investment income (loss) to average net assets 2.33% 1.99% (c) Portfolio turnover rate (d) 16% 20% FIRST TRUST LUNT U.S. FACTOR ROTATION ETF (FCTR) PERIOD ENDED 12/31/2018 (a) ------------ Net asset value, beginning of period $ 20.23 ------------ INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) 0.12 Net realized and unrealized gain (loss) (2.56) ------------ Total from investment operations (2.44) ------------ DISTRIBUTIONS PAID TO SHAREHOLDERS FROM: Net investment income (0.12) ------------ Net asset value, end of period $ 17.67 ============ TOTAL RETURN (b) (12.09)% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in 000's) $ 28,269 RATIOS TO AVERAGE NET ASSETS: Ratio of total expenses to average net assets 0.65% (c) Ratio of net expenses to average net assets 0.65% (c) Ratio of net investment income (loss) to average net assets 1.48% (c) Portfolio turnover rate (d) 183%
(a) Inception dates for EDOW and FCTR are August 8, 2017 and July 25, 2018, respectively, which are consistent with the respective Fund's commencement of investment operations and are the dates the initial creation units were established. (b) Total return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all distributions at net asset value during the period, and redemption at net asset value on the last day of the period. The returns presented do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. Total return is calculated for the time period presented and is not annualized for periods of less than a year. (c) Annualized. (d) Portfolio turnover is calculated for the time period presented and is not annualized for periods of less than a year and does not include securities received or delivered from processing creations or redemptions and in-kind transactions. Page 46 See Notes to Financial Statements -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND DECEMBER 31, 2018 1. ORGANIZATION First Trust Exchange-Traded Fund (the "Trust") is an open-end management investment company organized as a Massachusetts business trust on August 8, 2003, and is registered with the Securities and Exchange Commission under the Investment Company Act of 1940, as amended (the "1940 Act"). The Trust currently consists of twenty-one exchange-traded funds. This report covers the four funds listed below: First Trust Total US Market AlphaDEX(R) ETF - (The Nasdaq Stock Market LLC ("Nasdaq") ticker "TUSA") First Trust Dorsey Wright People's Portfolio ETF - (Nasdaq ticker "DWPP") First Trust Dow 30 Equal Weight ETF - (NYSE Arca, Inc. ("NYSE Arca") ticker "EDOW") First Trust Lunt U.S. Factor Rotation ETF - (Cboe BZX Exchange, Inc. ("Cboe BZX") ticker "FCTR")(1) (1) Commenced investment operations on July 25, 2018. Each fund represents a separate series of shares of beneficial interest in the Trust (each a "Fund" and collectively, the "Funds"). Unlike conventional mutual funds, each Fund issues and redeems shares on a continuous basis, at net asset value ("NAV"), only in large specified blocks consisting of 50,000 shares called a "Creation Unit." Creation Units are generally issued and redeemed in-kind for securities in which a Fund invests and, in certain circumstances, for cash, and only to and from broker-dealers and large institutional investors that have entered into participation agreements. Except when aggregated in Creation Units, each Fund's shares are not redeemable securities. The investment objective of each Fund is to seek investment results that correspond generally to the price and yield (before the Fund's fees and expenses) of the following indices:
FUND INDEX First Trust Total US Market AlphaDEX(R) ETF NASDAQ AlphaDEX(R) Total US Market Index First Trust Dorsey Wright People's Portfolio ETF Nasdaq Dorsey Wright People's Portfolio Index First Trust Dow 30 Equal Weight ETF Dow Jones Industrial Average(R) Equal Weight Index First Trust Lunt U.S. Factor Rotation ETF Lunt Capital Large Cap Factor Rotation Index
2. SIGNIFICANT ACCOUNTING POLICIES The Funds are each considered an investment company and follow accounting and reporting guidance under Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") Topic 946, "Financial Services-Investment Companies." The following is a summary of significant accounting policies consistently followed by the Funds in the preparation of the financial statements. The preparation of the financial statements in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates. A. PORTFOLIO VALUATION Each Fund's NAV is determined daily as of the close of regular trading on the New York Stock Exchange ("NYSE"), normally 4:00 p.m. Eastern time, on each day the NYSE is open for trading. If the NYSE closes early on a valuation day, the NAV is determined as of that time. Each Fund's NAV is calculated by dividing the value of all assets of each Fund (including accrued interest and dividends), less all liabilities (including accrued expenses and dividends declared but unpaid), by the total number of shares outstanding. Each Fund's investments are valued daily at market value or, in the absence of market value with respect to any portfolio securities, at fair value. Market value prices represent last sale or official closing prices from a national or foreign exchange (i.e., a regulated market) and are primarily obtained from third-party pricing services. Fair value prices represent any prices not considered market value prices and are either obtained from a third-party pricing service or are determined by the Pricing Committee of the Funds' investment advisor, First Trust Advisors L.P. ("First Trust" or the "Advisor"), in accordance with valuation procedures adopted by the Trust's Board of Trustees, and in accordance with provisions of the 1940 Act. Investments valued by the Advisor's Pricing Committee, if any, are footnoted as such in the footnotes to the Portfolio of Investments. Each Fund's investments are valued as follows: Common stocks and other equity securities listed on any national or foreign exchange (excluding Nasdaq and the London Stock Exchange Alternative Investment Market ("AIM")) are valued at the last sale price on the exchange on which they are principally traded or, for Nasdaq and AIM securities, the official closing price. Securities traded on more than one securities exchange are valued at the last sale price or official closing price, as applicable, at the close of the securities exchange representing the principal market for such securities. Shares of open-end funds are valued at fair value which is based on NAV per share. Page 47 -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND DECEMBER 31, 2018 Securities traded in an over-the-counter market are fair valued at the mean of their most recent bid and asked price, if available, and otherwise at their closing bid price. Overnight repurchase agreements are valued at amortized cost when it represents the best estimate of fair value. Certain securities may not be able to be priced by pre-established pricing methods. Such securities may be valued by the Trust's Board of Trustees or its delegate, the Advisor's Pricing Committee, at fair value. These securities generally include, but are not limited to, restricted securities (securities which may not be publicly sold without registration under the Securities Act of 1933, as amended) for which a third-party pricing service is unable to provide a market price; securities whose trading has been formally suspended; a security whose market or fair value price is not available from a pre-established pricing source; a security with respect to which an event has occurred that is likely to materially affect the value of the security after the market has closed but before the calculation of a Fund's NAV or make it difficult or impossible to obtain a reliable market quotation; and a security whose price, as provided by the third-party pricing service, does not reflect the security's fair value. As a general principle, the current fair value of a security would appear to be the amount which the owner might reasonably expect to receive for the security upon its current sale. When fair value prices are used, generally they will differ from market quotations or official closing prices on the applicable exchanges. A variety of factors may be considered in determining the fair value of such securities, including, but not limited to, the following: 1) the type of security; 2) the size of the holding; 3) the initial cost of the security; 4) transactions in comparable securities; 5) price quotes from dealers and/or third-party pricing services; 6) relationships among various securities; 7) information obtained by contacting the issuer, analysts, or the appropriate stock exchange; 8) an analysis of the issuer's financial statements; and 9) the existence of merger proposals or tender offers that might affect the value of the security. In addition, differences between the prices used to calculate a Fund's NAV and the prices used by such Fund's corresponding index could result in a difference between a Fund's performance and the performance of its underlying index. The Funds are subject to fair value accounting standards that define fair value, establish the framework for measuring fair value and provide a three-level hierarchy for fair valuation based upon the inputs to the valuation as of the measurement date. The three levels of the fair value hierarchy are as follows: o Level 1 - Level 1 inputs are quoted prices in active markets for identical investments. An active market is a market in which transactions for the investment occur with sufficient frequency and volume to provide pricing information on an ongoing basis. o Level 2 - Level 2 inputs are observable inputs, either directly or indirectly, and include the following: o Quoted prices for similar investments in active markets. o Quoted prices for identical or similar investments in markets that are non-active. A non-active market is a market where there are few transactions for the investment, the prices are not current, or price quotations vary substantially either over time or among market makers, or in which little information is released publicly. o Inputs other than quoted prices that are observable for the investment (for example, interest rates and yield curves observable at commonly quoted intervals, volatilities, prepayment speeds, loss severities, credit risks, and default rates). o Inputs that are derived principally from or corroborated by observable market data by correlation or other means. o Level 3 - Level 3 inputs are unobservable inputs. Unobservable inputs may reflect the reporting entity's own assumptions about the assumptions that market participants would use in pricing the investment. The inputs or methodologies used for valuing investments are not necessarily an indication of the risk associated with investing in those investments. A summary of the inputs used to value each Fund's investments as of December 31, 2018, is included with each Fund's Portfolio of Investments. B. SECURITIES TRANSACTIONS AND INVESTMENT INCOME Securities transactions are recorded as of the trade date. Realized gains and losses from securities transactions are recorded on the identified cost basis. Dividend income is recorded on the ex-dividend date. Interest income, if any, is recorded on the accrual basis. Withholding taxes and tax reclaims on foreign dividends have been provided for in accordance with each Fund's understanding of the applicable country's tax rules and rates. Page 48 -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND DECEMBER 31, 2018 Distributions received from a Fund's investments in real estate investment trusts ("REITs") may be comprised of return of capital, capital gains and income. The actual character of the amounts received during the year is not known until after the REITs' fiscal year end. A Fund records the character of distributions received from the REITs during the year based on estimates available. The characterization of distributions received by a Fund may be subsequently revised based on information received from the REITs after their tax reporting periods conclude. C. OFFSETTING ON THE STATEMENTS OF ASSETS AND LIABILITIES Offsetting Assets and Liabilities requires entities to disclose both gross and net information about instruments and transactions eligible for offset on the Statements of Assets and Liabilities, and disclose instruments and transactions subject to master netting or similar agreements. These disclosure requirements are intended to help investors and other financial statement users better assess the effect or potential effect of offsetting arrangements on a fund's financial position. The transactions subject to offsetting disclosures are derivative instruments, repurchase agreements and reverse repurchase agreements, and securities borrowing and securities lending transactions. This disclosure, if applicable, is included within each Fund's Portfolio of Investments under the heading "Offsetting Assets and Liabilities". For financial reporting purposes, the Funds do not offset financial assets and financial liabilities that are subject to master netting arrangements ("MNAs") or similar agreements on the Statements of Assets and Liabilities. MNAs provide the right, in the event of default (including bankruptcy and insolvency), for the non-defaulting counterparty to liquidate the collateral and calculate the net exposure to the defaulting party or request additional collateral. D. SECURITIES LENDING The Funds may lend securities representing up to 33 1/3% of the value of their total assets to broker-dealers, banks and other institutions to generate additional income. When a Fund loans its portfolio securities, it will receive, at the inception of each loan, collateral equal to at least 102% (for domestic securities) or 105% (for international securities) of the market value of the loaned securities. The collateral amount is valued at the beginning of each business day and is compared to the market value of the loaned securities from the prior business day to determine if additional collateral is required. If additional collateral is required, a request is sent to the borrower. Securities lending involves the risk that the Fund may lose money because the borrower of the Fund's loaned securities fails to return the securities in a timely manner or at all. The Fund could also lose money in the event of (i) a decline in the value of the collateral provided for the loaned securities, (ii) a decline in the value of any investments made with cash collateral or (iii) an increase in the value of the loaned securities if the borrower does not increase the collateral accordingly and the borrower fails to return the securities. These events could also trigger adverse tax consequences for the Funds. Under the Funds' Securities Lending Agency Agreement, the securities lending agent will generally bear the risk that a borrower may default on its obligation to return loaned securities. Brown Brothers Harriman & Co. ("BBH") acts as the Funds' securities lending agent and is responsible for executing the lending of the portfolio securities to creditworthy borrowers. The Funds, however, will be responsible for the risks associated with the investment of cash collateral. A Fund may lose money on its investment of cash collateral, which may affect its ability to repay the collateral to the borrower without the use of other Fund assets. Each Fund that engages in securities lending receives compensation (net of any rebate and securities lending agent fees) for lending its securities. Compensation can be in the form of fees received from the securities lending agent or dividends or interest earned from the investment of cash collateral. The fees received from the securities lending agent are accrued daily. The dividend and interest earned on the securities loaned is accounted for in the same manner as other dividend and interest income. At December 31, 2018, only TUSA had securities in the securities lending program. In the event of a default by a borrower with respect to any loan, BBH will exercise any and all remedies provided under the applicable borrower agreement to make the Funds whole. These remedies include purchasing replacement securities by applying the collateral held from the defaulting broker against the purchase cost of the replacement securities. If, despite such efforts by BBH to exercise these remedies, a Fund sustains losses as a result of a borrower's default, BBH will indemnify the Fund by purchasing replacement securities at its own expense, or paying the Fund an amount equal to the market value of the replacement securities, subject to certain limitations which are set forth in detail in the Securities Lending Agency Agreement between the Trust on behalf of the Funds and BBH. E. REPURCHASE AGREEMENTS Repurchase agreements involve the purchase of securities subject to the seller's agreement to repurchase the securities at a mutually agreed upon date and price, under the terms of a Master Repurchase Agreement ("MRA"). During the term of a repurchase agreement, the value of the underlying securities held as collateral on behalf of a Fund, including accrued interest, is required to exceed the value of the repurchase agreement, including accrued interest. The underlying securities for all repurchase agreements are held at the Funds' custodian or designated sub-custodians under tri-party repurchase agreements. Page 49 -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND DECEMBER 31, 2018 MRAs govern transactions between a Fund and select counterparties. The MRAs contain provisions for, among other things, initiation, income payments, events of default, and maintenance of collateral for repurchase agreements. Repurchase agreements received for lending securities are collateralized by U.S. Treasury securities. The U.S. Treasury securities are held in a joint custody account at BBH on behalf of the Funds participating in the securities lending program. In the event the counterparty defaults on the repurchase agreement, the U.S. Treasury securities can either be maintained as part of a Fund's portfolio or sold for cash. A Fund could suffer a loss to the extent that the proceeds from the sale of the underlying collateral held by the Fund is less than the repurchase price and the Fund's costs associated with the delay and enforcement of the MRA. While the Funds may invest in repurchase agreements, any repurchase agreements held by the Funds during the fiscal period ended December 31, 2018, were received as collateral for lending securities. F. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS Dividends from net investment income of each Fund, if any, are declared and paid quarterly or as the Board of Trustees may determine from time to time. Distributions of net realized gains earned by each Fund, if any, are distributed at least annually. Distributions from net investment income and realized capital gains are determined in accordance with federal income tax regulations, which may differ from U.S. GAAP. Certain capital accounts in the financial statements are periodically adjusted for permanent differences in order to reflect their tax character. These permanent differences are primarily due to the varying treatment of income and gain/loss on portfolio securities held by the Funds and have no impact on net assets or NAV per share. Temporary differences, which arise from recognizing certain items of income, expense and gain/loss in different periods for financial statement and tax purposes, will reverse at some time in the future. The tax character of distributions paid by each Fund during the fiscal period ended December 31, 2018 was as follows:
Distributions Distributions Distributions paid paid paid from Ordinary from Capital from Return Income Gains of Capital ------------------ ---------------- ----------------- First Trust Total US Market AlphaDEX(R) ETF $ 155,286 $ -- $ -- First Trust Dorsey Wright People's Portfolio ETF 417,641 -- -- First Trust Dow 30 Equal Weight ETF 235,451 -- -- First Trust Lunt U.S. Factor Rotation ETF 184,170 -- --
The tax character of distributions paid by each Fund during the fiscal period ended December 31, 2017 was as follows:
Distributions Distributions Distributions paid paid paid from Ordinary from Capital from Return Income Gains of Capital ------------------ ---------------- ----------------- First Trust Total US Market AlphaDEX(R) ETF $ 103,705 $ -- $ -- First Trust Dorsey Wright People's Portfolio ETF 163,136 -- -- First Trust Dow 30 Equal Weight ETF 16,690 -- --
As of December 31, 2018, the components of distributable earnings on a tax basis for each Fund were as follows:
Accumulated Undistributed Capital and Net Unrealized Ordinary Other Appreciation Income Gain (Loss) (Depreciation) ------------------ ---------------- ----------------- First Trust Total US Market AlphaDEX(R) ETF $ 5,031 $ (666,297) $ (1,692,453) First Trust Dorsey Wright People's Portfolio ETF -- (1,092,046) (2,487,040) First Trust Dow 30 Equal Weight ETF 10,767 (74,553) (1,512,279) First Trust Lunt U.S. Factor Rotation ETF 467 (1,663,858) (3,134,438)
Page 50 -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND DECEMBER 31, 2018 G. INCOME TAXES Each Fund intends to qualify or continue to qualify as a regulated investment company by complying with the requirements under Subchapter M of the Internal Revenue Code of 1986, as amended, which includes distributing substantially all of its net investment income and net realized gains to shareholders. Accordingly, no provision has been made for federal and state income taxes. However, due to the timing and amount of distributions, each Fund may be subject to an excise tax of 4% of the amount by which approximately 98% of each Fund's taxable income exceeds the distributions from such taxable income for the calendar year. The Funds are subject to accounting standards that establish a minimum threshold for recognizing, and a system for measuring, the benefits of a tax position taken or expected to be taken in a tax return. For TUSA and DWPP, the taxable years ending 2015, 2016, 2017, and 2018 remain open to federal and state audit. For EDOW, the taxable years ending 2017 and 2018 remain open for federal and state audit. For FCTR, the taxable year ending 2018 remains open for federal and state audit. As of December 31, 2018, management has evaluated the application of these standards to the Funds, and has determined that no provision for income tax is required in the Funds' financial statements for uncertain tax positions. Under the Regulated Investment Company Modernization Act of 2010 (the "Act"), net capital losses arising in taxable years beginning after December 22, 2010, may be carried forward indefinitely, and their character is retained as short-term and/or long-term losses. Previously, net capital losses were carried forward for up to eight years and treated as short-term losses. As a transition rule, the Act requires that post-enactment net capital losses be used before pre-enactment net capital losses. At December 31, 2018, the Funds had post-enactment net capital losses for federal income tax purposes as shown in the following table. To the extent that these loss carryforwards are used to offset future capital gains, it is probable that the capital gains so offset will not be distributed to Fund shareholders. The Funds are subject to certain limitations, under U.S. tax rules, on the use of capital loss carryforwards and net unrealized built-in losses. These limitations apply when there has been a 50% change in ownership.
Post-Enactment - No Expiration ------------------ First Trust Total US Market AlphaDEX(R) ETF $ 666,297 First Trust Dorsey Wright People's Portfolio ETF 1,092,046 First Trust Dow 30 Equal Weight ETF 74,553 First Trust Lunt U.S. Factor Rotation ETF 1,663,858
During the taxable year ended December 31, 2018, the following Fund utilized capital loss carryforwards in the following amount:
Post-Enactment Capital Loss Carryforward Utilized ------------------ First Trust Total US Market AlphaDEX(R) ETF $ 5,052
In order to present paid-in capital and accumulated distributable earnings (loss) (which consists of accumulated net investment income (loss), accumulated net realized gain (loss) on investments and net unrealized appreciation (depreciation) on investments) on the Statements of Assets and Liabilities that more closely represent their tax character, certain adjustments have been made to paid-in capital, accumulated net investment income (loss) and accumulated net realized gain (loss) on investments. These adjustments are primarily due to the difference between book and tax treatments of income and gains on various investment securities held by the Funds and in-kind transactions. The results of operations and net assets were not affected by these adjustments. For the fiscal period ended December 31, 2018, the adjustments for each Fund were as follows:
Accumulated Accumulated Net Realized Net Investment Gain (Loss) Paid-in Income (Loss) on Investments Capital ------------------ ---------------- ----------------- First Trust Total US Market AlphaDEX(R) ETF $ 679 $ (1,769,995) $ 1,769,316 First Trust Dorsey Wright People's Portfolio ETF 12,607 (948,782) 936,175 First Trust Dow 30 Equal Weight ETF -- 817,734 (817,734) First Trust Lunt U.S. Factor Rotation ETF -- (1,095,136) 1,095,136
Page 51 -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND DECEMBER 31, 2018 H. EXPENSES Expenses that are directly related to First Trust Total US Market AlphaDEX(R) ETF are charged directly to the Fund. Expenses for First Trust Dorsey Wright People's Portfolio ETF, First Trust Dow 30 Equal Weight ETF and First Trust Lunt U.S. Factor Rotation ETF (the "Unitary Fee Funds"), other than excluded expenses (discussed in Note 3), are paid by the Advisor. General expenses of the Trust are allocated to all the Funds based upon the net assets of each Fund. First Trust has entered into licensing agreements with each of the following "Licensors" for the respective Funds:
FUND LICENSOR First Trust Total US Market AlphaDEX(R) ETF Nasdaq, Inc. First Trust Dorsey Wright People's Portfolio ETF Nasdaq, Inc. First Trust Dow 30 Equal Weight ETF S&P Dow Jones Indices LLC First Trust Lunt U.S. Factor Rotation ETF Lunt Capital Management, Inc.
The respective license agreements allow for the use by First Trust of certain trademarks and trade names of the respective Licensors. The Funds are sub-licensees to the applicable license agreement. The First Trust Total US Market AlphaDEX(R) ETF is required to pay licensing fees, which are shown on the Statements of Operations. I. NEW ACCOUNTING PRONOUNCEMENT On August 28, 2018, the FASB issued Accounting Standards Update ("ASU") 2018-13, "Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement," which amends the fair value measurement disclosure requirements of ASC 820. The amendments of ASU 2018-13 include new, eliminated, and modified disclosure requirements of ASC 820. In addition, the amendments clarify that materiality is an appropriate consideration of entities when evaluating disclosure requirements. The ASU is effective for fiscal years beginning after December 15, 2019, including interim periods therein. Early adoption is permitted for any eliminated or modified disclosures upon issuance of this ASU. The Funds have early adopted ASU 2018-13 for these financial statements, which did not result in a material impact. 3. INVESTMENT ADVISORY FEE, AFFILIATED TRANSACTIONS AND OTHER FEE ARRANGEMENTS First Trust, the investment advisor to the Funds, is a limited partnership with one limited partner, Grace Partners of DuPage L.P., and one general partner, The Charger Corporation. The Charger Corporation is an Illinois corporation controlled by James A. Bowen, Chief Executive Officer of First Trust. First Trust is responsible for the selection and ongoing monitoring of the securities in each Fund's portfolio, managing the Funds' business affairs and providing certain administrative services necessary for the management of the Funds. For the First Trust Total US Market AlphaDEX(R) ETF, First Trust is paid an annual management fee of 0.50% of the Fund's average daily net assets. For such Fund, the Trust and the Advisor have entered into an Expense Reimbursement, Fee Waiver and Recovery Agreement ("Recovery Agreement") in which First Trust has agreed to waive fees and/or reimburse Fund expenses to the extent that the operating expenses of the Fund (excluding interest expense, brokerage commissions and other trading expenses, acquired fund fees and expenses, taxes and extraordinary expenses) exceed 0.70% of average daily net assets per year (the "Expense Cap"). The Expense Cap will be in effect until at least April 30, 2020. Expenses reimbursed and fees waived by First Trust under the Recovery Agreement are subject to recovery by First Trust for up to three years from the date the fee was waived or expense was incurred, but no reimbursement payment will be made by the Fund if it results in the Fund exceeding an expense ratio equal to the Expense Cap in place at the time the expenses were reimbursed or fees were waived by First Trust. This amount would be included in "Expenses previously waived or reimbursed" on the Statements of Operations. The advisory fee waivers and expense reimbursements for the fiscal year ended December 31, 2018 and fees waived or expenses borne by First Trust subject to recovery from the Fund for the periods indicated were as follows:
Fees Waived and Expenses Borne by First Trust Subject to Recovery ------------------------------------------------ Advisory Year Year Year Fee Expense Ended Ended Ended Waivers Reimbursement 12/31/2016 12/31/2017 12/31/2018 Total --------- ------------- ---------- ---------- ---------- --------- First Trust Total US Market AlphaDEX(R) ETF $ 77,425 $ 58,021 $ 112,511 $ 110,596 $ 135,446 $ 358,553
Page 52 -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND DECEMBER 31, 2018 For the First Trust Dorsey Wright People's Portfolio ETF, First Trust Dow 30 Equal Weight ETF, and First Trust Lunt U.S. Factor Rotation ETF, First Trust is paid an annual unitary management fee of 0.60%, 0.50%, and 0.65%, respectively, of such Fund's average daily net assets and is responsible for the expenses of such Fund including the cost of transfer agency, custody, fund administration, legal, audit, licensing and other services, but excluding fee payments under the Investment Management Agreement, distribution and service fees pursuant to a Rule 12b-1 plan, if any, brokerage commissions and other expenses connected with the execution of portfolio transactions, acquired fund fees and expenses, taxes, interest, and extraordinary expenses. The Trust has multiple service agreements with The Bank of New York Mellon ("BNYM"). Under the service agreements, BNYM performs custodial, fund accounting, certain administrative services, and transfer agency services for each Fund. As custodian, BNYM is responsible for custody of each Fund's assets. As fund accountant and administrator, BNYM is responsible for maintaining the books and records of each Fund's securities and cash. As transfer agent, BNYM is responsible for maintaining shareholder records for each Fund. BNYM is a subsidiary of The Bank of New York Mellon Corporation, a financial holding company. Each Trustee who is not an officer or employee of First Trust, any sub-advisor or any of their affiliates ("Independent Trustees") is paid a fixed annual retainer that is allocated equally among each fund in the First Trust Fund Complex. Each Independent Trustee is also paid an annual per fund fee that varies based on whether the fund is a closed-end or other actively managed fund, or is an index fund. Additionally, the Lead Independent Trustee and the Chairmen of the Audit Committee, Nominating and Governance Committee and Valuation Committee are paid annual fees to serve in such capacities, with such compensation allocated pro rata among each fund in the First Trust Fund Complex based on net assets. Independent Trustees are reimbursed for travel and out-of-pocket expenses in connection with all meetings. The Lead Independent Trustee and Committee Chairmen rotate every three years. The officers and "Interested" Trustee receive no compensation from the Trust for acting in such capacities. 4. PURCHASES AND SALES OF SECURITIES For the fiscal period ended December 31, 2018, the cost of purchases and proceeds from sales of investments for each Fund, excluding short-term investments and in-kind transactions, were as follows:
Purchases Sales --------------- --------------- First Trust Total US Market AlphaDEX(R) ETF $ 16,867,610 $ 16,862,637 First Trust Dorsey Wright People's Portfolio ETF 10,640,130 10,646,299 First Trust Dow 30 Equal Weight ETF 1,756,785 1,660,463 First Trust Lunt U.S. Factor Rotation ETF 46,422,532 46,057,662
For the fiscal period ended December 31, 2018, the cost of in-kind purchases and proceeds from in-kind sales for each Fund were as follows:
Purchases Sales --------------- --------------- First Trust Total US Market AlphaDEX(R) ETF $ 8,667,228 $ 8,767,744 First Trust Dorsey Wright People's Portfolio ETF 14,656,231 5,853,063 First Trust Dow 30 Equal Weight ETF 68,840,001 55,818,395 First Trust Lunt U.S. Factor Rotation ETF 51,233,390 19,672,458
5. CREATION, REDEMPTION AND TRANSACTION FEES Shares are created and redeemed by each Fund only in Creation Unit size aggregations of 50,000 shares in transactions with broker-dealers or large institutional investors that have entered into a participation agreement (an "Authorized Participant"). Such transactions are generally permitted on an in-kind basis, with a balancing cash component to equate the transaction to the daily NAV per Share of each Fund on the transaction date times the number of Shares in a Creation Unit. Authorized Participants purchasing Creation Units must pay to BNYM, as transfer agent, a standard creation transaction fee (the "Creation Transaction Fee"), which is based on the number of different securities in a Creation Unit of each Fund, according to the fee schedule set forth below: Number of Securities Creation in a Creation Unit Transaction Fee -------------------- --------------- 1-100 $ 500 101-499 $1,000 500 or more $1,500 Page 53 -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND DECEMBER 31, 2018 The Creation Transaction Fee is applicable to each purchase transaction regardless of the number of Creation Units purchased in the transaction. An additional variable fee of up to three times the Creation Transaction Fee may be charged to approximate additional expenses incurred by a Fund with respect to transactions effected outside of the clearing process (i.e., through a DTC Participant) or to the extent that cash is used in lieu of securities to purchase Creation Units. The price for each Creation Unit will equal the daily NAV per Share of a Fund on the transaction date times the number of Shares in a Creation Unit plus the fees described above and, if applicable, any transfer taxes. Authorized Participants redeeming Creation Units must pay to BNYM, as transfer agent, a standard redemption transaction fee (the "Redemption Transaction Fee"), which is based on the number of different securities in a Creation Unit of each Fund, according to the fee schedule set forth below: Number of Securities Redemption in a Creation Unit Transaction Fee -------------------- --------------- 1-100 $ 500 101-499 $1,000 500 or more $1,500 The Redemption Transaction Fee is applicable to each redemption transaction regardless of the number of Creation Units redeemed in the transaction. An additional variable fee of up to three times the Redemption Transaction Fee may be charged to approximate additional expenses incurred by a Fund with respect to redemptions effected outside of the clearing process or to the extent that redemptions are for cash. Each Fund reserves the right to effect redemptions in cash. A shareholder may request cash redemption in lieu of securities; however, a Fund may, in its discretion, reject any such request. 6. DISTRIBUTION PLAN The Board of Trustees adopted a Distribution and Service Plan pursuant to Rule 12b-1 under the 1940 Act. In accordance with the Rule 12b-1 plan, the Funds are authorized to pay an amount up to 0.25% of their average daily net assets each year to reimburse First Trust Portfolios L.P. ("FTP"), the distributor of the Funds, for amounts expended to finance activities primarily intended to result in the sale of Creation Units or the provision of investor services. FTP may also use this amount to compensate securities dealers or other persons that are Authorized Participants for providing distribution assistance, including broker-dealer and shareholder support and educational and promotional services. No 12b-1 fees are currently paid by the Funds, and pursuant to a contractual arrangement, no 12b-1 fees will be paid any time before April 30, 2020 for First Trust Total US Market AlphaDEX(R) ETF, First Trust Dorsey Wright People's Portfolio ETF, and First Trust Dow 30 Equal Weight ETF and July 20, 2020 for First Trust Lunt U.S. Factor Rotation ETF. 7. INDEMNIFICATION The Trust, on behalf of the Funds, has a variety of indemnification obligations under contracts with its service providers. The Trust's maximum exposure under these arrangements is unknown. However, the Trust has not had prior claims or losses pursuant to these contracts and expects the risk of loss to be remote. 8. SUBSEQUENT EVENTS Management has evaluated the impact of all subsequent events on the Funds through the date the financial statements were issued, and has determined that there were no subsequent events requiring recognition or disclosure in the financial statements that have not already been disclosed. Page 54 -------------------------------------------------------------------------------- REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM -------------------------------------------------------------------------------- TO THE SHAREHOLDERS AND THE BOARD OF TRUSTEES OF FIRST TRUST EXCHANGE-TRADED FUND: OPINION ON THE FINANCIAL STATEMENTS AND FINANCIAL HIGHLIGHTS We have audited the accompanying statements of assets and liabilities, including the portfolios of investments, of First Trust Exchange-Traded Fund (the "Trust"), comprising the First Trust Total US Market AlphaDEX(R) ETF, First Trust Dorsey Wright People's Portfolio ETF, First Trust Dow 30 Equal Weight ETF, and First Trust Lunt U.S. Factor Rotation ETF (the "Funds"), each a series of First Trust Exchange-Traded Fund, as of December 31, 2018, the related statements of operations, the changes in net assets and the financial highlights for the periods indicated in the table below for the Funds; and the related notes. In our opinion, the financial statements and financial highlights present fairly, in all material respects, the financial position of each of the funds listed above included in First Trust Exchange-Traded Fund as of December 31, 2018, and the results of their operations, the changes in their net assets and the financial highlights for the period listed in the table below, in conformity with accounting principles generally accepted in the United States of America.
INDIVIDUAL FUNDS STATEMENTS OF STATEMENTS OF FINANCIAL INCLUDED IN THE TRUST OPERATIONS CHANGES TO NET ASSETS HIGHLIGHTS --------------------------------------------------------------------------------------------------------------------------- First Trust Total US Market For the year ended For the years ended December 31, For the years ended December 31, AlphaDEX(R) ETF December 31, 2018 2018 and 2017 2018, 2017, 2016, 2015, and 2014 First Trust Dorsey Wright People's Portfolio ETF --------------------------------------------------------------------------------------------------------------------------- First Trust Dow 30 For the year ended For the year ended December 31, 2018 and the period from August 8, 2017 Equal Weight ETF December 31, 2018 (commencement of operations) through December 31, 2017 --------------------------------------------------------------------------------------------------------------------------- First Trust Lunt U.S. Factor For the period from July 25, 2018 (commencement of operations) through December 31, 2018 Rotation ETF
BASIS FOR OPINION These financial statements and financial highlights are the responsibility of the Funds' management. Our responsibility is to express an opinion on the Funds' financial statements and financial highlights based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Funds in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement, whether due to error or fraud. The Funds are not required to have, nor were we engaged to perform, an audit of their internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Funds' internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements and financial highlights, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements and financial highlights. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and financial highlights. Our procedures included confirmation of securities owned as of December 31, 2018, by correspondence with the custodian and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion. /s/ Deloitte & Touche LLP Chicago, Illinois February 25, 2019 We have served as the auditor of one or more First Trust investment companies since 2001. Page 55 -------------------------------------------------------------------------------- ADDITIONAL INFORMATION -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND DECEMBER 31, 2018 (UNAUDITED) PROXY VOTING POLICIES AND PROCEDURES A description of the policies and procedures that the Trust uses to determine how to vote proxies and information on how each Fund voted proxies relating to its portfolio securities during the most recent 12-month period ended June 30 is available (1) without charge, upon request, by calling (800) 988-5891; (2) on the Funds' website located at www.ftportfolios.com; and (3) on the Securities and Exchange Commission's ("SEC") website at www.sec.gov. PORTFOLIO HOLDINGS The Trust files its complete schedule of each Fund's portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The Trust's Form N-Qs are available (1) by calling (800) 988-5891; (2) on each Fund's website at www.ftportfolios.com; and (3) on the SEC's website at www.sec.gov. Beginning in April 2019, the Trust will cease to disclose each Fund's holdings on Form N-Q and will file Form N-PORT with the SEC on a monthly basis. Part F of Form N-PORT, which contains the complete schedule of each Fund's portfolio holdings, will be made available in the same manner as Form N-Q discussed above. FEDERAL TAX INFORMATION For the taxable period ended December 31, 2018, the following percentages of income dividends paid by the Funds qualify for the dividends received deduction available to corporations:
Dividends Received Deduction ---------------------------- First Trust Total US Market AlphaDEX(R) ETF 100.00% First Trust Dorsey Wright People's Portfolio ETF 100.00% First Trust Dow 30 Equal Weight ETF 74.65% First Trust Lunt U.S. Factor Rotation ETF 92.27%
For the taxable period ended December 31, 2018, the following percentages of income dividends paid by the Funds are hereby designated as qualified dividend income:
Qualified Dividend Income ---------------------------- First Trust Total US Market AlphaDEX(R) ETF 100.00% First Trust Dorsey Wright People's Portfolio ETF 100.00% First Trust Dow 30 Equal Weight ETF 74.65% First Trust Lunt U.S. Factor Rotation ETF 100.00%
RISK CONSIDERATIONS RISKS ARE INHERENT IN ALL INVESTING. CERTAIN GENERAL RISKS THAT MAY BE APPLICABLE TO A FUND ARE IDENTIFIED BELOW, BUT NOT ALL OF THE MATERIAL RISKS RELEVANT TO EACH FUND ARE INCLUDED IN THIS REPORT AND NOT ALL OF THE RISKS BELOW APPLY TO EACH FUND. THE MATERIAL RISKS OF INVESTING IN EACH FUND ARE SPELLED OUT IN ITS PROSPECTUS, STATEMENT OF ADDITIONAL INFORMATION AND OTHER REGULATORY FILINGS. BEFORE INVESTING, YOU SHOULD CONSIDER EACH FUND'S INVESTMENT OBJECTIVE, RISKS, CHARGES AND EXPENSES, AND READ EACH FUND'S PROSPECTUS AND STATEMENT OF ADDITIONAL INFORMATION CAREFULLY. YOU CAN DOWNLOAD EACH FUND'S PROSPECTUS AT WWW.FTPORTFOLIOS.COM OR CONTACT FIRST TRUST PORTFOLIOS L.P. AT (800) 621-1675 TO REQUEST A PROSPECTUS, WHICH CONTAINS THIS AND OTHER INFORMATION ABOUT EACH FUND. CONCENTRATION RISK. To the extent that a fund is able to invest a large percentage of its assets in a single asset class or the securities of issuers within the same country, state, region, industry or sector, an adverse economic, business or political development may affect the value of the fund's investments more than if the fund were more broadly diversified. A fund that tracks an index will be concentrated to the extent the fund's corresponding index is concentrated. A concentration makes a fund more susceptible to any single occurrence and may subject the fund to greater market risk than a fund that is not concentrated. CREDIT RISK. Credit risk is the risk that an issuer of a security will be unable or unwilling to make dividend, interest and/or principal payments when due and the related risk that the value of a security may decline because of concerns about the issuer's ability to make such payments. CYBER SECURITY RISK. The funds are susceptible to potential operational risks through breaches in cyber security. A breach in cyber security refers to both intentional and unintentional events that may cause a fund to lose proprietary information, suffer data corruption or lose operational capacity. Such events could cause a fund to incur regulatory penalties, reputational damage, Page 56 -------------------------------------------------------------------------------- ADDITIONAL INFORMATION (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND DECEMBER 31, 2018 (UNAUDITED) additional compliance costs associated with corrective measures and/or financial loss. In addition, cyber security breaches of a fund's third-party service providers, such as its administrator, transfer agent, custodian, or sub-advisor, as applicable, or issuers in which the fund invests, can also subject a fund to many of the same risks associated with direct cyber security breaches. DERIVATIVES RISK. To the extent a fund uses derivative instruments such as futures contracts, options contracts and swaps, the fund may experience losses because of adverse movements in the price or value of the underlying asset, index or rate, which may be magnified by certain features of the derivative. These risks are heightened when a fund's portfolio managers use derivatives to enhance the fund's return or as a substitute for a position or security, rather than solely to hedge (or offset) the risk of a position or security held by the fund. EQUITY SECURITIES RISK. To the extent a fund invests in equity securities, the value of the fund's shares will fluctuate with changes in the value of the equity securities. Equity securities prices fluctuate for several reasons, including changes in investors' perceptions of the financial condition of an issuer or the general condition of the relevant stock market, such as market volatility, or when political or economic events affecting the issuers occur. In addition, common stock prices may be particularly sensitive to rising interest rates, as the cost of capital rises and borrowing costs increase. Equity securities may decline significantly in price over short or extended periods of time, and such declines may occur in the equity market as a whole, or they may occur in only a particular country, company, industry or sector of the market. ETF RISK. The shares of an ETF trade like common stock and represent an interest in a portfolio of securities. The risks of owning an ETF generally reflect the risks of owning the underlying securities, although lack of liquidity in an ETF could result in it being more volatile and ETFs have management fees that increase their costs. Shares of an ETF trade on an exchange at market prices rather than net asset value, which may cause the shares to trade at a price greater than net asset value (premium) or less than net asset value (discount). In times of market stress, decisions by market makers to reduce or step away from their role of providing a market for an ETF's shares, or decisions by an ETF's authorized participants that they are unable or unwilling to proceed with creation and/or redemption orders of an ETF's shares, could result in shares of the ETF trading at a discount to net asset value and in greater than normal intraday bid-ask spreads. FIXED INCOME SECURITIES RISK. To the extent a fund invests in fixed income securities, the fund will be subject to credit risk, income risk, interest rate risk, liquidity risk and prepayment risk. Income risk is the risk that income from a fund's fixed income investments could decline during periods of falling interest rates. Interest rate risk is the risk that the value of a fund's fixed income securities will decline because of rising interest rates. Liquidity risk is the risk that a security cannot be purchased or sold at the time desired, or cannot be purchased or sold without adversely affecting the price. Prepayment risk is the risk that the securities will be redeemed or prepaid by the issuer, resulting in lower interest payments received by the fund. In addition to these risks, high yield securities, or "junk" bonds, are subject to greater market fluctuations and risk of loss than securities with higher ratings, and the market for high yield securities is generally smaller and less liquid than that for investment grade securities. INDEX CONSTITUENT RISK. Certain funds may be a constituent of one or more indices. As a result, such a fund may be included in one or more index-tracking exchange-traded funds or mutual funds. Being a component security of such a vehicle could greatly affect the trading activity involving a fund, the size of the fund and the market volatility of the fund. Inclusion in an index could significantly increase demand for the fund and removal from an index could result in outsized selling activity in a relatively short period of time. As a result, a fund's net asset value could be negatively impacted and the fund's market price may be significantly below its net asset value during certain periods. INDEX PROVIDER RISK. To the extent a fund seeks to track an index, it is subject to Index Provider Risk. There is no assurance that the Index Provider will compile the Index accurately, or that the Index will be determined, maintained, constructed, reconstituted, rebalanced, composed, calculated or disseminated accurately. To correct any such error, the Index Provider may carry out an unscheduled rebalance or other modification of the Index constituents or weightings, which may increase the fund's costs. The Index Provider does not provide any representation or warranty in relation to the quality, accuracy or completeness of data in the Index, and it does not guarantee that the Index will be calculated in accordance with its stated methodology. Losses or costs associated with any Index Provider errors generally will be borne by the fund and its shareholders. INVESTMENT COMPANIES RISK. To the extent a fund invests in the securities of other investment vehicles, the fund will incur additional fees and expenses that would not be present in a direct investment in those investment vehicles. Furthermore, the fund's investment performance and risks are directly related to the investment performance and risks of the investment vehicles in which the fund invests. MANAGEMENT RISK. To the extent that a fund is actively managed, it is subject to management risk. In managing an actively-managed fund's investment portfolio, the fund's portfolio managers will apply investment techniques and risk analyses that may not have the desired result. There can be no guarantee that a fund will meet its investment objective. Page 57 -------------------------------------------------------------------------------- ADDITIONAL INFORMATION (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND DECEMBER 31, 2018 (UNAUDITED) MARKET RISK. Securities held by a fund, as well as shares of a fund itself, are subject to market fluctuations caused by factors such as general economic conditions, political events, regulatory or market developments, changes in interest rates and perceived trends in securities prices. Shares of a fund could decline in value or underperform other investments as a result of the risk of loss associated with these market fluctuations. NON-U.S. SECURITIES RISK. To the extent a fund invests in non-U.S. securities, it is subject to additional risks not associated with securities of domestic issuers. Non-U.S. securities are subject to higher volatility than securities of domestic issuers due to: possible adverse political, social or economic developments; restrictions on foreign investment or exchange of securities; lack of liquidity; currency exchange rates; excessive taxation; government seizure of assets; different legal or accounting standards; and less government supervision and regulation of exchanges in foreign countries. Investments in non-U.S. securities may involve higher costs than investments in U.S. securities, including higher transaction and custody costs, as well as additional taxes imposed by non-U.S. governments. These risks may be heightened for securities of companies located, or with significant operations, in emerging market countries. PASSIVE INVESTMENT RISK. To the extent a fund seeks to track an index, the fund will invest in the securities included in, or representative of, the index regardless of their investment merit. A fund generally will not attempt to take defensive positions in declining markets. NOT FDIC INSURED NOT BANK GUARANTEED MAY LOSE VALUE ADVISORY AGREEMENT BOARD CONSIDERATIONS REGARDING INVESTMENT MANAGEMENT AGREEMENT The Board of Trustees (the "Board") of First Trust Exchange-Traded Fund (the "Trust"), including the Independent Trustees, unanimously approved the Investment Management Agreement (the "Agreement") with First Trust Advisors L.P. (the "Advisor"), on behalf of First Trust Lunt U.S. Factor Rotation ETF (the "Fund"), for an initial two-year term at a meeting held on December 10-11, 2017. The Board of Trustees determined that the 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. To reach this determination, the Board considered its duties under the Investment Company Act of 1940, as amended (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. To assist the Board in its evaluation of the Agreement for the Fund, the Independent Trustees received a report from the Advisor in advance of the Board meeting responding to a request for information provided on behalf of the Independent Trustees that, among other things, outlined the services to be provided by the Advisor to the Fund (including the relevant personnel responsible for these services and their experience); the proposed unitary fee rate payable by the Fund as compared to fee rates charged to a peer group of funds (all of which were exchange-traded funds ("ETFs")) compiled by Management Practice, Inc. ("MPI"), an independent source (the "MPI Peer Group"), and as compared to fee rates charged to other ETFs managed by the Advisor; the estimated expenses of the Fund as compared to the expense ratios of the funds in the MPI Peer Group; the nature of the expenses to be incurred in providing services to the Fund and the potential for economies of scale, if any; financial data on the Advisor; any fall-out benefits to the Advisor and its affiliate, First Trust Portfolios L.P. ("FTP"); and information on the Advisor's compliance program. The Independent Trustees also met separately with their independent legal counsel to discuss the information provided by the Advisor. The Board applied its business judgment to determine whether the arrangement between the Trust and the Advisor is a reasonable business arrangement from the Fund's perspective as well as from the perspective of shareholders. In evaluating whether to approve the Agreement for the Fund, the Board considered the nature, extent and quality of the services to be provided by the Advisor under the Agreement and considered that employees of the Advisor provide management services to other ETFs and to other investment companies in the First Trust fund complex with diligence and care. The Board considered that the Advisor will be responsible for the overall management and administration of the Fund and reviewed all of the services to be provided by the Advisor to the Fund. The Board considered the background and experience of the persons who will be responsible for the day-to-day management of the Fund. In reviewing the services to be provided, the Board considered the compliance program that had been developed by the Advisor and considered that it includes a robust program for Page 58 -------------------------------------------------------------------------------- ADDITIONAL INFORMATION (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND DECEMBER 31, 2018 (UNAUDITED) monitoring the Advisor's and the Fund's compliance with the 1940 Act, as well as the Fund's compliance with its investment objective and policies. Since the Fund had yet to commence investment operations, the Board could not consider the historical investment performance of the Fund, but the Board did consider the hypothetical investment performance of the underlying index. Because the Fund is an index ETF that is designed to track the performance of an underlying index, the Board considered reports it receives on a quarterly basis showing the correlation and tracking error between other ETFs for which the Advisor serves as investment advisor and their applicable underlying indexes. In light of the information presented and the considerations made, the Board concluded that the nature, extent and quality of the services to be provided to the Fund by the Advisor under the Agreement are expected to be satisfactory. The Board considered the proposed unitary fee rate payable by the Fund under the Agreement for the services to be provided. The Board noted that, under the unitary fee arrangement, the Fund would pay the Advisor a unitary fee equal to an annual rate of 0.65% of its average daily net assets. The Board noted that the Advisor would be responsible for the Fund's expenses, including the cost of transfer agency, custody, fund administration, legal, audit and other services and license fees (if any), but excluding the fee payments under the Agreement, interest, taxes, brokerage commissions and other expenses connected with the execution of portfolio transactions, distribution and service fees pursuant to a Rule 12b-1 plan, if any, and extraordinary expenses. The Board received and reviewed information for the Fund showing the unitary fee rates and expense ratios of the peer funds in the MPI Peer Group, as well as the advisory fee rates (along with related expense caps) and unitary fee rates charged by the Advisor to other ETFs it manages. Because the Fund's MPI Peer Group included peer funds that pay unitary fees and because the Fund will pay a unitary fee, the Board determined that expense ratios were the most relevant comparative data point. Based on the information provided, the Board noted that the unitary fee rate for the Fund was equal to the median total (net) expense ratio of the peer funds in its MPI Peer Group. With respect to the MPI Peer Group, the Board discussed with representatives of the Advisor how the MPI Peer Group was assembled and how the Fund compared and differed from the peer funds. The Board took this information into account in considering the peer data. With respect to fee rates charged to other First Trust ETFs, the Board considered differences between the Fund and other First Trust ETFs that limited their comparability. The Board noted that the Fund's unitary fee rate was in line with the total (net) expense ratios of comparable index ETFs advised by the Advisor that, like the Fund, focus on targeted segments of the U.S. equity market, employ robust selection and weighting methodologies and pursue objectives to add meaningful alpha compared to broader investment category benchmarks. In light of the information considered and the nature, extent and quality of the services expected to be provided to the Fund under the Agreement, the Board determined that the proposed unitary fee rate for the Fund was fair and reasonable. The Board noted that the proposed unitary fee for the Fund was not structured to pass the benefits of any economies of scale on to shareholders as the Fund's assets grow. The Board noted that any reduction in fixed costs associated with the management of the Fund would benefit the Advisor, but that the unitary fee structure provides a level of certainty in expenses for the Fund. The Board noted that the Advisor has continued to invest in personnel and infrastructure for the First Trust fund complex. The Board took the types of costs to be borne by the Advisor in connection with its services to be performed for the Fund under the Agreement into consideration and noted that the Advisor was unable to estimate the profitability of the Agreement for the Fund to the Advisor. The Board considered fall-out benefits described by the Advisor that may be realized from its and FTP's relationship with the Fund. The Board also noted that the Advisor would not 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 Advisor were not unreasonable. Based on all of the information considered and the conclusions reached, the Board, including the Independent Trustees, unanimously determined that the terms of the Agreement are fair and reasonable and that the approval of the Agreement is in the best interests of the Fund. No single factor was determinative in the Board's analysis. Page 59 -------------------------------------------------------------------------------- BOARD OF TRUSTEES AND OFFICERS -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND DECEMBER 31, 2018 (UNAUDITED) The following tables identify the Trustees and Officers of the Trust. Unless otherwise indicated, the address of all persons is 120 East Liberty Drive, Suite 400, Wheaton, IL 60187. The Trust's statement of additional information includes additional information about the Trustees and is available, without charge, upon request, by calling (800) 988-5891.
NUMBER OF OTHER PORTFOLIOS IN TRUSTEESHIPS OR TERM OF OFFICE THE FIRST TRUST DIRECTORSHIPS NAME, AND YEAR FIRST FUND COMPLEX HELD BY TRUSTEE YEAR OF BIRTH AND ELECTED OR PRINCIPAL OCCUPATIONS OVERSEEN BY DURING PAST POSITION WITH THE TRUST APPOINTED DURING PAST 5 YEARS TRUSTEE 5 YEARS ------------------------------------------------------------------------------------------------------------------------------------ INDEPENDENT TRUSTEES ------------------------------------------------------------------------------------------------------------------------------------ Richard E. Erickson, Trustee o Indefinite Term Physician, Officer, Wheaton Orthopedics; 161 None (1951) Limited Partner, Gundersen Real Estate o Since Inception Limited Partnership (June 1992 to December 2016); Member, Sportsmed LLC (April 2007 to November 2015) Thomas R. Kadlec, Trustee o Indefinite Term President, ADM Investors Services, Inc. 161 Director of ADM (1957) (Futures Commission Merchant) Investor Services, o Since Inception Inc., ADM Investor Services International, Futures Industry Association, and National Futures Association Robert F. Keith, Trustee o Indefinite Term President, Hibs Enterprises (Financial and 161 Director of Trust (1956) Management Consulting) Company of o Since Inception Illinois Niel B. Nielson, Trustee o Indefinite Term Senior Advisor (August 2018 to Present), 161 Director of (1954) Managing Director and Chief Operating Covenant o Since Inception Officer (January 2015 to August 2018), Transport Inc. Pelita Harapan Educational Foundation (May 2003 to (Educational Products and Services); May 2014) President and Chief Executive Officer (June 2012 to September 2014), Servant Interactive LLC (Educational Products and Services); President and Chief Executive Officer (June 2012 to September 2014), Dew Learning LLC (Educational Products and Services) ------------------------------------------------------------------------------------------------------------------------------------ INTERESTED TRUSTEE ------------------------------------------------------------------------------------------------------------------------------------ James A. Bowen(1), Trustee, o Indefinite Term Chief Executive Officer, First Trust 161 None Chairman of the Board Advisors L.P. and First Trust (1955) o Since Inception Portfolios L.P.; Chairman of the Board of Directors, BondWave LLC (Software Development Company) and Stonebridge Advisors LLC (Investment Advisor)
----------------------------- (1) Mr. Bowen is deemed an "interested person" of the Trust due to his position as Chief Executive Officer of First Trust Advisors L.P., investment advisor of the Trust. Page 60 -------------------------------------------------------------------------------- BOARD OF TRUSTEES AND OFFICERS (CONTINUED) -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND DECEMBER 31, 2018 (UNAUDITED)
POSITION AND TERM OF OFFICE NAME AND OFFICES AND LENGTH OF PRINCIPAL OCCUPATIONS YEAR OF BIRTH WITH TRUST SERVICE DURING PAST 5 YEARS ------------------------------------------------------------------------------------------------------------------------------------ OFFICERS(2) ------------------------------------------------------------------------------------------------------------------------------------ James M. Dykas President and Chief o Indefinite Term Managing Director and Chief Financial Officer (1966) Executive Officer (January 2016 to Present), Controller (January 2011 to o Since January 2016 January 2016), Senior Vice President (April 2007 to January 2016), First Trust Advisors L.P. and First Trust Portfolios L.P.; Chief Financial Officer (January 2016 to Present), BondWave LLC (Software Development Company) and Stonebridge Advisors LLC (Investment Advisor) Donald P. Swade Treasurer, Chief Financial o Indefinite Term Senior Vice President (July 2016 to Present), Vice (1972) Officer and Chief President (April 2012 to July 2016), First Trust Accounting Officer o Since January 2016 Advisors L.P. and First Trust Portfolios L.P. W. Scott Jardine Secretary and Chief o Indefinite Term General Counsel, First Trust Advisors L.P. and First (1960) Legal Officer Trust Portfolios L.P.; Secretary and General Counsel, o Since Inception BondWave LLC; Secretary, Stonebridge Advisors LLC Daniel J. Lindquist Vice President o Indefinite Term Managing Director, First Trust Advisors L.P. and (1970) First Trust Portfolios L.P. o Since Inception Kristi A. Maher Chief Compliance Officer o Indefinite Term Deputy General Counsel, First Trust Advisors L.P. (1966) and Assistant Secretary and First Trust Portfolios L.P. o Chief Compliance Officer Since January 2011 o Assistant Secretary Since Inception Roger F. Testin Vice President o Indefinite Term Senior Vice President, First Trust Advisors L.P. (1966) and First Trust Portfolios L.P. o Since Inception Stan Ueland Vice President o Indefinite Term Senior Vice President, First Trust Advisors L.P. (1970) and First Trust Portfolios L.P. o Since Inception
----------------------------- (2) The term "officer" means the president, vice president, secretary, treasurer, controller or any other officer who performs a policy making function. Page 61 -------------------------------------------------------------------------------- PRIVACY POLICY -------------------------------------------------------------------------------- FIRST TRUST EXCHANGE-TRADED FUND DECEMBER 31, 2018 (UNAUDITED) PRIVACY POLICY First Trust values our relationship with you and considers your privacy an important priority in maintaining that relationship. We are committed to protecting the security and confidentiality of your personal information. SOURCES OF INFORMATION We collect nonpublic personal information about you from the following sources: o Information we receive from you and your broker-dealer, investment advisor or financial representative through interviews, applications, agreements or other forms; o Information about your transactions with us, our affiliates or others; o Information we receive from your inquiries by mail, e-mail or telephone; and o Information we collect on our website through the use of "cookies". For example, we may identify the pages on our website that your browser requests or visits. INFORMATION COLLECTED The type of data we collect may include your name, address, social security number, age, financial status, assets, income, tax information, retirement and estate plan information, transaction history, account balance, payment history, investment objectives, marital status, family relationships and other personal information. DISCLOSURE OF INFORMATION We do not disclose any nonpublic personal information about our customers or former customers to anyone, except as permitted by law. In addition to using this information to verify your identity (as required under law), the permitted uses may also include the disclosure of such information to unaffiliated companies for the following reasons: o In order to provide you with products and services and to effect transactions that you request or authorize, we may disclose your personal information as described above to unaffiliated financial service providers and other companies that perform administrative or other services on our behalf, such as transfer agents, custodians and trustees, or that assist us in the distribution of investor materials such as trustees, banks, financial representatives, proxy services, solicitors and printers. o We may release information we have about you if you direct us to do so, if we are compelled by law to do so, or in other legally limited circumstances (for example to protect your account from fraud). In addition, in order to alert you to our other financial products and services, we may share your personal information within First Trust. USE OF WEBSITE ANALYTICS We currently use third party analytics tools, Google Analytics and AddThis, to gather information for purposes of improving First Trust's website and marketing our products and services to you. These tools employ cookies, which are small pieces of text stored in a file by your web browser and sent to websites that you visit, to collect information, track website usage and viewing trends such as the number of hits, pages visited, videos and PDFs viewed and the length of user sessions in order to evaluate website performance and enhance navigation of the website. We may also collect other anonymous information, which is generally limited to technical and web navigation information such as the IP address of your device, internet browser type and operating system for purposes of analyzing the data to make First Trust's website better and more useful to our users. The information collected does not include any personal identifiable information such as your name, address, phone number or email address unless you provide that information through the website for us to contact you in order to answer your questions or respond to your requests. To find out how to opt-out of these services click on: Google Analytics and AddThis. CONFIDENTIALITY AND SECURITY With regard to our internal security procedures, First Trust restricts access to your nonpublic personal information to those First Trust employees who need to know that information to provide products or services to you. We maintain physical, electronic and procedural safeguards to protect your nonpublic personal information. POLICY UPDATES AND INQUIRIES As required by federal law, we will notify you of our privacy policy annually. We reserve the right to modify this policy at any time, however, if we do change it, we will tell you promptly. For questions about our policy, or for additional copies of this notice, please go to www.ftportfolios.com, or contact us at 1-800-621-1675 (First Trust Portfolios) or 1-800-222-6822 (First Trust Advisors). May 2017 Page 62 This page intentionally left blank. This page intentionally left blank. FIRST TRUST First Trust Exchange-Traded Fund INVESTMENT ADVISOR First Trust Advisors L.P. 120 East Liberty Drive, Suite 400 Wheaton, IL 60187 ADMINISTRATOR, CUSTODIAN, FUND ACCOUNTANT & TRANSFER AGENT The Bank of New York Mellon 240 Greenwich Street New York, NY 10286 INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Deloitte & Touche LLP 111 S. Wacker Drive Chicago, IL 60606 LEGAL COUNSEL Chapman and Cutler LLP 111 W. Monroe Street Chicago, IL 60603 [BLANK BACK COVER] ITEM 2. CODE OF ETHICS. (a) The registrant, as of the end of the period covered by this report, has adopted a code of ethics that applies to the registrant's principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party. (c) There have been no amendments, during the period covered by this report, to a provision of the code of ethics that applies to the registrant's principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party, and that relates to any element of the code of ethics description. (d) The registrant has not granted any waivers, including an implicit waiver, from a provision of the code of ethics that applies to the registrant's principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party, that relates to one or more of the items set forth in paragraph (b) of this item's instructions. (e) Not applicable. (f) The code of ethics is filed as an exhibit to the Registrant's annual report on this Form N-CSR. ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. As of the end of the period covered by the report, the registrant's board of trustees has determined that Thomas R. Kadlec and Robert F. Keith are qualified to serve as audit committee financial experts serving on its audit committee and that each of them is "independent," as defined by Item 3 of Form N-CSR. ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. (a) Audit Fees -- The aggregate fees billed for each of the last two fiscal years for professional services rendered by the principal accountant for the audit of the registrant's annual financial statements or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements were $380,000 for 2017 and $415,000 for 2018. (b) Audit-Related Fees (Registrant) -- The aggregate fees billed in each of the last two fiscal years, for assurance and related services by the principal accountant that are reasonably related to the performance of the audit of the registrant's financial statements and are not reported under paragraph (a) of this Item were $0 for 2017 and $0 for 2018. Audit-Related Fees (Investment Adviser and Distributor) -- The aggregate fees billed in each of the last two fiscal years for assurance and related services by the principal accountant that are reasonably related to the performance of the audit of the registrant's financial statements and are not reported under paragraph (a) of this Item were $3,500 for 2017 and $0 for 2018. (c) Tax Fees (Registrant) -- The aggregate fees billed in each of the last two fiscal years for professional services rendered by the principal accountant for tax compliance, tax advice, and tax planning to the registrant were $55,575 for 2017 and $58,500 for 2018. The tax fees were for review of regulated investment company status. Tax Fees (Investment Adviser and Distributor) -- The aggregate fees billed in each of the last two fiscal years for professional services rendered by the principal accountant for tax compliance, tax advice, and tax planning to the registrant's adviser and distributor were $0 for 2017 and $0 for 2018. (d) All Other Fees (Registrant) -- The aggregate fees billed in each of the last two fiscal years for products and services provided by the principal accountant to the registrant, other than the services reported in paragraphs (a) through (c) of this Item were $0 for 2017 and $0 for 2018. All Other Fees (Investment Adviser and Distributor) -- The aggregate fees billed in each of the last two fiscal years for products and services provided by the principal accountant to the registrant's investment adviser and distributor, other than the services reported in paragraphs (a) through (c) of this Item were $ 0 for 2017 and $0 for 2018. (e)(1) Disclose the audit committee's pre-approval policies and procedures described in paragraph (c)(7) of Rule 2-01 of Regulation S-X. Pursuant to its charter and its Audit and Non-Audit Services Pre-Approval Policy, the Audit Committee (the "Committee") is responsible for the pre-approval of all audit services and permitted non-audit services (including the fees and terms thereof) to be performed for the registrant by its independent auditors. The Chairman of the Committee is authorized to give such pre-approvals on behalf of the Committee up to $25,000 and report any such pre-approval to the full Committee. The Committee is also responsible for the pre-approval of the independent auditor's engagements for non-audit services with the registrant's adviser (not including a sub-adviser whose role is primarily portfolio management and is sub-contracted or overseen by another investment adviser) and any entity controlling, controlled by or under common control with the investment adviser that provides ongoing services to the registrant, if the engagement relates directly to the operations and financial reporting of the registrant, subject to the de minimis exceptions for non-audit services described in Rule 2-01 of Regulation S-X. If the independent auditor has provided non-audit services to the registrant's adviser (other than any sub-adviser whose role is primarily portfolio management and is sub-contracted with or overseen by another investment adviser) and any entity controlling, controlled by or under common control with the investment adviser that provides ongoing services to the registrant that were not pre-approved pursuant to its policies, the Committee will consider whether the provision of such non-audit services is compatible with the auditor's independence. (e)(2) The percentage of services described in each of paragraphs (b) through (d) for the registrant and the registrant's investment adviser of this Item that were approved by the audit committee pursuant to the pre-approval exceptions included in paragraph (c)(7)(i)(c) or paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X are as follows: (b) 0% (c) 0% (d) 0% (f) The percentage of hours expended on the principal accountant's engagement to audit the registrant's financial statements for the most recent fiscal year that were attributed to work performed by persons other than the principal accountant's full-time, permanent employees was less than fifty percent. (g) The aggregate non-audit fees billed by the registrant's accountant for services rendered to the registrant, and rendered to the registrant's investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the adviser that provides ongoing services to the registrant for 2017 were $55,575 for the registrant, $44,000 for the registrant's investment adviser and $63,400 for the registrant's distributor and for 2018 were $58,500 for the registrant, $48,190 for the registrant's investment adviser and $80,310 for the registrant's distributor . (h) The registrant's audit committee of its Board of Trustees has determined that the provision of non-audit services that were rendered to the registrant's investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the registrant that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible with maintaining the principal accountant's independence. ITEMS 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. The Registrant has a separately designated standing audit committee established in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934 consisting of all the independent directors of the Registrant. The audit committee of the registrant is comprised of: Richard E. Erickson, Thomas R. Kadlec, Robert F. Keith and Niel B. Nielson. ITEM 6. INVESTMENTS. (a) Schedule of Investments in securities of unaffiliated issuers as of the close of the reporting period is included as part of the report to shareholders filed under Item 1 of this form. (b) Not applicable. ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Not applicable. ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Not applicable. ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS. Not applicable. ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. There have been no material changes to the procedures by which the shareholders may recommend nominees to the registrant's board of trustees, where those changes were implemented after the registrant last provided disclosure in response to the requirements of Item 407 (c) (2) (iv) of Regulation S-K (17 CFR 229.407) (as required by Item 22 (b) (15) of Schedule 14A (17 CFR 240.14a-101)), or this Item. ITEM 11. CONTROLS AND PROCEDURES. (a) The registrant's principal executive and principal financial officers, or persons performing similar functions, have concluded that the registrant's disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended (the "1940 Act") (17 CFR 270.30a-3 (c))) are effective, as of a date within 90 days of the filing date of the report that includes the disclosure required by this paragraph, based on their evaluation of these controls and procedures required by Rule 30a-3(b) under the 1940 Act (17 CFR 270.30a-3(b)) and Rules 13a-15(b) or 15d-15(b) under the Securities Exchange Act of 1934, as amended (17 CFR 240.13a-15(b) or 240.15d-15 (b)). (b) There were no changes in the registrant's internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act (17 CFR 270.30a-3(d)) that occurred during the registrant's last fiscal quarter of the period covered by this report that have materially affected, or are reasonably likely to materially affect, the registrant's internal control over financial reporting. ITEM 12. DISCLOSURE OF SECURITIES LENDING ACTIVITIES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. (a) Not applicable. (b) Not applicable. ITEM 13. EXHIBITS. (a) (1) Code of ethics, or any amendment thereto, that is the subject of disclosure required by Item 2 is attached hereto. (a) (2) Certifications pursuant to Rule 30a-2(a) under the 1940 Act and Section 302 of the Sarbanes-Oxley Act of 2002 are attached hereto. (a) (3) Not Applicable (a) (4) Not Applicable (b) Certifications pursuant to Rule 30a-2(b) under the 1940 Act and Section 906 of the Sarbanes-Oxley Act of 2002 are attached hereto. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. (registrant) First Trust Exchange-Traded Fund ------------------------------------------------- By (Signature and Title)* /s/ James M. Dykas ---------------------------------------- James M. Dykas, President and Chief Executive Officer (principal executive officer) Date: March 11, 2019 ---------------- Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By (Signature and Title)* /s/ James M. Dykas ---------------------------------------- James M. Dykas, President and Chief Executive Officer (principal executive officer) Date: March 11, 2019 ---------------- By (Signature and Title)* /s/ Donald P. Swade ---------------------------------------- Donald P. Swade, Treasurer, Chief Financial Officer and Chief Accounting Officer (principal financial officer) Date: March 11, 2019 ---------------- * Print the name and title of each signing officer under his or her signature.